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Remarks by Ambassador Michael Froman at the Graduate Institute in Geneva
October 17, 2016
Thank you, Professor [Richard] Baldwin, for the kind introduction and thank you all for being here.
With fewer than 100 days of the Obama Administration left to go, this is an important opportunity to look back and review just how far we’ve come over the last eight years.
I remember President Obama’s first international summit: the G-20 in London in April 2009. We were in the midst of the worst financial crisis in 80 years. The G-20 had come together to mobilize a coordinated international response to prevent the Great Recession from becoming another Great Depression. But even in the midst of crisis and in the early days of his Presidency, a number of leaders came up to President Obama and asked him for his perspective on the Doha Round. He agreed to take a hard look at it and to come back with his response at the next international summit.
Three months later, at L’Aquila, Italy, more than 20 countries gathered for various summits. The President told the other leaders that he had looked deeply into the Doha Round negotiations and had concluded that there was little chance we would reach agreement on the path we were on.
Now there were many reasons for that, and those can be debated by academics and diplomats for decades to come, but the fact was that the negotiations had reached a deadlock and that there needed to be a change if we were to maintain the strength of the multilateral trading system.
This was not necessarily the message the other Leaders wanted to hear. For years, at every international gathering, they had repeated the mantra “we must complete the Doha Round this year.” To be frank, I don’t think many of them believed it, but it was considered almost impolite to say anything else.
More than a year later, at the G-20 meeting in Seoul, Korea, there was another critical discussion of the Doha Round. President Obama was asked to start the discussion. He made clear his view that we needed to do something different if we were to make progress at the WTO. The next five Leaders speaking at that session all repeated their traditional Doha talking points. At that point, unprompted, President Obama did something relatively rare at these international summits. He spontaneously put up his flag and asked for the floor again. He said, “I don’t think you’re hearing what I’m saying.” He noted that, if we are serious about strengthening the multilateral trading system, we need to move beyond our traditional invocations of the Doha mantra and start thinking seriously about how to revitalize the WTO. Several of my fellow Sherpas came up to me afterwards and said they got it and their Leaders had heard the message. And that began a process that over several years has led in my view to the beginning of the revitalization of the multilateral trading system. We agreed to “turn the page;” we agreed to explore “fresh and new approaches.” We’re not there yet, but we are beginning to turn the corner into what could be one of the most exciting periods in the history of the multilateral trading system.
So many times during this process trade ministers would come to me and say “all we need is more American leadership.” That was code for “all the United States needed to do was to give up its principles and core interests for the sake of comity.” But leadership is not about giving up your principles or your core interests. It’s about being willing to say what no one else is willing to say (even if they might believe it inside), to do the right thing, to call it as it is, to make clear when the emperor has no clothes – even if it means being isolated and criticized. Precisely because the multilateral system matters so much to us, we find it important to be very direct, and that can make other Members uncomfortable.
Once we were a lone voice in the wilderness; now there is a fairly broad consensus that we need pragmatic multilateralism, one which recognizes that the world has changed significantly in the last two decades, that some developing countries have become globally competitive emerging markets, leading economies, and that with that increasing role in the global economy comes increasing responsibilities.
This is part of a broader historic trend. Beginning in Copenhagen in 2009 and culminating last year in Paris, the world came together to reject the historic notion that climate change was the responsibility of only a few countries to solve, but rather was the responsibility of all countries – developed, emerging and developing – to address.
So too has been the evolving story of the global trading system.
When major emerging economies are directing investment into excess capacity in a manner that distorts trade around the world, they have a responsibility to take action.
When major emerging economies are providing trade-distortive agricultural subsidies at a greater volume than all of the developed countries put together, we can no longer turn a blind eye to their lack of transparency and their failure to live up to their agreed-upon limits.
In our most recent WTO case, for example, we have found that China is providing nearly $100 billion per year in highly trade-distortive subsidies above and beyond its WTO limits. Think about that for a minute. $100 billion is more than the GDP of 130 countries. How can we have a serious conversation about distortions to global agricultural trade if we pretend that trade-distortive subsidies at this level don't exist?
The good news is that we are turning the corner.
Pragmatic multilateralism allowed us in Bali to reach the first multilateral agreement since the Uruguay Round – the Trade Facilitation Agreement. And it allowed us to reach agreement on agricultural export subsidies and a range of issues important to the least developed countries in Nairobi.
Pragmatic multilateralism allowed interested Members to come together and eliminate tariffs on over $1 trillion of information and technology products and to provide that benefit on a multilateral basis.
Pragmatic multilateralism has brought WTO Members together to work on eliminating tariffs on a range of environmental goods, so that we can see the dispersion of these key technologies to deal with a raft of environmental concerns as quickly and affordably as possible.
And pragmatic multilateralism has brought WTO Members together to liberalize the trade in services, an increasingly important part of all economies. And just last month, more than a dozen WTO members gathered to address the subsidization of fishing, a key economic and environmental issue.
At the same time, dozens of Members – including all of the major players in the WTO – have negotiated scores of bilateral and regional trade agreements over the last couple of decades. These agreements are not intended to replace or supplant the multilateral trading system, but to inform it and spur it on to action. The best of these agreements set high standards, address groundbreaking issues and define new rules, and can help establish models for the multilateral process as it defines a future agenda.
We all understand the economists’ admonition that the best and highest form of trade liberalization is multilateral trade liberalization, but that doesn’t mean that it is in our collective interest to tolerate years of deadlock or to resign ourselves to the lowest common denominator. We recognize that there is diversity among countries, that not all countries are prepared to progress at the same pace.
