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Speech by SCIT at Intercham luncheon (English only)

Following is a speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at a luncheon organised by the Intercham today (December 8):

Thank you, Alan, for the kind introduction.  

I'm delighted to be here today to talk to you about the upcoming World Trade Organization Sixth Ministerial Conference which opens in just five days from now at the Convention and Exhibition Centre.

This is a big event for Hong Kong, the biggest since the Reunification and, in terms of complexity, probably the most challenging event Hong Kong has ever staged.  As host, we've got to get it right.

We've certainly done everything we can over these last 12-18 months to make sure that we do.  We have a dedicated team - and I use the word dedicated in both senses of the word - putting in very long hours working out plans and contingencies for all the possible scenarios that might take place when you have more than 11,000 individuals accredited to a conference and another 10,000 or more on the streets protesting about that very conference.

Today, however, I want to focus more on what may or may not happen inside the conference hall.  The outcome of that will have a great significance in the medium and longer term on the shape of the world economy, particularly as it affects some of the world's poorest citizens.

I am sure you have been following events closely enough to know that the negotiations leading up to the Ministerial Conference have been fraught with difficulties.  They always are.  That is the nature of trade negotiations.

The main sticking point has come in the area of agriculture, where many countries, both in the developed and developing world, are arguing over the levels of reduction in farm subsidies and tariff barriers in the rich countries such as the United States and the European Union.

The Americans have put a bold reform offer on the table, conditional on it being matched by the other big players, notably the EU.  But the Europeans' counter offer has been poorly received, with most other WTO Members saying it does not go nearly far enough.  Whether or not the EU will go any further next week, or even early next year, is moot.

The issue is crucial because this current round of negotiations is all about helping the poor economies get a better and bigger share of world trade, particularly in agriculture.  Many of the developing and least developed economies rely almost exclusively on farming for their exports, and in some cases have a single agricultural product, such as cotton, sugar or bananas.

That's why so much emphasis has been placed on this issue in what is formally known as the Doha Development Agenda.  And because of this, progress in agriculture negotiations has been linked to other important agenda items, like services, industrial tariffs and a number of significant development matters, which I will discuss in just a moment.

Now all of these items are on the table in Hong Kong next week, when ministers from the WTO's 148 member economies - it will actually become 149 with the accession of Saudi Arabia - sit down to thrash out solutions to some knotty problems.  They will need to do this in a form that will enable us to drive forward into next year so that we can conclude the Round by the end of 2006.

Why the end of 2006?  The US President's so-called fast track authority on trade agreements expires in early 2007, and nobody expects it to be renewed by Congress.  So we must come up with a credible package by the end of next year to meet that deadline.

Given the political situation in the US, and the Presidential election cycle, it's hard to see another fast-track approval getting through Congress for probably another five years.  That puts even more pressure on the ministers to show political will and global vision in the Hong Kong meeting next week.  As chairman of the ministerial, I see myself as the honest broker bringing together all the conflicting and often contradictory interests and agendas of the member economies.

This is a difficult but necessary task because the WTO is a member-driven organisation.  All decisions are taken by consensus.  In WTO-speak, nothing is agreed until everything is agreed.

This makes decision-making awkward and time consuming, but it has the virtue of being both democratic and legally-binding on the members once agreement is reached.

And, as I have already mentioned, the negotiations leading up to next week have been anything but easy.  I suggest we shouldn't get too fazed by this.  Hand wringing and breast beating - obviously not at the same time - are all part of the negotiating process.

I read a nice description of how the game is played the other day from a veteran Australian trade negotiator, Peter Gallagher.  He said it helped if you could think of the negotiations as theatre - ritual, improvised and far too long.  But, he added, it was not necessarily the stuff of tragedy.  At this stage, he reckoned, the actors are keyed-up and tiring; alternately anxious and bored by their own lines.  They are looking for ways to bring the drama to a conclusion.

To continue with the theatrical metaphor, the stage is now set for the Ministerial Conference next week.  As the world's freest economy, and a bastion of free trade, Hong Kong is the perfect theatre.  We have put all the props in place.  The stage hands are ready. The actors will be arriving shortly to take their places on stage before we lift the curtain next Tuesday at 3pm. What we need now are some Tony Award winning performances from all concerned.

The show will have a limited run - from Tuesday to Sunday. I estimate that we will have some 100 working hours - 100 fateful hours for world trade - to win favourable reviews from a watching world.

So let me take this opportunity now to give you a preview. I should say first off that I am by nature an optimist. But I have been a public official long enough not to be starry-eyed.  It's just that when I see problems, I look for solutions.

Last weekend I returned from a whirlwind trip to Brussels and Geneva. In Brussels I attended a meeting of the G90 group of trade ministers of the developing and least developed economies. I had separate bilateral meetings with a number of those ministers as well. In Geneva, I attended the last meeting of the WTO's General Council, which adopted a draft Ministerial Declaration which is to be presented to the ministers at next week's conference. In my view, it contains the bones of an agreement that would take us forward to next year.

I also had very good meetings with the leading players from the US, Japan and India as well as various ambassadors who have been chairing the key negotiating groups at the WTO's Geneva headquarters. Such is the nature of this game that I also had an unscheduled but very useful meeting with the Australian Deputy Prime Minister and Trade Minister, Mark Vaile, whom I bumped into as I left my hotel to return home and he was arriving for another set of meetings with the G6 group which comprises the US, the EU, Japan, Brazil, India and Australia.

