The Rt. Hon. Patricia Hewitt

Trade and Development: Europe's Role in Spreading Prosperity

We all know the scale of the crisis. One in five of the world's people live in extreme poverty on less than a dollar a day. 1.2 billion people - two thirds of them women and girls - without adequate food, water, sanitation healthcare or education. Countries are, many of them rich in natural resources, wrecked by civil war and environmental disaster. A crisis almost too large to imagine, let alone to overcome.

Europe's History

But our own history, here in Europe, reminds us of what we must do. Just two generations ago, Europe was torn apart by war. The nightmare of the concentration camps. Millions of displaced refugees. The industrial strength of France and Germany destroyed.

In that crisis, Europe's leaders understood that peace and prosperity go hand in hand. Six countries set out to bind their economies together with the great aim of ending war between their peoples. Those six countries, by choosing to integrate their economies to remove barriers to trade and work together on issues of common interest, built the foundations for half a century of peace and prosperity.

We cannot measure the benefit only in material terms. But as a continent we are 165 billion euro better off because of the single market. As new members have joined, the promise of prosperity has been fulfilled. And now we are offering that same promise to ten new members.

So we know from our own history how the ties of trade bind nations together. And today - in a world threatened by conflict, poverty and terror - we have a great responsibility to extend those ties of trade around the world.

The Opportunity of Doha

The opportunity is there. In November 2001, we launched the Doha Development Round:

If we could just halve protection in agriculture, industrial goods and services around the world we could boost developing country incomes by around $150bn a year - three times the value of all aid budgets put together

• Substantial trade liberalisation could reduce the number of people living in poverty by over 300 million by 2015 - a significant contribution to reaching the Millennium Development Goals
• But progress is frustratingly slow. Just before Christmas - despite the heroic efforts of the negotiators - the WTO failed to reach agreement on access to medicines for the poorest countries.

The case for action is indisputable.

We must entrench, through a range of means, greater access to medicines for the poor, through infrastructure improvements, through the Global Fund, through differential pricing for the poorer countries of the world and a long-term solution to the particular problem of access identified at Doha.

On this issue there is no disagreement between Europe and the developing world. We compromised. But the United States refused to. So we must redouble our efforts to persuade them to join the developing countries and us in a solution that will make medicines available now without destroying the incentives to create new medicines for the future.

Agriculture

But there is another issue that threatens the Round. And that is agriculture. Unless we press ahead with reform of the Common Agricultural Policy, we could derail the Doha round.

In many ways the CAP has served Europe well for nearly fifty years. We all recognise that it needs to be reformed - a process that has been underway slowly for the last decade. But the pace needs to hot up substantially. Do not misunderstand me colleagues, I am not calling for the CAP to be scrapped. Neither would I want in any way to undermine the rural way of life that has been passed down from generation to generation in Britain, in France and across Europe.

Our villages and our countryside, and the traditions that go with them, are part of what define us as nations. Of course it is right to spend public money to protect the environment and support that way of life.

But it will benefit us all to reform the CAP further.

• To make farming more sustainable, in line with our commitments at World Conference on Sustainable Development
  
  
• To remove subsidies that encourages overproduction in Europe and lead to disruption in world markets. To link support instead to our rural infrastructure and environmentally friendly methods of farming - decoupling
  
  
• To generate locally more of the variety and type of food our consumers are increasingly demanding
  
  
• To reduce the cost burden on our taxpayers, and for our consumers - €22 for every family every week
  
  
• To give our consumers the greater choice that stems from competition between products from within Europe and overseas
  
  
• And to deliver enlargement affordably

So the case for CAP reform is a European case. But there is another argument for CAP reform - our commitment to tackling global poverty. We cannot claim to champion the interests of developing countries but deny them the chance to trade their way to prosperity.

We cannot preach free trade abroad and practice protectionism at home.

The Pain of Restructuring

Of course this can be a difficult argument to make - particularly for all of us who are elected representatives. Market opening brings pain as well as gain - and we represent those who are threatened by change as well as those who benefit.

