DG Azevêdo: To modernize the WTO, we will need vision and determination



Roberto Azevêdo | World Trade Organization

This speech is from the 2020 Washington International Trade Conference. To watch video of Roberto Azevêdo’s full remarks, click here. Director-General Roberto Azevêdo said that WTO rules have provided stability and predictability for world trade but the WTO needs to adapt if it is to remain an effective entity in the years ahead. He called for political leadership and involvement to make the necessary changes and said both vision and determination will be required to modernize the organization.

Good morning, everyone.

Washington was my very first diplomatic posting — I have very fond memories of that period — and it’s always a pleasure to come back. Thank you and thanks to WITA for the invitation to join you here today.

I’d like to start by paying tribute to former WTO Director-General Mike Moore, who passed away over the weekend after a prolonged illness. Prior to his term at the WTO, Mike Moore served as New Zealand’s trade minister and prime minister. He ended his distinguished career as his country’s ambassador here in Washington. He was deeply committed to a WTO that worked for all of its members, big and small. Our thoughts and prayers go to his family and friends.

The global trading system we have grown accustomed to over the past 70 years was not built by accident.

It was deliberately constructed out of a hard-learned understanding: the understanding that absent cooperation in international economic relations, everyone is left worse off and growth opportunities are lost.

I’m not here to deliver a history lesson on the multilateral trading system. Plenty of people in this room would do a better job.

What I want to emphasise is that the value provided by the system is plain to see. This value extends well beyond the peace, prosperity, and interdependence fostered by trade. Businesses and consumers benefit every day from certainty and predictability about access to products and markets. Over 75% of current world merchandise trade occurs on the WTO’s non-discriminatory MFN terms (if we count the European Union as a single economy). All other bilateral and regional trade agreements together account for around 20%. And even under preferential terms, the WTO rules are still present, providing stability and predictability. When trade flows smoothly, it helps keep the economic engines running. The recent erosion of predictability and certainty has made the system’s value all the more evident.

Now, can we live without predictability in trading conditions? Absolutely. The world would not end because of trade policy uncertainty. But there would be a price to pay. Without predictability, growth and job creation would be slower and more fragile than they would otherwise have been. Investment and consumption decisions would be postponed, many of them indefinitely. All this would translate to lower productivity, and diminished future potential.

Modestly lower growth might not seem to make a big difference from one year to the next. Over a decade, though, it would add up. Over a generation, the gaps would become dramatic. Our children and grandchildren’s economic prospects would be significantly worse than they could have been.

In the event of a serious downturn, the short-term costs of unpredictability in trading relations would rise sharply. Governments providing fiscal and monetary stimulus would be tempted to add protectionism to their growth, promoting measures undoubtedly compromising their original goals. The collective result would be to weaken the effectiveness of everyone’s recession-fighting measures.

So the multilateral trading system is worth keeping. But that does not mean keeping it as it is. There are areas where it could improve — where it must improve.

In the 25 years since the WTO was created, global trade tripled in volume. Trade barriers have fallen. Poverty rates have hit historic lows.

And the world has changed in ways that could scarcely have been imagined. Look around: the main actors in the global economy are different. They have different economic models.

The bulk of the WTO rule book dates back to the Uruguay Round. These negotiations were concluded in Marrakesh back in April 1994. That’s four years before Google was even founded.

What this means for the WTO is that to endure as an effective entity in the years ahead, it will need to adapt. And adapting to changing realities will not be a big bang but rather a continuous, perpetual process.

I have been saying this since the first day I took office in 2013: that the system has to deliver more and deliver quicker. Its rules must cover more aspects of cross-border economic activity.

And we have been doing just this. The trade facilitation agreement concluded in 2013 is a boost to global transactions that could lift trade by over one trillion dollars. In 2015, members agreed to eliminate agricultural export subsidies, removing a major distortion in farm trade. That same year, a group of about 50 members agreed to expand the plurilateral Information Technology Agreement, cutting tariffs on $1.3 trillion worth of touch screens, new-generation microchips, GPS equipment and other infotech products that didn’t exist back in 1996.

These were important changes, but they are not enough. We need to go further.

Unless we do, grey areas in trade rules will keep expanding. They will become fodder for tensions.

In fact, some of the unconventional policies and bilateral arrangements we see today might never have arisen had we done more to update the system. The impasse on dispute settlement is a case in point. Many members, not only the United States, were dissatisfied with different aspects of how the Appellate Body was operating. It is my hope that members will use the current crisis to produce an improved two-step appeals process.

Evolution and reinvention have been part of the multilateral trading system since its creation in the 1940s. It has incorporated new members and new issues. Governments have found new and creative ways of doing things, from the plurilateral codes on subsidies and other non-tariff policies, to the creation of rules in areas such as services and intellectual property.

That’s why I am pleased to be able to report that away from the gloomy headlines, WTO members are once again advancing on multiple fronts. At the multilateral level, they are working to reach an agreement that would curb fisheries subsidies and contribute to the health of our oceans. They are looking at how to liberalize and reduce distortions in agriculture trade.

At the same time, groups of WTO members are exploring potential future rules on investment facilitation, e-commerce and on domestic regulations that can unnecessarily obstruct services trade.

These ‘joint statement initiatives’, as they are called, tackle issues at the heart of the 21st century economy. They also represent a quiet revolution in the way governments negotiate at the WTO. Like-minded members are free to pursue issues without being held back by others. At the same time, no one is compelled to sign up to anything they don’t want to join.

The e-commerce talks, for example, bring together 82 members, accounting for around 90% of global trade, including the US, China, and the European Union. Establishing joint rules of the game would facilitate electronic transactions and digital trade, and could help manage wider tensions over technology.

For all of these processes, the WTO’s Twelfth Ministerial Conference, this June in Kazakhstan, will be a critical landmark. Delivering an impressive cluster of new rules is within members’ reach. These would go a long way towards preparing the WTO for the next 25 years.

Of course, the real question is not whether we need changes at the WTO. Just about everyone agrees on that. It is whether we can make the changes we need.

The fact is that change in multilateral institutions is hard. And it is doubly hard for institutions like the WTO, where every tweak in the rules has a concrete economic impact, threatening some interests even as it creates opportunities for others.

Technical experts sitting in Geneva cannot do it themselves.

We need political leadership and involvement. It’s either this, or we prepare to pay for the consequences.

For my part, I have been talking to leaders every chance I get. The G20 has endorsed WTO reform.

Now, getting the WTO’s 164 members to agree is always complex. But global problems require global solutions.

Looking ahead, I am sure that WTO members are ready for change. They want to improve the system we have — not throw it away and attempt to start from scratch. We have a solid foundation, one that has fostered growth, development, and increased purchasing power for decades. But a few coats of paint won’t be enough. We need structural changes.

All of you here have a role to play — businesses, academics, and government officials. We need your engagement. It’s not enough to say nice things about the system. Or to point out its flaws. To modernize the WTO, we will need vision and determination.

We need to roll up our sleeves and get to work.

Thank you.

– Roberto Azevêdo, Director-General of the World Trade Organization