New York, N.Y.
March 10, 2005
RICHARD HAASS: I'd like to turn to Bill Nuti, who's the CEO [chief executive officer] of Symbol Technologies, which he's been at for a few years after spending about a decade with Cisco. Bill has kindly agreed to host and preside at this first session. Again, let me just say how pleased we are to see you here. I look forward to having a chance to have conversations with as many of you as possible over the next day or so. We've built in some time, as they say, for networking. It will not be all work. And, again, welcome and thank you, again, not simply for being here, but for all that you do for us. Bill? [Applause]
WILLIAM NUTI: Well thank you, Richard. I appreciate it very much. And good afternoon to all of you. It really is an honor for me to be here today and to introduce to you today Dr. Supachai Panitchpakdi, the director general of the World Trade Organization. As the chief executive of an enterprise mobility company that does business around the world— Asia, North America, South America, and Europe— one way or another, I think Dr. Supachai and his work every day affects our company as I know it does your companies as well. And believe me, it's impactful not just in business today, but also going forward for all of us that we get more engaged in trade. What could be more fitting for a conversation on the rules of trade than to lay out a few ground rules of our own this morning?
First, this meeting is on the record, so whatever you say can and will be used against you. [Laughter] Second, please turn off your cell phones, your BlackBerrys, any devices that could interrupt the session today. And our guest is a man who can affect every one of the supply of our personal mobile devices, so I suspect that would be a good thing to do. Finally, if you ask a brief question— and I would encourage you to please be concise in your questioning— be brief. We want to get as many questions as we can in on this session. I would appreciate it. Also, please state your name and your affiliation, from where you come from.
Dr. Supachai began his three-year appointment as director general of the WTO [World Trade Organization] on September 1st of 2002 and has presided over this vitally important organization during some of its most fascinating and significant times. Dr. Supachai's efforts to build consensus and cooperation among all nations on a broad and complex array of trade issues is the mark of true leadership in our increasingly global and interdependent world. To paraphrase Dr. Supachai, never more than today does the world need a reaffirmation of multilateralism over unilateralism, stability over uncertainty, consensus over conflict, and rules over power. The WTO and Dr. Supachai's leadership help provide the affirmation and other proof that these values work and can benefit all, north or south, or rich or poor.
A staunch supporter of free and fair trade, Dr. Supachai has a most impressive biography. That should be included in your materials in front of you. He has been a successful banker, deputy finance minister, senator, deputy prime minister, minister of commerce, professor, author, husband, father— and that was certainly not in any particular order of importance, by the way. So without further ado, ladies and gentleman— please, it gives me great honor— let's all welcome Dr. Supachai Panitchpakdi. [Applause]
SUPACHAI PANITCHPAKDI: Thank you. Thank you very much for the kind introduction. Ladies and gentlemen, I have spent the last few days in Washington going through the process that we would do once every year just to touch base with our colleagues in the USTR [Office of the United States Trade Representative]. [Inaudible], you would know this quite well. We always need to look for some political guidance from the United States, and always we have to pay some visit on the Hill.
And can you imagine, after some of the cases that we've seen in the last couple of months, to be showing one's face from the World Trade Organization in front of the House Ag [Agriculture] Committee. So we had a fighting hour and a half discussion, and there are some bruises that we can show and some black eyes we can show for that session. But at least, nevertheless, it was an interesting exercise, an eye-opener, and it was always important that we would take up this kind of an opportunity to exchange views in a most straightforward manner— most straightforward manner. U.S. is going through a crucial year for us, and we are going through a crucial year also with regard to our negotiations. And certainly from the side of the WTO, we would like to give our fullest support to the issues that will be discussed in the Congress as to the continuation of U.S. involvement in the World Trade Organization and also in the extension of the trade promotion authority of the president; very crucial, very crucial issues for this year, in which we hope to be able to go to Hong Kong in December and expect to at least achieve breakthroughs in some areas which would be key to our negotiations, and I will go through this with you.
This year marks the 10th anniversary of the World Trade Organization. It is an occasion for us actually to reflect on the 10 years that have passed and consider ways of preserving and improving on the things that we've done well, while at the same time addressing areas where we still can do better. But it's also an occasion which warrants some celebration because, 10 years after its foundation, the WTO has never been more relevant and more important. A former USTR by the name of Bob Zoellick— [U.S. Deputy Secretary of State] Zoellick says that the World Trade Organization is the most important organization created in the last 50 years, and I certainly cannot disagree with him. Ours is an organization where trade disputes are resolved in a systematic and orderly fashion, where trade policies are analyzed and debated rigorously, and where the governments of the world come to negotiate the continued reduction of trade barriers and to set the rules which govern international business activity.