But we also know what happens when elected representatives give in to protectionist interests. That is what happened last year in the United States with tariffs on Europe's steel - tariffs that are in breach of WTO rules, tariffs that are inflicting huge damage on our steelworkers and communities, tariffs incidentally that are punishing US manufacturers just when manufacturing needs all the help it can get.

As the MP for Leicester West, I represent thousands of textile workers whose jobs have been threatened or destroyed not only by technological change but also by foreign competition.

Of course they would like protection. Of course they were unhappy about our decision in Europe to open our textiles market further, for example to Pakistan. That decision led directly to the closure of some firms I know.

But I also know - and have said on many occasions - that the way to secure the future for the UK textiles industry is not through protectionism, despite the very real competition they face from the other side of the world. It is through investment, and continual innovation, upgrading the products to retain their market share. Firms in my constituency won't lead the world selling basic cotton t-shirts, but they can find their niche in the technical textiles of the future. Our job is not to hold back change, but to help them make that adjustment.

So I say to colleagues here in the European Parliament - be it on the agriculture committee or elsewhere - we must also take the wider and longer view… We must remember that our own prosperity here in Europe was built on tearing down barriers - a process that the imminent enlargement of the EU will continue. We need, in reforming the CAP, to consider our own longer-term interests and those of our consumers and taxpayers as well as of our farmers. But we also need to consider the interest of the poorest people in the world.

Action in Europe

In agriculture, we in Europe have achieved much already to open our markets to the poorest in the world.

We are the biggest importer of agricultural produce from developing countries. We import ten times more agricultural produce from Africa than the US does.

And we are rightly proud of our decision to open up our markets to the 49 poorest countries in the world nearly two years ago under the Everything But Arms initiative. We already see the first effects of that - imports into the EU rose last year at a time when world trade volumes were low.

Commissioner Lamy must take the credit for this bold initiative. Without his vision and dedication it is unlikely we would have made as much progress on trade and development as we have.

Australia and New Zealand have already followed our example and granted duty and quota free access to all the Least Developed Countries. Now is the time for the other rich countries - and the more prosperous developing countries - to do the same.

As a continent we understand the need for reform in the way our own agricultural market works and I welcome both the mid-term review proposals tabled by Commissioner Fischler and the Commission's modalities paper for the WTO discussions as important steps in the right direction. So I regret that my French colleagues have asked for a further discussion of the modalities paper in the Council. Such a hesitant start on the long road to the inevitable re-shaping the CAP is regrettable. We see this paper as the bare minimum of where we need to be now.

We are rightly critical of US tariffs. We notice that they have put up their agricultural subsidies to a record of $32bn, with a further increase in spending for agriculture of $73bn over the next 6 years before demanding in the WTO a cut in subsidies to a maximum of 5 per cent of the value of agricultural production.

But the uncomfortable fact is that even after the US increases our subsidies here in Europe are twice the level of the United States! And they are disastrous for the poorest farmers of the world. We give $2 a day to every cow in Europe, but leaves more than half the world's population on a daily income of half that amount.

Why We Must Cut Subsidies

Take the example of sugar in Mozambique. The industry is the largest source of formal employment and can produce sugar at roughly half the cost as the EU. Three-quarters of the rural population live in abject poverty. Although the industry has the potential to employ 40,000 people, at present it is only employing 23,000 - thanks in part to the subsidies that we in Europe give to our own sugar exports. Even after the amendments to our sugar regime under the EBA programme, European subsidies will this year deprive Mozambique of around $106 million in lost revenue according to our calculations. Of course the EU does give aid to Mozambique, but it isn't much more - $136m per year.

So we are giving with one hand and taking away with the other.

The same story is told in Zambia and Malawi - like Mozambique, amongst the least developed countries of the world. All three produce sugar far more competitively than we do, yet none of them can compete against our subsidised exports to Nigeria and Algeria.

In 2001 the EU exported nearly 1 million tonnes to these two countries alone. If Zambia, Malawi and Mozambique had access to that market, it would have been worth an estimated $185 million to them or 13 per cent of their total exports.

