§ 3.9 p.m.
§ Lord Hunt of Tanworth rose to move, That this House takes note of the report of the European Communities Committee on EC Development Aid (21st Report, Session 1992–93, HL Paper 86).
§ The noble Lord said: My Lords, in moving the first Motion which stands in my name on the Order Paper, with the leave of the House, I should like to speak also to the second Motion in my name.
§ I am presenting to the House two reports by the European Communities Committee, prepared by Sub-Committee A, on the EC's policies towards developing countries. The first, on development aid, was published in May and the second, on trade and aid, last month. I am glad that we can debate them together because, if the Community's commitment to fostering sustainable development in the third world, particularly among the poorest and the most disadvantaged, is to be effective, its development aid cannot be seen as standing on its own but needs to be buttressed by its other policies, notably on trade and agriculture in so far as they affect the developing world.
§ I should like to begin by acknowledging our debt to all those who helped us with oral or written evidence to both inquiries: government departments, nongovernmental organisations, international bodies, academics, Members of the European Parliament, and many others. We were glad to be able to visit the Commission in Brussels and the Court of Auditors in Luxembourg. We were particularly appreciative of the oral evidence from the noble Baroness, Lady Chalker, and from Sir Leon Brittan. We owe special debts to Dr. Christopher Stevens of the Institute of Development Studies at Sussex University, who was our specialist adviser for both inquiries, and to our Clerk, Mr. Tom Mohan, who skilfully organised our inquiries and drafted our reports.
§ In speaking to two reports in the time normally available to introduce one, I obviously cannot attempt to cover them in detail, but I should like to focus on a few key points and hope that some of my colleagues may supplement what I have to say.
§ Our inquiries took place against a background of renewed discussion in the Council on the effectiveness of EC aid and on the relationship of the Community's aid programmes both to the aid programmes of member states and to the Community's other external policies. At the Development Councils held in May and at the beginning of this month, the Ministers of the member states considered similar questions to those dealt with in our reports. I should welcome it if the Minister, whom I thank for the government responses we have received 1124 to both inquiries, could inform the House in her reply what progress has been made in those discussions and thus perhaps supplement the somewhat terse written reply that was given to the noble Lord, Lord Brougham and Vaux, on 9th December.
§ One other important aspect of the background to these inquiries was the Maastricht Treaty, which has amended the Treaty of Rome to provide formally for the first time general powers and objectives for Community aid. Our inquiries were directed mainly at the principles which underpin the Community's policies rather than into particular or topical problems.
§ The coverage of the two reports differs in one important respect. The Community has exclusive competence under the common commercial policy to conduct commercial relations, including the award of trading preferences, with the rest of the world, whereas development aid is a matter of shared or parallel competence, with both the EC and its member states having their aid programmes. In the latter field there was much talk by some witnesses of complementarity, but although there is a reasonable degree of co-ordination to avoid duplication or conflict, there is no division of responsibility between the Community and member states according to predetermined criteria as to what is best done at EC or member state level. The EC's aid programme is essentially a 13th one alongside those of the member states and pursuing the same aims. We did not, however, question the justifications for this 13th programme and I personally feel that among other things it helps to make the Community a more outward-looking body.
§ There is, however, an important point about its size resulting from the Edinburgh Council's decision to increase spending on EC aid to Asia, Latin America, Central and Eastern Europe and food aid by 60 per cent. in real terms in the period up to 1999. The Council decision to increase EC aid provided from the general budget is of course only part of the picture. Rather more than half of the Community's development aid is provided to the African, Caribbean and Pacific states through the European Development Fund negotiated under the Lomé Convention. This is subject to review at five-yearly intervals. The next review will take place next year, and may well increase the size of the EDF.
§ One thing did, however, strike us forcibly. The UK's contribution to the EC's aid programme comes out of the same aid budget that finances our own national aid programme. The Overseas Development Agency seems to have escaped cuts in the recent public expenditure decisions; but if our contribution to the EC's programme is increased without an increase in real terms in the total ODA budget, it follows that there has to be a reduction in our own bilateral programmes to accommodate the EC increase. I accept that there are uncertainties attaching to the size of this squeeze, particularly since the future size of the EDF will not be settled until next year. But squeeze there will certainly be, and we were concerned about the implications for the ODA's expertise and independent capacity. I accept also that it is the quality of outputs rather than the volume of inputs which matters, but we felt bound to draw the House's attention to the possible serious 1125 consequences: and I note that the Select Committee on Foreign Affairs in another place (Fourth Report, Session 1992–93) subsequently said that it shares our concern.
