Examination of Witnesses (Questions 91-99)
MR GARY
CAMPKIN, MR
NEIL HARVEY
AND MR
STEVE BARNETT
20 JULY 2006
Q91 Chairman: Good morning. I am very
sorry that we have been delayed a bit this morning. Being a Sub-Committee
we have a small number of members, so if one is delayed or in
another committee we can be inquorate. We are quorate, and we
are very pleased to see you this morning. If I can start off.
You stated that the Doha Development Agenda is a "critical
opportunity to realise" economic benefits to developing countries.
We have heard from a number of witnesses, however, that the Doha
round talks are unlikely to have any major benefits to developing
countries. Is that your assessment?
Mr Campkin: Thank you, Chairman.
No, it is not. The second D in the DDA is development and it is
the Doha Development Agenda. Certainly, as far as our assessment
in the CBI is concerned, development aspects are important. In
the British business community we have been very supportive of
the British Government's position on ensuring that the DDA concludes
on an ambitious and balanced basis, which includes a large development
related component. Trade liberalisation is good for economic growth,
it is therefore good for development.
Q92 Chairman: The empirical evidence
does not always seem to point in that direction, does it? With
benefits, how will you quantify the benefits per every one pound
of trade that is generated? How many pennies go to developing
countries and stay there?
Mr Campkin: There have been a
number of studies which I am sure other witnesses have referred
to, including those from the World Bank and other institutions,
which vary the amount of benefit to developing countries depending
on the exact nature of the package that is concluded. I cannot
honestly tell you exactly what the end result will be. There is
no doubt at all that there are both static and dynamic gains from
trade liberalisation, and the DDA will deliver if it is concluded
on an ambitious and balanced basis for developing countries and
developed countries as well.
Q93 Chairman: One report is the EU
Sustainability Impact Assessment which states that liberalisation
in this round would have very variable effects tackling poverty
in developing countries. It may do nothing in some countries and
do more in others, so it is very variable. Does that not show
that we have to take appropriate measures which take into account
local conditions?
Mr Campkin: Chairman, I think
you have hit on an important issue, and maybe my colleagues would
also like to make an observation on this. It is true to say that
trade liberalisation generally is good for development. Indeed,
the latest DFID White Paper said economic growth is the single
most powerful way of pulling people out of poverty, and trade
liberalisation is an important part of that, but it is not the
end of the story, of course. It is important to ensure that issues
like governance, the rule of law, the so-called flanking measures
in technical parlance, are also there to ensure that developing
countries gain the most out of trade liberalisation. I do not
know whether any of my colleagues wish to comment.
Mr Harvey: I would add to that
that we would support any trade facilitation activities which
communities support to help developing countries wholeheartedly.
As an industry, the chemicals industry, we agree with Gary that
trade is a good thing and it will help developing economies develop
their economies further.
Mr Barnett: Looking at it from
the industries which I am involved with, which is the mining and
metals industries' type view, what you see is there is a clear
relationship in many countries between development taking place
with both environmental protection and an increase in wealth in
those countries and that is basically trade. You alluded, quite
correctly, Gary, to the issue of governance, and, particularly,
one of the biggest detractors from that effect taking place can
very often be the governance that takes place in those countries.
The EU report, where it shows variable effects, in fact shows
those variable effects to be skewed towards those countries that
have better governance rather than the ones that do not. I do
not think how that is addressed is part of the WTO's scope, but
certainly we would take the view that the increase in trade benefits
wealth creation in those countries and lifts people out of poverty
which enables them to put the money into the benefits of the environment.
Q94 Chairman: In the CBI's written
evidence, you have argued for "freer and fairer" global
trade. Does that suggest that developed countries should remove
their trade barriers but that developing countries, perhaps, could
be allowed to continue to protect their markets whilst they develop
their capacity to enter into global trade?
Mr Campkin: Chairman, I think
we need to be clear that in terms of the DDA least developed countries
are required to make no commitments unless they choose to. There
are two other categories affecting developing countries which
will mean also that they have flexibility in terms of a commitment.
These are the small and vulnerable economies and those economies
that have a large number of unbound tariff lines. The actual number
of developing economies within the context of the DDA that will
be making the full commitments is quite small. They are the emerging
economies. These are the big players, the Brazils, the Indias,
the Chinas of this world, which have in some cases very competitive
sectors globally. Indeed, an element which is often forgotten
is the importance of south-south trade. You may well be aware
that something like 70% of all tariffs paid are paid from one
developing country to another developing country. This is a clear
restriction on trade and a clear restriction on their economic
growth.
Q95 Chairman: Trade barriers are
only one thing when we are tackling this issue for the least developed
countries. Are there any other things that we can do to help them
develop their capacity to become more competitive to be able to
develop their markets?
