Mike O'Brien MP

Free Trade And The Doha Development Agenda

I am particularly pleased to be here in Shanghai today and would like to thank Mayor Han Zheng for his hospitality in welcoming me to this impressive city.

Shanghai has a rich legacy as a centre for commerce and foreign trade for centuries past. Today, the UK is the leading investor in Shanghai and across China, with nearly 3,000 British-invested joint ventures.

Today we have the opportunity to bring together CEOs from China and the UK in this high-level forum to exchange experiences. We have with us the CEOs of some of China’s most dynamic companies. You represent a new era for business in China. I am sure your discussions will be productive and wide-ranging.

Businesspeople in China today operate in a climate of extraordinary economic development. Much of the rest of world is suffering a decline in economic growth, China alone is expected to achieve over 8% growth for the first half of this year. Meanwhile Shanghai has registered double-digit growth every year for over a decade.

China has not only created millionaires, it has also lifted 150 million people out of poverty in the last ten years. Thanks to China's achievement, we now have a real chance of meeting the Millennium Development Goal to halve the proportion of people living in abject poverty by 2015.

Where once the world talked of China's great culture but mourned its poverty, today they still talk of culture but are even more fascinated by a developing country reaching for prosperity.

Much of this growth is being led by the enormous development in China’s foreign trade. China is now the EU’s third largest trading partner after the US and Switzerland. Despite the SARS crisis, exports and imports have continued to rise steeply this year so far.

As Trade Minister of the UK, one of the world’s greatest advocates of free trade, I regard China’s economic success as a testament to its ambitious and committed approach to economic and trade liberalisation.

China is perhaps the world’s best example of the benefits of free and fair trade.

International trade is good for business. Competition drives business and spurs innovation. Businesses that trade internationally are more productive than those, which do not. They spend more on innovation. They are more capital intensive. Their labour productivity is higher. And as a result, they are more competitive in overseas markets.

Free trade is not always plain sailing. We are now well into the second year since China’s accession to the WTO. Much has already been done to cut tariffs and enable Chinese and foreign firms to compete on equal terms. However, there is much still to do. As in every country, there will be those who would prefer to shelter from the wind of international competition.

But there can be no question about the importance of trade liberalisation to the global economy and to China. Opening up Chinese markets in line with the commitments made to the WTO will contribute to a more efficient allocation of capital and the development of a market economy in China. Nowhere is this more true than in financial services sector, an area of expertise for both Shanghai and the UK. It is only when banks and stock markets operate in an open and efficient way, are regulated impartially, and are led by the needs of customers, that other areas of the economy can take full advantage of the benefits of a free market.

WTO membership is not just about the pursuit of free trade. It is also about developing rules that guarantee fair trade. The new trade round, the Doha Development Agenda, is currently being negotiated among members of the WTO. It is the first round of trade negotiations to set out to create a fair, as well as, a free trading system: one that allows the benefits of globalisation to flow to developing, as well as developed countries.

There are some vital issues on the table, including trade in agricultural products and the right of developing countries to have affordable access to medicines. The UK and China share many interests in resolving these issues.

The massive power of the Chinese economy and China’s regional influence all point to China being a major player in the WTO and Doha Trade Round. The next big milestone will come in September this year, when WTO members will hold their Fifth Ministerial Meeting in Cancun, Mexico. I believe it is vital that China takes this opportunity to lead developing countries and ensure that the development agenda is at the heart of Doha. Now is the time for China to demonstrate it can be a world leader in securing agreements that will benefit developed and developing countries alike.

A country negotiates most effectively when it is engaged with the needs of its business community. I hope that as China’s officials and entrepreneurs adjust their working practices to adapt to the needs of WTO membership, we will also see a new compact developing between government and business.

As the development of China’s rules-based economy continues, I believe that businesspeople operating in China will communicate with government in a new way: lobbying for an economic environment which is enabling to business operations; they will support the development of a rules-based trading system in China and across the world. They will help to show policymakers that a transparent, fair and predictable commercial environment is the best protection for investment. In such an environment, entrepreneurs can think creatively and can think long-term.

I welcome the opportunity to meet you all today. I am very interested to hear your views on the attractions of operating in China, and your perceptions of the UK.

And I would urge you to take a close interest in the Doha Trade Round as it unfolds. This is not just about a level playing field. This time, we are shaping the rules of the game together.

As we continue to build on our strong trading relationship, let us also work together, bilaterally and through the WTO, to ensure that the benefits of free markets and increased global prosperity flow to all.