Text: USTR Barshefsky Remarks to Pacific Basin Economic Council
(China WTO membership is "opportunity of vast consequence")U.S. Trade Representative Charlene Barshefsky described the World Trade Organization (WTO)as being "of cardinal importance in our response to one of the greatest political challenges of the present era ... the end of the Cold War."
Speaking to the Pacific Basin Economic Council in Honolulu, Hawaii, March 20, Barshefsky said the post-Cold War period presents opportunities to help nations that are emerging from central planning to integrate themselves into the world of open markets under the rule of law.
"This is a task for our time whose consequences will be as great as those of the ... reintegration of Japan and Germany in the 1950s," she predicted.
Barshefsky said the WTO can play a major role in the reintegration process, and turned to China's accession to the world body to illustrate her point.
"Together with extension of permanent Normal Trade Relations, WTO accession will open China to the world in a way unprecedented in the modern era," she said.
"WTO accession will support reform, helping China create a more efficient economy with greater prospects for long-term growth," she added.
Barshefsky stressed that China's stake in Asia's stability and prosperity has grown as China has reformed its economy and opened to the world. She cited China's membership on the U.N. Security Council, and China's important role in maintaining peace on the Korean peninsula, as evidence of the country's increased investment in the region.
"The WTO accession, as the most important step in this process in twenty years, will therefore make a major contribution to the interests all of us share in a peaceful, stable and prosperous region," Barshefsky concluded.
Following is the text as prepared for delivery:
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REMARKS TO THE PACIFIC BASIN ECONOMIC COUNCIL
Ambassador Charlene Barshefsky U.S. Trade Representative
PBEC Annual Conference Honolulu, Hawaii
March 20, 2000
Good evening, and thank you very much.
Let me thank PBEC's General Secretary Bob Lees and Governor Cayetano for bringing us together today. It is also my privilege to be here with three of the Pacific's leading figures in trade and economic policy, in Minister Han, Minister Tun Daim, Minister Fernandez; and of course Clyde Prestowitz, who is an old friend and one of Washington's leading thinkers on Asian trade affairs.
Our discussion of the next steps, at the World Trade Organization comes, as is often the case with Clyde, at the perfect time. This month, we completed a comprehensive report, per the direction of Congress, on the record of the WTO after five years. This evening, I would like to share with you a the case we have made for the fundamental importance of this institution to the United States and the world; and the agenda we see for it in the years to come.
AMERICAN TRADE PHILOSOPHY
Our work at the WTO, to begin with, has rested upon a foundation laid down under President Franklin Roosevelt of American commitment to open markets, freer trade, and the rule of law in world commerce.
Americans have taken this position, in one sense, as a matter of clear economic logic. Open markets abroad offer opportunities to export, and exports are essential to a strong economy. Open markets at home are equally important, as imports help to dampen inflation and create the choice, price and competition that raise family living standards - for all families, but most especially the poor. But the trading system has importance beyond economics; and to fully grasp them we must trace today's World Trade Organization back to its beginnings.
DEVELOPMENT OF THE TRADING SYSTEM
The WTO has its roots in the General Agreement on Trade and Tariffs, or GATT. And its creation in 1948, in turn, reflected the lessons of personal experience in Depression and war.
Our postwar leaders had, in the 1930s, seen a cycle of trade protection and retaliation beginning with the Smoot-Hawley Tariff in the United States cut global trade nearly 70%. Within a few years, these policies had transformed an integrated world into something like a series of island economies, deepening the Depression, intensifying political tensions, and contributing to the political upheavals of the era.
Eighteen years later, they believed that by reopening world markets they could restore economic health and raise living standards; and that, as open markets gave nations greater stakes in stability and prosperity beyond their borders, a fragile peace would strengthen. Thus the foundation of the GATT was one in a series of related policies and institutions that have served us well for nearly six decades:
-- Collective security, reflected by the UN, NATO and our Pacific alliances;
-- Commitment to human rights, embodied by the Universal Declaration on Human Rights and a series of more recent Conventions.
-- Open markets and economic stability, with the creation of the IMF and World Bank on the one hand, and the GATT on the other.
