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29May1996
THE ROAD AHEAD: INTERNATIONAL TRADE POLICY INTHE ERA
OFTHE WTO
TheFourth Annual Sylvia Ostry Lecture
Ottawa, 28May 1996
Mr.Renato Ruggiero, Director-General WTO, lastnight delivered thefourth Sylvia Ostry
Lecture inOttawa, Canada.
ThefulltextofMr.Ruggiero 'sspeech isattached.
96-2032 MOREPRESS/49
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I
There cannot bemany individuals inCanada, orelsewhere forthatmatter, whocombine
Sylvia Ostry’sextraordinary depth andbreadth ofexperience intheareaoftrade, andeconomic
policy more generally. Norcanthere bemany whomatch herrecord ofexcellence inherchosen
field. Sylvia Ostry hasserved asahighofficial inhergovernment, shehasheldasenior position
inaprominent international institution -theOECD, andnow, from heracademic vantage point, she
ismaking asignal contribution toourunderstanding ofthecomplex world welivein.Many ofthe
ideas andissues Ishalltalkabout thisafternoon havebeeninfluenced bySylvia ’swork.
Itgives megreatpleasure, therefore, todeliver theFourth Annual Lecture oftheSylvia Ostry
Foundation. Before continuing, however, Iwould justliketosayonething toSylvia, whom Iam
proud tocount asalong-standing friend: ‘Sylvia, please goondoing what youdosowell. We
greatly value yourinsights, yourcapacity tointerpret economic trends andevents, andyoureyefor
sound policy prescription. Weneedyounowmore thanever’
II
TheGlobal Imperative
Itmust betruethatpractically every generation inhistory haslived through change -beit
social, economic orpolitical. Andnodoubt change hasbeenviewed inevery generation withablend
ofapprehension andanticipation -apprehension atthediscomfort itmight represent, andanticipation
attheopportunities itcanoffer. Some periods aremore turbulent thanothers, butIwonder how
many generations inyears gone byhavehadtocontend withtheextraordinarily rapid change that
characterizes ourtimes.
What kindofchange amItalking about, andwhatisdriving it?Thechange Irefertoisthe
dramatic internationalization, orglobalization, ofeconomic activity overthelasttwoorthreedecades,
andtheprofound political andsocial consequences thatflowfrom this. Apowerful confluence of
forces drives globalization. Some ofthem nodoubt reflect government policies, butmore
fundamentally, these areforces withalifeoftheirown-forces unleashed bytechnological change,
especially inthefields oftransport andcommunications.
Ineconomic terms, globalization means thatproduction andtrade havebecome inexorably
intertwined. Production processes arespread across theglobe. Producers mustinvest totrade and
trade toinvest. Most products entering themarket today areeither traded, orheavily reliant on
traded components fortheirproduction. Thefactthattrade plays agreater roleineconomic activity
thaniteverhasbefore iseasily discernible from statistics -trade flows havemultiplied fifteen-fold
inthelastfourdecades, while production hasincreased six-fold. Atthesame time, dramatic
increases have been registered inflows offoreign direct investment -inthetenyears to1993,
investment flows worldwide quadrupled, toalmost 200billion dollars perannum. More andmore
jobsrelyontrade, onthesideofbothimports andexports. Allthishastaken place against steadily
rising living standards inmany, butnotall,countries. Thefactthatthebenefits ofglobalization are
yettobeglobally enjoyed presents apolicy challenge towhich Ishall return. However, no-one
should underestimate theextent towhich global economic integration hashelped, andishelping, to
reduce poverty andmarginalization. Inthenextfewyears twobillion people indeveloping and
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transition economies areexpected toenter theglobal marketplace, reinforcing thetrends which have
putadozen ormore developing countries among theworld 'smost dynamic economies.
