Examination of witness (Questions 140
- 166)
TUESDAY 9 DECEMBER 1997
MR RICHARD
EGLIN
140. Is there an American in sight on the
Panel? I bet you there is not.
(Mr Eglin) No, it could be a Japanese. Let me
explain how the process works. We do not appoint the members of
the Panel, but the two governments who have the conflict agree
upon who is on the Panel, so the two complaining sides have to
agree who the panellists will be. We do not just appoint three
people. In the final analysis, if there can be no agreement and
if this looks like being a delaying tactic by one side, Ruggiero
can step in and appoint a Panel which he has done once only and
that was Helms Burton, the US versus the EU and so on, where it
was impossible to agree on panellists, but otherwise there have
been no other instances. The two sides agree on who the panellists
will be and again in the case of the Panel on bananas, it was
Hong Kong, it was not the US. Now, the Appellate Body is made
up of seven, I think, permanent, whatever they are called, appellate
judges, but anyway out of the seven, three are selected for each
case. That is why I say to you that who is selected, and it could
have been an American, it could have been a Japanese, it could
have been whoever, I do not believe has any effect because they
are there specifically to look at points of law and it is published.
The results of what is going on are published. You can look at
that and if you find any fault with it and suggest that this was
a situation where you think the Chairman was biased in favour
of one side because of his nationality, I would invite you to
do so, but I really do not believe that and I think it is a red
herring to pursue that.
141. Can I just finish off on this question
of bananas and these licences? Surely the Americans and Chiquita
were complaining about the fact that they were not getting enough
licences?
(Mr Eglin) Yes, that is right. That was enough
compared to whom and the others involved were other multinationals.
142. Okay, so they were complaining about
that. Therefore, if the regime changes, they want the European
Union to give more licences to Chiquita and the dollar banana
producers?
(Mr Eglin) No, no. They want the European Union
to obey the rules. The rules here in Article 13 of the GATT say,
"You must distribute licences on the basis of historic trade
shares", and again this does not interfere with your getting
a million tonnes of ACP bananas in—that is agreed under
Lomé. You should then distribute on the basis of historic
trade shares and if I show you the chart of the distribution,
the table, you will see that certain countries got a historic
share and then we have others.
143. So what is all the fuss about?
(Mr Eglin) It is the distribution of the licences.
144. Why are the ACP countries lobbying
like mad? Why are not the British Government and the European
Union and everybody scratching their heads and trying to get around
this problem if there is no effect on the ACP countries? Why is
it that the European Union under Glenys Kinnock sent a team who
said that they would have to switch to producing ganja and heroin
and God knows whatever else in order to survive? Why is that if
it is not going to have any effect on the Caribbean producers?
What is the fuss all about? Are they all wrong?
(Mr Eglin) Do you want a yes or no?
145. It is up to you. You are answering.
(Mr Eglin) No, Mr Grant, what is necessary, I
think, what the European Union Commission has to do is to re-examine
the way it issues licences. I see no reason on earth why the way
in which it issues licences should not be done such as to leave
banana production in the ACP countries, to all intents and purposes,
unchanged from what it was when Lomé was agreed.
146. So they are all wrong then?
(Mr Eglin) No, I am not saying they are all wrong.
I do not know what their arguments were and I have not heard them
directly. I would like to hear them directly before I could say
whether I think they are wrong or right, but our understanding
is that there was a very great deal of hysteria which developed
around this——
147. There still is.
(Mr Eglin) ——which was not justified
because the Panel's findings were not that there was anything
wrong with the Banana Protocol. The tariff quota, the duty-free
access for ACP bananas into the European Union is guaranteed by
the waiver. I can show you the findings. If you look further back
in that, you will see the findings and you will see this confirmed.
148. But perhaps we are concerned that the
interpretation of the ruling is such that it would disadvantage
those countries because 28,000 banana farmers in the Eastern Caribbean
are in severe difficulties in terms of losing their livelihoods.
(Mr Eglin) If those are traditional ACP banana
producers, then that is not true.
Mr Grant: I tell you
something is wrong here, Chairman.
Chairman: It is the
price, Mr Grant, that is too low for the banana farmers.
Mr Grant
149. Can I say to you that for several of
these ACP countries their economies are extremely dependent on
the various commodity protocols, like bananas, rum, sugar and
so on. Some of the most vulnerable countries are involved in those
protocols, in Africa, the Caribbean and the Pacific. What is the
legal position with regard to all four protocols?
(Mr Eglin) They are covered by the waiver.
150. They are covered by the waiver, so
there is no difficulty at all?
(Mr Eglin) No.
151. Is it correct to say that while the
Sugar Protocol is likely to survive, with the restarting of the
negotiations on agriculture in 1998 the others may not survive?