Why We Must Bring Down Trade Barriers

The second issue relates to countries that still face poverty but are not covered by EBA, countries where most of the world's poor still live. Europe's tariff barriers are still at an MFN average of 7.4%, 50% higher than those of the US.

Many African countries such as Nigeria, Cote d'Ivoire, Ghana and Kenya still face restrictions and substantial tariff barriers, despite the preferential access granted under Cotonou.

And there are more people living in poverty in India, neither an LDC nor a beneficiary of Cotonou, than in the whole of Africa. I was there a few weeks ago to learn more about how our actions affect their farmers. It wasn't hard to see. Indian farmers face tariffs of 175% when exporting meat to the EU. In dairy products the tariff is 83%. In Cereals, 58%. Sugar and sugar confectionary 49%. Vegetable and fruit preparations 43%. One can say they are punitive.

Higher tariffs on processed goods, for example chocolate, prevent poor countries adding value to their commodities - in this case cocoa. And the same is true for coffee. We must reduce such tariff escalation, which limits how poor countries can diversify their trade and grow their economy. But it isn't just tariffs that are the problem. Complex rules of origin often act as trade barriers even for EBA countries trading with Europe. And by disrupting the supply chain within regions, they hold back what we know in Europe to be true that the development of a strong regional trading block is vital to the peace and prosperity of that part of the world.

Labour Standards

So trade must be fair as well as free. And with our tradition of social solidarity it is not surprising that we in Europe are so concerned about fairness for the workers of developing as well as developed countries. Our consumers are rightly appalled by the sweatshops whose children labour to produce the branded goods of the West. And consumer pressure can be one of the most powerful ways of driving up labour standards in poor countries, as we saw with Nike and Levis. But let's remember too that a job in an export industry is almost always a step or several steps up the ladder out of poverty.

The men and women I met in North East Thailand recently stitching Ben Sherman shirts and Bata shoes were very clear that their pay and conditions were far better than when they worked in the rice paddies. Continuing strong support for the International Labour Organisation and its important codes are one key in this. And indeed all ILO members, the majority of whom are in the developing world, support those codes. But we must move through steady persuasion by helping their economies to grow, not by maintaining barriers developing countries can easily see as protectionist.

The Prize on Offer

Colleagues, the case for trade is strong at the best of times. But this is not the best of times. When world security is threatened by terrorism and failing states, when political uncertainty compounds economic downturn, the need for the new world trade round is overwhelming.

Even in these difficult times, we in Europe are reaping the economic and political benefits of becoming the largest single market in the world. And with enlargement we continue on that path. But as we become a wider union, I believe that our boundary walls have become too high, protecting our markets and subsidising our producers.

But that is not the way to become the world's most dynamic knowledge-driven economy - our Lisbon goal. Europe's economy needs the wealth-creating spur to innovation that comes from competition.

There is yet another reason to embrace the Doha Development Round. Unless we enlarge the lawful trade in goods, we will never stop the illegal trade in people. Millions of people are fleeing from poverty, persecution and war. Most of them get no further than other poverty-stricken countries. But Europe is a magnet and we will go on struggling to restore integrity to the asylum system and order to economic migration unless we help people to escape the poverty in their own countries that our own policies have helped to create. Either we sort this out and allow people to trade themselves out of poverty or we will feel the consequences. So I propose the other way. The way that shapes the market to achieve our social aims through free and fair trade.

Striving through the WTO to get a deal that is in the interests of all 144-member countries, two thirds of them developing countries. Modernising and extending the remit of the WTO to deal in services as well as goods. Ensuring that, in the words of Kofi Annan, "globalisation becomes a positive force for all the world's people, instead of leaving billions behind in squalor."

Uncertain Times

Now is the time to use our experience in the fight against poverty in the rest of the world, because poverty anywhere in the world is a threat to peace and security everywhere.

It is time that all of us in Europe in national and European Parliaments, recognise the crucial leadership role we have to play. So let's get on with building an economic coalition to fight the war on poverty all around the world.