MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | DEAN O'HARE
PACIFIC BASIN ECONOMIC COUNCIL
MAIN PAGE | EVENTS & PROGRAMS | 2001 | IGM | SPEECHES | DEAN O'HARE
Regional Vitality in the 21st Century
April 6-10, 2001 — Tokyo, Japan
Mr. Dean O'Hare
When I last spoken at the PBEC IGM, two years ago in Hong Kong, we were emerging from the Asian economic crisis and attempting to assess its implications for future regional development. On that occasion, I called for an aggressive agenda to achieve balanced and sustainable growth in the Pacific Rim. This I suggested would require a quantum leap in public policymaking and regional cooperation. While some progress has been made, I would categorize the efforts as distinctly mediocre. We have unfortunately become complacent with the limited progress of economic recovery to date. And, now, we are faced with the prospect of a slowing U.S. economy and its negative impact on the region. I believe that we are at a turning point - one of those historic occasions when decisions are made that will shape the future of generations. It we make the right decisions, we will all benefit from unparalleled prosperity. If we make the wrong ones, we will forge an iron trap around those who lack the resources to lift themselves out of poverty and despair. The forces of globalization - driven by technological change and 50 years of post-World War II trade liberalization and domestic reform - offer us unparalleled opportunities to raise standards of living around the world. Is there anyone here today who really believes the millions of rural refugees in China who float between city and a farm earning meager wages, would be better off without the economic lift that foreign trade and investment has given? Will the quarter of a billion people in India who currently live on less than $1 a day be better off without the reforms that were launched in 1991, aimed, in part, at attracting the technological and financial resources needed for economic growth? Of course, the answer is a resounding "NO." Yet, we seem to find ourselves challenged by naysayers who protested in Seattle, and unsure of our own future path. What an anomaly! The world, with all its problems has never been better off. Yet globalization - the means by which this has been achieved - is suddenly on the hit list of the misinformed and ill-disposed. Now, don't get me wrong, we face difficult issues that need imaginative solutions. The gap must be narrowed between the "haves" and "have nots," whether it's region to region, country to country, or within a country. Environmental degradation is an issue on everyone's table, but restricting the flows of trade, technology and capital that make remedies possible isn't the answer. Moreover, we must rededicate ourselves to the goal of achieving a just and fair world that recognizes the intrinsic importance of all human beings and their work. But this effort should not be driven by imposing on everyone a narrow set of values that doesn't reflect cultural distinctions and differences of opinion or approach. So, where does that leave us? As I said at the outset, I believe that we are at a turning point. The choice is to stumble along with half-measures, or take a bold step forward to promote global and, therefore, regional revitalization. I opt for the latter. We will have in Qatar, this fall, the change to launch a new round of multilateral trade negotiations in the WTO. The bickering and short-sightedness that characterized the Seattle ministerial must be put behind us. I was there and had the pleasure of being tear-gassed. I must tell you, as a businessman responsible for the well-being of thousands of employees and clients around the world, I was shocked at the extent to which politics overwhelmed economics. As an advisor to President Bush and former President Clinton, I've been close enough to trade negotiations to know that there is a hard edge to the negotiating dynamic where positions often get locked in for the wrong reasons. Too often, results are viewed as a "zero sum" game wherein you lose if you give something away. This overlooks who really benefits from liberalization. We all do. PBEC member economies are poised to regain momentum if we can open the doors to the world's closed markets. There is, in our region, a huge reservoir of intellectual and managerial talent, productive capital, and trainable labor that needs to be unleashed as an engine of economic growth. It is unfortunate enough that the ongoing services negotiations in Geneva - which are part of the embedded WTO program - have been bogged down in procedural haggling and lack of support by developing countries. These are the countries that will benefit most from liberalization, because they will have access to the services that form the backbone and soft infrastructure of a modern, competitive economy. We, as business people with global interests, should be taking the lead in getting our governments to prepare to launch a new round in Qatar. I believe that the agenda must be broad to reflect the interests of all concerned. After all, countries at different stages of development have different needs, and these needs must be accommodated in any new round. No reasonable issue for which there is substantial support should be off the table for discussion. But, that doesn't mean that we should allow disagreement in one area to sidetrack negotiations in another. Ultimately, a package must be finalized which offers substantial benefits to all participants. And, we, the Pacific Basin, have an opportunity to play a major role in launching such a new round and determining the scope of negotiations. That opportunity is the APEC