TOP Co-Chair Peter Lilley chaired an event hosted by the Commonwealth Parliamentary Association this afternoon, which explored the role that trade is likely to play in future development models. He was joined by Dirk Willem te Velde, Head of International Economic Development Group at ODI, and Peter Callaghan, Director General of the Commonwealth Business Council.
Dirk Willem kicked off the discussion saying that 2014 is an important year for trade, but we must do three things. Firstly we need to sell the positive message of trade as a development tool; the risks of not liberalising are far greater than those of liberalisation. Openness to trade increases productivity, helps to spread innovation, links resource availability with demand to create resource security, and helps to make countries resilient to global crises.
Australia has confirmed that it will use its G20 presidency to fight against protectionism, but tariffs and distorting subsidies remain problematic. Non-tariff barriers, however, are now creating more serious problems to open trade. Rules of origin, export taxes and standards all help to prevent small firms and developing countries from joining value chains. Following the success at the Bali Ministerial in December, NTBs and Trade Facilitation should be prioritised for the coming year – the momentum of Bali must be kept going.
The global trade policy agenda has some clear issues to tackle to benefit development this year. The EU must iron out the remaining issues concerning EPAs as some countries still face the prospect of increased tariffs if they fail to sign up. And as the post-2015 framework begins to take shape, trade must be embedded in development policy and vice versa – Aid for Trade is a key part of this and has been proved to pay for itself.
Peter Lilley continued the theme of non-tariff barriers, giving the example of the EU’s EBA, which purports to give DFQF access to LDCs, but is in fact far less effective that its American counterpart AGOA due to its extremely restrictive rules of origin. He also emphasised the importance of banishing the fear that somehow growth will not benefit the poorest – poverty may be alleviated in an uneven manner, but unequally better off is preferable to all being equally poor. There is no proven link between open trade and inequality – equality comes through domestic rather than international policies.
Peter Callaghan then turned to the vital role of businesses in using trade for development. He emphasised the need for basic infrastructure that continues to hold so many countries back – 30% of agricultural produce in the Commonwealth never reaches market due to lack of roads/bridges etc and the level of electricity being produced is preventing improved ability to work both at school and in industry (Nigeria generates just 50W per person).
Questions from the floor then raised the issue of making trade agreements conditional on human rights. The panel responded that while trade can be used to solve many things, it should not be used as a blunt instrument to address all issues and is not the best method for addressing human rights. It is obviously in businesses’ best interests to look after their suppliers and uphold labour standards, and open trade allows for increased external influences that are likely to have a more substantial effect that tying social issues into a trade agreement.