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Speech by SCIT at FCC luncheon (with photo)

    Following is a speech by the Secretary for Commerce, Industry and Technology, Mr John Tsang, at a luncheon at the Foreign Correspondents' Club today (November 11):

Ilaria, members of the board, distinguished guests, ladies and gentleman,

     Good afternoon, and thank you so much, Ilaria, for that kind introduction.  

     It's good to be back at the FCC, and this time speaking on a subject with a bit more real meat, I think, than my topic last April which, some of you might recall, was about spam.

     Today, I want to talk about the Sixth World Trade Organisation Ministerial Conference which Hong Kong will be hosting at the Convention and Exhibition Centre between December 13 and 18. And if you will indulge me in mixing my food and beverage metaphors, the delegates from the 148 Member Economies attending this conference are currently having their aperitifs in the Last Chance Saloon in Geneva if they are serious about securing an ambitious market-opening package in Agriculture, Industrial Products and Services by the time we meet in Hong Kong. I'll explain why in just a moment.

     But first, I want to say that the Hong Kong Ministerial is important for the future of world trade; it is important for tens of millions of the world's poorest people; and it is important for Hong Kong, not just in our narrow self-interest in some of the issues under negotiation, but in the wider context of our status as an icon of free trade; and it is also an important test of our ability to host and manage an event of this size and complexity, with all the implications it holds for the global economy.

     Let me briefly set the scene. Hong Kong made a bid to host this conference at the last WTO Ministerial in Cancun, Mexico, in September 2003. There were other aspirants for the 2005 ministerial, but the Members gave us the nod, having reached the decision last year by consensus in the usual way among all the members.

     Now given that Cancun ended in failure as far as the negotiations were concerned, and the gathering in the scenic Mexican city was marked by some pretty serious and violent protests, many people thought that it was pretty brave of Hong Kong to take on the responsibility of organising and hosting the Sixth WTO Ministerial.

     We don't look at it this way. First, we think we are more than capable of handling what happens both inside and outside the Convention Centre.  

     Second, we take it as an acknowledgement of our competence as a world city that we have been entrusted to do the job. Clearly, the Member Economies believe we can handle whatever challenges that might arise.

     Third, we think of ourselves as a responsible world citizen and, as a champion of the multilateral system of international trade, we want to do what we can to see to it that the system is strengthened as a result of our concerted effort.

     Fourth, as Hong Kong is in the words of the former US President, Bill Clinton, "Exhibit A in the case for global interdependence and its benefits", we want to show the world the results of those benefits. And this Round is an opportunity for us to help others climb the ladder in the same manner as we have done earlier.

     Having said that, we have never underestimated the task ahead of us. That is why we set up a dedicated team within the government more than a year ago to plan for every aspect of the conference - from logistics and security, to strengthening our links and liaison not only with the WTO Secretariat in Geneva but with a whole range of Member Economies as well. An important part of that process has been to learn what went wrong and also what went right with other major international events of this nature in recent years, and apply those lessons to Hong Kong.

     But let's return to the Last Chance Saloon - although I'm not sure how appropriate it is to mention this in so fabled a Temple of Temperance as the FCC. With just 31 days to go before we officially declare the Ministerial open on December 13, it is still frankly difficult to predict what the exact outcome will be. For all the talk of lowering expectations for Hong Kong, but maintaining our ambition for the Round, the negotiating picture is still rather cloudy, and it's hard to see at this stage whether the bottle is half full or half empty. Being congenitally optimistic, I think it's definitely half full. International trade deals, after all, have usually been last-minute cliffhangers.

     To rewind the video back to Cancun, you will recall that the Round then fell flat on its face.  With hindsight, Cancun was a watershed. Developing Economies demonstrated that the negotiations could no longer be dictated by the US and the EU - the two Big Beasts in the WTO jungle. Since then the bigger developing economies, such as Brazil, China and India, or what is known as the G20, which incidentally have become far more market-oriented than they were even a decade ago, have taken on their strategic position in the middle-ground. That has helped focus convergence of the more diverse positions.

