Examination of witness (Questions 60 -
79)
WEDNESDAY 9 FEBRUARY 2000
MR MARTIN
WOLF
Mr Mitchell
60. Mr Wolf, welcome. We have had a division
and the questioning went on rather longer than I thought. We apologise
to you for the delay in getting started. We are delighted to welcome
you because we want the views of eminent outsiders, those who
have got an overview of the scene and certainly your writing in
the Financial Times is to many of us a beacon of light,
particularly in respect of the confused policy towards the euro
of the Financial Times but, more specifically, in the confusion
on animal welfare and attitudes and views that the WTO has given
rise to. Let me ask you not so much what went wrong at Seattle,
that is fairly clear, but what lessons should be learned from
Seattle before the WTO attempts to hold a second ministerial meeting?
(Mr Wolf) I am grateful for the invitation. I should
stress, however, that in comparison with our previous witness
my knowledge of the agricultural scene is minuscule and I hope
you will not test me on it. However, I have followed the trading
system for about 25 years, at some stages more closely than at
present and so I hope I can put some context on it. First of all,
I think it is important to note that a disaster like Seattle is
by no means unprecedented. The meeting that was supposed to end
the Uruguay Round in 1990 was a total catastrophe, the ministerial
meeting of 1982 was an even bigger catastrophe and at all these
stages people assumed that the system was doomed. 1990 was particularly
worrying because there had already been four years of negotiations
in the Uruguay Round and absolutely nothing had happened. I do
not think there is anything particularly thrilling or exciting
about the fact that in starting a new and very complicated negotiating
process, particularly shortly before an American presidential
election, it was difficult to reach agreement. Indeed, the remarkable
thing, and I think that came up in the previous discussion, is
how much agreement there was in important areas, not excluding
agriculture. The reason that these failures have always in the
past been overcome is quite simply that the major players have
recognised that they have a greater interest in preserving a co-operative
rules-based system of some kind than allowing it to collapse.
I am reasonably confident that the same will be true and that,
quite apart from the negotiations which are already underway or
starting on the so-called built-in agenda items, which I am sure
you know about, agriculture and services, that other issues will
be put on the table and at some time, probably after the next
Presidential election, some form of round will start. It is true,
however, that Seattle and the events around it have indicated
that in important ways the environment for the WTO has changed
and the WTO itself is a different organisation from the GATT and
these do create a number of fairly serious problems. I think you
have already covered some of them. First, the membership is vastly
bigger than it was before. This was of course an indication of
stunning success and the reason it is much bigger is that everybody
wants to join when 30 years ago very few countries outside the
core industrial countries had any interest in it. It is much bigger.
It covers a vastly bigger area of trade and therefore of the whole
world economy than it ever used to so the issues that are involved
in it are immeasurably more sensitive and complex by comparison
with what was until the early 1980s essentially an organisation
dealing with manufacture and nothing else. That has enormously
increased the complexity. Third, it has become, as you have just
discussed, a quasi judicial system and a single undertaking which
means everybody is bound by the same rules and the rules are interpreted
through at least a quasi judicial process. Before the WTO was
established it was essentially a negotiating or diplomatic process
and this has enormously raised the heat associated with the outcomes.
You need only look at the sorts of problems raised in the EU and
the way the European Court of Justice operates and its effects,
and a similar thing has happened in the trading system and that
has enormously increased the heat. Finally, because so many countries,
so many issues are raised and because of the quasi judicial functioning
of it, it has become vastly more sensitive in domestic political
debate. When I used to work on the GATT, as I did pretty well
full time between 1981 and 1987, I found it immensely difficult
to interest any human being other than myself and about 100 other
people in the world in this institution. No one understood what
it was or why they should care a damn about it. It is pretty clear
that that is no longer the case but I regard that as the consequence
of a very long-term success, half a century of success, with which
the institution now has to grapple. I am reasonably confident
that it will manage to do so.
61. Thank you. As somebody who wants what I
see as a remorseless drive in a liberal direction, are the rows
at Seattle, particularly President Clinton's own stance on labour
legislation, for instance, likely to stymie the organisation,
and is the inclusion of all these new interests going to stymie
that drive to freeing up world trade?
