U.S. and Hong Kong (1999)

Transcript of Informal Remarks by
Frank Loy, Under Secretary of State for Global Affairs
to the Asia Society
Hong Kong
Friday, December 17, 1999

(Begin Transcript)

Thank you very much, Ronnie. I must say that the notion that the test of a superpower is whether you can get people in Hong Kong to come to breakfast at 8:00 is an entire new challenge. I also have to say that I am very honored that such a distinguished group has met that challenge. When Ronnie goes and talks about my past, and he mentions PanAm, which went bankrupt; the Penn Central, which came out of bankruptcy; and my three times in the State Department, it worries me as to what he thinks exactly my role is, or my capabilities are. I like to think that the State Department is here for a longer period than either of the other two organizations.

I am very pleased to be here in Hong Kong and to talk to the members of the Asia Society, because this is a premier organization that permits us to discuss in a frank and informal way the relationships between the United States and Asia -- the relationship in particular between the United States and Hong Kong and China. And this is a city I have been to a number of times and where I always have been received with great warmth. I am glad to be back again, and I feel the same warmth.

As you may know, I'm here at this particular time to represent the United States at Sunday's reversion ceremony in Macau, which is about to begin a journey similar to the one Hong Kong embarked upon in 1997. I must say we are very optimistic that Macau will prosper as a Special Administrative Region of China, that its institutions will grow and prosper, and that it will take a similar path to that of Hong Kong. We will be watching with great interest and great hope as that develops.

You know the story of Hong Kong since 1997 better than I do, but I must say that we, from our vantage point, find it a heartening story. This is by all indications a marvelous place to live, and to work, and to do business. The freedom of citizens to express themselves here, and to worship as they choose without fear of persecution, and to be part of the civic life, those are very important attributes of the vibrancy and the health of this city, and we are pleased that it continues to grow.

Yesterday, the vice minister of China came here to talk about Chinese accession to the WTO, and in the few minutes before breakfast I was asked a number of questions about our view of the WTO, what we thought happened in Seattle, what we think must happen in the follow-on to Seattle, and what we think about the importance of Chinese accession to the WTO. And so while that wasn't really going to be part of my remarks, I think I'd like to spend a few moments addressing these issues because they seem to be matters of considerable interest here.

A number of us spent the week in Seattle, and in some ways a dominant personal reaction to that week is one of disappointment. Disappointment that we did not succeed in pulling together an agreement. In part I say this because I thought that in many respects we were actually relatively close. You never can tell whether it would all have come together in the end. But certainly one of our great enemies was time. As Ambassador Barshefsky said at the close, we were faced with a remarkably large number of issues, novel issues, complex issues. And, we were faced with -- and this is a very healthy development -- an assertive group of countries, mostly developing countries, that previously had not been either as numerous or as assertive.

Mike Moore, the director general of the WTO, remarked that in Seattle there were more countries represented in what's called the Green Room (the smaller grouping that the Chair pulls together in order to actually hammer out agreement on various aspects; it's an institution that the WTO and previously the GATT had used for years) than there had been total members of the WTO or the GATT, 10 or 15 years earlier. Well, the complexity of the issues and the number of countries represented and their desire to play the appropriate role made it very difficult to figure out how to get to an agreement. And to some extent, I would say that those procedural issues and the time problem were greater obstacles than the differences in substance that remained at the end.

Before going on to the questions about what were some of those substantive differences and how do we address them next, we ought to talk about the process for getting to an agreement. We are, in the United States, absolutely committed to finding a way to resume discussions and to come to an agreement. The director general, Mike Moore, is at present having intensive rounds of discussions trying to determine the appropriate path to the future. We won't know really when and how to resume until those discussions and those investigations of Director General Moore have been completed. But we do know that in a world where trade is growing, where in our opinion more and more countries will become -- must become, and it is to their benefit to become -- participants in that trade, an organization like the WTO is critical. If you're going to have trade of the magnitude that now exists (and it's going to continue to exist), it is certainly better to have a rule-based organization in which one is a member that helps determine the rules of the road for that trade, than to be absent.

Why was there such intense opposition to the WTO on the streets of Seattle and, I would say more broadly, in some countries? You might imagine that we puzzled over that a bit, both before and during the event. And it's worth thinking about. One positive way to look at that, and it is frequently expressed, is that a lot of people now know what the WTO is who had never heard of it before, and certainly were unclear as to its function. I agree with that, and I think that's good. On the other hand, I must say that the terms of the debate in the streets and the terms of the debate in the press were, I thought, sometimes not as helpful and not as illuminating as they might be.

