DEBATE ON AFRICA

- Monday, 30th March 2009

 

6.17 pm

Mr. Peter Lilley (Hitchin and Harpenden) (Con): It is a privilege to follow the hon. Member for Sunderland, South (Mr. Mullin), who is a distinguished former Africa Minister. His stature in Africa raised him considerably above the foothills, if I may give his book a plug. He, the hon. Member for Hazel Grove (Andrew Stunell) and the right hon. Member for Coatbridge, Chryston and Bellshill (Mr. Clarke) all expressed the concern, which I share, that Governments may resile from or let slip their commitments on aid or debt relief. He and others emphasised the importance of peacekeeping and help on that front. However, I wish to focus exclusively on the importance of trade for Africa.

Trade has been the route taken by the most successful developing countries in moving from poverty to prosperity. Korea, China and Brazil, in Asia and Latin America, have shown that it is possible to trade out of poverty. That will ultimately be the route that Africa will have to follow. However, it is harder for the late starters to do that, because they have to compete with those who are ahead of them, who have already accumulated a critical industrial mass and the economies of agglomeration that go with it, yet still have low incomes and pay rates to compete with. Moreover, the poorest countries, the majority of which are in Africa, are poor because they typically face the greatest natural obstacles-lack of natural ports and navigable rivers, and a shortage of roads, railways and so on to get to market. It is therefore intolerable that we in the rich world add to those problems by retaining tariffs, quotas, subsidies and rules, which make it even more difficult for them to export their goods, enter our markets and trade out of poverty.

That is why, last week, four distinguished Members of Parliament-the right hon. Member for Birmingham, Ladywood (Clare Short), a former Secretary of State for International Development; the right hon. and learned Member for North-East Fife (Sir Menzies Campbell), a long-standing spokesman and former leader of the Liberal Democrat party; the right hon. Member for Leeds, West (John Battle), a former trade and Foreign Office Minister; and Lord Hastings of Scarisbrick, the recipient of a UNICEF award for his contribution to solutions for Africa’s children, as well as my humble self, a one-time development economist and subsequently trade Minister-launched a campaign to help the poorest

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countries, mostly in Africa, to trade out of poverty. Trade Out of Poverty is the name of the campaign and the all-party group, which we formed-I urge hon. Members to support it. We may be unlikely bedfellows, but we are united in a common commitment to bring to trade the same passion to mobilise public support as Make Poverty History brought to aid and Drop the Debt brought to debt relief.

We began by writing to the leaders of the G20, asking them to put Trade Out of Poverty on the agenda and to urge their countries, severally or collectively, unconditionally to open their markets to all the poorest countries, simplify their trade rules, end subsidies that hit the exports and trade of the poorest countries, help poor countries replace the high tariffs that they impose on each other with other sources of revenue, and invest in the physical and organisational infrastructure that those countries need if they are to take advantage of the opportunities that opening up our markets will give them.

It might seem quixotic to choose this conjuncture, when the developed world is suffering genuine pain, and the recession and the credit crunch have meant a revival of protectionism. Indeed, the World Trade Organisation has joined the World Bank in pointing out that countries have already begun surreptitiously to introduce protectionist measures. No fewer than 17 of the G20 countries have, since the last meeting of the G20, at which they unanimously endorsed a commitment to withstand the pressures of protectionism, introduced measures designed to undermine trade and protect their domestic markets. However, we know that in the 1930s, protection, far from helping countries recover, prolonged and deepened the slump. The poorest countries, then as always, suffered most from that prolonged recession. It is therefore even more important that we in the rich countries turn the tide against protectionism by opening our markets more liberally to the poorest countries of the world, especially the countries of Africa.

Malcolm Bruce (Gordon) (LD): The right hon. Gentleman is making a powerful and legitimate point, which I support. Does he also acknowledge that, in Africa, the internal barriers to trade also cause massive depression and that, in many cases, unlocking them would make those countries better able to trade, especially with the sort of support that his group offers?

Mr. Lilley: That is one of the five points that we advocate and that I shall outline shortly.

We believe that we can take steps at little or no cost to us. The poorest countries have one fifth of the population of the world, but account for only a fiftieth of its trade. By no stretch of the imagination are their industries a threat to ours. On the contrary, they want and need to buy more of our goods. The only thing that restricts the amount of goods that they can buy from us is their ability to pay for them by exporting to us. It is a win-win situation if we open our markets to them.

