With the necessary political will and appropriate policies nationally and internationally, the goal of having the proportion of the world’s population living in abject poverty by 2015 is achievable.
I am very pleased to be here today to talk about an issue that is so important in shaping the global economy. I thank Ambassador See and the Trade and Development Board for hosting our discussion this evening.
May I also express my warm appreciation for the work which UNCTAD -the United Nations Conference on Trade and Development – is doing, under the leadership of Rubens Ricupero, to take forward the trade and development agenda. Over the past 18 months my Department and UNCTAD have built up a strong partnership. I look forward to continuing this as we prepare for the Tenth UNCTAD Conference in a year’s time; and I am delighted that Mr Ricupero will continue to lead UNCTAD over the coming four years.
I am particularly pleased that we are having this discussion almost exactly two weeks before the High Level Symposium on Trade and Development, which will take place here in Geneva on 17 and 18 March. I hope the Symposium will help move thinking forward, as we work our way through this crucial year towards the important decisions that need to be taken in Seattle in December. My comments today are intended to help stimulate debate in preparation for the Symposium and the period beyond. I am keen to hear other views. I believe we need much more informed discussion on the links between trade and development.
Ten months ago Tony Blair came to Geneva to mark the 50th anniversary of the multilateral trading system. He committed our Government to work to spread the benefits of globalisation more equitably. As a first step, he committed us to provide $10 million in technical assistance to support developing countries in securing their proper interests in the multilateral trading system – not trade instead of aid, but aid to help developing countries strengthen their economies through trade and investment, and so reduce poverty.
Since May, my Department has been working hard to make this commitment a reality, in partnership with UNCTAD, and with the World Trade Organisation (WTO), the International Trade Centre (ITC), the World Bank, the Commonwealth Secretariat and our partner governments – those with whom we work most closely – in developing countries. We will continue to take these initiatives forward. But today I want to focus on the international trading system itself, and discuss specifically why I think a new round of trade negotiations offers important development opportunities.
I believe a round has an important role to play in helping all of us, but particularly developing countries, adjust to a more open, integrated global economy. It provides an opportunity for the international community to concentrate its efforts not only on removing barriers to trade and investment, but also on how to improve the rules governing trade to ensure they meet the needs of all countries, especially the poorest. It is in all our interests that a new round is designed to bring clear benefits to developing countries – which make up a majority of NA/TO membership.
That is why I want to propose that we all work to make the next round a ‘Development Round’.
The first point I wish to put to you today is that we have two important challenges left over from the Uruguay Round – challenges that we must address if all WTO members are to be convinced that the system brings them real benefits. The reality is that the Uruguay Round Agreements have not yet been fully implemented; and many countries are still not able to participate fully in the multilateral trading system. We must address these challenges of implementation and participation now, as we prepare for a new round. If we do not, further trade negotiations simply will not deliver the results we want.
I will start with implementation. Many people describe the debate on implementation of the Uruguay Round Agreements as an ‘impasse’. Developed countries are insisting on full implementation of all Agreements by agreed deadlines. Developing countries continue to highlight the problems they face in implementation – and point to what they see as developed countries’ own failure to implement their obligations.
We have to break out of this impasse. To start with, we must acknowledge the size and complexity of the challenge. The Uruguay Round extended the process of trade negotiation right into the heart of development policy-making – into issues such as how services are provided, how standards are set to protect health and the environment, and how subsidies are used.
Then we must find effective ways of meeting the challenge. Everyone agrees that developing countries should have access to technical assistance. But there is a risk that we become too glib with this – that we see ‘technical assistance’ as an easy way of making the problem go away -a panacea. This is wrong on four counts.
First, effective technical assistance is not easy. What the new trade agenda demands is not a few consultancy visits, but a concerted effort to apply our knowledge of development to the process of trade negotiation. This means the active engagement of development institutions – including UNCTAD and the World Bank – in trade policy and capacity building.
Second, implementation deadlines for developing countries are fast approaching. We should be prepared on a case by case basis to look at extending deadlines, to give technical assistance time to work.
Third, we cannot assume that we got all the new Agreements we drafted in the Uruguay Round absolutely right first time – before they had been tested in reality. We must use the process of built-in reviews to look seriously at whether the Agreements are working as intended – and be prepared to improve them where difficulties have arisen. This is not a question of renegotiation. Rather, it is a question of making what we have already negotiated work in practice.
Finally, we should remember that implementation is not just a developing country issue. Developed countries need to look at their – our – own record. I very much hope that the European Union will be able to play its full part in this. Strict adherence to the timetable of the Multi-fibre Agreement will be a key element in our own programme.
Our second challenge is to ensure that all countries – not just the largest and richest – are able to participate in the international trading system. In some ways this is the hardest issue which faces us. It covers everything from the difficulties some countries have in simply attending all the meetings here in Geneva, to the broader need for further analysis and capacity-building so that developing countries are able to exercise fully their rights under the WTO system.
