Only a generation ago opinion formers and leaders in this city and, in fact, throughout this continent were putting policies in place that would close the markets of Brazil and Latin America to the world. Those of us old enough to remember that probably also remember the prevailing optimism at the time that this would serve social justice and rapid economic development. The idea that developing countries had offered their natural resources and their labour at a steep discount to the capitalists of Europe and America, seemed pretty plausible. Let's put those European and American capitalists out, and everything will be all right!
Thirty years on it is striking how much a rejuvenated and confident Brazil has prospered by shrugging off the mantle of "dependence", and the protectionism that flowed from it. The challenges remain: more equitable social distribution and cohesion, the elimination of poverty, sustainable approaches to farming and the environment. And the goals of economic development and social justice, rightly, remain the same. But the view of the world has changed.
Openness, engagement, self confidence and interdependence have been the external expression of this change. The creation of Mercosur and its ambitious liberalisation negotiations with the EU testify to this at a regional level; as does Brazil’s leading role in the G20 group in the WTO Doha negotiation at the global level.
I want to pay tribute to the successive Brazilian governments and all of those in Brazilian politics who have worked for stability and reform and fiscal prudence in this country. This has not been an easy path but Brazil’s growing strength has lifted millions out of poverty, and transformed it into a powerhouse of global trade. There is more hard work ahead. But from now on you are building on a solid foundation.
The New Global Economy
Looking back at the early years of this century, economic historians will see Brazil’s development as part of a fundamental shift in the global economy.
In the last two decades a group of big countries, with dynamic growing economies, have made an almost unprecedented leap ahead. By channelling high levels of savings into investment, attracting foreign investment, and focusing on export-lead growth, Brazil, China and India have grown fast enough to double per capita income every ten years. They will eclipse the growth rates, the spending rates, even ultimately the absolute size of many of the OECD economies.
This is like the development equivalent of breaking the sound barrier. Twenty years ago, EU trade with China was statistically negligible. Today Europe is China’s largest export market, and China is Europe’s largest import market for manufactures. India invests ten times more abroad today than it did ten years ago. In the last decade, exports from Brazil to the EU have doubled.
And while all of these countries continue to face massive challenges of poverty reduction, and while new prosperity exists alongside old deprivation, each of them has taken a recognisable and undeniable, and irreversible step out of the developing world as we knew it.
The agri-businessmen of Brazil, the manufacturers of China and the software engineers of India define global competitiveness. They are the benchmark for every global trading business in Europe and America that still wants to be a business in twenty years time.
None of this has happened in a vacuum. Massive export-led growth needs open markets. Few could take issue with the statement that, alongside technological progress, the open trading system has been the single most decisive factor in the emergence of the new global economy.
When Brazil, and India and China turned their backs on self-sufficiency in the 80s and 90s, the WTO system embodied their hope of trading their way out of poverty. And it guaranteed the open markets they needed to leverage their spectacular growth.
Europe was among the first to recognise the change that had set these accelerating economies apart from the rest of the developing world. It was also the first trading group we engaged the G20 Group of developing countries in 2004 as a fully-fledged negotiating partner. I wouldn't describe this partnership as an easy ride – when it comes to pursuing his country's and his group's interests, Celso Amorim doesn't make my life exactly "easy" - but it is now a partnership that is indispensable to progress in the WTO.
Sharing the burden
The caricature of globalisation says that it is the tool and instrument of multinational corporations and global capital. The reality is of course that globalisation is sustained by governments and institutions. They guarantee monetary stability; they liberalise trade and protect investment; they define ultimately, the size, the shape - and the equity, the social justice - of the global economy.
The global trading system, of which the GATT and the WTO are the most obvious expression, is a political choice; and it can only be sustained by political choices. And it is governments that make those choices, in the name of the people they represent.
As the world's largest economies the governments of America and Europe are rightly subject to the highest expectations. We can legitimately be held to our own rhetoric. In particular, we must recognise that there is a deeply held conviction in many parts of the world, including here in Brazil, that agricultural trade in the developed world has been heavily protected in the past, and needs to catch up with the liberal rules that exist in other areas. I accept that.
In the Doha round, I have said that if others propose to match us in other areas of the negotiation, then Europe could accept average farm tariff cuts close to those requested by Brazil and the G20 developing countries. These cuts would exceed 50% on average, with even steeper reductions on the higher tariffs: they would be the most ambitious farm tariff cuts ever accepted as part of a multilateral trade negotiation. We’ve also offered to cut our trade-distorting subsidies by 75%, and to eliminate farm export subsidies completely over the next seven years.
Taken together, and if others do the same, this adds up to unprecedented dismantling of old-style protection. I know that competitive agricultural exporters like Brazil would like to see the EU go even further, even faster. But this kind of reform is imposing a heavy human and social cost on farmers in Europe: we are looking down the barrel of massive losses in EU farm receipts. Moreover, our other major partner has not yet offered to offer any real cuts in its own overall trade-distorting farm subsidies, so I don’t exactly have trouble looking my negotiating partners in the eye on farm issues.
