Examination of Witnesses(Questions 40-48)
TUESDAY 4 FEBRUARY 2003
PROFESSOR ADRIAN
WOOD, DR
ELAINE DRAGE
AND MR
IAN NEWTON
40. Let us move on to development box; I am
never quite sure whether it is a development box or development
boxes. We have had different coloured boxes mentioned today. What
line does HMG take on the development box? [Question 13: Does
the UK Government support the idea of a development box? Should
this be a temporary measure, or does it signal a recognition that
for international trade rules to be fair, countries at different
levels of development must be treated differently, and that food
security and development needs should be placed at the heart of
the negotiating process?]
(Mr Newton) We are generally supportive of the concept
of a development box, development box being a loose heading under
which you include a list of measures aimed specifically at helping
developing countries through recognising their special needs.
What we would be very wary about would be a development box which
included measures which in effect isolated developing countries
from trade liberalisation and which institutionalised their development
status. There are quite a number of ways in which we have been
looking at helping developing countries in this respect. There
are already quite a number of ways within the existing WTO agreement
on agriculture, not just in terms of lower reduction commitments
and longer time periods in which to put those reduction commitments
into effect, but also things like subsidies for agricultural inputs,
subsidies for rural and social development, which would normally
be included in our aggregate measure of support, that is the support
which is liable to reduction, in a developing country. They can
be excluded within developing countries to a degree. We should
like to continue with those in the new round. We are also open
to the idea of the extension of the special safeguard provisions
which would enable developing countries to protect their markets
against fluctuations on the world market. Another idea which has
been put forward is for developing countries to be allowed to
notify their annual support expenditure in terms of a world recognised
currency or a basket of currency, things like that. That would
protect them against currency speculation, currency movements,
inflation, that sort of thing.
41. I have a horrible feeling that the development
box is going to become one of those bits of political shorthand
which is going to mean different things to different people and
one is going to find oneself on a wet Sunday afternoon in Oxford
having an intense discussion with the local branch of Oxfam as
to what is actually meant by the development box. Could you be
very kind and let us have a more detailed note of where HMG stands
on the development box[14]?
(Mr Newton) Certainly.
42. I am sure you have done things for ministers.
I really just need to understand the nuances of this. It is the
sort of thing where we will find ourselves in a lot of discussion
and if we can actually understand what the nuances are, it is
probably helpful. Dr Drage, would you like to have a crack at
question 14? [Question 14: What is the UK Government's
view of the International Financial Institutions' imposition of
trade-related conditionalities (ie making liberalisation a pre-requisite
for financial assistance) onto developing countries? How is the
use of trade-related conditionalities consistent with the principle
of Special and Differential Treatment and granting developing
countries flexibility and policy choice?]
(Dr Drage) May I ask Adrian to have a crack at the
first of the two questions in question 14?
(Professor Wood) Trade related conditionality could
mean a wide range of things. What has actually been urged by IFIs
is reform of trade policies which are egregiously distorting:
quotas or quantitative restrictions on imports, whose effects
on domestic markets are huge and unquantified, tariffs of up to
100 or 200 per cent which vary enormously from one sector to another
for absolutely no reason and have an enormously distortive effect
on the structure of production. What the IFIs have been pushing
for mainly is to turn quantitative restrictions into tariffs,
"tarify" quantitative restrictions and try to make the
tariffs more uniform across sectors, just to try to reduce the
net distortionary impact. In that sense, one can make very little
defence of the regimes they were seeking to reform from any point
of view. If you were to ask whether we would be happy if the IFIs
insisted that all developing countries abolished all tariffs,
which is something they have not tended to do, no, of course we
recognise that there are legitimate economic and social reasons
for maintaining tariffs which are used by developed countries
and developing countries and we would not wish or expect that
to be taken away.
