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Westminster Hall

Thursday 12 October 2006

[Mr. David Amess in the Chair]

World Trade (Doha Development Agenda)

[Relevant documents: Third Report from the International Development Committee, Session 2005-06, HC 730, and the Government’s response thereto, Third Special Report of the Committee, Session 2005-06, HC 1425.]

Motion made, and Question proposed, That the sitting be now adjourned.—[Jonathan Shaw.]

2.30 pm

Malcolm Bruce (Gordon) (LD): I am pleased, Mr. Amess, to be under your chairmanship. I hope that neither I nor members of the Select Committee on International Development, which I chair, will cause you any trouble. I hope, too, that you will find the debate interesting. It is important and, I suggest, timely.

The Committee’s presence demonstrates that we are pleased to have the opportunity to debate the report. In April, when we produced it, the situation was tricky and a little disappointing. It is now considerably worse inasmuch as the talks are suspended, time is fast running out and even the political will to find a solution seems almost invisible, and certainly unclear when it comes to utterances, never mind activities.

The importance that the Committee attaches to a successful outcome of the Doha round—by that, we mean one that favours developing countries—cannot be overstated. It goes much further than simply securing a development round. If the Doha round of trade negotiations does not deliver a deal for developing countries, not only will it be a betrayal of the world’s poor, but it will prejudice the very foundations of and justification for free trade.

In a separate report earlier this year, the Committee argued the case for having an expanding private sector in developing countries as an essential component of poverty reduction. However, that in turn requires the opening up of trade possibilities as well as developing the capacity to trade. In other words, if a country does not have the opportunity to access markets, it will not be able to develop its private sector. We concluded that if such countries could not develop the private sector, they would not succeed in reducing poverty.

Earlier this week, I attended a lecture at the Royal Society at which David King, the Government’s chief scientific adviser, projected that gross domestic product for Africa in 2050 will be less than that of the United Kingdom. The whole of Africa will be generating less wealth in 44 years’ time than the United Kingdom will be. That is entirely unacceptable, and it reinforces the need for trade, aid and development all to be working in the same direction. David King also predicted that Africa will have fallen behind in the green revolution—a change that has enabled many other developing countries to feed their expanding populations, as well as achieving economic growth.

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I am sorry to say that that reinforces somewhat the hypocrisy—I cannot find a gentler word—of the United States and the European Union in lecturing the developing world about free trade while applying the regressive protection of their own agriculture sectors and demanding conditions for liberalisation. Economies that still champion the Monroe doctrine and support agricultural subsidies are not well placed to offer leadership. The developed nations, notably the EU and the USA, have talked one way and walked another, and they seek to pass blame back and forth between them.

Although the Committee welcomed the Government’s success in securing a commitment to policy space in the G8 communiqué under the British presidency, we believe that they have failed to use our presidency effectively to break the logjam. In particular, the Government allowed the EU to make conditional proposals on non-agricultural market access, and did not demur when benchmarking was tabled by the EU, both of which actions contradict the spirit of a development round. I am glad to say that benchmarking did not make much progress.

In that context, I refer to paragraph 39 of our report, which quotes evidence from Sheila Page. She said:

If we believe that it is a good thing to do, there should not be any conditions. At paragraph 42, we say that the UK should have rejected the benchmarking proposals. That would have allowed us to avoid what was a wasteful distraction.

I repeat that if we are to have a real development round—one that people can understand—the least developed countries would have 100 per cent. and unconditional duty-free and quota-free access to our markets. That, I believe, is what people understand the development round to mean. That should be accompanied—I accept that this is more qualified—by the recognition of these countries’ need for policy space. The Committee debated that, and some would argue—I concur—that policy space has to be time-limited and case-dependent. The purpose of that policy space is to allow those countries to achieve free trade competitiveness, and to recognise that small, weak, poor countries cannot immediately step up into the international marketplace and expect to compete on the same terms as the established, developed economies.

The Committee was also concerned, and remains concerned, that the EU wanted to designate up to 8 per cent. of its products as sensitive, and therefore eligible for continued protection against the weakest economies. A World Bank analysis suggested that even 2 per cent. would virtually eliminate the poverty impacts of a Doha agreement.

When we published the report, I said:

Similarly, if we are to agree to an aid-for-trade package, it should be considered not part of the aid
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budget—I fear that the Minister will probably tell us it will be—but as an investment by the UK and the EU in developing stronger trading partnerships with emerging economies, to everyone’s mutual long-term benefit.

