Examination of Witnesses (Questions 380-399)
Thursday 8 May 2003
MR CHARLES
GORE AND
MR RICHARD
KOZUL-WRIGHT
Q380 Mr Khabra: As you know, agriculture
and food aid are the most important issues in the developing countries
in particular. Could you tell us what impact subsidies, dumping,
export credits and food aid have on food security and livelihoods
in the developing countries?
Mr Gore: They have a negative
impact. There are concrete examples of this. In our last report,
we looked at the tomato processing industry in west Africa, and
perhaps I can just refer to that. We found there is a close connection
between the collapse of tomato processing in some west African
countries and the combination—and it is a combination, this
is quite important—of trade liberalisation which allows
the imports in and the subsidised exports coming from these countries.
The other good example is cotton. I have some numbers here, for
example, from the International Cotton Advisory Committee. It
puts the cost of producing a pound of cotton in Burkina Faso at
21 US cents compared with 73 US cents in the USA, but the United
States' subsidies guarantee a minimum price for US farmers, currently
about 52 cents per pound. This means that the Burkina Faso producers
find it very difficult to compete on world markets. The World
Bank has estimated that during 2000-01 downward pressure on world
cotton prices has caused a loss of export receipts of over 3%
of GDP in Mali and Benin, and 1 to 2% of GDP in Burkina Faso and
Chad. So the impact of subsidies and dumping is working through
food imports; it is also working through loss of export markets
in things like cotton. There are however other commodities where
it is not working. Coffee, for example, is an important export
for the least developed countries; there are other kinds of problems
for that commodity. But overall there are definitely negative
effects. We have found in our report that the countries which
have undertaken most, and most rapid, trade liberalisation had
in fact the greatest increases in poverty in the 1990s. At the
same time, the countries which have undertaken least trade liberalisation
have also had increasing poverty in the 1990s. So there is a complex
pattern. What is going on here? Why is it that the countries which
have undertaken the fastest and most radical trade liberalisation
have rising poverty? I think that it is related to this issue
which you are raising, but the linkages are quite complex. I do
not think they have all been worked out. That is an association
which I am just saying we have observed.
Q381 Mr Khabra: If that be the case,
what is being done to remedy the situation?
Mr Gore: I went to an IFAD meeting,
the 25th Governing Council meeting, and the remedy—put on
the table by a Belgian Government representative for debate in
the form of a question— was, should countries be allowed
to protect their agricultural sectors if no progress is made in
terms of agricultural subsidies and this dumping of below-cost
products on the markets. There was a range of views put forward.
My view was that that, of itself, was not going to do the trick.
You needed measures to increase the agricultural productivity
in these countries, and so it comes into the way in which aid
is used. For example, aid to agriculture in the least developed
countries has halved since the 1980s. There is definite evidence
of harm. If progress is not made in this agricultural subsidies/dumping
issue, then people are saying, "In this case, what do we
do?" —because you are going to get very high rates
of rural-urban migration, and an exacerbation of the poverty problem.
So people are putting forward the idea, "We need to protect".
Q382 Mr Khabra: Could you tell us
what impact tariff peaks, tariff escalation and preferences have
on food security and livelihoods?
Mr Gore: The thing which I would
emphasise from the least developed countries' position is the
issue of tariff escalation. Two-thirds of these least developed
countries are commodity-based economies, and it is very difficult
to develop through commodities. What everyone suggests, however,
is that you should be upgrading your commodity production, increasing
your value added; but what you find in the least developed countries
is that, in terms of processing, there has been a collapse of
processing of commodities before export. This is related to the
problem of tariff escalation. It is not only tariff escalation
which is the problem, but tariff escalation is definitely a difficulty.
In terms of the way it works, I am not sure if it is working on
the food security issue. It is the other points which you raised
earlier that affect that. The way it works is through, "How
does a commodity-dependent country develop?". It has to upgrade
its commodity production in some sense; it has to add value. These
tariff peaks have acted as a constraint on the processing of commodities
for exporting, and this is blocking the broader development process.
