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Updated On: Wednesday, 18 July 2018

DDG Wolff: A “crisis can bring good results”

Content by: World Trade Organization
Speaking at an event in Geneva on 6 July, Deputy Director-General Alan Wolff said greater investment was needed from WTO members, business, and non-governmental organizations to craft a better multilateral trading system. While the system is presently under severe stress, past experience has shown that a “crisis can bring good results,” DDG Wolff said. The text of his remarks is below:

The future of the WTO is very bright. (This is a faith-based assessment.)

In the far northwest of Spain lies the Cathedral of Santiago de Compostela, a holy place that is a destination for pilgrims. The roads the pilgrims walk vary in range from 300km to 800km.

The last three quarters of a century of trade policy has been a pilgrimage, somewhat like walking the road to the Cathedral of Santiago de Compostela. In the case of trade, our Cathedral, not yet reached — is free and fair trade — the elimination of all trade barriers at national borders.

The hardest route to Santiago de Compostela is the Camino Primitivo. A description found on the web states: "The route is a continuous series of ups and downs composed of forest trails, dirt roads, stone or lose-rock paths and occasional asphalt roads. To undertake the Camino Primitivo, at least some prior physical preparation is advised."

In trade policy, we have travelled a virtual Camino Primitivo. It has consisted of the unwinding of the 1930 tariff levels, first through bilateral trade liberalizing agreements, then the creation of the GATT, and then adding removal of nontariff barriers through plurilateral agreements, the addition of rules, and finally institutions through the WTO and its agreements.

We did not make it all the way to the Cathedral, which in the case of trade is unattainable. It is a single market, like the EU and the United States, only global. But we have traveled a significant distance along the path toward this gold standard for trade.

As far as I know, no one claims credit for stopping well short of Santiago de Compostela, turning his back on it, and taking the arduous Camino Primitivo in reverse. Going backwards, retracing our steps, is not acceptable, not for any distance.

I am a believer in the arc of history, hereinafter the "AOH", meaning inexorably, inescapably, inevitably moving toward freer and fairer trade. There will be departures, there will be aberrations, and some may be major, but national interests will require a strong set of rules under the World Trade Organization.

However a caveat is in order: the AOH, the arc of history, is completely unreliable in the short term and extraordinary efforts are needed to stay true to it.

Well, how do we move forward?

  1. Members and the WTO Secretariat need to increase the transparency of all barriers and distortions of trade. By this I mean that the actual facts about why trade flows, or why it does not, need to be clear to all.
  2. Members and the WTO Secretariat need to increase understanding of individual WTO Member's interests and concerns.
  3. Members need to increase their compliance with their current WTO obligations.
  4. The above steps should lead to increased trust without which new negotiations will not succeed.
  5. Of course political will is needed to make progress.

The world trading system was built on net contributions. This means going beyond reciprocal swaps of "I will reduce my tariff if you will reduce your tariff". There needs to be investment by Members in the trading system itself, which I think is now again a focus of Member governments.

Greater investment in the trading system is also needed by the private sector, by business and by NGOs.

Through these steps, the world trading system can get to a better place.

At present the world trading system is under severe stress, as nothing that has been seen since the early 1930s. But a crisis can bring good results:

  • 1930 tariffs brought on America's reciprocal trade agreements program in 1934
  • World War II brought Bretton Woods, and ITO, now GATT and WTO.
  • A unilateral U.S. 10% tariff on imports in 1971 resulted movement toward the current international monetary system of floating exchange rates and in the in Tokyo Round nontariff barrier agreements — TBT, GPA and Customs Valuation.

This is a time of "ferment". The dictionary gives synonyms for "ferment". It can mean "mayhem", but it also means "things being stirred up". Both seem to be occurring. Fermentation can lead to fine wine. Not handled correctly the process results in vinegar. The challenge for the members of the WTO is to make at least an acceptable table wine.

It is the responsibility of our generation to leave you a world trading system that is better than the one we inherited. I believe that all those on your program who are associated with the WTO subscribe to that obligation.

But it will be up to your generation:

  • To make trade freer and fairer,
  • To make trade even more inclusive,
  • To assure that the benefits are more widespread and the costs are distributed more fairly,
  • To do even more for the planet — for the air, the water, the soil,
  • To deal with further breakthroughs in technologies, and
  • To leave for succeeding generations a multilateral trading system that is better than the one you inherited.
The purpose of life, our lives and yours, is to make a difference.

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