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International
US trade
policy

The development and social progress

By United States Trade Representative
Charlene Barshefsky
Oct 16 - 22, 2000

The World Trade Organisation (WTO), is working towards a new round of global trade negotiations, monitoring and enforcing the implementation of its 20 multilateral agreements, and litigating numerous dispute settlement cases. Negotiations also are underway on the entry of 30 prospective new WTO members. It has regional trade initiatives underway in each part of the world; talks are underway to create a Free Trade Area of the Americas, the Asia-Pacific Economic Co-operation forum, or APEC, promotion of regional integration in the Middle East, implementing trade and investment in Africa and strengthening the Transatlantic Economic Partnership. The WTO is working with each of its major trade partners towards market-opening and deregulation in Japan; ensuring implementation of the large number of trade agreements world-wide that have grown exponentially since 1992 and devoting special attention to developing the high-tech infrastructure for trade in the next century.

Hoover and Roosevelt: The ideas are based in part on economic logic applicable throughout the world: exports allow us to serve larger markets and are generally associated with higher-paying jobs; and imports increase competition and economic efficiency, dampen inflation and raise the standard of living, especially for the poorest families. Policies are based not only on theory but on practical experience.

Seventy years ago, President Herbert Hoover signed the Smoot-Hawley Act, which was the largest single restricition on trade in American history. President Hoover's trade policy had rested on the belief that Americans could not compete effectively with developing countries. As Hoover put it, "we cannot successfully compete against foreign producers because of lower foreign wages and a lower cost of production." The result was a cycle of tarifff hikes and retaliation which cut trade by 70% between 1930 and 1933, deepened the depression and intensified the political tensions of the era.

After this experience, Franklin Roosevelt proposed the alternative, followed ever since. As he put it in 1944:

"A basic essential to peace, permanent peace, is a decent standard of living for all individual men and women and children in all nations. Freedom from fear is eternally linked with freedom from want. [And] it has been shown time and time again that if the standard of living in any country goes up, so does its purchasing power-and that such a rise encourages a better standard of living in neighbouring countries with whom it trades."

Since the Second World War, the work has continued for more than fifty years, and it has brought enormous benefits, such as:

Growth and rising living standards: The opening of world markets has helped to spark what is in effect a fifty-year boom, in which trade has expanded fifteen-fold since the 1950s, world economic production has grown six-fold, and per capita income nearly tripled. The result has been historically unprecedented social progress. Since the 1950s, world life expectancy has grown by twenty years, infant mortality dropped by two-thirds, and famine receded from all but the most remote or misgoverned corners of the world.

Economic security: In the Asian financial crisis of 1997-99, with 40% of the world in recession, the respect WTO members had for their commitments kept open the markets affected nations needed to recover. Thus, the system of mutual benefit and rule of law represented by the WTO helped prevent a cycle of protection and retaliation like that of the 1930s. Ultimately, it also averted the political strife that can erupt in economic crisis.

Peace and stability: The GATT, and now WTO, have helped us address some of the most profound political challenges as well. It helped to reintegrate Germany and Japan in the 1950s, and the nations emerging from colonial rule in the 1960s and 1970s. Now, the WTO has taken up a task of equal gravity as nearly 30 nations breaking with communist planning systems following the end of the Cold War seek WTO membership to reform their economies and integrate with the world.

Trade policy and development: A trade policy can never be enough: ultimately, countries largely control their own destinies. Trade policy, while they can create new opportunities, can never substitute for effective domestic policy or for financial stability. To believe otherwise is to court disillusion. Rather, development comes from the union of several different fields:

Appropriate domestic policies: the rule of law and a stable, democratic political system; a market-based economy; health and social safety net policies; financial stability; and, perhaps above all, education and the development of workers' skills.

The right balance of international assistance and financial policies including recognition of the fact that for the least developed countries, the financial burden posed by debt has made growth very difficult. President Clinton has thus challenged the Congress and the world to forgive 100% of this debt when such relief will help finance basic human needs in those countries.

A trading system that gives developing nations (in particular the least developed) greater access to world markets and more ability to defend their rights and interests. The system must do more to ease the unique difficulties newer and smaller firms encounter in the world market.

A more open trading system: In an open trading system, the most important point is more open markets.