(Mr Wolf) I would like to separate what I personally
would prefer from what I think will be happen. I think the labour
issue as indeed has already been the case to a large extent with
the environmental issue, can be handled by the establishment of
a committee either within the WTO or jointly between the WTO and
ILO to discuss the overlap between trade and labour. I think people
will discover that the relationship is very complicated and it
is not quite obvious what one should do within the trading system
to deal with it. In particular, I think they will discover, as
I have repeatedly argued, that nearly all the principal issues
one would legitimately be concerned about, the treatment of workers
and poverty in developing countries are not directly related to
or have almost nothing to do with trade policies because the vast
bulk of workers are not employed in exports. A tiny fraction of
workers are employed in exports and nearly all pool workers are
not employed in export activities. They will then conclude, I
believe, that this is an absolutely central development problem
and that the right way to handle it is to orientate development
policies more broadly in a way that raises the real incomes of
societies, including particularly the poor, and improves working
conditions in the process widely throughout the countries. I think
we will find a way round that and similarly in the case of the
environment I think the Environmental Committee has dealt with
quite a number of issues but the fundamental core global environmental
issues are not trade-related. Global warming is not trade-related.
Species diversity is not directly trade-related. If I may put
it in the very broadest sense, what we are moving towards very
very painfully is a structure of global governance which covers
a very wide sphere of the policies of countries which are therefore
very, very sensitive, of which trade is a part, but clearly only
a part, and the overlaps are very complicated but since we do
not have a global government and are not going to have one and
we have such vastly different countries in the world, that sort
of confusion is inevitable and, I think, natural. I do not think
it will fundamentally destroy the functioning of this system.
Mr Jack
62. Can I take you to an article you wrote on
8 December which had this wonderful sentence: "The passion
brought the cranks, bullies and hypocrites to Seattle", and
you went on to talk about anarchists and various other people
who turned up to voice in visual as well as in verbal terms the
views of what one might be looked at as the public in this. A
lot of emphasis has been put by Ministers, certainly in the United
Kingdom, on the consultations they have had with non-governmental
organisations. I would be interested in your thoughts, given what
you have just said about the enormity of where this thing could
go, on how you see the wood from the trees between the WTO responding
to legitimate concerns of matters linked to trade from everybody
else who seems, according to your article anyway, to be free-loading
on the back of the WTO as a grand opportunity to run whatever
cause they want to run.
(Mr Wolf) One friend of mine who is a very senior
official in the US administration very simply says, and I think
this is right, that trade in the WTO has become the lightning
rod for all complaints about the "globalisation process"
which is really about modern economic change. I think that is
understandable though in some respects rather peculiar because
the issues they were concerned with were so obviously second order.
How the system will deal with this? I regard this as politics.
The answer is, one, they will deal with it within domestic politics
presumably by politicians and others, and I consider myself one
tiny actor in this, engaging in argument about all this because
these are clearly fundamental legitimate political arguments.
Second, I hope a similar process will occur within developing
countries. Obviously one of the concerns that some developing
countries have expressed is they have got a new class of northern
actor and they do not necessarily find this very comfortable.
Then there will have to be changes within the system itself in
terms we have discussing about the transparency with which it
goes about it and there will be some very tricky questions about
how the dispute settling process should work, which incidentally
most of which will have the effect of making it more ponderous
and more difficult, not easier, because there will be more players
at the table, not fewer. Finally, and I think it is the most important
issue, we have to create bodies in other areas of global concern
which have comparable status and effectiveness, environment is
the most important, which will be the places where people will
take those concerns rather than taking everything to this.
Mr Mitchell: We will come back to that at the
end. David, you had a supplementary.
Mr Drew
63. It is a rejoinder to that. Clearly politicians
like Clare Short have argued absolutely the opposite to that,
that the WTO is a way to engage in other issues and it is the
only way the developing world will get access to the real negotiations
that take place within the world.
(Mr Wolf) I do not think what I have said and as I
understand what Clare Short has said is in any way in conflict.
I believe what she is saying is that the developing countries
have a very profound interest in market access to developed countries.
She is completely right. As such, the trade is immensely important
for development. All I am saying, and it may sound surprising
from me, is that trade development is not just about trade. In
fact, what I wrote this morning is I believe that open market
access to markets is as necessary but certainly not a sufficient
condition for long-term development. Clare herself has put a lot
of emphasis on the World Bank's role, the HIPC initiative and
things of this kind. It seems to me that trade is just part of
a wider package. I think that is what she believes; it is certainly
what I believe.
