Examination of Witnesses (Question Numbers
260-273)
LORD DAVIES
OF ABERSOCH
CBE, SIR ANDREW
CAHN, MR
PATRICK CRAWFORD,
MS CLAIRE
DURKIN AND
MR GARETH
THOMAS MP
14 JULY 2009
Q260 Mr Bailey: They are seen as
complementary to Doha, not as a substitute for Doha?
Mr Thomas: Absolutely.
Lord Davies of Abersoch: Absolutely.
Q261 Chairman: Do you think Lord
Mandelson, if he were speaking in Delhi now, would repeat what
he said in Delhi in January, "... the downturn does not reduce
the value of a bilateral trade deal, it raises it. The EU and
India should call the deal what it would be—a confidence-building
economic stimulus package—and sign it before the end of
the year". He was speaking before the developments on Doha,
I accept, but would he repeat those words now?
Mr Thomas: I think he might use
slightly different language in terms of timescale but I think
he would still be extremely upbeat about the case for an EU-India
FTA. I believe it makes economic sense for India, just as it makes
economic sense for the UK and for Europe more generally. I think
you do have to get out and make the case as politicians for trade
agreements because there are plenty of vested interests who will
argue against having a trade agreement and opening up barriers.
I would not want to put words into Peter's mouth but I have absolutely
no doubt he will be pushing the case for—
Q262 Chairman: The reason I say that
is that Anand Sharma, to whom you referred to earlier, I met recently.
He is extremely pro-Britain. He has a very strong positive attitude
and so here is a big opportunity to capitalise on. Doha obviously
matters but there is a huge opportunity for UK Plc's interests
as well out of the Indian elections.
Lord Davies of Abersoch: Absolutely.
India is obviously a strong trading partner for us. We have had
Indian businesses investing in the UK and vice versa. I think
they do need to open up some of their markets and there is a huge
appetite amongst UK plcs to invest there, so I think there are
huge opportunities and that is why UKTI, working with the Indian
Business Council,—and Patricia Hewitt's appointment is a
good one—is a big focus.
Q263 Chairman: I like Patricia Hewitt;
she is able and she was a talented minister, but should those
kinds of organisations be led by politicians? Should they not
be led by business people?
Lord Davies of Abersoch: As a
senior independent director for BT she had huge experience of
India. I remember from my days of working at Standard Chartered
that she was a regular visitor from her trade and industry role,
so, no, I think she has got a great role and she knows India well.
Q264 Chairman: But I do hear this
complaint I repeated from the Indian business side that there
is not the same sense of engagement at senior level in British
business.
Lord Davies of Abersoch: I think
there is always more that British business can do with India but
we must not forget that the volume of trade with India is very
significant and a very large number of British businesses have
large businesses in India.
Mr Thomas: I think, Chairman,
that if we can get a deal on the EU-India FTA that will substantially
change attitudes even further. As Mervyn says, there is progress,
but clearly an FTA would help.
Q265 Chairman: One last question
from me. We have talked about the opportunities of places like
India but there are threats at present in the global trading environment
from protectionism and I want to address this with you. Successive
governments, and this one, to its great credit, remain strongly
committed to what you describe in the UK Trade and Development
Policy Report as to "champion open and fair markets",
but that is a bit of a challenge in the current environment, is
it not? What do you need to do to champion "open and fair
markets" in these difficult times?
Lord Davies of Abersoch: I think
you have to name and shame those markets and countries that go
protectionist. I was dwelling on that on the way here. Just before
coming out I was reading Global Trade Alert's first report (just
to show that I am reading this stuff, so I am really a sad person
already). I think that protectionism—and it is stating the
obvious, we all know—would be horrendous for the global
economy. I think the danger in the financial crisis was that certain
markets would go very protectionist and I do not think there is
any evidence of that. There has been a temptation to put measures
in just to protect your own economy. We have not gone down that
route internationally. I think we have to keep on banging the
drum and saying that we have to have a Doha agreement and we must
not go protectionist.
Mr Thomas: Chairman, I wonder
if I can add that we have deliberately used the summits that Gordon
has attended as Prime Minister to press the case for countries
to continue to keep markets open. In a sense the WTO has been
given a very specific brief to watch for creeping protectionism.
They have published a series of reports, I think their third came
out yesterday, on levels of protectionist measures. We have sought
to replicate that international effort, not only through launching
Global Trade Alert, which Mervyn has just referred to, but you
will have seen, and I think you may have participated in, and
forgive me if I am getting this wrong, the first ever UK World
Trade Week, which is an idea that we have shamelessly poached
from the United States. Their world trade weeks were launched
in response to the recession in the 1930s, where their politicians
increasingly recognised that protectionism was slowing down the
opportunity for the US to recover. We think we need to continue
to make the case for open markets and World Trade Week is one
of the ways in which we do that, and all the different branches
of government have played a role in helping to make sure that
there were over 50 events, not only in the UK in the regions but
outside of the UK, to make the case for open markets and for continuing
to avoid protectionism going forward.
Q266 Chairman: I am going to make
a confession. It passed me by entirely but I am sure it did a
lot of good work.
Lord Davies of Abersoch: It will
not next time.
Q267 Chairman: You mentioned Global
Trade Alert. I was going to ask when it was going to be set up.
