The Biggest Problem Is Reducing Injustice

Pascal Lamy, in this interview with Hichem Ben Yaïche, discusses the role of the WTO in an ever-changing environment, the pros and cons of globalisation, protectionism and unfair terms of trade and Africa’s current status on the world economic stage.

Q: Today, the world is going through a structural crisis, experiencing a shift of economic powers and the emergence of a new set of operational rules. In this scenario, is the World Trade Organisation (WTO) still relevant?

A: Of course! And what’s more, it’s in part thanks to the WTO’s disciplines and their implementation that this global structural economic crisis has not degenerated into generalised protectionism. The reactions that we are seeing are normal. The pressures are there. And yet I don’t believe we’re in a world where protectionism protects. It no longer allows jobs to be saved.

Q: Trade barriers have, despite everything, allowed some countries to introduce and strengthen their industrial sectors [before opening up to the world]. I’m thinking specifically about China or South Korea …

A: I don’t think that that’s true historically. It may have been true in the 1950s and 1960s in South Korea, but definitely not in China. On the contrary, China’s economy took off when trade was opened up, through the reforms of Deng Xiaoping. It grew by 10% a year.

Q: What are the real challenges facing the WTO in a global context that is constantly changing?

A: The WTO’s priorities are above all to hold firm during the crisis. We must not go backwards. We must also carry out committed actions. To do that, we must continue to open up trade while improving and adjusting the rules of the game. We must also contribute in helping the developing countries build up their trade capacities.

Q: With regard to Africa, what exactly is the state of your negotiations with the African governments?

A: In the past 10 or so years, we have been involved in the establishment of three coalitions within the WTO: the African group, the Least Developed Countries group and the ACP group. But in fact, these three groups operate as a single entity today.

The African group is one that is pushing the hardest for multilateral negotiations to be concluded. Africa holds an important status at the WTO. For that matter, Africa’s position is a lot more important within the WTO than it is during bilateral government negotiations. Actually, in bilateral relations, the poorer you are, the weaker you are!

Q: Some African governments have little means. The industrial structure is often in the early stages of development and sometimes nonexistent. Are the decisions to dismantle the trade barriers and open up the borders really the right ones for these countries?

A: No one is asking Africa to dismantle trade barriers multilaterally today. Africa’s priority is intra-African trade, which represents just 10% of the total trade of African countries. In Addis Ababa at the beginning of this year, Africa adopted an ambitious and necessary plan. This has given priority to opening up intra-African trade. That’s a very important point. There are one billion men and women in Africa. In other words, that’s one billion skill sets. And yet, there is a multitude of micro-economies that are no longer relevant in terms of the global world we live in. Africa must continue to internationalise.

Q: From this point of view, what are your suggestions and proposals?

A: Today, integrating the African continent as a whole is the priority. The different regional economic groupings – East Africa, West Africa, Central Africa, Southern Africa – are already there.

Q: How are you furthering this process?

A: Simplifying and making procedures at different African borders more transparent would contribute significantly to easing up the movement of goods and services.

We are working on this closely with UNECA, which is based in Ethiopia. This is where there is the most expertise on this subject, together with the AU Commission. For some years now, we have also been working more and more with the Regional Economic Commissions, in particular with those that have shown the most enthusiasm, specifically in East Africa: Kenya, Tanzania, Burundi, Rwanda and Uganda.

Since the members gave me the Aid for Trade mandate in 2005, we have increased the volume of aid intended for the creation of trade capacities by 60%. A large portion of this aid was invested in regional integration projects in Africa.

Q: Today, the agricultural sector is a real issue for Africa. Where are you in the negotiations on this sensitive subject?

A: We know that Africa has significant yet underused agricultural potential. Thirty years ago Africa was a net agricultural exporter. Today, it has become a net agricultural importer because production has not followed the demographic changes. At the same time, dietary habits have changed. There is huge potential in Africa, and it is not the rules of the WTO that are going to stand in the way of its agriculture industry. It is, above all, a matter of investment.

