VoxEU Column International trade

Looking back, moving forward

After heading the WTO for eight years, Pascal Lamy offers his farewell remarks. This column reproduces them in full. Despite global turmoil including the Great Trade Collapse and an historic shift of economic power towards emerging markets, the WTO is larger and stronger. Regional trade arrangements can contribute trade opening but they are not sufficient. There is no escape from achieving positive results in the Doha Round, but this requires adjusting the agenda to today's realities by adding new elements.

I came before the General Council in 2005 when I was a DG candidate and again in 2009 to share with you my views about the WTO. Today, I come to you one last time in my capacity as Director-General, as a sign of my strong commitment to being accountable to you, the members of this organisation, whom I have strived to serve since you appointed me eight years ago.

Thank you for affording me this opportunity.

Let me begin by saying that it has been an immense honour and privilege to serve this organisation.

I think it is fair to say that, together, we have strengthened the WTO as the global trade body, as a major pillar of global economic governance. 

Despite the heavy headwinds and the turmoil in the global economy as well as on the geo-political scene, together we have made this organisation larger and stronger.

This, I believe, is our main achievement during these last eight years.

We have lived through eight transformational years. We have seen the rise of China to the number one 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.

And the WTO has remained solid in the midst of the tempest.

When I appeared before you in 2005, I said I believed trade opening and the reduction of trade barriers were essential to promoting growth, fostering sustainable development, reducing poverty and creating jobs. Ultimately, these would work towards peace and stability. But I also stressed that this process was neither natural nor automatic. 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.

The WTO is the "system" which provides for multilateral trade opening, global trade rule-making and enforcement of these rules. Opening markets and designing global trade rules remain our core business. And our core business remains unfinished. At the same time, openness, non-discrimination and transparency remain our core political values.

It is through these lenses that I would like to shortly outline the experience of these last eight years.

Multilateral trade opening: Adjusting to a changing world

Negotiating trade opening is not the only function of the WTO, but it is clearly one of its central functions. The embodiment of this function remains the Doha Development Round.

Because the Doha Round has not yet been delivered, some would be tempted to say that this organisation is in crisis; that trade multilateralism does not function, that the WTO has become irrelevant.

I believe these are simple shortcuts at a much more complex reality.

To begin with, I must say I do not think the debate is about the relevance of the WTO. It is about its credibility. And credibility stems from the capacity to deliver. And delivering multilateral trade opening today is not trivial.

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, Viet Nam 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.

I do not wish to be misunderstood. I am not against trade opening outside the WTO. I believe that plurilaterals, mega regionals, regionals, bilaterals and unilateral arrangements CAN contribute to trade opening and hence to the levelling of the global trade playing field, which must ultimately remain our collective goal. Because this is what fairness is about. But I do think we would do well to recognise that the issue is not trade opening IN the WTO as opposed to trade opening OUTSIDE the WTO. The issue today is with the difficulties involved in trade opening. Domestic trade politics have become more difficult and trade deals have become more complex because the nature of obstacles to trade has evolved. We are no longer negotiating just the reduction of tariffs, but also of non-tariff barriers, which have gained enormous importance.

Domestic trade policies require a permanent engagement with civil society and with the public at large. They also require properly placing trade in its right context; as one instrument in the toolbox to generate growth and create jobs. Trade policy is ONE instrument; an important one; but not THE instrument. And it is an instrument for, not a weapon against, the wellbeing of all.

The fact that non-tariff barriers are becoming the main obstacle to trade requires us to re-think the way we deal with them. How do we ensure that we limit the negative incidence on trade of measures often taken to protect consumers? This is a matter of interest for all members and whose dimension this organisation has not yet seriously recognised. If non-tariff measures are today's and tomorrow's main obstacles to trade, we need to make sure that the manner in which these measures are addressed contributes to levelling – and not scattering – the playing field. The WTO is not a regulatory agency for the vast majority of non-tariff measures, but it is well placed to become a platform where the convergence of these measures could be monitored, along the lines of what we have done for Aid for Trade.

