Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witnesses (Questions 40-59)



Mr Simpson

  40. You earlier used that ghastly phrase "multi-functionality" for what most of us would regard as the wider aspects of farming and agriculture; the protection of the environment, development of rural communities, and that kind of thing. It would seem that this multi-functionality has an impact upon trade negotiations. The legal basis of CAP is very much tied to agriculture. Is it possible, given that legal basis, to switch subsidies to environmental issues linked to agriculture and farming?
  (Mr Roberts) The treaty basis of CAP is very broad indeed and gives a lot of possibilities in terms of how you act, so I do not think there is a problem in the treaty basis.

  41. You do not think there is a problem, but do you think that for some of those that we are negotiating without outside the European Union, the wider subsidy on these other so-called multi-functional issues will be seen as some form of shadow protectionism?
  (Mr Roberts) Yes, there certainly is, and that was one of the other debates which went on mainly before but to some extent also at Doha, together with the question of how one addresses non-trade concerns. The Doha text does not say what the Cairns would like it to have said, that non-trade concerns should be addressed by targeted, transparent and non-trade-distorting measures. They abandoned their objective to get that, but they did achieve what they wanted, which was that they were referred to as something that should be taken into account rather than a subject in their own right in the negotiations. Again, there was a balance in Doha. Our position is what you might call at the liberal end of the non-trade concerns club. We do not agree with New Zealand or, perhaps more, with Australia, because New Zealand is always rather elegant in the way it asserts its position. We do not agree with those who say farming is just an industry like any other and there is nothing to consider. We do not have that view, but we do think it is an appropriate objective of the Policy to give the kind of agricultural environment that society wants to see. We do not take that to the limit of saying that therefore there should be no cuts in tariffs and no further liberalisation of trade.

  42. What is the attitude of the United States towards the multi-functionality of agriculture?

   (Mr Roberts) They like to be friends with the Cairns Group, and therefore they do not like to use the word, but they have a great number of feelings in common with us. This comes out in two ways. The last American Secretary started to talk about multi-faceted agriculture, which was really just a translation of the word "multifunctional". The other way in which it is quite clear to me that the Americans believe that agriculture makes a contribution to society for which it should be rewarded, is that many an American politician will say: "Our farmers and ranchers are in difficulties and therefore they must be helped." That, to me, is a recognition that agriculture is something different because you do not automatically say that every industry that is in difficulty must, for that reason, be helped. Therefore, I believe that the Americans at the bottom do see a part of their national identity being bound up in agriculture, and therefore they believe that it makes a contribution to their society. They were suspicious about multi-functionality because they thought that it was mainly a means by which we, and more particularly the Japanese, could keep heavy tariffs on potential American exports, so they hold a rather ambivalent view; but they certainly do not take the view that agriculture is no different from other industries.

  43. Are all second pillar payments classified as green box payments?
  (Mr Roberts) Our second pillar payments are notified under the green box, yes, but they have to respect the green box criteria: you do not become a green box simply by declaring that a measure has an environmental objective; it has to meet two key conditions laid down in the green box. First, it must not be, or only minimally, trade distorting, which is a general requirement to be in the green box at all; and, secondly, it has to meet the requirements of the green box, which is that the payment must not exceed what is required to achieve the environmental objectives. Therefore, you cannot give production support disguised as environmental measures.

  44. Is greater use of the second pillar likely to provoke adverse reactions in the WTO negotiations?
  (Mr Roberts) I think if we were to go to the extent that the Americans have done, where they first of all changed their policy to make it, arguably, green, and then increased enormously what they were paying on green and did not reduce at all what they were paying for amber, then I am sure that we would be criticised, as the Americans were criticised. If we moved our amber box payments into the green box, then I think that would be seen as a positive step in terms of reforming our policy and reducing its impact on world trade.

Paddy Tipping

  45. We have been talking about the views of the United States on these environmental payments, but what is the view of the entering countries towards these kinds of switching payments?
  (Mr Roberts) I meet the candidate countries at the beginning of each meeting of the Agricultural Committee in Geneva, and generally speaking we achieve a unity of position as between us and the candidate countries in the negotiations. I think that they do support the switches into the green box, and some of them have quite a high proportion of their existing aid classified in this way—Slovenia, for example. As far as I have been able to judge their position from the way they have discussed it in Geneva, they have no difficulty with this approach.