(Mr Eglin) I have no idea. In 1999, before the
end of 1999 the agreement on agriculture instructs WTO members
to begin to review the agreement again. That does not mean we
are going to liberalise agricultural trade on the 1st January
in the year 2000. It is the start of a process. I must admit,
I am not well briefed on the relationship between the agricultural
agreement and sugar and rum and beef and veal, but, as I understand
these, they have far more to do with what the new Lomé
looks like than they do with what the agriculture—I mean
the Uruguay Round agreements on agriculture required the EU to
"tariffy" and precisely on bananas, for example, the
EU did not, but it applied a tariff quota instead, so the same
can happen the next time around. I have no idea where this may
go, but it is certainly not for 1998 and I do not believe it is
for 1999 and I do not even believe it is for 2000, but it is for
some time down the road when there will be a review again and,
one hopes, a liberalisation or a renegotiation and a further liberalisation
of agriculture. How that will affect those specific protocols
or those specific products, I do not know.
152. If these agreements are not continued,
what do you think will be the options for these very vulnerable
economies, these island states?
(Mr Eglin) I must admit I do not know because
I do not know enough about their economies and I would hesitate
to answer.
153. And it is not the position of the WTO
to look into that aspect of it, is it?
(Mr Eglin) Not at all, no. That is completely
outside. What we do is we set the rules by which the international
markets work, but comparative advantage from our point of view
is something which is revealed, not dictated, so if the external
market situation changes, say, the bottom falls out of this market
or that market which you are very heavily concentrated in and
you need to diversify, but I am not a good enough economist to
tell you how you can diversify and what you should use and the
WTO certainly has nothing to say on that issue at all.
154. So it is like the point that Jenny
Tonge was making?
(Mr Eglin) Yes, in a sense.
155. So you do not concern yourself at all
with the effects of the WTO rules, but just on the rules themselves?
(Mr Eglin) That is a harsh way of putting it,
but if you want to put it that way, you can do.
Chairman
156. Let us take up the question of sugar
for a moment. You are saying that the WTO's policy is in fact
to liberalise, to go more towards free trade?
(Mr Eglin) Yes.
157. And sugar is a commodity not just traded
between the under-developed countries or the developing countries
and Europe or the United States, but it is traded worldwide.
(Mr Eglin) Yes.
158. And if you liberalise the worldwide
trade in sugar, the price is likely to go down because the world
price of sugar is very much lower than the various agreements
to supply sugar into the United States and into Europe, so the
effect of WTO's liberalisation on a global scale will be to reduce
the income from sugar to these countries, will it not?
(Mr Eglin) No, not necessarily. First of all,
why do we have a problem with sugar? Who has the restrictions
in the first place on sugar? The EU.
159. Yes, and the United States.
(Mr Eglin) And the United States, yes, I am sorry,
and other developed countries, I am sure. Now, those restrictions
are maintaining incomes in those countries and they are disadvantaging
all of their trading partners who produce and try and export sugar
to them, unless they get a preference, and a certain kind of preference
has been worked out under Lomé for sugar, for bananas and
so on. Now, what would happen if you were to liberalise the market
for sugar? You say the price would go down. I am not sure, and
again I am not a good enough economist to tell you, but when it
came to the end of the Uruguay Round, the prediction was that
liberalisation would result in prices going up, which indeed they
did, although I think not because of the end of the Uruguay Round,
one of the reasons being that you no longer have to subsidise
exported excess being dumped on world markets. Now, in the case
of sugar, again I am not an agricultural economist and I do not
know how much, if any, sugar the EU exports, whether it subsidises
that, where it goes, but, by and large, it is not the sugar producers,
it is not the cane producers who have created this horrendously
distorted world market for sugar and I would not instinctively
believe it is against their interests to get rid of the distortions.
It may well be very much in their own interests for those distortions
to go to liberalise trade in sugar or to liberalise the restrictions
which are there in very big markets in sugar. In countries which
are clearly uncompetitive, otherwise they would not have restrictions,
and let us talk about the US, the sugar restrictions in the US
are there to protect completely uncompetitive US producers of
sugar.
160. Sugar beet.
(Mr Eglin) If you were to remove the restrictions
and you were also to remove the protected producers, you have
a big market which can again be supplied by sugar cane. This is
really speculation. I do not know, is the answer to your question,
what would happen to it, but I do not see that there is any reason
to believe instinctively what you said, that the price would go
down, incomes would go down and everybody growing sugar would
be worse off. On the contrary, I think basic economics would suggest
that they would be better off.
161. Obviously in the period when the European
Union was dumping sugar of which they had subsidised the production,
clearly I can see that your argument might hold that the sugar
price might indeed go up without that dumping, but since the European
Union has in fact reduced the amount that it now exports on to
the world market very considerably, that argument weakens.
(Mr Eglin) But there is still the whole of the
domestic EU market. I do not know how much of the market is supplied
by domestic, uncompetitive, at-world-prices sugar, but if that
production no longer takes place, and again I am getting out of
my depth, I do not know enough about sugar or the EU's agricultural
policy, but I do not see any reason to presume the price would
go up or down. I do not know, is the answer. It is empirical.
