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close this bookEliminating World Poverty: A Challenge for the 21st Century - White paper on international development (DFID - The Stationery Office, 1997, 86 p.)
close this folderSECTION 3 - Consistency of Policies
View the document(introduction...)
View the documentThe Importance of Consistency
View the documentThe Environment
View the documentTrade, Agriculture and Investment
View the documentPromoting Political Stability, Social Cohesion and Responding Effectively to Conflict
View the documentPromoting Economic and Financial Stability

Trade, Agriculture and Investment

Introduction

3.13 Trade and investment are crucial to poverty elimination. They bring resources that can help generate the growth needed to establish sustainable livelihoods. We particularly need to work to ensure that the benefits which follow from the fall of barriers to international trade and investment reach the least developed countries, and the poorest people, and lead to sustainable development. This means paying increased attention to issues such as labour, environmental and health standards, and helping developing countries build their own capacity to take advantage of globalisation.

3.14 For these reasons, trade and investment policies form a key part of the Government’s approach to development. The time is right for progress, with important changes either in train or in prospect both within the EU and internationally. We plan to play a leading role in helping to shape these changes, working within the EU, within the multilateral institutions, with other governments both in developed and developing countries, and with the private sector.

Trade Policy

3.15 The Government supports an open, fair and sustainable multilateral trading system - from which all countries can benefit. The World Trade Organization (WTO) provides the rule-based framework which underpins the system. We will encourage and assist developing countries to become more fully integrated into the multilateral system and to participate in the WTO (see Figure 13). We want to support their efforts to reduce their trade barriers, taking account of the time needed for their economies to adjust.

Improving Market Access

3.16 We will work within the EU and the WTO for increased multilateral liberalisation of trade in goods and services, and the continued dismantling of tariff and non-tariff barriers worldwide. A particularly important sector for many developing countries is textiles, where we will press for adherence to the agreed timetable for the dismantling of quotas under the multi-fibre agreement. For the future we are committed to negotiate further comprehensive trade liberalisation, in particular in the agriculture and services sectors.

3.17 Dismantling trade barriers takes time. In the interim we will continue to work for the best possible access to EU markets for developing countries, in particular for those countries that need this most to compete on world markets.

· We will press for the elimination of tariffs on imports from the least developed countries, and for eventual agreement to eliminate tariffs multilaterally within a WTO scheme.

· We believe that the current Lomnd Generalised System of Preference (GSP) terms should be brought into closer alignment by seeking ways to level up preferences and by extending product coverage within GSP to include all industrial goods and a wider range of agricultural goods. We will focus in particular on sectors likely to be of benefit to poor countries and poor producers.

· We believe that any bilateral and regional free trade agreements should be structured to promote economic development and be consistent with the multilateral trading system.


FIGURE 13 - Shares of World Exports, 1995

Source: World Development Report 1997.

3.18 Eligibility for preferential access to the EU market (and other developed country markets) is governed by highly complex rules of origin. In practice, these make it difficult for ‘developing countries to take full advantage of their preferential arrangements. We will work within the EU to make these rules simpler and less restrictive, and we will work multilaterally to bring different sets of rules more into line with each other, so that they are easier to use.

3.19 WTO rules provide for antidumping, anti-subsidy and safeguard measures. Such measures are for use in exceptional circumstances and not as a means of protecting business from legitimate competition. We will work to ensure that they are not used as a form of covert protectionism to deprive developing countries of their comparative advantage.

Improving Trade Procedures

3.20 Complex and diverse trade procedures (such as export documentation and customs systems) can represent a significant barrier, particularly for the poorest countries and the smallest firms. The United Nations Conference on Trade and Development (UNCTAD) has estimated that the cost of such procedures could amount to as much as 10 per cent in value of trade in goods and services. We will make it a priority to work for a multilateral agreement to simplify such procedures.

The Reform of Agricultural Trade

3.21 Agriculture is a key sector for many developing countries. International trade in agricultural products has, however, been distorted by agriculture support policies throughout the world. A combination of domestic price support, import protection and export subsidies, in a variety of countries, has undermined the ability of many developing countries to compete successfully in a sector where they have natural comparative advantages.

3.22 Agricultural trade liberalisation will have major benefits for developing countries. The Government welcomes the important first steps that were taken in the Uruguay Round, but is acutely aware that there is a very long way to go, both in Europe and more widely.

CAP and Fisheries Reform in the EU

3.23 The Government is committed to fundamental reform of the Common Agricultural Policy (CAP). This will bring substantial benefits to EU consumers and taxpayers. The Government will make full use of the opportunities which this presents over the medium term to benefit developing countries.

3.24 The European Commission’s proposed Agenda 2000 reforms are a necessary step towards further and more extensive reform, including significant improvements in access to the EU market. This is where the major medium and long-term development benefits will be. In the short term, the current proposals have some potential negative effects for particular developing countries (which export agricultural products to the high price EU market under special arrangements). The Government is committed to working with the Commission and other Member States to consider how to address these effects.