Diana Organ

  46. In the light of Commissioner Fischler's suspected case of salmonella, he is no doubt very concerned about food safety, and, as you have said in your paper to us, there is widespread public concern that this round of WTO may bring on to the market a whole range of products about which we have concerns in relation to food safety. We have talked about the European Commission having proposed a precautionary principle, but you have said that there needs to be application and it needs to be clarified. What aspects in particular need to be clarified to meet this public concern?
  (Mr Roberts) We have a rather precise position on this. In the hormones dispute, although we lost that dispute, the appellate body gave a very useful interpretation of what is meant by the relevant parts of the existing agreement, and that interpretation, we think, is one that could usefully be adopted as being of general application. The decision by the WTO in the dispute settlement system applies, strictly speaking, only to the case concerned, although to some extent they work on the basis of case law, but legally speaking that decision applies to a particular case. We think that the balance that the appellate body struck in the hormones case could usefully be adopted as an interpretation for all cases. It said that there is a kind of hierarchy. First, if, in your health standards, you apply those internationally adopted standards, there is no question; secondly, you are not bound to be only at that level, and you can set a higher level. However, you must have a scientific basis for doing so; you cannot just invent some totally arbitrary higher standard. Thirdly, and most importantly—and this is where the precautionary principle came in—that higher standard and the scientific basis for it does not have to be accepted by all scientists; it has only to be a respectable minority view of scientists; it has to be something which would stand up to examination, though not necessarily something that you can prove. That hierarchy seems to us to be exactly the right way to address the health issues posed in international trade. Those who oppose us say that it is in this last point that they take issue because they are afraid that very, very small minority positions might be used to justify health barriers that are being used really as a trade barrier.

  47. The public needs to know what these standards are. Coming on to labelling schemes, most of the farmers and consumers in my constituency say that food labelling is such that you cannot really tell what it means, for example in telling the country of origin. A piece of bacon that has been wrapped in this country, may have "British bacon" on the label. What is organic? Kenyan beans that may be called organic are not considered by the Soil Association to meet the standard that British green beans might meet under an organic regime. As you stated in regard to food safety, if we are going to have a range of safety and hygiene standards, starting at an agreed minimum, but others may bring in higher standards, will that also appear on the labelling? Part of the concern is whether they will appropriately covered.
  (Mr Roberts) There are a lot of questions in that question.

  48. How robust is the labelling scheme covered by the WTO?
  (Mr Roberts) There is a WTO scheme dealing with labelling. It is the TBT (Technical Barriers to Trade) Agreement and it allows you to introduce labelling schemes as you see fit, but you have to notify your intention and ensure that it is not unduly trade-restrictive. When I talked about different standards, I did not mean that products come in at different standards, I meant that members of the WTO, if one follows the hormones judgment, are authorised to have different levels of standards; they can set them very high or only at the level—

  49. Would that be reflected in the labelling?
  (Mr Roberts) If the member of the WTO wants to introduce a labelling scheme to in some way reflect the health standards, it can do so providing it can demonstrate that it is not an undue restraint of trade. The label question does not arise. Take the hormones dispute. Let us assume that we had not been condemned for not having done a risk assessment before we introduced the hormones ban, which is what we were condemned for, and suppose that everything else about our hormones legislation had passed the WTO test: the effect of labelling that meat which had been produced with the aid of artificial hormones would not then arise. It would only arise if you set a higher or different standard internally and decided not to employ the standard externally. Then, you might want to label it, and the question will have to be addressed whether the label is simply informative or whether it is designed to be a barrier to trade. Let me answer your question on the organic point. We only allow a product to be sold within the Community with the organic logo if we have an agreement with the country concerned that their organic production system is comparable with our own. We do negotiate such agreements. I do not think it is necessarily the case that you would find a product on our market with the organic logo which was not produced to our organic standards, because we negotiate that with countries producing organic food.

