A partnership with academia

Building knowledge for trade and development

Vi Digital Library - Text Preview

The Future of Trade: The Challenges of Convergence Report of the Panel on Defining the Future of Trade Convened by WTO Director-general Pascal Lamy

Report by WTO, 2013

Download original document (English)

Chapter 1 of the Panel on Defining the Future of Trade Report discusses the contribution that trade opening has made to growth, development prosperity, the challenges of managing jobless growth, high unemployment, poverty, inequality, the environment and sustainable development, and the role of trade as well as investment in this context. Chapter 2 examines certain transformational actors that have shaped trade in recent years and will continue to do so in the future. Finally, chapter 3 contains a number of recommendations for possible action.

The Future of Trade:
The Challenges of Convergence
Report of the Panel on Defining the Future of Trade
convened by WTO Director-General Pascal Lamy


24 April 2013




Background
On 13 April 2012, the Director-General of the WTO, Pascal Lamy, announced the
establishment of the Panel on Defining the Future of Trade. The Panel was
mandated to: “….examine and analyse challenges to global trade opening in the
21st century” against the background of profound transformations occurring in the
world economy, looking “at the drivers of today’s and tomorrow’s trade, […] at
trade patterns and at what it means to open global trade in the 21st century,
bearing in mind the role of trade in contributing to sustainable development,
growth, jobs and poverty alleviation.”


The Panel’s members were:
Talal Abu-Ghazaleh
Chairman and Founder, Talal Abu-Ghazaleh Overseas Corporation, Jordan


Sharan Burrow
Secretary-General, International Trade Union Confederation


Helen Clark
Administrator, United Nations Development Programme


Frederico Pinheiro Fleury Curado
President and CEO, Embraer S.A, Brazil


Thomas J. Donohue
President and CEO, US Chamber of Commerce


Yoshiaki Fujimori
President and CEO, LIXIL Group Corporation and LIXIL Corporation, Japan


Victor K. Fung
Chairman of Fung Global Institute, Hong Kong, China
Honorary Chairman of the International Chamber of Commerce


Pradeep Singh Mehta
Secretary-General, CUTS International, India


Festus Gontebanye Mogae
Former President, Botswana


Josette Sheeran
Vice Chairman, World Economic Forum


Jürgen R. Thumann
President, BUSINESSEUROPE


George Yeo
Former Foreign Minister, Singapore
Vice Chairman of Kerry Group Limited, Hong Kong, China


The Panel on Defining the Future of Trade met three times, in May 2012, September 2012, and
January 2013.  The Panel also engaged in consultations and discussions with various
stakeholders. Meetings took place in Beijing, Singapore, Geneva, New Delhi and Amman.  A
member of the Panel, Talal Abu-Gazaleh, wrote a report entitled “WTO at the Crossroads”. 
Another member, Pradeep Mehta, reached out to the public through a questionnaire and
dialogue on the website of CUTS International. This work served as further input into the Panel’s
deliberations. In addition, a dedicated website was established to receive comments from the
public for consideration by the Panel in writing the report.




The Future of Trade: The Challenges of Convergence 1


EXECUTIVE SUMMARY 3


CHAPTER 1:
WHY TRADE OPENING WORKS FOR WELFARE 9


Introduction 9
Tradecreatesbenefits 10
Tradeandinvestmentgohand-in-hand 11
Tradefostersdevelopment 11
Tradecansupportmorejobs 12
Tradecanbemadetoworkforgreaterequality 13
Trade,jobsandinequality:realizingopportunity 14
Tradecansupportsustainabledevelopment 15
Tradeopeningneedsrules 15
Conclusions 15


CHAPTER 2:
TRANSFORMATIONAL FACTORS SHAPING INTERNATIONAL TRADE 17


Theworldeconomyischanging 17
Expandingtradeandinvestmentreflectglobalization 17
Geographicalshiftsintradeandinvestmentreflectchangingpower
relationships 19
Technologyistheengineofglobalization 21
Joined-upproduction:theriseofinternationalvaluechains 22
Policyisanimportantdeterminantofeffectivesupplychainparticipation 23
Internationalcooperationintradeandinvestmenthasbecomeincreasingly
preferential 23
Withthegradualfallinmosttariffs,non-tariffmeasuresincreasinglyinfluence
tradeoutcomes 25


TAbLE OF CONTENTS




2 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


CHAPTER 3:
OPENING TRADE IN A COMPLEX WORLD: WHERE DO WE GO
FROM HERE? 27


Principlesarethefoundationofthesystem 27
Non-discrimination: managing preferential trade 28


Non-discrimination: managing non-tariff measures 28


Transparency, accountability and stability 29


Managing reciprocity and flexibility 29


Processesmatter 31
Consensus decision-making 31


Building the agenda 32


Notifications 32


The WTO Secretariat 32


Reaching out to stakeholders and the public at large 33


Anevolvingagendainachangingworld 33
Issues directly linked to existing WTO provisions 34


Issues raised as being relevant to the WTO 36


CONCLUSIONS:
THE CHALLENGES OF CONVERGENCE 39


ANNEX:
bIOGRAPHIES OF THE PANELLISTS 41


Disclaimer


Thereportandanyopinionsreflectedthereinarethesoleresponsibilityofthemembersofthe
Panel Defining the Future of Trade acting in their personal capacity. They do not purport to
representtheopinionsorviewsoftheorganizationswithwhichtheyareassociated.Thereremain
elements regarding the relationship between trade opening and social and industrial policies,
investmentandthescopeofconvergence,inrespectofwhichdifferentviewswereexpressed.




The Future of Trade: The Challenges of Convergence 3


EXECUTIVE SUMMARY


InApril2012,theDirector-GeneraloftheWTO,PascalLamy, invitedadiversegroupof
prominent non-state stakeholders to analyse challenges to global trade opening in the
21st century.ThePanelheldaseriesofclosedmeetingsandalsoconsultedextensively
withinterestedparties.


Chapter1ofthePanel’sreportdiscussesthecontributionthattradeopeninghasmade
to growth, development and prosperity. It also discusses the challenges of managing
joblessgrowth,highunemployment,poverty, inequality,theenvironmentandsustainable
development,andtheroleoftradeaswellasinvestmentinthiscontext.


Chapter 2 examines certain transformational factors that have shaped trade in recent
years and will continue to do so in the future. These include increasing globalization,
geographicalshiftsinpatternsofgrowth,tradeandinvestment,technologicaladvances,
the riseof international valuechains, theproliferationofpreferential tradeagreements,
andthegrowinginfluenceofnon-tariffmeasures.


Chapter 3 contains a number of recommendations for possible action. They are not
prioritizedintermsoftheirdegreeofimportancebythePanel.Theyareorganizedaround
anexplorationoftheprinciplesandprocessesdrivingtraderelations,alongwithaseries
ofspecificissuesthathaveeitherbeenraisedinothercontexts,includingtheDohaRound,
or which the Panel believes warrant consideration. The Panel does not offer specific
recommendationstodealwiththeDohaRound,otherthannotingthatthe issues inthe
Dohaagendawillnotdisappearandthatnotfulfillingthiscollectiveundertakingcouldput
atstakethemultilateraltradingsystemitself.


Recommendations


Principles of the multilateral trading system


Non-discrimination: managing preferential trade
Whileweseetheadvantagesandcontributionofpreferentialtradeagreements,wealso
acknowledge their disadvantages when compared with themultilateral trading system.
WerecommendthatWTOmembersengageexplicitlyinanexplorationofwaysinwhich
preferential trade agreements and the principles underlying them could increasingly
converge with the multilateral system, perhaps starting with the elaboration of best
practices.




4 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Non-discrimination: managing non-tariff measures
WhiletheWTOisnotresponsibleformanagingpublicpolicyinkeyareasoftheeconomy,
suchashealth,safety,environmentalqualityandtherightsoflabour,webelievetheWTO
must find ways of ensuring convergence between the underlying objectives of trade
openingandpublicpolicies.


Transparency, accountability and stability
Members have an obligation to pursue a transparent approach in their dealings. They
should improvetheir recordforobservanceof their transparencyobligations in termsof
policies,measures,anddata.


Managing reciprocity and flexibility
ThePanelrecommendsanewapproachtomanagingreciprocityandflexibilitywhichfully
respectsthedifferentrealitiesandneedsofmembersatdifferentlevelsofdevelopment,but
embracesamoregranulatedanddynamicprocessleadingprogressivelytoconvergence.


Processes matter


Consensus decision-making
The Panel recommends maintaining consensus decision-making but advocates that
membersvetoingtheadoptionofdecisionsprovidereasonedexplanationsfortheirposition.
Consensusmustbebuiltgraduallythroughnegotiationandmutualaccommodation.


building the agenda
TheWTOSecretariat should be permitted to table proposals in order to speed-up the
deliberativeprocessandfacilitateconsensusbyprovidingtechnicalinformationandfresh
ideas.Thiswouldinnowaycompromisetheexclusiverightofmemberstodecide.


Notifications
Members should strengthen their commitment to transparency through respecting and
improving notification procedures. They should consider extending the authority of the
Secretariatfurtherincollecting,verifyingandrecordingofficialnotifications.


The WTO Secretariat
We believe members should support a stronger Secretariat, with sharpened expertise
acrosstheWTO’srangeofactivitiesandstrongerresearchcapacity.


Reaching out to stakeholders and the public at large
TheWTO should engage more directly with non-governmental stakeholders, including
business, trade unions, academics and non-governmental organizations, aswell as the
publicatlarge.Platformsshouldbeestablishedforregularexchanges.




The Future of Trade: The Challenges of Convergence 5


Issues directly linked to existing WTO provisions


Trade-distorting subsidies
Whilesubsidiescanaddressmarket failures, theycanalsodistort trade.Waysmustbe
foundofmanagingtensionsbetweengoodsubsidiesandanyadverseaffects theymay
haveonthirdparties,aswellasavoidingbadsubsidies.


Tariff peaks and tariff escalation
Tariff peaks and tariff escalation distort trade and frustrate efforts, particularly by
developingcountries,toaddmorevaluetorawmaterialandagriculturalproductsaspart
oftheireffortstodiversifyandgrowtheireconomies.Tariffpeaksandescalationshould
beeliminated.


Export restrictions
Justaswithtariffs,membershavetheirownreasonsforusingexportrestrictionsandfor
notwantingthemtobeused,butwebelievenegotiationscouldbeusefullyengagedon
thisissue.


Agriculture
For a variety of reasons, there has long been an asymmetry between agriculture and
manufactured goods in the degree of progress on trade opening. This has lessened
growthanddevelopmentopportunitiesforsomecountriesandagricultureopeningmust
beseriouslyaddressed.


Trade facilitation
Effectiveinternationalactionontradefacilitationwouldgeneratewin-winoutcomesforthe
internationaltradingcommunity.Westronglyencouragememberstocompletethetrade
facilitationnegotiationsbytheNinthMinisterialConferenceinBaliinDecember2013.


The digital economy
Electroniccommunicationhasloweredcosts,shrunkdistance,squeezedtimeandprovided
avastrangeofopportunitiesforthosewhohaveaccesstoit.Regulationshouldnotstifle
thismediumandwebelievetheWTOworkprogrammeonelectroniccommerceshouldbe
reinvigorated.


Issues raised as being relevant to the WTO


Competition policy
We believe that members should engage in the quest for a more trade-supportive
international competition policy framework, building on the work of other international
organizationssuchasUNCTAD,theOECDandtheInternationalCompetitionNetwork.




6 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


International investment
Likeintheareaofcompetition,weseetheabsenceofmultilateralrulesoninvestmentas
agapincooperation. Currentbilateralarrangementsarenot, inourview,asatisfactory
substituteforacomprehensiveinternationalinvestmentagreement.


Currencies and international trade
WhilemonetaryandexchangeratemattersaretheresponsibilityoftheIMF,werecognize
thelinksbetweentradeandexchangerates,andurgecontinuedcooperationbetweenthe
IMFandtheWTOinordertoavoidtheriskofaclashofregimes.


Trade finance
TheabsenceoftradefinancecanseverelydamagetradeandwestronglyurgetheWTOto
continuetomonitorthesituationandworkwithotherstakeholderstominimizetheimpact
ofscarceorcostlytradefinanceandtohelpbuildcapacityindevelopingcountries.


Labour
Globalizationhas focusedattentionsona rangeof issues relating to the legal rightsof
labour andworkingconditionsacross theworld. These issuescomeunder thepurview
oftheILObuttheyareasharedinternationalconcern.Continuingconvergenceoflabour
standardsshouldbeaprimaryinternationalobjective.


Climate change and trade
It istheprimaryresponsibilityofenvironmentnegotiatorstodefinenecessarymitigation
actions,andasharedresponsibilityofthetradeandenvironmentcommunitiestoensure
compatibilitybetweenthetworegimes.


Corruption and integrity
AlthoughtheWTOdoesnothaveanexplicitmandatetoaddresscorruption,webelievethe
WTOcancontributeinavarietyofwaystopurgingthisscourge,particularlythroughits
workonvariousdimensionsoftransparencyandongovernmentprocurement.


Aid for Trade
Trade capacity building is essential to allowmany poor countries to benefit from trade
opening.AidforTradeshouldbeanchored in theWTO.Over time,AidforTradeshould
develop into Investment for Trade through a closer relationship between development
assistanceandprivateinvestment.

Coherence of international economic rules
Wesee theneed forgreater coherenceamong international policy regimes inorder to
benefitfromsynergiesamongpoliciesthatoftenoperateinisolation.Werecommendthe
establishmentofaforumtoexploretheseissuesindepth.




The Future of Trade: The Challenges of Convergence 7


Conclusions


Webelievethatgovernmentsfaceafour-prongedconvergencechallenge:


• Convergenceamongmembers:thisfirstconvergenceconcernsnegotiationsamong
members,aswellastheirsequencing,inordertoachieveprogressive,development-
friendlyconvergenceoftheirtraderegimes.


• Convergenceofnon-multilateraltraderegimeswiththemultilateraltradingsystem:
thissecondconvergencerelatestothegradualalignmentofdifferenttraderegimes,
inparticularpreferentialtradeagreementsandthemultilateraltradingsystem.


• Convergencebetweentradeanddomesticpolicies:thisthirdconvergencerequires
deepercoherencebetweentradeandotherdomesticpolicies,suchaseducation,
skillsandinnovation.


• Convergence between trade and public policy non-tariff measures: this fourth
convergencerequiresgreatercoherencebetweentraderulesandpolicies,norms
andstandardsinotherareasofinternationalcooperation.




