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The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I begin by congratulating the noble Lord, Lord Vallance, on his excellent maiden speech. Speaking for what I agree is a small group of appointed industrialists who like to make speeches, and for those such as me who have followed the noble Lord's distinguished career for many years, we were not surprised by his thoughtful contribution to the debate. His speech was authoritative, knowledgeable and practical, which are qualities that we greatly prize in this House and we look forward to many more such excellent speeches.

I welcome the opportunity for this debate. It is in an area of high priority for the UK Government and the House of Lords EU Committee has produced an excellent report. I thank the EU Committee for this useful report and my noble friend Lord Radice for his clear exposition of the issues. Trade is important because, in our view, the responsible and equitable opening of markets worldwide is an essential plank in achieving prosperity and security for all.

The House of Lords report provided a very constructive basis for our debate today. As your Lordships know from the response that we sent in September, we agree with many of the recommendations: the need for a successful conclusion to an ambitious round of WTO trade negotiations; the need to improve UK competitiveness in order to compete successfully in the more open markets of the future; the need to stimulate south/south trade; and the need for the UK to play a leading role in shaping the trade policy agenda in Brussels.

However, since the publication of the report, there have been some significant developments that we also need to consider. The first is the publication of the DTI's trade and investment White Paper, Making Globalisation a Force for Good; the second is the agreement of frameworks in Geneva at the end of July; and the third is the appointment of a new Commissioner for Trade. If I may, I shall structure my comments around those three themes.

The aim of the White Paper was to explain how we can achieve globalisation with a human face or, to put it another way, to secure both free and fair trade. For too long, as we have heard this afternoon, the debate about
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trade has appeared to be polarised between those who believe that the market must prevail at whatever cost and those who think that globalisation is an inherent evil that will sacrifice the weak and vulnerable on the altar of corporate profit. Of course, it is not that simple. Trade liberalisation and development can go hand-in-hand. Indeed, the whole approach of the UK government to trade policy and liberalisation must be viewed in the wider context of sustainable development.

There is widespread acceptance that freer trade promotes economic growth. What has not been recognised so widely is that trade is a driver of growth in the country that exports and in the country that imports. That is why we in the Government talk about being against mercantilism. That does not mean that we are advocating unilateral disarmament in international negotiations by opening our markets without discussion. No, that would be politically naive. It means that we advocate an approach to trade negotiations that recognises the benefits of opening both our and other markets and in which developed countries do not insist on equal, or sometimes any, reciprocal concessions from the developing world.

If we want to be successful in export markets, we must ensure that our firms are among the most competitive and innovative in the world. The way to do that is to ensure that they are exposed to competition. Of course, when we open our markets to competition, we must accept that it can lead to shifts in market share from domestic producers to imports. We must make provision for the people whose jobs may be affected by that. It is futile to try to erect barriers to protect those sectors from competition; a more proactive response is needed. We need to be sure that working people in this country have the access to the training, the range of skills and flexibility required to move from one area of work to another.

That is the theory of free trade; what about fair trade? In the context of the Doha negotiations, the issue of fair trade has several dimensions. One of the most important is summed up in the following question: should we expect developing countries to take on the full rigours of open markets and free trade immediately? Our answer to that question is, "No, not immediately, but yes, in the fullness of time". That is what we mean by the phrase "same destination, different speeds".

The Government would disagree with the speeches made by the right reverend Prelate the Bishop of Manchester and the noble Lord, Lord Beaumont of Whitley. They should have a look at the countries that are successfully working their way out of poverty—countries such as China and India. The world figures for the decline in poverty show that it is almost entirely due to the new dynamism of those two countries. What is striking about those countries is the fact that they have opened their markets to free trade, with China joining the WTO. Reference was made to peasants in a particular situation. Noble Lords should go to China, visit the towns, see the factories that are opening up
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there and see the generation of people who, not so long ago, were poverty-stricken peasants but are now beginning to get a modicum of prosperity.

