Examination of Witnesses (Questions 1-18)
MR MICHAEL
GIDNEY AND
PROFESSOR L. ALAN
WINTERS
17 OCTOBER 2007
Q1 Chairman: Good morning. Sorry for
keeping you waiting slightly. The Members of our Committee are
slightly diminished because there are rather a lot of meetings
this week but the quality, I can assure you, is not in any way
diminished. This is an interesting and important inquiry from
our point of view. We are grateful to you for coming in and offering
to give evidence. Could you briefly introduce yourselves, who
you are and what your special interests in this are and then we
will carry on from there.
Mr Gidney: Hello.
I am Michael Gidney. I am the Policy Director of Traidcraft. Traidcraft
is two things: it is a fair trade company and also an NGO[1]
specialising in fighting poverty through trade.
Professor Winters: I am Alan Winters.
I am Professor of Economics at the University of Sussex. I have
spent most of my life working in international trade and until
recently I was Director of Research at the World Bank.
Chairman: Thank you for that. Robert
Smith wants to put an interest on the record.
Sir Robert Smith: Before we start, in
the Register of Members' Interests I have recorded an interest
as a shareholder in Shell and RTZ. I am also Vice-Chair of the
UK Offshore Oil and Gas All-Party Group, mainly related to UK
operations but still an extractive industry.
Q2 Chairman: Thank you for that.
Obviously in this particular session we are looking at the way
the Government is changing the approach to trade policy and in
terms of where the ministerial lead responsibility is. I just
wonder what your views are about that area, first of all changing
the lead from, I suppose you could say, Trade and Industry with
a sort of cross-party interest in the Foreign Office, to a lead
within the Department for International Development but with the
Trade Minister not on the Cabinet Committee and answerable to
two different Secretaries of State. On the face of it that looks
slightly complicated. What is your judgment of what is behind
it and how do you think it might actually work out in practice
and how it might affect trade effectiveness or benefit?
Professor Winters: I think the
first piece of context is to remember that most trade policy that
affects the United Kingdom is made in Brussels, so we are already
one step removed from the instruments of trade policy that one
typically thinks about. Insofar as the organisation within the
British Government is concerned, it is certainly too early to
say with any great confidence what the outcome will be and, indeed,
there has been something of a lack of transparency over the last
three months (since it was announced) as to exactly how it is
going to be implemented. I have found it very difficult to find
out what the facts of the situation are. It has been the case
over the last five or six years that DFID[2]
and the former DTI[3]
have worked fairly closely and the whole of government has been
fairly coherent on issues of trade policy and DFID have played
a larger role than development ministries in many countries and
that has been reflected in some of the stances and some of the
statements that the Government has made. One interpretation of
what has happened is that this is, as it were, just swinging the
balance a little bit more towards the view that argues trade and
aid policy, trade and international development policy, should
be even more coherent. I am not sure that we should necessarily
read it like that; it might have more short-term, more pragmatic
origins than in a sense a predetermined change in policy. Remember,
the policy positions are evolving all the time and I think my
reading of the last three or four years of statements about trade
policy within Britain suggests that we have been through a period
of some caution about globalisation for developing countries and
perhaps we are moving out of that with recent statements about
the importance of growth as a way of addressing poverty and the
centrality of trade in achieving that. I am not so sure that the
bureaucratic changes, the changes in organisation, reflect a predetermined
view about where policy should evolve so much as a more pragmatic
view as to who might want to do what and where expertise might
lie. Of course, some elements of trade policy remain with the
Business and Enterprise Ministry, trade promotion for instance,
so it certainly has not all moved to the DFID side.
Q3 Chairman: I do not know, Mr Gidney,
if you want to comment on that but I think the interest for us
as a Committee, taking the point about the EU being the lead,
is whether they have significance in terms of the Government's
priority towards using trade to promote development or using trade
to promote the British economy, putting it at its crudest. The
implication behind the change is that it is leaning towards the
former rather than the latter. In your position, do you interpret
it that way and think it will actually work that way?
Mr Gidney: I think Alan is right,
it is too soon to say how it is going to play out. There has not
been much light shed in the last few months since the decision
was announced, so we are also waiting to see what is going to
come out of it. I would say we think it is a good thing, that
the NGO community that works on trade sees this as a good thing,
because if you think of the Doha Development Agenda, if you think
of Economic Partnership Agreements, they have been an attempt
to put development centrally within the trade policy-making process
but this has not worked. Doha is pretty much a dead duck and EPAs
are still hugely controversial, as the Committee knows very well.