If the current round collapses or goes into deep freeze, it seems likely that trade patterns will be determined by bilateral agreements rather than multilateral ones. That would be a negation of free trade; it tends to mean some developing countries getting more favourable treatment than others. In addition, it means that when the agreements come to an end, which must happen, there will be further pain and disruption. Indeed, the Committee took evidence on that with the sugar regime.

John Battle (Leeds, West) (Lab): I am grateful to my right hon. Friend for giving way. It is not simply the timing of bilateral agreements. By and large, the big power holders in those bilateral agreements will beat down the poorer ones, so it will always be an unequal relationship from which the poor will lose. Bilaterals are bad news for poor countries.

Malcolm Bruce: That is a telling point. Indeed, Mr. Amess, you will have heard that the degree of agreement among the Committee is such that we can call each other our hon. Friends. We are good colleagues and friends.

The high hopes that the trade talks would be a development round—it was described by Pascal Lamy as a round for free for the poorest countries, giving them market access without reciprocal concessions—now look pretty jaded. Some people, including Pascal Lamy, are saying that there may be a brief window to secure a deal after the US elections next month and perhaps in February next year. Frankly, it is difficult to be optimistic, given the lack of progress to date over a much longer time scale.

The greater concern is that, because nothing is agreed until everything is agreed, less developed countries may feel pressured into making concessions to secure what is on the table now. Evidence from some countries is that that is the case. That demonstrates the point made by the right hon. Gentleman: it would effectively amount to an unholy alliance of the developed countries and the larger developing countries, to the detriment of poor countries.

There are those who welcome the current impasse on the Doha round. For example, War on Want says that resuming negotiations is now the worst possible option, and Christian Aid says that simply resuming talks on the same basis as before would be a mistake. However, Pascal Lamy, the World Trade Organisation director general says that if the talks were not resumed:

He adds:

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However, somebody in the developed world has to take a lead at this time. Ministers and Commissioners say the right things, but we are currently at a standstill. The Financial Times speaks of

As I have said, the situation was difficult when we published our report in April, but it is much more serious now. If trade negotiations move from the multilateral to the bilateral we will, as the Financial Times again observes, replace the rule of law with the rule of the jungle. Rather eloquently, it says:

That is a sentence worthy of the hon. Member for Buckingham (John Bercow) at his most florid.

I welcome the fact that the EU has exercised a moratorium on any new trade negotiations—bilaterals—since the beginning of the Doha round. Frankly, if that moratorium has ended—there are those who call for it to end—I suggest that that is a signal of the beginning of the end for the possibility of EU leadership in multilateral free trade.

I hope that the Minister will agree that such deals are not just, as some people think, second best in the absence of a WTO deal; I repeat that they are ultimately the negation of free trade. Despite the rhetoric, the EU and the USA do not have a credible track record on free trade. Therefore, the test now is not who blinks first, but whether the EU can stop blaming the US and unilaterally break the deadlock with a bold new initiative. Will the Government be prepared to put their head above the parapet and make such a demand? If nobody does, it is not just the developed world that will lose the Doha round: free trade will be the casualty and we will all be the losers, rich and poor alike.

2.43 pm

Hugh Bayley (City of York) (Lab): We have one last chance to save the talks before the US President’s trade promotion authority runs out. The window of opportunity will come after the mid-term elections, and frankly it will last weeks rather than months. Unless a draft deal goes back to Congress very early in the new year, the trade promotion authority will have ended before there is an opportunity to approve the deal. If there is no trade promotion authority, there is no deal. Whatever the US President or the US Administration via their trade representative might negotiate, it would be torn to shreds in a protectionist Congress—everybody involved in the talks knows that.

I urge the Minister and the Government to press the European Union vocally to make the most of this last opportunity. I simply ask: is the EU preparing a new offer to be publicly presented after the mid-term elections? We will not reach a deal in the WTO as a whole unless there is substantial movement both by the EU on the common agricultural policy and by the US on farm subsidies and on other agricultural protection measures, particularly in relation to cotton. There is no
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point having timid talks unless there is a bold offer to break the deadlock—it needs to be bold and to happen very quickly.

Deep in my heart I am pessimistic, although I hope I am wrong. Hon. Members need to ask and debate what the contingency is if the talks grind to a halt and fail or remain in deep freeze for several years to come. First, we need to learn the lesson that the stricture for this round that nothing is agreed until everything is agreed has been a recipe for failure. When the Committee was in Washington DC and met the US trade representative, that formulation was used to justify the lack of movement by the US. The US said that it had made an offer, and until others responded in a way that was acceptable to it, progress would not be made, and that progress could not be banked in one part of the negotiations while discussions continued in another, because nothing would be agreed until everything was agreed.

