Select Committee on International Development Appendices to the Minutes of Evidence


Memorandum submitted by Oxfam


  1.  Oxfam welcomes publication of the Government's Globalisation White Paper. The objective of making globalisation work for the poor is one we share, and the UK Government deserves considerable credit for being the first major government to publish a paper that tackles this issue.

  2.   Similarly, we welcome the broad orientation of the White Paper. The commitment to achieving structural changes in order to make markets work for the poor within a rules-based global system is one that Oxfam strongly supports, as is the re-affirmation of the 2015 International Development Targets.

  3.  We also share the White Paper's analysis that if globalisation can be made to work for the poor, then considerable progress can be made in reducing poverty but that if we go on as we are, the poorest countries will be further marginalised. We agree that neither outcome is pre-determined, and that progress will depend on the choices made by governments, international institutions, the private sector and civil society organisations.

  4.  In responding to the Globalisation White Paper, the starting point for Oxfam is that globalisation in its current form is not working for the poor. The expansion of world markets through increased flows of trade and finance has created unprecedented opportunities for wealth creation, yet the human development gains have, to date, been disappointing. The benefits of globalisation have been disproportionately captured by rich countries and powerful transnational companies, while poor countries and poor people have been left behind.

  5.  We readily acknowledge, as does the White Paper, that globalisation is creating both winners and losers, and that some poor people—for example women textile workers in Bangladesh and workers in the hi-technology industries of Bangalore—have made substantial gains. But poor men and women continue to be disproportionately represented amongst the ranks of the losers, with poor farmers in Mexico and the Philippines seeing their livelihoods destroyed by competition from cheap imports, and millions of Indonesians witnessing the human development gains made over a generation wiped out by the instability of capital markets.

  6.  Oxfam believes that the current pattern of globalisation is failing the poor because it is failing to tackle inequality and to deliver sufficient, equitable growth, and convert that growth into poverty reduction at the rate necessary to ensure that the 2015 International Development Targets will be met. The yardstick against which this White Paper should therefore be measured is the extent to which it identifies the policy changes necessary at both national and international level in order to promote economic growth, redistribution and poverty reduction.

  7.  We believe that many of the specific policy commitments contained in the White Paper are welcome, and we examine some of these in more detail below. In other areas, we believe the White Paper could have gone further, and again, we give examples. Finally, we also have some underlying concerns about the analysis set out in the White Paper, and believe that in particular, redistribution could have featured more strongly as an over-arching theme. We will attempt to outline these concerns in the following submission.


  Among the many policy commitments which we support are those on:

  8.  Growth with equity—We are pleased to see that the White Paper firmly states the Government's belief that economic growth alone is not enough, and that pro-poor development requires both growth and equity. Similarly, we share the analysis that the starting point is important, and that poverty reduction is more easily achieved in more equal societies. The White Paper identifies many of the polices required at the national level to promote redistribution, including land reform, taxation and public spending on social development priorities, such as health and education.

  9.  Corruption—We share the view that the poor suffer most from corruption and welcome the commitment to legislate in order to make UK law consistent with the OECD Convention on Bribery, and to introduce legislation to strengthen laws on money laundering.

  10.  Incentives for research into vaccines and treatments for HIV/AIDS, Malaria and TB—We support the notion of private/public partnerships aimed at increasing investment into research and development of drugs and vaccines to treat the major diseases which affect poor men, women and children.

  11.  Independent Commission on TRIPs—We welcome the proposal to establish an independent Commission which will examine how intellectual property rules might need to develop in future to take greater account of the interests of developing countries. This is a complex area of policy, and detailed examination by a high level Commission seems a good way forward. In preparation for our forthcoming campaign on TRIPs, Oxfam has undertaken research on the impact of the TRIPs agreement on access to essential drugs. Contrary to the White Paper's analysis, we believe there is compelling evidence that compliance with TRIPs will raise the price of essential medicines, with devastating consequences for poor households. While there are some safeguards in place, recent examples concerning HIV/AIDS drugs in South Africa suggest that these are inadequate, and often count for very little in practice, as the rules are frequently threatened by use of trade sanctions. We also believe that current rules under TRIPs go too far in creating monopoly marketing rights, as The Economist and others have pointed out. Our research leads us to challenge the rather more optimistic analysis of TRIPs given in the White Paper, and we look forward to presenting our conclusions to the Independent Commission.

