Examination of Witnesses (Questions 420-422)
Mr Pascal Lamy
10 JULY 2008
Q420 Lord Maclennan of Rogart: If
a trade agreement which is not universal is not harmful, surely
it might be possible at least, if not easier, to have consensus
that it could be, as it were, validated and overseen by the World
Trade Organisation?
Mr Lamy: Provided it is MFN. Provided
you give the benefit of what you do not only to those who have
participated in the negotiations but to everybody. This is what
happens in services. In services, within the framework of the
WTO GATS system, we will have an agreement, "I am asking
you to open your telecoms, okay, you are asking me to open my
dredging. Fine, we'll make a deal because I'm interested in your
telecoms and you're interested in my dredging but what you give
me in your telecoms you will also give to the others, and what
I give you in dredging I will also give to the others". Within
our system there is a big pillar which is non-discrimination.
One can imagine systems with a critical mass. That is what we
do, including in the Doha Round, in sectorals, for instance. If
you take jewellery or sports equipment, around the table there
may be a number of people whose combined weight in jewellery or
sports equipment is 80 per cent of world trade and they may deem
it of value to do this and give it free to the other 20 per cent
of the world. This happens. The ITA, the technology agreement,
works this way. China benefited from the ITA although it is not
a part of that. It is doable. Again, that is easier for market
access than it is for rules. If you take agricultural subsidies,
if I enter into an agreement with you and we both discipline our
agricultural subsidies but my neighbour does not do it, my competitive
position will be harmed, and I will not do that.
Q421 Lord Haskins: Mr Lamy, I agree
with you that it is probably more likely we will get a favourable
outcome sooner rather than later. I am slightly confused and worried
that you have an agreement with the Americans which has to be
renegotiated with Congress and how we get round that. Assuming
we do not get where we want to be this year, there is always next
year. In a situation in America where McCain is President and
there is a strong Democratic Congress, that would be quite difficult
because you would need to get hold of the next President and privately
get him into a room to agree that he needs you as much as you
need him. That may be an educational process and may take a bit
to get. That all assumes that you do not believe the world economy
is going through more than another of the cyclical blips that
have gone before, but are there fundamental issues here in energy
and food which may change all the rules of the game?
Mr Lamy: I think the economic situation
we are entering into is more than a cyclical blip. Energy prices
is a very complex issue and part of the solution is on the supply
side, part on the demand side. In food prices it is not a question
of the demand side. As in energy, you cannot say, "Maybe
we can consume less food" when the vast majority of people
on this planet who consume food are poor and hungry. The answer
is clearly on the supply side. On the US situation, let us assume
that we clinch a deal, it has to go to Congress as, by the way,
it has to go to Parliaments in most of our systems, Congress is
no different, there are procedural issues in the EU/US constitutions
which gauge the responsibilities of Treaties of Commerce with
foreigners and Indians, say, in Article 1 of the US Constitution
to Congress, but let us leave these technicalities aside. What
is for sure is that the deal on the table will not be renegotiated.
If the 153 Members of the Organisation at that time clinch a deal
there is no way people will accept that one of the Members picks
and chooses. It happened already in the Tokyo Round and has never
happened since. If we get there and the administration takes this
deal to Congress, which implies a decision on the administration,
there is a deal. The new US administration could take the decision
not to take it to Congress, to leave it there, and that would
mean refusing the deal with the geopolitical consequences that
would have. I do not think a Republican President would do that.
Personally, I do not think a Democrat would do that with a multilateral
Trade Round which is a Development Round. As you know, the debate
on the side of US politics has very much been focused on bilateral
rather than multilateral deals, and if you are including Obama's
announcements of today that is not the flavour he gives. Then
you have got the problem of Congress, and Congress will be in
the same situation, they will have to say "yes" or "no"
to a deal. Saying "no" to a deal is a huge geopolitical
determination at the start of an administration. That is not the
most plausible. I am not sure it will work well but the odds are
on the right side. By the way, this is what has happened many
times in the past. New administrations have had to take deals
to Congress which had been agreed by the previous administration,
starting with the Uruguay Round. If you look at China PNTR, which
was what Congress had to do to waive formal legislation for limited
trade with China when China joined the World Trade Organisation,
that was exactly the way it happened. The experience in US trade
legislation has always been bipartisan. I know of no trade legislation
in the last 50 years in the US that has been passed either by
Democrats or Republicans, it is always a mix. The mix can change
depending on the circumstances and where members of the Senate
or the House come from. Of course, no Democrat or Republican from
Michigan would vote in favour of reusing tyres on cars and no
Democrat or Republican from Georgia would vote in favour of reducing
subsidies on cotton. That is a well-known feature of US politics,
but overall it has to be a bipartisan system. At the end of the
day if we do clinch an ambitious development-oriented deal where
the US have their benefits, and in industry they will have many
benefits, in agriculture market opening they will have many benefits
and in services market opening they will have many benefits, not
to talk about fishery subsidies, we are not there yet but there
is a huge constituency in US civil society pushing this and if
it is a package it has a reasonable chance to go through.
