TUESDAY 23 MAY 2000
_________
Members present:
Mr Bowen Wells, in the Chair
Mr Nigel Jones
Ms Oona King
Ms Tess Kingham
Mr Andrew Robathan
Mr Andrew Rowe
Mr Tony Worthington
_________
MEMORANDUM SUBMITTED BY THE DEPARTMENT FOR INTERNATIONAL DEVELOPMENT
EXAMINATION OF WITNESSES
THE RT HON CLARE SHORT, a Member of the House, Secretary of State for
International Development, and MR JOHN ROBERTS, Acting Head of the
International Economic Policy Department, Department for
International Development, examined.
Chairman
358. Can I welcome you once more, Secretary of State, to our
Committee. We are at the end of an exhaustive inquiry into the WTO of which
this is the last evidence session we are taking, so we are very anxious to
hear your views and also that you bring us up to date with the current events
because things have moved on since Seattle, as you know. Can I also welcome
Mr Roberts who, I understand, is acting as the Head of the Economic Trade
Department. Is that what you call it? Perhaps you can tell us.
(Mr Roberts) The International Economic Policy Department.
(Clare Short) And he has a lot of detailed expertise on trade. He is
a considerable resource.
359. I understand that you would like to make a brief opening
statement, Secretary of State.
(Clare Short) Thank you, just very brief. I think it is my very strong
view that the World Trade Organisation is the best possible chance developing
countries have and the global system has of establishing equitable rules of
trade and creating conditions where the poorer countries can get more benefits
from international trade. It is remarkable what a bad press it has had and
the sort of atmospherics out of Seattle in that it has taken over from the IMF
as the organisation everyone concerned with development wants to hate. In
fact, as you all know, it is only five years old, considerably more democratic
than the old GATT negotiations in that countries join by choice, it makes its
decisions by consensus, it is a rules-based organisation and, therefore, it
does not matter if you are big or little, you are all subject to the same
rules and there are arbitration procedures available for you. That is a very
considerable advance on the arrangements that there were under GATT and again,
as you all know, very large numbers of developing countries, three-quarters
of the membership and more to come, have chosen individually to join. Now,
all that said, I think there are problems in the adjustment of its procedures
to the new more democratic arrangements. The GATT used to be an organisation
dominated by a few rich trading countries or blocs and now it has to adjust
its procedures to the fact that it is much more a membership-based, rules-
based organisation and we saw all sorts of glitches in the procedures at
Seattle, but there we are. I think anyone concerned with development or the
interests of developing countries or the need to improve their prospects for
growing their economy through increased trading opportunities and attracting
inward investment should firmly support the existence of the World Trade
Organisation and the continuance of its work and authority and support a new
trade round. The problem we have there is that trade is becoming more and
more complicated and lots of developing countries in whose objective interest
I am convinced a comprehensive round is - sorry about the construction of that
sentence - are just really worried by the complexity of the issues they have
to negotiate. We have been trying, as you know, to do a lot of capacity-
building and encourage more capacity-building and have done a lot, and there
is a lot more to do, but my own strong argument is that delay deprives
developing countries of trading opportunities and opportunities for economic
growth, that because people lack expertise, they quite reasonably say, "Let's
go more slowly", but the world economy is not going more slowly and if things
do not change to improve their opportunities, they are missing out and their
poor and their children will only be the age they are once and either be in
school or not be in school or be well nourished or not be well nourished. The
final point I wish to make is that I thought that the suggestion Alec Erwin
made at Seattle, and I do not know if he repeated it when he appeared before
you, but he has done a fantastically constructive job in trying to build an
alliance of developing countries to influence the round and take it forward
and I have been very impressed indeed by his performance, but he has suggested
that that the round should start with the built-in agenda and then have some
pauses for capacity-building for negotiators before moving on to some of the
really complicated questions like competition policy and investment, and I
still think that is a really constructive and sensible proposal. The World
Trade Organisation is a precious development instrument almost and those who
are attacking it are, I am afraid, in the words of that Malaysian Minister at
Davos, "organisations that claim to be in favour of development who are trying
to save the developing world from development".
Chairman: Well, Secretary of State, we saw Alec Erwin last week, as you
know, and he is very much in line with all that you have said to us this
morning, that the comprehensive round is very important for the developing
countries, and he sees it from the point of view that you have just expressed
to us. He did in fact say, "If the WTO goes down, we, the developing
countries, go down with it", and so he is clearly right in line with what you
are saying and he illustrated that.
Mr Rowe
360. He also said, "The commitment to the WTO by the developing
countries is massive. The protest groups say that it is working against us,
and of course there are aspects that are working against us, but we will
negotiate that. We do not need anyone else to negotiate that for us; we will
negotiate that". I just wondered - and we asked Sir John Vereker the same
question in a way - how do you see the accountability of NGOs being properly
exposed and explored because at the present moment somebody who set up an NGO
yesterday, if they have got funds or if they have got three or four people
good at publicity, can actually have a voice on the world stage which carries
a totally spurious credibility? I just wondered if you had any views about
how we can actually address this question of to whom are NGOs accountable, how
is that accountability to be expressed and how does it inter-relate with the
responsibility they claim they have for a constituency which they have not
been elected to represent?
(Clare Short) I think this is a very important question and it is
causing increasing tension. The governments of developing countries are
becoming more and more exasperated that NGOs that claim to be concerned about
development speak so often in their name and often make arguments with which
they do not agree. On the arguments of making the WTO more transparent,
developing countries by and large are not in favour of the opening up to NGOs
because they think their voices will be squashed by these forces. I think
they have got a real problem in that the world is changing under our feet, as
we know, and a lot of well-meaning NGOs just cannot command the detail of what
is happening to international trade and investment and so on and are adopting
a posture of, "This is all multinational capital. It is all exploitative",
and I call it the "Keep your dirty capital out of Africa" sentiment. A lot
of it is well meant, but it is sort of this romantic idea of the noble poverty
of the rural poor of Africa and South Asia living at peace with nature and
their environment and spiritually at one. There are a lot of people, really
good people, who believe in these sentiments and it is very dangerous. A lot
of them are good, well-meaning people and I think what we have to do,
committees like this, individuals like me, is to try to make the arguments,
take it on, try to nurture our relationships with the responsible NGOs and try
to share the information and the thinking and encourage them to take on the
bigger and more responsible agenda, but in the end to whom are they
accountable? Nobody. Those who give the money of course, but they are not
and far too often we slip from talking about civil society to meaning
development NGOs, and the World Bank's, which we helped to fund, survey of the
opinions of very poor people across the world showed that they did not trust
their governments, they did not trust politicians, they did not see much of
NGOs, and the people they trusted most were their mosques and their churches.