(Dr Drage) I shall talk about S&DT. One of the
best things is perhaps to offer you a short paper on S&DT
as well because it is not a simple issue[15]It
is a term which is used primarily and possibly only in the WTO
context and it covers a very large range of things. To some people
it means longer implementation periods for them to adopt one of
the Uruguay round agreements. To some people it means they would
like to renegotiate a bit of it and cut themselves out of it permanently,
for some it means temporary, for some it means they want a slight
reworking of it and there are many issues. The answer is that
the government believes in principle that there should be appropriate
special and differential treatment to allow developing countries
to be smoothed into the liberalised system. Some of the proposals
put down by some of the developing countries—and they are
not a homogeneous group—frankly would cut them out of the
global system completely and we do not actually think that it
is in their long-term interest to do that.
Alistair Burt
43. We slightly missed something and it might
have been more appropriate in the previous section than this,
but I should be very grateful if you would give us a brief view.
At the moment I seem to be more beaten about the head by lobby
groups on the liberalisation of services than almost anything
else. In your discussions with NGOs and lobby groups and others,
do you feel there is genuine hostility on this issue? Is it based
on a fundamental suspicion of what the liberalisation of services
is all about? Do you feel we will be confronted with quite a lot
of this from people we are meeting or has there been some sort
of meeting of minds on this in the discussions which would have
taken place over the last 12 to 18 months?
(Dr Drage) I will deal with GATS because I recognise
that it is a very contentious issue on which my department in
particular have had long and continuing dialogues, which we welcome,
with a number of NGOs. I have to say from my frequent trips to
Geneva, GATS is not a Uruguay round agreement which really gives
much concern to developing countries at all. They have confidence
that, because it is a bottom-up agreement where they can choose
which sector if at all we want to liberalise in and quite how
to liberalise, they have much more control over that process than
they do over the negotiations for a lot of the other agreements.
A lot of the concern which is generated in this country, often
from very good intentions, is because people are worrying about
the precise wording of the legal text of GATS, whether it will
remove governments' rights to regulate, whether it will force
governments to liberalise. The answer to that is: no, it does
not remove a government's right to regulate internally. What GATS
says is that if a country chooses to liberalise, say, its telecommunications
industry, it needs to treat a company coming in from another country
in the same way it treats its own telecom companies: however it
regulates its own, it regulates a foreign company in exactly the
same way. It does not remove a government's right to regulate.
I do not know, but I hope, that a lot of the concerns about whether
GATS will undermine public services in this country and other
countries will be laid to rest as negotiations proceed, because
I hear no demands from countries in Geneva for things which will
undermine those rights.
Chairman
44. Last section. Negotiating capacities of
developing countries. What have you done to enhance the negotiating
capacities of developing countries? [Question 15: What
are the key constraints which developing countries face in playing
a full and active part in international trade negotiations? What
should be done to enhance the negotiating capacities of developing
countries, and to ensure that they have an effective voice in
international trade negotiations, and what help have developing
countries received from DFID in this regards? Question 16:
Given that international organisations and donor governments have
a range of sometimes conflicting views about trade and trade policy,
and that these might not be shared by developing countries, how
should trade-related capacity building be managed so as to enable
developing countries to make their own informed decisions about
their trade policies?]
(Professor Wood) It is a point I touched on earlier.
International trade negotiations are incredibly complicated, involve
large numbers of highly technical issues, some legal, some technical.
They operate on a very wide range of fronts. Large numbers of
issues are being discussed at any one time and for any particular
country to engage seriously in these negotiations you need a lot
of very well-trained people. That is of course exactly what most
low income countries do not have. That is the constraint. In terms
of what we have been doing to help ease this constraint, we have
put a lot of money and a lot of effort into trade capacity building,
of which a large slice has been improving capacity to participate
in negotiations. We are not the only country or organisation to
have done so. I can give you a note on everything we are doing.
It is quite a good list[16]
45. Do we tend to support Commonwealth countries?
Are there particular groups of countries which we tend to support?
(Professor Wood) No, it is across the board. We have
tried to focus our effort on poor countries or countries with
a lot of poor people.
