28 May 2003
The Straits Times
G8 must lead way to trade liberalisation
By JEAN-RENE FOURTOU
THE world is approaching one of those crossroads where governments have to make
decisions that will affect people's lives for generations. Will the world's leaders work
together to build a more open global economy or will economic nationalism prevail? We
should know how the land lies before the year is out.
Governments can take the road to greater liberalisation of international trade for the good of
all, or risk sliding into a stagnant world economy hobbled by short-sighted self-interest.
Where business stands is clear. The chairmen of six leading business organisations, all of us
heads of major companies, have addressed an open letter to the heads of state and
government attending the G8 Summit at Evian on the banks of Lake Geneva. We have
appealed for them to show leadership in securing a successful outcome for the Doha round of
trade negotiations in the World Trade Organisation (WTO).
The joint message is in the name of the International Chamber of Commerce; the United
States Business Round Table; the European Round Table of Industrialists; the European
employers confederation, Unice; the Canadian Council of Chief Executives, and Japan's
Nippon Keidanren.
Past experience shows that when the momentum of liberalisation is lost, the trading system
may face resurgent protectionism - the 'bicycle theory'. It happened after the Kennedy round
in the late 1960s and after the Tokyo round at the beginning of the 1980s.
When trade barriers go up, everybody ultimately suffers, the poor as well as the rich, for
history teaches that protection shrivels the economies it is supposed to defend. That was one
of the lessons of the 1930s.
The world's most powerful industrial nations should exert their collective political will to
ensure that the Doha round fulfils its promise, despite recent missed deadlines and strains
between the European Union and the US. There is still time to get the negotiations back on
track for a crucial meeting of WTO trade ministers in Cancun, Mexico, from Sept 10-14.
Our open letter says: 'We reject the pessimism and scepticism expressed in recent months
about the prospects for the key mid-term meeting in Cancun, and for concluding a successful
negotiation by the 2005 target date. None of the various issues on the WTO agenda presents
an insuperable conceptual challenge. The promise of the WTO Development Agenda can
still be achieved.'
Global prosperity depends on trade and investment, on nations doing business with each
other. For the past half century, trade has driven economic growth, stimulated by the
progressive opening of markets over eight trade rounds.
It has been a spectacular success story, but one that is too much taken for granted. The
volume of world exports rose twentyfold while world output rose sevenfold in the past half
century. By last year, world trade amounted to 24 per cent of global output. As a result,
economic fortunes have never been more closely enmeshed. Like it or not, we live in an
interdependent world.
As for the future, a recent World Bank study predicts that pursuit of dynamic trade
liberalisation would raise annual world income in 2015 to over US$800 billion (S$1.3
trillion) more than it would otherwise have been.
That expansion is sorely needed, for reasons that go beyond economics. Societies become
more stable and more moderate when living standards are rising, when people can feel that
the future will be brighter and that they have a stake in it.
Moreover, we must factor in the rise in global population, which doubled in the last half of
the 20th century. The world economy has somehow to keep pace with demographics.
Further, the positive effects of trade and investment far exceed those of development aid and
they are closely linked. The multilateral trade agenda now has a fundamental impact not just
on the economy, but also on social progress and global security.
For all these reasons, it is vital that the Doha round culminates in greatly improved market
access. The industrialised world needs to ensure that its markets are open to the goods and
services, and especially agricultural products from developing countries. And developing
countries need to reduce, according to World Bank estimates, the US$57 billion burden
imposed by their own high tariffs. Only then will what is officially known as the Doha
Development Agenda live up to its name.
The writer is chairman of the International Chamber of Commerce, and chairman and
chief executive of Vivendi Universal.
