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Lord Beaumont of Whitley: My Lords, before the noble Lord sits down, he said that Mr Stoler gave several reasons why the WTO should not be part of the UN system. In fact he gave only one, although he mentioned that there were others. That reason was the different costs, in the broadest sense, of entry to the two forms of organisation. No doubt the committee had good reasons, but it appears not to have explored that evidence or attempted to ascertain its validity. I hope that the noble Lord agrees that that issue was not sufficiently explored.

Lord Grenfell: My Lords, the issue was not widely discussed in the sub-committee, partly because there was instant agreement that the WTO was better placed outside the United Nations system.

1.47 p.m.

Baroness Williams of Crosby: My Lords, this has been an excellent debate. I congratulate Sub-Committee A on its excellent report. As well as congratulating the Clerk on a sterling piece of work, I

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congratulate the chairman of the sub-committee, the noble Lord, Lord Tomlinson, on this well organised and very difficult study. The complexity of the subjects covered in the report evoked my admiration. Having once had the great delight of serving on Sub-Committee A, I wish that I had been there.

However, I suggest that the committee holds one more brief session before moving on to its next study. Having heard debates on a number of EU scrutiny committee reports, I feel strongly about their extraordinary quality and value and the inability of the media to cover them. A look round the Chamber shows how much attention we are likely to get from the newspapers. Sub-committees and committees of the House must make the wider publication of their reports an objective. If that means that they have to ask to appear and give oral evidence before the appropriate parallel committees of other legislatures such as the European Parliament and the US Congress or that they approach the BBC and other international media bodies to create broadcasts dealing with the issues raised, so be it.

I believe too that we are somewhat behind the curve when it comes to attracting attention to and disseminating our conclusions. That is the next step which our committees should take. I say that because I believe that this report would have an excellent influence on the very governments it addresses with regard to rushing the next round and the disastrous consequences which that may bring in its train.

I do not wholly share the criticism that has been made of the NGOs at Seattle for one reason and one reason only, and on this I may have the support of the noble Earl, Lord Sandwich. Although one can question their methods, the NGOs obliged the WTO to look again at the issue of systemic reform. Systemic reform seems to be crucial if, as the noble Lord, Lord Parekh, said, in his excellent maiden speech, the system is to carry the confidence and trust of the great majority of trading nations.

The great danger to it is not that the system is wrong. It must be right to have a rules-based system of global trade. The worry is that those countries which consider themselves to be unfairly treated by the system may withdraw their support for it. As the noble Lords, Lord Tomlinson and Lord Lea, implied in their speeches, it is absolutely crucial that the great majority of sensible developing countries believe that the system works for them and not against them. I recently attended the OECD forum and I am not at all persuaded that that is currently true.

Therefore, what do we need? The report reflects on that. We need to address the issue of the representation of developing countries. In some of the evidence given to the committee, one of the disturbing factors which has not been much debated today was the use of the so-called green room for informal settlement of differences. I shall not use the word "disputes" because that is obviously a more formal procedure.

I read the report and the evidence extremely carefully. The situation arose in which the chairman of the Ministerial Council of the WTO had the right to

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decide who entered the green room. Her choice left out some 110 countries. That situation is bound to elicit deep distrust on behalf of those countries which simply were not there. So the first matter which the WTO must address before any new round is started is how the developing countries can be properly represented, whether by grouping them or in some other way, so that they do not feel that the process excludes their interests.

The second point that I want to make is drawn attention to in an excellent piece of evidence given by Oxfam to the committee. The report states:

    "In Oxfam's analysis, a key factor behind unbalanced WTO agreements has been the unequal negotiation power of members".

It is not only that in some cases members were not even represented in the green room; it is also that when they were they often suffered from inadequate advice and expertise. So the second point about the systemic reform of the WTO which is now required is the question of who makes the rules and how the developing countries can play a greater part in that.

