REMARKS OF RITA DERRICK HAYES U.S. AMBASSADOR TO THE WTO

Global Logistics Council

Seattle, Washington May 11, 2000

Direction of the World Trade Organization and Trade Facilitation

Good morning. I would first like to express my appreciation to the Global Council for organizing this conference and inviting me to speak. It is a pleasure for me to be with you today in Seattle and I look forward to our discussion this morning.

Since I was last here, we have been working hard in Geneva and have gotten the WTO back on track. New negotiations have begun on agriculture and services. We have also developed a mechanism to address some of the implementation issues which were a stumbling block to launching a round of negotiations at Ministerial.

As shippers, expediter and distributors, I am aware that many of you are particularly interested in the WTO?s work on trade facilitation. However, before speaking specifically about it, I thought I would first provide an update on our work in Geneva, particularly as we begin new negotiations. Globalization

Because this conference is being held in Seattle, I thought I should make some short observations about globalization. The protesters here in December were wrong to blame the world?s ills on globalization- and the WTO in particular. Poverty, poor working conditions and environmental damage all existed before the development of the world economy. Various economic studies have shown that open trade and foreign investment have contributed to raising living standards. Nor has foreign trade and investment led to a lowering of labor and environmental standards, two fundamental fears expressed by the protestors last year and during this spring?s IMF/World Bank meeting in Washington.

Instead, some recent studies have shown that low environmental standards have proven to be counterproductive in attracting foreign investment, because the cost of complying with anti-pollution laws has generally turned out to be too modest to influence decisions on investment locations. Moreover, the higher living standards created by investment and trade have allowed developing countries to devote greater attention to their environmental needs.

Nevertheless, widespread insecurity has been created by the economic changes that have resulted from technology and globalization. We will need to develop new policies to address the concerns of workers in the new economy and to allow them to take advantage of new opportunities- through education, training and flexible retirement and benefit packages.

Development of the Trading System

The General Agreement on Tariffs and Trade began in 1948, with 23 original countries. Now that we have had over fifty years of experience with the multilateral system, it is clear that the opening of world markets has led to improved economic health and living standards. The world economy has grown six-fold; per capita income has nearly tripled; and hundreds of millions of families have escaped from poverty.

Since the creation of the GATT, there have been eight rounds of negotiations and, with the recent accession of Jordan, WTO membership has grown to 136 states and customs territories. Consistent with our broad policy objectives, one of our primary activities in Geneva is to bring the benefits of the WTO to new more states through accession.

Expanding WTO Membership

The end of the Cold War has created an opportunity for the WTO to assist some of the world?s greatest nations to build an infrastructure to develop their economies, through engagement with the outside world, transparency, and adoption of the rule of law. The experience of the Central and Eastern European nations has shown that WTO membership can foster political and economic reform.

Currently there are over 30 countries at varying stages of acceding to the WTO, including Russia, Saudi Arabia, Vietnam and Taiwan. However, the China accession clearly takes center stage. China?s WTO accession has the potential, beyond economics and trade, to serve as a foundation for the rule of law within China, and as a precedent for the willingness to abide by international standards of behavior. We have completed a far reaching bilateral agreement with China for WTO accession, which covers agriculture, services, industrial goods, unfair trade and investment practices- with specific and enforceable commitments.

The bilateral agreement with China provides for real market access improvements, which will be available to all WTO members: the average industrial tariff rate will fall from 25% as recently as 1997, to about 9.4% in 2005. China has also made important commitments to eliminate all quotas and discriminatory practices, as well as to liberalize product distribution channels. International services providers will benefit from greatly improved market access in most sectors, including distribution services, telecommunications services, financial services, professional services and many others. Recent WTO Accomplishments

The WTO was created as a permanent forum for negotiations. Already, since its creation, the WTO has reached important agreements in several areas. Since my arrival in Geneva in 1997, the WTO reached an important agreement on financial services. This package involved Members accounting for well over 90% of the markets in banking, insurance and securities trading. In industrial countries alone, over $1 trillion a year is earned in this sector.

There have also been agreements on Information Technology products - which eliminated tariffs on $600 billion worth of trade in high-tech manufactured goods, such as computers and semiconductors; and on Basic Telecommunications Services - which secured competitive regulatory principles in a sector long dominated by monopolies. These three agreements are building blocks for the economy of the 21st Century, by stimulating technological development, spurring investment and enhancing competitiveness.

WTO Mandated Negotiations

As you are all too aware, the WTO was unable last December to launch a new broad-based round of negotiations. However, as noted at the outset, negotiations have already begun on agriculture and services, pursuant to the mandate that was negotiated as part of the Uruguay Round.

Together, agriculture and services account for a large proportion of world production, employment and trade. According the to the World Bank, more than half of the world's workforce is engaged in agricultural activities, while nearly a third work in services industries.