8 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy




The Future of Trade: The Challenges of Convergence 9


CHAPTER 1:
WHY TRADE OPENING WORKS FOR WELFARE


Introduction


Tradehasmadeenormouscontributionstogrowth,developmentandprosperity.Aspart
ofavirtuouscircleofpolicyandcircumstance,ithashelpedtoliftmillionsoutofpoverty
and spread the benefits of higher living standards. Trade has brought nations closer
together,fosteringmutualunderstandingandcontributingtoworldpeace.Butthisisnot
thewholestory.Concernsoverfairness,incomedistribution,socialjusticeandjobshave
intensifiedinrecenttimes,particularlysincethe2007-2009GreatRecession.Growing
problemsintheseareasriskerodingpublicsupportformoreopentrade.Thelegitimacyof
themarket-basedsystemwillbeincreasinglyquestionedifthebenefitsofprogressarenot
moreequitablyshared.Weshould,however,beclearaboutwheretradeandtradepolicy
fitintothepicture.Tradeisonlypartofamuchbiggercontext.Itobviouslycannotdeliver
onitsownthefullrangeofbenefitstobederivedfromsoundeconomicandsocialpolicies.
Thechallengeistoconstructcoherentnationalandinternationalpolicyframeworksthat
deliverinclusivegrowth.


Tradeopeningissometimesregardedasunhelpfultoprogressorviewedwithsuspicion.
Whether we are looking at development challenges, employment or inequality, a key
pointtomakeisthattradeshouldnotbeconsideredinisolationfromnationalandglobal
realities.Intheabsenceofanunderstandingofhowinternationalexchangefitsintothe
largerpicture,tradeandtheWTOriskbeingtarnishedbytheabsenceofeffectivepolicies
inotherareas,includingthosethatsupportinclusivegrowth.Moreover,tradepolicyshould
not be deployed to address matters more appropriately addressed by other policies.
Governmentsfrequentlyfailtomakethecasefortradeandnecessaryflankingpolicies.


Far from avoiding the issue, linkages between trade and development, trade and jobs,
andtradeandincomedistributionneedtobespelledout.Tradehasavitalroletoplayin
harnessingdevelopment,butcanonlydosoifotherconditionsarepresent. Jobsmove
acrossfrontiersasaresultof tradeand investment,but this isnotaunidirectionalflow.
Jobsarebothcreatedand lost innationaleconomiesasa resultofopenness to trade.
Thequalityofjobsisalsoaffectedindifferentwaysthroughtrade.Thesameappliesto
distributionissues.Theseneedtobeaddresseddirectlywithappropriatecomplementary
policiesrather thantrade-relatedresponsesthatmaysimply reduceopportunity further.
Policy space must be sufficient to give flexibility to countries, but with the necessary
transparency,predictabilityandsurveillance.




10 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Adequaterulesandinternationalunderstandingastohowcountrieswillbehavetowards
oneanotherintrademattersarealsoanessentialingredientinthemixthatmakestrade
profitable to societies. Inadequate or skewed rules engender friction andmistrust, so
reducingtradingopportunities.


Inwhatfollowswereviewthecasefortrade,followedbyadiscussionoftherelationship
betweentrade,development,jobs,inequalityandtheenvironment.Wealsoconsiderthe
rolethatrulesplayinfosteringtradefairness.Thesecondchapterofourreportexamines
anumberoftransformationsintheshapingfactorsofinternationaltrade.Thethirdchapter
willgivefurtherconsiderationtosomeofthecomplexitiesconfrontinginternationaltrade
andtradepolicyintheyearstocomeandhowtheymightbeaddressed.


Trade creates benefits


Trademustbepartofa virtuouscircleofgrowthandenhancedopportunities. Ithelps
to enlarge the size of the economic pie, providing themeans to build better andmore
prosperoussocieties.Whatarethesourcesofgainsfromtrade?Thefundamentalcase
fortradeiswidelyacknowledged,butnotalwaysfullyunderstood.Bytakingadvantageof
differencesinproductivityorendowments,countriesthatparticipateintradebenefitfrom
greaterefficiencyintheallocationofresources.Citizensareabletoenjoymoregoodsand
servicesthantheycouldintheabsenceoftrade.Theycanalsoconsumeagreatervariety
ofgoods. Even in theabsenceofsignificantdifferencesamongcountries, tradeallows
scaleeconomiestooperate,therebybringingdowntheaveragecostofproduction.Finally,
tradegenerallychannelsresourcestothemostproductivefirmsintheeconomy,boosting
acountry’soverallproductivity.


These arguments still understate the potential gains from trade. Beyond these static
allocationeffects,dynamicprocessesare triggeredby tradeand liftacountry’sgrowth
prospects.Thesedynamiceffectsaretheresultoftheaccelerationincapitalaccumulation,
“learningbydoing”,increasesinthepaceofinnovation,andimprovementsinthequalityof
acountry’sinstitutions.


Tradecanencouragefirmstoinnovateoritmayitselfbecomethevectorthroughwhich
countriesgainnew technicalknow-how. Increased importsputcompetitivepressureon
domesticfirmsandonewaytheycanrespondtothisisbyinnovatingandmovingupthe
valuechainprovidedtheyhavebuiltthenecessarycapacity.Knowledgemaybeembedded
inphysicalproductsandservices.Moretradeintheseproductsincreasesthescopefor
knowledgetospilloveracrossborders.


Therecanbe“learningbydoing”,withacountry’sworkersimprovingtheirproductivityasa
resultofbecomingmoreexperiencedinproducingaspecificgoodorservice.Theeffects
ofthisarelikelytobepresentintheexportsectorsincethatiswherespecializationand
expansionwilloccurasaconsequenceoftrade.


Strongpropertyrights,competitionrulesandindependentjudiciariesmatter.Tradeopening,
especiallyifitisthroughpoliciesboundundertheWTO’srules-basedsystem,resultsinthe




The Future of Trade: The Challenges of Convergence 11


adoption of norms andpractices (transparency, non-discrimination, procedural fairness)
thatstrengthenorimprovethequalityofdomesticinstitutions.


Trade and investment go hand-in-hand


ThestrongandsustainedgrowthintradeobservedbeforetheGreatRecessionhasgone
handinhandwithsignificantincreasesinforeigndirect investment(FDI).FDIincreased
fromsomeUS$140billionin1987toapeakofUS$2trillionin2007.Thisrealaverage
annualgrowthof16percentcompareswith7percentininternationaltradeflowsover
thesameperiod.


TherewasatimewhenFDIwasseenasapossiblemeansofaccessingmarketsprotected
fromtrade.Increasingly,however,tradeislinkedtoFDIinadifferentway,asalargeshare
oftradecomprisescomponentswithinvaluechainsthatspanacrossnationalboundaries.
TradeandFDIhavebecome twosidesof thesamecoin.Yet, at theglobalpolicy level,
these twocomponentsofglobalizationaredealtwithbydifferent institutionsand legal
arrangements.Whiletradeiscoveredbyamultilateralframework,thesameisnottruefor
FDI.1Instead,FDIis,toalargeextent,dealtwithbilaterally.


A number of preferential trade agreements contain trade and investment chapters.
Provisions on both are sometimes mentioned in the same legal article. This arguably
reflects the need to dealwith trade and investment together in a contextwhere trade
increasingly takes place within individual companies, and where decisions about the
locationofeconomicactivity involveboth tradeand investmentasmeansof accessing
markets.


Trade fosters development


Therelationshipbetweentradeanddevelopmenthasbeenanenduringissueofdebate
amongpolicymakers,andoftenastickingpointintradenegotiations.Manydiscussionsof
theissuetendtowardsextremeendsofthespectrum,withsomearguingthattradeisthe
silverbulletofdevelopmentandothersthatopennesstotradeisadenialofdevelopment
space. While it is true thatnonationhasdevelopedandgrownwithout thebenefitsof
trade, it is also true thatmany factors determine how andwhen trade can have these
beneficial effects. Smaller countries are likely to bemore trade-dependent than large
ones.


Thebenefitsoftradedependonacountry’sstageofdevelopment.Forleast-developed
and landlocked countries, for example, trade contributes to livelihoods by bringing
in consumption goods as well as capital goods to ensure that better use is made of
local resources. For other developing countries with higher incomes andmore robust
economies,tradeisasourceoffastergrowth.Itextendsthemarketforlocalproductsas
wellasensuringbetterproductionpracticesandconsumptionopportunities.


Poorer countries will usually need to create a range of other conditions before they
canbenefit from trade. Even thebest conceivable tradepolicies aimedat reaping the




12 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


benefits fromtradeare likely tobe ineffective ifunaccompaniedbyproductivecapacity
andadequate infrastructure, if informationcannotbe transmitted through theeconomy
viaprices,andifpoorgovernanceandweakinstitutionsfrustratetheflowofgoodsand
serviceswithinthedomesticeconomy.


Whencountriesopen theirmarkets tocompetition through tradeandshuffle resources
andactivitiesinlinewiththeirrelativestrengths,theyalsoneedtoexportonthebasisof
specialization.Forthisreason–andbecausecountriesneedtodesignimportpoliciesin
waysthatrespondtotheircapacitytoadjustandcompete–thesuccessfuluseoftradeas
avehiclefordevelopmentreliesonsupportiveinternationalrulesfortrade.Therulesmust
befairandbalanced.Thisdoesnot,however,meanthatthereshouldbenorules,nordoes
ittranslateintothepropositionthatthefreeracountryisofrulesontradepolicy,themore
itwillprosper.Onthecontrary,rulesbringopportunitiesaswellasconstraints.Itistheir
design,nottheirabsence,thatmakesthedifference.


Whether in richer or poorer countries, the benefits from trade entail pain as well as
gain.Thatishowtradeworks.Governmentshavearesponsibilitytofindwaysofbetter
distributingthegainsandmitigatingthepainiftradeisnottobecomeasourceofsocial
tension, jeopardizing the overall gains to the economy. Addressing these adjustment
needscanbeparticularlychallengingfordevelopingcountries,andevenmoresoforleast-
developedcountries.Inadequateresourcesandsocialinfrastructurewillslowtherateof
change.Forgrowthtotranslateintodevelopment,theembraceofopennesswillbemore
gradualasgovernmentsimplementplansforstructuraltransformation.


Finally, a developing country’s ability to benefit from trade can be enhanced through
externalsupportforbuildingproductivecapacity,infrastructureandpolicyandinstitutional
development,includingsocialsystems.Thisisthepremiseofgovernment-supportedinter-
agencyinitiativessuchasAidforTradeandtheEnhancedIntegratedFramework.


Trade can support more jobs


Unemploymentratesremainunacceptablyhigh inanumberofeconomies.Jobcreation
has been prominent onmany policymakers’ agendas in the past years and is likely to
remain so for some time. The reasons for this differ across countries. Some emerging
economiesneedtofindwaystoabsorbpeople intothemoderneconomy,oftenagainst
thebackgroundofgrowingpopulations.Manyindustrializedcountrieshavebeenplagued
by stubbornly highunemployment rates since theGreatRecession.Youth employment,
however,hasemergedasachallengeacrosstheglobewithanaverageof12percentof
theglobalpopulationofyoungpeoplecurrentlyunemployed.


Trade opening both creates and sheds jobs.When the gains from trade are realized -
whether through shifting resources into more competitive uses, allowing producers to
captureeconomiesofscale,orrewardingthemostproductivefirms-newjobsarecreated.
Astradecanalsoresult inthelossof jobs, it is importanttoensurethatthoseaffected
find alternative employment. Businesses that give up their current activities because
ofcompetitivepressuresshouldalsobeable toenteranewactivityasentrepreneuror




The Future of Trade: The Challenges of Convergence 13


employee.Butanumberofthingscangowronginthisreshufflingprocess.Factorssuchas
poorlyfunctioningproductorcapitalmarkets,weaksocialsystems,ineffectiveruleoflaw
andgovernance,andinsufficientpublicinfrastructurecancontributetoslowingdownthe
adjustmentpath,ortoasituationwheretheactivitiesthatexpandinaneconomyarenot
themostproductiveones.Distortionscanevenbesuchthatjobcreationanddestruction
becomedecoupled,andnon-competitivefirmsaredestroyedbutproductiveonesdonot
managetogroworarenotcreated, leadingtounemployment.Traderestrictionsdonot
offeraconstructiveremedyundertheseconditions.


To the extent that trade is associated with the adoption of new technologies and
productivityincreases,thismayresultinthecreationoffewerjobs.Productivityincreases
bring importantbenefitsbecausetheyarean importantdriverofgrowthbutadjustment
requiresalternativejobcreationstrategies.


Trade can be made to work for greater equality


Separatelyfromthejobsissue,increasinglyskewedincomedistributioninmanycountries
is coming under intensified public scrutiny. There appears to be a growing discomfort
acrosstheglobewithincreasinglevelsofwithin-countryinequality.Inanumberofcountries
theshareof incomeof thewealthiest1percentof individuals reached15percent to
20 percentbeforetheGreatRecession–levelscomparabletothoseprevailingbeforethe
SecondWorldWar.Inmanyothercountries,similartrendshavebecomeapparentoverthe
lasttwodecadesorso.


Arangeoffactorscancontributetoincreasedinequalityandavailableevidencesuggests
thattradeisunlikelytobethemainfactor.Nevertheless,tradecancontributetoincreased
wage inequality between high-skilled and low-skilled workers and to increased wage
inequality across firms (with exporters paying higher wages than importers). But few
wouldclaimthatthepolicyresponsetoinequalityliesintraderestrictions.Rather,other
policiessuchas improvedsocialprotection,adequatewealthdistribution,moretargeted
education,andretrainingaregenerallyprescribed.Moreover,itshouldberememberedthat
individualsareconsumersaswellasincomeearners,andtradetendstolowerpricesinthe
domesticeconomy.


Ingeneral,technologicalchangeisfoundtobeanimportantdriverofinequality.Itisalso
the case that other aspects of globalization likemigration, FDI and other international
capitalflowscontributetoincreasedinequality.Whilemoststudiestrytodisentanglethe
impactsofthesedifferentfactors,recentstudiesaretakingintoaccountthattrade,FDI,
capital flows and technological change tend to go hand in hand. The strict separation
madeinthepastbetweentradeeffectsandeffectsofskill-biasedtechnologicalchange
maythereforehavebeenartificial.




14 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Trade, jobs and inequality: realizing opportunity


Asfarasjobcreationisconcerned,waysneedtobefoundtomanagethecostssufferedby
displacedworkers.Socialprotectionsystemscanplayanimportantrole.Thejobcreation
potential of trade reform depends on the extent of the supply and demand response
followingshiftsinrelativeprices.InitiativessuchasAidforTradethatfocusonimproving
the supply side can contribute to job creation. Reformed and strengthened financial
marketsmayalsohavehighpay-offs to theextent that theymake iteasier forfirms to
investandbecomemorecompetitive. Adequateaccess to tradefinanceat reasonable
pricesisalsocrucialtoincreasingjobopportunities.


Mountingconcernaboutinequalityleadstothequestionwhethertradereformsshouldbe
linkedtoredistributionmeasures.Governmentspursueanumberofdifferentapproaches
in aneffort to secure this link. Larger scaleefforts to addressdistributional concerns
related to globalization would have to include not only social protection aspects— as
suggestedabove—butalsotaxationpolicies,anareathattypicallyfallsundertherealm
offinanceministries.