Together, these made up a coherent vision of a peaceful and open world; a vision which over half a century of experience has fully vindicated.
Through eight Rounds of negotiations, and as 112 new members joined the 23 founders of the GATT, we abandoned the closed markets of the Depression era, and helped to foster a fifty-year economic boom. Since the foundation of the GATT, the world economy has grown six-fold; per capita income nearly tripled and hundreds of millions of families escaped from poverty. And nowhere, of course, has this been more clear than in Asia.
WTO AGENDA
We are now looking ahead to a new set of opportunities.
With the Uruguay Round, we took a GATT system less and less able to meet the demands of a more integrated, technologically progressive world; and fundamentally reformed, updated and modernized it to create the WTO.
We have since built upon that achievement through four historic global agreements: the Information Technology Agreement, covering over $600 billion in high-tech goods; the Basic Telecommunications Agreement; the Financial Services Agreement; and the WTO's commitment to duty-free cyberspace.
But the work is not done: as Uruguay Round commitments phase in, we are moving on to the negotiating agenda of the next decade. Its core elements are before us, in the agreement last month to open global talks on agriculture and services. These are the sectors in which markets remain most distorted and closed, and in which the opening of trade will mean perhaps most to future prospects for rising living standards, technological progress, and sustainable development. In each of them we have set ambitious goals; and beyond these negotiations, we have other pressing needs:
-- Market access concerns in industrial products, electronic commerce, trade facilitation, and other topics as well;
-- The universally recognized need for the WTO's wealthier and more advanced members to open their markets more fully to the products of the poorest and least developed nations.
-- And the building of the 21st-century economy.
As we move on from the four high-tech agreements of the last two years, we must turn to the next steps in opening information technology markets. We must do more electronic commerce, with its potential to spur development in remote and impoverished regions. And we must consider the application of biotechnology to agriculture, with its promise for better yields and reduced pollution, as well as the necessity for fair, transparent and science-based regulatory procedures to ally consumer concerns.
With these challenges before us, we are continuing our work to build consensus for a new, more broadly based Round. This will not be a simple task, but the outlines can be drawn, if WTO members accepted the shared responsibility of meeting the goal. As the President has said, we will keep working toward consensus; we are willing to be flexible, and expect our trading partners to do the same.
CHINA ACCESSION
As we look to the challenges of the future, the WTO is also of cardinal importance in our response to one of the greatest political challenges of the present era. That is the end of the Cold War, and the opportunities it presents to help nations emerging from central planning integrate themselves into the world of open markets under the rule of law. This is a task for our time whose consequences will be as great as those of the GATT's reintegration of Japan and Germany in the 1950s.
This is work of great complexity, both in technical trade policy terms and also in the political sense. But it is also fully achievable: since its creation in 1995, the WTO has admitted six transition economies: Slovenia, Bulgaria, Mongolia, the Kyrgyz Republic, Latvia, and -- ten years to the day after the fall of the Berlin Wall -- Estonia. Georgia will enter soon; and the accessions of Albania and Croatia are almost complete. We have made significant progress with Armenia, Lithuania and Moldova; and held fruitful discussions with Russia and Ukraine as well.
And in our recent bilateral agreement on WTO accession with China, we have an opportunity of vast consequence. This is a comprehensive agreement covering agriculture, services, industrial goods, unfair trade and investment practices and other rules, with specific and enforceable commitments that phase in rapidly in each area. Together with extension of permanent Normal Trade Relations, WTO accession will open China to the world in a way unprecedented in the modern era, creating new opportunities for farmers and businesses all over the Pacific region.
The benefits for China will be equally significant. WTO accession will support reform, helping China create a more efficient economy with greater prospects for long-term growth. As distribution services improve, tens or hundreds of millions of Chinese farmers will be able to send their goods to market more quickly and with less wastage. Chinese businesses and entrepreneurs will see their competitiveness improve through better telecommunications and other civilian technologies. And more generally, WTO accession will deepen a thirty-year process whose importance to peace and stability in the Pacific cannot be overstated.