Inpolitical terms, globalization means thatgovernments must learn tocooperate inmore
areas thaninthepast. Some ofthedistinctions weusedtomake between international policy and
domestic policy lookincreasingly facile andirrelevant. Tensions naturally ariseasgovernments are
perceived ashaving anevermore intrusive interest ineachothers ’policies, andthese tensions must
bemanaged withdeftness andpolitical agility. Asthedomain ofinternational rule-making andpolicy
coordination expands, andthenotion of“domestic ”policy assumes anarrower focus, adequate care
mustbetaken tosafeguard diversity andpreserve democracy. Atthesame time, defensive arguments
based onsovereignty must berecognized fortheillusion thattheyare. Thetrueexpression of
sovereignty intoday’sworld isthecapacity ofdemocratically elected governments toarticulate the
interests oftheirconstituents through negotiations andinternational commitments.
Insocial terms, managing globalization isalsoamajor challenge. Itisdisingenuous to
pretend thatmarket-opening, continuing international economic integration, andtrade liberalization
willalways bepainless. Some people maywellbedisplaced through theresource allocation shifts
thatoccur asaresult ofthese processes. Butweshould beclear about thewhole picture. The
efficiency gains from specialization through trade stimulate economic activity andcreate jobs, more
thanmaking upforwhatmaybelostthrough jobdisplacement. Managing thistransition, anddealing
withthedistributional consequences ofchange isafundamental responsibility ofgovernments, but
definitely notonethatwillbemetbyshying away from theworld marketplace.
Globalization will notgoaway. Policy-makers could notstoptheprocess, even ifthey
wanted to.Itisnotsomething which isoptional, butapartofournormal everyday lifeincountless
ways. Theonlyrealquestion iswhether ornotweaccompany itsadvance withdomestic policies
which willhelpusadapt tothereality ofchange without anunbearable social cost.
Internationally, thechoice iswhether thisinevitable process willtakeplace within asystem
based onagreed rules orsimply onpower. Inthepost-war period wehavegenerally triedtofollow
thefirstalternative. Toabandon itnowwould change theeconomic -andpossibly political -history
oftheworld inadangerous wayforallitspeople.
III
TheWTO 'sfirst18months: highlights andshadows
Before turning towhatIseeassome ofthemajor issues weneedtoaddress inthecoming
months andyears, Iwould liketolookbriefly withyouattheWTO 'sfirstyearandahalf. Itisa
picture oflightandshadow, ofcommitments implemented andothers which remain stillunfinished
business.
Thehighlights include:
implementation ofUruguay Round agreements: ithasbeenagood start, butthere isno
room forcomplacency. Thefullandprompt implementation ofcommitments isessential for
thecredibility oftheWTO andforbuilding confidence onwhich toexplore thetrade agenda
thatliesahead.
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dispute settlement :wenowhaveamore effective andcredible mechanism fortheresolution
oftrade disputes. Sofar,38complaints havebeenbrought totheWTO; andasignificant
number ofcases havebeensettled "outofcourt" -thatis,resolved attheconsultation stage
which isanessential partoftheprocedure. Thisisstrong testimony tothedeterrent effect
ofthesystem.
establishment oftheAppellate Body,whose firstdecision hasjustbeenhanded down -avery
difficult decision inviewofthenumerous criteria involved.
increasing membership :theWTO nowhas121Members. Thefactthat29countries are
negotiating tojoin(including China andRussia) shows thevitality andtheattraction ofthe
multilateral system. Individual countries mayjointheWTO seeking economic benefits, but
theglobal gainwillalsobemore stable international relations. Clearly, weareclose to
realizing thelong-sought goalofamultilateral trading system ofuniversal membership, based
notonweakened membership requirements butonastrengthened desire onthepartof
governments toparticipate fullyintheglobalizing world economy.
trade andtheenvironment :TheWTO 'sCommittee onTrade andEnvironment hasawide-
ranging agenda, which hasbeenexamined atsome length bytheCommittee. Thisdiscussion
hasprovided agood basis forfurther progress inthisimportant butoften controversial area,
bothclarifying theissues atstake andbringing formerly divergent views closer together. In
itsreport totheMinisterial Conference inSingapore, theCommittee willbeinaposition to
better define areas forfurther examination andmight beready tosuggest certain policy
improvements topromote environmental concerns while atthesame timeenhancing or
facilitating international trade.
Theshadows appear when werecall thatimplementation alsoincludes thecommitment to
continue negotiations infourimportant sectors oftrade inservices which weremade attheendofthe
Uruguay Round. Now thatwehaveatleastaninterim result onthree ofthese -financial services,
themovement ofnatural persons (those whoprovide services) andbasic telecommunications -Iwould
liketosaysomething about whathasbeenachieved -andwhatremains tobedone.