When I addressed the General Council in Geneva last week, I assured members that, as the conference chairman, I would insist on a transparent and inclusive process. I want all members to be involved, and to feel that they are involved. That, in my view, is the best way to get result in the tight situation we find ourselves.

I also made the point that as a member-driven organisation, it is up to the members to make or break this conference. We must exercise our collective responsibility to make it a success.

I certainly believe the pre-conference atmosphere is not bad. It is true that we have not travelled as far down the track as we would have hoped, essentially because of the roadblock over agriculture. But in Brussels and Geneva, I sensed a strong mood for progress. Now that the ministerial is upon us, and the shadow boxing must come to an end, WTO members by and large want to see a credible outcome in Hong Kong. Credible in the sense that we can pull together enough agreement to form a platform from which the Round can be concluded next year. There is still a small window of opportunity up to spring next year to achieve this.

If I am right about the atmospherics, and the desire to do a deal, what we will need now is the political will to turn that into something tangible. We'll know by the end of next week whether or not that political will is there.

I believe we will get a useful outcome next week, but precisely what shape it will take I cannot say.  I believe, however, that Hong Kong will not end in failure as did Cancun or Seattle.  Another failure is unthinkable and would come pretty close to destroying the WTO's credibility for years to come. And the fallout from that would mean increasing bilateralism in world trade deals, the only result of which would be further imbalance between rich and poor. Frankly, that path can lead to instability on a global scale.

Look at the other side of the coin: a successful Doha Development Round.  The World Bank estimates that it could add US$300 billion annually to the global economy over the next decade to the year 2015. It has the potential to bring 140 million people who live on less than US$2 a day out of their miserable existence.  Sixty million of these wretchedly poor people live in sub-Sahara Africa alone. As I have already mentioned, agriculture is the only export of many of these poor countries.

Do we really want to tell them that protecting a relatively small number of farmers in rich and prosperous countries is more important than giving them the means to trade their way to a better life for themselves and their children?

That's not an answer I want to give. And it is the main reason why I have from the beginning placed such emphasis on the development aspects of the Round. I have lost count of the number of different trade ministers I have met over the last 12-18 months. I reckon it is probably close to 100, many of them on several or even numerous occasions. I have clocked up 160,000 air miles flying from country to country, from city to city, talking to ministers and government officials to gain a better understanding of their concerns, working away at forging that elusive consensus.

It was against this background that at the recent meeting of APEC Trade Ministers in Busan, South Korea, I put forward five possible components of a development package. I hope you will bear with me as I restate that package here, as follows:

(1) commitment to tariff free quota free market access for products of the Least Developed Countries;

(2) harvesting as many of the agreement-specific Special and Differential Treatment proposals for Least Developed Countries as is possible;

(3) agreement on a longer transition period for Least Developed Countries under the Trade-related Aspects of Intellectual Property Rights (TRIPS) and Trade-related investment measures (TRIMs) agreements;

(4) commitment to an Aid for Trade-programme, which among other things should be sufficient to enable early implementation of the Trade Facilitation measures on which agreement is already very close; and

(5) securing a permanent solution to the TRIPS and Public Health issue, thus guaranteeing access to cheap drugs.

In addition, if it is, indeed, doable, I believe we should aim at achieving an early harvest on the reduction of cotton subsidies in the rich countries as well. I believe the Hong Kong Ministerial Conference will have achieved much if we can wrap up or make substantial progress on this package.

But I also want to mention two issues in particular that have not proceeded very far because of the impasse on agriculture. I refer to services and non-agricultural market access, or NAMA. In plain language, NAMA means industrial tariffs.

Wearing my Hong Kong hat for a moment, we estimate that local business stands to enjoy tariff savings of nearly HK$7.7 billion if the tariff on our top 10 domestic exports is removed.

And as services now account for some 90% of Hong Kong's economy, the opportunities for growth resulting from lowered barriers in our overseas markets will be multiplied. Like everyone else, Hong Kong's boat will rise with a successful Round.

I would like to make one final point, if I may. I hope most of you here today read the very strong letter in the FT last month from the chief executives and/or chairmen of some of the world's leading corporations, expressing concern about the reported blockage in the Doha negotiations.

Let me read a salient paragraph from that letter.

Quote: We strongly believe that the WTO-based multilateral trading system is one of the central pillars of international co-operation. Multilateral initiatives to liberalise world trade and improve access for goods and services are a strong driving force for global economic growth, job creation and consumer choice - as well as keeping in check the ever-present threat of protectionism. We underline our conviction that a successful Doha Round is vital to enable business to continue to play a leading role in the eradication of poverty and the raising of global living standards. Unquote.

I would say Amen to that.

The business leaders went on to urge WTO member governments to face up to their responsibilities and re-instill confidence among producers, consumers and investors that the multilateral trading system - which had done so much to raise global living standards over the last half century - is still safe in their hands.

These are compelling messages from international business. I would urge you and your peers to add your voice and your weight to their eloquent plea for a successful conclusion to the Doha Round.

Thank you.

Ends/Thursday, December 8, 2005
Issued at HKT 15:08


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