  12.  Reform of the WTO—The White Paper concedes that the WTO still bears the imprint of a smaller group of mainly northern countries and agrees that the organisation should be made more transparent and open. The Government's support in persuading the WTO to commit to the International Development Targets is particularly welcome.

  13.  Support for Capacity Building Measures—A number of measures aimed at building developing country capacity for trade policy and negotiations, especially in Geneva, are welcome eg the 2001 Africa Trade and Poverty Programme. We share the view that practical measures combined with support for initiatives such as the Everything but Arms proposal are both significant in themselves and important as confidence-building measures post-Seattle.

  14.  Improved Market Access—We warmly welcome the strong case that the White Paper makes for improved market access. It recognises that substantial inequities persist in the international trading system and rightly accuses northern governments of failing to practice what they preach in relation to the opening up of markets, particularly in sectors such as agriculture and textiles. We share the analysis that the Common Agricultural Policy is a barrier to access and support the case for reform. We note, however, that there may be disadvantages to developing countries opening up their own markets within the context of continuing CAP subsidies. We agree with the call for an end to quota protection of textiles by 2005, no new protectionism and tighter regulation of anti-dumping rules.

  15.  Untying Aid—Much of the media coverage surrounding the launch of the Globalisation White Paper focused on the Government's announcement that it will unilaterally untie the UK aid budget by April 2001. This is a significant move, and one which NGOs, particularly ActionAid, have been advocating for some time. Untying the aid budget will increase the effectiveness of aid spending and also has a symbolic significance, clearly demonstrating that all British aid will be directed towards the elimination of poverty rather than the furtherance of national self-interest.

  16.  A New Development Bill—We support the introduction of a new development Bill to consolidate a poverty-focused approach and to broaden the range of activities which the Government can support.

  17.  Poverty Reduction Strategy Papers—We welcome the emphasis on ensuring adequate civil society participation in the drawing up of PRSPs and believe it was helpful for the White Paper to acknowledge that there have been some teething problems with early examples. We firmly believe that both the World Bank and the IMF will need to radically alter their ways of working if PRSPs are to achieve their true potential. We are pressing for these institutions to support the notion of economic impact assessments prior to implementation, and would welcome DFID's support for this proposal.


  18.  Arms—The White Paper repeats the undertaking given by Stephen Byers at last year's Labour Party Conference that the Government will introduce a licensing system for arms brokers and also says that they will work to tighten international controls at the forthcoming UN Conference on small arms. While both of these are welcome commitments, Oxfam and other NGOs such as Amnesty International and Saferworld continue to be disappointed at the Government's failure to find Parliamentary time for legislation on Strategic Exports Controls prior to the Election. And while new proposals on brokering look promising, we also want action to control licensed production, improve end-use monitoring and introduce prior Parliamentary scrutiny of arms licences to potentially sensitive destinations.

  19.  Education for all—We welcome the White Paper's commitment that the Government will work to ensure that primary education is free for all, and the fact that it reiterates the Dakar commitment that no government seriously committed to universal primary education should fail through lack of resources. But we are disappointed that the White Paper fails to make any mention of plans to take forward the development of a proposed global initiative on education, also agreed at Dakar. Despite the fact that the Conference committed the international community to develop such an initiative "with immediate effect", progress since Dakar has been slow. We remain concerned that unless a global mechanism can be developed for linking good national plans to the promised additional financial resources, millions of boys and girls will continue to be denied their right to a free, high quality primary education.