These 10 years have transformed the way in which nations interact commercially, and have brought the WTO a lot of attention. The GATT— the General Agreement on Tariffs and Trade— while instrumental in reducing industrial tariffs in the post-World War II period, was a small and relatively tranquil institution to which most people paid little attention. The WTO has been anything but this. True, these years have brought us [the December 1999 WTO ministerial conference in] Seattle and [the September 2003 WTO ministerial conference in] Cancun in famous meetings. Some commercial disputes in the WTO era have been given far greater prominence, whether they concerned turtles, bananas, tax incentives, or steel, and sometimes gambling has also been a part of our dispute cases, for which I was brought to more attention on the Hill yesterday.
Sometimes, I am amazed that an organization which spends the vast majority of its time deciding matters of a supremely arcane nature has attracted so much media attention and controversy. Yet there can be no doubt that, in an era of ever-increasing economic integration, there is real need for such an organization. The global economy has advanced with remarkable speed over the past decade. Developments that no one could have foreseen in 1995 are today shaping the way we live. Products which many of us had never imagined and which few people owned are now a central part of our everyday lives. Countries like China, India, Brazil, and Mexico now play a major role in the global economy and in international economic policy-making.
Technological change and global economic integration has not come without cost. There has been displacement in the workforce and anxiety about the future in many countries, particularly in the industrial world. For this reason, the concept of globalization has sparked much debate. But with or without the WTO global integration is a reality, and there is every indication that it will continue to be so.
It was into this maelstrom that the WTO was born. Many of the fears and concerns that have arisen from this remarkable economic transformation have been laid at the foot of the World Trade Organization. The WTO is a soft target, but the factors driving globalization are numerous and complex. The WTO is not the problem in itself, but rather part of the solution.
There is no escaping the fact that global problems require multilateral solutions. Absent global rules which address the problems that stem from an often unpredictable and sometimes unsettling phenomenon, we are left with uncertainty, heightened international tensions and possible chaos. Absent the rule of law, we have the rule of the jungle.
It was the United States, perhaps more so than any other nation, which recognized the importance of the rule of law during the [1986-94] Uruguay Round [of trade negotiations], and sought to broaden and deepen its relevance to international trade. Weary of the unreliable dispute settlement system in the GATT, which enabled a respondent party to block the establishment of dispute panels and the issuance of panel reports, Washington sought and achieved a strengthened dispute settlement system which follow predictable procedures and delivers outcomes within a reasonable time frame.
The United States has been among the most active users of this system, bringing more cases to the WTO than any other member— nearly 80. It has been involved as a party in over 60 percent of all cases brought before dispute panels and the Appellate Body. In establishing the current WTO dispute settlement system, the United States and other WTO member governments have proven that multilateral solutions to global conflict are not only possible, they are desirable. One of my predecessors, Peter Sutherland, said earlier this year that no one foresaw 10 years ago that the WTO dispute settlement system would be so successful that it would be used more often in 10 years of activity— roughly about 325 cases have been brought to date— than the old GATT system was used in nearly a half century, but this is, in fact, the case. This is the truth.
This system has been successful largely because WTO member governments have been prepared to implement panel and Appellate Body rulings, and to bring their laws and regulations into conformity with WTO rules should a panel decision go against them. The United States has a reasonably good record here. When the matter can be resolved administratively, such as with respect to removing an import safeguard measure or revising an anti-dumping order, Washington has responded quickly and decisively. When the problem requires action by the Congress, the process is inevitably more complicated, and to no one's surprise the U.S. record is more mixed in that regard. On a positive note, Congress did pass legislation in 2004 to bring the United States into compliance with adverse WTO rulings in the Foreign Sales Corporation and 1916 anti-dumping cases. In several other cases, however, there has been political resistance and Congress has yet to act, despite requests from the Bush administration to do so. I can only say that the durability of WTO rules rests on the principle that governments will always abide by these rules, which after all they themselves have written and approved with their own hands.
Beyond dispute settlement, it was the United States which pushed most aggressively for the incorporation of agriculture, intellectual property protection, and services trade into the global trading rules. Today these areas represent vital elements of our negotiating agenda, an agenda which has once again been largely shaped through U.S. leadership.