The creation of the WTO was itself an extremely important step forward. In principle, it provides a forum for all countries to participate in shaping this important part of the global economic governance system. In practice, we still have a lot of work to do to make the system live up to its promise. This includes working to secure the accession, on the right terms, of those countries which remain outside the WTO. We must make particular efforts to bring least developed countries into the WTO – as Sir Leon Brittan has rightly pointed out. And in a very practical sense, we must organise the next round in a way which allows all developing countries to participate, taking account of the resource constraints under which many delegations here are working – even more so for the countries with no delegation here.
But this issue is not just about the next round. Helping developing countries to participate in the WTO must also mean helping them use the dispute settlement procedures which lie at the heart of the rules-based system. I know that there are two proposals currently under discussion in this area. One involves the establishment of a Legal Advisory Centre outside the WFO; the other involves strengthening the capacity of the WTO Secretariat itself to provide help. The UK Government has been involved in the development of both proposals – which like others we see as complementary. If a common proposal were to emerge, we would consider funding for this. But if it does not, we would be prepared to provide financial support for both of the current proposals.
I want to spend the remainder of my time setting out five key issues I which I suggest should be on the agenda for a ‘Development Round’. This is not an exclusive list; but it does I think illustrate why those who favour development should be pushing for a round which extends beyond the built-in agenda of further liberalisation in agriculture and services. We should see a broader round as a development opportunity.
First, agriculture. Since the Second World War trade in agriculture has been dominated by protectionism. The Uruguay Round was the first serious attempt to dismantle protectionist barriers, in response to the realisation of the enormous potential for global economic gains from liberalisation. In the early 1990s the International Monetary Fund (IMF) estimated that the costs of agricultural protection to taxpayers and consumers in the Organisation for Economic Co-operation and Development (OECD) alone amounted to about US$300 billion each year.
Further agricultural liberalisation is vital not only because of the substantial global benefits, but also because of the fundamental importance and natural advantage of so many developing countries in the agricultural sector. Tackling agriculture in a ‘Development Round’ will mean improving market access for developing country exporters and reducing the export subsidies that undermine local production. But it will also mean ensuring that the Agriculture Agreement itself provides a supportive framework for domestic development and food security, where required; and ensuring that there is a complementary strategy to support countries facing adjustment problems – including net food importing countries.
For the UK, our first task continues to be to argue strongly within Europe for a firm commitment to agricultural liberalisation. This will not be easy, but it remains one of the highest priorities for a ‘Development Round’. Many of us will judge the round on whether it delivers substantive benefits in agriculture.
Second, industrial tariffs. Although successive GAIT rounds have made substantial progress in reducing tariffs, specific tariff peaks remain – often on products of greatest export interest to developing countries, such as textiles, footwear and leather goods. And tariff escalation remains a key development issue: escalating tariffs on higher value-added goods can lock developing countries into primary production and commodities, impeding the diversification which is essential for sustainable development. Tackling tariff peaks and tariff escalation must be an important part of a ‘Development Round’.
But in turn developing countries must be ready to open their markets to foreign goods and service providers. Many developing countries have already liberalised extensively at the national level, recognising the benefits this will bring their own consumers and manufacturers. The challenge now is to use the WTO system to consolidate these policy changes, in return for better access to developed country markets.
Third, and closely related to this, rules of origin. Rules of origin are critical in allowing developing countries to take full advantage of the preferences which are in principle available to them. The problem is the horrendous complexity of the current network of rules. For example, Tanzania is a member of four different regional trading agreements, has numerous bilateral agreements, is party to the Lomé Agreement and a member of the WTO. Each of these comes with its own set of rules of origin. Flow can Tanzanian businesses navigate their way through this web of rules to ensure that they really do benefit from the preferences which Tanzania in principle enjoys?
Addressing this problem can bring major trade gains to developing countries. We need to simplify, harmonise and liberalise the existing network of rules, and create a system which enables developing countries to realise the theoretical benefits available to them. In short, we need a system which is designed to make it easier to get goods into markets, not easier to keep them out.
Fourth, anti-dumping. The Anti-dumping Agreement was intended to protect countries from the damaging effects of imports unfairly priced at below cost. But the reality is that anti-dumping instruments are being misused. In practice the economic basis for most anti-dumping cases is very weak. The Anti-dumping Agreement now risks becoming a WTO-endorsed route for protecting domestic industry – a very real danger, especially in the wake of the Asian financial crisis. Growth in the use of anti-dumping by both developed and – increasingly – developing countries should be a key area of concern for all of us.
There is a strong and pressing case for looking again at the anti-dumping rules. India has already put forward a set of specific, detailed proposals. They deserve a closer look. But it is essential that any tightening of the rules applies not just to the use of anti-dumping by developed countries. We need an improvement in the rules as they apply to everyone. Unwarranted and unpredictable protectionism will hinder development in all our countries; and it is the world’s poor who will pay the price.
