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World Trade Organisation

My Lords, I am delighted to take part in this debate today. I thank my noble friend Lord Brennan for raising this issue at such a critical time. The next major milestone in the DDA—the Hong Kong ministerial conference—is less than two weeks away. I also thank my noble friend Lord Radice for the excellent report of the European Union Committee into prospects for the ministerial conference. We all know how important the DDA is. The stakes are high. Trade increases prosperity, and prosperity gives people and nations a stake in the future. This round has the potential to deliver more than $200 billion in global gains. As my noble friend Lord Haskel pointed out, the UK has used its two presidencies this year to focus attention on Africa, and we should continue to do so in Hong Kong. The figure that I have is slightly different from that quoted by my noble friend Lord Radice but I think that it is the same as that given by the noble Lord, Lord Cobbold. It is that a 1 per cent increase in Africa’s share of world trade would benefit Africa by more than $70 billion, and that is three times the aid increase agreed at Gleneagles. But the point is the same. Developing countries could gain $47 billion in increased agricultural exports. But it is not just the poor countries of the world that will benefit from a comprehensive and ambitious Doha round. From non-agricultural market access alone, Europe could gain €20 billion a year. The Prime Minister, in his speech on 14 November, emphasised that an ambitious trade deal is a priority for the UK. We need a comprehensive, ambitious agreement to cut barriers to trade in the three key areas: agriculture, non-agricultural market access and services. The aim of the Hong Kong ministerial conference must be to create the conditions so that, by the end of 2006, we can get there. In Geneva tomorrow, the WTO membership is set to agree the texts to take to Hong Kong. Over the past month, Pascal Lamy, the WTO director-general, has been managing expectations for Hong Kong. Key WTO members remain some distance apart on important areas, and Lamy has stated that his overriding aim is to ensure that Hong Kong is not a failure. He also wants to ensure that an agreement there locks any progress that has been made since the framework agreement last summer. That approach will, in all likelihood, mean that another ministerial conference early next year—commonly referred to as ““Hong Kong 2””—will be needed to finalise dates and figures. In this vein, chairs across the different areas of negotiation have produced reports that summarise the state of negotiations and provide some tentative suggestions of areas of possible convergence. Consistent with their mandate, there are few surprises in the reports. This is a low-risk strategy, which has the advantage of lowering the chances of a repeat of Cancun. But the critical question will be whether Hong Kong can set up the conditions for conclusion next year. That is why, as I will mention in a few moments, we will continue to press WTO members to keep expectations high for Hong Kong. The agreed texts need to be the starting point for negotiations at the ministerial conference—not the negotiations’ end point. A successful Hong Kong will require progress across the breadth of the DDA negotiations. Much time and energy is focused on agricultural negotiations, and I thank my noble friend Lady Whitaker for reminding us of the importance of services to developing countries. She is correct in identifying that technical assistance must go hand in hand with opening trade to developing countries. Noble Lords may be interested to learn about three projects that the UK Government are funding to increase trade capacity in services. The first, which is being carried out by UNCTAD, is aimed at assisting the integration of developing countries in global services trade through ensuring adequate impact assessments of developing country import and export interests. That is a crucial tool in helping developing countries to negotiate from a position of informed strength. The second is a capacity-building project, undertaken by UNCTAD and the World Bank, which is focused on expanding developing country capacity to negotiate and schedule meaningful requests and offers. It is a technical issue that requires particular expertise and experience. The third is a specific commitment to the South African Government from the UK Government to provide £100,000 to aid consultation between ministries, regulators, business and consumers to assist in assessing when, where and how to open up the domestic service sector to foreign competition. This serves to illustrate that the Government are committed to providing developing countries with the tools that they need to participate effectively in trade negotiations. Developing countries are increasingly telling us that, together with financial assistance, they require assistance in gathering knowledge and understanding of their own domestic industries to build negotiating capacity. More generally, development is at the heart of the UK’s distinctive trade philosophy, as set out in the July 2004 White