The international spread of democracy began in the 1970s but came to an end in the 1990s. Why? Because with the cold war over, America’s moral mission is no longer so clear.

In 1940, faced with the threat of Hitler’s Germany, Franklin D Roosevelt called on the United States to be “the great arsenal of democracy”. The context has changed, but the evangelical spirit remains. Indeed, the agenda has been widened, particularly under the aegis of the neoconservative movement, to encompass the aggressive promotion and protection of democracy.

The philosophy is boldly optimistic. It asserts that democracy is a universal value that the west should use its position of power to spread. George W Bush and Tony Blair are both believers and they have linked the war on terror directly to the wider case for democratising the Middle East. As Blair asserted in his address to the US Congress last year: “We promised Iraq democratic government. We will deliver it.” Critics argue that democracy cannot simply be “delivered” and that such declarations smack of imperial hubris. While the optimists are right that democracy can be exported, they fail to grasp that the task is more complex now than in previous eras as force becomes increasingly inadequate.

There is much to support Bush and Blair’s passionately held optimism. Democracy can and has been exported in the past, beginning with its spread from Athens to other city states around the Aegean basin – “like frogs around a pond”, as Plato eloquently described them. More recently, Freedom House, a non-partisan organisation that evaluates the state of liberty within nations, has praised the 20th century as the “century of democracy” due to democracy’s unprecedented expansion across the planet. The Freedom House figures show that, at the turn of the millennium, more than half the world’s population, living in 120 states, enjoyed regular access to the ballot box.

The end of the cold war is frequently identified as the most significant turning point yet. Two major consequences are commonly cited. The first is summed up in Francis Fukuyama’s now infamous 1989 article “The End of History?”: the belief that the real victory of the cold war was ideological and that democracy finally stands peerless on the world stage after despatching the last of its rivals. He writes: “What we are witnessing is . . . the end of history as such: that is, the end point of mankind’s ideological evolution and the universalisation of western liberal democracy as the final form of human government.”

The second consequence relates explicitly to power. The fall of the Soviet bloc left a world with just one economic and military superpower. As Blair and others have put it, a “unipolar world” emerged. Indeed, many commentators have suggested that the US is so dominant that it deserves the new title of “hyperpower”. Far from hyperbole, the term is an expression of the unique historical position that America holds as the first truly global hegemon. As the neo-con Robert Kagan argues, now that the “lingering mirage of European global power” appears to be fading, there is no remaining counterbalance to the United States. In the Pentagon’s own words, from the 2002 US National Security Strategy: “Our forces will be strong enough to dissuade potential adversaries from pursuing a military build-up in hopes of surpassing, or equalling, the power of the United States.”

Thus, the events of 1989 led to a conjunction of power and ideological imperative that many see as irresistible. Recent works such as Niall Ferguson’s Colossus illustrate the point. Ferguson notes the successful democratisation of Germany and Japan after the Second World War as a simple prelude to his main argument. He claims the US should now look to carve a worldwide democratic empire from rogue regimes and failed states. Optimists and neo-cons are more confident than ever that democracy can be spread and that the process can be galvanised with an even greater application of force.

Ironically, however, this has become more contentious since 1989. The long-term strategic challenges thrown up by the conclusion of the cold war have been obscured by the sheer number of democracies established during and immediately after it. Freedom House statistics show that although the “third wave” of democratisation (which began in 1974) was the most prolific in history, the total number of democratic nation states has remained virtually unchanged since 1995. In other words, the spread of democracy has faltered in the unipolar world.

The optimist’s approach is deeply myopic. Its singular focus on delivering democracy causes it to ignore the attitudes and beliefs of the intended recipients. This is a critical oversight, because even in its most minimal, Schumpeterian sense, democracy requires the active support of those who are being governed. Mahatma Gandhi once said that “the spirit of democracy cannot be imposed from without. It must come from within”, and without the democratic spirit its formal structures alone are like castles of sand. From Germany in the 1930s to Pakistan in 1999, this has been proven time and again. This is vital now because the democratic spirit – or “hearts and minds”, as it has been rebranded in the lexicon of the war on terror – is suddenly proving elusive.

The problem lies with the unparalleled concentration of what Joseph Nye calls “hard power” (military and economic), which is proving extremely difficult to reconcile with the promotion of “soft” democratic values. This is not just to repeat the oft-quoted and benign point that imposing freedom is an oxymoron. That has always been so and has proven less problematic in practice than in principle. Rather, it is that, in the new world order, the US is suffering a chronic deficit of legitimacy in the eyes of those it claims to be seeking to help. Its power has become an albatross around the neck of the US and its allies.

The reasons are not hard to find, nor, in principle, are the solutions. At the most basic level, hard power is unavoidably threatening, arousing suspicion and fear. Realpolitik, the canon of thought founded on Thucydides, Macchiavelli and Hobbes, may be overly cynical for some, but the suspicion that power, ultimately, will always be used for self-interest still resonates strongly. As Thucydides put it: “Right . . . is only in question between equals in power, while the strong do what they can and the weak suffer what they must.”

US and other western leaders frequently emphasise the primacy of values and ideals in their foreign policy – Bush constantly refers to “freedom”, “liberty” and “democracy”, for example. Yet such words ring hollow, for it is impossible to ignore the mighty iron fist inside the velvet glove.

Indeed, whereas it could once have been claimed that “moralpolitik” and realpolitik were closely aligned, the unipolar world has driven a wedge between them. Face to face with an aggressive and authoritarian Soviet Union, it was easier to believe that advancing US and western interests was equivalent to advancing the world’s interests. As Robert Cooper argues, “the cold war is one of those . . . wars in which both values and survival were at stake” and, as such, it validated the widespread use of hard power. Now that survival is no longer at stake and there is no remaining “other” or counterbalance, military intervention has become a choice rather than a necessity. Consequently, its legitimacy is less self-evident and its ethics hold greater importance than in previous eras.

In this context, even perceived duplicity can seriously undermine the moral authority that America and the west need to win hearts and minds. At worst, whole peoples can turn against democracy’s star-spangled champion if the Pentagon is seen to pursue its own interests at the expense of others. In practice, the war on terror has demonstrated both the central relation of morality to contemporary foreign policy and the problems caused by failing to establish a wide base of legitimacy. Bush’s and Blair’s governments have acted basely on any number of issues: using flawed and “sexed-up” intelligence, double standards over human rights abuses in Guantanamo Bay and Abu Ghraib jail, flouting international law and sidelining the United Nations, not to mention accusations over annexing Middle Eastern oil. The result has been relentless opposition to the US and the “coalition of the willing”.

Antagonism is not confined to any minority group that can easily be labelled radical or extremist. When the survey group Zogby International asked a sample of the Iraqi population last year whether, over the next five years, “the US would help or hurt Iraq”, half thought it would hurt while only a third thought it would help. Contrast this with corresponding figures of 7.5 per cent “hurt” and 61 per cent “help” for Saudi Arabia and the lack of trust is put into sharp relief. Basic distrust and outright hostility in Iraq and Afghanistan are turning hearts and minds firmly against the US. It is not surprising, therefore, that when the same survey inquired about democracy in Iraq, 51 per cent viewed it with suspicion, and said it was a “western way of doing things and will not work here”.

