Examination of witnesses (Questions 40
- 59)
WEDNESDAY 20 DECEMBER 2000
RT HON
RICHARD CABORN,
MR RICHARD
CARDEN, MR
DAVID WALMSLEY,
RT HON
JOYCE QUIN,
MR HENRY
BROWN and MS
CHRISTINE BAXTER
40. But we have been urged to delay this for
five years, by which time presumably many more children—you
gave the example of the mortality rate of children in Mozambique
and Angola—will be dying when they could perhaps be benefiting
from a growing economy.
(Mr Caborn) You may be right, but we are moving at
a pace at which we take people with us and what we have been able
to do in the last few years is move the agenda forward in terms
of debt forgiveness, restructured economies and opening up the
developed world's market in a systematic way. What we have seen,
even though we were not successful at Seattle, is that at least
countries like Canada, Australia and the European Union are now
coming to the point of view that they have to get their markets
to access the LDCs' goods and services. That is to be welcomed
and it will eventually resolve those problems you are talking
about.
Chairman: I am trying myself to move the Committee
apace but you are exciting some of our members and I am getting
signals all over the Committee now.
Mr Worthington
41. You referred to the sugar price for the
EU being about two and a half times the world price and Minister
Quin referred to the overproduction of sugar in some countries.
Could you give us an idea of what happens to the overproduced
sugar, what happens to the surpluses and in what countries is
this sugar dumped?
(Ms Quin) It is basically dumped on the world market
via export subsidies, which is how the EU sugar system has worked
for many, many years.
42. What is the scale of the dumping?
(Ms Quin) The figure for the amount which was exported
last year was something in the order of three million tonnes.
43. Refresh my memory about how much sugar is
involved for the least-developed countries?
(Ms Quin) In terms of sugar which is coming into the
EU market, at the moment there is 1.3 million tonnes guaranteed
under the ACP agreement and then there is something like 300,000
tonnes under the special preferential sugar system.
Mr Borrow
44. Figures which the Committee have are showing
that production in the EU of sugar last year was 16.7 million
tonnes, consumption was 12.68 million tonnes, imports under the
agreement were 1.3 million tonnes and there is quite a gap between
what is available to be consumed and what is actually consumed.
We know that three million tonnes or so are exported through the
EU subsidy. I assume then that the rest of it is stockpiled and
should these proposals go through and more sugar be imported from
the least-developed countries as a result of these proposals,
we will presumably either have to find additional subsidies to
export them or additional stores to stockpile them and there could
be a problem with GATT when we have already undertaken to reduce
the amount each year that we export using the export subsidy scheme.
Am I correct in that?
(Ms Quin) In terms of what tends to be in stock, it
is about 1.5 million tonnes but it is seasonal, because sugar
beet is a seasonal industry. There are storage aids which allow
the sugarbeet industry to plan over the whole of the year, so
sometimes in the year the stocks will be lower than that and sometimes
they may be more than that. Although the stocks are in these private
storage arrangements, they are not of themselves a huge factor
in the overall regime and that can be seen from the figures you
quoted.
Miss McIntosh
45. Is either department in the position to
assess the quantity of sugar which might come in from least developed
countries? If they are, would the main impact of that new amount
of sugar coming in be on producers within the Community, as in
our home producers, or on ACP suppliers?
(Ms Quin) My instinct is that in the initial stages
it would be more likely to affect the ACP special preferential
sugar section simply because that is a variable component. You
have the guaranteed 1.3 million tonnes which come in from the
ACP but the special preferential sugar is an additional flexible
arrangement. That could be substituted by LDC sugar. That seems
to me to be where the impact is first likely to be felt, but I
have to say that a lot still depends on what the Commission decides
and what the final shape of the proposal is. That is my guess
at the moment.
46. If that is the case, would the Minister
accept that not only would it be difficult in this country to
get our producers to diversify, because sugar beet is a rotation
crop—at the moment as you will appreciate in north Yorkshire
we cannot even get it out of the ground—but that diversification
problem is even more of a problem for ACP producers because under
the EBA proposals we are going at both sugar and bananas which
are two of their most staple crops?
(Ms Quin) That is why the points the Minister for
Trade made about the work that both the Department of Trade and
Industry and DFID are doing in terms of working with the ACP countries
is extremely important. It is also why a transition period has
been decided for these particular products. Let me say that earlier
on you referred to employment in your own area and we are very
conscious of employment in the British sugarbeet industry. It
is only fair to say, however, that we also get lobbied by sugar-using
industries, who employ a huge number of people in the UK, about
the costs that the sugar regime has on them. I am not at all decrying
the importance of employment in the sector and indeed the area
she referred to, but at the same time I just wanted to make the
point that there are many employment considerations in this particular
issue.
47. Is that not a further argument to slow the
whole procedure and decision making down?
(Ms Quin) It is an argument in favour of an orderly
transition, that is certainly true.
Mr Curry
48. I do not want to come away with a sense
of the Minister for Trade's views which may not be accurate. I
understood him to say in relation to the impact assessment the
European Community was going to make, that because the quantities
were so small and because there was some sort of safeguard clause
against surges, the impact assessment did not really matter.