Youwillremember thatlastJulyanegotiation onfinancial services ended withamuted or
mitigated success: 29countries agreed toimprove theircommitments under theGATS, buttheUS
found thepackage unsatisfactory andwasunable tomake anyofferastofuture access toitsfinancial
services market. Thenegotiations willberesumed in1997andthenIhope, andexpect, animproved
package, with theUSasafullparticipant, willbeagreed. Inthenegotiations onbasic
telecommunications, which ended on30April, averyinteresting andworthwhile harvest ofmarket
opening offers, plussubstantial progress intheareaofcompetition andthebehaviour ofstate
monopolies, wasachieved. Butagain itwasimpossible tofinalize thedeal, because theUS
considered theresult unsatisfactory. Thenegotiators agreed topreserve theresults achieved sofar
withtheobjective thattheycanbeimproved further inabrief period ofrenewed negotiations in
January/February nextyear, andtomaintain thedateof1January 1998 fortheirentry intoforce.
Ibelieve thisprocess toowillbebrought toasuccessful conclusion in1997.
Thefourth sectoral negotiation, onmaritime transport, isnowinprogress. Ittooisfacing
difficulty, following astatement bytheUSthatitwillnotmake anoffer, inthelightofitsassessment
oftheoffers made byothers. Wemustensure thatanacceptable result cannevertheless bereached
bytheendofJune, butitwillnotbeeasy.
Itistooearly todraw upabalance sheet. ButIthink onepreliminary conclusion, atleast,
canbedrawn. Itisnotimpossible foranegotiation inasingle sector toproduce worthwhile -even
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surprisingly good -results. Thetelecoms negotiations proved that-andinmyopinion theresults in
financial services were alsomuch better thanmight havebeenexpected from ashort negotiation in
asingle, highly sensitive sector.
Ofcourse weshould notunderestimate theimpact ofmissing thedateof30April forthe
formal conclusion ofthetelecom negotiations, oroftheresult sofarinfinancial services. Butit
would beequally wrong tooverstate thecase. Thehistory ofinternational negotiations -especially
trade negotiations -isfullofmissed targets. Ifweallow every suchinstance tobecome adrama we
onlymake itharder togoontoeventual success.
Onefinalcomment: these negotiations became classed asunfinished business because itwas
notpossible tobring themtoresolution eveninthemagic moment oftheendoftheUruguay Round.
Sobydefinition theymustbeconsidered among thehardest cases. Itisthusnowonder iftheycould
notbesettled inonefurther attempt -butuptonownone hasbeenanoutright failure. Thisisall
themore reason whywecannot accept afailure inthemaritime sector.
IV
TheRoad toSingapore
Itisagainst thisbackground oflightandshadow thatpreparation isunderway fortheWTO 's
firstMinisterial meeting, which willbeheldinSingapore inDecember. Certainly theMinisterial will
provide achance totakestock ofwhat hasbeenachieved aftertwoyears, buttheconcentration of
political force itrepresents could bewasted ifwedonotalsohavemore ambitious goals. Letme
outline some possible areas where Ithink itisrealistic toexpect Singapore tohelpthemultilateral
system tomove forward asitmust.
One such area isfurther liberalization ingoods andservices trade -andthrough
improvements inthetrade rules. There isadebate onwhat further liberalization canreally mean.
Some delegations donotwant tochange thecommitments already taken attheendoftheUruguay
Round, andprefer toremain withthetime-horizon of1999 or2000. Some others, onthecontrary,
suggest considering possibilities including accelerated oradditional tariff reductions; undertaking
further work onprofessional services; andworking towards theharmonization oftechnical standards
andthesimplification ofrulesoforigin. Other possibilities willnodoubt emerge aswecontinue the
preparatory discussions.
Thediscussions thataregoing onamong anumber ofcountries about liberalizing trade in
information technology areaparticularly encouraging development, onewhich should also
complement andreinforce theopening-up oftelecommunications services. Ihopethatanyeventual
agreement willbemade onamultilateral basis, tomake themost ofitsbenefits bothtotheglobal
economy andthetrading system.