Aneglectedandcostlypolicyomissionhasariseninsomecountriesinthefieldofeducation
andskillspolicies.Thesepolicieshavegreatpotentialtoimprovetheemployabilityofthe
workforce. Yet fiscal pressure has sometimes led to prolonged neglect of investment
ineducation. Oneway toprepare theyoung for thechallengesof their futureworking
environmentistoensurethattheyhaveagoodbasicknowledgeandstrongcompetencies
in suchgeneral domains as reading andunderstanding,mathematics and science, and
theabilitytoemploythisknowledgeindifferentsettings.Butensuringthatyoungpeople
haveaskillsetthatmakesthem“adaptable”isunlikelytobeenoughforthemtofindajob
ifcurrentlevelsofunemploymentarenotreduced,inparticularwhentheyfirstenterthe
jobmarket.


Inhiringprocesses,employersaretypicallylookingforcandidatesthathaveasetofskills
specific to the job, or to the sector or subsector the company is active in. Successful
integrationoftheyoungintolabourmarketsisthereforelikelytodependtoasignificant
extentonwhetherthecohortsofyoungenteringthelabourmarkethavethesetofspecific
skillsthatroughlycorrespondtodemandinthemarketatanyspecificpointintime.This
isachallenge,giventhateducationandtrainingplanningtendtoprecedethemomentof
marketentry,oftenbyyears. Nevertheless,challengesof thisnaturearenopretextfor
allowingtheneglectofeducationandskillstoweakenthecapacityofpopulationstoadapt
tochange.


To minimize this problem and reduce the occurrence of skill mismatching, it will be
increasingly important for governments to strengthen skill anticipation mechanisms in
their economies. This implies strengthening the collection of information about current
andpossiblefutureskilldemandbyemployers,ensuringthatthesocialdialoguenecessary
toscaleupapprenticeshipsystemstakesplace,andthatqualification-basedtrainingand
educationisavailabletostudents.




The Future of Trade: The Challenges of Convergence 15


Trade can support sustainable development


Tradehassometimesbeencharacterizedasanegative influenceonsustainability, from
anumberofdifferentangles.Oneargumentisthatgoodshavetobetransportedacross
distances because of trade, eating up scarce environmental resources. This view is
based on a partial view of the economy. When all activity implicated in production is
takenintoaccount,environmentalimpactsmayvaryconsiderablydependingonproduction
technologiesand location. Tradeprovidesopportunities for resources tobeusedmore
efficientlyasaresultofspecialization.


Anotherargument is that trade leadstoaccelerateddepletionoffiniteresourcesor the
destructiveabuseofrenewableresources.Theproblemhereisoneofpricing.Ifresources
are not priced at a level that reflects their scarcity value and ensures sustainability,
restrictingtradewillnotbeaneffectiveapproachtomovetoagreenereconomy.Trade
policydoesnotworkwellasa toolof resourcemanagement for thesimplereasonthat
internationaltradeonlyaccountsforpartoftotalproductionandconsumption.


Trade opening needs rules


Some referencehasalreadybeenmade to theneed forwell-designed rules thatenjoy
legitimacy on account of their balance. The existence of such rules is an important
conditionforrealizingthebenefitsfromtrade.FewcontesttherolethattheWTOandthe
GATTbeforeithaveplayedincreatingaframeworkfortheconductoftrade.Manycould
pointtowaysofimprovingtherules.Moreover,theyneedconstantreaffirmationthrough
complianceandaproperlyfunctioningdisputesettlementsystemservesasafoundation
oflegitimacy.


Therulesfulfiltwovitalrolesforthetradingsystem.First, theyreduceuncertaintyand
therebychangetheriskprofilesfacingdecision-makers.Second,bycreatingaworldthat
isdrivenbypre-committedpolicybehaviourratherthanbyreactionstooutcomes,therules
helptoleveltheplayingfieldandreducepowerasymmetries.


Conclusions


In thisfirstchapterofour reportwehavevisited the reasonswhycountriesneed trade
toaugmentgrowthandopportunitiesforpeople.Wehavecautionedagainstneglecting
tradeonthealtarofmanagingthesocial,political,economicandenvironmentalchallenges
facingmarket-basedeconomies.Thesechallengesneedtobeaddressed.Butblaming
trade for that forwhich it is not responsible, or looking to trade policy to provide fixes
much better provided through other policies would only undermine confidence in and
commitmenttotrade.Wehavefocusedparticularlyondevelopmentandontheemployment
anddistributionalaspectsoftrade,inrecognitionoftheparticularchallengeswefacein
managingtheseaspectsofnationaleconomies,andtheirimpactontheconductoftrade.




16 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Internationaltradehascontributedenormouslytodevelopment,growthandgreaterglobal
peaceandprosperity.But trade isameans toanend,notanend in itself.Trade takes
place in a broader socio-economic and political context that must embrace a broader
anddeepercontextthangainsfromimportingandexporting.Amongthemostpressing
concerns facing societies across the world today are the imperative of development,
thescourgeofunemploymentand thedivisivenessof inequality. If theseconcernsare
neglectedorsetasideinthedriveforprosperityatthenationallevel,theyriskprovoking
alegitimacycrisisthatwillunderminetheorganizationalfabricofeconomiesasweknow
them.Governmentsmustrespondtothechallengesposedbydevelopment,andadeficit
of jobs and unequal opportunities without jeopardising the advantages accruing from
international specialization and cooperation. In order to achieve this goal we need to
ensurethecoherence,completenessandconvergenceofpoliciesthatimpactdirectlyand
indirectlyontrade.


Endnotes


1 WiththeexceptionofMode3tradeunderGATS.




The Future of Trade: The Challenges of Convergence 17


CHAPTER 2:
TRANSFORMATIONAL FACTORS SHAPING
INTERNATIONAL TRADE


Theworldeconomyhasundergonemajorchangesinrecentyears,changesthatarelikely
topersistandthatwillshapetradeintheyearstocome.Theybringwiththemmanynew
opportunitiesandchallengesforsocietiesandgovernments.Wewilllookatthosechanges
webelievetobeparticularlytransformative.Ourinitialfocusisonhowglobalization,along
withrapidgrowthinsomeregionsandnations,haschangedourworld.Weshallconsider
howproduction patterns have been transformed through the rise of international value
chains.Wealsolookattwodominantpolicytrendswithfar-reachingconsequences–the
explosion of preferential trade agreements (PTAs) and the rise of non-tariff measures
(NTMs).


The world economy is changing


Globalizationhaschangedourworldinwaysscarcelyimaginablebybygonegenerations.
A combination of new technologies, social adaptation, policy openness and innovative
business models has led to intensified economic, social and political interdependence
amongnations.Atthesametime,thecentreofeconomicandpoliticalgravityisshifting.
TheriseofAsiaandemergingeconomiesinotherpartsoftheworldisusheringinanew
configuration of economic power and influence. This is a continuing process, and we
arenowbeginningtoseetheemergenceofAfrica. Globalizationhasmadeforamuch
richerworld,butaswenoted inChapter1,ensuringabetterdistributionofopportunity
and inclusive growth remain key challenges, as does the imperative of environmental
sustainability. Globalization hasmade our world more robust in some ways andmore
fragileinothers.Globalizationcanonlybereversedatprohibitivecost.Wemustlearnto
manageanddirectthisrichsourceofopportunity,notseektosuppressit. Todosowe
needmoreinternationalcooperation.


Expanding trade and investment reflect globalization


On theeconomic front, the internationalizationof society is reflectedmostobviously in
theexplosionofinternationaltradeandinvestment.Worldtradegrowthhasoutstripped
productiongrowthbyasignificantmargineveryyearinthepost-SecondWorldWarperiod,
exceptfortherelativelyfewoccasionswhenoutputgrowthhasdippedandturnednegative.
Figure 1 demonstrates the trend with data since 1995, the year when the WTO was
established.Merchandisetrademeasuredinvolumetermsmorethandoubledbetween
1995and2011,whileglobalGDPgrewbylessthanhalfofthat.




18 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Figure 1
World merchandise export volume and GDP at market exchange rates, 1995-2011
(Index1995=100)


World merchandise exports


World GDP


19
95


0


50


100


150


200


250
223


157


19
96


19
97


19
98


19
99


20
00


20
01


20
02


20
03


20
04


20
05


20
06


20
07


20
08


20
09


20
10


20
11


Source:WTOSecretariat


Onlyrecentlyhavewebeguntorealizemorefullytheimportanceofservicestotheworld
economy.Thecontributionofservicestoproductionandtradehasbeensteadilygrowing.
Newstatisticalworkby theOECDandWTOshows thatwhenwemeasure services in
termsoftheirrealcontributiontotrade–thatisintermsofvalue-addedratherthangross
flows–theshareofservicesinglobaltradewasalmosthalfin2009,asopposedtoless
thanone-quarterusingtheoldmeasure(Figure2).


Figure 2
The share of services in global trade


Primary products Manufacturing Services Primary products Manufacturing Services


23%


Structure of world exports
in gross terms, 2008


Structure of world exports
in value-added terms, 2008


65%


37%


12%
18%


45%


Source: OECD/WTOvalue-addedtradedatabase




The Future of Trade: The Challenges of Convergence 19


Figure 3
World FDI flows, 1990-2011
(BillionsofUS$)


19
95


19
94


19
93


19
92


19
91


19
90


0


200


400


600


800


1000


1200


1400


1600


1800


2000


2200


19
96


19
97


19
98


19
99


20
00


20
01


20
02


20
03


20
04


20
05


20
06


20
07


20
08


20
09


20
10


20
11


Source: UNCTAD


Foritspart,worldforeigndirectinvestment(FDI)inflowsincreasedbyanaverageofsome
12percentperyearbetween1991and2011(Figure3).Thatrateofgrowthimpliesthat
thevolumeofFDIalmostdoubledeverysixyears.ThegrowthofFDIhasbeenfarfrom
steady, experiencing successive peaks and troughs. The flow of FDI in 2011was still
belowthe2007peak.


Geographical shifts in trade and investment reflect changing
power relationships


Rising shares of international trade and investment accounted for by emerging and
developingeconomiesareastrikingfeatureoftheoverallgrowthininternationalproduct
andfactormovementsinrecentyears.Withouttradeandforeigninvestment,itisdifficult
to imagine the attainment of high growth such aswe havewitnessed from a range of
emergingeconomies.


AccordingtotheGrowthCommission,113economiesmanagedtoaverageGDPgrowthof
7percentormoreforaperiodof30yearsormorebetweenthesecondhalfofthe20th
centuryandtheearly21stcentury. Tenoftheseeconomieswere inAsia,one inAfrica,
oneinEurope,andoneinLatinAmerica.2Theseeconomiesandotherssimilartothem
havenotgrownmerelyassuppliersofcommodities,aswouldhavebeenthepatterninthe
past, but as producers ofmanufacturedgoods and increasingly sophisticated services.
Measuredinpurchasingpowerparityterms,theeconomiesofemerginganddeveloping
countriesnowconstituteabouthalfofworldGDP.Theyhavealsobecomemoreimportant
destinationsandsourcesofFDI.




20 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Figure4showshowtheshareofNorth-North tradehasshrunk in in the last20years,
whilethoseofNorth-SouthandSouth-Southtradehaveexpanded.Ifthetrendsobserved
inthelastfewyearsweretopersist,by2020theshareofSouth-Southtradewouldhave
increasedto34percent,comparedtothe24percentsharein2011.


Figure 5 shows the changing patterns of inward and outward FDI. As emerging and
developing economies attract proportionately more inward investment and account for
a growing share of outward investment, these new patterns are transforming national
attitudestowardsforeigndirectinvestment.Webelievetheyarecreatingnewopportunities
forclosercooperationinthisarea.


Figure 4
Shares of North-North, North-South and South-South Trade in world merchandise exports,
1990-2011
(%ofworldtrade)


1990 1995 2000
0


10%


20%


30%


40%


50%


60%


70%


80%


90%


100%


North-North


North-South


South-South


Unspecified
destinations


2005 2008 2009 2010 2011


8


33


56


12


35


51


12


36


50


16


37


46


20


37


41


21


37


40


23


38


37


24


38


36


Source: WTOSecretariat




The Future of Trade: The Challenges of Convergence 21


Figure 5
Changing patterns of inward and outward FDI by country category, 1980-2011
(%ofworldtrade)


Inward FDI flows Outward FDI flows


Developed economies Developing and emerging economies Developing Asian economies


1980-
1984


1985-
1989


1990-
1994


1995-
1999


2000-
2004


2005-
2009


2010-
2011


1980-
1984


1985-
1989


1990-
1994


1995-
1999


2000-
2004


2005-
2009


2010-
2011


0


10


20


30


40


50


60


70


80


90


100


0


10


20


30


40


50


60


70


80


90



Source: UNCTAD


Theglobalshiftineconomicpoweroffersmanynewopportunities,andhasbeeninfluential
in pulling millions out of abject poverty. We also acknowledge, however, that power
shiftsposeachallengeforinternationalcooperation.Changeofthismagnitudecallsfor
statesmanshipandvisionbyleaders.Todaythesequalitiesarenotabundant,whichinour
viewpartlyexplainsthedifficultiesweareencounteringinmanaginginternationalrelations
insuchdiverseareasastrade,climatechangeandtheinternationalfinancialandmonetary
architecture.


Technology is the engine of globalization


The influenceof technologyasadriverofchangewouldbedifficult toover-state.New
technologies have shrunk the cost of distance and fostered new, instantaneous and
inexpensivemeansofcommunication. Inreducingthecostofdistance, technologyhas
placedapremiumonefficiency.Thesechangeshavenurturedtheinternationalizationof
productionandcontributedgreatlytotheconstructionofvaluechains.Thedevelopmentof
thejetaircraft–afasterandlowercostoptionthanthepiston–drivenplanesitdisplaced–
hasreducedtransportationcostsmorethanten-foldoverthelast50years.Seatransport
hasalsoevolvedinsignificantways.Thearrivalofthecontainer,anotherwisenondescript
metalboxofstandardizeddimensions,resultedinanentireindustry(thelogisticsindustry)
beingbuiltarounditanddedicatedtothespeedy,predictable,safeandlow-costdelivery
andhandlingoftradedgoods.




22 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Advances in information and communication technology and the development of the
personal computer, smart phones and the internet have revolutionized industries of all
kinds.Awidevarietyofcommerceandtradenowtakesplaceontheinternet,andthiswill
growfurtherasmoreoftheworld’speoplegainaccess.Businessisbeingre-configured
by new and innovative ways of harnessing electronic communication in production,
consumption,buyingandselling.Togethertheseinnovationshavemadepossibletoday’s
highlyintegratedworld,just-in-timeproduction,valuechainsandoffshoringofmanytasks,
alladdingtotherelianceoftheglobaleconomyontradeandforeigninvestmentforincome,
growthandjobs.Moreover,technologywillnotstandstill.Roboticsand3Dprintingwill
furthertransformthewayweproduceandconsume.


Joined-up production: the rise of international value chains


The embrace of globalization is starkly reflected in the rise of international value
chains.Gonearethedayswhenproductionwaslargelyaboutfabricatingproductsfrom
beginningtoendinsinglecountries,eitherfordomesticsaleorexport. Whetherwithin
largemultinationalcorporations(MNCs)orthroughnetworksofsmallandmedium-sized
enterprises(SMEs), theproductionprocesstodayoften involvesseveralcountries,each
specializingindifferenttasksalongthesupplychain,fromtheearliestproductionstagesto
finalconsumption.Thisrealityhasforcedustothinkoftradeinadifferentway.Because
componentsareproducedinmultiplelocationswecannolongerattributefinalproductsto
asingleoriginwithoutcreatingamisleadingimpression.Weneedtoidentifythedifferent
productionsites thathaveaddedvalueacrossdifferentcountries. Thisgoes forgoods
productionaswellasservicesproduction.Measuringtradeintermsofvalue-addedrather
thangrossflowshastransformedthewayweseetraderelationships.