We need an openness to civil society, but we need to really mean civil society
and the people that are close to the poor of the world, not self-appointed
groupings who claim to speak on their behalf, and we have got a very serious
problem here. My final point is that the world turned to protectionism once
before in the 1930s and I think it would be very complacent to assume that we
are going to go forward with a stronger WTO and fairer and fairer rules. I
hope we can achieve that and I think it is the way we should go and I think
it is achievable, but there are forces out there in all our countries that are
leaning in another direction and we could go backwards to more protectionism,
and that is the big blocs and the big countries looking after their own
interests, and that we know from what happened in the 1930s could be a very
dangerous development.
361. Alec Erwin said, did he not, that some of the protesters
exhibit what, from our perspective, will end up as being a straight
protectionist position, so whatever they may dress that up as, it does not
take away from the fact that this is an attempt to protect their lifestyle or
their economy; this is perfectly legitimate. That just sums it up.
(Clare Short) For me, the point is young people in Seattle wearing Nike
trainers with mobile phones who organise their demonstrations on the Internet
and fly in, living the comfortable life of citizens of the kind of countries
we live in with access to modern technology and all the fruits of
multinational capital which organises the use of that technology for us,
trying to protect the poor of the world from many of the fruits of it.
Chairman: I think your answer is, Secretary of State, it is a problem,
but we do not know quite how to deal with it.
Ms King
362. I am very interested in what you just said really. Mr Erwin
also said, "I think a great deal of attention has to be paid to how you deal
with the legitimate concerns of your own civil society", and I think maybe
that is where we need to differentiate between NGOs and the home-grown
indigenous NGO networks, the role of DFID in civil society and capacity-
building there, and the good NGOs operating out of Britain, Europe, et cetera,
who see themselves as pure facilitators to that process, not necessarily
speaking on behalf of or doing pure advocacy on behalf of, but enabling both
governments and civil society in developing countries to have a role and have
a voice in anything like the WTO. I think there are two very distinct types
of NGO operating there, one which claims to speak on behalf of people in
effect and one which sees itself as actually working in partnership with
governments and civil society in countries. I do not know whether you agree
with that or not.
(Clare Short) I do agree with that and I repeat that there are lots of
people of extremely good intent working in and supporting development NGOs and
there is a move now to try and facilitate the building of the voices of the
people themselves rather than speak on their behalf. However, nonetheless,
to run an NGO you need a profile and you need to raise funds and the way you
get your name in the media is to attack things. Certainly in the preparation
for Seattle, as we became more and more engaged and more and more worried
about what was going to happen and invited in British development NGOs and
talked about what we were doing, we tried to peel them off - this is to put
it crudely - an alliance that was already there, driven more by the
environmental NGOs which was very hostile, there was some adjustment and some
movement, so there are lots of good people, but fashions run, the media runs,
all are very powerful and in the end to be a successful NGO, you have got to
have your name in the papers and that pulls in another direction.
Chairman
363. In the initial memorandum that the Department submitted to
us, it mentions the apprehensions which many developing countries feel about
the new round of trade negotiations. Mike Moore, the Director of the WTO,
speaking at the end of the May meeting of the General Council, unveiled a
number of "confidence-building measures" designed to raise the confidence of
developing countries in the multilateral trading system. These proposals
included an offer of tariff and quota-free access for "essentially all
products", a series of special sessions of the General Council on
implementation issues, a commitment to give "positive consideration" to
individual requests to roll over implementation deadlines, and a commitment
for increased technical assistance. Are any of these proposals new and do you
feel that this package will be sufficient to build the confidence of
developing countries? Could it not be argued that this package, excluding,
as it does, sensitive agricultural goods, could actually undermine confidence
in the WTO as regards its commitment to least developed countries? What is
being excluded by the "essentially all" caveat?
(Clare Short) I think the agreement to give better trade access to least
developed countries, which was a call originally made by Mr Rigiero, the
response has been disappointing in that there have been exclusions by country
after country or blocs, the Japanese, American and of course the EU with their
tantalising "essentially all", which means the offer is less generous than we
would have hoped and needs continual working, and we need in the EU to get on
with defining what we mean by "essentially all" because there are deep
protectionist policies within the EU and clearly there will be a fight about
that, so although the EU is committed to implementing this anyway, still
determining exactly what is included is an important piece of work which has
not yet been undertaken. John, do you have anything to add to that?
(Mr Roberts) Yes, Secretary of State. Pascal Lamy, the Commissioner
for Trade, briefed the European Parliament last week on this. He had been in
consultation with his colleague, Franz Fischler, the Commissioner for
Agriculture, and what he is reported as saying is that he wanted to make
progress in the agricultural field and opening the EU market to imports in the
least developed, and that the hard core of difficult products consisted of
beef, rice and sugar.
364. I thought sugar might be amongst them.
(Clare Short) There are real problems because of the Lom‚ and access
which is guaranteed over time will clearly be phased out, so the EU has got
some genuine problems given its other commitments on the commodity protocols,
but Lamy has grasped this agenda and I believe it has become clearer and
clearer, the need for developing countries to make gains from the round, but
we will have to get agreement from all the Member States and that will not be
a simple process and it is something that the Committee might want to keep an
eye on. The Bangladesh Minister or representative in Geneva, the Chair for
the least developed group, did express some disappointment about the package
on access for the least developed countries, but I think the agreement that
was reached to review implementation of Uruguay and to look genuinely at
countries that have not been able to implement all the undertakings they have
made, and really have not and need more help and need more time, I think that
has brought a lot of relief to developing countries who just took on more than
they knew they were taking on and just have not had the capacity to implement
it and were worried that deadlines were approaching and they could then be
open to penalty. So I think that agreement in Geneva to review implementation
has been very welcome and helped the atmospherics that that was part of a
package that would really assist developing countries. I think developing
countries are keen on more transparency internally. Everyone understands that
if you are going to have negotiations and a final deal, you cannot have all
136 countries at the table, but you have got to have representatives of
different groups that report back to their groups so that you have got a
proper process and everyone is engaged, and I think there is more and more
consensus on that and that is the way that will go. Then, finally, developing
countries are not at all keen on what is called external transparency because
they think it is going to go back to NGOs speaking on their behalf. Obviously
we all want things to be published and just more open and scrutinised, but
there is a reluctance amongst developing countries because they fear that
their voices are going to be squashed by those other voices about which we
talked. Have I missed anything out?