You would also recall that, on 1st of January 2005, WTO members eliminated quotas on textile and apparel trade, marking the end of more than 40 years of managed trade in this sector. The increased competition resulting from this will certainly bring significant benefits to consumers everywhere. It is the poorest consumers, which pay a much larger share of their income on clothing, who shall benefit the most.
The information age has been given a significant boost through our 1998 agreements on telecommunications and information technology products. Trade in information technology products rose sharply after this agreement, and it is notable that the gains have been registered not only in industrial countries, but in developing countries as well. From 1996 to 2002, developing countries' share of world exports in this sector have risen from 40 percent to 52 percent.
The smoother flow of capital around the world has been supported by WTO's 1998 financial services agreement which established global rules on trade in this sector and which has provided greater certainty, transparency, and predictability.
Surely, one of the most important achievements of the last 10 years has been the enhanced integration of developing countries into the WTO system. Never before have so many been such active participants in the global trading system. The rise to prominence of the so-called "G-20" [group of twenty industrial and emerging-market countries] in the agriculture negotiations, the high level of dispute settlement activity by developing countries, and the important place that cotton holds in the Doha negotiations, all these are clear illustrations of greater participation by developing countries. With respect to cotton, for example, it would have been unimaginable 10 years ago that four poor West African nations could have persuaded the global community to include a trade topic of great interest to them on the global negotiating agenda. Regardless of your substantive position on the cotton issue, we can all agree that active participation in the trading system by even the poorest member countries is indeed a positive development.
The level of participation is due, at least in part, to the significantly improved delivery of technical assistance. Technical assistance funding has increased many fold in recent years, and this increase has greatly enhanced the capacity of developing countries to participate in the system. The process has also been facilitated by our much-improved coherence with other international organizations. Better working relations with the United Nations, its agencies, the World Bank, and the International Monetary Fund have also allowed us to better address the trade adjustment concerns that members have expressed.
We have, in the meantime, also brought 23 new members into the global trading system, including major trading economies like China and Chinese Taipei, as well as small and vulnerable countries like Nepal and Cambodia. Chinese membership has brought under global trading rules an economy which is growing at an astounding rate, and which has already become one of the world's three largest trading nations.
But as important as these achievements are, there can be no doubting the fact that we can improve in all areas of our work, including reforming the dispute settlement understanding, improving our operating procedures, and improving our links with other international organizations, and also with civil society. It is probably fair to say as well that our image could use a bit of polishing.
How can we best address all these challenges? How can we ensure the WTO's continued relevance to the goals of economic growth, development, and international cooperation? The answer is really both simple and complex: just conclude the Doha Development Agenda [DDA] in a timely fashion and with an ambitious outcome. Of course, easier said than done, I presume.
But I don't think there is any doubt that the single-most important thing WTO member governments can do to strengthen this organization and the global trading system is to conclude as rapidly as possible an ambitious agreement on the Doha Development Agenda Round of negotiations. Such an outcome would be a considerable contribution to the global fight against poverty. Better market access for poor countries' exports, steep reductions in trade-distorting farm subsidies, and more equitable trade rules, would present developing countries with a once-in-a-generation opportunity to help to use the trading system as a vehicle for sustainable development.
Advanced countries, too, will reap the benefits arising from expanded trade. An ambitious agreement would result in greater market access for services provider, farmers and manufacturers; wider consumer options; and greater certainty for exporters. Increasing prosperity among developing countries is a win-win situation, as they become the markets of tomorrow. These achievements would greatly assist governments in their efforts to keep their economies expanding.
WTO member governments are now giving positive signals that they want to conclude this round, this Doha Development Round, by the year 2006. Their objectives for the Hong Kong ministerial conference in December this year are agreement on modalities for trade in agriculture and industrial products— these are our targets for the ministerial conference in December end of this year— for modalities agreement for trade in agricultural and industrial products, a critical mass of market-opening offers for trade in services, significant progress in areas such as rules and trade facilitation— and in the rules area, it includes trade remedy rules, subsidy rules, rules on regional trade agreements, and things like that— and also a proper reflection on the development I mentioned. After all, the middle name of this round is "development." This would, indeed, provide a springboard for the final negotiation in 2006.
I believe the political commitment is there on the part of all governments, and I do know that in Geneva [at the WTO annual public symposium in April], ambassadors are prepared to expend every effort towards the objectives of an early conclusion to the round. WTO member governments deserved considerable praise for agreeing on a framework deal in agriculture last July, but I sense there's a degree of complacency that has set in since that period, and it is quite a concern to me.
