Address to the Economic Commission for Latin America and the Caribbean, and the Inter-American Development Bank

  • Tim Groser
International Climate Change Negotiations Trade

The intersection between trade and climate change is a large and open policy space. I want to concentrate today on a helicopter view of the two sets of formal negotiations, one in the WTO and the other in the UN setting of the UNFCCC.

I am, one could say, going back to school here: "compare and contrast the two multilateral economic negotiations in trade and climate change". However, before doing so, let me start with a few comments on some specific examples of work New Zealand is doing in this joined-up policy space with Latin American countries.

It is nothing new for me to be working with Latin American countries in the field of trade - the Cairns Group, led by Australia and which played such a critical role in the Uruguay Round, started political life as a coalition between Australia and NZ and a group of Latin American countries to promote our shared interests in agriculture trade liberalization. The Cairns Group continues to this day to be an important and positive force for change.

But climate change is something new in terms of cooperation between our parts of the world. Again, there is an understandably heavy emphasis on agriculture in this policy domain too. New Zealand, along with 31 other countries, including the US and many from Latin America, is working to address the challenge of growing more food with fewer emissions.

The Global Research Alliance on Agricultural Greenhouse Gases is a research network that seeks to reduce the emissions intensity of agricultural production in a way that improves efficiency and productivity. Ultimately, it aims to contribute in a sustainable way to overall mitigation efforts, while still helping meet food security objectives.

As an example of such collaboration in June, the Inter-American Development Bank and New Zealand signed an agreement to support a major Latin American research project on mitigation of greenhouse gas emissions from pastoral livestock.

Likewise, the reform of inefficient subsidies for fossil fuels has moved into the international limelight because of its considerable climate change mitigation potential, as well as benefits for trade, economic growth, and energy security.

As we grapple internationally and within our own economies with how to put a price on carbon, it is incoherent to think that globally we are at the same time subsidising the consumption and production of fossil fuels to the tune of at least $400 billion a year. To borrow a phrase from former Costa Rican President Jose Maria Figueres, who in 1995 removed fossil fuel subsidies in that economy, “If you don’t want more of something, don’t subsidise it.”

I work closely with Jose Maria's sister, Christiana, in the UNFCCC negotiations, given her critical role as the Executive Secretary and I recently had the pleasure of meeting President Figueres, again in a climate change context.

I am sure that these links, connected to common interests we and Australia have with Latin America, in the spheres of trade and climate change will grow.

But I now wish to turn to the two great multilateral economic negotiations in trade and climate change – to examine their links and their common challenges. Let me start with some general, and necessarily personal, reflections.

We have here two great international political initiatives that have been going a long, long time and there is much cynicism around both of them. In the WTO, the negotiations we know as the Doha Development Agenda have been going nine years by one count, or eleven years, if you count the start date back to the so-called ‘BIA’ or Built-in-Agenda, which was mandated as part of the Uruguay Round outcome.

With respect to climate change, I am much less familiar with the history of the negotiations designed to put in place a new set of commitments to build on the Kyoto Protocol. But it is probably reasonable to pick 2005 as the formal start of that process. It was in 2005 at the Montreal Climate Change meeting that the decision was taken to establish an Ad Hoc Working Group to look at post-2012 commitments. We are still at it. I have just come from Pretoria where Ministers responsible for climate change negotiations remain deeply engaged on precisely that question.

The State of Public Opinion

In most countries the so-called ‘interested public’, has generally turned its attention elsewhere, though certain NGOs and special interest groups continue to strongly oppose, or strongly support, the trade or climate change negotiations, depending on their respective long-standing ideological predisposition or interests.

Trying to understand the common problem with both sets of negotiations requires us, at least in my view, to abandon the comfortable negotiating cliché that ‘the devil is in the detail’. It is one of those professional clichés that is seemingly dripping in wisdom and sophistication. Here it is misplaced.

