Select Committee on International Development Seventh Report

1  INTRODUCTION

The promise of trade and the place of Cancún

1. The increased involvement of developing countries in international trade could help lift hundreds of millions of people out of poverty. At Doha in November 2001, the World Trade Organization's (WTO) 142 member states promised to deliver the improved market access and development-friendly rules which are needed to harness trade for development and poverty reduction. At Cancún in September, the world will be able to judge whether countries, including the UK, are keeping their Doha promises.

2. Trade can and should play an important role in reducing poverty and contributing to the achievement of the Millennium Development Goals (MDGs). The platform from which the pronouncements made by many governments about the benefits of trade and trade liberalisation are delivered is the economic theory of comparative advantage. This suggests that, if each country specialises in the production and export of those goods and services which it can produce relatively efficiently, and in turn imports those goods and services in which it has a comparative disadvantage, all countries will benefit. Productive resources would be allocated more efficiently, leading to growth, the benefits of which might be targeted at poverty reduction.

3. The reality of international trade is drastically different, as the Trade Justice Movement has recently reminded us all. The North does not practice the free trade that it preaches. In total, developed countries provide nearly $350 billion per year of support to their agricultural sectors, a sum which is greater than the Gross Domestic Product (GDP) of the whole of sub-Saharan Africa.[1] The dumping of Northern-produced food on developing countries and the maintenance of barriers which limit developing countries' access to Northern markets, distorts world markets and prevents developing countries from using agricultural exports as a way to trade up and out of poverty. Countries in the North and South maintain a variety of barriers to non-agricultural trade, inhibiting the growth of regional trade and integration. Many countries in the South are ill-equipped to take advantage of the limited trading opportunities that they have. As a result, the potential gains from specialisation and trade - in terms of dollars earned or poverty reduced - are lost. Oxfam notes that "If Africa, East Asia, South Asia, and Latin America were each to increase their share of world exports by one percent, the resulting gains in income could lift 128 million people out of poverty. In Africa alone, this would generate $70 billion—approximately five times what the continent receives in aid."[2] And in a world which is far-removed from the models of free and fair trade, the gains from trade which do materialise are enjoyed primarily by powerful countries and corporations.

4. At Doha, the World Trade Organization's (WTO) members stated that they would "seek to place" the needs and interests of developing countries at the heart of a new round of multilateral trade negotiations.[3] This round, which the WTO envisions as the "Doha Development Agenda", provides an important window of opportunity for the international community to build a multilateral trading system which will provide developing countries with the opportunity to trade out of poverty and towards meeting the MDGs. The UK Government, with the Department for International Development (DFID) at the fore, is fully behind the MDGs, and is a strong proponent of the "Doha Development Agenda".[4] The round is scheduled for completion by 1 January 2005. At the WTO's Fifth Ministerial Conference in Cancún in September 2003, it will become clearer whether the WTO's members are living up to their promises. The World Development Movement, doubting the ability of the WTO and its members to deliver a genuine development round, suggested that failure at Cancún would be "potentially positive, if there is a shock to the system and if there is then a process of reflection and reform."[5] We disagree strongly with those who would like to see Cancún fail; reflection and reform are desirable, but failure at Cancún would be very bad news for developing countries.

The inquiry and the report(s)

5. We announced our inquiry into "Trade and development: Aspects of the Doha Agenda" on 26 November 2002, and invited organisations with relevant experience or expertise - and particularly those based in developing countries—to submit written evidence. We intended to produce a single report in July 2003, but mid-way through the inquiry we decided that it would better serve our aims to extend the inquiry until after the Cancún Ministerial, and to produce two reports. This is the first of these reports, and is focused on issues which are directly relevant for Cancún; other issues will be addressed in a post-Cancún report.

6. Our aim in this report is not to provide a comprehensive assessment of the relationship between multilateral trade rules, national trade policies, trade and poverty reduction. The UK Government's views on these matters are set out in its second White Paper on International Development;[6] alternative perspectives are widely available.[7] Neither is it our aim to question the wisdom of WTO members seeking to place the needs and interests of developing countries at the heart of a round of negotiations which is based upon hard-bargaining between states with vastly unequal resources, although we do consider how this circle might best be squared. Rather, our aim is to maximise the chances of the current round of WTO negotiations amounting to a genuine development round, by influencing the UK Government's input into the EU's positions before and at Cancún.[8] Our second aim is to encourage the Government and through them the EU to ensure that developing countries can play a full, active and well-informed part in negotiations. In addition, we hope that this report will inform our Parliamentary colleagues about Cancún and the WTO's "Development Round".

7. We have made considerable efforts to listen to the views of organisations and representatives from developing countries, including pioneering the use of video-link technology by a Select Committee for a public evidence session. In addition to hearing from the International Monetary Fund (IMF), the South Centre, the United Nations Conference on Trade and Development (UNCTAD), the United Nations Development Programme (UNDP) and the World Bank - we have met or received evidence from Heads of Government, Ambassadors, negotiators, parliamentarians, business organisations and non-governmental organisations (NGOs) from Bangladesh, China, Ethiopia, India, Jamaica, Kenya, Mauritius, South Africa and Thailand. But we make no claim to speak for them. Developing countries, and people within those countries, hold a wide variety of views about trade, development and the WTO. Their views must be listened to and taken seriously within the WTO if there is to be any chance of the "Doha Development Agenda" producing a genuine development round.

8. In chapter two we examine the notion of a "Development Round", explaining why one is needed, and outlining what we believe are the necessary components of a genuine development round. In chapters three and four we examine - for a range of issues—what was agreed at Doha; assess what the current state of play is; examine the key issues; and suggest what the UK Government should do to maximise the chances of a development-friendly outcome. In chapter three our focus is agriculture, the most important and most intractable of the issues. In chapter four we look beyond agriculture, considering: non-agricultural market access; the "new" or "Singapore Issues" of investment, competition, transparency in government procurement, and trade facilitation; Trade-Related Intellectual Property Rights (TRIPS); the General Agreement on Trade in Services (GATS); and commodities. Whilst chapters three and four include suggestions about what should be done in particular issue areas to achieve a development round, in chapter five we examine two other components which are fundamental to a genuine development round: effective participation by developing countries; and, the creation of development-friendly rules. Finally, we emphasise the importance of policy coherence, political commitment, and the opportunity and responsibility which the UK has to provide leadership in making Cancún a successful staging post in a genuine development round.

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1   Ev 3, para 15 [HMG memorandum] Back

2   Ev 43, para 2 [Oxfam memorandum] Back

3   WTO, Ministerial Declaration adopted by the Fourth Session of the WTO Ministerial Conference, Doha, 9-14 November 2001, (WT/MIN(01)/DEC/1), para 2. See also The Doha Declaration explained. Both available at http://www.wto.org Back

4   Ev 2, paras 3 and 5 [HMG memorandum] Back

5   Q 268 [Peter Hardstaff, World Development Movement] Back

6   Ev 2, para 4 [HMG memorandum]; HMG, Eliminating world poverty: Making globalisation work for the poor, Cm 5006, December 2000. Available at http://www.dfid.gov.uk/Pubs/files/whitepaper2000.pdf Back

7   See, for example: Oxfam's Rigged rules and double standards; the work of the Third World Network; UNCTAD's Trade and Development Report; Making global trade work for people whose preparation was co-sponsored by the UNDP; and the World Bank's report on Making trade work for the world's poor. Back

8   Trade is a matter of Community competence; the EU speaks with one voice at the WTO. Back

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Prepared 14 July 2003