Globalisation and Trade: How to make sure there is space for development?

Introduction

Thank you very much, President Currie and Professor Inoguchi, for your kind introduction. Delighted to be back in Tokyo, and even more pleased to be back at Sophia University, where I have wanted to deliver a speech ever since I joined the European Commission back in 1999. I don?t always wear my religion on my sleeve, but it is for me an important moment to come to an institution as important as Sophia, particularly when I reflect on the story of Catholicism in this extraordinary country.

If I understand rightly, Professor Inoguchi, my thanks are also due to you for letting me, basically, hijack your foreign policy class to talk about globalisation, trade and development - with one or two hundred other specially invited guests thrown in ! A few years ago, the idea of talking about globalisation in a foreign policy classroom would have course been a total aberration. Far too esoteric a subject to mess with diplomacy ! Real diplomats don?t touch trade questions. But of course, now they have to...when you stop to think about it, globalisation, trade and development are now intimately connected with foreign policy. So I make no apologies for hijacking your class. Either way, I shall be brief because this is a university and I want to hear what you think about these questions. So I trust you are armed with comments and questions. And if not, you have ? from now on - about 15 to 20 minutes to think of something.

Globalisation

On globalisation, I think we face a two-fold task: first, of harnessing globalisation, of using this force to produce growth and jobs, and better regulation in the name of justice. And secondly, to ensure that we also ensure that development and more specifically the interests of developing countries are fully considered.

For the fact is that globalisation currently is a two sided coin: one bright, the other excessively dark. The bright side is important. Globalisation can bring spectacular success ? like the 200 million people lifted out of poverty in China since 1990, a single fact which alone makes it possible to envisage the Millenium Development Goal of halving world poverty. But like the moon from time to time, the dark side is to the fore at present. The report by the World Commission on the Social Dimension of Globalisation reminds us that globalisation has also brought uncertainty and poverty to other regions ? the least developed countries are actually getting poorer, as their modest economic growth has failed to keep pace with population growth. And within every country, the low-skilled have lost out in the increasingly competitive labour market, while women continue to work much longer hours than men within and outside the home and are almost always paid less, and sometimes not at all. For globalisation to work, it has to be sustainable. And in order to be sustainable, it has be inclusive ? economically and socially, and in all our societies.

Quite apart from the divergences in economic reality, part of the difficulty lies in people?s perceptions. Globalisation scares people because they have the impression, and sometimes of course it is the reality - that they don?t control their own destiny. On top of which, of course, in a social or indeed a psychological sense, globalisation challenges people?s sense of identity, their sense of where they come from, their sense of who they are. And most of all, even if problems are experienced locally, they of course have global roots, and this means that we have to be able to take a global view when we turn to look for solutions.

So from an economic as well as a psychological perspective, globalisation is a real phenomenon. Over the last couple of hundred years, but with increasing velocity and indeed some would say ferocity, market capitalism has triumphed. I am not one who believes in inevitability of history. How could I say that when I am speaking in a Catholic university ! But I do believe that we have no choice in one fundamental matter, which is that we have to try to limit the potential violence of the marketplace with rules. And if you will forgive me a brief diversion in this respect, I happen to believe that it is Europe and European institutions which offer up a real global example: namely that it is possible to establish new rules, to frame the positive disciplines of the market place, to encourage economic growth but establishing limits to the market place. In summary, I am a disciple of what we call, in French, l?économie sociale de marché, or in German, die Soziale Marktwirtschaft. I am not sure there is an English translation ! Either way, it is in essence a system which puts people ahead of market numbers. The slogan is: OK for a market economy, but not a market society.

The same basic philosophy applies to the external as well as just the internal sphere. I believe in a world where we are not afraid to open markets, but where we do so with a particular focus on sustainable development, and with a particular eye on the interests of developing countries. Where rules as well as market access matter. Where regional integration counts, and developing countries are not encouraged to behave as separately floating atoms, encouraged to cut the best free trade deal that they can with the highest bidder from the north.

So that, if you like, is my analytical framework, indeed the kind of world we need to sketch out in the future: globalisation is a positive and negative force both inside our own domestic lives, and between countries. The power of the market means the positive side looks after itself. But positive action is needed to manage the darker side.