Mr Campkin: Again, colleagues
can maybe make some observations on this. In broad general terms,
yes, we have been very supportive of the UK Government's financial
commitments towards the Aid for Trade package, which is all about
ensuring that developing countries can do exactly what you have
suggested. There is a big debate in Geneva at the moment, which
the WTO Director General is heading up, about how to deliver on
the Aid for Trade commitments, and these are important. I think
it is also more broadly the case, and this goes back to the flanking
measures point outside necessarily the exact nature of the DDA,
that it is important that we continue to look at improving governance,
reducing corruption and speeding up trade facilitation, which
is, in fact, a key part of the DDA, to ensure that the grit within
the trade system is removed.
Mr Harvey: I would add to that,
that in order to help the companies trade and trade their way
out of their situation they need as simple a process as possible.
It is in their interest to have a simple open trading system so
their goods can reach other markets. There is a whole welter of
international organisations out there to help them develop their
economies. The WTO is not the main vehicle, I would suggest, to
deliver on these sorts of issues. We have the World Bank, the
International Development Bank, United Nations' programmes, and
all these things are big powerful means to help economies grow.
Trade is one aspect of that, and I think our role in the WTO is
to make trade as simple as possible to help them develop their
industries.
Q96 Chairman: There was one section
which I did not quite understand in your written evidence. You
said: "The reduction of tariff barriers tends to lead to
value being added closer to the source of raw material production,
which means that goods transported are of higher value and less
weight, which has benefits in terms of transport impact and emissions".
I do not quite understand the point about "less weight"
because perhaps with liberalisation taking place more weight at
a higher value would be exported, therefore carbon emissions from
that trade would increase rather than decrease.
Mr Harvey: The chemicals industry
basically turns natural resources into consumer products, that
is what we do. We would like this to happen in the most efficient
way possible. If in turning a natural resource into a chemical,
which is then used in a consumer product, we can find the best
source of the material, then that would be the most sustainable
benefit for the planet. I would argue that we should be looking
at the most efficient conversion of the world's natural resources
into products, and if that happens to be in a developing country,
excellent, the trade will be able to open these markets up, both
for exporting and importing and develop the efficiency of converting
resources into products.
Q97 Chairman: In one sense you mentioned
chemicals, but surely what we actually see is manufactured goods
deriving their components from all over the place which are being
shipped around the world, a bit added on here and a bit more added
on there. Is that not what really happens?
Mr Barnett: To reinforce a little
bit of what Neil was saying in the first point and I will partly
address your second with a specific example. That example is nickel
tariffs in Brazil where, for example, there are tariffs on import
which limit the ability of the local stainless steel producer
to source material outside which makes his product uncompetitive
on the world market. It limits their potential to grow that sector
of their industry. That was put in place to protect part of their
upstream mining industry. You get the distortion where it protects
one part of their economy but limits the ability of another part
of their economy with valued-added products to grow. I think that,
perhaps, is the sort of example we are thinking about. Similarly,
of course, by limiting that, you ship finished products in rather
than, in this case, having an opportunity to export value-added
products because their raw material is more expensive than it
would be if they did not have those tariffs in place.
Q98 Chairman: In your evidence you
have highlighted the involvement of multinational companies being
able to enhance environmental standards in developing countries.
I wonder if you can say how widespread you think that benefit
is and give us some examples.
Mr Barnett: I can give you two
or three examples from the mining industry straightaway. There
is the classic one which is in Mozambique with investment in an
aluminium smelter, importing material from Australia, a duty-free
area just outside Maputo. This was the catalyst for a large amount
of change and development in Mozambique and lifted the whole standards
which Mozambique applied to its environmental protection. It was
seen by the Mozambique Government as a way that they could have
development, environmental protection and trade at the same time.
That is one classic example I can give you that is well documented,
there are others from the industry around and, of course, there
are always negative examples as well.
Q99 Chairman: Are the good ones more
predominant than the negative ones?
Mr Harvey: Yes, and as time goes
on there are more and more of the positive ones. There are the
legacy issues which are always there, but the positive ones outweigh
the negative ones by a long way from what we have seen.
Mr Harvey: Multinational companies
do not like to have different management systems in their operations
around the world, they like to have the same systems in place,
whether it be in Africa, China, Europe or America. It is easy
to manage a company if you are running it with one management
system. In my experience in the chemicals industry, good practice
in America and Europe is taken to plants which are being set up
in China and other developing parts of the world. The same standards
apply, and they are very often much higher than the local environmental
regulations require.
Mr Campkin: Chairman, if I can
add on a more general note. Companies, and particularly in my
experience of British companies, do take these considerations
immensely seriously. A lot of them have very well developed codes
of conduct based on a corporate ethos drawing down on all sorts
of corporate responsibility instruments which often go above and
beyond compliance with the law. I think it is very important to
recognise that is a key element of business assessment and business
planning from our companies. Within the business community there
is a growing concern about the activities of some non OECD-based
multinational companies and the sorts of standards that they are
employing in some of their operations. That is a very big challenge
as we move ahead to try to get them to recognise that they have
a responsibility to stand up to the challenges in the same way
that our companies do.
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