Examination of Witnesses(Questions 20-39)
TUESDAY 4 FEBRUARY 2003
PROFESSOR ADRIAN
WOOD, DR
ELAINE DRAGE
AND MR
IAN NEWTON
Mr Battle
20. On the question of the model, we could change
the language and say we have moved from trade liberalisation and
we are redefining it as trade promotion, but the question is whether
the model is any different. There is a view that there is one
agreed model now and some of the promoters of a model in the last
20, 30, 10 years say that there will only be one model for trade
liberalisation. The implication of that model is opening trade
and it will be a trickle-down theory. We are still signed up to
that trickle-down theory, even though we know it is not working
even in cities in Britain and America where there are deep pockets
of poverty. I am simply asking, if the trickle-down Heineken theory,
where it does not reach the other parts, is not working, are there
any signs of any new models? Or, to shift the metaphor, in the
Philippines I was impressed by an economist who said maybe if
we increase trade and economic activity we have the theory of
the rising tide lifting all the boats, but he said the only boats
in their harbours were now the boats from the rich world and fishing
had gone. Are we looking at new economic challenges to the consensual
model? Rather than trying to tinker with the language and saying
it is not just trade and adding on a bit of aid if the trade does
not work, we recast the modelling of what we see the economic
share to be?
(Professor Wood) The model has actually moved on in
the last few years. There is increasing recognition that expansion
of trade is only one of a number of things which you would need
to try to do in order to tackle the problem of mass poverty in
particular countries. The three other elements I would mention
now fit in a much more balanced and much more appropriate way
into the model: one is improvement of the business climate, the
vital need just to expand investment, particularly in Africa where
investment is incredibly low; another element is widespread distribution
among the population of a country of access to assets such as
education and land and credit and also access to markets is really
crucial, particular groups of poor people are left out because
of the problems of poor internal transport infrastructure. The
fourth element is what I was emphasising before, social protection,
the need to have something in place to help people who are losers.
If you go back 15 years, a much more simplistic view was coming
out of the World Bank, which was that trade policy reform was
more or less sufficient to stimulate growth and poverty reduction.
That view has changed. If you read what is coming out of the Bank
now, and you read the way we put it in the White Paper, without
a major fanfare or a change of label, the model has actually shifted
in the kinds of directions you would think are good.
(Dr Drage) I cannot remember who the quote is from
but trade liberalisation is a necessary but not sufficient factor
for poverty reduction. There need to be the other factors which
Adrian has just explained.
Chairman
21. Who would like to lead on the Uruguay round
and assessment thereof? [Question 5: In our post-Seattle
report on the WTO and developing countries, we said "We are
astonished at the lack of empirical study of the impact of the
Uruguay Round on developing countries. Adequate resources must
be provided to fund such a review on the basis of a sample of
countries". What assessment, if any, has been made of the
developmental impact of the Uruguay Round?]
(Professor Wood) It is a point which has come out
of this Committee earlier that insufficient analysis has been
done of the effects of the Uruguay round. It is a fair point.
What we still have is a large number of studies which were done
during the Uruguay round of the potential impact on different
groups of countries and particular sectors. What has not been
done is a really systematic attempt to go back and see to what
extent those predictions translated into reality and to what extent
they did not. Part of the reason that evidence does not exist
is that it is too soon; they take a very long time for a lot of
these effects to translate into practice. If you are talking about
the changes in the structure of production which occur as a result
of a change of trade policy, it might take a decade to work themselves
out, particularly in terms of the expansion of export activities.
That is not to say no work is being done on this subject. Work
is being done in the research community and probably the most
important group of people working on this is in the World Bank.
DFID over the last five or six years have put substantial money
into World Bank trade research and capacity building, partly directed
at that. Another thing we have done which you could interpret
as a study of the impact of the Uruguay round, though not a statistical
one, is the International Commission on Intellectual Property
Rights which DFID funded. One of the most important and controversial
elements of the Uruguay round was the TRIPS agreement. The White
Paper recommended that we set up such a commission, we have done
it and it has reported. The UK Government will be officially responding
to it very soon.
