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To put things in context, I think that I am right in saying that only a tiny fraction of world trade, which covers all goods and services, is in agricultural products. It is 3 per cent. that the EU, Japan and America are arguing about. It is massively dwarfed by financial services. Yet the continued refusal by America, the EU and Japan to reducenot completely to abolish but to reducefarm subsidies and tariffs is resulting in the complete blockage of the WTO system and, at the same time, as other hon. Members have spelt out, the dumping of excess crops. Dumping continues, and crushes small farmers and people with poorer land who are trying to scrape a livelihood in sub-Saharan Africa. Their chances of survival are being reduced, not increased, by that. It is little wonder that African countries are failing to catch up. They have no chance. They are being crushed by the system.
Where are we now? The US refuses to lower its farm subsidies to the extent that would be acceptable to the EU, which, in turn, accuses the US of keeping protectionist barriers to trade in agricultural goods in position. Despite all the rhetoric of commitment to so-called free trade, a protectionist row between America and the EU is what is going on. The poor countries are locked out completely, as my hon. Friend the Member for Islington, North (Jeremy Corbyn) mentioned. The US will hold onto its $226 billion domestic agriculture subsidies, but it is playing that agenda off against the EU. The poor of the third worldAfrican countriesare again locked out. The Doha round has ended as a fight for advantage in agricultural markets by large and powerful countries, corporations and lobbies, which are fighting among themselves.
I hope that our Committee will make some small effort to keep the agenda of the poor and of poor countries going. It is our job, and the Committees job, even though the agenda is immensely complex, to keep trade and development locked together, right at the top of the local and global agenda, and to ensure that the political will exists to secure a development round that will not trickle away.
Finally, I want to mention two proposals. First, the EU did at least propose that the poorest countries should get full and fair access to the wealthy countries markets. We should get behind that proposal, back Commissioner Mandelson and say that we want him publicly to continue to champion it, with more rigour and vigour, in the next few months. Secondly, perhaps all nations, rich and poor, could substantially reduce their long list of sensitive productsfrom 80 per cent. I completely respect the need to be sensitive to the fact that the livelihoods of vulnerable small farmers in poor countries can be completely wiped out by a surge of cheap imports, so that some sensitivity must be shown to the impacts of decisions, but we could at least consider some flexibility.
I close with a remark from a written statement made in Septemberwe can obtain written statements in the middle of the summer now, when the House is not sitting, which is welcome. My right hon. Friend the Minister for Trade recognised:
Developing countries, including the poorest countries, are the biggest losers from the failure to reach agreement.[Official Report, 11 September 2006; Vol. 449, c. 122WS.]
Ann McKechin (Glasgow, North) (Lab): I share the pessimism and disappointment of my Committee colleagues about the current state of the WTO talks. Last year there was an unprecedented public and political campaign behind Make Poverty History, and thanks to the lead taken by the Government we made substantial progress on debt and aid. However, unfortunately, on the third and most important issuetradewe have signally failed to achieve what we aimed for.
In the past two and half years, until June this year, I represented the British group of the Inter-Parliamentary Union on the WTO parliamentary conference. I listened to a lot of talking in that time and attended two ministerial conferences, in Cancun and Hong Kong. Frankly, apart from some progress that was made about six months after the Cancun conference, there has been little progress in the negotiations as a whole. Fundamentally there is little political momentum in the EU or the USA towards achieving significant progress.
Some, including many non-governmental organisations, have argued that no deal is better than a bad deal, but no one should be under the illusion that nothing will change if no deal is reached. There is a real danger of regressing back into protectionism. The most vulnerable victims would be the worlds poorest. If that happens, the losses to the least developed countries will be much greater than those that have been modelled in the NGO reports. We must face the danger that the clock could be turned back, as well as being kept on hold for the next three years. That is why it is important that at this point the Government, with their EU partners, should closely examine the reasons for the problems and the underlying macro-economic dynamics that we need to address if we are to move the trade agenda forward in the next few years.
History tells us that trade negotiations are normally long and drawn out. The Uruguay round took much longer, and did not start out with such an ambitious agenda in the first place. Unlike the current Doha round it was not burdened with such an altruistic political aspiration as alleviating global poverty, or with being the subject of debate by millions of ordinary citizens throughout the world. As my hon. Friend the Member for City of York (Hugh Bayley) mentioned, the development agendathe Doha round was launched in 2001came as a consequence of international solidarity after the terrible events of 9/11 and a wake-up call in the international community about the global security threat to us all. However, it was a reaction to the events, rather than a fundamental shift in the political strategy behind trade liberalisation.