The devil is not in the detail. Neither of these great multilateral negotiations will be saved by diving into detail. That will come, but we are not there yet. It is not the detail, but the big picture that needs to be framed correctly, if we are ever to put in place multilateral successor agreements to the Uruguay Round in trade and the Kyoto Protocol in climate change. And we must eventually close both negotiations out, of that there is no question.

If we step back and try to take a high level view of both negotiations, I think it is pretty clear where matters stand. In neither case – climate change or trade – is there a fundamental rethinking taking place about objectives, much as those ideologically opposed to either of those sets of negotiations pretend otherwise. Let me start with climate change.

The Multilateral Climate Change Negotiations: Where Are We?

In climate change, we know what the polling in country after country is telling us in the post-Copenhagen period. In many countries, more pressing economic concerns – particularly high structural unemployment and the massive need for fiscal consolidation in many developed countries - have pushed action on climate change down the ladder of political priorities. Why should we be surprised?

Furthermore, at the level of principle, the climate change sceptics still exist. However, most Governments are still pushing ahead on climate change in terms of what the political traffic will bear. That differs, country by country.

Yet I think the political pattern here is pretty clear. In every case, putting a price on carbon, or adopting strong complementary policies to combat anthropogenic global warming is deeply controversial – look at the difficult political history around introducing the EU ETS. But it is now part of the European political furniture, at least in terms of mainstream political thinking.

The classic small country example is my own country, New Zealand. We spent years debating this, first at the level of principle – ‘should we treat the risk of anthropogenic global warming seriously? Then, having more or less politically answered that question positively, we debated for years as to whether a carbon tax or an ETS was the best policy approach.

But finally, in countries that have made the policy shift, and the fundamental political deal has been settled in mainstream political thinking, people move on. Mainstream political parties readjust and the debate becomes about speed of adjustment to a lower carbon future, not the issue of principle. This is really a debate about transition costs to a lower carbon growth trajectory, with one extreme trying to airbrush these costs out of the debate, imagining that there are unlimited opportunities for “green jobs” and the opposing extreme view arguing that in the current difficult economic environment, there is no capacity to absorb any such costs. The balance is surely somewhere between.

I am fully conscious that in some developed countries, we are not there yet. That is, the fundamental change has yet to occur in the form of legislation. But such Governments are not walking away from the issue - even in those countries which are clearly politically blocked for the time being. We in New Zealand will be watching with great interest what our cousins in Australia can achieve, after the recent introduction of legislation by Australian Government to try to pass through the Australian Parliament a comprehensive price on carbon.

Nor is it just about Governments. Major international companies are systematically trying to lower their carbon footprint. ‘Greenwash’ may be the driver in some cases but that is palpably incorrect in the cases of many great companies like Boeing, GE, Walmart and others in other continents.

Similarly, in my part of the world, we recently concluded the Pacific Islands Forum. This is a meeting of Pacific regional Heads of Government, including Australia and New Zealand. This year it was chaired by the New Zealand Prime Minister, the Rt Hon John Key, since New Zealand was the host. It was also attended by some international heavy-hitters as observers. They included the UN Secretary General, the US Deputy Secretary of State and President Barroso, the President of the European Commission.

Frankly, the issue of climate change dominated the first day – because it continues to be a huge concern to these small island States. So, yes, the public mood has cooled noticeably since Copenhagen but the evidence hardly indicates that Governments and major companies are walking away from the issue.

Meantime, the multilateral climate change negotiations continue. Alongside the Doha round, these are the biggest economic negotiations of our time. Unsurprisingly, these are also some of the most difficult multilateral negotiations globally. I do not want to attempt here a comprehensive diagnostic around Copenhagen. I was a critic of the negotiating strategy, the central plank of which was ‘there is no Plan B; we will only accept a full and ratifiable agreement’.

A full and ratifiable agreement was never remotely on the cards for Copenhagen – there was no text to deliver such a result. In fact we got a Plan B – the Copenhagen Accord. But it was done in such a controversial and unplanned way, that the substance of the Copenhagen Accord was bitterly opposed by many and thus stayed outside the formal negotiating process. The following year of work amongst officials prior to Cancun was largely wasted.