In that respect, one of the challenges which we must meet is how to help developing countries to be properly represented. I am aware that this month there has been a press release from the WTO about the efforts being made to assist developing countries in representing their interests in the legal structures of the WTO. But what is being proposed by the donor countries is 20 million dollars over three years. I made a quick estimate and I worked out that that would pay for just 20 lawyers per year at the level that a highly professional American lawyer is paid. So we can see that we are quite a long way away from the effort which is actually required to give developing countries the opportunities they need to be heard.

In that respect, I share some of the doubts expressed by my noble friends Lady Sharp and Lord Taverne about the move with regard to intellectual property and in particular patenting as a universal principle. Again, patenting as a universal principle must be right but the difficulty is that there are literally dozens of countries which have no idea at all how to go about patenting their own inventions and inherited advantages.

I give just one example. At present countries which are seeking to protect the biodiversity of the rain forest, which sustains many forest peoples, some of them indigenous, simply do not know how to go about protecting what is part of their traditional knowledge and are frightened that that traditional knowledge will simply be exploited by major multinational companies. I agree with CAFOD and other NGOs that we should think hard about whether life forms should be open to patenting, given their significance for many of the poorest countries in the world.

One aspect which has been touched upon by my noble friend Lord Sharman and others was that of transparency. I add one other thought to what has been said already. It is important that the WTO should make an annual report; that that annual report should be made available to the parliaments of its members states; that chambers like this one should be able to

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discuss such an annual report. In respect of transparency, it is equally important, as my noble friend Lord Sharman and the noble Lord, Lord Grenfell, said, that we should advance and support very strongly the system of mediation and consideration of public hearings in respect of the dispute procedure.

I turn now to the general agreement on trade of services. I agree with what the noble Lord, Lord Freeman, and my noble friend Lord Sharman have said about that. In a knowledge-led economy, the movement of experts, of people with knowledge and skills, is absolutely crucial, particularly if the world is to benefit from that knowledge-based economy. I shall be very blunt. It is high time that the EU and to a lesser extent the United States began to address the issue of the movement of people. We all know the element of fear that is aroused when countries think that they will be swamped by huge movements of population. But we are allowing ourselves to get into a situation where we defend the fortress of our countries against virtually any movement. That is bound to operate against the most successful outcome for the global economy as a whole.

I refer in passing to the amazing development of software engineering in countries like India, which will be of benefit to the whole world, but not if the world turns its face against the movement to other countries of any of those software engineers on, I hope, mainly a short-term basis.

I do not wish to delay the House and so I shall make brief reference only to three final points. The first concerns the issue of PPM--production, process and marketing. In that context, I wish to make two comments. First, consideration must be given to environmental issues. We have not discussed that as much as I had hoped in this debate, but, as Oxfam points out, there is often a conflict between the legitimate desire to liberalise trade and the legitimate desire to protect the environment.

Anybody who travels widely in the developing world, as many of your Lordships do, must be aware of the devastating effect of cash crops on forestation and on the fertility of the earth. One has only to look at places like Nepal and the steady extension of plantation crops in much of South-East Asia replacing natural forest to see that there must be a better balance than that which is currently likely to emerge from the single-minded pursuit only of growth for its own sake. It is not growth but sustainable growth which should be our watchword.

The second point is that I agree with the noble Lord, Lord Grenfell, and others that the EU must face up to the need to reform the common agricultural policy. In that context I agree with the noble Lord, Lord Bruce of Donington--perhaps this is the only point on which I agree with him--that it is vital to end subsidised exports to the developing world that destroy many of their possibilities and opportunities for trade.

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Thirdly, and finally, I turn to this country. International trade is an issue that goes wider than the scope of the Department of Trade and Industry. It involves relations with all the other major global institutions such as the World Bank, the International Monetary Fund, the United Nations and UNCTAD, all of which are now directed towards the alleviation of global poverty.

