Examination of witness (Questions 80 -
99)
TUESDAY 9 DECEMBER 1997
MR RICHARD
EGLIN
80. You said earlier that all waivers were
subject to annual review.
(Mr Eglin) Yes.
81. Does the review include the possibility
of revoking the waiver, or is it just some form of continuous
assessment, as it were?
(Mr Eglin) No. It is a continuous assessment.
The waiver cannot be revoked once granted[1].
The waiver is given for a specific period of time. It is subject
to annual review. Now, I say the situation has never arisen where
any waiver has been revoked. I suppose some catastrophic scenario
could be put forward where something like that would happen. It
would imply that you would make such fundamental changes in the
middle of the new Lomé, that the basis upon which the waiver
had been originally granted would be considered as no longer to
prevail. The waiver, as such, cannot be revoked. What could go
wrong is that you may change the Lomé in a way that is
no longer covered by the existing waiver. I am sorry, I may be
obscure, but if you do not get the waiver right the first time
and then stick to it, there is always the possibility of it starting
to unravel. That is why it is so important to get the waiver right
to begin with.
Mr Grant
82. How long has the WTO been going?
(Mr Eglin) It started in January 1995.
83. A couple of years.
(Mr Eglin) Yes.
84. How many waivers have been granted?
(Mr Eglin) That is a good question. I do not know
the answer, to be specific[2].
Lomé is certainly not the only one, if that is what is
of interest to you. Let me make the point. There are two other
very important and very similar waivers which have been granted
for Canada and the United States, covering the Caribbean Basin
Initiative and Canada's relations with the Caribbean too. So this
is not an unusual route to go. If one goes back and asks: why
is the waiver necessary? It is necessary because you are discriminating
between developing countries. I guess you are familiar with the
basis for that. Other countries do that too. The United States
does it. Canada does it. They have found it necessary to go and
apply for a waiver to cover their own preferential trade arrangements.
Those waivers certainly have both been granted since the WTO came
into effect, but one reason why it is a bit complicated to answer
your question is that when the WTO came into effect, all existing
waivers were rolled over. They needed to be reapproved but they
were approved in a job lot. So there are a lot of waivers there.
How many I do not know. Again, it is information that I can provide.
85. Yes, that would be very helpful to us.
Mr Robathan
86. Is there any evidence and are you collecting
it, (or is it not your business), that these waivers actually
achieve the object for which they are sought? Also, are countries
that have benefited from such waivers, making progress to a position
where they do not need them any more, somewhere down the track?
(Mr Eglin) Yes. It is tempting to say it is none
of our business. We certainly have not tracked the Lomé
Convention to see whether the trade preferences within the Lomé
Convention have brought the trade benefits that were envisaged
at the beginning for the ACP countries.
87. It is for the EU to do?
(Mr Eglin) Absolutely. It is not for us to do.
Is that good enough? I mean, when you mention this business about
waivers, there must be a presumption because of the rule-based
trading system, that the waiver will eventually cease to be required.
Eventually. That does not mean in three years or five years. It
could be 20, 30, 40 years, it depends what you are talking about
and how long is a transition period. They are viewed as exceptional.
Therefore, they are not a matter of course. It would be very damaging
to the trading system to introduce endless permanent waivers,
particularly from Article 1 which is the bedrock of non-discrimination.
In the end, you would not have a rule-based trading system. You
would have a spaghetti bowl of waivers. So there is a presumption
that the waivers eventually will no longer be required and this
is a transition period.
88. But, presumably, somebody somewhere
is doing work on whether these waivers actually achieve the objective
for which they are sought? You do not know who that is but we
will find out.
(Mr Eglin) Well, I can tell you. The waiver is
doing its job in the sense that it has waived these obligations.
