Examination of Witnesses (Questions 43-59)
CONFEDERATION OF
BRITISH INDUSTRY
22 NOVEMBER 2005
Chairman: Gentleman, thank you very much
for joining us in the second session this afternoon.
Q43 Mark Hunter: You suggest in your
written evidence to the select committee that a focus on development
need not distract from the real gains the Doha Round can bring
to UK companies and the British economy as a whole. You will not
be surprised learn that not all of our witnesses agree. One in
fact suggests that there is no genuine commitment in the European
Commission's tactics and aims to making trade benefit developing
countries. What benefits does UK industry have a right to expect
from a development Round?
Mr Campkin: In terms of the overall
benefits from the Round, we start from the fundamental premise
that trade liberalisation generates economic growth and development.
That means job creation and generating wealth. It generates tax
revenues; it creates the conditions in which societies can prosper.
For a general development perspective, we think that trade liberalisation
is beneficial to all countries. In terms of developing countries
specifically, it is quite clear that the Doha Development Agenda
has set up a number of flexibilities for developing countries
to ensure that this is a development Round. As you probably know,
the least developed countries—the 32 countries under the
UN classification—will not have to make any commitments
under the negotiations unless they wish to. In addition, there
are a number of flexibilities within the negotiating mandates
which allow for differential treatment for developing countries.
British business believes that is right. We do not think that
is in conflict with ensuring that British business and European
business can also get market access opportunities, particularly
in the emerging economies of the world: Brazil, India and China.
Q44 Mark Hunter: So it is mutually
beneficial?
Mr Campkin: Absolutely.
Q45 Mr Weir: UK Steel suggested to
us that a successful conclusion of the Non-Agricultural Market
Access negotiations would stimulate south-south trade and thereby
drive economic development in developing countries. Do you agree
with that assessment?
Mr Campkin: Absolutely. One of
the areas which has been less fleshed out in some of the media
coverage are the potential gains from south-south trade. Most
of the trade undertaken by developing countries is actually south-south
trade. Their levels of tariffs are generally higher than between
developed and developing countries. We believe that this is an
area where there is a lot of potential and where there are significant
development gains. I would also say that in terms of regional
trading agreements, there is some way in which the southern countries
coming together and ensuring a critical mass of market access
will help themselves. Again, we would be supportive of that within
the context of the overall WTO.
Mr Bickham: Anglo American does
much of its business in Africa and Latin America. If one looks
at Africa in particular, one of the things that we would hope
would be emerging from Hong Kong is a package which will complement
the very necessary but very public sector-focused Gleneagles outcomes
Round on aid and debt relief. Africa also needs opportunities
for businesses to trade more easily. There are so many real impediments,
some of them erected by African countries themselves, to successful
enterprise in Africa. If the WTO can set the right framework for
liberalisation, particularly in the agricultural areas, and if
there can be a package developed around trade facilitation, that
should be a major boost to the whole Gleneagles momentum.
Q46 Mr Weir: That being the case,
if there is a successful opening up of markets in this area, do
you think that will directly benefit UK companies or is the main
beneficiary likely to be in the advanced developing countries,
if we can call them that, themselves?
Mr Campkin: Can I answer that
in two ways? Going back to my first set of comments, trade liberalisation
generates economic development and therefore, if you are growing
economies, there will be greater opportunity for all. You are
not redistributing the pie; you are growing the pie. It is important
to recognise, and that is why I also made a remark about the regional
trading dynamics, that as you grow capacity within regions, it
is often easier, particularly for companies coming from developing
countries, to trade first of all within their regional context.
We would see this as one of the ways in which real development
gains from the Round can be achieved. Of course, as you grow economies,
as opportunities grow, we would hope that opportunities for UK
companies would also appear.
Mr MacVay: I work for a lot of
UK companies with an interest in this area. They are very concerned
partly with the course of liberalisation, improving direct access
to lower tariffs, but also, perhaps even more importantly, with
the structures that allow them to trade in a predictable, reliable
way around the world. That applies also to developing country
businesses as well. That is an interest in common to all traders.
