October 5, 2004
Remarks of Rufus H. Yerxa
Deputy Director General, World Trade Organization
Coalition of Services Industries
Washington, D.C.
Let me begin the evening by thanking you for your invitation and for the very kind introduction. It is indeed a pleasure to be back here with so many familiar friends whose efforts have done so much to help shape the international trading system over the years. Your member companies, and your tireless President Bob Vastine, have worked so hard to educate us in Geneva about the importance of your industry and the critical nature of the goals you espouse. We not only welcome that input but we need it.
I would also like to take advantage of my visit here to acknowledge the tremendous efforts of USTR, which were on display once again during our negotiations over the so-called "July package" this past summer. Bob Zoellick and his team did an unbelievable job in bringing that package to fruition. We literally could not have done it without U.S. leadership.
This is nothing new. Almost a decade before I started working as a GATT negotiator, a small but dedicated cadre of people at USTR - with the help of many of your companies - struggled to build the intellectual and technical foundations of the GATS. It took many years of hard work to get where you are today, and many people deserve praise. One of them is here tonight - my good pal Dorothy Dwoskin. She was one of the early pioneers of those delicate talks in Geneva to convince the world that the time had come for services to be part of the system. She’s gone on to be a trusted right hand to five successive USTRs.
USTR is full of dedicated and skilled professionals who often toil without much appreciation or recognition. Often their only reward is more work! The same can be said of the organization I now represent - the Secretariat of the WTO. This relatively small organization of trade experts services a massive system of trade agreements involving 148 member countries, dozens of standing bodies and negotiating groups, a large and growing case load of trade disputes and a tremendous demand for technical assistance. Members rely on the Secretariat for expertise, and they demand that we remain objective and neutral in all matters. So I speak to you tonight from the perspective of someone who is expected to give full weight to the point of view of all WTO members.
But I am also proud to be one of a long line of American nationals who have served in my present capacity. Like my predecessors, I think part of my job is to keep people from the United States - the WTO’s biggest member in trade terms - informed about what is really happening in Geneva. But secondly, and equally important, I think my job is to help the rest of the WTO membership to understand the American perspective on trade. It is often popular to criticize American trade policy. This is understandable, since you are the largest partner for many of the WTO’s members and your actions have a disproportionate impact. But your trading partners should also appreciate the burdens and the responsibilities that the United States assumes in world trade. In fact, the five largest WTO members in trade terms besides the United States - namely the European Union, Japan, China, Canada and Korea - all enjoy a global trade surplus. Yet all of them would have a deficit if it weren’t for their trade with the U.S.
So part of my role is to help put their concerns over U.S. policy into perspective, and to ask them to consider the pivotal and constructive role that the United States has always played in the system, despite the often tremendous unpopularity of trade liberalization in many parts of the United States. I am not trying to say that America is right about everything, but on the larger questions facing the world trading system, the United States has not done too badly by its trading partners.
This brings me to a few thoughts on the current environment surrounding trade issues. You know, the trade debate is never easy. In living through this debate over the last 25 years, I have often wished that a voice would just come down from on high and tell us all what the right answers are. I am not sure, however, that even if it did we would fully believe the answer.
It reminds me a bit of a story the American humorist Garrison Keilor likes to tell that comes from his Norwegian ancestry. It seems that this Norwegian named Sven was climbing one day in the mountains above his village and he slipped and began falling over a cliff. On the way down he grabbed a limb from a small tree that was growing on the cliff face and it stopped his fall. As he hung there precariously thinking what to do, he looked up the cliff face and said in a plaintiff but calm voice: "is anybody up there?" Just then a voice came out of the heavens: "Sven, this is the lord. I will save you! Let go of the branch and I will bring you safely down the cliff!" Well Sven looked down at the fjord several thousand feet below, and he looked back up the cliff and he said: "is anybody else up there?"
I think that’s the nature of the trade issue. There are never any universally accepted answers and the problems you face will always test your faith. But we must continue to search, continue to question, and most importantly, continue to believe we can make progress.
