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House of Lords

Friday, 14th July 2000.

The House met at eleven of the clock: The CHAIRMAN OF COMMITTEES on the Woolsack.

Prayers--Read by the Lord Bishop of Gloucester.

Carers and Disabled Children Bill

Baroness Pitkeathley: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of commitment be discharged.

Moved, That the order of commitment be discharged.--(Baroness Pitkeathley.)

On Question, Motion agreed to.

World Trade Organisation: EUC Report

11.7 a.m.

Lord Tomlinson rose to move, That this House takes note of the report of the European Union Committee on the World Trade Organisation: the EU mandate after Seattle (10th Report, HL Paper 76).

The noble Lord said: My Lords, the third ministerial conference of the WTO was held in Seattle last November. It had limited objectives: to set the agenda for a new round of negotiations planned for earlier this year and to establish a motive for the suggested--perhaps optimistic--title of the millennium round. Instead, as I believe most noble Lords will be aware, the conference broke up in chaos with no agreement amid many recriminations and enormous publicity, most of it negative.

Although the United Kingdom is a WTO member, the Council of Ministers of the European Union fixes the negotiating mandate and the Commission negotiates on the basis of that mandate. It was therefore appropriate for the European Select Committee to take stock of the mandate, especially in the context of efforts made by many to sketch out a way forward--efforts that led to a WTO council meeting in early May this year. It is that report which today I commend to noble Lords and of which I ask them to take note.

At the outset, I pay a heartfelt and sincere tribute to our Clerk, Dr Elizabeth Hopkins, without whose skill and dedication the report would lack many of the qualities that I believe it contains. We have come to expect intellectual rigour and endeavour from our Clerks, but we have no right to expect the excessive hours and weekend efforts without which the committee's efforts would have been to much less avail and without which I doubt whether the report would have been ready for debate today. In this case, the burden was magnified because we did not appoint a

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specialist adviser. It was almost impossible to contemplate a specialist adviser who would not take one side or the other in the general argument concerning the WTO. The burdens of work also fell on Helen McMurdo, to whom I express my and the committee's gratitude.

I wish to make a general point with regard to such efforts because noble Lords refer frequently--as I myself have done--to the lack of facilities in your Lordships' House. I believe that we should make clear that that applies quantitatively but definitely not qualitatively to our committee Clerks as a whole.

I thank our many witnesses, and thank also the WTO ambassadors whom we had the opportunity to meet informally in Geneva. I express special thanks to Dr David Vines, Dr David Evans and my noble friend Professor Lord Desai for giving the committee the benefit of their substantial economic talents and advice. They were of great help, enabling us to clarify our minds on some of the economic issues involved in the discussions.

In the limited time available today, it is quite impossible to do full justice to the report. It is almost impossible even to explain fully the summary of the report. It is a big report, and one for which much evidence was taken. The written evidence and transcripts in total amount to some 300 pages.

In our approach to the subject, we began from first principles: are the Government and the European Union right to support increasing trade liberalisation? The committee concluded that they are right and that they are right to emphasise certain provisos. Liberalisation should be within a rules-based system, such as that provided by the World Trade Organisation. Liberalisation should not be a process considered in isolation from other issues. We were particularly concerned, for example, that environment and development considerations should be engaged in the process of liberalisation.

The rules of the system should be observed not only by companies and their governments, but by large multinational companies. The system needs to ensure that the poor as well as the rich stand to benefit from the development of liberalisation. We therefore agree with the assumptions of the European Union mandate that globalisation accentuates the need for a rules-based framework, that trade liberalisation needs to be considered with other issues and that the WTO needs to work in co-operation with other international institutions.

It was important that the inquiry should not just be a post mortem on Seattle. We need to understand clearly what went wrong there to consider what lessons the Government and the European Union should learn for the future. We concluded that the main problem was a lack of proper preparation to narrow the issues down for debate. In addition, there was a clear view in the committee that the hosting of the conference by the United States when an election was coming up did not help the process of resolving the agenda questions.

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There was also substantial insensitivity in the handling of developing countries who had come to that ministerial conference with high expectations as relatively new members of the WTO. Almost in parentheses, I might add that some of the demonstrations outside the building did not help the process of deliberation inside.

A lot of work is needed before the next conference. That will involve extensive bilateral contact, promoting the role of the developing countries to make sure that they feel fully involved and increasing transparency to get a better understanding of what the WTO is seeking to do. In that context, having spent some time in discussion with the WTO secretariat and looking at its facilities, it was the view of the committee that the secretariat needs to be properly resourced and perhaps given a more formal power of initiative to get things moving when negotiations are deadlocked.

Part 5 of the report relates to the EU's approach to issues of substance. We reached the clear conclusion that the EU is right to maintain the principle that the agenda for the next round should be comprehensive. That is necessary to ensure that there is scope for trade-off in the negotiations. The execution of that mandate by the Commission, as the negotiator for the European Union, will need to be flexible.

We also emphasised that any comprehensive agenda must involve agriculture, and that must entail a willingness and ability in the mandate to negotiate major, fundamental reform of the common agricultural policy. I shall not burden your Lordships by going through the arguments that have previously been made, but every report from the European Select Committee relating to agriculture has dealt in full with the need for comprehensive reform.

We must also ensure that the next round is a development round. Developing countries must be offered better market access and better resources to ensure the capacity-building that is so often referred to. Those resources must be available through the WTO. We were pleased to see that some of the capacity-building measures that we had in mind were being developed with the advisory centre on WTO law to ensure that there was equal access to legal expertise for all countries engaged in legal discussion on WTO issues.

We also strongly believed that the European Union needs to review its mandate at ministerial level, not merely in its 133 Committee--a committee of officials that has reviewed the mandate on several occasions. As the negotiations had broken down, a review of the mandate was necessary. A failure to do so would reinforce other countries' perceptions of the intransigence of the European Union in pursuit of its mandate. Ministers should have been seen to be concerned about the views of others. If changes to the mandate were found necessary, they could have made them. If no change was necessary, they could have confirmed the mandate.

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The committee looked at a number of specific aspects of the mandate. Regulation on trade in services can easily be used as a protectionist measure. But we agree that the mandate for further liberalisation in that area is vital. However, we suggest that that is best achieved by continuing the approach approved by the general agreement on trading services whereby countries opt into agreements.

Moving on from trading services, we turned to the whole question of investment and competition rules which are clearly linked. It is a statement almost of the obvious to say that there is no realistic expectation of agreement on either. The EU mandate may well be too optimistic but the subject area is important and negotiations should begin.

In that regard, we could perhaps adopt the opting-in approach which has existed in relation to the EU services. But two things need to be clearly understood: first, that progress will be slow; and secondly, that that slowness should not be used as an alibi to hold up progress in other areas.

I turn to intellectual property. The mandate of the European Union is somewhat non-committal. We clearly support the universal application of patent law. We recognise the challenges that that poses to many developing countries. We should strenuously encourage the possibility of companies granting exemptions from their patent on humanitarian grounds.

For example, we were very much encouraged by the example of some United States pharmaceutical companies in making concessions to developing countries on humanitarian grounds. We believe that that could be emulated by European Union countries. Let us look at a matter which has greatly concerned your Lordships' House; namely, the spread of AIDS in sub-Saharan Africa. It is probably by United States and European pharmaceutical companies acting in unison and making concessions to patent law--which we believe must be observed--which will make the necessary contribution to the eradication of that problem.

We dealt also with environmental issues, which are extremely complex. Increasing trade can and should be compatible with sustainable development. Among our recommendations are those which say that the European Union should make firm proposals on adopting WTO rules to allow multilateral environmental agreements and also that governments should be allowed to make eco-labelling mandatory.

We also applaud the European Union for having prompted WTO discussions on the precautionary principle but we chose not to venture too far into that complex area.

Core labour standards have been clearly defined and agreed by the member countries of the International Labour Organisation. Although we had extremely lengthy discussions in that area, there was clear support for the European Union proposal for an early ministerial meeting which should involve other

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international bodies such as the International Labour Organisation and UNCTAD. It is in those fora that the way forward should be considered.

Of the other issues on the agenda, the most important was to look at the dispute settlement procedure. Dispute settlement is an important and necessary element in any rules-based system. Our examination of its application in the now notorious banana dispute shows the need for change to ensure that the system is fair to all. We believe that the European Union must take a lead in pressing that case for change in the disputes resolution procedure.

Looking at the way forward, the major concern is to ensure that the next ministerial conference succeeds in agreeing a sensible agenda. Therefore, European Union countries must lead the developed countries in offering some real concessions to the developing countries to show that trade liberalisation is in their interests.

The package which was produced by Ministers in the WTO at their May meeting is just not good enough. The European Union should insist that enough time is given to prepare the next ministerial conference. It was because of the unwillingness to observe the time necessary for preparation that we use a very strong form of words in one of our conclusions. This states:

    "We deplore the agreement reached by the EU and the US on 30 May to try to launch a new Round during the course of this year. It is much more important to get it right than to get it soon".

The future liberalisation of world trade stands to benefit poor as well as rich countries. It is as important an issue as any on the world agenda. Seattle was a shame to us all and a fiasco. Nobody can afford another such failure. I believe that its consequences would be disastrous to developed and developing countries alike. I beg to move.

Moved, That this House takes note of the report of the European Union Committee on the World Trade Organisation: the EU mandate after Seattle (10th Report, HL Paper 76).--(Lord Tomlinson.)

11.26 a.m.

Lord Biffen: My Lords, the noble Lord, Lord Tomlinson, has moved the Motion with customary skill, diplomacy and persuasiveness. That is only right and proper given the very distinguished service he received from the Clerk to the committee and, indeed, the membership of the committee.

My remarks will be brief and I shall cast a slightly sceptical eye over some of the provisions and implications. But I do so, having regard to the noble Baroness, Lady Williams of Crosby, in wishing to quote from an old Liberal slogan which was that if trade cannot cross frontiers, armies will. Of course, there is that lingering philosophy that somehow or other, broad and free trade could avoid conflicts which otherwise led to war. I hope that there is some truth in that, but there is plenty of evidence to suggest that there are other interpretations as to what leads to conflict.

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What has been so well elaborated in the report is an extension of the philosophy that growing international trade, and not just tariff reduction but trade intervention, will be broadly beneficial for the world community. That is a fairly heroic judgment. But I cannot deny that what is being proposed is a massive extension of intergovernmental intervention.

If GATT has been a success over the years since 1948, I suspect it was largely because it was passive in its operation. It did not seek to prescribe a whole set of behaviours which were extremely germane to domestic politics and interests.

