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Following is a speech by the Secretary for Trade and Industry, Mr CHAU Tak Hay, at the luncheon of the Pacific Economic Cooperation Council (PECC) Standing Committee Meeting in Dalian today (April 13):
Thank you, William, for your kind words. Ladies and gentlemen,
I would like to take this opportunity to express the deep appreciation of the Government of the Hong Kong Special Administrative Region to the Liaoning Province People's Government and to the Dalian Municipal People's Government for hosting PECC's first Standing Committee meeting under Hong Kong, China's chairmanship.
I would also like to thank the Chairman of PECC for inviting me to speak at this lunch, not least because it gives me the perfect excuse to visit again the beautiful city of Dalian.
It is also a great pleasure for me to be able to speak to such a distinguished gathering and to share with you my views on the post-Seattle scene and the challenges facing the World Trade Organisation (WTO).
The Pacific Economic Cooperation Council has a long and distinguished record of playing a positive role in shaping the trade policy agenda of the region. Hong Kong, China is pleased to be associated with this organisation, and is very much privileged to assume the chairmanship for this year and the next. I look forward to enhancing our cooperation with PECC through our Chairman and my good friend, Dr. William Fung.
Seattle Fiasco
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You have probably arrived at your own conclusions as to why the Seattle Ministerial Conference ended the way it did, especially those of you who were there as observers from PECC.
There were a number of reasons for the fiasco in Seattle. The AFL-CIO (American Federation of Labour and Congress of International Organisations) and other non-government organisations (NGOs) would like to believe that the failure to launch a new Round of multilateral trade negotiations was due to their demonstrations and protest marches. I can tell you categorically that that was not the case. Nothing could be further than the truth.
The NGOs had nothing to do with the breakdown in the talks. It was very much a self-inflicted injury. It was inflicted by the members of the WTO, especially by the major players, on themselves.
The talks broke down because we had failed to prepare for the Ministerial Conference adequately. After months of work in Geneva, Ministers were presented in Seattle with a draft declaration which was 35 pages long and had more than 200 square brackets. As we all know, Ministers may be good at many things, but they are not very good at negotiating every comma and semi-colon in a long, detailed and complicated document.
There were wide gaps, or differences in positions, on every important issue - implementation of Uruguay Round, the results of agriculture, foreign investment, competition policy, anti-dumping, the environment, labour standards, etc..
And the differences were not just between the developed and the developing countries, which had always been the case traditionally and would have been difficult enough to reconcile. But this time, differences existed even among the major developed countries, especially between the United States (US) and the European Union (EU).
As one of the 135 ministers who were literally "sleepless in Seattle", let me underline the fact that serious attempts were made to narrow the gaps, and to resolve the differences among members. At the end of four days, we were much closer together, but certainly not close enough to be able to agree on the scope of the new Round and to launch it.
And there was little political will or flexibility on the part of the major players to forge a meaningful compromise. They also probably thought that, as in the past, they could again drive a steamroller over the developing countries. They were proven wrong this time.
Many developing members were already skeptical about a new Round because they felt the Uruguay Round had not delivered the sort of results that they had been promised.
The most obvious example is the case of textiles and clothing. While the major importing countries, such as the US and the EU, have no doubt abided by the letter of the Agreement governing the progressive reduction of quotas on textile and clothing imports, they have done so by keeping any meaningful market access improvements to the minimum and by deferring the liberalisation of products of greatest export interest to developing countries to the very end of the 10-year phasing out period, i.e. 2005! Very often, even such limited improvements have subsequently been frustrated by contingent trade measures such as anti-dumping duties and special safeguards against import surges.
The major players' lack of willingness to show more flexibility and accommodation in Seattle convinced the developing members that it was contrary to their interests to rush into a new Round.
On top of all that, and whether we like it or not, it is a fact of life that you cannot start a trade Round unless there is a large measure of consensus between the world's two largest trading entities, the United States and the European Union. We certainly saw no sign of that in Seattle. And so Seattle failed.
Rebuilding Trust and Confidence among Members
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The failure to agree, after all the hard bargaining, not only meant that we could not launch a new Round to keep up the pace of multilateral trade liberalisation, which is so vital if we are to maintain an effective WTO; it also soured the atmosphere, worsened the level of mistrust among members, especially between developed and developing countries, and seriously undermined the credibility of the institution.
