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WTO Conference (Hong Kong)

12.32 pm

The Secretary of State for Trade and Industry (Alan   Johnson): With permission, Mr. Speaker, I should like to update the House on progress made at the sixth World Trade Organisation ministerial conference, which took place in Hong Kong last week.

I attended the conference with my right hon. Friends the Secretaries of State for Environment, Food and Rural Affairs and for International Development and   my hon. Friend the Minister for Trade. The UK delegation included representatives from the CBI, the TUC and Oxfam, as well as the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski) and for   Gordon (Malcolm Bruce) and my hon. Friend the Member for Kingswood (Roger Berry). I greatly appreciated their participation and thank them for their work.

The conference was attended by delegates from all 150 members of the World Trade Organisation, including Tonga, whose accession was approved during the week and which we celebrate here today.

The Hong Kong meeting was an important staging post in the Doha development trade round. The round commenced just after 11 September in a spirit of harmony and good will, and with a determination to   entrench global security by promoting global prosperity. The round was due to be substantially completed by the end of 2006.

We had originally hoped that the Hong Kong meeting would put in place the essential elements of an ambitious and pro-poor conclusion to the round, but in the run-up to the talks, it became clear that substantial divergence between WTO members made such an ambitious outcome unlikely. We therefore set off for Hong Kong with the objectives of locking in the progress already made, constructing a meaningful development package and using the conference as a springboard for the successful completion of the round next year.

From the repeal of the corn laws in 1846 to the successive post-war GATT rounds, Britain's liberal trade policy has fostered rising national prosperity. However, as the Make Poverty History campaign has highlighted, trade reform—alongside debt relief and increased aid—is also crucial for those in impoverished parts of the world.

The UK's G8 presidency has focused on sub-Saharan Africa and the conditions needed to foster sustainable development in the region. The meeting of Finance Ministers in June and the meeting at Gleneagles in July delivered substantial additional aid and debt relief, but trade has far greater potential to generate sustainable prosperity for poor countries. The Commission for Africa, which my right hon. Friend the Prime Minister set up last year, judged that an ambitious conclusion to the Doha round represented the best opportunity to   create a reformed world trading system that would allow poor countries new scope to trade their way out of poverty.

For all the heightened political interest in trade across the world in 2005, progress in the round has remained slow. Agriculture is the motor of the round, so it was always clear that there would be no movement on other
 
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areas in advance of progress on farming. The crucial elements were domestic support in the US and market access into the European Union. Offers were tabled in October by the US, EU and others to unlock that set of negotiations. While the offers led to intensive negotiations, the major players—both from developed and developing countries—all remained some distance apart on fundamental aspects of the talks. There was a great deal of frustration that the talks were bogged down in an agricultural quagmire that was preventing progress from being made on the other two trade areas: industry, or non-agricultural market access—NAMA, to use WTO terminology—and services.

The week itself saw little real discussion on the overall level of ambition on agriculture, either in terms of domestic subsidies or tariffs. With limited movement on agriculture, it was always going to be difficult to make any significant progress on industrial goods and services. However, there was limited progress in six areas, which meant that while the talks could not be described as successful, neither could they be categorised as a failure.

First, there was progress on the agricultural export subsidies that lead to first-world farmers' produce being dumped on the third world with ruinous consequences for local producers. The House is aware that we have argued that these should be scrapped. Some European Union members came to Hong Kong reluctant to concede anything. Others argued that the end date should be dependent on broader progress in the trade round. The compromise reached was an end date of 2013. Although that is later than we would have liked, the date is specific and fixed and, furthermore, the elimination is progressive. There is a commitment to phase out a substantial proportion by the mid-point between the end of the Doha round and the 2013 end date—by around 2010.

While the EU's export support is transparent, similar practices in many rich countries are opaque, but have exactly the same effect. American food aid provides some help in feeding the hungry, but it is primarily about boosting the incomes of the well-fed by guaranteeing that significant overseas demand is met exclusively by US produce. State trading enterprises in Canada, New Zealand and Australia use a mix of export credits, financial underwriting and monopoly power to similar effect. Although export subsidies are delivered in a number of ways, the effect on poor producers is the same, so we successfully ensured that the deal provides for parallel abolition of all such practices, also by 2013.

