Examination of Witnesses (Questions 309
- 319)
WEDNESDAY 7 MAY 2003
MR RICHARD
EGLIN
Chairman: We are part of the House of
Commons' Select Committee on International Development, carrying
out a fairly substantial inquiry into trade and development policy.
We have been taking evidence from a large range of witnesses,
from the Prime Minister of Ethiopia to parliamentarians from southern
Africa to high commissioners from the Caribbean. I am afraid that
we now have a kind of examination paper which we have tended to
set for our interlocutors! I hope that you will bear with us as
colleagues ask questions. It is just to make sure that we cover
the whole "syllabus". There is always a danger with
a committee like this to become self-indulgent on one particular
topic, become immersed in sugar policy and then discover that
we have asked nothing about GATS and TRIPS. Perhaps we could start
with John Battle?
Q309 Mr Battle: I wonder if we could
start with an overview. We have heard one or two voices suggest
that in fact it should not be entitled "the development round"
at all. Could you give us an overview of whether you think it
can be a development round? What is the chance of it being concluded?
The time frames seem to be really tight; even the deadline, January
2005, seems too tight, given the large range of topics. What is
your view? Can it be a development round? Can it get on track?
What are the obstacles, the road blocks, in the way of something
really happening?
Mr Eglin: Can it finish on time?
Yes, it can. This is the ninth round of negotiations that we have
conducted here, either under the old GATT or now, the first one
with the WTO. If we could get the political decisions we need
in the areas of market access—which is really what is holding
things up at the moment—technically, we would need another
six to nine months to finish the whole thing off. Given our reputation,
I know that the end of next year looks horribly optimistic; but
technically it is do-able. The Director-General and the membership
are still insisting that there should be no lowering of the level
of ambition and that we should stick to the timetable. It is a
matter of political commitment; it is really not a matter of technical
problems. Can it be a development round? Most definitely, yes.
I myself believe that all rounds are development rounds, in the
sense that they deliver better market access to developing countries
and they assist developing countries to integrate into the international
economy. What makes this one special? The developing countries
signed on in Doha to a round which they saw as being a political
commitment by the industrialised countries to address the issues
which they consider to be most important for them. So it has to
deliver for the developing countries. I do not believe that the
developing countries will agree to conclude this round if they
do not see that their economic interests have been properly addressed.
They, in the end, can now quite evidently stop this going forward,
or at least can hold it up until they have had their problems
addressed adequately.
Q310 Mr Battle: Do you then see some
consensus starting to emerge, or at least some coming together
starting to emerge? Our Committee has visited the United States.
Voices there and "voices off", as it were—I am
not sure I know what one is, but it sounds more like a Mexican
stand-off than a real negotiation. What do you think the chances
are of a compromise and a consensus emerging, with that kind of
bloc politics around?
Mr Eglin: I do not think there
is a bloc. The developed-developing, North-South—I do not
believe that has ever been the way in which negotiations have
been conducted here, and I do not think that this one will be
conducted in that way. Countries go into these negotiations with
their individual interests at heart. In some areas you will find
that the Latin American agricultural exporters are lined up with
Australia, New Zealand and Canada. In other areas you will find
that they have very different positions when it comes to manufactured
goods and liberalisation of services. So it has never worked,
and this one will not either, on a North-South basis. That said,
there are some issues which will be looked at in a North-South
way. TRIPS and public health is one. Special and Differential
Treatment is a guiding parameter for the whole Round. On the US
and the EU, frankly, that changes so much from day to day, week
to week, or month to month—and here Dr Supachai, when he
talks to you this afternoon, will be able to tell you better what
happened last week. There was a ministerial meeting in Paris.
On the sidelines of the OECD meeting there was a trade ministers'
get-together, at which Commissioner Lamy and USTR Zoellick—as
far as I understand — sang very much from the same hymn
sheet. Indeed, you get the sense that politically there is an
awful lot at stake in making sure that multilateral co-operation
in the economic area is seen to be alive and well, and moving
forward. I think that is a message which they are keen to put
out at the moment.
Q311 Mr Battle: And, in fact, what
leads part of it?
Mr Eglin: Yes. I think that you
should not come here, look at the squabbling and the attempt to
herd cats, and so on, and go away thinking that this is a major
problem. This always happens. It has been said before, but it
is true: we are much further ahead with this round than we were
at the same stage with the Uruguay Round. There is some meaning
in that. There is a great deal more clarity of focus on what the
problems are. "Problem" is maybe the wrong word, but
where the political breakthroughs need to be made if the Round
is to move forward. When they are made, I do believe that it can
move forward and it can move forward quite quickly.
Q312 Tony Worthington: This is an
outsider looking in. When you look at the framework of these enormous
economic powers—the United States and Europe—and the
incredibly weak individual countries, the developing countries,
it does not look like a fair fight. How does it get evened up?
How does it become fair?
Mr Eglin: First, I think that
looking at it as a fight is wrong.
Q313 Tony Worthington: But everyone
is going for their own interest. You said that. So it is a fight.