I am particularly concerned about the pace of negotiations on trade in services. Services make up more than 50 percent of economic activities for nearly all WTO members. Trade in services makes up nearly a quarter of overall global trade. Member governments committed themselves in Doha to negotiating an agreement further liberalizing trade in services and establishing more equitable rules for such trade. And yet, there are now more than 40 countries which have yet to make even an initial offer in this area of negotiations.
This is really unacceptable. Governments cannot expect others to show interest in areas of concern to them if they are unwilling to participate in negotiations in a sector as vital to the global economy as services. I have written to the ministers of all these countries, encouraging them to put in offers and pointing out that the future of this round, a round dedicated to improving the trading prospects of developing countries, would be at risk unless they all participate. One of the more troubling elements of the hesitation of some members to participate is that they are really hurting themselves. The data are clear on this point.
In transportation for example, in 168 countries, the barriers to access in provision of transport services are more onerous than tariff barriers. This constraint on competition means higher fees. In developing countries, transport costs are on average 70 percent higher than in developed countries. Freight costs in Africa are twice as high as the world average, for example. Improvement of a country's transport infrastructure has obvious benefits for trade, and one study says that improvement could lift trade volume by as much as 68 percent. Telecoms services are also essential to virtually all economic sectors and positively affect trade volumes. Advances in this sector means lower costs and greater access to other services. The quality and price of financial services are key factors in overall trading costs. Greater competition in this sector has proven to be central to increased efficiency and diversity of these services.
We have a deadline of May 31 to submit improved offers. Understandably, the 72 members which have already submitted their initial offers— and counting EU [European Union] as representing 25 countries— will be reluctant to submit improvements when so many of their trading partners have refused to come forward. Should this deadline be missed, it is inevitable that there will be a spillover into other areas of the negotiations, and the delicate balance and steady progress we have achieved will be undermined.
It is always difficult to translate political energy into concrete action, but unless we begin to show real progress in services and across our very large agenda of negotiations as a whole, we will not have sufficient time to deliver an ambitious outcome at the Hong Kong meeting. Progress in other areas like industrial goods, rules and environment have lagged behind. Even in agriculture, many of the most difficult elements remain far from being resolved.
We have an unfortunate tradition in this organization, rather unfortunate, of waiting until the very last minute before we negotiate in earnest. It is a tradition which has outlived its usefulness. We have too many governments in a negotiation, and our agenda is simply too large and too complex to expect that ministers in Hong Kong can resolve all differences in a matter of three or four days. And this proved to be a failure in Cancun, so we should learn from our past mistakes. This is why it is essential for governments to be clear by the spring what they really want from Hong Kong and to deliver significant progress toward that objective by the end of July.
Fortunately, ministers seem to have learned this lesson, which is why they have urged negotiators in Geneva to agree this July to build on the achievements of last summer, reduce the number of differences among them, narrow the gaps in other areas during the autumn, and bring to Hong Kong a manageable number of politically difficult issues for resolution. It is indeed a tall order I realize, but it is the only way negotiators at the Hong Kong ministerial conference can attain the kind of objectives they have set for themselves and the only way we can conclude this round by the end of next year.
I would note that successful conclusion of the Doha Round will also depend on the outcome of the congressional debate this spring on two important WTO-related issues that I have alluded to at the beginning of my remarks: the two-year extension of the Trade Promotion Authority for President Bush and the second five-year review of the U.S. participation in the WTO. I have spent a large part of the last two days on Capitol Hill discussing these issues with congressional leaders, and I can report to you that I came away quite optimistic.
Not all our problems can be addressed through the Doha Round, I realize. There are questions about our processes, our sometimes inefficient methods of decision-making, and our budget. These problems will need to be addressed through action by governments after the round has been concluded.
You may already know that I have commissioned a group of distinguished trade experts who are close friends of mine, chaired by Peter Sutherland and including the Council's own Jagdish Bhagwati, who is here with us and is going to have things to say to you after this, to ponder on these subjects, and offer their recommendations for the future. They have, indeed, been doing a great job. They have performed an extremely valuable service, for which I thank them and congratulate them. As director general, I cannot take a position on their suggestions— though I may have something to say about these recommendations after I have stepped down from this position on September the 1st. But I would like to urge you all to read this report[The Future of the WTO] and form your own conclusions, and I'm very anxious to get engaged in this debate after I have left this position.