3.25 The EU currently has 16 fisheries agreements with developing countries. The Government aims to ensure that fisheries agreements provide value for money, promote sustainable fishing and are coherent with UK and EU development policies.

Multilateral Liberalisation

3.26 Multilateral liberalisation of trade in agriculture, including increased access to markets in all developed countries, and the phasing out of export subsidies, has huge potential benefits for developing countries. The prospects are promising, and indeed pressure for trade liberalisation from within the WTO has been one of the key factors which has made reform of the CAP increasingly possible. As part of the Uruguay Round, it was agreed that negotiations on further agriculture trade liberalisation would start at the turn of the century. The Government sees this as a major opportunity and is committed to achieving substantial further liberalisation in these negotiations.

Investment

3.27 Foreign direct investment can bring a range of benefits to developing countries, including employment, exports, new skills and technology. Portfolio flows can provide resources for local companies and deepen domestic capital markets. However, whilst private capital flows have increased substantially, they are heavily concentrated in a small number of the most advanced developing countries (see Figure 14). The least developed countries attract little foreign investment, and therefore continue to depend heavily on official development assistance.

3.28 We believe it is in the interests of developing and developed countries alike to create conditions which will help attract beneficial private investment to developing countries. This requires the right domestic policies and conditions in these countries, including political stability, transparent and accountable government and the prevention of corruption. These are crucial in order to attract and retain both foreign and domestic investment. We will encourage and assist developing countries to put in place such policies.

Multilateral Framework

3.29 In the Organisation for Economic Co-operation and Development (OECD) we are already in the process of negotiating an improved multilateral framework through the Multilateral Agreement on Investment (MAI), based on the principles of non-discrimination against foreign investors, open investment regimes and investor protection. The Government is working to ensure that the MAI fully reflects our commitment to core labour standards and that it prevents countries from lowering environmental standards to attract investment.

3.30 The Government will continue to participate actively in dialogue with developing countries about the MAI. In particular we will encourage those - mainly the more advanced - who have a particular interest to consider becoming parties to the Agreement. But we recognise that the MAI is not designed for the economic and institutional constraints of poorer developing countries. We are exploring how their needs can be taken into account. In parallel, we are playing a full part in WTO discussions, supported by analytical work in UNCTAD, exploring the links between trade and investment and the implications for development and economic growth. We will work towards the eventual establishment of a WTO agreement on investment. We support moves to make capital account liberalisation a specific purpose of the IMF and to give the Fund appropriate jurisdiction over capital movements.


FIGURE 14 - Total Not Resources Flows to Developing Countries 1988-1996

Source: External Debt Statistics 1985-1996, OECD, 1997

3.31 We will work to ensure that the OECD Guidelines on Multinational Enterprises are closely associated with the MAI and reviewed regularly to ensure they are up to date and effectively disseminated. In preparing for the review next year we shall draw on experience of voluntary codes already drawn up in specific sectors and between unions, consumer groups and NGOs.

Competition Issues

3.32 In order to fully benefit from increased foreign investment, developing countries - like developed countries - need to have in place the right domestic policy framework to deal with a range of competition law and policy issues, such as monopolies, mergers and restrictive business practices. We will continue work within UNCTAD to help develop a model framework for national policies in these areas. We will consider how best to assist developing countries who want to strengthen their domestic regulatory framework before applying to join the MAI. And we will work with others to address these issues at the international level too, through the WTO Working Group on Trade and Competition.

Guarantees and Insurance

3.33 Guarantees and insurance are important mechanisms for encouraging private investment into developing countries. This is particularly important for infrastructure projects, where large sums of money need to be mobilised. The Overseas Investment Insurance Scheme of the British Export Credits Guarantee Department (ECGD) is increasingly utilised to help companies to invest overseas. We are considering whether this facility can be made more readily available to poor countries. We are also discussing with the World Bank Group how best to expand guarantee cover in developing countries - and particularly in poorer developing countries.

Intellectual Property

3.34 We are committed to rules on intellectual property rights which will facilitate the transfer of technology, and provide incentives for investment. We will pay particular attention to the impact of intellectual property rights on the interests of indigenous and local communities who depend on local biodiversity for their livelihoods and welfare. We will also work to ensure intellectual property rights promote the conservation of biodiversity. We will work with multilateral institutions, such as the World Intellectual Property Organization (WIPO), WTO and UNCTAD, to help developing countries restructure their intellectual property rights systems, and implement the WTO Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement, in order to support domestic investment and attract foreign investment.

Standards

3.35 Dismantling the barriers to international trade and investment is essential. But we also need to ensure that the benefits contribute to poverty elimination and sustainable development. Increasing attention is therefore being paid in international fora, in the business community and in consumer and development groups to the issue of standards.

Core Labour Standards

3.36 We are working for the world-wide observance of core labour standards for all workers, including those in the informal sector where female workers are concentrated. These are human rights and must not be misused for protectionist purposes to deprive developing countries of the opportunity to benefit from their comparative advantages.

· In the UK we are supporting collaboration between business and the voluntary sector in promoting ethical business, including the development of codes of conduct and ways of monitoring and verifying these codes.