Q47 Mr Weir: Taking what you are
saying about developments south-south in manufactured goods, do
you feel that the UK's focus in this Round should be more on service
industries rather than manufactured goods, given the strength
of our service sector and their desire, if you like, to break
into these developing country markets?
Mr Campkin: The CBI, as you well
know, is a very broad church. We represent from the National Farmers'
Union on one side through manufacturing industry and into the
service and tertiary sector as well on the other. One guiding
principle in our approach to all of this is that failure to conclude
the Round will have negative effects and failure to conclude the
Round will be a lost opportunity for everybody, in developed and
developing country business communities alike. In terms of specific
UK interest, you are right to point out the importance of the
services industry to the UK economy, but we also have significant
interests in NAMA (Non-Agricultural Market Access) areas. Again,
in the emerging economies particularly, there are some pretty
high barriers to trade, which should be looked at and reduced.
These will provide some benefit to British business as well.
Q48 Mr Weir: Can I ask Mr Bickham
this? Obviously your company has a lot of experience in these
areas. Do you see companies like yours going into partnership
with companies in developing countries? Do you see yourselves
taking over companies in developing countries? Do you see yourself
setting up there? How do you see trade working on a south-south
basis?
Mr Bickham: In our particular
industry, essentially we are guided by where there are mineral
deposits that can be developed, and a lot of those are in developing
countries. Sometimes that involves joint ventures and sometimes
greenfield exploration. It sometimes involves acquisitions. Certainly
we do a fair amount of joint venturing where that is appropriate
for the business model. If one thinks about south-south trade,
however, and take again the example of Africa, there are several
impediments. Those are not only about WTO; they are also about
infrastructure, investment, customs facilitation and the investment
climate.
Q49 Chairman: You have given an estimate[1]
of the global gains of freer trade in your evidence to us, a pretty
broad estimate, of $250 to $600 billion per year. There is a pretty
large margin for error there. Are you able to give us any estimate
within that rather generously-defined range of what the benefits
would be to south-south trade specifically?
Mr Campkin: Economics. I am glad
in one sense that I am not an economist, I am a mere geographer,
and I am told that the science of economics is not always exact;
you can make figures tell you almost anything you want them to
tell you. However, the figures that we used in this particular
instance were from the DTI's White Paper, so they were actually
the DTI's figures. The latest figures that I have seen vary but
it obviously depends on how you model. My opening comments were
perhaps somewhat non serious, but there are some very serious
points about economic modelling. The latest figures that I have
seen from the OECD recognise that the elimination of industrial
tariffs and progress in trade facilitation would yield global
welfare gains of about US$174 billion, of this the share accruing
to developing countries would amount to about US$90 billion, and,
of course, the potential gains from the liberalisation of trade
in services are much higher; so that would give you some idea
of the scope according to the latest modelling from the OECD.
Q50 Chairman: So in a development
Round more than half the gains go to the rich north?
Mr Campkin: Correct.[2]
Q51 Chairman: Can I ask you before I
go on to Peter Bone who is going to come in next, the question
that is often put to me by the lobbyists and NGOs which I find
difficult to answer: that Britain developed her industrial base
actually on protectionism, Japan did pretty much the same thing,
South Korea (I hear suggested from my right) and actually we would
argue that America has maintained its industrial might off the
back of Britain, quite blatant protectionism. I am instinctively,
as a free market economist, and I was an economist some years
ago, being drawn to a free market, yet it is a fact that a lot
of the successful nations in the world are preaching what they
did not practice?
Mr Campkin: Let me draw a distinction
between economic history and the realities of the world today.
The instances that you outlined happened at a time when the world
was a very different place and the dynamics of doing business
were very different.
Q52 Rob Marris: Not with Korea it
was not.
Mr Campkin: In what way?
Q53 Rob Marris: It is not that long
ago, is it? It is only 25, 30 years?
Mr Campkin: The issue of the US,
the issue of the United Kingdom was significantly different. What
the South Korean model showed was that trade liberalisation actually
worked. If you compare that to the North Korean experience, of
you look at the state of the North Korean economy now compared
to the South Korean economy, the difference is trade liberalisation.
