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Gareth Thomas MP, Former Minister for Trade, Development and Consumer Affairs (jointly with DFID)
CBI / Warwick Commission, 30 October 2008
It has become, sadly, a truism that with the global economy reeling from a credit shock and an economic downturn, we are facing uncertain times, the full impact of which may take some years to work through.
While we wait to see the longer term consequences of the financial turbulence, we must now decide how we will react in the face of calls for greater protectionism and higher barriers to trade.
One of the most important things we can do to deliver prosperity for developed and developing countries alike is to ensure that the global market is fair, open and sustainable, so that everyone – especially the world’s poor – can unlock the benefits that increased global trade can deliver.
Despite the current economic turbulence, the world ecomnonmy, it is estrimated, will double in size over the next 25 years, creating a billion new jobs.
But if current trends are maintained, that economic growth and the wealth it creates will by-pass the people who need it most.
The challenge of making sure that all countries – especially the poorest - can play a proper role in globalisation, and receive a proper share of its rewards, is one of the greatest challenges of our time.
We need to be clear ourselves and clear with international partners that trade is fundamental to meeting that challenge, with all the many consequences that brings.
There are, I believe, five key elements to ensuring our international trade system is equipped for the next ten years.
First then, we still need a multilateral trade deal. Despite the setback this summer, a Doha deal is still our top priority. Securing a deal would provide a vital shot in the arm for the global economy – and a lifeline out of poverty for developing nations.
The lack of agreement at the WTO Ministerial in July was of course disappointing. But significant progress was made.
The package on the table would have secured substantial cuts to US and EU tariffs and subsidies on agriculture;
it would have delivered greater market access for EU firms to countries like Brazil and Argentina, in key sectors like cars and the wider automotive sector; and it included strong signals on possible services liberalisation for example in asset management and insurance markets in India, China, and Brazil.
I think that shows how much is at stake.
Although we cannot now conclude the Doha Round this year, there remains a window of opportunity following the US elections and before the end of the year for securing agreement on agriculture and industrial goods, which would then pave the way for completing the round next year.
The forthcoming international Group of 20 leaders’ meeting in Washington on 15 November will be a key milestone. At that meeting we will urge countries to show their commitment to an open global economy, and – as part of that – to a multilateral trade deal.
If we don’t succeed in securing agreement this year, we will miss an important opportunity. After that, the new US administration will need time to settle in, and trade is unlikely to be their first priority - although the confidence injection a Doha deal would deliver for the global economy may be a powerful attraction to a new administration.
Indian elections and changes to the European Commission next year will also reduce their ability to engage.
If we don’t succeed this year we may have to wait until 2010 before we have another chance. So it is urgent we act now.
Secondly on stronger institutions.
As well as staying firmly committed to Doha, we need to ensure that our international institutions are fit for the 21st Century.
Alongside reforms of the IMF and the World Bank, there will inevitably be a discussion about how to make sure the World Trade Organisation is properly equipped for the challenges ahead.
That discussion needs to address:
Thirdly, support for business.
We also need to continue to help UK businesses gain access to new and emerging markets – enabling them to achieve faster growth, and to generate wealth for the countries they operate in.
UKTI is helping UK businesses overcome barriers to trade, and generating around £3 billion a year in benefits for Britain. It has already helped nearly 20,000 British companies to exploit opportunities in overseas markets.
High growth markets such as India, China, other Asian countries, the Gulf, and other emerging economies will continue to be our priority.
But I’d be interested in views on whether or not small and medium sized enterprises will want further help to access more familiar markets such as the EU and US, where language, rule of law, governance issues are perhaps less of a challenge than elsewhere.
We are working to conclude Investment Promotion and Protection Agreements (IPPAs) with priority countries identified by business. Successful agreements will set higher standards of investor protection – enforceable through international law, with independent dispute settlement – and encourage new investment in the UK and partner countries.
Bilateral trade agreements can of course also play an important role in improving trading opportunities and opening up new markets for investment – so long as they don’t distract from Doha.
Our short term priorities are the Free Trade Agreements with the Republics of Korea and India - two key trading partners of the future - and we hope to see the conclusion of at least one of these agreements next year.
Fourthly climate change.
If developing countries are to achieve sustained economic growth, they will need to adopt new climate resilient technologies.
To help them, the World Bank’s Clean Technology Fund – with UK backing - will support programmes which demonstrate low carbon development technologies in action.
We are also looking at dynamic new proposals for Europe to work with the Chinese government on Low Carbon Development Zones in China. These Zones could provide a far-reaching opportunity for us to try out a new range of trade, investment and development policies which would put China and the EU on a faster track to an energy-secure, low carbon economy.
UK and EU business has a real stake here. The EU would benefit as a net exporter of environmental goods. And the UK would capitalise on our strength in environmental technologies, and our expertise in the fields of clean coal and carbon capture and storage.
I'm talking about creating the right conditions for Foreign Direct Investments in all sorts of innovative, low carbon goods.
Low Carbon Development Zones have the potential to be a clear sign of our shared intentions for a new kind of global economy - shared intentions between the EU and China, and shared intentions between this Government and UK business.
The challenge is now to make action on Low Carbon Zones a reality at the EU-China summit on 1 December.
Finally, developing countries also need to build up their infrastructure and improve their capacity to trade. In the Central African Republic moving a container from a factory in Bangui, the capital, to the nearest port and getting through customs takes 116 days.
In Denmark it takes five.
As I’m sure you’d agree, delays like that make doing business nearly impossible. These are the kind of issues that governments can do something about.
We will shortly be launching a strategy setting out how the UK will support vital infrastructure programmes to improve roads, ports and telecommunications – things which developing countries desperately need if they are to participate in the global market – the so called Aid for Trade agenda.
We will increase our Aid for Trade to over £400 million a year by 2010 – a 50% increase compared to 2004.
For example, we are providing nearly £5 million to remove bottlenecks and reduce transport costs in Africa’s North-South Trading Corridor.
And next year we are chamioning an Infrastructure in Africa conference hosted by the southern and east African regions to secure investment in Africa’s North South trading corridor and so improve trading opportunities from the copper-belt of northern Zambia to the ports of South Africa.
Conclusion
As we respond to the financial crisis and the economic downturn, our ability to maintain open economies, build stronger trading partnerships, and stand firm against those who would prefer to erect walls and barriers around us will help to define how quickly we emerge from the current turbulence.
I have no doubt that open markets will continue to be fundamental to our ongoing economic strength and the growth and development of the world’s poorest countries.