All that is now subjected to question by the noble Lord, Lord Tomlinson, and his committee. The noble Lord, Lord Tomlinson, accepted that there would be a rules-based regime extending to agriculture. There is the habitual cheer for the prospect of reformation of the common agricultural policy. If reforming the agricultural policy depended upon cheers in parliamentary assemblies, it would have been reformed years ago. The truth is that it represents innate national interest which would be defended furiously and whose defence could easily prejudice the wider case for international free trade.

I shall give one pointer. On the issue of GM crops, if Asian countries are likely to develop GM crops--China is a case in point--surely it will not be long before they will be in a position to export to the western world, including to the United Kingdom, where it is likely--I put it no higher--that there will be strong, restrictive arrangements on the use of GM crops. Quite unintentionally, we may find ourselves moving towards a conflict situation, whereas on the whole we are seeking general agreement.

If agriculture is parochially tossed in as the first line of expansion for the World Trade Organisation, it could be followed by services, investment, competition rules, the environment, technology and labour standards, none of which is on the immediate agenda, but we have been served notice that ultimately it is intended to put them on the agenda. If they are not required to be on the agenda by this country with our interests, they will certainly be put on the agenda by other countries with their interests.

Perhaps I may be allowed to draw an analogy, although I do not want to raise the temperature by involving the European Union. It is as though one has taken the Treaty of Rome on tariff reduction and elimination and compared it with the single market. The single market is full of intervention, control and regulation. I do not argue for or against it, but I am saying that we should recognise that there is a sea-change between tariff reduction and what is now being proposed as part of the extended role of the World Trade Organisation.

I believe that that collides with other interests. One is the extent to which there is an expectation that cannot be fulfilled, a shopping list of the World Trade Organisation that has been elaborated on by the noble Lord, Lord Tomlinson, and myself, which must lead to a belief that that will have a substantial and transforming effect upon the world economy. Indeed,

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that was on the lips of many of those who demonstrated in Seattle. They were not there as minimalists; they believed that they saw an evolution that required their radical presence to secure the aims that they had in mind.

I wonder whether really substantial, radical change can possibly be produced by these measures. In the report, on page 10, I was interested to read what was said by Dr David Evans of the Institute of Development Studies at the University of Sussex--not an area that I would look to for support of my own prejudice. He said:

    "little is known at present about where and by how much trade liberalisation will contribute to poverty alleviation, and where it may even help those in poverty".

It is just as well that we understand that, with our rhetoric, we are setting an expectation that may well not be fulfilled by what is secured. More chilling is the thought of what we try to do about the structure that is now proposed. Who will be the agencies? Who will enforce the regulations? What will the sanctions be and to what extent will they be rooted in public acceptability?

I see in heavy print in the report the comment that,

    "The world therefore needs an international organisation to agree the principles on which the rules are to be based, and to set and police the rules".

We all want to see a harmonious relationship between the countries of the globe; we certainly want there to be a harmonious relationship between the developing countries and those of Western Europe and North America. However, I am not persuaded that this degree of proposed intervention and control, which will be political and not economic, will bring about what is sought by the enthusiasts for the World Trade Organisation. Therefore, I am minimalist in my reaction to these challenges. I hope that we can continue to develop the World Trade Organisation as an extension of GATT, but that we will not fall for an ever-increasing involvement of international authorities in the administration, policies and domestic judgments of nation states, for in that way we shall pay the penalty for the folly of assuming that public contentment is derived from internationalisation.

11.35 a.m.

Lord Parekh: My Lords, although I am a university professor and was once, for my sins, a vice-chancellor, I must confess to a considerable sense of diffidence in rising to deliver my maiden speech. That is partly because I am in the midst of many noble Lords whom, over the years, I have greatly admired and whose wisdom and courage have long been a source of inspiration to me. The diffidence is also caused by the fact that the six weeks in which I have been a Member of your Lordships' House have triggered a complex cluster of emotions that I have not been able to analyse and fully integrate.

I was born and spent the formative years of my life in the shadow of British rule in India. Several Members of your Lordships' House governed my

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country with great wisdom and humility; others left something to be desired. Naturally, they provoked a wide variety of reactions such as admiration, gratitude, anger and resentment. Like all other Indians of my generation, I grew up with those emotions. I am now a Member of your Lordships House, a recipient of noble Lords' kindness and generosity and I find myself building up an entirely different relationship compared with my own history and the history of your Lordships' House.

When, several decades ago, I first came to Britain, the country most generously gave me all the rights of citizenship, including the right to vote. I am now told that I can no longer exercise that right to vote and do not perhaps even enjoy it. As if to compensate for that act of disenfranchisement, I am now supposed to be entitled to a new kind of passport which presumably brings certain privileges in its train.

The staff, with their amazing memory for names, have been extremely kind and helpful and I am grateful to them all. Their most generous and constant invocation of my lordly status, however, has tended to give me a rather exaggerated sense of my own importance. Sometimes it is a bit of a let down to venture into the wider world and find that it takes a rather different view of oneself because of its legitimate commitment to democratic equality.

In short, the past few weeks have been full of paradoxes and ambivalences. As I am still struggling to resolve the conflicting logics, I hope that noble Lords will forgive me if my brief remarks on the subject of the EU mandate fail to meet your Lordships' highest standards.

The World Trade Organisation is an excellent instrument of international economic co-operation. It is rightly committed to the view that free trade benefits all and that trade barriers should be reduced and, ideally, removed altogether. Unlike the International Monetary Fund and the United Nations with its Security Council, the WTO treats all its members equally and gives them a more or less equal say in the determination of its policies. It even requires the United States to accept its rigorous trade discipline.

Therefore, the WTO has rightly come to enjoy considerable procedural legitimacy, but if it is to enjoy substantive legitimacy and command the enthusiastic support of not only governments but also NGOs and ordinary citizens the world over, it needs to ensure that its framework of rules benefits all its members equally and promotes their well-being. If it is to do that it needs to bear in mind certain principles. I would like to mention five which, in my view, are critically important and have not always received the attention that they deserve.

Some of those principles have been rightly stressed by the excellent Select Committee report we are now considering and which was introduced by my noble friend Lord Tomlinson. But they can do with some degree of reiteration. First, since not all economies are equally developed, obviously they are not equally equipped to benefit from free trade. To treat unequals uniformly is to treat them unequally and unjustly. It is

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therefore vital that the competitive capabilities of developing countries be strengthened, so that they can take full advantage of trading opportunities. That involves building up their educational, social, technological, financial and economic infrastructures and giving the WTO's work a developmental orientation. Trade is not an end in itself; it is merely a means. It is an important means, but nevertheless, just a means. It needs to be located in the larger framework of economic development.

Secondly, if free trade is to deliver on its promise, it needs to secure certain conditions, one of the most important, in my view, being the stabilisation of currency movements. Without that stabilisation and without the mechanism for it, the economies of developing countries can be easily destabilised, as we saw not so long ago in the case of east Asia. If that happens, those countries lose both the willingness and the ability to benefit from international trade. It is no use having a regulatory framework for trade but none at all for currency transactions.

Thirdly, if international trade is to work to the advantage of all, developed countries must stop protecting some of their industries, especially those which are of vital importance to developing countries, particularly agriculture and textiles. There is therefore little to be said for the EU common agricultural policy. That not only places the agricultural imports from developing countries at a disadvantage, but also weakens the EU's own ability to persuade developing countries to open up their markets. Britain should therefore take a lead in persuading our partners to rethink that policy.

Fourthly, the social clause, which relates to child labour and other components of the productive process, is a double-edged weapon. It can ensure uniformity and eliminate obvious social evils in developing countries. But it can also become both a protectionist device and a subtle tool of subverting developing economies. The social clause therefore needs to be interpreted and applied in a culturally sensitive manner and should be based on the willing, uncoerced consent of developing countries.

Fifthly, and finally, no trade is culturally neutral. We cannot talk about trade as though it was purely an economic and unculturally-related activity, because no commodity is culturally neutral. Free trade therefore can easily become a vehicle for transforming not only the economic but also the cultural lives of the societies involved. Even the culturally confident French have shown deep worries about the increasing Americanisation of their way of life. The fear is even greater, deeper and more extensive in developing countries, many of whom panic at the prospect of the subtle and relentless transformation of their ways of life and cultural identities. That has sometimes led to cultural and religious fundamentalism, which is an incoherent and dangerous but nevertheless understandable response to the remorseless and relentless logic of globalisation.

We therefore need to view their anxieties with compassion and charity, and ensure that the framework of trade that we design allows all countries,

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especially the developing ones, adequate breathing space, some control over their cultural affairs and the opportunity to adjust to the logic of globalisation at their own pace and in a manner which is best suited to their own traditions. Cultures are not commodities and cultural products require a different regime of control to that which is suited to what I might call material commodities. The WTO's tendency to treat all commodities uniformly as if they were all the same needs to be reformed.

Therefore, if we wish to avert moral and cultural panic and the consequent emergence of self-defeating fundamentalism in developing societies, we need to show a greater appreciation of the dilemmas and anxieties of developing countries than the WTO has done so far.

I thank noble Lords for their patience and for granting me a few early moments of self-indulgence.

11.44 a.m.

Baroness Sharp of Guildford: My Lords, on behalf of the House I congratulate the noble Lord, Lord Parekh, on his excellent, amusing and insightful maiden speech. I am glad that he mentioned the issue of currency stability because it was not an issue covered in our report. I was a member of the Select Committee which put the report together. The noble Lord is absolutely right that it is an essential factor if we want to carry forward free trade; it is an essential concomitant of carrying that agenda forward.

As the noble Lord implied, he has had a long and, if I might say so, distinguished career in academia both here in Britain and in India, Canada and the United States. He has written extensively on political philosophy and on social and political thought. He has also contributed his time and energy to promoting equal opportunities for ethnic minorities in this country. We welcome the noble Lord to this House. We look forward to benefiting from his wisdom and breadth of knowledge and to enjoying contributions of the calibre he has made today.

As a member of Select Committee A responsible for this report, I am delighted that so many of those who have read it regard it so highly. A number of people have said what an excellent report it is. Credit is due, as the noble Lord, Lord Tomlinson, said, very much to our Clerk, Dr Elizabeth Hopkins, who both guided our deliberations and gave shape and substance to our conclusions.

I must also declare another interest. Forty years ago, on graduating from Cambridge, I joined what was then the Board of Trade and, as one of those allocated to the trade policy division, was initiated in the rites of the GATT, which was and remains in many respects the Holy Grail of that side of the department. During that period I had the privilege of being set to read some of the Bretton Woods paper. I was in fact researching commodity policy and Keynes's notion of setting up an international buffer scheme--Commod--to limit the swings of commodity prices.

I learnt both of the high hopes in 1945 that the world would establish an international trade organisation to regulate trade between nations and of the dashing of

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those hopes and the establishment instead, under the Havana Treaty, of the General Agreement on Tariffs and Trade, built upon the twin principles of reciprocity, in terms of most-favoured nation treatment, and consensus, and moving forward little by little.