§ This diversion of resources from our national to the EC's aid programme will make it all the more important to ensure that full value for money is achieved for the EC's aid programme. In expressing some concerns about this, I would not like to give the impression of a report which is unduly critical of the Commission and its overseas representatives. Indeed, we heard much evidence that was favourable to them: and those of us who visited Brussels were, I think, favourably impressed by the quality of some of the people in the development directorates whom we met. Nevertheless, we felt that certain changes were needed and that in the Development Council the Government should press, or perhaps I should say "continue to press" (for I accept that to some extent they are already doing so), for these changes.
§ They can be summarised under two heads: first, the Community needs a more integrated aid policy given the different legal instruments through which it functions and the need to have a common EC approach on many across-the-board policy issues. The EC's aid programme has grown up piecemeal over the past 25 years, with both the EDF for the Lomé states and a wide range of different programmes financed direct from the EC budget. It may be politically impractical to merge these different instruments now, but the need to focus aid primarily on the poorest people in the poorest countries calls for a more integrated approach, with as a first step the responsibilities for aid at present divided between Directorates-General VIII and I being amalgamated under a single director-general. We also expressed some concern about the separating off of the EC's emergency humanitarian relief into a new office (ECHO) because in many cases a division between emergency and longer-term aid cannot be sustained.
§ Secondly, we think the Commission should concentrate more on policy and pre-planning where a longer planning horizon, particularly for budgetary aid, is desirable and then afterwards on monitoring and evaluating the quality of aid delivered; and should delegate more to its representatives in the field during the middle operational phase. We heard far too much about the need to refer everything to Brussels, although we accept that to some extent this reflected a concern about financial accountability.
§ When we were taking evidence on the development aid inquiry, several witnesses made the point that trade concessions were a more effective way of helping developing countries than aid: and our second report on trade and aid was a natural follow-up, particularly since Article 130v of the Maastricht Treaty required the Community to take account of its development objectives in the other policies it implements which affect developing countries.
§ The EC's tariff preferences, which have their origins in colonial history but have become overlaid with a variety of different agreements, are complicated, different and varying in their effect. Part 2 of our report 1126 therefore tries to give a straightforward and clear explanation of them before we go on in Part 3 to evaluate them.
§ The complicated preferential hierarchy, or "pyramid of privilege" as it is often known, is not significantly out of line with the Community's declared objective of concentrating the greatest assistance on the poorest countries. Preferences are, however, a very imprecise tool. They are negotiated without proper analysis of the potential value of a given concession and are difficult to target to particular needs. Furthermore, their take-up, as distinct from their awarding, depends on a whole variety of other economic, administrative and educational policies. That is illustrated vividly by the fact that many of the least favoured states from the preference point of view have in practice performed better than some of the most favoured. Indeed, in some cases an, over-reliance on preferences seems to have been a disincentive to diversification away from traditional and primary products.
§ The value of tariff preferences has in any case been eroded by greater trade liberalisation, and that is likely to continue. Furthermore, developed countries wishing to restrict imports in sensitive areas have turned increasingly to quotas and non-tariff barriers. While accepting the need for those in certain circumstances, we were clear that some of them—and in particular some aspects of the rules of origin—bear especially heavily on developing countries. We think that that is an area where the EC's declared priority to take account of their needs in its other policies is not being sufficiently followed: and here we offer some suggestions. In particular we believe that both the public and private sectors could do more to encourage the export regimes of developing countries.
§ Three things were in a sense peripheral to our second inquiry but were of crucial importance to it. The first was uncertainty about the outcome of the Uruguay Round. But, assuming that it was concluded successfully, we felt that it could only benefit the developing world in the long run through an expansion of world trade. However, it is a sad fact that some of the poorest will benefit least and some, particularly in Africa, may lose in the short and medium term. We believe therefore that some poor countries should be offered by way of compensation new preferences on certain products considered too sensitive for general liberalisation.
§ The second was the CAP. I hope that we avoided trespassing on the territory of Sub-Committee D, but we felt bound to record our view, which the Select Committee endorsed, that the CAP, which leads, for example, to the dumping of subsidised beef in West African countries to the detriment of farmers and herdsmen in those countries, is seriously holding back the development of agriculture in the developing world; and without that no other development there is possible.
§ The third was the help being given to central and eastern European states. Of course we welcomed that, and in the long run the emergence of those countries as fully fledged market economies should benefit also the traditional developing world. There is, however, no doubt that that help represents a diversion of resources 1127 away from the traditional developing countries, particularly in the technical assistance area, and we felt that that should not continue. Central and eastern Europe is a new commitment and other resources should be found for it.