(Mr Roberts) The special review mechanism which was agreed by the
General Council is regarded as very important. It was mooted at the time of
Seattle, but not agreed then and this will indeed provide an ongoing mechanism
means for ----
(Clare Short) That is the work on implementation, which I think has
meant that that is the most important gain developing countries have made and
that means they are less discontented than you might otherwise expect because
they see that as extremely important, and a bit of good faith for their real
problems.
365. So you do see these measures as building confidence in the
developing countries in WTO, do you?
(Clare Short) I think, firstly, I agree very much with Alec Erwin, that
developing countries do believe in the WTO and that is why they joined it.
In Bangkok, at the UNCTAD meeting in Bangkok, it was very clear that
developing countries understand that the smaller, weaker economies are going
to get justice out of a membership organisation with rules and if that does
not survive, then the big countries and the big economies will bully everyone
else and that clearly must be less good for developing countries, but I think
they are slightly overwhelmed by just the pure technical detail and the
difficulty of negotiating and complying, but I think in the present
atmospherics, the agreement to review implementation is very, very important
to developing countries and has made them feel better.
366. When do you see these discussions really getting down to
business and the implementation taking place?
(Clare Short) I think what we need is a bit of a kind case-by-case look
at countries that generally have not been able to implement commitments they
undertook in Uruguay, looking at their difficulties, looking at the technical
assistance they need to be able to do so and giving them realistic timescales,
so I think we need a kind of fair objective look mechanism, which does expect
everyone to comply, but is realistic about the capacity of countries to comply
and the help they need in order to get there, and I hope we will get to that
sort of process quite soon.
(Mr Roberts) We are making a start with TRIMs which are the General
Council's specific decision to consider this sensitively and to defer any
action.
367. When will you begin TRIMs?
(Mr Roberts) I do not know the exact timetable for consideration of
this, but the Council decided that implementation of TRIMs would be a high
priority for consideration.
(Clare Short) But I think again that should be driven forward and it is
urgent because, otherwise, dates where countries are supposed to complete
their compliance with Uruguay will kick in and, without some exceptions being
made, they become liable to sanctions, so it has got its own timetable and it
has to be driven forward, otherwise we get all those problems and that would
really damage the WTO and any prospects of another round.
Mr Rowe
368. I wonder if we could be reminded of the scale of this so-
called concession to the LDCs in relation to the size of the EU economy. We
have heard some absolutely minute figures being used.
(Clare Short) Yes, the least developed countries make up 0.4 per cent
of world trade - tiny, tiny, tiny amounts. These are the poorest countries
in the world. You would think that everyone could just open up their
economies and help them to trade and then of course there would be more
attractive destinations for investment and that would help them grow their
economies. Surely that is both right morally and in all our interests to get
a more stable world and more trade and so on, but look at the process then.
Country by country, powerful, wealthy economies start paring away some of the
access - it is very disappointing - so you see the difference between the
rhetoric on liberalisation and trade, especially from the big economies, and
then in practice when you get down to some of the detail, but that is the
reality that we are working with.
Chairman
369. When do you think the Rigiero proposals are actually going to
be implemented?
(Clare Short) Well, the commitment that has now been made by the US,
Japan, the Quad, and of course countries like Switzerland and Korea and Poland
have said they will do it too, I presume will be implemented quite soon, but
they do not allow much more access than countries have at the moment. In
terms of the EU, we have already discussed that. It is committed to
implementing anyway regardless of what happens during the WTO by 2005, but
starting the process in the year 2000 and we need to move the EU on and get
down to the detail on what is "essentially all" and start the process, and I
think we all need to press the EU much more firmly.
370. And that is rice, beef and sugar?
(Clare Short) Well, Commissioner Lamy has said that those are the
obvious exceptions. That is not the same as getting all the Member States to
agree and we must as a Government, we must all, and it would also be good to
have the Committee's help to press that agenda forward and get the EU to agree
to start the process.
Ms King
371. You mentioned the Head of the Bangladeshi mission to the WTO
in Geneva, Abdul Manning, who I think has made an impressive contribution to
this debate. When we met him in Geneva, he cited many of the failures that
the WTO had had, but he also said that, in his view, "If there is a lack of
legitimacy, then we, the developing countries, have contributed to it as much
as anyone else". Do you think there is any way or how do you think the
developing countries could improve their own performance?
(Clare Short) I think what we are seeing is a process of historical
change and many developing countries, after their independence, were working
with a model of a very powerful state driving economic development, with the
support of development thinking in industrialised countries that did look to
a closed economy with quite a lot of protection and the idea that you build
up your infant industries behind protectionist barriers. That has proved to
be, just by pure economic history, a desperately flawed model which has led
in many countries to the population growing faster than the economy and,
therefore, the invincible growth of poverty and the crumbling of public
services. I think we are all, whatever our original point in the political
spectrum, having to adjust our mind-set to the changes that are taking place
in the world and that process is going on in developing countries amongst
their politicians, their technical people in their trade ministries and their
public opinion, so there is that general problem that we all have and share
and we need to move forward the world's mind as to how we manage this
globalising era more beneficially and overcome some of the old stereotypes,
and that is part of the problem. Some of the rhetoric from developing
countries in Geneva has been, "Please don't do this to me" rather than the
positive agenda that developing countries need to agree about what they want,
they take into the next round and of course if they agree on it, they will get
it, which is very much the Alec Erwin approach and is much more likely to
produce real fruits for developing countries, and then on top of that there
are real problems. A country like Bangladesh, it might be a very poor
country, but it is a big country and it can support its mission in Geneva much
more than some of the very small, poor African countries which are just tinier
countries with much smaller government machines and people with very little
back-up, and that is a problem that we have got to sort in our arrangements,
collective secretarial help, and I do hope our forthcoming White Paper on
globalisation and development will help with some of this. We have got to
move the mind-set of the world on in order to start to have a serious
discussion about how we manage globalisation in a way which will be equitable
and stable and just for developing countries, and I think all of our countries
have got this problem and all our public opinions.
Chairman: I think I will ask Nigel Jones to ask the next questions on
the outcome of the WTO Council, some of which have been dealt with.
Mr Jones
372. We have had two meetings of the General Council this year, on
the 8th February and the 3rd May. How satisfied are you with the outcome and
progress made concerning measures in favour of the developing countries
because progress does seem to have been painfully slow?