It has been set up. What exactly does it constitute? It is bringing
together a network of international think-tanks, is it not?
Mr Thomas: The WTO, with respect
to the Secretariat, produce relatively dry commentaries on what
is happening in terms of protectionist measures. Global Trade
Alert, as you say, is a network of think-tanks, academics and
leading economists who can be more voluble in terms of their commentaries
on protectionist measures or not, and therefore they throw a sharper
spotlight on what is happening internationally in terms of particular
protectionist measures. They are a way for the business communities
to engage in and highlight measures that are taking place in particular
countries. It is a way of going beyond the dry WTO reports and
increasing the pressure on countries to resist protectionist responses.
Q268 Chairman: Lord Davies, you said
there was a need to name and shame. Can you name and shame someone
here today for the Committee?
Lord Davies of Abersoch: No, I
am not going to do that; I will resist that temptation, but what
I would say is that we do need business to have a louder voice
on this. Now that I am on this side of the political fence I keep
on saying to business leaders that they do need to speak with
a louder voice everywhere, internationally, in support of a Doha
agreement. The more they are pushing for it in the States and
everywhere else the closer we will get to a deal.
Q269 Chairman: The thing that alarmed
the Committee slightly earlier in the year was that the relaxation
of state aid rules in the European Union seemed to be accompanied
by protectionist clauses around that relaxation. I will not name
and shame anyone but quite a close neighbour seemed to be guilty
of this in particular. Is there any evidence of protectionism
in European Union countries at a modest, disguised, subliminal
level?
Lord Davies of Abersoch: We are
going to put you on the spot right now.
Ms Durkin: I know that there is
an active debate on whether or not some of the interventions could
be seen as straightforward protectionist measures or inadvertent
protectionist measures. What we have sought to do is establish
that any intervention within Europe is focused and time-limited
and with the state aid relaxation we talked about two years and
a review of that and drawing back, so while we acknowledge that
because of the downturn there are inevitably going to be some
actions that would in normal years not be necessary. If they are
necessary we will make sure they do not get established and we
will review them and very quickly step back.
Mr Thomas: There was concern earlier
in the year about a "buy US" policy that appeared to
be being promoted. We know that there has been substantial amendment
to that policy to keep that approach within World Trade Organisation
rules and we have welcomed that.
Q270 Chairman: I am grateful for
that. Thank you very much. I do not want Mr Crawford to get away
without speaking. That is what I was just deciding.
Lord Davies of Abersoch: I can
think of questions for him.
Q271 Chairman: There is a novel idea!
Lord Davies, what would you like me to ask Mr Crawford, on the
record? Mr Crawford, we were aware of the increased interest in
the ECGD's activities and increased funding. Is there anything
that you would like to say to the Committee about the contribution
you make to British exporters? It is the softest question you
will ever get from a select committee chairman, so enjoy it.
Mr Crawford: First of all I should
stress that ECGD has responded to the downturn. Inquiries by exporters
have gone up 50%. We supported just under £31.5 billion of
new business in the last financial year to 31 March. We expect
that that will double or even more in this financial year. We
have played a key role in helping Airbus aircraft exports. We
have historically been supporting 17-18% of their deliveries.
It is quite likely that we will support double that in this financial
year. We have just closed a consultation on a possible new product
to confirm the share risk on confirmations by British banks of
UK export contracts, which would take us back into the short-term
credit area which was privatised in 1991 but is a topic that exporters
have been raising concerns about and the Government will be giving
its response shortly. We are responding both to increase in demand
and suggestions that we should look at new products that we have
not hitherto had to supply.
Q272 Chairman: Do you want me to
ask him a question, Lord Davies?
Lord Davies of Abersoch: No. I
think the problems in the short-term trade credit market, which
were alluded to earlier, have caused huge problems, not just in
the UK but right across the world. People focus on the banks but
the withdrawal of trade credit has been a big challenge for exporters.
We are having a look at the letter of credit scheme which Patrick
referred to and we are also doing a medium-term review on what
else should ECGB be focusing on. We have an open mind and we are
going through a consultation, so in the next two or three months
we will come up with some ideas.
Q273 Mr Bailey: From my perspective
as a representative of an area with a huge number of SMEs, many
of them were quite significantly affected by that. Can I just
stress that this consultation needs to be concluded very quickly
and very productively.
Lord Davies of Abersoch: I think
there are two issues. First, the letter of credit scheme, as we
say, will be coming out in the next week or so. There is the separate
issue of trade credit and the role of the firms. I am meeting
with the two COs next week. I have had a series of meetings on
this issue. I think trade credit structurally we need to think
about from a European and international perspective and that is
why it is important that there is this injection of liquidity
through the IFC and through other measures on letters of credit
because the withdrawal of letter of credit finance around the
world has had a huge material impact on trade, and that is why
we are addressing it.
Chairman: Can I just say this in public.
We take the absence of criticism as a sign of success and we have
heard very little criticism of ECGD. Having said that, of course,
the flood gates will open and we will have you back in for a separate
inquiry, but so far so good. Gentlemen, there are many other things
we could have explored but we have done very well in two hours.
We are very grateful to you for your time and trouble. Thank you
very much indeed.
| 