If there is now an attempt at a ministerial level to lock DFID
in some way into the trade policy process, and even to give it
authority over the process, then there is a greater chance of
actually bringing about this rather difficult thing of making
trade and development work together. That said, because there
has not been anything publicly announced on this in the last few
months, I am concerned that we have all structure and no content.
It is not just a question of changing hats or putting a new minister
in charge, what we need to see is a work plan, some kind of accountability
for how this new role is going to be played. I think there is
a real opportunity with EPAs, where the development impacts have
been so controversial, for DFID in its new role to say, "Hang
on a minute, let's develop some red lines, some lines in the sand,
which the trade negotiations cannot go past without taking account
of what is coming through". If we capture that it could be
a real step forward, but it is too soon to say whether that will
happen.
Q4 Ann McKechin: Notwithstanding
your welcome for development to be involved in trade I think there
has been some question raised about the fact that the International
Development Secretary of State chairs the Cabinet Sub-Committee
on Trade Policy and Promotion and although Gareth Thomas is the
Trade Policy Minister on that Sub-Committee, the Trade Promotion
Minister, Lord Jones, does not attend. Does this suggest to you
that we still have not quite fully thought out in Government what
the relationship is between both areas?
Mr Gidney: I do not know because
since 1997 when DFID was created, DTI led on trade and increasingly
DFID was expected to have a role in trade recognising the impact
of globalisation and the fact that globalisation is an inescapable
factor of our lives. I think it would be as unimaginable now for
DFID to develop a robustly pro-poor trade policy whixh ignored
the interests of UK businesses as it would be for DTI, as it was,
to go around promoting naked free market mercantilist approaches.
Trade and industry are not so easily separated.
Professor Winters: I think that
is correct. We are talking about a middle of the range, a little
bit balanced this way and a little bit balanced that way. I guess
my view is that these things tend to go in fashions and the fashion
just at the moment has been to elevate the development focus perhaps
a little bit above the trade promotion focus. My guess is that
the form of organisation will resolve just one or two debates
more in the direction of, shall we say, development and responsibility
towards poor countries than towards promotion of British businesses.
In fact, it seems to me, we ought to remember that trade policy
primarily should be about the burgeoning interests of British
consumers and residents, not business or particularly other countries.
It is all a balance. One would want to ask whether there is a
consumer affairs representative on this committee, an issue which
I gather both Gareth Thomas and Lord Jones have some responsibility
for.
Mr Gidney: Could I just add another
comment to that, thinking about what Alan said at the beginning.
Recognising that trade policy is still Brussels led and recognising
the particular and fairly inflexible approach that DG Trade[4]
has taken on recent multilateral and bilateral trade policy, I
think it is really valuable to have a Member State looking at
it in a new way.
Q5 Ann McKechin: Do you think this is
more a signal to Europe about where the UK stance is?
Mr Gidney: I hope so.
Q6 Ann McKechin: As much as it is
in terms of internal departmental arrangements?
Mr Gidney: I would hope so because
I know that DFID has tried very hard over the last few years to
influence the trade policy that has been made in Brussels and
I do not see a huge amount of success yet. If we look at EPAs,
we are still going to have pretty much the EPA that was envisaged
by the European Commission at the outset. Anything that signals
some kind of rebalancing I think will give a very powerful message
to the Commission.
Professor Winters: Whether it
was intended as a signal or not, that is the instrument through
which we have to operate and, in a sense, the counterparts that
will feel this rebalancing most directly will be the people in
Brussels through whom we are trying to implement most of our ideas
on trade policy.
Q7 Sir Robert Smith: You really do
not see that the Promotion Minister not tied in to what is happening
in that Sub-Committee could be going off at a tangent and promoting
British trade from the policy direction?
Professor Winters: It is always
possible for governments to get incoherent. My view is that we
are talking about very small amounts of rebalancing. Remember
that nearly every policy area has very, very many interested parties
and not all of them can be represented on the Cabinet Committee.
Much will depend on the structures beneath to make sure that proper
attention is paid to the interests of trade promotion and that
trade promotion, in a sense, is kept on-side with the rest of
trade policy. It is not just about a Cabinet Committee.
Q8 Chairman: The fact that he is
openly going round saying, "I am a cheerleader for British
business", and I have actually heard him make deep and profound
statements about his commitment to development—presumably
he will be travelling half the time rather than attending committees.
Professor Winters: You would know
better than I whether that was an important barrier to effectiveness.
There has always been something of a tension within DTI between
promoting British business and protecting the interests of British
consumers or British consuming industries and international development.
One clearly needs a serious effort at senior Civil Service level
and at senior political levels to make sure it does not get too
incoherent.
