Examination of witnesses (Questions 380
- 399)
TUESDAY 23 MAY
THE RT
HON CLARE
SHORT and MR
JOHN ROBERTS
380. When we spoke to the Haiti representative
in Geneva at the WTO, he said that he thought that developing
countries could not take on a comprehensive Round, including labour
and environment. Is that a slightly different argument?
(Clare Short) I think that is a bit back to the Alec
Erwin case. I think that just pure negotiating and technical capacity
is a real problem here. These are very complex issues. With the
back-up of a government machine like we have, we still have to
do quite a lot of work to understand all the different components
of trade negotiations and lots of negotiators just do not have
that kind of back-up. But I think the Alec Erwin proposal really
squares the circle, that you can start off on the built-in agenda
and get on with those negotiations, pause, have some real high-quality
capacity-building for negotiators and then go on with things like
investment and competition which are complicated. I am personally
very attracted to that and I think it solves both problems.
Chairman
381. In the memorandum that DFID sent us, they
said that at Seattle a new Legal Advisory Centre had been established
to assist countries involved in dispute settlement proceedings.
It will not become operational until 20 members have completed
the ratification process and the financial commitments exceed
US$12 million. How many countries have completed the ratification
process and when is the new Legal Advisory Centre expected to
become operational?
(Clare Short) Could I just give a little background.
The Colombians lead a lot of this. It is like a law centre really
or more like a legal aid system. It is a rules-based system, yes,
but trade lawyers are so expensive that if you are a poor developing
country, it is quite terrifying to commission them to get advice
on whether you have got a case, but to have some access to expertise
that is affordable and guaranteed of quality so that poor countries
feel able to access and get justice under the rules that everyone
has agreed to I think is a very important part of the World Trade
Organisation meaning that the rules should work for all. When
we got involved in trying to support the Legal Advisory Centre,
there was a lot of resistance, including in the EU early on. We
are there now and it was agreed by the end, but I just want you
to know that because it is a very interesting story, the resistance
there was. There was this talk about, "You can't possibly
give people legal advice to take action against an organisation
of which you are a member", and we said, "We give legal
aid to murderers in our country. This is a tradition of the rule
of law", and it took the EU some time to agree that members
of the EU should be able to support the Legal Advisory Centre.
I think one of the benefits of Seattle is that a lot of people
who were taking that kind of position before now understand that
there will not be agreement unless developing countries make gains,
so on some issues like that, there has been change and it is worth
your knowing that. On the question of who has signed up and when
it takes effect, have you got the answer?
(Mr Roberts) I think we have a quorum of countries
which are committed to this. Many of them require parliamentary
ratification of the articles of association and that is in progress.
382. The quorum you talk about, Mr Roberts,
is the 20 members, is it?
(Mr Roberts) Yes.
383. And you have that 20 members?
(Mr Roberts) Yes. We expect the process to be completed
in October and the Centre to be operational at that time.
384. That is progress, is it not? The other
part of the question was whether you think there is scope for
the expansion of the remit of the Centre or the setting up of
another independent centre to provide assistance to developing
countries in understanding WTO agreements and taking part in trade
negotiations.
(Clare Short) I think no to the second part. We very
much think, and the World Bank has moved belatedly on this, that
the assistance to developing countries that comes from the international
financial institutions and so on should include the capacity to
negotiate their trade interests. It should be part of the mainstream,
not the kind of law centre addition, and I think the World Bank
has been delayed in moving, but has now moved and this just should
be part of mainstream development assistance, not a special little
organisation in Geneva.
385. The WTO has got a system where they, I
think, help the trade negotiators learn their trade at 25 a time,
I think we learned the other day, and that obviously is good for
the 25 who are there, but it clearly needs expansion. I think
this comes under the WTO trust which I believe your Department,
Secretary of State, have contributed, have they not?
(Clare Short) They have indeed. As you know, we spent
£15 million and we will carry on increasing it, on this capacity-building,
some of it through UNCTAD, some of it through the WTO, some of
it through the Commonwealth Secretariat because we need massively
to build the capacity of negotiators and indeed the implementation
within countries and of business people to understand the rules,
the rules of origin and how they take up their trading rights.
