THE WTO: FRIEND OR FOE - August 3, 2003

THE WTO: FRIEND OR FOE?

ADDRESS BY

HONOURABLE DR. KENNY D. ANTHONY

PRIME MINISTER AND MINISTER FOR FINANCE, ECONOMIC AFFAIRS, INTERNATIONAL FINANCIAL SERVICES AND INFORMATION

WTO SEMINAR FOR PARLIAMENTARIANS

AUGUST 04, 2003

INTRODUCTION

It gives me great pleasure to welcome to Saint Lucia, the WTO officials and the other experts who have traveled to our shores to assist us with the conduct of this Parliamentary seminar. We are looking forward most eagerly to share in your knowledge of WTO rules and procedures, as well as to engage you in a debate which should help to bring greater clarity, coherence and consistency to our national positions in the current trade negotiations. I understand that for some of you this is your first visit to Saint Lucia, so I trust that you will be able to take some time from your busy schedule to travel around our country, to experience its beauty and the hospitality of our people, but also to obtain a better appreciation of the defining characteristics of our particular, small island developing state. Beauty can admit of weaknesses, and in our case, it is our economic fragility and vulnerability.

As has been mentioned already, this National Seminar for Parliamentarians is only the second ever to be convened by the WTO, the first being in Cape Town, South Africa. The acceptance by the WTO of our request for this seminar is no doubt a tribute to the high profile and respect that Saint Lucia has been able to earn for itself within the WTO.

The WTO, perhaps more than any other international organization, has been dominated by power relations among its members. In that organization, it is commercial and economic powers which are the principal determinants of the attention received and the influence which can be exerted. When a small country like Saint Lucia whose share of the world trade does not even register in the statistics, showing up as 0.00%, and does not even have a resident Embassy in Geneva, the attention and recognition extended to it is almost suspicious.

A VICTIM OF THE MULTI-LATERAL TRADING SYSTEM

Having welcomed you, I must be frank and tell you, that Saint Lucia does not regard the WTO as a friend. Saint Lucia is a casualty of the multilateral trading system, administered by the WTO. As you might have anticipated, I am referring to the impact of the WTO decisions on the preferential arrangements for the export of our bananas. Unquestionably, the WTO decisions, upholding the challenge to the preferential regime by the United States, have helped to cripple the banana industry in Saint Lucia, and the Windward Islands. Since those decisions, prices have fallen dramatically, the Windward Islands have lost their market share in the United Kingdom, farmers have abandoned the industry, and new requirements have been imposed for the production and marketing of fruit. Not surprisingly, export plummeted from a high income of E.C$188.4 million in 1990 to EC$ $110.7 million in 1994 and now to EC$ 41.16 million in 2001. Likewise, exports fell from 117,564 tons in 1990, to 90,254 tons in 1994 and now 34,044 tons in 2001. Admittedly, production in 2001 was severely affected by a debilitating drought. I shall not bother to explain the social and emotional consequences that have followed in the wake of the decline of our banana industry. Given our experience, how, then could the WTO be an asset to small states?

As if you have not yet arrived at that conclusion, I merely wish to say that I am far from sanguine about the WTO. Its fundamental principles and accompanying practices rarely impact in a benign manner on small and weak trading nations.

QUALITY OF MEMBERSHIP

The WTO was always meant to be a truly global institution. To enjoy that status however, it is not enough that it opens its doors to membership by all countries. While the numerical size of membership is important, greater importance should be placed on the quality of that membership. What is essential is the right and the ability of all members to participate meaningfully in an institution whose business is to secure benefits for all, and I would assume that that includes the disadvantaged. The fundamental rights of members cannot be dependent on their size or their political or economic power.

But Honourable members and friends, the WTO is now a permanent feature of the architecture of global regulations, and we have to live with it as part of our daily lives. We are compelled to find the means of securing our interests and this must start with familiarising ourselves with, provisions of the WTO.

A LOSS OF SOVEREIGNTY

Unquestionably, the WTO system of global regulation is proving to be a serious constraint on the scope of national sovereignty over domestic policy. Countries have lost sovereign control over the levels of taxation to be applied to imports, an area long targeted by the General Agreement on Tariffs and Trade (GATT). Indeed, if some countries have their way, government procurement and competition policy among others would go the same way.

Whilst our maneuverability is being steadily limited domestically, of even greater concern is that the scope for preserving international rules which permit us to obtain benefits essential for our economic growth and development are being regularly challenged and steadily eroded. The tide is also flowing against non-reciprocal trade preferences. We have for decades been able to export to the European Union, the USA and Canada without having to offer reciprocal duty free entry for the exports of those countries. We were fortunate to secure a WTO waiver for those arrangements, but we must wonder how much longer can we rely on such derogation from the rules. Even outside of those special provisions, the liberalization which got a great boost with the end of the Uruguay Round and the birth of the WTO, has resulted in a steady reduction in tariffs which is likely to accelerate even further with the Doha Development Agenda. What this means is that the value of our preferences are being continually eroded. If the garments which we sew get into the US market free of duty, the higher the tax which is applied to other similar garments imported into the US market, the greater the competitive advantage of the Saint Lucian garment. But as-across-the-board duties fall, the market becomes more difficult for our producers.

We are fighting a losing battle to preserve preferences. Eventually, we will face a world without trading preferences. In theory this means, that we have to become more efficient, by lowering our costs and improving our quality. These things are essential not only to compete internationally, but also domestically. Increasingly, local production will be obliged to face import competition. We cannot stop it, and we are told that, competition will be beneficial to the development of strong, viable industries, as well as to the consumers.

INFLUENCING RULES

While these are some of the things which we must do in order to survive, the real challenge for us small developing countries and island states is to secure changes to the rules to make them more sensitive to our needs. Hitherto, small countries have not really participated meaningfully in the multilateral trade negotiations, and cannot be perceived as having had any real influence on the outcomes. We must work together to change that.

1) As small countries we must define our own goals, based on a clear understanding of what is genuinely in our interests and which will further our development. We must resist attempts to have our goals defined by outside agencies for which our interests can only be secondary or even incidental. While we value the advice and support of the Bretton Woods institutions and friendly governments, donor organisation and agencies, the definition of our goals and aspirations can only be done by ourselves.

2) We must keep the public with us. The domestic economic restructuring and the pursuit of changes to the WTO rules are truly massive tasks which will require the mobilization of our resources. But also, the pubic will need to understand why it is being asked to do things differently and why it is being called upon to make sacrifices.

WORKING AGAINST THE TIDE

Honourable members, we are now at a very difficult and challenging point in our economic history. The tide of liberalization is helping the stronger and more competitive while working against the weaker and less competitive. The tragedy we face is that despite the most valiant efforts on our part, we seem incapable of successfully fighting the changes or working against the tide. However, there is something which we can do, and that is the lesson which is beginning to take shape for us in the WTO. Think of a small sailboat making its way against the wind. Logically that should be an impossibility but those of you who know about sailing should understand the principle, and indeed might have mastered the technique of "tacking". To achieve our goals and to make progress in defiance of the odds, we need clear vision. Temporary tactical lateral movements, even retreats, are sometimes necessary, but we must have a firm grip on the rudder. This is what permits us to move forward without being thrown here and there, or being carried along by the tide. It is not our strength which will get us where we have to, but our vision, unity of purpose, and determined pursuit of our goals.