Select Committee on International Development Minutes of Evidence


Examination of witnesses (Questions 200 - 219)

WEDNESDAY 21 JANUARY 1998

MR PHIL BLOOMER, MS PENNY FOWLER, MS HELEN O'CONNELL and MR CLIVE ROBINSON

Dr Tonge

  200.  Thank you, Mr Chairman. A lot of the memoranda we have received have criticised the European Union's rules of origin. How do you think that they should be revised and what should be reformed under Lomé V?
  (Mr Bloomer)  Mr Chairman, I wish I could answer this in more detail, but I can give a very short answer, which I think is the best I can do. In terms of the rules of origin there is——

Mr Grant

  201.  First of all though, just explain what rules of origin are?
  (Mr Bloomer)  I am trying to avoid the jargon here. The rules of origin are where the European Union, for instance, says, "We will accept products from the African, Caribbean and Pacific countries and we will give them access if 60 per cent of the value of that product is from that country". That is not very important in terms of apples, because in terms of an apple all of it comes from South Africa, so that is fine, we just say 100 per cent there. If however that apple is, for instance, imported to make cider in South Africa and that is then sent on to the European Union, and if the apples happen to come from a non African, Caribbean and Pacific country, then the European Union may say, "Sorry, that is not really an ACP product because making the cider represents only 20 per cent of the total value".

Mr Grant:I understood that too!
  (Mr Bloomer)  Goodness, I am astonishing myself here too!

Dr Tonge

  202.  What about pesticides?
  (Mr Bloomer)  Sorry?

Mr Canavan:  Okay, order, order!
  (Mr Bloomer)  That is the difficulty that the European Union faces and also it is the problem that the African, Caribbean and Pacific countries face. It is particularly difficult in manufactured goods because generally if you are producing, say, to take an extraordinary example, a microwave oven, you may be bringing in the cases from Korea, you may be bringing in the microwave generator from Japan and some of the steel may have gone from one of your countries to Korea and come back again as a shell for the microwave oven, and then you are assembling it, say, in Namibia in a free trade zone in Namibia and you are importing it into the European Union, so you can see the level of complexity once you get to manufactured goods. Now it gets very complicated. Therefore, I think that what most people are seeking is a simplification of those rules of origin. Now if we are serious about providing opportunities for diversification out from bananas, out from copper, the primary commodities that are losing their values, if we are looking to achieve that diversification, then rules of origin are very important in promoting manufactured goods. It may be that we are looking at initially simply assembly in some of those ACP countries, but in terms of their opportunities to start getting plant in to provide work—- and I am sure that Helen O'Connell will come on later to say that we need to make sure that that work which is often in assembly women is with good standards of labour and reasonable salary levels—- as I say, if we are looking to create those industries, even though they be assembly industries, having complicated rules of origin that make it almost impossible for an investor to know what they are going to get in terms of the tariff that will be raised on those microwaves is extremely important and the less that there is in terms of a tariff which is raised on those imports, the better for the possibility of beginning to get manufacturing industries, that is to say, incipient manufacturing industries, in some of the African, Caribbean and Pacific countries.

Mr Rowe

  203.  As you spoke I thought to myself, well, maybe they should look instead at the proportion of the take which returns to the countries who are trying to export, but then I thought to myself, but there is a problem there because the ownership of the corporation that is assembling your microwave may well be in either Tokyo or Birmingham and I wondered whether you had any comment on those thoughts?
  (Mr Bloomer)  Again, Mr Chairman, it is a question for the European Union to look at very carefully. I have not got a specific proposal on it, but what I can say is that the European Union perhaps understandably, if it was to see more flexible rules of origin, not looking in detail at where the different components had come from, but saying, it is coming from the ACP countries and therefore it has got to be good for giving access, if it wants to make sure that the producers—and they are almost certain to be foreign investors if it is a microwave oven because very few investors in the African, Caribbean and Pacific countries have the marketing knowledge and the technical knowledge and know how—if it is going to be a foreign direct investor, then it should be a European Union manufacturer. There are reasonable arguments about that from simply a European Union self interested perspective, and there is nothing wrong with self interest as long as it is not very damaging to the development potential of the Lomé agreement and the future Lomé agreement, and so it is a matter of finding that balance. We have not been able to do enough work it to say where that balance lies, but it may well be, I would say, that certainly the European Union investors and ACP domestic investors in particular should be encouraged, and there may be ways in which other investors may be encouraged also to invest in ACP states if they are seriously generating good quality employment for poor people in those countries, but there has to be a balance between European Union self interest and the development interests which the rules of origin provide.