This abrupt confrontation with reality shows that addressing such views has become essential. Blair’s simplistic emphasis on delivering democracy needs to be underpinned by a more complex philosophy that recognises the necessity of fostering trust and belief in democratic values from within.

Fundamentally, hearts and minds must be converted before the architecture of government can be. Less direct methods will have the greater effect. In particular, increased familiarity and exchange between cultures, virtually guaranteed by globalisation, are likely to be central. First and foremost, however, genuine fears, especially those surrounding US and western imperialism, must be allayed. As Tom Bentley and Ian Hargreaves put it in The Moral Universe: “When we say that . . . just wars based upon values have superseded wars based upon territorial and resource interest, we still have a great deal to prove.”

The US is no Gulliver in Lilliput, but Swift’s satire does illustrate the uneasy relationships that accompany greatly magnified power differentials. Similarly, though the birth of a unipolar world has augmented the US’s position as the arsenal of democracy, it has also profoundly changed the way the US relates to the rest of the world. The struggle for hard power has been won decisively. The more immediate and subtle battle now facing the exporters of democracy is for the hearts and minds of those they seek to help.

James Page, a recent Leeds University graduate and a Demos researcher, is the winner of the Webb Essay Prize 2004, awarded by the Foreign Policy Centre in association with the New Statesman and the Webb Memorial Trust. The subject was: “Can democracy be exported?” The judges were Ahdaf Soueif, novelist; Mike O’Brien MP, minister of state, Foreign Office and Department of Trade and Industry; Ann Clwyd, Labour MP; Sir Menzies Campbell MP, Liberal Democrat shadow foreign secretary; Zainab Bangura, women’s activist; Richard Rawes of the Webb Memorial Trust; and Peter Wilby, NS editor

If you have any comments on this article please e-mail james.page@demos.co.uk

Published in The New Statesman on 13 December 2004, http://www.newstatesman.com

The top two items on the agenda of the European Council, when it meets in Brussels on 17-18 June will, of course, be the European Constitutional Treaty and the nomination of a new President of the Commission. If they have any time left over from these two tasks, they could do worse than devoting it to a serious discussion of the EU’s future financing.

In the period up to the end of 2006, this has been determined by the Financial perspectives agreed at the Berlin summit in 1999. This set an annual limit of expenditure of 1.27 per cent of GNP, which has been comfortably adhered too so far, including in the budget appropriations made for the next two years.

In February, the Commission published its proposals for new perspectives for the seven-year period, 2007-13. These were fashioned around three priorities – the achievement of the Lisbon agenda to make Europe the world’s most competitive economy (on which progress so far has been disappointing), the completion of an “area of freedom, justice and security”, and the projection of Europe as an effective “global partner”.

A slightly reduced annual expenditure limit of 1.24 per cent of GNP was proposed, with projected spending averaging out at 1.14 per cent per year. Even before the Commission had produced its proposals, a pre-emptive strike was launched by seven member states which are substantial net contributors to EU funds.

A letter, which looked as though it had been drafted within the UK Treasury, but was signed by the heads of government of France, Germany, the Netherlands, Sweden, Denmark and Austria, as well as Tony Blair, was despatched to Romano Prodi. It demanded that average expenditure “should not exceed 1.0% of gross national income”.

This would effectively freeze spending at existing levels, and would prevent EU activities benefiting from future growth in the European economy. The seven leaders claim to be “deeply committed to the principle of European solidarity, and to the maintenance of cohesion in the enlarged Union”.

They make no effort, however to explain how the greatly enhanced responsibilities of the Union, notably concerning enlargement, the Lisbon agenda and the European Security and Defence Policy – all of which they had approved – could be met, without a drastic reduction of current activities.

The only justification offered in the letter was that member states had recently been cutting back on their own budgets, and that “our citizens will not understand if the EU-budget were exempt from this consolidation process”. This argument was recently blown sky-high by Philippe Maystadt, the President of the European Investment Bank (EIB), and previously a highly-regarded Belgian finance minister.

In a lecture last month to the Centre for European Policy Studies (CEPS), he pointed out that the EU budget increased by 8.2 per cent during the period 1996-2002, while national budgets in the 15 member states grew by no less than 22.9 per cent. It is very much to be hoped that Maystadt’s lecture will be published, as it is by far the most thoughtful and constructive commentary on the Commission’s proposals yet to appear.

It is difficult to escape the conclusion that the letter was based, not on any detailed consideration of the Union’s financial needs, but on a crude desire to cut back on their own national contributions.

This view is understandable, as some (but not all) of the seven countries are currently paying more than what might be regarded as their ‘fair share’. Germany, for example, long the milch-cow of the EU, has been feeling the pinch since reunification left it with a massive bill to upgrade the economy and environment of its own eastern Länder, while it is no longer one of the wealthier member states.

Yet, on a per capita basis, it is far from being the biggest single net contributor (see table). That honour now belongs to the Netherlands, whose citizens contribute almost twice as much per head as any others, while the Germans are only the fifth largest contributors, just ahead of the British, who benefit from the rebates they have received since 1984.

If governments could be assured that they were not being asked to make a disproportionate contribution, they might be more willing to consider the financial perspectives on their merits. The Commission therefore proposes – not for the first time – a new mechanism for the “correction of budgetary imbalances”.

This would have to replace (or incorporate) the present specific arrangement for Britain, which successive British governments have declared to be non-negotiable, though they insist that they would not in principle oppose comparable arrangements for individual member states which found themselves in difficulties.

This would not be a starter, however, as the Union will not again commit itself to inflexible arrangements, not subject to a time-frame, or provision for amendment in the light of changing circumstances.

That the British would have to receivea roughly equivalent amount to the present, at least initially, is evident, as without the rebate they would become the largest single net contributor, while being far from the most prosperous nation. But, in the long run, it would surely be counter-productive of them to continue to veto any proposed change, especially as all the new member states are required to contribute to the rebates under the present arrangements.

Similarly, the present net beneficiaries (particularly the Irish whose per capita GNP is now well above the EU average) should bow to the inevitable and agree to a gradual redirection of structural fund money towards the poorer nations in the east.

All this will take a lot of hard bargaining, which is likely to continue right up to the deadline for decision at the end of 2005. It would help to clear the air if the summiteers agreed to a full and frank exchange of views next week before the detailed negotiation gets under way.

Who loses, who gains?

Net per capita contributors to EU budget, 2002

Country (Euros)
1 Netherlands (-189)
2 Luxembourg (-107)
3 Belgium (-101)
4 Sweden (-96)
5 Germany (-74)
6 U.K. (-69)
7 Italy (-58)
8 Denmark (-49)
9 France (-38)
10 Austria (-33)
11 Finland (-1)
12 Spain (+226)
13 Portugal (+274)
14 Greece (+325)
15 Ireland (+373)

The European Office of Amnesty International has already made its own assessment. “Is the EU now more free, secure and just as a result of the Tampere Agenda?” it asked in a report published last month. It considered the two dominant elements of the Tampere agenda – asylum and immigration, and judicial co-operation in criminal matters – and its verdict, from a human rights point of view, is “generally negative”.

