APPENDIX 10
Letter from the Secretary of State for
International Development to the Chairman of the International
Development Committee
The Government supports the "everything
but arms" proposal as an important concession to the world's
poorest countries and a confidence-building initiative for a new
Round of trade talks. The UK Government will ensure that the concerns
of the non-LDC ACP countries are addressed in the decision-making
process in the EU.
Thank you for your letter of 21 November enclosing
the correspondence from British Sugar, Tate and Lyle and the Caribbean
Council for Europe. I am aware of their views as well as of those
of non-LDC ACP countries and UK farmers. My Department has considered
their concerns carefully along with those of the LDCs, and has
also taken into account the wider picture of international trade
liberalisation.
The Government supports the "everything
but arms" proposal. As I explained in response to your oral
question in the House of Commons on 22 November, the least developed
countries make up just 0.4 per cent of world trade. Average annual
income in LDCs in 1998 was $287 per capita, substantially less
than a dollar a day, while the equivalent figure in the Caribbean
is currently 17 times higher. Maintaining barriers to trade against
the LDCs weakens their prospects for economic development and
the effectiveness of aid. I agree with the conclusions of the
International Development Committee's report on the WTO and Developing
Countries that "it is vital that trade barriers are brought
down and low income countries encouraged to take advantage of
the resulting opportunities to increase their share of world trade."
The ACP sugar-producing countries have helpfully
expressed their views on the proposal and we will ensure that
these are addressed. It is important to remember that 39 of the
48 LDCs are in the ACP group. Under the Sugar Protocol, LDCs receive
only 4 per cent of the tariff-free quotas available to ACP countries.
Sugar-producing LDCs such as Mozambique and Zambia cannot export
to the EU at all under the Protocol. The current arrangement clearly
benefits EU farmers, refiners and some ACP countries at the expense
of LDCs that are already facing enormous barriers against poverty
eradication.
If the proposal is adopted, then all products
from LDCs bar bananas, rice and sugar will have duty-free access
to the EU market from 2001. Bananas, rice and sugar will be phased
in beginning with a 20 per cent tariff cut in January 2001. This
will be increased to 50 per cent in January 2002 and 80 per cent
in January 2003 before the tariff is removed completely in January
2004. Discussions in Government have concluded that new imports
of sugar from LDCs are unlikely to materialise before 2002 at
the earliest.
It is difficult to produce a precise estimate
of the exact impact of the proposal; there are many imponderables
concerning the speed with which LDCs might increase exports in
response to duty free access to the EU. Views differ, notably
about the infrastructure and production constraints in the sugar
producing LDCs and whether they would import from the world market
and export all or most of their domestic production. It is clear
that weak infrastructure and bureaucratic hurdles limit the capacity
of LDCs to take advantage of preferential margins. They have been
unable to respond in the past to incentives provided through duty-free
access on 99 per cent of goods imported into the EU. It is impossible
to believe that the LDCS will be capable of putting in place the
type of heroic logistical operations that would be necessary to
achieve the level of import surge predicted by some in the UK
sugar industry. The EU can take safeguard action if imports of
LDC sugar cause or threaten to cause serious difficulty to Community
producers.
I recognise the importance of the Sugar Protocol
and the stability that it has provided to Caribbean and other
non-LDC ACP beneficiaries. But there will continue to be pressure
on both the EU and the ACP to reform their existing markets and
trading arrangements as a result of global liberalisation. Some
countries have developed plans to adjust their sugar sectors,
Guyana being a notable example. These countries have the best
chance of maintaining sugar exports in more competitive market
conditions and should use the three-year transition period built
in to the proposal. We will seek through the EU, the multilateral
agencies and other donors to ensure that any affected countries
are assisted in managing the costs of adjustment. I am strongly
of the view that the EBA proposal will not lead to impoverishment
in the Caribbean.
More widely, this proposal would help in building
confidence among developing countries for the new Round of world
trade talks for which the UK is pushing. The IDC emphasises this
point in its report on the WTO and Developing Countries. It has
been suggested that sugar be excluded from the proposal on account
of the particular sensitivities within Europe and the ACP. Since
sugar is the most important LDC product currently denied duty-
and quota-free access under the GSP, this would weaken the value
of proposal considerably as a confidence-building initiative.
The Government is keen to support the proposal—we
believe the concerns expressed by some ACP countries can be resolved
without undermining the proposal or ACP interests. My Department
has been in constant contact with officials in MAFF, DTI, FCO
and HMT in formulating a Government position on this proposal.
I understand that MAFF officials are working to ensure that on-going
discussions about reform of the EU sugar regime takes adequate
account of LDC duty-free market access.
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