Speech by Mr Kimmo Sasi, Minister for Foreign Trade, at the North-South Dialogue on Democracy and Globalisation seminar, 20.6.2001

Considering the Interests of Developing Countries in International Trade Agreements


- today globalization is one of those catchwords which stir strong emotions. Recently, resistance to the - presumed and actual - consequences of globalization in both developed and developing countries has gained momentum.

- I see globalization more as a challenge than a threat. It is widely understood as a phenomenon of expanding and deepening of market relations, characterized and largely generated by technological development and, in particular, information technology. Globalization entails growing specialization and, on the other hand, interdependence of economies. Specialization makes possible a more efficient use of resources, improved productivity and accelerated technical development.

- today the benefits of globalization are not evenly spread - there are both losers and winners. The WTO and the multilateral trading system have often been criticized for having caused injustice in world economic relations. What is being widely overlooked in this context is the fact that in many countries internal strifes, corruption and disregard of good governance could be the biggest barriers to development, and also to trade and investment relations. Such problems need to be tackled by proper policies by the governments and civil societies themselves.

- unfortunately, over the last hundred years, there is no example in economic history for an inwardlooking development strategy which led to a sustainable improvement in the living standards. Common values, functioning government institutions, vibrating civil society and respect for basic freedoms can also be seen as economic values, when states adapt themselves to the globalization and compete in evolving markets. Letting people use their creativity and encouraging to it is one of the biggest economic forces.

- what is essential today, is that most countries want to participate in globalization, because they believe that integration into the world economy does serve their interests. I maintain that every country can realize the gains from trade by unilateral liberalization. There are 141 member countries in WTO and about 30 are negotiating to join the WTO. Ultimately states and governments are responsible how sound their economic policies are in the long run, and how well prepared they are to provide services needed by civil society, business community and investors.

- harnessing the globalization is our biggest common challenge. We need to build consistent support for the economic liberalization and open markets. At the same time basic safety networks should be tailored to respond the best possible way every nation's own individual needs. The risk for the social exclusion and marginalization varies depending on the preparedness and the resources of the country concerned to respond the challenges. Increased opportunities and information available highlight the need to invest in human capital – to education on all levels of society.

- increased prosperity creates more favourable conditions to alleviate the fears of globalization. The costs and the benefits of the globalization should be shared. Developed countries should be partners with developing countries in combating the economical and social exclusion. We can expect to be successful in our efforts when we join our efforts and cooperate.

- WTO can have a role in managing the globalization process through the trade policy rule-making. But it is only one of the players in the process, although a key player. According to its mandate WTO aims to develop an integrated, more viable and durable multilateral trading system in rules with the objective of reduction of tariffs and other barriers to trade i.e. trade liberalisation. Common rules and a binding dispute settlement system – both enhance the predictability of the multilateral trading system.

- for Finland priority for the next autumn is to get the multilateral trade negotiations launched at the Doha Ministerial Conference in November. It is important to agree on the agenda that takes into account the interests of all the WTO Members. However, we should avoid pre-negotiations and let the actual negotiations (themselves) determine the end results.

- I am confident that the comprehensive multilateral trade round provides us the best possible way of contributing to the content and shaping the direction of the future of trade policy. In this process WTO gives us a democratic forum for achieving this goal; WTO members represent Governments and their people. The European Union has advocated a new round of trade negotiations which would take into account the interests of all participants in a balanced way. In this connection we attach special importance to the integration of developing countries into the world trading system by improving their market access and by assisting them in building their capacities.

- recent developments have provoked strong internal pressures in our societies to clarify further the WTO rules pertaining to environment and consumer health and safety. There is a need that these matters should be addressed at the preparations for the Doha Ministerial. I would like to stress that the aim is NOT to use these items for protectionist purposes. These questions are acute in our societies and we believe that it is in the interest of all WTO members that rules on these questions are clarified by WTO members and not through the Dispute Settlement process.

- there are also other new areas for trade negotiations like trade and competition and investments. The question of investments highlights the importance of creating predictable multilateral framework of common principles at the WTO. This is in particular relevant in the context of developing countries, as the foreign direct investments (FDI) have been growing more in the past years than the trade.

- several developing countries have stated that their priority is the implementation of existing Uruguay Round commitments, as well as for improved access to developed country markets for their products. Regarding market access issues there is a growing feeling that any further WTO negotiations should have a specific developmental focus.

- I hope that by the end of July we will have a better picture of the preparations for the Doha Ministerial Conference. We need to work together in order to identify the key issues that need to be solved before the last steps to Doha. Time is running out – we all should be prepared to bear the responsibility for the multilateral system which functions well and guarantees the predictable trade rules.