In the aftermath of the Seattle debacle, the WTO is now going through a confidence-building stage in order to re-establish trust and goodwill among its members. The Director General, Mike Moore, has proposed a five-point package aimed at offering technical assistance and more market access opportunities so as to better integrate developing countries, especially the least developed among them, into the multilateral trading system.
All members of the WTO family should have an equal place at the table. Marginalisation of the less developed is not only unfair and unhealthy, but will eventually backfire on the developed countries by reducing the efficacy of the WTO.
The Director General is consulting the broader membership on such capacity-building measures and is due to report back before Easter.
Prospects for a new Round
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The question now facing us is: What next for the WTO? Realistically, the chances of launching a new Round this year are rather remote.
President Clinton and my good friend Charlene Barshefsky continue to talk about launching a new Round this year, but so far we have not seen any sign that the US Administration could turn rhetoric into reality.
They have more immediate priorities, not the least of which is the most important task of securing the passage by the US Congress of Permanent Normal Trade Relations status (PNTR) for China in the United States. I shall return to this subject a little later.
On the other hand, the EU, while professing enthusiasm, has displayed little of the flexibility that is necessary to entice the developing countries to come to the negotiating table. It has not dropped or modified its demands for negotiations on investment measures and competition policy, which the majority of members believe are not ripe for negotiations.
Instead, a recent EU Trade Ministers' Meeting reaffirmed the EU's position for a comprehensive agenda, and underlined the importance of addressing new issues, namely investment, competition policy, the environment and labour standards, in any new negotiations. Their emphasis was more on better packaging than on a more realistic assessment about what was achievable.
Trade and Labour
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A major roadblock is the issue of trade and so-called "core labour standards". Both the US and the EU maintain that they cannot go into a Round unless there is progress in parallel on addressing social conditions, in particular labour standards, of member economies. It seems more than a bit ironic that the developing countries are now expected to "pay" the developed countries for agreeing to a Round, for which the latter were in fact the main demandeurs before Seattle.
To insist on including labour standards in the agenda of the WTO can only be a recipe for another deadlock. I cannot see how the developing countries could agree to this. Neither do I think we should give in to such demands.
On this issue, Hong Kong speaks with a clear conscience. We have a very good record of observing high labour standards. We have in fact ratified more International Labour Organisation (ILO) conventions than some developed countries.
But we disagree, as a matter of fundamental principle, that trade instruments should be used to achieve non-trade objectives. The right place for addressing labour standards is the ILO and not the WTO.
The Financial Times has rightly described, in an editorial, the attempt by some developed countries to link trade with labour standards as "hypocritical ethical imperialism". WTO members are correct to be concerned that the inclusion of this subject in a new WTO Round would be the thin end of a wedge.
Because of the presidential and congressional elections in the United States in November and given the Democratic Party's traditional reliance on labour union support, there seems little likelihood that the US will have much flexibility on this subject before November. And that is why we are becoming less and less optimistic about the prospects for a new Round this year.
Alternative - No Round
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One alternative is to forget about a new Round altogether, and pretend that it's business as usual in the WTO. Business as usual would include carrying on the WTO's regular work programme, mediating in dispute cases, processing applications for membership, and proceeding with the so-called mandated negotiations on agriculture and trade in services.
The WTO does not need a new Round to get on with its work on the first three elements. However, most of us recognise that significant progress in the mandated negotiations can only be achieved in the context of a broader negotiating agenda, which allows for a balancing of interests across sectors and among all participants. And that is why Hong Kong has been among the large body of WTO members promoting a broad-based and balanced new Round.
Incremental Approach
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So, shall we just settle for a dull and inactive period in the WTO? Not for Hong Kong if we can avoid it. A middle of the road approach is perhaps to advance in an incremental manner. We could aim for a progressive agenda, which is realistic, manageable and germane to the core business of the WTO. It could be gradually expanded to include elements which have a better chance of commanding a consensus for their inclusion.
I have in mind possible candidates such as industrial tariffs, trade facilitation, e-commerce, and improvements to the Dispute Settlement Mechanism. The more sensitive or difficult issues should be deferred to a later part of the agenda.