As China has reformed its economy and opened to the world, its stake in the region's stability and prosperity has grown. This is clear in the constructive, positive and very important role China plays on such issues as the maintenance of peace on the Korean peninsula, and as a member of the U.N. Security Council. The WTO accession, as the most important step in this process in twenty years, will therefore make a major contribution to the interests all of us share in a peaceful, stable and prosperous region.
ASIAN FINANCIAL CRISIS
Finally, of course, the WTO has been an institution of great practical economic benefit to Americans and to our trading partners.
We see this in our own economy, as the opening of world markets has helped to catalyze a 55% expansion of American goods and services exports since 1992, to a record total of $958.5 billion last year. But still more important is the role it played in the financial crisis of the past two years.
Between 1997 and 1999, with 40% of the world in recession and five major Asian economics contracting by 6% or more, the world faced a crisis unlike any since that which sparked the Depression in the 1930s. Few now alive remember those events. We can imagine, though, that the pressures which led to the Smoot-Hawley Act and the broader cycle of protection and reaction it sparked must have been very like those on governments in Korea, Southeast Asia and South America in 1997 and 1998.
This was a severe test for all of us. Hawaii, as Governor Cayetano can attest, felt this crisis very directly and severely: the statistics which show a drop of 30% in Hawaii's exports to its Pacific markets show why Hawaii is the only state in America which has lost jobs and seen unemployment rise over the past seven years. But in this period of stress, complementing the reforms underway in many of our Asian and Latin American neighbors in Asia and South America have made in response, the WTO proved its value.
The respect its members generally showed for their open market commitments ensured that affected countries had access to the markets necessary for recovery -- as we see in record levels of imports last year from Malaysia, Colombia and South Korea. As a result, the spread of the crisis was contained; affected nations had the access to markets necessary for a speedy recovery; and the political strife that can erupt in economic crisis never emerged.
THE CHALLENGE OF REFORM
This is a remarkable achievement. And in its aftermath, one may wonder at the increasing debate and critical scrutiny trade policy and the trading system now receive. But I think it is not a mystery at all.
We live in an age when telecommunications and the Internet, together with improving education, challenge old ways and habits everywhere in the world.
In the aftermath of the financial crisis, and as young people think about the challenges before them, the public in America and probably all our countries is asking more questions about trade policy. This is quite natural and ultimately should be welcomed. But in this new environment, if trade policy is to have the same foundation of public support in this new era it had in the past half-century, we have new responsibilities.
First of all, each of us must work harder to make the fundamental case for open markets. The core vision of the trading system is right: opening markets in the past decades has sparked growth, reduced poverty and strengthened peace. To begin reversing the work we have done would be irresponsible and damaging in the extreme.
Each of us must also, however, acknowledge that the trading system is not perfect, and be willing to listen to and act upon legitimate criticisms.
This does not, of course, mean that all criticisms are valid. Indeed, part of the response must be a rejection of unsubstantiated and more radical criticisms. But as we lookout on the world today, all of us can see missed opportunities; we can see institutions that can be updated and reformed to fit the modem world more securely; and we cart see injustices and erosions of the quality of life that better policies can avoid.
The WTO today can do more to promote growth and rising living standards than it does today: this is the basis of our agenda for the built-in agenda talks, and for the foundation of a new Round.
It can contribute more effectively to worldwide efforts to improve environmental protection and promote respect for core labor standards. In these areas an open and fair dialogue can help us meet legitimate needs and contribute to aspirations all of us share.
And it must address concerns about transparency and inclusion, both with respect to the general public and to WTO members who have felt less able then they should to assert their interests and contribute to decisions.
This is the challenge of reform. It is never easy to face. But there is no reason to fear it; there is every reason to believe that success will be of great value in its own right and for the trading system's future health and credibility.
CONCLUSION: THE WORK AHEAD
Our responsibility, then, is to remain true to the generous vision of the GATT founders fifty years ago, while meeting the challenges of a new era. That is true not only for those of us now in government, but for all of us here today.
None of these tasks are easy. We all know that. But as we think about the work ahead, we should also be optimists, remembering always that others before us have shouldered equally difficult tasks and brought them home to success.
That is the record we have built together, over fifty years of leading the world toward freedom, prosperity, the rule of law and strengthening peace. It must be our record in the decades to come.
Thank you very much.
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