On asylum, it says that “The Tampere commitment to ‘full and inclusive application of the Geneva Convention’ has evaporated. The determination to provide security is neither matched by effective co-operation nor balanced with essential safeguards … The vision of the Area of Freedom, Security and Justice has turned out to be a parallel universe to the daily reality experienced by asylum seekers, illegal immigrants, suspects in police stations and defendants in courts”.

Much of the fault for the EU’s failure to translate its good intentions into effective action is attributed to the impact of September 11. Counter-terrorism has replaced human rights as the driving force for legislative action. The quick agreement, at an emergency summit on 21 September 2001, to speed up a European Arrest Warrant, is described as “a huge leap forward in the development of a European judicial space”. So far, however, its effect has been disappointing, not least because of the failure to buttress it, as originally promised, with adequate human rights safeguards.

The warrant was due to come into effect on 1 January 2004, but in a number of countries, Amnesty reports, “implementation has been mired in difficulties in national parliaments due to lack of trust in the standards of criminal justice in other member states and the lack of common standards in the application of basic procedural safeguards in criminal proceedings”. Italy has still not obtained parliamentary authority to go ahead.

Potentially, the arrest warrant could be an important weapon in the fight against international and organised crime, the trafficking in human beings and terrorism, which constitute, in themselves, a grave threat to human rights. “However”, Amnesty concludes, “the effective application of the European Arrest Warrant requires the European Union to establish and maintain high standards across the EU in order to breed genuine mutual trust between independent judicial authorities.”

I asked Dick Oosting, the Dutch head of Amnesty’s EU office, where the blame lay for the EU’s failure to live up to the hopes raised at Tampere. He was quick to absolve the European Parliament, and – largely – the Commission, which leaves the Council of Ministers and the member states (or some of them) as the main suspects.

It is the EP which has taken the lead in monitoring human rights, getting the Commission to establish a network of national experts to report on the situation in each member state. Organised by a Belgian human rights expert, Olivier de Schoutter, it has formed the basis for annual reports which have drawn attention to human rights breaches in member states.

Oosting has repeatedly attempted to get the EU to act on the basis of major reports Amnesty has itself issued over the past years, including on Spain, Greece and Portugal, but without success. “These are the letters I never get a reply to”, he told me. He also accuses EU governments of “double standards” in their response to reports presented at Geneva to the UN High Commission for Human Rights. One of these by Theo Van Boven, the UN’s Special Rapporteur on Torture, strongly criticised Spain for its conduct in the Basque country.

The Spanish government reacted angrily, and even attacked Van Boven’s integrity. Delegates from Norway, Canada and New Zealand rallied to Van Boven’s defence, but not a word was spoken by representatives of any other EU country.

The Commission, prompted by the Justice and Home Affairs Commissioner, António Vitorino, who unfortunately will not be eligible for reappointment due to the nomination of his compatriot, José Manuel Durão Barroso, as the incoming President, has backed the initiatives of the Parliament, and last October adopted a communication with proposals on how the Council of Ministers should apply the hitherto dormant Article 7 of the Treaty on European Union.

This Article, subsequently strengthened by the Nice Treaty, empowers the Council to act in the event of either a “clear risk of a serious breach by a member state” of its human rights obligations, or of “a serious and persistent breach” which has already occurred.

Nine months later the Council of Ministers has still not got round to considering this communication. A check-list of actions which the Dutch presidency should take, published by Amnesty on 1 July and entitled Closing the gap between rhetoric and practice, gives a high priority to bringing it forward for decision by the Council.

Equally urgent, in Amnesty’s view, is to follow up the surprise decision taken by the European Council last December to establish an EU human rights agency, based in Vienna. The presidency should work with the Commission to prepare a firm proposal defining the scope and powers of the new body, which Amnesty believes, should be firmly focused on monitoring human rights within the EU rather than attempting a global role.

The Amnesty document also draws attention to what it describes as “the systematic discrimination and social exclusion of Roma”, and calls for the adoption of an EU strategy to counter it. It is important, says Oosting, that the new member states, whose human rights record was subject to scrutiny during the accession negotiations, should get the message that the EU is equally concerned to ensure the highest standards from its existing members.

Throughout the history of the EU, Dutch governments have been in the forefront of those fighting to defend and extend human rights and to combat racism and xenophobia. In the recent past, they have faced a certain backlash, manifested by the electoral success of the Pim Fortuyn movement, and have undoubtedly been tempted to trim.

Now is the time for Jan Peter Balkenende’s government to demonstrate to its EU partners that its determination has not faltered and that the Union should prepare to live up to the high ideals enshrined in its past declarations, and in its new constitution.

Serbia-Montenegro has slipped disastrously behind the other four West Balkan states which were recognised as potential members of the Union a couple of years ago. Since then three of them (Croatia, Macedonia and Albania) have either signed, or are currently negotiating, a Stabilisation and Association Agreement (SAA), while Bosnia-Herzegovina is participating in a feasibility study which should lead on to such an agreement, the essential first step on the probably lengthy road to membership negotiations. .

Serbia-Montenegro, the largest and most populous of the states, has not even reached the feasibility study stage yet, and is sadly stuck at the end of the queue. There have been two main reasons for this. One is its failure, so far, to co-operate fully with the International Criminal Tribunal for the Former Yugoslavia (ICTY), whose chief prosecutor, Carla del Ponte, was on hand in Luxembourg on Monday to give an up-to-date report to the Foreign Ministers.

Equally to blame has been the virtual non-operation of the institutions of the state union between Serbia and Montenegro, with whom the EU was expecting to negotiate. The state union will remain, at least theoretically, in force until February 2006, after which the question of independence for Montenegro may be considered.

The EU does not want to wait until then before meaningful negotiations towards an SAA can get under way. On Monday it decided on a new twin-track policy, under which while it will still hope to deal with the state union on issues which clearly fall within its competence, the EU will talk separately to the governments of the two republics on those areas – including notably, trade and the internal market – which are, in practice, under their control

The new EU initiative may well have been prompted by the encouraging development of the election, in July, of Boris Tadic, who was in Brussels last week, as President of Serbia. Although he has few executive powers, he is an influential figure who is an outspoken advocate of full co-operation with the ICTY, political and economic liberalism and working closely with the EU

His election should act as a spur to the chronically hesitant Serbian Prime Minister, Vojislav Kostunica, to give a more decisive lead to his government. Better still it could encourage him to reinforce it by bringing in the Democratic Party (DS), of the assassinated Premier Zoran Djindzic, which is now led by Tadic.

The DS has been in opposition since March, when Kostunica finally succeeded in forming his government, three months after last December’s parliamentary elections. Although there was a clear majority in the Parliament for democratic reform, long-standing personality differences between Kostunica and Djindjic’s supporters got into the way of forming a coalition which included both their parties.

Instead, Kostunica even considered forming a coalition with the ultra-nationalist Serbian Radical party (SRS), of indicted war criminal Vojislav Seselj, which is the largest party in Parliament. Now led by Tomislav Nikolic, since Seselj surrendered himself to the ICTY, the SRS was effectively vetoed by other potential partners.

