WTO General Director- Pascal Lamy has just delivered a speech to members of the APEC Business Advisory Council (ABAC) this afternoon. His speech focused on 3 matters related to Doha Round. The following is his full speech.  

WTO Doha Development and APEC

WTO General Director Pascal Lamy: “Working Together To Achieve Our Common Goal”

Ladies and Gentlemen,

I am very pleased to be with all of you today, Members of the APEC Business Advisory Council (ABAC), and to share with you my views as to where we are in the on-going WTO negotiations.

This morning, I joined the APEC Trade Ministers Conference in a retreat to exchange views on how to resume the Doha Round as soon as possible. Ministers reiterated their political commitment to the multilateral system. All of them expressed a sense of urgency and joined in calling for a rapid restart of the negotiating round in Geneva.

Of course, this morning Ministers had discussed another important point on the agenda: Vietnam’s WTO accession. I want to congratulate our friends and colleagues in Vietnam on their joining the world trade family. This is an important moment for the Organization. Vietnam’s WTO accession shows a firm political commitment of the Vietnamese government to integrate into the world economy. But it is also a collective recognition by the WTO Members of Vietnam’s economic reform and policy changes which started 20 years ago with the Doi Moi policy. Vietnam is this region’s rising star.

Another APEC member, Russia, is also taking essential steps to join the World Trade Organisation. With progress on the bilateral front, including the news on the deal between Russia and the U.S, I very much hope that the Russian side will now devote much needed attention to the multilateral part of its accession process which is still lagging behind. It is the next phase of the negotiations, the multilateral one, at which we need to concentrate our energy in order to firmly anchor Russia into a rule-based multilateral trading system.

Coming back on the Doha negotiations, today I would like to brief you on three issues: first, why is the Round stalled? Second, what’s on the table now and why we should not forgo it? Third, how can the APEC business community contribute to push up the negotiations?

Why is the Doha Round so tough?

Last July, after consulting with governments of WTO members, I proposed breaking the negotiations off temporarily to give participants a “time-out” to reflect on and adjust their positions. Why can agriculture, which only account for less than 8% of world trade, keep the entire Doha Round agenda off track?

The answer is simple: because food production remains a very sensitive sector for both rich and poor countries. Since the current Round started and since more than 70% of the world’s poor live in rural areas, there is no way the negotiations can succeed if the existing agriculture bias against developing countries is not properly addressed. This means an effective reduction in farm subsidies by rich WTO members as well as a reduction of agriculture tariffs providing for substantial improvements in market access should be done.

Obviously, the tariffs reduction should be modulated flexibly for developing countries. In July we could not reach an agreement on this point because, on the one hand, what was offered in subsidies reduction was not high enough for developing countries to approve, and because, on the other hand, the insistence on flexibilities negotiated in the principle of market access was unacceptable to some developed and developing countries. For the succession of the negotiation each one of the major players in this round must take a decisive step forward. When they do, they must bring with them the extra flexibility in their negotiating positions so that we can closer the gap on the very substantial trade agreement that is now completely within our reach. We have recently seen some signals of new flexibilities from key players. I do hope these will soon turn into concrete and specific results.

So what do we have on the table?

Understandably, ending this Round is difficult. The most ambitious attempt is that governments can open trade multilaterally basing on their ability, not only in the hard core of agriculture, but also because of the countries that are negotiating and that can share the results. The Uruguay Round wrote the modern rule-book for the trading system, and the Doha Round is using it to open trade and carry out reforms on an unprecedented scale.

There are more than 20 negotiation issues discussed in the Doha Round. Let me examine just five of them which I see have a considerable impact on APEC activities. No one should claim this Round, in comparison with Uruguay Round, is worthless.

The Uruguay Round succeeded in creating the first comprehensive set of cross-border trade rules on agriculture, the WTO Agreement on Agriculture. It created a framework for disciplining agriculture subsidies and a process of market opening in agricultural trade. The Doha Round promises to build on the results of the Uruguay Round by going further in “eliminating difference in the related fields” in agricultural trade.

The Uruguay Round reduced the agricultural tariffs of developed countries to an average of 36%, and of developing countries to an average of 24%, except for those who chose to simply bind their tariffs. At this time we have abandoned average reduction, which gave countries the option to pick and choose and left us with sky high tariffs on sensitive products, in favor of a banded formula which will cut higher tariffs more than lower ones. Moreover, even conservative proposals on the table today are better than the tariff cuts achieved in the Uruguay Round.

The Uruguay Round saw a reduction of agriculture subsidies which distort the world trade of rich countries is 20%. Today we are discussing to cut more than three times lower. In the Uruguay Round, developed countries agreed to reduce their spending for export subsidy to 21% whereas today we have already agreed to the complete elimination of this category of subsidies by 2013. The Doha Round would also strengthen and develop new disciplines for other forms of export support such as export license, food aids and state trading enterprises.

In addition, in the Doha Round, cotton was in quick and detailed negotiation and got high appreciation from three pillars in the round.

What about progress made on industrial products, which account for over 90% of global trading goods? We can simply describe this progress as “one formula, greater predictability and more cuts”.

The Uruguay Round delivered average cuts, meaning Members were free to select which products to cut tariffs and which not. This led to the maximum tariff and eliminated tariff, especially tariff on products of interest of developing countries such as textiles and garment, clothing or footwear. In this Round, Members agree to cut tariffs base on one methodology: where has high tariffs would be cut more than low tariffs. It remains a remarkable bravery that nearly two-thirds of the WTO Members will apply the same formula, accounting for approximately 97% of world imported industrial products. Using this formula, developed countries will apply the tariff cuts for all products, with no exceptions, while limited flexibilities would be applied to developing Members.