     Against this background, when the Americans put a pretty bold offer on agricultural reform on the table at a meeting in Zurich a few weeks ago, we thought we had traction. I was at that meeting, and I can assure you that the atmosphere was quite electric. We all sensed that the game had at last commenced - and not a minute too early.

     The US proposal put the ball fairly in the court of the European Union whose challenge was to come up with a credible response that seeks to bring down trade-distorting agricultural subsidies and tariffs, in particular to produce market access for the farm products of developing economies.

     The EU response came two weeks ago today, and has already been greeted with a chorus of disappointment by key players such as the US, Australia, and Brazil, as well as a spate of criticisms of over-ambition by others such as Switzerland and Japan. And France, with imminent elections on the horizon, is claiming a right of veto over the whole process because they think EU Trade Commissioner Peter Mandelson has exceeded his negotiating mandate.

     But from where I stand, the ball is still very much in play. That is welcome news. Given the limited space in which Commissioner Mandelson finds himself working, his offer was bound not to please everyone. But the stakes are so high for the Doha Round, that as Chairman of the December Ministerial, I have been urging all the Member economies to show political will and flexibility to keep the process moving forward. This is a time for statesmanship, not brinkmanship.

     After all, the WTO is in the negotiating business. That's what we do. And there's a huge amount of work to do if we are to come up with a package that gives us the necessary lift-off for the final stage of this negotiation.

     I returned from meetings in Geneva just yesterday after a very interesting week for the WTO. Ministers from the US, EU, Brazil, India and Japan met in London on Monday. On Tuesday and Wednesday they joined an informal meeting of ministers from some 20 other economies in Geneva, which was chaired by Pascal Lamy.

     Some of the remarks made by some of the ministers after those meetings make my "Last Chance Saloon" sound a little lame. However, you have to remember that inside every trade negotiator there is a drama queen just bursting to get out. And in my experience, the closer you get to the real negotiation in the final stages of the game, the more you would expect to see dramatic performances both inside and outside the negotiating chamber. Key players would not miss any opportunity when confronted by the media to repeat the quality of their offers, to express disappointment towards the offers of others, and to claim that if their demands were not met, the talks would necessarily break down. This mode of presentation will no doubt continue with growing intensity as we get closer to the end game.

     The background noises may be confusing but my take is that the series of meetings in Geneva had been very useful, not least because for the first time ministers were comparing notes across the whole spectrum of the negotiation drawing linkages between elements of the entire package, instead of looking at each component in its own silo in isolation. This balancing out of gains and losses across the board is an essential, if occasionally bloody business, as we begin to see the shape of the possible trade offs.

     So the gloves are now off. The real negotiation has begun. The run up to the December ministerial will be action packed. So watch this space.

     Up to now all the talk has been about agriculture. There is so much emphasis on agriculture in the Doha Round because at its heart is a commitment to bring down the walls of protection and huge subsidies in agriculture in the same way the barriers on the industrial front were broken down in recent decades. Why is this? Because in the aftermath of the 911 outrage in the US, the WTO meeting in Doha in November 2001 set itself a boldly ambitious agenda, the Doha Development Agenda, of doing just that so that the poorest countries could compete on a more level playing field to get their farm products on a competitive basis into the big protected markets of the developed economies, such as the US, the EU and Japan. Many developing economies depend almost entirely on their agricultural sector for survival. Some have but one agricultural product for export purposes.

     And there is no argument about just how heavily protected the big markets are.

     The US spends some US$20 billion a year on trade-distorting support. The EU number is around Euro 70 billion. This means that 40% of the EU's budget goes to just 4% of its workforce.

     My Australian counterpart, Trade Minister and Deputy Prime Minister Mark Vaile - being an Aussie, he has an eye for a quirky quote - pointed out recently that a typical cow in the European Union receives a subsidy of US$2.20 a day. That is simply amazing. More than 1.2 billion of the world's poorest people live on less than that every day.

     So, as I say, the stakes are high. The World Bank estimates that more than US$630 billion could be added to the world economy by a successful outcome of the Doha Round. It further estimates that this could lift some 140 million of the world's poorest people out of poverty by the year 2015.  