§ I hope that these two reports provide the House with a useful assessment of the EC's main policies towards the traditional developing world. I should like particularly to thank most warmly the other members of Sub-Committee A for all their interest and help. It was a privilege to work with them in my baptism of fire as chairman of Sub-Committee A.
§ There was of course a missing element in these inquiries: debt and the burden of debt servicing. Consideration of that issue, which is an international and not just a European Union problem, would however have taken us outside our terms of reference. We therefore ventilated the possibility of an ad hoc Select Committee to address the matter.
§ This country has a major interest in helping the traditional developing countries. There is a moral interest to help the have-nots and the less fortunate certainly, but there is also a self-interest. When poor countries progress, they are better able to care for themselves and less prone to instability and conflict; and as a major international trading nation we should welcome the growth and diversification of their economies. But at a time when there are severe constraints on public expenditure—and when in particular a higher proportion of our aid budget is to be spent on our behalf by the EC rather than directly by the ODA—it becomes more and more important that that assistance is targeted correctly and that value for money is achieved. I beg to move.
§ Moved, That this House takes note of the report of the European Communities Committee on EC Development Aid (21st Report, Session 1992–93, HL Paper 86).—(Lord Hunt of Tanworth.)
§ 3.26 p.m.
§ Lord Carr of HadleyMy Lords, perhaps I may first say how much I agree with what the noble Lord, Lord Hunt of Tanworth, said in speaking to these two Motions. As the first of the other members of the sub-committee whom he thanked to speak, I should like, on behalf of all its members, to thank our chairman for the leadership and control that he exercised over us. I also warmly endorse the gratitude he expressed to our Clerk, our specialist adviser and all our witnesses.
Once upon a time—to be precise some 30 years ago—I was an aid Minister myself. I realise, therefore, the danger of having my head stuffed with out-of-date, and dangerously out-of-date, information. On the other hand, I believe that I learnt some basic principles at that time which are probably still valid. So I shall not hesitate to use that experience in some of the comments that I wish to make.
First, I am sure of one thing that has not changed; that is, the necessity of looking at aid and trade in the same breath. I am sure it is of value to the House that our sub-committee looked at those two subjects one after the other and that we should today be discussing the two 1128 reports together. The first question that I asked myself, coming again to the subject, was whether it was right that aid to the developing countries should be provided by the Community collectively and by individual member countries. It was apparent from the evidence that no serious attempt was made to co-ordinate collective and individual national policies. Nor was there much attempt within the Community to co-ordinate its own policy. Nevertheless, on balance, I believe that it is right. The noble Lord, Lord Hunt, gave one reason—the outward-lookingness of the Community. But in the post-colonial era I believe that there is some value in the poorest developing countries having more individual nation states to whom they can look for assistance. So on balance it is right that we should be content—although it is a muddle sometimes—that the Community itself, collectively, and individual member states, should be providing aid. That brings me straightaway to what I want to emphasise perhaps more than anything else; that is, the point made by the noble Lord: the singular importance of Britain's own aid programme.
All one can discover about that aid programme from independent sources is that everyone is full of praise for it. Its quantity is never enough but its quality and effectiveness are rated highly. I support our contribution to the EC's aid programme, but we must not allow our own aid programme to fall below what I might call the critical mass level where we can maintain its present efficacy and quality. That would be bad for Britain and the interests of the developing countries. I hope that my noble friend the Minister will have words of comfort on that subject.
I pass to the EC's organisation; and perhaps it would be kinder to pass over it quickly. While I agree that it has among its staff some first-class skilled people of great merit, its organisation is crazy. It is spread about among several directors-general and that must be put right. Rationalisation of the present organisation within the EC cannot wait for years.
In addition to the unrationalised responsibility within the Commission I wish to re-emphasise a point made by the noble Lord, Lord Hunt. As the committee took evidence it became apparent that there was a need for the Commission to concentrate more on the monitoring and evaluation of its programmes as the best way of obtaining value for money and of achieving a good effect on the ground. The decision-taking and the administration must become significantly less centralised. More of the management needs to be local because it is at local level that co-ordination is achieved between what the EC is trying to do and what the non-governmental organisations, individual countries and the receiving governments are trying to do. Such co-ordination cannot be achieved by having messages flashing up and down the line between Brussels and the front line of action.
Furthermore, it is important that more effort is made not only by the Commission but by all individual donor countries and NGOs to make the maximum use of local staff; that is, using the nationals of the country that is being assisted. I have had experience both of overseas aid and that relating to the problems of inner cities and 1129 there is a similarity between them. The more experience I have had the more convinced I have become that one can build effectively only from the bottom upwards and not from the top down. I believe that is of immense importance.