I think we now are all agreed, and we as a Government have agreed,
that there should be an expansion of the capacity of the World
Trade Organisation to provide that technical back-up, but we do
think that the World Bank should move in a big way on this, because
there are more resources there, they have got programmes in each
country and in each country they are often involved in civil service
reform or those kind of programmes, and to put into the mainstream
poverty reduction strategies that country after country is now
agreeing with the Bank and the Fund, the building of their trade
negotiating and implementation capacity should be just part of
the mainstream, that is important.
Tess Kingham
386. You see it as part of the countries' strategies
actually to have capacity-building built-in as part of the process
with the World Bank rather than the World Bank negotiate at the
regional level with some countries to provide some kind of capacity-building
programme?
(Clare Short) Well, the World Bank has been organising
these regional meetings, and good, but the World Bank has been
coming from behind and has only just—has it opened the office
in Geneva yet?
(Mr Roberts) I think so.
(Clare Short) Well, it has only just agreed to do
so and we and others of the Development Council pressed this very
hard. The World Bank should have it as part of its mainstream
toolkit. With every country now we have moved to these published
poverty reduction strategies which is really the way to go, looking
at macroeconomic policy as well as social policy and the transparent
budget to be able to grow the economy and distribute its fruits.
I have just been in Rwanda, and included in its strategy for the
development of its economy must be its trade policy, and it needs
to be in the mainstream. The World Bank is now moving, but it
has been slow and should have moved earlier.
Chairman
387. In order for a developing country, for
example, such as Rwanda which you have just visited to bring a
legal action, the developing country must first identify a breach
in the WTO Rules. Is there any mechanism to assist developing
countries identify such breaches in order to bring a case to the
WTO dispute settlement process?
(Clare Short) I do not know. Do you, John? I think
countries tend to know. On things like anti-dumping, they would
know when it is being abused. Countries tend to know about their
own economy and whether they are being blocked unfairly. That
is my sense. It is using the procedures then to get justice which
is the problem rather than knowing where the injustice is.
(Mr Roberts) I do not know precisely how developing
countries go about this, but they do bring a number of cases to
dispute settlement already. Obviously they will be able to prosecute
these cases much more vigorously if they are able to gain access
to advice from the Legal Advisory Centre.
(Clare Short) But again, the more you have got capacity
in their trade ministry, in their business community, and the
Commonwealth training is building up the business community in
developing countries to understand the rules, the more you have
got people who know the rules and know their rights, and the more
they will know when their rights are not being adhered to, so
it is all part and parcel of the same job.
Mr Rowe
388. It has been implicit in a lot of what you
have said, explicit in some of it, that the world is changing.
Going back to another remark of Alec Erwin's, he said, "When
India, China, Brazil and South East Asia, South Africa, Nigeria
and Egypt come together, we are a significant market for Europe,
so we are going to be able to do some deals", I really would
just like you to comment, if you would, Secretary of State, on
your perception of the way in which the balance of negotiating
power is beginning to shift and what you think that may hold for
the developing world.
(Clare Short) I very much agree with the point you
are making and when I made that original speech—when was
that—in March of last year or something, in Geneva, saying
that the next Round should be a development Round, I was pointing
out that the majority of member countries of the World Trade Organisation
are developing countries. If they can agree amongst themselves
what the gains are they want out of a Round, because of course
there are differing interests, they can dominate. There cannot
be agreement without them being a part of it. When I made that
speech, there were a lot of developing countries represented and
it was sort of psychologically stunning, and that was the point
I was making to Oona King later, that they so much felt, "This
is a big, powerful organisation and we are small, weak economies
and we are trying to get things moving our way", and there
had not been this full realisation of their potential power. I
think that is changing in a very important way. Alec Erwin understands
it very clearly and has been building this alliance of the big
countries, Nigeria, South Africa, Brazil, India, and India has
kind of got two views on protectionism because part of its economy
wants to protect its new economy and wants to open and India is
shifting as its information technology industry grows and it wants
to trade, whereas some of the locally-owned manufacturing wants
to keep up barriers, so it is quite an interesting case, but he
has built that alliance or worked on very big economies which
I think has already changed the nature of future trade negotiations.