At that time, in 1960, the GATT's second round, the Dillon Round, had just been completed. Had I remained within the department it is quite possible that at some point I would have had responsibility for carrying forward the Holy Grail through one of the subsequent GATT rounds. As it was, I did the next best thing by marrying one of the troubadours whose task it was to do so through the latter stages of the Tokyo Round. As a result I have been and remain perhaps more conscious than most of how much has been achieved over the course of the years by this gradual moving forward. I call it the "shuffle, shuffle, one-step" process of the GATT. The need to move by consensus meant inordinately long rounds of negotiation, of consensus building, capped by the often quite sudden emergence of consensus and therefore the one-step completion of the round.

Forty years ago, in 1960, I was negotiating the reduction of quota restrictions on imports into the UK. Tariffs on motorcars and many other luxury goods were then at around 40 per cent. By the end of the 1980s, and as a result of the Kennedy and Tokyo rounds, tariffs on most manufactured goods were close to zero and the Uruguay Round saw the opening up of new areas--trade in services, investment, intellectual property and, for the first time, agriculture.

We should not underestimate the benefits from the reduction in tariffs on manufactures for it fuelled the very fast rise in international trade between developed nations and also opened the door to imports from countries such as South Korea, Taiwan, Malaysia and the Philippines and enabled what were, in the 1970s, called the "newly industrialising countries" of south-east Asia to become sophisticated players within a now global structure of trade. What we now call globalisation has in many respects been the outcome of this long process of trade liberalisation.

It is that heritage--the rooting in the long, slow processes of reciprocity and consensus building that characterised the GATT--which gave me an interest in the WTO. I welcomed this inquiry as a chance to update my knowledge. Superficially, I approached it somewhat apprehensively. What had gone wrong? Why had a seemingly even-handed organisation such as the GATT, or so it appeared, become the handmaiden to the more strident American view of free trade, which was riding roughshod over environmental and social concerns?

I have to say that this inquiry has renewed my faith and reassured me that, despite glitches, the project is still on course and that the process is the right one. I had not realised that from the 30 or so members of the GATT in 1960 there are now 136 members, the

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majority of which are developing or newly-industrialised nations. This is important because, as Mr Stoler, the deputy director-general at the WTO, reminded us:

    "Any country can join any UN agency if they agree to pay the dues. There is a different admission price here ... Entry is not cost free ... You have to have an economy and a set of rules in that economy".

In other words, as a member, you have to adhere to the rules that are set and, above all, adhere to the central rules of reciprocity and consensus.

But, inevitably, with 136 members the process of consensus building is more complex. What sank any chance of agreement at Seattle was not the presence of the NGOs and the street battles against capitalism, but the internal failure of the system to arrive at consensus. The reasons for this are various and are set out in our report--the failure to appoint a new director-general on time and the lengthy wrangling over his appointment, the insensitivities of the US as a host nation, organiser and chair for the whole occasion and the intransigence of the EU on agriculture. Indeed, the list is long. But fundamentally it was the fact that not enough time and effort had gone into building the underlying consensus among the nations that was necessary if the business was to proceed and succeed.

As became clear from our discussions, the WTO cannot afford another disaster like Seattle. Although rooted in the GATT, it is still a new organisation and, as such, still fragile. As a new organisation in the new globalised world in which we live, it is also pioneering new forms of governance. The dispute settlement procedures are new and unique, but it is very important that they succeed and that they gain credibility. This means, I believe, that we must face up to the issues posed by potential conflicts--for example, the environmental objectives of the multilateral environmental agreements--and seek reconciliation within the system. The same applies to poverty and social issues. I find it very difficult to accept that the EU cannot discriminate in favour of the small banana growers in the Caribbean. However, if the WTO fails, we must be aware that there is a great danger that cowboy capitalism rather than rule-based capitalism will win the day.

It was significant that it was one of the WTO's deputy directors from a developing country, Mr Onedraogo (a previous Minister in Burkina Faso) who said:

    "The world is lucky enough to have these rules set up within the framework of the WTO protecting small, big, rich and poor countries. Otherwise we would have been in the jungle".

He made it clear that small, poor countries such as his would be the losers in such a jungle. As Clare Short said clearly:

    "The rhetoric of the protestors is entirely the wrong way round. It is the developing countries that need the rules-based institutions ... more than the developed and wealthy industrialised nations. There is a sense across the world of fear of globalisation".

Perhaps I may take up this idea of fear of globalisation. Just to reiterate, my argument to date is as follows: first, that trade liberalisation under the GATT has brought great benefits both to the

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developed and to the developing world. Secondly, among other things, it has helped to unleash the forces of globalisation; and, thirdly, in a world of globalisation it is jungle warfare in which the biggest and the strongest companies and countries will win unless there is an agreed set of rules under which those companies and those countries agree to operate. The WTO provides such a set of rules. Therefore, it is vital that we strengthen and support such rules rather than cast them aside.

The danger with another Seattle-type fiasco is that the WTO loses all credibility and is, in effect, cast aside in favour of other approaches. But for any other approach to work and succeed, it must carry those same fundamental principles of reciprocity and consensus. It seems futile to risk throwing away all that has been built up over the past 50 years. That is why, at the end of the day, the advice in our report to the EU as regards its approach to these negotiations is that, first, it must not be too ambitious. Its mandate argued for negotiations across a broad agenda, but it would not matter if the issues such as investment and intellectual property were cut out.

Secondly, the EU must recognise that as the system expands so new support mechanisms will be required. We put great emphasis in our report on the need for capacity building among developing countries. But perhaps we should also be thinking about the breadth of the agenda. I shall quote your Lordships just one example--the TRIPS agenda and patenting. Can we really expect developing countries to be able to set up their own patent offices and police their own patent system?

Thirdly, we advise the EU to recognise that it has to give as well as take. In particular, it must be prepared to negotiate on two issues that are of considerable importance to developing countries--namely, agriculture and textiles. Finally, it has to be patient. It should not try to push the process too fast. It must allow time for consensus building. As the noble Lord, Lord Tomlinson, implied, we were horrified to learn that, at the last summit in June, the EU and the US were of the opinion that they could resurrect the negotiations and move forward within the next six months. We believe that that would be very dangerous. We do not advise the EU to go in that direction.

11.57 a.m.

Lord Lea of Crondall: My Lords, before I address some of the issues raised in the report, I should like to echo what our chairman, my noble friend Lord Tomlinson, said about the contribution made by our Clerk, Dr Elizabeth Hopkins, and add a few remarks to what has been said. She maintained her unflappability through various difficulties, including rescheduling our visit to Geneva to meet the requirements of the Whips. Her technical excellence and speed of delivery was a tower of strength and I am sure that that has maintained the reputation of the committee as one which produces reports of the highest standard. Indeed, I am sure that our report will influence the EU and WTO debate as it moves forward.

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Although we do not say it in quite so many words, I believe, reading between the lines, that we found the EU mandate, which is the basis of the report--each section is built around a quote from the EU mandate--had not only been very well put together but had also stood the test of detailed inspection by the committee. However, as my noble friend Lord Tomlinson said, we make the comment that the EU should not perhaps have simply reiterated the mandate, but that may be a presentational objection to something that was drawn up a year ago. But, as I said, it stood the test of our scrutiny.

I draw attention to the fact--I believe that this is stated somewhere in the report--that no other country has put its cards on the table in the same way as the EU. That is a strength. Sometimes the EU has been criticised for a lack of transparency. However, if that remark was made in connection with the matter we are discussing, it would be 180 degrees the opposite of the truth. It is more a case of living in a goldfish bowl. In terms of setting out agendas for consideration, the EU has again proved its indispensability as an international network. Can one imagine getting anywhere at all without such a structured approach? Would any British government, left to their own devices, have produced such an explicit and public mandate? I am sure that they would not have done.

The WTO is intergovernmental and is made up of constituencies which comprise member states. That is a fairly obvious, even trite, remark, but I think that it has consequences in terms of whether we can, as it were, carry out other people's negotiations for them. Sometimes the positions which are adopted are negotiating positions adopted in the expectation of multiple trade-offs in negotiations. This presents some difficulties. The report contains a section on the workings of the WTO secretariat within the system. We call for some revisiting of the power of initiative to the Director-General. If we had started from scratch, we probably would not have had the present arrangements. We would have probably incorporated the WTO within the UN system. Part of the rationale for it not being part of the UN system is that not everyone belongs to it. That obviously cuts both ways. I take the example of the relationship between trade and development. The United Nations Conference on Trade and Development--UNCTAD--is a UN body which perhaps produces an inadequate interface.

I take the example of China and the WTO. One can argue that China is open to influence through being part of the system. That relates to the question of the so-called "democratic deficit". I do not think that there would be argument about democratic deficit if the WTO were more obviously part of the UN system. We comment on page 28 of the report that the WTO secretariat is not even in the position of the typical UN secretariat in being able to table papers in the name of the Secretary-General. That may have been a factor at Seattle, but for the future we should at least consider how we give some greater degree of initiative to the Secretary-General in the WTO system.

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It has become commonplace that we need a rules-based system. However, in some areas we are moving in a rather different direction. I believe that this is true of the area of direct investment. I refer to multinational corporations in this regard. A major opportunity was lost in the 1970s when an unholy alliance of Moscow and Washington forced the breakdown of a comprehensive negotiation through the UN Commission on Transnational Corporations, to which I was an expert adviser. The Americans said, "Hands off" and the Russians said that socialist enterprises should not be covered. The Indian delegation, the Brazilian delegation and other major G77 countries most regretted that outcome. We are now picking up some of those ideas again but in the framework of bilateral negotiations. One might ask what could be fairer than that. However, in a world of bilateral negotiations between rather unequal parties, it all depends who is the stronger. As people used to say in the field of industrial arbitration, "The lion's share goes to the lion".

As regards dispute settlement, it is surely disproportionate for the US to introduce trade sanctions via 100 per cent tariffs on folded cartons to apply pressure in seeking a solution to the banana dispute. We recall from Gilbert and Sullivan that the punishment should fit the crime. However, I cannot see that being the case in the banana dispute where a totally unconnected party considers it perfectly all right to slap on 100 per cent tariffs as part of the WTO sanctions procedure.

I do not believe that my next point has been mentioned. We should not too readily criticise the EU for saying that the WTO should require the elimination of "essentially all" rather than "all" preferential arrangements when we, DfID and everyone else knows that there are two or three instances--bananas comprise one of them--where the issue is a little more tricky.