The current Chancellor of the Exchequer has a distinguished record in trying to fight to relieve the heavily indebted countries and for education and health to be protected from budgetary cuts that may arise as a result of budgetary problems. Through the Chancellor, I would like to see the UK argue that there has to be a broad approach to these issues and that that must put at the forefront the need to rescue the poorest countries of all from consequences that we, who are stronger and more prosperous, can easily take on board. If we do not protect that small group of countries--not more than 40 or 50--at the bottom of the heap, the warning given in the impressive maiden speech by the noble Lord, Lord Parekh, whom we are delighted to hear in the debate, could well become a reality and we may face the alienation and fundamentalism of people who feel that the global order has nothing to offer them. It has much to offer them, but we need to be able to explain that to them and we need to be able to take their interests on board more than we do at present.

2.1 p.m.

Lord Northbrook: My Lords, we are all grateful to the noble Lord, Lord Tomlinson, for securing the debate on this important Select Committee report. I congratulate noble Lords on their contributions, particularly the noble Lord, Lord Parekh, on his fine maiden speech. I endorse the comments of the noble Baroness, Lady Williams of Crosby, that it would be good if the contents of the report were circulated to a wider public by way of the BBC, other media, newspapers or other publications.

Compared with other members of Sub-Committee A, I am a newcomer to the subject. First, I have to declare an interest as a farmer and investment fund manager in the City.

The collapse of negotiations in Seattle was a great disappointment to Members on these Benches. The talks were shrouded in controversy from start to finish with protest groups disrupting procedures. I support the remarks of the noble Lord, Lord Lea of Crondall, about the role of NGOs in the proceedings. Member states could not find agreement on an agenda for a new trade round in Seattle. The current limited agenda, which focuses on agriculture and services, agreed in 1993, will now go ahead as normal. Noble Lords on these Benches support the target of global free trade by 2020. We are disappointed that the talks did not make genuine progress towards that target and we call upon the Government to renew the fight to cut EU tariffs and to make a strong commitment to free trade.

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The Government make much of their influence with the EU but that influence appeared entirely lacking in the Seattle negotiations. As the report concludes, they should have encouraged other members of the EU to narrow the range of issues to be addressed in the round. As many noble Lords have said, the EU should have concentrated on the issues where progress was most likely to be achieved rather than looking for trade-offs on the broadest possible canvas, for example, getting involved in intellectual property rights, labour standards and the environment.

That would be facilitated by the EU making sensible changes to the common agricultural policy of its own accord and in advance of the next round rather than keeping them as bargaining counters. As many speakers have said, Europe's common agricultural policy is unsustainable in its current form, especially with the likelihood of enlargement. We, on these Benches, support radical CAP reform, but on the basis, as my noble friend Lady Byford stated, of a level playing field. That would mean shifting support payments away from production subsidies and towards income support measures that do not directly interfere with price levels.

Another option is to convert price subsidies into direct payments for public goods that the farmers provide, for instance, the maintenance of valued landscapes. Overall, it is clear that the matter of agricultural subsidies dogged the debate. In the words of the Seattle Times, the US and EU were at loggerheads over how far to go in reducing trade barriers in farming. It must not be forgotten, as has already been stated, that the US subsidises its farmers but often under a different name.

Looking in detail at the summary of the opinion of the committee, we on these Benches agree with many of the conclusions. There is a statement that the benefits of increasing world trade within a "rules-based system"--not cowboy capitalism, as the noble Baroness, Lady Sharp, stated--can and ought to outweigh benefits for all parties. The committee states that there is a need for international organisation to agree the principles on which the rules are to be based and to set and police the rules. That was the original basis of GATT, the predecessor of the WTO, with its emphasis on reciprocity and equal treatment for all trading partners.

We on these Benches broadly support the EU negotiating position on the desirability of further trade liberalisation. We agree with the report's view that the largest economies stand to gain the most, in absolute terms, from liberalisation. I was interested to see the table on page 9 of Volume I of the report showing the gains anticipated from trade liberalisation and putting the EU at the top with a gain of 92 billion dollars and the US at 45 billion dollars.

But developing countries are also likely to make substantial relative gains. The rules-based system, in our view, prevents a slide back into protectionism and strengthens the position of parties with less bargaining power. Therefore on these Benches we concur with the

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EU's reaffirmation of the multilateral trading system and of its basic principles as guarantees against protectionism and unilateralism.