Ministers atSingapore willalsohavebefore them the"built-in agenda" oftheWTO -the
commitments which already existtobegin newnegotiations inagriculture, services andother areas
before theturnofthecentury. The"built-in agenda" alsotouches onsome oftheother subjects
which various members have proposed fortheWTO 'swork programme, suchasinvestment and
competition. Iwould liketosaysomething about eachofthese.
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Asfarasinvestment isconcerned, globalization hasdramatically reduced theutility of
distinctions thatpolicy makers usedtomaintain between different forms ofmarket access.
Inthissetting, itseems tomethatnorationale canbeoffered fornothaving multilateral
investment rules while wehavemultilateral trade rules. IntheUruguay Round, thenegotiation on
trade-related investment measures -orTRIMS -resulted inamandate tolookatinvestment issues
withaviewtoconsidering whether theTRIMS Agreement should becomplemented withprovisions
oninvestment. Atthesame time, negotiations inthefieldoftrade inservices haveledtosubstantive
commitments oninvestment inawide range ofsectors. These commitments apply totheright of
foreign investors toestablish themselves, aswellastoconduct business oncetheyareestablished.
Inaddition tothese sector-specific undertakings, WTO Members arecommitted toproviding m.f.n.
treatment withrespect toalltrade inallservices, except intherelatively fewcases where narrow
exceptions tom.f.n. havebeeninscribed.
Notwithstanding thesignificance ofwhatwehavealready achieved inservices, Ibelieve we
needamore horizontal andall-encompassing approach toinvestment intheWTO, particularly as
nothing hasbeendonesofarinthesphere ofgoods. Multilateral rules inthisareashould build on
theWTO principles ofm.f.n. andnational treatment, thereby contributing toapolicy environment
thatencourages andsafeguards foreign investment, especially inthegreat majority ofdeveloping and
least-developed countries whoareatpresent largely outside themain flows offoreign direct
investment. TheOECD, aswellassome regional trade agreements, havealready developed, orare
intheprocess ofdeveloping international investment rules. ButIbelieve governments will
increasingly recognize theneedforwork onthisissue inamore global setting.
There isarisk, intheabsence ofastrong multilateral framework, ofanaccumulation of
potentially inconsistent andeven discriminatory regimes inregard toforeign investment. The
question ishowtoensure atrulymultilateral dimension tothisquestion thattakes account notonly
oftheroleofinvestment within theinternational trading system, butalsoofthecommon interest that
bothindustrial anddeveloping countries haveinensuring afavourable investment climate. Itishard
toimagine thatananswer canbefound outside theWTO. There arecurrently more than
900bilateral investment treaties. Andifallcountries intheworld were toparticipate insuch
agreements, wewould needaround 20,000 bilateral treaties. Thisfactprovides aclear answer to
those whopreach thesuperiority ofabilateral approach. Icannot imagine thatbusiness would
welcome suchabewildering variety ofrequirements. Itisclearly preferable tohavejustoneset,
covering allcountries, developed anddeveloping alike, under thesame rulesanddisciplines andwith
justoneenforcement procedure.
TheTRIMs Agreement alsocontains amandate toconsider theneedforrulesoncompetition
policy. TheGATT andWTO have sought toenhance competition forthelast50years through
promoting trade liberalization. More explicitly, competition questions weretaken upintheHavana
Charter, andcame onto theUruguay Round agenda through thenegotiations onbasic
telecommunications. Ibelieve itisimportant forustoexamine thisquestion thoroughly intheWTO
setting. Asgovernment-mandated andsupported policies havebecome lesstrade-restricting, attention
focuses increasingly onmarket barriers maintained byenterprises -thatis,barriers thatareintrinsic
tothestructure ofmarkets andindependent ofanygovernment policy.
Weneed todetermine, firstly, how pervasive andproblematic such barriers may be.