...and development

In the external sphere, this means development. For its part, the European Union is ready to push faster and further for development. We are already the largest donor of development aid, and Japan has done well here, over the years, although we need to recognise that there is a certain development fatigue here. One major advance, however, is the recognition that development cannot be separated out from trade. Just as in the 1970s and 1980s, NGOs and others realised that famine relief was not a sufficient response to the systemic problems of what we used to call the Third World, in the 1990s we realised that development had to be integrated into all our policies. In the jargon, we have to mainstream development objectives into trade, and indeed, trade objectives into development.

What has the EU done specifically, in terms of putting its money where its mouth is, as the saying goes ? I would say: ?a lot?. The EU is by far the most important single market for products from the developing countries ? we already take as much agricultural produce from the US, Japan, Canada, Australia, and New Zealand: combined. And we have now stepped forward with our idea to allow the world?s poorest 49 countries to have totally free access to the EU market, in our ?Everything But Arms? initiative, which others are now supporting, and I hope Japan will soon be one of them.

But don?t take our word for it ? check out the recent report by World Bank and IMF experts who recently produced a development report which concluded that the EU was the major economic power most open to exports from developing countries, and which has done the most to reduce our average levels of trade protection in their favour.

The multilateral dimension ? using a trade ?round? ? the Doha Development Agenda

We also have to ensure that development is at the core of our multilateral trade policy too. How ? Via a trade ?round? of negotiations. What is a trade round ? The idea goes back to the heart of the multilateral system ? namely that what you give to one country, you must also give to all. If you cut your tariffs in the WTO, you can?t, except in special circumstances, cut them for one partner, and not for others. A trade round is simply a way of bundling up a package of trade negotiations in different areas ? a mixture of tariff cuts (or ?market access?) and improved trade rules. And although you wouldn?t believe it if you read the newspapers, the multilateral system has the capacity to be an important motor for development, by ensuring firstly that the strong can?t cut out the weak, and secondly, by allowing for rules to actually favour developing countries, particularly the most vulnerable.

I still find it extraordinary that the WTO is routinely vilified as a secret or not so secret agent of globalisation, a sinister, dark organisation that works hand in glove with international multinationals to undermine democratically elected governments. The fact is that the WTO is a rather small, rather nascent island of international governance in a sea of globalisation, vulnerable to both big waves and indeed global warming.

In fact, I like to tell anti-WTO protestors that it is not that the WTO has too much power, but that it doesn?t have enough. Everyone believes, that this great GATTzilla which people love to hate, ?Geneva?s mistake by the lake?, is so powerful...but in fact it actually has only around one quarter the staff of the OECD. An organisation so ?ruthless? in its execution of global rules that the Director General has no power of initiative, no power to make a proposal to the 148 Members. Indeed, and it is another separate debate, that is why many of us also believe that the WTO needs fundamental reform, at the right moment, to make it a more effective organisation simply in terms of efficiency of purpose.

So indeed the European Union was to the forefront of hose who fought very hard to ensure that our current Round is not just a conventional trade negotiation, where everyone tries to get the most for himself, and does as little as possible for anyone else. That is why we supported the idea of calling the current Round of negotiations, the ?Doha Development Agenda?, Doha being the place where we launched the Round back in 2001. But as the name implies, the intention is to ensure that development is right at the forefront.

So let me briefly retrace my steps. Globalisation is a problem as well as a benefit, and which requires more attention to development. But development implies greater attention to trade, and to multilateral trade in particular ? and the best current vehicle for pushing multilateral trade in the interests of developing countries is the Doha Development Agenda, or DDA.

And what is happening right now on the DDA ? Well, we launched it in 2001, with the hope of concluding it in 2004. I fear, since the disastrous Cancun meeting, that that is not going to happen, but we and others are fighting hard to get the round back on track, and the EU in particular is making some very concrete moves on agriculture and development.

Agriculture

Let me start with agriculture. We in the EU, like in Japan, make no apology for having an agricultural policy. Agriculture is not like coal, or widgets. It concerns the protection, preservation and promotion of a traditional rural way of life, of a unique landscape, indeed landscapes in both societies.

There is nothing wrong with that ? agricultural life has a right to be looked after, whether it is in Europe, India, Japan, or the US. And the US, for example, despite having bigger, more competitive farms, throws just as much subsidy, as a percentage of GNP, at its agriculture as we do. But at the same time, agriculture is of course a hot issue for developing countries who feel ? and they are right, by the way ? that the rich countries spend too much money supporting their agriculture in trade distorting ways, and to their detriment.