I think that new power is starting to be understood. It requires
alliances, though, and agreements on bottom lines and countries
have got to co-operate in order to make gains. I personally think
that as that develops, the danger of some big, rich countries
breaking away becomes greater, and that is why we must protect
the principle of a membership-based, rules-based, inclusive, multilateral
organisation because of course as developing countries make gains
and get stronger and stroppier, others might think, "Oh,
why don't we just do a direct deal between the obvious blocs",
and that always remains there as a danger, and if the WTO gets
bogged down, the richer countries can just break away and make
their own deals.
389. In stark contrast to James Goldsmith's
view of the world, is it not right that 85 per cent of all investment
still goes into the developed world, or something horrendous of
that kind? Presumably you would see in time these changes in bargaining
power perhaps affecting the investment strategies of the world
as well.
(Clare Short) I think there is no doubt that 80 per
cent of the population of the world is in developing countries
and 90 per cent of the new people as we go from six billion people
to nine billion people and hopefully stabilise because we will
have educated girls and given people access to contraceptive healthcare,
but that is where the world is going. Now, if the OECD big countries
think that they can remain prosperous and ignore 80 per cent of
the population of the world, that cannot be. You can already see
the interests of big companies in the Chinese market and in the
Indian market, a billion people, that is an awful lot of customers
and clearly over the next 20 plus years, there is going to be
a shift in the balance. The interests for countries like ours
is in a just world where we will have our place because if it
is going to be only down to power, the billion people in India
and in China and so on are going to become more and more powerful
and more and more important to multinational capital because it
is an awful lot of customers. I think we have got an interest
too and it is not just in justice to developing countries, but
in a fair, equitable, rules-based system which is inclusive and
allows development to take place across the world.
Chairman: Would you like to lead us,
Mr Rowe, into the reform of the World Trade Organisation. Question
six?
Mr Rowe
390. I should love to. It is beyond my capacity.
I think your Department's memorandum stressed the importance of
reforming the WTO procedures both to enable developed countries
to participate more effectively and to secure a consensus. We
would like to know what proposals has the UK submitted on the
reform of the WTO consultative and decision-making procedures?
(Clare Short) The UK did propose this Eminent Persons
Group to review procedures and I think that broadly has not found
favour and remains on the back burner. As I understand it, the
talks in Geneva were about greater internal transparency, which
is back to this I think we should abolish the concept of the Green
Room but you have clearly got to have final negotiating teams
made up of countries which represent lots of countries that report
back and that needs tidying up and making clearer and more transparent
after the chaos of Seattle, which was, of course, worse because
of what was going on in the streets so people were trapped in
different buildings. You need to clearly know how negotiations
will proceed, which group you are part of, who will represent
you in any final negotiating group and how they report back to
you. My understanding is that the discussion of that is going
quite well and there is a broad consensus that is how it should
move. The external transparency comes back to the question of
NGOs. We are keen on external transparency and publishing more
documents and so on and there is a big reluctance amongst developing
countries who think once we get to that we are going to have lots
of meetings with NGOs represented and their voices will be outweighed
by people speaking on their behalf making arguments they do not
agree with. It is the developing countries that are reluctant
there.
391. What is this thing about ministerial on
ministerials?
(Clare Short) Well, there are periodic Ministerial
Meetings. There was one in Singapore. I think that was to declare
the commitment to try and get zero tariff access to least developed
countries.
(Mr Roberts) That was the first one in 1996.
(Clare Short) There was one in Singapore after we
formed our Government. It is thought that there should be a ministerial
meeting to get the comprehensive Round going but it should not
take place until it is prepared because you cannot afford a failure.
392. Right.
(Clare Short) I do not know if that answers your question.
393. It was just this interesting phrase "a
ministerial on ministerials". We were not quite sure what
that meant.
(Clare Short) That would be for the procedures of
ministerial meetings.
394. Oh, right.
(Clare Short) Every sector has its job.