There are also the examples of the various experiments in the two kinds of policy. There is North Korea and South Korea. I talked today to a trade delegation from South Korea, which is now, I think, the eleventh biggest economy in the world. We can compare it with North Korea in a perfect experiment in the relative merits of a closed economy and an open economy. We should ask ourselves what it tells us. There are no examples of rich closed economies.

At the same time, the Government will continue to press in the EU and with WTO members the importance of having a true development outcome to the Doha negotiations. They are focused on an effective, special and differential treatment. We will work to ensure that economic partnership agreements fulfil the development potential consistent with our trade philosophy, "same destination, different speeds".

To my noble friend Lord Judd I say that we recognise that too often in the past low-income countries have had little say in the terms on which they received World Bank and IMF support. That is why we support developing countries in the formation of their own national strategies to reduce poverty and promote growth. I agree with my noble friend Lord Lea of Crondall that it is an extremely important issue. However, I agree fundamentally with the noble Lords, Lord Hannay of Chiswick and Lord Taverne, that it would be a poisoned chalice to support protectionism in the long term in developing countries.

We agree that developing countries need to co-ordinate opening their markets with their wider policies for development, so-called "sequencing", especially when markets in developing countries are suffering from distortions caused by the widespread and substantial dumping of surpluses from developed countries. We agree that it is right to offer imports from such countries preferential access to EU markets. However, we must not forget that the reason we do it is to lift the level of development in those countries to the point at which they become competitive internationally, eventually on the basis of their own competitive advantage and not preferential tariffs. At that point, it is right that those countries should compete on the same basis as everyone else.

I shall now say something about the concrete issues that we face. Cancun was a failure, and the report goes into some detail about the reasons. Thankfully, the Doha process was brought back on track in the summer, by virtue of an agreement on frameworks reached in Geneva. Those frameworks sketched out the general principles of a final package. The framework on agriculture was the most detailed and included commitments by developed countries to eliminate export subsidies. That will be an important element of a genuinely pro-development package. There is still a long way to go, not just in agriculture, and it is too early to say what a successful outcome to the Doha negotiations might include in detail or when a final agreement might be secured. However, it is clear that there is now enough
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on the table to keep everyone interested—agriculture, industrial tariffs, trade in services, trade defence and trade facilitation. We shall need to work hard as the EU to ensure that that interest remains.

So the prospects for the coming months, and for the Doha negotiations in general, do not look as gloomy as they may have done when the report was compiled. From a UK perspective, we are clear on what we want to see in a final agreement: namely, the total elimination of agricultural export subsidies by developed countries; a significant reduction in developed country agricultural subsidies, which distort production; a significant reduction in tariffs and non-tariff barriers worldwide, both agricultural and industrial; significant liberalisation of services markets worldwide; new rules that simplify procedures for exporters and importers worldwide; a reduction in the scope for the abuse of trade defence instruments; an appropriate level of special and differential treatment for developing countries; and, finally, measures to promote south/south trade.

The period between now and the WTO ministerial in Hong Kong next December will be crucial in establishing whether those objectives can be met. Currently, negotiations are going on in Geneva, focusing on technical matters. We will push for the EU to play an active and constructive role in that process with the aim of taking this technical work and feeding it into the ministerial.

I have talked about our White Paper which articulates our approach to trade policy. I have also talked about the encouraging developments in Geneva over the summer and the challenges of the coming months. I now want to say something about the third development; that is, the appointment of a new commission in Brussels.

The report rightly gives considerable attention to the European angle in trade negotiations. Of course, that is because trade policy is an area of Community competence. So, in a way, it makes no sense to talk about "UK" trade policy. What is important is the EU's trade policy and how it is negotiated on our behalf by the European Commission. To the noble Earl, Lord Sandwich, I say that we will work hard through the EU to bring the Doha development agenda to a successful conclusion.