Q422 Lord Kerr of Kinlochard: I have
been trying to think of differences from towards the end of the
Uruguay Round and now. It seems to me there are two. There is
one similarity, which is the brilliant cabaret between President
Sarkozy and Commissioner Mandelson, which reminds me very closely
of the cabaret between Alain Juppé and Leon Brittan last
time round. The only mistake that has been made, it seems to me,
is Peter Mandelson saying he is being "undermined",
which must be the reverse of the truth, his position must be greatly
strengthened here by this demonstration that it is difficult for
him to contemplate a further concession. One of the two big differences,
it seems to me, is last time round the multinationals were not
silent. Last time round the Wall Street Journal, the FT,
the voice of corporate America, was quite keen on a Uruguay Round
deal. I do not know where the voice of corporate America is now,
because I have not heard it. That is why I say maybe Singapore
was a mistake. If the investment dossier was still on the table—and
I do not think the investment dossier is just in the interests
of the G20, it is very much in the interests of the developing
countries, too—it would give the north, as it were, a second
demand in the negotiation and, therefore, it might be louder.
The other thing that is different is, for some reason which I
do not understand, the lobbies in the north, in the G20, for development,
have turned against us all. They criticise the EU, they criticise
what is on offer here. I wonder whether that is partly because
of Hong Kong. Hong Kong did not satisfy the appetite, and it now
leads people to say, "And what more are you going to do for
the developing countries? This is a Development Round after all,
where is the development in what is on the table?" These
seem to me in public relations terms to be two great difficulties,
and that you face that your predecessor did not face at the end
of the Uruguay Round.
Mr Lamy: That is a valid point. It is
not for me to comment on the intra-EU debate. You are right, multinationals
are less vocal than they were at the end of the Uruguay Round,
although if you take solid organisations like the National Manufacturers'
Associations, the International Chamber of Commerce, BusinessEurope,
they are pushing very hard. These organisations mobilise their
troops, their money and their lobbying capacity when there is
something on the table. They are not in this business of 15 years,
they are in the business of "They will do it, and I know
they will do it when we need this to be done for ratification".
The other reason why international business is pushing less is
the technology has changed. If I have a problem with accessing
this market or producing in that market I shift, I jump over things,
I go elsewhere. There is much more mobility and production shifting,
which is the horizontal distribution of labour internationally,
which has changed things fundamentally. I appeal to those among
you who are statisticians and economists, that what has changed
to the point where the way we compute trade flows today does not
really make sense, in my view. Comparing trade flows to GNP numbers
to measure the degree of opening of an economy is very strange.
The right thing to do is try and compute trade flows to understand
where the added value is created. That is how trade statistics
should be done in the future. If you take the trade deficit between
the US and China, a lot of that is just because production which
was happening elsewhere than in China is now happening in China
and is re-exported to the US. You have to look at how the trade
balance between China and its Asian neighbours has changed to
understand that. They have a deficit with them. This is something
I will leave aside because it is something we need to think of
in the future. Civil society is still criticising the WTO, the
Round, there is not enough for developing countries, but in many
ways that is a change from where we were five or ten years ago
when the problem was to kill the WTO, to get rid of the WTO, to
sink the WTO. Having a debate on whether the rules of world trade
are enough or not for development is one thing, but at least you
understand and accept that you need rules and the WTO is not just
a club of hungry multinationals plotting in some sort of black
Geneva room. There is a debate about this. We have offered to
civil society in many ways a platform in naming this Round a Development
Round. They are entitled to say there is not enough for developing
countries, apart from the fact that developing countries speak
for developing countries. The numbers I gave you some time ago
in terms of duties foregone were two-thirds of the deal paid for
by developed countries, one-third by emerging countries, basically
zero paid by poor countries. That is a reasonably fair Development
Round if you try to assess it. I am not saying we are there, but
overall it looks reasonably like the right way of sharing the
bill. Again, remember the bill which will have to be shared for
climate change and think if we cannot share the bill this way
on trade how are we going to do it on climate change, on a much
larger bill which will have even more profound consequences on
what our children and grandchildren will do. I think it is worth
trying.
Chairman: Thank you very much, Mr Lamy. You
have been very generous and given us more time than you probably
have. Thank you.
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