(Dr Drage) I endorse the point you have made about
TRIPS. It is important to remember that in a number of areas,
the Uruguay round did not actually change things, it froze things
so that people could not go backwards. That is particularly true
in terms of the Agreement on Agriculture, where agriculture was
brought into the multi-lateral system of negotiation for the first
time. You put it on the escalator, so to speak. It was equally
true with the GATS. What countries did in their GATS commitments,
which is a new Uruguay round agreement, was to bind what they
were already doing, so there was no measurable change as a result
of that Uruguay round commitment. In some areas you will in time
be able to measure change. In other areas you will not, as a result
of the Uruguay round. You need to differentiate between the different
agreements.
(Mr Newton) The important thing was that agriculture
was brought into the world trading system for the first time by
the Uruguay round and it set certain markers which it is now impossible
to retreat from. We can only move forward from that and that is
what the current negotiations within the context of the Doha round
are concerned with and no doubt we shall come onto that shortly.
22. That conveniently brings us on to the next
chunk which is agriculture and rural policy. I am assuming that
DEFRA, being the apostolic inheritors of MAFF, are the lead department
on these questions. Would you like to start with question six?
[What would amount to the "substantial reduction in support
for agriculture" which the UK Government has set itself as
a target by 2005?]
(Mr Newton) The first thing I should like to say is
that when you talk about substantial reduction in support for
agriculture, we are really talking about substantial reduction
in trade-distorting support because the CAP reform proposals will
not actually reduce support, but they will shift the balance of
that support. The degree to which it changes is difficult to say.
We—we being the European Union—have submitted some
proposals now to the WTO which call for tariff reductions of 36%
export subsidy reduction of 45% domestic subsidy reductions of
55%. That is as far as the European Union is able to go within
its current CAP mandate. Clearly we are going to need to go further.
The US and Cairns, two other big groups in the WTO negotiations,
are looking for something far more substantial than that. They
are talking about the abolition altogether of export refunds and
maximum tariffs of perhaps 25%. The result, hopefully, will be
something somewhere in between, but I cannot really put a figure
on what that substantial reduction is going to be.
23. Question seven.[ Question 7: What
impact does the Common Agricultural Policy have on food security
and livelihoods in developing countries? What assessment has been
made of the likely impacts of CAP reform on developing countries?]
(Professor Wood) The short answer is that it has a
very complicated impact and it does not lend itself to simple
summary. There is no doubt that in aggregate developing countries
lose from the CAP, so when you do model simulations of the effect
of CAP reform, developing countries gain in aggregate by numbers
of the order of $25, $30, $40 billion a year. When you then start
splitting up developing countries and looking at the impact on
different groups, you find very varied effects. Many of the gains
of reform are concentrated on middle income countries and if you
look at the impact on low income countries it is much more varied.
A lot of them stand to gain, but there are two kinds of potential
losers we need to worry about: one is countries which enjoy preferential
access to EU markets which would lose as a result of reform; the
other is countries which are currently net food importers which
would lose from a rise in world food prices as a result of less
dumping of agricultural surpluses on world markets. In the case
of food importing countries, again it is very complicated because
you have to look at who within them is going to gain and lose.
It may well be that a rise in world prices would provide a stronger
incentive to production among poor farmers. It may well be that
poor farmers would gain from a rise in food prices whereas more
affluent urban workers would lose. It is very country-specific
and on balance we are pretty convinced that even if you look at
low income countries where the bulk of poor people are concentrated,
that reform of the CAP would help to reduce poverty. Issue by
issue and commodity by commodity, it varies from one country to
another.
24. May I ask a brief supplementary as you raised
preferential access? About one quarter of the Commonwealth countries
are in the Caribbean. Through the ACP mechanism bananas have preferential
access. I notice the Premier of St Vincent and the Grenadines
wrote to the Competition Commission saying that they should not
allow Wal-Mart to take on more supermarkets because Wal-Mart source
their bananas from Ecuador and other South American countries
rather than good Commonwealth countries in the Caribbean. Does
HMG have a line to take on this or is DFID literally indifferent
to preferential access, provided poor countries generally are
benefiting from an increase in trade?