David Taylor

  50. If we could move to a semi-related area of animal welfare, I work frequently with Compassion in World Farming on some of these matters. The Commission has proposed compensation of additional costs to meet animal welfare standards from reduction in commitments. How sympathetic are the EU's negotiating partners to animal welfare concerns; and, secondly, what types of mechanism do you have in mind to try and compensate producers? Can you give specific examples in relation to intensive chicken farming, where 800 million chickens are bred and slaughtered in this country every year, often in extremely cruel conditions? How can we see the negotiating process to deal with that and any improved standards that may emerge within the EU and within the UK over the next few years?
  (Mr Roberts) Our basic position is that we would like to see an amendment of the green box so that payments to deal with additional costs arising from moving to higher welfare standards could be dealt with under the green box, similar to the way in which the green box already deals with environmental payments, that is to say an amount, which was not more than the cost of moving to a higher standard. That is our basic position. How well has it been received? The answer is, extremely badly. Sometimes it is received extremely badly because countries simply do not understand the problem. They do not understand the problem because they do not import. The Australians are highly critical, but if you look at their health requirements, given their island or continental status, they are able to produce to WTO health standards which prevent them importing poultry from anywhere, so of course they do not have to worry about their animal health standards being undermined by cheaper imports from elsewhere, where cheapness is not due to normal questions of comparative advantage but simply to the absence of regulation. There are some developing countries that are major exporters of poultry, for example Brazil and Thailand. They have managed to wage a very effective behind-the-scenes lobbying campaign with all the other developing countries. They invented the wonderful slogan in Seattle, "The Community cares more about animal welfare than human welfare", and that slogan has been very difficult to overcome. Whether, at the end of the day, we will find it is purely a negotiating tactic, in other words they know we want it and they know we want it very much and therefore they object very much to giving it to us, so that in the final trade-off they can obtain another X per cent off our tariffs in exchange for giving us this, or whether it is a deep-seated problem, it is very difficult to tell at this stage in the negotiations. We have very few friends on this matter. Switzerland is our friend, and we have a lot of opponents.

Mr Jack

  51. I wanted to ask you about the mid-term review of the CAP, but when I was reading your note to the Clerk and I saw the words "the preparation of mid-term review falls outside my responsibilities", that pulled me up short, but nonetheless I shall venture forth. I want us to go back to try and put both the WTO discussions we have had and the CAP mid-term review into a financial context. To pick up a point that Mr Drew was discussing with you, in the Uruguay agreement the aggregate measure of support was agreed to be reduced by 20 per cent from the 1986-1988 level to a lower level by 2000. Was that in money terms, or was it expressed as a percentage of the EC budget? The point that comes from that is this. Does that level reached by 2000 form the total support package which the Community now has available for agricultural support; and if that is the package, is that the one from which money to deal with newcomers to the Community will have to be taken?
  (Mr Roberts) The Uruguay round only had reduction commitments in relation to trade- Œdistorting support, amber box support. Neither the blue box nor the green box were subject to reductions. That is the first point. The second point is that the AMS comprises both budget expenditure and support arising from holding your prices above world prices; therefore, it is not a budget figure, it is expressed in money but it is a measure of the amount of support. It is not only direct payment support, it is also support by way of a tariff that holds the prices up. Is the Community's AMS the total available to the enlarged Community? It is not because the candidate countries also have AMS, and we would add the whole together and the whole AMS with the enlarged Community would be the maximum level of trade-distorting support which can be granted within the enlarged Community.

  52. As far as the budget is concerned in terms of the agricultural expenditure from which the support we have just discussed will come, what is the baseline position where the mid-term review will start? I struggle to understand the debate that says the mid-term review continues Agenda 2000; and Agenda 2000 was designed to look at the budget that could cope with enlargement and at the same time recognise the constraints that Member States have put on agricultural expenditure. There are a number of things that seem to be pulling in different directions. Can you give a commentary on the budgetary background to the mid-term review?
  (Mr Roberts) The mid-term review was commissioned by the Agenda 2000 decisions, and the Agenda 2000 decisions taken as a whole included the financial perspectives for the years up to 2006; so obviously one of the things we have to address in the mid-term review is whether or not the Agricultural Policy can respect the budget commitments set out in the Agenda 2000 budgetary conditions. There is no direct link between that and our AMS because, as I have just said, the AMS includes not only budgetary expenditure but also transfer expenditure, the value to agriculture of having prices above world prices.

  53. Let me ask you this as a negotiator. One of the impressions that I got was that Agenda 2000 had given a warm and cosy glow to Member States that there would be no real need to make substantial changes to the CAP to accommodate anticipated pressures as a result of the round which we have now described as Doha. If you are sitting at the negotiating table, are you going to be saying to Commissioner Fischler, "do not be too radical in your suggestions because it will upset my negotiating position: I do not want to send out a message that everything within the CAP at mid-term review is suddenly up for grabs because it will weaken my position"—vis-a"-vis the groups you described in your earlier answers.
  (Mr Roberts) Mr Fischler is the chief negotiator. I am only a negotiator at an official level. He would have the thought very much in his mind without me putting it there. The decision that we took in the Uruguay round was to change our policy first to meet our own internal policy objectives, and then negotiate a conclusion which was compatible with that policy. That is one of two options in this round. The Americans are a little further down the track. They are nearly there in that they are negotiating a new farm bill which will take them to the limit—some would say beyond—but certainly to the limit of their current AMS commitments; so they are taking the view that they would rather decide in Congress now what they will spend, so long as they can spend it, and cut it back later. Until now the Community has never negotiated in that way. It has always negotiated its external commitments to be compatible with its internal policy.

