Washington, 7 November 2001 - The events of the past century
demonstrate how trade can deliver tremendous benefits to countries
that open their markets to foreign competition and challenge
businesses to market their goods and services around the world. But
the past century also reveals that there is a high price -- economic
and political -- when support for free trade withers. This experience
points to the importance of moving forward with trade liberalization.
Doing so would open the way for increased development,
entrepreneurship, innovation, growth, and ideas to shape the course
of globalization.
By opening markets, we can strengthen forces that will help bind
nations and peoples together through the peaceful exchange of goods,
services, capital and ideas. That is one reason why Albania, Croatia,
Georgia, Jordan, Lithuania, Moldova, and Oman have joined the WTO in
the past two years, and why China and Taiwan will be invited this
week to join.
Building support for free trade has been a top priority for the Bush
Administration. President Bush has promoted a strategy to expand
trade and investment globally, regionally, and with individual
countries -- reaching out to both developed and developing nations.
Our strategy serves five principal purposes.
First, by moving forward with trade liberalization, we can signal
that there is an international coalition for openness and growth that
respects core values. The tragic events of September 11 have given
our work a renewed urgency. America and the world have been attacked
by a network of terrorists who are masters of destruction, but
failures at construction. They stand for intolerance and abhor
openness. The international market economy -- of which trade and the
WTO are vital parts -- offers an antidote to this violent
rejectionism. Trade is about more than economic efficiency; it
reflects a system of values: openness, appreciation of differences,
peaceful exchange, opportunity, inclusiveness and integration, mutual
gains through interchange, freedom of choice, governance through
agreed rules, and a hope for betterment for all peoples and lands.
Second, America's ability to sustain coalitions against terrorism
will depend in part on our attention to the problems faced by our
partners. Many democratic governments in developing nations, already
struggling with economic challenges before September 11, now face
staggering difficulties. Countries throughout Latin America and Asia,
and increasingly nations in Africa, depend on trade with G-7 nations
for growth. Through August, the dollar value of trade by the United
States, Japan, and Canada had declined 3.6 percent compared to a year
earlier. During the same period last year, the trade of these nations
was up more than 19 percent. If this trend continues for the United
States, as I expect it will, 2001 will be the first year since 1982
that U.S. trade numbers will actually fall.
Third, trade liberalization presents the greatest opportunity for
developing nations. They will find, as many nations already have,
that trade facilitates greater economic integration and political
cooperation with the developed world, while introducing new ideas,
investments, business networks, production methods, and technologies.
Building a fairer, rules-based trading system is critical as
developing nations seek greater economic opportunity and political
stability. As President Bush has said, "Trade creates jobs for the
unemployed. When we negotiate for open markets, we are providing new
hope for the world's poor. And when we promote open trade, we are
promoting political freedom. Societies that open to commerce across
their borders will open to democracy within their borders."
A recent World Bank study examined developing countries that opened
themselves to global competition, and those that did not. It
concluded that the income per person in globalizing developing
countries grew more than three-and-a-half times faster than it did in
non-globalizing developing countries. The absolute poverty rates for
globalizing developing countries fell sharply over the past 20 years,
while the income levels of the lowest income households grew in line
with the overall economy.
The trade liberalization ushered in by the Uruguay Round highlights
the potential of more trade for developing nations. In the six years
following completion of the Uruguay Round, exports from developing
nations grew by nearly $1 trillion, to a level of $2.4 trillion. With
continued trade liberalization, we can create more opportunities, for
more people, in nations throughout the world.
A study by Joseph Francois, of Erasmus University in Rotterdam,
forecasts that completion of new negotiations would generate
approximately $90-190 billion a year in the form of higher incomes
for developing nations. In particular, liberalization of the global
agriculture market - a top priority for the United States - is
arguably the single greatest contribution that new negotiations can
make to poverty alleviation in the developing world. The U.S.
Department of Agriculture has estimated that complete elimination of
distortions in the agriculture trade would produce a 27 percent
increase in the annual agriculture exports of developing nations.
