Examination of Witness (Questions 207-219)
Mr Syed Kamall
24 JUNE 2008
Q207 Chairman: Thank you very much for
coming to see us. We know that you are a member of the Trade Committee
and since we are writing a report,on European Trade Policy, we
have got a set of things we would like to ask you about. We have
just come from seeing Fairtrade so we have just recently been
talking about the less developed countries and there is quite
a lot in your report about them, so we might like to ask you a
few questions about that. Unless you would like to make a general
statement about the report, can I just start with a question?
Mr Kamall: Yes, please do.
Q208 Chairman: We know you are a
services specialist and nobody has told us very much about how
services are going under this Round. Can we ask you how you view
the prospects for liberalisation of services in the WTO? How is
that going?
Mr Kamall: My personal view is that it
is not going very well. There are negotiations and negotiating
groups specialising in the three areas, and there is one negotiating
on services. Pascal Lamy came to see us a couple of weeks ago
and I rather provocatively asked him, "It seems that services
is a bit of an afterthought" and I know that was provocative
but I just wanted to see what his answer was, and he gave the
standard answer I expected, which was "We have to have a
deal on services because it is a single undertaking, therefore
we need a deal on agriculture, NAMA and services. There can be
no deal without services". I am not convinced that as much
energy is being placed in negotiation on services as it is on
agriculture. There may be a good reason for that because agriculture
is a very difficult deal to unlock. Even if we do get a deal,
and it is looking increasingly unlikely, a Doha deal this side
of changes in European personnel and this side of the US elections,
then I suspect it will be a very, very minimal services deal,
and I do not even know what I mean by that frankly, I have no
indication what any services deal would mean because the focus
has mostly been on agriculture and industrial goods.
Q209 Lord Woolmer of Leeds: That
has rather taken the wind out of my sails!
Mr Kamall: Sorry.
Q210 Lord Woolmer of Leeds: No, not
at all, it is extremely helpful to have your current assessment
of that. Let me have two tracks with you. One is if negotiations
were able to deliver something on services, which are the key
areas that you and your Committee would like to see on some liberalisation
in services?
Mr Kamall: Can I first of all distinguish
me from my Committee, not because I want to but I am not convinced
that my Committee would agree with me on this issue. Personally,
I would like to see more liberalisation in areas like financial
services, for example. I think financial services are incredibly
important, the lack of capital in many of these countries. The
problem with financial services liberalisation is the way it is
portrayed, particularly by the NGOs. It is quite often portrayed—I
am just checking whether anybody is wearing a pinstripe suit—as
big, fat white men wearing pinstripe suits with cigars who come
and stub their cigars out on the heads of poor black people, if
you like, and just want to rape the country and exploit the poor
people. If you speak to many of the entrepreneurs in these countries,
and these are the people who are going to create wealth and take
many of the poor countries out of poverty, what they are saying
is, "Look, either I have to go to a state monopoly bank or
I have to go to a bank where the bank has good connections with
the ruling elite, so if I am trying to raise capital and it could
be in competition with an organisation that has links to the ruling
elite then it is going to be very difficult for me to get capital".
When you look at the other side of the story, I was in Uganda
in November last year and was speaking to an entrepreneur and
I also spoke to the Central Bank governor and got both sides of
it, if you like, and they said that one of the greatest things
that has happened is the fact that they have gradually licensed
more banks to come into the Ugandan market and, therefore, entrepreneurs
now have a choice of capital. What that means if we can turn round
financial services liberalisation to portray it as giving entrepreneurs
in poorer countries access to capital so that they can buy that
extra chicken coop, for example, or that tractor to plough more
fields, to create more jobs locally in their village and their
surroundings, to create wealth, then that shows there is a positive
side to financial services liberalisation. I also think, where
possible, we want all the infrastructure liberalisation, telecoms,
energy, but the problem is capacity, can it be done, and even
if you do open up your markets would the private sector come in
because they want guarantee on return and are they really going
to get a 30 year guarantee on return when they go into these markets.
I was talking to a chap, Andrew Mwenda, who is a well-known classical
liberal in Uganda, and I said, "Look, given that we are going
to come in, whether you like it or not we are going to give aid",
and he is very sceptical about aid, "Where do you think aid
should go?", and he said, "Actually, you should just
come in and build infrastructure because the market is not going
to deliver infrastructure because we cannot give those guarantees".
