Select Committee on International Development Third Special Report



Memorandum from the Secretary of State for International Development

The Government welcomes the Report from the International Development Committee in Session 2000-01 on the White Paper: Making Globalisation Work for the Poor. Detailed points raised in the Committee's Report are dealt with below.

Paragraph 1: Conclusion 1

We welcome the new policy emphasis on international development and consider this to be a valuable result of the creation of a separate Department of State.

The Government shares the view of the Committee. The creation of a separate Department of State has been crucial in raising the profile of international development within Whitehall and the international community. This White Paper represents the views of the Government as a whole and is the result of wide inter-departmental and external consultation.

Paragraph 2: Conclusion 2

We welcome the publication of a second White Paper as an important addition to, and elaboration of, the first (Development) White Paper.

The Government confirms that this Paper stands alongside the first White Paper on International Development published in November 1997, and the Target Strategy Papers published subsequently.

Paragraph 3: Conclusion 3

As with our Report on the first (Development) White Paper, we do not set out to examine all of the issues raised in the Globalisation White Paper nor in the memoranda produced in response to it. However, we hope that this Report, coupled with the evidence submitted to the inquiry will provide a useful resource for both the Government and non-governmental groups alike. Its builds on some of the conclusions of our Report on the WTO and we hope that it may serve to take forward the debate on the merits - or otherwise - of globalisation.

The Government hopes that both the White Paper and the Committee's Report will help raise the level of the debate on globalisation and development.

Paragraph 8: Conclusion 4

We are impressed with the efforts made by DFID in conducting a wide-ranging consultation as part of the process of producing the Globalisation White Paper.

The Government welcomes the Committee's comments on the consultation process.

Paragraph 10: Conclusion 5

We are concerned about the lack of parliamentary time allocated to debates on international development. We regret that there has not been a debate on the Development White Paper, published in 1997.

The House of Commons debated the second White Paper on International Development on 3 May 2001. The House of Lords debated the Paper on 7 February 2001.

Paragraph 11: Conclusion 6

We now have a separate Department of State dedicated to international development and responsible for considerable sums of taxpayers money. It is deplorable that the House of Commons has no opportunity to scrutinise in debates DFID's activities effectively. We recommend that there should be an annual debate on international development on the floor of the House.

The Government notes the Conclusion and will consider the case for an annual international development debate against other bids for parliamentary time.

Paragraph 13: Conclusion 7

The Committee agrees with the Government that the ultimate impact of globalisation - positive or negative - will be determined by the political choices adopted by government, multilateral institutions, the private sector and civil society.

The Government welcomes this conclusion.

Paragraph 17: Conclusion 8

We agree with the Globalisation White Paper that support for open trade is not to be confused with support for unregulated trade. We commend the White Paper for its admission that "there are substantial inequalities in the existing international trading system", and for its commitment to press the WTO to adopt the International Development Targets. An early priority must now be the identification and elimination of such inequities and to build the confidence of developing countries in the international trading system.

The Government is pressing strongly for the next trade Round to be a 'Development Round' that brings real benefits to developing countries. However, as the Committee notes, much remains to be done in order to secure developing country support to launch a Round. The WTO General Council continues to oversee an Implementation Review, launched as part of a series of confidence-building measures, which aims to address developing country concerns about difficulties faced in implementing Uruguay Round commitments. The EU and UK position remains that reasonable improvements can be made to agreements, but that reopening agreements can only be done in the context of a new Round.

The European Commission put out a paper in December refreshing their position for a new Round. We welcome the Commission's attempt to bring developing country concerns into their thinking. Another important issue is the functioning of informal consultations within the WTO and the way these feed into the formal decision making process. Consultations have taken place — and continue — in Geneva, with the aim of increasing transparency, and the dissemination of information. The UK and EU fully support measures to increase internal and external transparency. We have sought ways to formalize this, including for example seeking WTO General Council agreement on written guidelines for informal consultation processes (with sufficient flexibility to allow discretion in individual circumstances). As part of the response to these concerns, the WTO General Council has had regular reports on informal contacts. It is expected that this new approach will be carried forward by the incoming chair of the General Council, Stuart Harbinson of Hong Kong, China.

