Mr. Chairman, Professor Victor Bulmer-Thomas
Specially Invited Guests
Ladies and Gentlemen
I welcome this opportunity to participate in this important conference, particularly at this moment of economic and financial uncertainty. The current crisis has underscored the interconnectedness – or interdependency if you wish - of the global economy and highlighted the importance of having both institutionally-driven as well as people-oriented solutions to resolve economic, financial and development challenges.
In this regard, the topic of this conference, “Making Trade Work for Development in Latin America,” is indeed on target. I offer my compliments to the organizers and sponsors for their insight. Inherent in this title is a suggestion that current trading arrangements may not fully support development priorities and objectives in Latin America.
However, I believe that this title also signals an important desire and commitment to review existing structures with a view toward putting forward concrete proposals to enhance the positive impacts of trade for the nations and peoples of the Americas as we work toward building more prosperous, inclusive, safe and just societies.
In a recent speech at Stanford University, World Trade Organization’s Director General Pascal Lamy made an important point which bears repeating. He said, “trade opening is not good for everybody in every country, every time nor under every circumstance, but the evidence is persuasive that trade openness delivers efficiencies and generates wealth. If trade opening takes place in the right conditions, all countries can benefit from international exchange”.
Today, I will speak of “New Approaches to Trade in the Americas” and provide an overview of trends in the Western Hemisphere. At the Organization of American States (OAS), we have come to recognize that approaches to trade for Latin America and the Caribbean, if they are to be successful, must take into account the great diversity that exists in the region - from small island nations such as Dominica with a population of less than 100,000 to large countries such as Brazil with a population of almost 200 million.
There are also large differences between countries in the Americas in terms of levels of income and development. Hence, making trade work for development requires flexible strategies that adapt to needs, capacities and levels of development.
MAKING TRADE WORK
As we move toward increased trade and integration, there must always be room to consider such important questions as: Who benefits? How do they benefit? How can we make growth more equitable? Are there basic provisions that incorporate special and differential treatment for more vulnerable economies?
In addition to the agreements currently being negotiated, there are now over 40 trade agreements in the hemisphere. This creates its own set of challenges as countries determine how to make this complex set of trade agreements compatible.
In this complex environment smaller economies find their human, financial and institutional capacities stretched as they try to participate in simultaneous negotiations with different groups on different issues.
The previously heralded Free Trade Area of the Americas (FTAA) negotiating track has been stalled. Under the leadership of Venezuela an alternative trading arrangement has been proposed (ALBA). But the ALBA has also not been able to receive hemispheric wide support. With the current stalemate we do not know the future of these initiatives, but it has also stalled consultation between hemispheric partners on trade and economic issues. Issues related to investments, trade facilitation, exchange of information and best practices, vulnerability, and technical assistance, among other areas, have been left uncompleted and should be revitalized.
Fundamentally, however, what we are seeing in this plethora of trade agreements, whether bilateral or multilateral, is realignment or strategic global re-positioning – an almost organic remapping of alliances, partnerships and strategic interests.
BROADENING TRADE RELATIONS
In the Latin American region, perhaps one of the most significant new approaches to making trade work more effectively for development is the systematic broadening of trade relations. Countries have also become more active and nimble global actors in pursuing a wider range of trading arrangements and partners.
Over the last decade, several countries of the region have based their trade policy on a multi-pronged approach to international negotiations, seeking to develop new trade agreements with the United States and the European Union while also placing significant emphasis on intra- and inter-regional trade.
This has led to an expansion of more South-South as well as North-South trade relationships. Perhaps, the best example of this approach is Chile which has concluded more than 20 trade and economic agreements with numerous countries including Australia, China, Mexico, and the United States.
Mexico has also been active in negotiating free trade agreements (FTAs) with a diverse range of countries. This movement toward diversifying the range of trading partners has upended the traditional US/Canada – Latin America/Caribbean trade and investment nexus.
Expansion of relations with the Asia-Pacific region is relatively new for Latin America and the Caribbean. However, it is clear that there is a certain amount of realignment with regard to East-West economic and trade relations. This is most clearly seen in trade relations with China. In 2007, China’s trade with Latin America was valued at $102.6 billion, more than twice as much as the trade volume of $50 billion that it had with the region only two years before.
This enlargement of the “spaghetti bowl” with the increasing number of bilateral trade agreements can also be seen as a response to the state of negotiations at the multilateral level. Though, arguably, the slow pace of the Doha Round can be interpreted as the flexing of the muscle of developing countries as they are now in a position to ensure that their concerns are addressed.
Developing countries, as they become more fully integrated into the global arena, may also begin to construct more wiggle room to impact trade negotiations and perhaps achieve compromises that support their development objectives.
As developing countries in Latin America and the Caribbean seek to create a buffer to their structurally weak position even as they have become more fully enveloped in the global market, they have had to find innovative ways to remain competitive in their economic and trading arrangements.