The GATT system was built on the expectation of leadership from the United States and the countries of Europe. But in the new global economy, rights and responsibilities will inevitably be shared in new ways. The health and dynamism of the WTO system and international institutions that are making these phenomenal changes in the global economy possible will gradually come to rest on the shoulders of those who benefit most from the openness that the system is creating. And from the perspective of the last decade that must mean the growing exporters of the industrialising developing world.
The Industrialising Developing Countries and the developing world
What does this imply for developing countries like Brazil? Most fundamentally, your experience and your incredible achievement firmly rebuts the idea that trade liberalisation is something developing countries can only endure, not something they benefit from. The most dramatic benefits from the open trading system in recent years have been felt here.
So there is an entirely legitimate expectation that Brazil and the other G20 countries will pay into the Doha Round by offering new access to their markets for manufactures and services. I believe that the Brazilian economy could comfortably absorb some further real liberalisation or, in many cases, consolidation of the liberalisation that has already taken place. Brazil, India and China have been cutting their tariffs over the last decade because they know it makes economic sense. Doha asks them to take one additional step multilaterally, as well as binding in Geneva what they have already done.
In doing this the faster growing developing countries can play a more active role in helping the poorer developing countries - the same countries in whose name Doha was launched in 2001.
Most industrialised countries like Europe are already very open to the exports of countries at the bottom of the development scale. Europe, for example, receives three quarters of the agricultural exports of Africa and half of the agricultural exports of Latin America and charges no duty whatsoever for almost all of these goods. The fifty poorest countries in the world have complete duty and quota free access to the EU market.
That preferential access is, incidentally, one of the only reasons that some poor African countries can compete in the huge European market with highly competitive agricultural exporters like Brazil: which emphasises the difficult balance countries like Brazil need to strike between speaking on behalf of the developing world and recognising the competitive challenge they themselves pose to the poorest. It is also the main reason why excessive farm tariff cuts of the sort demanded by the United States will never command support among from more than a small minority of WTO members.
Here’s a statistic that speaks volumes: about 70% of the tariffs paid by the poorest developing countries are paid not on their exports to Europe or the US, but to other developing countries. The highest average agricultural tariffs in the world are not in Europe or the US but in the developing world. The highest average tariffs on manufactures in the world - by a long, long way - are not in Europe and the US but in the developing world.
Opening South-South trade would help others follow countries like Brazil in trading their way out of poverty. It would help replace dependence on tariff revenues in the developing world with more sustainable fiscal income from growing economies and commercial sectors. It would help encourage greater regional trade in the developing world. But it has to be done multilaterally, through the WTO, to ensure that the benefits are equally shared.
I know that for some this argument is hugely controversial. It is condemned as a rich country attempt to divide the developing world. But it is nothing of the sort. It merely reflects the economic reality of a changed world in which Brazil and China and India find themselves in the fast lane of a motorway between the developing and the developed world. What I am advocating is a policy that ensures that you keep moving at speed down that road, while reflecting on the needs of those in the slow lane: because in the end, the solidarity we all owe is to the poorest.
EU - Mercosur
I want to finish by just saying a few words about a key bilateral issue, which is the conclusion of a bilateral free trade agreement between the EU and Mercosur. Our shared focus on the Doha negotiations has diverted us over the last 18 months, but there should be no doubt about Europe's commitment to finalise these negotiations as soon as possible.
The EU - Mercosur negotiations are about more than creating the first free trade agreement in the world connecting two regions. Obviously, we support the consolidation of Mercosur for its own sake, because we believe regional integration is good for economic development - and a trade deal would reinforce this. We have welcomed the addition of Venezuela to Mercosur, even if this could make our discussions more complex in a first stage. We believe a strong Mercosur will be good for Europe. But more fundamentally there is no region in the world with whom we have so much affinity of culture, shared history and commerce. I look forward to re-engaging soon to conclude these negotiations on solid commercial terms.
So what is my message today? I welcome the immense strides Brazil has taken. You have put in place the right policies and you have benefited. For an outsider, Brazil sometimes seems halfway between taking credit for the exceptional economic development it has begun, and wanting to insist on the traditional developing country label. Part of my point tonight is that those labels often confuse the economic and development debate rather than clarify it. Brazil’s view of itself and its role in the global economy is evolving and will continue to evolve.
This is not in any way to suggest that huge development challenges do not remain. Poverty is still a priority. Economic growth built on an aggressive export strategy has to be balanced with moves to nurture domestic demand and production for your own market. Economic development needs to be balanced with policies that protect Brazil’s incredible environmental inheritance and natural resources.
Europe welcomes Brazil’s arrival as an export powerhouse and a global economic power. We see the opportunities and advantages as well as the short term and sectoral costs. We are ready to pay those costs, within reason, and at a measured pace.
But we look to Brazil, like China and India, to meet us, if not half way, then at least somewhere down the path to shared responsibility for, and shared contribution to, to the global system we all need to sustain.