The international community got this negotiation back on track at the Ministerial meeting in Cancun in December last year. A great deal of credit must go to the Mexican Government which showed sophisticated political judgement and leadership. The supportive and constructive contributions of many Latin American countries to the success at Cancun must also be noted.

The success at Cancun was totally contrary to the low expectations for the meeting; most members of the Commentariat had wrongly assumed the negotiations had died politically at Copenhagen.

Remember this please: multilateralism can often look down and out, but at the end of the day, there is often no alternative. We will, I believe, get to that point eventually when we come to the multilateral trade agenda.

Today, piece by piece, the landing zone of a successor to the Kyoto Protocol is coming into view. Failure is still of course possible. But long term I would not bet on failure. The next test will be at the Ministerial meeting in Durban in two months time. There is no possibility of completing a comprehensive final agreement by then and it is highly likely that there will be a gap between the end of the First Commitment Period and a new, more comprehensive climate change Agreement. Nevertheless, I think we will eventually get there.

The political theory behind Kyoto was that the developed countries would lead, and the developing countries would follow. Therefore the first set of international obligations, other than vague reporting obligations, fell only on what are called ‘Annex 1’, or developed countries.

In the 1990s when the deal was negotiated, ‘La Maison Kyoto’ was indeed situated in a very fashionable part of town. But the people who were meant to occupy the penthouse suite – the United States – objected to the fact that China and the other major developing countries had no tenancy obligations. In a vote in the US Senate, the decision against Kyoto went 95 to zip. The United States stayed out. The neighbourhood immediately started to look a bit thin.

I should add that the path of actual US emissions is a totally different matter. But the US was not prepared to buy into a deal where, under international law, the major developing countries were effectively obliged to do nothing.

Fast forward to today. Even more of the tenants have given notice that when their lease expires in about twelve month’s time, they too have no intention of renewing their lease in a second commitment period. That includes Japan, Russia and Canada. La Maison Kyoto still has a very respectable anchor tenant – the EU. In addition, there is a dwindling number of small non-EU countries such as New Zealand, who at least in principle are prepared to renew their lease and make a new set of commitments looking beyond 2012. But there are conditions attached.

For a start, some house rules governing our tenancy need updating. In our case, I am referring to the complex rules around Land Use Change and Forestry. New Zealand, which essentially farms trees on a sustainable basis, needs more flexibility around rules governing plantation forests. The small changes we seek in negotiations are totally consistent with environmental integrity. I am confident we shall get there.

The more complicated and important conditions relate to the quality of the neighbourhood. All the Kyoto tenants want to be sure, before we renew our leases for a second commitment period, that others living in the tenancies outside are playing by similar rules of behaviour. We want to be sure we will be living in a secure and quality neighbourhood, where everyone pitches in.

To understand why, you have, as I said, to go back to the numbers. The set of countries that is prepared to establish fresh commitments under Kyoto now account for a mere 16% of global emissions, and that number is going to fall remorselessly year by year.

Climate change is fundamentally different from trade negotiations in one vital respect. In trade negotiations, while reciprocal trade liberalisation is far better than unilateral liberalisation, we have 200 years of orthodox economic thought and numerous practical examples that tell us unilateral liberalisation will strengthen your economy – even if you can rarely sell that proposition domestically.

In climate change, it is completely different. New Zealand, for example, has 0.2 % of global emissions. We are prepared to play our part and do our share in reducing our emissions. This is not just rhetoric; we are on a pathway to do that via an ETS and complementary policies such as our determination to reach 90% of our electricity production from renewables. We are already at nearly 75% - the second highest in the world after Iceland.

But our efforts and the efforts of many other small or medium sized countries will be meaningless if the major emitters continue remorselessly to pump their emissions into the atmosphere. You cannot protect your future generations from the impact of anthropogenic global warming by unilateral action. Finally, all the gases merge in the upper troposphere.

