G20 Summit

Harriet Harman Excerpts

Monday 15th November 2010 Commons Chamber

[The Prime Minister (Mr David Cameron)]

With permission, Mr Speaker, I would like to make a statement on my visit to China and the G20 summit in Korea. First, however, I am sure that the whole House will want to join me in welcoming the liberation, at last, of Aung San Suu Kyi. Her tenacity and courage in the face of injustice has been truly inspiring. I spoke to her this morning to pass on the congratulations of everyone in this country on her release and her remarkable stand on democracy and human rights. We must now work to ensure that her release is followed by freedom for more than 2,000 other political prisoners in Burma and that this becomes the first step towards the people in Burma genuinely being able to choose the person whom they want to run their country.

In China and Korea, my main focus was on jobs and growth. In China, I led one of the biggest and most high-powered British business delegations ever. This helped to win new business for Britain worth billions of pounds, involving businesses all over the UK and cities across China. We strengthened our ties on trade, education and culture, all the while raising our concerns with China on issues such as human rights where we have a difference of view.

In Seoul, Britain had four priorities, the first of which was to continue to win recognition for the importance of fiscal consolidation, with those countries with the greatest deficits taking the fastest action. The second priority was to get a clear commitment from all countries to fight protectionism and take the steps necessary to boost global trade. The third priority was to help move development issues up the G20 agenda, and the fourth was to address the global imbalances that were at the root of the global financial crisis and which still hold back growth in the world economy.

I believe that we made good and important progress on all four of those priorities and I will now take each in turn. First, on fiscal consolidation, it is now perfectly clear what the consequences are if we ignore the dangers of large deficits—we see markets questioning our economy, interest rates rising, confidence falling and the economy back in the danger zone. That is where Britain was only a few months ago, but because of the measures we have taken that is no longer the case. Countries with larger deficits need to act on them and do so now. That was exactly the view of the G20. In Seoul, we agreed that

“failure to implement consolidation would undermine confidence and growth.”

We also agreed to

“formulate and implement clear, credible, ambitious and growth-friendly fiscal consolidation plans”.

There can be no clearer statement of our collective intent.

Secondly, on trade, as the world comes out of recession with some countries moving more slowly while others, including the new emerging powers, forge ahead, there are inevitable pressures in some quarters for protectionism. The G20 has been a vital forum in fighting to keep markets open. Increasing trade is the biggest boost and the biggest stimulus we can give to the world economy. It does not cost any money, it is not a zero-sum game and it creates wealth and jobs. So, against a background of rising protectionist pressures, the G20 reaffirmed its determination to learn the lessons of the past and avoid the trade barriers and beggar-my-neighbour policies that wrecked the economy in the 1930s. It refreshed its commitment

“to keeping markets open and liberalizing trade and investment as a means to promote economic progress for all”,

and pledged to

“roll back any new protectionist measures that may have arisen”.

On the Doha round, let me say that it is incredibly frustrating that this trade round is almost 10 years old and that world leaders say again and again that it is going to be completed, but that the situation still remains stalled. The longer it has gone on the more difficult it has got, because the world economy has changed so fast that the deal has become outdated. Both developed and developing countries are looking for more from the round. I do not want to raise hopes artificially but I think that some real progress was made in Seoul.

The language of the communiqué refers to 2011 as the “critical window of opportunity” and crucially refers to the “end game” of the negotiations. As I proposed at the Toronto summit, we have to make the deal bigger by having a wide, across-the-board negotiation. What changed at this summit is that the US said that if a good and fair deal comes forward it will be taken to Congress, so we all instructed our trade negotiators to put more on the table so that a deal can be done. I am determined that Britain should do everything it can to push this agenda forward.

Thirdly, on development, it is right that the G20 is now playing a bigger role in this issue. As well as the very richest nations, the new emerging powers have a huge role to play in helping some of the poorest people and countries. There is a real recognition of the importance of trade, infrastructure and finance in the Seoul agreement. I also raised the importance of continuing our aid programmes. Britain is keeping its promises on aid and I pressed others to do the same.

On the trade agenda, together with South Africa and with Ethiopia and Malawi, which were there to represent Africa, Britain mobilised the G20 behind

“the vision of a free trade area”

for Africa. Only 10% of Africa’s trade is within the continent of Africa, so knocking down the trade walls between African countries can help unleash economic growth, which will benefit them and us, too.

