Memorandum submitted by the Confederation
of British Industry (CBI)
1. As the UK's leading business organisation,
CBI speaks for some 240,000 businesses that together employ a
third of the private sector workforce, covering the full spectrum
of business interests both by sector and by size.
2. CBI welcomes the International Development
Committees' inquiry on Cross-Departmental Working on Development
and Trade. Our submission addresses the key areas set out in the
Committee's Press Release of 19 July 2007.
TRADE POLICY
DECISION-MAKING
Division of responsibility
3. CBI believes that the UK can be justly
proud of its reputation for being one of the most open and liberal
economies, not only in Europe, but throughout the world. The UK
Government's championing of free and fair global trade and its
rejection of protectionism within the EU has been a major contribution
to this achievement. CBI would vigorously oppose any weakening
of this position.
4. We therefore raised a number of major
concerns following the ministerial changes related to trade policy,
announced immediately after Gordon Brown became Prime Minister.
The rationale for the ministerial changes was not entirely clear.
CBI is unsure what value is anticipated to be added to UK policy-making
from the sharing of responsibility for trade policy between BERR
and DFID. The UK Government has consistently been a major supporter
of development-friendly trade policy in the EU, for example by
supporting the abolition of all tariffs and quotas for least-developed
country imports in the framework of the WTO Doha round and by
urging other WTO members to sign up to a similar level of ambition—positions
which the CBI fully supports. It is therefore difficult to conceive
how much more development-friendly the UK's trade policy could
be, or what further level of departmental co-ordination and co-operation
could in reality be achieved.
5. With regard to the position of Minister
for Trade Promotion, we can foresee potential benefits for business
from the creation of a new role focused solely on trade promotion.
We supported UKTI's new five-year strategy and particularly a
renewed focus on export promotion to the major emerging markets.
The appointment of a minister with responsibility for UKTI could
boost the organisation's effectiveness and help to deliver real
benefits for UK business in overseas markets. But while trade
promotion centres on practical assistance for companies, there
is a link with trade policy that must be maintained, particularly
regarding a coordinated UK government approach to specific trade
and investment barriers in individual markets.
6. The two Secretaries of State must ensure
that these new arrangements do not lead to confusion, inconsistencies
and a loss of focus in the formulation and presentation of trade
policy. We would argue that trade policy is a vital part of the
enterprise and competitiveness agenda and that, as such, effective
trade policy can play a part in securing the benefits from a pro-growth
approach to development. The new role of Parliamentary Under Secretary
of State for Trade and Consumer Affairs, located in two departments
(DFID and BERR), has a significant responsibility to achieve this
goal.
7. As trade policy is a key priority for
businesses operating internationally, it is critical that the
lead for this area remains anchored in a Department that is focused
on competitiveness. Many aspects of trade policy are entirely
unrelated to or are much wider than developmental concerns. These
include trade defence, trade relations with OECD countries, regulatory
convergence, investment chapters in free trade agreements and
customs procedures, among many others. Trade policy in these areas
can have serious ramifications for businesses operating globally.
It is therefore vital that the UK can demonstrate a clear, coherent
and effective pro-competitive trade policy both within the EU
Council and globally.
Decision-making structures
8. Our concerns regarding the ministerial
structures given above also relate to the day-to-day operational
functioning of trade policy officials within government. We believe
that the BERR trade officials have done excellent work over the
years in ensuring that UK interests are well represented in the
EU at both technical and ministerial levels. The trade team has
also been diligent in consulting with all stakeholders, including
business, unions and development NGOs, and reflecting these interests
in their policy work. Therefore, while we would question the value
of merging the DFID and BERR trade teams in the first place, we
are pleased to note that the new team will be headed by the senior
BERR official who has had the policy lead in the former Department
of Trade and Industry.
9. As we understand the situation currently,
changes to the current setup will be limited in practice. It is
vitally important that the team is able to continue functioning
efficiently and effectively. We would emphasise the fact that
officials from many government departments, including FCO, DEFRA
and HMT, have interests in trade policy and their input should
continue to form part of trade policy-making.
DIRECTION OF
TRADE POLICY
Evolution of trade policy and DFID's role
10. We see no reason at all why these changes
should shift the direction of UK trade policy and expect it not
to do so. CBI believes that in recent years the UK Government
has been able to promote a balanced trade policy, one that is
both pro-competitive and pro-development. The fundamental reason
for this is the Government's firm belief that trade liberalisation
can provide vital economic growth for both developed and developing
countries. Clearly, different levels of liberalisation will be
appropriate for countries at different levels of development.
Certainly in poorer countries, a focus on aid-for-trade—an
area in which DFID has previously been very active—is to
be encouraged and CBI supports this. The UK's positions reflect
a belief that, over the longer term, trade liberalisation boosts
trade and, in turn, trade boosts economic growth and economic
growth is the basis for development. Moreover, unlike aid, trade
provides a self-sustaining and continuously growing source of
prosperity.
11. CBI would also highlight the key fact
that, when formulating an effective and sustainable development
policy, trade liberalisation cannot be considered as a policy
tool divorced from other aspects of economic governance. In particular,
trade liberalisation may be ineffective where there is an absence
of a solid and well-functioning regulatory framework. Other important
considerations include the investment climate, infrastructure,
effective rule of law and, most importantly, good governance.
We expanded in detail on these points in our submission to the
DFID White Paper consultation on Development in 2006, which is
annexed to this submission.
12. Given this, we expect DFID's role in
trade policy development to be the same as it was before July's
machinery of government changes. However, we hope that DFID's
highlighted involvement will result in a better understanding
of pro-growth, pro-competitive and pro-business issues in a way
that has a cross-cutting impact on the overall work of the Department.