Thevalue-addedtradepictureunderlinestheextentandnatureofinterdependenceamong
nations. Itemphasizes theorganic relationshipbetween importsandexports, reflected
in the growing share of intermediate goods in trade. Today, this share is, on average,
anywherebetween50percentto60percentoftotalmerchandisetrade.Similarly,these
trade relationshipsare reflected in the import contentofexports,whichhas risen from
around20percentinthe1970stosome40percenttoday.Value-addedmeasurement
alsoimpartsimportantinformationabouttheoriginsofthetechnologicalcontentoftrade,
insteadofmerelyattributingthistothelastproduceralongthesupplychain.


Thismorerealisticviewof tradealsoemphasizeskeycomplementaritiesbetweentrade
andinvestment. Theseareno longer justalternativemeansofaccessingmarkets, they
areessentialpartners insupplychainproduction. But it isnotonlyamatterofaclose
nexusbetweentradeandinvestment.Moreover,thefusionofgoodsandservicesmarkets
is a fundamental part of this story. The role of services in virtually all economies has
beenunder-estimated.Asnotedearlier,usingavalue-addedmetricformeasuringtrade
revealsthatservicesarealmosthalfoftotaltrade,ratherthanlessthanone–quarteras
estimatedingrossnumbers.Inshort,marketsaredeeplyintegratedtoday,bothnationally
andinternationally.Treatingthemseparatelyinpolicytermsislikelytoresultinforegone
opportunities.




The Future of Trade: The Challenges of Convergence 23


Wehavealsounderstood thatbilateral tradebalanceswill tend todiffer significantly in
gross and value-added terms, even though of course each nation’s total trade balance
remainsthesame.Whilewedonotattachgreateconomicsignificancetobilateraltrade
balances, a potential lesson to derive from the value-added estimation is if a country
restricts imports, it might also be frustrating its own exports further upstream on the
supplychain.


Policy is an important determinant of effective supply chain
participation


RegardlessofwhetherMNCsorSMEsareatthecentreofparticularinternationalvalue
chains, these do not simply land on a country’s doorstep. Successful participation
dependscruciallyona rangeofpolicies. Asamechanismforeconomicdiversification,
valuechainsallowcountriestoinsertthemselvesintointernationalproductionprocesses
through component production rather than having to dominate entire production lines.
The services-intensity of many value chains also offers diversification opportunities
thatdonotnecessarilyentailmanufacturing. While international valuechainshave led
to increasedcompetitivepressureoncostsandprices, theyhavealsocreated jobsand
movedincreasinglytowardsimprovedstandardsofproduction,partlyinresponsetogreater
consumer transparency. From a developmental perspective, governments will often
beseekingways toaddmorevaluedomesticallyalongvaluechains.Different formsof
supportcanhelpthisprocessalong,althoughthequestfordeeperinvolvementmustalso
bebalancedbycompetitivenessconsiderations. Adequate infrastructure,policydesign,
predictabilityandproperadministrationareallcrucialinthisregard.


TheWorldEconomicForum’s2012ExecutiveOpinionSurveyofover14,000businesses
in139economies reported that14per centof respondents citedhighcostsor delays
causedbynationalandinternationaltransportationasthemostproblematicfactorfacing
exports. Just over 20 per cent of the respondents cited burdensomeport procedures
as themainobstacle to importing. A further12per cent said theirmainproblemwas
corruptionatthefrontier.Tariffandnon-tariffbarrierswereidentifiedby20percentofthe
respondentsasthemainobstaclestoimporting.Thesesurveynumbersareindicativeof
someofthethingswhichgovernmentscanrectify.Moreover,policieshaveamagnifying
effectonoutcomeswhengoodsandservicescrosssuccessivefrontiersalongasupply
chain.Theserealitiesmakeastrongcaseforamoreholisticapproachtobarriersaffecting
trade. We need amore comprehensive approach. By focusing narrowly on particular
obstacles,wemaymisunderstandtherealobstaclestoreapingthebenefitsofefficiency
throughtrade.


International cooperation in trade and investment has become
increasingly preferential


TheGATT/WTO’straditionalmainstayofnon-discriminatorytradehasincreasinglyyielded
groundtopreferentialarrangements.Thishasoccurredforacomplexarrayofreasons,
increasingtradingopportunitiesbutalsoraisingchallengesforthecoreprincipleofnon-




24 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


discriminationenshrinedinmultilateralism.Inconceptualterms,preferentialarrangements
canfocusoncountriesoronspecificpolicyareas.Preferentialarrangementsestablished
geographically(amongcountries)willbydefinitionembodysomeelementsofdiscrimination.
Agreementsfocusingonspecificissuesmayormaynotbediscriminatory.Thiswilldepend
on theirdesign. Theymaysimply implicateasub-groupofcountrieswhichestablishes
abalanceof rightsandobligations inaparticularpolicyarea, implyingadiscriminatory
outcome for third parties. Or theymay entail obligations for signatories with benefits
extendedtoallcountriesonanon-discriminatorybasis.Somepolicyareas,whetherthe
subject of specific agreements, or folded into geographically-based arrangements, will
bytheirverynaturetendtowardsnon-discriminatoryoutcomes,evenofade factobasis.
Tradefacilitationmeasuresareagoodexampleofwhatcouldbeade factoorade jure
non-discriminatoryoutcome.


Notwithstandingthemultiplewaysinwhichglobalizationhastakenhold,beginninginthe
1980s,wehaveseenarapidmultiplicationofPTAsandBilateralInvestmentTreaties(BITs).
Some300PTAsarecurrentlyinoperationandmanymoreundernegotiation.Onaverage,
eachWTOmemberbelongsto13separatePTAs.EveryWTOmemberbelongsto,orat
least is negotiating at least onePTA. Similarly, over 6,000BITs regulate international
investment.


PreferentialtradeagreementsarenotnewtotheGATT/WTO,buttheyshoweverysign
of continuing to increase in number. The intention of theUnitedStates and theEU to
launchaPTAnegotiationpushespreferentialismfurtherthaneverbeforeinthehistoryof
theGATT/WTO.TheWTO’sWorld Trade Report 2011,whichisfocusedonregionalism,
revealsaneclecticcollectionofagreements,ofunevenquality.Halfofthemarebilateral,
andalmosttwo-thirdsarebetweendevelopedanddevelopingcountries.Aroundhalfof
thePTAsinforcearecross-regional.TheWTOreportalsodiscussesthevariedreasons
whycountriesseektoestablishPTAs.


InmanyPTAs,ithasprovennoeasiertoeliminatehightariffs.AmongPTApartners,more
thantwo-thirdsofproductlinesfacingtariffsofover15percenthavenotbenefitedfrom
anyreductionunderPTAs.Despitethepersistenceofhightariffs inkeyproductareas,
including agricultural and labour-intensive manufactured products, the overwhelming
impression of modern PTAs is that they are not primarily about tariffs. Indeed, more
than four-fifths of trade flows take place on a non-discriminatory basis, and less than
2 per centofworldtradeiseligibleforpreferencemarginsabove10percentagepoints.
Thismeansthatregulationsarefarmoreimportantaspotentialtradebarriersandsources
ofdiscrimination.


Preferentialtradeagreementsaddtotradecosts,notleastbecausetradersmayoftenneed
tonegotiatenumerouscriss-crossingregimesoforiginrules.PTAscanbeexclusionary,
leavingsmallercountriesoutsidetheirpurview.Theymayalsoleadtoregulatorydivergence,
intentionalorotherwise, resulting insegmentationof theworldeconomy. On theother
hand,someregulatoryreformunderPTAsmaybeintrinsicallynon-discriminatory,leading
toade factoMFNdividend.




The Future of Trade: The Challenges of Convergence 25


Theriseofregionalismraisesimportantquestionsbothastotheroleandtherelevanceof
theWTO.Theexpansionofpreferentialtradeopeningamongsubsetsofcountriesmaybe
easierorpoliticallymoreattractive,buttheeconomicbenefitsfromsuchopeningmaybe
less.Governmentsneedtoaskthemselvesiftherearegoodreasonswhythefundamental
logic of non-discrimination – a cornerstone of post-war trade governance – no longer
servesausefulpurpose.


With the gradual fall in most tariffs, non-tariff measures
increasingly influence trade outcomes


Althoughtariffsremainaninstrumentoftradepolicy,theyhaveprogressivelybecomeless
significant as a result of unilateral, bilateral, plurilateral, andmultilateral trade opening.
Asmosttariffshavetumbled,however,somehightariffpeaksremain.Internationalvalue
chainsforsomelabour-intensivemanufacturesandagriculturalproducts,wheredeveloping
countrieshavecomparativeadvantage,arealsoafflictedbytariffsthatescalatewiththe
degreeofprocessing.Thisescalationcanreduceopportunitiesfordevelopingcountries
toacquireadditionalvalue-addedalongtheaffectedinternationalvaluechains.


Thetermnon-tariffmeasureonlytellsusinthevaguestsensewhatthesemeasuresare
byindicatingtheonethingthattheyarenot.Theycantakemanyformsandserveawide
arrayofpurposes,withvaryingimplicationsfortrade.Theyareregulatoryinnature.They
maybedesignedtolimittradeortheymayhavethateffectbecauseofthewaytheyare
implemented,eitherwithalackoftransparency,inefficiencyorcorruption.


Increasingly, NTMs are associatedwith public policy objectives and raise issues of far
greatercomplexitythantariffs,andtheymeritcloserattentionthaneverbefore.


WherepublicpolicyinformsNTMs,wenolongerthinkofreductionoreliminationasthe
objective, like with tariffs. Public policy motivations for intervening have becomemore
commonplaceongroundssuchashealth,safety,andenvironmentalquality.Thepursuit
oftheseobjectivesgrowsastheworldbecomesmoreinterdependent,andrisingincomes
alsoincreaseconcernsofthisnature.Informationandcommunicationstechnologieshave
helpedraiseawarenessandempowerconsumers.


NTMsmotivatedbypublicpolicyconsiderationsmaywellrestricttrade,suchasinthecase
oftheprohibitionoftradeinharmfulproducts.Buttheymayalsolimittradeeventhough
thisisnottheirexplicitintention.Insuchcases,tradeasameansappropriatelyyieldsto
publicpolicyasanend.Thetradepolicychallengeinthiscontext,however, istoensure
thatNTMsdonotunnecessarilytruncatethebenefitsoftrade.Boththedesignandthe
implementationofmeasurescanleadtodual-purposepolicy,unwittinglyorotherwise.An
interventioncouldbothmeetapublicpolicyimperativeandimpartanadditionaladvantage
todomesticproducerinterests.WhileNTMsmayreducetrade,thepointtoguardagainst
isthattheydosoexcessivelyorwithunjustifiablediscrimination.


Divergent public policy design is likely to carry trade costs. But divergence canoccur
fordifferentreasons.Itmaybeareflectionofdifferentsocialpreferencesandvalues.In




26 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


thiscase,thenotionof“levellingtheplayingfield”intraderelationstakesonanadditional
layerofcomplexity– thesearchcannotbeforuniformity incaseswhereanattempt to
homogenizesocietalpreferenceswouldbeanintrusivesteptoofar.Cooperationinthis
casecanonlybeaboutavoidingunnecessaryfrictionorunwarranteddiscrimination.


DifferencesinNTMsmaysimplybeincidental–amatterofform–drivenbytheshadowof
pastpractice.Incidentaldivergencesuggeststheneedforworkontheharmonizationof
standardsorthedevelopmentofmutualrecognitionarrangements.Differencesmayalso
resultfromalackoftechnicalorenforcementcapacity.


Endnotes


1 CommissiononGrowthandDevelopment(2008),TheGrowthReportStrategiesforSustainedGrowthand
InclusiveDevelopment,WorldBankonbehalfoftheCommissiononGrowthandDevelopment.


2 TheeconomiesconcernedincludeBotswana;Brazil;China;HongKong,China;Indonesia;Japan;Republic
ofKorea;;Malaysia;Malta;Oman;Singapore;ChineseTaipei;andThailand.




The Future of Trade: The Challenges of Convergence 27


InChapter1we revisited the case for trade and located the discussion in the context
of theeconomic, political andsocial realitiesof today. Weemphasized thatwecannot
dowithout tradeandmustencourage it. But trade isnotanend in itselfandwemust
constructaproperenvironmenttoshareitsbenefitswidely.


InChapter2weexaminedhowourworldhaschangedinrecentdecadesandconsidered
a rangeof transformationalchangesandchallengesthatmustbecore in informingour
actionsnowandinthefuture.


Chapter3seekstodrawtogetherandcompleteourdeliberationsbyaskinghowtheWTO
canbetter serveanopen, vibrantand relevantmultilateral tradingsystem in the future.
Ourstartingpoint inthisendeavour istheconvictionthattheworld isworseoffwithout
the system.This short analysis ispresentedasa setof suggestions toWTOmembers
from interested stakeholders. We freely express our views, but it is governments that
are ultimately responsible for strengthening, modernizing and rendering more relevant
the multilateral trading system. They must find agreement through balanced mutual
accommodationandcompromise.


We do not make specific recommendations in this report about how to deal with the
DohaRound.Wewouldonlyliketomaketwoobservationsweregardasfundamentalto
theconsiderationbymembersofthenextsteps.First,theissuesunderlyingthestalled
negotiationswillnotdisappear.Theyremainasrelevanttodayastheywerewhentheywere
includedonthenegotiatingagenda.Circumstancesandinterestsmayhavechanged,but
notthebasicchallenges.Second,webelieveclosureisapoliticalimperative.Whatever
formthistakes,adecade-oldcollectiveundertakingremainstobefulfilled.Atstakeare
futureprogressinmutuallybeneficialcooperativeendeavours,aswellasthehealthofthe
multilateraltradingsystemitself.


Inwhat follows, we divide our discussions about the future of trade along the lines of
principle,processesandaseriesoftopicsforconsideration.


Principles are the foundation of the system


Wefocusonthreeareaswhereprinciplesdefiningthesystemarecrucial.Theserelateto
non-discrimination,transparencyandtherelationshipbetweenflexibilityandreciprocity.In
ourviewthefirsttwoprinciplesarerobustindesignanddonotneedtobereconsidered.
The third one, dealing with the relationship between reciprocity and flexibility does,
however,needfreshthinking.


CHAPTER 3:
OPENING TRADE IN A COMPLEX WORLD: WHERE DO
WE GO FROM HERE?




