12 December 2008
Remarks on the World Trade Organization Doha Round to the Global Living Standards Panel, Center for American Progress, Washington DC
SIMON CREAN: Thank you very much, Sarah. I’d also like to thank the panel for the opportunity and their insights today.
There are two observations I’d like to make. Firstly, the issue going to the parallelism, I think that Rick referred to. When Australia had to confront globalisation as a labour movement, a Labor Government and trade union movement in the mid-80s, we ran the parallelism line. We had to moderate wages growth, but we traded that wages growth off against a better healthcare system, better superannuation system, better transfer payments. Why do I say this? I say it because as hard as it is, it works.
I think yesterday, an indication, or a prosperity index that was published here in the United States shows Australia at the top of list now in terms of that prosperity. So, it reinforces the point that yes, you have to embrace the structural change, you do have to embrace the globalisation agenda, but it’s good for economic growth if you get that equation right. The second point I want to go on to, because I really say that to give some indication of my background – I’m not just a person here advocating trade liberalisation for the sake of it - I do understand the importance of it and the need for the adjustment factor as well. But, the second and more fundamental point is this: that as much as it is important that the fiscal stimulus has to occur within the domestic economies, and that that does need to be on the stronger side, we diminish the significance of that fiscal impact unless we also expand the trade flows. And why is that the case? It’s because world trade grows faster than domestic output.
Historically, it’s a three times multiple. And each time there’s been a successful conclusion to a trade round, the multiplier has increased. That’s why not only do we have to make sure that trade is the positive part of the agenda now – and it’s interesting that everyone says we shouldn’t revert to protectionism – but what are we doing to advance the cause of liberalisation? That’s where concluding the Doha modalities, in my view, is the most important thing a country, so vital to trade flows and economic growth, the most vital thing that it can do in transition.
This is something, in a bipartisan way, as important as the auto package is - and is getting bipartisan support - what I think we need to see is that bipartisan support now to enable the agenda that the G20 leaders directed Trade Ministers to undertake – that was the conclusion of modalities before the end of the year. And I just pose this question to the audience, that if in fact, again, I think the term was used uncharted waters, if in fact the challenge is how do we embrace the new financial architecture that facilitates capital flows, if in fact we’ve got to deal with the new challenges of fiscal policy, which is seeing a renewed role for government, the market itself – Kemal talks about no market signals, the fact is there’s a lot of market failure, and there’s been acceptance of the extent to which governments can make a difference. The challenge still remains how far do they intervene if that’s the term some want to use, or what role do they play, but whilst we’re grappling with those challenges, what signal does it send in our capacity to deal with those, if we can’t use properly an existing architecture, a rules-based system, a system that recognises differentiation between developed and developing countries, if we can’t use the existing architecture of the WTO to actually generate the multiplier of what domestic stimulus is supposed to facilitate, then what hope have we in the other areas.
Now, I think the important signal I’d like the Center for American Progress to do, as the think tank close to the new administration, is actually get the bipartisan signal that we need to get these modalities concluded, because if the new administration wants to send the signal about a re-committal to multilateralism, here is the most immediate opportunity for them to demonstrate that willingness to engage. And I think a lot of the other interactions and the functional connectedness that everyone has talked about, I think we will start to see a much more solid basis upon which the G20 leadership can advance their agenda in April, because the first thing they did direct was that conclusion of modalities. If we can’t do that this month and give a solid basis in an existing architecture, I think the task in terms of getting the other coordination going is going to be a lot more difficult.
[Ends]
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