Remarks by Under Secretary Grant Aldonas
"Fair Trade and the Fight Against Poverty"
Tuesday, July 2, 2002
Carnegie Endowment for International Peace
As Prepared for Delivery
Thank you, John [Audley, Sr. Associate at Carnegie]. It is a pleasure
to be here. It is a pleasure to see John here, given that he and his wife
just welcomed a newborn to their family this past week. I had opportunity
to work with John previously during his tenure with the National Wildlife
Federation. I appreciate his commitment to encouraging new voices in the
debate on trade.
I also welcome the opportunity to appear with Ambassador Ssempala. I
had the opportunity to work closely with the Ambassador while I was with
the Senate Finance Committee. Ambassador Ssempala led the African diplomatic
corps' efforts to secure passage of African Growth and Opportunity Act.
Political Logic of Trade is Broken
I would like to use the African Growth and Opportunity Act as a point
of departure for my comments on Kevin's talk and on Oxfam's report. We
have seen an interesting phenomena on trade in the United States: broader
support for a bill that unilaterally granted preferential access to our
market than for support for further trade negotiations.
Why is that? One significant reason, in my view, is that the political
logic that has driven trade negotiations for the last 70 years is broken.
Trade, as practiced in the GATT and WTO is driven by a mercantilist political
logic of trading market access. Politically, we sell trade deals on the
basis that our exporters are getting an equal or better opportunity than
we are giving up to foreign exporters who want access to our market.
The problem now is that the cupboard is bare, except for those tariff
peaks that Kevin's work has identified. They happen to fall in the most
politically sensitive categories for the United States and for the rest
of the developed world.
President Bush has said that there is nothing that is off the table
in the next round of WTO talks, and that includes agriculture subsidies
and our tariff peaks. So, he has made it clear that he will be prepared
to deal if our trading partners are willing to go as far as we are in
eliminating agriculture subsidies, industrial tariffs, and other trade-distorting
But, in some respects, that still begs the question -- how do you build
a stronger base of support for the benefits that trade liberalization
can undoubtedly offer the developing and developed world alike?
Relevance of the Oxfam Report to Rebuilding a Consensus on Trade
That is where Oxfam's is acutely relevant to the trade debate. While
I do not agree with all of the reports particulars and affirmatively oppose
some, the report's great strength in my view is that it points the way
to a new, and I would argue, more politically sustainable basis for the
conduct of trade.One reason is the report's starting point -- which honors
the fact that trade has helped lift more than 400 million people out of
poverty since the mid-1970s. The report also underscores the impact that
even a small increase in the developing world's share of world exports
could have on their economic prospects, vastly outstripping, but not replacing,
all forms of bilateral and multilateral assistance.
The other is the report's critique of the current trading system, its
rules and its biases. Here, I find myself agreeing with the doctor's prescription
in many respects, even though I don't agree completely with the diagnosis.
End of the Cold War and the Economic Consequences of the Peace
In that regard, I would draw a different analogy to Lord Keynes than
did Kevin in the Oxfam report. It is to his earlier work, "The Economic
Consequences of the Peace," where Keynes criticized the Carthaginian
peace the Allied nations imposed on Germany after World War I as unworkable
and ultimately destabilizing.
Events, of course, proved Keynes right. I worry for what Keynes would
have said about our collective response to the post-Cold War world. While
Kevin rightly points out our error in thinking of globalization as a recent
phenomena, that may overlook some of the fundamental and systemic changes
that accelerated the pace of change over the last decade.
The first place everyone looks is technology, which has drawn our world
closer together and made tighter economic integration possible. The next
place everyone looks is to the rules-based trading system, which together
with the active encouragement of the policies of the Bretton Woods organizations,
has reduced the barriers to trade.
What is often over-looked may be the most fundamental fact, that the
political divisions that persisted in the world at least since the onset
of World War I largely came to an end with the demise of the Soviet Union.
What we may not have realized was that the end of the Cold War required
a political and economic strategy that would rival the end of either the
first or second World Wars. That we did not do -- we did not act to ensure
that the seeds of global integration found fertile soil and that the benefits
of globalization were broadly shared.