Secondly, wemust askwhether these should bedealt with nationally, orwhether weneed
international disciplines toensure theproper functioning ofmarkets. Andifwedoneed an
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international approach, what should itbe? Should wecreate aright ofmultilateral action that
commits government toimplementing theirnational competition policies, orshould wegofurther and
write substantive competition rules? These areinteresting andimportant questions thatwemust
address. Wecancertainly learnsomething fromthenegotiations onbasic telecommunications, where
governments clearly felttheneedtospelloutandcommit themselves tospecific, multilateral pro-
competitive principles.
Whether ornotwerecognize it,competition ismaking itself partofouragenda. Itisjusta
question ofwhen andhowthisbecomes explicit.
Beyond thebuilt-in agenda, issues which havebeenproposed bysome countries include trade
andlabour standards (themostpotentially controversial ofallthese subjects). No-one candenythe
importance ofcorelabour standards thathavebeeninternationally agreed. Buttheissueisnowabout
theextent oftherelationship withtrade andthebestforum fordiscussion. Thisiswhythisissue
remains potentially divisive. There isashared responsibility toavoid adramatization ofitatthe
Ministerial Conference. Ifthiswere tohappen, itiscertain thatthepeople whose interests weall
wanttoprotect would notbeinanybetter position.
Proposals alsoinclude theproblem ofcorruption ininternational trade, which hasbeenlinked
withtheneedforfurther work ongovernment procurement ;thequestion ofregionalism ;andthe
adaptation ofthetrade rules totheglobal economy. Theissue oftheeffects ofcommodity prices,
exchange ratesanddebtondeveloping-country trade earnings hasbeenraised orally.
These suggestions willneed tobeapproached withobjectivity andcare, inlinewiththe
principle ofconsensus which hasalways guided themultilateral system. Developing aconsensus in
these areas willbeaserious challenge -butthemultilateral trading system hassuccessfully metsuch
challenges inthepast(forexample when services andenvironment were brought intothepicture).
Oneofthemostnotable changes ontheworld trading scene inthelastdecade orsohasbeen
thedeath oftheNorth-South divide -anevent assignificant asthedemolition oftheBerlin Wall.
Thischange isattributable inlarge measure totheembrace ofmarket-opening andliberalization
policies incountries atalllevels ofdevelopment. Apriority forSingapore istosustain thisnew
unity.
Ifwearetomove forward todevelop atrade agenda forthe21stcentury, itisessential to
haveasolid baseofconfidence among allthemembers ofthetrading system thatitisworking in
theirinterests.
V
TheChallenges Ahead
Shaping thetrading system ofthenewcentury means above allresponding tofour
fundamental challenges.
Thefirstistodoabetter jobthanwearedoing atpresent inconveying topeople everywhere
themessage thatopentrade andthemultilateral system work intheirinterest. Wehavetorecognize
thattherapid advance ofglobal integration hascontributed toaclimate ofuncertainty inmany
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societies, asituation which isripeforexploitation bythose whopeddle thequack remedies of
protectionism andxenophobia. What isurgently needed isforgovernments, theprivate sector and
academics towork together torestate clearly andpersuasively thetruththatthepast50years ofour
history makes soevident -thatopen trade within therules ofthemultilateral system isthekeyto
growth, andhence toallourhopes ofamore prosperous andstable existence.
Thesecond challenge istorespect andstrengthen thefundamental contract thatnowunites
countries atalllevels ofeconomic development. Theindustrialized world hastokeep open its
markets andimprove theiropenness intheyears ahead. Ontheirside,thedeveloping countries have
tocontinue withtheirliberalizing reforms andincrease theirintegration intotheglobal system. And
together, bothindustrialized anddeveloping countries havetowork toimprove thesituation ofthe
least-developed.
Ibelieve thatraising living standards inthese countries isoneofthemosturgent tasksbefore
us.Ithasbeenestimated thatwhile incomes perheadareexpected toriseby80percentonaverage
inEastAsiabetween nowandtheyear2005, thecomparable figure forSub-Saharan Africa isonly
8percent. Howcanwehelptonarrow thiswidening gapandtopromote development inthepoorest
countries?
Attheveryleast, wemust ensure thatallmarkets arecompletely andsecurely open tothe
goods andservices produced bythese countries. Acommitment tobindalltariffs thattheyfaceat
zeroandeliminate allremaining quantitative restrictions ontheirexports byafirmdatewould beone
useful initiative. There aremany other ways inwhich wecould assist, suchasimproving theiraccess
toinvestment (another reason fortaking thisissue upintheWTO), encouraging regional initiatives
among least-developed countries, andapplying more flexible rules oforigin totheirproducts.