395. Yes. In your view, how important will the
reform of WTO procedures be in comparison with, say, capacity-building,
or concessions from the EU on agricultural policy, in dictating
the success or otherwise of future negotiations?
(Clare Short) I think post-Seattle everyone thought
there had to be monumental reform. I think there is now agreement
that there should be incremental reform and it is this inclusion,
knowing where the negotiations are taking place and who negotiates
on your behalf when all 136 cannot be sitting around the table,
but it is the country point. My understanding—John, you
should come in and comment on this—is that in Geneva there
has got to be more internal transparency and the agreement on
reviewing implementation in the Uruguay Round has led to a more
contented atmosphere that we are at work reforming the WTO and
we can do it incrementally and pragmatically and we do not need
some sort of major shift and change.
(Mr Roberts) An essential point is also that there
is agreement—general agreement—that the consensus
basis of taking decisions in WTO should be preserved and that
there should not be any system of voting on decisions. This means
that the current structure has been found to be broadly correct,
though perhaps some duplication of work between councils and working
groups can be eliminated through streamlining, but that in order
that the consensus can emerge in a manner which is generally agreed
and is transparent then countries must work together more in groups.
There should be more reporting back from representatives of these
groups which are present in the difficult negotiations which must
take place to resolve difficult decisions. This has been referred
to in the past as the Green Room. Members of the Green Room should
not be there simply at the beck and call of the Director-General
but should be—
(Clare Short) They should be representative. As I
have said, that is agreed. I think we should pause and think of
the world, this globalising world, having agreed its procedures
for trade agreement, for environmental agreements, as a consensus
of all countries. It is remarkable. Imagine running this Parliament
by consensus.
Chairman
396. Yes.
(Clare Short) We are proceeding. These are the instruments
of international environment agreements, trade agreements, consensus
systems. It is remarkable that is where we are. It does give potential
power to developing countries.
Mr Rowe
397. Has the Director-General got a big enough
resource at his own hand? Would we be in favour of increasing
that or would we see it that he should have access to more prescribed
assistance, as it were, from outside organisations like OECD?
(Clare Short) We think the Secretariat is very efficient
and effective, lean and competent. It is in an analytical capacity
and so on. It does not need major reform. We think the WTO needs
more resources for technical assistance to countries. Do you want
to add anything, John?
(Mr Roberts) I think that is it.
Chairman
398. Can we just ask, we understood that the
representatives of the countries, or groups of countries, from
the developing world were appointed by presumably the Director-General.
They were not elected from amongst their number, they were appointed
by the Director-General. If that is so, is there any reform proposed
for that because clearly it seems to us that it is right that
groups of countries should appoint their own spokesman in the
Green Room and for that spokesman then to be accountable to those
who elect him or her?
(Clare Short) There is a strong Africa group and obviously
that works together and then it has its own power and authority.
There is a least developed countries group, I presume they appoint
their own chair. There are all these working groups that exist
in Geneva. The Caribbean has a strong group which has become stronger.
We have helped to support them in their analytical work which
they value greatly about the Caribbean's interest. I think we
should abolish the Green Room but who is at the table for the
final stage of negotiations when you are trying to get a deal
struck. You will have had working groups before that and obviously
they need to be chaired by different people and have a mix of
types of countries both geographically and a stage of development
on each. I would have thought that there needs to be a commitment
to representativeness but the Director-General would have to guide
that to get enough people into all the different groups representing
everybody. But then out of that, when you are getting to the final
deal, in what used to be called the Green Room, you need to have
representatives of all the major blocs and areas and everyone
who is represented by a country needs to know who their representative
is and have an accountability procedure. I think that needs tightening
up and everybody agrees about that. It needs to be made much more
transparent, who is representing who and how do they report back
to them, so that no final deal is struck with somebody not knowing
what is going on and not having been included in that.
399. In your mind, Secretary of State, what
is the difference between the Green Room and what you are proposing?
You want to abolish the Green Room but you want to get another
form of what essentially the Green Room did?
(Clare Short) It is just the Green Room—I do
not know where it comes from. They have them in theatres and television
studios. Is it where you have a drink before you go and do the
business?
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