In the grip of the need to address the causes of global instability, the language of the negotiations changed, so that development needs were seen to be put at the forefront. There was also an open acknowledgment of the need for a correction of the imbalance that had been created by the Uruguay round. However, there was a failure to emphasise that that could be a win-win agenda for all members, rich and poor.
Malcolm Bruce: That is a telling point. Is not it true that the corollary is the case: that no deal is a lose-lose agenda for rich and poor? That is the danger of some NGOs encouraging the idea that stopping the process is a good thing for the poor. In reality, everyone will lose.
Ann McKechin: I fully agree with the Chairman of the Select Committee. It is a very real danger. I have listened in the past two and a half years to many parliamentarians, from different parts of the world, discussing those matters, and the language of protectionism is becoming much more prevalent. Sometimes it is cloaked in different ways, and sometimes it entails the mention of environmental concerns or food security. I certainly agree that in a small, poor island community food security is important, but I find it difficult to accept that Iceland had a major problem with food security, for example. I have heard that the value of agriculture to France should be referred to UNESCO on the basis of culture, and about the unique quality of Italian soil. I have heard many statements of that kind, but in the end they mask serious protectionist bias that we must fight. We must not think that things will remain neutral because we do not go ahead with the talks.
John Bercow: This question of the consequence of failure is important. While I agree with the right hon. Member for Gordon (Malcolm Bruce) that no dealthe collapse of the talkswould be a lose-lose scenario, does the hon. Lady accept my view that there is a huge difference between the loss to be sustained by the richest countries in the world, which is a lesser increase in wealth, and the loss to be sustained by the poorest ones, which is to be a continuation, and probably an intensification, of grinding poverty?
Ann McKechin: I fully accept the hon. Gentlemans argument. However, the west will lose a major political battle in these talks, not an economic one, because if we do not hold to the virtue of multilateral talks, we set an unwelcome precedent in terms of the entire politics of global security as well as global economy.
As I said, the fact that we failed to emphasise the win-win situation entrenched the lack of political momentum. As my right hon. Friend the Member for Leeds, West (John Battle) mentioned, we might be talking only about 3 per cent. of our economy being adversely affected by these talks. If we are simply to be seen as losers and not necessarily net gainers, where is the apparent incentive for politicians to trudge through long years of hard negotiation to come out with not very much to produce to their citizens and electorate? We must reassess on which basis we look forward to these talks in the future.
There needs to be much more talk about creating more jobs in the global economy as a whole, rather than trying to rectify a trade imbalance between north and south, if we are to give that incentive. The hon. Member for Buckingham (John Bercow) appropriately discussed the moral argument, and I agree that a strong moral imperative exists, but the realpolitik is that we have to produce the incentive to encourage members of the international community to reassess their positions at these talks. In the past 30 years, there has been a
growing disconnect between employment rates on the one hand, and economic growth on the other. That inevitably leads to a rise in protectionist sentiments if unemployment levels remain high or the perception is that further liberalisation may increase unemployment. The rise of the Chinese economy in particular has helped to increase those fears.
We must give a much higher priority to policy coherence between trade and labour sectors of government, so that more aid for trade is directed at labour market preparedness and providing greater social protection for emerging economies. If people are being asked to take the risk of moving from one sector of employment, such as subsistence agriculture, to industrial production of agriculture or to industry, for example, we are asking them to take a great risk in their own lives and those of their families. If there is no form of social protection at a basic level, the political reality is that people will be strongly opposed to taking that risk in the first place because they know the consequences of something going wrong. There is growing evidence that the use of cash transfers as part of a comprehensive social protection system can play a key role in reducing absolute poverty and the vulnerability and risk element in rapidly changing economies.
Yesterday, the hon. Member for Boston and Skegness (Mark Simmonds) attended a meeting of the all-party group on debt, aid and trade, which I chaired. We took part in a briefing arranged by Oxfam on the next round of the European Union economic partnership agreements. We cannot see them in isolation from what is going on in the World Trade Organisation negotiations. I want to summarise the interesting remarks made by the Rwandan ambassador, who said that what people need to develop their economies is investment in infrastructuretransport, energy supplies, water, research and so on, but under poverty reduction strategy paper rules they are severely limited in taking on additional borrowing. He said:
We cant get grants, and aid money
is focused on hospitals and schools. If we dont have the infrastructure, we cant compete against richer nations or cope with further liberalisation.
The Committee has just produced its own report on private sector development. It has become increasingly important that the sequencing of any trade liberalisation for the least developed countries must be accompanied by the opportunities for genuine improvement in economic infrastructure. We also need to focus on creating viable alternative streams of Government income to replace that lost by reductions in tariffs. I know that the Department for International Development is already carrying out work in the countries in which it operates and is helping in terms of customs and revenue reforms, but this needs to be done at a much greater level by all the international donors.