So, Kostunica ended up with a minority government, formed by his own Democratic Party of Serbia (DSS), and three smaller parties, the Serbian Renewal Movement (SPO) of Foreign Minister Vuk Draskovic, the New Serbia Party (NS) of Minister Velimir Ilic and the obscurely named G17+ party of Deputy Premier Miroljub Labus.

Ludicrously, this government has had to rely on parliamentary support form Milosevic’s Socialist Party of Serbia (SPS) to maintain itself in power, and – partly in consequence – its legislative record has since been distinctly patchy.

Fortuitously, an opportunity may soon exist for the reconstruction of the government. Within the past two weeks, Tadic has twice called on Kosovar Serbs to use their votes in the elections, on 23 October, for a parliamentary assembly, which many of their leaders had been determined to boycott since the ugly incidents of ethnic cleansing by Kosovar Albanians last March.

This was brave move by Tadic, who has since been widely demonised, and the Radicals have tabled a motion in the Serbian Parliament to remove him from the presidency. The SRS has now declared that it will back the Radicals’ initiative, thereby emphasising just how unreliable a source of support it is for the government.

If Kostunica, who ultimately if reluctantly threw his support to Tadic in the second round of the presidential election, enabling him to overhaul Nikolic who had led on the first ballot, can now bring himself to include the DS in his team, he will provide himself with a parliamentary majority and a much firmer base for pursuing his reform programme.

This would send an encouraging message to the international community, at a time when donor help is beginning to dry up, and private foreign investment is increasingly hard to come by. It will need to be backed up, however, by a number of other crucial steps.

Most urgent is the need to provide full-hearted co-operation with the Hague Court, stepping up the drive to find Radko Mladic, who is widely believed to be living in Serbia (while Radovan Karajic is more likely to be in the Serbian Republic of Bosnia), and handing over three other generals who have recently been indicted.

Equally important is to reform the judiciary and the media to make them functional and independent, and to provide increased security for national minorities, including Hungarians in Vojvodina who have recently complained of increasing harassment by Serbs, though Tadic claimed during his visit to Brussels that the incidents had been exaggerated.

Serbia – and Kostunica’s government in particular, may now be at a crossroads. If it seizes the opportunities open to it, Tadic’s claim, made last week to European Voice, that it was a “realistic expectation” that Serbia could join the EU by 2012, could prove justified. If not, his country faces a long period of isolation and further decline.

The Beauty Queen’s Guide to World Peace isn’t the kind of primer that will fly off the shelves before Spring Break on an average US campus. There are no potted descriptions of the UN or handy definitions of the caliphate that will help those perfect 10s look particularly smart. Instead, there are over 300 pages that more resemble a freewheeling dinner party conversation than a reference guide. Plesch will clunkily change gear from defending the UN mandate for the Second World War to outlining the risks of Japanese/North-Korean conflict via a lengthy disquisition on the ills of shareholder privilege. He’ll cut to Oliver Cromwell and the shortcoming of royalist histories before unveiling a grandiose plan for world government. This is security issues at their most elastic. Perhaps Plesch should write more – for there are at least three good pamphlets – on terrorism, corporate law and democratic reform – awkwardly yoked together here.

These days author Dan Plesch he is more likely to be seen consorting with retired Generals on BBC 24 than unfurling his CND banner, but he still retains the high-octane mixture of terrifying fact and dark prediction that he learned as an anti-nuclear campaigner in the early eighties. Refreshingly, he rehearses the power of nuclear weapons and the horrors of a nuclear winter – familiar enough for those of us brought up with When the Wind Blows and Greenham Common protests but probably unknown to a whole new political generation who can’t remember Thatcher. But elsewhere he rides fast and loose with descriptions of the apocalypse: a future war in the Gulf “could result in the near collapse of the industrialised economies”, while nanotechnology “might turn the world into grey sludge”, quite aside from those nukes. There is no room here for whiggish claims that that billions are being swept out of poverty by economic growth, or that the world is far less dangerous than when rival superpowers faced each other in Berlin.

Though a political radical in the tradition of George Mombiot and Naomi Klein, his worries about military interventions to protect human rights (“virtue runs amok”) and defence of traditional state sovereignty is a conservative vision that could have come from the curled lips of Alan Clark. Plesch seems here unwilling to engage with the difficulties of whether states forfeit the rights to sovereignty when they mistreat their populations. And he assumes that our biggest dangers will come from nuclear wars between strong states: he has little to say on the arguably greater danger that weak states (particularly in sub-Saharan Africa) will collapse. But if the shape is amorphous, then, like the best teachers, Plesch has a rich fund of memorable quotes and insights. Any book that tells the story of how a startled Yeltsin was awakened with a false report that the US had launched missiles at Russia in 1995 is worth the cover-price, regardless of your waist measurements.

Rob Blackhurst is Editorial Director of the Foreign Policy Centre

He argued with great force, and not a little bluster, that the ceiling of expenditure should be set at one per cent of Gross National Income (gni) of the Union, compared to 1.24 per cent as proposed by the Commission and the existing level (never reached) of 1.27 per cent. He went on to insist that there was no question of re-negotiating the rebate which Britain has enjoyed since 1984, and that the case for it was as strong as ever.

Brown received a much more encouraging response to his first argument than to his second. In addition to the five countries (France, Germany, the Netherlands, Sweden and Austria), whose leaders joined Tony Blair in writing a letter to Romano Prodi backing a limit of one per cent, both Italy and Denmark made sympathetic noises, while Finland and Cyprus appeared open-minded.

On his plea to retain the British rebate unamended, Brown was greeted with a deafening silence. No vote was taken, but if it had it would surely have been 24-1.

Instead, the ministers concentrated on giving their first reactions to the Commission proposal, tabled in July, of a generalised corrective mechanism (GCM), to compensate not only the United Kingdom, but other member states deemed to be carrying more than their ‘fair share’ of the burden.

The proposal is that any member state whose net contribution would exceed 0.35 per cent of its gni should have its excess payments refunded at a rate of 66 per cent. The total refund volume would be limited to a maximum of 7.5 billion euros a year.

This limitation would effectively mean that the total cost of such a GCM would be little more than that of continuing the unique British rebate. In effect, the British share would be what was left after other rebated states had been compensated – perhaps half of what it could expect to receive under the present arrangements.

The Commission advances a strong case that circumstances have changed substantially since 1984, when the terms of the British rebate were agreed at the Fontainebleau summit. At that time, Britain was the poorest of the six member states which were then net contributors, with a gni only 90.6 per cent of the EU average.

By 2003, the situation had been transformed with the British gni rising to 111.2 per cent of the EU average (measured in terms of purchasing power parities), making her the second most prosperous of the then 15 member states, after Luxembourg.

The table shows the Commission estimates of what the average yearly contributions of the ten leading net contributors would be during the period of 2007-2013, under its proposals, which include provision for a gradual phasing out of the British rebate. These show that, in per capita terms, Britain would come equal third with Sweden, behind the Netherlands and Germany, but would still pay substantially more than France and Italy, countries which British officials have categorised as roughly equal economies, and which have been notable under-payers in the past.