Finally, I do believe critics have a point when they suggest that the manner in which we conduct multilateral negotiations could be improved. Much time could be saved in the negotiating process if, after an initial phase of definition of objectives to be reached and principles to be observed, leading to a mandate, the Secretariat was tasked to mobilise its expertise to table proposals around which the negotiations would take place. It being understood that it would be for members to take the final decision. Mirroring the processes followed by other international organisations.

All of these are valuable lessons for the Doha Development Agenda, which remains an unfulfilled promise. And which will need to be fulfilled in order to redress the imbalance in some of our rules which is a legacy of history, starting with agriculture. I believe there is no escape from achieving positive results in the Doha Round. Just like there is no escape from adjusting the Doha menu to today's realities. This will require the introduction of new elements into the menu, new elements which require multilateral handling, so as to better level the trade playing field.

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.

My sense is that the situation on this front has improved, even if more remains to be done.

Progress has been achieved in transparency in regional trade agreements, with close to 100 agreements considered since 2006. A new monitoring of trade policy measures has been developed in response to the 2008 crisis. There has been an improvement in the rate of notifications in committees, thanks in part to the technical assistance which has focused on helping developing countries meet notification requirements, and also thanks to a better use of Trade Policy Reviews. Committees have also worked to improve peer reviews.

And tremendous progress has been made in bringing all trade policy information under one roof through the creation of the I-TIP (Integrated Trade Intelligence Portal). Just yesterday we unveiled the new module covering services. I-TIP will provide members with a one-stop shop, with easily downloadable access to non-tariff measures across the spectrum of WTO agreements, tariff and trade data. We have also started working with other partners such as UNCTAD and the World Bank to ensure a more coherent use of our resources in this field. In sum, we now have greater transparency and simpler access to trade intelligence.

But of course we still can and must do better: the rate of notifications remains too low, peer reviews can be made more effective and I-TIP 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.

Finally, I believe there would be merit in an improved and more frequent use of good offices, mediation and arbitration, each of which are provided for in our existing rules. The banana case is the only one in which these have been used since 2005.

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.

Aid for Trade, the Enhanced Integrated Framework and the Consultative Mechanism on Cotton are clear examples of coherence at work. Not that we have turned the WTO into a development agency, not that we have greatly expanded the Secretariat resources to work in these areas, not that we have indulged in some sort of mission creep. Rather, we have used our convening power, our legitimacy, our notoriety and our leadership on trade matters to ensure that building trade capacity goes hand in hand with trade opening. And that the benefits of trade opening do not remain a distant hope for so many of our poorer members. The numerous examples of results on the ground that were showcased at the recent Fourth Global Review of Aid for Trade are a clear testament to our collective wisdom in launching this initiative in 2005. And a lot of credit for this wisdom goes to DDG Valentine Rugwabiza.

But there have been many more examples of co-operation and enhanced coherence: on trade finance; on agriculture and food security under the UN Task Force on Food Security chaired by the UN Secretary-General (and I would like to pay tribute to the contribution of DDG Harsha Singh on this matter); on climate change with UNEP; on measuring trade in value added with the OECD and many others; on access to medicines and medical innovation with WIPO and WHO; on sanitary and phytosanitary standards under the STDF; on non-tariff measures with UNCTAD and the ITC; on jobs with the ILO.

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. Finally, I have participated in all 16 meetings of the UN Chief Executives Board during this period.

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.

We have also expanded outreach with external stakeholders.

We have significantly stepped-up our dialogue with NGOs, business and civil society at large both during my visits to WTO members as well as here in Geneva, in particular through the Public Forum, which has attracted an increasing number of participants every year.

We have further developed our contacts with parliamentarians, for whom we have devised a regular newsletter and local and regional seminars to brief them on trade-related matters.

And we have enhanced our relations with academics, and in particular those in developing countries, through the creation of the WTO Chairs, the WTO Young Economist Award and the revamping of the WTO Reference Centres.

