Examination of Witnesses (Questions 187-199)
COMMISSIONER FRANZ
FISCHLER AND
MS MAEVE
DORAN
THURSDAY 20 MARCH 2003
Chairman
187. Thank you for giving your time in what
we know is an extremely busy day. Last time you and I met was
when I was Douglas Hogg's deputy minister during the BSE crisis
and I was also the UK fisheries minister. So I am glad that we
meet in happier circumstances! We, as you know, are Parliament's
development committee. We are conducting an inquiry into trade
and development and we are obviously interested in what is happening
in the Doha Round. I know that a number of my colleagues will
have detailed questions about CAP policy, market access, Special
and Differential Treatment. I wonder if I could start with a slightly
broader policy question? I suppose that broadly, over the Iraq
crisis, what we have seen is a failure in some ways of multilateralism
where, from my perspective—other colleagues may have a different
view—history is being written that the failure of multilateralism
was due to some of our European Union colleagues, and it was for
that reason that a coalition of the willing had to go it alone.
I caricature, but I hope that I make my point. In a sense, there
is not very much for the United States to get out of the WTO.
If Doha fails, if the WTO fails, what is the downside for the
United States? For Doha to succeed, therefore, the United States
have to get something in return. It is quite clear that one of
the things that they are looking for in return are some concessions
on agriculture from the European Union. We had the fortune to
meet Commissioner Lamy last night, who said, "Actually, there's
no need for any concessions on agriculture because the CAP . .
.—we are there". I think that is a fair summary of
what Commissioner Lamy said. I make no value judgment about that;
it is factually what he said. What prospects do you see of the
WTO negotiations succeeding if the European Union is not able
to make any further substantial concessions on CAP reform and
meeting the agenda in the United States?
(Commissioner Fischler) Thank you very
much for giving me the opportunity to have this exchange of views.
Thank you also for agreeing with me that, in the end in 1996,
we managed the BSE crisis rather well, and we still have fish—we
do not have mad fish, for the moment at least! Coming to your
question, it is clear that there is a risk that, after this war,
more unilateralism could take place in the world. On the other
hand, I still believe that, exactly for that reason, we have to
do everything we can to make sure that multilateralism will continue,
because this is the only way forward. If you say that there is
not much in this round for the US and therefore they could not
have much interest, first of all we are speaking about the round
and not only about agriculture. The round is much broader and
covers many other things, not only agriculture. Secondly, we are
speaking about the Doha development agenda and I am not aware
that the US is a developing country. It is therefore quite right
that there is not much for the US in this round in the agricultural
sector, because there should be a lot for the developing countries
and not so much for the developed countries. We see this rather
differently, I must say, and now I will focus more on the agricultural
sector. First of all, if we look at what has happened in the last
years, you can see that the European Union is by far the biggest
importer in the world. It is also by far the biggest importer
of agricultural products from developing countries. We alone import
more agricultural goods from developing countries than the US,
Canada, Japan and Australia together. What we are asking in this
round is that we should have a fairer burden-sharing. This is
what is on the table for the negotiations. Unfortunately, we must
say that in the last draft from Mr Harbinson we do not see that.
We know that our US friends are asking for more market access,
but this more market access is at the cost of developing countries.
You will therefore understand that it is difficult for us to agree
with that. It is also no longer true that the reason for the distortions
in agricultural trade is our agricultural support. Our agricultural
support, on export subsidies, compared with the value of the export,
is more or less insignificant. If you look at the different commodities
and the different sectors, however, then, to be fair, there are
sectors where we still have a problem—and we clearly have
to deal with these problems. This is also part of our reform process,
therefore. Looking at the developments in the different commodities
in the last years, you can also see that our market share is much
lower than it was in the past. Our export share decreased in more
or less all sectors. The only field where we gain is with the
highly processed goods. There we are not in competition with the
developing countries. For example, with our wine exports or our
exports of ham and similar products, there is no direct competition
with the developing countries. The other element where there is
a discussion is the question of internal support. When we speak
about internal support, the decisive question is which kind of
support is trade-distorting and how do we reduce trade-distorting
support. The problem here is that, with our reforms—we started
in 1992 with the McSherry reform, but also with the reform in
Agenda 2000 and the proposals which are now on the table—we
have always gone in the same direction. We reduce the more trade-distorting
trade elements and partly increase those elements which are not
trade distorting. Unfortunately, our American friends have done
the opposite—especially with their last Farm Bill. This
is where we now have a rather difficult discussion. This is also
now part of the negotiations in Geneva, with these new proposals.
