Examination of witnesses (Questions 340
- 359)
TUESDAY 27 JANUARY 1998 (PM)
DR MARJORIE
LISTER, MR
SIMON MAXWELL
and DR CHRIS
STEVENS
Chairman
340. Will it not put up the cost of administration
of the programme very considerably?
(Mr Maxwell) Centralisation costs money because
everything is shuttling backwards and forwards, the paperwork
is immense.
341. Yes. What about decentralisation? If
you have got accounting officers or delegated authority in each
of the states you are delivering aid to that is quite a lot of
money and a lot of administration.
(Mr Maxwell) Yes, but they already have a substantial
staff and if you free time from one thing you make time for another.
342. Ah, this is a costless proposal, is
it?
(Mr Maxwell) It is substantially costless with
the one rider I want to provide, which is that in the study we
carried out in Ethiopia we found there was very, very poor clerical
and administrative support to very expensive professional staff.
To be very specific about it, and I can provide exact numbers
later,[8]
we found something like seven or eight European officers assigned
to the office in Ethiopia. There was not one single Ethiopian
in that office above the rank of secretary, outside the administration
and public relations units. We calculated that for the price of
one European age 30, you could provide something like 20 Ethiopians
of the level of university professor or higher.
343. I am sure that is true.
(Mr Maxwell) Why are there no local staff in these
delegations? Why can we not empower local offices? The answer
again lies in control by the Member States over staff numbers.
It is our fault that these things very often do not work, and
we need to do something about them.
Mr Rowe
344. So what you are saying is the control
by staff number is barmy and what we ought to be doing is control
by staff budget?
(Mr Maxwell) And staff performance.
345. And staff performance manifestly. Basically
it would be far more satisfactory rather than counting heads to
count the budget?
(Mr Maxwell) Yes. We recommended a capacity study
of the office in Ethiopia to look at exactly that question.
Mrs Kingham: It happens
everywhere, not just Ethiopia.
Chairman: I would
like to hurry on, I am afraid, to trade. Could I ask Oona King
to lead our questions starting on the trade matters.
Ms King
346. Thank you. I wonder if you could tell
us with the non-LLDCs most probably having to migrate from the
current special preferences on GSPs, is this going to increase
poverty in those non-LLDCs? What impact do you think the migration
will have? Therefore, if that impact is going to be fairly appalling
for those economies or not in your opinion, what prospects are
there for an improvement in the GSPs under the forthcoming review?
(Dr Stevens) My first response is I do not think
we should assume that they will have to migrate, that is for negotiation.
I see the report of this Committee as being part of those negotiations.
I would read with delight recommendations that this should not
be an automatic requirement. You are right, the Commission has
said in its previous draft communications—we wait to see
what the final document out momentarily will say—that if
non-ACP countries do not agree to either a co-operation agreement
or a partnership agreement with the EU then they will be put on
to the standard GSP. The GSP expires this year. It is related
to our standard tariffs which will decline until the year 2000
and thereafter are likely to be renegotiated with the WTO. We
do not know what the conditions of the GSP will be in the next
century. If they were like they are now it would be quite a substantial
loss of income, we would be imposing taxes on imports from these
countries where previously we did not impose taxes. Someone has
to pay these taxes. It is no different from the debate on taxation
within countries. We do not know exactly who will pay it, we do
not know whether it will be the farmer, the exporter, the shipper,
the importer or the supermarket but I think we would be extremely
optimistic to assume that it will not be the poor farmer. They
are the least powerful actor in the supply chain and the presumption
ought to be that they will bear the brunt of it. Money will be
going to the European Treasury out of the pockets of producers
in non least developed developing ACP countries and many of those
non least developed are very less developed, they are not middle
income countries at all. It seems very perverse to offer to give
better tax preferences to Venezuela, to Guatemala, to Colombia
than we give to Ghana or to Cote d'Ivoire. So what can be done
to improve the situation? Well, as I have said, the GSP expires
this year and next and it has to be renewed. The Secretary of