This Round will also bring greater transparency and predictability by increasing the number of product with tariff cuts which will be in a maximum ceiling or binding level. In the Uruguay Round, the upper average binding level to cut tariff is 73% for only 21 participating developing countries and 99% developed countries.

In the Doha Round, developed countries would achieve a 100% binding level. This 1% increase should not be forgone, as the trade involved is significant in terms of value for at least three of these countries: Canada, Japan and the United States. For developing countries, the percentage will increase to approximately 99.7%.
  The Doha Round will also bring deeper cuts and completely wipe out high bound rates. While the Uruguay Round set a reduction of 33% as an overall target, the actual reductions were well below this average, especially in developing countries. Doha Round significantly reduce a series of “tariff peaks” that rich countries still apply to developing countries’ exports and cut tariffs in developing countries, in particular with regard to South-South trade.

Let me now examine the situation regarding services. At the Hong Kong Ministerial Conference in 2005, Members agreed to map out collective aspirations at an unprecedented level of specificity. It was agreed to bind existing access conditions in cross-border trade to improve the flexibility on types of legal entities permitted and to improve the commitments on services’ professionals de-linked from commercial presence. WTO Members also agreed to a cross-border approach of request-and-offer negotiations complementing the bilateral approach. The multilateral negotiations will provide the much necessary attention to sectors of interest and on strategic partners (requesting and requested Members).

Core services sectors such as financial services, telecommunications and environmental services are to produce tangible gains in the negotiations in terms of increased market access. Therefore, the ground for a meaningful second round of revised offers scheduled at the end of July, 2006 was well-prepared and will hopefully take place soon in the context of the overall resumption of the negotiations.

Another key delivery of this negotiation is trade facilitation. The costs to deliver goods through the borders increase domestic prices and prevent domestic enterprises from exporting. One recent study cited by the World Bank in “Business in 2007” estimates that each product delayed in the delivery phase reduces trade by at least 1% per day. Another one shows that reducing trade costs by 50% could increase global trade in manufacturing by up to US$ 337 billion each year and the benefits for consumers from tariff reduction will triple.

Today we are negotiating a completely new agreement on Trade Facilitation to make existing trade rules more suitable to modern business practices of the today’s world. How? By reducing transaction costs which helps to reduce prices for both consumers and producers; by reducing delivery costs; by facilitating the expansion of small and medium-sized enterprises that cannot manage to deal with excessive bureaucracy and red tape; and finally, by helping governments to apply and conduct their border controls more effectively.

Trade facilitation is an area that APEC has showed its leadership and commitment and I would love to thank you all for that. The ideas stemming from the APEC Working Group on Trade Facilitation and the connection between measures on trade facilitation and technical assistance to your weaker members have provided inspiration in the multilateral talks.

These negotiations will also improve existing rules on anti-dumping and subsidies by bringing about more transparency and predictability. They will also create stronger disciplines on regional trade agreements.

For the first time, we will also introduce discipline on aquaculture subsidies which must be responsible for to the depletion of our ocean stocks. World-widely, the global fishing fleets, including 24,400 large decked ships and well over 2 million smaller commercial craft, have exploited over 80 million tons of fish from the oceans. This number is four times than that of the 1950. The global aquaculture subsidies are considered as another reason why the world’s fishing fleets have been overused. They are causing “too many fishermen to chase after too few fish” as has often been stated. At present, 75% of fish stocks are either fully exploited, or over-exploited, and annual global fisheries subsidies amount to approximately USD 15 billion. A WTO agreement on aquaculture subsidies could, thus, contribute to handle this situation.
  After going through what’s on the table in areas of agriculture, industrial tariffs, services, the motivation and trade rules, I believe that no one could argue that this Round is not worth the fight. It deserves our efforts, and it is worth to be made successful. The Doha Round is a once-in-a-generation opportunity for all the WTO Members, and would definitely bring tremendous commercial benefits and a better trade environment to the enterprises community.

How can the APEC business community contribute?

Now, let me turn to my last point today: how the APEC business community can help to conclude the Doha Round.

Today, the Asia-Pacific has obviously become the most dynamic region on this planet. APEC has the population of 2.6 billion people, account for about 60% of world GDP and 50% of world trade. APEC economies do play an important role in the success of the Doha Round.

I have three wishes for the APEC business community:

First, lobby your governments and push for a successful conclusion of the Doha Round. As I have explained above, the business community is the one that gains benefit most from the succession of this Round. Therefore, you have the responsibility to push your Governments and negotiators to show a more visible political engagement and to put greater flexibilities on the negotiating table.

Second, help us explain the benefits of the Round to those who are not familiar with what this Round is all about. Your backup is crucial in raising the public awareness and support for trade opening globally. We need to do that when globalisation impacts greatly on our economic and social structure, and sometimes public anxieties are understandable.

Third, engage in the negotiations as much as possible, and tell your negotiators about the difficulties, trade barriers and unfair treatment you have encountered in doing business. This world is changing rapidly; the way of doing trade is changing as well. Your ideas or suggestions will be valuable to us on future rules making.

APEC 2006 has a good theme: “Towards a Dynamic Community for Sustainable Development and Prosperity”. I do hope the APEC business community could play a leading role in ensuring a transparent and predictable global business environment, narrowing differences and advancing freer trade.

Finally, I would like to take the opportunity to thank ABAC’s continuous support of our work and to call for the early resumption and successful conclusion of the Doha Round. You correctly pointed out in the Report to the APEC Economic Leaders that “the Doha Development Agenda is a once-in-a-generation opportunity to make progress on trade liberalization and must end in a positive outcome for the world trading community”.

Your support to the WTO in the Doha Round at this key moment is crucial. I look forward to working closely with you in the coming months to achieve our shared objective. I count on your support.

Thank you.