The first special session on agriculture resulted with the development of a program of work for the first phase of the negotiations, including benchmarks for tabling negotiating proposals by the end of this year, to be followed by a stock-taking session in March 2001.

Within the agricultural negotiations, we are focusing on substantive reform proposals, such as the elimination of export subsidies, reducing tariffs and reducing trade-distorting domestic support levels. We also want to ensure market access for biotechnology products, through the application of open, transparent, science-based regulatory regimes.

The initiation of services negotiations has similarly gotten off to a brisk start. These negotiations will result in commercial opportunities for all Members- as reflected by the fact that the first two negotiating proposals were tabled by developing countries: Pakistan and Dominican Republic.

In services, the United States will seek the removal of restrictions on services trade and will ensure non-discriminatory treatment for U.S. suppliers. We are particularly interested in such sectors as distribution, energy, environmental, audio-visual, express delivery, financial, telecommunications, professional, private education and training, private healthcare, and travel and tourism.

Progress Towards a Round

Of course, we are interested in bringing more elements to the negotiating round than merely services and agriculture. Most WTO members already agree that a number of issues should be included within the scope of negotiations. These include market access for industrial products, electronic commerce, trade facilitation, and transparency in government procurement.

In an effort to build support to launch a broad-based round, the WTO General Council last week took actions to improve the trading environment for the poorest countries, gave priority to implementation of existing agreements, enhanced the operations of the institution in its outreach to Members and civil society, and started a new course for cooperation in the area of technical assistance and capacity building for developing nations.

Commitments were made by 13 countries, including the United States and the other largest trading Members, to promote economic growth and sustainable development in the world?s poorest nations through enhanced market access. The least- developed countries will benefit from duty-free and quota-free market access for essentially all their products pursuant to preferential schemes. Passage of the Africa Growth and Opportunity Act and the expansion of the Caribbean Basin Initiative, will make an important contribution to this effort.

Director General Moore and the WTO Secretariat are also working to strengthen the WTO?s work in the area of technical assistance and capacity building, starting with least-developed Members. You should see benefits from this assistance, as developing countries take advantage of it to modernize their customs administrations.

Implementation Issues

The General Council also took decisive action to give priority attention to the question of implementation of existing WTO agreements, by establishing a special mechanism to consider these questions on a priority basis.

All WTO Members acknowledge the importance of implementing the commitments that they made during the Uruguay Round. Some of these agreements have been difficult for Members to implement- whether due to technical complexity or because of political difficulties. Nevertheless, they do offer substantial benefits, by creating an environment of transparency, predictability and regulatory efficiency in which foreign and domestic investment can thrive.

Notably, the customs valuation agreement establishes an approach to value imports for purposes of applying tariffs. Because it requires the use of transaction value- invoice price - as its first method of valuation, the implementation of this agreement is important for transparency and to expedite the customs clearance process. The WTO has been successful in reviewing the problems faced by many Members in implementing this agreement and have developed individual work programs designed to ensure full compliance within specific time frames.

Transparency

The enhancement of WTO transparency has two important aspects- internal and external transparency. With respect to internal transparency, there is a need to ensure that all Members, regardless of size, have a voice in the organization and have the means to participate effectively. This poses a very real practical problem in an organization of 136 Members, all working on the basis of consensus - and contributed to the confusion at the Ministerial Conference.

The work on external transparency seeks to address the challenges posed by a public that is ever more focused on international trade issues. As trade growth becomes more important to all nations, the need for openness, accountability and public access increases. We seek to address this problem through more rapid release of documents, by enhancing the input of citizens and groups, and a more regular organization of symposia and other forms of dialogue with civil society. These measures are necessary to create the foundation of public support for trading system.

Trade Facilitation

All WTO trade agreements have sought to further trade facilitation. But more recently, this term ? trade facilitation ? has taken on a more specific meaning in the WTO context ? how can traders get their products across borders with a minimum of delay and red tape.

The nature of trade flows has changed greatly over the past ten years, not only in terms of increased trade, but also in terms of faster time-lines. In some sectors, product cycles last no more than 12 to 18 months. These dramatic changes have been brought about by revolutionary changes in electronic communications, which have affected the movement of information; and advances in transportation capabilities, affecting the physical movement of goods. In this environment, regulatory structures have not always kept pace.

WTO members are already convinced that there is a clear link between economic development and improvements in the trade facilitation environment. In a global economy that operates with just-in-time delivery and just-in-time distribution, a transparent system of border controls that allows for rapid release of goods is a necessity for expanding economic output.

Manufacturers need inputs, and investors need to know that sourcing plans and operations will not be subject to interference because of difficulties in customs clearance. Small- and medium-sized enterprises are particularly vulnerable to unexpected disruptions.

Improvements in the trade facilitation environment are also an essential part of institutional reforms that are being undertaken worldwide. Greater transparency and efficiency in the administration of customs systems ? with appropriate financial and political support ? can reduce the potential for arbitrary decision-making and corruption.