In the discussion at the Ecofin meeting, not all the 25 member states expressed an opinion on the proposed GCM. Nine countries – the Netherlands, Austria, Sweden, Belgium, Greece, Italy, Ireland, Slovakia and Slovenia came down in favour of the Commission proposal, though reserving their position on the details.

Eight others – Denmark, Spain, Finland, Portugal, Poland, Hungary, Lithuania, Portugal and Cyprus – were critical, but also made it clear that they were opposed to continuing the British rebate.

This was only a preliminary discussion, and it is likely that many member states will shift their position as the debate develops. Both the Commission and the Council hopes that agreement will be reached by the end of the Luxembourg presidency next June. This is partly because the chair is then taken over by Britain, the country least well placed to propose a compromise solution.

The final deadline, therefore, is likely to be during the Austrian presidency in the first half of 2006, which will end only six months before the 2007-2013 spending period begins.

In the meantime, the British look like being stuck with a completely unrealistic negotiating position. On the one hand, Gordon Brown and other British ministers constantly boast of the success of their economic policies, and the statistics bear out that during the past seven years Britain has out-performed the EU average on nearly every economic indicator. On the other, they deny the natural consequence of this – that Britain has succeeded in catching up or over-taking almost all of its continental rivals.

In these circumstances, it makes no sense for British ministers to deny the evidence of what has happened. A far smarter move would be to accept in principle the case for a GCM, but to negotiate hard on the details to ensure that the UK got as large a slice of the cake as possible.

Two ways of achieving this would be to reduce the threshold of 0.35% of gni, to 0.3 or even 0.25, or to remove or increase the proposed ceiling of 7.5 billion euros. If Britain does not change its tactics soon, it will face the almost certain probability of having to make a humiliating climb-down at the 11th hour or face universal condemnation for the failure to agree on the financial perspectives for the next seven-year period.

Who would pay the most?

Average Percentage shares of national gni, 2007-2013

Net contributors
Without rebate With British rebate With GCM
Netherlands
0.55 0.56 0.50
Germany
0.52 0.54 0.49
Sweden
0.47 0.50 0.46
United Kingdom
0.62 0.25 0.46
Austria
0.37 0.38 0.41
Italy
0.29 0.41 0.36
Cyprus
0.28 0.37 0.34
France
0.27 0.37 0.34
Denmark
0.20 0.31 0.26
Finland
0.14 0.25 0.20

Source: European Commission

There are many beneficiaries and there are many drivers of globalization. In fact, free trade is one of the most powerful guarantors of fair trade, which should be high on the list of anyone really interested in helping the so-called developing countries. To make the world fairer, we need to make trade freer.

At the moment, we are still living with a trading system that has many forms of open and hidden protectionism, including undue tariff barriers, cumbersome customs procedures and trade distorting subsidies of all kinds. This creates a trading environment that is both far from free and also far from being fair.

Trade distorting subsidies don’t even always work for those they are supposed to protect. The European Union’s Common Agricultural Policy and farm policies of other OECD countries are very good examples of this problem. Approximately 70% of EU subsidies go to 30% of the biggest farmers. Most small farmers usually struggle to break even – despite the subsidies.

Real CAP reform would send a powerful message of free and fair trade to the world as it would end the effective locking out of farmers from developing countries. Latin America and many Asian sugar producers, for instance, who at the moment find it impossible to successfully enter European markets despite being very competitive, could finally sell their goods on the continent. Such free and fair trade would be mutually beneficial: European consumers would be able to buy cheaper products while Latin American and Asian farmers could make a better living. Unfortunately, Europe is not alone in wasting billions in farm subsidies – the U.S. is also guilty of handing out distorting farm aid. America’s 25,000 cotton farmers alone receive each year $3.5 billion in subsidies, effectively locking out some of the poorest African countries that could offer American consumers much cheaper cotton of comparable quality. This kind of protectionism hurts the livelihood of a large part of the more than 3 billion people living in rural areas of the developing world.

A constructive free trade agenda would help lift emerging economies out of poverty. This should also include the liberalization of trade between developing countries. Just as free trade helped Switzerland – the home of Nestlé – in the 19th century, free trade can help the developing world in the 21st century. Reducing trade barriers is vital to increase the efficiency of global economic structures and systems and to promote the economic development of some of the world’s poorest countries.

In October 2002, Rubens Ricupero, Secretary General of the United Nations Conference on Trade and Development, went so far as to tell international business leaders that their most important corporate social responsibility was to advocate free trade and capacity-building in developing countries. Only when governments lower barriers can local and international companies invest in new capacities, thus attracting investment and improving living standards.

It is certainly right that businesses can gain from globalization but so can emerging economies. The two are not mutually exclusive. The dichotomy of the anti-globalization movement is a false one. But while it is true that lowering trade barriers creates new opportunities, it also intensifies competition. And some businesses are simply afraid of this competition and don’t want to adapt to the new challenges, rejecting therefore free trade. The same debate is raging among governments around the world, but as long as they hold on to protectionism they will continue to frustrate economic progress of developing countries.

Contrary to the anti-globalization slogans, there is no single business voice at trade summits and no powerful monolithic force driving the opening of international markets. However, the unambiguous message at the heart of all campaigns for free and fair trade is that it will increase prosperity in both the developing and developed world. This holds the key to the eventual success of future trade talks.

Businesses cannot allow themselves to become bystanders in trade negotiations. They need to develop a strategic, long-term perspective on trade liberalization, appreciating its overall benefits as well as its risks. Strong, balanced and successful advocacy from companies in all sectors and of all sizes, from rich and poor countries, need to muster a common effort to guarantee the proper functioning of the multi-lateral trading system that will emerge from future trade rounds. Before business leaders are able to convince others, however, they may need first of all to convince themselves.

Mr. Oberhaensli is head of economics and international relations at Nestlé. This opinion editorial is adapted from “Free and Fair: Making the Progressive Case for Removing Trade Barriers”, an essay collection published by the Foreign Policy Centre.

European qualms are understandable. But the EU could now implement a number of programmes that would make a significant contribution to improving the security situation in Iraq and creating the building blocks of democracy. Laying the foundations for a deeper European engagement in Iraq need not compromise sincerely-held convictions about the wrongs of the invasion. The Iraqi people need help to build a peaceful, prosperous and open society – it must not continue to get caught in the cross-fire of transatlantic politics.

As yet Iraq has received no convincing answer as to how it can guarantee security and build viable and democratic political institutions from the international actors best equipped to help – its Middle Eastern neighbours and regional players. Nothing more was agreed at the regional conference at Sharm el-Sheikh this week than a vague expression of support for Iraqi elections, optimistically scheduled for January 30th 2005. The EU, with its expertise in post-conflict reconstruction and strong track record in dialogue with local groups, is now the most important organisation for Iraq. And the prospects for a constructive EU plan are more favourable than previously. In June 2004, the EU agreed a common strategy paper promising consideration of further cooperation. To create a serious partnership for democracy with Iraq, it must now take this forward with concrete proposals for assistance.