The climate change sceptics – the deniers are in a different camp altogether – are well aware of this inescapable scientific reality and argue that nothing should be done until you have a comprehensive and binding global regime. Somebody wrote a play about that – ‘Waiting for Godot’. Godot never came.

Countries like New Zealand are more pragmatic and apply the 80:20 rule – we can accept that countries can move at a different pace in reducing the growth of their emissions and we don’t need to get literally everyone on the mitigation bus. But we do need to get most emitters on the mitigation bus and for that we need a comprehensive agreement to replace Kyoto.

Another set of commitments under the Kyoto Protocol can, according to this middle of the road view, be part of the deal, but it cannot possibly be the whole deal. You cannot seriously argue that a deal that leaves out 84% of global emissions – a number that will rise remorselessly every year – is an answer in the early 21st Century to this challenge.

Developing countries – non-Annex 1 countries – are understandably nervous of the implications of this analysis. Even those which have made extraordinary progress in the last 20 years still have large numbers of people living in very difficult conditions and often deep poverty. In some obvious cases, millions are still without electricity, even if millions of their citizens are living a lifestyle that we associate with first world countries.

For developing countries, the demands of their development will always trump climate change, if developing countries are put in the corner and forced to make a choice. The art in this negotiation is to avoid the serious mistake of making this a binary choice. It is quite unnecessary in any event. There is a way forward to a balanced, comprehensive deal.

Professional climate change negotiators are more and more converging on a concept called ‘the transition’. It is not yet precise, or thought through in detail. At the end of the day, it is driven by the biggest geopolitical trend on the planet: the vast shift in relative economic and political power to the developing world.

In that transition phase, it will not be enough for just developed countries take on obligations. The developed world emissions pathway has more or less flat-lined, whereas developing country emissions are still growing rapidly. The IEA estimates that between 2000 and 2006 cumulative Annex 1 (developed country) emissions grew 3%. Non-Annex 1 (developing country) emissions grew 44%.

This is not a ‘moral’ judgement. This is exactly what you would expect. Given that emissions are highly positively correlated with income, the extraordinary success of the developing world to develop their economies is ineluctably associated with a rise in their aggregate emissions.

No one in these negotiations is expecting developing countries’ emissions to fall from current levels. That issue, known as ‘peaking’, is for later. What is negotiable is a set of commitments from the developing world to lower the growth rate of their emissions.

The climate change experts here will understand that I am referring to the concept of ‘bending the BAU, or Business As Usual, curve’. This is doable. More and more developing countries, including China, are adopting a suite of policies to lower the rate of growth of emissions. Brazil has dramatically reduced the rate of deforestation in recent years.

Unquestionably, such policies have other laudable policy objectives. There is massive energy inefficiency in most developing countries. If you can systematically improve energy efficiency, you have an economic as well as a climate change, dividend.

General assurances to continue down this path however, are not sufficient to seal a post-Kyoto deal. Such policies need to be subjected to a non-intrusive process of reporting and international verification process. We need to understand that all major emitters are doing their bit and then verify that what has been foreshadowed has been delivered.

My general point here is this. Yes, the international climate change negotiations appear endlessly protracted. After the disappointment of Copenhagen, it is no longer fashionable. We have fewer teenagers (often middle-aged “teenagers”), running around in polar bear costumes at international climate change negotiating meetings shouting at negotiators. Curiously perhaps from the perspective of so-called ‘activists’, this seems to have helped rather than hindered the negotiations.

I have just returned from a climate change Ministerial meeting in Pretoria and attended in Washington the Major Economies Forum, or MEF Ministerial Meeting, as a guest – New Zealand, by even the most generous assessment, hardly qualifies as a ‘Major Economy’.

Here I think the basis of a reasonably robust deal is being laid, building on the fact that at Cancun we got mitigation pledges representing some 80% of global emissions and 90% of world GDP, though it is difficult to evaluate those professionally. There are other things to do of course around the issue of the aggregate level of ambition and a set of other issues outlined in what is known as the Bali Action Plan. It is all doable.

