16.4.2002, Intia

Our world is characterized by many paradoxes. Take the one concerning democracy for example. Democracy has never been as widely spread in history as today, as measured by both the absolute number and proportion of people who can elect – and dismiss – their leaders in free and fair elections. At the same time we have probably never witnessed the same degree of disillusion regarding the ability and will of our democratically elected representatives to deliver what their electorates expect of them.

There is a growing feeling that the forces and events which shape our lives are out of control – certainly beyond the reach of the controls exercised by democratic governments. There is also a feeling that politicians – when in government but increasingly in opposition as well – have become powerless puppets whose task it is to sell voters the current version of TINA – There Is No Alternative. Instead of voting being experienced as a choice between different directions that can affect one’s own life and that of others, it is felt to be a sort of theatre, or entertainment, which will make little difference, an exercise in fatalism.

As a result we can see in the developed countries falling participation rates in elections on the one hand and growing extra-parliamentary activity on the other. A small minority even sees violence as justified political activity in democratic countries.

The key to understanding this paradox is globalisation. Internationalisation and growing economic and political interdependence is nothing new as such. What is new is the combination of internationalisation and the spectacular development of new technologies, information and communication technology in particular, which passes well for a shorthand definition of the phenomenon we call globalisation.

Globalisation is not only something inevitable but, on the whole, potentially positive.

Positive because of its obvious wealth-creating powers through an enhanced international division of labour and a more effective use of scarce resources.

Positive also because of the increased scope for individual freedom to blossom and for making societies more open. Repressive governments find it increasingly difficult to censor or control the use new information technologies. It has also made it more difficult to cover-up human rights violations, and for others to ignore them without reacting.

But the qualifying word potentially is needed, because the increase of wealth and prosperity created by globalisation is being distributed more unequally than before, both within and inside countries and regions as well as globally.

It is needed also because globalisation based on neo-liberal free-market values can intensify environmental damage. It can also threaten core labour standards and weaken trade unions as well as challenge national and minority cultures.

Globalisation can also be socially damaging, destroying sustainable traditional communities and threatening established welfare systems, which can never be replaced by purely market-based solutions.

”All that is solid melts into thin air” is how Karl Marx and Friedrich Engels characterized the world more than a 150 years ago, but it describes our own time even more aptly, including in a rather bizarre way the results of the attack on the WTC towers on September 11th. But the threats and challenges identified in the Communist Manifesto were successfully thwarted and dealt with because new social movements – primarily, but not only the labour movement – for democracy and social justice were able to harness capitalism and lay the foundations for the welfare societies of today’s developed world.

The international credo of the labour movement notwithstanding this was essentially a national project realized through the democratic institutions of independent and sovereign nation states. A similar project is no longer workable. We live in a world where global market forces – even more threatening because of their anonymity – undermine or dilute the instruments we have historically employed to steer our economies, guarantee social security and redistribute wealth.

Thus globalisation calls for democracy that works on a global level and is able to deliver the kind of global governance that is expected by our increasingly sceptical electorates. I will try to clarify what this means for the development of the international trade regime.

Globalisation calls for better global governance and coherence of policies through international cooperation. Better global governance in terms of how rules and disciplines are negotiated, decided and implemented. Coherence in terms of mutually supportive policies, not only between international organizations but within national administrations. With regard to global economic governance, rules and disciplines should respond to the needs of the economic operators, i.a. industries, companies, services providers, as well as be responsive to the aspirations and concerns of the peoples around the world.

Commonly agreed rules reflect underlying values of those that have participated to the rulemaking process and together with an open and transparent decision making contributes to the legitimacy of the global rules based governing system. World Trade Organization has a key role in global economic governance. Other important actors in this respect are the Bretton Woods Institutions, the World Bank together with the IMF, as well as the United Nations. While WTO remains the organization with the best potential for managing trade related aspects of globalization, it may not always be the most effective organisation for addressing all trade or trade-related issues. Trade capacity building calls for strengthened and improved cooperation between the World Bank and other international development institutions.

The role of the WTO The General Agreement on Tariffs and Trade, GATT, was an attempt to combat the spreading of the protectionism of the 1930’ies and top spur liberalization of world trade. The original plan was to establish an International Trade Organization within the UN system as a third pillar within the structures of the Bretton Woods institutions. The failed ITO was an ambitious vision of rules to govern a.o. employment, restricted business practices, services and investment.