  20.  Investment—The White Paper effectively acknowledges for the first time that mistakes were made with the Multilateral Agreement on Investment. It concedes that the OECD was not the right forum for negotiating a genuinely multilateral agreement. It also stresses that any new agreement must be balanced and flexible, allowing foreign investors to invest in defined sectors but also recognising the rights of governments to set their own health, social and environmental standards, and to legislate in favour of certain regions or sectors. Nevertheless, it still insists on National Treatment, and possible performance objectives, which we believe could restrict poor governments from achieving certain development objectives. The White Paper places considerable emphasis on the need to encourage foreign direct investment in developing countries. While we support the case for the right kind of FDI, we feel that the White Paper downplays some of the negative consequences of the wrong kind of investment, and linked to this, the need for better regulation of TNCs. While there is a welcome emphasis on the OECD guidelines and other voluntary initiatives aimed at promoting corporate social responsibility, this is not balanced by measures aimed at introducing binding international regulation of those who play an increasingly powerful role in the management of the global economy.

  21.  Debt—Given the Government's excellent record on debt relief over the past three and a half years, it is perhaps churlish to criticise the White Paper for offering nothing new on debt relief. We congratulate the Chancellor of the Exchequer and the Secretary of State for International Development once again for their personal efforts on this issue and we also welcome the flurry of activity at the end of last year which resulted in 22 countries successfully entering the HIPC initiative. Nevertheless, we continue to believe that the level of debt relief delivered by HIPC2 is inadequate, as evidenced by the fact that many countries who have graduated through HIPC2 are continuing to spend more on servicing their debt than they are able to invest in health and education. We also believe that eligibility for debt relief under HIPC2 should be extended to a wider range of countries. We and other NGOs involved in the Drop the Debt campaign will continue to press the case for wider and deeper debt relief in order to reduce debt burdens to sustainable levels, commensurate with social development priorities. Increased multilateral debt relief, bringing the IFIs into line with existing bilateral commitments, could be an important element in this.

  22.  Aid spending—The White Paper confirms the figures given in the latest Comprehensive Spending Review which show that UK aid is set to rise to 0.33 per cent GNP by 2003-04. We welcome the steady increases in the aid budget made by the Government and, as with aid untying, believe that aid spending has both a practical and a symbolic significance in terms of the UK's commitment to the poorest countries. We note, however, that if progress continues at the current rate, it will be sometime before the UK reaches Scandinavian levels of generosity.



  23.  The statement that globalisation has been accompanied by increasing inequality has become received wisdom in many quarters and Oxfam, along with other NGOs, quoted figures from the UNDP Human Development Report to back this position in our White Paper submission. The White Paper challenges this analysis, and treats the data on purchasing power parity differently in order to argue that after increasing between 1960 and 1990, inequality between the richest fifth of the word's population and the poorest fifth has now started to fall.

  24.  Without access to the detailed data behind this assertion, it is difficult to evaluate. The Secretary of State has offered NGOs a briefing with DFID economists on this issue. We welcome this opportunity, and will clearly be better placed to comment in detail on this aspect of the White Paper after this has taken place. Nevertheless, our initial reaction to these figures is one of caution, as we find them difficult to square with other evidence, for example figures given in the World Development Report which show that average incomes in low income countries have fallen from 10 per cent to 7 per cent of average incomes in high income countries between 1996 and 1999.

  25.  Secondly, drawing a general conclusion on the basis of figures relating to a specific time period carries the obvious risk that if the same calculation was made for a slightly different time period—a few years earlier or a few years later - it would give a very different result.

  26.  Thirdly, and again at the risk of stating the obvious, the problem with averaging out the figures is that they mask a huge degree of regional variation. As the White Paper acknowledges, much of the success of the last few years can be accounted for by economic growth rates in two of the world's most populous countries, China and India. Meanwhile, it is clear that many of the poorest countries in sub-Saharan Africa and some middle income countries in Latin America have fallen further behind. Average figures also obscure the problem of inequality within countries, and there is plenty of evidence that this is growing across a wide range of countries, including China, India and Vietnam, where it is weakening the link between economic growth and poverty reduction. This is not to suggest a case for abandoning market oriented reforms but it does highlight serious problems in the current reform process.