It is well known that the CAP was devised before we joined the Community. I say to the noble Lord, Lord Biffen, that I hope that we are not about to make the same mistake in terms of our membership of the euro. Do we not engage in too much simple breast beating about the CAP? It is a fact that the first step towards dismantling the old-style CAP was taken in 1992 with the MacSharry reforms when the elements of market support were reduced for some products and farmers were compensated by direct grants. In recent years support prices have been frozen or reduced, while milk output has been controlled by quota and some land has been taken out of production through set-aside. There are now no mountains of intervention stock. Currently, for example, we have about 19 days' supply of wheat.

In 1997, in the perspective of a further major enlargement of the European Union, the Commission--which with Britain has been the main promoter of agricultural policy reform--proposed more changes in its document, Agenda 2000. On the basis of that the Heads of State and Government decided at Berlin in March 1999 substantial extra

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reforms. The main elements are price cuts; part compensation to farmers by direct grants; stronger measures in favour of the environment and wider rural development plans. In particular, support prices for wheat and other cereals will be cut by a further 15 per cent beginning this month. The support price for beef will be cut by 20 per cent over three years. However, we need to go further and no doubt we shall as the discussions on enlargement progress.

The report states that much ground needs to be covered on a number of matters before a full scale round takes place. The relationship between trade and labour standards is a good example of that principle. We support the creative proposal--this is covered in the report on pages 59 to 63--that the EU should urge the convening of a ministerial ILO/WTO meeting to be preceded by the creation and work of an ILO/WTO forum. The report noted the positive approach of the British Government on that matter who fully support the EU proposal for a joint forum. That point was reiterated by my noble friend Lord McIntosh in his reply to the debate on globalisation on 19th April. So far, so good.

However, I should mention some of the objections that have been raised. The EU has explicitly stated that it opposes and rejects any initiative to use labour rights for protectionist purposes and that the comparative advantage of countries, particularly low wage countries, must not be put in question. I echo what the noble Lord, Lord Parekh, said in his maiden speech. I look forward to engaging with him in many other debates over the years to come.

Perhaps I may make a broader point. The countries which have done best in sustainable development-- I use the word "sustainable" in three senses: economic sustainability, democratic sustainability and environmental sustainability--are the ones which have strong trade unions engaged in dialogue with government in an open market economy. Trade unions are the reality of day-to-day democracy so far as concerns employment.

But models of development vary, from the highly successful Singapore model--which is not everyone's cup of tea but is remarkably resilient--through to countries such as South Korea and Brazil. The range demonstrates the correlation between trade union development and sustainable democratic development.

In this context I should mention that Mr Carl--the leading official of the Commission whose evidence appears at page 62--pointed out that countries such as India, Pakistan and Egypt view the EU's motives as regards this matter with a certain suspicion. But they have their motives too. We all have motives.

Perhaps I may give examples of non-sustainability, such as the labour conditions and lack of observation of ILO standards for migrant workers in parts of the Gulf and, of course, in Saudi Arabia, and how this affects the pattern of trade. All Gulf countries ostensibly subscribe to the ILO principles, which include provision for regular visits by ILO representatives and regional meetings. The

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ILO requires delegations to include workers' representatives--but none of the countries in the Gulf sends foreign workers. Saudi Arabia selects a tame national from the state oil company and repeatedly defers regional ILO meetings.

This surely demonstrates rather than contradicts the value of universalist principles. We need to use all the opportunities that we can to promote them--and talks within the WTO will be an excellent opportunity. Three years ago the Indian consul general in Dubai tried to invoke the provisions of the UN Human Rights Commission to force the UAE to give citizenship to children of second generation Indians, one consequence being that they would have rudimentary labour protection. The authorities in both Abu Dhabi and Dubai threatened mass deportations if the case was pursued, and it was dropped.

I am not suggesting that the Gulf is typical of the world as a whole--there is no such place--but it demonstrates one pattern which has vast repercussions all around that area--including, for example, in the Yemen, where I saw at first hand the consequence of deportations from Saudi Arabia after the Gulf War. It is a self-confident and successfully integrated society that gives rights and freedom of association to its citizens.

Perhaps I may say a word in conclusion about NGO involvement in Seattle. It was a useful experiment; the NGOs made a positive contribution. But it is fair to make the point that NGOs cannot expect to be invited into the conference chamber and assume that this has no consequences for the way in which they behave outside the door. The environmental movement, for example, has come a long way since Rio de Janeiro but has probably now hit a plateau, in part because it did not stop to think through whether the dynamics of growth through a certain populism would be valid, at least when some of the reforms it was advocating were on the table inside the conference. This is the lesson that the trade union movement learnt the hard way over the past 100 years and more. There is a debate about development versus environment; global warming is an illustration of that.

We are in effect giving a green and amber light to Pascal Lamy and his colleagues, both in the Commission and in the Council of Ministers. We hope to see a substantial proportion of the mandate agreed.

12.14 p.m.

The Earl of Sandwich: My Lords, I, too, thank the noble Lord, Lord Tomlinson, for producing such a formidable report. I hesitate to join in a debate of such erudition but I do so on the grounds of its importance to developing countries. It is essential to all of us, especially to the 48 least developed countries, that we get the WTO right if we are to make progress in the elimination of world poverty. Here I plead guilty in advance to some of the rhetoric which was so powerfully characterised by the noble Lord, Lord Biffen, to whom we owe a debt.

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I shall make simply four points drawing on the committee's comprehensive report, the recommendations of which I have studied carefully along with some of the evidence. First, as to timing, I strongly support the conclusion in paragraph 159 that the new round must be a broadly developmental round, as apparently already favoured by the UK. It must not take place until the WTO is strengthened and reformed. Whatever we think about the CAP, I strongly agree that the EU must give a lead to the Quad countries in allowing duty-free access to all imports from the least developed countries, which, after all, represent only 0.5 per cent of world trade. It is a matter of confidence. The least developed countries know that they need to belong to the WTO but they will not have any faith in it until they see it working effectively and to their advantage.

It is too easy to say that Seattle was a disgrace and that the WTO was ill-prepared for it. It was bound to happen. In some ways it was a major advance to accommodate 135 nations in one place, not to mention the thousands who came to point fingers at it. But we now know that it was another false start. If we include the MAI, that means that third time has to be more than lucky; it has to be spot on target. A major initiative by the EU now, using Lome as an example could give the WTO the fair wind that it desperately needs.

Lome is often described as a model of international aid and trade agreements which has met the reciprocal needs of the EU and the ACP countries. It may be out of date but there is nothing else like it. In the present hostile climate surrounding the EU's aid programme, Lome is still a shining example which can yet be used to create new mechanisms for a world-wide trading partnership.

My second and related point is about poverty. Freer, fairer trade is a well-understood route to the elimination of poverty. It is the Government's policy objective--as with the DAC 2015 targets they helped to inspire--to reduce world poverty at least to a tolerable level, to a land somewhere beyond the rubbish tips and mud slides, those insulting symbols of the throw-away world we inhabit. It is to attempt to rebuild a world in which the very poorest in the shanty towns and remote rural areas can hold up there heads and at least contemplate some improvement in their children's lives, be it jobs, better housing, drinking water or another basic human right.

The poorest should be at least aware of the attempts to reach them on an international scale, if not at the level of the Marshall Plan or the vision of Barbara Ward--we have put that behind us--then perhaps in a realistic new trade initiative from the international financial institutions in line with the poverty reduction strategies. Could there be, even now, before the end of the Clinton administration, a renewed effort by the international community to replace what is now a fading HIPC initiative to help the highly indebted countries--something of which this Government must at least dream when they are preparing their globalisation White Paper? Trade and trade liberalisation are surely the best means of lifting the

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poorest towards minimal standards of humanity rather than becoming another vehicle for cushioning the stomachs and lifestyles of our industrial society.

Thirdly, on capacity, there must be a structure which will ensure more effective and active participation by the developing countries. A lot of this will be improved by in-country capacity building--and the UK's interest in and contribution to this is acknowledged--but capacity of member countries can also be exaggerated because any technical assistance has to be in proportion to the existing civil service and legal capacity; it cannot be just flown in for the purpose.

Just as important are regional groups and the preparatory meetings, as has been mentioned, which may happen several months in advance of ministerial meetings. One aspect of the fiasco in Seattle was that some key regional countries were thwarted when delegations were isolated in their hotels--they could not even speak to each other. The building of consensus must be a major objective in the next round. It is easier said than done.

Nearly half the least developed countries still have no representation in Geneva. The WTO and its EU supporters need to place more emphasis on consensus building. South Africa has even suggested a two-stage process based on the Uruguay Round. The Secretary of State was interested in that suggestion. Perhaps the Minister can tell us what is the position in that regard. The risks of forcing the pace are considerable in that they could bring the whole WTO system to a halt.

Connected to that is the developing countries' and the NGOs' concern for transparency and accountability, and especially the need for civil society to contribute to the process of negotiation within the dispute settlement procedure and to the development of public policy. That is where trade, aid and development must work closely together. It may be a long way ahead for many countries, but there are examples of action groups in some of the highly indebted countries which show that coalitions of local NGOs and private interests can be effective in monitoring and influencing governments.

Fourthly, I turn to the NGOs. I declare an interest here and depart from the views of the committee and of the noble Lord, Lord Lea, which reflect concerns about the role of NGOs and their participation. Perhaps their view is more fashionable. I firmly believe in the importance and influence of NGOs but I am surprised at the impression given in paragraphs 72 to 76 and the conclusion in paragraph 79 about NGO access. I regard commercial lobbies, which represented over one-third of the 1,000 NGOs at Seattle, as a separate case. It is not the intention of the development NGOs--at least not of the UK-based ones that I know--to sit at the WTO table or take part in discussions which are properly inter-governmental. On the contrary, their concern is for the full and equal participation of national governments, especially the LDCs, and their ability to represent the legitimate interests of their producers. As the committee recognised, it is vital for these NGO voices to be heard.

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The most articulate voices are always those which most closely advocate the causes of their own communities. However, disputes, as we know, are quite often settled by larger interests which they cannot control. Here I, too, have to mention the Caribbean banana producers and the latest threat to their livelihood and to those other businesses in the EU which are likely to suffer from the US "carousel" retaliation announced this week. Many of us hope that the EU will stand up to the bullying Chiquita lobby. If not, our promises to the Caribbean under the protocol will be worthless. There are many other cases where island or one-crop economies are similarly threatened by unfettered trade liberalisation. These must be the subject of special arrangements for those regions.

In conclusion, I hope to hear from the Minister, as he told us in the globalisation debate, that core labour and environmental standards, while they can be raised in the joint forum or even within the dispute settlement process, belong more properly with the ILO and with the World Bank than they do with the WTO. That would give reassurance to those developing countries which again fear the heavy hand of the US and other business interests. If the European Union governments do not have poverty eradication firmly in sight--US pharmaceutical companies and the AIDS situation in Africa come to mind--the whole edifice of the WTO, which developing countries and developed countries so badly need, will have been in vain.