Paragraph 20: Conclusion 9

We consider that the proposal to extend market free access to least developed countries into the EU without equivocation or dilution was a modest proposal that would have carried relatively small costs to EU countries whilst having the potential to bring significant benefits to some of the poorest countries in the world. It was always possible to couple the proposal with assistance to other low income countries affected by the proposals. Whilst the final agreement is undoubtedly a step in the right direction, delays in the elimination of duties and quotas for least developed country imports of bananas, rice and sugar show that the EU still has a long way to go to ensure that rhetoric matches reality in making globalisation work for the poor.

The Regulation is a good outcome for the EU and the developing world. The 48 least developed countries (LDCs) are characterised by their exclusion from world trade: their share of world trade is less than 0.5%, and falling; their average daily income is significantly less than a dollar a day. Agreement of this Regulation will make a real difference to these countries, particularly if other industrialised countries follow the EU's lead. Although the original proposal went further in relation to the sensitive products, we must not underestimate the achievement in getting agreement at all on an end date for total liberalisation for products from LDCs. It puts us significantly in advance of the other Quad members who made commitments to improved LDC market access — US, Canada and Japan - in terms of the openness of our markets. The EU will now cover 100% of goods, compared to 90% in Canada and much less in Japan and the US.

This new Regulation also takes into account the legitimate concerns of non-LDC African, Caribbean and Pacific (ACP) country producers, a point which the UK pressed throughout negotiations. The five year transition period for bananas, and the eight year transition period for sugar and rice, gives a reasonable time for vulnerable non-LDC ACP producers to adjust to the additional competition from LDC imports. It is very important that all commodity producers start taking action now to increase the efficiency of their industries over the long transition period. The UK will work with the EU, multilateral and other donors to ensure that the adjustment needs of vulnerable non-LDC ACP economies are taken fully into account in assistance programmes during this time.

Paragraph 21: Conclusion 10

Any dilution of standards in the Ethical Trading Initiative would obviously damage its developmental impact. We would welcome the Government's comments on how this can be prevented, for example through the use of international benchmarks for social auditing competence.

The Government welcomes the rapidly growing interest in Corporate Social Responsibility (CSR), but shares the Committee's concern that this has led to a proliferation of initiatives, including codes of conduct, labelling and triple bottom-line reporting (reporting against social, economic and environmental impact). The Ethical Trading Initiative has set high and sensible standards, which create real trading opportunities for developing country producers. Other initiatives may have the unintended consequence of acting as trade barriers. Developing country producers are often insufficiently consulted and may be concerned about how to improve their capacity to respond to CSR standards (eg. with respect to accreditation, reporting and labelling).

The Government therefore supports greater co­ordination between these initiatives. We believe that this will create less confusion and difficulty for developing countries, as well as giving the standards and initiatives themselves greater potential for positive impact. We are currently exploring ways to encourage and support this.

Paragraph 25: Conclusion 11

The Department has obviously not done enough to disprove the 'received wisdom that globalisation has been accompanied by increasing inequality'. More clearly needs to be done to identify the relationship between trade liberalisation and inequality and to define the necessary components of pro-poor growth.

The Government agrees that there is still much to be done to raise understanding of these issues. DFID has published the research commissioned before the publication of the White Paper, has held detailed discussions with non-governmental organisations since the publication of the Paper, and is undertaking increased research in this area. The Government is also pressing for trade and investment policies to be integrated far more strongly into the nationally-owned Poverty Reduction Strategies that the international community is supporting, which set out strategies aimed at achieving pro-poor economic growth.

Paragraph 26: Conclusion 12

We would welcome further research from DFID on the movement of skilled people. A cross-departmental approach in Whitehall is urgently called for.