28 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Non-discrimination: managing preferential trade
Webelieve that theprincipleofnon-discriminationmustcontinue toserveas thebasis
for trade relations among members. This is not to say we should avoid all kinds of
discriminatoryaction,butthepermitteddeparturesfromthenon-discriminationprinciple–
notablytosupportweakercountriesintheirdevelopmenteffortsandtopermitmembers
toestablishPTAs–mustbeproperlyregulatedandmonitoredtopreventcorrosionofthis
coreprincipleoftheWTO.


As we discussed in Chapter 2, PTAs are becoming increasingly dominant. They can
servearangeofimportantobjectives.Preferentialagreementscanprovidebenefitsfor
their signatories and also for non-signatories through promoting growth. They can be
laboratories fordeeper integrationatamultilateral level. Theyallowcountries tomove
furtherandfasterthanissometimespossibleintheWTO.Theycanrespondtoparticular
regionalimperatives,includingthoseofapoliticalnature,thatarenotcateredtoinawider
setting.WealsorecognisethatPTAscanresultfromthedifficultyoffindingconsensus
attheWTO.


Noneofthisdiminishesourconvictionthatanon-discriminatory,moreinclusiveandvibrant
multilateraltradingsystemispreferabletoafracturedandoverlappingsetofplurilateral
andbilateralarrangements.WeareawarethatPTAscanfracturetraderelations,exclude
countries in discriminatory ways, and risk increasing regulatory divergence in a world
whereNTMsincreasinglyaffecttrade.


In order to conserve and build upon the benefits of PTAs while at the same time
strengthening the multilateral trading system, we recommend that members engage
explicitlyinanexplorationofwaysinwhichPTAsandtheprinciplesunderlyingthemcould
beconsolidatedwithin themultilateral system. Theworkof theAsia-PacificEconomic
Cooperation(APEC)indevelopingbestpracticesforPTAscouldserveasanexampleof
how tomove forward. Sucheffortscould lead toconsolidationaroundbinding rules in
agreedpolicyareas.WebelievethattheabsenceofdiscriminatoryintentinmanyPTAs,
alongwith the practical difficulties of discriminating in some regulatory areas, such as
tradefacilitation,makethisafeasiblecourseofaction.


Wearealsoconvincedthatoncethisprocessofconsolidationisunderway,memberswill
find iteasier tomakeprogresson re-writingGATT/WTOrules in thisarea– rules that
arewidely regardedas incompleteand ineffectual. Thisapplies togoods, inparticular
underGATTArticleXXIVthatcontainsdisciplinesoncustomsunionsandfreetradeareas.
Manyunsuccessfulattemptshavebeenmadeinthepasttoimprovethedisciplinesunder
ArticleXXIVoftheGATT,includingintheDohanegotiations.Thisalsoappliestoservices
underGATSArticleV,whichoffers legal cover for departures from themost-favoured-
nationprincipleforservicessimilarlytothewayGATTArticleXXIVdoesforgoods.The
multilateral system will remain deficient until a real set of disciplines is established to
facilitatetheconvergenceofPTAswiththemultilateraltradingsystem.


Non-discrimination: managing non-tariff measures
As mentioned in Chapter 2, the topography of trade barriers is changing. With the
reduction in tariffs,NTMs naturally attractmore attention. Whilewe urge vigilance as




The Future of Trade: The Challenges of Convergence 29


to themanner inwhich they are designed and used froma trade perspective,we also
recognizethatNTMsareheretostay.Wheretheyservepublicpolicyobjectives,theissue
isnotelimination.Rather,wemustmanagethemappropriatelyinrelationtotheireffects
ontrade.


Regulations in key areas of the economy, such as health, safety, environmental quality
andlabourrightsarenotsetintheWTO.WhatthismeansisthattheWTOmustconsider
howtoarticulatetherelationshipbetweentradeopeningandtheexistenceofmeasures
outsideitsremitthatareneverthelessrelevanttotheconditionsunderwhichtradetakes
place.Whileaconvergenceofpublicpolicydesignwouldfacilitatemattersfromapurely
tradeperspective,werecognisethatrespectfordifferingsocialpreferencesisparamount.
Wemustworktowardsasharedunderstandingofwhatconstitutesalevelplayingfield.As
amatterofprinciple,wearguethatthediscriminatoryapplicationofNTMsmustbeavoided
wherepossibleandthatmembersshouldnotrestricttradewherethisisnotessentialto
thepursuitofpublicpolicyobjectives.Capacity-buildingandtechnicalassistanceshould
alsobeavailabletohelpdevelopingcountriesinthisareaofpolicy.


Transparency, accountability and stability
Theworldbecomesadarker,lesscertainandlessstableplacewheninformationissparse
orpoorlydistributedamonginterestedparties.Thisiswhytransparencyisakeygoverning
principleoftheWTO.Membershaveanobligationtopursueatransparentapproachin
theirdealings. Policiesshouldnotbeasecret. Proceduralaspectsof theirapplication
anddecisions taken inpursuanceof theirobjectivesshouldnotbesecretseither. Few
woulddisagreewiththeobservationthattransparencyhasnotbeenastrongsuitofmany
members.Anabsenceofcommitmenttotransparencynegatesaprinciple,weakensthe
system,fostersmistrustandbreedsacultureofopacity.


Transparencyand legitimacyacross the full rangeofpolicies thataffect tradecouldbe
strengthened through domestic dialogue among interested parties, including business,
civilsocietyandtradeunions.SomeWTOmembershaveexperience in thisfieldthat is
worthsharing.Moreover,inacooperativeworld,governmentsshouldbewillingtoadvise
and consult their trading partners when formulating policies. Finally, if governments
embrace greater transparency as a principle for conducting relationswith their trading
partners, there is every reason to suppose that this will extend to policy data. The
strengthandlegitimacyofthetradingsystemwouldbesignificantlypromotedbyagreater
willingnessonthepartofgovernmentstosupplyinatimelymannerandopenlysharetrade
policy information. Theprovisionofdatashouldnotbeseenasabargainingchiporan
optionalextra.WerecommendthatmembersbuildontheTradePolicyReviewprocessto
strengthenitseffectivenessasaninstrumentoftransparencyanddialogue,muchaswas
donewiththeWTO’smonitoringexercisefollowingthefinancialcrisis.


Managing reciprocity and flexibility
Thenotionthatnotallcountriesshouldshareexactlythesamesetofobligationsatagiven
pointintimehasbeenwellunderstoodandincorporatedintheGATT/WTOsystemsince
thebeginning.Nofundamentaldisagreementexistswiththepropositionthatcountriesat
differentlevelsofdevelopmenthavedifferentprioritiesandneeds,andthatthesemustbe




30 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


accommodatedifthemultilateraltradingsystemistoserveallitsmembers.Thechallenge
ishowtoachievethisandhowtoadjusttothedynamicsofdevelopment.


Specialanddifferentialtreatmentfordevelopingcountries–inotherwords,thebalance
betweenreciprocityandflexibility–relatesbothto the levelof tradeopennessandthe
applicationoftraderules.Onthemarketaccessside,developingcountriestendtohave
higheraveragetariffsthantheirdevelopedcountrycounterparts. Theycanalsobenefit
fromtariffpreferencesontheirexportsiftheyqualifytoreceivetheseunderthevarious
schemesoftheirtradingpartners.Whenitcomestotherules,developingcountriesmay
bepermittedtoadoptdifferentrulesalignedtotheirowncapacities.Theirtradingpartners
arealsopermittedtodepartfromthenon-discriminationprincipleinordertofashionspecial
rulesfordevelopingcountriesthatfacilitatecomplianceandeaseofaccesstomarkets.


ItisimportanttonotethatrulescoveringmanyNTMs,particularlythoseaddressingpublic
policy concerns, simply do not lend themselves to departures from non-discrimination.
Governments will never agree, for example, to buy harmful products from one source
andnotfromanotherinthenameofsupportingdevelopment.Thegrowinginfluenceof
NTMsontradeshouldthereforetakesomeofthestingoutofthespecialanddifferential
treatmentdebate.


Webelieveitistimetoembraceanewperspectiveonmanagingreciprocityandflexibility.
Wedonotquestiondifferentiationandconsideritanessentialfeatureofafairandeffective
tradingsystem.Weareawarethattheleast-developedcountriesandother low-income
developingcountries,aswellasdevelopingcountriesfacingparticulardifficulties,cannot
beexpectedtoaspiretothesamedegreeoftradeopeningasmoredevelopedcountries
whilethesechallengespersist.


Butinrecognizingthelegitimacyofdifferentiation,weconsiderthatpolicyeffectiveness
iscrucial.Weneedadynamicapproach toflexibility, tailor-madeforspecificneedsand
supportedbyappropriatecapacity-buildingprogrammes.Thisapproachshouldbebased
onfourguidingprinciples.


• First,flexibilitiesshouldbebasedonneedsandcapacities.


• Second,theyshouldtargetspecificchallenges,andnotfocusonlyoncategoriesof
countries.


• Third, flexibilities should be time-specific to advance progressively towards
convergence.


• Fourth,weneeddynamicmonitoringofthemannerinwhichflexibilitiesarehelping
countriesconverge.


Alltheseprinciplesarerelatedtooneanother.Akeytonuancingthebalancebetween
reciprocityandflexibility istotakeamoregranulatedapproachtodifferentsectorsand
populationgroupswithineconomies. Distinctionsarebecoming increasinglyblurredas




The Future of Trade: The Challenges of Convergence 31


certain emerging economies and industrial ones have begun to converge in a number
of areasof economic activity. The search for appropriateflexibility requires thoughtful
analysisofspecificconditions.Thereisnosingletippingpointthatappropriatelydefines
a country’s developmental status as one condition or another. We must rethink the
balancebetweenreciprocityandflexibility,andrecognisethisasaprocess.Growthand
development,afterall,arepartofthesamephenomenon.Theyaremerelydifferentpoints
onthesamespectrum.

Weconsiderthattherearetwofactorsthatcouldfacilitateprogresstowardsachievinga
morefruitfuldialogueonmanagingreciprocityandflexibility.Thefirstistoconsiderthe
policycontentoftheconvergencetarget.Therearestillrulesinthesystemthatreflect
historicalpowerrelationships.Weneedtoembraceopennesstotheideathatit isboth
legitimateandnecessary to revisitsuch rules. Anyperception thatcountriesarebeing
askedtoembracerulesthatareunfairandhostiletothenational interestwillnotfoster
convergence.


Another factor that can contribute towards convergence is technical assistance and
capacitybuilding. Weneedcoherenceamong theseefforts,and theAid forTradeand
EnhancedIntegratedFrameworkinitiativesarepositivemovesinthisdirection.TheWTO
andmanyotherinternationalandnationalinstitutions,bothinsideandoutsidegovernment,
contributetocapacitybuilding.Stakeholdersmustpurgeanysymbolism,superficialityand
grand-standingfromtechnicalassistanceandcapacitybuildingefforts,focusinginstead
on results in a process of continuing assessment. Themore these efforts respond to
demandsandinitiativesfromthebeneficiaries,themoreeffectivetheseprogrammeswill
become.

We suggest a sequenced two-stage approach to striking an agreed balance between
reciprocity and flexibility. The first stage is to recognise the objective of progressive
convergence.Insomeways,wearetalkingaboutthereaffirmationofaprinciplefirstlaid
outintheGATTTokyoRoundinthelate1970s.Intheend,thisisaboutempowerment,not
aboutexclusionsandexceptions.Thesecondstageistonegotiateitselements.


Processes matter


Weneedtoprogressfromprinciplestoprocesses.Adequateprocessesareessentialfor
theefficientworkingofthesystem.Processisnotaboutdefiningoutcomes.Rather,itis
abouthowtogetthere,andprocessesshouldbewell-defined,respectedandstable.


Consensus decision-making
TheGATT/WTOwasbuilt on thepracticeofconsensusdecision-makingat theoutset,
exceptinmattersconsideredtobeofaproceduralnature.Thismighthavebeendifferent
hadtherebeenaweightedsystemofvotingwhentheorganizationwasestablished.But
eventhen,thenotionthatacountrycouldhavesensitivetradepolicydecisionsinvolving
real resource transfers in the domestic economy imposed upon it through a vote by
tradingpartnerswasregardedasasteptoofar. Weconcludefromthis reasoningthat
consensusdecision-makingwillnotbechanged.OneofthechallengesfacingtheWTO,




32 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


however, is how toprevent theprocessof attaininga consensus frombeing frustrated
by the exercise of veto. If countrieswish to prevent a decision from being taken or a
proposal from being adopted, it should bemade impossible for them to do sowithout
givingareasonedexplanationfortheiropposition.Simplysayingnoshouldnotbeenough.
Moreover,consensusdoesnotalwayseludethemembershipbecauseofadesiretostop
something,especiallywhendecisionswithmulti-facetedconsequencesareatstake. In
thecaseoftheDohaRound,forexample,itisnottheabsenceofaconsensusaboutthe
desirabilityofcompletingthenegotiationsthatpreventsthisfromhappening.Rather,itisa
stand-offamongafewmembersoveranumberofspecificnegotiatingissues.


Inourviewthereisnoeasysolutiontotheseproblems.Nosubstituteexistsforbuilding
consensus gradually, through negotiation and mutual accommodation, including where
a sub-set of issues prevents progress on a larger endeavour. Progress requires that
membersvaluetheWTOsufficientlyasaninstitutionneithertopushissuesopposedby
many,norblockprogressdesiredbymany.


building the agenda
TheWTOisanorganizationdrivenbyitsmembers.Traditionally, it isalsoonlymembers
whotableproposalsforactionthroughabottomupprocess.Webelievethatpermitting
theSecretariattotableproposals,asisdoneinsomeothermember-driveninternational
organizations,couldspeedupdeliberativeprocessesandfacilitateconsensusbyproviding
technicalinformationandfreshideas.Thiswouldinnowaycompromisetheexclusiveright
ofmemberstodecide.


Notifications
Wehavealreadyexpressedourconcernatthelackofcommitmentamongsomemembers
totheprincipleoftransparency.IntheWTOanimportantinstrumentoftransparencyis
notifications. Twomajor problems existwith notifications. One is that somemembers
disregardtheirnotificationobligationsorleavetheirnotificationsverylate.Anotheristhat
someofthenotificationsrequirementsthemselvesarenotdesignedtoprovideadequate
informationinthemostusefulformat.Weareawarethateffortsarebeingmadetoaddress
theseproblems,butsucheffortsshouldbeamatterofpriority.Wesuggestthatmembers
might consider extending the current arrangement where the Secretariat can gather
informationandpresentittothememberconcernedforcommentorcorrectionpriortothe
informationbeingrecordedasanofficialnotification.Wealsourgethecontinuedprovision
oftechnicalassistanceonnotificationsforthosecountriesneedingit.


A secondelement here is databases. Databases are indispensable for comprehensive
information,readyaccesstosuchinformation,andforanalysis.Databasesshouldalsobe
open,notlimitedtoaccessbyafew.TheWTOSecretariathasaresponsibilityhere,which
itisaimingtomeetthoughinitiativessuchasI-TIPandcooperationwithotherinternational
agencies.Thesemustbecontinuedandfacilitatedthroughsupportfrommembers.


