Rebalancing the Economy: Trade and Investment - Business, Innovation and Skills Committee Contents


3  Global Factors

57. While there are many influences which the Government can bring to bear, a significant proportion of trade agreements are conducted at a multinational level. As Dr Sally from the LSE highlighted:

    Most of our trade policy is conducted in Brussels and it is a pretty centralised operation. In that sense the UK does not have a trade policy. Rather we have an input into EU trade policy made in Brussels.[56]

This reality was recognised in the Trade White Paper:

    Trade and FDI policy (though not trade and investment promotion) is an EU competence and the Commission negotiates on behalf of Member States in accordance with instructions given by them.[57]

58. The CBI took the view that the impact of the UK's input needed to be maximised and argued that the Government should play to the UK's strengths by pushing for comprehensive liberalisation across all sectors in trade agreements:

    It must fight to ensure that liberalisation of the services sector, which make up over 40% of the UK's exports, is at least as ambitious as goods liberalisation. It should also, in consultation with business, draw up a priority list of fast-growing emerging economies, based on the opportunities and challenges each one presents to UK businesses, particularly in high-growth, high-value sectors, and ensure that FTAs are put in place.[58]

Dr Sally also argued that historically, UK Governments were guilty of "punching well below [their] weight" which resulted in other European nations being allowed to direct trade policy in a way which did not benefit the United Kingdom.[59] He also had particular concerns about the increasing role of the European Parliament:

    The Parliament now has powers to block. It has got to be taken into account in terms of trade policymaking. Globalisation-sceptical constituencies find support amongst certain members of the European Parliament, and some of them are actually on the International Trade Committee. Actual knowledge about international trade is sadly lacking, and that is also true of many members of the Trade Committee.[60]

He concluded:

    I think it is important for the British Government and for companies and indeed for parliamentarians to have much closer contact with the European Parliament and, on these issues, with the International Trade Committee in particular, partly to educate them as to the facts of the world and to have trade policy go in the right direction, and not be derailed by this or that often non-trade issue that might hijack a trade agenda.[61]

59. We were told that in some areas the UK had suffered due to its lack of engagement in EU bilateral trade agreements. The Society of Motor Manufacturers and Traders (SMMT), for example, highlighted that the EU South Korea Free Trade Agreement had disadvantaged the UK car industry.[62] Paul Everitt, SMMT's Chief Executive said:

    Our disappointment was that there were a number of European Governments with concerns about the Korean Free Trade Agreement; the UK was not one of them and, therefore, some of the other major vehicle manufacturing countries, which could have come together to have done something slightly more productive on that Agreement, did not have all the support that they might have required.[63]

60. We welcome the Government's assertion that it will be more active in shaping EU trade policy. However, we note that previous Governments have used similar rhetoric with mixed results. The Government will be judged on its delivery of an EU trade policy which benefits the United Kingdom. As a key negotiator in world trade the EU will play an important role.

WTO and the Doha Round

61. In addition to policy formation at the European Level, a crucial driver in world trade is the WTO and the Doha round of negotiations. The importance of Doha was noted by the CBI. It stressed the importance of an early conclusion to negotiations and urged the Government to do all it could both within the EU and as part of other groupings (such as the G20) to secure the necessary political support.[64]

62. Other organisations we spoke to were all keen for Doha to be completed. Melanie Leech from the Food and Drink Federation told us:

    In general terms, in the UK food and drink industry, we want to buy globally traded commodities at a competitive price. We want to export value added products into global markets, so a multilateral trade liberalisation has to be the priority for us, so Doha is absolutely critical.[65]

The SMMT also called on Government and BIS Department to "prioritise an effective, balanced and fair conclusion to the Doha Development Round of WTO trade talks".[66]

63. The Trade White Paper acknowledged the importance of Doha to trade:

    Concluding the DDA (Doha Development Agenda) is the overarching trade priority for the UK Government and 2011 is the make or break year. The deal on the table represents the most ambitious multilateral trade deal yet, covering agriculture, industrial goods, services, intellectual property and trade facilitation. The Government will work hard to enable a conclusion to the Round in 2011.[67]

However, the UK can only influence the WTO through the EU. Dr Sally reminded us that the UK does not negotiate on its own in the WTO but as part of the European Union:

    The EU commission sits there, albeit with the Council sitting on its shoulder like 27 parrots trying to whisper in its ear. Nonetheless, that is the issue in all of this. We can go around and talk to people; job owning is always a good thing to do if you want something to happen in a political sense, but the bottom line is it is not within our gift to complete this.[68]

64. The importance of completing the Doha Round has again recently been highlighted by the publication of the Trade Experts Group Report.[69] The group was set up by the UK, Germany, Turkey and Indonesia to consider the actions needed to combat protectionism and boost global trade. The report concluded that the Doha negotiations had produced the most substantial package of trade liberalisation and called on national leaders to seize the opportunity.[70]

65. We recognise the fact that the UK's influence on the WTO can only be exercised through its membership of the European Union. However, the lack of a direct influence should not deter the Government from using established bilateral relations to press for an early conclusion to the Doha round. This is a complicated area of international agreement and we support the Government's desire for an agreement which will deliver the right environment for free trade. We look forward to an update on progress when the Government responds to this Report.


56   Q 356 Back

57   Department for Business, Innovation and Skills, Trade and Investment for Growth, Cm 8015, February 2011 Back

58   Ev 165 Back

59   Q 362 Back

60   Q 363 Back

61   Q 363 Back

62   Ev 204 Back

63   Q 81 Back

64   Ev 165 Back

65   Q 84 Back

66   Ev 204 Back

67   Department for Business, Innovation and Skills, Trade and Investment for Growth, Cm 8015, February 2011 Back

68   Q 365 Back

69   The leaders of the United Kingdom, Germany, Indonesia and Turkey set up the high level group in October 2010 to provide analysis and recommendations in support of trade liberalisation and revitalisation. It was co-chaired by Professor Jagdish Bhagwati and Peter Sutherland. Back

70   Peter Sutherland and PR Jagdish Bhagwati, World Trade and the Doha RoundBack


 
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Prepared 11 July 2011