Separate from that matter, but related to it, is my belief that it is about time the EC became more sceptical about claiming to provide aid by exporting food surpluses to developing countries. To call that "aid" is pure hypocrisy. Too often it disrupts the primary production facilities of the developing country on which its whole social and economic development depends. I remember that when I became an aid Minister many years ago I received a request from the late Sir Edward Boyle to talk to him about the subject. He was a splendid man in everything that he did and he had some wise words to say on the matter. Above everything else he wished to impress upon me his historical view. I had studied science at university, not history, and I needed support in the matter. His historical view was that the healthy development of a country required that an agrarian revolution should precede an industrial revolution. To achieve a healthy economy and a healthy industry in such countries one had to build up the primary side of agriculture, in particular, before one started helping with steel mills and so forth in terms of modern technology. I believe that in that respect, and in others, the EC must get the CAP under control. It should not handicap rather than help the development aid that we are trying to give to the countries that need it most.
I pass briefly to the EC trade policy. Hitherto it has depended almost entirely on preferences. There is a complicated pyramid of preferences to which the noble Lord referred. One of the disappointing factors is that in terms of development the countries receiving preference do not appear to have benefited as much as one might have hoped. No doubt the reasons for that are complicated, and some were mentioned by the noble Lord, Lord Hunt. One reason may be that if preference is given to a market one becomes complacent and not sufficiently competitive. Whatever the reason, preferences have not been as helpful as might have reasonably been expected, say, 20 years ago.
Whatever may be the truth of that, we must face the fact that with an increasing amount of free trade in the world, and perhaps a new GATT agreement, preferences will become less important. Trade will become freer and there will be fewer tariffs against which one can give a preference. Therefore, preferences will be no substitute for advanced countries more freely opening their markets to imports from developing countries.
Of course, that means hurt for Britain and for other countries but we must face that. I say not only to our Government—and I held this view 30 years ago in respect of the governments of other countries—let us spend, if necessary, some of the money which we are at present spending on aid in helping people in our home economies to be able more freely to absorb imports from developing countries. In doing so we shall be helping them to redeploy their own industries and employment. We shall have to do more of that.
In that respect the CAP is a terrible sinner but it is not the only sinner. Many industries in this country and in 1130 others too easily try to claim protection against dumping. Of course our industries must he properly protected against genuine dumping but the Committee considered, among other things, that what constitutes genuine dumping must be looked at more precisely and critically than has often been the case within the EC and individual countries. We must take that step if we are to achieve the development that we want in those countries because in the end it will be a great support to our own prosperity. The sooner those countries develop prosperous markets the greater will be the wealth that we shall gain from them.
In conclusion, I wish to make one or two reflections on my experience of 30 years ago. Aid and trade must be dealt with together. I then came to the conclusion, and now feel more strongly than ever, that the measure of the percentage of GNP devoted to aid is thoroughly phoney and should be given up as soon as possible. There are a number of reasons for that. The first is that aid has to be associated with trade. When I was a Minister all those years ago I was in no doubt that what was done at the first United Nations Conference on Trade and Development in trying to free trade did more good than all the aid that we were giving. My right honourable friend Sir Edward Heath was then President of the Board of Trade and played a notable part in that conference.
A country which is generous in giving aid and clocks up an enormous number of Brownie points in the percentage of GNP test but is mean in making its markets accessible to the produce of developing countries might do better to stop giving aid and to open up its markets. Trade is more important than aid. To judge what we, and other countries, do for developing countries as the size of our aid programme measured as a percentage of GNP is phoney for that reason.
It is also phoney for another reason. When I was a Minister I came to the conclusion, and I have not changed my mind, that by and large technical assistance is more valuable than capital assistance. It is much cheaper. A country which gives primary attention to providing technical assistance will spend less money than one which gives primary importance to providing capital aid. The country which gives primary importance to capital aid will clock up more Brownie points under the stupid measure of how well we serve developing countries; that is, by expressing its aid programme as a percentage of GNP.
I dearly wish that the international community could find some other factor which would be a truer indication of the help which different countries give to developing countries. I am not saying that because I wish to cover up our performance. I do not believe that we give enough assistance. It is not adequate and has not been so for 20 or 30 years. I should love to see that performance become more adequate. However, I am merely saying that we should not fall into the trap of believing that the percentage of GNP given in aid is the right way in which to measure what a country is doing to help developing countries; it is not.
When you have an old bee in your bonnet you can go on buzzing for too long. I had better stop it buzzing straightaway.