What we are asking for is nothing else but that, primarily, we
would like to see a level playing field. We cannot accept that,
for example on export competition, we have to phase out altogether
our form of export subsidisation and others can continue their
export subsidisation. Their form of export subsidisation has the
same trade-distorting effect. There is no difference. In Mr Harbinson's
last proposal, as it is drafted, there are also big loopholes
where, for example, our American friends can continue with their
practice of giving export credits, or with their abuse of food
aid. Similarly with their internal support. It is really unacceptable
that we are prepared to move away from amber box measures but,
in Mr Harbinson's concept, the amber box is treated not so differently
from the blue box. If you look at what the OECD says in the study
they published recently, however, they say that the trade-distorting
effect—if you make the relationship and calculate a ratio
between the trade-distorting effect of their new amber box measures,
their new counter-cyclical approach, compared with blue box measures—there
is a ratio of 1:4. In other words, their form of internal support
is four times more trade distorting than our form of internal
support. This is what we have to discuss. There is also an important
additional point which we should discuss further. We are always
speaking about developing countries, but is it right, especially
in agriculture, to put all the developing countries on the same
footing? If you compare the competitiveness of Brazil, for example,
with that of a sub-Saharan African country, it is like day and
night. Nowadays and in certain areas, Brazil is perhaps more competitive
than even the US—for example, if I look at the soya market
and what is going on there. We should therefore be somewhat careful.
I know that this is very difficult, because there is a UN definition
and we will not change it—but it is a matter of fact that,
economically speaking, it is not very logical just to speak about
"developing countries". If we look at what has happened
with Everything But Arms, we are prepared to do more—and
especially to do more for developing countries and for the poorest
countries amongst those developing countries. I think that this
is what has to be reflected. We have a real problem where there
is no, let us say, patent solution. As you know, with many ACP
countries we have a contract—the Cotonou Agreement. The
Cotonou Agreement gives these countries a clear preference. However,
with ideas like those floated by the Cairns Group and others,
they would totally lose their preferences. Exports to the EU would
move away from the ACP countries and would go to these other very
competitive developing countries like Brazil—especially
if you speak of sugar, for example. This is something which we
have to take into account when we discuss market access. Clearly
it will be necessary to open up the markets more, but we must
do it in a way so that it is not at the cost of the poorest and
where only the richer developing countries—at least in the
agricultural sector—would gain. Something similar applies
with the tariff rate quotas. If I read studies from, for example,
Oxfam and others, they just use the tariffs as they are notified
in Geneva, but they never look at the details and that we give
clear preferences to the developing countries, especially to the
ACP countries, and that this has a major effect. The tariff rate
quotas were introduced in the Uruguay Round, together with tariffication.
It was necessary to do this because some tariffs were very high
and the idea, therefore, was to make sure that there is a minimum
market access. However, to say now that these tariff rate quotas
should be increased—without looking at what is really going
on in the markets, without also making sure that others who do
not have tariff rate quotas should open their markets in a similar
way—is also an imbalanced treatment of the different WTO
members. I will stop there, and I hope that you have a feeling
for where I see the problems which face us. Perhaps we can continue
with our discussion and find out how to solve these problems.
Chairman: That is extremely helpful.
Perhaps we could ask a brief machinery-of-government question
and then go on to CAP reform.