On balance, I can say with confidence that these past 10 years have been a success; perhaps a qualified success, but certainly a success. We have learned important lessons about transparency and inclusiveness, about more effective management of the secretariat, and about how to better manage the negotiations themselves. But we have also learned that there is no alternative to the global trading system in international commerce. No other route to rule-making affords such complete— no other route to rule-making affords to have complete coverage of sectors and countries. Absent global rules, the problems we face would not go away; they would merely become more difficult to resolve.
I have no doubt the next 10 years will bring more difficult times, but I am also confident that the lessons learned during our first decade will help future leaders to chart a course for greater equity, stability, and prosperity. Thank you. [Applause]
NUTI: We're now going to start the Q&A session. Just a brief reiteration of some of the ground rules. First, please wait for the microphone and speak clearly, but give us your name and affiliation as well. And also, again, just if we can keep it to one question so that as many members as possible can participate, that would be great. Who wants to be the first brave soul?
QUESTIONER: Richard Gardner, Columbia University. Mr. Director General, that excellent report that Peter Sutherland shared warns about the development of regional and bilateral free trade areas [FTAs] and preferential agreements, something that our friend Jagdish Bhagwati worries about too, and calls [them] stumbling blocks rather than building blocks in world trade. And this has accelerated with the free trade areas recently negotiated by the U.S., and now ASEAN [Association of Southeast Asian Nations], China, Japan, Korea are talking of regional arrangements in Asia. Does this worry you? How does this relate to your desire to strengthen the global system under the WTO?
PANITCHPAKDI: Yes, Jagdish being here, I have some constraint in saying things about this. [Laughter] I certainly would like to leave things for my dear friend Jagdish to be talking about this afternoon, but I liked the way he coined the term. What it is the term you coined? Not the "spaghetti bowl," but the "least-favored nation" [LFN]. The "least-favored nation." I thought I would be working for most-favored nation concept in the WTO, and yet we are not being confronted by the fact that some of the major countries are working on the basis of LFN and not on the basis of MFN [most-favored nation]. This is worrying for the fact that it would be time-consuming when people go around the world and get engaged in so many different— hundreds of negotiations. We know that there is about— more than 300 FTAs being concluded, but we don't know that there might be a few more hundreds that are still going on. And politicians like to go around the world— this is on record, is it right? I have signed the— it's on record. [Laughter] So I may have to change a bit the tone of what I just said. [Laughter]
But I would keep on saying that it's purely political expediency. It's purely political expediencies that politicians like to travel around the world and go and sign MOUs [memorandum of understanding], and many of the MOUs that there are signed do not always lead to the final outcome. And some of the final outcome that has really become the result or fruits of their negotiations will not always point towards the direction of the kind of sharing of benefits that one can see in the multilateral solutions.
Notwithstanding all this— notwithstanding all this— I don't really— we can prove really the benefits of all this multiples of FTAs and RTAs [regional trade agreements]. But in spite of all this, what bothers me most is that when I try to urge and plead and convince countries to come more often to Geneva to release their human resources— trade negotiators, so they can be with us for a longer period of time— not for one day or half a day— then I have to fly out to these countries there just to sign or to work on some negotiation on behalf of my political masters. Sometime I got this decline, and they refuse. They said, "Well, we have to go here and there," whereas they should be coming to Geneva to concentrate on the effort of the multilateral negotiations.
If we would be doing nothing these days I wouldn't mind that very much, but now that we are trying to come to the final phase of our negotiations and people keep complaining— actually [inaudible] complain to me, which I don't like— they keep saying that because you are so slow in Geneva, and that's why we had to go on this track of FTAs and RTAs. Don't they think that these tracks are also slow in producing results? And ultimately, the result will not justify their efforts; will not justify their effort, a lot of waste of time. Whereas if they would completely dedicate themselves to the MFN approach, to work with us in Geneva, we certainly would be able to finish the round within next year, I'm sure. But if they don't concentrate, I don't know, it might go beyond that, and then would be no end to it.
So my concern is not really— and this is one concern, the unclear results of all these multiples of FTAs and RTAs, but also the concern that there is distraction away from this process in Geneva that will need all effort, all hands on deck, and that that might be the kind of negative results that I think would be really pertinent to what we are doing at the moment.
NUTI: Great. Just so everyone knows as well, there are 150 copies of The Future of the WTO here on premises today, so you can get a copy before you leave. Next question.
QUESTIONER: Hi, Mark Spradley. We are on the record, but what advice would you give your successor? [Laughter]
PANITCHPAKDI: Well, nice question. Nice question. Difficult to answer, what should I advise? I mean, if I look at the four potential successors, four potential candidates, potential successors, I think they seem to know probably better than I do know what needs to be done after this.