I must say that in the run-up to the agreement on frameworks in the summer, the Commission did a first-class job including, in particular, as many noble Lords have pointed out, the Commissioner, Pascal Lamy. Indeed, it is arguable that one of the keys to the agreement of frameworks was the letter written jointly by Commissioners Lamy and Fischer to the other WTO members in May. The letter offered the complete phase-out of agricultural export subsidies provided that that was matched by similar action by other developed countries. That was a brave move. The Commission had to deal with the scepticism of some WTO members on the one hand and the anger of some EU member states on the other. But Lamy pulled it off and the result was a framework agreement in July that went beyond the expectations of many.
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We look forward to that trend continuing under the stewardship of the new Trade Commissioner, Peter Mandelson. He starts with a strong hand. We have frameworks in place and a firm commitment from the EU to a successful conclusion to the Doha negotiations. He will also represent 30 per cent of world GDP and 40 per cent of world trade flows.

But he will also face challenges. He will face the challenge of keeping on board some of the more sceptical members of the WTO, some developing countries which fear that the Doha negotiations might be as unbalanced as previous trade agreements and some developed countries which would prefer to sit behind protectionist barriers rather than open themselves up to competition.

He will face the challenge of consulting member states in a meaningful and timely manner without undermining his freedom and flexibility to negotiate with other WTO members. Of course, he needs to keep the European Parliament fully abreast of all relevant developments. Finally, he needs to ensure that "civil society", by which I mean the whole range of groups affected by the outcome of these negotiations, but not a party to them, are kept fully engaged.

I now turn briefly to one or two of the more specific points raised in the debate. Perhaps I may say to the right reverend Prelate the Bishop of Manchester and my noble friend Lord Judd that there is nothing in the service negotiation that forces governments to privatise their public services or to prevent them regulating suppliers appropriately. It is a matter for individual governments to decide what is best for their countries, which is as it should be.

The noble Lord, Lord Cobbold, raised the issue of the future of the WTO. We recognise the need for reform of the WTO and await the findings of the Sutherland commission with interest. However, to embark on such reform while seeking to bring the Doha negotiations to a successful conclusion would be a mistake. I think that we would risk overburdening the ongoing negotiations and place an intolerable burden on those WTO members with limited institutional capacity, those whose views need to be heard but rarely have been in the past.

My noble friend Lord Radice asked about the mini-ministerial in the spring. We are in favour of the idea of a mini-ministerial next year, but we need to ensure that the timing is right. Too early, and the anticipated new US trade representative will not be up to speed, while too late, and the opportunity to move the negotiations forward early will be lost. We will continue to feed our ideas on this issue to the Commission.

The noble Lord, Lord Hannay, raised the Singapore issues. We are pleased that negotiations have started on trade facilitation and we think that dropped Singapore issues would deliver benefits to developing countries. However, it is sensible to remove competition, investment and transparency in government procurement. The issues remain within the WTO mandate and we would like to see discussions on them continuing at working group level outside the Doha negotiations.
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On the question of export subsidies and dates, an end date or dates will be agreed in future negotiations within the agricultural special session in parallel with its negotiations on other forms of export competition such as export credits and food aid.

I think that I have covered the points on services, but they are ongoing with the delayed deadline for raised offers set for 1 May 2005. We will be encouraging the EU and other members to table substantially improved offers.

Finally, so far as Africa is concerned, I do not think that anyone looking at the issues of development and what is happening today would disagree with the view being put forward by my right honourable friend the Prime Minister that if there is one priority in the world, it is to deal with the problems of sub-Saharan Africa. We must not neglect other areas, but given what is happening across the world, this is the one place where it is very difficult to see any real signs of hope. We need to make certain that there can be signs of hope for the future.

In conclusion, from the UK's point of view we shall be doing all that we can to help the new commissioner to drive forward a successful conclusion to the DDA negotiations, achieving significant market liberalisation but in a way that brings real benefits to both the UK economy and to others, especially those in the developing world. And we should not forget that we have a special role to play since, from July next year, the UK will hold the Presidency of the EU. Of course this does not mean that we can dictate the agenda or determine the outcome of the DDA, but it does mean that through confident and effective stewardship, we can help to ensure that the EU takes a positive and constructive position in the WTO ministerial in Hong Kong in December 2005, which will be a key date in the Doha negotiations.
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5.54 p.m.

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