TCS Daily

Down on the Farm

By Syed Kamall, MEP - December 13, 2005 12:00 AM

Five years after the European Union held a summit in Lisbon and promised to develop a competitive, high knowledge market economy, the continent is falling behind. First, while capital flows in increasing quantities into countries such as China, India and the US, it flows out of the Eurozone at an alarming rate. Some $50 billion flowed out of France last year, $19 billion left Italy and $39 billion was withdrawn from Germany. Second, the governments of the Eurozone spend on average half their GDP through the state, compared to just over a third in Australia and America, and just 28 percent in South Korea. And third, our populations are ageing. In terms of generating growth, Europe is simply not competing with the young, lean might of giants like China, India and the US.

By finding new markets, we can of course boost our economies. A trade deal in Hong Kong giving European firms access to new markets would go some way towards that. Mature economies such as ours boast expertise which many entrepreneurs in the fast-developing world would love to hire. We could provide the world with expert telecoms, financial, legal, IT, engineering, design, marketing, media, management, services -- to help grow their economies and bring much needed income into ours, too. But unless Europe gets a deal on trade in services, we are set on our present course -- to become one of the poorer continents of the 21st century, to be a continent whose global pre-eminence belonged in the 19th century.

Virtually all the countries that will meet in Hong Kong -- developed, developing and underdeveloped -- know a trade deal on services makes sense. Think of the African country whose state-run water company cannot provide plentiful clean water to its citizens but which could benefit from knowledge transfer of water sanitation and engineering expertise from a European investor. Or of the farmer who would like to turn to a European financial institution for the finance package to enable him to invest, to buy the tractor to plough the fields, to feed his family, to employ the laborers and ultimately to spread wealth through the village and beyond.

Freer trade in services would benefit not only developing economies but developed ones, too. Where is the justice in stopping people in developing countries from buying services available to people from developed countries? In an increasingly globalized world, it is morally offensive that formal trade rules should deny the world's poorest people access to the expertise of the world's richest nations. Trade justice demands a new deal on trade in services.

Europe has put a bold offer on the table. But other countries are holding firm because a deal on trade in services alone does not give them access to Europe's agricultural markets. Most developing countries -- apart from a few sugar and banana republics looking to Europe for old imperial-style trade preference -- simply want to compete on level terms with Europe in agriculture. They and a raft of NGOs pleading the case of underdeveloped nations argue that trade justice also demands a deal on agriculture. And they are right. There is a moral imperative to allow farmers in the poorest countries of the world to sell their produce to the richest.

Europe has to recognize that it cannot make a strong moral case for free trade in services without accepting an equally strong moral case for free trade in agriculture. Despite his attempts to put down a meaningful offer on services, Europe's top trade negotiator, Peter Mandelson, will have to go further and make bold offers on agriculture, too. Of course, he feels hampered by protectionist forces in the European Union. But if he really believes in the Lisbon agenda's vision of a competitive Europe he has no option but to make more concessions -- for the sake of his own peoples as well as those of the world. This is the only way to change the rest of the world's view of Europe as the roadblock to a deal.

If only European leaders could slip their eyes away from agriculture and look at the bigger picture, they would see how much more there is at stake in Hong Kong than keeping a few farmers in unproductive jobs. Our economy is increasingly becoming service-oriented and we need to make the most of the advantages we have left. It will not be long before the skills bases of China and India are larger than our own. Already, China is turning out three million graduates a year, 250,000 in engineering (while Britain can't even find enough people to teach physics in its schools).

Five years on from the Lisbon summit, Europe is as uncompetitive as ever. We need a trade deal in Hong Kong to get our economies moving. But unless we can get over our obsession with agricultural subsidies, our officials will leave Hong Kong empty handed. Meanwhile, thousands of corporate wallets from around the world will be swarming across Asia to create industrial wealth on a scale never before witnessed, and Old Europe could be left out in the cold, down on the farm.

Syed Kamall is a Member of the European Parliament from London. He serves on the International Trade committee.

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