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INTERVIEW: Dr. Supachai Panitchpakdi of the World Trade Organisation

Published by The Straits Times, Singapore on 2004-11-08

SUPACHAI Panitchpakdi of Thailand has been Director-General of the World Trade Organisation since September 2002. As the prime architect of Thailand's recovery from the 1997 Asian financial crisis, Dr. Supachai was appointed Deputy Prime Minister in charge of economic policies, and relaxed Thailand's restrictions on foreign participation and ownership and thoroughly revised the Alien Business Law. He brought the country's accounting standards into line with international practices to enhance and ensure transparency in the economic system. In 2000, Dr. Supachai was awarded the Nikkei Asia Prize (Regional Growth).

The 58-year-old Dr. Supachai played a key role in the international arena, principally in the Asia Pacific Economic Cooperation (Apec) and in Asean. He also promoted efforts to liberalise trade in the region through what has become the Asean Free Trade Area (Afta).

Dr. Supachai was the first to push for the formation of the Asia Europe Meeting (ASEM) that draws together heads of governments from Asia and Europe to foster closer ties between the nations of the two continents. He first proposed the formation of ASEM at the East Asia Economic Forum in Singapore in 1992.

He has been a major driving force behind the Greater Mekong Sub-region from its inception, pushing for closer economic integration between the economies of Yunan China, Laos, Thailand, Cambodia, Myanmar and Vietnam.

He was also the initiator in the BIMST-EC consultative group that links countries in South and Southeast Asia, namely Bangladesh, India, Myanmar, Sri Lanka, and Thailand. His contributions to the grouping are well recognized. He was co-founder of the Asean-Japan working group on Indochina and Myanmar, along with former Prime Minister Ryotaro Hashimoto of Japan.

He took over as Director-General of the WTO for a four-year term, which ends in late 2006. The following are excerpts from a rare interview he gave to The Straits Times from his office in Geneva:

Has the WTO gained more global acceptability under your leadership?

Certainly the WTO has gained more global acceptance. This is due to many factors, not least the fact that more and more people have become aware of what we do and what we do not do. Developing countries have seen, for example, that this organization has much to offer them. The development orientation of our Doha Development Round of global trade negotiations has been very strong. Development issues are a central part of these talks. Moreover, developing countries have used the dispute settlement system effectively and now it is clear to them that this is a forum in which they can defend their interests.

Can you offer examples of this change?

This more active role was clearly illustrated by the stance taken in Cancun by the so-called G-20 group of developing countries. The determination of Brazil, China, India, South Africa and others to state their case and hold out for a better deal was a clear sign that developing countries see this organization as a place which affords them the opportunities to participate in a way which may not be present elsewhere. This trend is only going to continue as WTO technical assistance programmes increase the capacity of developing country negotiators to participate in our negotiations.

What else has contributed to the improvement of the WTO's standing, especially among developing countries?

The agreement we reached in July on a framework for future work has also done much to lift our standing. Members pledged in July to abolish all forms of export subsidies in agriculture, to reduce trade distorting domestic support in agriculture by 20 percent from the first day the Doha Development Agenda (DDA) is implemented and to begin negotiations aimed at facilitating trade through the removal of unnecessary red tape and questionable border practices. Importantly, we have sharpened the focus of our negotiations in trade in industrial products and have set benchmarks for deciding on key development issues. In essence, we accomplished in July what we had hoped to accomplish at the Cancun Ministerial Conference last year - we may even have accomplished a bit more.

There's concern about relations between the WTO and other international organisations. Could you address that issue?

I believe that our enhanced co-ordination with other international organizations like the United Nations, the World Bank and the International Monetary Fund have made us more effective. We have a series of technical assistance programmes, which we operate in conjunction with these organizations, and the Bank and the Fund have developed some vitally important funding programmes to help developing countries adjust to the changing trading environment. Programmes like the IMF's Trade Integration Mechanism, for example, can assist developing countries worried about the impact of the elimination of textile quotas on their industry.

What about the question of access to life-saving drugs in the poorest countries?