(Clare Short) We have discussed it. I think the mini-package on
implementation is good, as we said, and now we need to get on with it, and
that won a lot of goodwill. The market access for least developed countries
is disappointing. We need to keep pushing and we need to push the EU to do
more than the minimum, and that is our own responsibility. I think personally
that the views of developing countries to the package and post the Bangkok
UNCTAD are very positive. I know that Alec Erwin thinks that what is going
on in Geneva is getting bogged down - I saw him when I was in South Africa
just recently - but those are not the reports that I get back, so it could be
a lot better, but the atmospherics are quite good and the implementation
commitment is very important.
Mr Robathan
373. I would like to ask about changes to the negotiating position
of the EU in the light of events in Seattle and subsequently. Firstly, what
aspects do you think should be changed, if any, and, in particular, are you
happy with the current EU negotiating position on agriculture? You will know
that agriculture is the one which is brought up the whole time by developing
countries, and I think quite rightly. Alec Erwin, if I might quote what he
said last week, said, "...the European Union has to change its agricultural
policy...this is a matter of massive concern to developing countries. It is
an obstacle to growth for the developing world".
(Clare Short) We worked quite hard on getting an EU negotiating position
that we as a Government supported and we had a big struggle on trade and
labour, as we know, when we got an outcome that we thought we could live with,
and we also very much wanted the EU support for the comprehensive round both
because we believed that progress on competition and investment policy would
be beneficial to the developing countries and because we need a broad round
to get a deal so that all parties are getting something, so that was a
satisfactory part of the EU negotiating mandate. On agriculture, as you know,
the EU has difficulties on this. It is the position of the UK that we want
major reform and we welcome the fact that the EU is extending its membership
and that the piece clause is going to become exhausted on agricultural
protection under Uruguay in 2003, so there has to be progress. Also, it is
widely known that we as a country want to go further than we can get the other
Member States to agree on agriculture, but we think there are historical
forces at work that will drive major agricultural reform and the EU will not
be able to afford the level of agricultural subsidy as it widens its
membership; the finances just do not add up. Also we have got the WTO as
another ally in getting sensible agricultural reform. So it is the most
difficult area, there is no doubt, but we saw in Seattle when some negotiation
was going on some flexibility, and of course there are politics within the
politics in the WTO and some of the other big economic blocs that did not want
a more comprehensive round were saying, "Ah, the reason the EU wants to
include investment and competition is anything but agriculture", whereas we
believe there should be a comprehensive round, agriculture must be included
and it is the most difficult for the EU, as we well know as a country, and we
want the EU to go as far as it can possibly be pushed to go. I believe with
Alec Erwin that this is important for developing countries, although
developing countries have adjusted to the existing distortions in agricultural
trade in the world, so as barriers come down to agricultural trade, there will
be winners and losers amongst developing countries, so developing countries
have got into the niches of existing arrangements. Obviously what developing
countries need to do is do more processing of their food in order to get more
value added in their imports and that is where Africa needs to move, and then
I think as food is more processed, it hits more tariff barriers and that is
a very important issue for developing countries. However, let me just finally
add that all the research evidence is clear that a reduction in tariffs on
manufacturing would also be highly beneficial to developing countries, so yes,
agriculture, but manufacturing needs to be important to them too and in south-
south trade in manufacturing, there are very high tariffs and bringing them
down would bring economic growth to developing countries.
374. I wish I shared your confidence that enlargement of the EU
must inevitably lead to a proper reform of the agricultural policy, but I do
not want to get too bogged down too far in that, but ----
(Clare Short) It is just the finances, it is a very optimistic thing.
Look at these countries with big agricultural sectors, Poland, Hungary and so
on; if they are all going to have a Common Agricultural Policy and all be
subsidised, the finances just will not add up, so that is going to drive
change in a way that we as a country think is highly beneficial for the
agricultural reform we want anyway.
Chairman: And the effect on world commodity prices would be drastic for
the developing world, would it not, with huge exports of subsidised sugar,
wheat, barley, et cetera?
Mr Robathan
375. I think we come at this from the same way, but I am somewhat
less sanguine about the changes made ----
(Clare Short) Let me agree that the barriers to reform are huge, but I
think there are objective forces coming out of the bottle that are going to
drive reform. That is the optimistic scenario.
376. You have mentioned the UK getting the EU to do more than the
minimum. How possible do you think realistically it is possible for the UK
to get the EU to do more than the minimum and is not the trade agreement
between the EU and South Africa rather a bad precedent for this?
(Clare Short) Yes, I think the trade agreement with South Africa shows
all the sort of begrudging, protectionist interests that are alive and working
in the EU, so countries trying to prevent the import of fruit that is produced
at a different time of year than their own fruit, it is absolutely contrary
to any opportunities for enlarged agriculture, and it has been a very painful
process. I think it demonstrates very powerfully the value of multilateral
trade negotiations because if it is country by country and individual
developing country against a very wealthy bloc, it is a supplicant, whereas
if you put all the developing countries together and wealthy countries will
not change, they are in a much more powerful position to get some gains for
developing countries out of the agreement and I think that might be one of the
reasons why Alec Erwin is so clear about the value of multilateral trade
negotiations. How can we get the EU to do more than the minimum? The EU is
committed (and was it part of the Lom‚ mandate or was that agreed beforehand?)
to zero-tariff access on essentially all products for the least developed
countries whether anyone else moves or not and was committed, quite apart from
the confidence-building measures, in the WTO and, as I said earlier, we are
supposed to start phasing it in by the end of this year and it is supposed to
be completed by 2005, and we should drive that and get on with it, put a lot
of pressure on the EU to be generous and get on with it quickly. I think the
other issue is the phasing out of the multi-fibre agreements quite rapidly,
and that is coming to the table quite quickly. It is very important to
developing countries and the EU is about to adopt a position. Is that right?
(Mr Roberts) The next stage, the third stage of removing textile and
clothing products from the quota, putting them into the general WTO regime,
is scheduled for the 1st January 2002 and the European Union must now get its
act together to decide what it is going to take out of quota and put into the
WTO regime for that deadline of 1st January 2002.
(Clare Short) It is an issue the Committee might want to keep an eye on
because the EU has got to start preparing its position now.
Chairman
377. Is there a long list of these products?
(Mr Roberts) Yes, there are, and I forget how many, groups of products
and the position has been hitherto that those groups of products which, on the
whole, have not been very helpful to developing countries have been taken out
of quota and that leaves groups of products which are of keen interest to
developing countries, trousers, shirts, blouses and so forth, which are still
subject to quota.