My fifth set of issues for inclusion in a ‘Development Round’ centres on government procurement – an area where basic principles of efficiency and transparency can yield enormous benefits.
Government procurement represents a sizeable slice of economic activity: estimates range from 3-12% of GDP. This in itself is a strong argument for including purchases by governments in the multilateral rules system. But developing countries in particular have much to gain. Not only are they potential exporters to other governments, but they also stand to reap large fiscal rewards from more efficient and effective procurement systems, releasing resources for additional investment in health and education – which are crucial for development. Good procurement systems also bear down on corruption – and, as we now all know, it is the poor who pay the price of corruption. We need to continue to build on the good work already underway on transparency in public procurement in the WTO. And developing countries must participate in this work. They have a strong interest in ensuring that the rules are workable for them.
It is particularly ironic, and I think frankly hypocritical, that Western governments have been so slow to open procurement under their bilateral aid programmes to all comers. I am strongly supporting OECD efforts to reach agreement on untying aid to least developed countries. I hope my OECD colleagues will work with us to conclude an agreement by May, and that non-OECD countries will take a stronger interest in this issue.
I am conscious that in focusing on these five issues – agriculture, 11 industrial tariffs, rules of origin, anti-dumping and government procurement – I have missed others, including further liberalisation of trade in services, and the particular problems facing least developed countries. European governments have already agreed to provide bound duty-free access for substantially all LDC exports by 2005. It is now up to other industrialised countries to follow our lead.
There are also the new issues – including investment and competition -which offer strong developmental gains, but where we are still discussing what the broad framework for any new rules might look like. The possibility of new rules on investment in particular has prompted a very lively debate in Britain, and I am sure here in Geneva. I continue to believe that the right investment rules would benefit developing countries – particularly those countries which are finding it difficult to attract the inward investment they need to secure beneficial economic growth. I hope we can make progress on both issues – investment and competition – during the rest of this year. I am very pleased that we are supporting UNCTAD in its programme of capacity building for developing countries on investment issues.
And as important as these issues of policy are, we must never forget that the core of the trading system is its nuts and bolts; and that some of the most important gains will come from making trade procedures work more effectively. Bureaucratic customs procedures leave goods sitting at ports – and absorb valuable human resources. Even in the UK, the collection of trade information by government departments is often fragmented, sometimes duplicated and occasionally unnecessary. We need to make room in the next round for real progress on trade facilitation, alongside the other issues. I want to pay tribute here to the excellent work UNCTAD and ITC are doing on this.
Finally, I want to make a few comments about what we need to do in I addition to the process of trade negotiation and rule-making, to ensure that the governance system we develop for our globalising world is equitable and coherent. I believe strongly in the importance of multilateral rules governing trade and investment. But I believe equally strongly in multilateral co-operation on social issues, including child labour, and the environment. The progress we have made in recent years in the International Labour Organisation (ILO) and through the multilateral environmental agreements has demonstrated what can be achieved.
I am well aware that developing countries fear that environmental and labour standards could be used for protectionist purposes. This is understandable. But developing countries, as well as developed countries, have a real interest in reversing the loss of their environmental resources, and in better labour standards – particularly the elimination of child labour. We must ensure that the agreements we reach on social and environmental issues meet the needs of developing countries, and that, as a minimum, they do not conflict with our trade agreements. But more than this, we must identify policy changes which will deliver strong trade, environment and development benefits. We already have some good ideas on this. For example, tariff escalation in developed countries can leave developing countries felling forests rather than manufacturing furniture. And greater trade in environmental services can help improve the quality of service provision in all countries, including developing countries. Ensuring that our different global policy-making and co-operative processes are consistent with each other is essential if we arc to achieve sustainable development and continuing poverty reduction.
We live in a time of great uncertainty, but also great opportunity. The globalising world economy is creating rapid political, economic and technological change. It is also creating new global wealth – wealth which provides opportunities for a great advance in the reduction of poverty. The challenge of our time is to manage this process so that the benefits of globalisation are more evenly spread. And there are good possibilities for achieving this. To a large extent, we know what works in development – and what doesn’t. We have moved beyond the stale ideologies of the past. Centralised planning has been tried and failed; but so has the monetarism and market idolatry of the ‘80s. There is a new synthesis in development thinking – a strong role for governments in guaranteeing the provision of key public services and in putting in place proper systems of financial, economic and environmental regulation. Arid there is a vital role for a profitable and responsible private sector – in generating the economic growth that makes poverty reduction possible.
The governments of the world have agreed a set of international poverty eradication targets, including the goal of halving the proportion of the world’s population living in abject poverty by 2015. With the necessary political will, and with appropriate policies, nationally and internationally, these targets are achievable. A more equitable trade system has a major role to play in securing poverty eradication. I hope that the ideas I have floated today for a new ‘Development Round’ can help us achieve this crucial objective.