Shanghai Summit in October. We need to use that occasion to demonstrate the region's support for a new round and to set the agenda. This would be particularly appropriate, since China chairs APEC this year, and will also soon be entering the WTO as its newest member. Asia has benefited more than any other region of the world from trade liberalization. And, the fact of the matter is that the "Asian economic miracle," as we have so often called it isn't dead, it just needs resuscitation. A successful new round of comprehensive negotiations would help to bring economic vitality back to the region. This would complement the huge market opening which will occur as China implements its WTO accession commitments. While China's dynamic economic growth has been led by exports and foreign investment, a new paradigm will emerge as barriers to imports fall. This should result in a substantial stimulus to Asia economies. However, as we know, there is a real risk to sustainable economic growth when a region becomes too dependent on a single market, whether it's China or the United States. In addition, I think it's clear that we won't be able to count on revival of the Japanese economy anytime soon, to provide the boost in demand needed to offset the effects of a slow-down in the U.S. economy. Nor is there any expectations that growth in Europe will accelerate to provide additional demand for Asian exports. A new round of multilateral trade negotiations is the only credible scenario that will pry open market and provide the new business opportunities around the world that the PBEC region, especially, would benefit from. Such a round if aggressively pursued on a reasonable timetable, would send a clear message to counteract the forces of anti-globalization that are threatening to undermine trade liberalization. In addition to the launch of a new round of multilateral trade negotiations, we need to address major gaps in the WTO's disciplines in the areas of services and electronic commerce that need to be addressed in the negotiations already underway in Geneva. Services represent a growing proportion of virtually every country's economy, and electronic commerce is expanding its reach into virtually every corner of the globe. With regard to services, most countries' schedule of commitments in the General Agreement on Trade in Services, or GATS, doesn't reflect the level of liberalization achieved through domestic reforms since the agreement was signed in 1995. This is also true for the Financial Services Annex to the GATS, signed in 1997. In addition, it's now time to begin to look at regulatory issues that aren't covered adequately in these existing two agreements. Without getting into the details, let me just say that the nature of regulation in a particular services sector such as financial services, can essentially undermine the benefits gained from liberalized market access. Consequently, we need to develop some principles that would help to ensure that the type of regulated used is reasonable and necessary to accomplish its stated objectives. This is consistent with the results of work we've done in PBEC on financial services regulatory reform, where we called for open, transparent, rule-making processes and minimally intrusive regulation that recognizes the importance of market forces in providing product and price competition. Now, I'd like to turn to the subject on electronic commerce - the second area in services where I said there was a gap in WTO disciplines. There isn't anyone here today who hasn't been affected, directly or indirectly, by electronic commerce - a phenomenon that has developed dramatically since the last round of WTO negotiations was completed. Even with the "dot com" meltdown in the U.S., there is every reason to believe that electronic commerce will continue to bring about substantial change in the way we do business. Yet, whether it's a transaction involving business-to-business or business-to-consumer relationships, there is no framework in the WTO for dealing with the application of trade rules to country-to-country, or cross-border exchanges. Clearly, the long-term viability and growth of such commerce needs to be ensured by a set of principles that will permit it the greatest freedom to flourish, it not, we, call, stand to lose. Let me conclude by summarizing three key points: First, a new round of WTO trade negotiations is needed to open closed markets around the world to revitalize the PBEC region's economy. We have an opportunity with China chairing APEC to play a significant role in launching a new round in Qatar and setting its agenda. If we act boldly now, we can set the course for accelerated economic growth around the world that will benefit not only us, but future generations. Second, it's time to give impetus to the services negotiations already underway in Geneva, and to take up the issue of regulatory barriers to services trade. After all, services are the backbone of a modern economy. And regulatory barriers can severely limit the benefits gained by consumers and providers as market access liberalization takes place. Third, we need a framework to promote electronic commerce in its various forms. This is a complicated area that overlaps services, good and regulation. But, we need to start dealing with it, in all of its aspects, so that we can enjoy the benefits e-commerce has to offer. If we are all willing to take these steps - and I believe PBEC and APEC can help make this happen - we will begin to write a new chapter on globalization that will justify our long-standing commitment to a more open and just world trading system. |
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