162. Anyway, you have given us, I think,
a great deal to think about. These things are quite clearly not
as automatic as one might have thought before you had given us
your evidence. There is just one last question. There is a trade
agreement called a multifibre agreement, which must have got your
waiver at some point or another and it keeps getting waivers every
ten years. It is going to come to an end, we are told, every ten
years and every ten years it gets another waiver. We are told
that we are nearing the end of the last multifibre agreement.
What credibility should we give to that statement? Do you not
think that the multifibre agreement offends the general rules
of the WTO?
(Mr Eglin) Yes, horrifically, absolutely. I think
you have a cast-iron guarantee because the multifibre arrangement
is to be phased out ten years after the end of the Uruguay Round.
Liberalisation is already taking place and it is black and white,
signed by the heads and indeed ratified by the parliaments of
all of the WTO member governments that all the quantitative restrictions
on textiles and clothing will be removed before the end of, I
guess, 2004.
Chairman: I am glad
you have such faith and I hope that we do not see an application
to you for a renegotiation of that undertaking.
Mr Rowe
163. A lot of what you have been saying
today gives the impression that the countries that carry the clout
within the negotiating machinery at WTO are really giving away
preferences and so on to the minimum extent that they can get
away with in order to, as it were, fend off huge unpopularity.
Is that fair or do you detect within the world community a serious
desire to arrive at your goal of a tariff-free world?
(Mr Eglin) There is certainly a very serious desire
at present, I think. Economics does not exist in a political vacuum
and the politics determines what the economics will be to a large
extent. In the post-war period we have seen it go up and down
and we have not always lived in a period of a general desire for
more trade liberalisation and the 1970s, in particular, was, if
anything, the opposite. However, at present yes, I think that
the extent to which not all, but a very large proportion of WTO
members are engaging in sectoral liberalisation, first, the conclusion
of the Uruguay Round, second, the sectoral liberalisation that
is going on, and thirdly, the banging on the door to get in, and
our membership is still very small compared to the UN, Russia
is not a member, China is not a member, we have, I think, at present
30 countries that wish to accede, they must see some advantages
to it to getting in and particularly when you are talking of countries
that big, it is not that China or Russia could not exist independently,
now, exactly what they see in it, I am not sure, but I go back
to something I said before which is that trade restrictions are
a political construct. They were not there in the first place
and somebody put them on and they were put on for reasons which
can become anachronistic. It is no longer necessary to protect
this sector, to protect jobs perhaps or to protect whatever it
might be in this sector or get rid of the trade restrictions.
I am not claiming that a trade restriction-free world is the perfect
world and there may well be good reasons to keep on trade restrictions
in the future, but, let me say this with a qualification, that
there is a very, very broadly shared government belief that trade
liberalisation is the flavour of the day, but there is increasingly,
I think, a recognition that they will not continue to maintain
public and political support just on the grounds of turning out
cheaper consumer goods and there has to be more to it than that
and it is that which at present is not very clear, I think.
Mr Khabra
164. We often talk about the over-production
of food and we have all heard of the mountains of food of one
item or another. Why is it necessary that this has got to be destroyed?
Is it because it actually affects the interests of the rich countries
or why cannot it be distributed to people, to those who actually
need this food?
(Mr Eglin) The reason is really that there are
other agricultural producers in the world, for many of whom agriculture
is the main economic activity. Australia and New Zealand are obvious
examples amongst the OECD countries. Argentina, Thailand, Brazil
and so on, many developing countries rely upon agricultural production
as their main form of economic activity and upon agricultural
exports as an important income-earner for them. Now, if the rich
countries dump surplus food all over the world, these other countries
will not be able to export because the markets will be saturated
by dumped products. So, if I can give you an example, the Egyptian
market, Egypt at one time, I suppose, had a thriving agricultural
sector. It then began to receive heavily subsidised food imports
from the EU, very heavily subsidised at below world market prices.
That destroyed Egypt's own agricultural sector because farmers
there could not compete with subsidised EU exports and it prevented
sales to Egypt from Egypt's traditional suppliers, so it was the
farmer in Argentina or in Australia who was paying the price of
the EU dumping food surpluses into Egypt. You do not see the result,
but that is the result. You have poor farmers in other countries
suffering because of subsidised exports. However, it is most peculiar,
I agree, in terms of common sense if we have all this excess food
and there are starving people. Why do we not feed the people?
But therein lies, I think, a much bigger debate.
Chairman
165. You can impoverish by food aid the
farmers of the countries which you are trying to feed. That is
right, is it not, Mr Eglin?
(Mr Eglin) Yes.
166. Thank you very much indeed for a most
useful session. I think we have gained enormously by your coming
here and giving us your views and answering our questions. What
it spells out for the Committee is that they have got a lot more
work to do. Thank you very much.
(Mr Eglin) Thank you very much indeed.
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