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Forums, October 2003 Click on a link to see Past Forum notes: CLAIRE SHORT ON 'THE FUTURE OF AID' CAN THERE BE DEVELOPMENT WITHOUT CAPITALISM? REPORT FROM CANCUN: INTERNATIONAL TRADE IS A GOOD THING INTELLECTUAL PROPERTY RIGHTS ARE NOT A THREAT TO THE THIRD WORLD The evening was chaired by Johnny Grimond, until the beginning of this year foreign editor of the Economist Chairman Clare Short There is a growth of enormous inequality across the world. There are going to be 9 billion people by 2020 and this is a product of development. Children are surviving and the old are living out their lives. This requires us to use our resources more carefully. 1 in 5 are abjectly poor, on less than $1 a day. That is $1 according to the local purchasing power in the US, not in that country. So if you can imagine what $1 can buy in the US, that is what they are getting. They have no access to education, most children die of preventable diseases, such as diarrhea, measles and bad nutrition. Those that so survive are often mentally and physically deficient because of bad nutrition. That's 1.2 billion people. 2.8 billion people live on $2 per day. People living in OECD countries, the 10 most industrialized countries, live on $70 per day. Half of humanity are urban dwellers and the projections are that 65% of the population will be urban dwellers in 10 years, which challenges the nature of poverty. Agricultural poor are more passive and less organized, than urban poor will be. Now with media communication we are more close to one another and can see how others live. We all saw the girl born in the tree during the floods in Mozambique. Now people here care about people from all over the globe. It also means, however, that the poor can see how we live and compare our lives and become more angry. We are heading for environmental disaster. Bangladesh stands to see a population increase of 50% in 30 years and to lose 1/3 of its land in flooding to global warming. The Kyoto Protocol is breaking down. This is the world we are living in today, but this future is not inevitable. We have knowledge, experience and capital to deal with this. We are also in a unique time, when more people are living longer and are educated. We can deliver basic sustainable development across the globe; water systems etc and that was what I was working towards with this government. Until, we were shuntered off course after 9/11 by America and this mistaken War on Terror and the mess we have made in Iraq. The Millenium development goals were to reduce inequality and injustice, which requires aid. Africa needs more than aid however. 20% are living in conflict, so we also need a working UN in peace keeping and enforcement. After the Cold War, wars are generally civil and semi-criminalised not inter-state conflict. Fairer trade is needed. Most of the processing plants, even for Fair Trade products, are done in Europe. There also needs to be a drive in Britain to change peoples’ minds on aid. After the election we did a survey to see if the population agreed with an increase in the aid budget and most did not want this. However, this was not compassion fatigue, but that they felt funds were being misused and they did not want the money going to corrupt governments. In the past aid has been misused, but this has improved. China, with the help of aid, has made massive improvements in getting out of poverty, though everything is not perfect in China, they are making great progress. We need to help fix country's systems, to let them grow themselves. To reach the Millennium Development goals, we need to double the current global aid fund, to $100 billion. GB currently spends £4 billion per year and £8 billion would not be much for our budget. The international community has taken a knock from divisions over Iraq. We need to overcome this to get back to addressing the Millennium goals, rebuild Iraq and work towards peace in the Middle East, or we will all suffer. For Britain, which lost its empire and never found a role, this is it. Questions 1) You spoke very powerfully about doubling aid and focusing on outcomes, not corrupt regimes. How does the UK government intend to do this? 2) £4 billion is spent on aid, how much is spent on defense? 1/2 of humanity has no clean water and sanitation,
so it was decided in Johannesburg to step up the access to water.