DFID has commissioned research on the impact of the migration of skilled people on poverty reduction in developing countries. This research is examining both the problems associated with the loss of skilled people, and potential benefits such as remittances, knowledge transfers and business linkages. It is designed to help develop policies which will maximise the positive impacts on development, and minimise the potential negative impacts. This research is being discussed with all interested Whitehall Departments. DFID is also undertaking longer term studies on these issues.

An inter-departmental group has now been established to look at all aspects of the UK migration policy. DFID is an active member of this group.

Paragraph 30: Conclusion 13

We agree with the Secretary of State and with the Globalisation White Paper that migration can play a significant developmental role through improving skills and the generation of remittances. At the same time, it is vital that any moves by developed countries to recruit public service personnel from developing countries should only take place with the consent of the relevant authorities and should not lead to skill shortages in such countries. We recommend that similar guidelines to those already in place in the NHS are drawn up by all other relevant public authorities. We also recommend that the Government, in its Response, provide the Committee with details of how guidelines can be extended to cover the activities of private recruitment agencies.

DFID is working with other Government Departments, principally the Department of Health (DoH) and the Department for Education and Employment (DfEE) on the issue of guidelines covering the recruitment of staff from developing countries. The NHS is currently revising a Code of Practice for Trusts which will, among other things, mean that there will not be recruitment from Africa. DoH will work with DFID to develop appropriate strategies that reduce brain drain but maximise the potential for professionals to gain experience in the UK where this could be of benefit to poor countries. DFID is also working with DfEE on its polices on the recruitment of teachers from developing countries.

On the issue of private agencies, DoH believe that there will be less need to utilise their resources in the future, and are considering developing concordats with agencies to address their recruitment practices. DfEE is also discussing recruitment issues with private agencies.

Paragraph 33: Conclusion 14

At present, it is often left to trade unions to monitor and implement basic rights, a point made by the Commonwealth Trade Union Council in their memorandum, "precious union resources are used to secure justice when it is the responsibility of the government to enforce the legislation". This is clearly not acceptable. We call for the Government to set out how core labour standards can be best implemented, monitored and enforced.

Rights at work are an important component of human rights. The core labour standards are set out in the ILO Declaration on Fundamental Rights and Principles at Work and its supporting Conventions. The UK has ratified all the relevant ILO Conventions. We welcome trade union efforts to monitor and implement basic rights, but also recognise that the worst labour standards and abuse of labour rights occur outside the formal sector where there is rarely any trade union presence.

The Government gives priority to supporting the elimination of the worst abuses such as child labour and forced labour and to strengthen the rights of workers in the informal sector where most poor people work.

The Government is working in a large number of fora to support the successful implementation, monitoring and enforcement of these standards. Internationally, we are providing financial and technical assistance to ILO and supporting developing countries interests through our contacts with other international agencies such as the World Bank. Nationally, our bilateral programmes support projects which address labour rights. For example, in Andhra Pradesh, India, DFID is funding the programme for elimination of child labour and in Nepal we are helping recently liberated bonded labourers. DFID also support efforts by business to set and uphold labour standards in their operations and supply chains through organisations such as the Ethical Trading Initiative and the Resource Centre for Social Dimensions of Business Practice. DFID also supports the work of organisations such as Anti-slavery International, Save the Children and Homenet International, which are helping poor people to understand and claim their rights, and is funding trade union development in Indonesia.

Paragraph 35: Conclusion 15

We welcome the Government's pragmatic approach to capital account liberalisation and to attracting foreign direct investment to developing countries. We would welcome further details on the Globalisation White Paper's proposals for 'road maps' for the opening up of capital accounts and on proposals to discourage excessive short-term capital inflows.

Capital controls can take a wide variety of forms, from outright prohibition to market based measures which discourage capital flows by making them more costly such as a tax. Following the Asian financial crisis, consensus has been reached that capital account liberalisation needs to be carefully sequenced with reforms to strengthen financial sector regulation and supervision. Furthermore, market based capital controls which discourage short-term volatile flows (such as foreign currency bank loans of less than six months), but do not discourage longer term investment, can provide much needed stability during reform.