The EU must first of all recognize that it can no longer legitimately criticize the US for neglecting human rights issues and focusing overwhelmingly on infrastructure and security forces training, without contributing itself to democratisation. With the notable exception of Germany, European members outside the US-led coalition have so far declined to offer any significant amount of development assistance to Iraq. This has been a source of bitter disappointment to many fledgling grassroots groups eager for non-US funding. For 2004-5, out of a total Commission commitment of 200 million euros, only 10 million euros was set aside for the construction of new democratic institutions in Iraq.

The second step is to recognize that Europe can make a unique and vital contribution to reconstruction that the US cannot provide. The US has for instance been attacked for imposing overly harsh neo-conservative market solutions on Iraq, and for focusing on high-visibility, “white elephant” projects devoid of relevance to the daily concerns of ordinary Iraqis. The EU has been particularly successful in other post-conflict zones in creating efficient economic structures at the local level and inclusive “social market” reforms, principles that could usefully be applied to Iraq.

Well-developed regional partnerships are another asset that the US cannot claim to share, and where a European contribution would have real added value. Despite the disappointing outcome of Sharm el-Sheikh, the EU should use its leverage with other Middle Eastern states to push them into more constructive partnership with the new Iraqi government. The EU has signed a trade agreement with Syria; it should use dialogue with Damascus – which Washington lacks – to push for a commitment from Bashar Assad to clamp down on the recruitment of jihad fighters from Syria. Europe must inscribe Iraq into its region-wide strategy on democracy, creating partnerships stretching across the region.

The third step is to outline concrete recommendations for European action that would make the best use of EU expertise with local groups at the sub-national level. Improving the physical security of Iraqis is the first priority. So far European nations have only trained hundreds of police officers instead of the necessary thousands. Just a fraction of the 100,000-strong security force needed in Iraq is properly equipped, and the resources allocated to this must be dramatically increased. Europe could also make a vital contribution by agreeing to train Iraqi border guards to stop the passage of foreign fighters into the country. More generally, Europeans could place greater emphasis on the democratic control of Iraqi security forces, something that is not far enough up the list of US priorities.

The disarmament of local insurgents is a major security issue that will become increasingly important as and when rebel groups choose to buy into the democratic process. European nations – including Germany – have a good record from Kosovo and Bosnia in running social, political and economic reintegration programmes for insurgents. This should be put to immediate use in Iraq, where weapons ownership among the population is rife and initiatives such as cash-for-guns sorely missing.

Non-coalition European states have also blocked proposals to make money from the EU’s large MEDA funds quickly available for Iraq. While a massive diversion of aid from other recipient countries is undesirable, there is scope for including Iraq in some of the softer social and cultural EuroMed programmes, which would be relatively low cost and symbolically important.

On the political level finally, the international media has focused on the importance of national elections. But building legitimacy through local structures is just as important – and is a longstanding European specialty. Here a more coordinated EU effort could build on the British approach in Southern Iraq of fostering citizens’ participation in local institutions. This assistance could give Iraqi citizens the perception of participation in the decisions affecting their daily lives – something they are unlikely to get from amorphous national coalition that is likely to emerge from January’s elections.

European opponents of the war have attacked the US for favouring former exiles and allowing Iraq to drift towards religious-sectarian politics. But they themselves have done nothing to help foster secular and ethnically diverse grassroots parties. The EU must move to support the development of a dense web of national institutions, such as professional associations, chambers of commerce and universities. If power is to be dispersed from US-backed former exiles, the 100-plus political parties that have emerged must be helped to develop coherent manifestos and effective election strategies.

The challenge lies in formulating a united European strategy that can reconcile the bitter differences over the invasion. Some European leaders apparently still feel that scoring political points over Iraq is more important than helping it – as the last-minute cancellation of the Iraqi president’s talks with French ministers in Paris appeared to confirm. Conversely, European supporters of the war have been insensitive to the depth of moral and political opposition to the war among other nations, which make them reluctant to contribute without qualification to the reconstruction process. But when Iraqi democrats came looking for European support during the 1990s they were rebuffed – broad strategic calculations were deemed more important than fostering Iraqi democracy. To repeat this oversight today would represent a mistake of historical magnitude.

Dr Richard Youngs is Senior Researcher at the Fundácion para las Relaciones Internacionales y el Diálogo Exterior (FRIDE), Madrid, and Senior Research Associate at the Foreign Policy Centre. “Europe and Iraq: From Stand-Off to Engagement” is published by the Foreign Policy Centre, http://fpc.org.uk/fsblob/331.pdf

Certainly, UNMIK’s record in Kosovo is distinctly mixed, as was spelled out by Kai Eide, Norway’s Ambassador to NATO, who last July produced a devastating report, at the request of UN Secretary-General Kofi Annan. During the course of UNMIK’s stewardship, Kosovo’s economy has shrunk alarmingly, while the organisation was totally unprepared for last March’s outbreak of inter-ethnic violence, which led to the death of 19 Serbs, with hundreds injured and thousands driven from their homes.

This is not the time, however, to consider a new protectorate. The election, in October, of a new parliament and provisional government for Kosovo, has already led to the handover of some of UNMIK’s responsibilities, and more are likely to follow.

Yet the authority of the provisional government is distinctly fragile. Only some 300 Kosovo Serbs actually cast their votes in the election, which was boycotted by most of the Serb parties, which meant that they won none of the 100 seats up for general election, and their representation is restricted to the ten seats specifically reserved for Serbs. Another 10 seats are reserved for other minorities, which means that the Albanian Kosovars control about five-sixths of the 120-seat Parliament.

Nor does the composition of the new government do much to reassure the Serbs. President Ibrahim Rugova’s moderate LDK party won the most seats, but without an overall majority. They chose to form a government with the more hard-line AAK party of Ramush Haradinaj, rather than with Hasim Thaci’s PDK, which is seen as less hostile to the Serbs,

Haradinaj has become Prime Minister, but his tenure may not be long, as there are persistent rumours that he will soon be indicted for war crimes by the International Criminal Tribunal for the former Yugoslavia (ICTY).
If so, he is likely to be charged in connection with the killing of 40 Serb and Albanian civilians near his home village of Giodjane in the summer of 1998, when he was the leader of the Kosovo Liberation Army (KLA).

Haradinaj’s indictment would cause a major political crisis in Kosovo, which many fear could spark off further violence. Meanwhile, Haradinaj has shown himself very conciliatory towards the Serbs since he became Premier, but neither the Kosovo Serbs nor the Serbian government in Belgrade have shown any willingness to have dealings with him.

Haradinaj, together with Rugova and most of his ministers, met with the United Nations Contact Group on the former Yugoslavia (UK, US, France, Germany, Italy and Russia) in Pristina on 16 December, and pledged the closest co-operation with UNMIK in the run-up to the Final Status talks due next summer.

Haradinaj’s team declared their “immediate priorities” to be “reformation of local power, increase of dialogue between communities, security for minorities, the return of internally displaced persons and the completion of reconstruction”, while it asked from UNMIK the “successful transfer of competences”.

