The Rt. Hon. Patricia Hewitt

Progressive Globalisation: achieving global justice through trade

The Fabians, as early as 1922, wrote of the benefits of applying co-operative principles to international trade. It was under a Fabian banner in 1965 that Sidney Wells wrote, "there is no reason why socialists should be protectionists. There is everything to be said for their trade policies, especially in those policies which affect the welfare of human beings who are still the submerged two-thirds of the population."

Forty years on, your timely intervention today and the clarity of thought and purpose you will bring to it will help the centre-left once again come to terms with the extraordinary global challenges that face us.

In 1931, R H Tawney in his classic work, Equality, attacked the privilege, the snobbery and the inequality of pre-war Britain. Instead he wanted to see a country where "it would cease to be the rule for the rich to be rewarded, not only with riches, but with a preferential share of health and life, and for the penalty of the poor to be not merely poverty, but ignorance, sickness and premature death"

Today, he would still be horrified by the gulf in health, education and life-chances between the child growing up in an impoverished council estate, with a secondary school where only 10 or 15 kids in a class of 100 can expect to get five decent GCSE's and the child of the leafy suburbs heading confidently for university and a professional career.

But I doubt if he would confine himself to one country. Because poverty and inequality in Britain, shocking though it is in the world's fourth largest economy, is dwarfed by poverty and inequality across our globe. Over a billion people living on less than a dollar a day. Over 40 million people afflicted with HIV/Aids. Most of them black. Most of them women and children. So it is the condition of our world - and not only the condition of our country - that must engage the passion and commitment of the left.

In the 1940s when Labour created the NHS, we created an institution based on the principle of equality that we all have an equal right to healthcare. It remains our greatest achievement.

But we are, and always have been, an internationalist party. The values and aspirations we have for our own people must be the values and aspirations we have for people everywhere in Tanzania as much as in Tyneside or to Tottenham. So the new challenge we face today is to apply the same Labour principle of equality to the global economy, reforming the world trade system itself in the belief that we will have an equal right to opportunity and prosperity.

Faced with the wreckage of people's lives around the world, it is hardly surprising that some respond by turning against globalisation in general and Americanisation in particular.

The anti-globalisation movement, of course, is a pretty disparate gathering. And it is not at all clear what they would prefer, beyond perhaps a vague ideal of production for local use. But the experience of the last fifty years and more is scarcely encouraging about the attempts made by various countries to disengage from the world's economy. Look at the experience of Ghana and South Korea. Back in 1955, Ghana was 25 % richer than South Korea but by 2001, the average South Korean was seven times better off than the average Ghanaian. What was the secret of Korea's success? Investment in education and sound fiscal policies definitely played their part. But also the realisation that firms that were exposed to international competitive pressure were more likely to succeed in the long run.

During the 1990s, the number of people living in abject poverty in the world fell by 125 million, almost entirely due to improvements in India and China spurred by their economies' increased openness to trade.

Instead of trying to cut themselves off from world trade, as the anti-globalisation movement seems to propose, developing countries now form the majority of the 146 nations in the World Trade Organisation with others queuing up to join.

I have no doubt that the best way to combat poverty and injustice in our world is not to turn our backs on world trade, but to reform world trade. To create a trading system that is fair as well as free. To make globalisation work for the many, not the few.

If we could cut by half the barriers against trade, we could raise the income of developing countries by $150 billion a year, three times what they currently receive in aid payments.

By 2015, we could lift over 300 million people out of poverty, a huge step towards achieving the Millennium Development Goals. That is the opportunity we now have with the Doha Development Round, launched eighteen months ago in the wake of September 11.

At Seattle, the headlines were the anti-globalisation protests. But the real story was the deep mistrust felt by developing countries who believed, with good reason, that the rich nations were once again trying to dictate the terms of economic engagement. At Doha, we began to put that mistrust behind us. We began to create a more transparent process of negotiation. We saw the developing countries, the majority of the WTO, coming together in growing strength to negotiate for their interests. And we launched a trade round that, for the first time, put development at the heart of the negotiations.

But now we are less than 100 days from the WTO Ministerial meeting in Cancun, in Mexico, the meeting that should mark the halfway point of the Doha Round. And we have not made anything like the progress we need, in particular, on TRIPS and access to medicines, an issue of profound significance to countries ravaged by HIV, AIDS, by TB and Malaria.

Just before Christmas, the European Union, developing countries and others reached an agreement on this vital issue. Every member of the WTO except one, the USA.

A few weeks ago, the G8 called on Ministers to find a solution before Cancun. We must certainly do that, and we in the UK government have redoubled our efforts to get agreement on access to medicines, including support for the Global Health Fund.

But we must do far more.

We are entering a new era in trade policy in the UK. For too long richer countries have dictated the terms of trade and this must change. We will push the WTO as hard as we can to get an agreement that works for developing countries and their future prosperity. So I say now, as the leader of the UK delegation to the WTO, that we will not accept or agree to any trade proposal that will damage the prospects of developing countries trading themselves out of poverty. We are not in these trade negotiations merely to promote UK plc. We are pursuing the new trade round because it is morally the right thing to do. We will act even if there is no direct benefit to the UK, although the reality is that we all benefit from the increase in markets that comes from the rise in global prosperity.