Q383 Mr Khabra: You are aware of
duty and quota-free access, for agricultural products particularly,
for the least developed countries. What are the prospects of that
happening?
Mr Gore: What are the prospects
of it? I am not sure, but I think that the past experience with
preferences shows problems of the utilisation of preferences.
Again, if I could quote a figure, before the Everything-but-Arms
initiative, 99% of the products of non-ACP least developed countries
were covered by a generalised system of preferences—so they
were offered preferences—but only 34% of the imports which
were offered preferences actually came in with those preferences.
They came in at higher duty rates. The question is, why is this?
They are offered the preferences; they are eligible for preferences,
but the preferences are not utilised. There are various reasons
for it. It is a question of how big is the preference. Is it worthwhile
to go through all the paperwork? But a key issue is the rules
of origin. You are theoretically given the preferences, but you
cannot realise it because you have to satisfy certain rules of
origin in order to get that. With your issue of duty-free access
the question is, will it be hedged around with various rules of
origin, and will this enable it to be actually realised? In terms
of prospects, I am not sure how that will play out. It is a question
of the utilisation of these things. I think that the northern
countries have been quite generous in terms of what they are offering,
on paper, for least developed countries in terms of market access,
but the problem is, are these utilised? Can these be utilised?
Is anybody looking at ways of increasing the kind of utilisation?
Q384 Mr Khabra: Is it due to lack
of information? What are the reasons?
Mr Gore: That is a possible reason,
but what people are particularly putting their finger on are rules
of origin. What is surprising—and this is recent, ongoing
research in UNCTAD—is that you would think that these rules
of origin are just applied for manufactured goods, where there
is a kind of assembly process chain; but in fact this is also
affecting agricultural processed goods where, in the processing,
there are certain imported inputs which are required. What people
are putting their finger on, therefore, are the rules of origin.
Another issue is the security of preferences; another is information;
another is the margin of preference and whether that is sufficient
to go through all the paperwork.
Q385 John Barrett: Perhaps I could
continue on the matter of tariffs. You mentioned tariff escalation
and then you touched on market access. What sort of formula for
tariff reduction do you favour? You touched on tariff escalation
but, bearing in mind the problems that exist for maintaining comparative
advantages if there is asymmetrical tariff reduction, is it linked
to one of the problems you also mentioned earlier in relation
to coffee—the problems when there are different tariffs
on the ground coffees as against the coffee beans? The price of
coffee in the shops has not plummeted, but the world market price
of coffee has taken a plunge. How do you see tariff reduction
progressing while maintaining advantages for certain countries,
and how can you move forward there?
Mr Gore: I do not think that I
can answer that question.
Mr Kozul-Wright: There is a bit
of confusion, really. We do not work on the specifics of the WTO-driven
trading system. Our focus is on the links between trade and development
more generally conceived. It is fashionable, of course, to focus
on something like Doha, because it is in the press, because of
the activities of NGOs, and it homes in very quickly onto this
very specific set of issues that come from this very specific
institution. But the trade in question is a much bigger question
than this. There is a recent study from the CEPR in London, by
Andrew Rose, that tried to estimate the impact of multilateral
trading rules on the shape and dynamics of trade, and found that
there was very little impact from the trading rules, once you
factor all the other forces that drive trade and growth in the
world economy. Ironically, he found that preferences were one
of the factors that had a significant impact on developing country
prospects in the trading system. We are interested in trade perceived
more generally, in the context of development agendas. In that
context, we cannot link it to Doha because in many respects the
agenda for trade is not driven from the WTO and it has, over the
last two decades, been much more intensely driven by Washington.