(Professor Wood) We are not indifferent. We recognise
that there are quite a number of developing countries, including
low income ones, which are currently large-scale producers of
particular agricultural commodities because of the preferential
access they enjoy to the European market. Bananas are the best
known case. But the most striking in terms of some of the numbers
is actually sugar where access to the European market with very
high sugar prices has provided an incentive for countries like
Barbados to remain in sugar production, which makes very little
economic sense in terms of the other activities they might engage
in. That means that following any reform of the CAP which alters
the structure of preferences or any other related trade reforms
which alter the structure, we have to in some way assist adjustment
in countries which have been led into producing uneconomic agricultural
commodities. DFID have a very strong involvement in the Caribbean
and one of the focuses of that over a long period of time has
indeed been providing assistance, support, information and technical
assistance to enable farmers who are producers particularly of
bananas to adjust and move into other activities.
(Dr Drage) The issue of the balance between multi-lateral
liberalisation and preferential access is a particularly difficult
area. There is going to be a mid-term review of the sugar protocol
to the Cotonou agreement. That is written into the Cotonou agreement
and I am very conscious that there is a number of countries which
are very heavily dependent upon sugar. We hope very much that
there will be changes to the internal EU sugar regime. Commissioner
Fischler is expected to produce proposals to reform the EU regime
in about June of this year. The changes which will then happen
in terms of the ACP countries will come out of that because, if
the internal EU price for sugar falls, which is what the government
very much hopes will happen, it will become less worth while for
some of the countries with preferential access to export to the
EU than, say, to other places which may be more local to them.
There was a study several years ago to look at how competitive
in the world market a number of the sugar producing countries
could be. That came to a conclusion that a number of them could
well be productive and sell on the world market at world market
prices because the EU internal prices are anywhere between two
and three times the world market price. We are very conscious
that this shift and this change will be difficult and it does
need to be smooth for them and they need to be given assistance
to do so. One way of doing that is to ensure that in the multi-lateral
context tariffs are significantly reduced which will enable them
to diversify to a greater degree into areas they probably cannot
now because of the tariff structure.
(Mr Newton) Elaine is absolutely right. What we need
on CAP reform in this area is managed reform. The Commission are
due to report on sugar in May/June this year. The current sugar
regime is due to expire in 2006. If we were simply to abandon
all our support for sugar overnight, it would not help the Caribbean
countries or the African countries. The country which would benefit
the most would be likely to be Brazil, which is a huge sugar producer.
We need to do it in a managed way and that is what we are aiming
at.
(Dr Drage) Some of the LDCs under the Everything-But-Arms
(EBA) agreement are beginning to make gains out of sugar, countries
like Mozambique, which are now exporting to the EU where they
could not before and the quantities they can export will go up.
There is a very complicated trade-off between developing countries
as well in a lot of these areas.
25. We have a whole evidence session with Caribbean/Commonwealth
colleagues, so it will be interesting to hear what they have to
say on this. Who would like to have a go at question eight? [Question
8: Is the primary concern of EU CAP reform to make EU agricultural
policy WTO-compliant, or development-friendly? Will decoupling
and modulation (a shift from price support to direct payments
to farmers) make the CAP WTO-compliant? Will decoupling and modulation
make the CAP development-friendly?)
(Mr Newton) First of all, it is probably true to say
that the primary concern of the EU CAP reform is neither of these
things. It is reform to meet internal EU consumer demand and to
change the way the CAP operates in relation to the environment,
rural and social development as well as to the budgetary implications
of the CAP. Obviously it does have an impact on the wider world.
CAP does not exist in isolation, despite what some people might
prefer to think. That answers the first part of the question.
The second part: will decoupling and modulation make the CAP WTO-compliant?
At present the CAP is WTO-compliant, but it will certainly help
to make it more WTO-compliant by shifting support away from trade
distorting subsidies into what is colloquially known as green
box subsidies, that is non-trade distorting or at best minimally
trade distorting. That way it will also enable the EU to make
a far more aggressive offer on liberalisation and to that sense
decoupling and modulation will also make the CAP more development
friendly.
