Tal
House of Sweden, Washington D.C. 1 mars 2007
Sten Tolgfors, Handelsminister

Anförande i House of Sweden, Washington D.C: Challenges for Global Free Trade

Ladies and gentlemen,

We need to put the Doha Development Round in the context of globalisation.

Globalisation is not something that has already happened, and is over and done with. Instead, it is a process that is only getting started and it changes its features constantly. More importantly, we are only starting to see a new, deepening wave of globalisation due to the rapidly growing economic weight of the BRIC countries in the international economy. This goes for both trade and direct foreign investment.

Globalisation is deepening due to the potential for increased productivity offered by global production chains. There is also the accelerated diffusion of technology achieved by falling communications costs and innovative forms of business organisation.

The World Bank projects that global economic growth will be higher in the period 2006-2030 than it was between 1980-2005. In almost every growing economy, the importance of trade will rise, continuing and adding to the trend of the past two decades. The growth in trade ratio over the next 25 years will be powered by a new dynamic in trade in services. Global trade in goods and services is likely to rise more than threefold.

Further, global growth will increasingly be powered by developing countries. Some of them will become main drivers of the global economy. The share in global output of developing countries will increase from about 20 per cent to nearly 33 per cent.

Development is important for freedom and democracy. Closed societies rapidly become economically outdated in an interdependent world.

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I am a friend of market economy and private ownership. I dislike market distortions. I believe that the naturally given and self-created comparative advantages should be allowed to allocate resources in the most effective way.

Free trade is a cornerstone of Swedish policy. Swedish prosperity is built on international trade and the ability of our companies to compete in global markets. Exports and imports correspond to about 90 per cent of our GDP.

We need to take on the challenges of globalisation by increasing our own competitiveness. The sometimes negative effects of globalisation, for instance the factory closing down and production moving abroad, can cause anxieties. And we need to do a number of things to deal with this.

We can't compete with low wages. We must compete with the quality of our goods and services. We must move up in value added in our production when the BRIC economies compete with low cost production. We have to compete with a well-educated labour force, resources for research and development, well organised production, leadership and communication. We also have to show political leadership and point out the positive sides of globalisation.

Building or maintaining barriers will only reduce our ability to cope with global competition in the long run.

I am a multilateralist and a friend of the United States. We are interdependent. Swedish companies create 200 000 jobs in the US. In Michigan alone our companies created
6 000 jobs last year. I also believe in common values of democracy and a free economy. We need to work together.

A strong, rules-based multilateral system is the best vaccine against protectionism. This is important, especially when the centre of economic gravity is shifting and we virtually see "new kids on the block" with, for example, the BRIC countries.

To Sweden, the World Trade Organisation is the first and foremost forum to negotiate rules that provide stability and predictability in the global economy.

A recent Swedish study shows that what is on the table right now is worth roughly USD 117 billion per year in welfare gains globally. We're talking USD 400 per Swedish household. And this is not taking into account dynamic effects.

For the US, it would give opportunity for improved market access to key emerging markets such as Brazil, Argentina, India and China. Not only in agriculture but also in industrial goods.

Agriculture is the sticking point to solve in the negotiations, even though its share of world trade is limited - less than 8 per cent. The EU has offered to substantially lower both agriculture subsidies and tariffs.

But more needs to be done, both by the EU and the US. An important responsibility falls on the US to come up with a good offer on domestic agricultural support.

Even though agriculture is the hardest nut to crack, the negotiations on industrial goods and services are of far greater importance for both our countries. To give just one example, recent studies show that 65 per cent of Swedish welfare gains from a successful Doha round - 65 per cent! - will come from liberalisation of trade in industrial goods.

In the area of industrial goods, a top Swedish priority is to get an ambitious coefficient. In our view, five for developed countries, or at least not above ten. And for developing countries, not above 15. Future export potential to the emerging markets requires a coefficient of 15.

In addition to an ambitious formula, we see a need for sector agreements. (For Sweden, sectors such as forestry, pharmaceuticals, chemicals and electronics are of high importance.)

Finally, in the area of industrial goods, non-tariff barriers are of tremendous importance. Many Swedish companies name NTBs as their main priority.

The service sector corresponds to 70 per cent of the Swedish economy. There is a tremendous potential in the trade in services.

Trade facilitation is of key importance to global trade. It is therefore important that it is part of the final package. I would also like to emphasise that further refinement of the anti-dumping instrument is an important issue for Sweden.

A failed Doha Round would be a serious blow to the multilateral system:

1. It would mean that we lose the opportunity to better integrate emerging economies like China, India and Brazil in the multilateral system. In the longer run, it would also lower the attraction for new members to join the WTO. Russia is one major economy that both our countries share an interest to see integrated into the WTO.

2. We must protect the multilateral trading system.

I don't want to see the world divided into separate trading blocks, depending on bilateral FTAs. FTAs are good if added on top of a Doha deal. They can be broader and go further, but should not be allowed to inflict on the WTO.

I could rest assured that Sweden belongs to the largest and most important economic area in the world, with 550 million consumers. I could rest assured that any emerging market would see the need for a bilateral agreement with us. I could rest assured that the absolute majority of our export goes to the European market and markets with which we will have bilateral agreements. I do not.

Instead, I want the EU and the US to cooperate. Together, we are 60 per cent of world GDP. But we are also obliged to ensure a substantial agreement for developing countries.

3. There is a substantial risk that we would see an increase in disputes within the WTO. The US and the EU are the most likely targets for such disputes. It is better that negotiators control the agenda rather than the judiciary.

(Some world leaders would celebrate a failed Doha Round. They would blame Western economies, and argue that we have let the developing world down.)

Politics may not be globalised yet - but companies are. We need to get this deal done. This is the time. It's for the better of both our countries, as well as world economy.