Mr Mitchell
64. As politicians we do not always see these
things with the simplicity and clarity of a liberal economist,
small L. When you said that a way will be found to handle them
and inferred that was a question for the politicians, what do
you mean? That they will be kept out of the WTO and they will
not be able to block imports on those grounds? Is that what you
meant?
(Mr Wolf) The specific way I meant is where there
are specific global environmental concerns, the environment even
more than trade covers such a staggering range of quite different
things that it is very difficult to separate, but where there
are global concerns there will be, as there are in many areas,
a global agreement. There are global agreements and some of these
global agreements, quite logically, include trade components.
The Montreal Protocol is a very important example on CFCs. Where
those trade protocols apply they will be applied within the trading
system. Where trade does not arise within the context of a specific
environmental concern, I do not believe it arises in any fundamental
way in the context of global warming, it will not arise in that
context. We do have a series of environmental treaties. I expect
there to be many more and these will have trade overlaps and trade
negotiators will be aware of those and where a trade provision
is included in them it will be enforceable within the WTO. Nobody
has ever, as far as I know, attacked one of the trade conditions
which have been attached to environmental treaties. That is what
I meant. Similar things could apply conceptually if we reached
a global agreement on labour standards. How it would work I do
not know but it is quite possible to imagine.
Mr Curry
65. When we read all about Seattle the impression
was given that here was a sort of politburo of elderly and established
gentlemen sitting inside the building and something called "civic
society" outside representing good causes and things we ought
to be concerned about. I have no doubt Mr Bill Gates is responsible
for a great deal of this. It is perhaps symbolic that the thing
was in Seattle.
(Mr Wolf) Not elderly.
66. Not elderly. Do you think then that we have
moved into a new period where the globalisation of the economic
force is now matched with the globalisation of the lobby? How
do we cope with that? Does it threaten the ability to deliver
the policy? Do we need to restate the bald argument for free trade
which we have assumed is right and is expressed in terms of GDP
growth and expansion of traded goods ahead of the normal GDP expanding?
(Mr Wolf) I think for the reasons I suggested at the
beginning that trade has become, partly for perfectly rational
and good reasons and partly because of general concerns about
economic matters and security and the environment and all the
rest of it, a focal point of popular concern, but what seems to
me to have happened is two quite different things coming together,
both of which are quite natural. The first thing is that what
was originally just a concern of technical trade negotiators became
(already very clearly by the 1970s and increasingly in the 1980s
and the 1990s) the focus of massive lobbying concern by the major
corporations. They were not that involved, interestingly, in the
1940s and 1950s. This is particularly true in the US. And then
in the late 1980s and 1990s non-governmental organisations, which
referred to themselves or are referred to as "civil society",
a designation I do not accept but never mind, non-governmental
organisations which also have perfectly legitimate concerns and
are perfectly legitimate players have also wanted to get in on
this act. Since corporates are involved, why should they not be?
It seems to me perfectly reasonable. They are entitled to put
their views forward and they also operate very effectively globally.
In fact, they are wonderfully good at using the machinery. The
other aspect of it I think, if I may put it here, is it seems
to me one of the other things that has happened is that after
the collapse of Communism and the apparent triumph of the global
market economy those people, some of whom may be in this room
and certainly many of whom are in all our societies, who basically
think the market economy is a pretty horrible idea have recombined
around other causes and the anti-globalisation one is, it seems
to me, the primary one at the moment, again completely and utterly
understandable. How do we deal with it? We deal with it by argument
which is the sort of thing myself and others like me are involved
in and by governments trying to reach some notion of what the
broader national interest is. By and large, I think governments
continue to do so and can continue to do so. They are presented
with a more open, more contested political arena than before.
On the whole I think that is a good thing. I am not against that.
If it makes life more difficult for politicians, that is tough.
Mr Mitchell: Politicians are frustrating you.
We will now adjourn. We will resume as soon as we have got a quorum.
Since we are getting very good crisp answers, it would help if
we can keep the questions the same way.
