Speech at the Ministerial Council Meeting of the OECD, Paris

Future Challenges for the Multilateral Trading System

4 June 2008

Thank you for giving me the opportunity to address this Forum on Future Challenges for the Multilateral Trading System.

Why Does the WTO and Doha Matter?

Australia believes the multilateral trading system developed through the GATT and the WTO is vital to global prosperity. 

The WTO has been of immense benefit to the global community. This rules-based system has provided certainty and security to trade and has helped build global economic cooperation. 

Over the past 50 years, world trade has grown at three times the rate of growth in world output. However, over the past 5 years growth in world trade has slowed to only two times the rate of world output. 

Economic indicators show that every negotiating round has boosted the growth of world trade. So it is incumbent upon us all to make sure that we conclude the Doha Round this year to provide a much needed economic and confidence boost to the global economy at a time of some uncertainty. 

Ladies and gentlemen:

A variety of proposals for improving the world trading system have been floated. Many of these suggestions from groups like the Warwick Commission focus on the governance of the WTO – getting the decision making structures right. From my perspective, the first challenge for the future is with us now – that is to conclude the current negotiation.

Doha is at a critical stage. 

If we don’t conclude modalities before the European summer break I have grave fears for the future of the WTO and its ability to conclude a global round. Failure on our part to conclude the Round this year could threaten the capacity of the global community to achieve future multilateral rounds. Failure to conclude the Round this year would significantly undermine the momentum we now have behind us with the Round potentially going into deep freeze for some time. Failure to conclude the Round this year would also undermine the comprehensive platform we require to support continued regional trade liberalisation, including in the Asia Pacific region, and also to provide a good platform for bilateral free trade agreements which many OECD Members and Developing Countries are pursuing. 

If we fail to conclude the Round this year we will also be playing directly into the hands of the protectionist forces that would see such an outcome as a great victory on their behalf. 

It is for these reasons that last weekend in Arequipa, Peru, APEC Ministers Responsible for Trade, agreed on a strong statement of support for the Doha Round. In Arequipa, APEC Ministers reiterated our determination to bring the Doha Development Agenda to a successful conclusion this year. Consistent with this, APEC Ministers expressed their readiness to engage to deliver expeditiously a modalities agreement and urged other WTO Members to do the same. 

Where is Doha at?

We are now on the verge, after many years, of achieving our goal of concluding the Doha Round.

I’m very pleased that in recent weeks we have received new negotiating texts on agriculture, industrials and services. There remain areas of disagreement, but the important thing is that we are narrowing areas of difference – and that is a sign of real progress.

Australia believes a successful conclusion to the Doha Round must deliver improvements in market access across agriculture, industrial products and services.

Agriculture has always been considered as the most difficult area of the negotiations to progress towards resolution. Australia, as Chair of the Cairns Group, is happy that progress on agriculture has been made after intense negotiations, particularly on sensitive products. 

However, this level of intensity on agriculture has not been matched with the same level of intensity on NAMA. Nevertheless, the NAMA text provides the architecture for further negotiations in advance of a Ministerial Meeting. It is important that the intensity of officials negotiations in Geneva is increased to try and narrow the differences within the architecture. 

Given the single undertaking we are all committed to, it is now time to achieve progress on NAMA commensurate with the progress we have achieved on agriculture - along with an outcome on services which is being facilitated by the Signalling exercise. 

A final outcome on agriculture cannot be achieved unless we also achieve outcomes on NAMA and services. 

The Round also offers the prospect of strengthening of rules. 

Nowhere is this more important than in the area of fisheries subsidies, where we have the challenge of making an immensely important step to a more sustainable situation. Australia is committed to a strong outcome on this. I am pleased to be on this panel with James Leape of the World Wildlife Fund (WWF) and I welcome the attention that the WWF and others, such as Oceana, are bringing to the issue.  

We now look forward to a WTO Ministerial Meeting taking place in Geneva over the next few weeks.

Having come so far, what’s needed to get us over the final hurdle is political will to conclude the negotiations. We cannot let this opportunity pass. 

The Future of the Multilateral System

Although Doha is our immediate challenge, we are also responsible for ensuring the wellbeing of the multilateral trading system into the future and in this area I’d like to advance three ideas.