Therefore, we can apply Lomé. Whether the trade preferences
are doing their job, there is some very good work that has been
done, both by the EU Commission and also by the World Bank. We
have not done any. We were thinking of doing some. I am not sure
we have the resources to do that. The evidence would tend to suggest,
so far, that preferences are very important if they can be accessed
properly. A very large part of the problem is either the conditions
attached to the preferences— rules of origin, for example—or
the fact that it is not market access which is the developing
or especially the least developed country's real problem. The
problem is being able to supply the goods in the first place.
Produce something which somebody wants to buy; not that there
are barriers to selling the products they can produce into the
industrialised country markets. Now, that is a very general statement.
In the area of textiles and in the area of agriculture, quite
clearly, there are still very significant trade barriers to exports
from least developed countries and developing countries, more
broadly, which are maintained and which are very harmful. Those
are areas in which they can produce and they can sell, yet they
are finding they are meeting barriers. We had a conference for
the least developed countries at the end of October and in the
context of that we looked at the market access barriers facing
48 least developed countries, that is, all of the least developed
countries, not only the ACP but the others as well. We came to
the conclusion that around 85 per cent of the imports from the
least developed countries into the industrialised countries are
absolutely free of border restrictions. The residual is very largely
textiles and clothing and agriculture, and footwear to some extent,
but 85 per cent of their trade is unencumbered by border restrictions
into either the EU or the US or Japan and yet their trade share
continues to shrink. The answer to that, I think we concluded
anyway, is that it is less to do with market access and more to
do with assisting the developing countries and the least developed
countries to produce higher quality goods, goods to an international
standard, to diversify their exports, to produce higher value
added goods, in other words, to help them in situ rather than
to continue to rely only on getting rid of the trade barriers.
That is important, it is a contribution, and it certainly cannot
help for their exports to be restricted, but we came to the conclusion
that it really was not the primary problem for most least developed
countries. Again it is a very general statement because you will
give me Bangladesh and you will say, "Well, all of their
exports are textiles and clothing, so there is one which is very
significantly affected", and yes, you are right, but overall
it is not really market access.
Chairman
89. When you are reviewing these waivers,
do you go into whether the waiver is actually having the effect
for which either the European Union or the United States of America
first applied to you for a waiver? Do you review whether or not
it is having the required effect?
(Mr Eglin) Required effect, I am not sure. I think
probably the correct answer to you is no, not the required effect
because the motive is not our business. What was expected is not
our business either. What effect it is having is our business,
well, it is the business of the other WTO members because they
want to know if their trade is being affected, but they are not
directly concerned with whether the ACP countries are benefiting
out of these trade preferences under Lomé from the EU,
no. The EU, and again you are welcome to add this to the list,
but the EU submitted a paper for the review of the waiver which
described what is happening and this is a public document, so
if you do not have it, I can again send you that. It is a WTO
document. Let me just make a list of these things.
Mr Canavan
90. I would like to ask you about the Ruggiero
proposal. I understand that your Director General has proposed
removing all tariff and non-tariff barriers for all 48 least developed
countries, not just the ACP ones, but all of them, which would
allow them access into the OECD markets, not just the European
Union, but the OECD markets, and that this would be a right secured
by a multilateral organisation like the WTO rather than just a
favour granted by a regional body like the European Union. I also
am informed that in the October WTO High-Level Meeting on Least
Developed Countries, there seemed to be some failure to agree
or at least there was no ruling on the Ruggiero proposal. Can
you tell us where the proposal stands now and what response there
has been from the various members of the WTO and what likelihood
there is of this initiative being implemented in full?
(Mr Eglin) Yes, with pleasure. Mr Ruggiero made
the proposal first at the G7 Summit in Lyon and the response he
got from a number of the G7 Heads of State was, "Our trade
is already very largely free of barriers", as I have just
said, 85 per cent, or more if you take an individual country,
"The remaining items where we have restrictions tend to be
sensitive items from the point of view of our domestic producers.