Mr Grant

  204.  This is a very interesting point because, if we take the microwave, if they took the component parts from the European Union presumably the rules of origin would apply?
  (Mr Bloomer)  Yes, that is right.

  205.  So it is like tied aid?
  (Mr Bloomer)  Yes.

  206.  A similar situation, so is anyone actually saying that the ACP countries should not be allowed to import the component parts for a microwave oven, say, from anywhere and they should not have a tariff? What is the European Union saying, the Commission?
  (Mr Bloomer)  In terms of what is being said in the European Union, it is that the least developed countries, that sacrosanct category, will be given more flexible rules of origin but the non least developed countries will not be provided—- or, it is being talked about in those terms, because obviously it is still early stages of the debate. The president of the World Trade Organisation has asked and the European Union has I think demonstrated a very welcome commitment to providing no tariffs and flexible rules of origin for the least developed countries, and not just in the ACP group but also the other nine that are outside the ACP group, and that is very, very welcome. What we come back to is, is the least developed country category adequate? It misses out entirely the Caribbean, for instance, it leaves those out, and therefore their ability, for instance, to begin to manufacture in the Caribbean products for the European Union is very curtailed.

Mr Rowe

  207.  That leads on directly to the next question, which is that paradoxically, as I understand it, that some of the Lomé preferences are not actually exploited to the full because of supply side constraints which I suppose in non-jargon terms means creating goods of a standard which anybody wants to buy. What sort of trade development measures should the ACP countries be helped to create to overcome that difficulty?
  (Mr Bloomer)  As I started with, the first difficulty is that many of the tariffs, the preference, the difference in the tariff, is not sufficient to provide a real incentive, a significant incentive, for the ACP countries: only 7 per cent have a 5 per cent preference for the ACP. Nevertheless what you say is very important in terms of the ability of the African, Caribbean and Pacific countries to manufacture goods at a competitive price at a good enough quality to become competitive in a European Union market. We believe that one of the difficulties in the past of Lomé IV, for instance, but particularly Lomé III and II, is that there has not been sufficient emphasis in the aid programme on really tackling the difficulties that the ACP countries have in producing goods at a good price and a good quality. Of course, one of the most important things to improve the quality of goods and the potential of the ACP countries to export is first to raise the level of education in the country. In the longest term that is one of the key determinants, the Asia model, the South East Asia model, demonstrating that investment in social services is key to generating your competitive abilities. Alongside that there needs to be—and the European Union is involved already in trying to assist countries in this—development communications infrastructure so that there can be rapid communication around issues of quality, and in developing I would say a key area should be the whole information technology area. In certain countries, for instance, particularly in the Caribbean, if you have an educated workforce there is a significant possibility of bringing in information technology service industries which will generate significant employment. What that demands, of course, in a number of instances, is technology transfer and with the development of intellectual property rights, that is to say, the patents which are created and the increasing number of years for which a patient is held, that does create significant difficulties for the African, Caribbean and Pacific countries to get hold of that technology early enough for them to be competitive. Therefore, the direction——

  208.  I am sorry, can I just interrupt you there and say that when I was working in the Department of Trade and Industry it was very clear that a lot of the Asian countries from whom we wanted contracts were insisting that a very substantial proportion of any contract was actually technology transfer, so presumably that is not an insuperable obstacle, but you have to have a contract sufficiently attractive for someone to be prepared to sell out their property right?
  (Mr Bloomer)  Yes, that is right, and there are two parts to it. The European Union has to be mindful enough of the potential of that in terms of technology transfer when they negotiate the forms of contract with the African, Caribbean and Pacific countries, but also the African, Caribbean and Pacific countries have to want to desire to get that technology transfer into the contract and therefore also negotiate away perhaps other aspects of it. However, I think that at the moment that issue of technology transfer is not as central to the debate as it should be.