Equally important isbuilding uptheirinstitutional andhuman capacity sothattheyarefully
abletotakeadvantage ofimproved opportunities. Thiscallsforsome fresh approaches, bothinthe
cooperation among agencies providing technical assistance andinthemeans bywhich theydoso.
TheWTO hasmade astartinthisdirection, bydeveloping anintegrated technical cooperation
planwithUNCTAD andtheInternational Trade Centre, which wejointly sponsor. There isclearly
more tobedoneinpromoting suchcooperation. Wemustalsowork closely together withallother
relevant agencies toexploit tothefulltheopportunities newcommunications technology offers to
extend thescope andthelasting impact ofourcapacity-building efforts.
Lastly, there isaneed topayserious attention tothesituation ofnetfood-importing
developing countries who-foravariety ofreasons -arefacing rising prices foranumber of
agricultural commodities.
Thethirdchallenge isuniversality -theneedtobring China, Russia andalltheother countries
stilloutside intotheWTO system. Wecanonlyreapthefullbenefit ofarule-based global trading
system when thisisachieved. No-one isunder anyillusion thattheprocess isaneasyone. The
accession oflarge transition economies, inparticular, raises significant questions ofsubstance whose
answers needtostrike anacceptable balance among theaspirations ofthecandidate countries, the
interests ofexisting members andtheneedtosafeguard theintegrity ofthesystem anditsrules.
There isnoquick political fixtothese issues. Aspiring andexisting members alike share inthe
responsibility ofensuring thattheaccession negotiations proceed asrapidly aspossible butinaway
which strengthens thesystem asawhole.
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Thefourth challenge istomake sense oftherelationship between regionalism andthe
multilateral trading system. Itislessthanfifteen years since thedramatic explosion inregional
agreements occurred, making sucharrangements theprominent feature ofinternational economic
relations thattheyaretoday. In1980, relatively fewcustoms unions andfreetrade areas existed, but
nownearly allWTO Members belong tooneormore regional trading arrangement. Apart fromthe
European Community, whatarrangements there werefifteen years agotended tobelimited inscope
andtofocus primarily, ifnotexclusively, onpreferential tariffs. Thenewwave ofregional trading
arrangements canbesaid,likesomany things, tohavestarted inNorth America.
Indeed, Canada played apivotal andinitiating roleintheestablishment ofafreetrade
agreement inNorth America, which wassoontobeextended asNAFTA. Andnow, there areplans
forahemispheric freetrade agreement, which would alsobuild onexisting arrangements inSouth
America, suchasMERCOSUR, theANDEAN PactandtheCentral American Common Market. In
Asia, weseeASEAN recently expanding itsgeographical coverage anddeepening theintegration
process. TheSouth Asian countries arealsodeveloping aregional arrangement. And, ofcourse, we
haveAPEC, which, while notasyetinvolving trade preferences among itsmembers, embodies an
ambitious vision offreetrade among countries inAsiaandalsoacross thePacific Basin toNorth and
South America. InAfrica, several regional arrangements arebeing developed. InEurope, the
European Union hasbuilt upacomplex hierarchy ofpreferential arrangements involving allits
immediate neighbours, andhaswider schemes inprospect. TheideaofaTrans-Atlantic freetrade
agreement hasalsoattracted considerable attention recently.
Theregional liberalizing impulse isnotinitself cause foralarm among theupholders ofthe
multilateral system. Regional initiatives cancontribute significantly tothedevelopment ofmultilateral
rules andcommitments, andinregions such asSub-Saharan Africa theymaybeanessential
starting-point forintegration ofleast-developed countries intothewider global economy. Atthemost
basic leveltherealsplitisbetween liberalization, atwhatever level, andprotectionism. Viewed from
thisperspective regional andmultilateral initiatives should beonthesame side,mutually supportive
andreinforcing.