In that sense—it is globalisation in some generic sense,
whatever that means—it is the impact of trade liberalisation
and this drive for trade liberalisation which has been the overwhelming
characteristic, if you like, of the policy agenda on trade for
the last two decades, and what are the consequences of a rapid
and what we believe to be a fairly asymmetric and biased pattern
of trade liberalisation on developing countries in general. As
Charles has said—and his focus is on the poorer countries—we
have paid a lot more attention to looking at middle-income, industrialising,
developing countries. Although I understand the concerns with
agriculture, if you look at the share of developing country exports,
the allocation between different types of products over the last
two decades, it has moved from essentially 20% of exports being
in manufactures in 1980, the rest being in primary exports and
agricultural products, to something like over 60% of the composition
of exports in developing countries now being in manufactured goods.
Within that is a tremendous asymmetry, between who is doing well
in terms of manufacturing and manufacturing exports, and who is
not. So, when you break down the figures, the big success stories
are essentially confined to a small group of economies in east
Asia—the Hong Kongs, Taiwans and South Koreas, joined recently
by China, quite spectacularly. They have been driving the successful
entry of developing countries into a different pattern of growth,
based on industrialisation and manufactured exports. There are
wrinkles round this story. For example, a big feature that has
emerged over the course of the last decade is the way in which
international production networks, driven by large multinational
corporations, have reshaped the pattern of integration of many
developing countries into the trading system. Indeed, in some
of the most dynamic parts of the trading system—areas like
automobiles, electronic goods—these are essentially driven
by these networks. A number of countries have entered the trading
system through this vehicle: countries like Mexico and Malaysia,
a large number of countries in Central America. There are benefits
to that, clearly; but when you look at the way in which they are
integrated, there are a couple of big problems. One is that they
tend to get stuck in producing essentially the assembly part of
what are sophisticated goods, and they find it very difficult
to move up the ladder into more value-added components of that
process. Another is the real danger that we have flagged in a
number of our reports, of enclave economies being built around
this particular pattern of integration into the trading system.
So you get funny results. You get countries that are exporting
a lot more, but their value added is stagnant or, indeed, in some
cases is actually declining. We made a point in last year's report
that a lot of developing countries—middle-income developing
countries—are trading more and earning less, from the way
in which this more open, international, business-driven, global
economy is working currently. We have attributed a lot of that
to the way in which liberalisation has been rushed in many developing
countries, exposing domestic firms to an environment that essentially
they cannot handle. The classic cases in this respect are in Latin
America, where you had a pattern of integration through this import
substitution industrialisation—which had tremendous weaknesses
in it and, at least in terms of growth performance, was better
than the current period, but certainly had problems—coming
to an end in the debt crisis. Countries open up, and they get
squeezed, sadly, from both ends. They do not have the technological
sophistication that allows them to move in to compete with northern
industrial producers in high-technology, high value-added products,
so their industries get squeezed on international markets from
that end; and, from the lower end, they cannot compete with low-cost
producers in Asia, in China or India, in areas like clothing or
footwear. They are being squeezed from both ends. As Charles said,
the natural response to that is to resort back to your natural
comparative advantage in exporting resource-intensive goods, which
then puts you in competition with poorer countries, which increases
the extent of competition on these primary commodity-driven parts
of the trading system, and is probably not the basis for sustainable
growth. The issues for us are not so much driven by the details
that interest you, in terms of the specifics of tariffs and trade-related
areas of negotiation, but this wider system of a fixation with
liberalisation—trade and financial liberalisation—which,
as far as we are concerned, has not delivered what it promised,
which was faster and more stable growth across the developing
world. It has not. It has delivered slower and more unstable growth
in most of the developing world, with the interesting exception
of a handful of countries in east Asia. That worries us tremendously,
because ultimately the big losers from that kind of system are
the countries at the bottom of the ladder, who get stuck with
problems of poverty and underdevelopment which they simply cannot
get out of.
Andrew Rose, 2002, "Do we really know that the
WTO increases trade?". CEPR Discussion Paper 3538. See www.cepr.org
Q386 Mr Battle: It is very helpful
to see that big picture. UNCTAD has been around for nearly 40
years now, and it has been that question of how to shift up that
ladder, to add value, to move away from commodities to processing.