Although it starts from a different premise, the Oxfam report makes
much the same point. And, until we begin to address that problem from
the right perspective, we will ultimately fail as did the drafters of
the Treaty of Versailles.
Building a New Consensus on Trade
Does that mean we should be discouraged? No, for the answer is close
at hand. One of my heroes, Amartya Sen, happens to be both a Nobel Laureate
in economics and the Honorary President of Oxfam. In his most recent work,
"Development as Freedom," Sen capped a long career in studying
the basis for economic development. He concluded that the basis for all
economic development was human freedom.
Sen's definition of freedom is broader than we tend to think about it
in Western democracies. It includes the freedom from any limitation that
undermines human potential.
Trade is ultimately consistent with that definition. At its root, it
is about human freedom -- the freedom to interact and exchange goods and
services for one's own purposes, and to do so without the interference
of the state.
And, that to me is the real contribution of the Oxfam report. What it
points to is a way of talking about what trade is that is far more compelling
a vision for a just human society, than the mercantilist political logic
that informs the approach of the current trading system and its members,
developed and developing alike.
What that logic ignores is what the Oxfam report values -- the contribution
which trade could make to raising living standards throughout the world
if we could break free of the logic that currently pervades the trading
You can build a far more compelling case for the benefits of a global
trading system intent upon reducing barriers to trade if you focused on
those areas that are most likely to lead to rapid improvement in the prospects
not only for the developing world, but for the poor in the developed world
Thus, for example, consider what you would achieve for the poor of the
world if we profoundly shift our approach from that of trading market
access -- which many see as a "zero sum game" -- to liberalizing
trade in the sectors that will have the greatest benefit to humankind.
As a practical matter, that is a large part of Oxfam's agenda:
Agriculture -- Consider what liberalizing trade in agriculture
products would do for the 7 million children who, according to UNICEF,
die each year of malnutrition.
Energy -- Or consider what liberalizing trade in energy might
do for the billion people in urban and rural areas who, according to the
World Bank, lack access to modern forms of energy, such as electricity
Health/Sanitation -- Or consider what liberalizing trade in pharmaceuticals,
medical equipment and healthcare services might do for the 2.2 million
people who, according to the World Health Organization, die of dysentery
due to bad water, or the 40 million people worldwide who have HIV/AIDs,
which is now the leading cause of death in Sub-Saharan Africa, and a scourge
that continues to expand worldwide.
Private Sector as Allies
Now, having said that, I should confront what I think is one of the
weaknesses of the Oxfam report and that is the extent to which the report
lays much of the blame for what exists in the way of inequities in the
world trading system at the feet of the poorly lablelled Trans-National
or Multinational Corporations.
I would argue that those same companies are likely to be our strongest
allies to advance the cause of a just world economically and a just world
in terms of the rules of the game in trade.
Here is the irony. While it is common, as the report does, to criticize
corporations for their statelessness (which I take to mean the notion
that they are somehow free of all control by states), the truth is that
they have a stronger stake in a rules-based system than virtually all
governments. The reason is that, in an era of global trade and financial
flows, what becomes important is not so much that the rules afford them
some advantage (again, the mercantilist perspective), but that the same
rules apply to all.
That is not to say that the content of the rules don't matter, intellectual
property is a case in point. But, companies engaged in global commerce
are a powerful force for ensuring that the playing field is level.
Equally important, the largest players in the private sector recognize
that developing countries make up over two-thirds of WTO membership and
are therefore central to achieving what the private sector wants. That
provides enormous leverage to refocus the terms of trade.
I would like to conclude by returning to the words of Amartya Sen, Oxfam's
Honorary President and Nobel Laureate.
In the foreward to the Oxfam report, Sen wrote that "the broader
object of the report is to promote discussion of the kind of institutional
architecture that may best serve the interests of the poor and the deprived.
The basic objective is to combine the great benefits of trade to which
many defenders of globalisation point, with the overarching need of fairness
and equality which motivates a major part of the anti-globalisation protests."
There is no more difficult, impractical goal. And, yet that is what
must be done. Kevin's work and that of Oxfam has begun moving us that
direction, and I want to thank you for that.
I welcome your questions.