Perhaps the most important development in recent years has been the agreement in 2003 to enhance access for the poorest countries to life saving drugs. By ensuring that those countries which lack the capacity to make such drugs generically can have more than one source of supply - that is can by generic drugs from other countries - the WTO has proven that it is an organization which can address humanitarian crises as well as trade disputes.

Do you think that the public, which has long mistrusted the WTO, now understands your organisation better?

It is for others to judge whether my leadership has contributed to better understanding of this organization by the public.

Are you concerned that tariffs still remain high in most developing countries?

Yes. In fact, developing country tariffs on industrial products are far higher than those in the developed countries, where the average tariff is less than 4 percent. This is not to say that developed countries can't do more to reduce tariffs. The fact that rich country duties applied to products from Least-developed Countries are often three or four times higher than those applied to products from other rich countries is troubling to say the least. But bound tariffs in many developing countries average 30 percent, 40 percent even 50 percent. Applied rates are lower but are often in the 20 to 30 percent range.

Still, hasn't trade between the developing countries increased?

South-South trade has been expanding at a faster rate than overall global trade and this has made an important contribution to development. But the fact is that developing country tariffs are much higher than those in developed countries. This is somewhat ironic given the impressive performance of developing country goods exporters. During the 1990s, developing country exports rose on average by 8.5 percent annually and export revenues from manufactures rose from 15 percent of GDP to almost 25 percent. Today, some 80 percent of developing-country export revenue comes from the sale of manufactured products. Twenty years ago, 70 percent of such revenue came from natural resource-based commodities.

Can developing countries now compete better in the world marketplace?

Clearly, many developing countries can compete in the global marketplace. This doesn't mean, however, that all countries are ready for significant reductions in tariffs. Least-Developed Countries, for example, may need more time before they are ready to make substantial tariff reductions. LDCs would benefit on the other hand from better access to markets for their products - this means developing as well as developed country markets. Apart from the benefits that can accrue to developing countries from better access to export markets, many developing countries would also benefit from opening their own markets, creating greater competition in the domestic market, stirring innovation and offering consumers a wider array of goods and services at more competitive prices.

How can these countries be persuaded to lower their tariffs while at the same some industrialised nations want to engage in protectionist measures?

It is true that many developing countries have said before they are prepared to open their markets further to agricultural imports, they want to see advanced countries reducing their trade distorting subsidies. They also believe that the developed countries must show more flexibility on development-related issues such as Special and Differential Treatment and Implementation of existing WTO agreements. But the advanced countries don't have a monopoly on protectionist measures. It is critical that all WTO members participate to the greatest extent possible in this process. The July agreement has moved us forward in this respect. Many developing countries were very pleased with the results in the agricultural negotiations. Hopefully, this will lead to more progress in other areas, not just non-agricultural market access and services, but in rules negotiations on anti-dumping and subsidies and on negotiations on trade and the environment.

The WTO seems to be a lightning rod for criticism, no matter how issues are adjudicated. How do you persuade recalcitrant nations to accept WTO decisions without reservations?

We have a dispute settlement process, which has proven to be very successful. Governments have brought more than 300 disputes to the WTO and they have done so because they believe the system has integrity and credibility. This does not mean governments are pleased with all of our rulings. Generally speaking, when a Member loses a case it is unhappy. This is normal. What I say to governments, all governments, is that compliance with panel rulings is essential because failure to implement those rules strikes at the heart of the system's credibility. If one wants others to change their trade regimes to bring them into compliance with WTO rules, one must comply with the rules as well. In the end, all Members benefit from a smoothly functioning dispute settlement system.

What scenario do you foresee when the textile quotas are eliminated by the end of the year? Are you concerned that Chinese and Indian textiles will drive South Carolina mills out of business?

Dynamism is a constant element in world trade. And it has to be. The world is changing and trade and trading patterns must change too. Ten years ago when the Agreement on Textiles and Clothing was reached, I would have told you that all parties stand to benefit from the elimination of the quotas. During these ten years, some companies have undertaken the necessary adjustments required competing in a quota-free market and some have not. Clearly, consumers will benefit from the lifting of quotas. Lower prices for clothing will benefit consumers, particularly those on lower incomes, in the rich countries. Some developing country exporters will also benefit through increased market share. Some exporters will face tough times and producers and exporters in some countries will have to undergo adjustment. We are working to prepare them for this difficult period. The International Monetary Fund has established a fund, called the Trade Integration Mechanism, which seeks to assist such countries. Bangladesh has already utilised this facility and several others are in the process of tapping into this fund. For our part, we stand ready to work with those countries experiencing difficulties during the transition period to come.