State said quite correctly that it is entirely within the decision
of the European Union how generous or ungenerous to make this
generalised system of preferences. I think that parallel to the
start of the Lomé renegotiation, the UK should use the
presidency to make sure that the GSP is renewed in a way that
makes it much more attractive and much closer to what the ACP
have at the present time which means that if they then refuse
to sign up to a co-operation agreement or partnership agreement
they will face a much smaller deterioration in their terms of
access. What might that mean? Well it means several things. First
of all, tariffs have to be reduced. At the moment the GSP gives
some tax breaks but not as large or extensive a tax break as under
Lomé. That is not all. That has been discussed. It is part
of the Ruggiero proposals in the WTO and it is on the table. It
has not been agreed but it is on the table. There are other things
which have not even been put forward yet. One is that important
non tariff barriers to exports which are not covered by the GSP
need to be brought within the ambit of the GSP, particularly non
tariff barriers on imports of clothing. Secondly, another area
is that there are complex rules of origin which determine whether
a shirt is a Bangladeshi shirt or whether it is Taiwanese because
it has Taiwanese buttons on. Now the ones under the GSP are less
favourable than the ones under Lomé. In general terms you
have to add more value in a country to get GSP than you have to
add to get Lomé so the rules of origin need to be harmonised
as well. Only if both of those are done and the tariffs are reduced
will the GSP start to approximate to Lomé.
347. On that, can I ask, as I understand
it the Government is saying that it thinks it would be prepared
to see the GSPs match Lomé.
(Dr Stevens) Yes.
348. But that is not realistic, is that
the case, not politically realistic in your view?
(Dr Stevens) Certainly it will not happen if it
is not proposed. It is excruciatingly difficult at the present
time to get the EU to improve its access to developing countries.
I have been involved in the negotiations with South Africa, I
am sure you have heard all about those this morning. Had you not
heard plenty, as I am sure you did, from Rob Davies, you would
not have believed quite how unreasonable the EU is being in extending
preferences to South Africa. So it is going to be an uphill struggle.
But unless the EU is willing to improve on the GSP then I think
the ACP are wise to say "We do not want to budge, we are
happy with what we have got. You may not be happy with it but
we are happy with it and we have no confidence at all because
you are not prepared to improve on the GSP that when we get into
the smoke filled rooms to negotiate these co-operation or partnership
agreements, you are not going to put before us an offer which
is very unsatisfactory". I think the EU's credibility depends
upon making an effort on the GSP.
Chairman: Do you think
we have covered 11, Oona?
Ms King
349. Just briefly. If, as it seems likely,
the EU applies for a further waiver to allow the Lomé preferences
to stay for another five year period to facilitate the transition
towards full WTO compatibility and the WTO will agree to it, do
you see that as a possibility, as the most likely possibility?
(Dr Stevens) Whatever is agreed will have to be
sold to our colleagues in the World Trade Organisation, the organisation
not the secretariat. In earlier drafts of the Commission's proposals
it claimed that some avenues were in some senses easier to sell
to the WTO than others. We always took exception to this and argued
that it was not the case. I am very pleased to see that in the
Commission's current proposals it has recognised that there is
no royal road, as it were, there is no one option which will remove
the need to negotiate. What can we guess about the likely attitude
of the other members of the WTO to the different options on the
table? My guess is that they will not be ill disposed towards
a continuation of Lomé, period. As Mr Eglin pointed out,
the United States and Canada both have very similar arrangements
with the Caribbean and those are approved in exactly the same
way as Lomé is currently approved. There is no evidence
that the US or Canada find these inherently unsatisfactory arrangements.
As for the other options, I would imagine that the members would
be more likely to support a system which had a long term objective
of making the EU system more compatible with everything else.
So a system which over a period of time extended coverage to a
larger number of developing countries and at the same time lowered
Europe's standard tariffs against industrial countries would tend
to be more easily defensible than one which did the opposite.