We should pursue multilateral agreement where consensus is possible, and plurilateral agreements where it is not. And we hope what is plurilateral today could well become multilateral tomorrow. What we cannot allow is for progress to be defined by the least ambitious, the slowest, the most obstructionist. Not when it comes to the important issues our people face, such as the protection of workers and the environment, the promotion of innovation, the advent of the digital economy, the importance of small and medium-sized enterprises and the distortive effects of state-owned enterprises.
Nairobi represented a critical turning point in the history of the WTO, and great credit goes to Amina Mohamed and Roberto Azevedo for shepherding that process to successful conclusion. It was a moment in which both multilateral and plurilateral agreements were reached. And it was also a moment in which it became clear, officially, for the first time, that there is no consensus to continue the Doha mandate. Make no mistake: we have begun a new chapter in the history of the multilateral trading system.
That doesn’t mean that the focus on development is gone; quite the contrary. There has been no greater contributor to the alleviation of poverty around the world than trade. As we look around the world today, we see clearly that those countries that have pursued good policies, opened themselves and integrated with their neighbors and the global trading system have seen the greatest gains – not just in terms of economic growth, but among a range of human development indicators, and those who have remained closed and reformed the least have seen the fewest.
That’s why it was so important from the U.S. perspective to renew the African Growth and Opportunity Act, or AGOA, for an unprecedented 10 years, to renew our GSP and other preference programs, and to renew our commitment to trade capacity building around the world. That’s why it was so important last month to lay out some thoughts about our relationship with Africa “Beyond AGOA,” because rather than issue an ultimatum to withdraw tariff preferences if our African partners did not sign up to a particular agreement by a specific deadline, as some of our friends have done, we thought it was better to consult with our African partners about how to deepen our trade and investment relationship together. And that’s why it was so important that the Trans-Pacific Partnership, or TPP, brought together developed, emerging and developing economies – all committed to a high standard, ambitious and comprehensive agreement.
In fact, all around the world, from the Pacific Alliance in Latin America, to the ASEAN Economic Community in Southeast Asia, to the Continental Free Trade Area in Africa, serious work is being done to open markets as an integral part of a development strategy.
Meanwhile, at the WTO, between Doha and Nairobi too little was done in practice to allow trade to promote development. Our hope is that now the WTO can move beyond a sterile debate on trade and development to a more honest discussion about what works and what doesn’t. Since Nairobi, we are beginning to see the green shoots of new thinking. We hope to see new ideas about how to address outstanding issues, as well as proposals about new issues for the WTO to take on. Both are important.
For example, we know agriculture is tough. We took an important first step in dealing with export subsidies in Nairobi. But one cannot deal with agriculture without taking on market access restrictions, which economists view as the most distortive of all policies. And if we’re going to deal with domestic support, we will need to deal with every Member’s programs – because if you’re a cotton farmer in Mali, it doesn’t matter whether the distortion comes from a subsidy in the United States or Europe or from a subsidy and the stockpiling of excess supply in China.
And that raises another issue: The record of compliance with the WTO requirements for transparency and disclosure is nothing short of abysmal, as Members either take far too long to provide the required information or ignore the obligations altogether. We shouldn’t underestimate the potential for this situation to seriously erode the credibility of the system as a whole – including the negotiating arm. The United States will be looking to work with other Members to find solutions to this increasingly urgent problem.
No, we can’t leave the unfinished business behind, but we also cannot pretend that the focus of the global trading system should be frozen in time. In 2001, when Doha was launched, the Internet was a novelty, global supply chains were beginning to emerge and smart phones were just a dream. Today, the digital economy is revolutionizing everything from advanced manufacturing to the way in which services are traded across the world, small and medium-sized businesses have become key participants in global manufacturing, and experts are just beginning to understand the potential impact of artificial intelligence.
For the farmer in Africa, checking market prices for his crops and conducting banking transactions on his cell phone, there’s a lot at stake in how these issues get addressed. For the small businesswoman in Southeast Asia, selling clothing and processed food products through her website to members of her diaspora halfway across the world, how these issues get resolved is fundamental to development.
I would be remiss if I stopped before underscoring the value and importance of the WTO dispute settlement process. The U.S. is one of the most active participants in the dispute settlement process and views the integrity of that process as critical. As we have made clear, this is not an area where judicial activism or the creation of new obligations through arbitrator discretion is appropriate. We will continue to underscore the importance of ensuring that the dispute settlement system is strictly bound by the agreements those Members have negotiated and remains accountable to Members.
I am optimistic. It’s an occupational necessity. I don’t think you’d survive long as a trade minister if you get discouraged easily – particularly these days. But when I look at where we started eight years ago, after the failure of 2008, and where are now, with the success of Bali and Nairobi, I am confident that if Members continue to take seriously the challenge of charting a new course, they will succeed. That process might not be complete by Buenos Aires, but that should not be a cause of alarm. This time, it’s important to get it done right, not fast. Doing so will require putting ideology to the side and being pragmatic; stepping away from rigid notions of who is a developing country and what are their responsibilities; and focusing less on an antiquated snapshot of the past than on the challenges of the present and the opportunities of the future.
The United States will be an active and committed participant in that process. For the past seven decades, the last 12 U.S. presidents have supported the multilateral trading system – six Democrats and six Republicans, by the way. Let me be clear: there is, and can be, nothing short-term or transitory about the commitment of the United States to this system. That commitment is enduring.
Serving as U.S. Trade Representative for the past three plus years, and working with all of you, has been a great privilege and high honor. I trust that whoever succeeds me will continue to help shape and strengthen the multilateral trading system. Doing so is critical to addressing development and the hopes and aspirations of all of our people.