So it doesn’t surprise me to find yet another debate on the benefits versus the costs of trade liberalization and its long-term impact on the U.S. economy. I see that even prominent economists like Paul Samuelson and Joe Stiglitz are now questioning today’s trade orthodoxy. Of course, the growing U.S. trade deficit has helped fuel this debate, as have the economic downturn and job losses of a few years ago. And of course the phenomenal success of China has raised questions in many quarters about whether this will lead to an unacceptable weakening of our industrial base.
These doubts about the impact of a more open U.S. market in an asymmetrical world are not unprecedented, nor are they something I think we should fear. In fact, the debate is healthy. I remember the debate of the early 1980s, when the U.S. trade deficit tripled and everyone was writing about Japan, Korea and other Asians taking over our economy - the hollowing out of the American economy, they called it. This led to a long reappraisal in the Congress and the Administration of U.S. trade policy. I worked in Congress during that debate. In the decade that followed, the United States toughened some of its trade policies, opened many foreign markets, and negotiated the two largest trade agreements in its history. Those efforts were shared by both political parties and by both a Republican and a Democratic Administration. As a result, many U.S. industries were rejuvenated - exports boomed (so did imports of course) and the U.S. created 20 million new jobs (despite Ross Perot’s dire predictions to the contrary)
That export boom seems to have subsided, and now the U.S. economy is obviously facing new challenges. So the debate will once again, I am sure, be intense. But I think it is hard to argue that the growth in the trade deficit is primarily the result of trade agreements or trade liberalization. After all, the European economies have liberalized in industrial goods and services almost as much as the U.S. and most of these countries are enjoying trade surpluses. And if you look at U.S. exports, they have dropped by nearly $60 billion in real dollars since 2000, even though all of the U.S.’s top trading partners significantly increased their imports during the same time and world trade continues to grow at over 4%.
So there are far more important factors at work here, and trying to correct these imbalances by attacking trade agreements or open market would, to my mind, not produce meaningful results (except perhaps negative ones). However, I do understand why many groups don’t see trade agreements as the solution either, and that makes your job harder in selling trade!
But that is for your political process to resolve. I can only hope that as you engage in the domestic debate about trade policy, you will also continue to engage in the WTO. I am not going to give you that predictable line about the WTO being essential to the United States, but I do know that the U.S. is essential to the WTO, and without your active leadership the system would not succeed. If there are things about the WTO you don’t like, then try to reform and improve them. That’s what your negotiators have been doing since Doha. That’s a far more viable option than disengaging from the WTO, which I don’t see as a realistic option.
And in this debate, let’s also keep in mind what the WTO is and what it is not. It is not a perfect system, nor is it one that demands blind allegiance to free trade. It recognizes the right of countries to limit and restrict trade under various conditions. It is about trying to maintain an overall trend towards open markets, but with clear rules and guidelines. And I think many attacks on the WTO for supposedly denying the U.S. the right to defend its market in areas like unfair trade are themselves somewhat unfair. Take the field of antidumping. Since the WTO was launched in 1995 the United States has imposed over 250 antidumping measures. Yet only 11 challenges have been brought against such measures in the WTO dispute settlement process and not all of those succeeded. And WTO rules recognize the right to restrict trade for many reasons - safeguard actions, technical standards, health and safety standards and national security - to name a few.
So the question here is not one of pure free trade, but of establishing a predictable, fair set of international trade rules in a more open world economy. That world will continue to trade, and trade will continue to grow. We can talk about the alternatives to the WTO, but in your major trade relationships - with Europe, Japan, China and many others - there is no other system to address your problems.
Now let’s finally talk about the world of services trade, since after all that is what you came here for! It is worth noting that services is more than 65% of the U.S. economy and over 80% of employment, and that the United States is a relatively open services market. So obviously, there is a lot to gain from opening up the world market - particularly in the so-called "new economy" services, where technology now allows far greater cross-border trade. But more importantly, services represent more than half of the world economy, and the entire world - rich and poor - will benefit from a growth in trade and a growth in efficiency
.Now all of you know these things, and I realize I am preaching to the choir - or perhaps more accurately - preaching to the priests! But here is my real point: of the three major components of world production - agriculture, industry and services - agriculture is the smallest. Yet it generates the greatest political heat and is the toughest to deal with in Geneva. As important as I think agriculture is, I don’t think it is more important to the world than services. Its just the governments have consolidated their positions and objectives more fully on agriculture. So I think the services providers around the world need to do the same. You need to force governments to focus on their real objectives and to finally acknowledge the gains they can make by allowing greater competition in the services field. In other words, I would urge you to be a squeaky wheel, but to use facts and objective reality to convince doubting governments that they too can be winners.