I think that is going to be the line up, effectively in the final
analysis. The WTO is a Jekyll and Hyde organisation. One of its
facets, the one that is most in our minds at the moment as a result
of the banana dispute, is when it acts to implement the agreements
the members have already reached. Then it acts in a quasi judicial
manner. I like to liken it to the European Court of Justice which
acts in a quasi judicial manner and Member States suddenly find
that some of the things they agreed to have implications which
are very different from the ones they anticipated when they agreed
to it but they are interpreting the agreement. Its other persona,
which is the one which it will be in when Lomé or post
Lomé comes up for approval, is it is like the UN General
Assembly, it is a democratic institution. The WTO agrees what
the members agree.
Mrs Kingham
350. Can you just remind us what the weighting
is in terms of voting?
(Dr Stevens) One country one vote. Rwanda has
one vote, the United States has one vote.
351. No, I meant in terms of the EU, how
much weight does the EU carry? It is quite considerable, is it
not?
(Dr Stevens) Yes. There is voting weight and there
is real weight. It is inconceivable, I think, that the EU would
try to force through something which was opposed by the United
States and Japan even though they only had one vote and I think
it is not likely that the United States would try and veto a proposal
which was considered important by the EU and did not affect any
fundamental US interests. The powerful Member States try to reach
a consensus because they have far more to gain outside Lomé
and other areas by having a system in which they have mutual confidence.
So the EU, I think, would have a great deal in its favour if it
tried to negotiate any agreement which was either similar to the
present one or was better in the sense that it foresaw a period
of transition to a more coherent trade policy.
352. It just needs the political will of
going in with a strong negotiating position and belief?
(Dr Stevens) Yes. The political will to be willing
to do a deal. What I fear most is when the Commission says "We
cannot get this through the WTO", what they mean is "we
would have to do a deal and we are not prepared to make any concession,
however small, in order to get this deal because the ACP are not
important enough for us".
Mr Rowe
353. That leads directly to the question
I want to ask all three of you really. Do you detect the political
will to help the poor has increased or diminished or stayed the
same?
(Mr Maxwell) Since when? Aid has fallen by 20
per cent in real terms since 1990. It is not going to go up because
the Japanese aid programme is going to fall. What we hope in the
development community is that last year's White Paper marks a
turning point at which aid and development begin to acquire more
public support.
Chairman: It was WTO
you were asking about, was it not?
Mr Rowe
354. They have all been involved in this
world for a long time and the rhetoric has not changed a great
deal but has the political will actually increased or diminished
or stayed the same? At the end of the day that is actually more
important really than anything else we talk about.
(Mr Maxwell) This is a personal judgment, but
I am more optimistic now than I have been for many years.
(Dr Stevens) I think you need to distinguish between
your question which was aid and helping poor people and what would
be involved in negotiating something in the WTO. What has declined
is the objective economic importance of the ACP for Europe. When
Lomé I was signed the ACP were, as a group, among the most
important of our trading partners in the developing world. They
are now among the least important of our trading partners. What
was worth the candle in 1975 is perceived in some quarters as
being not worth the candle now. That is a different answer to
the question that you actually posed.
(Dr Lister) I would say political will has certainly
wavered in Europe on this subject. I think the European Union
took a lot of criticism on Lomé because of the aid mechanism,
on this issue in particular, that their aid was not working well.
In the Green Paper there is a reference to the fact that the EU
might "go it alone", suggesting that they might give
up on all this sort of thing, give up on development altogether
and the declining aid budgets I think are right. I think political
will has certainly wavered. The debate over is aid worthwhile,
does development aid work, has affected this. There is certainly
a chance now for some kind of political will to re-emerge. I just
add to what you said about the ACP being less important economically.
They are less important politically now than they were under the
Cold War. Under the Cold War it was quite good to sign up people
to the Lomé Convention as a kind of pro-Western agreement
but now that does not seem to be very important.
Chairman: That is
a very important point.
Dr Tonge
355. You briefly mentioned Mr Ruggiero and
his proposal to move on tariff and non-tariff barriers for least
developed countries. Can you tell us the pros and cons of this
and where the proposals stand and when they are likely to be implemented?