I have learned during the past maybe two and a half years that tenacity is one of the qualities that one requires. Not only patience, but tenacity; keep coming back, keep coming back, keep fighting, never a lost cause. I mean, after Cancun, everybody was saying this is the demise of the WTO. It is this— you know, we cannot achieve anything, and it will spell the doom for the DDA.
I thought— I look at Cancun in a different light. I mean, Cancun was a wake-up call. Cancun was the first time we are hearing every voice in this organization very clearly, particularly the voices coming from the developing countries, from very small economies as well. So Cancun was, for me, a wake-up call; was a contribution toward the full participation of everyone.
So I don't think I would need to advise my successors to do anything, but I'm sure that all the candidates— my potential successor would know full well what is most needed to be done now, and the single thing that we need to help all the members to finish in time is this round. I mean, like I said in my address, we need it not only because we've set out to do this, but it's the only thing that would be able to go up against the kind of backsliding into more protectionism. It's the only thing that can guarantee the continuation of global economic expansion and can guarantee predictability in our trading system, because there's nothing else. So, I mean, the single issue is please finish this round in time, and I hope that my legacy would be one which helped pave the way for this round to be completed in time.
NUTI: OK. We're— again, if— just a reminder, if you can give us your name and affiliation, that would be great. We're going to go here first, and then to the back.
QUESTIONER: Hi. Irene Meister. Mr. Secretary General, so many of the disputes in your area arise from, in practical terms, from some of the problems with customs. I wonder if you could comment on the relationship between WTO and the World Customs Organization [WCO], and how much influence do you have over their rules?
PANITCHPAKDI: We have an excellent relationship with the World Customs Organization. In fact, the single Singapore issue that has been agreed upon that will be included in our negotiation is trade facilitation. And this deals mainly with customs procedures, customs procedures in terms of regulations, the announcement, the fees, and all these other things, transportation of goods, goods in transit, and things like that.
We have been working very closely with the World Customs Organization, particularly with the start of this negotiation on trade facilitation. The WCO has been very, very helpful in coming to Geneva and giving us a full session of explanation to the members so that they would understand what should be the framework of our negotiations. We have had also been engaged in some joint training facilities as well with the World Customs Organization. And so I'm sure that this relationship can even be more improved in the future as we work on these new rules on trade facilitation.
QUESTIONER: Thank you. Mr. Director General, I'm [inaudible], business columnist for the New York Sun. Your next job is reported to be heading UNCTAD, the U.N. Conference on Trade and Development, which is also based in Geneva, so you won't have much a move to make as far as your family goes and your belongings. But do you see your new position, or your incipient position, as possibly competitive to the WTO? Can the industrial global trading system in fact need two such bodies working parallel or concurrently? And what would be your agenda for UNCTAD, which as you know, began as a conference but then has stayed on as a U.N. bureaucracy? Thank you. [Laughter]
PANITCHPAKDI: One of my friends, upon learning that my name was proposed by the U.N. secretary general to head UNCTAD, this organization, he said he was sure that one of the reasons for this nomination is that the cost of relocation for me is minimum, is the cheapest. I don't have to [laughter] to relocate in Geneva. But I'd like to think that there is more to it than that. [Laughter]
Since a number of years, relationship between UNCTAD and WTO— how would I say, this is on record— sometime strained. Not difficult, but strained. UNCTAD was conceived for really very specific reasons, very clear purposes. While the WTO or GATT in those days spent our time working on the rules and tried to be the best guardian of the rules, UNCTAD tried to help advising particularly developing countries on how to make best use of the system. It's a different thing. It's a totally different thing. And as a guardian of the rules, they should not be— we should not be trying— I mean, I'm a bit mixed up with the two things— and just for your information, I have not yet been confirmed by the U.N. General Assembly, so it's not for sure yet how things will be going there. [Laughter]
But there are two definitely distinct areas of work. We do best our work by restricting ourselves to negotiations to improve and strengthen the rules, make sure the rules are abided by, and make sure that the rules are applied in a way that we can always work towards enhancement of more opening and market access in trade. But UNCTAD serves useful purposes in areas of being advisers to the developing countries in implementing the rules and making use of the rules. I do not see any conflict in having both organizations at the same time.