Fourthly, on imbalances, there are huge trade surpluses in some countries and deficits in others. According to the IMF, such balances are forecast to get worse, not better. Alongside protectionist pressures, we have seen the sign of so called “currency wars”. The G20 agreed the Seoul action plan, which included agreeing to move

“towards more market determined exchange rate systems”

and to refrain from “competitive devaluation of currencies”. However, the issue of trade imbalances goes beyond currencies. Just as countries with big budget deficits must cut public spending, which is right for them and for the world economy, so countries with big trade deficits need to save more, consume less, and export more. If that is not accompanied by higher consumption by surplus countries, world growth will be lower and protectionist pressures higher and we will repeat the mistakes of the past. In the end, it is as simple as that. By acting together, we can maximise world growth and cut world unemployment. Imbalance is not some obscure economic issue; it is about jobs.

Trade imbalances have also led to an imbalance of funds—a wall of money in the east and a wall of debt in the west. That was part of the problem that helped pump up some of the bubbles that led to the crash that affected us all. As part of the Seoul action plan, we agreed that we would

“pursue the full range of policies to reduce excessive external imbalances and maintain current account imbalances at sustainable levels.”

The issue of imbalances will never be solved overnight, but the key thing is that it is being discussed in a proper, multilateral way, with some progress being made.

On other issues, the summit also delivered important progress on financial regulation and the reform of global institutions. To those who say that the G20 is not effective, I say that the last Basel accord on capital ratios, Basel II, took nine years. With the G20 behind it, Basel III has been done in just 18 months. Reform of the IMF to make it more representative of the global economy has been discussed year after year. The G20 has finally got the deal done.

On climate change, President Calderon briefed the G20 on the plans for Cancun and we received a report from the UN Secretary-General’s high-level advisory group on climate change financing.

This summit delivered important progress in managing the tensions that are present in the global economy. In my visits to China and the G20 summit, we have protected and promoted our national interests. We have taken vital steps towards the strong, balanced and sustainable global growth that we need. We secured recognition for acting on the deficit, support for more action on trade and development and agreement on working to rectify the imbalances that threaten global economic stability. Ultimately, this will win more jobs and growth for Britain, and I commend this statement to the House.

[Ms Harriet Harman (Camberwell and Peckham) (Lab)]

I thank the Prime Minister for his statement and advance notice of it. We should all agree with what he said about Burma. As we celebrate the freedom of Aung San Suu Kyi, we must remember that there is still a long journey before there is a free and democratic Burma. I also welcome the release of Paul and Rachel Chandler. I am sure that the whole House wants to send them its best wishes. I welcome the Prime Minister’s work on his visit to China.

Turning to the G20 summit, I welcome the South Korean Government’s success in keeping development on the agenda. Development aid is important for the lives it saves, but, as the Prime Minster says, it makes an important contribution to global growth. I also welcome the fact that he pressed the G8 countries that were in Seoul to keep their promises on aid, as we are.

Turning to climate change, will the Prime Minister tell us how the promises made at Seoul will be turned into action at Cancun? We welcome the continuation of work to reform the financial regulatory framework that was set in motion at previous G20 meetings. The increased stringency of the Basel committee’s capital requirements is a welcome step in making banks across the world more stable, but further work is needed to implement those reforms, and we recognise that that is difficult. Will the Prime Minister tell us how to balance the need for financial stability with the need for economic recovery and growth?

We all know that, for the UK, global economic growth is always important. We are a trading nation. Jobs in this country depend on strong exports, which in turn depend on a growing global economy. Will the Prime Minister acknowledge that that dependence is even greater because of the decisions that he has taken on the economy here at home? Cutting public spending and increasing VAT will dampen domestic demand, and that will hit jobs. The Office for Budget Responsibility has shown that because of the cuts that he is making, Britain must increase exports by more than £100 billion just to sustain growth and jobs. How can that happen if our export markets are failing to grow?