Mr Walter
188. This is really about how you operate here
with regard to the Doha Round. The Doha Round is a development
round, but it is about trade and a major part of the trade picture
for the developing countries is agriculture. Within the Commission
here you have three different Commissioners dealing with those
headings of development of trade and of agriculture, and you have
three directorates-general. Can you give us an idea of how you
work together on these matters?
(Commissioner Fischler) This is very clear and very
simple. I am responsible for agriculture, including the international
part and including the WTO negotiations—full stop. I am
clearly in close contact with my friend Pascal Lamy and also with
the Commissioner responsible for the development policy but, in
terms of the responsibility, this is different from the other
sectors. Pascal Lamy is responsible for all sectors except agriculture
in the international negotiations. Agriculture negotiations are
done by DG-Agriculture under my responsibility.
Mr Colman
189. Commissioner, you are quoted as saying
that the new CAP would have to be agreed before EU Member States
could provide you with a new negotiating mandate for the WTO agreement
on agriculture. Could you then take us through the timetable of
the next six months leading up to Cancun? I understand that the
WTO deadline for agreeing modalities in agriculture is the end
of March, but your proposals which you introduced on 22 January
have not yet gone to the Council for approval. I think that there
was a debate this Monday. How do you see the movement going forward
which would enable there to be tabled, well ahead of Cancun, the
negotiating position of the EU on agriculture?
(Commissioner Fischler) I think there is a bit of
a misunderstanding. We have already tabled our negotiating position
on agriculture. We tabled this in January, and we are ready to
negotiate on the basis of our proposal. I must also add that our
proposal is really more in the centre than most of the other proposals.
There is a group of countries, like the Americans and the Cairns
Group, which says that our proposal does not go far enough, but
the Japanese and others are saying that our proposal is going
too far. The reality is that the proposal is there and we have
a mandate to negotiate.
190. That has gone through the Council, has
it, Commissioner?
(Commissioner Fischler) Our mandate, coming from the
Council, decided in the Foreign Affairs Council, in the General
Affairs Council—which is the same—in January, allows
us to negotiate it basically on the basis of Agenda 2000. This
is our mandate. It is also true that our positions—or the
different positions of Members in the WTO—are far apart.
The question is how can we converge these positions. I always
wonder a little why the Europeans always have a tendency to blame
themselves for something, but maybe this is a European tradition.
Others do not do that. The point is that it is obvious—and
this was repeated two days ago by Mr Harbinson—that a lot
more technical work has to be done before the WTO, not the Europeans,
is in a position to conclude modalities. He identified nine different
areas where more technical work is necessary. It is true that
it is no longer very likely that there will be an agreement at
the end of March about modalities. However, our American friends
tell us that they are not accepting the Harbinson paper as a basis
for negotiations—so there is no difference. I therefore
do not accept that one can blame the Europeans here. We have always
said that we are prepared to negotiate; we can negotiate, but
there is not much interest on the other side. There is then the
other question of our internal reform. This is a different story.
Our internal reform is there and there are negotiations going
on in the Council. We hope that we will have an agreement about
this additional reform in June. It is true that, if we are successful
with this reform, we would, so to speak, have more negotiating
capital; but this does not mean that this is a precondition for
us to negotiate. This is perhaps an interpretation by the Australians,
but it is not our interpretation.
191. So you may have a new negotiating position
after the Council meeting in June?
(Commissioner Fischler) We can then amend our mandate—this
is true. To put it bluntly, we have a strategic disadvantage here
as the European Union. Why is this so? Because others—like,
for example, the US—can make tactical proposals. The American
proposal is a pure tactical proposal and nothing else, because
they would have a huge problem if they were forced to implement
their own proposal in the US: they would have to reform their
policy. It is not possible for them to implement their own proposal
under the present conditions. They can do this, however, because
their trade representative has a free hand. We cannot do it, because
we will never get the mandate from our Member States—and
we can only operate on the basis of a mandate from our Member
States—which is outside our present policy. Therefore, we
are much more transparent. We cannot start tactical manoeuvres,
saying, for example, "We are very keen to reform internal
support", knowing that then the Americans will make sure
that this will not happen. This is what they are doing. They know
that we have to fight for certain things because our policy, as
everybody knows, is a certain policy. They can therefore be relaxed
and wait until we fight the result. This is how the game goes.