While these controls need to be seen as temporary, we recognise that reforms to achieve the strong, competitive and well regulated financial sector plus macro-economic stability required for orderly and sustainable liberalisation may take considerable time in some developing countries. We believe that the international financial institutions should support countries in the preparation of country specific approaches or 'road maps' for reform and its sequencing, in a clear, planned and sound way. The Government can assist in this process by providing technical capacity building support and by ensuring that the international financial institutions offer balanced and well-judged advice on a country by country basis.

Paragraph 36: Conclusion 16

We look forward to receiving the note on the Government's policy on the Tobin Tax promised by the Secretary of State in evidence.

The note is attached at annex A.

Paragraph 37: Conclusion 17

The White Paper could have considered the issue of trade in services in greater depth and in all of its aspects, particularly as it has generated such controversy among NGOs and some developing countries. The Government has, as we discuss below, agreed to set up a Commission on Intellectual Property Rights. We believe a similar commission on trade in services could usefully be established so as to allow an open, impartial debate on the subject.

The Government believes that the current negotiations on trade in services offer important potential benefits for developing countries, both as importers of services vital to their development (such as financial services and telecommunications), and as exporters (such as tourism and software services). We reject the arguments, put forward by some NGOs although not by developing countries themselves, that the General Agreement on Trade in Services (GATS) forces governments to privatise the provision of public services such as education and health. Where countries choose to make commitments to liberalise sectors of their economies under the GATS, the agreement specifically protects the sovereign right of governments to regulate for national policy objectives. This point was underlined most recently by developed and developing countries alike in the March Special Session of the WTO Council for Trade in Services.

The Government has no plans to establish a Commission on Trade in Services. It will continue to provide briefing and hold discussions with responsible NGOs and other interested parties on trade policy issues, including services. The most recent meeting of the Trade Policy Consultative Forum was held at the end of April.

Paragraph 40: Conclusion 18

We agree that urbanisation is an important element of globalisation and one that could well have been addressed in the context of the Globalisation White Paper.

The Government has acknowledged the importance and impact of the process of urbanisation currently taking place in developing countries, as well as in many transition economies, and the opportunities that urban areas provide for enhanced national development and poverty reduction. DFID has recently published its Target Strategy Paper on "Meeting the Challenge of Urban Poverty" which outlines the challenges of urbanisation, the impact of globalisation on urban areas, and priority actions for the reduction of urban poverty.

Paragraph 45: Conclusion 19

We request further information from the Government on what measures it is taking to make communications technologies more accessible for the developing world. We also request information on how the Government is proposing to ensure that research and development in this area is appropriate to the needs of developing countries and on efforts to improve developing country representation in relevant organisations such as the International Telecommunications Union.

The Government's approach to Information Communications Technology (ICT) includes more traditional media. We believe that a combination of the old and new technologies can lead to benefits reaching all sections of society.

We have therefore recently launched a £6 million programme entitled 'Bridging the Digital Divide' which will deliver advice and support to developing countries on regulatory reform, and policies to create equitable access for their citizens to communication technologies. This programme also includes support for developing country participation in international discussions on ICT related issues, through the provision of information on key policy issues, and direct support for developing country representation at critical international meetings. This support will cover both the International Telecommunications Union (ITU) and other key international fora, including WTO. The Government is keen that developing countries become more influential in these and other relevant international fora, and recently committed $100,000 in direct support to developing country participation in the G8 dot force process.

Paragraph 47: Conclusion 20

We welcome a number of innovative proposals outlined in the Globalisation White Paper to encourage pro-poor research, such as the use of public purchase funds to help develop new vaccines against HIV/AIDS, malaria or TB, differential pricing regimes and the use of tax credits. We also welcome the White Paper's announcement that it is developing proposals to increase investment into pro-poor research and development.

Substantial progress is being made on taking forward the White Paper's proposals to increase access and affordability of existing medicines, and research and development to tackle the diseases of poverty.