Financial services liberalisation and all the infrastructure,
electricity, if possible, and water. Water is vital in many of
these countries. The problem is not water as such, it is the delivery
of clean water, and where the state cannot do that because of
limited resources I do not see an argument for blocking private
providers coming in as long as they are properly regulated and
there is transparency. There is still an ideological battle here
in the Parliament in my report where I was speaking to my Socialist
shadow rapporteur and I said, "I am not trying to score points
here but if the state, for whatever reason, cannot provide water
services, do you have any objections to private companies coming
in or non-state or co-operatives?" and she said, "I
don't see how they can provide water".
Q211 Lord Woolmer of Leeds: I agree
with every single word you have said. Can I add two follow-up
questions? Why do you think that in some of the poorest and some
developing countries, but also the less developed, there is such
resistance to liberalising services? Secondly, what is it that
the rich countries have to offer in return so that it does not
look like a one-way track? You and I, and I am sure everyone at
the table, would agree with what you have said but from the other
side there is a suspicion of, "Well, we are giving this,
what are we getting in return". Two questions: why the resistance
at the other side of the table to doing this, and I know there
is resistance, and what we offer in any deal has got to be a quid
pro quo, is it just agriculture or is there something in services
that can be offered?
Mr Kamall: In terms of negotiations?
Q212 Lord Woolmer of Leeds: Yes.
Mr Kamall: Yes, of course.
Q213 Lord Woolmer of Leeds: Why should
they liberalise if they get nothing in return?
Mr Kamall: I think it is partly the EU's
negotiating position, and actually America's negotiating position.
If you look at the EU's negotiating position it is quite aggressive
on things like environmental standards and other issues like that
and too defensive on agriculture. The way I characterise the EU's
offer is this: we think we have made a very good offer on agriculture,
we are waiting for the other negotiating parties to come back
with reasonable counter-offers and they have not come back seriously
on agriculture. That is what Peter Mandelson has been telling
the Trade Committee for a long time. He is saying there are margins
for debate, of course. I think we should be more aggressive on
agriculture, not aggressive vis-a"-vis other negotiating
partners but we should give more away on agriculture, frankly,
in order to unlock a deal, but we are seen to protect our interests
while trying to be aggressive with our service companies in opening
up service markets.
Q214 Lord Woolmer of Leeds: I was
going to mention service markets and you have helpfully gone on
to it. In services particularly, why is it that the other countries,
the developing and the less developed, resist, and they do? That
is the first question, why is there resistance to the negotiating
of services and opening them up? On the service side, what, if
anything, can the richer countries offer so there is movement
on the services side? You said there is no real serious negotiation
going on, is there?
Mr Kamall: Because of the way the negotiations
are done, because they are looking at agriculture, industrial
goods and services, because we have not given enough away on agriculture,
it is all down to negotiating chips at the moment. Rather than
the pros and cons of negotiating a particular sector it is down
to negotiating chips. I remember once talking to someone here
in the negotiating team on agriculture and I said, "Why don't
we give away more? Why don't we just give away more on agriculture?"
and he said, "Yes, in theory I agree with you, the problem
is we lose our negotiating chips". I think that is what we
are down to. Regardless of the argument, whether it is good to
liberalise services or not, we are down to negotiating chips.
The EU has not moved enough on agriculture and that is why the
other countries are not moving on services. In order to unlock
services negotiations we have to move more on agriculture and
the other areas. Secondly, I am not sure that we have addressed
the concerns that they have. Services liberalisation is still
seen as big European companies being aggressive and taking over
water markets, electricity markets or whatever markets, and we
have not addressed that concern. It is an emotional argument and
we have not addressed it, we are just saying, "You have to
open up your markets". Does that answer the question?
Lord Woolmer of Leeds: It is well on the way
and I will come back again if time permits.
Q215 Lord Kerr of Kinlochard: It
is depressing because you can see from Sarkozy talking to Peter
Mandelson via the press conference at the European Council that
it is not going to be easy for the EU to offer more on agriculture.
And the American Farm Bill not too good either. And on services
is not part of the problem that the BRICs have got in the middle
of the debate with, say, Uganda about whether it would be good
to liberalise access to services in Uganda for OECD country companies?
Isn't that debate now obstructed by people like the Indians and
the Brazilians who are doing frightfully well out of the present
situation in services and do not see any real reason to give any
ground at all?
Mr Kamall: Yes.
