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EU Trade Policy: EUC Report

My Lords, like other speakers, I congratulate my noble friend Lady Cohen on securing the debate and on so ably chairing the committee that produced the report before your Lordships today. As the noble Lords, Lord Haskins and Lord Trimble, said, the report was produced in 2008 and published almost 11 months ago. Since then, the financial crisis and the collapse in demand in north America and Europe has caused global recession, reducing the volume of merchandise trade by over 10 per cent this year alone, and taking the level of global trade back to where it was in 2005. We know the recessionary consequences here, but the severe falls in global trade caused even bigger problems in low-income countries that do not have the market flexibility or social and economic safety nets to withstand such a shock. Our committee was concerned that global recession and price volatility in commodities might increase the pressure for protectionist measures. I refer noble Lords to paragraphs 18 to 21 and 54 of our report. However, no WTO member has retreated into widespread trade restriction or protectionism, not has there been any significant instance of trade retaliation. According to the WTO, any such measures that have occurred—and some have—covered collectively at a maximum more than 1 per cent of world merchandise trade, concentrated in particular on agricultural and iron and steel products. Evidence from WTO trade policy reviews this year confirms that most developing countries have kept to their existing trade policy course, including autonomous steps to liberalise imports in many cases, even in the middle of this global recession. Very few have reacted with trade restrictions. Zambia is one of several African countries assisted by Aid for Trade, for example, that has continued with major reforms to open up its economy despite the global recession. The robustness of the world trade scene in the face of the worst recession in both my lifetime and that of the WTO speaks of the determination of world leaders—the G20 and others—of the massive financial and fiscal stimulus programmes that have been injected into economies, and of the robustness of the WTO itself. It speaks well of the WTO system that it has been able to withstand this massive shock to world trade. I turn to trade in services, considered in paragraphs 23 to 25 of the report. Services make up around 77 per cent of GDP and employment in the European Union, but represent only 28 per cent of EU external trade. Services make up 64 per cent of the US economy, 80 per cent of the Australian economy, 55 per cent of the Indian economy, 54 per cent of the Brazilian economy and 40 per cent of the Chinese economy. They are therefore very important across the world, not just in Europe. Despite restrictions, international trade in services is several times that in agricultural products, yet liberalisation of trade in services has, in the words of paragraph 23 of the committee’s report, ""been curiously neglected: left until last in the negotiations and of less interest to most witnesses"." It may be worth reminding ourselves of the wide diversity of services—there is a splendid list on the WTO services gateway page; I shall not bore your Lordships by reading it all out. An enormous range of services, not just financial, exists, in very many of which this country and the rest of the world have enormous interest. Part of the problem in making faster progress on reducing barriers to trade in services is that the barriers are not those of negotiable tariffs, or export/import duties. More typical is the huge variety of different laws, regulations and administrative restrictions that applies to service industries. In most poor or developing countries, these are labour-intensive industries, with deep cultural and political resistance to perceived threats of competition. Often, when one barrier to a service or trade is overcome, another barrier pops up. Many government departments, agencies and interests are involved. We know how difficult it has been in some parts of service industries in the European Union to ensure free movement of trade in services. This still applies in some cases of public services in the EU. Recent banking experience in cross-border problems of consumer protection and government bail-outs in Europe alone demonstrates that liberalising trade in services, harmonising standards and agreeing regulatory frameworks are not easy matters. Nevertheless, services are an integral part of development and of prospering economies. It is the lack of many services that holds back development in some developing countries. What is the Secretary of State’s judgment of the current status of negotiations on services within the ongoing discussions around the Doha report? Are services a matter to be dealt with after progress has been made in agriculture and industry? Or is there a desire at the European level to make progress alongside? Due to the variety of services, there are very different interests in different countries. The lack of relatively simple targets such as bound and applied tariff levels and non-tariff duties make it difficult to go forward. Does the Secretary of State think that any significant progress can be made on services in the Doha round? If he does, what are the objectives of Her Majesty's Government as far as services go in those negotiations, bearing in mind that this country ranks second in the world as an exporter of commercial services and third in the world as an importer of services? We have an enormous interest in this. As those figures show, the United Kingdom is a very open economy for trading in services and buying and selling abroad. What are Her Majesty’s Government doing to ensure that international market opportunities for United Kingdom service businesses are opened up more widely and quickly, whether through the Doha round or through other European Union bilateral negotiations?