The Rt. Hon. Patricia Hewitt, Secretary of State for Trade and Industry, Cabinet Minister for Women

Trade and Investment - the DTI White Paper

I'm delighted to be here today and in particular to share a platform with Mexican Economic Secretary Fernando Canales.

I last met Minister Canales in January here at the DTI. Bienvenido Señor Canales a esta su casa de nuevo.

I know he shares my belief that we must make globalization a force for good for the many and not the few.

It was the Nobel Prize winning Mexican poet Octavio Paz who said, "Today we all speak, if not the same tongue, the same universal language."

Today, that language is globalisation. We all face the same challenges that globalisation brings: our goods, our services, our money and our people crossing national frontiers, our economies growing ever more dependent on each other.

And so this afternoon I want to consider how we can work together to ensure that free and fair trade promotes development for the poorest in the world as well as bringing benefits to more developed economies.

Trade is the key driver of economic growth, as Mexico itself can testify.

We in the UK enjoy warm trade relations with Mexico. Bilateral trade is up by nearly a fifth since 1999. The UK invests more than US$5bn in Mexico annually and now the Mexican Government, advised by Partnerships UK, is making impressive progress in such areas as Public Private Partnerships.

Mexico is now emerging as a global market with increasing strategic importance, building on its membership of the North American Free Trade Agreement and Free Trade Agreement with the EU. Mexico is already the 9th largest economy in the world and her GDP is predicted to grow still further.

It's clear its economic prospects are considerable. But Mexico's progress has the potential to reap benefits not just for its own citizens but beyond its borders as well. With the emergence of the G20 as a major economic and political force, I agree with the Mexican President Vicente Fox when he says: "Middle-income emerging economies are in a position to become the most effective bridge to world growth."

But if globalisation is to work for the many and not the few, we must do more than welcome the progress of individual countries. We must break down barriers, open up markets and remove subsidies.

Developing countries are heavily punished for the trade distortions that rich countries maintain.

I know Mexico has concerns about US protectionism on maize, beef and pork. Here in the UK we face criticism much closer to home.

There is no justification - ethical or economic - for subsidising our own farmers to export to the rest of the world whilst restricting others' access to EU markets. We're denying poor countries the chance to trade their way out of poverty and our own consumers' access to cheaper products. Indeed, 75% of British consumers rightly see trade as more effective than aid in reducing poverty in the developing world.

The World Bank estimates that developed country agricultural policies cost developing countries up to €75 billion a year.

If we cut all trade barriers in half, we could raise the income of developing countries by $150 billion a year - three times the value of all aid budgets put together. In Britain alone, households would be better off by £500 a year. And by 2015, we could lift more than 300 million people across the world out of poverty.

That's some prize. But is it deliverable?

As one of the world's oldest and most open trading nations, the second largest investor in the world and a key player in the European economy, Britain can take a leading role in the campaign to make globalisation a force for good.

Our White Paper is the UK government's call to action to its partners in Europe and the international community to step up the drive for free and fair trade.

We are at a pivotal moment in the world trade agenda. The EU is now the world's largest trading bloc. The new European Commissioners taking up their posts this autumn have a vital role in ensuring the benefits of globalisation are delivered in Europe and beyond.

So the White Paper is my calling card on the new Commissioners.

My message? That it is vital we maintain progress if we are to achieve better living standards at home and abroad - and give millions of people in the developing world an escape route out of poverty.

In particular I am calling on the EU to end the trade distorting effects of its policies under the Common Agricultural Policy - a policy that does untold damage to farmers across the world yet costs the EU's own taxpayers some €50 billion a year, plus another €50 billion through higher food prices! It doesn't make sense economically, it doesn't make sense developmentally.

I'm also challenging all developed countries to eliminate all forms of export subsidy and trade-distorting domestic support. We must reduce and simplify all tariffs and open up markets to developing countries - especially where those countries have a comparative advantage.

But the White Paper goes further - the developed world must also make a step change in the way we approach trade negotiation.

We must call a halt to the macho mercantilist approach that treats opening markets as concessions that have to be battled over - often in the small hours of ministerial summits - as Minister Canales and I know all too well from first-hand experience.

We in the developed world must accept that benefits come from increased trade flows overall - not just our exports and our inward investment, but our imports and outward investment as well. A more open and competitive world trading environment generates a virtuous spiral - and benefits all.

