Select Committee on International Development Appendices to the Minutes of Evidence


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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