We seem to have made no real progress, do we? You are suggesting
that rushed liberalisation has slowed it down and made it worse.
Do you see the Cancún event offering anything for commodity-dependent
LDCs? Do you see any hope there that there could be any change,
or that the system will shift?
Mr Gore: I am not sure whether
the Cancún event will do that, but I think that there is
increasing attention to the issue of an international commodity
policy. In our last least developed countries report we identified
a very close association between the rate of extreme poverty—this
is the $1-a-day poverty—and commodity dependence, which
is obvious in itself, but in fact this was not an issue in the
poverty debate. There is a very close relationship. We were getting
figures like 68% of the population living on less than $1 a day
in commodity-dependent least developed countries whereas, for
those which had diversified into manufactures, the rates of $1-a-day
poverty were declining and much lower—around 25%. This is
very extreme poverty. It is a very extreme standard and I do not
want to suggest that there is not poverty in other countries and
the more advanced developing countries; but, at this extreme level,
there is this close relationship between commodity-dependence
and poverty. The striking thing about the international approach
to poverty reduction was that the international commodity policy
issue was absent—total silence. We therefore said, "This
is a major gap". The problem then is to think about what
constitutes a new international commodity policy because, in some
sense, we cannot go back to the old approach of these international
commodity agreements, which did not really work; and there is
not much political will to go back there. The question is, how
does one rethink an international commodity policy? I think that
the commodity issue is not simply a WTO—what an international
commodity policy might look like. For example, you might think
of linking debt service payment schedules to commodity prices.
I would see that as an aspect of an international commodity policy.
You might think of ways in which aid can be used to upgrade commodity
production. The British Government, for example, might think about
how aid can be more successfully used to build up productive capacity.
I would see that as part of an international commodity policy.
However, there are WTO aspects to this international commodity
policy. Let me give you another figure on coffee. I mentioned
the cotton figures, but this is a number which relates to this
commodity issue. The International Coffee Organization reported
that, in the early 1990s, export earnings by coffee-producing
countries were about $10 to $12 billion; the value of retail sales,
largely in developed countries, was about $30 billion. In 2000-01,
the producing countries received $5.8 billion and the value of
the retail sales was US$ 60 billion. What one has to think of
is what does one do about this? In countries in which 75% of their
export earnings are from coffee and you have 60% of the people
living on less than $1 a day, how are we going to square the circle?
How is Cancún going to fit into this? I do not have an
answer and I am not so sure that it will happen in Cancún,
but I think that the international commodity policy issue is going
up the agenda. People want a market-based solution to this, but
they find it very difficult to think of it. However, I think that
you should carry around in your head these numbers that I have
just quoted on coffee.
Q387 Mr Battle: Just for reference,
are they in your recent report on the least developed countries?
Is that where those numbers are to be found?
Mr Gore: They were not. They are
in an International Coffee Organization report. We had an executive
session to discuss The Least Developed Countries Report, which
was held in the Trade and Development Board, where the numbers
were referred to.
Q388 John Barrett: Would you be good
enough to repeat those, so that we can make sure we have them
down?
Mr Gore: The International Coffee
Organization reported that in the early 1990s export earnings
by coffee-producing countries were about $10 to $12 billion, and
the value of retail sales of coffee, largely in developed countries,
was about US$ 30 billion. However, in coffee year 2000-01, producing
countries received only US$ 5.8 billion of the value of retail
sales of more than US$ 60 billion. That is the situation.
Q389 Mr Battle: A widening gap.
Mr Gore: Yes, and that is to do
partly with market structures; it is partly to do with quality
of output. Amongst the least developed countries, you have countries,
like Ethiopia, and Uganda, which are very highly dependant on
coffee exports and you have very high rates of poverty. Cancún
is part of the solution, but it is —
Q390 Mr Battle: As part of the picture,
Richard mentioned a paper by Andrew Rose. Is it worth our also
looking at that to get a good overview?