Niche development has been one approach adopted by many countries but particularly the smaller countries of the Caribbean which have developed niche services markets in areas such as off-shore financial services, medical transcription services, shipping and aircraft registry, call centers, and remote gambling services. For these smaller economies taking advantage of the opportunities offered by the liberalization of services sectors has allowed for the use of their most valuable resource, their human capital. Gaining access for their service suppliers to foreign markets continues to be of strategic importance for the development of their countries.
Regretfully this earlier call for diversification of Caribbean economies by the developed trading partners, has resulted after the diversification efforts in opposition from the same partners.
AID FOR TRADE
Aid for trade is an important element in helping to empower economic actors to reap the full benefits of globalization. The establishment of Regional Aid-for-Trade Networks – comprised of key stakeholders such as regional development banks, multilateral institutions and donors - to assist countries and sub-regional entities in identifying priorities, drawing up plans and mobilizing resources, is central to achieving trade aid objectives.
In our view, human resource development and technical cooperation need to be central components of bilateral and multilateral trade agreements. It involves addressing a range of public policy and private sector development approaches such as:
• Trade policy reforms to create an enabling environment for business and help countries better participate in the multilateral trading system;
• Private sector initiatives to assist entrepreneurs and established businesses to develop and strengthen the tools and techniques to be competitive; and
• Infrastructure development to create the basic logistics, transportation and telecommunications networks that can facilitate trade, economic growth as well as short- and long-term development.
• Building human resource capacity to bolster the region’s ability to negotiate trade agreements and to strengthen trade policy formulation and implementation.
• Regional database development and information sharing to inform the negotiation of trade agreements and provide the requisite tools to optimize international trade opportunities.
In sum, “aid for trade” serves the interest of developed and developing countries, as well as international financial institutions given the existing inter-dependencies.
In this regard, labor movement within and among countries further impacts trade and economic relationships. It also impacts the overall development of countries of origin as well as receiving countries. While there are useful ways of promoting labor mobility outside of the more formalized and rigid structure of FTAs, the issue deserves thoughtful treatment within the context of trade agreements.
Labor mobility has always existed at an intra-state or inter-state level, and yet represents one of the most complex cross-border issues with which nations and regions as a whole must grapple. In the Caribbean, for example, the outward migration of skilled professionals has largely had a negative developmental impact on these countries with net losses to GDP.
CARICOM’s move toward the establishment of a Caribbean Single Market and Economy (CSME) is a pragmatic strategy to mitigate the constraints of size and capitalize on combined strengths and capacities. This agreement which will, among other things, allow for the free movement of skilled services and labor among member states is a major step toward reinforcing an intra-regional trade and economic agenda for development.
A similar undertaking is underway in Central America through the Central American Integration System SICA.
EDUCATING FOR COMPETITIVENESS
I would like to propose that education must become a fundamental tool in the trade and economic development arsenal to create a solid foundation for socio-economic transformation. I believe we must use the power of education to increase the collective potential of our countries and harness the individual skills of our young people.
Education must become an agent for transformative change and a tool for competitiveness. If we do not address successfully the educational and training challenges, economic growth, productivity and competitiveness will be adversely affected.
Our ability to reap the benefits of globalization will depend on the flexibility of our labor force to adapt to changes in the job market, particularly in an environment in which workers face displacement from international competition or technological advances.
We must improve education and training among our youth and develop private-public partnership programs to assist them in the development of business models, entrepreneurial approaches and programs that harness the incredible flood of information and use it to engineer practical knowledge-based products that can revolutionize their lives and the future of their countries.
Heads of State and Government at the IV Summit of the Americas unanimously agreed that, in order to meet the trade and economic challenges of the future, new public-private partnerships must be created in order to improve competitiveness and train a pool of young professionals that can advance the trade agenda of the nations of the Americas in support of national and regional development goals.
I am of the view that the time is right to rethink trade priorities and objectives. Development must be at the core of trade negotiations and key to the formulation of the economic agenda. Poverty reduction, social responsibility and access to opportunity cannot be divorced from the trade and economic agendas.
Indeed, we need a new paradigm on development in the Americas that takes into account global interdependence, hemispheric dynamics as well as the need to deliver more in terms of opportunity, equality and equity.
I believe that the quality of our future democracies and the sustainability of our economies depend in great measure on the policies, actions, programs and investments that we make now at this crucial moment in history.
Today, rich in diversity and united in a commitment to democracy and development, the peoples of the Western Hemisphere can move forward in partnership recognizing the difficult challenges that confront our nations – large and small. In this regard, I believe that the Fifth Summit of the Americas to be held in April 2009 in Port of Spain (Trinidad and Tobago) will provide a unique opportunity for the newly elected and sitting leaders of the Western Hemisphere to discuss a strategic social and economic agenda for the Americas, a strategy that requires the full engagement of civil society, particularly the private sector and trade unions.
In closing, I am convinced that together, Latin America and the Caribbean can look forward to the possibility of realizing its vast potential, the perfection of its democratic institutions, the protection and promotion of its freedoms and human rights, and its commitment to ensure that all of its citizens are provided with the tools to share in economic and social benefits.
I thank you once again for the opportunity afforded to me this morning to address you. I wish you fruitful deliberations and I certainly look forward to the conclusions of this important conference.