Are you just talking about the bureaucracy? I certainly would not fully agree with you in the way that bureaucracy is bureaucracy everywhere. If you allow bureaucracy to flourish, it will raise its head at any time. But I do think that if I look far into the future, when agreements become more numerous and more complicated, when we go into areas which will not be purely trade, it will not be a pure trade area— I wouldn't say non-trade— everything is related to trade, of course, but— into areas which might not be purely trade, I think developing countries in the process of development would be greatly assisted if we have deeper understanding of how developing countries can manage to equip themselves, you know, to take part fully in this system and to reap the full benefit more so than in the past. And one of the areas in which UNCTAD can do very well, and has been doing a lot of great work which WTO can never compete with, is in the area of investment, for example, and I think the future of the work in UNCTAD could also be seen in that light. I mean, I cannot say more than this, because I'm still trying to finish my work with the WTO at the moment.
NUTI: OK, we're going to go to this table here, and then to this gentleman next.
QUESTIONER: John Mbiti, from Mayer, Brown, Rowe and Maw. I'd like to take you back to the issue of agriculture and the question of subsidies. Although from an economic perspective it's clear that an elimination of subsidies is in everyone's best interest, from a political perspective, it's a much more difficult case to make. It seems to me, however, that unless and until politicians in rich countries can convince their plenipotentiaries from a political perspective that subsidies are not in their interest, we may not get very far. And in that vein, my question to you is how does an American politician, for example, convince an American farmer that a reduction in subsidies, which constitutes a daily source of his bread, should somehow be in the best interest of a farmer, say, in Berlin?
PANITCHPAKDI: Well, again, very, very good question. I would have thought that at the moment not only the theoreticians have already accepted the demise of subsidies, but also practitioners and even policy-makers. You'd be surprised. In various countries, even in Europe— and I don't have to quote another friend of mine here, [former European Commission commissioner for trade and Association of Notre Europe President] Pascal Lamy, has been doing. I think people are convinced that subsidies are really, really wasteful and really create negative, negative impact. It's how best to phase out subsidies that we are talking about, how to reduce— keep reducing it and try to replace it with something else. If you need people— for example, like what they did in Europe— if you need people to be working on promotion of cultural diversity, then so be it. But let them work on cultural diversity and give them support for doing that and not to be doing in terms of true, let's say, agricultural policies and things like that. So go straight for that issue.
If you think that you need to support people in certain areas— for example, in the United States, where they need to go away from some of the less competitive activities— then you need to be able to come straight and say that this is something that is really not profitable. You are surviving on the basis that you are getting this kind of charity from the rest of the community, from the rest of the economy. So it is a taxation that the rest of the community would have to bring up in order to support some of the segments of the economy to survive. Of course, in certain countries, in certain areas, when you have subsistence farming, it's a different argument. When people have nothing else to do, they have to do their subsistence farming, raise more plot, and very poor, impoverished farmers. Although, of course, in due time, international trade would dictate to them that they would have to gradually adjust and change, but in the short period of time it might be deemed to be reasonable to give them some support.
But otherwise, in a framework of an economy like the one in the United States— it is easily demonstrable that the U.S. has choices, has different choices, and the impact— I think, I have asked some of our colleagues in western Africa to do come to the United States— you know, these are farmers and politicians from countries like Burkina Faso, Benin, Chad, and Mali— to come here and talk to their colleagues in areas that would be competing with them in terms of producing cotton, but at prices that are so much higher than in West Africa and vice versa.
I would advise— I would advise the best way is to go there and see for yourself. I've been there. I've been there, and for some time I thought I would be seeing, let's say, the president of Benin, and he said, "Well, you can come in, then, and see me now, and I went in there." I thought he would be sitting there alone or with his advisers; no, he was there sitting with 300 farmers. [Laughter] You know, it was open and there's this big hallway, and I thought he was [laughter]--I went in there and there were 300 farmers sitting in front of him. Well, he said, "Come in, Supachai," and then, "I'm not going to talk to you; you talk to the farmers." [Laughter] So it was startling for me [laughter], putting me to the sword [laughter], and I was sweating for nearly an hour trying to come to some terms with the West African farmers, cotton farmers.
I think this is really— you need to get the people to go there and see out in the jungle and everything, which people have really, really nothing else to do except doing this. And this is a bit— we teach people to do things that are comparatively, you know, more competitive to do, and what they are asking us to do is really to reduce the level of trade extortions, nothing more than that. They're not asking for free lunch or for debt relief.