The WTO?s contribution to improving the trade facilitation environment has three components: simplifying and streamlining procedures; requiring the advance publication of customs practices and requirements; and providing for the rapid release of goods from customs custody.

A U.S. exporter recently described his experience in filling an order for a spare part for an industrial robot that had broken down in an overseas automobile plant. The exporter acted immediately and shipped the part overnight express. However, customs officials retained the part for a week, because they were trying to decide whether the part had been imported under a warranty, or imported as a new product. In the meantime, the auto assembly plant was forced to produce manually. Obviously, the costs to everyone involved were enormous.

At the heart of this situation was a failure of the customs authorities to make sure that its requirements and practices were well publicized and to make sure that the goods can be released from customs on a timely basis. In fact, these very points were the ones raised most frequently by private sector representatives at the 1998 WTO Trade Facilitation Symposium. That symposium launched a more focused and detailed discussion in the WTO on the scope for additional WTO disciplines in the field of trade facilitation.

In the months preceding the Seattle Ministerial, we joined a group of countries, including both developed and developing countries, to undertake the development of a proposal for WTO negotiations on trade facilitation. This group offered an approach to trade facilitation that promised to be the first initiative of its kind in either the GATT or the WTO.

Negotiations on new trade facilitation disciplines would proceed hand-in-hand with an assessment of gaps in the customs capabilities of individual Members. This approach would allow technical assistance to be provided on an ongoing basis- and allow countries to have the technical capacity necessary to take on new obligations as they come into force. The trade facilitation approach is unique, because it departs from our customary practice of concluding agreements first, with transition periods and technical assistance to follow.

While we wait for a new round to begin, efforts are being taken to maintain momentum on trade facilitation. This work begins with a comprehensive and open assessment of the current capacities of all WTO Members in the area of trade facilitation. Such an assessment provides useful information on where each country is in its customs reform efforts. While the focus is likely to be on developing countries ? as it should be, since they require the greatest assistance in capacity-building ? some developed countries are reforming their customs systems as well. The assessment would also provide an opportunity for countries to relate their experiences in addressing trade facilitation issues.

Before moving to electronic commerce, I want to emphasize one additional point on trade facilitation. As I noted earlier, many existing WTO agreements already relate to trade facilitation. Any future WTO work on trade facilitation should be seen as complementing the disciplines created by those agreements, particularly on customs valuation, pre-shipment inspection and rules of origin.

There recently has appeared to be a growing trend by some Members to use arbitrary minimum import prices for purposes of determining customs valuation. This practice has also often been linked to complicated import licensing practices and inefficient pre-shipment inspection systems.

No WTO program for trade facilitation will be worthwhile and effective unless all related WTO obligations are fully implemented. As noted earlier, extensions of time have been required in several instances for customs valuation, to ensure that the necessary technical capacity is in place. However, the implementation of these agreements is of paramount importance and must not be sacrificed as a price for pursuing new work on trade facilitation.

Electronic Commerce

Now I would like to say a few words about the electronic commerce initiative. As you know electronic commerce can encompass a wide range of opportunities for business, exporters and importers alike. E-commerce will provide a channel for businesses in developing countries to access directly markets they had never before contemplated. It has signaled the advent of not only the most innovative means of conducting trade, but it also provides the fertile grown for advancing other elements of the human experience, for example in the area of education, health and communication.

While encompassing a variety of means of transmission, electronic commerce is typically associated with the Internet. It was in February 1998 that the U.S. proposed that WTO Members commit to maintaining their current practice of not imposing customs duties on electronic transmissions. After much work with trading partners, the Declaration at the 1998 Geneva Ministerial contained the moratorium on imposing duties and a commitment to establish a work program to examine the application electronic commerce.

The United States and the European communities obviously have the lead in this area, but we are both committed to ensuring that all economies benefit from the advancements in the Internet and e-commerce.

During our work in 1999, we realized that work needed to be done on determining how existing WTO rules apply to electronic commerce. That work includes such fundamental issues as whether particular transmissions more closely resembled goods or services. We also came to the realization that use of electronic commerce should serve as a mechanism for trade facilitation, by cutting down the flow of paper that needs to be processed for products to clear customs. Conclusion

I am pleased with the progress we have made since I was last here in December and it is clear that the WTO is back on track. Agriculture and services negotiations have already gotten underway and important work has been done to address the needs of our negotiating partners. I am confident that broad-based negotiations will soon be launched, which will allow the WTO to open world markets to industrial products and to facilitate trade and establish a sound basis for the growth of electronic commerce.

We will continue to work for the participation of all economies in the multilateral system- including economies in transition and developing nations. And to complete the negotiation of accession for China in the very near future.

In conclusion, I know that all of you attach considerable importance to our efforts to expand trade and global opportunities for U.S. businesses in a meaningful way. As business leaders with a direct interest in trade, I would like to ask your support in helping us move the U.S. trade agenda forward. I look forward to answering any questions that you may have. Thank you.