Paper, Making Globalisation a Force for Good. A key element of the development debate, on which the Make Poverty History campaign this year has concentrated and which my noble friend Lord Haskel covered so eloquently, is the extent to which developing countries should be forced to liberalise. Liberalisation has the potential to deliver huge gains for both developed and developing countries. But if it is done too quickly, it can be disruptive, as was seen with the shock treatment meted out by the IMF and the World Bank in the 1980s. I agree with my noble friend Lord Haskel that we should make the case for liberalisation to developing countries. Liberalisation is not only a north-south issue; it is also a south-south issue. It should also be said that liberalisation and increased prosperity never come without some economic disruption. However, I am afraid that I cannot agree with the comments of the noble Lord, Lord Christopher, about free trade and textiles trade. If you look across the world, you will see the huge benefits that have come to many developing countries, such as Vietnam, China and Bangladesh—some of the world’s poorest countries—from being able to access markets in Europe with their products. I would argue that the disruption that we have seen recently comes mainly from the fact that we have maintained protection in Europe for too long. Suddenly removing that protection brings with it obvious economic disruption. I agree with my noble friend Lord Haskel that we should make the case for liberalisation in developing countries, but it is for developing countries to make their own decisions on the timing, pace, sequencing and product coverage of any market opening in line with their own national development plans and poverty reduction strategies. As we have set out, we will not force liberalisation on developing countries through aid conditionality or trade negotiations. We should move away from a mindset where market opening by developed countries is seen as a ““concession”” to be traded for access to developing country markets. I hope that that nuanced and carefully balanced policy is now clear to the noble Baroness, Lady Miller. I also want to use this opportunity to mention aid-for-trade proposals, which the Government have done so much to advance through the Gleneagles Summit. As set out in the Commission for Africa report, it is not enough for poor countries to have increased access to markets abroad. They also need support to build the capacity to take advantage of those new trading opportunities. The EU is the biggest provider of trade-related assistance worldwide by far. Earlier this year, President Barroso pledged to increase aid for trade to €1 billion a year, and last month the Prime Minister pledged to treble UK trade-related aid to £100 million a year by 2010. We will be pressing others to make similar pledges to help to ensure that poorer countries gain from the Doha agreement. Before I turn to what the Government are doing to help to ensure a successful outcome at Hong Kong, I would like to comment on the excellent report on prospects for the ministerial conference produced by the European Union Committee. As it was published only today, I will not make a detailed response. However, I wish to compliment noble Lords on the production of a timely report and give my broad support to their conclusions. In particular, I welcome the call to end export subsidies by 2010 and to agree a date for final offers on services. In terms of negotiating dynamics, it is clear that developed countries must play a leading role in removing their trade distorting support. But, as the report and the noble Lords, Lord Brennan and Lord Brittan, point out, advanced developing countries such as Brazil and India also now need to play their part. The state of negotiations makes it clear that all parties need to turn over their cards in the next few weeks and months. The Government are working hard to deliver a successful outcome to the DDA. As we are all aware, the UK is an active player in trade policy and champion of the multilateral trading system. The UK has continued to play an active role in the EU and beyond. The UK has consistently made the case for bold steps in DDA negotiations, such as the EU’s offer in May 2004 to eliminate export subsidies. And we will be using our presidency of the EU to help to deliver a progressive European position at Hong Kong. The UK has used its presidency of the G8 in 2005 to highlight aid, trade and debt. A statement on trade at Gleneagles in July helped to display the level of commitment from world leaders to an ambitious conclusion to the DDA and highlighted the need for aid for trade for poorer countries. The UK has also been making the case for the development of an effective package of trade-related technical assistance and capacity building to help unlock the development benefits offered by the DDA. We will maintain this effort and continue to press other WTO members to work together for as much progress as possible in Hong Kong. We must see agreement to a package that will allow conclusion of the round by 2006 and which both genuinely delivers on development and helps to build a more competitive