The European Commission was not represented at this meeting, though its help, financially and otherwise, will be an essential ingredient of a successful implementation of these policies. Even so, it will require a larger and much better focused contribution than in the past.

A recent report, by Professor John Bradley and Mr Gerald Knaus for the Berlin-based think tank, The European Stability Initiative*, pays the EU a backhanded compliment. It suggests that the very success of its efforts in helping to improve the economies of eastern European countries which have been candidates for EU membership, through pre-accession aid, has made life more difficult for Kosovo.

It has increasingly become a less attractive proposition for foreign direct investment than near neighbours whose economies are rapidly expanding. By contrast, Kosovo, where a high proportion of the population is dependent on remittances and subsistence agriculture, is caught in a downward spiral.

The IMF, which in December 2001 had estimated Kosovo’s GDP at €1.85 billion, reduced its estimate to €1.57 billion in June 2003. Six months later, UNMIK and various financial institutions, put it at €1.34 billion.

The key priority for the new Kosovo government and its successors, Bradley and Knaus argue, is to identify ways in which Kosovo can catch up with the rest of Europe. The overriding goal of their economic policy must be to bring about a substantial process of convergence towards European living standards within the next generation.

The first step, they argue, must be the drawing up, with the co-operation and material assistence of the EU, of a National Development Plan comparable to those adopted by the former candidate states of central and eastern Europe. The EU contribution would not only consist of the provision of pre-accession-style funds, but the close monitoring to which the candidate states submitted during the long process leading up to their admittance as full members last May, or, in the case of Romania and Bulgaria, until the newly confirmed target date of 2007.

If help was given on an equivalent scale, the cost to the EU would not be enormous, given that the population of the territory is not much more than two million, compared to 22 million for Romania and 8 million for Bulgaria. The cost to Europe of letting the territory collapse into an economic ‘black hole’ would be far greater.

Whatever decision is taken over the Final Status, the chances for Albanians and Serbs to live peaceably together can only be improved if the future economic prospects for the territory are put on a firmer footing.
*Towards a Kosovo Development Plan (www.esiweb.org).

The relief operation is well underway, faster in Sri Lanka than in Indonesia, but both of these countries will face a difficult task as they try to recover. You would not believe it if you saw it. I have never seen anything like it.

The events of 2 weeks ago have seen the world reach out to fellow human beings in deep distress. Compassion, practical help, comfort and support for people who have become in a sense our neighbours even though they live on the other side of the world.

What matters now is to see this through. That support, compassion and determination are needed to help the people of the countries affected to rebuild their lives. And yet if we think about it, disaster of a different kind and, in a way, on a different scale, strikes poor people around the world every single day. We think about 150,000 people have died in the tsunami. No one know for sure and we are still waiting for a full assessment of the west coast of Aceh. Last year 2.5 million Africans died of AIDS; that’s the equivalent of nearly 17 tsunamis. On the same continent, a quarter of a million women die every single year unnecessarily as a result of complications in childbirth – for want of skilled medical attention; the equivalent of one and a half tsunamis.

So many people live with these deadly, silent tsunamis that also take away people’s lives that the world does not appear to see or hear. They don’t fill our television screens or thousands of our column inches day after day. And yet I refuse to believe that the generosity of spirit, the compassion of heart, the practical help we have witnessed in the past 14 days from people in the countries themselves – who have received little coverage and who are bearing the brunt of this disaster, picking up dead bodies, comforting the bereaved – and from people and governments across this small and fragile planet that is our home – I refuse to believe that we can only do this in response to one kind of disaster. I believe that our clear and moral responsibility at this point in human history is to act to save and to change lives in all the disasters there are whether on TV or not. I came back with renewed determination that it does not have to be this way.

Now we look deep into ourselves and ask what we can do to help – and developing countries and their people ask ‘what can we do to help ourselves’, rightly as their future rests in their hands. The other thing I did on my trip was to go to Nairobi for the signing of the Sudanese peace agreement. This was a historic moment. The conflict in Sudan is Africa’s longest running civil war and has left 2 million dead. They have now decided that politics should replace conflict; and hope, fear. It was remarkable to witness this – it reinforced that without peace and stability, there is no development.

So we know that tackling conflict, confronting corruption, building effective states, creating a climate in which people want to come and invest their money, action to relive debt, giving increased, predictable and effective aid – we know that this is what is needed. And so is allowing countries to earn and to trade their way out of poverty. And it is about that I want to speak today.

Now, just over three years ago the World Trade Organisation (WTO) met in Doha and agreed for the first time to put developing country concerns at the heart of the WTO. As we know, at the end this year, WTO members will meet in Hong Kong– a real political opportunity to turn words into progress. Progress we want to see.

Before that, we will gather in New York for the Millennium Summit to review the Millennium Development Goals. Everyone knows what we will say to ourselves: we are not doing well enough. If we mean it, really mean it, then we have to use the unlocked potential of trade to change lives for the better. We must seize this opportunity to make the case for trade to lift people out of poverty, help children into school and improve healthcare. Studies show that an ambitious outcome could produce annual global benefits of up to $600 billion and reduce the number of people living on less than $2 a day by 144 million. I would call that real progress if we can achieve it. The world now needs to deliver on the promises it made in Doha.

Now, we all know that the current trade rules are stacked against some of poorest countries in the world.

Take one of the worst examples – West African cotton producers. In Benin the cotton industry accounts for 85% of total exports and 20% of national income. They are very heavily dependant on cotton. Benin and three other West African cotton producers are potentially very competitive. They followed the prescriptions of the World Bank and IMF and ended all subsidies to farmers. But they liberalised into trading in highly distorted markets. They are paying the price.

Their cotton industry is now in crisis and with it, the livelihoods of over 10 million people in West Africa who depend directly on cotton. This is because they have to compete with heavily subsidised EU and US producers. In 2001, the US gave to cotton farmers nearly $4 billion in assistance – that is more than the entire GDP of Benin, to put it into perspective.

We need to tackle trade distorting subsidises and further open our markets. Total support to agriculture by OECD countries was US$318 billion in 2002 – roughly 5 times more than all of the aid which the rich world currently gives. Agricultural protection is damaging to developing country producers. It costs them $20 billion a year by shutting them out of EU markets.

That is why the Government has been at the forefront of those pushing for further reform of the CAP, and will go on doing so.

That is why we agree with the Make Poverty History Coalition that we need to tackle export subsidies. The EU has now committed itself to abolishing all its export subsidies. But this will be of limited benefit if there is no parallel movement from other WTO members in addressing their export subsides. An end date must be agreed in the next stage of negotiations.

That is why I welcome the agreement reached in July last year by the WTO General Council. It represented a significant step forward. It is significantly better for developing countries than what was on offer in Cancun, especially in agriculture and the Singapore issues. Now that was rejected by developing countries but the good thing is that, in making their voice heard, it showed that developing countries are capable of recognising their own interests, as is right and proper.

Developing and developed countries alike stand to benefit from trade facilitation so it’s good that negotiations are going forward on that. Clearly measures should focus on well-trained staff, effective border controls and standardisation of procedures and forms in customs. For example the establishment of the East African Customs Union has created new opportunities for trade between Kenya, Tanzania and Uganda.