Finally, we have tried to keep close to the public at large through the revamping of the WTO website, which is highly rated, the engagement with media across the world, through enhanced technical assistance and outreach efforts, and initiatives such as the Open Day, which have helped bring the organisation closer to our own immediate environment in Geneva.

All these initiatives have helped reposition the WTO within global economic governance and improved the visibility and the image of the organisation.

This task, however, is far from being completed. The WTO, with its single Geneva site and its very limited resources, cannot substitute for an active outreach by its members. Longer term, outreach will be essential to sustain the legitimacy of an institution whose core mission – reducing barriers to trade – will have to deal with more value-based, hence more politically sensitive, non-tariff measures.

A professional secretariat at the service of members

Three adjectives come to mind when we think of the WTO Secretariat: small, lean and hyper competent. With its 650 staff, the Secretariat is very small compared to our sister organisations, whose headcount are in the thousands. But it is home to an incredible reservoir of expertise devoted to serving members.

My objective has been to modernise the Secretariat, introducing changes to adjust to evolving circumstances, but also to enhance efficiency and improve value for money. At the end of the day, we remain an organisation funded by taxpayers. Let me en passant thank those of you who have helped with your capitals in settling arrears, certainly not an easy task! And not concluded, but a major step forward.

I will not detail the changes in resources management which have been introduced and which have been the object of a separate report to you. Instead, I would like to focus on the importance of ensuring that the Secretariat provides intellectual leadership in the field of trade.

This means fostering research and encouraging thinking and publication. I believe much has been achieved in this field and the credit for it goes to staff. Research on trade in value-added, work on value chains, on analysing regional trade agreements, preparing trade policy reviews, World Trade Reports, assisting panels and Appellate Bodies and the list goes on. The WTO is today THE reference on trade knowledge.

But we cannot rest on our laurels. The Secretariat needs to continue to be forward-looking, to be fully aware of new issues and look into future obstacles to trade. And this will require networking with members and with other stakeholders. In the staff of the Secretariat, you have an incredible asset. Keep investing in it. And think about how you could better exploit its potential, as suggested by the Report of the Stakeholders I convened last year to look into the future of trade. What I can guarantee to you is that neutrality and independence are deeply rooted in the Secretariat's values. And therefore it deserves more of your trust.

Advice from a parting Director-General

I am coming to the end of my statement and I think it is time to start looking into the future.

These eight years have seen the building of a stronger institution. And I am not just referring to the renovated premises. This is now an institution, which is more than an organisation. Beyond the benefits that it provides to its members, the WTO, as an institution, is an asset in itself, a global public good that each and every one of its members must nurture. Of course, the DG represents the system and should always care about the system. But it cannot be that the "DG lives on Venus", the planet of a global public good, and "Members live on Mars", the planet where members fight for their individual interests. You must look beyond your interests and also care about this institution, both as owners but also as stakeholders that you are.

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.

On 31 August, I will be stepping down as Director-General. I will take with me great memories, many friends, also some bitter lessons, but above all I take a sense of fulfilment in what has so far been a career at the service of the public interest.

All of this would not have been possible without the support that you have extended to me during my two terms. Without your collaboration and even sometimes without some "barking" here and there.

This would not have been possible without the A-team of DDGs with whom I have worked during these eight years. They are behind many of the achievements of these years. They have been my arms, my eyes and my ears to provide you all with our best service. Alejandro, Harsha, Rufus, Valentine, my thanks for your support and your friendship.

Neither would this have been possible without my office, a small but beautiful team of devoted staff who have endured my frantic and demanding working and travelling rhythm, while never – or almost never – losing their calm and smile. To all of them go more than my sincere appreciation, my heartfelt gratitude.

Finally, my final words of thanks go to Secretariat staff. To all of them without exception. To the professionals and the support; to the Directors and the rank and file; to the security, to all of those who have made this adventure possible. They have helped me learn more each and every day of these eight years, which I consider a rare privilege.

My journey at the WTO is coming to an end. It is time for a bit of public emotion, which is not exactly my style! It is time for me to embark towards another life cycle.

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