(Dr Drage) We have done it in two ways. One is through
supporting projects at places like UNCTAD or in the World Bank,
to help developing countries develop templates for them to use,
both in the negotiations and for impact assessment on the various
areas. There have been specific country projects. I had the privilege
of meeting probably the entire Ghanian trade negotiating team
who were in London last week to have a series of sessions with
people. It brings it home to you when they say they have precisely
two computers in the entire ministry in Ghana, neither of which
has internet access, which means of course that they are not getting
the papers from Geneva within the sort of timescale they need.
There are some practical things we could be doing to help countries
link up so they can actually obtain the papers, get instructions
from capitals.
46. Should the WTO not be making sure that participating
countries have the capacity? How do you have a negotiating round
where half of the people involved have one if not both hands tied
behind their backs?
(Dr Drage) WTO does have a large annual fund that
member states put money into; I cannot remember the exact sum
this year. It runs a whole lot of projects there on capacity building,
but it runs projects which it is asked for by the poorer member
countries, so they need to ask for it. Some capacity building
is being done by the UK; there are quite a lot of other countries,
particularly the northern liberals, who are putting money in to
help capacity building. There are things developing countries
need to do themselves as well. If somebody has been on courses
and got trained, you really do not want to move them to do a completely
different job in the ministry and that is happening too.
47. Question 17: new issues, ensuring the issue
of competition versus trade, blah, blah. I think the innuendo
here is that we are adding to the agenda at a time when people
are having difficulty coping with the existing agenda. What do
you have to say about that? [Question 17: How does the
inclusion of "new issues" on the agenda fit with the
UK Government's efforts to improve the capacity of developing
countries to cope with the existing agenda? Is this, as Save the
children suggests, an example of a lack of joined up government?
How does the use of Mini-Ministerials fit with the UK Government's
commitment to ensuring that the international trading system "provides
an effective voice for developing countries"?]
(Dr Drage) There is no one simple answer to that.
The issue of investment has been raised already. Most developing
countries are desperate to get investment into them. What the
EU means by arguing for a basic framework on investment to be
negotiated in the WTO round is really a very simple and transparent
framework of rules so that a foreign investor coming in will know
exactly where they are. This should give greater confidence to
investors, should help to create conditions more conducive to
FDI and in that sense will help poverty reduction in the country
concerned. That is investment. In terms of competition, I do not
hear any worries in talking to developing countries about the
issue of competition which relate to its substance. They all see
that competition and controlling competition is potentially a
really important matter for their own economy, not least in helping
to ensure that the benefits of growth are spread more widely in
the economy. They worry about their capacity to negotiate it but
something like 100 developing countries already have competition
law: their concern is not to have too bureaucratic an overhead
and what the EU will be arguing for is that there should just
be a very simple framework of principles which people should accede
to at least at this stage. We recognise that we are not arguing
for a big complicated superstructure to control multinationals
even though the issue of hard-core cartels is certainly a matter
of concern to a number of countries. There are potential real
gains for them in going for competition. Trade facilitation is
about improving your customs procedures and getting more money
for you as a developing country government. That is really a very
good thing for them, but it means sorting your own bureaucracies
out. Some are favourable to that, some are less so. The final
issue about government procurement is about transparency rules
which ensure that you as a government get best value for money,
so the principle has to be right.
48. Thank you very much. Today's session has
demonstrated the complex inter-relationship of a whole number
of issues. One of the things we are almost certainly going to
have to do in this report is a glossary of terms at the end, a
dictionary of terms, everything from AGOA, to special and differential
treatment, to development boxes so there is an index.
(Dr Drage) I have one I can send you9.
Chairman: That would be very kind. It
is a bit like algebra, you have to sort out the bits of the building
block before you can even get a policy debate. Thank you very
much for helping us. I hope you did not find the way in which
we approached it . . . I think it may have been beneficial you
having the questions and then we asking supplementaries on those.
It has managed to save us time at a time when everyone in this
place always seems now to be working against the clock. We have
managed to give ourselves five minutes before prayers, so thank
you very much for being both helpful and concise in covering an
enormous amount of ground.
9 Further information to follow.
14 Further information to follow. Back
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