In the United States and in many countries there is a genuine feeling that the level of international trade that is taking place implies some loss of control of our own future. That certainly is the view of an important segment of the trade union movement in the United States, and it is certainly the view of an important segment of the environmental community in the United States. It is also the view of others in the Untied States who basically believe that we are living in an age of excessive consumption. There is an equation that goes -- more trade equals more wealth, equals more consumption, equals more environmental degradation. Those were views that were frequently expressed in the media. One of our concerns is that this would seem, to me at least, to be a quite distorted view of what's at issue.

Let's talk a little bit about the issues of trade and labor and trade and the environment discussed in Seattle. One of the things that is important in thinking about what was sought to be accomplished at Seattle in the area of trade and labor is how modest our objective was. I want to make as clear as possible that we were not seeking to impose any level of wage rates, or any minimum level of wage rates, or to affect wage rates in any respect. We recognize that countries at different levels of development have different wage rates, and that this is an important element in the overall economic competition. What was suggested in the area of labor was that there is -- and it is hard to argue against this -- a relationship between levels and magnitudes of trade and the rules therefore, and the condition of working persons all over the world.

In 1998 the International Labor Organization in Geneva adopted with essentially unanimous consent core labor standards. The ILO, as most of you may know, is an unusual organization in that it has a tripartite structure in which countries are represented by representatives of government, representatives of business and representatives of labor. And they came to the conclusion that there are certain core standards that they agreed upon. They include, for example, that there should be no forced or exploitative use of child labor, there should be no forced labor at all, that there should be no unreasonable impediments to or restrictions to the working men's right to associate among themselves. They did not address any particular wage rates.

We did not say at Seattle that those ILO core standards ought to be incorporated into the WTO, because there was much opposition to that. There was a feeling that the ILO had acted correctly where it did, but that was a different issue from that addressed by the WTO.

Our proposal was that there be a working group in the WTO that would look at the relationships between trade and various elements that affect labor, including the kinds of labor standards I just described involving child labor, and forced labor, and involving rights of association, but also including the social safety nets of countries and the need for some level of protection against unemployment.

This was to be a study effort to determine how those matters related to each other so that in the future one could talk about that with somewhat greater clarity and less hyperbole. There was on the part of a number of countries, including some from this region, a concern that this was a kind of Trojan horse, that in the end there was going to be an effort to undermine competitive advantages of differential labor rates. And the issue was discussed quite fully. It was not clear whether we would have come to an agreement at Seattle on this. In the end, we might not have achieved exactly the kind of working group that I described, but I think we might have started the process of discussion.

I would just say that in our opinion that is one of the losses of not coming to an agreement in Seattle. I would hope that we would be able to re-start that discussion when the time comes. And I say that for three reasons. First, I think everybody in this room would agree that the kinds of labor practices that are condemned by the ILO core standards are not desirable for humane and modern countries to adopt. Second, that there is a relationship between trade rules and the lot of the working man. And third -- this was not a part of the discussion at Seattle, but it is a fact -- that in our country, and I think this is true of a number of industrialized countries, the support by the body politic for an expanded trade regime can no longer be totally separated from considerations of the impact of that trade regime on the working man and on his standard of living.

It's very difficult, as everybody I would guess here understands, to explain to a broad public what the benefit of trade is. It was dramatic, remarkable, that at Seattle, for example, that there were in the streets at times representatives of the Longshoremen's Union, people that facilitate shipping commerce, and machinists from Boeing. There were, even -- I only saw this on the tube -- airline pilots. The others I met on the street. Now if there are three groups that rely on trade for their living, it is shipping, and Boeing workers, and the airline pilots. But they were presumably expressing a form of labor solidarity with others who were differently affected. All I'm saying is that it is important that we address the labor issue if we in the United States are going to be able to continue our support of the liberal trade regime, a regime which, in our opinion, has benefited us enormously as it has every country that participates.

Moving on to the question of the environment and the WTO, let me express what we were trying to accomplish there and what fears we were trying to address. In the U.S., I would say the biggest single fear is that the WTO and its rules and its decision-making apparatus will make it impossible for the United States, or any other country, to enforce its domestic environmental standards. There are other fears, some of them real, some of them quite bogus, but they're important. And behind that fear is the feeling that the WTO is a very secretive organization run by a priesthood of trade gurus who are absolutely uninterested in either environmental progress or in making public the way they do business.

Now, much of that fear is overstated and much of it is plain nonsense. But it's there, and there is, as there is in so many cases, just a core of truth in much of it. And so our first objective was to de-mystify this organization and to make it much more public. I must say that we did not have an easy time in achieving that. Our aims, again I would say, were relatively modest. We wanted first of all to -- this is a terrible word -- to "de-restrict" the papers that are circulated in this organization so that other people could read them. We also suggested some affiliation, some role, some connection between the WTO and other international organizations, and we were successful in the partial sense that there was an agreement signed (a memorandum of understanding) between the Director General of the United Nations Environmental Program and the director general of WTO. Eventually, we would like to see an even closer relationship, some form of observer status, or the like, for these United Nations and other organizations.