However thesheer sizeandambition ofrecent regional initiatives means wecannolonger
takethiscomplementarity forgranted, ifindeed weevercould. Weneed aclear statement of
principles, backed upbyfirm commitments, toensure thatregional schemes donotactasa
centrifugal force, pulling themultilateral system apart.
Theanswer istobefound, Isuggest, intheprinciple which some ofthenewer regional
groupings haveenunciated -Open Regionalism .
Ofcourse, weneedtobeclear about what open regionalism means. Among thedifferent
possibilities, Iseetwobasic alternatives.
Thefirstistoensure thatanypreferential areaunder consideration willbeconsistent with
thelegalrequirements ofthemultilateral system. Theexisting provisions mean thatsuchareas could
atthesame timebelegally compatible withtheWTO 'srules andpreferential intheirnature, which
means theycanbeanexception tothem.f.n. clause which isthebasic principle ofthemultilateral
system. Thepossibility ofmaking suchalegalexception tothem.f.n. principle within theruleswas
conceived inacompletely different timeandsituation. Today, withtheproliferation ofregional
groupings, theexception could become therule,andthiswould riskchanging completely thenature
ofthesystem.
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Thesecond interpretation ofopenregionalism istheoneIhearfromanumber ofgovernments
including some members ofAPEC orMERCOSUR. Inthisscenario, thegradual elimination of
internal barriers totradewithin aregional grouping willbeimplemented atmore orlessthesame rate
andonthesame timetable asthelowering ofbarriers towards non-members. Thiswould mean that
regional liberalization would inpractice aswellasinlawbegenerally consistent withthem.f.n.
principle.
Thechoice between these alternatives isacritical one;theypoint toverydifferent outcomes.
Inthefirstcase, thepoint atwhich wewould arrive innomore than20to25years would bea
division ofthetrading world intotwoorthree intercontinental preferential areas, eachwithitsown
rules andwithfreetrade inside thearea, butwithexternal barriers stillexisting among theblocs.
Isthisthesortofworld anyofuswould want?
Ileave youtoimagine theconsequences ofthisvision interms ofworld stability andsecurity;
where, forexample, would China andRussia beinsuchaworld?
Thesecond alternative, ontheother hand, points towards thegradual convergence of
regionalisms andmultilateralism onthebasisofshared aimsandprinciples, firstandforemost respect
ofthem.f.n. principle. Attheend,wewould haveonefreeglobal market withrulesanddisciplines
internationally agreed andapplied toall,withthecapacity toinvoke therespect oftherights and
obligations towhich allhadfreely subscribed. Insuchaworld there could andmustbeaplace for
China, Russia andalltheother candidates totheWTO.
Given thereality ofregionalism, andthenecessity tomaintain thecentral importance ofthe
multilateral system, thequestion comes down tohowbesttoensure thisgradual convergence takes
place.
Should it,forexample, belefttoconcerted unilateral effort orbethesubject ofamultilateral
negotiation, inthesame wayaspastenlargements oftheEuropean Community helped spark previous
GATT Rounds?
Should weattempt tosetatime-limit within which regional liberalization ofmarket access
would befollowed either byitsextension onanm.f.n. basis orthestartofmultilateral negotiations?
Where regional groupings establish newtrade rules, should weseektoagree onamechanism
andatime-frame under which theywould bebrought intofullconformity withthemultilateral rules
where theyexist? Incases where there areasyetnoequivalent WTO ruleswewillneedtoconsider
atimetable fornegotiating theirmultilateral application.
Maintaining theprimacy oftheWTO 'srulesanddispute settlement system isvital, notasan
endinitself, butinorder toavoid abedlam ofcompeting andcontradictory jurisdictions. AsI
mentioned earlier, thecurrent evolution ofrulesoninvestment gives some early warning ofwhatthis
could belike.
Ifwedonotuphold theprimacy ofthemultilateral rules, weriskseeing aformofGresham 's
Lawoperating indispute settlement, withweaker rules driving outstronger asgovernments choose
thejurisdiction which most favours theircase.
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Obviously themechanisms bywhich weassure theconvergence ofregional andmultilateral
systems needs agreat dealoffurther thought. Iamhopeful thatthenewWTO Committee on
Regional Trading Agreements, under theveryableChairmanship ofCanada 'sAmbassador tothe
WTO, JohnWeekes, willmake animportant contribution tothisprocess. Fornow, theimportant
point istobeclear about thenecessity ofthisconvergence.