  54. You put in your note to the Committee a helpful summary of the remarks that Commissioner Fischler had made about the areas which you thought might be the subject of the mid-term review. Looking at these items, they do not strike me as being any more than incremental in terms of the change which they might suggest, and yet there are some—born out of comments, for example, at our recent Oxford farming conference—which suggest, in the case of the United Kingdom and Germany, that there is some feeling that there could be an epoch-making change to the CAP. You have seen many efforts to re-negotiate and change the CAP; do you have a feel for which side of the equation the current development is on, incremental or big bang change?
  (Mr Roberts) As to what people outside the Commission are saying, I can only confirm what you say. There are those who are looking for a big bang and those who are looking to avoid a big bang. As to what is going on inside the Commission, I think I had better use the analogy of a Treasury official in the run-up to the Budget: I do not comment.

  55. Whilst you may not comment, you may observe, and you happen to sit in a very good listening post. You see and hear much of chatter and noise and the background of what goes on in the Community. If you cannot comment specifically on the proposal, can you give me a well-informed view as to your assessment of the mood for change amongst Member States? I mentioned two that might be more change minded, but you may be aware of others that have made public comment and who are less change minded. Can you give me a feel for the balance towards change and reform?
  (Mr Roberts) I think it is well known that some Member States are traditionally more for change and reform than others. If we look at the major Member States, the French have an election in May, the Germans have an election in October and the Irish not a major Member State but a very important one in the enlargement process because of the problems over the Nice treaty, have a referendum in the autumn. Listening to what people are saying now, it is perhaps not all that important, if I might put it that way, because what matters is what the governments that are there when the decisions are taken and actually in power think. That depends on the outcome of elections yet to take place.

  56. When will some proposals come forward in terms of the mid-term review? Will we see something on them on paper?
  (Mr Roberts) I would expect in the middle of the year.

  57. Can you clarify a point about Agenda 2000? Does it prevent there being a discussion at the mid-term review about changes to the dairy regime, bearing in mind the renewals of the current renewal which have already been agreed?
  (Mr Roberts) It is always possible to review decisions and it may very well be sensible. I think that Mr Fischler, in his remarks to the Agriculture Committee of the Parliament, suggested that there could be an advantage in advancing the discussion on dairy because it is necessary to look at beef, and it is difficult to look at beef without looking at dairy. The quota system continues until and unless there is a qualified majority to change it, that is if you want to change it earlier than was foreseen in the Agenda 2000 decisions. For example, if you wanted to advance the date at which one starts to make price reductions, that would require a qualified majority on the basis of a proposal of the Commission. In that sense, Agenda 2000 prevents earlier decisions, unless there is a qualifying majority wanting an earlier change.

Mr Breed

  58. Can we turn back to enlargement and the way the EU will be looking at the accession states, in particular the transition period coming in to full acceptance of CAP. It has been reported that the Commission is considering making a single area payment directly to individual farmers in the new states. How firmly has that proposal to pay those direct payments been worked out with the new Member States during any transition period before they actually qualify fully for any CAP payments?
  (Mr Roberts) Mr Fischler said in Berlin that that was an idea that was under consideration within the Commission. However, it is not an idea that has been adopted by the Commission. As I said, in my earlier remarks, we have to make proposals shortly on how to conduct the final stage of the negotiations, and it is with a view to making those proposals that the work to which you referred is going on; but there is not yet a Commission decision.

  59. Taking that, and other decisions in terms of the way in which the EU deals with the candidate countries, to what extent will those take into account our negotiations with the WTO? Are these payments going to be acceptable under WTO? Is that something that is on the additional agenda, when you are talking to these candidate countries; that agreements to try and bring in those countries into the full CAP, whatever we decide, need to ensure that they are WTO compatible?
  (Mr Roberts) The candidates are members of the WTO, and we are also, and they have to fulfil their existing WTO commitments; and within the Community they are co-responsible, or rather they have obligations arising from the Community WTO obligation. The totality of the policy applied to the enlarged Community would have to be compatible with the Community's WTO obligations.

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