· In developing countries, we shall look at ways of supporting local capacity to develop and monitor voluntary codes of conduct including assistance to Ministries of Labour, trades unions, NGOs and employers’ associations.

· At international level, we shall support the efforts of the International Labour Organization (ILO) to promote internationally recognised core labour standards. We shall seek to strengthen the ILO’s ability to make progress in eliminating exploitative and abusive practices throughout the world by increasing our support to its technical co-operation programmes, such as the International Programme on the Elimination of Child Labour, and by using its supervisory activities to encourage adherence to human rights in the workplace. We are active participants in the efforts of the international community to eradicate speedily all intolerable forms of child labour and shall do our best to ensure that the new ILO Convention designed to tackle this problem helps to stop the worst abuses. We shall also support the development of the ILO programme More and Better Jobs for Women.

· We shall promote a human rights based approach to labour issues in our support to multilateral organisations, including the European Community and the World Bank. We are supporting the use of positive incentives in the EU Generalised System of Preferences to link enhanced market access terms to adherence to these standards. We shall press for the EU to reaffirm at the WTO Ministerial conference in May 1998 its commitment to support the ILO’s work in promoting labour standards and to have this reflected in any Declaration. We shall also press for systematic reporting by the ILO and WTO Secretariats on their collaboration in this area.

Environment Standards

3.37 Products which use natural resources sustainably can meet the growing wish of British and other consumers to minimise the damage that our consumption does to the environment and can offer sustainable livelihoods to some of the world’s poorest people. The Government will work with producers and importers to increase trade in sustainably produced products and services from developing countries, including by supporting voluntary certification and labelling.

3.38 Trade rules should not be used to impose unfair standards on developing countries or to discriminate unfairly against their exports. We will work to ensure that the interests of the environment are fairly reflected in the development of the global trading system. Most developing countries have signed the main Multilateral Environment Agreements. We will support their efforts to comply with those agreements and encourage others to join. In areas where clearer international standards are needed, we will support work to develop these.

3.39 The Government will work where appropriate with developing countries to support their efforts to raise their domestic environment standards. We will focus on this in order to help them meet the UN target of implementing national sustainable development strategies by 2005.

3.40 We shall strengthen the links between trade, environment and development as part of our review of our own Sustainable Development Strategy. We are also supporting work in the EU, WTO and UNCTAD on these issues.

Health Standards

3.41 We will do our best to ensure that the export and advertising of pharmaceutical products and other items such as tobacco and baby milk are conducted in a responsible way.

3.42 We are working with other governments towards a global ban on tobacco advertising. In the meantime we will support an international code of conduct for transnational companies advertising tobacco products, covering the content and exposure of children to advertising, and the use of health warnings.

3.43 We also support the World Health Organization’s (WHO) International Code of Marketing of Breast Milk Substitutes, which sets minimum standards for labelling, advertising and promotion of infant formulas and other baby foods. We will support efforts to defend the Code.

Standards of Business Conduct

3.44 Bribery and corruption divert resources from poverty elimination and development (see Panel 11). We are working with developing countries and at the multilateral level to develop and implement policies designed to raise standards in this area. These efforts are reinforced by companies which refuse to pay bribes in order to win business contracts, and we strongly support the OECD initiative to make the payment of bribes to foreign public officials in international commercial transactions a crime under national law. We will include anti-corruption clauses in all DFID contracts under our own development assistance programme, and we will work with partners in the Development Assistance Committee (DAC) of the OECD to include similar clauses in all contracts signed by DAC members. We will help partner governments to keep their own procurement procedures fair, transparent and up to date, and work to increase the professionalism of public sector purchasing.

Building Capacity

3.45 Dismantling barriers to international trade and investment will be of limited benefit if developing countries lack not just the supply but the human and institutional capacity to take advantage of new opportunities. We will support efforts to improve the multilateral coordination of technical assistance, and will also harness our own development assistance programme, in order to help developing countries build capacity:

· to manage the practical ‘nuts and bolts’ of the trade process, for instance customs procedures and trade regulations

· to improve their trade promotion efforts

· to participate fully in the WTO, and implement increasingly complex international obligations

· to meet international product standards

Knowledge and Information

3.46 As old barriers come down, countries seeking to enter the market face new problems. The amount of information required to trade successfully in today’s global economy is daunting. Exporters need information about market opportunities, trade rules and procedures and product standards. Important work is being undertaken in this area by the International Trade Centre (ITC). We will support international efforts to find new ways of sharing knowledge and information, and assess whether there is a direct role we play ourselves in this area.

Institutions

3.47 Developing countries must be encouraged to participate fully in the WTO. Its provisions already recognise their interests and that they cannot always assume their obligations, for instance to open their own markets, as rapidly as developed countries. We support work in WTO and UNCTAD to enable member countries to adjust effectively to meet these obligations and take advantage of their rights and to enhance the understanding of countries in the process of accession. We also support work to analyse the impact of trade agreements and issues on the international trade agenda from a development perspective.