This is not just aid that is needed, we need to help people to
build a system where all people have to contribute money. To get
a basic working system, you need basic charges, or they won't
be sustainable. There can't be free water for all or it won't
get repaired. 3) I have heard that the poor countries are paying more to us in debt than we give in aid, is this true? 4) Is globalisation in its current form failing developing countries? What do you think of the US calls to expose people to even more competition? 5) What can an individual do most effectively, other than political activism? Should we just give to charities? The Jubilee 'Drop the Debt Campaign' had some considerable success. The G8 meeting in Birmingham did not even have debt and development on the agenda. Then they heard that campaigners, including Bishops and Church people, were marching to the meeting debt got onto the agenda. It made a huge difference. Because of debt, poor countries can never borrow to pay for sensible investment. Poverty reduction strategies were put in place to provide debt relief for 3 years and if they stick to this programme then they'll have the debt written off. This has written off $67 billion off the poorest countries. Some countries, like South Africa, do not want debt relief, as they want a good credit rating, even though South Africans are now actually paying for the debts incurred by the apartheid government, so they are paying for the years of oppression they suffered. Globalisation is a reality and has been going on for centuries. One cannot be for or against it; it's a case of how it's managed. Presently having countries open without protection to international competition is not productive for those countries, as they cannot grow their own economies. There needs to be a system of phasing in opening, to allow for growth in health and education to sustain growth. I'm glad you asked this question, because development is not simply a charity question. The underpinning problems of the countries need to be addressed, the system. Yes give to charity, but one does not give to cancer charity and then say that we don't need a health system. Pressure needs to be put on government, by using your political voice to up the aid budget. 6) Have funds been taken out of the aid budget to pay to rebuild Iraq? 7) What is the role of multi-nationals in sustainable development and how should we engage them? 8) The Department for International development invested hugely in Sierra Leone, but poverty and corruption is still at large. Can you throw some light on this? In Iraq, the thinking was for an immediate UN operation to get things going, as Iraq has many resources and a very educated population. But GB and USA did not prepare properly for after the war, which was criminal. I had brokered a commitment to take the money from the Treasury, not from the aid budget, but now they are taking it out of the aid budget. The biggest failure was not giving authority to the UN and to create a democratically elected Iraqi provisional government, who did not have an agenda. It's a shame that the military who have such a huge budget, seem to need extra money for whenever they do anything and the aid department budget is used instead. These crude campaigns of multi-nationals hijacking the Johannesburg summit is wrong. African's want phones and internet and all the goods these companies bring, so their investment is key. Whether they behave responsibly or irresponsibly, we all buy their products, though they are feeling the pressure if corporate responsibility from consumer boycott campaigns. There is an Ethical Trade Initiative now, so this good will needs to be turned into practical action. Sierra Leone, like Rwanda and Mozambique are all desperately poor and after many years of conflict their economies have imploded. They are rich in resources which will help them rebuild their economy, but it is also what caused the conflict and corruption in the 1st place. GB is hard on corruption and we will only help rebuild it when there is a reduction of corruption. But it cannot happen over night. Progress is happening, but it is such a desperate situation is will take about 10-15 years. GB are putting in £100million in. The debate was held on 22nd October. The Chair was Ms Caroline Spellman, MP Opposition Spokesperson on International Development. Professor Paul Collier University of Oxford Dr John Cameron, University of East Anglia Dr Adotey Bing, Director of the Africa Centre
The second wave of development was due to protectionism and restriction, development without being subject to external pressures. This can broadly be said to be the experience of Germany and France, for example. The third wave was the Asian Tiger economies rapid
development. The World Bank have debated on whether ‘economic
success' here was the result of free market or subtle government
intervention against the rules of capital to protect certain industries,
while they grew strong. So, historically, free capital flow has
never been the cause of development. Capital is not actually central. The process is
about competitive markets where you have capital and skills accumulate
and vice versa. The disaster in Africa is that most of its policy
makers and institutions are corrupt and policies are created to
only benefit the few. Africa actually haemorrhages capital. 40%
of its wealth is outside of Africa. Adotey Bing Performance of countries is because of what goes
on politically internally. But with Africa especially, you cannot
forget what happens externally. There was a time when no one was
able to decide on a global scale of what happens to people and
countries. It was Europe that was able to go out and control the
world. Prior to 1500 there were many empires and systems. Now
there is one world system and those who control this system can
regulate and control parts of this system for the benefit of other
parts.
