SIXTH REPORT
The Agriculture Committee has agreed to the following
Report:—
THE IMPLICATIONS FOR UK AGRICULTURE AND
EU AGRICULTURAL POLICY OF TRADE LIBERALISATION AND THE WTO ROUND
I. INTRODUCTION
Spending on agricultural
subsidies in the OECD (Organisation for Economic Cooperation and
Development) countries soared to its highest ever levels in 1999,
according to preliminary OECD figures.[2]
1. It used to be a truth universally acknowledged
that trade liberalisation was a force for good, allowing countries
to deploy their comparative advantages to achieve economic growth
with all the benefits this brings to their citizens on all sides.
The alternative, as observed in the 1930s, was protectionism which
led to closed borders, government intervention and inefficient,
stagnant economies. Within this post-war free trade environment,
the guarantor of fair play was the GATT and subsequently the World
Trade Organisation with its self-declared "overriding purpose
... to help trade flow as freely as possible - so long as there
are no undesirable side-effects".[3]
The WTO agreements and disputes settlement procedure were designed
to create a rules-based system in which free trade could flourish,
with conflicts resolved through discussion and enforcement of
predictable rules rather than gunboats or barricades. The inter-governmental
club worked effectively and without challenge.
2. Events at Seattle in November 1999 forced both
the WTO and the Governments of its member states to recognise
that there were many organisations and individuals who were prepared
to make vocal and in some cases violent protests against the WTO
and what they claimed it symbolised. Not all the protesters were
against the concept of the WTO in itself: some wished to broaden
its scope, others wished to force reform of the organisation to
make it more transparent, more democratic, more accessible to
developing countries, although representatives of developing countries
we met were annoyed that some groups who claimed to be speaking
on their behalf gave the wrong impression that developing countries
were against the WTO in general and this Round in particular.
But the belief in the benefits of free trade in its own right
has been called into question. As the WTO and its members now
seek to re-start agricultural negotiations and perhaps to relaunch
a wider Millennium Round, they must also address themselves to
the task of re-making the basic case for trade liberalisation,
managed by a rules-based organisation with, at its heart, a clear
mechanism for the resolution of disputes.
3. Trade in agricultural products has traditionally
raised particular sensitivities because all countries, no matter
what their size, have a direct interest in ensuring the reliable
supply of cheap, safe and nutritious food to their population
and have concerns about how this food is produced, to what standards
and about the impact of competition on the viability of their
own food producers. However, the main excuse for agricultural
protectionism is usually the desire to protect the rural way of
life and the population the land supports, since lowering trade
barriers and support for farming would have implications beyond
the immediate food supply in terms of land use, the countryside
and the social and economic welfare of rural communities. On a
global level, trade in food also raises concerns about food security
and the environmental impact of transporting food items across
vast distances. These are important issues which need to be carefully
weighed in formulating the rules under which world trade can operate.
However, there are also clear benefits to liberalisation, including
increasing access by developing countries to other markets. Previously
regarded as distinct from other forms of trade, agriculture was
brought fully into the WTO trade liberalisation process for the
first time with the conclusion of the Uruguay Round Agreement
in 1994.
4. We believe that the case for further trade
liberalisation in agriculture is compelling. It will open up new
markets for UK exporters, provide new products for UK consumers
and encourage UK farmers to be more efficient and competitive,
whilst rationalisation of production will lower costs to the taxpayer.
It will also benefit developing countries just as directly and
positively as opening markets to their manufactured goods. The
impetus it gives to further reform of the Common Agricultural
Policy is particularly to be welcomed. We believe that the
WTO system is the best instrument we have for managing the trade
aspects of the ongoing process of globalisation in order to enhance
the benefits of free trade while safeguarding vulnerable economies
from dumping, unfair competition and barriers to development and
trade. We recognise that the WTO and the proposed Millennium Round
of talks provide an invaluable forum in which to agree and implement
rules which are appropriate to trade in agricultural goods in
the 21st century and which meet the needs and priorities of all
countries and interest groups. As the Rt hon Joyce Quin MP, Minister
of State at the Ministry of Agriculture, Fisheries and Food, argued,
"the WTO has a tremendous amount to offer to developing countries
and has a lot to offer in addressing some of the concerns that
the critics of the WTO often make."[4]
We agree with this analysis and support all efforts to engage
positively in the talks and in the new trading environment which
will emerge as a result.
Conduct of inquiry
5. On 30 July 1999 we announced an inquiry into the
implications for UK agriculture and EU agricultural policy of
trade liberalisation and the WTO Round.[5]
Our terms of reference covered "the impact of the inclusion
of agriculture in the forthcoming WTO negotiations which are due
to begin in November 1999, and the potential advantages and threats
of free trade for the UK agricultural sector." Within this
general framework, we decided to concentrate on "specific
areas of difficulty relating to animal welfare, scientific dispute,
consumer resistance, environmental support regimes and other non-tariff
barriers to trade", and called for evidence on "the
situation regarding: (i) battery hens; (ii) hormones in beef;
(iii) import inspections of foodstuffs; [and] (iv) restrictions
on trade in GM foodstuffs." These terms of reference were
later clarified to include the food as well as the agriculture
industry. In December 1999 we reviewed the inquiry in the light
of the failure to launch a new round in Seattle. The commitment
to begin negotiations on agriculture under the built-in agenda
- the timetable for reform set at Uruguay - persuaded us that
there was merit in continuing with our inquiry, although these
events have naturally had a significant effect on the scope of
our work and conclusions. This Report should be regarded as an
interim study which explores some key questions about liberalisation
of trade in agriculture.
6. In the course of our inquiry we took oral evidence
from Professor Alan Swinbank, Professor of Agricultural Economics,
University of Reading, Mr Martin Wolf, Economics Editor of the
Financial Times, the National Farmers' Union of England and Wales
(NFU), Compassion in World Farming (CIWF), the Royal Society for
the Prevention of Cruelty to Animals (RSPCA) and the Rt hon Joyce
Quin MP, Minister of State, Ministry of Agriculture, Fisheries
and Food. We also had informal discussions with MAFF officials
early in the inquiry and received some 27 written submissions.
In addition, our understanding of the issues involved and the
positions taken by each of the major players was greatly enhanced
by visits to the European Commission in Brussels, to the WTO headquarters
in Geneva and to the United States. We are grateful to all who
contributed to our inquiry.
7. Our specialist advisers on this occasion were
Professor Tim Lang, Professor of Food Policy, Thames Valley University
and Professor Kenneth Thomson, Department of Agriculture, University
of Aberdeen. Their expert advice and assistance has been much
appreciated.
8. The Report is structured as follows. Section II
sets out the background to the Ministerial meeting in November
1999, the position of agriculture within the WTO rules, the negotiating
position of the key parties to the talks and the outcome of the
Seattle meeting. Section III examines the current situation and
the issues which might be raised in the ongoing negotiations on
agriculture. Section IV looks forward to the launch of a wider
round which could bring new items onto the agenda for agriculture.
Section V concerns the WTO itself and addresses questions on possible
reforms, on the disputes settlement procedure and on the value
of the WTO as an organisation regulating world trade. The penultimate
section takes a broader view of the likely impact of trade liberalisation
on UK farmers, the food industry and consumers, as well as on
EU agricultural policy, whilst in Section VII we present our conclusions
and a summary of recommendations.
2 AgraEurope, 26
May 2000, p. EP/9. Back
3 WTO,
Introduction to the WTO, (second edition, February 1998),
p. 4. Back
4 Q
337. Back
5 Press
Notice No. 23, Session 1998-99, 30 July 1999. Back
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