We are not there yet. The Ministerial meeting in Durban at the end of this year is not assured of success, and will certainly not be the conclusion of a new Treaty. In short, this negotiation, even in the event of a high level success at Durban, has some way to run.

We are, in any event, probably looking at something more flexible than a Kyoto type deal with broader coverage. It cannot be just a ‘pledge and review’ or ‘bottom up’ deal in which emitters simply declare what they intend to do, what gases are to be covered, and create their own accounting rules. That would imply no structure, no set of multilaterally agreed rules, around those pledges. But we are not blocked. We can still surprise the cynics. There is a basis for a multilateral deal emerging that will establish coherence amongst countries’ efforts on the climate change front.

The Multilateral Trade Negotiations

We are well and truly stuck in Geneva with the Doha Development Round. I do not think there is any country in the world that has put a greater effort into the WTO Round than New Zealand, starting with our Ambassador in Washington, the Rt Hon Mike Moore who is with us today. Mike was the Director General of the WTO when the Doha Round was launched. I have chaired at an earlier stage in the Round both the Rules Negotiating Group and the Agriculture Negotiating Group. Other New Zealanders, Crawford Falconer and David Walker, have played similar leadership roles. Do not mistake my realism for lack of commitment. Personally, I have contempt for wishful thinking. No good ever comes of it.

So where are we? Some may want the Ministerial meeting at the end of this year to deliver a Death Certificate. I don’t think that is going to happen but I do not want to make light of the profound negotiating difficulties.

The first order question then is – have we entered a new period in which the very idea of incremental trade liberalisation is being challenged? The deep anti-trade lobbies love to pretend that what is called ‘The Washington Consensus ‘is dead and there is a movement away from open markets.

Well, bits of the Washington Consensus may well need reframing – it is hard to argue in the light of economic events that we had the ‘best of all possible’ policy frameworks for dealing with, say, managing asset bubbles.

So bits of the Washington Consensus may need rethinking or re-framing. But there is no case for re-thinking one part of it - the underlying premise of the last 50 years that open markets work best on trade.

The developing world has made extraordinary progress in the last quarter of a century, bringing hundreds of millions of people out of absolute poverty. Export-led development strategies have been at the heart of much of this and that would have been impossible if they had been facing the type of trade barriers in place after the War.

Nor is there any strong evidence that Governments, both developed and developing, have reached a different conclusion. If you judge by their actions, few Governments want to turn their backs on advancing the frontier of trade liberalisation – though I do respect the fact that North Korea has a different view.

The evidence for my orthodox conclusion, in my view, is very clear. 2009 – the year of the sharpest contraction in the global economy in seventy years – showed a high degree of respect for the relatively open trade system, in spite of obvious large pressures to engage in protectionist measures. No-body wanted to undo the achievements of the past.

Avoiding going backwards on trade is one thing; pushing the trade liberalisation agenda forward is a different matter. That remains deeply difficult in terms of political management. But advancing the frontier of trade liberalisation always has been acutely difficult – talk to any veteran of the Uruguay Round, the Tokyo Round or any of the major regional trade negotiations like the NAFTA.

It seems clear to me that in spite of these familiar difficulties managing new liberalisation, the determination of Governments to pursue trade liberalisation through regional trade agreements continues unabated, particularly in the Asia Pacific region. My own Government, as strongly attached to the WTO and multilateralism as any Government, is pursuing multiple trade liberalisation FTA agendas with many like-minded developed and developing partners.

So I don’t think we are dealing with a shift in underlying philosophy, principles or thinking on trade. A lot of good people have put huge commitment into this Round. But in spite of all these efforts, the Round has completely lost momentum. In trade negotiations, as in life, momentum matters.

I do not have a magic solution as to how to recreate momentum. It is clear that the issues which the Doha Development Round sought to address have not gone away. On many of them, it is also clear that any solution will have to replicate parts of what is on the table and informally understood as in the right zone.