We should not expect poorer countries to pay a heavy price for developed countries' concessions on subsidies, tariffs or market opening - as trade negotiators too often imply. I see welcome signs that more developed countries are accepting this approach.

Nor must we shrug off the problems that developing countries face opening up their markets.

Last year I met rice farmers in Honduras - rice farmers who were wiped out 10 years ago when their home market was liberalised. They were efficient, they could have competed - but not against the massive subsidies enjoyed by American producers.

Developing countries need time and adequate support to adjust their economies. The new blueprint for trade liberalisation must be "same destination, different speeds". So WTO rules must be designed so they are sufficiently flexible for developing countries to operate.

I welcome the formation of the G20 and G90. They have strengthened the voice and bargaining power of developing countries. But we need to build the capacity particularly of the poorer Developing Countries to participate in trade negotiations. To this end my Government has committed £174 million for trade-related capacity building work in developing countries since 1998.

The economic evidence is clear. Countries gain from opening their own markets. But globalisation is not just an issue of economics, but one of political stability and security too.

The framework WTO members agreed in Geneva last month was a crucial step towards ensuring the Doha trade round delivers for all. It has been welcomed by key developing countries - including Mexico - and rightly so.

We now have firm negotiating commitments in agriculture across the three pillars of domestic support, export competition and market access.

We have agreed an immediate 20% reduction in domestic support in year one of implementation. The EU demonstrated considerable leadership in committing to the elimination of export subsidies by a negotiated end date. The US too has made considerable commitments to reductions. But this is only a down payment on the further reductions needed.

We will have a single-tiered approach to market-access, with substantial reductions in tariffs and the highest cuts to the highest tariffs.

And while the Singapore Issues - of Investment, Competition and Transparency in Government Procurement - will not form part of this trade round, we do have consensus to continue negotiations on trade facilitation. Indeed, developing countries stand to gain most from these negotiations. Rationalising inefficient customs procedures will boost revenue, reduce company costs and encourage foreign investment.

So we have made significant progress - but hard work lies ahead.

I know for example that Mexico and other WTO countries are concerned about the timescale for eliminating agricultural subsidies. I will be raising this issue with EU partners. I hope we can help deliver an ambitious timeframe which meets both EU and developing countries' needs.

We face a challenging agenda. Here in Europe we need to be fit to meet it. We must renew our commitment to the Lisbon agenda of structural reform and push ahead with the liberalisation of capital, product and labour markets.

And here in the UK we must continually improve our competitiveness and productivity if we are to succeed in world markets. We need to provide the sound economic framework that helps create new jobs as old ones disappear. And we must deliver support for our people to manage the change that opening up markets undoubtedly brings.

For without that dynamic approach we are weaker in the face of the siren calls for protectionism. We are more prey to the misguided belief that international trade and investment are a zero-sum game, rather than a virtuous spiral from which both developing and developed countries alike will benefit.

Hard work lies ahead of us and we must press on, and press on quickly. The prize of trade liberalisation that works for all is within our grasp.

We have come a long way. One year on from Cancun we have proof of the commitment of WTO members to successfully completing the Doha trade round. Last month's framework agreement contains much encouraging language for developing countries.

But we need more than warm words. We must maintain momentum and drive this agenda forward if we are to deliver tangible benefits for rich and poor alike.

We in the UK Government will continue to press for substantial progress to be made before the next WTO Ministerial Conference in Hong Kong in December 2005.

This Autumn I will visit European member states to build support for our approach. The new EU Trade Commissioner Peter Mandelson has already said the big prize would be agreement on Doha.

And with the UK holding the Presidency of the EU and the G8 in 2005, we have a major role to play in pushing the Doha agenda forward, both through the EU and on the wider global stage.

Trade liberalisation is a win-win opportunity for developing countries and UK business. Geneva marked a crucial step on the road. But unless we maintain momentum, we will not reach our goal.

Globalisation can be a force for good, but only if we make it so - only if WTO members work together to confront entrenched interests and build free markets, fair for all. Minister Canales, I look forward to working further with you and politicians from across the world to meet the huge challenges ahead.

Today we all speak the same language of globalisation. But I hope this afternoon you will take more than just warm words from what I have said - I hope you will take a sense of Britain's commitment to deliver.