Anybody who has been involved in any kind of negotiation knows that a deal is built up incrementally. I spent a number of years as a full-time trade union official negotiating deals on pay and conditions for a range of health service staff. A deal was not created by a flash of inspiration on both sides of the negotiating table at a single point in time: a deal was put together in parts. In order to encourage and put together a WTO deal in obviously difficult negotiations, involving 130 parties, success needs be announced part by part. I do not see any reason why a deal cannot be reached and banked on agriculture when further deals have been made in other parts of the negotiations, for example on non-agricultural market access. If, as I suspect, the talks remain dormant for two or three years until, to be blunt, there is a new President of the US and a new President of France who are not out to sabotage them, we need to use the time between now and then to ditch the doctrine that nothing is agreed until everything is agreed. If we do not do that, the talks will have little more chance of success in two or three years’ time than in the past two or three years.

Within the EU, the British Government have taken a position against conditionality with offers. We have taken the view that reducing tariffs and quotas, and increasing market access, is not something that harms the country or group of countries that do it; it is put into the negotiations because it benefits us and our trade partners.

It is unfortunate that a clear majority in the EU does not accept that non-mercantilist approach to trade negotiations, but what we are arguing is right. Yes, of course transitional arrangements need to be provided for developing countries with fragile economies as they liberalise. A big bang is not helpful to the least developed countries, but the principle is right. If we sincerely believe that trade liberalisation will help to raise the incomes of poor people in poor countries because they are able to sell the product of their labour internationally in places in which they were hitherto unable to do so, we must use the time between now and whenever a global deal is made to put that principle into practice by changing the policies of the European Union.

We cannot unilaterally change the trade policies of the United States or Japan. I wish that we could, but we cannot. That is the problem with these negotiations, but we, as a leading country in the European Union, can
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press for and, I hope, achieve changes in our European Union policy. That has been done before. The “Everything but Arms” agreement was introduced before we got to this round of trade negotiations. It was introduced for the right reason: it increased opportunities for poor people from poor countries to sell their goods—primarily agricultural products—to a European market. We need to go further unilaterally by tearing down the barriers. To use the words of my hon. Friend the Minister for Climate Change and the Environment when he was the Minister for Trade and gave evidence to our Committee, we need to “kick open the door” that keeps the goods of poor people from poor countries out, and we can do that in the EU by ourselves.

We have a package agreed in the EU to phase out export subsidies by 2013, conditional on reaching an agreement in the Doha trade round. It is the right thing for the EU to do, and I am sure that it is the right thing to do for the countries where we have been dumping subsidised agricultural produce and undermining local markets and the livelihoods of local farmers. It is possible for us to ensure that we unilaterally phase out export subsidies by 2013, or by an earlier date, if that is feasible, simply because we choose to do so. It would be to our benefit to do so and it would be to the benefit of some poor farmers in poor countries if we did so.

We can unilaterally, if we choose to do so, make further progress in modifying the nature of subsidies under the common agricultural policy and reducing subsidy levels overall under that policy, so that farmers who are producing unsubsidised agricultural produce in Africa who have open access to our markets will be competing more nearly on a level playing field; in other words, competing with less highly subsidised agricultural produce produced in Europe. Those are things that we can do by ourselves.

I hope desperately that this window of opportunity can be used to achieve progress in the round as initially intended, but if that is not possible, the greatest betrayal would be for us simply to walk away from the trade agenda and not to do what it is in our power to do unilaterally within the European Union to promote development and the attainment of the millennium development goals. I am talking about achieving that through our own unilateral actions on trade.

Let us remember why this kind of trade round was launched at Doha. It came just a couple of months after 9/11, when there was a feeling throughout the world of global solidarity and a recognition in the rich world that if we do not promote development and create opportunities for economic development in poor countries, we create, at least in some poor countries, failed states within which terrorism can thrive and terrorists can find sanctuary, rest and recuperation for their operatives, and money laundering facilities from a poor but compliant Government. It was because of that recognition that the big power blocs of the western world agreed that the priority of this trade round should be to deliver a development agenda for the poor. However, that has been forgotten. The round so far has failed and may fail in the short term, although I think that in the long term an agreement will be made. However, that is not an excuse for us in Britain and for the EU to forget that we can reform trade unilaterally to benefit the poor, and we must do so. That is in their interests, but also in ours.

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