07/16/2019 | Press release | Distributed by Public on 07/16/2019 09:28
I thank the Ministry of Finance of France, as chair of the G7, for convening this meeting today and for inviting the WTO to participate.
The creation of a multilateral trading system is a remarkable achievement, a landmark of cooperation among trading nations unprecedented in world history. It is an essential component of the liberal international economic order. At Bretton Woods, 75 years ago, it was not much more than a gleam in the eyes of the participants. The multilateral trading system became a reality only somewhat later.
The system was based on the premise that open markets contribute substantially to the maintenance of an enduring peace. This vision was articulated by Woodrow Wilson at Versailles in 1919. Although his plan was formally adopted at the Peace Conference, it was never implemented.
Following the Economic Depression and the onset of another world war, equal access to markets was listed as a key objective of Franklin Roosevelt and Winston Churchill in their Atlantic Charter. It was central to their plan for shaping the peace that would follow that war. Their concept was recognized in the 1948 Havana Charter for the International Trade Organization, linking trade to the cause of peace. The very first words of this Charter for world trade affirm:
the determination of the United Nations to create conditions of stability and well-being which are necessary for peaceful and friendly relations among nations,… .
The vision, that where there is trade there is more likely to be a better chance for peace, is very much alive today. It is eloquently testified to by representatives of the countries which have most recently joined the WTO, Afghanistan and Liberia, and those who seek entry. They see a strong tie between improving the economic conditions of their peoples and peace. Of the countries now in the process of joining the WTO, 13 out of 22 are considered fragile or conflict-affected. Included in this list are Bosnia-Herzegovina, Somalia, Sudan, South Sudan, Iraq, Ethiopia and East Timor. Eleven days ago, the Ambassador of Sudan told a meeting at the WTO that with the restoration of civil order just the day before, Sudan was ready to resume its effort to accede to the WTO.
These fragile, conflict-affected countries regard WTO accession as a tool to build and transform their economies, to create a credible trade and policy framework through WTO-consistent reforms for post-conflict recovery and development, state-building and the promotion of peace. Their aspirations are a potent and current reminder of the conditions that led to the founding of the multilateral trading system.
The trading system did not spring forth whole as did its elder sisters from an idyllic sylvan birthplace like Bretton Woods. The organization envisioned for trade at Bretton Woods that emerged from Havana did not become reality as the United States was unable to ratify it.(1) Despite this unpromising beginning, pragmatic officials from 23 countries salvaged a code of important rules for international trade, although they failed to create a formal instrument for their administration. This was the multi-party contract known as the General Agreement on Tariffs and Trade (the GATT).
The multilateral trading system as we know it today did not come into being until a half century later. Is was the cumulative result of an extended and laborious process, involving eight successive rounds of negotiations over a period of seven decades, with ever expanding participation, each wearing away trade barriers at the border, and finally within national boundaries.(2)(3) Agreement for the establishment of the institutional framework, the World Trade Organization (WTO), was reached only toward the conclusion of the Uruguay Round negotiations (1986-93).
The current relevance of the 164-Member WTO to the world economy is demonstrated by the fact that today by far most of global trade takes place in accordance with the WTO's rules:
The multilateral rules are the foundation on which all bilateral and regional agreements are concluded. This is demonstrated most recently by the launch nine days ago in Niamey, Niger, of the African Continental Free Trade Agreement (AfCFTA), a landmark agreement among the 55 countries of Africa, which could not have occurred in its current form without being underpinned by the multilateral trading system.
And importantly, the WTO continues to provide a means for settling disputes by panels made up of independent persons with experience in trade.
There is much more: A myriad of other activities are ongoing at the WTO. Members exchange drafts of proposed standards for comment by other Members; they support the building of the capacity of developing countries to meet international food safety standards; and they focus increasingly on enabling women and small businesses to benefit to gain more from participating in international trade.
In no small part, as a result of this multilateral framework for international trade, both world trade and global GDP have tripled from the level they stood at twenty-four years ago when the WTO was founded, and since the system went into effect the volume of trade has expanded by about 40 times.
This said, at present the system faces a number of serious challenges:
Against this background, the difficulties being encountered moved to a state of crisis. The proximate causes were:
The relevance of the WTO is being questioned as never before. After being taken for granted, not being that much in the public eye for more than a decade, it is now a focus of widespread attention and concern.
A time of crisis can present opportunities:
Importantly, there is the challenge to make more broadly understood to those affected by trade that the multilateral trading system is working for their interests, not against. The primary purpose of the WTO's present rules and those being contemplated forward is to supply fairness -
In the course of human events, there are times of change, liminal moments, moving from something that was to something that will be. We mark the memories of these periods of change, as many countries did here in France with the recent 75th anniversary of the Normandy landings and today with the 75th Anniversary of the Bretton Woods Agreements.
For the multilateral trading system, we can look to three periods of change: The first in the 1940s was a period of vision resulting in the creation of the system. The second in the 1990s was the creation of the WTO as the institution to administer an updated unitary set of agreements. The third is the current period of potential reform that began at the WTO's 11th Ministerial Meeting at Buenos Aires in December 2017. At that meeting:
Since the Buenos Aires Ministerial, many reform proposals have been tabled by various WTO Members.
While there are certainly differences among Members with respect to where these efforts should take the organization, a sense of crisis has caused a rededication to making the WTO work better. The opportunity for change through reform has been created which must not be squandered. To succeed, the process of reform calls for leadership and vision of the kind that existed at the founding of the multilateral trading system; it calls for enforcement of current obligations; it calls for restoring the ability to make new rules to meet current needs; and it calls for the restoration of legitimacy in the eyes of all of an improved dispute settlement process. The result should be a more effective organization in all aspects, to deliver benefits for all Members, and the creation of an updated and strengthened multilateral trading system.
A common purpose must be rediscovered. Leaders must step forward. Open trade under agreed global rules is an essential part of a revitalized international economic order that can continue to deliver the benefits that its founders envisioned.
Predicting the future
For predicting the future, one relies on probabilities and natural laws. For assessing probabilities, one uses decision-tree analysis - at each fork of the road choosing the path more likely to be taken. In the long run, the decisions taken will be weighted in favor of economic growth over stagnation, cooperation over confrontation. As for natural laws, I believe in Riccardian physics. Trade takes place because it is dictated by needs and consumer preferences, ultimately requiring the road taken to be the one that leads to greater economic wellbeing.
My belief is that the multilateral trading system, buffeted as it is by the current turbulence, will ultimately prove to be the path forward. Resort to 500 bilateral agreements as exist today, even if they become more than a 1000, is not a sensible way to organize the world economy.
Going it alone (des stratégies de faire le cavalier seul) or in pairs, which is nearly the same thing, ultimately leads to a poorer world. Bilateralism worked for Noah's ark only because the passengers were able to get out and take their place in a wider world.
In the future, I believe that there will be a renewal of a consensus for greater openness that is inclusive and global. Leaders with the necessary foresight will emerge from Africa (including its most populous countries), from China, from the European Union (under the influence of the most forward leaning members), from India, from the United Kingdom (whose presence is missing and is missed), from the United States, and those who are like-minded from other countries regardless of size or location.
Realism and idealism will converge out of economic and geopolitical necessity. The era of 'me before you,' from which all suffer, is going to recede.
It will not be immediate. More likely than not, difficult times are ahead. The near future will very likely consist of a combination of severe stresses and muddling through.
But the lessons of Bretton Woods will not be lost -- never to be rediscovered and applied. They will survive and shape the future.