  209.  But, you see, yesterday many of us were lobbied by the National Farmers' Union and some of the farmers in my constituency were saying that they now have entered into quality control arrangements, integrated pest control programmes and so on, and the supermarkets are saying, fine, if we really cannot get supplies anywhere else, we will come back to you, but actually we want even higher standards than that. If that is happening to deeply sophisticated British farmers, it must presumably be an appalling spectacle for the African, Caribbean and Pacific countries just to watch the standards being driven further and further out of sight, and often by people over whom governments have virtually no control at all, is that right?
  (Mr Bloomer)  Yes, I think that that is a good summary of the increasing height of the hill which a number of the African, Caribbean and Pacific countries feel that they have to climb in order to gain access to the European Union market.

Mr Grant

  210.  If I can just have a quick question here, Mr Chairman, coming back to the Caribbean countries and the banana situation, if the European Union is asking those banana producing countries to diversity into other industries, unless they relax the rules of origin it is just a futile gesture because they do not have the materials in their own countries, for instance, they do not have any aluminium or anything like that?
  (Mr Bloomer)  Or energy even.

  211.  Yes, or energy even, therefore, to talk about diversification on any serious scale, the only thing they could possibly diversify into would be some other kind of agricultural product, mangoes or something like that?
  (Mr Bloomer)  The issue of more flexible rules of origin for small island states is crucial and that is why we would want to see the least developed countries category starting to include a vulnerability index, if you like, to bring in small island states. It is important to say, for instance, that the issue of energy is very important too. As you say, it is the provision of raw materials for manufacturing, but it is also the energy which is very difficult. Now the European Union leads in some of the renewable energy resources and there is therefore a real potential for importing at relatively low cost the energy technologies, particularly wind, for instance, in the Windward Islands and also solar energy which I believe the Caribbean has quite a lot of, so there are at least two areas there where you can see the potential.

  212.  With the White Paper the British Government is talking about conflict prevention and about poverty eradication as aims. Can I ask you whether in terms of the trade negotiations as far as the European Union is concerned they take any of these into account when they discuss trade and come to trade agreements under Lomé
  (Mr Bloomer)  Mr Chairman, first of all, it is only fair to say that conflict is becoming much more central to development co-operation for all institutions and we know, for instance, that DFID now has its own unit around the issues of conflict prevention and Oxfam has been working hard, for instance, over the last five, six years to ensure that in all our procedures we are mindful of conflict prevention. It has also to be said in terms of the Commission that there tends to be a time lag in some of the areas and conflict prevention may be one of them so, for instance, the Green Paper that was produced in 1996 with Lomé I think mentioned the words conflict prevention once in something like 100 pages of report. However, it is now the case that in the latest paper, the guidelines, there is much more mention of conflict prevention. We certainly feel that in terms of trade issues there is not sufficient emphasis put on the issue of conflict prevention, particularly because Oxfam's experience at least in terms of conflict is that one of the greatest risk factors tending to make social conflict spill over—and social conflict sometimes can be good—into violence and war is perhaps economic shocks and rapidly rising levels of inequality and sudden dramatic decreases in a nation's or group of nations' income. At the moment, as I think I tried to describe through the options which are on the table, and particularly the two more extreme options of graduation to this general system of preferences which is the loss of real access to the European Union market and, secondly, the free trade agreement, we feel that for a number of countries which are already in a state of some instability there is a possibility of driving them further into conflict by that kind of economic shock in terms of a free trade agreement or sudden loss of preferences and therefore a shutting down of manufacture that might be provoked. The other thing I would add to that is the issue of international criminality and the fact that a few of the African, Caribbean and Pacific countries will, if they lose some of their advantage into the European market, find that their only other real comparative advantage is in the manufacture or trans shipment of drugs, either into the European Union market or, in the case of the Caribbean, into the north American market; that is to say, international criminals will use those places as sites either for the cultivation of or the trans shipment of drugs. Dominica, for instance, has become a significant site according to the International Narcotics Report of 1997, that is, a significant trans shipment point for cocaine into the United States and inevitably marijuana production is registered as increasing in the Caribbean over the period. All that we can say at the present time is that if we see some of the countries of Africa and the Caribbean lose their comparative advantage in the legitimate imports into the European Union, inevitably of those that are driven out by that some will see their only option in terms of their livelihoods the entry into criminal opportunities, outlawed opportunities.