There's a committee in the WTO, a committee on trade and environment, which was created in the final act of the Uruguay Round, at Marrakech. It has been, to put it undiplomatically, a bust. It has not succeeded in achieving the kind of illumination that it was intended to achieve, and one of our efforts was to define its role in such a way that it could play a better role in the future. And specifically, to make sure that it would express its views on the environmental consequences of trade actions taken by other parts of the WTO.

The last part that we tried to address -- I put this under the environmental category, although it was desired by many others -- is to reform the dispute settlement mechanism. The dispute settlement mechanism is an absolutely critical element of the WTO. It's what gives it much of its strength and much of its authority, and we would say, altogether, it has been an effective instrument. I think it has had 140 cases since the WTO was formed. We've been a party to a number of them, both as a plaintiff and as a defendant, and we've won some cases and we've lost some cases. And when we've lost them, we have accepted that as part of the rules of the game and we have adjusted our ways accordingly.

Unfortunately, this mechanism is also part of the mystique of the organization. It operates in private. There are no observers to the panel proceedings, no observers to the appellate proceedings. The submissions of the parties are not made public or not made public until long afterwards. There is no right to file an amicus curiae brief; we think that is very important, because often the interests that are involved in the dispute settlement mechanisms are interests that involve others than the parties and provide ideas that may not be in the decision-making process if they are not introduced by outsiders. And so we said that amicus curiae briefs ought to be a matter of right, in order to illuminate the process more fully. All those things which we grouped under the heading of "transparency" proved to be difficult to achieve. And, I would say to the business community here and to the others, that -- I hope that you would agree -- it is in our interests if we find the WTO an instrument of value to us, that we all work to convince governments that these kinds of reforms are necessary in order to give to this organization the legitimacy and the importance that it deserves.

Maybe that's enough on the WTO. I'm not going to go on too long; I can see you're worried right there. Let me say a couple more words about several other things in my portfolio. Ronnie was either kind enough or clever enough to not try to describe what I do in the State Department, but I will because this is relevant to the last comments I'll make.

In 1993, President Clinton created the post of Under Secretary for Global Affairs to recognize the proposition that diplomacy in the 1990's and in the next century is going to have a somewhat different focus from diplomacy going back to the age of Metternich. Specifically, that the political and security issues, which of course will be important as long as there are nation states, are not the only issues that states must address aggressively and thoughtfully. And among the other issues that have perhaps not had the highest profile until recently, are the issues of the environment, of human rights, of the promotion of democracy, of dealing with refugees, of international humanitarian responses to crises, man-made or otherwise, of the growing international trade in narcotics, and of the unfortunate growth of international or trans-border criminal activity. This shakes some of our societies, and some of them are absolutely undermined in a very profound way. These issues, which were not country-specific or even region-specific, are the global issues with which I deal.

One of these that is very relevant when you come to Hong Kong is rule of law. We have emphasized our desire to be helpful in upgrading, if you will, international standards of rule of law in all countries, including ours, and illuminating those areas where there are developments in countries that actually hurt our efforts to grow rule of law regimes.

One of those efforts was highlighted earlier this year by a conference convened by the Vice President of the United States, Al Gore, on the issue of corruption in governmental activities. It was a remarkable session. Seventy countries attended, at very high levels, and talked about corruption in every country. Everybody told a story, and no one was exempt, because it is truly an international problem that affects us all in varying degrees. There was remarkable agreement that two things had to happen, and one of them was beginning right then: This subject had to cease being a taboo subject. If you couldn't talk about corruption publicly you weren't going to defeat it. And second, the corrosive, damaging effect of corruption had been very much underestimated. There were countries that simply could not attract business investment because of the level of corruption, and often those countries had distribution of income differences that were destabilizing the country, destabilizing it badly, because of levels of corruption.

I needn't stand here and name them because I would guess that you will each recognize some countries that are in that category. But it was an important part of our effort to take these global issues and bring them to the center and begin to address them.

I might just say one more thing about corruption. One remarkable thing in this area is the significance of a particular NGO, Transparency International, which didn't even exist a few years ago, but brought to the attention of the world the facts about corruption, the consequences of corruption, and began to talk about it in a public way. I can't think of very many NGOs -- landmine NGOs would be another example -- that so quickly took an issue which was underground and made it visible and made it a subject of discussion by everyone. It is a remarkable indication of the strength of a well-led NGO.

We have programs that seek to address rule of law issues in other ways. I was recently in a country where we discussed a lot of issues that are affected by a failure to have a solid rule of law regime. I have never been in a single place where it struck me so dramatically that every single problem -- from getting the airport rebuilt, to building a road, to getting physical facilities built, to getting hospitals opened, to providing health care - every single part of their life - was badly influenced by their failure to have a rule of law regime, by their having a judicial process which was not trusted by the people and not trusted by the business community.