Q9 John Bercow: Neither of you is
overflowing with optimism about the prospects for ambitious pro-development
outcomes from the Doha Trade Round or, it would seem, for an agreement
on the EU Economic Partnership Agreements. Instead you seem to
be thinking in terms of incremental gains and what I think Professor
Winters has described as a slight shift in the balance which,
if he will forgive me saying so, he said with a certain world
weary cynicism as though he has seen all of these things before,
which I am sure he has in the course of his illustrious career.
I wonder whether either or both of you could say something more
specific and explicit about what the British Government should
do to ensure that the political will that is needed for countries
to make concessions and come to some sort of agreement is maintained
both in the European Union and in the United States? Also, I wonder
whether I might tempt either of you to give us a hint as to where
you think specific agreements might be reached in relation either
to particular developing countries or to specific sectors?
Mr Gidney: A role for the British
Government? One of the things that we have been repeatedly told
over the last few years is, "What can we do, we are one of
27 now, don't blame us, blame" whoever it might be according
to the circumstances. That is a real problem and I do understand
that, and DFID have made various attempts, I think, to influence
the process but I do not think this influence has amounted to
that much, as I say. We need to make a choice in Britain about
whether we are prepared to stand up a little more to Brussels.
I have heard from people in DTI, on EPAs, that Brussels has repeatedly
said to them "get your tanks off my lawn". After the
UK position paper in March 2005 on EPAs there was a lot of effort
by UK government officials, and we were told this frankly, at
mending fences with the Commission because the Commission were
unhappy about it for various reasons. That is, if you like, a
local problem but it does not actually address the bigger picture.
As a Member State with particular development interests and a
particular mandate for looking at the popular interests and the
consumer interests that we have here in the UK, we should encourage
our ministers to speak out more publicly on the developmental
consequences of trade policy. Okay, it might upset Brussels but
it is not the end of the world, I am sure they are capable of
dealing with it. If we do not have some kind of public reflection
on where trade policy is going then we do not do anything for
the trust which is essential between developing country groupings
and the richer countries. We all know that part of the problem
with Doha has been the lack of trust and part of the problem with
EPAs has been the lack of trust. There is no confidence in the
process, no confidence that the richer countries are listening
to the poorer countries in the negotiations. Given Britain's historical
links with many developing countries, surely there is a role for
her as something of an honest broker. When the Cotonou Agreement
was concluded in 2000 with lots of good language about poverty
reduction, there was an opportunity then for the British Government
to say, "Okay, this is what we are going to be looking for
because this is what we hear is wanted amongst the parties"
and then tracking that, setting some indicators around that. If
we can do that with some of the new agreements, like the EU-India
bilateral and some of the other regional trade agreements which
are gathering momentum at the moment, then I think we will help
encourage and retain trust amongst the negotiating parties. Being
silent publicly, although not in private, does no service to the
development content. In terms of how you are going to get an agreement,
I simply do not see an agreement on WTO[5]
without a substantial move by the richer countries, a demonstration
of political goodwill actually, and similarly with EPAs. There
was an interesting letter from Commissioners Mandelson and Michel,
which you may have seen, to the West African grouping dated 11
October where the West Africans were saying they wanted more time,
they were not in a position to conclude the EPA by the end of
the year, and the two Commissioners just said "No".
It was said in a number of different ways but they just said "No".
With an honest broker looking at that, "No" is not an
acceptable answer if you are looking for a development agreement.
The development approach would be, "Okay, why not? What can
we do? What manoeuvrability is there? How can we help you?",
rather than just, "No, sign". That kind of role for
the UK I think would be very valuable.
Professor Winters: I have some
sympathy with the way Michael has characterised it. There is not
too much attraction in, as it were, preserving our pride and our
reputation for saying all the right things but achieving nothing
at all in Brussels. We do have to be sufficiently on-side that
we are influencing the process quietly as well as grandstanding.
It is a very difficult balance to call. I do believe that clear
public statements by the British Government of its beliefs based
on evidence about what role trade and other aspects of globalisation
and, therefore, the various agreements could play in development
is always useful and this Committee has played part of that role
in laying out some of the issues and clearly we have to continue
to do that. The volume at which the Government will speak is to
some extent affected by the organisation. Having said that, my
own view is that in Doha we very clearly need to have further
progress on agriculture. I would not want to guarantee that that
would be enough to reach even a fairly modest agreement overall,
but I think it is clear that without further steps we are not
going to get one. For myself, I hope that we do try to bring the
Doha process to a close fairly soon just because it is riddled
with a lack of trust and there is no point keeping it alive for
another three or four years without evidence that it is going
to be quite different.
