March 16, 2012

Venue: Japan Institute of International Affairs

H.E. Pascal LAMY, Director-General, World Trade Organization (WTO)

Theme: “The Changing Landscape of the WTO”

Two major changes can be seen regarding international trade in recent years.

One is therise of emerging countries, and the other an increase in interdependence between states
due to expanded trade.

The development of industrializing nations has expanded the scaleof the global economy, and emerging economies have now acquired tremendous influencein terms of GDP, trade and investment.

Trade has also been expanded by thedevelopment of increasingly global supply chains in line with a growing division of labor inproduction processes.

The extension of global supply chains has added to the complexity of trade structures,
necessitating a detailed analysis of its impact on employment.

The mainstream pattern formany products now is for manufacture to take place in China, after which the goods areimported by developed countries for domestic sale.

It might seem at first glance that sucha pattern of trade would only increase employment in China and would adversely affect US
employment, but this interpretation is erroneous.

For instance, the US gains about fourtimes as much added value for computer equipment manufactured in China for a US
manufacturer and then exported to and sold in the US than does China.

It is not necessarily a good idea to assess current-account surpluses and deficits from trade
statistics that show only simple export and import amounts and then seek on that basis toharmonize interests between countries.

There are incidental services involved in theprocess of manufacturing goods and, bearing in mind that there is considerable service
input before and after the manufacturing stage – design, layout, marketing, sales, warranty,etc. – policy examinations from the perspective of which portions are gaining how muchadded value have taken on greater importance.

While considerable progress can be seen in lowering tariffs as the numbers of bilateral andmultilateral preferential trade agreements rise, future attention will likely focus on thereduction of non-tariff barriers.

The benefits of facilitating trade in these preferential trade

agreements have extended even to third countries, and have contributed substantially tofurthering trade.

On the other hand, it is also true that the actual amount of trade utilizing

preferential trade agreements has not grown in proportion to the number of theseagreements, due in part to the increasing complexity of rules of origin.

The special

regulations and rules set forth on the basis of preferential trade agreements could evenbecome major barriers in the course of moving toward future multilateralization.

The trade environment is changing moment to moment as a consequence of technologicalinnovation, changes in business practices, and transformations in production processes.
Approaches to WTO negotiations need to be updated in line with these changes.

Forinstance, should closely-related goods and services be addressed separately innegotiations?

Are there more innovative methods available for managing rules of origin?

How should non-tariff barriers be converged?
continue to be decoupled?

Should discussions on trade and investment

Is it necessary to distinguish between commercial policy andcompetition policy when examining trade?

Should the whole concept and effectiveness oftrade remedy measures be reconsidered?

Questions such as these should perhaps be

given some thought.

The changes in trade structure in recent years appear to be closely connected with theinfluence wielded by Japan, which boasts strong technological and logistical capabilities.
Asia, where intra-regional trade is booming, has become a key battleground in the extensionof supply chains.

In this sense, too, I would like to see Japan, with its considerable

knowledge and leading-edge status, give in-depth consideration to these issues andgenerate answers. I look forward to Japan’s cooperation in studying the best direction for
the future in continued recognition of the importance of developing a stable and functional
multilateral trade system.