The debate was chaired by Laurence Cockcroft, Chair of the UK Chapter of Transparency International John Hilary; Trade Policy Analyst with ActionAid Philippe Legrain; Former advisor to the Director General of the WTO, Chief Economist at Britain for Europe and author of ‘Open World: the truth about globalisation’. Summary
The EU was keen to expand the agenda for Singapore issues. These issues cover new areas of government procurements, trade facilitation, customs duties and investment. This expansion has been consistently opposed by development countries; they even put out public statements. When the WTO has been consistently failing with the current agenda, an expansion is not what is needed. Day 1 and 2 of Cancun was pretty much as non event. On the eve of the last day, however, ActionAid received the final draft of the consensus text of the proposal from the discussions. It caused outrage among the developing countries. Instead of taking their considerations on board, including their rejection of the Singapore issues, they were completely disregarded. Agriculture reflected only US and EU issues. The developing countries were faced with a text that threw all their concerns in their face. Any good that was in this trading round was squandered. Developing countries stood firm, however, and did not give in to pressure. Pascal Lami, Chair of the EU team, finally said they would give way on 2 Singapore issues, but still proposed to go ahead with 2. The meeting collapsed and the EU basically blamed everybody they could, apart from themselves. What was interesting; was that the media, rightwing press included, were unanimous in blaming the rich countries – EU and US, for the collapse by not giving way on agricultural subsidies. The process is obviously flawed when the minority wins. We do not know how it was drawn up, who said and recommended what because the meetings are not transparent. We, nor the press are allowed to hear what is going on and all the meetings crucial are done behind closed doors The good and bad that came out of this round: There is now a new constellation of forces, within the agreement of agriculture. The Peace Clause runs out at the end of the year, which is a clause that protects EU and US subsidies from being changed. Strong developing country alliances emerged, the strongest
being the G21, comprising of the strongest of the developing countries:
Brazil, India, China etc They concentrate exclusively on agriculture
and are not interested in making any other deals, until their interests
are satisfied. This idea of trade liberalisation is often sold as a win-win situation. World Bank figures say millions will be lifted out of poverty because of it, but even they admit that these figures are useless. Some countries have benefited from trade, but what trade is the best: free or fair. Free trade pits the poor against the rich. Sometimes the poor win, but usually not. Certain groups, like China, which is quite rich, may benefit. But it usually it works out very badly for the poorest countries. Of course, we do not propose to return to the time
of blanket protectionism, but we do not want the other extreme of
no protection. An EU internal document admits that: Philippe Legrain The rules of the WTO say that if you open up your market to one country, you have to open it to all countries. So say the US used its power to lower EU import taxes, the poor countries would benefit from US power. The WTO is a recourse for poor countries, when rich countries behave badly – which is better than no recourse at all.
If the majority of countries were not in favour of Singapore issues and wanted to amend the unfair agricultural subsidies of the EU and US, why did their ideas and wants not even get into the consensus text? Hilary: Democracy in the WTO is very hard to understand. A lot of power is in the hands of the Chair and the WTO Secretariat, which very much set the agenda. When you receive the final text at the 11th hour, when there is no time for discussion or manoeuvre, only either take it or leave it, this really destroys trust and good will. Philippe: Well that’s news to me that the secretariat has influence and power! I was a member of it and we are just like a civil service. The fact is the WTO is very weak. We have a low budget and cannot do anything without the say so of all members. For good or ill it works on consensus, not 1 country 1 vote. Why would India, for example, benefit from the free trade of agriculture; it already has plenty of food. Philippe: India is already a net food importer, but the question is could it get it cheaper. It exports mainly textiles, IT, financial services and drugs. India has the highest import taxes, though it varies, poor countries have among the highest tariffs. Hilary: Japan claims the prize for the highest tariffs for its rice tax. But the developing countries should be able to decide what food to import, what level of tariffs to have and what it should grow and export. Cheaper food imports are good for the poor so people can afford to buy them, but not if it destroys their home market. Even the UN agrees; in a study which says it is no longer good enough to promote this idea that free trade is a win-win situation. It does not work. Developing countries should decide and have the flexibility to decide that areas to free up. Philippe: This is precisely what the WTO does! Can you explain Singapore issues, which even look threatening to the UK economy and also making economies into subsistent economies – i.e. getting countries like India to start importing food and getting them to concentrate on a few areas, such as IT, textiles and what the world economy demands, creates new problems; such as the migration of out of work farmers into the city and the growth of slums, is not necessarily a good thing. Philippe: Singapore issues are about streamlining importing and customs procedures, combating corruption by having checks from the port to the shop. It is also about competition policy and developing countries do not want it as they don’t want extra competition and they also lack expertise in these fields. I do not think subsistence economies are damaged; one reason China has grown so much is