Since the first round of trade negotiations in the late 1940’ies, trade has gradually been liberalized and new areas included in the negotiations during the consequent seven rounds of negotiations. As a conclusion of the Uruguay Round in 1994, the last and most ambitious round of negotiations, 123 countries agreed to expand the coverage of the multilateral trading system to services and intellectual property rights. At the same time textiles and agriculture were integrated more substantially into the trading system. As a result of the Uruguay Round, the GATT system was expanded and restructured as an international organization with a legal basis of its own. Today the WTO includes over 140 member states, most of which are developing countries.

The Uruguay Round expanded not only the substantial coverage of the rules based trading system, but for the first time involved a vast amount of developing countries in the negotiations. The Fourth Ministerial in Doha last year brought yet another new element to the negotiations. The Doha Development Agenda addresses developing country concerns in a coherent manner and integrates the developmental dimension in the negotiations. This together with enlarged substantial coverage of rules based area of trading relations contributes to the better global governance of economic relations.

The WTO was established at a time of an almost euphoric belief in the neoliberal agendas of privatization, deregulation and liberalization. By the beginning of the new Millennium, mainstream thinking has been modified and the need for an enhanced political influence and steering mechanism of the economic processes is being recognized. This paradigm shift and the experience gained during the first years of the functioning of the WTO show, that there is need for clarifying the focus of the organization and for reforming the working methods and decision-making procedures in order to achieve a greater degree of transparency and democracy. Better transparency and enhanced possibilities to reflect various views in decision-making, both at a national level and at the organization itself, contributes to the legitimacy of the organization and enhances possibilities to carry public opinion along as the international trading system is developed. On the one hand increased transparency and communication is needed to engage the civil society and the public opinion constructively and more fully in the process. On the other hand there is a need, in particular at the national level, to engage parliaments in the formulation of the policies and positions regarding the WTO and hence increase the legitimacy of the rule making.

Sustainable development and poverty eradication Let me address the question of coherence in more concrete terms. Sustainable development consists of three elements; economic, social and environmental sustainability. The WTO’s specific task is to establish a level and fair playing field for trade and economic exchange. Trade can make a powerful contribution to eradication of poverty and contribute to sustainable development through the creation of resources for the financing of development. In this respect the outcome of the ongoing trade negotiations, and especially in agriculture and textiles, is of crucial importance to the vast majority of developing countries.

Poverty eradication in developing countries calls for comprehensive and coherent country-specific eradication strategies where trade is an essential element. The possibilities and capacity of the developing countries to participate, to the extent and pace they are prepared for, on a more equal footing in the multilateral trading system and the World Trade Organization must be enhanced.

The content of the multilateral rules and disciplines needed to enhance the protection of the environment and ecological sustainability should be set by Multilateral Environmental Agreements (MEA), not within the WTO. The task of the WTO is to ensure that within its own area of competence, agreements and rules regarding sustainable development and the environment, are honoured and enforced.

The financing of development through official development assistance (ODA), private direct investment (FDI) and the role of trade in the creation of resources for development have more often been treated as separate issues than as tools to contribute to development and eradication of poverty. Trade capacity of developing countries should be strengthened at the same time as their potential to trade is enhanced and as barriers to trade are lowered.

Capacity alone is not enough, if there is nothing to trade or if barriers to trade are too high to overcome. Official development assistance should be complemented by private investment. In fact, the amount of FDI outnumbers today ODA four-fould, and is ten times the World Bank lending. Good governance and the creation of a conducive environment for foreign direct investment is hence of importance. Nevertheless, it should be remembered that the overwhelming majority of the FDI is concentrated a few developing countries and, for example, the whole of Africa receives approximately only 1 % of all FDI. One major achievement of the UN Conference on Financing in Monterrey was the common realization of an urgent need for the coherence of development financing. The Conference also offered a possibility to exchange views on the realization of goals through various ways, including a currency transaction tax and various insolvency framework arrangements. The ambitious Millennium Development Goals can only be achieved by innovative thinking and the complementarity of actions in different fora, under the leadership of the United Nations.