In agriculture, for example, we will never have a deal that does not involve a radical reduction of trade and production distorting internal support or the elimination of export subsidies. In non-agriculture market access, any solution will need to involve a degree of harmonisation. We still need to advance the frontier on services trade, fisheries subsidies and so forth.

It is no longer sufficient to expect leaders of the developed world to close the gap on their own, as they did at Blair House in the 1990s when the final crude but necessary decisions were taken to close down the Uruguay Round. I remain convinced that we will eventually need a ‘New Blair House’ to complete the Doha Round, but it is inconceivable that it can be just the EU and the US to do the final deal.

It is a statement of the obvious that we are living in an age of profound transition. During this transition period, in which power will be shared among several large developed and developing countries, the same habits of a shared sense of responsibility for the system need further development. The system will never work if the major players, developed and developing, do not add to their legitimate individual ‘country position’ a deeper sense of responsibility for managing the system as a whole.

Largely for this reason, I am sceptical that the way forward lies in re-engaging the negotiations in a formal way with regular negotiating meetings. For the time being, this will lead nowhere since formal negotiations only succeed when the informal negotiating process is moving forward under the surface.

The informal process can never in itself invent a solution on a blank piece of paper and then try and impose a made-to-measure ‘solution’ on the body politic. Believe me, I have seen that tried and fail many times. But the process of building up convergence, which leads in due course to formal multilateral agreements, necessarily starts informally and quietly.

Nor would further ‘high level political appeals’ produce forward movement. Here, I recall the G20 meeting in November 2008. The greatest political leaders in the world met here in Washington and issued a clarion call for their Trade Ministers to go to Geneva to complete the Round expeditiously. Not only did this not happen, the Trade Ministers concerned did not even turn up to try.

As the new Trade Minister of my country, but having resigned as Chair of the Agriculture Negotiations some three years previously, I turned up in Geneva in December 2008 after the Poznan Climate Change Ministerial just to try and find out what on earth was going on. I think I was the only Minister who did make it to Geneva. We are not going to solve this multilateral with more firm communiqué language. Been there, done that.

People have to be patient. Yes, I appreciate that after a decade that will sound a bit flat. But that is where we are. It apparently took the French and Swiss Governments eleven or twelve years to negotiate a small exchange of territory to build the airport at Geneva. I know a negotiation in New Zealand around establishing a higher level of marine protection in a pretty harbour setting that has been going 20 years. The Doha Round is a little more complicated.

I have no doubt that at the end of the year in Geneva we will need a political formula that reaffirms the need to conclude this negotiation. This will involve some elegant language that Geneva negotiators are skilled at producing. But whatever it says and whatever diplomatic format used to capture collective thinking, I am equally convinced that the way forward will lie informally.

We need some quiet conversations amongst a range of countries, most particularly the most powerful developed and developing countries, to explore some new thinking. We have tried in recent months to see if we could conclude the Doha Round on the basis of a smaller package – the so-called the ‘Doha Lite’ approach. I applaud those who made the effort and it may yet produce some results. But even the most enthusiastic advocates of that approach will acknowledge that this is just maintaining things in a holding pattern. In terms of the big picture issues facing a rapidly evolving world trading system, the only solution that can work is a larger, not a smaller, package.

And that, ladies and gentlemen, raises a most uncomfortable thought. That is, what some Governments might have thought was sufficient negotiating flexibility in say, 2008, might not be sufficient to get us over the line tomorrow – and I will deliberately not try to define ‘tomorrow’. Surely we have collectively learned the lessons about the utter uselessness of formally negotiated ‘time-lines’.

This is not a perfect time to see such a discreet conversation being brought to a successful conclusion. There is a phrase in Latin – primum vivere, deinde philosophare – survive first, then philosophise. Right now, the world, particularly the developed world, is focussing on survival. That is putting it a little too dramatically. But all eyes are certainly focussed on getting through the macro-economic and financial crisis that began with the collapse of Lehman Brothers in late 2008 and is still not behind us.