Mr Kozul-Wright: He is rather
sceptical about the effectiveness of the trading rules. What is
important is that it forces you to think about something bigger
than the WTO when thinking about trade issues. As Charles pointed
out in the case of commodities, it is not possible to restrict
one's attention just to what is happening there. You have to link
it in this case to issues of debt. Most commodity producers are
also highly indebted countries, and solutions cannot be found
by just focussing on one part of the problem. You do need a much
more holistic approach. I think that Rose antagonised a lot of
my colleagues across the road, and there are disputes about his
numbers, but his bigger point is a very important one. It is time
to get away from thinking about trade and development issues as
defined simply in terms of multilateral rules, and think about
how trade feeds into a development strategy that can get back
to delivering developing countries 5, 6, 7% growth per year on
a sustained basis—which is what they do not have now. More
trade for its own sake is not interesting; it is fundamentally
not interesting. What is interesting is how trade can feed into
this dynamic, virtuous growth path of higher investment, higher
productivity, stronger domestic enterprise sectors that are capable
of competing against enterprises from other parts of the world.
Without those questions, the nitty-gritty of the trading system
is a big yawn for me, I am sorry to say.
Q391 Tony Worthington: Can I switch
to the liberalisation of trade in services, how important you
think that is to the developing countries, how it got on the agenda
and what the drive is there? It was very interesting yesterday
that one of the ambassadors we met said that the most important
thing to him was Mode 4—the ability of people to travel
to other countries and then send back remittances—and that
that gives a great boost to economies.
Mr Gore: Like the tariff question,
I find it difficult to say much on that. My response would be
exactly the one which the ambassador gave: that the issue of this
migration of persons is an important one. It is a mechanism for
poverty reduction. It is very important for a number of poor countries
and least developed countries, but I do not think that I can add
that much.
Mr Kozul-Wright: The sad thing
on migration is that no one has done any serious work on it. I
am not aware of any serious work, and that includes from developing
countries. This response from developing countries that, "As
long as we have labour migration, things will improve", is
not obvious to me—at least from an economic point of view.
Moving goods is just another way of moving factors around the
world. Goods are a way of embodying capital and labour, crudely
speaking, and shifting them around the world. If it is not working
with goods, it is not obvious to me that it will work with labour.
It may do. I have my doubts, particularly as to the way it is
likely to unfold. Ten years ago, FDI was going to solve developing
countries' problems. That was the way of solving your problems.
It would bring in capital; it would bring in entrepreneurship;
it would be more export-oriented. The record does not show that
to be the case. I suspect that it will be similar with migration.
There will be a big push for it; it will not happen, I do not
think—so it essentially becomes a bargaining chip, which
I understand is useful for developing countries. I would like
to see some serious work done on that particular subject in terms
of the economics of it, but I have not seen any, unfortunately.
Q392 Tony Worthington: In terms of
the wider issue of trade in services, in the evidence that we
have been considering so far there is a conflict between our Department
of Trade and Industry, which is saying, "This is a completely
voluntary thing. If the developing country feels that it is in
its interests to offer to go into the GATS arrangement, then it
can do", as against NGOs who are saying that they are being
forced into it—forced into it partly by the EU, it is asserted—that,
even if they are not being forced into it by the GATS arrangement,
then the World Bank is making it a condition of their poverty
reduction strategies. Have you any view on what is happening there?
Mr Gore: I do on the poverty reduction
strategies and on the way that that process works. From what I
have seen, the government officials in the very poor indebted
countries are afraid to take the risk that a heterodox approach
would be penalised.
Q393 Tony Worthington: What do you
mean by that?