But this kind of thing, I mean, if it goes on, if it goes on, the way countries in West Africa— Chad, Benin, Mali, and Burkina Faso will have to buy up all their cotton every year, and they have no way to get rid of all this cotton. So what they are doing at the moment is to accumulate debts, huge debts, and what an advanced country would be doing is that, let them do this and then come back, you know, some other time, then we just give them debt relief. This is not good enough, you see, because debt relief is a good thing, but we should go to the origin of the problem, and trade is actually the real— the origin of all these things. If we can address trade in a way that we can show to people here and around the world that this is something that will be much, much cheaper and this is something that people— for their own dignity they would like to have more than, you know, being— given handouts all time. This would be the best solution.
So I would advise more exchange of information on a, you know, face-to-face basis to do that. And I think people have been doing this more often, and I'm beginning to see more understanding and full appreciation, really, for what— the appreciation that the moment is proposing here to do, this budgeting that showed the indication, the intention to begin the reduction in some of these subsidies and also in the area of cotton. I don't know how finally it would come out to be, but at least I am in full praise of what the effort has been.
QUESTIONER: Yes, Christopher Wall, Pillsbury Winthrop. I would like to ask if you could elaborate somewhat on the political dynamic that you see leading up the Hong Kong ministerial and then afterwards, towards the conclusion of the round. When the WTO was founded ten years ago, the major players in the negotiations of course were the United States and Europe. And of course today, there are many other economies, major economies that are part of this system; China of course, India and Brazil are taking a much larger role politically, not to mention all of the developing countries that are in the process, and obviously this had negative consequences in the Cancun negotiations. How do you see the politics playing out from here on? What sort of trade-offs have to be made? What does it take to get things moving? The image of herding cats now comes to mind, but something has to happen in order for the political process to get from here to there.
PANITCHPAKDI: I would certainly primarily recommend the process to be managed not only— of course it has to be managed by the politicians and governments, but involvement by the private sector as you are doing today, that are you part of this meeting. I think we need consistent pressure coming from the private-sector side. We need governments who understand what kind of interests you have in the round, why services are so important, for example. I mean, I've been inviting the Coalition of Service Industries to come to the Geneva on the regular basis. They've been doing that, and that's been very helpful for our negotiations. So I would say that— and this is true not only in the United States; in Europe equally too, when you have active participation from the private sector, the political agenda will be always more balanced.
Secondly, I would certainly like to address the issues of the balance in the round. The political solution to the round can only be achieved if everyone knows that they have something, you know, out of this package of the round. So it means that we have to have a balanced agenda. At the moment, sometime people have been led into believing that this is purely a round of agricultural negotiation alone, and this might be true in the beginning. We place a lot of emphasis, focus ourselves a lot on agriculture negotiation. This is a key issue which is the linchpin. But after all, this is a round which includes other key areas besides agriculture: services, goods, rules, and development dimensions and things like this. So I think for the political agenda to be a successful agenda, it must be balanced one in that all this areas we make progress.
A third point is that, of course, there must be a trade-off all the time, a trade-off. A trade-off in this round would be a little bit more complicated because unlike— Pascal, you've rightly mentioned that in the past round, only a few key countries would do that trade-off, and then they present this to the rest of the members and say, "OK, you take it or leave it," and this time around it's more complicated than that. That's why it's also— I think it's a positive evolution of our negotiations that we are seeing different groups emerging. When you deal with groups, it's always easy to see if they are dealing with every individual [WTO] member, you know, in a 148 basis. When you deal with a group of 20 or 30 or 10 or something like that, it's always easy to see and the way it is there for the group to be united. I certainly would advise that we need to take into consideration all these groups.
Before we went to Cancun, I had the feeling that some of the small economies may have difficulties in addressing themselves at some key issues that we had to solve in Cancun. Now the lesson is that we cannot ignore even the smallest island state anywhere in the world. They can play a role in blocking, in stalling the negotiations. So politics-wise, I would recommend that as early as possible— bananas, for example. You would be surprised if I would mention that, bananas— don't underestimate bananas at the moment. Bananas could be an issue in Hong Kong, and not for consumption. [Laughter] Not for consumption, but bananas as a dispute, you know, between the parties that we know about, and it's not yet fully been resolved. It can flare up again. And if we do not really nip this in the bud before we go to Hong Kong, it might flare up in Hong Kong and someone might use this as a reason, an excuse to undermine the whole situation. So I would say balanced treatment, good preparation, and also taking good care, you know, politics-wise of all countries, which is before we really embark upon the Hong Kong process.
NUTI: OK, thank you very much. Dr. Supachai, thank you. [Applause]
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