Logically, this should have nothing to do with advancing the frontier of multilateral trade liberalisation. Indeed, concluding the Doha Round would stimulate growth and productivity and help in the recovery. But who said this would be decided by logic? There is an unmistakeable human element to this that cannot be ignored.

In the first instance, let me repeat me central point: we need a series of off-line, quiet conversations amongst professional negotiators designed to build up the basis of some possible new understandings that might lie behind a bigger package. But it might also be helpful if we had some new thinking that is quite separate from the negotiating process.

I do not think this needs to be from political personalities at this stage. That would be for later. Nor, frankly, do we need distinguished academics explaining once again the theory of comparative advantage to us all. We practitioners sort of ‘get it’.

When I and my senior colleagues reflect on the state of play we are convinced that the ‘development dimension’ is fully understood. There has been some corridor discussion about ‘dropping the development dimension’. I regard this as ridiculous. It would cause a political explosion and lead nowhere in any practical sense. This is the Doha Development Agenda and there is no case for revisiting that.

The development case is well made. What we think is lacking is business support to complement it. Bar a few groups, there never has been sustained pressure on negotiators from the international business community to succeed. This is in marked contrast to the previous Uruguay Round, where there was a great deal of business pressure on negotiators, and more importantly, their political masters.

That was a quarter of a century ago and since then the character of international business has changed radically. That change is best summed up in the phrase ‘the global supply chain’. It describes the extraordinary phenomenon of the growth of trade in intermediate goods and services, not final goods and services. What is stamped ‘made in China’ or ‘made in Europe’ as the final good or services entering, say, the customs territory of the United States, will typically involve inputs of goods and services from numerous countries, including the United States. The brilliant study of the Apple i-pod that I mentioned before is simply the best known example of this massive paradigm shift. Furthermore, the idea that the emerging economies are delinked from the great developed markets of Europe and North America is deeply flawed. We are all in this together.

Frankly, I do not know whether the channels or institutions of global business opinion exist to channel that enormous shared business interest in the multilateral trading system into political pressure. But one thing is clear – it could not just be any longer a trans-Atlantic conversation. We have long ago passed that point.

This is not the time to explore such an idea because I do not sense there is any political space to move forward in the immediate future. This is, I admit, a highly subjective political judgement and others may well disagree. But right now there is not the appetite to recreate momentum and attempts to ignore that bedrock reality resulting in yet another failure can only set the long term endeavour back.

I remain forever the optimist. I cannot see clearly through the fog to a solution. But what encourages me to persist in the admittedly elusive search for a way through is the absence of any serious retreat by Governments from open markets. Yes, we are politically blocked now and all eyes are on surviving the current deep currency and other macro-economic disturbances.

That said, I am a great believer in persistency and the individual creativity of negotiators. The case for multilateralism in trade is as strong as ever, given the ever tight economic interdependence summed up in the phrase ‘the global supply chain’.

I am sure we will get there and the Doha Round will not be the final high water mark of multilateral economic diplomacy. The ‘aquis’, or the accumulated achievements of past multilateral negotiations, could not withstand the erosion over time that such a permanent impasse would create. There is nothing in human and political history that supports the alternative view that ‘this is as good as it gets’ is a long-term sustainable position.

Unfortunately, this will just take a little more time, a bit of new creative thinking about what a bigger package might look like, without abandoning the need to address the remaining trade and development problems of the 20th Century that the Doha Development Agenda was meant to address.


There are clearly some broad themes underlying both of these two great multilateral negotiations. First, and it is almost a truism, we need both of them to succeed since finally there is no alternative to multilateralism. This is more obviously the case for climate change - please recall my point about unilateral action, even if undertaken by a huge country emitter - cannot possibly deal with the long-term threat from AGW. Only collective action can fix that problem.

But it is also true for trade. There are certain things that can never be done in bilateral FTAs or regional groupings that can only be done multilaterally - particularly in the rules around subsidisation, contingency protection and, by definition, global dispute settlement. Second, all these regional trade agreements - and I am fully supportive of them - depend on the global system of liberal rules to keep them coherent and reduce the discrimination inherent in them.

