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PRESS/251
2 November 2001
(01-5538)
BROAD NEGOTIATIONS AGENDA NEEDED FOR WEAK WORLD ECONOMY
— WTO CHIEF’S 2001 REPORT
Ministers attending the Fourth WTO Ministerial Conference in Doha, 9–13 November 2001,
urgently need to initiate a broad agenda of negotiations, WTO Director-General Mike Moore says in
his latest annual report on developments in the international trading environment.
The report notes that trade has slowed and confidence is weak. A broad negotiating agenda is
essential for continuing policy reform and trade liberalization; it would do much to build confidence
and ensure that the WTO’s trading system plays its  full part in promoting recovery and growth.
Merchandise output growth in 2000 at 4% and trade growth at 12% were “outstanding”, the
report says, the strongest in more than a decade. But “the contrast between the figures for 2000 and
the available figures for the first half of 2001 could hardly be greater.”
The report, which also contains summaries of activities in the WTO and actions member
governments have taken in policy areas that come under the organization, describes how
governments’ good sense and WTO rules helped reduc e the impact of the Southeast Asian financial
crisis that began in 1997.
“Trade became part of the solution and was integr al to a return of confidence and to recovery.
Seldom have the gains from trade been so evident,” the Director-General’s report says. New
negotiations would do the same for the curr ent global economic slowdown, it concludes.
The annual report on major WTO activities and significant policy issues affecting the trading
system is prepared for WTO member governments to discuss. Mr Moore has decided that this year’s
report should be publicly available as a WTO publication.PRESS/251
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MOREThis is the introduction and summary:
Introduction
The World Trade Organization provides an agreed set of rules for the orderly conduct of trade
between its Members. These rules serve well. The recent financial crisis that originated in South-East
Asia is a stark, telling example. Sixty years ago a financial crisis led inexorably to a great depression;
there were many causes for this, not the least that in a knee-jerk reaction of economic nationalismcountries moved to close their markets to protect domestic producers from “cheap” imports. Trade
became part of the problem. In mid-1997 the difficulties of a South-East Asian bank sparked a severe
regional downturn in output, and world markets trembled as confidence in the financial order was
drawn into question. The good sense of governments and WTO rules kept markets open; excess
production in the crisis economies, where hard decisions were taken, found a ready market in healthy
economies. Trade became part of the solution and was integral to a return of confidence and to
recovery. Seldom have the gains from trade been so evident.
Trade enhances consumer choice, raises national incomes, and gives signals for an
appropriate allocation of resources, thus prom oting employment, development, and growth. The
multilateral trading system embodied in the WTO safeguards these gains. Chapter I  of the Report
shows clearly the turn to a global economic slow down. Trade has slowed and confidence is weak. A
continuation of the process of reform and liberalization of trade policies, particularly by initiating abroad agenda of negotiations at the Fourth Ministerial Conference, would do much to build
confidence and to ensure that the system plays its full part in promoting recovery and growth.
The raison d’être of the WTO is to allow its Members to enhance and efficiently reap the
gains from trade. It fulfils its role by Members’ adherence to the fundamental principles, grounded in
economic sense, of non-discrimination, stability and predictability, and transparency. These buildingblocks of the WTO serve to reduce costs and to promote certainty, thus enormously facilitating trade,
allowing a freer flow of goods and services. Chapter II  reports on the recent activities of Members in
their ongoing work to maintain and strengthen the WTO. Part A of the Chapter reports in particular
on the continuing mandated negotiations on agriculture and services, which have now successfully
entered their second phase; on issues and concerns related to the implementation of WTOAgreements, an area of considerable weight to the Membership; on the preparations for the Fourth
Ministerial Conference, for which the political momentum on the adoption of a broader negotiating
agenda has been building throughout the year; and on other matters of vital concern to the system,
including accessions to the WTO, trade-related capacity building, technical assistance, and the dispute
settlement mechanism, which ensures that trade conflicts are settled in accordance with the rule oflaw, not power, and on a timely basis.
Part B of Chapter II of the Report provides information on trade policy trends in WTO
Members. Importantly, it notes that fears that the failure of the Third Ministerial Conference in Seattle
to agree on an agenda for a new round of multilateral trade negotiations could lead to a resurgence of
protectionism have not, by and large, materialized; the trend towards more liberal trade policies has
been maintained. Nevertheless, significant barriers to trade remain; there continues to be ample scope
for a lowering of tariff protection, subsidies are still an issue — especially in agriculture — and theelimination of restrictions in textiles and clothing has been modest. The rising trend in the use of trade
defence instruments, particularly anti-dumping, slowed in 2000 but the number of measures in force is
still considerably higher than in 1997 and more Members are using them. The section also notes that
there has been an acceleration in the pace of autonomous liberalization in services, a sector with an
important bearing on economic performance and development; that, in view of the WTO Agreementon Trade-Related Aspects of Intellectual Property Rights (TRIPS), many developing and transition
economies have taken steps to adopt new intellectual property legislation, but that a number ofPRESS/251
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MOREMembers face difficulties on implementation; and that the trend towards regional trade agreements
continues apace.