Mr Canavan

  213.  Before we move next on to aid questions, may I just ask Penny Fowler whether she has anything that she would like to add at this stage?
  (Ms Fowler)  No, thank you, I think that is fine.

  214.  Right, thank you. We will move on then to aid questions and, as I say, they will be directed more to Ms O'Connell and Mr Robinson. My first question relates to the Maastricht Treaty which commits the European Union to policy coherence in its pursuit of development objectives. What degree of policy coherence already exists and are there any measures that you can think of which might improve policy coherence under Lomé V?
  (Mr Robinson)  Mr Chairman, I am very glad that we have returned to this because I think that in the last remarks which Ms Fowler contributed she put her finger on the impact of the common agricultural policy on all the policies that are pursued under the Lomé Convention, both aid and trade, the potential that the agricultural policies, the trade policies, the industrial, economic, financial, policies of the European Union have for undermining the good work that can be done through aid programmes and I will try to come to the point in terms of the graphic examples that I know the Committee appreciates, but also in terms of the mechanisms. I think that the two clearest cases that we have seen over the past few years are the interferences by other European Union policies not just with the prospects of developing countries but interferences with the Maastricht Treaty commitment, and these are in beef dumping and unsustainable fisheries. In 1993 Christian Aid was one of the agencies to expose the adverse effects of European beef dumping in West Africa and in 1997 we have seen similar adverse effects happening through European Union export subsidies in terms of beef dumping in South Africa taking livelihoods away from stockholders in the region, both in South Africa itself and in Namibia. In the case of fisheries we have seen a number of fisheries agreements concluded very much in the interests of European Union Member State fishing fleets in very distant parts of the world. We know that there is a very great problem of depletion of fishery resources in European waters, we know that there are industrialised and far travelled fishing fleets leaving European ports. Now what normally happens—and this affects a number of ACP countries in particular—is that the European Union negotiates fishing rights in the waters of some of the poorest coastal countries in Africa in return for relatively small contributions to the national budgets of those countries so initially there appear to be two actors in play, one a government which sells fishing rights and the other the European Union negotiating on behalf of its fishing fleets to enable its fishers to go and exploit those waters. There is in fact a third actor who is often overlooked, and that is the artisanal fisherman or fish worker because very often the industrial fishing fleets from Europe displace the local fishers and deplete the resources more fully than the local fishers would normally do. I think that those are the two most vivid examples which bring this question home. We have raised for many years the question of policy coherence and the need for instruments and mechanisms to establish policy coherence in European Union policy making. We have talked to Commission officials, we have talked to officials in the Ministry of Agriculture, Fisheries and Food here and we have talked to officials in former ODA-DFID about it, and unfortunately the progress has been very slow. Last year it seemed under the Dutch presidency that there was going to be an opportunity to have more coherent mechanisms for policy coherence. The idea was put forward for an inter-service working group within the Commission, the idea of an annual report on cases of incoherence, the idea of a complaints mechanism for those who feel affected or aggrieved, and those ideas did not get very far when they were debated by all Member States. I think that what we would recommend now, particularly bearing in mind the way that ACP countries are affected, is a complaints procedure, perhaps some sort of ombudsman procedure. As we have the European Parliament, as we have the ACP-EU joint assembly, it would be possible to construct an ombudsman procedure attached to that assembly so that complaints could be heard both from ACP countries and from groups with interests within Europe.

