As the leaders of the G8 sit down at the negotiating table in Northern Ireland, Trade Out of Poverty hosted a pre-G8 breakfast at KPMG with Myles Wickstead CBE, former Head of Secretariat for the Commission for Africa. We were joined by parliamentarians, representatives from the private sector and financial services as well as civil society to discuss how the UK government can use this Summit to promote the role of trade as a sustainable solution to global poverty.
Myles, who played a key role in setting the agenda for the Gleneagles G8 Summit of 2005, which saw world leaders vow to ‘Make Poverty History’, began by taking us through a snapshot of how the development policy landscape has changed in the last 20 years. Aid has shifted away from infrastructural investment and technical support towards a focus on social projects and governance, but the shift has gone too far – aid budgets must be reallocated towards infrastructure and capacity building as it is impossible to sustain social advancement without strong economic growth and a secure private sector.
The political buy-in achieved in 2005 and the huge support that the international community gave to the Millennium Development Goals when they were signed in 2000 made it possible to take some extraordinary steps towards poverty reduction across the developing world. Of the three pillars – aid, debt and trade – fantastic progress has been seen in the cancellation of third world debt, countries continue to move towards reaching their commitment to give 0.7% GDP in aid (with the UK achieving this earlier this year), but there has been no noticeable improvement on global trade.
The same political will power must now be applied to trade. While a US/EU trade deal might help to unlock the stagnant Doha Round, it must be remembered that we don’t need to sign off the entire round to get things done. The G8 this week must take care not to overshadow the issues of trade and tax collection with their own headline acts of the TTIP and tax offenders such as Google and Amazon when they have a unique opportunity to kick start action that will genuinely facilitate the wider post-2015 development process.
The international process begun by the MDGs, will continue with a new set of goals for the post-2015 period, which will aim to eradicate extreme poverty by 2030. The UN High Level Panel’s report on the post-2015 agenda, published at the end of May, was full of rhetoric that supports all of TOP’s aims. However, recognition must be given to the fact that halving extreme poverty between 200 and 2008 had almost nothing to do with aid – this remarkable achievement was predominantly due to the benefits of trade that saw India and China become major players in the global economy.
A joined up government approach is required from developed country governments as they work to simplify trade rules, eliminate export subsidies and open up markets for the world’s poorest – aims that must be included in the 2015 manifestos of all the UK parties as well as forming a key pillar of the post-2015 framework.
Opening up to the floor, Jeremy Anderson, Chairman of Global Financial Services at KPMG, said there is an increasing amount of interest in investment opportunities in Africa, but that the lack of infrastructure is a major turn-off. Trade and investment must become part of the ‘lingua franca’ of development in order to encourage serious participation from the big city players. Paddy Doherty of Phoenix Africa then spoke of the urgency required in this change of rhetoric – saying that while Britain continued to exaggerate the levels of risk in Africa, our businesses are missing out to their Indian and Chinese counterparts; why is it the government is willing to back spending on conflict resolution, but then shies away from the reconstruction phase?
Part of the problem for trade and investment policy lies, particularly in Africa, lies in a skewed public perception, said Myles. The popular image of Africa is still that of the 1980s, with NGOs continuing to over-use image that tug on the heart strings to promote their campaigns – a shift in image is required if we are to promote the vast opportunities that the continent has to offer. Aid and trade are not mutually exclusive, but a more balance approach that appreciates the developmental impact of trade policy is essential.
John Small from the Eastern African Association said that for African economies to open up, the bigger countries must realise that trade is a two way activity and take the lead. He noted that while the trade policies of the EU and US at least receive some scrutiny, Japan’s protectionist habits go largely unnoticed, and South Africa could do a lot to improve intra-African trade if it chose to open up to its neighbours. The need to change from a policy of aid to a broader development approach must be made – eventually we must be aiming to ‘Make Aid History’.
Africa has 15% of the world’s population, but contributes less than 3% of global trade. This is despite the international community pouring half a trillion dollars in aid into the continent over the last 50 years. Although the continent has seen high levels of economic growth in recent years, this continues to fail to translate into permanent poverty reduction.
Trade has proved to be the only successful route out of poverty. The developing worldʼs success stories – Korea, China, Brazil – used trade to become what they are today, but high tariffs, subsidies, rules of origin and infrastructural deficits continue to hinder the development of the world’s poorest countries. Breaking down these trade barriers would not only allow these nations to trade their way out of poverty, but would also provide a much needed boost to the world economy – increasing global GDP and creating new export markets for countries such as ours.
As the G8 leaders gather in Northern Ireland to discuss a tripartite agenda of trade, tax and transparency, the role of trade as a catalyst for sustainable poverty eradication and economic growth must be put at the forefront of the international development agenda.