The objective of this incremental approach will be to keep up the momentum of trade liberalisation, while seeking to build support, and define over time, the scope of trade negotiations to be included under the umbrella of a Round.
I believe that this approach should be more acceptable to the wider WTO membership than the painstaking, and painful, approach of trying to define upfront the scope of the Round - an approach that was tried and failed in Seattle.
I was in Canada and the US last week and had the opportunity to see the Canadian Minister for International Trade, Mr. Pierre Pettigrew, and the US Trade Representative, Ambassador Charlene Barshefsky. I found that both were still actively considering how to revive the prospects for a new Round, failing which I am sure they would be interested to see if an incremental approach is possible.
We obviously need to thrash out the details and the mechanics of this approach. My colleagues in Hong Kong and Geneva will be doing just that, and will speak to other WTO members to see if this may become a viable middle-of-the-road option.
How PECC could contribute
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I understand that you had a good discussion this morning about the challenges of the 21st Century and what PECC might do to contribute to the global trade agenda. On this, I have two suggestions to make.
First, PECC can certainly help build up a supportive constituency for trade liberalisation. Not all our critics in Seattle were wrong. Some of the concerns raised about labour rights and the environment are legitimate issues. But to resolve them by eschewing trade liberalisation as the anti-trade advocates suggested is like throwing the baby out with the bath water, to use an old cliche. These anti-trade advocates are seeking to ignore the conclusive economic evidence that trade liberalisation spurs economic growth, creates jobs and reduces poverty worldwide. And they are dead wrong.
I believe that your unique tripartite setup, coupled with your good connections with think-tanks, NGOs, and your extensive network of business contacts, puts you in the best position to argue a convincing case for progressive trade liberalisation.
You will be doing the multilateral trading system a great service by helping to correct misconceptions in some quarters and by instilling a better understanding of the benefits of free trade among the general public.
Secondly, PECC is very well placed to provide research support in respect of the so-called new issues such as trade and competition policy, e-commerce, etc..
Born out of an increasingly globalised world economy, these new issues often cut across many different sectors. They are less comprehensible - their full implications often unknown even to trade policy experts, not to mention the man on the street. This explains the doubts, the fears and difficulties of reaching consensus on such issues among the vastly diverse membership of the WTO.
More research in these uncharted territories, and more sensible discussions on them, are therefore desperately needed, and I call on you all to work towards promoting a better understanding of these new issues.
China's Accession and PNTR
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Progress on China's negotiations for her accession to the WTO and the question of PNTR have been so much in the limelight in recent months that my presentation would be incomplete if I did not refer to this most important among the tasks facing the WTO this year.
As I indicated earlier, I have only just returned from the United States, having accompanied the Chief Executive of the Hong Kong Special Administrative Region, Mr. Tung Chee Hwa, in his meetings with President Clinton, Secretary Albright and leaders of the US Congress. One of the key messages that Mr Tung was able to put across was the importance of early passage of the PNTR vote.
This is most important for US businesses, if they are to enjoy the benefits of the market opening concessions that China has committed herself to, and which are largely the result of the hard work put in by US negotiators and which the US will be getting without having to give anything in return.
This is very important for Hong Kong, too, because the Mainland of China and the US are our two largest trading partners. Hong Kong stands to benefit not just from the further opening up of the Mainland's markets but also from a stable and good economic relationship between China and the US.
China's accession to the WTO is, of course, in the interest of China herself as well as the global trading community. The WTO cannot claim to be a truly global body if the world's seventh largest economy and 11th largest trading entity is not a member. As a member, China will have to bring her laws and regulations into line with international rules and practices, and at the same time will be able to enjoy a more predictable and stable trading environment.
We are very pleased that the US Administration is making an all-out effort to secure early passage of the PNTR vote. The prospects are looking good at least in the Senate. The House of Representatives will be much trickier. But I believe that, with the combined lobbying efforts of the US Administration and the powerful American business community, the passage of PNTR by early June is achievable.
We hope that China will soon be able to conclude her bilateral negotiations with a few remaining trading partners, notably the European Union. And we look forward very much to the time when China assumes its rightful place in the WTO. I hope this will happen in the middle of this year. Only then can the WTO become a truly "global" trade organisation.
Thank you very much.
End/Thursday, April 13, 2000
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