So development really is at the centre of the UK’s trade policy. The UK was one of the first countries to call for the launch of this round of multilateral trade talks with a much greater focus on development and poverty reduction.

It is no coincidence that Africa, whose share of international trade fell from 5% to 2% between 1990 and 2000, now has one of the highest levels of poverty in the world. Global trade flows are now worth $ 25 million a minute. Africa’s are only $500 thousand a minute. This is one fiftieth of the total.

We all of us have to work hard in 2005 to make trade work for developing countries, and that’s why this essay collection “Free and Fair; Making the Progressive Case for Removing Trade Barriers” is particularly timely.

The Make Poverty History Coalition will be leading a global campaign for Trade Justice. It is calling for fair trade and argues that this is not free trade. The words free and fair can be very emotive when applied to trade. I have no doubt debate will continue to rage about whether on one hand they are compatible or on the other, mutually exclusive.

The new Trade Commissioner, Peter Mandelson in his recent speech to the ACP, advocated progressive trade liberalisation. I support this view, but we must ensure that it is a properly sequenced process which recognises the needs and interests of developing countries, not all of which have the same needs or the same interests.

I also believe that free trade on its own is not the answer.

The extent to which more open trade helps to reduce poverty depends on broader economic and social circumstances and policies. Experience shows that if a country liberalizes without putting in place the right institutions, transport and marketing arrangements then the result can be a sudden surge of imports. And that can wipe out small producers and increase poverty.

However protectionism is not the answer either.

There are strong links between more open trade and growth. In a group of eighteen developing countries that became much more open to trade after 1980, the average growth rate has accelerated. This group included most of the world’s poor people – among the eighteen countries are Bangladesh, China, India, Ghana, Nepal, Uganda, and Vietnam. Growth in turn has helped reduce poverty. As you know, poverty in China has decreased by two thirds since 1981 and in Vietnam, poverty was halved in a decade. I call that progress. However, in sub-Saharan Africa where trade and growth have fallen, poverty has almost doubled since 1981.

So the question is how should we support the adjustment to more open markets. Trade barriers need to be removed in a way that is properly organised. Unless protectionism is phased out, industries fail to innovate and lose competitiveness; we saw that in Latin America in the 60s and 70s. Governments need to resist pressure from inefficient industries demanding permanent protection – governments, as history has shown, can’t always pick winners!

Countries can end up locked into sectors in which they have no export competitiveness. When economic restructuring takes place, there will be losers in the short term. People and resources will need to be transferred from sectors which are no longer competitive to new areas and this takes time and it takes money.

Developing Countries need flexibility to introduce reforms at a pace they can deal with. That is why the UK strongly supports – excuse the jargon – effective special and differential provisions in the WTO. This means giving developing countries longer to open their markets and implement agreements, more flexibility and fewer procedural burdens than developed countries.

That is why the UK welcomes the recognition by European Commission of the need for the Least Developed countries and “other weak or vulnerable developing countries” to be treated differently and asked to make less commitments than other WTO members in the negotiations.

That is why the UK Government, like the Trade Justice Movement, supports proposals from poor countries that enable them to protect special products that are essential to poverty, food security or rural development. We are working with NGOs and developing countries to amend WTO rules to this end.

Now we all recognise that there will be winners and losers from more open markets in the short to medium term. In the short-term, the losers from trade liberalisation will need transitional assistance – providing social safety nets for those that lose their livelihoods and helping diversification of their economies to more competitive export products.

That’s why the UK will work to ensure that help is given to those affected by, for example, the reform of the sugar regime. The rules on sugar arbitrarily give advantages to some producers over other more competitive suppliers, like Mozambique, like Malawi, and like Tanzania. For every dollar of aid given to one group of developing countries by the US and the EU, $2.75 of economic damage is done to others. We need to ensure changes to this system are accompanied by proper assistance.

That is why the UK is working closely with the World Bank on what policies will best give developing countries the flexibility they need to pace and sequence carefully their trade reforms so that they encourage national development.

That is why we are also working with developing country governments and other development agencies to ensure trade issues are carefully integrated into donors and the country’s own plans to reduce poverty. If they are then developing country governments should be able to access the development funds they need, for example to improve roads, to improve the business and investment. Since 1998 the UK has allocated £174 million to support a range of initiatives to assist developing country governments in designing these trade policies that work for the poor, as well as participate more effectively in trade negotiations.

We recognise, I recognise, that too often in the past low income countries have had little say over the terms under which they receive World Bank and IMF support. This has led to criticisms, including from the NGO community. This support has often been conditional on the adoption of trade liberalisation and privatisation policies. The UK believes, I believe, that aid terms and conditions must support, not “buy” reform.

For that reason I published our review of the UK’s use of aid conditionality. At this year’s Annual Meetings, the UK secured a commitment from the World Bank to review its policy and practice on conditionality and report back at next year’s Meeting. I think there is a need to address the scope and content of conditions, particularly in relation to sensitive policy reforms, such as privatisation, such as trade liberalisation.

There is a lot to do to realise the aim of free and fair trade but we are making progress. This year our presidencies of the EU and G8 give us the opportunity to put trade high up the international agenda. The Africa Commission will be producing their report in Easter. This will also create opportunities to explore how trade reform can help Africa’s development.
In 2005 we will work with partners how we can provide additional support for developing countries to meet the costs of trade adjustment and additional supply capacity. In 2005 the UK will work to reach agreement in the EU and G8 on simplifying rules of origin. This does sound techy but it has the potential to deliver real benefits for developing countries. Preferences schemes are a way of offering better access for developing countries to developed markets that are offered to others. But for many of these schemes, they have clauses that restrict take up. For example, Tanzania can’t benefit from the preferential access it receives under the ‘Everything but Arms Agreement’ to the EU market if any processing takes place in its non-LDC neighbour – Kenya. We want to see, I want to see, reform of these restrictive rules on the origin of products.

We will also be working to ensuring the EU negotiations with the ACP on Economic Partnership Agreements – an issue on which I know a lot of people have a view – to help make a tangible difference to trade working for the poor. We want to preserve the current high levels of market access for the African, Caribbean and Pacific countries access to the EU. But in return, to be WTO compatible, the ACP countries will need to offer some market access to the EU. Preferences have failed to boost exports as intended. ACP countries have enjoyed long-standing preferential access to the EU market yet by 2002, only 3% of EU imports originated from ACP states, as compared to 6.7% in 1976. We will be pressing in the EU for longer transition periods for the ACP, which will take into account the needs for the ACP countries.

In 2005 we will be also producing research to help inform the WTO negotiations.

Above all, we need political will from all WTO members. And this is my final point. If we had sat here 10 years ago, no one would have thought it possible to reach this point. 3 weeks ago, no one would have predicted that we would see the biggest humanitarian relief operation yet – but people were determined. We live in an era where it is fashionable to decry the power of politics. But I believe in that power. Look at what we have achieved in 8 years on development. This is a result of your campaigning too. So we must try this year to deliver a Round which genuinely supports development and helps change people’s lives for the better.

ENDS