A particular example of protectionism is tariffs. British consumers have to pay 8.9 per cent extra for chocolate from outside the EU because of the EU's common tariff wall; they pay 9.7 per cent for biscuits for the same reason; an extra 9 per cent for rice; 4.7 per cent for dolls; 12.8 per cent for clothes; 8 per cent for video recorders and 2.7 per cent for pens. In all the EU imposes a scarcely credible 15,600 separate tariff duties.

A large proportion of the revenue from that tax on consumers must be spent on merely collecting it, and the rest probably pays for the EU's programme of wasteful bureaucracy. The Government should demand that the EU drop those tariff barriers that cost the EU economy £300 billion a year. We call on the EU to show that it is serious about free trade by making a serious unilateral offer to cut or abolish a significant number of those tariffs, contingent only on multilateral acceptance of an agenda for the millennium round that would achieve dramatic steps towards tariff-free trade.

Looking further at the conclusions of the committee, we agree with the assumption in the EU mandate that globalisation accentuates the need for a rules-based trading network and that only an international organisation like the WTO can provide it. As the report rightly states, it is companies, not countries, which trade. As a result, the liberalisation of trade needs to be considered in conjunction with other issues and not in isolation. And the WTO needs to work in co-operation with other international institutions so that each can fulfil its proper function within the framework of international governance. We agree that the EU should press for a process to be established to achieve that.

The committee makes another major point; that is, that under the EC treaty it is inevitable that the Commission will negotiate in the WTO on behalf of member states. It is, however, as other speakers have commented, important that the Commission should act strictly within the limits of its authority and, again to echo other speakers, it is disturbing that some important decisions have been taken without reference back to member states.

The report quotes two key examples where that problem occurred. In the first there was a well-publicised case in Seattle where Commissioner Lamy agreed on behalf of the EU that there should be a WTO working group on biotechnology whereas the position of the member states was that that issue should be treated separately. The second example, already referred to, arose during March 2000 when chairs of various WTO groups were being appointed for the next year. The Commission blocked the appointment of the highly respected Brazilian ambassador to the WTO, Mr Celso Amorin, as chair of the group to take forward the negotiations on the built-in agenda to agriculture, reportedly on the basis that the country concerned formed part of the Cairns

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group. That decision went down badly. According to the UK trade Minister, Stephen Byers, the UK would have been happy to accept the Brazilian ambassador, but,

    "as part of the European Union there was a view that it would not have been helpful to have a leading member of the Cairns group chairing those negotiations at that particular time".

The report goes on to another issue: that the voices of the social partners and of the non-governmental organisations concerned with WTO issues should be heard. The report believes that they have been. Social partners and NGOs included trade union members and Mrs Hilary Colby, chair of the UK NGO network. The views of Friends of the Earth were canvassed. The report states tellingly:

    "It seems [to the committee] that the UK Government, the EU and the WTO itself have been commendably open over the issues, and that the complaints of NGOs about lack of transparency must sometimes be interpreted as complaints that their lobbying does not have the desired effect".

Finally, we support the proposition detailed in the report that the Government should involve Parliament as closely as possible in their preparations for WTO negotiations.

I conclude by saying that we on these Benches welcome the excellent report of the committee chaired by the noble Lord, Lord Tomlinson. We believe that it lives up to the fine traditions of this committee.

2.14 p.m.

Lord McIntosh of Haringey: My Lords, I join other noble Lords in welcoming the report of the European Union Committee on the EU's mandate on the WTO following Seattle. I congratulate all noble Lords who have taken part in this excellent debate, notably my noble friend Lord Parekh on an extremely thoughtful and well-argued maiden speech. There is much with which we can agree in the report. Of course, we are, by convention at least, bound to reply to the report within two months. But I can make two comments in that respect. First, this debate will form part of the evidence that we shall take into account for the response that Ministers will make; and, secondly, we are working very hard to ensure that Ministers approve a response and that it is published before Parliament goes into its Summer Recess. I hope that that will be helpful both to the committee and to noble Lords.