Benefits of open economies: Part of the responsibility for creating more open markets lies with developing country governments. Experience shows that the most open economies grow fastest, create new and innovative businesses most efficiently, and reduce poverty most effectively.

This clearly has occurred not only in America but worldwide. As Southeast Asia, Central Europe and Latin America opened to the world, they grew more rapidly; reduced poverty; and built more stable, peaceful regions. By contrast, South Asia, the Middle East and Africa, where trade barriers remain highest, poverty has been reduced more slowly and political tensions persist. There is simply no substitute for membership in the WTO and participation in its most recent agreements on information technology, telecommunications and financial services. The development of regional integration initiatives like the ASEAN Free Trade Area, the Free Trade Area of the Americas and Africa's three regional trade groups is also essential.

US programmes: At the same time, however, when countries do the right thing, the world must do more than stand by and applaud. The US offers a generally open market, as evidenced by the more than $500 billion worth of imports of goods and services it purchased from developing countries last year. This total will perhaps reach $600 billion in 2000. The US has developed a series of programmes, which offer special market access privileges to developing countries such as The Generalised System of Preferences, or GSP, which offers duty-free treatment to about two-thirds of all goods from developing countries, and which we recently increased by over 1,700 tariff lines for the least developed countries.

A trading system easier to use: Open markets mean little in practice without the ability to reach them. This presents us with two separate challenges: first, ensuring that the least developed countries can take full advantage of a trading system that is more complicated than ever before; and second, making sure the WTO and its agreements give new ventures and small family firms — the same opportunities they create for larger companies.

Technical assistance and capacity-building: Some of the WTO's agreements on intellectual property, services, sanitary and phytosanitary standards, or dispute settlement — demand considerable expertise from participating governments. Therefore, the WTO is committed to a programme of increased technical assistance and capacity building to build understanding of the agreements; help governments comply with them; and also help countries assert their rights and interests in negotiations.

This is especially important for the least-developed countries, which come to the WTO with less experience and resources. Last year the WTO joined Bangladesh, Lesotho, Nigeria, Senegal, and Zambia, in a proposal to improve its current programme, known as the Integrated Framework, in these areas.

More broadly, WTO has already begun a series of workshops and sessions in several different regions of the world — on its own and together with colleagues from the Agency for International Development, the Federal Communications Commission, the Department of Agriculture and others — to offer advice and assistance on the WTO, as well as on the US market access programmes. This will help to make sure that governments, businesses and academics are familiar with, and can take advantage of, all the options the WTO offers.

Electronic commerce and trade facilitation: At the same time, WTO believes that new information technologies, together with practical trade facilitation measures, can offer a fundamentally better world for smaller and newer businesses. One of the most profound and exciting trends today is the development of the Internet and a worldwide telecommunications network.

Internet access requires little capital, helps entrepreneurs find customers and suppliers quickly, and eases technical and paperwork burdens that can slow participation in trade. Thus, electronic commerce is ideally suited for developing countries. WTO is working to ensure access to these technologies through programmes like the Leland Initiative in Africa and the Internet for Economic Development programme, which help developing countries gain information technology skills and ease access to the Internet.

WTO is also capitalising on these new opportunities through a greater focus on trade facilitation. Here the work is very practical. For instance, in the Free Trade Area of the Americas talks, there is a hemispheric agreement to post all visa and customs requirements on the Internet, and are also implementing streamlined customs procedures for express shipments and commercial samples. Similar initiatives are underway in APEC.

Conclusion

Altogether, WTO hopes to create a system that does more to support long-term growth and export opportunities for developing countries, as well as make it easier for governments to use and also takes into account of the special problems of smaller businesses and new entrepreneurs. Broadly speaking, the objective is to create a trading system, which gives people a broad sense that the world economy offers opportunity to anyone who is willing to work.

The challenge is complex and all questions cannot be answered. But in partnership with 136 other WTO members, there can be a trading system of shared responsibility and shared benefit, welcoming every country to its rightful place in this system.

The above is the edited version of the keynote address delivered at The Centre for International Private Enterprise (CIPE) at its second international conference for women entrepreneurs in June 2000. Ambassador Charlene Barshefsky is the US Trade Representative and also the President's principal trade negotiator and policy advisor.

A CIPE/AsiaNet Feature