- the European Council in Gothenburg, 15-16 June stressed again that the launch of an ambitious and balanced new round of multilateral trade negotiations in Doha in November remains the objective of the Union. According to the European Council such a round should respond to the interests of all WTO members, and in particular to those of the developing countries, and demonstrate that the trading system can respond to the concerns of civil society. The Council urged all WTO partners to work constructively and flexibly to forge a consensus in Doha.

- I am convinced that EU can act as the principal advocate of the new Round and developing countries simultaneously. Furthermore, we have already taken steps in order to promote LDC’s possibilities to enter the EU markets.

- a year ago, 77 ACP (African, Caribbean, Pacific) countries and the EU (with its 15 member states) signed a comprehensive twenty-year partnership agreement in Cotonou, Benin. The Cotonou agreement is the successor of the Lome agreement made between these countries and the EU. However, the Cotonou agreement contains several improvements. It is more versatile and puts more emphasis on every sector of EU-ACP co-operation. The agreement rises a wide range of new policy challenges. For instance, how to mainstream the participation of non-state actors and local governments. I hope that the agreement paves the way for the preparation of a new WTO compatible trade regime between the EU and ACP.

- in February the EU adopted the “Everything but Arms” regulation, which extends duty and quota-free access to all imports from least developed countries to the EU. Since 5. March, 2001 the EU has been open for almost all products from the least developed countries, expect for three product groups (bananas, sugar and rice) that will be liberalised gradually. For sugar and rice the EU offers annually increasing duty-free quotas until full liberalisation is achieved.
- this regulation is the EU´s response to the call to improve access to the markets of developed countries. I hope that other developed countries - the USA and Japan – will make similar decisions. The EBA regulation goes beyond the commitments the EU made in the Cotonou agreement. I recognize that this is an important first step when we are abolishing impediments to the trade on the EU side.

- at the conclusion of the 3rd United Nations Conference on the Least Developed Countries, the international community for the first time adopted the objective of duty-free and quota-free market access for all products originating in the LDCs. This decision will expand the impact of the "Everything but Arms" initiative, already adopted by the EU.

- the Conference adopted a Programme of Action for the decade 2001-2010 to help least developed countries (LDCs). The Programme of Action envisages concrete actions by LDCs and development partners to reduce poverty and to promote sustainable development in the LDCs.

- I would like to take up one more important question – the sustainable development. We need to consider the ways in which an open trading system can promote environmentally friendly growth that allows economic and social development to take place. In the EU we are building the concept of sustainable development into respective EU policies. On trade policy specifically there is a need to produce an overall net positive development taking into account all three issues - economical, environmental and social. Sustainable development is not a protectionist measure against free trade – it is meant to make certain that trade flows between parties take into account those three issues mentioned.

- of course, trade policy itself is not the whole answer to problems facing developing world today. The Governments want to promote human welfare in the broadest sense and trade policy is only one of the instruments Governments use in pursuing this goal. In order to reap the benefits of trade liberalisation the decision-makers need to pay attention to other walks of life as well. Developing countries face constraints in their human resource base. By improving access to education and skills needed in the new economy developing countries will be better positioned to compete in the world market

- I believe that international financial institutions have a special role to play by channeling capital flows to investors in developing countries. Furthermore, IFIs should pay attention how to empower governments to better their economies and further improve their capacities to face the challenges of the open markets. On their part governments should develop chances for people to use all the possibilities a sustainable economical infrastructure can offer.

- in the recent Development Committee Meeting of the World Bank one of the main themes was Trade and Development. Both the World Bank and the International Monetary Fund provide policy advice and lending to developing countries for capacity building, expansion and diversification of exports and infrastructure development in order to accelerate their integration into the global economy. Ministers and high representatives of the industrialized countries considered expansion of world trade as a leading priority for enhancing development as the potential benefits from trade far outweigh any other form of resource transfer.

- also in the Economic and Social Council Special high-level meeting with BWIs on 1.5.2001 the importance of trade and the access of the developing countries to global markets were strongly enphasized as well as the consolidation and strengthening of international financial systems that would be responsive to the needs to promote economic and social equity in the global economy.

- I consider that trade remains vital to development policy to promote economic growth and poverty reduction. Coordination efforts in this area need to be accelerated and coherence in actions enhanced. I also stress that concerns of all countries should be taken into account to ensure that the trade policies are adaptable to different country situations and that the countries can consider them to be legitimate. This would also promote democratic ways in dealing with trade problems and global equality. Although the Governments make decisions in official multilateral forums, civil society concerns and proposals can offer valuable inputs. "Broad ownership" of policies can be better ensured if these inputs are taken into account.

- I want to conclude my presentation by recalling that it has not been too long ago, when the concept “foreign trade” was a synonym for “trade barriers and protected markets” – people benefiting from the situation were the owners of the closed and protected business sectors. Today open and free markets mean that you have something to share with others – that way we all can prosper.