Q: But what can be done about products that are subsidised – in Europe and especially in the US – to the detriment of those in Africa? This is the case, for example, with cotton. What solutions do you recommend?

A: Cotton is a perfect example of an issue where the required action does not need to be taken by Africans, even though they do need to keep modernising this sector. Instead, efforts need to be made by developed countries, by Americans and Europeans. And on this point, the members of the WTO have not yet succeeded in convincing the US to make a concerted effort on cotton.

Q: Africa is bursting with resources. And yet, they are very poorly managed. What can be done to change this?

A: Africa is a pre-emergent continent. In terms of economic development, it is situated where today’s ‘emergent countries’ were 20 years ago. We can identify several challenges. The first is fragmentation. The second deals with infrastructures (energy, transport, financial systems). The third challenge is coming up with a form of growth that is more evenly distributed.

Absolute poverty has been reduced; on the other hand, inequalities have increased. Africa’s economic development, in comparative terms, has been relatively quick. It will remain that way in the years to come as growth slows down in developed countries. Growth has slowed less in Africa than in developed countries.

I would even go as far as to say that it has slowed less in Africa than in China or Brazil. The real question is about transforming this fast economic growth into social well-being. Here, we are faced with a problem of governance, and a very complex one at that.

Q: China, India, Brazil … these new emergent countries are investing in and are interested in Africa. What do you think about this presence? Is it beneficial for the African continent?

A: Of course! You only have to look at how African trade has changed over the last few years. It has quadrupled in 10 years and is focused on the emergent countries. So this is really about an opportunity for Africa.

Q: What has stuck you most during your trips?

A: Generally speaking, a distinct improvement in the business environment, more macro-economic stability, growth, initiative. I was able to observe that several projects had progressed, such as the Dar es Salaam Port in Tanzania, the Port of Mombasa in Kenya, the platform for negotiations on Addis Ababa’s raw materials in Ethiopia, the University of Dakar in Senegal …

The WTO’s mission is to open up trade. And the results can be very impressive. Let’s take horticulture as an example. All the African countries have access to the European, American and Japanese markets. There are no tariff or quantitative barriers. However, African horticulture must conform to the phytosanitary standards of developed countries. So it’s not strictly a matter of trade.

How much does it cost to put in place a national system to verify the content of pesticides in exported flowers? Five to $10m. If all of that goes well, two years later, there will be $100-200m of exports. There are leverage effects that are truly substantial!

Q: Let’s talk about Algeria. How can you explain the lengthiness of your negotiations with this country? Why is Algeria still not a member of the WTO?

A: This is a somewhat special case. The number of accessions at the WTO is continually growing. This year – in addition to Russia, Montenegro, Vanuatu and Samoa – Laos and Tajikistan have also joined. However, to accede to the WTO, there needs to be a certain harmony between the ‘economic logic’ of the country that wants to enter and that of the organisation and its existing members. In the case of Algeria, we’re not there yet. I think that it will come with time. Russia has just joined after 18 years! Algeria is now the oldest of the countries in negotiations.

Q: Everything is indicating that we have gone from happy globalisation to anxious globalisation … What do you think about this phase of change? Do you think that we’re going to come out of it unscathed?

A: I want to specify straight away that I have never been an apostle of happy globalisation. Never! Even though I have sometimes been labelled as such. Read my public statements starting from 1999, the time when I began to deal with these questions. Through intellectual analysis and daily practical experience, I know only too well that there are both positive and negative effects. Thanks to globalisation, there are half as many people living in poverty in the world. But, at the same time, we can observe that there are also many more inequalities. I have always considered it to be a phenomenon that, without returning to far-too-simplistic Marxist culture, can be attributed to the progress of technology.

That progress is the overall driving force of globalisation – at least in terms of trade – because technology has an enormous effect on reducing the cost of distance, which was, until now, what was impeding the play of comparative advantages in a very well identified Ricardo-Schumpeter model.