Mr Rowe

  215.  May I just stop you there for a second. It seems to me that that kind of complaints procedure would be most likely to be government witnesses and so on and that that would go straight back to your original anxiety that one of the players in this game is the poor countries, the least developed poor countries' governments, but the people you are trying to protect are the citizens of their own government. Are you saying that this complaints procedure would be open to individuals or consortia?
  (Mr Robinson)  Oh, entirely, yes, and particularly for individuals or organisations, groups of workers in ACP countries who are affected. There are other models already. There is an inspection panel established by the World Bank so that groups who are aggrieved by World Bank projects can complain about the damage that those projects may be doing. It is simply that we are talking in an EU context, we are talking with the existence of an ACP-EU joint assembly. The ombudsman concept is a European concept. That may be the easiest way to provide aggrieved individuals or groups with means of redress. Another mechanism we would advocate is a strengthening of the annual report by the Commission to the Council and Parliament on cases of incoherence. It was just about agreed during the Dutch presidency last year that there would be a report preferably annual, but we need something like that for coherence. We would like to see that develop into something much more comprehensive and that is a single annual report on all European Union co-operation with developing countries from the Commission. That does not exist at the moment. We are familiar here with an annual report from DFID and other government departments. One problem within the Commission is that its external policies and its development policies in particular are fragmented among a number of different directorates and a number of different commissioners and because the question of putting right the weaknesses in a fragmented aid administration is essentially a management question for the Commission it is clear that the Member States cannot go very far in tackling that and saying that the Commission should have a different kind of organigram. One way in which greater coherence could be established is to ask the Commission and all the fragments of the aid administration to get together to produce a single annual report taking as its structure the commitments to sustainable development in the Maastricht Treaty. If I could just add one last mechanism, Mr Chairman, because I referred to fish, this is another area where a more structural or better mechanism within the EU-ACP context would be of benefit. At the moment fisheries agreements are bilateral, they are negotiated by the European Union but bilaterally with individual African, Caribbean and Pacific countries, rather on a parallel with the bilateral EU-South Africa negotiations which Mr Bloomer was describing. It would be a benefit if there were a joint EU-ACP committee for fisheries agreements to ensure that experience of sustainable development between different affected countries were fully shared and also, frankly, to give the African, Caribbean and Pacific countries greater bargaining power when it comes to dealing with the European Union and with the industrialised fishing fleets.

Mr Canavan

  216.  Ms O'Connell, would you like to add anything?
  (Ms O'Connell)   Just briefly, thank you, Mr Chairman. The question of aid and development is a highly political question and I think that when you look at coherence it brings to mind immediately the kind of ideological underpinnings of the different parts of the European Commission and the different Member States. The aid policy is very clear, that it wants to promote sustainable development, poverty eradication, but the trade policy is coming from a completely different perspective. Within the Commission itself there are people whose objectives, perhaps rightly so, would be to promote the European Union's own economic policy, their own access to markets in African, Caribbean and Pacific countries and the free movement of finance. Those objectives run counter to the objectives of DG VIII and DG IB who are talking about development as we all understand it. I think that we need to get the contradictions out on the table and look at them very clearly and recognise that it is an intensive political debate just as it is an intensive political debate in Whitehall between the Department of Trade and Industry and the Department for International Development and the Ministry of Agriculture, Fisheries and Food. We should not kid ourselves, I think, that just because the Maastricht Treaty talks about coherence, the coherence is going to be with development and poverty reduction at the top and everything else supporting that. The Maastricht Treaty says that development co-operation objectives should be taken into account; it does not say they should be given top priority. We would argue that they should be given top priority and that what you do in the field of agriculture and what you do in the field of trade and what you do in the field of foreign policy and so on has to be measured and tested by whether or not it is going to achieve what you say you want to achieve on development, poverty elimination, equality between men and women, protection of the environment and promotion of respect for human rights and democracy. Obviously as non governmental organisations these are our priorities and we think that they should be the test. We have not quite won that battle with parts of the Commission that have other priorities or other parts of Whitehall that have other priorities, but I do think that we have to keep it in mind that there are conflicting objectives.