The Government's commitment to a global purchase fund was announced in February as part of the Global Child Poverty Initiative. This builds on the political commitment made by African leaders, the UN, the G8 and the EC to tackle the diseases of poverty. The fund's initial focus will be on providing resources for preventing and treating HIV/ AIDS, malaria and tuberculosis.

The Chancellor of the Exchequer introduced several tax measures in the February budget, in order to provide incentives to the industry to increase research and development into treatment and prevention for the diseases of poverty, as well as improve affordability of new and existing drugs and vaccines. These also include measures designed to encourage the effective and appropriate targeting of any drug donations.

The Cabinet Office Performance and Innovation Unit's Global Health Study will be providing more details about these and other policy measures to address the twin problems of access and affordability, and of research and development. Options include tiered pricing - where companies agree to supply drugs and other commodities at low prices to poor countries. Strategies to prevent re-importation to, and maintain price levels in wealthier countries would be essential. An advanced purchase fund commitment is also being examined, as a possible incentive for investment in research and development


The Government is continuing to invest in strengthening health systems - over £1 billion since 1997 - without which drugs and vaccines will not reach the poor.

Paragraph 48: Conclusion 21

We recommend that, in its Response, the Government outline actions being taken to help reduce the vulnerability of developing countries to global environmental change.

There are three pillars to sustainable development - social, economic and environmental - and the environment is often neglected totally or given inadequate attention. In consequence, most environmental trends are negative. The Government therefore believes that it is crucial that environmental considerations are mainstreamed in development policies and programmes.

The Government is a strong supporter of the Global Environment Facility (GEF) which aims to capture global environmental benefits from biological diversity, climate change, international waters and the protection of the ozone layer and control of persistent organic pollutants. We are pushing for a 50% increase in the third replenishment (from $2 to $3 billion).

Poor people are especially vulnerable to natural disaster. The increased variability of the climate is a contributory factor to the floods and other natural disasters we have seen all over the world in recent years. We have committed over £200 million in the last three years to climate change related activities. In addition, energy efficiency programmes which reduce carbon dioxide emissions are a major part of GEF work on climate change and will help to reduce climatic variations. We will shortly fund a study to analyse the extent to which climate change will affect the achievement of the international development targets by developing countries.

With partners, the Government is looking at the linkages between environmental degradation and poverty reduction (eg in China, West Bengal, Bangladesh, Kenya) and, in the light of that work, we are developing appropriate programmes. We are also working to ensure that analysis of environmental change/degradation is integrated into Poverty Reduction Strategies.

We have looked at the links between environmental stress and conflict, and will be supporting regional work in Africa that will help partners reduce their vulnerability to such stresses. The Africa Trade Initiative has a strong focus on the implications of environmental degradation and is helping to establish links between environment authorities and Trade Ministries. We are also helping strengthen the capacity of environmental authorities to enable them to mitigate environmental degradation that affects the poor. We have a public service agreement target to build capacity for more effective environmental management in ten key countries. The partner countries in which we will work are currently being decided.

Paragraph 49: Conclusion 22

We recommend that the Government, in its Response to this Report, assess progress towards the production of national strategies for sustainable development, and outline measures being undertaken by DFID to help developing countries produce such strategies.

The Government is working through the OECD's Development Assistance Committee (DAC), in consultation with eight other countries, to produce guidance on how development agencies should support strategies for sustainable development. This guidance was agreed by the DAC High Level Meeting on 25-26 April 2001. The DAC guidance sets out key principles which underpin an effective sustainable development strategy. These include country-ownership, building on existing strategies, integrating economic, social and environmental objectives and strengthening and building on existing country capacity. These principles now need to be disseminated within the broader international community in the run-up to the Rio + 10 conference next year.

The Government believes that the label on the strategy does not matter. Nationally-owned poverty reduction strategies offer a major new opportunity to put the principles of strategic planning for sustainable development into practice. One key challenge is to ensure that Poverty Reduction Strategies support and promote sustainable development. Where this is achieved, a country's Poverty Reduction Strategy could serve as its strategy for sustainable development.