The second area of limited progress concerns duty-free and quota-free access for least developed countries—the very poorest countries—to developed country markets. The European Union has already committed to that principle under its "Everything but Arms" initiative, and at Hong Kong we pushed hard to get the developed world to take the same approach. Other nations signed up to the principle, but only on the condition that they retained some temporary flexibility to exclude 3 per cent. of tariff lines during a transition period of indeterminate length.

That is a step forward, but the risk of a 3 per cent. exclusion is that developed countries will apply them to precisely those products where the poorest countries have the best chance to export. I very much hope that
 
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the US, Japan and others will now face real pressure from the rest of the WTO membership to give an early date for 100 per cent. coverage in this area.

The third important area was cotton—colleagues may remember that this was largely the cause of the complete collapse of the Cancun talks—where progress was made, but on a very disappointing scale. There was a commitment to end cotton export subsidies by 2006. There was a commitment to grant duty-free and quota-free access to least developed countries' cotton from the date of implementation—progress, yes, but market access had never been the key concern over cotton. The real issue on cotton remains the $4 billion a year in trade-distorting domestic subsidies received by American producers that deny a level playing field to west African producers. On this there was agreement to discussions with the most affected countries, but sadly as yet no commitment to action.

Fourthly, on aid for trade, which will help poorer countries to build the capacity that they need to trade successfully, the week saw new commitments and a new Geneva-based taskforce set up to maintain momentum.

Immediately before the conference Japan committed to US$10 billion in aid for trade over the years to 2010; in Hong Kong the Americans committed to $4 billion by 2010, and European member states committed to new money to go alongside that already pledged by the Commission. The various announcements take us well beyond Gleneagles, replacing vague aspirations with specific commitments and specific dates.

Fifthly, solid progress was made on trade facilitation. To give just one example of how important this area is and the sort of bureaucracy that it will tackle, in India an exporter needs 29 documents for clearance, in quadruplicate, with 257 signatures along the way. Progress in trade facilitation is important, although it is fair to say that progress was virtually guaranteed before we went to Hong Kong, so it cannot be described as an outstanding outcome from the conference.

Finally, and crucially, we have agreed a road map for conclusion of the round. Reaching a deal on an agreed way forward is an important, if modest, achievement for the WTO and the multilateral trading system that it encapsulates. After failed ministerial meetings in Seattle and Cancun the credibility of the WTO and the prospect of concluding the round next year depended on such a deal. So how does this outcome from Hong Kong measure up against our objectives? Overall, the outcome is disappointing. While it was good that talks did not break down, it is fair to say that we wanted much more progress than we achieved.

An agreement of a development package covering aid for trade, cotton and duty-free and quota-free access for LDCs is to be welcomed. But this is no substitute for   fairer trade rules, which will bring the majority of gains for this round, where there was no breakthrough. We welcome the decision to phase out export subsidies progressively. This is an important step forward. We will continue to press to ensure that they are phased out as quickly as possible.

I said in my opening remarks at the ministerial conference in Hong Kong that we still faced a mountain to climb and that we needed to use the week of talks to
 
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get beyond base camp. The conference did do that—WTO director general Pascal Lamy has judged that we are now more than halfway to the final deal. And it has set out a potential route to the top—agreement of the final architecture of a deal in agriculture and industrial goods by the end of April 2006, and the substantive conclusion of the round by the end of next year.

We should not underestimate the challenge that this poses. Talks have moved slowly over the past four years and some of the trickiest terrain still lies ahead, but we remain passionately committed to a successful round. The Doha development round has the potential to lift hundreds of millions of the world's poorest out of poverty for good, and entrench prosperity and security across the world—a huge prize that we will continue to pursue unrelentingly. I believe that we have the support of the whole House in this endeavour.


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