26. Question nine. [Question 9: Is the
primary aim of EU agricultural reform—as far as relations
with developing countries go—to protect small farmers from
the effects of dumping, or to provide commercial farmers with
export opportunities? Would these different aims imply different
sorts of reforms?]
(Mr Newton) The primary purpose, as far as relations
with developing countries go—and Adrian will correct me
if he sees it differently—is to provide better market access
for developing countries. That is certainly the message which
comes across most clearly in the meetings which I attend regularly
in Geneva. The developing countries want access to our markets
and the ability to sell onto our markets. They would also like
access to other markets where our subsidised exports tend to undercut
them. Those two issues are perhaps the most important in terms
of the development aspects of CAP reform.
Alistair Burt
27. Two wider questions. What evidence is there
that when European countries who have strong agricultural sectors
find their interests adversely affected, there is any sense of
movement towards policies which will be beneficial for countries
outside the European Community?
(Mr Newton) I suppose most European countries have
a concern for their own internal agricultural welfare, and rightly
so. Some are more concerned than others about it. From a UK policy
point of view, we see considerable benefit in promoting liberalisation
of trade which will help not only our own producers and our own
agri-industry, but also the industries and producers in developing
countries as well.
28. But we get to the bit as far as reform goes
on and then at some crucial stage the French and the Germans decide
to get together, stitch up a deal and the chance of reform is
lost. What sensible evidence do you have to suggest that no matter
how far we progress with this, there will be some sort of cultural
change which will affect that protection of their own interests?
(Mr Newton) That is difficult to answer. You will
no doubt have been following discussions on the WTO negotiations
and the EU's input to those WTO negotiations in terms of its modalities
and you will be well aware that the French in particular, for
example, made it very difficult to get agreement on the paper
which was eventually submitted. But they did agree in the end.
In the final analysis, those countries which are what might loosely
be termed the more protectionist countries within the CAP will
come round to an agreement on agriculture. That is my hope and
that is what I believe. I hope I am not proved wrong on that.
It may not be everything the UK wants, but it will be a significant
step, a substantial step, in the right direction.
(Professor Wood) May I offer one bit of evidence.
I think the fact that France and various other European countries
are now mounting such an aggressive defence of the CAP is evidence
that they feel that it is under threat. I think they sense, rightly,
that the climate of opinion within Europe has shifted against
the CAP and they need to resist this very, very strongly. That
is why they have been so very vocal. That is my one bit of evidence,
as it were, to support Ian's hope.
(Dr Drage) May we add one point about the agreement
on the CAP ceiling which has been to some degree misrepresented
in the press as an absolute defeat for those who want to reform
the CAP and bring it down? What it agreed was actually a cut in
real terms in CAP ceilings over a period of seven or eight years
and a cake which has to be shared between 25 countries not 15.
That puts quite a lot of downward pressure on each of the regimes
within the CAP and we believe was by no means the great defeat
which some of the press held it as. It poses a real problem for
those countries within the EU who have made a lot of money out
of the CAP in its current structure.
29. From your sense to date of applicant countries'
views of all this, do you think they will be allies to the process
of assisting development in countries outside the EU or do you
fear that their own concerns about joining the EU will make them
slightly more protectionist in nature? What is your sense from
having had some contact with them in these stages of their movement
towards the EU?
(Professor Wood) We have not had very much contact
with them yet. If one had to guess, my guess anyway would probably
be the same as your guess, which is that they would be more protectionist
and less reformist.
(Mr Newton) In the context of the agriculture negotiations
in Geneva, I know that the European Commission, which negotiates
on behalf of the EU 15 in total, has regular sessions with the
new accessionary countries. Their main concern is that for the
most part they are economies in transition to a market economy
and that is something which underlies their approach to the negotiations
at the moment. It is probably fair to say that development is
not a major focus for them.
Mr Walter
30. I sense from the answers that the feeling
of our witnesses is that there is small progress in this direction.
I put it to you—and this may be unfair—that there
appears to me not to be the political will to change the situation
significantly and in fact a lack of ability of individual Member
States to have much effect on it. I think that if you went back
and examined the party manifestos of every British political party
since we joined the European Community you would find the words
"reform of Common Agricultural Policy" somewhere in
there. We are talking about £64 billion of cost of the CAP
in addition to the distorting price mechanisms and the same figure
in the United States as well. Even if we put this into a green
box, we are talking, just in terms of Europe and the United States,
of a series of green boxes amounting to over $100 billion a year.