Q10 John Bercow: I understand that,
but can I put it to you in these terms: although the developing
countries are in no sense a homogeneous bloc, and we know that
now, there have been very substantial developments in recent years
with the emergence of new and, in some cases, even competing blocs,
nevertheless, as a broad statement I think it is true to say that
the need—not desire, the need—for a successful outcome
to the Doha Round is that much greater amongst the developing
countries that have suffered as a consequence so far from its
absence than is the need of Britain, Europe and the United States.
You look suitably sceptical, Professor Winters, at my proposition.
Let me put it to you that if you are at least partially sympathetic
to the view that there is well nigh an imperative for the developing
countries to get a successful round which assists them then there
ought to be a move away from the rather tedious game of table
tennis and buck passing which has been indulged in by the European
Union and the United States, and there needs to be a recognition
of the case for some unilateral initiatives by either the European
Union or the United States, in other words a unilateral willingness
to tear down the barriers that are damaging developing countries
irrespective of what their response on other matters might be.
Is that a position to which you would sign up?
Professor Winters: Yes, I have
a great deal of sympathy with that. I certainly did not mean to
be sceptical; I was looking interested.
Q11 John Bercow: I am sorry if I
misjudged your body language.
Professor Winters: What exactly
have I got to say about need? Developing countries have much greater
needs for development, for economic advance, and I believe that
a liberal trading regime almost always is going to be a strong
part of the cocktail that helps in advance. I believe that a satisfactory
Development Round calls on developing countries to do quite a
lot themselves. I believe that developing country liberalisation
is a very important part of development, it is not just that the
wicked West is doing them down. How do we get there? I do not
believe that we can actually browbeat developing countries in
the Doha Round into doing more liberalisation than the rather
small amount they have indicated over the last few years. That
is one of the reasons why I am quite keen to see it drawn to a
close and we can start, as it were, another conversation. How
might we do it? I think you are exactly right that we ought to
walk the talk that we care about development, we ought to be prepared
to confront some of the groups within Europe and the US who resist
liberalisation and I think unilateral actions would be one of
the ways of really signalling intent. It has become a very stylised
gavotte, we know the moves, we know the music but it does not
go very far. If we could energise the European Union—we
the British or anybody else, I suppose—into unilaterally
and unconditionally taking one more step and saying, "This
is the analysis, we have got to make it work, we have got to make
it work soon", I think that would be very constructive. It
may or may not work.
Q12 John Bercow: Thank you very much.
Mr Gidney: I think you are right,
leadership and some kind of unilateral action is absolutely needed
or we should just stop the dance because everyone is agreed that
it is a huge waste of energy and time. A role for DFID would be
to support that other aspect of development that is so important
which is not being addressed at the moment and is perhaps being
compromised, which is regional co-operation in developing countries.
At the same time as having to negotiate at the WTO and bilaterally
with the EU many developing countries are also trying to improve
the economic efficiency of their regional blocs recognising the
increasing importance of regional trade to their economies. That
is a vastly important process. We need to be conscious of the
degree to which liberalisation with the EU, for example, is happening
at the wrong stage—is that the right approach and what would
happen? We need to think of the consequences for regional co-operation.
Also, DFID really could be helping through its activities, through
its funding, to support regional integration effort more, protecting
the space to allow that to happen but also giving the technical
and research capacity which it is well known to have channelled
in that area. That would help developing countries see more clearly
an international economic strategy in many cases.
Q13 Chairman: I just wonder if we
could turn, finally, to issues of bribery and corruption because
this morning in the three evidence sessions we are looking at
that as well. I attended an event at the Foreign Office after
Hilary Benn had been appointed the champion against corruption.
Transparency International told us that under the new arrangements
"it is understood that this role now falls to the Secretary
of State (DBERR),[6]
but nowhere is this set down".[7]
First of all, is that your understanding? Then they say that it
is incoherent and the OECD[8]
and others have said that the Government's attitude towards corruption
seems to be lacking in energy, to put it mildly. The Corner House
puts it rather more bluntly than that when looking at the Saudi
investigation: "the UK's anti-bribery policy is nothing short
of a shambles—legally, institutionally and politically."[9]
From your perspective, how effective do you think this Ministerial
Champion has been, in other words the role that Hilary Benn had,
and what is your understanding of where the centre of gravity
is about to move to and how it might concern you?
Mr Gidney: This is not a specialisation
of Traidcraft; our focus has been much more on trade policy rather
than anti-corruption.
Professor Winters: Nor is it a
specialisation of mine. I found it difficult to understand what
was happening to trade policy, which I do understand. If Transparency
International thinks that it is unclear that certainly reflects
my position that it is not at all clear. How has the British Government
as a whole over the last year performed on issues of corruption,
I think the truth is "not in a terribly distinguished way".