These benefits from more trade are not denominated in dollars alone.
Open trade advances political reform. Open trade swells the ranks of
independent businesses, and can reduce the level of government
intervention in national economies throughout the world. And improved
trade rules help to level the playing field for developing nations
and create the institutions that support economic development.
As the United States and our trading partners pursue free trade, we
need to do so in a way that is consistent with our values and draws
on our compassion. For example, the Bush Administration is
implementing a flexible policy on intellectual property as it relates
to medicines to treat HIV/AIDS and other pandemics. This flexibility,
afforded by the major international trade agreement on intellectual
property, enables countries and companies to help deal with this
tragic pandemic by encouraging low-cost access to critical medicines.
At the same time, the preservation of intellectual property rules
ensures incentives to develop medicines and biotechnology that can
help us cure and treat diseases that have plagued humankind since our
origin.
We recognize that some of the least-developed countries in the WTO
find it difficult to fully comply with the pharmaceutical patent
rules governing world trade. In response to these difficulties, the
United States has proposed granting the least developed countries a
10-year extension, to 2016, to come into full compliance with all
pharmaceutical-related patent obligations under the TRIPs agreement.
We have also proposed a moratorium of at least five years on WTO
challenges to the action of other sub-Saharan African developing
nations as they respond to HIV/AIDS, infections related to AIDS, and
other health crises, such as malaria and tuberculosis.
Fourth, opening markets is important for economic recovery in the
short run and for economic growth over time. It will also enhance
productivity and efficiency, while helping to keep inflation in
check. A signal that the world's trading nations are committed to
open markets -- and that they will resist protectionism -- would
inject additional confidence and energy into financial markets.
Businesses will focus more on opportunities to be created and less on
competition to be thwarted.
After all, there is a bicycle theory for trade: If the trade
liberalization process does not move forward, it will, like a
bicycle, be pulled down by the political gravity of special
interests. To counter the slippage, some nations are turning to
regional and bilateral agreements. By seeking to promote open markets
on multiple fronts - globally, regionally, and with individual
countries - the United States hopes to create a competition in
liberalization that counters the political gravity of protectionism.
Trade liberalization is also needed to affirm the WTO, which is
falling behind developments in the world economy. It needs new
negotiations to keep up. Since the completion of the Uruguay Round in
1994, international commerce has been transformed by new
technologies, networks, business models, and investment patterns. It
has also been buffeted by financial crises and other economic shocks.
Governments are under increasing pressure to protect local producers.
Fifth, trade liberalization will be an engine of global economic
growth that benefits families around the world. In America, the
market openings implemented as part of the Uruguay Round and the
North American Free Trade Agreement generate annual benefits of $1300-
$2000 for the average family of four. The numbers may differ in other
nations, but it is clear that opening markets through global trade
liberalization can deliver hefty tax cuts for families who are
watching their budgets throughout the world. And the biggest
beneficiaries of increased trade are those with lower-incomes, as
they are the least able to afford the higher prices for food,
clothing, and appliances.
While great progress has been made in opening markets in recent
years, continued progress is not preordained. The world economy of
about a century ago also held out the promise of great technological
change, trade flows, and economic integration similar to the
forecasts of today. But the world's leading trading nations chose the
wrong course, and it took the second half of the century to overcome
the disastrous mistakes of the first 50 years.
At the dawn of this new century, we again have a choice of ideas.
Which ones will triumph -- those of fear, destruction, and dwindling dreams
-- or those of humankind's untapped potential, its aspirations, and the
creative energy of free peoples seeking better lives? We can let the hopes of
a new generation slip away amidst disputes, narrow interests, and
insecurities. Or we can build on the momentum of the past 50 years, championing ideas
that lead to opportunity and growth, and setting a course of increased
peace and prosperity for the world, not just for a year or two, but for decades
to come.
Robert B. Zoellick is the U.S. Trade Representative.