378. Do you think, Secretary of State, that we could have a list
of those that have got to be taken out of quota by 2002? I think it would be
very useful to the Committee.
(Clare Short) It is a very important issue.
Chairman: I think it would be useful to have it if we could.
Ms King
379. The Brazilian Ambassador to the WTO has suggested that a new
round is in effect under way, given the fact that there are, firstly,
negotiations going on with regard to agriculture and services and, secondly,
the whole range of issues that are being discussed within the Implementation
Group. If that is the case, what would you say are the prospects now for a
broad round going ahead?
(Clare Short) Under the Uruguay Round, there was agreement to the built-
in agenda, as it is called, to come back to agriculture and services, so that
is what is going on; it was bound under Uruguay and those negotiations have
started. Then, as we have said earlier, there has been this agreement to
review the implementation of Uruguay and have more flexibility for countries
that have not been able to implement all their commitments, so that is
presumably the point that the Brazilian Ambassador is making and that is good
and the work should go on. However, I am convinced myself that we will not
get major gains, particularly on something like agriculture, without the more
comprehensive round so that all blocs are making gains and, therefore, they
will make concessions, so that work should go on, but I would not be
optimistic on a very difficult issue like agriculture taken alone and that is
not part of a comprehensive round. So that work can go on, but I do hope that
we will get agreement to get on with the round and broaden it in order to get
the conditions for political agreement.
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 œ15 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.
Ms 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 having its strategy for the development of its economy
must be its trade policy, and it just needs that in the mainstream and 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
Alex 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 and 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?
400. I think there is a Green Room in the WTO headquarters.
(Clare Short) It has now got all these associations of an in group, not
being accountable, not being transparent. I am simply saying as well as
changing the arrangements, I really think we should get rid of that concept.
401. Yes.
(Clare Short) It is not for me to determine the language but I think we
should have the final negotiating group, some agreement on who is represented
on it and who they are accountable to and how they report back. That is not
difficult to organise. I think as discussions are going on people are quite
content that is fairly easily organised. It is a matter of will. It is not
rocket science.
402. Would it be fair to characterise what you are saying as you
want an inclusive arrangement as opposed to what the Green Room suggests is
an exclusive arrangement?
(Clare Short) Indeed. Absolutely. We all have to accept that there will
have to be a smaller group at the end of any massive negotiations to finally
bring a package together but then that smaller group must be representative
of the others and report back to the others. That has not been properly done
yet.
Chairman: Can we go on the dreaded TRIPS and Nigel Jones has
volunteered to lead us with TRIPS and then later on TRIMS.
Mr Jones
403. In DFID's memorandum to us on this inquiry it states that the
Government "... recognises that in particular cases the TRIPS agreement will
increase the cost of achieving the international development goals and
targets. In these cases the Government will seek to collaborate with concerned
parties to find appropriate solutions". Can you give us any examples of
countries where the implementation of the TRIPS will, in your opinion, result
in an increase in the cost of achieving the international development targets
and of any solutions which have been proposed?
(Clare Short) I would just like to say a couple of preliminary things
and then bring in John on some of the detail. I think these agreements on
intellectual property and, indeed, traded services, the NGO rhetoric is that
these are all against the interests of developing countries and oppressive for
developing countries. We do not agree with that. We think proper intellectual
property protection is part of creating the conditions which will make your
country attractive for inward investment and, indeed, that people in your own
country will in turn get protection for their own invention. I just want to
say that it is very much in the broad rhetoric that this is totally oppressive
and not helpful to developing countries. I do not personally believe that to
be true. There is a stand alone organisation - what is it called - on
intellectual property. The countries join voluntarily to become part of an
international system of intellectual property that has been growing up
alongside but without any enforcement mechanism. The change that was made in
the Uruguay Round was to bring that inside the World Trade Organisation. Can
you answer the specifics of the question on costs?
(Mr Roberts) Yes. There are short term costs and longer term gains in
the introduction of intellectual property protection. The short term costs
obviously relate to the fees which you have to pay, the royalty fees or the
licence fees which you have to pay to the owner of intellectual property
through the product price. I suppose this cuts in most dramatically in the
case of pharmaceuticals. In the longer term there is gain from having a
business regime which is more orthodox and in which innovation, research and
development finds its reward. Companies which are investors, who are in
information intensive businesses, will be willing to invest in order to take
advantage.
(Clare Short) But you are not answering the question on the specific
costs. For example, in India there is a lot of production that is imitation
of other products, and in China indeed. I have visited, I think it was, an EU
funded irrigation project in China and they said "This is the Italian one,
this is the German one and we think this is the best. We have tried to copy
it but we could not get it right". There is that culture of creating - without
paying any respect for intellectual property - imitation goods. Now that
tends to be second rate goods and so on and has all sorts of other
consequences for an economy, but if a country is going to sign up and start
enforcing people who are in those kinds of sectors they will obviously have
a problem. Has anyone estimated costs? There is some World Bank estimate
that we think is a guess of the costs of these adjustments.
(Mr Roberts) I cannot quote a figure but certainly there have been
attempts at working out the cost benefit ratio of intellectual property
protection.
(Clare Short) Can we look into that and come back to you? I think that
is best, John, rather than blabbing on here. I have seen a figure somewhere
and I think it is unreliable but let us look at what there is and come back
to you.
Chairman
404. The Director-General of the WTO was due to report back - and
I think the suggestion is that he has reported back within May, after the
General Council meeting must be the answer to what we are asking - on the
extension of a deadline for compliance with the WTO agreements on Intellectual
Property, Investment Related Measures and Custom Valuation Agreements beyond
December 1999. He is now proposing, as we understand, further postponement of
these deadlines. I think you, Secretary of State, have said to us during the
course of this discussion that in fact you think the deadlines for
implementation of these agreements on Intellectual Property should be examined
country by country and in agreement made on implementation with each one of
them. Is that now going to be the policy or what is going to be the future for
implementing TRIPS, TRIMs and Custom Valuation Agreements?
(Clare Short) Actually developing countries were supposed to implement
TRIPS by January 2000 but in those sectors not previous protected by patents
developing countries have until 2005 to implement TRIPS obligations. Least
developed countries must implement obligations by 2006. I think that is the
existing timetable.
405. Right.
(Clare Short) I think the commitment on implementation, because of
course January 2000 has happened ---
406. Yes, exactly.
(Clare Short) --- is a commitment to revisit where countries have not
been able to comply. That would be country by country and I think it will not
be exemption. It will be "what are your problems, how can we help you, do you
need some technical back-up and assistance, but you are expected to adhere to
the obligations you took on".
