The Role of WTO in the Current Crisis

Harsha V. Singh

Deputy Director General, WTO30 April 2010

OUTLINE

• Present situation

• Importance of the present WTO regime

• Recent steps taken by WTO

• Way Ahead for the Recovery

Present situation

• World economy - severe battering, worst in last 70 years.

• In 2009, Volume of Output:– Global Output fell -2.3 % – Developed Countries output fell – 3.3 %

– Developing Countries output was + 1.2 %– Colombia’s output increased by + 0.4 %

• In 2009:

• Global Trade volume declined -12 %• Developed Countries trade volume

declined by – 15.3%• Developing Countries trade volume

declined by – 8%

• Colombia’s volume of exports of goods and services decreased by about – 8.2 %

• Forecast for 2010:– World output volume rise +2.7 %– World trade volume growth nearly +10 %

• Exports (developed countries) +7 %• Exports (developing countries) +11 %

– Colombia’s Output volume to rise +2.5%– Colombia’s volume of exports of goods and

services to increase +6.1 %

• Fast speed of the turnaround compared to historical experience

• In 1930s, protectionism prolonged and deepened the recession

• Did not happen this time

• Some instances of protectionism– These affected below 1 % of world

trade

• A vital factor was existence of international trade rules (WTO).

• But risks remain as long as unemployment remains high

• We can not go back to business as usual

• We need to be vigilant about the risk of back-tracking

Importance of the present WTO regime

Presence of WTO disciplines meant that:

• Countries are aware of actions that would be questioned

• WTO disciplines provide reference or a standard for reasonable behaviour

• WTO Disciplines help countries to monitor and assess actions based on them

• WTO gives a platform for interaction, sharing common concerns and taking common initiatives

• If trade restrictive measure is adopted then:– WTO provides processes and mechanisms

for dealing with them

• WTO system has been tested

• Credible dispute settlement mechanism. Allows to settle disputes peacefully.

• Reduces tensions and pressures from disputes and disagreements

• Promotes orderly and non-disruptive behaviour – Columbia has been:

• Complainant in 5 cases• Respondent in 3 cases• Third Party in 17 cases

• WTO’s Technical Assistance Programme helps improve use of the system:– Since 2008, Columbia has had:

• 3 National activities (services, agriculture, trade and environment)

• Seminar on trade facilitation• Several training activities covering

academics and officials

Recent steps taken by WTO

• During the crisis, WTO also has taken pro-active steps

• Several initiatives of the WTO Director General to:

• Stem protectionism, keep markets open • Focus on key trade policy initiatives• Reduce tensions and disputes • Contribute to exit from the crisis

• Important role of monitoring and transparency for these objectives

WTO DG prepared detailed monitoring reports with information :– on policy measures by individual Members

during the crisis

– in consultation with and using data inputs from WTO Members, as well as information from other sources

– discussed by the whole Membership at special meetings

• Monitoring report discussion:

– provides peer review

– opportunity to raise and clarify concerns, including specific policies

– Gives voice to large number of smaller countries

• Monitoring Reports showed that countries also adopted:

• trade opening or trade facilitating measures

• Terminated previously adopted trade restrictive measures

• Discussion gave basis to WTO DG to carry the voice and concerns of all the Membership (153 WTO Members) to world fora

• Such reports give stronger voice to developing countries:– These nations have more difficulty to obtain

comprehensive information

• Monitoring reports provide basis to better deal with political protectionist pressures

• Another initiative of WTO DG was to emphasise importance of trade finance in facilitating trade:

– particularly for smaller businesses and poorer economies

– especially if countries not able to raise such finance

• WTO DG highlighted: – need for treating trade finance different from

other types of finance • Trade finance repayment period shorter and

repayment more certain

– need for international support to assist with trade finance and thus facilitate trade

• He worked with other major international institutions on the issue of trade finance

• G20 has put aside $250 billion trade finance support to help poorer countries.

• Evidence was highlighted to show that countries better withstand adverse effects if they have:

• adequate safety nets

• adequate regulatory frameworks

• open trade policy complemented with appropriate domestic policies

• Emphasised the need for meeting aid commitments for developing countries

• Aid for Trade is important part of stimulus in less developed countries

• Inter-connected world and common interests

• Crucial to keep in mind both present situation and medium term effects of actions

• Evidence to show that while:– trade decline can cause economic

effects

– trade links help more rapid recovery

• Evidence shows that countries with more open markets and trade links generally able to respond quicker

Way Ahead In Recovery

• We need to:– ensure that stability due to

multilateral rules is maintained, i.e. keep markets open

– work co-operatively, emphasising interests of all countries, small, medium and large

– improve the system to increase opportunities, reduce distortions, and address any unfairness in the system:

• keep opening markets and opportunities

DDA negotiations

• Several areas covered, offering many positive opportunities and more level playing field

• E.g., agriculture, industry, services, Anti-dumping, Fisheries subsidies, environmental goods and services, certain TRIPS related issues, development concerns, trade facilitation

• Columbia is a very active participant

AGRICULTURE

• More level playing field by reducing trade-distorting subsidies:– major reductions in domestic

subsidies in developed countries– elimination of export subsidies

• These are important objectives of Columbia

• Enhanced market access opportunities for primary and processed products:

– reduction of tariffs, tariff peaks and tariff escalation• Will encourage processing activities under

Columbia’s Productive Transformation Programme

– Liberalisation of Tropical Products markets – Tariff-quotas providing market access for

sensitive products

NAMA

• Improved access to markets for industrial products through reduction of:– tariff peaks ; tariff escalation; non-tariff barriers

• Strong tariff peak reduction in all developed country markets

• Greater market access and greater certainty in major developing country markets

• Concerns on Non Tariff Barriers addressed (Colombia should be active in these negotiations)

Services

• Improved access for services trade– More market opening for most services emphasised by

Colombia – (signalling conference and plurilateral negotiations)

• Greater transparency and certainty with regulatory regime

• More growth and development opportunities:– Services are large part of economy– Services trade is more dynamic and resilient– Service growth has widespread positive effects for

economic and social achievements

Examples from Other Areas

• Improved disciplines on trade-remedies (e.g., anti-dumping)

• Greater disciplines for fisheries subsidies

• Increased markets for environmental goods and services

• Increase in markets and decrease in costs due to better trade facilitation – World Bank Report “Doing Business”

shows Colombia one of top ten reformers in 2008/2009

– Colombia improved to 37th rank in 2010 from 49th rank in 2009 for ease of doing business

– Columbia’s improved custom administration reduced time to prepare documentation by:

• 60% for exports • 40% for imports

• Fairer trading system, and greater participation of small and medium sized developing countries in the international system

• These are all important objectives of Colombia, which is both:– A friend of the existing system– Significant contributor to improving the

system further through negotiations

Thank You