Speech

Australian Minister for Trade, Mark Vaile

27 June, 2000

Reaping the Full Benefits of Global Trade for Development

Ladies and Gentlemen, it is a great pleasure for me to be here today to participate in this important discussion. I do so having just participated in my first OECD Ministerial Council Meeting here in Paris where I am glad to report that international trade was one of the key issues under discussion.

The international trading environment has changed enormously in recent decades. Globalisation, the impact of new technology and the sheer pace of change have brought adjustment pressures and increased competition for all of us. This means the importance of increased and fairer access to markets has never been greater.

Few of us have the economic muscle to go it alone. Australia, a medium-sized economy not a member of a powerful geo-political bloc, cannot by itself wield sufficient clout to force other economies to open their markets. Nor can most other countries, particularly developing countries.

Working towards the new round

The experience of the post-War period has shown that broad-based multilateral negotiations are the best way to deliver a more equitable, open and predictable trading environment. That's why Australia has long been a strong supporter of the World Trade Organization (WTO) and in the last few years has been an equally impassioned advocate for an early launch of a new, market-access focused round of multilateral trade negotiations.

Why is a new round necessary? And what benefits will it bring developing countries?

First, the benefits for both developed and developing countries in removing barriers to trade are enormous. A report released by Australia at last year's OECD meeting shows global welfare gains from halving current trade barriers are estimated at about US$400 billion annually.

Secondly, a new round would not only result in further trade liberalisation but would also help ensure that countries do not backslide on their existing commitments to wind back protection.

Agriculture a key priority for Australia, the Cairns Group and developing countries

This is particularly important in agriculture where the establishment of a more level playing field would enable developing countries - some of whom may be less ready to join the so called "new economy" - to benefit more equitably from increased trade and economic growth.

It is a stark reminder, in this regard, to note from the OECD's annual report on agricultural policies that total agricultural support in OECD countries in 1999 rose to a staggering US$361 billion in 1999. That means farm protection in the OECD cost approximately seven times as much as the aid OECD members give to developing countries in the form of Official Development Assistance. And government support to farmers has returned to levels not seen for more than a decade. This situation is unacceptable, untenable and must be reversed.

Time and again in various international fora, we have all declared our commitment to helping developing countries reap the full benefits of global trade. But the resurgent level of trade-distorting support in the agriculture sector in recent years contrasts sharply with this rhetoric. We need to match rhetoric with action. The Cairns Group is systematically addressing agricultural reform in the current WTO agriculture negotiations and working with other developing countries towards the common goal of trade reform.

As you know, the second session of the agriculture negotiations will commence in two days time in Geneva. The Cairns Group is ready to negotiate constructively to achieve the fundamental reform that all WTO members have undertaken to work towards. It has already submitted an ambitious but realistic proposal on export competition.

Export subsidies are an area ripe for reform. There is widespread recognition that these are the most pernicious and trade-distorting of all forms of support. That is why they have not been permitted in industrials for 40 years. But in agriculture - which is a key industry for so many of the countries whose development we are trying to encourage - we continue to allow countries to subsidise exports. Essentially, the treasuries of rich countries are allowed to block the development opportunities of their poorer neighbours.

If we can achieve the elimination of export subsidies as a first step in these negotiations, we can show the developing world that we are serious about full engagement in the global economy.

For developing countries to benefit fully from a rules-based system, market openings must be available in areas where they have export potential and the capacity to supply. This is far more important for developing countries than negotiations on so-called "new issues" which, if overly ambitious, can only delay the gains on offer from market access openings.

APEC Trade Minsiters' Meeting Darwin

Thirdly, experience has shown that lowering trade barriers - in addition to undertaking wider structural economic reforms - has significantly assisted the economic development of countries which have taken these steps. An Australian report, "APEC - A Decade of Progress", released at the May APEC Trade Ministers meeting in Darwin, which I chaired, demonstrated that economies in the Asia Pacific region which best weathered the "Asian crisis" were precisely those which had become more integrated into the world economy through more open trade and investment.

Importantly, APEC Ministers - representing a diverse range of developed and developing countries - supported the early launch of new WTO round and endorsed a series of practical steps to that end.

We have seen powerful results from multilateral trade liberalisation in the past. Average tariffs on manufactured goods in industrialised countries have fallen from about 40% to 4% over the last 50 years due to multilateral trade rounds. The benefits of the Uruguay Round are estimated to exceed US$200 billion annually. But, as my comments on agriculture show, more needs to be done.

Lessons from Seattle

The WTO and the process of trade reform has not been without its critics. As reflected in the demonstrations at Seattle, debates between governments now take place against a backdrop of growing domestic concern about the globalisation of economic activity.

But if these critics think they are representing the interests of the developing world, they are wrong. As President Zedillo of Mexico has said, to stave off further trade reform as a response to concerns about globalisation would "save the people of the developing countries from development".

Still, I wonder if the gaps between the advocates of multilateral trade liberalisation and its critics from civil society are as wide as is sometimes thought. In fact, much of what civil society is calling for is what a fully functioning multilateral trading system should deliver, namely:

• income levels for all which reflect their capacities
• efficient use of the world's resources on a sustainable basis
• equity and predicability
• rule of law and judicial review
• and - a particularly Australian sentiment - a fair go for all.

Developed nations have a responsibility to ensure that developing countries have the capacity to implement their existing WTO commitments and to participate fully in any new round negotiations. Australia has been active bilaterally, within the WTO and in APEC in delivering and supporting capacity-building programs. This will continue.

The main industrialised countries also have a responsibility to bring to an end the lack of consensus about the scope of a new round so that the focus can be on actual launching. Necessary convergence will require leadership from the U.S. and the EU, a strong dialogue with developing countries to ensure their concerns are fully taken into account and flexibility on all sides.

There may be an opportunity to launch a new round after the US Senate has passed the important legislation on Permanent Normal Trading Relations for China and before the US election.
If so, we should seize it.

Conclusion

A new round of multilateral trade negotiations in the WTO, centred on market access in agriculture, services and industrial goods, will help achieve the sustainable economic growth and development needed to improve the lives of people in both the developed and, particularly, the developing world.

Thank you for this opportunity to speak to you today.