Ms King: Chairman, in case there is anyone here who does not
understand what we are talking about with TRIPS and TRIMS, is there any chance
of a definition?
Chairman
407. Yes. TRIPS is Trade Related Intellectual Property Rights and
TRIMs is Trade Related Investment Measures. I get them muddled up myself. The
question, therefore, is that these countries already in breach of the original
deadline, are they going to have a blanket roll-over, is that what Mike Moore
is proposing?
(Clare Short) My understanding is that it is going to be case by case,
country by country: "What is the problem? What kind of assistance do you need?
What kind of timescale is reasonable?"
(Mr Roberts) That is right.
(Clare Short) I think that is the right way because some countries will
have much more capacity than others.
408. Yes.
(Clare Short) You have to make sure that it is not countries trying not
to comply, that it is a genuine process that is fair to all.
409. Who will decide when this roll-over takes place? Will it be
the Director-General?
(Clare Short) I do not think it is a roll-over, I do not think that is
the right concept. It is country by country: "How far have you got? What are
your difficulties? What kind of technical support do you need? What is
achievable by what date?" Then that country would have a new time frame.
410. So the Council is going to examine each of these non
compliant states, ask those questions and then make a new ---
(Clare Short) --- make a new plan with each one. Some committee is
being set up.
(Mr Roberts) The Special Implementation Review Mechanism in the General
Council will supervise this.
(Clare Short) Then it will come down to lots of technical work. There
is an open committee structure to supervise it. So far, we are at the
beginning of it, there is a general sense amongst developing countries that
is good.
411. Could we have a note as to which countries have yet to comply
and the new mechanism for taking the programme forward you have just outlined,
Secretary of State?
(Clare Short) I think we might not know the full answer to your
question. You can certainly have a note on everything we know. Some of these
dates have not come in yet.
412. Right.
(Clare Short) I suppose countries that are not complying, people might
not even know until there is some kind of conflict over it. We can do the best
we can.
413. Would you? Would you clarify our minds as far as possible.
(Clare Short) Yes.
Mr Rowe
414. I am so ignorant about this that I am going to ask a very
simple question. Do all countries have patent offices and places where you can
register Intellectual Property or do they, in fact, go to some kind of
regional office? Is there an international office to which they have access?
It seems to me improbable that some of the countries which are emerging would
have the kind of patent office that can provide them with any serious
protection.
(Clare Short) Absolutely. It was agreed under Uruguay that everyone
should put in place Intellectual Property Protection, I think to minimum
international standards. There is this international body ---tell me the name
again?
(Mr Roberts) World International Property Organisation.
(Clare Short) World Intellectual Property Organisation, WIPO, that is
it. It has grown up voluntarily. The countries have joined in order to agree
some sort of minimum standards and to get some technical advice about what
minimum standards are. That was all growing up anyway. A lot of countries
want to comply to be a good place for investment. There was a process at work
which made more and more countries want to come into it. What was agreed
under the Uruguay Round was that all countries as part of the Round would
agree to become part of it. I think there is not a rigid formula, it is
minimum provision for the protection of Intellectual Property. As you say,
lots of countries have got no idea how to begin to go about it, especially
some of the poor least developed countries. They have never had any
Intellectual Property law, they have not got a patent office. No-one has ever
thought about doing this. They need some back-up and help.
415. If I lived in Rwanda, or somewhere like that, and had a
brilliant idea for a bicycle to go on water or something like that, presumably
if I register that with whatever Rwanda's office is, there must be a huge risk
that somebody in this country or America or somewhere will invent a very
similar thing and the protection granted by the Rwandan Patent Office will be
regarded as faulty?
(Clare Short) My understanding is you have to register country by
country. The fact you have registered in the UK does not protect you in Rwanda
or the US.
Chairman
416. That is right.
(Clare Short) All companies have to register in every country so it is
quite a business.
417. It is a huge cost.
(Clare Short) Yes. Of course lots of rural people who are inventing
tools and things will just get on with it. It is when you are starting to take
things to market and fearing that somebody is going to rip you off and copy
your invention, it is going to be a higher stage up the market where anyone
is going to bother to register. Of course then intellectual property rights
do become exhausted they are not permanent. They are meant to reward the
inventor and then be exhausted.
Chairman: Yes. I am going to ask Tess Kingham to ask questions on Trade
Related Investment Measures and their agreements.
Ms Kingham
418. Yes, from TRIPS to TRIMS, Trade Related Investment Measures.
I am not going to give a two sentence definition of that, I am afraid. Do you
think countries like South Africa should be allowed to have laws which require
foreign investors to employ a certain proportion of their workforce from a
particular ethnic or other group or to purchase a certain proportion of raw
materials locally?
(Clare Short) The Trade Related Investment Measures, they do exclude -
or do they - commitments on a certain proportion of local sourcing. They do
bite on that. They do not bite on lots of financial incentives.
419. It is more about that local content, how much of that local
content can be used?
(Clare Short) Apparently in the world system it is the chemical and
automotive sectors that do most of this and it is in industrialised countries.
The agreement was not intended to bite on developing countries, it is bad
practice in economies like our's and most of the countries that are affected
by the chemicals and the automotive sector. If Alec Erwin brought this up it
would be a question for them to take back into the negotiations. Some
countries have rules that companies have to have a certain proportion of
local ownership if they are not affected currently by TRIMS. The amount of
local sourcing ---- Is that right?
(Mr Roberts) That is right. Of course, there are other ways of going
about it. Even in this country we encourage foreign investors to source
locally and they do.
420. But that is voluntary.
(Mr Roberts) That is voluntary, yes.
421. In some areas of the world that has been undermined greatly
by some of the free trade zones that have been set up. The TRIMS Agreement
could actually do as much damage as some of those free trade zones have done
to undermine local purchasing and local content.
(Clare Short) I do not know. That has been alleged. It would be very
interesting to look at it case by case. This has been agreed as part of the
Implementation Agreement, country by country they will look at TRIMS and give
countries extensions. If we get the new Round and it is at fault it can be
brought back to the table and we can negotiate a change. What is in the
agreement is designed to get industrialised countries, not developing
countries, that is the origin of it, using this local sourcing as a kind of
protectionist measure, as I understand it, in chemicals and cars particularly.
422. The other example we have been given has been Columbia.
Columbia is one of the countries that is concerned about the impact of TRIMS
on food processing, the food processing industry there, which is dominated by
foreign multinational corporations, almost to ensure that a minimum use of
local agricultural products is still allowed and if that is not allowed could
the restrictions on local content policy have potentially damaging
consequences for poverty reduction? Obviously the connection between the two
is quite apparent.