That may be incoherence, it may be something else, but to the
extent that we are serious in our statements that solving issues
of corruption is one of the really principal necessities for development,
and given that every corrupt transaction has two parties, it seems
to me that more coherence and more energy and more focus would
be desirable. Again, whether the reorganisations will make much
difference, I suspect the leadership has to come right from the
very top.
Q14 Chairman: It does sound really,
if you look at it in terms of the switch going from Hilary Benn
to presumably John Hutton, as if there is almost a trade-off against
arrangements about trade going the other way, in other words that
we will put trade in the Department for Development as the lead
ministry and we will put anti-corruption in the Department for
Business, which does not send out a very good signal I would suggest.
It looks to me as if there has been a trade-off to give one counterbalance
to the other.
Mr Gidney: It really does depend
on what they do. This is what we are saying, that in many parts
it is too soon to say. If I might suggest, it might be something
which the Committee might come back to after a period of time
to see what has changed, whether the new ministerial structure
and regrouping of responsibility has made any difference at all
in terms of the development and accountability agenda.
Chairman: There is one change, we have
a minister coming in to see us tomorrow and it is the fourth attempt
to actually get a minister to appear to explain the Government's
trade and anti-corruption policies.
Q15 James Duddridge: To a degree
if you have to ask the question and you have got the answer: it
does not make a difference. Professor Winters, you talked about
the Government's poor performance on corruption and said it was
perhaps "incoherence or something else". What was the
"something else"?
Professor Winters: I certainly
do not want to claim to understand, as it were, the full set of
motivations of senior levels of Government but sometimes things
go wrong because they are not organised properly or different
people are pulling in different directions. Sometimes they go
wrong because someone has said, "Frankly, I think we won't
bother about that, let's lie low". Whether it is a manifestation
of some conscious view, mistaken I suspect, that in the long run
British interests are not served by very active pursuit of certain
inquiries or whether it is, in fact, that different parts of the
Government neutralise each other and it has been a muddle and
is falling on stony ground, I guess I would not want to say. It
is important to realise that one can have similar looking outcomes
from essentially incoherence leading to a process that just does
not work or from a more conscious view that having a process that
does not work is actually quite convenient.
Q16 Sir Robert Smith: From the development
point of view, if we cannot tackle corruption then we are never
going to get an effective development policy delivered.
Professor Winters: I am not a
corruption absolutist. To say that unless we can get corruption
sorted it is not worth bothering about anything is incorrect.
It is quite clear that the sophistication of transactions and
the level of trust that is required to run and develop harmoniously
in Britain, Denmark and the US is way beyond the levels that most
developing countries have reached and, therefore, if they are
to achieve the sorts of economic activity that we have achieved
at some stage they will have to, as it were, very much improve
their performance in those areas. I absolutely do not believe
that we should put corruption as the first thing before we move
to other things. All of these things should go in steps, a little
step on this side and another step on that side, and there are
very, very many useful things that one can do even in regimes
that are fairly unpleasant. However, we ought to walk the talk,
we ought to be clear that there are two sides to a corrupt transaction
and we actually sometimes have jurisdiction over one of those
sides.
Q17 Chairman: A comment made many
times is that if British companies are not whiter than white then
it is very difficult to lecture developing countries. I think
that is really a point of concern.
Mr Gidney: That is right. Another
contributor to this whole debate is the degree to which companies
are encouraged to report on their environmental and social as
well as economic impacts. The new Companies Act, of course, now
encourages directors to be mindful of that sort of data and those
kinds of impacts. Again, this is something that DFID could support
because there are very clear developmental benefits for clarity
and accountability.
Q18 Chairman: Can I thank you both.
Obviously, as you have both said, this has some way to work through,
which we will be following with interest. Clearly for us, as a
Committee, we think it is a positive development to put trade
in the Department for International Development but at the same
time we need to see how that works in practice and how the three
departments work together effectively and how they resolve any
tensions that arise. You are quite right that we have to keep
an eye on it and maybe come back to it at a later stage. Can I
thank you both very much for your clear answers. Thank you.
PROFESSOR
WINTERS: Thank
you very much.
1 Non-governmental Organisation (NGO) Back
2
Department for International Development (DFID) Back
3
Department of Trade and Industry (DTI) Back
4
European Commission's Directorate-General for Trade (DG Trade) Back
5
World Trade Organisation (WTO) Back
6
Department for Business, Enterprise and Regulatory Reform (DBERR) Back
7
Ev 10 Back
8
Organisation for Economic Co-operation and Development (OECD) Back
9
Ev 12 Back
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