To my mind that is a barrier to trade, if you have no green box
at all from which to launch your export effort, from which to
develop your agriculture. Is there any sign that we are moving
to a situation . . . I hear that the green box of course is not
direct subsidies to production but is environmental and all the
rest of it. I have been a farmer and people used to ask me what
I farmed. I told them I farmed subsidies and kept a few sheep
to justify it. My subsidies were not only subsidies to production,
the Ministry of Agriculture was paying me money to fence my fields
on the basis that I did something to the hedgerow in between.
Fencing my field was actually a subsidy to my production. We can
kid ourselves about green boxes but they are actually trade-distorting.
Would you like to comment on that?
(Mr Newton) I cannot deny that. Any subsidy is to
a degree trade-distorting. We have to take things a step at a
time and we have made quite considerable progress over the last
decade on CAP reform, starting with the McSharry reforms in 1992.
We are continuing to progress in that way. The proposals for decoupling
in the current mid-term review, are very, very significant. We
should like to see support made more degressive. Apart from the
proposals for modulation, there is not much degressivity in the
MTR proposals at the moment. At some stage that will happen, but
in making our farm support and shifting it away from those which
are blatantly production assisting to those which are more environmentally
and socially friendly but which admittedly will make some contributions
to the overheads of a farming business, we are making a big step
in the right direction and I think that is the important thing
to understand. I do not think in wider Europe that it would be
politically possible to make such a major step as you would like
to see in one go.
Ann Clwyd
31. Having spent five years in the European
Parliament, some 20 years ago, incessantly voting on reform of
the CAP, and with a very determined leader at that time, Barbara
Castle, whose main aim in life at that time was to reform the
CAP, I would say that the changes have been very slight indeed.
You are really glossing over the reality. Would you not think
that it is the new membership of the European Union which will
actually eventually force that radical reform which we have been
wanting for a very long time, rather than the policies of individual
states? It will be the sheer pressure of those countries coming
in and their demands on the CAP which will bring about those reforms.
(Mr Newton) That is happening to an extent already
in so far as we have a budget ceiling imposed, which is now going
to have to be split between 25 Member States instead of the original
15. Yes, the budgetary implications are going to have a major
impact on the future of CAP reform. I am not here to defend the
CAP, but I am trying to say that there have been some positive
steps in the right direction and I think they are a bit more than
you might suggest, if you will pardon me saying so.
Mr Khabra
32. Do you think it would be possible for a
country like France to agree to EU agricultural reform?
(Mr Newton) There are signs already within France
that they recognise the need for reform, that they cannot stand
still. In certain areas of agriculture the French are well placed
to benefit very well from a more liberalised market in agriculture.
I am thinking particularly in the cereals sector, of which I have
some experience. Yes, I think so, but they will no doubt be pulled
along slowly.
Mr Colman
33. My colleague talked about the fact that
he was farming subsidies. To what extent could you actually have
a situation where the UK Government could in a sense directly
pay the farmers the money in the way that we perhaps pay redundant
steel workers or redundant coal miners through the benefit system,
redundant farmers are paid a certain amount of money and short
circuit the system? To what extent could the UK go it alone and
by all means support people who will look after the countryside
in the same way as perhaps other sections of the community whose
world has moved on are subsidised rather than having a situation
where they are asked to produce steel which is uncompetitive or
coal which is uncompetitive in the world market?
(Mr Newton) The short answer to that is that we are
part of a Common Agricultural Policy and we are bound by common
rules, so we cannot go it alone, even if we were to provide money
to persuade farmers to quit the land, if that is what you are
suggesting.
Mr Colman: No, just make a direct payment.
Continue living there and just pay the money.
Chairman
34. We all have our thoughts on how the CAP
might be reformed. I remember a prominent German Christian Democrat
told me 15 years ago that they had been bribing their farmers
for their votes for years and they did not intend to stop now.