Uganda provides an illustration of what can be achieved. Uganda's Poverty Reduction Strategy built on an existing process - so it had strong national ownership and political commitment. But the earlier draft of the Plan overlooked poverty-environment links. DFID assisted the National Environment Management Authority to define these linkages and to lobby for the integration of the environment. As a result, the Poverty Reduction Strategy now recognises the importance of poverty-environment linkages, and issues of longer-term, environmental sustainability. Uganda's Poverty Reduction Strategy can therefore be seen as a strategy for sustainable development.

The importance of support strategies for sustainable development is reflected in DFID's PSA target: "gaining international agreement on the integration of social, economic and environmental aspects of sustainable development into poverty reduction programmes."

Paragraph 52: Conclusion 23

The Committee commends the Government's decision unilaterally to untie development assistance.

The Government thanks the Committee for its support of this decision.

Paragraph 55: Conclusion 24

An early multilateral agreement to untie aid is now an urgent priority. We request that the Government keep us informed of progress towards reaching such an agreement within the EU and other multilateral fora such as the OECD.

The Government has been working hard over more than two years to secure agreement at the OECD's Development Assistance Committee to a Recommendation on untying for the Least Developed. At the recent High Level Meeting, the Development Assistance Committee agreed this Recommendation ad referendum. Although all Member States have now to confirm that they endorse the Recommendation, we are hopeful that it will be formalised before the Third UN Conference on Least Developed Countries in May. This agreement represents an important step towards the goal of full untying by all donors.

We are also seeking to ensure that in their bilateral programmes, EU member states comply fully with treaty requirements and with the EU Procurement Directives.

Paragraph 56: Conclusion 25

We recommend that, in its response to this Report, the Government list efforts which are being made to help British consultants win work both in other countries and in multilateral organisations.

The Government is committed to the provision of fair opportunities for British consultants to win business. Officials from DFID and British Trade International (BTI) participate in regular working party meetings organised by the British Consultants Bureau to exchange views on development procurement policy and business opportunities. Trade Partners UK, the trade and overseas investment arm of BTI, provides market intelligence, seminars and training workshops on doing business with multilateral organisations, through its specialist teams in the UK and overseas. The Government's e-business programme is making a major effort to ensure efficient on-line access for business to these and other services.

Paragraph 58: Conclusion 26

We welcome the establishment of the Commission on Intellectual Property Rights and ask the Government to keep us informed of its progress.

The Commission has now been established. It is headed by John Barton, Professor of Law at Stanford University in the USA. He is an expert on intellectual property law, who has long studied the impact that international and national rules have on developing countries.

The other members of the commission are:

Daniel Alexander, an intellectual property barrister from the UK

Professor Carlos Correa, Professor of Economics at the University of Buenos Aires, Argentina

Dr. R. A. Mashelkar, Director General, Council of Scientific and Industrial Research, New Delhi, India

Dr. Gill Samuels, Senior Director of Science Policy and Scientific Affairs, Europe, Sandwich Laboratories, Pfizer, UK

Dr. Sandy Thomas, Director, Nuffield Council for Bioethics, London, UK.

The Commission will hold its first meeting in London on 8-9 May to chart out its objectives and how it will go about its work. The aim is that it will report to the Secretary of State for International Development by March next year. The Commission will be supported by a Secretariat whose members will be drawn from the staff of the Department for International Development and the UK Patent Office.

Paragraph 60: Conclusion 27

Overall, the process of producing the Globalisation White Paper has been a useful one. However the success of the White Paper will depend on the degree to which its proposals are implemented. Whilst the Globalisation White Paper is a good start, we will monitor with interest how far the UK, and the multilateral development agencies to which it contributes, are prepared to go to ensure that globalisation truly works for the poor.

The Government welcomes this endorsement by the Committee and is working for its effective implementation.

Department for International Development

May 2001

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