There were worries about Clare Short earlier in the year. Her handling of the Montserrat volcano crisis seemed unsure. Fellow MPs could scarcely believe the crassness of her gaffe about the islanders "wanting golden elephants next". Her eye did not seem to be on the ball. Now we know where her eye was. Last week the fiery Secretary of State for International Development launched the first Government White Paper on the subject for 22 years. Most critics were reassured. Aid agencies were heartened by her new emphasis on sustainable development and the elimination of poverty with its commitment to specific targets on primary education, gender equality and a cut in infant mortality. Labour colleagues were impressed by her success in persuading the tight-fisted Chancellor to allow her to increase the pounds 2.3bn development budget from 1999.

But the White Paper is not about aid. It is about development, and its intellectually impressive broad sweep makes clear that this is the responsibility not of one department but of the whole government. It talks of the need for consistency between the policies of the different departments - aid, trade, environment, agriculture and Treasury - and there is some sign that this is more than rhetoric. The key symbol is the scrapping of the pounds 73m Aid and Trade Provision programme, which helped to fund the controversial Pergau dam project in Malaysia. There was more to this than corruption. The policy of aid tied to the purchase of British goods has been a sorry one. Rusting steel mills in Mexico, collapsed buses in Zambia and expensive military helicopters used to ferry tourists around India are testament to that. Tied aid is like tokens which employees can spend only at the company store: it limits choice, inflates prices and creates hidden subsidies for inefficient British firms. It had to go.

But Clare Short has not made the Old Labour mistake of seeing business as the enemy. Business can be a tool for development where its approach is ethical. Hence her emphasis on the "fair trade" approach pioneered by agencies such as Traidcraft, which imports from small overseas producers and helps develop their business skills. It underscores the constructive approach to consumerism of others such as Christian Aid which grade supermarkets for their treatment of Third World workers or negotiate voluntary codes of conduct with manufacturers such as Nike. And the Government is exploring the development of another Traidcraft initiative - "social accounting", which uses the techniques of financial auditing to monitor the impact of UK firms on everything from individuals to the environment.

The document is not without blind spots. Opposing the globalisation of the world economy is like opposing the Industrial Revolution, says Ms Short. So the Government is to press for the further liberalisation of trade and investment policies because this will create jobs for the world's poor. Undoubtedly it will. But it has a downside which the document ignores. There are conflicts of interest between business, governments and the world's poor in the liberalisation strategy. Before impoverished nations can compete on equal terms something must be done about deep-rooted problems such as Third World debt and trading rules which are skewed against the developing world. At present such structures are loaded towards the big boys. The evidence? Look at the Multilateral Agreement on Investment which the rich nations are fixing among themselves - refusing even to allow poor nations into the negotiations. Or look at the World Trade Organisation. It defeated as powerful a body as the European Union when the two locked horns over the issue of bananas. Europe wanted to preserve the system of paying higher prices to former colonies such as the Windward Islands to help their economies diversify out of the single crop that colonialism left them. The WTO said no, and insisted that such poor producers should only get the same price as is paid to the massive US-dominated multinational corporations with their vast plantations in Latin America. The WTO went to court and won. Such are the vested interests of the existing system.

Re-asserting values wider than the economic is the priority for real development here. Clare Short should not under-estimate the challenge. But there is no doubt that with this White Paper, which has been endorsed by Tony Blair, Gordon Brown, Margaret Beckett and the whole government, Ms Short has won the battle and made a good first move in the right direction.