There is always going to be slow progress. Can we move onto market
access? Everything-But-Arms initiative. Has DTI done an assessment
on the success of the Everything-But-Arms Initiative? [Question
10: What impact has the European Union's Everything-But-Arms
initiative had on trade between developing countries and the EU?
How does the focus of the Everything-But-Arms initiative on a
fairly arbitrarily-classified group of least developed countries,
to the exclusion for instance of India, fit with DFID's poverty
focus?]
(Dr Drage) It is a little bit early to do that. It
is not quite two years since Everything-But-Arms came into effect
for all the areas, except bananas, sugar and rice, where there
is a phasing in of access. We are also talking about the least
developed countries in the world who have the least capacity to
respond rapidly to changes in access. We do think there are one
or two statistical signs and a report is due to come out from
the World Bank very shortly looking at both EBA and AGOA. Certainly
when it comes I shall make sure that the Committee is sent a copy[12]Just
looking at odd statistics here and there, we can see that for
the sugar producing countries who are LDCs, yes there are clearly
some benefits starting to flow already. There are one or two very
slight signs in other areas; we hope to have the start of some
statistics in the not too distant future, but we are not expecting
a radical change. Given the relative lack of capacity of LDCs
it is going to be a slow growth thing.
35. My impression is that African countries
seem to be much more excited about AGOA than they are about EBA.
Is that because of any substantive difference, or simply because
our American cousins have been better at promoting the benefits
of AGOA than we have of the EBA initiative?
(Dr Drage) I think AGOA is structured extremely differently.
When you actually look at AGOA, the area which is growth has been
oil from Nigeria. People talk about AGOA boosting exports from
Africa to the USA; a large amount is oil. There is a small area
where there are textiles now being produced in Africa, but that
is outdoor relief for the US textile industry. Slightly worryingly,
when you look at the structure of AGOA, that depends on certain
clauses in AGOA which are potentially subject to review and repeal
by Congress in several years' time. We have some doubts. There
are clearly some benefits flowing from AGOA, which are short term.
Whether they are going to turn out to be long term, we really
do not know. A lot of the benefits are in primary commodities
which probably the Americans would have bought anyway.
36. Non-tariff barriers; question 11. [Question
11: Are non-tariff barriers, including phyto-sanitary standards
and technical barriers to trade taking the place of tariff barriers
in restricting developing countries' market access? What is the
UK doing, to enhance the ability of developing countries to meet
such standards?]
(Dr Drage) It is an extremely important and difficult
area and in terms of phyto-sanitary standards one which causes
concern to quite a number of developing countries, not just in
Africa. It is not an area which is up for negotiation in the current
WTO round. There are two things which the UK Government is seeking
to do: one is that through the aid programme we are seeking to
assist developing countries to meet the standards, so they actually
can export, and that phyto-sanitary standards in particular do
not act as a barrier even if the tariffs have come down already.
The second thing we need to do is within Europe. We need to have
a very critical look at whether new standards are needed, are
they appropriate, what level of assessment has been done. Are
we for example aiming to save one life in three years in the entire
EU, but what might the effect be on lives in developing countries?
A lot of that external look when the EU is drawing up phyto-sanitary
standards is still not being done properly. It is a question of
balance and they are very difficult issues when you are talking
about risk assessment for health and safety standards; we recognise
that.
(Professor Wood) We ran a large international workshop
on this subject about six months ago, where we had representatives
from a lot of developing countries and from the EU. The object
basically was to try to improve communication on this issue. We
think that was helpful in addition to the more specific things
we are doing. The other point I should like to make is that increasingly
the private sector is setting standards which are in excess of
those which are laid down by law and this is particularly true,
in food, of supermarkets. That is a very, very difficult problem,
because the supermarkets see their claims to health safety as
a very important marketing tool. What, if anything, the UK Government
can do about that is a very tricky issue.
37. Question 12 and the UK's Africa trade and
poverty programme and increasing productive capacities. [Question
12: What is the UK doing to help developing countries to take
advantage of enhanced market access, by increasing their productive
capacities? What is the status of the UK's Africa, Trade and Poverty
Programme?]