(Clare Short) I find it extraordinary just from first principles to
think that a multinational food processor would set up in a developing country
and import the raw product from elsewhere, it seems like the opposite of
economies of scale. Columbia has this enormously competent Ambassador to
Geneva who is one of the inspirers of the Legal Advisory Centre, so I am very
interested in what he has to say. As I say, there has been agreement as part
of the General Council agreement on implementation to look at TRIMS and the
difficulties countries have country by country and then, if there is a genuine
problem in the agreement that is reached under Uruguay, if developing
countries think that they can take it back to the table in the next Round.
423. Is this an issue that DFID has been looking at in terms of
bilateral negotiations with these countries?
(Clare Short) No, it is not an issue that has been particularly raised
with us. We are open to anything but it is not an issue that has been brought
to us by the developing countries that we have been working with as a major
problem. You have just given me two interesting cases that I have not heard
about before. I remember in Birmingham when we built the International
Convention Centre we had a commitment to local labour. It was all in my
constituency so I was rather attached to this. In the end it broke down on
just the practicalities of finding out where everybody lived. My own sense
is that countries and people tend to have a deep attachment to this and
practicalities often need to change. That is my instinct but if there are
individual cases we would be very interested to hear about them. There are
processes now agreed where these could be reviewed.
Chairman: Secretary of State, there are also problems with the
workforce in relation to this. We understand that South Africa has got laws,
presumably because they want to do positive discrimination, which require
foreign investors to employ a certain proportion of the workforce from a
particular ethnic or other group. We are really asking whether you would
support South Africa maintaining such laws?
Ms Kingham
424. Or Rwanda.
(Clare Short) I am very strongly in favour of equal opportunities
policies and employing local labour from the local community is a very
important principle in that. We have it in our country and it is to be
encouraged all over the world I think. Does the existing agreement clash in
any way with that?
(Mr Roberts) No.
(Clare Short) I did not think so.
Chairman
425. Alex Erwin made another very interesting remark concerned
with using labour laws in the trade agreements, which was one of the issues
the NGOs and the trade union movements in Seattle were trying to do, as you
have told us. Alec Erwin said that there had to be greater harmonisation
between the ILO Conventions and the WTO system. Would you agree with this
assessment?
(Clare Short) My view is that those who want to use the WTO to enforce
core labour standards are taking the wrong route. Inevitably it leads to
punishing countries for their poverty.
426. Yes.
(Clare Short) Where is child labour? It is in the poorest countries.
95 per cent of it is not in traded sectors. Those are the kinds of issues
that quite reasonably people feel emotional about but they reflect poverty and
they need to be remedied and children need to be in schools and their parents'
incomes need to be increased. Taking a trade sanction against that country
is not the right route to make progress. This was one of the causes of the
Seattle breakdown. It is felt very strongly by developing countries that this
is pure protectionism. There is this strong feeling in the American trade
union movement that with all the technological change that has taken place -
and of course the economy is booming but there is a lot of technological
change because we are living in such an era - all the change is capital
exiting from the US and going to countries where labour is cheaper. There are
lots of people who really believe that to be the case. All the analysis says
that it is not the case. Therefore, they are trying to say "you have got to
have competition by having cheaper labour". Well, it is one of the
comparative advantages of developing countries. It is intolerable that there
will be a minimum wage in the world and capital will not move to your country
unless you are paying as much an hour as is paid in the US, which is the logic
of that position. There are lots of people who genuinely feel emotionally
about this but it is the wrong route, WTO is the wrong instrument. What we
need is a more effective implementation of ILO agreements. There has been
progress in the ILO recently. This is a UN body with representatives of trade
union, government and business from every country, so it is a very suitable
body, bringing together all the appropriate interests. They have recently
agreed this set of core labour standards to simplify it because they have got
lots and lots of different conventions and different numbers of countries have
signed up to different numbers of conventions. To get round to the core
labour standards, which are child or bonded labour, the right to organise,
which is not just trade unions but including community organisations, people
have a right to organise themselves, and no discrimination. That is right,
is it not? They have made those the core and said that the ILO will report
on progress in every country year on year against these core labour standards.
They have instruments, like the IPEC Programme, to work on reducing child
labour. We have put some money into that. They are doing some collaborative
projects in Andhra Pradesh, in Tanzania and on child sex workers between
Thailand and Bermuda, what do you call that triangle, the Mekong. We
strongly, strongly believe that we should do all in our power to drive forward
core labour standards and particularly child labour we should make progress
on otherwise it is a life sentence for the child. Not only do they not have
a childhood, they do not get any education and therefore they are poor and in
turn their children will be poor. I passionately do not believe the WTO is
the right instrument to enforce that. I think we have made some progress.
This was very hard in the run-up to Seattle, even in the EU there were major
forces going with the WTO enforcement system. As you know, the United States
went with it and President Clinton came to Seattle and said it and that was
all part of the atmospherics that really soured Seattle. I understand that
since then the ILO has put together a working group drawing in the World Bank.
We think that all the development agencies should get together with the ILO
to look at how we can drive forward the implementation of core labour
standards across the world. I think the ILO has started that process. It is
now under new leadership. I think there is a hope of getting more vigour and
more progress.
427. They should be separate WTO and ILO pursuing their objectives
but they should not actually join?
(Clare Short) It is the enforcement. The WTO has an enforcement
mechanism, that is why everybody wants it, the environmentalists, and
everybody wants to get inside the WTO. The enforcement mechanisms are
sanctions against the trade of a country.
428. Yes, and that you do not agree with.
(Clare Short) If you just look at where child labour is in the world,
most of it not traded, but you would end up with sanctions against the poor
countries, that is the pure logic, you would punish countries with trade
sanctions for the fact that they are poor. The alternative must not be no
action, no progress. We must not go down that road. It is wrong and it would
bring the WTO into disrepute.
Ms Kingham
429. I can see the argument about the WTO but the other criticism
of the ILO is that there is not an enforcement mechanism, that it is done in
a sense on the goodwill of companies or multinationals to accept the standards
within their working practices within individual countries. We have also
heard in evidence from the Committee before that companies have said that
consumer power is very important in putting pressure directly on countries and
the Ethical Trade Initiative has been part of that. Do you not see any role
at all for enforcement within any of those structures? Do you think there is
a place for enforcement which is not within the WTO?