Consequently, I don’t believe that what we have is either a happy globalisation or an anxious globalisation. It is happy for some countries and anxious for others. The same goes for the people. I am of the opinion that it’s a force that needs to be controlled, organised and governed …

Q: How exactly can we obtain the globalisation tools that are needed to control the change and to navigate in its complex world?

A: We are making significant progress. The first way to obtain these tools is through education. But that’s a very complicated puzzle because, in order to go to school, one must be able, after all, to get enough to eat! These facts are well known, so I won’t dwell on them. The truth is that globalisation offers more capabilities. Yet the systems that allow those capacities to be used need to be available. The responsibility for building them begins at the local level and then extends to the international level. The WTO, among others, is part of the latter.

Q: Let’s talk about the ‘Doha Round’ negotiations that appear to go on forever. This seems to have become a never-ending issue. Where are we on this?

A: This is a very complicated negotiation, maybe even too complicated, that consists of trying to make the 157 members of this organisation agree on a revision of the WTO ‘bible’, where we’re revising 20 chapters at once!

For the time being, we haven’t yet concluded this negotiation in accordance with the principle that was adopted from the start: if we don’t agree on everything, we don’t agree on anything. We identified this problem last year at the ministerial conference in December. We’ve now adopted a somewhat different approach. It consists of knowing whether, from this vast bundle, we can take on only what can be done in the short term. This is what we have been attempting over the last few months, with some signs that are more encouraging. However, the ‘great deal,’ as it had been imagined 10 years ago, won’t come to a conclusion for now. Firstly, because of the crisis and secondly, because the difficulty of finding a political balance between the developed countries and the emergent countries, a problem that existed before the crisis, has been added to the overall issue.

From this point of view, Africa is not the problem. What we are talking about is finding a balance in terms of rights and obligations, in this part of the international system that covers the international trade rules between emergent countries and developed countries, symbolised by the US on one side and China on the other. In this respect, we are in a situation that is rather comparable to the other areas of international negotiation, beginning with the environment.

Q: The WTO has several roles. Can you explain to us how things work?

A: At the WTO, we have, in effect, four roles: that of legislator, which involves establishing the rules for international trade; that of administrator, to ensure that these rules are implemented (hence, an enormous machinery of committees for surveillance, reports and monitoring that carry out the WTO’s daily activities); that of judge, to settle the disputes between our members, in a way that is unprecedented in the international system – when you lose a trial at the WTO, all you have to do is comply; and lastly, that of helping developing countries acquire the capacities to benefit from the first three divisions, including the capacity to open up trade. This last division enlists the bulk of our human resources. Having rules that are not respected isn’t of much use. Still, we need to be adaptable on the problem of capacities, hence these efforts …

Q: You are currently in your second term; what is the ‘trademark’ of Pascal Lamy? What do you want us to remember you by?

A: I am leaving on 31st August 2013. So it’s a little too early to judge. However, what the 157 members of this institution have in common is the conviction that opening up trade works. It’s what unifies the WTO! But for all that, does it work in every case for everyone, no matter the latitude or longitude? Of course not. Opening up trade brings efficiency, and thus growth and, potentially, reducing poverty. But it’s a force for change and transformation. And like all forces of this nature, it requires adjustments, adaptations that are sometimes difficult. Hence, the extreme importance of social systems. If you look at surveys, the attitude towards international trade is, generally speaking, much more favourable today in developing countries than it is in developed countries. Today, Africans are more favourable to opening up trade than Americans or Europeans.

Among the developed countries, those that are the most open to international trade are the countries with the most sophisticated social systems. And that’s perfectly normal! What is it that has made some countries succeed more than others in this grand efficiency-producing machine that is globalisation? It’s the quality of their social systems, in the broad sense: working conditions, the right to work, the social security system, the systems of training, of innovation, what one might call social cohesion. It’s social and societal. And that’s no coincidence!

Q: Is that essentially the vision of Pascal Lamy?

A: Yes, that’s what I think. I remain convinced that the biggest problem is reducing injustice. I believe that opening up trade is a very powerful tool for reducing injustice and inequality. It is a vital prerequisite in reducing these wrongs, even if alone it is not enough.