The Committee suspended from 17.26 to 17.34
for a division in the House
Mr Mitchell
67. Let us resume; we are quorate. Thank you
for your patience. How would you rate the importance of agriculture
in WTO talks as a whole? Assuming that a wider round is launched,
is agriculture going to be the dominant issue?
(Mr Wolf) Agriculture is very, very important and
the reasons it is very important are that, first, it is the most
important product sector which was not affected in any way by
liberalisation until the Uruguay round. Second, it is the most
protected sector in the world of anything, so it has the biggest
distortions in the use of resources world wide and correspondingly
domestically. Third, there are a number of very important countries,
big, small and developing, for whom exporting agriculture is an
important interest. Finally, it is the most important unfinished
business of the last round. So for these four reasons I find it
very difficult to believe that we will get an outcome to another
round which does not include agriculture. How much will come out
of it I do not know, but I do think it is the most important single
component. I am not saying it is more important than everything
else put together, that is not true, but it is a pretty important
component.
68. Do you think it can be treated on the same
basis of other trade, manufacturing trade for instance?
(Mr Wolf) That was in some sense the model which they
were following the last time round in the sense that—
69. Is that model right for agriculture?
(Mr Wolf) Yes.
Mr O£pik
70. The crucial $64,000 question is what would
be the implication of failure for the UK and the EU of the talks,
and I am really thinking about it slightly in terms of the general
outcome, but specifically in terms of agriculture?
(Mr Wolf) If there were no agreement at all?
71. If it failed and ran into the sand.
(Mr Wolf) First of all, there are two forms of failure:
one, there never is a round; and, two, there is a great big round
and it fails—and they are slightly different in their class.
If you assume that the status quo survives and all we are
talking about is changes in the status quo—and that
is a very big assumption—I think the implications for us
would be very modest in the sense that we would continue with
what I regard is a completely insane agricultural policy but we
can afford it and if we wish to continue to run it, we can continue
to run it. We are very rich; we can run it. And the rest of the
world will not get the market access which they have not had for
the last half century, they will continue not to have it, and
the world will continue. Personally I think that the most important
forms of liberalisation in the world have been achieved. This
then gets us to the real core of the question to my mind which
is whether or not a failure of a round for agriculture led the
major players, basically the US and EU, to turn away from the
system as a whole and to move essentially to a bilaterally based
system run on the basis of reciprocal force. I think it is very
unlikely actually that they would do so because I think they would
see the immense complexity and difficulty in all their relationships
that would then ensue. It is clearly against the whole tenor of
development. The most important agreement by far, vastly more
important than anything we are discussing here, is China's WTO
membership and the fact that China wishes to come in suggests
very strongly the opposite view. If it were to lead to a collapse
of the entire rules-based system and everything associated with
it, we would be in a big mess but I think that is a very low likelihood.
I think of it in a different way. If we can pull off a round with
agriculture in it we will have made some further progress to the
cause of a somewhat less irrational farm policy around the world
and this will be a good thing. If we fail we will not have made
that progress which will be sad but it will not be a catastrophe.
72. Very briefly, yes or no, is the implication
of what you are saying that from a selfish short-term economic
interest the EU might not be too upset if the WTO fails?
(Mr Wolf) I have taken it for granted that many in
the EU would be very far from upset if the round failed or never
started and I assume that the negotiating position taken by the
EU in Seattle was designed to ensure that result.
Mr Todd
73. I want to short circuit this slightly. I
think it is clear that you do not believe that animal welfare
and environmental issues and indeed probably food safety issues
in the fairly narrowly defined sense of the word are appropriate
components of a WTO round other than the straight phyto-sanitary
arrangements that are currently in place?
(Mr Wolf) Am I allowed to ask a question? If you can
explain what you mean by the sorts of animal welfare concerns
or environmental concerns that you think ought to be or might
be in such a round, then I think I might be able to provide you
with a better answer. Let me give you one partial answer. If you
think that we could have a negotiation in the WTO which changed
the entire animal husbandry system from top to bottom of India
or China, then I think that seems to me a pretty implausible proposition,
putting it very gently. But if you mean something narrower than
that and I could imagine it, perhaps you could explain what that
would be.
74. The EU attempted to place animal welfare
on the agenda at Seattle.
(Mr Wolf) Correct.