  27.  Our second underlying concern relates to our first, and centres on the White Paper's analysis about the relationship between increased openness, economic growth and poverty reduction. On the basis of a review of recent research evidence, the White Paper concludes that, on average, the poor benefit from trade openness in the same proportion as richer households. It cites a Dollar and Kraay study which demonstrates that in a group of 18 developing countries which became more open to trade after 1980, average growth accelerated, whereas other developing countries, who became only slightly more open, saw growth levels drop to near zero. Such evidence is used to back the proposition that trade liberalisation is good for growth, though the White Paper acknowledges that whether or not this growth is converted into poverty reduction depends on broader economic and social factors.

  28.  In fact, the developing region which has opened up most dramatically since 1980 is Latin America, the region which has achieved the lowest conversion rate for growth into poverty reduction. During the 1990s, Latin America has achieved a reduction of only around one per cent in the incidence of poverty, despite regional economic recovery, and the region is currently converting growth into poverty reduction at one-third the rate of East Asia. Such examples suggest that the links between openness, growth and poverty reduction are far from automatic. And while the White Paper argues that greater openness was a key factor in East Asia's success, there is a counter-argument which says that one aspect of the East-Asian miracle was the initial use of selective protectionist measures aimed at shielding infant industries from the full force of global competition.

  29.  As the White Paper rightly concedes, the problem with averaging out the statistics concerning the relationship between trade openness and poverty is that there are cases where poor people gain from trade less than proportionately and cases where they gain more than proportionately. It correctly states that the challenge for policy makers is to reduce the former and increase the latter, but then offers little in terms of understanding the circumstances under which trade liberalisation will most benefit the poor. While the debate as to whether or not trade liberalisation is generally "good" for the poor will no doubt rage on, it strikes us that the real priority is to understand the reasons for current variations and based on this, to identify the policies necessary to ensure that trade liberalisation does benefit the poor.

  30.  We that in mind, we believe that this section of the White Paper could have placed more emphasis on the central importance of redistribution. In one quarter of the 143 growth episodes covered in a study for Howard White at IDS, distribution played a stronger role than growth in increasing the incomes of the poor.


  31.  The White Paper places a great deal of emphasis on the changes necessary at national level to ensure that globalisation works for the poor, and the International Development Targets are met. It is right to do so, because future development clearly is dependent on the governments and people of developing countries. But Oxfam believes that their efforts must be coupled with more radical action and reforms at the international level if many of the underlying inequities in the current global economic system are to be addressed.

  32.  At present, the odds are stacked against the world's poor in many different ways—they have lower incomes, poorer health, fewer educational opportunities, less access to resources such as land and credit, less access to markets and above all, less of a voice in how the global economy is run. For this to change, it is not only the governments of developing countries which need to take action—it is northern governments and northern dominated international institutions as well.

  33.   While the White Paper correctly identifies some of the changes necessary—for example, steps to improve market access—we are concerned that it may under-estimate the scale of the changes required and over-estimate the willingness of northern governments to implement them. The current row over Pascal Lamy's Everything but Arms proposal provides a good example. Here we have a proposal to extend free market access to all exports except arms from the Least Developed Countries into the EU. It is a modest proposal that would carry relatively small costs to EU countries whilst bringing significant benefits to some of the poorest countries in the world. Yet it has provoked an extremely hostile reaction from the international sugar lobby, from Caribbean producers and particularly from sugar beet farmers in the EU. In this case, for the poor to become winners, others who are less poor will have to lose (or, more realistically, be helped by EU governments in bearing the costs of adjustment in an increasingly globalised economy). The final outcome will be an interesting test of how far EU governments are genuinely prepared to go in order to make globalisation work for the poor. While we should avoid slipping into the cynicism and negativism of which the Secretary of State so rightly warns, it is vital for those on the progressive side of the argument to be aware of the strength of the forces ranged against them if they are to rise to the challenge of pressing forward policy changes aimed at making globalisation work for the poor.


  34.  There is much in the White Paper that Oxfam welcomes and we congratulate the Government on producing a clear statement of policy on this vital and complex issue. Above all, we welcome the Government's recognition that the future direction of globalisation is not pre-determined, but a matter of political will that rests in the hands of governments, international institutions and civil society organisations. For our part, we support the Government's objective of making globalisation work for the poor and will continue to work with them on areas of agreement, to challenge them on areas where we think they should go further and to debate with them on areas of difference.


January 2001

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