I bring that up because the rule of law seems to me to be very closely related to the subject of environment that I mentioned earlier. This is an area where, in this part of the world, various significant steps are being taken. I'm very impressed with Hong Kong's efforts to address its environmental problems and very heartened by the recent statement of Chief Executive Tung in October, where he highlighted the environment of Hong Kong as a key element in developing a healthy future for Hong Kong. We would certainly agree, and our sense is that one of the things that is important to achieve in environmental progress, quite aside from political commitment, is that you have the laws and the legislatures to adopt those laws, that you need the administrative capability to enforce them, and anti-corruption efforts that make it possible to do that. And I would say that you have -- and this is maybe a peculiarly American viewpoint -- an NGO community that holds the government accountable.

I'll tell you, anybody who comes out of Seattle and praises the NGO community, that has beaten them up rather badly I would say -- verbally I mean -- has to really believe in that community. There are times when, obviously, we in government find it distressing that we haven't been more persuasive with that community in that they continue to scold us when in fact we think we're doing exactly the right thing. Nevertheless, it is absolutely true that in the task of addressing some of our most critical problems, a healthy NGO community is a great help. In the United States, I will state flatly, we would not be where we are (and we're not nearly where we ought to be yet) in terms of our international and national efforts on environment if we did not have an aggressive, thoughtful, frequently very competent NGO community.

Let me say one last word about environment, in particular related to China, and that is the area of climate. One of my tasks is to lead the U.S. effort to achieve an international agreement on climate begun in Rio in 1992, that came to an important mark in 1997 with the Kyoto Agreement on Climate Change. We are heading toward a hopefully decisive meeting of parties in The Hague in November of 2000.

I think it is very important for everyone, very important for all countries, including China, that there be an agreement that will permit countries to implement the various provisions of a climate agreement. A failure to address climate is going to hurt us all. Probably not evenly, because there is an element of luck and chance and geographic location involved, but it is going to hurt us all badly. The cost of failing to address climate is huge. The problem politically is that the harm is in the future, and it is very difficult to come to grips with exactly what has to be done now.

The reason it is so difficult to come to an agreement is not only because the risk is in the future and the efforts have to be taken now, but also because we are addressing such a fundamental aspect of our life: our fossil fuel-based economy. We are seeking to redirect it, and to reduce the emissions that come from that economy, either by using less fossil fuels or by using them more cleanly. We're talking big economic consequences, and therefore everybody is very careful.

The industrialized countries of the world took on explicit numerical targets at Kyoto that they are to meet. The first period the targets are set for is the period 2008 to 2012. If the industrialized countries meet those targets, in the aggregate they will have reduced greenhouse gas emissions 5 percent from the 1990 levels. That's a major accomplishment. It's not good enough in many ways, but it's a major accomplishment if it's done. The important thing is to make sure that an agreement that commits them to do that comes into effect.

Everybody, more or less, agrees however, that that's only half the story. By the year 2030, or 2020 -- it's not clear -- more than half of all the greenhouse gas emissions that are emitted by the world will come from developing countries that are not part of this target obligation that I just described. And so we have to begin to address the question how those developing countries, including China, will participate in the world's efforts. China has resolutely made it clear that it is not prepared a t this time to take on a similar target that industrialized countries have taken on, on the ground that, A) the industrialized countries are the ones that caused the concentrations of greenhouse gases that exist now (a statement that is certainly quite accurate), and B) that it is concerned that its economic development would be in some way negatively impacted.

We obviously have to address that second belief, which is not accurate. We have to engage China further in an effort to bring them into the agreement in an effective manner. China is in fact taking very significant domestic steps. There is a moratorium on new coal fired electric generating plants. There is considerable switching from coal to gas. There's a lot that's going on that's very good. The need is to bring them into the international agreement, so that one can truly talk about a global agreement that meets a global challenge. That is our aim and, I hope, will be the aim of China. That is the task that we have in that area for the rest of 1999 and for the year 2000.

Let me stop here, and simply tell you that this has been a partial discussion of some of the United States' objectives in the area that I have responsibility for; slightly selective and slightly warped by the concentration on the WTO. But I was trying, like all entertainers, to get the sense of the audience here and to determine what you're interested in. That is the reason for my focus that I have described.

Let me again thank you for the privilege of addressing you in this informal fashion. And let me say once again that the importance of the relationship between the United States and Hong Kong and the United States and China, cannot be overstated. The existence of organizations such as this, where one can talk freely and frankly with knowledgeable interlocutors, is an important part of our process of communication, and it's a great privilege for me personally.

Thank you.

(end of transcript)