Examination of Witnesses (Questions 180-186)
MR KARL
FRIEDRICH FALKENBERG
AND MR
MAURO PETRICCIONE
THURSDAY 20 MARCH 2003
180. Can you say a little about the food security
box?
(Mr Petriccione) I am not really the greatest expert
on agriculture, but basically the principle is that there are
developing countries for whom agriculture is not simply an economic
issue; it is not simply a question of exporting; it is not simply
a question of not being in competition with subsidised exports.
It is a question of imports and of food security. For these reasons,
they should be given the flexibility to protect certain production.
I do not think that the concept goes much further than that at
this stage, but we are at the beginning of a negotiation. There
are ideas floating around, like that of enabling developing countries
to have some flexibility on strategic products in the agricultural
field. What is a strategic product? A product may be strategic
because a country needs to import it. It may be strategic because
it is the key to agricultural production in a certain country.
The exporting interests are as important or more important. It
is a broader concept. However, there are a number of options which
are beginning to be explored, around the notion that agriculture
for developing countries has a different value than it may have
for developed countries, or even for some of the more advanced
developing countries like Argentina.
181. Another area where there seems to be—"conflict"
is perhaps too strong a word—but it is what is being said
by the European Union in its Doha preparations and so on, and
the fact that developing countries also are going through poverty-reduction
strategies with the international financial institutions, where
there are trade-related conditionalities which are pro-liberalisation,
and so on. Do you find that there is a conflict between what a
country is being asked to do by the World Bank and IMF as part
of its HIPC procedures and what is happening with European Union
policies?
(Mr Petriccione) It is not a conflict, but there is
an element of disconnection. There are attempts to fix that problem.
The most serious one concerns least developed countries and the
integrated framework for least developed countries, which is an
initiative co-run by six international agencies—the World
Bank, IMF, UNDP, WTO, ITC, and I can never remember the sixth
one—with the participation of both beneficiary and donor
countries. We have been involved in that, for instance. That is
based on the notion that within poverty-reduction strategy papers
you have to have a trade component. To the extent that trade is
a source of, if not development, resources needed for development,
it has to find a place in that strategy. In the original poverty-reduction
strategy papers there was very little in terms of what is the
role of trade policy in the development strategy of an LDC. The
IF was designed to remedy that. It is getting there—very
slowly though. The first IF scheme did not work very well; the
second scheme, which concerns Mauritania, Madagascar and Cambodia,
has given mixed results. Not much use in Madagascar; some usefulness
in Mauritania; excellent results for Cambodia. The Cambodians
have grabbed the ball and run with it. They have designed a trade
strategy; they have integrated it in their national development
plan. It is a strategy to request technical assistance from donors,
and they are obtaining it, putting this as part of the WTO accession
strategy. So there is evidence that it can work: that you can
integrate trade policy as an element of poverty reduction. Unfortunately,
it is still almost anecdotal evidence. We have a second batch
of IF countries, about 11 countries. A new initiative is that
donor countries accept to be facilitators. You have a donor country
who decides to give assistance to one of the beneficiaries, counselling
how to use the products of the IF and the diagnostic studies that
the World Bank does. We are doing it for two or three countries
in Africa—Senegal, for instance. I do not remember what
the other two are. The problem will be how to extend these principles,
which are beginning to work, beyond LDCs. The Bank is very active
on this. We are working with them to devise categories. It is
not easy. We return to the question that developing countries
hate being categorised. They really dislike it; they find that
it weakens their bargaining position vis-a"-vis multilateral
institutions, vis-a"-vis donor countries. However, the fact
is that there are probably a number of developing countries who
have almost the same need as LDCs. Where does that stop and where
do you start implementing different strategies? You do not need
this kind of strategy for the countries of south-east Asia—with
the exception of Cambodia and Laos.
182. We are seeing the Bank and the Fund next
week. On behalf of, say, the countries of Africa and your own
policy, what should we be asking them to do?
(Mr Petriccione) The main problem we are identifying
with the Bank is a problem that we also have within the Union.
Development policy has developed, ignoring completely the role
of trade in national policies. It is proving easy in theory to
talk about integration of trade and development policies. It is
proving a lot more difficult in practice. In the Union this is
complicated by the fact that our programmes have such a long lead
time that, just to change the nature of a programme, just to redirect
money, is an extremely complicated operation. Some Member States
are much quicker on their feet on this—not all, unfortunately.
I would say that the Bank is average, in the sense that their
procedures are fairly long and cumbersome—certainly a lot
more efficient than ours. The main problem is to convince those
who have been doing development assistance for years—concentrating
on infrastructure of projects, concentrating on ensuring water
supplies, concentrating on primary education—that there
are choices to be made; that there is not enough money for everything
and that perhaps at least some of the money should be redirected
towards needs which may appear less immediate, but which can produce
growth in the long term. If you take education, it is a very stark
choice: having to choose between whether to support primary education
in developing countries or whether to support professional education.
How long before primary education produces a professional class,
capable of producing greater economic growth? There is a very
high cost in human terms in privileging professional education,
which may produce economic growth faster. People, including in
the Bank, are only beginning to ask themselves these kinds of
questions, and we are far from having any final answers to that.
That is the main problem that we see in the Bank, but it is not
a problem with the Bank: it is a problem with all donors.
Mr Battle
183. I have a quick question on "new issues"
in the next round. Do you think the developing countries want
them to be on the agenda? What is in it for the EU if they are?
(Mr Petriccione) Again, you cannot say "the developing
countries". Some developing countries do—the majority,
I would say—or at least are quite happy to see them negotiated.