because we have given them so much finance to fund their factories and industry to produce for the US. Hilary: It is clear that investment is good and developing countries are not saying that they don’t want investment, but they do not want to be bound by rules which are damaging to their economy. Developing countries are liberal and open enough and they don’t want more liberalisation rules, in the form of the Singapore issues, enforced on them from the WTO. These proposed extra rules would reduce developed countries won ability to use investment to their maximum advantage. Flexibility is important; they need to be able to determine their own policies and terms. Philippe: Yes flexibility is important. But there needs to be WTO rules to keep them like that, or there is no point in the WTO. The Trade Justice Movement was the biggest lobby on Parliament ever. Did the UK just ignore the public’s wishes or did the other EU countries throw it out? Hilary: That’s a very good question, one that we have been trying to find out. What I can say is that it did make a difference within Parliament and government and we saw public statements from Patricia Hewitt, saying she would not see Singapore issues as a top priority. There is no transparency in the dealings though, it is all done in ‘green rooms’, so it is hard to track what individual member states said. Publicly the UK said it would not push for Singapore issues, but privately they supported it and Pascal Lami said from the beginning that these were a deal breaker. Philippe: The UK people lobby for the UK, but we are represented under the EU, so we have to compromise. Is GM democracy flawed? Maybe, but why single out trade issues? You can’t start having global elections or have NGO’s representing the UK – the government are far more representative. What we can do though, is make the WTO process more transparent, but it is the developing countries, many of whom have dictatorships, which oppose this the most. The US and Scandinavia are the advocates of greater transparency. Who are on the secretariat? Why did the few rich countries get what they wanted on the agenda and the not the majority’s wishes and concerns? Philippe: It was just a draft text, which was rejected as there was no consensus. This shows the WTO to be working. The secretariat is appointed openly – you can apply for a post on the internet. Hilary: Though Philippe worked there, he is wrong. This is not just a draft text – it is the central focus for discussion and it was not representative of the majority, but of the rich. It is not negotiating, but bargaining and bullying; chiefly by the US. The rich countries do not want a majority rules system and insists on consensus, so they can veto what they don’t want. The Chair is extremely influential and the process of who gets to chair; is not an open process. There needs to be a focus on making the process more transparent. On who wants it, it is not a clear North/South divide. There should also be rules so that countries cannot set the agenda at the last minute, when it’s too late to do anything and it should be a process of negotiation, not squeezing and forcing developing countries into doing what the rich want – which is what happened at Doha. Philippe: Trade is win-win, poor will
benefit from cheaper imports and technology, as did China and Vietnam.
Chairing the debate; Rachelle Harris, herself an expert on the subject as a researcher and PHD student on intellectual property issues, took a guiding role in this passionate argument of 3 very different opinions. Ruth Mayne, a policy adviser for Oxfam, took a strong stance against TRIPS, on the grounds that it is bad for the public health and development in Southern countries. Sir Dominic Cadbury, Chairman of the Wellcome Trust and formerly also of the Economist Group, took an altogether different view, praising patents and asserting that the world could not do without them. Bringing in a different debate from the usual public health centered debate, Dr Ken Shadlen; an LSE lecturer of Development Studies, introduced the little discussed technological angle. This is an area of least protection, media attention and is most at risk from losing out because of patents. Ruth Mayne Oxfam is not against International Property
Rights (IPR) per se, but we are opposed to the blanket and excessive
IPRs currently being imposed on poor countries. The points I will address
are: a) Take the TRIPS Agreement, for example; After a ridiculously short transition period Malawi will have to implement the same high level of IP protection as the US, and medicines are treated the same as cars. There are important public health safeguards but they are limited in scope and difficult for poor countries to use. Plus, because WTO patent rules set a floor, but not a ceiling it has allowed rich countries to pressure poor countries not to use the safeguards, and to push for ever higher standards outside the WTO. There have been recent changes to TRIPs ,
but though these are important steps, they only open very small windows. b) In most poor countries, the people have
to pay for their own medicine. Parents take their children out of school,
they have to sell their animals, often their means of livelihood, in
order to buy medicine. Though patents are not the only determinant of
prices, it is a major factor in raising prices. The patented price of
HIV/AIDS is $10 000 per person per year which almost nobody in the Third
World can afford to pay. Drug companies only lowered their prices in
response to international public outcry,and generic competition. Indian
companies offered to supply generic versions of HIV/AID medicines, for
a much lower price of $300 per person per year. However, once India
signs up to TRIPS in 2005, they will no longer be able to do this. These
problems of high prices caused by TRIPS will also extend to all new