The time has passed when richer countries could use trade negotiations to increase their profits at the expense of the developing world. So we, in the US and in the EU, need to put our own house in order. We cannot preach the virtues of free trade abroad while we practice protectionism at home.

• In Europe, the CAP is equivalent to paying $2 a day for every cow in Europe, when 1.2 billion people in the world live on half that amount.
  
  
• The OECD, of which the US is the largest country, spends over $350 billion every year to support its agriculture sector, roughly the same as sub-Saharan Africa's GDP and far more than the $50bn spent on aid.

And it damages our own citizens, people living in Europe not only provide 45bn euro of taxes to fund the CAP but a further 50bn euro from their pockets to buy the more expensive products that are on sale as a result.

Talks are still ongoing on CAP reform. The deal on the table is a good one but there are still some considerable difficulties. We will continue to push for a good deal, not any deal, and we are determined to get one. Because we need to take a long close look at the effect of the systems we ourselves have created.

Take sugar. The EU subsidises their farmers to produce sugar, which is sold cheaply onto the African market. Added to this is the sugar protocol, a quota system whereby some countries get preferred access into the EU market. Excluded countries face tariffs of well over 70%, and as a result can't export their sugar into the EU market. It's a double whammy, poorer countries are shut out of the EU market and then they find they cannot compete with EU subsidised exports in the world market either.

Since 1995 the EU has spent approximately 1.25 billion euros a year subsidising sugar exports. The system is so distorting that it pays a country like Finland to actually produce sugar.

Look at Mozambique, one of the poorest countries in the world. Its sugar industry is the largest source of formal employment in the country and can produce sugar at roughly half the cost as the EU. Even after recent amendments to our sugar regime, European subsidies will this year deprive Mozambique an estimated $106 million.

The EU gives aid to Mozambique, but it isn't much more, $136million per year. We are giving with one hand but taking away with the other. It is a scandalous situation. We must seize the opportunity to reform the sugar regime later this year and I can announce today that I will lobby hard both in Brussels, in other member states, and at home for this.

We are of course committed to helping those countries dependant on the Sugar Protocol through this process of adaptation, which will inevitably follow a radical reform of the regime.

Of course no one country themselves can deliver a successful outcome of the world trade talks. We in Britain are only one out of 146 members, and much of our mandate flows through the European Commission. But one government can set the pace for a truly development round. That is what we will do. And I understand, particularly given the history of such negotiations in the past, the cynicism of anti-globalisation protestors who fear that poorer countries will be forced to act against their own interests. The experience of the way that international financial institutions have acted in the past in Asia and Russia has not exactly been encouraging.

Just as we all have a right to good health, but don't all need the same medicines, there is no one-size-fits-all solution in trade. Different countries have different needs.

We don't want an unplanned dismantling of trade barriers, although there is no doubt that protectionist barriers must come down. The experience of short, sharp shock liberalisation has shown the damage of that approach.

We recognise that trade, though important, is only one part of the jigsaw. We need to develop an international understanding that each country has the right to ensure it has the infrastructure, the regulations and the investment in education and capital to grasp the opportunities offered by increasing trade. And the sovereignty to make their own choices about how to do that. That is why we must make progress on negotiations for increased flexibility for the poorest nations, so called special and differential treatment.

Before I end, I would just like to briefly deal with the issue of investment, which will be the subject of a welcome campaign by the Trade Justice Movement later this week.

Our priorities for Cancun are reform of agricultural trade and access to affordable medicines. Both of vital importance to developing countries. However, my discussions with developing countries leave me in no doubt that more investment is critically important for these countries, and crucial if we are to meet the Millennium Development Goals and enhance poverty reduction. Foreign companies not only provide additional capital, but also help to transfer new technologies, increase local skills and generate employment. The evidence shows that they are attracted to countries with a record of good governance and that businesses are more likely to make investments if a country has clear and transparent regulations.

A new multilateral framework of basic rules, such as that proposed for the WTO, could provide such clarity and security for investors. But of itself it is no guarantee that foreign direct investment flows will increase to developing countries. For example, a country that is politically or economically unstable will not attract foreign investment, regardless of whether or not a multilateral framework is in place.

At present no decisions have been made on structure or content of an agreement. But we, as an internationalist Labour government, will not sign up to something we did not believe to be in the interests of developing countries overall. And in making that assessment we will include the costs to developing countries of negotiation and implementation of any new agreements.

Today I have set out the centre-left case for globalisation. A case the Fabians have been making for many decades. We are an internationalist movement and our commitment to the developing world is clear. But we must use this opportunity to reclaim this ground for the centre-left.

Trade negotiations are reaching a critical stage. The mid round meeting in Cancun, in September, the deadline for completing the Doha Development Agenda next year. Both are opportunities we cannot afford to miss.

The current dialogue offers us great potential. But we must keep the pressure on the negotiations to ensure they deliver on this potential. Because the prize for success is a better system based on trade justice. Something I'm sure would have made Fabians through the ages proud.