Trade Liberalization Impacts Employment
Moore, G.D. WTO
Speech to the International Labor Organization (ILO) March 18, 2002
you for this opportunity to address the ILO's Working Party on the Social
Dimension of Globalization. UN Secretary General Kofi Annan has urged all of the
multilateral agencies to work more closely together, and, where we can make an
appropriate contribution to each other's work, I strongly endorse that approach.
I'm personally very pleased to be able to take part in this important extension
of the debate on globalization.
I think the WTO
secretariat could be of service to this Working Party and to the UN World
Commission on the Social Dimensions of Globalization. I believe it is a good
idea to house the World Commission here at the ILO. It is good to see that the
WTO and the ILO secretariats are able in this forum to continue their existing
And of course I
welcome the fact that later in this session you will be looking at Trade
Liberalization and Employment, as well as Investment in the Global Economy and
Decent Work. I cannot emphasize too strongly the WTO's belief in the positive
impact of trade liberalization on improving living standards worldwide.
members would like me to reiterate the WTO's commitment to the observance of
internationally recognized labor standards, and of course, our belief that the
ILO is the competent body to deal with these standards. As you are all aware,
the WTO provides an agreed set of rules for the orderly conduct of trade between
its members, allowing them to efficiently enhance and reap the gains from trade.
This is, and will remain, our core business.
The cause of
trade liberalization has, I believe, been greatly advanced by the WTO's decisive
actions over the past four months. We have not only launched the Doha
Development Round, but forged ahead on our program, with strong support from our
member governments. We have chosen a venue, Mexico, for our next Ministerial
conference, obtained a new and increased budget, determined the Trade
Negotiations Committee structure, and selected chairpersons for all the WTO
Committees and Working Bodies, several months ahead of the process after the
launching of the Uruguay Round.
We are keeping
up the momentum. One of the key features of the Doha Agenda, was that for the
first time, developing countries put conditionality on the developed, by
demanding capacity-building and technical assistance in order to fully take part
in the round. Last month saw us concluding an agreement with the Inter-American
Development Bank, which we hope will be a model for cooperation with other
regional banking organizations. This is all part of our drive for enhanced
coherence in international trade-related donor efforts.
successful Pledging Conference last week, which saw us double our target for
additional funding to finance increased Technical Assistance, has given us a
very solid basis for capacity-building. This was a remarkable outcome and will
help ensure that the world's most vulnerable countries have a more effective
voice in the new Trade Round. I believe this result indicates that donors have
recognized the hard work we have done to increase transparency and
accountability in our auditing and performance-evaluation mechanisms for its
programs. We are on schedule and ahead of target, as promised at Doha.
mean that we don't still have an enormous amount to do, in implementing our
expanded technical assistance plan, and in achieving our core mandate of
increasing market access across the board.
We are also
following up on another important mandate from our members, embodied in Point 10
of the Doha Ministerial Declaration. This states that “…we are committed to
making the WTO's operations more transparent, including through more effective
and prompt dissemination of information, and to improve dialogue with the
To this end, we
are holding an important symposium in late April. Key development issues from
the Doha Development Agenda will take center stage. But following through on our
commitment on transparency and improving dialogue with wider society, there is
also a very important session on the functioning and financing of the WTO.
I hope that the
previous three Chairmen of our General Council, as well as such distinguished
trade officials as Clayton Yeutter of the US, will be on hand to offer insights
and ideas about how we can improve our internal and external relations and
We plan special
workshops where both critics and friends will have time put aside to make their
case. This includes the environmentalists, the ICFTU, the Chamber of Commerce,
the Third World Network, other development NGOs like Oxfam, Parliamentarians,
and hopefully Party Political Internationals. I believe these kinds of exchanges
are all very healthy and can be a constructive opportunity to learn and improve
upon our performance, the better to serve our Member Governments and the people.
The WTO will
always remain an Inter-governmental organization, because ultimately it is
always our member Governments and Parliaments that must ratify any agreements we
conclude. We need to encourage better-focused and more constructive inputs from
civil society. They should be given a voice, but not a vote. But in return, we
should seek from civil society and its representatives a formal code of conduct,
and much greater transparency and accountability from them to us and to their
reference to how trade liberalization affects employment, I would refer you to
the report prepared by the WTO Secretariat and circulated at the November
meeting of the Working Party on the Social Dimension of Globalization, which
discusses the different mechanisms through which trade liberalization affects
employment, and more explicitly workers.
report notes that, in the first place, trade liberalization has the effect of
lowering prices of consumer goods and of increasing consumer choice, while also
allowing the reallocation of production factors towards higher productivity
activities. I believe all these aspects have a positive effect on the well-being
of people in the liberalizing economy, including workers. Workers gain because
they are consumers themselves and therefore benefit from lower prices and
increased consumer choice. Some workers will also benefit because they will see
the demand for the services they provide increase, which will in return reflect
positively on their job opportunities. For example, a comprehensive World Bank
report on trade reform in developing countries found that in eight out of nine
countries, manufacturing employment was higher one year after the liberalization
period, than before.
Workers as a
group will thus be better off from trade liberalization. Yet, the report also
points at two mechanisms through which trade liberalization may negatively
affect certain workers.
