Ruggiero warns Union against trade myopia

Date: 30/01/1997

By Tim Jones

THE man heading the body regulating world trade has a stark message for his fellow Europeans: think globally, or sink.

“Europe seems to be concentrating too exclusively on its own construction and on the single currency,” says Renato Ruggiero, director-general of the World Trade Organisation.

“If you tell people that Europe's mission is to improve its competitiveness to create more jobs through greater liberalisation of the economy and more involvement in the world economy, then I think the single currency message would be better accepted,” he told European Voice in an interview this week.

The 66-year-old former diplomat, Italian trade minister and European Commission official, who took over at the helm of the WTO two years ago, wants his former political colleagues to take this message to the public.

He feels that protectionist voices have held sway for too long and, in his view, these economic nationalists are not only dangerous but wrong-headed.

“When I read newspapers and watch television, globalisation is presented as a catastrophe where the wild laws of the market will prevail, where social marginalisation in industrialised countries will increase, where sovereignty will be destroyed and which will end up with the complete Americanisation of our societies,” said Ruggiero with a touch of irony.

“Finally, there will be a clash of civilisations, as predicted in the last book of the Bible.”

In many European countries as well as the US, politicians and media personalities warn of economic war with Asia, Latin America and emerging powers in central and eastern Europe.

In the minds of most people in industrialised countries, these economies are increasingly being used as bases for large-scale manufacturers, producing cheap, low-quality goods which are flooding the markets of the West.

The facts, according to Ruggiero, tell a different story. “Never before has European growth been so dependent on an increase in exports to developing countries and especially towards the 'dangerous' countries in Asia,” he said.

During the past five years, the ten leading economies in Asia have imported 600 billion ecu worth of goods from Europe. Many of these countries have begun to import heavily - capital goods for manufacturing but also high-quality consumer goods as their average disposable wealth increases - and some are experiencing that old European problem: trade imbalances.

The WTO chief points out that, between 1990 and 1995, EU exports to the developing countries of Asia grew by 15&percent; every year. “In Europe, we profit from globalisation,” he said. “It is job-creating, not job-destroying. Okay, there are sectors where changes have to be made - this has always been so in economic history and you cannot pretend that nothing will change and no jobs will be lost.”

Areas of the economy - such as shipbuilding, steel, textiles or coal - where European firms can no longer compete without bankrupting subsidies are already disappearing or revolutionising their approach to production.

Ruggiero admits that the restructuring of these industries can hurt, but insists it is necessary.

“In Europe, we need a new message from our leaders about the requirements of adjustment,” he said. “You cannot have all the advantages of globalisation without an adjustment effort, but this does not have to mean the destruction of the welfare state.”

Industrial workers in Europe might be excused for believing that they are unique in having to take the pain of 'adjustment' while their counterparts in the countryside are cushioned from every blow.

The Common Agricultural Policy's system of subsidies and compensation for the swings of the market have protected Europe's farmers for the past four decades.

Left out of world trade negotiations for most of that time, farming subsidies and their tendency to distort the market finally found their way into the tortuous eight-year-long Uruguay Round of talks which ended in 1993.

Even then, most of the CAP's often bizarre schemes survived intact, while the arrival of a free-market-dominated Congress in Washington has seen American farmers' guarantees under attack.

Under the terms of the Uruguay Round settlement, the CAP is protected until 1999, when a new round of agricultural negotiations should begin. Can the Europeans justify another series of CAP safeguards?

The WTO's director-general is careful not to say too much. “I can see that the evolution of the Common Agricultural Policy compared with the evolution of world farming and the commitment in 1999 to start a new phase of negotiations implies that the EU will have to reconsider the CAP,” he said.

The diplomat within Ruggiero is loath to go further. It is this very even-handedness which several trade negotiators claim to be his greatest strength in brokering solutions within the WTO's infant disputes-settlement procedures.

These will be put to their stiffest test yet as the organisation tries to find a solution to the dispute over the US Helms-Burton legislation, which allows Americans to sue foreigners in the US courts for doing business in Cuba.

The WTO's disputes-settlement body (DSB) made its first ruling last year, when it decided that American limits on petroleum imports violated the rules of the General Agreement on Tariffs and Trade.

Even though the methods are new and little-tested, Ruggiero has no doubt that they have worked.

“The benefit of the disputes-settlement procedure is not just because it makes rulings about who is right and who is wrong,” he said.

“Since it was set up, several big bilateral disputes between members have been solved before the findings of the panel or a ruling of the appellate body were made. If the mere existence of the system can facilitate an agreed solution by both sides before a procedure really gets under way, then that is a great victory for everyone concerned.”

Apart from trying to settle these disputes, the WTO has a punishing workload this year, beginning with the deadline for a deal to liberalise global telecommunications in a fortnight, a second on semi-conductor trade a month later and ending with a celebration of the 50th anniversary of the Bretton Woods institutions founded in the aftermath of the Second World War.

Ruggiero insists there are many reasons to celebrate, saying: “I want the 50th anniversary to be a high-profile celebration to remind us of the origins of this multilateral system, which has been the greatest success story of the world economy in the past half-century.”