First, a key challenge, from our perspective, is how we advance the trade reform effort in the longer term. 

The current global food price crisis underlines why we need continued trade reform. 

As APEC Ministers also agreed last weekend – successful conclusion of the Doha Round will be an important factor in overcoming the serious international situation caused by recent food price escalation. 

Producer incomes are high, so we must use this opportunity to lock-in the reform of damaging farm subsidies which hurt producers in the third world. We should not be making food more expensive by retaining tariffs at a time of high demand and pressing need. On the contrary, currently high food prices are another reason why we must act now to conclude the Round.  

Second, a long term challenge for the multilateral trading system is how to manage the relationship between the WTO and the multiplicity of bilateral and regional trade arrangements.

The challenge is to ensure that bilateral and regional trade agreements build on and reinforce multilateral trade rules – that is, that they are WTO plus.

The FTA Australia has just concluded with Chile is a case in point – this is the most comprehensive deal Australia has ever negotiated with another agricultural exporting economy. This high-quality agreement covers all existing goods trade and makes significant WTO-plus commitments on services and investment.

I suggest that the WTO ought to have a stronger role in ensuring RTAs are comprehensive and of high quality. In this context, the recent establishment of the WTO’s “Transparency Mechanism” for RTAs is a useful start. Shedding light on the RTAs that are being concluded – and their consistency with WTO rules and principles – is a useful influence on the quality of RTAs.

But the WTO could go further. 

Australia has been an active participant in the Doha negotiations aimed at clarifying and improving the rules which apply to RTAs, and we will continue to argue that RTAs need to support the multilateral system. The work which has been undertaken in APEC – with respect to developing ‘model’ chapters and best practices for RTAs has been useful in the consideration of how RTAs can be designed to complement the multilateral system.

I’d suggest that the OECD could also play an important role through deeper analysis of the relationship between RTAs and the WTO, and the development of a best practice guide for RTAs.

Finally, I think we need to look at ”behind the border” trade issues. 

These issues are particularly important to facilitating the fastest-growing areas of trade, that is, services trade, as well as the changing nature of trade. It is no longer just a case of produce and ship. Increasingly, it is about companies establishing a presence in overseas markets and becoming part of global supply chains via direct investment flows. 

As a result, trade policy is increasingly concerned with issues outside the normal province of Trade Ministers.

The Doha Round’s focus on trade facilitation is part of this trend which will continue as the obstacles to the flow of goods and services increasingly involve regulations, standards, and a range of other “behind the border” issues.

Reflecting this development, the Australian Government´s trade policy is built on two pillars:

• Opening up new markets through trade liberalisation – reforms at the border; and
• Undertaking necessary reforms to improve productivity and competitiveness behind the border.

If all countries are to maximise the opportunities arising from trade liberalisation at the border increasing attention must be made to addressing the ‘behind the border’ agenda. This is an area in which the OECD has great expertise.

As part of our commitment to this agenda Australia will host an APEC Ministerial Meeting on Structural Economic Reform in Melbourne from 3 – 5 August this year.

Australia has learnt first hand the benefits of structural economic reform. Like many economies, we have been reforming for a long time – well over 20 years: opening up our economy, deregulating our financial sector, reforming tax and labour systems and improving governance. Those reforms have dramatically lifted Australia´s economic performance: our competitiveness, our employment levels, our trade and investment flows. By encouraging other countries to engage in structural reform, we will also be able to advance an objective we all have – better integrating the developing countries into the world trading system.

Conclusion

In concluding, I would like to reiterate my first and fundamental point.

The immediate priority for the future of the multilateral system must be to conclude the Doha Round this year. A successful conclusion to the Doha Round this year would promote sustainable economic development, help alleviate poverty and make a significant contribution to improving global food security. Importantly, it would also reinforce confidence in, and reliance on, the multilateral trading system.

A successful conclusion to the Doha Round would provide a much needed confidence boost to the global economy. And it would lay a firm foundation for future trade and economic reform. The benefits of a strengthened liberal trading system are too important to jeopordise by failure now to capitalise on the progress we have all made. 

I am confident that by working together we will achieve successful conclusion of the Doha Round this year.

Media contact: Mr Crean's Office (02) 6277 7420 - Departmental (02) 6261 1555