The committee's report makes it clear--and the Government fully agree--that a second failed attempt to launch a round would be very damaging for the world trade system. If we are to have a successful launch next time, we certainly agree that the correct political conditions will need to be in place, as well as an agreement on an inclusive agenda reflecting the interests of all WTO members. However, I shall return to the issue of timing, which is the critical issue and one in respect of which we may not be fully in sympathy with the committee, at the end of my remarks.

We believe that it is important for us to press ahead with work towards a successful launch of a new round of trade negotiations as soon as possible, with parallel work on the reform of the WTO. Like all who have spoken, we believe that a comprehensive round is in

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the best interests of all WTO members and of sustainable development. All countries can get something from a comprehensive round, notably the prospect of greater liberalisation of trade.

As has become clear in this debate, and, indeed, over the past nine months, there are far too many myths about the World Trade Organisation--the myth that it is undemocratic; that it is only there for big business; that it is bad for the environment; and bad for developing countries. I believe that those myths were very well rebutted by my noble friend Lord Parekh, but they still appear to be there. Moreover, as many noble Lords said, there remains poor public understanding of what the WTO is and what it does. That became very apparent at Seattle, or rather outside the meeting places in Seattle, where idealistic young people joined with hard-bitten, rust-belted trade unionists from the AFL and the CAO to protest, from entirely opposing points of view, against this most valuable organisation. It was the protests that made the headlines more than the failures within the conference chambers. But I do not believe that those protests accurately reflect the functions of the WTO. Indeed, they reinforce false arguments and scare stories about trade liberalisation and globalisation.

Trade liberalisation and the WTO do not benefit big business only. A prosperous world economy, with a rules-based world trade system on which the committee is entirely agreed, benefits producers of all sizes. It benefits small and medium businesses, not just large companies, and enables them to trade freely and with confidence. The exposure to international markets is one of the most important spurs to innovation and improving competitiveness. Nor does the WTO benefit rich, developed countries only; it offers equal rights to all trading organisations to the particular advantage of the smaller states in the global system. As has been said this afternoon, it is unique in that way and that is very much in contrast to other international organisations.

Unless we have a multilateral rules-based trading system, smaller countries will be unprotected against the greater trading weight of larger economies and some of the large multinational companies that are larger than the economies of the smaller countries. With WTO rules, we have to provide a basis upon which the world's major power blocks can handle their disputes without disruption and all the damaging consequences that would arise therefrom. Most of the day-to-day work of the WTO, which does not get reported--like the work of the committees of your Lordships' House--is directed at all of its members, especially developing countries and the members of those societies. My noble friend Lord Parekh is right to say that they need more aid and advice. The work must go on, Seattle or no Seattle. I believe that we can agree--I agree here with the noble Baroness, Lady Sharp, and the noble Lord, Lord Taverne--that for the less developed countries there must be clear benefits in prospect for a new round.

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I turn to the EU mandate. A small minority of speakers today--notably the noble Lord, Lord Bruce of Donington-- have expressed the view that the United Kingdom should not submit itself ("submit" is a prejudiced word, but he probably did not use it anyway) to the European Union mandate. We have worked for many years to secure that the European Union mandate not only benefits Europe and the world but also benefits this country. It always has done. It has particularly benefited UK exports. Our support for a European Union mandate--I do not think that the committee even questioned this--is fundamental to the way in which we play our part in the World Trade Organisation.

We support the mandate's recognition of the

    "need for an 'appropriate balance' between trade liberalisation and the other desirable objectives referred to in the negotiating position".

However, the report suggests that the European Union mandate should be reopened before the launch of a new round. The Government do not agree with that. We remain in support of the agreement at the informal Trade Ministerial held in Porto on 17th and 18th March of this year that the conclusions reached at the October 1999 General Affairs Council remain valid. The noble Lord, Lord Tomlinson, asked today for a review at ministerial level. That was a review, although informal, at ministerial level. We believe that the conclusions contain the necessary flexibility for the Commission to negotiate an agenda for a new round which is acceptable to all WTO members. At Porto, Ministers agreed that the Commission should continue intensive work on the launch of a round later this year.