12.23 p.m.

Lord Freeman: My Lords, I wish to be associated with the remarks of the noble Baroness, Lady Sharp, and the noble Lord, Lord Lea, in congratulating the noble Lord, Lord Parekh, on his wise and concise words. From the Conservative Back Benches, we look forward to his contributions with great anticipation. We extend a warm welcome.

I very much agree with what the noble Lord, Lord Tomlinson, said in his opening remarks, particularly about the need for greater liberalisation of services. My brief remarks are concentrated on that subject. I very much agree with the report. I welcome it. It is an excellent contribution to the debate. I join the noble Lord in congratulating his committee and the Clerk on its preparation.

I declare an interest as a former partner of PricewaterhouseCoopers, which has given written evidence to the committee on services. But I, like my professional friend, the noble Lord, Lord Sharman, am now relegated to the role of superannuated adviser, rather as he is with his firm. Nevertheless, I associate myself with the report delivered by my firm and with that of British Invisibles, chaired now by my noble friend Lord Levene, who cannot be with us for the debate today.

As the report says in paragraph 166,

    "open markets in services are beneficial to the global economy".

My noble friend Lord Biffen frankly described himself as a minimalist. He will forgive me if I describe myself as--not exactly at the other end of the spectrum but a little further distant--an optimistic globalist. I say so

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because I firmly believe that, as the noble Earl, Lord Sandwich, so eloquently reminded your Lordships, the development of world trade in goods, investment and services should benefit all countries. Certainly in modern history, the record shows that that has been broadly the case. But we need a much freer flow of people. It is the people who provide the specialist, managerial and technical services in particular which are the lubricant of growth. Services in the western industrialised world now account for approximately 70 per cent of gross domestic product. Yet, as a proportion of world trade, services account for around 20 per cent.

There are still significant barriers to the liberalisation of services. What are they? There are two main barriers, both of which the report addresses. The first is the mobility of workers, of people. I am not talking about immigration, but the mobility of people who are to provide services. I refer in particular to those who do so for relatively short periods of time, perhaps up to 12 months and in some cases up to 24 months. There are many examples of visa and work permit restrictions, not only throughout the western world but throughout the world as a whole. I am referring not just to what sometimes commentators regard as the people most affected by restrictions on short-term work permits. I am referring also to semi-skilled and unskilled workers from the developing countries who, for short-term contracts, have sometimes a vital role to play. That point is developed, quite rightly, in paragraph 69 of the report.

The developing countries have as much to benefit from the liberalisation of free movement of people as those who are sometimes referred to as the key business or professional people. It is important--the noble Earl, Lord Sandwich, touched on this point indirectly, but I suspect he would agree--that the liberalisation in services should not be seen as benefiting the western industrialised nations and the business and professional classes only. We are talking about global liberalisation.

The second barrier is national protectionism in relation to the licensing of functions provided by groups of workers or individuals. As the report says, the principle of non-discrimination by nations in relation to domestic workers and foreign workers is extremely important when it comes to the short-term provision of a service, be it professional, technical or otherwise.

There is a separate related issue of the mutual cross-recognition between countries of professional qualifications and skills. Having made a modest contribution some 35 years ago in terms of the liberalisation of British professional practices, and having revisited what I wrote then, I realise how little progress we have made in western Europe. In this country we are still protectionist in too many of our professional services and we have a long way to go.

What progress can be made? First, those who provide services--which includes a broad range of services, as I stressed earlier--need to have their collective voice heard by the Commission, because the

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European Union shares equally with national governments responsibility for negotiating the liberalisation of services, unlike the liberalisation of trade. Thus, the services sector needs to ensure that it makes its voice heard clearly not only by the Commission in the form of the European Services Forum--which was established under the aegis of Sir Leon Brittan; I welcome that--but also needs to ensure that that forum is closely in touch with Her Majesty's Government along with the other European governments.

Secondly, and more importantly, I conclude by saying that the General Agreement on the Trade in Services is now stalled in a political vacuum, following failure in Seattle. Noble Lords will recall that the general agreement on services as opposed to tariffs and trade was established and commenced its work in 1994, but negotiations were to begin in earnest this January 2000. However, very little progress has been made. What is needed, therefore, is to kick-start those negotiations to liberalise the provisions of services globally by setting up a new ministerial conference. I congratulate EU trade commissioner Pascal Lamy--he came to London last week--on his vision and determination not only to ensure that, from the standpoint of the European Union, a ministerial conference is held, it is hoped, at the beginning of next year, but also on ensuring that the provision of services is high on the agenda. I hope that noble Lords will agree with that.

12.31 p.m.

Lord Desai: My Lords, first I should like to welcome this report and to thank my noble friend Lord Tomlinson for his kind remarks on my contribution to it.

The World Trade Organisation is an extremely important and unique institution of post-war economic regulation and governance. As my noble friend Lord Parekh said in his excellent maiden speech--I look forward very much to his future contributions--the WTO is the only body which treats all its members equally. That is not true of the United Nations or of any of the other great world institutions. The WTO is the only body that has made decisions chastising the United States which the United States has then obeyed. Because it is such a unique institution of economic governance, it is important to ensure that it is preserved and strengthened.

I was fascinated and intrigued by the remarks of the noble Lord, Lord Biffen. He said that he was a minimalist in this area. It is right to say that GATT made great progress from 1945 to 1994 by sustaining a passive, minimalist approach. However, at that time, GATT was by and large--not entirely--a club of OECD countries. The Uruguay Round was initiated by the developing countries because they wanted to gain access to the markets of the developed countries, which until then they did not have. All the talk--the Kennedy Round, the Tokyo Round and so forth--may have liberalised trade among the developed

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countries (which was all well and good) but not enough was being done to enable the developing countries to gain access to western markets.

We should remember that in the initiatives driving the Uruguay Round, the developing countries came to realise that they, too, had a stake in encouraging freer trade. I shall not talk about "free trade"; there is no such thing. That is due mainly to the policies of the developed world, but I shall not go too deeply into that matter. However, freer world trade works in the interests of the developing countries. That is why the initiative was taken with the Uruguay Round. When the WTO emerged from GATT, it needed a different set of rules to which everyone could subscribe; otherwise the weaker countries would not benefit from freer world trade, something they thoroughly deserved. The WTO is a different institution from the old GATT. Furthermore, as the report rightly points out, it is--possibly alone in the world--a rule-based system. For example, even the Multilateral Agreement on Investment, which foundered on various different popular protests, was rejected by the US Senate. The Americans did not want to see a multilateral agreement on investment because they did not wish to be treated like everyone else. Thus it is important that the logic of the rule-based system is advanced step by step in other spheres of the global economy. In that respect, the WTO plays an essential role.

I agree with several points made in the report as regards what took place in Seattle and why those events proved to be very bad for the developing countries. The people demonstrating outside the meeting thought they were defying the power of the multinationals and so forth. However, all they succeeded in doing was to reinforce the power of the developed countries--especially the host country, which for entirely incidental political reasons, sabotaged the Seattle meeting. I put it no more strongly than that.

That means that any future ministerial meeting cannot be held until after the new US President has been bedded down in post. It is an unfortunate fact of life that the US is an extremely important elephant in this jungle. Indeed, much of the delay over the signing of the 1994 Marrakesh agreement was due to misbehaviour on the part of the United States and the European Union. In the final stages of the Dunkel draft, more time was spent debating French agriculture than considering any of the poor and developing countries.

I am worried that those who complain the most about the WTO are, in fact, the rich countries rather than the poor nations. Perhaps I may say that two-thirds of those who attended the Seattle conference were sent there by AFL-CIO, which, I am sure, wishes only to do a good job of protecting its members. However, every job protected in a rich country takes away a job that could be created in a poor country. It is important that the rich countries take a positive attitude to the restructuring caused by freer trade, rather than adopt a passive and protectionist attitude.

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Every time a factory closes in this country, a Minister feels compelled to say that he will protect those jobs. I do not know why that is so. We should say, "That is a fact of life in free trade. We should advance, restructure, reorganise, retrain and then open something new". We should not be protecting our car industry, coal industry or iron industry. That is not the way to encourage development or to eliminate poverty in the world.

If the rich hang on to their gains, if they do not make the necessary structural adjustments, we shall not see the poor get any richer. The European Union should be more bold than it has been so far in adopting a true leadership role in WTO negotiations. Furthermore, it should commit itself, through its own policies, to stop the subsidy of domestic industries--as is still done all too often. I appreciate that that is a harsh lesson. Many of us who have been on the Left and progressive side thought that the state should be the protector of jobs. If the state does not protect jobs, we worry. However, if we protect jobs over here, then we shall destroy jobs over there.

It is important to adopt a positive and, indeed, an internationalist attitude in this respect. Furthermore, the EU should take the lead. I am not at all fascinated by Monsieur Bove, the maker of a highly delightful cheese who enjoys a great deal of protection, when he risked the anger of the great multinational corporations by destroying a McDonald's restaurant in France. He does not, by any means, represent the poor. He represents only a form of European protectionism fighting a form of American protectionism. We must declare that we are not too interested in that kind of thing. If the poor countries are to become rich, they will do so as a result of greater open access to markets in developed countries. Developed countries should not erect any form of barriers to trade with such countries; indeed, they should encourage it as much as possible.

A strong argument was advanced by my noble friend Lord Parekh that some developing countries are not yet ready to benefit from trade. But the answer is not to keep them in that state, but to enable them to benefit. The poor do not benefit from trading with the poor; they benefit from trading with the rich, because that is where the money is. Unless that is done, they will not advance.

Perhaps I may make one controversial point. I am not at all sympathetic to the EU banana policy. The EU had a 10-year notice that the banana policy was not acceptable in terms of most-favoured nation status and liberalising trade policy. It is not a good idea to keep a mono-crop country mono-crop. All these years, we have paid lip-service to economic diversification, but have not implemented that approach. It is no good complaining that Chiquita bananas are produced by large-scale corporations, that there is a great deal of investment, and so on. Why did not the EU invest in those banana production facilities? How do EU countries think that poor banana growers will become rich? By remaining poor banana growers? The poor of Honduras and Guatemala who work to produce the bananas are employed by Chiquita and probably have

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decent working conditions. So we need to examine carefully whether the EU has done well by its former colonies where bananas are grown. Structural readjustment is necessary, not merely in terms of economies but in our whole approach.

12.41 p.m.

Lord Taverne: My Lords, it is always a great pleasure to follow the noble Lord, Lord Desai. Like him, I am a strong supporter of the WTO. I need not make the case for it, because the noble Lord has done so eloquently. The noble Lord is all the more persuasive an advocate for the WTO because no one can accuse him of being a spokesman for the multinational companies or of being unsympathetic to the plight of the developing world.