So the question becomes: not whether we should have a public policy to support agriculture, or not, but how we can make it less trade distorting. We in Europe, we are often the most criticised, but we have made clear that we were ready to do a lot to reduce domestic support of agriculture, particularly the most trade distorting kinds; ready to do more to open our markets, and ready to tackle one of the most controversial subjects of all ? export subsidies. Already export subsidies are now two thirds lower than in 1992, and last year, we offered to eliminate them on a list of products of interest to developing countries.

That was last year. Before a singularly disastrous Ministerial meeting of the WTO held in Cancun, where we basically flopped, and failed to meet our objectives to reach the mid-way point of the Round. And why ? There are many ideas, but essentially, it was developing country unease, and especially from the poorest countries who coalesced in a group called the G90. So we have once again returned to the drawing board, making clear that we are ready to go further still on the question of export subsidies, if there is equivalent action from the other rich countries, such as the US, Canada, Australia, on their own means of subsidising exports. Just this one example shows that Europe is serious about opening up markets in agriculture, particularly for poor countries, even if the rest of the world continues to believe that this an area where European protection will be absolute and eternal.

And development again...

But the other example from the DDA I want to give you is of the overall importance we and others attach to development issues per se in the Round. Some clearly feel that by calling this Round the Development Agenda, it was if we tried or were trying to co-opt developing country support for the Round by pretending it is not about difficult policy choices in opening markets, putting together complex new rules, but really just about development. Of course, the Round won?t succeed, won?t be seen to have succeeded, if it doesn?t manage to integrate developing countries better into the world economy. That is a cornerstone policy for us, including outside the WTO context, as I have said already.

But at the same time, remember why the Cancun meeting failed last year: poor countries? anxiety and frustration. They had the sense that they had the least to gain and the most to lose from the Round. So to be very frank, we have been looking for ways to reassure this group of countries, essentially the G90, that the Round will not be a burden for them.

Who are these most vulnerable countries ? There are many ways you can assess who they are. But my own best proxy, having flown around the world for the last five years and discussed these issues back and forth with Ministers from more than a hundred WTO countries, is lack of negotiating capacity. India and China have many poor people, but they have plenty of resources, plenty of know-how, to defend their corner in international trade neogtiations. Hence their ability to lift so many out of poverty. So does Brazil. So does India. Ethiopia, Chad, Laos, do not.

So I have in recent weeks used the slogan, including in this letter we have sent to all Trade ministers, of the ?Round for Free?. Perhaps that it is too politically incorrect for some. But we do believe that we should offer the Round at a sharply discounted price, to use some good globalisation rhetoric, to the poorer, more vulnerable countries on this planet. We should offer them this reassurance for a whole host of reasons ? because it?s the right thing to do, and it is also the most practical thing to do. There?s no point negotiating for years with countries who don?t have the capacity to implement what is agreed, and where ? just to get the deal done at the end ? we agree to give lengthy derogations or carve-outs from obligations. While it would be classic trade negotiating strategy to make a grandiose offer of this kind only in the closing days of the Round, I think that would be too late. We need the proactive involvement of these countries now and we will only get that by delivering reassurances now.

So where are we now ? The current signs are relatively good. I have said before that trade talks are like volcanoes, with three modes: sleeping, smoking and erupting. The last few weeks have convinced me that that the Round is now ?smoking? rather actively, and the stage is set for a decent eruption in July, where we hope to tie down modalities for the rest of the negotiations. That would take us around 50% of the way along to completion of the Round. This would be satisfying in lots of ways, not least to show people that conventional wisdom ? in this case, that there will be no movement in 2004 ? can be profoundly wrong.

Conclusion

Let me conclude before opening the floor for debate. I wanted to show you today that the WTO and the Doha negotiations can be an effective tool in harnessing globalisation in the interests of all, and combatting the darker side of the moon...and that agricultural negotiations don?t have to be about giving up legitimate communal interests to preserve a way of life in Europe and Japan and elsewhere. But they do need to be about focusing on the interests of the poorest countries in the globe, and about tackling the market distortions in the north which work against developing country interests.

I make no apology for descending today into the details of the trade negotiation. I know that a university audience wants some technical details, and not just generalities about trade and development, and I wanted to give you a concrete explanation about how development and trade have to work hand in hand in practice. And I wanted to show you how the round can advance the cause of development and of developing countries, ensuring that their voice is heard for the first time properly in a global forum, and indeed translating words into action...

Thank you very much