The WTO Secretariat
TheSecretariat is a vital lubricant of thismember-drivenorganization. TheSecretariat
provides a range of services essential to the smooth and effective running of the




The Future of Trade: The Challenges of Convergence 33


institution. We believe that the members should support a stronger Secretariat, with
sharpenedexpertiseacrosstheWTO’srangeofactivities,andstrongerresearchcapacity.
TheSecretariathasconsiderablescopeforcontributingtoeffectivecommunicationand
fosteringdeliberations.Theseactivitiesshouldbeencouragedbecausetheycanfacilitate
theworkofthemembership.TheSecretariatcanneverreplacemembers,butmembers
cannotdeliverwithoutastrong,efficient,neutralandwell-fundedSecretariat.


Reaching out to stakeholders and the public at large
Inourview,theWTOshouldengagemoredirectlywithnon-governmentalstakeholdersas
wellasthepublicatlarge.Thesestakeholdersincludebusiness,tradeunions,academics
andnon-governmental organizations that focuson variousaspectsofpublicpolicyand
developmental issues. We believe that platforms should be established for regular
encounterswithstakeholders. Theseplatformswouldfostercommunicationandbetter
understandingthroughdialogueandconsultation.Sucharrangementswouldnotreplace
informalchannelsthatalreadyexistfordialogue.Engagementofthisnaturedoesnotin
anywaydilutetheultimateresponsibilityofmemberstotakedecisions.Rather,itwould
betterinformdecisions.WealsobelievethatthisisnotonlytheresponsibilityoftheWTO,
butalsoofindividualmembersinthenationalcontext.Asnotedearlier,manygovernments
alreadyhaveexperienceofthiskindofinteraction.


An evolving agenda in a changing world


OnemightsaythatthisPanelisareflectionofthemembershipoftheWTO.Duringour
deliberationsmanyissueswereraisedbydifferentpanelmembersbecausetheyregarded
themasimportant.Theprioritiesattachedtothesetopicsvariedconsiderablyamongthe
individualpanellists.ThePanel’sownexperiencewasmirroredinturnbythewidearrayof
differentissuesraisedbyparticipantsinconsultationsanddiscussionsthatthePanelheld
withdiversepartiesindifferentpartsoftheworld.


Allthisremindsusthatifgovernmentsaretosecureadegreeofinternationalcooperation
thattheyvalue,thatreflectsandrespectsdifferentinterests,andthatretainsitsrelevance
inachangingworld,theyneedtoshowflexibility.Theyneedtounderstandwhymanaging
diverseprioritiesandinterestsultimatelyspeakstoasinglecommonpurpose.Governments
shouldalsoreflectonwhattheworldwouldlooklikeiftheyfailtorisetothechallengeof
forgingthatcommonpurpose.


The issues raisedbelowall cameup in thePanel’s variousdiscussions. Wehave tried
toorderthemsystematically,butnotinanyorderofpriority.Wearenotsuggestingthat
everyoneoftheseissuesshouldbecomethesubjectofaWTOnegotiatingmandate.On
thecontrary,someofthemhavetraderelevancebutanaturalhomeinanotherpartofthe
architecture of international governance. Others are not necessarily for negotiation at
all.TheWTOdoesnotonlymakerulesandadjudicatethem.Italsoprovidesaforumfor
deliberationinvariousguises,suchascommitteediscussions,forums,andprocessessuch
astheTradePolicyReviewMechanism.Sometimestheprocessofdeliberationitselfmay
secureadesiredobjective.




34 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


We stress that we are not proposing a specific, holistic negotiating agenda or work
programmefor theWTO. Wedo,however,highlightwhatwe think is important. Some
of these issues are being addressed in the Doha negotiations, while others are not.
Weemphasize thatwedonotattempt topronounceonhowmembersshouldgoabout
addressingtheDohanegotiatingagendanorontheprioritymembersattachtodifferent
elementsreferredtobelow.


Issues directly linked to existing WTO provisions


Trade distorting subsidies


SubsidieshavelongbeenanissuewithwhichtheGATT/WTOhasgrappled. Therules
haveevolvedoverthehistoryofthemultilateraltradingsystem.Atthecoreoftheproblem
is the reality that few members would argue subsidies are always bad and should be
banishedfromthetradepolicylexicon.Atthesametime,itisrecognizedthatsubsidies
affectrelativeprices,candistortmarketsandaffecttheconditionsofcompetition. The
presenceofhighlevelsofsubsidyinagriculturehasbeenalong-runningsourceoffriction
inthetradingsystem.ThemembershiponlybegantoaddressthisintheUruguayRound,
andmuchremainstobedone.


Weseeotheremergingtensionstoday.Wearecurrentlyinasituation,forexample,where
most governments are aware that subsidies are likely to be needed for research and
developmentinordertodeveloprenewableenergysourcesandmitigateclimatechange.
Yetthesesubsidiesaffectcompetitionandthetemptationistocountervailthem.Thisis
partof thegreengrowthdebate. Waysmustbe foundofaccommodating theneedfor
well-designedsubsidiestomanagemarketfailures.


Afurthersubsidy-relatedissuewhichwebelieverequiresurgentattentionissubsidiesto
fishing.Thisisaclassicresourcedepletionproblemthatgovernmentsaresimplyallowing
toworsenbyfailingtocontrolfishingsubsidies.


Tariff peaks and tariff escalation


Theexistenceoftariffpeaksandtariffescalationisaveryoldissueofparticularconcern
todevelopingcountries,goingbacktothe1950s.Itdeservesmorevigorousattention.It
shouldbeconsideredapriorityforconvergenceinthesensewediscussedabove.Tariff
peaks and escalating tariffs along processing chains frustrate efforts by developing
countries toaddmore value to rawmaterialsandagriculturalproductsas theyseek to
diversifyandgrowtheireconomies.Thisproblemwouldbesignificantlyaddressedinthe
ongoingnegotiationsonindustrialandagriculturalproducts.


Export restrictions


The impact of export taxes and quantitative restrictions on trade in primary products
hasattractedattention.IneffecttheGATT/WTOrulesonimportsandexportsarequite
asymmetric.Whileprovisionscover,inter alia,taxes,licensingandvaluationwithrespectto
imports,theseprovisionshavenotbeendevelopedontheexportside.Werecognizethat,
justaswithtariffs,membershavetheirownreasonsforwantingtousethemorforwanting




The Future of Trade: The Challenges of Convergence 35


themnottobeused.Aswithtariffs,webelievethisisanissueonwhichnegotiationscould
beusefullyengaged.


Agriculture


Therehaslongbeenasymmetrybetweenagricultureandmanufacturesinthedegreeof
progressintradeopening.Thishasbeenasourceofconsiderableconcerntocountries
withasignificantdependenceonagricultureforexportearnings.Theissueencompasses
both access to domestic markets and the effects of government policies on exports
andpricesinworldmarkets.Itisaquestionthereforeofimportandexportbarriers,and
domesticandexportsupport.Amongthereasonsforslowerprogressareconcernsabout
foodsecurity, foodsafetyand the impactof tradeopeningon farmers’ incomes. Trade
restrictionson foodandagriculturalproductscanworsenpricevolatilitybysegmenting
nationalmarkets.Itmustberecognized,however,thatwheninternationalpricesarehigh,
governmentsbecomeconcernedaboutthe impactondomesticprices. Nevertheless, if
marketsweremoreopen,tradewouldprovideameanstobridgedifferencesinconditions
ofdemandandsupplyamongcountries. Food-scarcecountrieswouldbeable tomeet
theirneedsfromcountrieswherethesegoodsaremorewidelyavailable.Withregardto
foodsafety,thereisnointrinsicreasonwhyamoreopentraderegimeforfoodproducts
cannot be reconciled with the use of scientifically-based sanitary and phytosanitary
measurestosafeguardthehealthandsafetyofconsumers.Finally,farmincomescanbe
protected throughsupportprogrammes thataredecoupled fromproduction rather than
throughimportprotectionortrade-distortingpricesupports.


Trade facilitation


This isoneof the leadingcandidates in theDohaRound forearly resolution. Westart
fromtheassumptionthatmostgovernmentsdonotseeanyadvantageinfosteringcost-
raising inefficiencies in tradeprocessesandadministrations– inefficiencies thatsimply
makeeconomies less competitive. With thegrowingprominenceof international value
chains inmanyeconomies,andthe implicationsthesehavefor linksbetween importing
andexporting,weareremindedoftheincreaseddamageunnecessarybarrierstotrade
can cause to national economies. The costs of such barriersmultiply as intermediate
productsusedinproductioncrosssuccessivenationalfrontiers.Internationalcooperation
can certainly help to ameliorate this problem by encouraging mutually beneficial
concertedaction, establishingaplatform for consolidatingcommitments internationally,
andprovidingsupport through technical assistanceandcapacitybuilding. Westrongly
encouragememberstocompletethetradefacilitationnegotiationsbytheNinthMinisterial
ConferenceinBali.


The digital economy


We referred at some length in Chapter 2 to the remarkable contribution that the
digital economy has made to our world in so many ways. The capacity for electronic
communications to lower costs, shorten distances, squeeze time, and provide a vast
rangeofnewopportunitiesacrossmanysegmentsofsociety,hasbeenimpressive. WTO
members have embraced the principle of “technological neutrality”,meaning thatWTO
rules and principles apply irrespective of the means through which trade takes place.
Challengesinevitablyariseastocontentandsuchmattersasintellectualpropertyrights,




36 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


localinfrastructurerequirementsorcrossborderinformationflows.Challengesalsoarise
intranslatingtheopportunitiesprovidedbythedigitaleconomyintorealitiesfordeveloping
countries.Wewould urge, however, that regulatory concerns do not stifle this valuable
medium. We believe that the current WTO work-programme on electronic commerce
needstobere-invigoratedtodiscussthesechallenges. Thisarrangementisessentially
builtonthepremiseof“donoharm”.WealsobelievethattheWTOcouldfosterapublic
debateoverissuesrelatedtothedigitaleconomy,includingthroughitsPublicForum.


Issues raised as being relevant to the WTO


Competition policy


Practices that frustrate international competition,whether throughmarket behaviour or
government policy go against the interests of consumers and producers. Rules aimed
at fostering competition and open trade policies are to some extent complementary,
and theybothcontribute towelfare.Currentarrangements for internationalcooperation
arefragmentedand leavegaps inthefabricof internationaleconomicgovernance. We
believethatmembersshouldengageinthequestforamoretrade-supportiveinternational
competition policy framework, building on thework of other international organizations
suchasUNCTAD,theOECD,andtheInternationalCompetitionNetwork.


International investment


AsdiscussedinChapter1,tradeandinvestmentarecloselylinkedassourcesofopenness
andcontributorstogrowthanddevelopment.Theyusedtobecharacterizedasalternative
meansofaccessingmarkets. Withtheadventofvaluechains,thischaracterizationhas
becomeblurred.Itisfarmorerelevanttothinkoftradeandinvestmentascomplements
alonginternationalvaluechains.Likeintheareaofcompetition,weseetheabsenceof
multilateralrulesoninvestment(beyondthosecontainedintheGATSwithrespecttoits
Mode3)asagapincooperation. Currentbilateralarrangementsarenot, inourview,a
satisfactorysubstituteforacomprehensiveinternationalinvestmentagreement.


Currencies and international trade


Theeffectofcurrencylevelsandvolatilityontradehasbeenalong-standingissue.When
exchange rates behave in a disorderly manner, the volatility affects business. Primary
institutional responsibility over monetary matters rests with the International Monetary
Fund(IMF).ButGATTrules, inparticularArticleXV, require that the IMFand theWTO
cooperate over measures affecting exchange and trade. Members are required not to
frustrate the intent of the GATT provisions through actions on exchange rates, nor to
underminetheprovisionsoftheIMFArticleofAgreementsthroughtradeactions.Avoiding
aregimeclashrequiresafullunderstandingoftheessentialrelationshipsunderlyingtrade
andexchangerates,andthusoftheappropriateinstrumentsfordealingwithtensionsthat
arise. WebelievethatthecurrentdiscussionstakingplaceintheWorkingGrouponTrade,
Debt and Finance should continue, along with existing cooperation between theWTO
andIMFonthismatter,inordertopreventmutuallydestructivepoliciesinthetradeand
exchangeratespheresfromtakinghold.  




The Future of Trade: The Challenges of Convergence 37


Trade finance


Thebulkofinternationaltraderequiresfinancetolubricatethepaymentchain.Ifthisis
lackingorundulycostly, thenegative impacton tradecanbesevere.The regulationof
tradefinancedoesnotfallwithintheremitoftheWTO,butfollowingtheGreatRecessionit
becameclearthatthispieceoftheinternationalfinancialarchitecturewasbeingneglected.
TheWTOExpertGrouponTradeFinancefilled thegap indiscussionson thefinancial
system and financial reform. Trade finance was side-swiped by the crisis and liquidity
problemsbegantohaveasignificanteffectontradeflows.TheExpertGrouphasplayed
ausefulroleinmobilizingtradefinance,ensuringthatfinancialregulationswouldnotharm
thislow-riskformoffinancing,anddevelopingprogrammestohelptradersindeveloping
countriessecureaccesstotradefinance.Hence,tradefinancehasbeenfoldedintothe
AidforTradeagenda.ThisisanareawheretheWTOshouldcontinuetopartnerwithother
relevantstakeholders.


Labour


Globalizationhasshonealightonarangeofissuesrelatingtothelegalrightsoflabour
andworkingconditionsacrosstheworld.AswearguedinChapter1,thismustbeashared
concern at the international level. The primary institutionalmandate and responsibility
for global standards in the area of labour rights rests with the International Labour
Organization(ILO).Thelinkbetweentradeandlabourstandardswasestablishedbythe
WTOandILOmembershiprespectivelyinthe1996SingaporeMinisterialDeclarationand
inthe1998DeclarationontheFundamentalRightsandPrinciplesatWork.Intheworld
ofinternationalvaluechains,oneideathathasbeenmootedistolookattheestablishment
oflabourstandardsalongthechains.


Climate change and trade


Manyareasofclimatechangepolicypotentially intersectwith tradepolicy. In thepast,
internationalagreementsontheenvironment,suchastheMontrealProtocol,havemanaged
both the environmental and trade aspects of cooperationwithout a clash. This should
provide inspiration to governments aswe risk encountering problems of incompatibility
thatcouldleadtoaclashofregimesthatwouldhurtclimatechangemitigationeffortsand
trade.Thishasnotoccurredyet,althoughithasbeenwidelydiscussedandisaconcernof
many.Onewaywealreadyseehowthismayhappenisintherashofcontingentprotection
casesinitiatedattheWTOamongseveralcountriesinrelationtogovernmentsupportfor
renewableenergy.Inourviewitistheprimaryresponsibilityoftheenvironmentnegotiators
todefinewhatisnecessaryinordertoensureadequatemitigationactions,andthenitisa
sharedresponsibilityofthetradeandenvironmentcommunitiestoensurethatmeasures
donotunderminetradeandpandertospecialinterests.