Ms Follett

  217.  I am on to decision making here and in particular decision making for some of the EU delegations in each country. There have been memoranda which have argued for greater responsibility for decision making to be given to the EU delegations in each country. How will it be possible to combine efficient devolved decision making with a consistent developmental approach and value for money?
  (Mr Robinson)  I think that we have covered a number of fairly controversial areas this morning, but this seems to be one of the least controversial now in that every memorandum that I have seen in the preparations for the successor Lomé Convention seems to agree that it would be a good thing to devolve responsibility to the delegations. The particular questions of consistency and value for money I think can be addressed. We are no longer in the situation that we were in perhaps even ten or 15 years ago where the European Union delegations were isolated posts with difficult communications. Modern communications have made it much easier now for European Union delegations or for that matter for the aid management offices of the DFID to be in constant touch with headquarters offices and we have also seen a great development in the methods of appraisal, of monitoring, of evaluation of programmes and projects so that consistency is established both through good communications and through refined methods of progressing development programmes. One can know, one can easily use e-mail or the telephone to get to know, that a delegate in Botswana, say, is taking forward development programmes with his country counterparts following formats and policies and procedures that have been established and fully discussed in Brussels. That does not seem to be a problem. The question of value for money I think can also be addressed by looking more imaginatively at how delegations are staffed and resourced. Some evaluation reports have noted that each delegation at present seems to have a fairly small number of European experts posted to it with very little use of local specialist staff, local professionals, who could be recruited at I suspect cheaper rates than are paid to officials posted from Brussels. They could be recruited to complement the expertise which is available from the European staff. It has also been remarked in a different context that if the European Union is moving into greater attention to the social sectors, to gender, to poverty eradication, then it needs to enhance its capacity both in the delegations and in Brussels to deal with those areas. I am sure that it would be possible to recruit more local staff to the delegations to reflect the cultural approaches to those questions in their own countries. It would equally be possible to make greater use of a method which the Commission has already employed, that is, having detached national experts from Member States. DFID in particular has posted a number of social development advisers on short term contracts to the European Commission to assist in the development of social development expertise there. That could be developed further and probably, as we were also talking of greater civil society and private sector involvement in the new arrangements, there could be greater secondment from NGOs, both African, Caribbean and Pacific and European Union.

Mr Rowe

  218.  May I just take that point up, Mr Chairman. It has been my observed experience—my wife works in the international field—that there is a lamentable tendency for the people who get these prestigious overseas jobs to be selected because of who they know, not what they know. Would it be possible to have some kind of internationally agreed recruitment procedure, for example, that could diminish the risk of someone's nephew getting a post whether in fact they know anything about development or not?
  (Mr Robinson)  Mr Chairman, I do not have an intimate knowledge of recruitment procedures, but you allow me through the question to mention the one concept that I meant to mention under the heading of consistency, and that is rotation, because our experience is that the best results for development are obtained when both the Commission and the DFID manage to rotate staff between different overseas postings and headquarters, so if that is the existing practice and it is one that we should encourage even more in the future, then it is the career possibilities for all staff working in development that we are talking about rather than particularly attractive overseas postings. That is the way that I think we can get the best possible understanding of development conditions on the ground fed back into headquarters offices, and it is also another way to ensure consistency if there are going to be—and we strongly support the basic concept, let me just say that now—greater devolution of decision making power to the delegates. I think that the reason that this question of devolution comes up so starkly with the European Union programmes is that the European Commission is inevitably more bureaucratic than any national administration. If what has been forged in Brussels over the past 30 or so years is a blend of so many different national administrations with all the different types of checks and balances that they have, whether it is in auditing or legal affairs and so on, you can imagine that the end product would not be a product that is simpler than any national administration.

  219.  Can I just go back to that. For example, if you take the Gambia, Save the Children Fund was one of the only two non governmental organisations working in the Gambia, of which there are thousands, who did not actually have their local premises on the attractive coastal strip. If in fact sophisticated international aid agencies assisting the poorest of the poor insist on siting themselves in an untypical part of the country merely because it provides the best possible conditions to their staff, how much greater is the temptation for a struggling country where this may well be the only opportunity for somebody to escape to do the same. What bothers me is that in a highly bureaucratic organisation like the European Union the kind of advice that is often tendered comes from people who actually sit on their butts in comfortable air conditioned offices and do not actually have a very clear perception of what is going on on the ground. I wondered whether you had any views on that?
  (Mr Robinson)  Not so much on what you say. I think that the day of the golf course delegate is over, if ever there was such a day, and I am not saying that there was. I think that day is over. I think that——


 
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