patented medicines for all diseases. c) Patent laws need reform so that the poor countries can get access to affordable medicine and so they can design their own patenting laws, according to their development needs. This is, after all, what the rich countries did; only inventing patents once they had reaped the benefits of poaching other's ideas and knowledge. Currently poorer countries have to fight just in order to use the existing public health safeguards in TRIPs . d)Companies need to admit that patenting is part of the problem, as well as poverty, lack of political will and poor health infrastructures. Major companies argue that strong patent protection to poor countries is vital to ensure R & D into new medicines. But while patent protection plays a useful role in stimulating R & D in rich countries, extending these rules to poor countries will not significantly increase R & D particularly into poor peoples diseases. This is because poor people lack purchasing power – Sub Saharan Africa only accounts for 1 % of global sales of drug companies. Even doubling patent protection would not change that basic market reality. What is needed is public money or public/private partnerships, where the company is genuinely interested in providing affordable medicine, or a non-profit organisation. There needs to be sustainable competition of generic drugs to prevent monopoly and high prices. Public pressure cannot be the only source of keeping medicine prices down. Sir Dominic Cadbury International Property Rights (IPR) is a very important issue as the world economy has more emphasis on knowledge and creativity, as opposed to manufacturing. So IPR attracts great attention. The difference between Ruth and me is not the issue - should IPR exist - of course it should. Without them, there would be not investment in R&D. If you want drugs, you need IPR’s. This issue is not all about health. It's about striking a balance between R&D and discovery of new drugs and affordable access. One of the prescriptions for signing up to the world trade was that countries had to sign up to TRIPS. Do we want to tear up the agreements from the Uruguay talks, and if so, what are you going to put in its place. Or, do we work with the existing ground rules. There is change taking place, these rules are not set in stone. There is no question of the disparity in health of poor and rich countries. Life expectancy in poor countries is about half of that in the rich countries. But remember, currently 90% of drugs regarded as essential, are not on patent. Yet 30% of the world do not have access to them, so the problem is beyond patents. Logistics and distribution are bigger problems that IPRs. R&D is expensive - millions of dollars. This does mean that it is not advantageous to put money into researching for tropical diseases, or diseases associated with poverty, as the beneficiaries could never afford to pay for the drugs, which would be at high prices to gain returns on the R&D. Patents do work for some people. India, which 5 years ago did not want patents, now see the benefits. There are rules that allow a phase in time for countries. Parallel imports allow poorer countries to obtain drugs at cheaper rate. Political issues are often the main problem, not IPRs. In South Africa the battle over cheaper HIV drugs had little to do with the pharmaceutical companies, but with the South African government and Mbeki's attitude that HIV does not necessarily lead to AIDS. To get money for R&D into tropical diseases, which are currently a problem, public/private partnerships are needed. Changing TRIPS will not solve the problem or help poor countries get money for R&D. It is not a case of huge companies perverting the system. Most of the investment is now typically coming from universities and the R&D being carried out by tiny bio-tech's, with the big companies manufacturing the goods. International Property Rights, or TRIPS, act as lubrication for the machine. Dr Ken Shadlen Less than 10% of patents are on drugs. There
is a whole other world of patents, so the argument is not just about
public health. Before I go any further I will explain a bit about patents.
Patents confer limited rights to ideas. These are: Most agree I think that current obligations are not appropriate for developing countries, for technical innovation. All firms and universities that receive money for R&D and own patents are overwhelmingly US and some European companies. They dominate, which is bad for technological innovation and potentially for transfer of technology. Basically, it is still under study, so we do not know really and should take cautious steps because of this uncertainty. Take Brazil, for example. All movements in the WTO are on public health, which has media attention, not on technology transfer. Brazil has 2 clauses that allow compulsory licensing in cases of national emergency, i.e. for public health reasons, such a disease out break. Secondly; the owner of the patent must produce the good in Brazil after 3 years. This will allow Brazil to benefit from technology transfer, as domestic firms learn how to produce it themselves and employ their own workforce. The first clause is accepted under WTO rules, but the US is questioning the legality of the second clause. At least in theory there are allowances in cases of public health, but they do not even exist for the technological side. Some of the questions from the floor. Q: There was recently a Commission Inquiry in the UK, by DfID, said TRIPS had adverse effects on developing countries. Can you comment on this Inquiry? Also, the pharmaceutical industry is undergoing radical change and is facing losing profits. So does this not create an atmosphere of decreasing innovation? Sir Dominic Ruth Patents increase costs. In the cases of Korea and Taiwan, which have been cited as successes, they had weak patent rules while they developed economically and technologically. Once they achieved a strong technological base, they found patents to be useful and strengthened the laws. At the beginning stages, it only hinders development. Q: What about the patenting of food and plants, which have been used by the indigenous population for centuries and then a large foreign company comes and patents it, preventing the locals from using it without paying the company and disrupting traditional practices and local agriculture. The rice tech patent is threatening to take away the livelihood of the people in India. It seems to me that patents allow the rich to take away from the poor. Sir Dominic |