Does the right hon. Gentleman recognise that the global economy on which we are now even more reliant is fragile? That is why this G20 was so important. The most recent figures show that growth in our largest export market, Europe, has halved and that the US is still facing high unemployment and slow growth. Does he acknowledge that with growing disagreements between major economies about currencies and trade restrictions, co-ordinated action through the G20 is more important than ever? Does he recognise that this G20 was a missed opportunity?

No one expected the problems to be solved overnight, but it is a problem that the summit provided no co-ordinated action to support jobs and growth worldwide, little progress on reaching agreement on currencies, particularly between China and the US, little assurance by way of anything practical to prevent a resurgence of protectionism, and no concrete action to restart the Doha round of trade negotiations.

This was the fifth G20 summit since the global financial crisis hit in 2008. During that time, the UK provided leadership for co-ordinated global action. Why did the Prime Minister fail to offer that leadership in the run-up to and at Seoul at such a crucial time for jobs in this country and for the global economy? The question that everyone is left asking is, what was his strategy? What was he aiming to achieve? Did he have any proposals for jobs and growth? What were they?

No one expected that the summit would be straightforward, but the problem is that no one even knew what the Prime Minister was trying to do. Tonight he will say in a speech that Britain is

“at the centre of all the big discussions. Producing the ideas.”

So what were his ideas for the G20 and what did he say in those big discussions? Is it not the case that because he has not taken action on jobs and growth in Britain, he cannot lead in the debate about jobs and growth internationally? Is it not the truth that because he refuses to recognise that the economic crisis was global, he cannot engage with international efforts to tackle it? Britain needed to send a statesman to that summit, but all we sent was a spectator. By watching from the sidelines of the G20, the Prime Minister has let Britain down.

[The Prime Minister]

Oh dear. First of all, it is lovely to see the right hon. and learned Lady back.

On the Chandlers, I very much agree with what the right hon. and learned Lady said. I spoke to Paul Chandler this morning. It is hard to imagine what that family has been through, and it is great that they are now safely in Kenya and are soon to fly home. I am sure the whole House will want to wish them well.

Let me try to answer all the right hon. and learned Lady’s points. On development, which is something that Britain very much puts on the agenda at such meetings—I spoke up very firmly about the pledges that we had made—she is right in one sense. We talk about global imbalances. There is a huge imbalance between the rich world and the poor world, and if we can get people in the poorest parts of the world to join the world economy, we will all benefit.

On climate change, the key point is we are prepared to sign up to another Kyoto-style period, but we have got to have global agreement where others agree to sign agreements as well. That is the point that we will continue to push. The right hon. and learned Lady raised a point about the introduction of the Basel III accords and how we balance wanting safety in our financial institutions with an increase in bank lending. That is one of the reasons why Basel III is phased in the way it comes in.

The right hon. and learned Lady raised the issue of the deficit and made the usual accusation that, in Britain, we are acting too fast in dealing with it. I just think that Labour is completely wrong about this. The alternative to dealing with the deficit would not be some beautiful period of uninterrupted growth; it would involve putting ourselves in the same category as countries in which interest rates are rising and confidence is falling. That is the alternative, and that is where she and her party would have landed us.

The right hon. and learned Lady said that there were great disagreements over currencies, but if she looks at the language of the communiqué—perhaps next time she will read it before writing her script—she will see a lot of agreement on not having competitive devaluations over imbalances. She is right to say that this issue is not going to be solved overnight; I said that in my statement. We are asking different countries to do different things in order to achieve a maximum global outcome. That is tough and difficult, but there was progress at the summit. I also heard direct from the Chinese about their plans to rebalance their own economies.

The right hon. and learned Lady asked what we had brought to the table. The idea of a pan-African trade deal was not on the G20 agenda; we put it on the G20 agenda. The idea of pushing further ahead on Doha by making the deal bigger was a French, German and British initiative that we did at Doha and that pushed the Americans and others to go further. On the issue of imbalances, the key compromise to get the Americans and the Chinese together was again something that was pushed very much by the Germans and the British.

I think that the right hon. and learned Lady is completely wrong about this. If Labour had been at this G20, it would have been completely isolated over the issue of the deficit. Everyone else in the room was signing a communiqué on how we have to take early action on deficits. That is the consensus, but Labour is completely outside the consensus. One group of people represented at the meeting was the International Monetary Fund, and I suspect that if she had been there, she would have been locked in a room with them.