Corruption and integrity


ThePanelencounteredmanyindividualsinthecourseofitsconsultationswhoexpressed
concernabouttheprevalenceofcorruptioninmanypartsoftheworld,andthedestructive
effectthishasnotjustoneconomies,butonthefabricofsocietyitself.TheWTOdoesnot
haveanegotiatingmandateoraworkprogrammeoncorruption.Ontheotherhand,we
wouldarguethattheWTOcanneverthelessplayitspartinmitigatingthiscancer.Wehave
alreadyspokenoftransparency,andtreateditasaprincipleoftheWTO.Greaterrespect




38 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


for transparency in tradepolicy andadministrationwould certainly beone contribution.
Effectiveactionstofacilitatetradewouldbeanother.Rulesongovernmentprocurement
canalsocontribute,includingthroughanexpansionofthemembershipoftheAgreement
onGovernmentProcurement.Inthinkingabouttheseastradepolicyissues,webelieve
itisworthrememberingthatprogressintheseareascouldhaveausefulby-productasa
curtailingforceoncorruption.


Aid for Trade


AidforTradeisavaluableinstrumentformainstreamingtradeintotheeconomyatlarge
throughtradecapacity-building. It isanessential ingredientformanypoorcountriesto
benefit from tradeopening,andassuch it shouldbeanchored in theWTO. Over time
AidforTradeshoulddevelopintoInvestmentforTrade,thusbuildingacloserrelationship
between development assistance and private investment. This could be done through
multi-stakeholderplatformssuchaswehaveseenemergeinAfricaintheareaoffood.


Coherence of international economic rules


Afinalissuethatmeritsmentionisthatofcoherenceandregulatoryconvergenceamong
andwithindifferentbodiesof internationaleconomic rules. As thePanelexploredand
attemptedtounderstandbetterthephenomenonofinternationallyfragmentedproduction,
webecameincreasinglyawareofthefactthatseparateinternationalregulatoryregimes
have each emerged within their own context at particular times over the last several
decades.Justasmoderntechnologysupportedbypolicymakersandbusinesshavejoined
nationsmorecloselyinvaluechains,whyshouldwenotexplorethepossibilityofachieving
morecoherenceandbettersynergiesininternationalpolicyregimes?Webelieveitwould
beworthconsideringhowtobringarangeofstand-aloneagreementsclosertogether,to
renderthemmorecoherent,andmoreattunedtotheenvironmentsinwhichtheycurrently
operatelargelyinisolationfromoneanother.Inordertoreflectfurtherontheimplications
ofsuchapotentiallyfar-reachingendeavour,werecommendtheestablishmentofaforum
toexploretheseissuesindepth.




The Future of Trade: The Challenges of Convergence 39


CONCLUSIONS:
THE CHALLENGES OF CONVERGENCE


Regulatingtradeopeningisonlyoneofthemanychallengesfacingarapidlyintegrating
worldeconomy.Butitisalsoonewherewealreadyhaveasystemthathasshownresilience
inthecurrentcrisis.Likeallassets,whatitneedsisnotjustpropermaintenance,butalso
investmentinthefuture.


Wehavecoveredawiderangeofissuesinthisshortreport.Weofferitasacalltoaction
andacontributiontofurtherreflection–actionandreflectionthatwebelieveareessential
toaddressourcurrentstasisandtherealriskthiscarriesofimposingsignificanteconomic,
socialandpoliticalcostsacrosstheglobe.Wemustnotberememberedasthe“can’tdo”
generation.


Insummary,webelievethatgovernmentsfaceafour-prongedconvergencechallenge:


• Convergenceamongmembers:thisfirstconvergenceconcernsnegotiationsamong
members,aswellastheirsequencing,inordertoachieveprogressive,development-
friendlyconvergenceoftheirtraderegimes.


• Convergenceofnon-multilateraltraderegimeswiththemultilateraltradingsystems:
thissecondconvergencerelatestothegradualalignmentofdifferenttraderegimes,
inparticularpreferentialtradeagreementsandthemultilateraltradingsystem.


• Convergencebetweentradeanddomesticpolicies:thisthirdconvergencerequires
deepercoherencebetweentradeandotherdomesticpolicies,suchaseducation,
skillsandinnovation.


• Convergence between trade and public policy non-tariff measures: this fourth
convergencerequiresgreatercoherencebetweentraderulesandpolicies,norms
andstandardsinotherareasofinternationalco-operation.


InalltheseendeavourstheWTOmustseekoutcomplementaryandmutuallysupporting
initiatives,includingincooperationwithotherinternationalagenciesandnon-governmental
actors.




40 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy




The Future of Trade: The Challenges of Convergence 41


ANNEx:
bIOGRAPHIES OF THE PANELLISTS


Talal AbU-GHAZALEH


Chairman and Founder, Talal Abu-Ghazaleh Overseas Corporation, Jordan


HEDr.TalalAbu-Ghazaleh,bornonApril22,1938inJaffa,istheChairmanandFounderof
Talal Abu-GhazalehOrganization (TAG-Org). Founded in 1972, TAG-Org is an international
professional servicesgroup,whichoperates out of its73offices in theMiddleEast,North
Africa,Pakistan, India,CyprusandChina. Ithas representativeoffices inEuropeandNorth
Americaandnon-exclusivestrategicallianceagreementswithvariousnetworksandindividual
firms,thusenablingittochooseafirmbestsuitedtoitsclients’needsinvirtuallyeverycountry
intheworld.


Itcurrentlyoffersacompositerangeofprofessionalservicescovering:Accounting,External
Audit, Internal Audit, Corporate Governance, Taxation, Educational Consultancy, Economic
andStrategic studies,ManagementAdvisoryServices,Professional andTechnical Training,
TechnologyTransferProjectManagement,RealEstateManagement,InvestorsandBusiness
AdvisoryServices,HumanResourcesandRecruitmentServices,E-Government,E-Commerce,
E-Education,ITandSecurityAudit,WebmasteringandWebDesign,ProfessionalInterpretation
andTranslation,WebsiteArabization,DomainNamesRegistration,ICTStrategicPlanning,ERP
Consulting Services, IT and Internet Skills Training and Examinations; Intellectual Property
NewsAgency, IPBusinessandAssetValuationandBrandingServices, IPRegistrationand
Protection, IntellectualPropertyRenewals, IPRProtectionandManagement,LegalServices
(SolicitorsandAttorneys),andPublicOffering.


Sharan bURROW


Secretary-General, International Trade Union Confederation


SharanBurrowwaselectedGeneralSecretaryoftheITUCatitsSecondWorldCongressin
Vancouver,June2010.Priortothis,sheheldthepositionofITUCPresidentsinceitsFounding
Congress in Vienna (November 2006) and the position of ICFTU President since its 18th
WorldCongressinMiyazaki(November2004).Sheisthefirstwomantohavehaldanyofthese
positions.


Sharanwasborn in1954inWarren,asmalltowninwesternNSW, intoafamilywitha long
historyofinvolvementinunionsandthestruggletoimprovethelivesofworkingpeople.




42 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Hergreat,greatgrandfatherparticipatedintheshearers’strikeof1891/92,becomingoneof
thefirstorganisersfortheAustralianWorkers’UnionandstandingforthestateseatofCobar
forthefledglingAustralianLaborPartyin1896.


SharanstudiedteachingattheUniversityofNSWin1976andbeganherteachingcareerin
highschoolsaroundcountryNSW.


She became an organiser for the NSW Teachers’ Federation, based in Bathurst, and was
PresidentoftheBathurstTradesandLabourCouncilduringthe1980s.Sharanwaselected
Senior Vice-President of the NSW Teachers’ Federation and became President of the
AustralianEducationUnion(AEU)in1992.SherepresentedtheAEUontheACTUExecutive
throughthe1990s.


SharanwaspreviouslyVice-PresidentofEducationInternationalfrom1995to2000.Education
International is the international organisation of education unions representing 24 million
membersworldwide.


In May 2000, Sharan Burrow became the second woman to be elected President of the
AustralianCouncilofTradeUnions(ACTU).


In October 2000, Sharan also became the first woman to be elected President of the
InternationalConfederationofFreeTradeUnionsAsiaPacificRegionOrganisation.


She has also served as a member of the Governing Body of the International Labour
OrganisationandamemberoftheStakeholderCounciloftheGlobalReportingInitiative.As
partofherILOresponsibilities,SharanchairedtheWorkers’GroupoftheSub-Committeeon
MultinationalEnterprises.


Helen CLARK


Administrator, United Nations Development Programme


HelenClarkbecametheAdministratoroftheUnitedNationsDevelopmentProgrammeon17
April2009,andisthefirstwomantoleadtheorganization.SheisalsotheChairoftheUnited
NationsDevelopmentGroup,acommitteeconsistingoftheheadsofallUNfunds,programmes
anddepartmentsworkingondevelopmentissues.


Prior to her appointment with UNDP, Helen Clark served for nine years as PrimeMinister
ofNewZealand,serving threesuccessive terms from1999-2008.Throughouther tenure
asPrimeMinister,HelenClarkengagedwidely in policydevelopment andadvocacyacross
the international,economic,socialandculturalspheres.Underher leadership,NewZealand
achieved significant economic growth, low levels of unemployment, and high levels of
investment ineducationandhealth,and inthewell-beingoffamiliesandoldercitizens.She
andhergovernmentprioritizedreconciliationandthesettlementofhistoricalgrievanceswith
NewZealand’sindigenouspeopleandthedevelopmentofaninclusivemulticulturalandmulti-
faithsociety.




The Future of Trade: The Challenges of Convergence 43


HelenClarkadvocatedstronglyforNewZealand’scomprehensiveprogrammeonsustainability
andfortacklingtheproblemsofclimatechange.HerobjectiveshavebeentoestablishNew
Zealandasbeingamongtheworld’sleadingnationsindealingwiththesechallenges.Helen
Clarkwasalsoanactiveleaderofhercountry’sforeignrelationsandpolicies,engagingina
widerangeofinternationalissues.AsPrimeMinister,HelenClarkwasamemberoftheCouncil
ofWomenWorldLeaders,aninternationalnetworkofcurrentandformerwomenpresidents
andprimeministerswhosemissionistomobilizethehighest-levelwomenleadersgloballyfor
collectiveactiononissuesofcriticalimportancetowomenandequitabledevelopment.


HelenClark heldministerial responsibility during her nine years asPrimeMinister forNew
Zealand’sintelligenceagenciesandfortheportfolioofarts,cultureandheritage.Shehasseen
thepromotionofthislatterportfolioasimportantinexpressingtheuniqueidentityofhernation
inapositiveway.


HelenClarkcametotheroleofPrimeMinisterafteranextensiveparliamentaryandministerial
career. First elected toParliament in1981,HelenClarkwas re-elected to hermulticultural
AucklandconstituencyforthetenthtimeinNovember2008.Earlierinhercareer,shechaired
Parliament’sForeignAffairsCommittee.


Between1987and1990,shewasaMinisterresponsibleforfirst,theportfoliosofConservation
andHousing,andthenHealthandLabour.ShewasDeputyPrimeMinisterbetweenAugust
1989andNovember1990.FromthatdateuntilDecember1993sheservedasDeputyLeader
oftheOpposition,andthenasLeaderoftheOppositionuntilwinningtheelectioninNovember
1999.


Prior to entering the New Zealand Parliament, Helen Clark taught in the Political Studies
DepartmentoftheUniversityofAuckland.ShegraduatedwithaBAin1971andanMAwith
FirstClassHonoursin1974.SheismarriedtoPeterDavis,aProfessoratAucklandUniversity.


Frederico Fleury CURADO


President and CEO, Embraer S.A, brazil


FredericoFleuryCuradohasbeenPresidentandChiefExecutiveOfficeofEmbraerS.A.since
April2007.Embraeristheworld’slargestmanufacturerofcommercialjetsofupto120seats
andoneofBrazil’sleadingexporters.


Mr.Curadobeganhiscareerin1984asamanufacturingengineeratPratt&WhitneyCanada,
working on behalf of Embraer. In February 1995, he became an executive officer of the
Company,initiallyinthecapacityofExecutiveVicePresidentforPlanningandOrganizational
Development,andthenasExecutiveVice-PresidentfortheAirlineMarket,apositionheheld
from1998untilhisappointmentasCEO.


Mr.CuradohasbeenawardedtheMedalforAeronauticalMeritbytheBrazilianGovernment
andtheMedalforMeritbytheBrazilianAssociationofMilitaryEngineering.


Bornin1961,inRiodeJaneiro,heearnedadegreeinMechanicalAeronauticalEngineering
fromITA—InstitutoTecnológicodeAeronáuticaandaM.B.A.fromtheUniversityofSãoPaulo.




44 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


Thomas J. DONOHUE


President and CEO, US Chamber of Commerce


ThomasJ.DonohueispresidentandCEOoftheU.S.ChamberofCommerce.Sinceassuming
hispositionin1997,DonohuehasbuilttheChamberintoalobbyingandpoliticalpowerhouse
withexpandedinfluenceacrosstheglobe.


Donohue has aggressively advanced a competitiveness agenda that includes doublingU.S.
exports in five years, strengthening capital markets, forging a national energy strategy,
reforminghealthcareandeducation,andprotecting intellectualproperty rights. Inaddition,
Donohuespearheadedthecreationof theAmericanFreeEnterprise.DreamBig.campaign,
apositive,long-termprogramtodefend,protect,andadvanceafreeenterprisesystembased
onindividualinitiative,hardwork,andpersonalresponsibility—operatingwithfreetrade,free
capitalmarkets,andreasonabletaxesandregulations.


DuringDonohue’s tenure, theChamber’s lobbyists,policyexperts, andcommunicatorshave
helpedsecuremanylegislativevictories,includingmajortaxcuts,moresensibleworkplaceand
environmentalregulations,andincreasedfundingfortransportation.Ontheinternationalfront,
theChamberhasbecomealeaderinknockingdowntradebarriers,winningnewfreeandfair
tradeagreements,andfightingisolationismathomeandabroad.


UnderDonohue’sleadership,theChamberhasemergedasamajorpoliticalforcebyeducating
the public about the business records of congressional candidates and generating voter
enthusiasmthroughtheChamber’spowerfulgrassrootsprogram.


DonohueestablishedtheU.S.ChamberInstituteforLegalReform,whichhaswonsignificant
legalreformsinthecourts,atthestateandfederallevels,andinelectionsforstateattorneys
generalandSupremeCourtjudges.


TheNationalChamberLitigationCenter,theChamber’slawfirm,hasbecomemoreaggressive
inchallenginganti-businessmeasuresincourt. In2010,NCLCfiledasapartyor intervenor
in 17 cases and 90 times as a friend of the court. TheNationalChamber Foundation, the
Chamber’spublicpolicythinktank,drivesthepolicydebateonkeytopicsandprovidesaforum
whereleadersadvancecutting-edgeissuesfacingtheU.S.businesscommunity.


Donohuehasalsolaunchedanumberofmultimillion-dollarinitiativesaroundseveralkeyissues,
includinganationalenergy strategy, stronger capitalmarkets, andprotectionof intellectual
property.


Previously, Donohue served for 13 years as president and chief executive officer of the
AmericanTruckingAssociations,thenationalorganizationofthetruckingindustry.