75. And most countries responded by implying
that that was simply protectionism under another term. Would you
share their view, in other words, that that was broadly right
in the EU's published position of what animal welfare meant?
(Mr Wolf) I honestly do not know why in this case
the EU promoted it. I have assumed in all these standard discussions,
labour and the environment, that there is in practice, whatever
I may say in print, a mixture of two motives, one holy and one
unholy. There are genuine moral concerns about the way the world
is run whose essence is a core feeling—which I understand—which
is obviously very problematic, that we know how things should
be and other people should run things in the same way. So, if
you like, the export of arms to the rest of the world standards,
to put it crudely. Many of the people who want to do this are
extremely high minded and moral people. Then there are other interests
who can see the advantage of having these principles developed
internationally because they would be an excuse for protectionism.
Then there are yet others with a perfectly reasonable material
interest take the form of, "If we are going to have to bear
all these costs, how can we compete with people who do not?"
It seems to me that a mixture of these three elements clearly
arises in these cases.
76. The alternative model to placing these sorts
of subject within a WTO context would be to recognise that individual
states can choose their own welfare policies according to the
ethical considerations of their populations, as they might choose
other objectives like social objectives in agriculture, this multi-functional
concept that is brought out. You can support those objectives
perfectly legitimately provided they do not interfere with free
trade in agricultural product, although that is scarcely the objective
of this round and we are not likely to reach it.
(Mr Wolf) I think the risk of that is truly minuscule.
It clearly would be possible to do that and in some areas and
some ways you can, but let us suppose one had a very strong feeling
personally about how animals were looked after and one wished
to be sure that nothing one ate violated that, then one clearly
would want to ensure that the standards of husbandry in the exporting
industry which was producing the things one is eating in this
country, say, did meet those standards and therefore trade would
be involved. There is a trade overlap there. Then the question
comes how do you go about this? There you get to some very very
fascinating questions which we could explore further if you want.
There I do think there is in principle a trade-related aspect
of the animal welfare standards issue. The same applies clearly
in the environmental process. The question then is what are the
best ways of handling it. If you want to handle it within the
trading system there are a number of alternative ways of doing
it. We could discuss that further. In the end I do not think the
trading system will turn out to be a particularly effective way
of raising animal husbandry standards worldwide. I can see there
are overlaps between trade and animal welfare just as there are
clearly overlaps between trade and the environment. You could
try and handle those within the trading system and the question
then arises how precisely do you go about it in a world where
standards differ, values differ, resources differ and we have
a system which is based on international agreement.
77. Would not the most obvious way be the legitimisation
of concerns in that area, say, because there are others that could
be affected, and the recognition that provided those subsidies,
this is the concept of the green box if you like within the current
arrangement, provided those subsidies do not interfere with trade,
then those were fine.
(Mr Wolf) That is no problem but what I am suggesting
is there are clearly situations in which these concerns you have
raised would have trade implications.
78. The other approach—and it would be
interesting to test your liberalism on this if you like—would
be to place more choice at the consumer level rather than the
nation level and therefore a legitimate clearer labelling system
and better information exchange.
(Mr Wolf) Clearly one of the several ways of handling
the question of what you do in a world with divergent standards
when there is trade would be through the principle of consumer
choice.
Mr Mitchell
79. How do you feel about that? Is labelling
the last resort of the neo-liberal?
(Mr Wolf) The first resort perhaps! I do not know
why "neo". As far as I can see, the only people who
use the phrase "neo-liberal" are new leftists and they
probably do not like being called members of the new left. Perhaps
they are neo. I consider myself a wishy-washy liberal actually,
in this regard. I have no objection, on the contrary, to as much
information as possible. In the case of animal welfare issues,
that might work. I would love to see what label you would put
on the chicken we get in our supermarkets to describe the precise
conditions in which chickens are mass produced in this country.
Maybe that would turn out to be the best argument for vegetarianism.
The principle is clearly a perfectly good one, but it is actually
very difficult to know what you put on a label which would not
then be a ten page text and of course in many areas, the food
safety area and everything to do with bio-technology and all the
rest of it, I think most of us (and I certainly include myself)
would not be able to understand the labels if they were there
so how much use they would be is questionable. But the idea of
providing consumers with choice—we are told there are free-range
eggs and non-free range eggs and we have a choice between this—this
principle can clearly be extended.
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