Q216 Lord Kerr of Kinlochard: Have
you anything to cheer us up?
Mr Kamall: I wish I could cheer you up.
I can cheer you up a little bit, but one thing I would say is
let us not forget as well that a lot of the poor countries, for
want of a better word, do not actually have the negotiating capacity
when they put position papers, so who writes their position papers?
It is NGOs who have a different agenda.
Q217 Chairman: As we have just seen,
yes.
Mr Kamall: The NGOs are going in and
writing position papers and these countries are just giving away
their negotiating positions effectively to NGOs who are writing
the papers for them. I am not sure if it is an ideological agenda
or whatever, but some of my colleagues who are more cynical about
the NGOs say they have an ideological agenda and others say it
is not that, it is well-meaning but misguided. To be positive
on services, we are seeing movement on services in the bilateral
agreements. If you look at the Economic Partnership Agreement
we have negotiated with the CARIFORUM, services is a major part
of that. In some ways I think we do not help ourselves. Because
we have been so aggressive with services in the CARIFORUM deal
the other Economic Partnership Agreements that we are trying to
negotiate want a watered down services component to the Partnership
Agreements. The criticism I have received of the CARIFORUM deal
is if a company wants to invest in the Caribbean the CARIFORUM
countries are not allowed to have ownership restrictions, so they
cannot go for a joint venture step and I think that is a needless,
aggressive position to take. If we want to encourage more liberalisation
and more foreign investment we have to allow them to do it their
way, or give them policy space as academics say. I am a bit concerned
about how aggressive the EU has been in that area. Speak to me,
I am very happy to have 100 per cent ownership from where I am
coming from, but if you want to unlock negotiations and bring
people with you, you have got to allow them some policy space.
In a lot of the bilaterals we will see services as a component
because it is in the EU's interest to negotiate that.
Q218 Chairman: How interesting, and
how depressing that it is easier to negotiate in a bilateral.
Mr Kamall: Yes. The thing about multilateral
versus bilateral is there are lots of different arguments and
some papers argue that bilaterals undermine multilaterals and
others say if you negotiate bilaterals in a particular way, trade
heavy, make sure that non-preferential tariffs are also low, then
you can build up or contribute to a multilateral system. The other
thing about bilaterals is if a country is concerned about the
multilateral negotiations because of the most favoured nation,
if they are concerned about one particular country, for example
China or Brazil, they may not want to get involved in trade negotiations
or negotiate seriously, but if they are negotiating a bilateral
and the country they are negotiating a bilateral with does not
have interests in the area that they want to protect then what
it does is it brings them to the negotiating table, it gives them
negotiating experience and skills and they start to negotiate
trade agreements and eventually that may or may not give them
the confidence to step up to the multilateral table. Like most
things, there are two sides to the argument.
Q219 Lord Maclennan of Rogart: Korea
is going well, India not too well perhaps but going, and there's
ASEAN. How does this all fit in with the wider multilaterals?
Mr Kamall: With Korea, the sticking point
is opening up the Korean auto industry and various things like
the approval process, why would European cars have to be approved
all over again in the Korean market. India, all the issues that
they are holding up at the WTO, the same story. I am sorry I cannot
remember what the exact point was, but there was a particular
point in the negotiations with the EU where the Koreans turned
round to the EU negotiators and said, "We cannot give on
that ground because it would affect our bilateral with the US".
That is where bilaterals can cut across each other. One of the
problems with bilaterals if you go back to the old trade diversion
argument is it can help in terms of opening up certain sectors
for certain European interests and if you have got a US-EU-Korean
bilateral you are helping certain interests, but you end up with
what everyone calls a spaghetti bowl of deals and it is how these
deals affect each other. It was Razeen Sally of LSE who said what
you need to make sure bilaterals do not undermine the multilateral
system is make sure it has to be liberalisation heavy and other
issues do not get in the way. For example, on the Economic Partnership
Agreements, when I criticised the Commission in Committee on the
fact that they were spending a lot of time on the governance structures
and almost replicating the EU and having regional assemblies rather
than getting down to negotiating liberalisation, the Commission
spokesman said to me, " Well, this is not just about trade"
and I thought, "I don't want to hear that when we are talking
about bilaterals. I don't want you to be telling me that a bilateral
trade agreement is not just about trade because it will allow
other issues to get in the way". Not only us, we do allow
other issues to get in the way.
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