Therefore, we will not agree to a blanket zero tariff, no trade
barriers in favour of the least developed collectively, but individually
we will see what we can do". The only one which has really
come good on that is the EU which at the High-Level Meeting announced
this initiative to extend all of the trade preferences under Lomé
to the remaining least developed countries who are not ACP already,
and that gives the least developed countries almost unrestricted
access to EU markets. The United States extended its GSP quite
considerably in June, but certainly not completely and it continues
to maintain restrictions on imports from least developed countries
in various sectors. Japan maintains quite extensive restrictions
on imports from least developed countries. Now, in October, therefore,
we got very little other than the EU announcement from the OECD
countries. What we did get, and where we were very pleased to
see them, were announcements of improved market access for the
least developed countries from the advanced developing countries,
and that means Korea, Thailand, Singapore, Malaysia, and I am
not sure I will get the list right, but there were nine in total.
Mauritius also announced improvements in market access for least
developed, so this genuinely was a first. Up until now preferences
had been seen as something that the developed give to the developing.
What we are now seeing is the developing giving to the least developed
as well, so we have a new structure of preferences and that was
the first thing or the main thing that came out of this meeting
in October. At the meeting, Ruggiero repeated, insisted that we
need to get rid of all market access restrictions for the least
developed countries and we will put this back on the agenda or
bring this up again at our ministerial meeting which will be held
in May of next year, so Ruggiero continues to push, but it is
not easy and what you are pushing on now is those particular sectors,
or in many cases particular products, where the restriction is
protecting somebody's job in the developed countries or in other
advanced developing countries and those are always the most difficult
trade restrictions to remove. There is no reason not to remove
them, I agree, but, nevertheless, that is the reason why this
thing is heavy going.
Mr Grant
91. You mentioned that the United States
and Japan have restrictions on the imports from the LDCs. How
could America take the European Union to the WTO on the bananas
issue when they themselves have restrictions and why does the
European Union not challenge the Americans in the same way as
the Americans challenged Europe? How can they justify it, is what
I am trying to say?
(Mr Eglin) How could the US justify what they
did on bananas?
92. Yes, when they had restrictions.
(Mr Eglin) Well, the US justified what it did
on bananas taking the EU to a dispute by saying that the EU had
broken the rules. If the EU can point to the US and find an area
where it has broken the rules, then it can do exactly the same
thing. The fact that the US maintains trade restrictions against
least developed countries is not grounds in and of itself for
complaining. Those restrictions were the result of the Uruguay
Round negotiations and the EU maintains plenty of restrictions.
Those restrictions are written into the schedules for the EU and
everybody has accepted that that is the EU's trading regime, so
that is accepted, you cannot challenge that. What you can challenge
is if somebody breaks the rules or reneges on what they have committed
themselves to. So the basis of bananas, I am not in detail briefed
today on bananas, but the basis of bananas, and you did not ask
me this question, but if I can make a comment back to you about
it, there has been an enormous amount of publicity about it and
I think it is important to repeat again what the Banana Panel
did do and what it did not do. What it did do was confirm absolutely
that for traditional ACP banana producers, the Lomé waiver
covered the Banana Protocol. That was not at issue and that has
not been overthrown by the WTO. What the WTO Panel said was that
the way in which the European Union Commission distributes the
licences is inconsistent with the EU's obligations. It is how
the licences are distributed; it is not the fact that there are
quotas on bananas or duty-free access for bananas into the EU,
it is not the Banana Protocol, as such. That is why I mentioned
before the importance of getting the details right. The EU in
the Lomé waiver have said, "We want a waiver to allow
us to discriminate" and they got it and they can and they,
therefore, can treat ACP bananas preferentially under the terms
of Lomé, but they did not say, "In addition, we want",
in what the US saw as a highly prejudicial fashion, "to discriminate
in the way we hand out licences. We will give licences to this
importer, but we will not give it to that importer". You
are not talking about a banana producer now; you are talking about
multinational corporations. The US complaint was that the way
the licences were being distributed was inconsistent with WTO
rules and that is the grounds upon which the Panel and the Appellate
Body found. So what the EU now needs to do, it does not need to
change the Banana Protocol or Lomé, it needs to change
the way that the licences are distributed. This is complicated
and I am sorry.
