A difficult decade for trade liberalisation

In his farewell remarks to the World Trade Organisation, Pascal Lamy reflects on eight tumultuous years which saw a great trade collapse and an historic shift of economic power to emerging markets.

VoxEU.org

We have lived through eight transformational years. We have seen the rise of China to the No.1 world exporter, significant progress in meeting the Millennium Development Goals, and developing countries accounting for more than half of the world's economic activity and more than half of global exports. But we have also seen challenges such as two food crises, the biggest financial and economic crisis since the 1930s, pandemics and natural catastrophes which have severely impacted the functioning of global production chains.

Getting more value for your trade not just more trade means that trade opening also needs to be embedded in a set of domestic and international policies. My belief in what I called the 'Geneva consensus' in 2005 is even firmer today.

Multilateral trade opening: Adjusting to a changing world

Opening trade and crafting multilateral rules have been impacted by the profound shifts in geopolitics and economics. The former two-speed model of a world divided between developed and developing countries no longer reflects today's economic realities. A serious conceptual adjustment is needed. We must find a new balance between reciprocity and flexibility in a multidimensional membership if we are to deliver on multilateral trade opening.

This is compounded by short-term politics that are becoming increasingly incompatible with the setting of the medium and longer term goals essential for designing consistent trade policies.

Trade opening has been further dented by the biggest economic crisis since the 1930s, which has left millions unemployed in advanced economies and which is now hindering the sustainability of growth in emerging economies.

I also believe it is too easy to say that trade multilateralism does not function.

We saw trade multilateralism work in Hong Kong in 2005. We saw it work in the adoption of a transparency mechanism for Regional Trade Agreements. We saw it work in the renegotiation of the Government Procurement Agreement. We saw it work in the simplification of the rules governing the accession of least developed countries to the WTO. And I am now convinced we will see it work in Bali with the successful conclusion of a deal on trade facilitation together with some development, least-developed-countries and agriculture issues, and even possibly with the delivery of the Information Technology Agreement.

We have also seen it work in the negotiations which have brought eleven new members into the WTO family. Large economies such as Russia, Saudi Arabia, Vietnam and Ukraine. Small economies such as Tajikistan, and Montenegro. And five least developed countries: Samoa, Vanuatu, Tonga, Laos and Cape Verde. And with Yemen looking good for September. Together, they are equivalent to an economy of the size of Germany.

A message of caution for the future; make sure you do not create a divide between 'RAMs' – recently acceding members – and 'ROMs' – rest of the members, with RAMs having on average higher levels of commitments than the rest. We must strive for a more convergent trading system.

I often hear that the way forward is to abandon the WTO and simply move to plurilateral or regional arrangements. But we have all seen the fate of a number of these plurilateral deals such as the ACTA or the Global System of Trade Preferences among developing countries. We also know that behind the headlines of the launching of mega regionals, as some refer to them, lie tremendous difficulties and sometimes even no final deal at all, as was the case of the Free Trade Area of the Americas.

Administering existing agreements: Reinforcing monitoring

If opening trade and crafting new trade rules is essential to the credibility of this organisation, administering existing ones is also what gives it its raison d'être. As the saying goes, 'sunshine is the best disinfectant'.

Perhaps because members have, since 1999, mainly focused on the negotiating pillar of the WTO, perhaps because we all took the administering of existing rules for granted, the reality is that the surveillance function of the WTO has been underperforming for some years. The mandates for notification and peer review are clearly there, but their implementation is somewhat spotty, to put it mildly. The rate of notifications remains too low, peer reviews can be made more effective and I-TIP (Integrated Trade Intelligence Portal) will continue to require a serious investment to become the depository of all WTO trade policy information.

Let me now turn to the dispute settlement, the other main function of the WTO.

Fifty-eight panels have been composed since September 2005, 43 of which by the director-general. The dispute settlement system is solid and works well. The Dispute Settlement Understanding review process has continued to run its course, but in the meantime, under the leadership of DDG Jara, improvements have been introduced to reduce the costs of administering the system. We are also very advanced in developing a digital registry which will allow the e-filing of cases.

Looking forward, the main challenge in dispute settlement will be to address peaks of activity, in particular at the appeal level. Another challenge is the participation of developing countries in dispute settlement. The provision of technical assistance and training and the support of the Advisory Centre on WTO law are crucial, hence my own personal support to ensure adequate funding of the centre.

Contributing to greater coherence in international economic policymaking

Let me now turn to coherence. Using the terminology of an Appellate Body report, the WTO "does not work in clinical isolation". It is part of a wider system of global governance, hence the importance of ensuring coherence in global economic policy-making.

We have strengthened our cooperation with the IMF and the World Bank, under the explicit coherence mandate contained in the Marrakesh Agreement. But we have also significantly expanded it to many other organisations, in particular to the United Nations family – and let me here pay tribute to the Secretary-General of the UN and thank him for the support he has always afforded to the WTO and to me personally – as well as to regional development banks and to several regional economic organisations.

The WTO is also at the G20 table and has prepared regular reports on trade and investment protectionism and on Aid for Trade. And we have cooperated with the UN system in the context of the Millennium Development Goals and the Post 2015 Development Agenda. 

But as important as coherence between member-driven international organisations is, what really counts is the coherence of members. And I hope more will be done in domestic coherence and in the other areas, such as the relationship between the WTO and ILO. That, of course, is your own task.

More and better targeted outreach

There was a time when trade negotiations could be conducted, agreements could be reached and even implemented largely away from the public eye. As the French saying goes, pour vivre heureux, vivons cachés. But our societies no longer allow this. Not least because trade remains politically sensitive: the many who benefit are silent, those who suffer are, understandably, vocal. Their voices need to be heard because they are usually the weaker, the less well trained or skilled workers, often women. Public scrutiny is inevitable. There is a growing need to engage with our stakeholders and with the public at large.

This is why ministers' and capitals' involvement is decisive. But experience shows that engaging both ministers and ambassadors is a delicate chemistry. Too much time spent with ministers and the ambassadors get restless. Too much time spent with ambassadors and the ministers become distant and mobilising their support at the right moment becomes harder. On this, my successor will have to find the right recipe. Mine did not always work!

Much has been achieved to enhance interactions with stakeholders and the public. We have expanded our engagement with small and non-residents members. This has been tremendously helped by the setting up of an e-learning platform which has grown from around 250 participants in 2005 to almost 5,000 in 2013. By the end of 2012, we would have provided access to e-learning to 22,000 participants. This is one of the major achievements of the WTO's technical assistance in these eight years: smarter more targeted and more cost efficient support.

Advice from a parting director-general

In these eight years, I have also seen the political economy of trade opening better integrated into a set of domestic and international policies. This is an important step forward in the challenge of 'convergence' that the Report on the Future of World Trade has so well reflected. Support for more open trade will not be sustained without ensuring greater fairness between winners and losers of trade opening. And without more convergence on values-based preferences that lie behind differences in non-tariff measures. This remains a challenge ahead.

This is an edited extract of Pascal Lamy's farewell remarks to the WTO. For the full transcript, click here.

Pascal Lamy is director-general of the World Trade Organisation. Originally published on www.VoxEU.org. Reproduced with permission.