That is how the U.S. finally got the telecommunications and financial services deals. Of course CSI has already been doing a lot of this. But my message to you tonight is simple: you need to keep it up! I know that sometimes it is tough. I can imagine that you often suffer from trade fatigue. But the fact of the matter is that the GATS has not even come close to achieving its full potential. It has had some success in locking in deregulation and openings, but it is not yet the instrument it should be in freeing up commercially traded services world-wide. Of course, getting results is still going to be a long process. These negotiations will take time, and will require a grueling dialogue sector-by-sector dialogue.
The good news is this: the July package of agreements we reached in Geneva has put the Doha Round back on track. Roadblocks have been removed (for the time being anyway) in agriculture, industrial tariffs and trade facilitation. Talks are now poised to gain momentum in tough areas such as antidumping and subsidies.
And the services negotiations - under the able chairmanship of Chile’s Ambassador Alejandro Jara - are now gaining some velocity. We have more countries coming forward with their initial offers. We have a May 2005 target date for revised offers. We have a number of key players, including in the developing world, realizing that they have a lot to gain. India, for example, joined together with the United States to strengthen and elevate the status of services in the July package (and here, incidentally, I want to pay tribute to Bob and your team for your work in this regard). I remember when India was the major antagonist to the U.S. on trade in services, yet today they define themselves as a major exporter with huge potential, and for good reason.
And this gets me to my closing point tonight about the future of the WTO and the multilateral system. There are, understandably, a number of concerns about what whether the WTO is a fair system, whether it is too cumbersome, whether it can really handle the modern era of globalization. Just about every charge that can be made against it has been made, and unfortunately quite a few of those charges are uninformed or based on some hidden agenda that may be worse than the WTO agenda. And I have yet to hear a convincing, coherent argument from those who oppose the WTO of what they would put in its place.
Predictions of our demise are not new. I remember when Lester Thurow, the MIT economist, went to Davos in 1987 and said "GATT is dead". Five years later we accomplished the most sweeping expansion of the GATT system in its history. We have now brought China into the system and China’s remarkable success since joining speaks for itself. Within the next few years we will bring in most of the main players who are still outside the WTO - Russia, Saudi Arabia, Viet Nam and many others.
And despite the doubters, I think we will eventually succeed in the Doha Round, because its logic is compelling - reduce the barriers that have prevented the developing world from competing in areas like agriculture, bring down the remaining high tariffs in the industrial world, create more solid rules in areas like customs procedures, and yes, create new openings to global services trade. Most economic studies say these changes will expand wealth and promote development in both rich and poor countries alike.
know that next year you may have another legislative debate about whether to continue giving the President authority to conclude the Doha Round, and in fact I guess you will also debate whether to remain in the WTO. It is not the job of any international official to tell you how to resolve those debates. Elected officials decide this based on what they see as in this country’s enlightened self-interest. So you will exercise your sovereign right to decide what America’s trade policy ought to be. But I will venture one observation: They don’t rewrite the laws of economics, and there is very little about this debate that hasn’t already been clearly demonstrated by objective economic reality. Despite what some would have you believe, the economic data of the past half-century is clear. Those who liberalized, who have taken the risks of opening up to global competition, have garnered the lion’s share of global prosperity. Those who have suffered the most have been the societies that have resisted this trend. I know the world has gotten more complicated, but there is still no escaping that reality.
I have a lot of confidence in the United States. It still looms large in the world. It’s remarkable $11 trillion economy with unprecedented ingenuity and entrepreneurship is still capable of tackling almost any economic challenge. So I welcome the coming debate, and I look forward to working with all of you to continue building a strong foundation for world trade. |
