Hamish McRae: Trade is defeating poverty, Dr Williams

How should the rich, developed world ensure that a greater share of global wealth goes to the billion people in extreme need?

How should the rich, developed world ensure that a greater share of global wealth goes to the billion people in extreme need?

That was the question at the heart of an important sermon yesterday in St Paul's by Rowan Williams, Archbishop of Canterbury, to mark the 60th anniversary of Christian Aid. His argument was that there is a fundamental lack of trust which is hampering the world's commitment to fighting poverty. He called both for fairer trade and for debt relief. "Naive confidence" in free trade had to be questioned.

The subject of how best both to generate greater sustainable wealth and to use that to help those left behind is of such paramount importance that anyone who raises it in a prominent manner deserves praise.

Since the end of the Second World War, the world has had the longest period of sustained growth it has ever known. For the first part of that period much of that additional wealth was generated in the developed world, and many people still think of global inequality as between the developed world and the less developed one.

But those labels have become less and less apposite. During the past 25 years growth has spread not just to the so-called "tiger" economies of South-east Asia (which now match Europe in terms of GDP per head) but also to the two giants of the old developing world, China and India. This year the total size of the Chinese economy will in all probability pass that of the UK, and it will pass Germany to become the world's third largest economy within five years. The living standards of its richest regions are already clearly middle class. India now has a middle class of several hundred million and has begun the world's largest road-building programme to accommodate their cars.

Of course not all countries have shared in this boom. Africa lags sadly. Its most populous nation, Nigeria, has a GDP per head that, despite its oil wealth, is no higher now than it was in 1980. Indeed the total GDP of Nigeria, with its 137 million people, is only about the same as that of Barcelona or Munich.

So the great imbalances to which the archbishop rightly draws attention do remain. But outside of Africa, these gaps in wealth have increasingly become evident within countries rather than between them. The gaps of wealth within China, India or Brazil are becoming relatively more important than the gaps between those countries and the developed world.

If you go to Beijing or Shanghai and look at the way people are dressed, the goods they are buying in the shopping centres and the cars they are driving, you would not notice much of a difference between them and people in a provincial British city. The big visible difference is that the buildings in China are newer and the roads better. But you do not have to look hard to catch glimpses of extreme poverty amidst the prosperity.

There is profound concern among politicians in both China and India about the dangers of the widening gap. Mercifully, there is solid evidence that the wealth is gradually spreading.

Dr Williams' focus is on the need for fairer trade and for greater trust in economic relationships has to be set in the context of these achievements. On trade, in a sentence that will strike a chord with many, he said: "The rich protect their markets while talking about the virtues of free trade."

Of course in one sense he is right: some trade protection, particularly in agricultural products does remain and it is a scar on the world economy. But world trade last year increased by 9.9 per cent. Thanks to that, the world economy experienced its fastest growth for more than a decade, with the developing world growing at roughly double the rate of the developed.

To take more specific examples, Ikea, the world's largest furniture retailer, sources nearly 20 per cent of its goods from China, its largest supplier. BT has moved much the servicing of its internet customer base to India - indeed India, quite aside from its success as a service industry location, has also seen a surge in manufacturing exports.

So despite some protectionism, which Dr Williams rightly criticises, we in the developed world do import a huge and ever-growing amount from the world's two most populous nations.

A further line of attack by the archbishop is on debt: "Debt repayment has constantly distorted the possibilities of stability, let alone growth," he said.

Well again he is quite right to draw attention to the burden on the heavily indebted countries, just as our own government has been are the forefront of trying to get this debt - much of it to Africa - written off. But it is worth pointing out that India, which 10 years ago had debts of just under $100bn and reserves of only $18bn, has managed sustained growth of 6 per cent (and 4 per cent per head) despite that. The latest figures I have handy show debts of $105bn - but reserves at $106bn!

As for trust, Rowan Williams asks: "Do we want to live in a world where trust seems natural?" Of course the answer must be "yes". But it would have been good to see him develop the idea of why trust should be so lacking. "Wherever in the world political leaders have shown commitment to the goal of a world in which trust is possible and natural," he said, "they need our encouragement as they try and persuade others."

Yet surely trust is a much greater element in world trade than it is in political initiatives. Without the trust that goods will be delivered on time and be paid for on time world trade would grind to a halt. Trust is the very glue of commercial relations. When it breaks down trade becomes impossible. That is why, to take a UK example, Rover dealers have been so angry at being encouraged to build up stocks of cars in recent months and it is why the trigger for ceasing production was the refusal of component manufacturers to deliver unless they were paid up front.

By contrast, even a quick flip though recent exchanges during this election suggests that trust in politicians is very low - and not just over a contentious issue such as the advice over the legality of the Iraq war. To take it away from Britain, who would you prefer to trust to deliver what it says it will do: President Chirac or a Renault Espace?

So we should thank the archbishop for raising the question as to how the growing wealth of the world could be better shared. But we should also celebrate the progress made in the world's two most populous (and, as it happens, largely non-Christian) countries in generating economic growth. We should also respect how they are seeking to share their wealth more widely, the success so far achieved, and the role that world trade has played in reaching for both those goals.