In the course of the committee hearings, the case was also made powerfully by Clare Short. Perhaps I may quote part of her passionate evidence, which is cited by the committee at page 10 of its report. She said:

    "The fastest reduction of poverty for the largest number of human beings that has ever happened in human history was East Asia's progress over the last 25 years, and it is built on opening up their economies to inward investment and trade and export and a ... concentration then on education of their people, a fantastic achievement ... just in pure numbers of people getting out of abject poverty and seeing improvement in their lives".

That was a quotation worth making in the body of this interesting and excellent report.

Perhaps I may begin my comments with another quotation from Clare Short concerning the attitude of some of the NGOs. It appears at page 19 of the report. She says:

    "We have got lots of people from industrialised countries speaking on behalf of the interests of developing countries who, in the words of the Minister from Malaysia, are almost trying to save the developing world from development".

Had I been her, I might have cited a different authority than a member of Mr Mahathir's cabinet. Nevertheless, her remarks are telling. It is a pity that some of the NGOs, who start with excellent motives, have in so many respects begun to advocate policies that will be counter-productive to their aims. I was for a long time a supporter of both Friends of the Earth and Greenpeace, but both have turned against science and their attitudes to some of these issues are not helpful to their own causes.

I want to touch on three issues that are of central importance to the developing world. What I like about the report is that it does not pull its punches. It slightly obfuscates and fails to deal with one or two issues--for understandable reasons--but others it faces squarely. A good example is the common agricultural policy. The lack of progress in reform may be understandable, but the fact remains that it is an absolute scandal. It is vital that there should be progress if we are to deal with hunger in the world. One can only hope that the needs of enlargement will produce more rapid progress than has been made so far. As the report points out at page 35, the developing world needs better market access; it also needs a reduction in subsidised exports and a reduction in domestic support.

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What is the effect of the common agricultural policy? It is put very well at page 271 of the evidence to the committee, in the words of a submission by Oxfam:

    "The Common Agricultural Policy causes massive market distortions, and directly contradicts other EU policies which aim to promote development ... The dumping of subsidised Northern exports in developing countries distorts markets, undermines the competitiveness of often highly efficient local producers, and threatens rural livelihoods and food security".

Members of Friends of the Earth and others should note that point. So often, when the argument is advanced that the developing world needs GM foods, they turn round and say, "That is not the answer. There is plenty of food in the world. All we need is to do is distribute it more fairly". There is plenty of redistribution already. There is redistribution through the common agricultural policy. Let me repeat the words of the report:

    "The dumping of subsidised Northern exports in developing countries ... undermines the competitiveness of often highly efficient local producers, and threatens rural livelihoods and food security".

That is a point worth making. We have often pandered to some of these lobby groups to a disgraceful extent.

That brings me to my second point--one which the committee studiously, though understandably, avoided: the attitude of European countries to GM food. There was a report in The Times yesterday about yet a further statement by leading academic authorities, leading scientific bodies, in the developing world and the UK. The Royal Society played a major part. Those authorities repeat what should be common knowledge: that GM food production is an important part of the solution to the problem of feeding the world. It means that crops can be grown in arid regions. How can we solve the enormous problem of improving agricultural productivity by conventional agriculture? That means using up marginal land, with economically and ecologically disastrous consequences. Water shortage is already a major problem to urban society. Food shortages cannot be met through extra irrigation. We need GM technology. But the European Union will not even discuss the issue properly. This is one issue on which the United States is far more sensible than we are, and far more progressive. Europe places massive obstacles in the way of exports of GM crops which the developing world needs.

The situation is made worse by eco-labelling. I understand that if consumers want eco-labelling, it is hard to deny them. One cannot tell consumers what is good for them. But one should also remember that this is done on a totally irrational basis. There are no grounds for the special labelling of GM products when there is no evidence whatever that these products are a danger to health.

I attended the OECD conference in Edinburgh where there were 400 experts from around the world. At the end of the conference the chairman, Sir John Krebs, asked, in the presence of representatives of Greenpeace, consumer groups, Genewatch and Friends of the Earth, whether anyone at the gathering had evidence of any kind of harm caused by GM foods, any danger to health. There was absolute

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silence. That was enormously significant. Hundreds of millions of Americans have eaten GM foods for over a decade. There is no shred of evidence of harm to health. I am glad that at last this has been recognised at least by the Commission of the European Union. In today's Guardian there is an article about the complaints by Greenpeace as a result. Commissioner Byrne believes that we must be realistic and recognise that there is no scientific evidence whatever of danger to health from GM foods.

My third point is concerned with intellectual property rights. This is another difficult issue on which the report makes no clear recommendation, as the noble Lord, Lord Tomlinson, observed. I sympathise with the committee because it is a very complex issue, the solutions to which are not clear. Like the report, I accept the need for patents to encourage innovation and investment, but I also believe that the balance has swung too far in favour of the multinationals and against developing countries.

I have some sympathy with submissions made by Friends of the Earth which can be found on page 47 of the evidence:

    "the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement threatens the culture and livelihoods of communities in poorer countries, by imposing intellectual property rights systems that blatantly disregard local agricultural knowledge and tradition and discourage production of cheap pharmaceuticals".

Clare Short has said that there are some terrible myths in this field, and that may be true. I do not have sufficient expertise to talk about this matter with any great authority. However, there seems to be an imbalance here. I am glad that my noble friend Lady Sharp provides powerful support. Some unreasonable requirements have been placed on the developing world under TRIPs and I believe that it should be looked at again.

Several multinational companies appear to recognise that. Spurred on by Mr Gordon Conway, Monsanto has made important concessions. For example, its work on the genome sequence of rice has been made available free to the International Rice Institute in Manila. It also hopes that various licences can be waived to deal with the insertion of the vitamin A gene into rice. Recently, Novartis has also announced similar concessions. While we should be critical of multinational companies, we should not abuse them unreasonably because they are part of the solution. There is also a certain amount of good-will there which can be exploited. However, it should not simply be a matter of compassionate waiver; one must look at the agreements themselves. One cannot rely solely on compassionate waivers to help to solve the problem of hunger in the world through the exploitation of GM technology.

I welcome the report and the speeches made in this debate, including the very distinguished contribution by the noble Lord, Lord Parekh. As the noble Lord, Lord Tomlinson, said very eloquently, if the new round is to be successful it requires meticulous preparation. Some very difficult problems must be

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solved and hard choices made, and the sooner the issues are more widely debated and considered the better.

12.53 p.m.

Lord Bruce of Donington: My Lords, I congratulate the Government and the usual channels on providing this House with an opportunity to advise the Government on their whole attitude towards the World Trade Organisation and the desirability of furthering its objectives. We can do very little other than offer advice, unless we happen to be happy members of a focus group that is charged with a specific task. However, on the assumption that we are all equal, our advice should be taken into account.

I find the report of the Select Committee very interesting. It indicates the deliberate choice that this House should consider the line of action to be taken by the WTO but with particular reference to the European Union. After all, we are considering a report by the Select Committee on the European Union.

While I agreed with most of the speech of the noble Lord, Lord Tomlinson, I marvelled slightly at his extreme politeness in dealing with the role of the European Union in these matters. The report is very pungent in its views on part of the role of the European Commission. For example, in the summary of the opinion of the Select Committee one sees in paragraph 9 on page 3:

    "We recognise that under the EC Treaty it is inevitable that the Commission will negotiate in the WTO on behalf of Member States. The terms of the mandate which has been given to it allow considerable flexibility, but it is important that the Commission should act strictly within the limits of its authority--and disturbing that some important decisions seem to have been taken without reference back to Member States".

That is further elaborated in the evidence of Mr Stephen Byers and Clare Short at pages 207 to 216, to which I commend your Lordships' attention. From that it is quite clear that, without taking all proper steps to communicate with the Council and its members, some of whom were there, the Council deliberately arrived at decisions in regard to recommendations for the post of director general which ran contrary to the views of member states which the Commission did not contact. These are serious matters.

It is important to understand the whole machinery for arriving at agreement and action in this field, whether on behalf of the companies involved--I assume that they are involved not only in trade but services--or others. After all, "agreement" means "discussion" which in turn means discussion between people who represent governments, NGOs or whatever they may mean. Most noble Lord will be aware from their personal experience that such discussions and the preparations for them have one characteristic in common: they take time. Time is required not only to consider all the factors but to formulate opinions and to read the various documents which are placed before governments before they arrive at decisions. The UK Government do not lack paperwork from the European Commission on which

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to arrive at decisions. I am aware that day after day they are literally deluged with draft proposals or draft legislation in the form of rules, regulations or whatever. Furthermore, it is clear that in this House and in another place the scrutiny committees are able to see only a fraction of the material that emerges from the European Commission.

I raise this matter deliberately, because, if somebody--it could also be put in the plural--is to take action to achieve the objectives of the WTO, he must be aware of all the current developments and also the attitude of others before negotiations can even begin. That is a pretty prodigious task. I am convinced that my own country--I take it as the United Kingdom for the moment without its association with the European Community--has all the basic qualifications to enable it to negotiate the United Kingdom's position with the WTO of which it was a founder member.

In correction of somewhat undue modesty towards the United Kingdom's own position, achievements and power, we should remember that we have a unique advantage enabling us to have either a direct link with the WTO or through our representations within the European Union. We should remember that we are probably the fourth largest economic power in the world with the USA, Germany and Japan. We are a founder member of the Security Council. We are a member of the G7. We are a member of the IMF, the World Bank, the Commonwealth and NATO. We have enormous power at our disposal. Instead of denigrating that power in favour of others--by calling for "must-catch-up-with"; or "must-catch-the-bus" and the rest of the paraphernalia which our own country has denounced--we should remember that we are a country of some significance and with a history of some significance in relation to most of the powers that exist in the world and the developing countries.

I raise that point because the common agricultural policy has been touched upon, in particular by the noble Lord, Lord Taverne. Does any noble Lord think that the European Commission has any intention whatever substantially to amend the common agricultural policy? Yet there is common agreement--it is shared by all sides of the House and another place--that the developing countries must be free to supply the world with their own food products which will enable the developing countries to have their proper share of world prosperity. There is not the remotest chance of that happening. If we were to think for one moment that there will be any drive from that quarter in that direction, we delude ourselves. When I had the honour to represent your Lordships' House and the country in the European Parliament at the beginning of 1975 there was talk about drastic reform of the common agricultural policy. Some minor amendments have been made since but the Commission has no intention so to do.

This is a debate in part on the European Community and I venture to reiterate my own views although they have not always been popular in your

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Lordships' House except in relation to fraud where there is general acceptance of my original observations made many years ago.