Social dimension has an important role to play in the better global governance. The Working Party on the Social Dimension of the Liberalization of Trade has studied the subject since 1994. The work of this Working Party – today called Working Party on the Social Dimension of Globalization – where participants from ILO, WTO and World Bank have discussed the subject has accompanied by a new initiative when ILO decided to convene high-level group of respected international leaders to analyse social aspects of globalization. This World Commission should present concrete proposals and recommendations to guide the development of globalisation. The 21-member Commission is Co-Chaired by President Benjamin Mkapa of Tanzania and President Tarja Halonen of Finland and it will present its report in 18 months’ time, autumn 2003.

The WTO should, as envisaged in the Singapore Declaration, engage in an open dialogue and co-operation with the ILO and with the Social Partners, in order to develop mechanisms where the multilateral trading system could support human rights in general and core labour standards in particular. Linking trade and core labour standards calls primarily for possibilities to create incentives, not sanctions. Fears of protectionism in developing countries and fears of social dumping in industrialised countries cannot be tackled by merely denying them. It is important to note that more than a South-North divide, social injustice in a developing country is first and foremost a treat to neighbour countries and their social development, no to distant industrial countries.

TRIPS Technical assistance and capacity building is an essential element of the Doha Development Agenda (DDA). From the outcome of the Uruguay Round intellectual property rights have often been cited as an area where many developing country negotiators were not necessarily aware of the implications of the agreement. This may or may not be true, but if it is, it certainly underlines the need to reinforce technical assistance and capacity building. Understanding the implications of agreements is a sine quo non for a successful outcome in the trade round. We need, however, to differentiate between developing countries. Countries like India have very skilful negotiators also in the area of intellectual property rights. Furthermore, IP protection is important to countries like India, in order to be able to attract investment and also as an incentive for local researchers.

Reform the TRIPS agreement A review of the present TRIPS agreement is of particular interest to the developing countries. The present agreement has, for instance, enabled transnational corporations to patent life forms that have been developed and used locally for a long time. This has the potential for seriously threatening food security in many regions. While acknowledging the need to protect innovation and spur research and development of new drugs, the TRIPS agreement must not be allowed prevent developing countries from producing affordable drugs by adapting technologies and decreasing their dependency on the transnational pharmaceutical industry of the North.

There are several issues involved in the TRIPS Agreement. Let me begin from the public health problems. The declaration on the TRIPS Agreement and Public Health was an important achievement in Doha. It was, to a great degree, a compromise and a result of the willingness to compromise between two protagonists on both sides, namely India and Brazil on the other side and US and Switzerland on the other side. Firstly, the declaration acknowledges the gravity of the public health problems afflicting developing countries and confirms that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. It also leaves Members to judge what constitutes a national emergency or other circumstances of extreme urgency. Secondly, it confirms each Members right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted. The declaration did not give an answer to the needs of those countries with insufficient or no manufacturing capacities and that therefore could have difficulties in using the possibility of compulsory licensing under the TRIPS Agreement. This latter issue was left to be studied further and the TRIPS Council will report on issue by the end of the year. In our view this issue should not only be reported, but solved by the end of the year.

When discussing the issue of better access to medicines, we should not close our eyes from the fact that patents are only a part of the solution, or problem. Strengthening health care systems, including infrastructure for manufacturing and distributing drugs, increasing information and education, increasing investment on research and development are vital in the combat against HIV/AIDS and other epidemics. Other international efforts, such as the Global Fund to fight HIV/AIDS, tuberculosis and malaria, are also needed to make medicines available at affordable prices. Likewise it is important to make sure that medicines reach those in need of them.

(Least developed countries are provided a transition period for implementing the TRIPS Agreement until 1 January 2006, and this period can be extended on request. Furthermore, it was agreed in Doha that LDCs don’t have to implement or apply the TRIPS Agreement concerning patents and data protection for drugs before 1 January 2016.)

Another issue is the protection of geographical indications and traditional knowledge. DDA provides for the negotiations to establish a multilateral registry for wines and spirits by the 5. Ministerial next year. The extension of the protection of geographical indications to products other than wines and spirits is addressed in the Council for TRIPS as part of the implementation work and a report will be provided to the TNC by the end of the year in view of deciding the continuation of the work. In addition the Council for TRIPS was charged with examining, inter alia, the relationship between the TRIPS Agreement and the Convention on Biological Diversity, the protection of traditional knowledge and folklore, and other relevant developments. Council should take into account, inter alia, that protection and enforcement of intellectual property rights should be conducive to social and economic welfare and that Members may adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that these measures are consistent with the provisions of the TRIPS Agreement.