Clearly the way in which we approach the new round must include the preservation of the transparency and the good relationships with NGOs which were perhaps almost the only good features of Seattle. The report concludes that the WTO

    "is remarkably transparent compared with many other institutions".

We in the UK need to ensure that global institutions, such as the WTO, command public support. Their proceedings need to be transparent and their roles need to be better understood. The Government support greater transparency. We are working with our EU partners to look at ways that this can be improved. That might include further de-restriction of WTO documents, an increased use of the Internet, and wider consultation by the WTO secretariat.

Whether the negotiations themselves should always be held in public is quite another matter. When we discuss that issue we have to bear in mind the sensitivities of other countries and include the sensitivities of the less developed countries. The inclusion of NGOs--the United Kingdom took a lead at the Seattle conference in that regard--should, and has been, continuing. We met with representatives from NGOs, business, labour, local government and consumer groups to discuss WTO issues in the run-up to a new round. These meetings have taken place since the beginning of the year and they will continue.

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I turn to the issue of coherence; in other words, co-operation with other international organisations. After the Joint Statement delivered by Moore (WTO), Camdessus (IMF) and Wolfensohn (World Bank) in Seattle, the United Kingdom has been following closely the implementation of this commitment to greater co-operation in delivering capacity building and technical assistance. There has been further work on this at official level in the G7/8, particularly with a focus on trade, finance and development. The widening of the trade agenda to include investment, financial services and domestic regulatory areas will lead to greater overlap between the work of international bodies and we will need more policy consistency at national and international levels.

However, these proposals are for policy consistency rather than for the kind of meta-international body which the noble Lord, Lord Biffen, fears and the noble Lord, Lord Freeman, hopes for. We are a good way from that kind of mega organisation which would supplant the existing international financial institutions. Certainly, any initiative for greater co-operation between the international financial institutions must come from the member states and it must be consensus driven.

We agree with the committee that the WTO secretariat is performing well and we are pleased to see the acknowledgement in the report that the UK is one of the member states which is giving adequate financial support to the secretariat. But I fully understand the point of the noble Lord, Lord Grenfell, about the need for security in future funding.

I turn now to the vexed issue of agriculture, which understandably took up a considerable part of the debate. Negotiations on the WTO agreement on agriculture were mandated under the Uruguay Round and are now under way. The WTO agriculture committee, meeting in special session, has called for proposals for the negotiations from members by 2000. I am sorry that I am not able to follow the noble Lord, Lord Taverne, into a debate on genetically modified foods, much as I would like to, as he knows from our previous debates on the issue.

The agriculture negotiations will focus on the liberalisation of agricultural trade and further reductions in agricultural support. To put it mildly, this sits well with our objectives for the further reform of the common agricultural policy, which has been urged so strongly by many speakers in the debate. The EU agriculture council has said that the decisions adopted within the framework of Agenda 2000 constitute essential elements of the EU position for the WTO negotiations, with the EU's policy being founded on the full Agenda 2000 package and will include--and must include--reviewing some of the key CAP commodity regimes over the coming years.

It was good to have the reminder from the noble Lord, Lord Grenfell, that enlargement will eventually undermine many of the bases on which the common agricultural policy at present exists. I fully understand the disappointment of the noble Baroness, Lady Byford, and of the noble Lords, Lord Bruce and Lord

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Northbrook, and others, at the slow pace of reform of the common agricultural policy. I agree with the noble Lord, Lord Northbrook, that the UK, in pressing for further reductions in production-related support, has consistently emphasised the importance of accompanying targeting measures to conserve and enhance the rural environment and to protect the rural economy. We support further liberalisation of agricultural trade in order to be able to support sustainable development and economic growth world-wide and to improve opportunities for our own exporters.

I hope that noble Lords will forgive me if I do not spend time on the banana dispute. I can possibly justify that by saying that diverse views have been expressed on that issue and that the Government are continuing to work on it.

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