Impact of new structure on international development
13. Likewise, we would not expect the recent
changes to alter the way international development in itself is
conducted. However, we would caution that, depending on how the
UK Government presents its new structure, there could be a number
of risks in the approach that others adopt toward us or the assumptions
others make of us. One risk lies in the possibility that key players
in the trade or aid sectors conclude that the UK now views development
as the engine of trade policy, rather than trade the engine of
development. Another lies in the possibility that a minister whose
principal remit is development might be perceived to have less
negotiating clout among international discussions with ministers
whose principal remit is trade.
14. In either case, the blurring between
trade and development responsibilities may not be helpful. Whilst
we can only surmise that the recent machinery of government changes
are a statement about the importance of trade to development issues—with
which principle we would strongly concur—we believe care
must be taken not to seriously undermine the UK's general pro-competitiveness
approach to trade policy.
Effects on negotiations at the WTO and with the
ACP countries in the EPA negotiations
15. The consequence of this may be to weaken
the UK's strong voice in major trade negotiations such as the
WTO. At a time when there are already many advocates of a less
than robust approach to opening global markets, the UK has been
a consistent champion of free and fair trade. If we are seen as
less pro-competitive, we may end up strengthening the hand of
those who have more protectionist tendencies. This would have
a disastrous effect on the direction of trade negotiations in
general and undermine our ability to compete on a level playing
field in trade—and investment—matters. Furthermore,
it could seriously undermine the authority of the global rules-based
system and thus of the WTO itself.
16. Regional trade agreements—such
as in the EPA—are negotiated directly by the European Commission.
However, there is a potential risk of the UK being less able to
influence EU partners and therefore the direction of trade negotiations
along pro-competitive lines.
OECD AND CORRUPTION
ISSUES
OECD Guidelines and promotion of the risk awareness
tool
17. CBI supports the OECD Guidelines as
one of the leading voluntary corporate responsibility instruments.
We were closely involved in the work that led to the creation
and update of the Guidelines through our participation as the
UK member of the Business and Industry Advisory Committee (BIAC)
to the OECD. Gary Campkin, Head of CBI's International Group,
is currently the co-chairman of BIAC's Investment Committee and
CBI is therefore in a leadership role on these issues. This has
recently included the OECD Risk Awareness Tool. We believe that
BIAC's championing of a web-based portal, which the Trade Union
Advisory Committee also endorses, offers the greatest potential
to promote the Tool further.
UK National Contact Point (NCP)
18. The recent changes to the UK NCP are
generally welcomed by business. In particular, we believe that
indicative timescales, greater clarity of process and consideration
of an awareness raising strategy are positive. CBI is one of four
external members of the newly established NCP Steering Board,
which exists to provide oversight of the operation of the NCP
and review procedural issues.
OECD review of UK anti-bribery legislation
19. CBI is against bribery, corruption and
extortion. It is morally wrong and it distorts the market. We
believe UK law complies with the requirements of the OECD Convention;
however we have consistently called for its modernisation. The
Government's request to the Law Commission to re-examine UK laws
and to propose a new draft bill in 2008 is something CBI strongly
supports. This means that the suggested timescale for the OECD
bis II review makes little sense. It should be postponed until
after the Law Commission has completed its work and subsequent
Parliamentary action.
Minister for corruption and UK action plan for
combating international corruption
20. We believe that there is value in having
a Ministerial champion to ensure an effective and co-ordinated
approach across government. CBI has felt that more attention should
be given to tackling extortion and bribe solicitation, which we
have pointed out is often where business finds itself when it
comes into contact with these issues.
NATURAL RESOURCES
DFID's role in promoting economic and trade governance
in resource-rich countries
21. CBI believes that DFID has a key role
in promoting good public governance and the rule of law in all
developing countries. We fully support that role and commend the
work that has been done to date to promote good governance in
development. CBI would refer the Committee to our submission to
DFID last year in response to its White Paper consultation, in
which we elaborate our views on the central role of good governance.
We were pleased that DFID in turn has made good governance the
defining element of its policy approach as describes in the White
Paper.
22. This approach—and DFID's role—is
especially crucial in resource-rich developing countries where
increasingly there are competing international interests for the
resources they can offer. A fully functioning and transparent
public sector underpins development; currently, the development
of many countries is considerably hampered by the endemic corruption
that permeates the public service within many developing nations.
When natural resources are prevalent, the tendency to poor governance
would appear only to increase. It is thus all the more important
for DFID to be involved in the strengthening of institutions which
can help to deliver good governance structures and practice in
such countries.
23. DFID has done some good work on public
governance, such as its pivotal role in establishing and promoting
the Extractives Industry Transparency Initiative (EITI). This
work could be extended into other areas which would benefit from
increased transparency and good practice. We would urge that DFID
consult UK business as many of the main issues are the same ones
which companies investing in developing countries face. There
may be useful lessons which business can share with DFID on such
issues.
24. CBI believes that DFID's role and influence
are all the more critical at a time when corporations and state-owned
enterprises from third countries are affecting traditional relationships
with developing countries and altering the way that business is
done there. There is a real danger that crowding out by less scrupulous
third-country governments and business may start to exacerbate
the problem of poor governance.
DEVELOPMENT ASPECTS
OF DEFENCE
EXPORTS
Impact of changes in ministerial responsibilities
on criterion 8
25. We do not anticipate that the changes
in Ministerial responsibility will impact on export licensing
and in particular on the application of the "consolidated
criteria". As the Committee will be aware, the Quadripartite
Committee considered the role of DFID and Criterion 8 issues in
Chapter 5 of the Quadripartite Committee's report published on
7 August 2007.
September 2007
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