The review of article 27.3 (b) and the issue of patentability, or rather exclusion from the patentability, must be one of the most controversial issues related to TRIPS Agreement. The article allows certain discretion in determining the extent to which biotechnological inventions can be protected. Issues around this provision are related, inter alia, to the interpretation of microbiological processes and the issue of GMO crops. Apart from the moral or even religious grounds, some developing countries have argued the lack of interest or outright opposition to patentability because they don’t have production or R & D capacity required.

A revision of the present TRIPs agreement should take account of especially the following principles:

* Plants, animals, micro-organisms and all other living organisms, as well as natural processes that produce living organisms should not be patented.

* Any patent protection legislation should provide for the protection of the innovation of indigenous communities in developing countries and the continuation of traditional farming practices.

* The TRIPs agreement should be harmonized with internationally agreed conventions, like the convention on bio-diversity, covering the compensation and benefit sharing of commercial exploitation of genetic resources.

The reviews of all these agreements must be carried out and the views of the various interest groups should be taken into account and duly reflected in the outcome. The results of these reviews should be used as a basis for reforming and revising the existing agreements as well as for negotiating any new agreements.

Streamline the focus Three key functions of the WTO should remain the main focus of the organization also in the future, namely promoting gradual and mutually agreed trade liberalization worldwide, providing a forum for developing jointly agreed trade rules and disciplines, and acting as a binding dispute settlement mechanism in these areas.

At the same time we must have the farsightedness and courage to tackle also more difficult issues relating to trade on the one hand, and the need to adequately address concerns related to the environment, core labour standards and the preservation of national cultures, on the other. Rules and guidelines regarding investment must also be developed while taking into account these concerns.

The WTO cannot and should not strive to be the international organization that settles environmental, social and labour or cultural issues. The division of responsibilities between the WTO and those international organizations that have the competence to tackle these issues should be clarified and cooperation between them intensified, for which the cooperation between the ILO and the WTO has set a good example. We need to establish a coherent global mechanism where trade and other issues can be dealt with in a balanced manner and where these social, environmental and cultural issues will not be allowed to lead into divisive and disruptive trade conflicts, or create new unfounded market access barriers.

Many developing countries face great difficulties in implementing agreed commitments within the set timeframe. Capacity of these countries should be reinforced, and due flexibility allowed in implementation of commitments, so that trade would support their legitimate development objectives and national interests. The GATS agreement in relation to health, social and water services, the agreement on agriculture, and also the agreement on rules of origin are all important within this context.

Proceed with implementation and capacity building The principle of special and differential treatment (SDT) of developing countries is incorporated in various WTO Agreements and is taken into account in the commitments of the developing countries. However, text of SDT is often unclear and based on best endeavour commitments. Further progress in the development of the WTO system requires that the SDT provisions are made more operative and that the actual needs of the developing countries are addressed in binding commitments. The DDA includes a work program under implementation programme on SDT provisions. Committee on Trade and Development will report to the General Council and make recommendation for a decision by July 2002 on those provisions that should be made mandatory.

Furthermore, technical assistance and capacity building should be enhanced to enable developing countries to fulfil their commitments. Better coherence of the policies of various international organizations is also needed to support the restructuring of economies, especially of the most vulnerable least developed countries. Technical assistance and capacity building work is financially well underway after the WTO Pledging Conference held in March this year. WTO received pledges worth 28 million CHF, well over expected target 15 million CHF. Nevertheless, the real challenge is the content of the work and cooperation and coherence of action between different organizations and national programs. The WTO has the potential to act as a clearinghouse for the activities, but should restrict its own activities to those related to building negotiating capacity.

We all welcome the broad international coalition that has been forged to combat terrorism. It is equally important that a similar broad coalition is created to eradicate poverty. Monterrey Summit was an opening towards this. The birth of such a coalition now depends on the next steps. Our next goal should be to continue the process and use the upcoming World Summit on Sustainable Development to be held in Johannesburg next August to further integrate trade into sustainable development.