Mostly because, unlike when we first started talking about these
issues, they have done what it takes. In the past 10 years domestic
investment regimes have been largely opened up, liberalised, made
more transparent. There are now close to 100 countries in the
world with a competition regime, which is almost double what it
was in the late-1980s. That includes a large number of developing
countries. You have developing countries like Zambia which has
had a competition authority for a very long time. The problem
is, again, a handful of developing countries who see this as an
interference in domestic policies which are discriminatory or
which are closed. The problem is that some of them actually work.
Malaysia has profited from a discriminatory investment regime.
It is perhaps a unique case. We have had OECD studies and the
only case they could find where discrimination works seems to
be Malaysia. Then you have the poorest countries for whom the
question is, "We would love to do this. Can we actually afford
to do it?". The unspoken question is, "Are you going
to make it simple enough for us and are you going to put forward
the resources to help us do it?". Underlying that, there
is, "We don't trust that you will". That is the problem
we are having. If you take away the handful of countries who have
an egoistic interest not to, then everybody else is persuaded
that they would be better off with rules. The problem is that
a number of countries are not persuaded that it can be done in
a rational way. There is a gap in trust in our ability to come
clean on our promises of technical assistance.
184. On that gap in trust, you have made the
distinction between building trade capacity for production and
investment, and the negotiating capacity of developing countries
in general. I am sometimes left confused and thinking that maybe
the negotiations are with the institutions and governments of
the developed world and the NGOs, rather than with the countries
with whom we should be negotiating. What is your view on the capacity
for negotiation, or is it not a serious issue?
(Mr Petriccione) I think that it is a serious issue.
I think that it is a vastly overblown issue. The only countries
in the world who have a sizeable problem in negotiating capacity
are in Africa and in some of the Pacific islands. Everybody else
has a perfectly adequate negotiating capacity. It does not match
ours, but ours is not what it should be for developing countries.
It is cast as a question of priorities for them, but negotiating
capacity can be increased relatively quickly, and these countries
are doing it. A more serious problem is implementation capacity
when it comes to new rules. If you take an agreement on competition,
it is relatively easy to train a handful of people who can negotiate
an agreement on competition. It will be a lot more difficult to
train sufficient people to staff a competition authority—although
that too is overblown. If you are a small African country, you
do not need a large competition authority and you do not need
a competition authority that does the kind of complicated analysis
done in America or in Europe; you do not need to look into mergers.
You may want to look simply into cartels and monopolies. Some
African countries have done it without too many problems, with
assistance—with quite a lot of assistance, but it can be
done. Then you have to think about training judges, lawyers, academics,
businessmen, into a culture of competition. Again, not undoable,
but you have a larger problem there. However, it is an implementation
problem; it is an after-the-negotiation problem. There is a problem
of capacity. It is a serious one and it needs serious resources.
It is certainly not insurmountable and, in many cases—not
in all—it is overblown. I had the pleasure of hearing, in
a meeting with ASEAN countries in January, finally somebody openly
saying, "All this technical assistance in negotiation is
very interesting; we love these meetings; we love talking to you—but
we can read! We know what you are talking about". My reaction
was, "Thank God! Finally somebody has said that openly".
Mr Walter
185. Perhaps we could deal briefly with GATS
and perhaps start with the misunderstandings amongst some of the
NGOs and also amongst some of the countries involved. It is very
much a voluntary agreement. The UK Government has made it clear
that GATS is not about privatisation; it is not a privatisation
agenda. However, there is a perception that the EU has focussed
very much on those sectors where the state is the sole supplier
of services in developing countries. I do not know whether you
feel that that is an unjust perception?
(Mr Petriccione) I think that it is factually wrong,
in terms of where we have focussed—for the very simple reason
that, since the GATS is incapable of producing privatisation,
that would be a stupid strategy. We have focussed on sectors where,
in our partners, services are provided privately, because that
is where we can get any economic advantage. It is true that there
are sectors where the situation is uneven. There are countries
where a service is provided privately; countries where it is provided
by public authorities; and countries where the situation is mixed.
In respect of those services, our request is very simple. To the
extent that services are provided privately, we would like to
see them liberalised and open to foreign enterprise and to our
enterprises. "To the extent" are the operational words.
Those sectors, however, are not those where there is the greatest
growth. Again, I am not the services specialist, but I
think that the only case where you have a strong element of public
service provision in a number of countries, and where there are
still aspects in which there is a commercial interest, is water.
There we are not talking about water supply, but water treatment
and distribution. In many cases you have a water supply which
is a public monopoly, but the distribution and treatment is provided
by private enterprises. In those cases, we are certainly not asking
to privatise the supply of water but, at the same time, if a country
decides that publicly owned water is then distributed by private
companies, why only domestic companies? There is evidence that,
in cases where the distribution is restricted to domestic companies,
there are huge inefficiencies in the supply. Again, a country
does not have to say yes. The argument, "Yes, they don't
have to say yes, but you will twist their arm", has to be
taken with a fairly large pinch of salt. I think that the history
of the original GATS negotiation—and what we are seeing
across the board in the Doha development agenda—shows that
our ability to twist the arm of developing countries, even if
we wanted to, is not what it is said to be.
Chairman
186. We have to draw to a close what I think
has been a fascinating session. Thank you very much for sharing
this time with us, in what I am sure is a very busy day. It has
been very much appreciated, in helping us to understand the nuances
of many important issues.
(Mr Petriccione) Thank you. It was a pleasure.
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