We have spelled out five steps which the rich countries can and must take to help the poorest countries in Africa trade out of poverty. First, rich countries must unconditionally open their markets to all low-income countries. We do not need to require them to reciprocate. The poor countries are understandably reluctant to open their fragile industries to the full blast of competition

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from the developed world. They say that most rich countries used infant industry protection when they were developing, and so ask why should not they do likewise. Plenty of economists-I am normally among their number-dispute that case and argue that it is in the interests of poor countries to liberalise their markets. That is as may be, but we should not make the best the enemy of the good by saying that, because it is in their interests to open their markets, we will not open ours to them. If we want to persuade them to be more liberal in their trading policies, we should first set an example by opening our markets to them.

Of course, the European Union, like many developed countries, already offers unconditional free access to some countries. Under the Everything but Arms agreement, we allow tariff-free, quota-free access, but only to a list of the smallest and most vulnerable countries. In Africa, the agreement excludes most of the more populous countries, such as Nigeria, Côte d’Ivoire, Ghana and Kenya. We should offer them, too, free access to our markets. Even when we have, in theory, opened our markets for specific goods by abolishing tariffs, complex and onerous rules of origin have rendered it largely ineffective.

Sir Nicholas Winterton (Macclesfield) (Con): How does the policy of the European Union influence our opportunity to take goods, especially food, from those countries?

Mr. Lilley: We collectively make decisions on trade in Europe-that may or may not be a good thing; it is not what I am arguing. If we want to liberalise access to the British market, we must persuade the EU to liberalise access collectively to the European market. I believe that there is a consensus on that, as reflected by the cross-party composition of Trade Out of Poverty, and I hope that Conservative and Labour Front Benchers will support that consensus and a move in the direction that I am outlining.

Secondly, we should simplify and make more generous the rules of origin and other trade rules that we operate. Trade increasingly involves chains of production, with a series of processes and components from a variety of countries. It is vital that African countries are enabled to participate in those chains of production. For example, America, through the African Growth and Opportunity Act, liberalised its rules of origin, which resulted in a marked increase in exports of clothing from Africa to America. Rules of origin matter.

Thirdly, we must end subsidies that damage trade and inhibit exports from the poorest countries to ours. My hon. Friend the Member for Buckingham (John Bercow) mentioned the $3 billion or more subsidies that the Americans offer to maintain only 25,000 cotton manufacturing jobs-that is more than $120,000 a job. It would be easier to give those people-not all of them, only those whose product has to be dumped abroad-a stipend for a while and let them move into other activities. That dumping destroys millions of jobs and undermines millions of people’s income, especially in west Africa.

John Bercow: I heartily endorse the point that my right hon. Friend has just made. I probably was being slightly impatient earlier. I am a keen supporter of President Obama, but it does no harm to underline the

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urgency of the matter. In making the suggestion for the withdrawal of export subsidies that he has just made, will my right hon. Friend confirm that that, too, should be unconditional?

Mr. Lilley: I am sure that President Obama is as relieved as I am to know that he has my hon. Friend’s support. Those subsidies should of course just go. Their removal is ultimately in the interests of taxpayers in the rich countries and would enable us both to enjoy products better produced abroad and to focus on those things that we are best at producing.

On average, the EU spends almost as much supporting every cow every day as the average income in the poor countries of the low-income group, as defined by the World Bank. That in turn inhibits those countries’ ability to compete with us. It is deplorable that the EU should have reintroduced subsidies for, say, milk powder. Milk powder is an important product that is potentially made and consumed in the developing world, but we are undermining that potential through those subsidies.

The fourth step recognises the point that the right hon. Member for Gordon (Malcolm Bruce) made about the phenomenon whereby the highest tariffs that most African countries face are those that are imposed on them by their equally poor neighbours, and which they likewise impose on those neighbours. One of the reasons why African countries impose those tariffs is that doing so is one of the simplest means of obtaining the revenue to finance their activities. It behoves us in the developed world to help those countries to replace those sources of income with other sources of domestic revenue, so that they can trade more actively with each other. It is significant that 75 per cent. of the exports of European countries go to other European countries, whereas only 10 per cent. of the exports of African countries go to other African countries. The potential for trade growth within Africa is enormous if we can help countries to take that step.

The fifth and final step that we advocate is to focus investment on both physical and administrative infrastructure. In the successful countries of Asia, a high proportion of the population lives near the coast, near roads or near navigable rivers. In Africa, the population is highly dispersed and often distant from any means of transport. Without improved transport infrastructure, people will not be able to get their products on to world travel routes and world markets. At present it costs less to get goods from Tokyo to Mombasa than to get them from Mombasa to Kampala. Through our efforts we must help African countries to improve their infrastructure. It is sad that in recent years the proportion of aid that has gone on infrastructure has been declining. We believe that it should be increasing; indeed, something that the Foreign Secretary said in his opening remarks leads me to believe that the Government are also of that view.

 

 

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