Itcomes down toaquestion ofthesortofworld wewant tolivein.Dowewant aworld
where theadvance ofglobal economic integration ismatched byaglobal framework ofagreed trade
rules which ensure openness andfoster growth withstability? Ordowewantapower-based system
where competing blocs attempt toregionalize theglobal economy withalltheeconomic andpolitical
stresses thatwould entail?
Imake noapology forputting thechoice sostarkly interms ofalternative visions. Ifthe
multilateral system isnotanimated byapositive andchallenging vision ofitsfuture howcanithope
tomaintain dynamism anddirection? Regional schemes havemore often thannotapolitical vision
guiding thetrade initiatives andinmany cases acleartimetable aswell. Whyshould themultilateral
system beanylessambitious?
VI
Conclusion
Thechallenges Ihaveoutlined arecontributing toagrowing awareness thattrade isnotjust
atechnical question, butamatter ofhighpolitical importance. IntheWTO, theworld nowhasa
permanent trade policy forum aswellasamore effective means ofnegotiating commitments and
making andenforcing trade rules. Trade andtrade policy havebeenputbackinthefront rowof
international concerns, where theywereintended tobebythearchitects ofthepost-war international
institutions. With theestablishment oftheWTO, andtheconclusion -which isexpected verysoon-
ofcomprehensive agreements forcooperation atevery levelwiththeWorld Bank andtheIMF, the
matrix oftrade andfinance anddevelopment isnotonlycompleted butupdated tocontribute toglobal
prosperity andstability inthenewcentury. Thisimproved institutional cooperation isamajor step
towards fulfilling themandate given totheWTO bygovernments towork forimproved coherence
ininternational economic policy-making.
TheWTO hasbeeninvited forthefirsttimetoparticipate, withtheBank, theFund andthe
United Nations, intheG7Summit ofleaders ofthemajor industrialized economies, which willbe
heldthisyearinLyon attheendofnextmonth. This recognition oftheimportance ofthe
multilateral system isverywelcome notonlyforitself butalsobecause oftheopportunity itgives to
reinforce thetrade dimension ingrowth anddevelopment forcountries atalleconomic levels. Many
ofthethemes thatwillbebefore theG7leaders willfollow onfromtheSummit which Canada hosted
inHalifax lastyear. Thefactofglobalization willbethebackdrop totheSummit 'sdeliberations, as
itistoevery serious economic discussion. ItismyhopethattheWTO, whose business iswiththe
lifeblood ofglobal integration -trade -canhelpbring concrete andpractical answers tothequestions
thatsurround thisprocess, especially theextension ofitsbenefits tothose whoarecurrently onthe
economic margins.
Attheendofnextyear, themultilateral trading system willbe50years old.Iwould liketo
seethisanniversary properly observed; notjustasarecognition ofwhatthesystem hasmeant for
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growth andstability intheworld since 1947, butasareaffirmation ofitsvalue forthepresent and
thefuture. Precisely howandwhere suchacommemoration should takeplace isaquestion for
further discussion, possibly byMinisters attheSingapore meeting thisDecember. ButIbelieve we
should notwaste suchanopportunity torenew atahighpolitical levelourcommitment tothesystem
which isthefoundation ofourpresent prosperity andourfuture prospects.
Someone observed tomerecently thatCanadians havemultilateralism intheirDNA, andit
iscertainly truethatCanada 'scontribution tothemultilateral principle, whether ineconomic or
political affairs, hasbeen anoutstanding one. Themost recent expression ofthiswasofcourse
Canada 'sleadinadvocating theestablishment oftheWTO attheendoftheUruguay Round. Iknow
thatNAFTA andother regional initiatives haveassumed anincreased importance intheCanadian
policy landscape asinyour economic life; butIamconfident thatCanada willtaketheleadin
demonstrating thatthere isnocontradiction between theactive development ofregional opportunities
andacontinuing firmcommitment tothemultilateral principle. Inthis,asinsomany other ways,
Sylvia Ostry'sinfluence willcontinue tobefelt.
END