Donohueservesontwocorporateboardsofdirectors—UnionPacificCorporationandSunrise
SeniorLivingCorporation.HeispresidentoftheCenterforInternationalPrivateEnterprise,a
programoftheNationalEndowmentforDemocracydedicatedtothedevelopmentofmarket-
orientedinstitutionsaroundtheworld.




The Future of Trade: The Challenges of Convergence 45


BorninNewYorkCityin1938,Donohueearnedabachelor’sdegreefromSt.John’sUniversity
andamaster’sdegreeinbusinessadministrationfromAdelphiUniversity.Heholdshonorary
doctoratedegreesfromAdelphi,St.John’s,andMarymountuniversities.Donohueandhiswife,
Liz,liveinPotomac,Maryland.Theyhavethreesonsandfivegrandchildren.


Yoshiaki FUJIMORI


President and CEO, LIXIL Group Corporation and LIXIL Corporation, Japan


Mr. Fujimori became President and CEO of JS Group Corporation (now LIXIL Group
Corporation)inAugust2011.LIXILGroupisaleadingcompanyofhousingandbuildingmaterial
companyoperatinggloballywith$20Billion in revenue.Majoroverseassubsidiaries include
PermasteelisaS.p.AandAmericanStandardAsiaPacific.


Mr. Fujimori also serves as theNon-ExecutiveMember of theBoard ofDirectors of Tokyo
ElectricPowerCompany,Incorporated.HeisaViceChairmanofKeizaiDoyukaiandleadsthe
CommitteeonthepromotionofEPAs/FTAs.


PriortojoiningtheLIXILGroup,Mr.Fujimoriworkedfor25yearsatGEwherehewasSenior
VicePresidentandmemberoftheCorporateExecutiveCouncil.Heservedaspresidentand
CEOofvariousbusinessdivisionsincludingMedicalSystemsAsiaandGEPlastics,GECapital
AsiaandChairmanofGEJapan.Prior to joiningGEheworkedforNissho IwaiCorporation
(nowSojitz)for10years.


HeholdsabachelordegreeinPetroleumEngineeringfromUniversityofTokyoandanMBA
fromCarnegieMellonGraduateSchoolofBusiness.


Victor K. FUNG


Chairman of Fung Global Institute, Hong Kong, China
Honorary Chairman of the International Chamber of Commerce


DrVictorKFungistheGroupChairmanoftheLi&Funggroupofcompanies,whichcomprises
majorsubsidiaries inTrading,Logistics,DistributionandRetailing, includingpublicly listedLi
&FungLimited,ConvenienceRetailAsiaLimitedandTrinityLimited.HealsoistheFounding
ChairmanoftheFungGlobalInstitute,anindependentandnon-profitthink-tankthatgenerates
and disseminates innovative thinking and business-relevant research on global issues from
Asianperspectives.


Dr Fung holds a number of civic and professional appointments.   He is a member of the
Chinese People’s Political Consultative Conference and a vice chairman of China Centre
for InternationalEconomicExchangesof thePeople’sRepublicofChina.He isChairmanof
theGreaterPearlRiverDeltaBusinessCouncil.HeisalsoamemberoftheCommissionon
StrategicDevelopmentof the  HongKongGovernment.  From1991to2000,DrFungwas




46 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


ChairmanoftheHongKongTradeDevelopmentCouncil,from1996to2003,hewastheHong
KongrepresentativeontheAPECBusinessAdvisoryCouncil,from1999to2008,Chairman
oftheAirportAuthorityHongKongandfrom2001to2009,ChairmanoftheCouncilofThe
UniversityofHongKong.


DrFungisHonoraryChairmanofInternationalChamberofCommerceheadquarteredinParis,
ChairmanofAsiaAdvisoryBoardofPrudentialFinancial, Inc(USA). Heisamemberofthe
WTOPanelonDefiningtheFutureofTrade.Healsoisanindependentnon-executiveDirector
ofBaosteelGroupCorporation andChinaPetrochemicalCorporation (People’sRepublic of
China),BankofChina(HongKong)Limited,ChowTaiFook JewelleryGroupLimited(Hong
Kong)andKocHoldingA.S.(Turkey).


Born and raised inHongKong, Dr Fung holds Bachelor andMaster Degrees in Electrical
Engineering from Massachusetts Institute of Technology and a Doctorate in Business
EconomicsfromHarvardUniversity.HealsotaughtasaprofessoratHarvardBusinessSchool
forfouryearsbeforereturningtoHongKongin1976. DrFungismarriedwiththreechildren.


Pradeep Singh MEHTA


Secretary-General, CUTS International, India


PradeepSMehta(64)isthefoundersecretarygeneraloftheJaipur-basedConsumerUnity
&TrustSociety(CUTSInternational),oneofthelargestconsumergroupsinIndia,withoffices
inLondon,Lusaka,Nairobi,HanoiandGeneva.Establishedin1983/84,CUTSInternational
hasnowcompleted30gloriousyears.MehtastudiedatTheScindiaSchool,Gwalior(higher
secondary), St Xavier’s College at Calcutta (B. Com) University and law at the Rajasthan
University,Jaipur.


Mehtaserves/hasservedonseveralpolicymakingbodiesoftheGovernmentofIndia,related
to trade, environment and consumer affairs, including theNational Advisory Committee on
InternationalTradeoftheMinistryofCommerceanditsworkinggroups.HechairstheAdvisory
BoardoftheSouthAsiaNetworkonTrade,EconomicsandEnvironment,Kathmandu.


MehtaalsoservesontheadvisoryboardsofCentreAdvisory&ReviewGroupoftheResearch
Centre on Regulation and Competition, Institute for Development Policy andManagement,
ManchesterUniversity,UK;  Institute forConsumerAntitrust,LoyolaCollege,Chicago,USA;
BrainsTrustof theEvianGroup,Lausanne; theOECD’sAdvisoryCommittee for Investment
inAfrica,OECD,Paris;AdvisoryCommitteeoftheCentralElectricityRegulatoryCommission,
NewDelhi.


Inthepast,MehtahasbeenanNGOAdvisertotheDirectorGeneral,WTO,Geneva,besides
serving on the governing boards of the Life Insurance Corporation of India, Mumbai; the
International Centre for Trade & Sustainable Development, Geneva and the Consumer
CoordinationCouncil,NewDelhi.


Aprolificwriter,giftedspeaker,skilledtrainerandorganiserinthesocialsciencefield,Mehta
hasbeennamedasoneofthe30mostfamouscolumnistsinIndiabyaleadingnewspaperin




The Future of Trade: The Challenges of Convergence 47


India.Over1100articlesofMehtahavebeenpublishedinseveralnewspapersandmagazines
onissuesrelatingtoconsumerism,competitionpolicy,andtrade&economics.


Hehaswrittenand/oreditedseveralbooksandmonographssuchas:TowardsaFunctional
Competition Policy for India; Competition Regimes around the World; WTO and India: An
Agenda for Action in Post Doha Scenario; Analyses of the Interaction between Trade and
CompetitionPolicy;MultilateralisationofSovereignty;Howtosurviveasaconsumer;Numbers,
atwhatcost.


Festus Gontebanye MOGAE


Former President, botswana


H.E. Mr. Festus Mogae served as the third President of the Republic of Botswana from
31st  March1998untilhistenureofofficeendedon31st  March2008.


Bornon21stAugust,1939atSerowe in theCentralDistrictofBotswana,he trainedasan
EconomistattheUniversitiesofOxfordandSussexintheUnitedKingdom.


Mr.Mogaestartedhiscareer inthepublicservice inBotswanaasPlanningOfficer in1968
and progressed to become Director of Economic Affairs, and then Permanent Secretary,
MinistryofFinanceandDevelopmentPlanning.HebecameAlternateGovernorforBotswana
attheInternationalMonetaryFund,AfricanDevelopmentBankandtheInternationalBankfor
Reconstruction andDevelopment from1971 to1976.During this period, he served on the
boardsofvariousParastatalsas:MemberoftheBoardforWaterUtilities,BotswanaHousing
Corporation, Botswana Meat Commission, Botswana Meat Commission (United Kingdom)
Holdings,ECCOColdStoresLimitedandAlliedMeatImportersLimited.HewasalsoDirector,
thenlaterChairman,BotswanaDevelopmentCorporation,RepresentativeoftheCommonwealth
Fund forTechnicalCooperation,Directorof theDeBeersBotswanaMiningCompany (Pty)
Limited(DiamondMiningCompany),BotswanaRSTLimited,BangwatoConcessionsLimited
(BCL)andBankofBotswana.


Mr.Mogaealsoserved inWashington,DCasAlternateandExecutiveDirector, International
MonetaryFundforAnglophoneAfricafrom1976to1980beforehecamehometotakeupthe
positionofGovernoroftheBankofBotswana,afterwhichheservedasPermanentSecretary
to the President, Secretary to the Cabinet and Supervisor of Elections. Hewas appointed
MinisterofFinanceandDevelopmentPlanningin1989andbecameVicePresidentin1992,
until31stMarch,1998whenhebecamethethirdPresidentoftheRepublicofBotswana.


HewasChairmanofSouthernAfricanDevelopmentCommunity(SADC)CouncilofMinisters
from 1992 until 1996. By virtue of his position as Vice President, he was also Leader of
theHouseforBotswanaNationalAssembly. In1994,hecontested in thegeneralelections
andwon a seat for thePalapyeConstituency.Hewas alsoMember of theCommonwealth
ParliamentaryAssociation,Memberof theParliamentariansforGlobalActionbased inNew
YorkandtheGlobalCoalitionforAfricabasedinWashingtonD.C.


His Excellency was Governor for Botswana for the International Bank for Reconstruction
and Development, Member of the Joint Development Committee of the World Bank and




48 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy


the InternationalMonetary Fund on the transfer of real resources to developing countries,
WashingtonDCfrom1989to1990.


HewasalsoinvolvedincommunityorientedorganisationswhichincludeKalahariConservation
Society,BotswanaSociety (ResearchOrganisation)ofwhichhe isPresident,LionsClubof
Palapye,PresidentoftheBotswanaSocietyfortheDeafaswellasbeingPatronoftheJunior
AchievementBotswana.HeisalsoChairmanoftheNationalAIDSCouncil(launched30March
2000).


In1989,Mr.MogaewasawardedthePresidentialOrderofHonourofBotswanafollowedin
2003withtheawardofthehighesthonouroftheRepublicofBotswana,NalediYaBotswana—
Gaborone.Heholdsnumerousotherhonoursandawardsatthelocal,regionalandinternational
levels.


HisExcellencyMr.Mogaeismarriedwiththreedaughtersandagrand-daughter.


Josette SHEERAN


Vice Chairman, World Economic Forum


JosetteSheeran isVice-Chairmanof theWorldEconomicForum.Shepreviouslyservedas
ExecutiveDirectoroftheUnitedNationsWorldFoodProgramme(2007)andChairoftheUN
High-LevelCommitteeonManagement.SheservesonseveralboardsincludingMarsGlobal
Advisors,theCenterforStrategicandInternationalStudiesDevelopmentCouncilandtheUS
State Department’s International Council on Women’s Business Leadership Committee on
access tomarkets.ShewasUnder-Secretary forEconomic,EnergyandAgriculturalAffairs
at the US Department of State responsible for economic issues including development,
trade,agriculture,finance,energy, telecommunicationsand transportation. In2006shewas
appointedtotheHigh-levelUNPanelonSystem-wideCoherenceintheareasofdevelopment,
humanitarianassistanceandtheenvironment.MsSheeranalsoservedasDeputyUSTrade
Representative responsible for trade negotiations in Asia and Africa. She was Managing
DirectorofStarpointSolutionsandwasalsoPresidentandCEOorEmpowerAmerica.Sheis
amemberoftheCouncilonForeignRelationsandwasonitsWashingtonadvisoryboardand
hasservedonanumberofotherboards,includingtheWashingtonboardoftheUrbanLeague
andtheUnitedNegroCollegeFund.MsSheeranhasaBAfromtheUniversityofColorado.




The Future of Trade: The Challenges of Convergence 49


Jürgen R. THUMANN


President, bUSINESSEUROPE


JürgenR.ThumannisPresidentofBUSINESSEUROPE.With41memberorganizationsfrom
35EuropeancountriesBUSINESSEUROPErepresentstheinterestsofmorethan20million
EuropeancompaniestowardsEuorpeanandinternationalinstituions.Since2008heisalsoCo-
ChairoftheTransatlanticBusinessDialogue(TABD),theofficialdialoguebetweenAmerican
andEuropeanbusinessleadersandtheU.S.andEUgovernment.


Thumannisabornentrepreneur.Attheageof19,hetookoverthemanagementofthefamily
business.LaterhefoundedHeitkamp&ThumannGroupwhichtodaycomprises21companies
withatotalofabout2000employees.Thecompanyisworldmarketleaderforthesupplyof
metalandplasticcomponentsforspecializedmarketswithinthepharmaceutical,automotive
andconsumerbatteryindustry.In1998heresignedfromanactivemanagingroleandbecame
ChairmanoftheAdvisoryBoard.


George YEO


Former Foreign Minister, Singapore
Vice Chairman of Kerry Group Limited, Hong Kong, China


GeorgeYeojoinedKerryGroupon1January2012asViceChairman.FromSeptember1988
toMay2011,heserved23yearsinGovernment, andwasMinisterforInformationandtheArts,
Health,Trade&Industry,ForeignAffairstillhisdefeatintheMay2011GeneralElection.


George Yeo studied Engineering at Cambridge University on a President’s Scholarship,
graduatingwithaDoubleFirstin1976,andbecameaSignalsOfficerintheSingaporeArmed
Forces.  Aftergraduating fromtheSingaporeCommandandStaffCollege in1979,hewas
postedtotheRepublicofSingaporeAirForce. HegraduatedwithanMBA(BakerScholar)
fromtheHarvardBusinessSchoolin1985. HewasappointedChief-of-StaffoftheAirStaff
(1985-1986)andDirectorofJointOperationsandPlanning in theDefenceMinistry (1986-
1988),attainingtherankofBrigadier-General. 


GeorgeYeochairstheInternationalAdvisoryPaneloftheNalandaUniversityGoverningBoard. 
HeisamemberoftheFoundationBoardoftheWorldEconomicForum,theNicolasBerggruen
Institute’s21stCenturyCouncil,theAsia-PacificAdvisoryBoardofHarvardBusinessSchool
andtheInternationalAdvisoryBoardofIESEBusinessSchool. 


He is Patron of LASALLE College of the Arts and Advisor to the Sun Yat-Sen Nanyang
MemorialHall.




50 Report of the Panel on Defining the Future of Trade convened by WTO Director-General Pascal Lamy




ISBN 978-92-870-3876-0
© World Trade Organization, 2013


World Trade Organization
Centre William Rappard
Rue de Lausanne 154
CH-1211 Geneva 21


Switzerland


Tel.: +41 (0)22 739 51 11
Fax: +41 (0)22 731 42 06
email: enquiries@wto.org
Website: www.wto.org


Photo credits
Anthia Cumming – iStockphoto


Tobias Helbig – iStockphoto
Nikada – iStockphoto




ISBN: 978-92-870-3876-0


9 7 8 9 2 8 7 0 3 8 7 6 0




Login