The European Commission has one overriding purpose: to become the government of Europe. I can provide many quotations; I shall not weary your Lordships with them. But everyone knows that this is what it is bent on doing. So it goes into discussions on other matters always with that one reservation in mind: that whatever it does must be strictly in conformity with its drive to be the government of Europe. That has been emphasised many times, not only here but in many other countries.

On the other hand, we are in a different position. We have the powers and the reputation which I have mentioned. I refrain from adding for good measure a measurement of time, the English language, and so on. We are unique, in particular from the Commonwealth standpoint. I talk of India and Pakistan--even though there are differences there. Our influence is enormous if only we care to use it; if only we can spare the time to do so and if only we can identify those matters in the European Union which are of real value and on which there should be detailed co-operation. I refer to the fields of the environment, long-distance transport and many others. If we confine ourselves to those areas we should then proceed with speed to organise--if necessary on our own initiative, together with other members of the WTO--a conference at which meaningful negotiations can properly take place without there being any division of interests.

Yesterday in another place my right honourable friend the Prime Minister revealed a report dealing with the Government's activities. It is clear that in many significant fields very great progress has been made. It is also clear that much more still has to be done, and one such example is that we abandon the concept of trying to get to the heart of Europe--whatever that may mean. We do not need to be at the heart of Europe particularly when the events over the past year and the frauds revealed since demonstrate that the core of Europe as it is now is already rotten. We have no need to be part of it but should rely upon our own judgment, our own Civil Service and many loyal European Commission civil servants too. They are not all in the same category as those in some of the ministries which have been criticised. This is the way to gain a World Trade Organisation with extended influence, leading to more extensive prosperity throughout the world including the developing countries. I am convinced that my own country is probably the best of the lot in leading the propulsion towards that end.

1.8 p.m.

Lord Beaumont of Whitley: My Lords, I, too, join in thanking the committee for its report, and the noble Lord, Lord Tomlinson, for his introduction of it. It seems a most fascinating and suggestive report and in some areas very imaginative. Nevertheless, on behalf of the Green Party and myself I have queries and reservations. I believe that in some areas the report should have gone further.

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The committee concludes that it would not be appropriate either to bring the WTO formally within the United Nations family or to establish a WTO parliamentary assembly. But nowhere in the report do I find those particular conclusions supported by argument. I do not know why it came to that conclusion and the report does not appear to give any indication of how it was reached.

I and my party believe that to bring the WTO into the UN framework would be a welcome insurance against the progressive hijacking by trans-national corporations. If this was to be done, there would be little point in a WTO parliamentary assembly. If it is not done as the report suggests, I think that a parliamentary assembly would probably be a very good thing.

I welcome the conclusion in paragraph 9 of the summary that the tendency for the European Commission to negotiate on important points without referring back to the member states--I join with the noble Lord, Lord Bruce of Donington, in condemning that--should be nipped in the bud, if it is not already a thriving branch. I also welcome the call for the WTO to hold dispute settlement procedures in public. These are matters of the utmost importance which affect everybody. Indeed, the whole of paragraph 31 on this subject provides us with an admirable and imaginative expansion of that idea.

Paragraph 16, on finance, is important. The WTO must be properly financed, and the idea of even considering privatisation is appalling. The committee's request for an explicit acknowledgement that agriculture serves many purposes is most important and long overdue. Although I wish to see European agriculture thriving, I entirely concur that the EU should prevent dumping in world markets. However, since I and my party believe in the supreme importance of every country being able to feed itself as far as possible, it follows that we would not go along with opening EU borders to unprocessed agricultural produce from the undeveloped countries. They should, if necessary, be encouraged not to rely on one form of produce, as the noble Lord, Lord Desai, suggested with regard to bananas.

Finally, I join your Lordships in deploring another round without adequate thought. It would be a recipe for chaos, even if it was held on a desert island, and, although in our view more chaos would be preferable to a retreat to the status quo ante, a serious, well thought out reform of the whole institution is preferable to either.

1.13 p.m.

Lord Sharman: My Lords, I welcome the opportunity to contribute briefly to the debate. I too was a member of the sub-committee which produced this report and which was so ably chaired by the noble Lord, Lord Tomlinson. I should like to associate myself with the tributes paid to the work of our Clerk, Dr Elizabeth Hopkins. It was my first experience of

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working on a sub-committee, and whatever this House may lack in quantity of resource, it is assuredly compensated for by its quality.

I shall confine my remarks to four issues. They may not be the most important but they struck me rather forcibly as we gathered evidence and reviewed our conclusions. They are transparency, trade in services, competition rules and whether free trade is fair trade.

References to transparency are sprinkled throughout the evidence and the report. I was interested to note the CBI brief, which many of your Lordships may have received and which is entitled Global Trade: Global Gain. After a statement with which I found it difficult to associate myself, namely that trade is a sexy issue, it says that the issues of transparency and accountability need to be tackled. Although transparency is vital for proper accountability, it is not a panacea for all our problems. Indeed, when used by different people the term does not always mean the same thing. Sometimes the organisations that complain about a lack of transparency are really complaining that they do not always get what they are lobbying for. Other organisations use it to complain that they have not got their desired seat at the table.

The report demonstrates that the WTO is a relatively transparent organisation. It publishes a lot of information on its website and in its documents. The EU and our Government are to be congratulated on their degree of transparency. I associate myself with the remarks of the noble Lord, Lord Lea of Crondall, concerning the mandate. If ever a document demonstrated transparency, the mandate is it.

Clearly further progress is needed on this vital issue, most importantly perhaps by holding dispute settlements in public. Great progress has been made with the dispute settlement process, particularly by enabling the provision of lawyers for everyone and by providing quasi legal aid, but public hearings of dispute settlements would be a valuable step forward.

I should like to associate myself with the remarks made about trade in services by the noble Lord, Lord Freeman. Despite what many may think, although we are both superannuated members of accounting firms, we have not talked about this issue before. To many, the WTO equals trade in produce. Yet as the noble Lord, Lord Freeman said, services as a proportion of the total economies in the developed and developing world are not only important but growing. It is important to make progress on that front. The CBI perceives that as a priority.

I welcome the formation of the European Services Forum, but it needs to ensure that it has adequate links directly into the governments of member states. It is important to remember that the EU derives its mandate from the member states and not from trans-European entities. It is also important that we should see more input other than from the financial services industry and professional services. It was noticeable that the overwhelming majority of evidence from trade in services came from financial services or professional services. Areas such as travel, tourism and the like were noticeably absent.

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It is also an area in which non-tariff barriers can provide a significant impediment to trade, particularly the use of regulation. I, too, endorse the notion of the principle of national treatment as one way forward. By "national treatment", I mean that foreign and domestic service providers should be treated the same way.

I turn to competition and competition policy. It is linked with investment but I want to carve out the issue of competition. It is a very difficult area and the temptation must be to place it into the "too hard" box and leave it there. I accept that limited progress in the area will be possible. Again, the CBI in its submission notes the need for a level playing field.

Whether we like it or not, globalisation is with us. It is a driving factor and there is a need to have some form of framework. It is noticeable that many developing countries have no national rules on competition. I would encourage the Government to make a start. I do not believe that the matter should be put aside--the temptation will be to do so and to leave it--but that a start should be made on the framework.

I turn finally to the issue of free versus fair trade. In much of the evidence that we took the WTO was characterised as being hell-bent on unlimited free trade. That was the criticism levelled against it. The notion was advanced that free trade in that sense cannot be fair and that what is needed is fair trade to ensure that the benefits of free trade are shared more equitably. I suspect that that notion lies at the root of much of the criticism of the WTO and the assertions that it is broken beyond repair. I do not believe that to be the case and neither the report nor the evidence supported that view. It is clear from the evidence that if the WTO did not exist we would need to invent it to do the job that it is doing.

I, too, was most struck by Clare Short's evidence of the benefits which can be demonstrated. As is stated at the beginning of the report by the RSPB, it is not a question of rules or no rules; the question which faces us in ensuring that we have a balance between fair and free trade in the world trading system is: whose rules and what rules?

1.23 p.m.

Baroness Byford: My Lords, I, too, want to congratulate the noble Lord, Lord Tomlinson, and members of the Select Committee on their report. It is detailed and raises important issues for the future of international trade. The rules-based system encourages trade and services and should include help for developing countries.

Perhaps I may concentrate my few comments on agriculture, as I know that other noble Lords have dealt with the other important and wider issues.

In March last year, when the EU agriculture Ministers met, they came forward with new proposals for changes to the CAP. At that time, some people within the farming community suggested that the original proposals did not go far enough. At a later meeting of heads of state, the proposals from agriculture Ministers were watered down even further.

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The CAP reform was a farce and a disappointment. Important issues were not tackled and several noble Lords have mentioned them.

At the time, we on the Conservative agriculture team and many others spoke out against the failure of the EU to achieve radical reform and pointed out that it would add to the difficulties of the conference in Seattle later in the year. That proved to be the case. It was recognised that the reduced proposals would weaken the EU's position when WTO talks took place later in the year. That is the background against which I want to base my comments. The noble Lord, Lord Tomlinson, spoke positively of the need for proper reform of the CAP and many other noble Lords mentioned it today.

The Select Committee's report clearly recognises the difficulties. Paragraph 19 on page 4 states:

    "We should like to see explicit acknowledgement within the WTO of the fact that agriculture serves many purposes (though preferably avoiding the barbarous term 'multifunctionality')".

The problem is that I cannot find a more simple term. It continues:

    "But we do not agree that this provides a justification for continuing the Common Agricultural Policy in its present form ... we remain convinced that more radical reform of the CAP is needed".

Perhaps at this stage I should declare my interest in a family farm in Suffolk.

Paragraph 33 on page 6 states that the EU,

    "should be going for a Round which concentrates on the issues where progress is most likely to be achievable, rather than for looking for trade-offs on the broadest possible canvas".

I support that suggestion.

Yesterday I was not in this House. I left early and was at the Great Yorkshire Agricultural Show, the eighth show I have attended this year. Farmers are not asking for special treatment, but they are looking for a level playing field. That is another phrase I do not like but I have not found a substitute. Farmers look to the Government to ensure that they do not have to carry extra burdens which have not been imposed on farmers in other countries.

I want to share some thoughts with your Lordships. Extra costs imposed upon our farmers are the result of extra regulatory burdens imposed on them by Brussels. As regards animal welfare standards, I want to place on record my appreciation to all our farmers, who work to the highest standards. They do not want to reduce those standards; they want to maintain them. However, producers who send products to this country are not required to achieve those same high standards. That imposes extra costs on our farmers.