(Mr Caborn) No, that would be wrong. What we are trying
to do in this and indeed many other industries, textiles is another
industry we are having to deal with in the globalisation of trade,
there are many industries, the MFA agreement is another area which
is creating difficulty which we have to manage through ... No,
there will be a continuing assessment of how we are managing that
change of which this impact assessment we are talking about from
the European Community will be another tool in making sure that
we can manage that transition in the most effective way possible.
So you would be wrong.
49. This is an assessment then of the impact
as it is happening in your terms not an assessment of the impact
which might happen.
(Mr Caborn) It is both. It would be both.
50. But it cannot be because you said before
that you would anticipate decisions being taken before an impact
assessment had been concluded.
(Mr Caborn) Yes and I said that the one thing we have
in that is to make sure that effectively an assessment has been
made, which I have given you today, which is the amounts which
are exported by the LDCs.
51. That is not an assessment, that is a factual
situation.
(Mr Caborn) It is a factual situation.
52. An assessment is an impact.
(Mr Caborn) What I have said is that we are now content
with what the Commission tell us in terms of being able to safeguard
any effects on the British industry and indeed the European industry
because there is a safety valve in the system which says that
if there is a surge we have the right to take action.
53. Is that a surge on a national market or
on the European market as a whole?
(Mr Caborn) That is on the European market.
54. Not a national market.
(Mr Caborn) Then we would have to look at it in the
national context as well.
55. Hang on. What does "the national context"
mean? We have a currency situation in Europe with a strong pound,
weak euro, whichever way you want to look at it. That is an important
impact upon the direction of trade flows. So what happens if the
impact happens to be particularly severe on the UK, but in the
European Union market as a whole it is relatively small because
the quantities are small. What can we do to defend ourselves against
that impact, even if other people are not feeling the same?
(Mr Caborn) First of all, we would approach the Commission
if we believed damage was being done and the safeguards in addition
to the fraud measures and the temporary withdrawal provided within
Article 22—
56. Slow down please.
(Mr Caborn) The safeguard in addition to the fraud
measures and the temporary withdrawal provided for in Article
22 of the GSP, Article 28, provides the normal safeguard provisions.
Where a product is imported on terms which cause or threaten to
cause serious difficulties to a Community producer of like or
directly competing products, common customs tariff duties may
be reintroduced at any time at the request of a Member State or
on the Commission's own initiative. That is one part of it. You
know also, Mr Curry, that in the wider context of having to deal
with the differences between the currencies, we have had to make
some readjustments in our industrial base as well but I think
overall that has been managed very effectively indeed. I am not
talking just about the agricultural industry, I am talking about
the manufacturing industry as well.
Mr Casale
57. May I shift from producers to consumers
and ask what the implications of the "everything but arms"
proposal would be for consumers of sugar and also what the implications
of these proposals would be for the Community budget?
(Mr Caborn) On the Community budget, that will have
to fit in with the Berlin agreement. I cannot give all the details
about that but in terms of the Community budget, the Community
budget is set and it was set in Berlin and any actions by the
Commission or indeed the Community will have to be within the
context of the Berlin agreement; the parameters are set.
(Ms Quin) On the consumer side the consumer organisations
have lobbied over the years very strongly in the UK for a reform
of the sugar regime simply because of a distortion between the
prices in the European Union and the price outside on the world
market. They think very much that consumers would benefit from
a reform of the regime and also from a liberalisation of trade.
Mr Bradshaw
58. Can you say by how much? How much would
the average British consumer save if we were paying normal world
prices for sugar rather than prices two and a half times normal
prices? With the amount of sugar we consume in all sorts of ways
we must be talking about a considerable savings to the annual
household budget. How much would that be?
(Ms Quin) That is not an easy question to answer because
it depends on a large number of factors such as how much price
reductions in basic commodities then get passed on to the consumer,
and indeed that is one of the reasons why the European Commission
in its proposals on the sugar regime is saying that it will look
at the issue of how much reductions in prices are passed on to
consumers. It is also complicated by the fact that sugar is used
in a variety of ways. One could imagine that a price reduction
could be more easily passed on in terms of a bag of sugar, but
in terms of sugar-using industries, for example in cakes or biscuits
or whatever, since there are so many other factors to take into
account it is not clear that you would necessarily have exactly
the same correlation in terms of price reduction. Nonetheless,
given the big difference between European Union and world sugar
prices, the impact is thought to have the potential to be considerable.
Mr Wells
59. I want to turn to bananas. As we understand
it, the tariff preference enjoyed by the ACP banana producers
would be crucial both during the transitional period and in the
longer term in safeguarding the import arrangements for ACP suppliers
from further World Trade Organisation challenges. Would this not
be undermined by granting similar preferences to other suppliers,
suppliers particularly who were likely to result in the reduction
of tariffs from West Africa in particular? Many West African countries
are now producing bananas and can increase the amount they produce
very quickly, within nine months to a year, and in fact further
production could be stimulated within two years.
(Mr Caborn) The lead on bananas is MAFF, it is not
a trade issue.
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