Mr Gore: I mean an approach which
does not conform to the Washington institutions' view of what
should be done to reduce poverty. In fact, they are given a lot
of freedom, if you like, to formulate their own poverty reduction
strategies. This freedom can potentially release a lot of creativity,
in terms of fitting the poverty reduction to particular national
contexts. What you see coming out, however, are poverty reduction
strategies which look the same and look very similar to the old
structural adjustment programmes. My own view on why this is taking
place is that the poverty reduction strategies have to be deemed
satisfactory by Boards of the Bank and the Fund, and the government
officials do not want to take risks in producing a strategy which
may be rejected. So they have a lot of freedom to do what they
want but if they make the wrong move, they will potentially lose
aid, or it will be delayed for six or nine months, or they will
potentially lose debt relief. This will increase poverty rates
in their countries. If you get it wrong, your poverty rates will
increase. So they do not all want to take the risk. This is quite
an important point in terms of how the whole process works. They
are in a situation where—and I am talking of the poorest
countries now—they are aid-dependent and debt relief-dependent.
The positions which they can adopt reflect their judgment in terms
of ensuring the continuity of aid and debt relief. They are being
told that they can do anything but, if you put yourself in their
shoes, there is a risk. The risks of making the wrong decision
are too high, I think.
Q394 Tony Worthington: Do you think
that they realise the implications of liberalising services? Do
you think that enough has been done to increase capacity? When
you hear about GATS, it is very difficult to get your head round
it, even from our perspective, as to what the implication is of
liberalising trade in services, when those services do not even
seem to exist in some countries.
Mr Gore: I think that there is
always a case for increasing knowledge of the whole process. I
would say that, for the whole process, just increasing information
about what things mean, and increasing capacity to understand
what it means, is an important thing to do. This is perhaps something
which needs to be supported, but it needs to be done in a way
which is pragmatic rather than ideological. The problem is that
it has to be done in a pragmatic way. Richard has said various
things about our views on liberalisation, but I think that what
it comes down to, in the end, is that you need to take a pragmatic
view of how these things work in practice and not go in on faith,
if you like, so that you assume that trade liberalisation will
promote growth in an economy where the average GDP per capita
is 72 US cents per day. This is the current situation in least
developed countries. The resources available in these least developed
countries for physical capital accumulation, expenditure on health
and education, law and order, is 15 cents per person per day.
Are you expecting a similar response to trade liberalisation in
this context as you would in Switzerland? Our overall approach,
I think, is one of pragmatism rather than to have a kind of blind
faith. That pragmatism has to be evidence-based on an understanding
of how the whole system and the relationship between trade and
development is working.
Q395 Mr Walter: We have made various
assumptions about trade and growth. What is your reading of the
historical relationship between trade and trade policy to liberalisation
and poverty reduction? Linked with that, what assessment have
you or others made of the development impact of the Uruguay Round
and what assessment are you likely to make of the post-Doha situation?
Mr Gore: That is a very big question.
Q396 Mr Walter: I apologise for throwing
it in at the end. It challenges our assumptions really.
Mr Gore: There is a professor
at Sussex called Alan Winters who is preparing papers for the
World Bank in particular, and he is essentially pro-trade liberalisation.
He produced something for the WTO a few years ago, on trade liberalisation
and poverty. There was a quote in there, and I will see if I can
find it. Much of what he was writing about was concerned with
the short-term effects of trade liberalisation—an issue
where people have tried to look at the channels through which
reducing a tariff barrier affects poverty. It works through such
things as what does trade liberalisation do to government revenue?
What does it do to consumer prices? What does it do to competition
with producers, et cetera? They worked that out. However, it is
a different issue between the short-term effects and the long-term
effects. What he says on the long-term effects is, "Overall
the fairest assessment of the evidence is that, despite the clear
plausibility of such a link, open trade alone has not yet been
unambiguously and universally linked to subsequent economic growth".
This is a person who is basically pro-trade liberalisation and
he is saying," . . . open trade alone has not yet been unambiguously
and universally linked to subsequent economic growth". Our
reading would also be that it has not been established. Although
people are saying that there have been 250 studies which show
this link, if you look at it very closely—and Dani Rodrick
is the person who has looked at this in particular—you do
not find a very clear link. As I said earlier, we have found in
our last report that poverty was increasing most in those least
developed countries which had undertaken trade liberalisation
most rapidly.