Chapters III to VI of the Report deal with selected topics. Chapter III , on developing
countries’ participation in world trade and WTO activities, notes that the WTO has got a key role to
play in promoting development prospects. But further action is needed to enhance the benefits
developing countries can derive from the WTO. This will certainly require tackling persistent tradedistortions, including the tariff peaks and escalation, in both developed and developing countries, that
affect a number of the products of main export interest to developing countries. It is also important
that emphasis continues to be placed on building capacity in developing countries and on supporting
reform to mainstream trade policies into their overall development objectives.
Accessions to the WTO is the subject of Chapter IV  of the Report. The Fourth Ministerial
Conference will complete the accession procedures for China and Chinese Taipei, and 28 other
governments are in the process of accession, a vivid reminder of the value countries attach to a rules-based multilateral trading system. Each accession to the WTO has a “win-win” quality for the system.
The acceding Government operates a more predictable and transparent trade regime, opens its markets
to its trading partners, and often locks in reform s aimed at fostering growth and development. The
new Member gains similar rights and terms of access, and commitments are enforced — on both sides
— by dispute settlement. Domestic reform and integration into the world economy thus go hand-in-hand to promote the growth prospects of the acc eding Government and of the existing Members.
Two issues singled out by critics of the WTO are considered in Chapter V  of the Report:
access to essential drugs in low-income countries and the TRIPS Agreement; and the potential impact
of the General Agreement on Trade in Services (GATS) on the quality and availability of health and
education services. On the first issue, of prime importance to the health of people and to achievingsustained development, the Chapter is clear that the TRIPS Agreement provides — and Members
have used — flexibility that can mitigate the exclusive rights of patent holders. The precise nature and
extent of the flexibility provisions of the Agreement are under discussion and may lead to action by
Members to ensure that the Agreement is implemented in a way that contributes to access to drugs,
especially for the poorest. On the second issue, critics charge that GATS constrains the ability ofgovernments to protect public health and education services and/or to apply necessary quality
standards. It is also said that the ongoing servic es negotiations have got free trade in health and
education services as their objective. This objective has not been endorsed by Members. Further,
under GATS, governments have complete discretion to make commitments in covered services,
including health and education. In fact, some developing countries have taken such commitments, inthe hope of attracting investment into these sectors and with a view to improving the quality and
availability of these vital services. The Chapter is clear that negotiations will not affect Members’
rights to pursue the regulatory objectives they deem appropriate within their jurisdiction.
Non-discrimination is the cornerstone of the WT O. It is a principle embodied in the most-
favoured-nation (MFN) provisions of the GATT, GATS, the TRIPS Agreement, and is fundamental to
all WTO Agreements. At the same time, the WTO allows Members to conclude customs unions and
free-trade areas, which by definition establish an element of preference in the trade between parties tothe agreement vis-à-vis the rest of the world. Such regional trade agreements (RTAs) have become the
most important exception to the MFN principle. The Secretariat has identified some 170 RTAs and
estimates that their number could grow to 250 by 2005; about 43% of world trade is intra-RTA trade,
and this could rise to over 50% by 2005. Chapter VI examines some of the issues that arise for the
WTO as a result of RTAs.PRESS/251
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The Chapter notes that the proliferation of RTAs poses systemic risk. This lies less in the
potential for trade diversion in each RTA than in the collective impact of a large number of RTAs,
each with its own mini-trade regime, on the smooth functioning of the rules-based multilateral trading
system. This risk is smaller, and RTAs and the WTO are more likely to be mutually supportive, when
the WTO is functioning well and is responding to the needs of the Membership. Options for the WTOto respond effectively include continued multilateral trade liberalization and a strengthening of
relevant WTO rules and procedures. The Chapter warns that, given the recent and prospective growth
in the number of RTAs, time may be short. This adds urgency to the importance of adopting a broad
agenda of negotiations at the Fourth Ministerial Conference.
____________________
Overview of Developm ents in the International Trading Environment: Annual Report by the Director-
General  will be available from WTO Publications under "Free publications":
http://www.wto.org/english/res_e/res_e.htm
END