(Clare Short) Yes. As I have just said, the ILO needs to do more
effective work on enforcement. It is meant to draw up conventions and then
countries are meant to incorporate them in their law and then they are meant
to enforce them. Many countries have laws against child labour and against
bonded labour, I think India does, but there is lots of child labour and an
awful lot of bonded labour. The ILO is a UN body, it is not multinational
capital, it is a UN body, and the member states that are represented take
delegations that represent their government, their trade unions and their
business community. It is unfair to describe it as just belonging to
multinational capital.
430. I did not do that.
(Clare Short) No, but you said that is what the criticism is.
431. No. Can I separate that out, the focus is on multinational
companies like Nike or some of the ones that there have been consumer
activities against operating in certain countries with poor labour standards.
(Clare Short) Yes, I am coming on to that. We must improve the
effectiveness of the ILO and there is this work going on on poor labour
standards. There is a programme - what does SIPEC stand for - dealing with
child labour. The US have just put a lot of money into it. It needs to be more
effective on the ground and some of the ILO's programmes have not been. We
need a big reform effort there. I agree with you, we have a general problem
in the world system that lots of countries have signed up to ILO conventions,
incorporated them in their law, and there is no enforcement; India being a
case in point. Then the question for multinational companies, I think people
imagine them opening factories in Bangladesh because what they do is source
locally. They might well give cloth and patterns to a local Bangladeshi
employer who then employs the local staff and so on. That is how it works
rather than them opening up their own company. So you get local labour
practices. In a country where child labour is widespread then you will get
those local employers engaging child labour. Then the multinational company
will find itself on the front page, never having directly employed child
labour but sourcing goods from someone who does. The consumer power has been
very, very important here. Multinational companies are more and more
investing their label, their reputation is fantastically important to them in
a business sense not just in a sort of concerned social sense, and they are
very, very keen to avoid these kinds of scandals that can be so damaging to
them. More and more of them are signing up to ethical codes. All of these
British retailers have joined the Ethical Trading Initiative and that is
trying to clean up supply chains and generally raise standards but not have
boycotts. As I say, the man from Delmonte comes and says "Do not tell me it
is cheap, tell me there is no child labour here". The power of that, if we
can get it right is very important indeed, or the man from Tesco or wherever.
Those movements are having a lot of effect. Then you hit this real problem
about the boycott and lots of really concerned good people who say children
have been employed in Bangladesh in the making of shirts or t-shirts they
might buy, they call for a boycott but we have the experience in Bangladesh.
Senator Hartness just tried to bring in a bill that said America should not
allow any imported textiles from Bangladesh if there were any children
employed in producing it. It actually probably never had any chance of being
law, like our Ten Minute Rule Bill, but it led to lots of children being
thrown out of their jobs in Bangladesh. A study was done and lots of them
ended up as sex workers and beggars. You have got to act but you have to act
in a way that protects the interests of vulnerable and poor people. It is the
same with Cellcots in Pakistan which makes 90 per cent of footballs in the
world. It is outsourced to people's homes. The poorest of the world tend to
be widows and women whose men folk have abandoned the family. Of course they
can sew those footballs at home and the woman might have small children. It
was revealed at the time of the last World Cup that this was where all the
footballs were coming from. The danger is everyone does a boycott and finds
another supplier and some of the poorest people in the world are thrown out
of all employment. Actually it would have been easy to just stick with a
factory and then the women with children would not be able to come. We have
been working with Save the Children, I think it is, to have a phased
programme, getting those children into school and increasing the income level
of their parents. That is what we need. The emotions are so powerful, quite
reasonably, that the call for a boycott is very reasonably understood but it
can lead to damage, like the Bangladesh case, and then it can be misused by
protectionist forces.
432. I accept that totally on companies where there is a brand
where there can be some kind of consumer power. I think the concern about some
of those issues, like the TRIMS issues that we have touched on here, have been
for some of the companies where there is not a public face to the company.
Without any enforcement process, whether WTO or ILO or whatever, there is no
consumer power to actually nudge those companies into that activity and then
there are millions of people hidden in a sense behind the scenes working in
some countries with absolutely no protection at all. What levers do we have
to pressurise those kinds of employers?
(Clare Short) You are absolutely right and all the studies show there
is room for improvement but the employment standards for goods sourced by
multinational companies tend to be better on average than local employment
standards in the poorest countries for the reasons we have been discussing.
It does not mean we should not get improvement. If you read about the
Bangladesh children that make bedding, that is a child, and it is a massive
production for local youth and lots and lots of children work very, very long
hours and certainly are not in school as a consequence. I think they are
sacked when they get a bit older and are not cheaper. You are right, this
cannot be our only enforcement mechanism but it should be the local government
that is the enforcement mechanism adopting the codes of the ILO that they sign
up to when they go to those meetings in Geneva. It is part of the development
job to help countries create the conditions where they can do so. There was
a proposal from the ILO to have phased programmes for the removal of child
labour and so on. I repeat 95 per cent of child labour is in non traded
sectors. It is in agriculture, local mining, rock breaking, you know all those
horrible jobs that you see. We have to engage for real with where the real
children are and it becomes a development job. The ILO should do all the
reinforcement, but even rule making does not get those children breaking
rocks. Nobody is paying them any wages and we have to get into development and
have programmes in countries to really phase out child labour but it has got
to include increasing the income level of those families. Those children work
because otherwise the family will not have enough to eat.
Chairman
433. It is a poverty question, is it not?
(Clare Short) Absolutely.
434. It comes out of poverty.
(Clare Short) We can strengthen the ILO's capacity here. We are working
with them now in Andhra Pradesh, Tanzania, Mekong, to try and learn how to do
this better and get them as an institution to be able to both do advice on
codes but helping countries enforce and lift up the poorest so they are not
in those conditions. Bonded labour is another one. Bonded labour, I have met
bonded labourers, their father was sick when they were children and therefore
the whole family was sold into bonded labour. They all have been working for
nothing ever since. In this day and age this is going on. It is a form of
slavery and it is rife in Nepal and Beehar.
435. Yes, it is, and we should not hide from it. It should not be
used in trade as a measure to sanction a country.
(Clare Short) That ends up punishing poor countries for being poor and
that we must not do.
436. Secretary of State, thank you very much indeed for bringing
us up to date and discussing these very complicated but terribly important
subjects. We hope to produce a report before the summer is out and we hope,
thereby, in fact, to make clear what these problems are and, therefore,
enhance the whole drive to get a good developing countries round in the WTO.
Thank you very much indeed for answering these questions and helping us with
this report.
(Clare Short) Thank you very much.
