unctad.org | Third WTO Ministerial Meeting
Statement by Mr. Rubens Ricupero, Secretary-General of UNCTAD
Third WTO Ministerial Meeting
Seattle
30 Nov 1999

On the way to Seattle we have heard much talk about making these new trade negotiations into a Development Round. Our central objective must be to change that rhetoric into substance - in the agreements themselves. This is the way to give practical effect to the efforts by developing countries to become full-fledged - not shadow - members of the system.

UNCTAD is doing precisely this: encouraging developing countries to take a pro-active attitude in redressing the imbalances and shaping a better system through the "Positive Agenda Programme", whose impact can already be measured by the fact that half of the 250 proposals in the preparatory process came from those countries.

The developing countries in the past have been likened to the "free-riders" in the system. This was never true, and by their actions, the developing countries have shown just how wrong this view is. They have liberalized faster and further than any other countries. And in the preparatory process for Seattle, they have submitted more than 110 detailed and concrete proposals for dealing with the specific problems which they have identified as impeding their ability to participate fully and effectively in the multilateral trading system.

This is not only the best, but the only, way to deal with the problem of legitimacy, which stands now at the very heart of the trade debate -- as anyone can see just by glancing through newspaper editorials or watching the street demonstrations.

At the root of the problem lies globalization and its disruptive effects: job security, increasing inequality among nations and inside them, the pervasive fear that people are losing control over their own lives. The backlash against globalization finds expression in shifting targets. First, it was the NAFTA, then the investment negotiations in OECD. Now WTO´s turn has come. In this sense, it is suggestive and perhaps ironic that the home town of Microsoft, the symbol of the globalized economy, should become the setting for demonstrations against global trade, even if most participants in the protests come from elsewhere. It would be a serious mistake to brush aside the significance of these demonstrations. They have to be taken seriously.

For any international organization, legitimacy depends on three main components: universal membership, participatory and effective decision-making, and fair sharing in the benefits of the system.

WTO´s universality has just received a big boost from the breakthrough on China´s accession, which will hopefully soon put an end to the long wait of one fifth of humanity.

We are still a long way, however, from ensuring that the accession process will become fairer and quicker. This requires agreeing to a "fast track" for those 19 least developed countries who remain in the waiting room. It also means not making demands on acceding countries, beyond those requirements already imposed on the current members. Now that the US and China have agreed upon terms for China´s accession, there is no more reason for a geostrategic game which has had serious knock-on effects for many acceding countries.

But as the organization grows more universal, it also gains in size, complexity and heterogeneity. The club-like decision-making process of the old GATT served well for an entity of a few like-minded countries, but it no longer fits one with 140 member nations, China among them, with different interests and development levels. As a former participant in the green-room system of the Uruguay Round, I have to admit that it was less than fair or transparent to the many excluded Contracting Parties. Since the end of that round, and because of the way it ended, complaints have been accumulating about the lack of participation and transparency in decisions. There has been a clear pattern of complaints leading to disappointment, and this in its turn is generating a sense of a "legitimacy deficit" for the whole system in the public eye. The net result has been a growing perception that the system could become more and more difficult to manage, as suggested by a series of painful episodes culminating in the inconclusive pre-Seattle preparatory process in Geneva.

A sure way of making things even worse would be to produce an artificial consensus on the basis of texts negotiated by a few key players. In due course, this will only turn disappointment into disaffection. In effect, it is not size that makes the process cumbersome, but the one-sided promotion of the interests of just one group of countries, and the persistent refusal to acknowledge the legitimate interests and well-founded concerns of developing nations. This is precisely what we have been seeing in relation to the genuine difficulties these countries have been facing with the implementation of some provisions in TRIPS and TRIMs, among others.

The implementation problem is but the last one in the long list of imbalances that have been distorting a system which was for many years aimed at the reduction of industrial tariffs among advanced economies. It was perhaps understandable, in that light, that agriculture would be kept largely outside the disciplines of a system that had to accommodate the construction of the European Common Market and its CAP, or Common Agricultural Policy. This was achieved, by the way, not through the official free trade philosophy of the multilateral system but very in spite of it. Massive subsidies and State intervention turned the market upside down, disproved all the predictions of the reputable economists of 80 years ago and made Europe into one of the largest agricultural exporters in the world. The first waiver in agriculture was granted to the US in the early 50s, while the first "short-term" arrangement for cotton textiles that would later develop into the Multifiber Arrangement occurred in the latter part of that decade: In one case, nearly half a century ago, and in the other, more than 40 years ago. And the nations which after all those years say they are not yet ready fully to liberalize agriculture or textiles trade are often the very same ones that feel it would be much too lenient to grant developing countries more than five years in which to adapt to the complex changes in intellectual protection.

In order to deserve to be called a "development round", future negotiations would have to redress those imbalances, as a bare minimum. More specifically, they would first have to eliminate the most glaring example of imbalance, the freedom of developed countries to subsidize massively their exports of agricultural products, and to place their industrial subsidies in the non-actionable category. Secondly, they should accelerate the dismantling of the Multifiber Arrangement, where only 6 per cent of the value of restricted items has been liberalized so far. Thirdly, it is time to get rid of tariff peaks and tariff escalation in a large array of products where developing countries are competitive, and to grant bounded free market access to LDCs exports.

There is no alternative to the multilateral trading system, but this does not mean we have to resign ourselves to its current imbalance. After the two decades of the Tokyo and Uruguay Rounds, the vast majority of developing countries have ended up with more trade deficits - 3 per cent more than in the 70s - and less economic growth - 2 per cent less than before. This is in part the result of inadequate domestic policies, although as I mentioned earlier, most of those nations carried out serious adjustment programmes and can no longer be called "fee riders" after the rapid opening of these markets. There are other reasons: the sluggish growth of the economies and import demand of advanced countries, the fall in commodity prices and consequent deterioration in terms of trade. But a significant cause of this worrying state is certainly the asymmetries in the balance of mutual rights and obligations, including market access, that must finally be set right.

There are only two options before us. The first is to persist with the mercantilist approach of pressuring developing countries to further open markets that will soon become non-existent, as those nations will not be able to get through exports the resources they need to pay for their imports. The second is a "lift all boats strategy" that will allow developing economies to export their way out of poverty and underdevelopment, earning them the money to finance their imports of capital goods and technology from industrial countries, without increasing their debt. I hope that Seattle will choose the second road, the only one that can close the "legitimacy gap" and update the old UNCTAD slogan, "trade, not aid", with two new formulas: "market access, not speculative capital and debt; trade, not hot money".



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