192. Can I ask you questions about the impact
of the CAP on developing countries? You talked about fairer burden-sharing
amongst developing countries' farmers. Do you see the changes
that you are proposing as being fairer on developing country farmers,
either in terms of the protection of small farmers against the
effects of dumping or to provide commercial farmers with export
opportunities?
(Commissioner Fischler) Yes, our reform proposal will
have some effects in this direction. We said from the very beginning,
when we started the reform process, that we were speaking about
a process. What is on the table now, therefore, is not the last
step. There is one very sensitive area, which is sugar, and this
has a lot to do with the developing countries; but sugar reform
will follow, and that has already been announced. When we have
settled this first package, the next step will be sugar reform.
Altogether, however, it is clear that if we move, with our own
support measures, away from partly trade-distorting blue box measures
and put these measures into the green box—which means by
definition that they are no longer trade distorting—then,
first, the competition situation will change. Secondly, if we
move away from using export subsidies, for example in the dairy
sector—if, following our reform, we no longer need to use
export subsidies in the dairy sector—this will change the
situation. If we decouple, for example, the whole beef sector—we
should remember that we have already more or less abolished the
intervention system in the beef sector, so that the market will
regulate supply and demand—then developing countries in
the beef sector are also in a much better competitive situation.
As I said, however, no one should think that our export subsidisation
will play a big role in the future because, in the future, the
amount of money used for export subsidies will be about 5% of
their export value—and this will not change the world.
Mr Battle
193. Do you think that decoupling itself will
make the CAP WTO-compliant? Will it get you there?
(Commissioner Fischler) We are clear—decoupling
means a shift to the green box.
John Barrett
194. I am probably the first Scotsman you have
met for a while who has not mentioned fish!
(Commissioner Fischler) I mentioned fish at the beginning,
but in another context—but not cod!
195. Earlier, you mentioned market access not
being at the cost of the poorest developing countries or the richer
developing countries' gain. Is market access the most important
issue for poor farmers in developing countries, or is it being
given too much priority in negotiations?
(Commissioner Fischler) I think this is rather difficult
to say in a very general statement. It also depends on the objectives
you have. If we would like to give trade—I would not say
instead of aid, but at least in addition to aid—then we
must give agricultural trade, because there it is much easier
to have export opportunities for many developing countries. Usually
there are some problems in establishing a regular export structure;
for example, the question of standards for hygiene. Therefore,
if we want to be serious about giving real opportunities to developing
countries, it is not enough that we introduce quotas and so on;
we must also give them certain technical assistance, so that they
are able to make use of the new opportunities, in the form of
how they can establish the necessary veterinary standards, phytosanitary
standards and suchlike. Nowadays, because more and more products
need a kind of certification, the introduction of such certification
systems is also something on which we can give help to the developing
countries, so that they can take advantage of this possibility.
196. On the question of export subsidies, the
graph which you presented to us showed a clear reduction in the
percentage of subsidised exports; but are there particular sectors
that pose particular problems within that, would you say?