So the first order conclusion is the most obvious and most important: we can't just walk away from multilateralism in climate change and trade because it's heavy sledging politically. The job will have to be finished.

Second, I believe the way forward in both is through patient, incremental forward progress. Even if we need to fix our sights on a bigger global deal to find a politically feasible way forward on trade, this remains true. To those who spend their lives looking for a dramatic gesture or the quick fix - sorry, find another profession. Neither trade nor climate change are fields for those who are into instant gratification. In reality, the chance to update a global system of rules around both trade and climate change comes up about once every decade or more. It takes years to negotiate a politically acceptable package, additional years to phase in the full results of that package, and it is never going to be good enough to satisfy everyone.

Neither the GATT before the WTO or the WTO today, nor the UNFCCC are, or ever were, agents of revolution - it is about evolutionary change. I am sure that if we put every one of the eight previous multilateral trade rounds under a political microscope today we would conclude that each one of them had been 'inadequate' from one or other perspective. For heaven's sake, it took seven global rounds before anything serious was done on agriculture, or before services were properly integrated into the global architecture. Similarly, with respect to the UNFCCC, it is now obvious that the Kyoto Protocol, by failing to capture a broader share of global emissions, can not possibly be considered a sufficient response today. But it is inconceivable that we would be in the position we are in today where we have, in the Cancun Agreements, pledges covering 90% of global GDP and 80% of global emissions without the first tentative steps forward taken by the negotiators of the Kyoto Protocol.

Third, both of these negotiations are ultimately influenced strongly by public opinion, but public opinion waxes and wanes and works in different and subtle ways. Paradoxically, in the multilateral climate change negotiations we are making more progress in the post-Copenhagen phase now that the manufactured glare of public opinion has waned. Professional negotiators can get on with their job of putting an agreement together instead of competing in an international beauty contest in which first prize went to those who would call for palpably impossible timetables and objectives, believing that 'political pressure' alone would force through an agreement.

In the field of multilateral trade, we have lost our audience. They have got bored with the WTO. It is obvious. But political markets have not lost the plot more generally on trade when advanced regionally and they clearly accept the value of the WTO acquis - the past achievements of previous multilateral rounds which stop wholesale backwards slippage.

Having lost momentum, those of us who work in the long-term, have to accept that this is not the moment to start yet another false move to 'revitalise' the Doha Round. It won't work and will only make it more difficult later on to achieve a recalibration of the negotiation, which will have to be prepared through quiet and informal discussions. In the wider world, all eyes are now on getting through the genuine crisis that exists in world debt and currency markets. Across town in Washington this week, Finance Ministers and Central Bankers are meeting and the mood is sombre to say the least.

But if we can avoid meltdown, I suspect that in a year or two, public opinion will be ready, so to speak, to 'go back to school' - to value once again traditional economic orthodoxy about debt and fiscal prudence, the importance of productivity enhancement, the value of international policy cooperation and the need to keep multilateral platforms updated to reflect current power realities. It is not time to sign off on multilateralism yet.

Fourth, and finally, both the trade and climate change negotiations need leadership. But it is facile to expect this to come solely from the traditional centres of political power in the developed world, the US and the EU. The emerging economies must now assume more fully their leadership role. I appreciate this is not straightforward. For example, India is both a first world economy and the number of people in India living in absolute poverty is simultaneously greater than the total numbers of people living in Least Developed Countries.

This is true but finally we need to recognize a broader reality. Thirty years ago the then USTR, Bill Brock, started to talk about the 'level playing field'. Reading between the lines, he was saying essentially that the United States had done most of the 'heavy lifting' on trade over the previous four or so decades. I am sure that the United States has in no way lost its sense of political responsibility for making the framework of international cooperation work and work effectively. But the US cannot do it on its own ‑ that day has passed ‑ and needs political support from the rapidly growing emerging economies. Small countries like New Zealand are ready to provide that support, but the real push needs to come from within these new centres of political power.

Thank you.