European economy. As my noble friend Lord Radice said, that is essential as US fast-track authority expires in 2007. We have a strong team heading out to Hong Kong headed by the Secretary of State for Trade and Industry, accompanied by the Secretaries of State for Environment, Food and Rural Affairs and International Development and the Minister for Trade. I shall now deal with the few specific points that were raised during the debate. My noble friend Lord Brennan spoke of the cotton initiative. Cotton is a key example of a crop where unfair competition from subsidised production predominately in the US, but also in the EU, is undermining the development potential of competitive cotton farmers in west Africa. The development impact of cotton subsidies is widely acknowledged and the subject of a special initiative in the WTO, driven by four west African LDCs, Benin, Burkina Faso, Chad and Mali. The UK strongly supports the EU proposed fast-track initiative in the WTO on cotton to eliminate all trade-distorting support given to producers in developing countries and to offer duty-free access to the least developed countries. Progress has been slow and at Hong Kong we want to see progress on the WTO cotton sector initiative. The noble Earl, Lord Sandwich, spoke about the sugar regime. The sugar regime has not been reformed for more than 40 years and European sugar prices are three times world levels. We do not have a choice on this issue. Reform is necessitated by a WTO panel ruling on a case brought by Australia, Brazil and Thailand. ACP producers will still enjoy European prices at two times world levels. I have a certain sympathy with Peter Mandelson’s statement that he is pressurised to liberalise agriculture and then criticised when the Commission does so. We need, as the UK is doing, to push for an adequate transitional package for those countries affected. Adequate transitional assistance is necessary to send the right message to the ACP ahead of Hong Kong. My noble friend Lord Judd had a list of relevant and important questions. I shall deal with them quickly. First, on the end date for export subsidies, we totally agree with that. Government policy is to agree an end date of 2010 for agricultural export subsidies and we shall press for solution of that issue at Hong Kong. Secondly, he asked about action on subsidies, especially on cotton. I have already dealt with cotton in that regard and we support the Commission proposal to fast track implementation of commitments on cotton. Thirdly, he asked about increased market access, particularly duty-free and quota-free access for LDCs. Yes, we agree on that. The Everything But Arms agreement of 2001 granted duty-free and quota-free access to the EU and we shall be pressing all developed and developing countries in a position to do so to follow suit. Fourthly, he mentioned special and differential treatment for developing countries. We agree that special and differential treatment is a crucial element of negotiations. As the Government have set out, we will not force liberalisation through either aid conditionality or trade negotiations, allowing developing countries to plan and sequence reforms. Finally, he asked about the move away from the culture of trade-offs in negotiations. In the White Paper of 2004 the UK Government rejected that a mercantilist approach of treating reforms as concessions to be traded off. The noble Lord is correct in saying that the UK is a minority in that regard. The reality in Geneva, as noble Lords have recognised, is that all members need to use Lamy’s phrase, to share the political pain. There is agreement that developed countries should take most of the pain but advanced developing countries need to show their willingness to make some limited movement as well. Is a bad deal worse than no deal? We should remember that we have seen substantial progress on delivering the Doha mandate. We must not overlook that. The EU has offered to reduce its trade distorting domestic support by 70 per cent and average tariffs by 38.9 per cent. The deal must deliver a development and the voting arrangement of one member one vote means that a deal that does not deliver on development could be vetoed by any of the 149 members. What can we realistically expect Hong Kong to deliver? Your Lordships will have seen the push to reduce the ambitions for the Hong Kong conference. We are uncomfortable with that. The 2006 deadline remains. The same politicians will be in the same seats next year. It is hard to see how conditions early next year will be better than they are now. The bottom line is that some tough political decisions have to be made and we are pressing for them to be taken at Hong Kong. At Hong Kong the easy choice will be a lowest-common-denominator outcome. We need to aim higher—much higher indeed. All WTO members need to make a huge effort to get the process back on track. No one wants Hong Kong to fail and, most importantly, very few want to reduce the level of ambition for the round, but if we are to succeed it will require more than goodwill and ambition. It will also require vision, enlightened self-interest and the willingness of all countries to take tough decisions.