How do you see globalization evolving?

Globalization is a fact of life. Very largely, this phenomenon has been drive by technological advances in information dissemination, transport and communications. In many respects it has been a positive thing. Certainly many developing countries have benefited from it. And we at the WTO have made an important contribution by ensuring that developing countries participate more actively in the process. Cancun was proof of this. Enhanced participation by developing countries in the Doha Development Round will assist them in their efforts to integrate more fully into the global economy.

But haven't there been losers in the great globalisation game?

The fact is that there have been losers as well. What we in the international community need to do is to ensure that there are adequate rules, agreed by governments, in place to address common concerns that arise in this ever-smaller world. I do not see globalization halting or slowing down. Such a development could hold highly negative consequences economically, politically and socially.

How concerned are you about the projected tepid global growth rates for 2005? What stimuli would you suggest?

I am not overly concerned about growth projections for 2005. We have seen good growth in Asia and in the Americas. It's true that China shows some signs of slowing down, but that need not be cause for alarm. India's future growth looks sound and Africa has shown signs of enhanced output. Governments need to follow sound monetary and fiscal policies in the coming year and to remove unnecessary obstacles to economic activity. Of course, one important contribution that governments can make is to remain committed to the Doha round. A successful conclusion in the near future would life confidence among entrepreneurs and provide the sort of assurances in the international market place that are needed to ensure continued strong growth in trade.

What are your expectations for the December 2005 ministerial talks? Will the Doha Round be concluded? What do you hope it will achieve?

We have not decided yet on the objectives for the Hong Kong, China Ministerial Conference next year, but we need a solid achievement. Currently, our members are engaged in the important technical work that is needed to prepare for the next stage of political decision-making. Work on the types of tariff reduction formulas that may be used, how subsistence farmers can be identified, what constitutes trade distorting access to credit or state trading practices is highly complex and must be carefully considered by technicians before politicians can decide the way forward. Work of this nature will continue until the spring. In March, we will hold a stock taking exercise and then Ministers, meeting in various formats over the coming months, will begin to assess what is possible for Hong Kong. Some governments have said we should seek to reach agreement on full modalities for agriculture and non-agricultural market access but there is no consensus on this yet.

Have you made the WTO more transparent?

Without question. Upon taking office, I immediately sought to establish an NGO advisory group. We have held, every year, a public symposium at which some 1,000 members of civil society have been present. Many NGOs have run their own workshops at these symposiums, espousing ideas and opinions, which are sometimes highly critical of the WTO. These NGOs attend our Ministerial Conferences and work effectively to lobby governments on many important issues. These are among the reasons why the relationship between the WTO and civil society has become more constructive and less acrimonious that before.

Its critics have long considered the WTO secretive. How has your Website contributed to opening up the organisation to outside scrutiny?

Our Website is rated by many as one of the best, most informative Websites of any international body. Each month, by conservative estimates, roughly 650,000 visitors access our site. Our Annual Report lists the origins of all our funding, all of the members of our Secretariat and all the activities we have undertaken the preceding year. We brief the media after virtually every one of our meetings and had more than 2,000 journalists at our Cancun Ministerial Conference. In fact, a study funded by the British Parliament said that our organization was more transparent than many of those NGOs who have been critical of what we do.

What remain your dissatisfactions about the organization?

I have organized a Consultative Group, chaired by former WTO Director-General Peter Sutherland, that is examining the way in which this organization functions, including decision making, participation, the role of the Director-General and the role of the Secretariat. I expect that this report will be issued to the public and to our membership in January. I would rather not go into details on reform of the WTO until that report has been made public.

Any possibility that you may seek to be the next Secretary General of the United Nations?

I don't think so.

Pranay Gupte,
Senior Writer and Global-Affairs Columnist

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