Roger Berry: Having been to both countries
and being an economist, I find that extraordinary. It is just
a matter of trade liberalisation, not capital accumulation that
in the south was . . . Historically the success of the south was
based on a rapid capital accumulation initially behind tariff
and other barriers. It was capital accumulation. The whole issue
about the trade events seems to me . . . I am sympathetic to liberalisation
because I think, given the world's resources, there are benefits
to be gained. There are winners and losers, but the long-term
effects will depend on the impact on capital investment in each
country, and, frankly, economists cannot predict that, I can assure
you. I am one. Forgive me for interrupting, but the North Korea,
South Korea thing, I am sorry, that, with respect, is, in my view,
tosh.
Chairman: I do not think you need to
feel obliged to answer that question. I am not an economist, as
I have freely and honourably admitted to this Committee. There
are some other issues at stake, but I have made the point.
Roger Berry: I am sorry for interrupting.
Q54 Chairman: Unless one of you wants
to come back on that, Mr Bickham is going to shout very loudly
and make his point.
Mr Bickham: I was only going to
say that there are also many other examples where trade liberalisation
has been good for the global economy, the European Union being
an example. You can say there are some examples in history or
there are some examples within 25 years of specific countries
where this was not the case, but the economy has become much more
global, investment is more mobile than it was and that investment
is less likely to go into countries where the investor does not
feel that they can export easily from or indeed extract the investment
from as required.
Chairman: We will move on. Peter Bone
wants to come in on this anyhow and has some other questions of
his own.
Q55 Mr Bone: I am going to talk about
tariffs, and I suppose we should declare an interest as UK Plc,
as we are one of the biggest exporters of goods in the world.
I think from your evidence you suggest that there should be a
maximum bound tariff level of 15% for all sectors. First of all,
the background: can you tell us what improvement that would be
over the current position?
Mr Campkin: It is a very long
and complicated answer, because, of course, there are variations
in tariffs and this has been part of the problem. There are things
like tariff peaks in certain sectors in certain countries, there
are various levels of tariff protection which need to be harmonised
down—that is why we support a Swiss formula which cuts the
highest tariffs by the greatest amount and brings the maximum
market access. Iain, you might have some observations.
Mr MacVay: Focusing on tariffs
peaks is very important, many of the tariffs are well above 15
and I think that 15 is a level that will bring significant benefits.
It is a number that even in . . . I deal a fair amount in developing
countries, in fact. In India, for example, people there talk about
business on the ground, saying they are planning on a 15% tariff
for the future whatever happens. In the round that is where they
think it is going.
Mr Campkin: I can give you one
example, which I think Iain is very well aware of, on distilled
spirits. In India there is an imposition of a basic duty of 150%
on distilled spirit which sometimes rises to over 500%.
Q56 Chairman: They still drink a
lot of whisky, in my experience.
Mr Campkin: It is a good product.
Q57 Mr Bone: We are talking about
a maximum of 15%, and you have explained that you might have tariffs
at the moment of 500%; so is it a realistic prospect of getting
this 15% maximum?
Mr Campkin: We think it is. We
think that there is a very real sense in which one can make significant
cuts in tariffs, and again I think the general prevailing philosophy
is towards trade liberalisation. There does seem to be in Geneva
amongst trade negotiators a sense that tariffs need to come down.
Whether we get to 15 is up to negotiators, but it is an important
goal to have and we will strongly continue to support that. Of
course, in the developed world tariffs, generally speaking, are
significantly lower than 15% already. The average tariff across
the Atlantic, I think, is round about three to 4%, something like
that, so some of us are already there.
Q58 Mr Bone: That is interesting.
Let us just talk about the EU for a second. What would be the
sort of tariff level that somebody trying get into our market
would have to face from outside?
Mr Campkin: In what sort of sectors?
Q59 Mr Bone: Any sector. You pick.
Mr Campkin: You could look at,
Iain, correct me if I am wrong, something like autos.
Mr MacVay: Indeed, I was thinking
of petro-chemicals where it is 7%.
1 Note by witness: Measures need to be taken
to reduce tariffs between African countries, to dismantle non-tariff
barriers and to improve infrastructure. Back
2
Note by witness: According to that model which does not
include agriculture. Back
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