Mr Kozul-Wright: The links between
trade liberalisation and financial liberalisation, for example,
in the recent period are very close. Countries that have been
forced to liberalise on the trade front have often, in the face
of imbalances, asymmetries and the inability to compete internationally,
been forced to liberalise on the financial front in an effort
to maintain a respectable growth rate, close the balance of payments
constraint. That sets off another set of asymmetries because,
in the world of finance, developing countries are even worse off
than they are in the world of trade. The asymmetries are even
greater, but the two are not separate—they are very closely
linked. There is a lot of history here. It is an area I have worked
on. Trade liberalisation was a British invention, when the Brits
had essentially established themselves as top dog industrially.
Until 1840, Britain was itself a relatively closed economy. Fortunately
for the rest of the world, it was not a dogma that was followed
elsewhere in Europe. Most of Europe, in the period when it was
developing, was closed or relatively closed. There were exceptions.
For example, Switzerland was a fairly open economy; Belgium was
a fairly open economy. The big economies, however—and the
biggest economy of all, the United States—used tariff protection
as a way of nurturing their own industrial capacities. You do
not go to a market unless you have a product to sell. You cannot
get a product to sell unless you have the capacity to produce
it. The ways in which you do that are partly through nurturing
your own domestic capacities, and trade protection is one way
of doing it. It certainly worked for the countries that are now
telling the poorer countries not to use it. We know that for sure.
Whether it is the most efficient way, of course, is an important
question. What other ways might be used more effectively than
simple protectionist measures? But there are no short cuts in
development. The sad thing about the current debate is that there
was a belief that somehow there was a short cut to development:
that you would find the silver bullet which would move you—whether
it was FDI, whether it is labour migration, whether it is opening
up in services. High rates of investment, strong productivity
growth, building up technological capacities—these are ultimately
what gets you from a $1,000 per capita income to a $20,000 per
capita income, and you will not do it overnight. It is slow, long
and difficult. All one can say is that a certain degree of humility
on the part of advanced countries, a certain respect for their
own history, and a certain recognition that flexibility in the
multilateral system is the defining quality of a development component
of multilateralism, as it works for developing countries, are
essential. If you remove all of those elements, I do not think
that developing countries have very much chance of progressing
up the ladder in the way that we progressed up the ladder 100
years ago. I think that is the sad thing, in the end.
Q397 Chairman: This is a fascinating
discussion which we could pursue for some time, but we have other
meetings. Thank you very much for sharing your time with us. I
think that you are very kindly going to share with us the summary
and the full report?
UNCTAD, 2002, Least Developed Countries Report. See
www.unctad.org
Mr Gore: Yes, I have summaries
of the least developed countries report. I also have a statement
which I made at the WTO Integrated Framework, which specifies
briefly this relationship between trade liberalisation and poverty
in the least developed countries.
Charles Gore, 2002, "Mainstreaming trade in
national development strategies: Some new evidence on the relationship
between trade and poverty in the LDCs".
Chairman: Thank you very much.
Witness: MRS LAKSHMI PURI, Director, Division
on International Trade in Goods and Services, and Commodities,
UNCTAD, examined.
Chairman: As you probably know, we are
a committee of the House of Commons, looking at international
development. We are interested in the Doha Round in terms of its
development implications. Clearly, here in the Trade Division,
you are looking at capacity-building and the ability of LDCs to
participate effectively in WTO negotiations. We would like to
ask some questions, therefore, about the mechanics of the WTO.
Q398 Tony Worthington: When you look
at the mechanics of the WTO, it is the most democratic of the
multilateral institutions, in theory. The poorer countries of
the world outnumber the rich countries of the world. It sounds
like this is a chance to get a fair deal. How do you see the negotiating
process working in practice and how would you strengthen it?