We in this country have adopted various countryside stewardship schemes in order to improve our environment. Indeed, we have encouraged farmers to take greater care of it. However, I suspect that the concept of supporting farm incomes in return for farmers producing environmental goods rather than food could come under heavy criticism from other

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trading nations. That matter was raised with me by British Cereal Exports. It expressed its concern that the Cairns Group is likely to claim that the payments are a disguised way of supporting farmers to produce food. In countries such as Argentina and Canada, where population density is low and the area used to produce food rarely seen by the majority of the population, there is great difficulty in convincing people that farmed land has uses other than food production.

Fourthly, and perhaps most importantly, it stated that farmers are accused of receiving subsidies when other countries--for instance, America--support their farmers financially but under a different terminology and a variety of different schemes. Unlike us, they do not use the term "subsidy".

Surely, we must all agree that we must move forward and speak the same language. Unless we do so, in trying to solve problems we shall be approaching them from different angles. As regards the agriculture industry in Europe and internationally, I fear that that is one of the biggest problems that we face. We all approach this matter in a different way, and I hope that the report, which I welcome, will strengthen the ground rules. If we do not understand each other and accept that others have safety nets, or whatever, we shall not reach common agreement, which I believe we all desire.

On pages 34 to 36, headed "Anything but Agriculture", the report recognises the challenges which face EU countries in trading in the global world. Paragraph 133 recognises that, whether the EU likes it or not, negotiations on agriculture cannot be avoided. That I heartily endorse. In the following paragraph--No. 134--the committee states that,

    "[it] is not surprising, with not only the Cairns Group but also developing countries ranged against the EU",

that there are problems to tackle.

I thank the noble Lord, Lord Tomlinson, and all those who contributed to this important document. I apologise if my comments have leaned towards the issue of agriculture. However, I believe that the report gives a good example of some of the real problems that we face, I suspect in other industries, too, but particularly in farming and animal welfare.

The noble Lord, Lord Desai, who is not in his seat at present, mentioned subsidies. However, the truth is that at the moment, for example, approximately 40 per cent of chicken breast imports to this country come from developing countries. It is known that many countries do not have to adhere to the strict regime that we have in this country. Why does that matter? It matters because our farmers are more likely than ever to go out of business. Last year some 18,000 went out of business. If that continues, two things will happen: our rural community will not be helped but, more importantly and more worryingly, some of the great expertise that we have within that sector will be lost.

I thank the noble Lord, Lord Tomlinson, for giving us the opportunity to debate this issue. It is hugely important because we in this country, within Europe

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and, indeed, throughout the world wish to move ahead with a freer trading environment. However, we must do so with a basic understanding of our intentions.

1.32 p.m.

Lord Grenfell: My Lords, I begin by thanking my noble friend Lord Tomlinson and congratulating him warmly on the excellent report from Sub-Committee A of the European Select Committee. I speak quite objectively because it was not until 9th May that I rejoined Sub-Committee A. Its members were near the end of their labours and were about to deliberate on the chairman's draft report, a text in which I recognised the sure and experienced hand of my friend Dr Hopkins, to whom I pay great tribute.

My noble friend Lord Tomlinson has given an excellent summary of the report. After listening to many speeches covering a wide range of issues, I want to pick out only a few of the report's conclusions which strike me as being of major importance.

Quite rightly, the report endorses the assumption in the EU mandate--I agree with my noble friend Lord Lea of Crondall that, by and large, it is an excellent mandate--that globalisation accentuates the need for a rules-based trading framework which only an international organisation such as the WTO can provide. Those who fear globalisation and demonise the WTO as globalisation's evil agent cannot or will not grasp that point. It is because the largest countries stand to gain the most in absolute terms from trade liberalisation that the WTO, as my noble friend Lord Desai said, is needed to make sure that rules of the game exist to ensure that developing countries make substantial relative gains and that those rules are followed in that, among other, areas.

The European Union understands that, even if it does not always follow it to the letter. The case of bananas has been quoted. The EU's mandate affirms its support of a multilateral system which rejects protectionism and unilateralism. However, that in itself is obviously not enough. The committee's report rightly insists that the EU mandate reflects a firmer commitment to a fairer spread of the benefits which flow from a multilateral, anti-protectionist trading regime.

I am glad that the inquiry concluded that the demonstrations in Seattle, unhelpful as they were, were not the prime cause of the collapse of the negotiations at the ministerial conference. The failure to prepare properly, the choice of venue, the chairmanship and the often insensitive handling of the developing countries' participation contributed in varying degrees to the eventual debacle. The report rightly does not mince its words in deploring the great harm done to public confidence in the system by that collapse and in its insistence that further failure cannot be contemplated.

The previous eight post-war rounds made a progressively important contribution to the world's economic expansion and integration, and there is no reason why further rounds should not bring further significant gains. From the beginning, as the report

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notes, the GATT depended on a process of wide negotiation and trade-offs, and it has worked well. Therefore, the EU would do well to maintain the principle of a comprehensive mandate, which it should execute pragmatically and flexibly.

On that point, perhaps I may refer to a remark made by my noble friend Lord Bruce of Donington. He stated that the Commission had exceeded its mandate, as we know that it did on one or two occasions. However, that was not in order to influence the appointment of the director-general of the WTO; it was in relation to the appointment of a chairman of the agricultural group in order to continue the work after Seattle.

I seek to reassure the noble Lord, Lord Beaumont of Whitley, as to why we do not feel that the WTO should be part of the United Nations' organisation of agencies. It should perhaps have been spelt out more clearly in the report, but we subscribe to the views of Mr Andrew Stoler, the deputy director-general of the WTO, as set out in paragraph 58 of the report. For many reasons, given in his evidence at questions 462 to 464, he felt that it would be inappropriate.

A heavy responsibility also lies on European Union governments, on academia and on the business community to make information about the trading system more widely available, including how the system operates and what benefits are derived from it. It is truly depressing that so much of the hostility directed at multilateral trade negotiation is based on a needlessly inadequate public understanding of what is at stake and how benefits can best be secured and fairly distributed. That also raises the question of the WTO's own transparency, referred to by the noble Lord, Lord Sharman. As Martin Wolf recently pointed out in the Financial Times, the organisation is becoming vastly more accessible. However, critics are right to call for public access to the dispute settlement process and, at the least, immediate distribution of the minutes of official proceedings. I believe that the report reflects some of those concerns as well.

Of course, as the report points out, it is absolutely crucial that the voices of social partners and of the NGOs concerned with WTO issues be heard. I agree that on the whole the United Kingdom Government, the EU and the WTO itself have been open on those issues. However, as I insisted just a moment ago, still more information needs to be disseminated to target audiences if hostility through lack of understanding is to be progressively reduced.

That is one of the many reasons why the WTO needs more resources. My noble friend Lord Tomlinson referred to that. Its entire budget is no more than the United States' contribution to the Food and Agriculture Organisation. That is ridiculous. The report rightly praises the secretariat for managing as well as it does on such limited resources and insists that the European Union must demand that WTO financing by member countries is put on to a much surer footing.

Another resource constraint is in the provision of sufficient finance and expertise to build up the capacity of the developing countries to implement agreements

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already entered into in the Uruguay Round, as well as future agreements. That should not fall exclusively on the developing countries. Many will have neither the financial resources nor the expertise to manage. This is a prime area for co-ordination among the relevant international organisations. The so-called integrated framework--a programme of co-operation to provide technical assistance--has been in existence since 1997, but it appears to have done almost nothing and to have been virtually forgotten. Financing is doubtless the problem. As our report says, the EU must press for a resolution to the problem. The steps taken in early May to set up a special procedure to resolve the implementation issues are a promising sign. We hope that that process will not wither on the vine.

As the report states:

    "If developing countries are to be persuaded to continue to co-operate in the multilateral trading system, they will need to be convinced that the system has the ability and the will to understand and address their problems".

That goes far beyond the implementation of the Uruguay Round. As the report insists, it is crucial that the EU should continue to do everything possible to make the new round a real development round.

The EU waxes eloquent on that point in its mandate, but there is an age-old legal principle that a plaintiff must come to court with clean hands. If the EU wants co-operation from the developing countries, it cannot continue to avoid changing its agricultural policies to prevent the damaging dumping of its surplus on world markets and must permit access to its markets for the agricultural exports that are the economic lifeblood of so many developing countries.

As other noble Lords have pointed out--it cannot be said too often--if the EU continues to insist that the next round must be an "anything but agriculture" round, it will fail. The CAP must be reformed anyway to ensure that an enlarged European Union does not sink under the weight of its costs or see the new members revolt against the lack of fair access to its benefits.

Reform is also crucial to the global trading system. The European Union claims that the shift from market price support to blue box payments has resulted in a major decrease in the trade impact of CAP support. I agree with the noble Lord, Lord Lea of Crondall, that there has been movement following the Macsharry reforms. However, the system still distorts trade and must be reformed. Just a few days ago, on 30th June at the WTO talks on agriculture, the United States made it brutally plain that it and the Cairns Group want the complete elimination of farm export subsidies by a fixed date. I listened with great care to what the noble Baroness, Lady Byford, said. I agree that the US subsidises its farmers, but puts it under a different name. However, that does not stop the Americans telling the European Union that it has to abolish its subsidies. They will not give up easily until they have seen some progress. The European Union must see the writing on the wall and read it carefully.

The EU must seriously consider giving a lead by allowing duty-free access to all imports from the least developed countries, not just "essentially all", which is

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the current formulation. That is a cop-out, the long-term costs of which to all participants in the global system will outweigh the short-term gains to the few.

My penultimate remark is that the report is right to point to the real danger of overloading the WTO with responsibilities that would more appropriately be borne by other international organisations. Issues such as labour standards and the environment are highly contentious and risk allowing too easy resort to contingent protection through sanctions. That burden should not be placed on the WTO. The issue should be handled elsewhere and must be the subject of domestic policy improvements, freely embraced and respecting levels of development and cultural sensitivities, as my noble friend Professor Lord Parekh said in his remarkable maiden speech. They must not be forced on developing countries as absolute conditions for full participation in a liberal trading system.

Finally, the report gets it absolutely right when it insists that we must not rush into a new round. The interim package put forward by the quad countries--the EU, the US, Canada and Japan--in March may, in the words of my right honourable friend the Secretary of State for International Development, be "a confidence-building measure", but it is surely not yet enough for a relaunch.

I do not know what got into the heads of the EU and the US when they agreed to try to launch a new round this year--a year of presidential elections in the United States and feverish activity in the European Union as it moves towards crucial decisions on enlargement to be made at the Nice summit. There are many lessons to be learnt from the Seattle failure and hard decisions to be made by all member states on issues such as strengthening the WTO, as well as a lot of thinking to be done on how to make a new round work. All those issues are prerequisites for a successful launch. The Government should mark well what this excellent report says.

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