The international community must take a robust approach both nationally and at an international level on issues that severely restrict fair trading at a global level, and, as a result, employment creation, be they capital flight, tax avoidance or, in particular, the widespread and pernicious mispricing of exports and imports to shift profits out of a country. It is estimated that the aid flow of $25 billion, mostly to sub-Saharan Africa, is dwarfed by the $50 billion that the region loses in capital flight. We need to reassess where the
money is going and where it is escaping from if we are to give the LDCs the chance to trade on fair terms.
It is understandable that many of those countries are cautious given their past experiences of forced liberalisation and the one-size-fits-all policies imposed by the World Bank and International Monetary Fund in the mid-1980s and 1990s. As recommended in the report, the Government need to press for the WTO to promote a system of independent, impartial and publicly available economic analysis of the effect of different proposals on different countries and groups, so that decisions can be made on the basis of the fullest information being available to all parties at the negotiations, regardless of their wealth or size.
The reluctance of western nations, including the EU and the USA, to reduce substantially their trade barriers remains the biggest negotiating hurdle. Those protectionist sentiments run deep; we need only witness debates in the US Congress and Senate to see that such sentiments are increasing, rather than decreasing as the years go by. That promotes the pessimism about any hope of a realistic settlement in the next few months. We should not speak about having an ambitious development-oriented agenda while offering only a small fraction of our own markets. We need to be much bolder and braver if we are to create a fairer global economic market and one in which we can all form a part.
The WTO has a lot of faults, some of which we mentioned in our report and in our comments today, but it is a unique international structure because it is based on one member, one vote. It is quite different from the World Bank, the IMF and the permanent United Nations Security Council. The growing shift in power to the new and emerging world economies as the talks have progressed has changed the nature of the negotiations as they have gone along. The G20, consisting of India, China, Brazil and some of the middle-income developing nationsif I can put it that wayhas emerged. I remember that at Cancun everyone thought it was a temporary phenomenon that would last only for a few months and that it was simply a case of nations getting together on a very informal basis, but it has formed a resilient trade negotiating bloc within the WTO. It represents the shift in economic power from the north to the south, and that is inescapable; it will happen. It is about time that western nations faced up to that fact economically and came to terms with it.
It has been mentioned that the G20s priority might be different from that of the G90, although it must be remembered that there are more people in absolute poverty in India than in the whole of Africa. So the G20 has considerable problems with which to deal, but a new political economic order is developing in the world. We must be able to reach out and accommodate and to work with such countries to achieve fairer trade for all.
In the short term, it would be helpful if larger member states could avoid sniping at each other. If they could concentrate on getting at least some of the agreed negotiations on giving better access to LDCsthe aid-for-trade package has been mentionedthat would at least keep the multilateral concept on the road. That is important politically, if not economically in the short term, if we are to reach a better agreement that more fully represents the needs of developing nations, although that might be two to three years down the line.
This is not the first time that we have debated the World Trade Organisation and I suspect that it will not be last. Unless we get right the WTO final resolution, if there is ever to be such a thing, the poverty and the imbalance of power and wealth in the world will get worse, not better. As things are now, the situation for the poorest in the world is getting worse.
I was interested in the reference made by my hon. Friend the Member for Glasgow, North (Ann McKechin) to the shift of power between the negotiating blocks of the traditional western powersthe EU and the United Statesand development of the group of 20. That is a significant and important development. It has created success as well as problems. It shows that there has been growth in the economies of what were very poor countries, but also that they are prepared to combine to develop their own agendafor example, with Brazilian soya, and so onoften at the expense of the poorest countries or the people in those countries. There are many very poor people in Brazil and even more in India, and I am not entirely sure that their interests are being represented by the agribusiness interests that dominate their Governments national negotiating stance.
The point that I want to emphasiseperhaps the Minister will say something about itis what we are doing to ensure that in the negotiating round the representatives of the very poorest countries, which are mainly African, get a reasonable hearing. I was not in Hong Kong, but I have talked at length to those who were and it seems that the representatives of a number of poor African countries went to Hong Kong, attended the opening session, spent a great deal of time sitting around and talking to any non-governmental organisation that happened to pass by, and took little part in any negotiations but were invited in for the final collapse to learn that their needs had been ignored during the previous several weeks. It is not for us to create a colonial system to ensure that they are represented in a different way, but it is up to us as part of the negotiations to recognise that those countries have an even more legitimate voice than anyone else and should have been heard because this was supposed to be a development round. We should bear that in mind.
John Bercow: Is the hon. Gentleman saying that the nub of the problem is formal lack of speaking or representation rights, or is the bigger part of the problem perhaps that the poorest countries have insufficient access to lawyers and technical specialists in trade policies?
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