(Commissioner Fischler) Meanwhile, if you look at
the big sectors, you could say that we no longer use export subsidies
for wheat; I think that we will also be able to phase out export
subsidies for the other cereals; we do not use export subsidies
for olive oil or some other Mediterranean products. The remaining
sectors where we substantially use export subsidies are beef,
the dairy sector—but this will more or less go when we are
successful with our reform ambition—and sugar. Sugar is
a real problem, but it is also a very complicated problem in many
respects. There is the problem of the ACP sugar regime; there
is the problem that there is a different financing system because
it is a kind of self-financing system and so, in the end, the
consumer pays the price of the subsidies. It is a very close system
between the industry and the beet producers. We therefore have
to look at both. In this reform which we are planning we have
to look at the transferability of the price—in other words,
how big is the share which arrives at the farm gate from the consumer
price. That involves the question of competition in the industry—or,
rather, the lack of competition in the industry! In addition to
that, we have to think about ways of how we can continue—clearly
at a lower level and not at the same level as in the past—a
certain sugar production in the European Union. The point here
is that it will always be difficult to produce beet sugar at the
price level of the most competitive cane sugar producers. You
could also argue that Europe is no longer interested in sugar
production and we could import all of the sugar. This is another
alternative, but it is perhaps an alternative where the chance
of getting agreement with the Member States is rather limited.
Hugh Bayley
197. You direct us to parts of the export subsidy
regime where progress is being made, but our committee was in
Ghana recently and we saw a very large tomato canning factory
and a large irrigated farm, both built with European aid. The
factory had closed and the farm was producing about 10% of its
capacity. The pumps had broken down. There was no market for the
tomatoes, it appeared. European tomatoes were being sold in the
market, which were much cheaper than they could produce locally.
You say that export subsidies will be down to 5%, but that is
an average. If my head is in the oven and my feet are in the snow,
I am, on average, very comfortable! But what can we do to set
a ceiling, product by product, on export subsidies? Because, if
we do not do that, we will continue.
(Commissioner Fischler) But how will this make sure
that this canning industry in Ghana can survive? How would you
like to solve the problem of Ghana here?
198. Ghana suffers because European tomatoes—canned
tomatoes and tomato paste—are exported at below the price
that they can produce them. There is a policy contradiction here.
I cannot recall whether it was EU development assistance or bilateral
assistance from EU countries, but there is a lack of policy co-ordination
here. I cannot ask you to respond to an individual case—I
appreciate that—but the question is, should we not be setting
a limit on the proportion of the value of a single product that
we export that comes in the form of subsidy, rather than averaging
it over the whole of our agricultural exports, including beef,
olive oil, and things which bear no export subsidy at all?
(Commissioner Fischler) Let us be clear—we have
such a limit. The system as it works is that we say that the maximum
export subsidy we can give is the difference between the world
market price and our internal price. Sometimes the real problem
is getting real figures about the world market price. However,
we have no interest whatever in giving higher export subsidies
so that it is possible to dump the market in such a way that we
lower the world market price. Such things happened in the past.
I do not deny that. I know that, for example, when we sold the
butter storage at the beginning of the 1990s, we really dumped
the world market with these products. From the Commission side,
however, we have no interest whatsoever in such things happening.
If there are such cases, for whatever reason, and if you have
this case from Ghana, then please give me that case and we will
check it. There was a similar problem in the south of Africa,
in Botswana or Swaziland. It was true that there was some damage
done there by European exporters. I can show you that, immediately
afterwards, we changed our export policy here and we drastically
reduced the maximum level of export support to these countries.
So if there are trade distortions, then we are always prepared
to look at these things. As I said, however, overall I think that
the question of export subsidies will not be the decisive question
for the future, because in future export subsidies will play less
and less of a role. When we now reduce, or more or less abolish,
export subsidies for the dairy sector and if we are then able
to carry out reform in the sugar sector, there will no longer
be very much left.
199. At its fundamental, if we are reducing—or,
better still from my point of view, eliminating—export subsidies,
we must be amending the CAP so that the subsidised element only
applies to that volume of produce that is consumed within the
EU. Surely the difficulty with the tomato case is that we are
providing subsidy for production according to our rules, but for
more production than we consume? That, of course, is the case
with sugar—but, as you say, that is a separate issue.
(Commissioner Fischler) Yes, but there is no internal
support for tomato production.
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