One of these
mechanisms has been discussed intensively in the economic literature. It refers
to the fact that trade liberalization may result in a permanent reduction in
demand for certain types of labor services. Workers supplying those services may
be permanently worse off from trade liberalization. It has been argued that this
has been the case for low-skilled workers in industrialized countries. But given
that the economy as a whole gains from trade liberalization, it will be possible
to compensate those workers leaving everybody better off. In order for this to
happen appropriate redistribution mechanisms need to be in place at a domestic
mechanism refers to the potential short-term effects of trade liberalization on
workers. Some workers in import-competing sectors may lose their jobs and
temporarily be unemployed before finding a new job. They may thus have to go
through a period in which they receive a low income and may have to incur
expenses before finding a new job. Even if they may ultimately be better off in
the new job, this transition period can be a serious burden for them.
points out that well-functioning domestic labor and credit markets and the
existence of social safety nets will do a lot to alleviate the transition
process for workers concerned. Indeed, I would observe that a great deal of the
responsibility for workers' well-being rests at the domestic level. For example,
to date only 18 countries have signed the Migrant Worker Convention,
Supplementary Provision 143 (of 1975). Only 19 have signed the UN High
Commissioner for Human Rights' International Convention on the Protection of the
Rights of all Migrant Workers and Members of their Families (of 1990).
It has also
been argued that the timing, pace and other aspects of trade liberalization may
affect the smoothness of the before-mentioned transition process. This may in
particular be the case in the presence of certain market distortions or the
absence of certain domestic institutions.
I would like to
emphasize that the WTO negotiation process, and specific provisions in WTO
Agreements reflect our keen awareness of this timing dimension of the adjustment
To sum up,
trade liberalization may lead to adjustment costs and may affect domestic income
distribution. But we do not believe that concerns about adjustment costs and
income distribution are meaningful arguments against trade liberalization. We do
believe that with appropriate domestic policies and institutions in place,
everyone can gain from trade liberalization.
Later this week
I will take part in the Financing for Development Conference in Monterrey,
Mexico. I will be using this opportunity to reiterate the WTO's belief that
trade liberalization can make a huge contribution to the generation of resources
for the financing of development. Recent studies have estimated that the cost of
achieving the core Millennium Development Goal of universal primary education
could be in the region of US$10 billion per year. The World Bank estimates that
abolishing all trade barriers could boost global income by $2.8 trillion
and lift 320 million people out of poverty by 2015. The elimination of all
tariff and non-tariff barriers could result in gains for developing countries in
the order of $182 billion in the services sector, $162 billion in
manufactures and $32 billion in agriculture. Indeed, OECD agricultural
subsidies run at six times the level of their total aid to developing countries.
We have learnt
that freedom works, and as it grows, so do people’s living standards. This is
not text-book theory, it’s fact; Transparency International, UNDP, World Bank
facts and figures show that the more open the economy, the freer the people, the
higher their living standards, the better their labor and environmental
conditions. But this freedom is fragile. And many of these leaders of emerging
democracies tell me that, without growth — in which trade and open markets
play a key role — they fear for their nations’ future. The more closed the
economy, the more corrupt the practices. If these nascent democracies collapse,
what would happen then to the rights of business and workers?
Development Agenda agreed last year will fail without dramatic progress in
market access in such key areas as agriculture, textiles and tariffs. It will
fail if we do not build capacity so that marginalized and capacity-constrained
nations can meaningfully participate in complex new development negotiations. I
think it's important to look at developing good governance in such areas as
investment, government procurement, trade facilitation, competition policy and
the environment. Differing product standards, restrictive and non-transparent
administrative regulations and border delays accounting for up to 20% of the
overall transport time, hamper the integration of the global economy. Recent
studies indicate that the overall dead-weight welfare loss caused by these
inefficiencies amounts to $70 billion.
time to time we ought to celebrate the real progress we have made. What are the
most important issues for people across the globe? Life expectancy, hunger and
poverty reduction. Access to clean drinking water, democracy, a better living
environment. And on almost every useful measurement of the human condition, we
have seen the greatest advances in the history of our species during the last
half century, according to data collected by the UNDP and other agencies.
1900, average life expectancy was 30, today it is 67.
average, developing countries have increased their food intake from 2,463 to
2,663 calories per person over the past decade – an increase of 8%.
1970, 35% of all people in developing countries were starving. In 1996, the
figure had fallen to 18% and the UN expects the figure will have fallen to 12%
1990-1999, adult illiteracy rates in low-income countries for males aged 15 and
above decreased from 35%-29%; and for females aged 15 and above, the figure
decreased from 56%-48%.
only 30% of people in the developing world had access to clean drinking water in
1970, today about 80% have.
and conditions have improved as economies grow.
the US, lead concentration in the air has dropped more than 97% since 1977. The
US EPA estimates that about 22,000 deaths are avoided every year because of the
dramatic decline in lead levels.
of the Great Lakes were considered dead 30 years ago and rivers sometimes caught
fire. Today, people can swim and fish in them.
of this is to suggest that we should be happy with the current state of the
world. There is still all too much injustice. But, as a recent IMF paper points
out, in trade-opening East Asian countries — the New Globalizers – the
number of people in absolute poverty declined by over 120 million between
1993 and 1998. On the evidence to date, Globalization has been good for an
increasing number of people, including, of course, workers.
strongly believe that concluding a new Round is vitally important for jobs and
businesses everywhere. According to the World Bank, complete liberalization of
merchandise trade and elimination of subsidies could add US$1.5 trillion to
developing country incomes.
are making solid progress: according to the IMF, over the past two decades, the
growth of world trade has averaged 6% annually, twice as fast as world output.
My plea to you today is not to allow the negative forces fighting against Globalization
and market liberalization to triumph.
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