(Dr Stevens) They are mainly pros. The con is
that nothing much is happening. The Ruggiero proposals would not
help the non-least developed ACP countries, it is only the least
developed who already have relatively favourable access to the
European market. The EU's GSP is good in the sense that it gives
additional preferences to the least developed. Perhaps one reason
why the EU has been more co-operative in responding to the Ruggiero
proposal than have some other industrialised countries is because
it is already much closer to meeting the target. What needs to
be done is for the proposals to be adopted. They do not have to
be adopted in toto. Mr Ruggiero proposed them at the WTO for all
WTO members but because the GSP is an autonomous act of each member
country there are no negotiations involved. The EU can change
its GSP tomorrow, it does not have to talk with anyone, certainly
not the United States or Japan. There is no reason why the EU
should not implement the Ruggiero proposal itself. It would be
much better if the United States and Japan did so as well but
I do not think the interests of the least developed are served
by delaying one country doing it until the others do. Having said
that, it only applies to tariff and non-tariff barriers, it does
not apply to the additional area which I mentioned earlier of
the need to have rules of origin which are more favourable. Bangladesh
would still be disadvantaged in exporting clothing compared to,
say, certainly Mauritius, compared to Morocco, compared to Turkey
if the Ruggiero proposal were adopted, unless it was also extended
to these other areas which affect trade besides the tariff barriers.
Chairman
356. If you put India into that as well—I
do not know whether India qualifies as an LLDC having seen the
fantastic republic parade yesterday, it is a nuclear power—do
we count it as an LLDC?
(Dr Stevens) No.
357. Yet the per capita figures suggest
that it is. The reduction of all tariff barriers I suppose would
decimate the European textile industry very quickly, would it
not?
(Dr Stevens) Well, it might. It might decimate
the South Korean and Hong Kong trade. There is a strong argument
to say that the main beneficiaries of these restrictions have
been the East Asian countries which have been able to jump around
all the hurdles and the quotas and get much higher prices in the
European market than they would if India and Bangladesh were allowed
to exploit their comparative advantage and export clothing.
Chairman: Good argument.
Dr Tonge: What about
the European Union suggestions for free trade areas and those
proposals?
Chairman
358. Are they practical?
(Dr Stevens) In time. It all depends what you
mean by a "free trade area" as you will have heard this
morning about South Africa. The EU is very hobbled in negotiating
free trade areas because it has to protect the Common Agricultural
Policy and you cannot have free trade in agricultural products
and maintain the Common Agricultural Policy. In terms of goods
a lot depends on whether a country is mainly interested in the
European market for exporting CAP products, in which case it is
going to be very tricky, or whether it is mainly interested in
the European market for other products where it would be more
practical. In terms of institutional feasibility it is going to
take a long time. South Africa has been negotiating for four years
now and we still have at least a year to go. South Africa is a
very sophisticated country compared to many in the ACP. I think
this has been recognised in the proposals now. The Commission's
proposal allows three years to begin the negotiations but implementation
could take longer. I think the British Government has suggested
five years. In practice it will be at least five years whatever
is stated on paper. I think that there are some countries in the
ACP group, particularly say the SADC group or CARICOM group, where
it would be feasible to negotiate a free trade area. Whether it
is desirable or not depends very much on the detail. Personally
I would be happy to see an outcome of Lomé being that they
embark on that path provided there is a fall back position which
is reasonably close to the present situation so that when the
details are there and it looks as if it is not in their interests
they are not forced to sign or face unacceptable consequences.
(Mr Maxwell) This is a question about reciprocal
free trade and it is therefore also a question about whether subsidised
European beef destroys the beef industry of South Africa. It is
dangerous to have free trade when you have still got large subsidies
in Europe.
359. My problem with that argument is that
if you have got subsidised exports you are not in a free trade
situation, are you?
(Dr Stevens) I think Simon is wrong here. There
is no reason why a free trade area should require South Africa
to open up its market to subsidised beef exports. It is perfectly
compatible to include in the agreement that subsidies are offset
by import duties. That would still be compatible with a free trade
area.
8 See Evidence, pp. 141-142, para. 6. Back
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