Mrs Puri: I am very happy to have
this opportunity of talking to you and sharing with you what—I
would like to qualify—are my personal views. There is no
institutional stamp on what I am saying. I think that we should
be very clear on that. We have had some experiences in the past
where what was said by one of the officials was attributed to
the institution. I am the Director of the International Trade
in Goods and Services, and Commodities Division, but it would
enable me to speak more freely if I were to detach myself from
my official capacity and so I begin with that caveat. Indeed,
you have put your finger on a very important issue; that is, of
process being as important as the substance. You are quite right
that, in theory, decisions are to be either voted upon or taken
by consensus. There are two problems, however. One is of process
overload. The developing countries, first of all, do not have
the capacity. Some of them are not represented here. Some of them
have very small missions which are covering the entire UN system
here, all of the specialised agencies, and also covering the WTO.
So sometimes you may have the ambassador and one other person
trying to cover everything in the WTO, against—and I do
not have the numbers—the 30 or 50 people that the European
Commission, or the US, or any other country have. That is one
issue—of capacity in terms of sheer presence. There is capacity
in terms of trying to understand what the issues are; in terms
of the multiplicity of proposals and issues; and also in terms
of the profound implications that these issues have for their
economies, but which they do not have a hold on. They have neither
the capacity to do that, nor perhaps the time. We keep talking
about meeting time deadlines, but that is another problem for
the developing countries. Yet another issue is how decisions are
taken. In fact, the Chairman of the General Council will tell
you the stories of the Doha Round, and how decisions were still
taken in small groups. As somebody said, the WTO is still evolving
out of the "clubby" atmosphere and culture to which
it was accustomed, and there is not yet in the WTO that chaos
of democracy that the UN system is known for. There is no voting
as such. Delegates have told us of how key decisions are sometimes
taken on the basis of a group of people getting together, coming
to a particular decision, and then bringing it in front of the
rest. Then there is an element of political pressure and hard
bargaining, unrelated to the WTO sometimes. It means that, in
the end, the developing countries are having to accept packages
that are not of their making, or perhaps not in their interests.
That is the feeling that developing countries have, of a certain
hopelessness and inadequacy to deal with the challenge of WTO.
Even in terms of implementation—implementing what has already
been agreed—because it is an extensive package. If you will
permit me a little later, I will address this whole issue of what
is the development dimension of the Doha Round. However, there
is this problem that, first, they have to deal with the challenge
of implementing what has already been agreed in the Uruguay Round,
and then the Doha Round came about. Most of the developing countries
had not yet assimilated and had problems, and that is why you
had the 90-odd proposals on implementation issues—which
they felt needed to be looked at because they needed, first of
all, to correct some of the imbalances in the Uruguay Round agreements.
They were unable to implement some of these and therefore they
needed some specific help, and there were other proposals for
reform. This is the context in which the present process has to
be looked at. Now, in the present process, apart from the traditional
issues of market access—you have non-agricultural market
access, the agricultural negotiations, and services—in addition,
there is the challenge of how to deal with the Singapore issues.
There are also two working groups which are looking at trade and
transfer of technology, and trade finance and debt. It is a huge
process, therefore.
Q399 Tony Worthington: I do not know
if you were in the room when we were discussing this with our
previous guests, but when a developing country is going into the
room, in theory as a free agent, are they bringing with them elements
of fear—if they do not agree?
Mrs Puri: I would not be able
to say. I think that it is more appropriate to address some of
this to the negotiators themselves. Nobody is sitting there with
a gun to their heads—it is not fear in that sense. The issue
is very clearly a sense of hopelessness. I have come across LDC
delegations and I have come across Africans who feel that, whatever
they put forward, they are somehow set aside and they may not
be able to sustain their proposals—that they are not listened
to, and sophisticated arguments are put forward. Partly, of course,
it may be an issue of capacity, but I have explained what the
capacity problem is. There is also a feeling that, in the actual
workings of the WTO, there is not the common good approach, or
the development approach in the real sense, and that, ultimately,
it is a question of bargains. The mercantilist approach on the
one hand and, on the other hand, the economic power play. This
is the problem.
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