93. Can I just follow up on that? Surely
the distribution of the licences is the reason why there are problems
because if the licences are handed out freely to the dollar banana
producers, then they can flood the markets?
(Mr Eglin) Absolutely.
94. And then that would affect it, so it
is a secondary effect on the Caribbean banana producers as opposed
to a primary effect straight off.
(Mr Eglin) Well, what kind of secondary effect?
What is guaranteed and is not challenged and the WTO has not overthrown
it is that the ACP countries can import into the EU, and here
the numbers escape me, but I think it is 890,000 tonnes, or whatever,
of bananas a year and that has not been challenged. There is a
tariff quota system whereby the ACP gets duty-free access up to
a certain tonnage of bananas. Beyond that, there is an advantageous
tariff which is applied to another chunk of the tonnage of bananas,
so that you have carved out for the ACP countries under the Banana
Protocol a certain tonnage of bananas which are imported into
the EU for which licences are distributed, yes, but that was not
what was challenged and that is guaranteed. What was challenged
was the way in which the licences for the remaining countries,
the non-traditional ACP and the non-ACP, were being distributed.
Mr Khabra
95. What sort of price mechanism is used
to import raw materials from the least developed countries or
the developing countries?
(Mr Eglin) The market prices, and I am not sure
I am understanding the question properly, but the market prices
would be the mechanism, or the market would be the mechanism that
would set the price, the world price for raw materials or primary
commodities, and that is the price at which they would be traded.
Am I missing your point because I am not sure?
96. Is it not the case that the importing
country independently negotiates with the countries exporting
or has the World Trade Organisation got anything to do with price
fixing?
(Mr Eglin) Not at all, sir, no. There are no rules
on prices in the World Trade Organisation outside the area of
dumping, which does not apply at all to what you are talking about,
and we are not involved in any way in trading. All we do is set
rules for how trade takes place, but the basis upon which trade
takes place is then left entirely up to market operators or governments
if it is government procurement, but we have nothing to do with
price fixing, nor are we in a position to be able to improve the
prices that are paid for primary commodities or to alter them
in any way whatsoever. That is completely outside our mandate
and competence.
Dr Tonge
97. Mr Eglin, I just want to pursue bananas
a bit further while we are on the subject because I do not really
understand. If the European Union countries had allowed licences
to the big banana companies, the ACP countries' bananas would
not have had a chance. Surely that was the whole essence of the
waiver. The ACP countries' banana imports into the European Union
are a tiny proportion anyway, is my understanding.
(Mr Eglin) That is right.
98. And yet they are those countries' total
economy virtually as it is the only thing they produce.
(Mr Eglin) That is right.
99. Therefore, how else do you suggest that
the European Union, having obtained the waiver on bananas from
the WTO, how else could they have helped the ACP countries, except
to differentiate between the licences?
(Mr Eglin) Well, excuse me, but let me try and
explain it just to make sure I understand the question. A certain
tonnage, and, as you say, it is not the majority of the EU market
for bananas, but a certain tonnage of bananas, which is the 1991
level, if I am not mistaken, which was agreed and is in the Banana
Protocol, those bananas come in from the ACP countries, and they
continue to come in from the ACP countries because in the licence
you are asked for an origin certificate and, therefore, there
is a guarantee that that tonnage of bananas is coming into the
EU. That has not been challenged at all in the WTO, so all those
bananas will continue to come in.
1 Note by witness: Article IX:4 provides the
possibility for the WTO Ministerial conference to extend, modify
or terminate a waiver. however, this has not been invoked in the
case of the Lomé waiver. Back
2
Note by witness: about 50 waivers have been granted or
extended under Article IX of the WTO agreement since its entry
into force on 1 January 1995. Back
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