     It's a simple but sad and staggering fact that in our world of plenty, half of the people on the planet live on less than two dollars a day, and more than a billion survive - barely, I guess - on less than half that amount. An estimated 115 million children are not in school, and 40 million people are suffering from AIDS.

     International trade is not the silver bullet that will fix all these grotesque disparities overnight, but it is clearly the case that there can be no improvement to their desperate plight without it.

     If we cannot come up with a credible package next month that would enable the Round to complete in an ambitious manner in 2006, we will have lost a once-in-a-generation opportunity to make a mark on history. The political and practical realities for the Doha Round are these:

(1) We have already missed several deadlines. We need only look back at Cancun.

(2) We must conclude a worthwhile package by the end of the year for the simple reason that US fast-track approval runs out in 2007. We will need all of next year to build on what comes out of Hong Kong and put whatever we achieve into a proper legal framework and allow Members to obtain approvals from home governments.

(3) Congressional sentiment is such that Congress will not grant the President any further fast-track approval if Doha should fail. And no member economy of the WTO would be willing to allow the US Congress to tinker with the finely balanced package that was the result of years of negotiations.

     So, what would be the consequence of all that? First, the WTO simply cannot afford another failure as it had in Cancun. To paraphrase Oscar Wilde, to lose one Ministerial Conference is unfortunate, but to lose a second would be downright careless. And in this case, disastrous.

     The WTO's credibility would be shot to shreds. Members would lose confidence in its ability to get results, and the multilateral trading system as we know it would be seriously undermined.  

     We would see a proliferation of bilateral agreements. And, as Martin Wolf argued so eloquently in the Financial Times a week or so ago, "since these agreements are almost entirely unregulated, the weak would be at the mercy of the strong, while the latter would, in effect, be seeking to create commercial spheres of influence. The consequences must include a rise in global tensions."

     High stakes indeed.

     Madame Chairman, you will have noticed that I have not mentioned the other aspects of the Ministerial that are no doubt on the minds of our citizenry, not to mention the press. I refer to the possibilities of traffic gridlock, disruption to business activities and schooling, violent protests and the like. Let me reassure you once again that these are matters which concern us greatly. Our organising team has been working day and night for the past year devising ways and means to meet all kinds of eventualities. We are preparing for the worst, and hoping for the best. We hope the lessons we have learned from Cancun and Gleneagles and other similar events will help us deal with whatever is thrown up at us.

     But I do want to stress that as a free, open and tolerant society, we will welcome the great majority of protestors who want to make their views heard. We have that tradition in Hong Kong, and it continues today. There will be 2,000 non-government organisation representatives accredited to the Ministerial, and for the first time, they will be housed under the one large roof of our meeting place along with 6,000 accredited delegates and 3,000 accredited media representatives. This really is the big, inclusive WTO tent, the broad church so to speak.

     For those who want to demonstrate their dissent outside of the conference venue, we have designated areas for them at the Wanchai Cargo Handling area and the Wanchai Sports Ground.

     But we are not so naive as to believe that there won't be a minority who is bent on disruption and even violence. They have made known that their proclaimed agenda is to disrupt or derail the Ministerial.

     Our agenda is to make Hong Kong safe for the delegates, the NGOs, the press, the peaceful protestors and our own community who want to go about their daily business. Our police are well equipped and trained to deal with those who have mayhem in mind.

     Ladies and gentlemen, let me sum up: as host of this crucial conference, my hope is that events outside the conference hall will not blight what we are trying to achieve inside it. I would hope that whatever happens on the streets will become but a footnote in history. My fervent hope is that within 12 months of the Hong Kong ministerial, the 148 Members of the WTO will produce a reform package of trade liberalisation that will merit a whole chapter in history, and a heroic one at that. There is still everything to play for.

     From a personal standpoint, I'm determined to do my best to see that the Hong Kong Ministerial give the Doha Development Agenda the momentum it needs to reach the successful conclusion it deserves by the end of next year.

     Thank you.

Ends/Friday, November 11, 2005
Issued at HKT 15:41


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