(Professor Wood) Part of it in general terms is what
I was talking about earlier. The single most important plank of
raising productive capacity is helping developing countries to
remove obstacles to investment, particularly obstacles which arise
from poor governance of various kinds. It is a very tricky issue.
We are trying to do that across the board. The gains in production
that you will get in a wide range of sectors will enable a country
to take advantage of better market access. The trade and poverty
programme is ongoing. We are working in a range of countries.
The programme is not really fully in operation yet. We have been
working on it and we have put a certain amount of money into it;
we are working with a range of countries, trying to fit it within
the framework of their poverty reduction strategies and trying
to look, among other things, at opportunities for more regional
integration in Africa. This is a field in which we are trying
to do a wide range of things[13]
Mr Khabra
38. Do you think they can decide an item of
production which can easily be exempted from these barriers? I
am not talking about all items, but there are certain items which
can be easily exempted.
(Professor Wood) It has to be said that many items
already are exempt. Most unprocessed tropical products come into
most developed countries with very few restrictions on access.
Where there are still barriers, they are usually there for a reason,
for a domestic political reason. This applies for example to temperate
agricultural products which would compete with producers in Europe.
It also applies to tariff escalation, for example where there
is a much higher tariff on chocolate or something with a sugar
content than there is on raw cocoa, which again has the effect
of protecting European manufacturers of chocolate. We believe
that these costs are not sufficiently significant to be worth
defending these barriers, but there are relatively few examples
of cases where you could remove a barrier to trade and there would
be no losers in the EU. Most of those have already gone.
Chairman
39. May I put to you what I think is a slight
dialogue of the deaf sometimes between DFID and developing countries?
It is something like this. From the 1997 White Paper, where agriculture
moved out of the vocabulary and the emphasis was on sustainable
livelihoods and people making the best of what they had, so you
have sustainable livelihoods. Then you have good governance and
sometimes political cousins are not always interested in hearing
a conversation about good governance. Then you have a conversation
about greater regional trade because it is the view of some of
the DFID and other economists that there are going to be better
advantages to African countries in pursuit of regional trade.
That is sometimes your conversation. Their conversation very often
is that they have cocoa, coffee, rice, whatever, with which, if
only they could overcome certain hurdles, they could do a lot
better in the markets, or Ethiopian coffee if they could just
get it branded as organic coffee, all that kind of stuff. We can
pick through them, but in the poverty reduction strategy programmes,
to what extent is DFID and HMG collectively, one by one with countries
to which we are giving help, asking them what bits of existing
EU or world trade policy they think are inhibiting them from exporting
more than they are at the present moment. Does that make sense?
(Professor Wood) Yes, it is a very sensible question.
If one starts from poverty reduction strategies, we think that
up to now trade issues have not had a large enough place in them,
partly because of the origins of poverty reduction strategies
in debt relief and in a wish that the revenue gains from debt
relief would be spent on social sectors which would benefit poor
people. We think increasingly there should be more emphasis on
production, on growth and on trade. We have not made much progress
in talking about specific sectors and in particular the way in
which they are protected by specific bits of developed country
policy. It is something we probably should do. How much we can
do it is not clear, because you wind up getting into a lot of
extremely detailed issues which DFID may not be the agency best
equipped to do. What we can usually do is to provide some kind
of technical assistance to enable the country to carry out its
own dialogue on these particular issues.
(Dr Drage) You mentioned the important issue of tariff
escalation, but there are many issues which are probably very
similar across a large swathe of developing countries, which is
why we think pursuing the multilateral process of liberalisation
is really important. That way hopefully you get wins which can
be spread widely across a whole lot of developing countries, which
is tariff peaks, tariff escalations, which Adrian has already
spoken about. In terms of internalising trade and trade-related
capacity building into the PRSPs, it is still a very new art,
or science—I am not sure which it is—really probably
only five years' old. Many countries, in their thinking about
development, are behind us and are not yet really seeing trade
as one lever for poverty reduction. There is a certain degree
of resistance to thinking that way amongst a number of other countries
who are involved with PRSPs as well.
12 Further information to follow. Back
13
DFID also submitted a background paper entitled "Africa Trade
and Poverty Programme Overview". A copy will be placed in
the Library. Back
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