Motion to Take Note

Part of EU Trade Policy: EUC Report – in the House of Lords at 3:32 pm on 1st December 2009.

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Photo of Lord Haskins Lord Haskins Crossbench 3:32 pm, 1st December 2009

My Lords, I join in the thanks given by the noble Lord, Lord Trimble, and the noble Baroness, Lady Cohen, for the help we were given by officials in producing this report. I also thank the noble Baroness for her leadership. How much the world has changed since we embarked on this report; indeed, it has been a somewhat long 12 months since we published it, and I am gently reminded of the expression of an author whose name I cannot remember, although others will: "The past is another country. They speak a different language there", because so much has changed since we were in Geneva in July 2008. Then, people were still hoping to complete a Doha round when, remarkably and for the first time, the European Union was not the villain of the piece thanks to the then Trade Commissioner being prepared to take on the French and Irish farmers, never mind the French President. I heard some very uncomplimentary remarks about him in Mullingar one time in the middle of last summer.

The global economy was still steadily moving forward. Yes, there were a few small dips on the horizon such as Bear Stearns and Northern Rock, but in general people felt that they were a little local difficulty that we would ride over. Even in November the same EU Trade Commissioner, now translated into a member of the British Cabinet, said that, like the rest of us, he was still hoping for a deal of some sort. In fact a deal nearly happened, but the Americans and especially the Indians could not settle their differences. Today, Doha is a low priority for the world's leaders. The discussions taking place right at this time in Geneva are mentioned in only one national newspaper today. Even the anti-capitalists are a shadow of their former selves when compared with the excitements of Seattle 10 or 12 years ago-a bonfire in Geneva on Sunday did not make the headlines.

Alan Beattie's brilliant article in today's FT, to which the noble Lord, Lord Trimble, referred, is deeply depressing. The banking crisis has brought Doha to a shuddering halt and events today make a settlement even harder to achieve than when we wrote the report. This is self-evident. First, there is widespread illiquidity, both corporate and national. Secondly, protectionist rhetoric has arisen from the banking crisis, both inside and outside the EU-the US, China, France, Germany, Russia-and even the British Prime Minister referred to British jobs for British workers. Thirdly, there has been a substantial decline in global trade volumes as a result of the crisis, which is inevitable as countries look more inwardly towards the way they do business and less outwardly than they did. Fifthly, there are continued severe trade imbalances, as the noble Lord, Lord Trimble, mentioned, with the US and Britain in huge deficits and China and Germany in huge surpluses. Sixthly, there has been severe exchange rate volatility over the past 12 months with the dollar and the euro; the Chinese position is volatile and the pound and the euro have become difficult to do serious business with. All of these factors seriously distort trade.

However, it is encouraging to note that, despite all these pressures, the rules of the WTO and of the European single market have been largely respected, although there have been a few hiccups within the EU and between China and the rest. Furthermore, there is a general recognition of the need for international co-operation in dealing with the banking crisis-unlike the 1930s-and this is the most crucial element. The IMF is better resourced and is having a relatively good war; the G20 is having some effect. I read somewhere that Russia is now seriously pursuing membership of the WTO. If that is the case, it is welcome news.

So why does getting a Doha agreement still matter? The world must trade itself out of recession-that is the only way it is going to do it-and Doha is the focal point in enabling that process to continue and to develop. The worst thing that could happen to the world would be a 1930s-type resort to protectionism. We must press on.

What are the obstacles to making progress? The banking crisis is far from over, as witnessed by what happened in Dubai this weekend. Doha is, unfortunately, low on the radar compared with that banking crisis and with Copenhagen. The new US Congress is much more protectionist than the old one. The distorting trade imbalances remain. Agricultural commodities are again unstable and farmers, not only Irish and French farmers, are demanding more state support, especially the dairy farmers. Agriculture has always been a stumbling block in WTO negotiations. Cross-border banking failures have undermined trust and confidence between countries. The regulation of financial markets remains a national responsibility, which is a large problem. Business support, which was critical in getting a settlement in the last WTO Uruguay agreement, seemed non-existent at the time of the report, which is fairly worrying.

It may be more difficult to get the EU 27 to agree a single position in 2010 as the noble Lord, Lord Mandelson, did in 2008 despite the French and Irish farmers. The EU, incidentally, has always been at a disadvantage in these negotiations because, unlike the other countries, it has to have two negotiations: one within the EU 27 to agree a position, and then with the WTO itself. Of course, during the process of the internal negotiation within the EU 27, it reveals its hand and enables other people to take a position.

I urge the G20 to intensify its pursuit of greater international co-operation in the following areas in order to lead the world out of the crisis: first, a more effective IMF with adequate financial resources, much of which is already in place; secondly, greater co-ordination and harmonisation in the regulation of global financial markets, especially between the US and the EU; thirdly, greater co-operation to tackle climate change; and, fourthly, greater co-operation to tackle tax scams. We need to make sure that the bilateral agreements which are still being made complement but do not undermine the WTO.

Where does this leave the WTO? Have international capitalism, world trade and the WTO itself been mortally wounded by these events? No, of course they have not. However, realistically, because of all these factors there is little prospect of meaningful progress in the short term in Geneva. The dust must be allowed to settle but, before that happens, I fear that there will be more banking shockwaves and even new earthquakes.

The priority, therefore, must be defensive: to ensure that countries abide by the existing rules of the WTO and, for Europeans, the rules of the single market, which are as critical. Pascal Lamy and Neelie Kroes have both done an excellent job so far in holding the line and resisting rises in existing tariffs, but they need to keep a close eye on President Obama, Premier Wen, President Sarkozy and even our own Prime Minister, and resist their protectionist rhetoric. At present, the world's leaders are caught like rabbits in the headlights, but normality will return to the global economy only when, once again, the WTO can return to its grand objective of promoting more fair but free trade across the globe. I hope that the Minister will dissipate my pessimism.