Mr Eglin: Yes, but one would hope
that the lessons of Adam Smith have more or less sunk in: that
it is in your own interests to liberalise trade, alebeit at your
own pace perhaps. Members are in the WTO system, whose avowed
purpose is to liberalise trade within a rules-based system, with
Special and Differential Treatment and so on, but nevertheless
that is the purpose. If they are not intent on doing that, then
there really is no point in us continuing here. Yes, the US and
the EU can bring far greater negotiating power to the table because,
at the end of the day, all multilateral negotiations break down
to a lot of bilateral negotiations. I can assure you, however,
that when China sits down opposite the EU—or India, or Brazil,
or Malaysia, or Indonesia, and I can go on with a long list—it
is not that unequal. If we were to believe that the EU is seeing
this as a completely mercantilist bargain, where the EU will not
liberalise its trade unless it gets something back from someone
else, then we are in a pretty sorry state. You presume, and I
believe, that the political commitment from the EU—and certainly
from the US—is that they do want to reform the structures
of their economies, liberalise, make them more competitive; that
this is the way in which they see themselves becoming more productive
and being able to accelerate growth. It is always easier to do
that together than it is on your own. For any one country now
to say, "We shall abandon the use of any trade-distorting
or restricting measures" —subsidies for example—it
is much easier to do that collectively, and that is what makes
a multilateral negotiation tick. Trade-offs help the domestic
political calculation. It really does not end up in a position,
however, where the weak and the poor are being clubbed round their
head to do things which they are incapable of doing, or completely
politically unwilling to do. There may be instances where it appears
that is what is being done. But the system will fall to pieces
if the US and the EU simply badger the weaker and poorer countries
into getting an agreement at the end of the round, and then it
proves impossible to implement. Whether it is politically impossible,
or lack-of-resources impossible—for whatever reason—the
system will fall to pieces. So nobody really has an interest in
pushing anybody right to the edge and, if necessary, over that
edge.
Q314 Tony Worthington: In a sense,
that is the reverse of what we heard when we came here after Seattle
and met Mike Moore—suffering from shell shock. All the talk
then was, "We can't go on with these developing countries
having such a lack of negotiating capacity and the skills to understand
what is going on". Are we past that stage?
Mr Eglin: No, but two things have
happened. One is that there is now, as a result of Doha, a big
programme of technical assistance in place. WTO, UNCTAD, the World
Bank, UNDP and so on—all trying to push in the same direction
of helping countries to upgrade their negotiation skills, be it
legal drafting or whatever. I think that in Seattle the problem
was not so much the weakness of the developing countries in their
negotiating stance; it was the feeling that everything was cooked
up in small rooms amongst the big 15 or 20, or whatever, and that
the rest were left out and basically told to swallow whatever
it was that the few could agree upon. That indeed has changed.
I think the WTO learned its lesson from Seattle in that respect.
Since then, throughout the preparation for Doha, and since Doha,
we have had very few meetings involving what is called the "green
room" process. It has not moved forward in that way. Stuart
Harbinson, who was General Council Chairman for Doha, had a very
open process in getting the Members together for Doha. Everything
was fully transparent and fully open, so that the smaller and
the weaker countries had a chance of getting their voice heard.
It is not perfect by any means. We have 30-odd delegations who
are not even represented in Geneva, so clearly they cannot participate
in that way. So, yes, there is an inequality, if you like, in
negotiating power and ability. However, unless you believe that
the results of the Uruguay Round, for example, were contrary to
the development interests of countries, I do not think that argument
is a particularly persuasive one. Assuming that we come out of
this Round with more market access; clearer rules in the area,
for example, of antidumping and subsidies; something on TRIPS
and public health; resolve the issues which developing countries
have now put very firmly on the table—issues that were not
there for the Uruguay Round, Special and Differential Treatment,
implementation, TRIPS and public health—those issues have
to be resolved.
Q315 Tony Worthington: You came on
to my next point there. What we have heard back in Britain from
lobbyists, and so on, is that a lot of the issues on the table
that are called the "new issues" are there against the
wishes of the developing countries; that this is cluttering up
the agenda, making it too complicated, and so on. To what extent
is there a genuine wish by the developing countries for those
new issues to be included?
Mr Eglin: I will talk about the
new issue that I know well and that is investment. It is probably
the most controversial of the lot. At the moment, without naming
names, I would say that there is one developing country member
that is adamantly opposed. There are a lot of other developing
countries who see things in a tactical sense. That is to say,
they are comfortable moving ahead on investment as long as they
get what they want in other areas which are important to them.
And there are quite a lot of poorer countries, African countries
in particular, who are saying, "We see this as being in our
long-term interest", because the alternative is bilateral
investment treaties. In a bilateral investment treaty they have
no negotiating power whatsoever. The EU comes along and says,
"There's my model treaty. Sign it". At least here they
will have the opportunity of seeing development provisions put
into an eventual investment agreement—which is not there
in a bilateral treaty. So they are saying, "We believe it
is in our long-term interest to negotiate this multilaterally,
not bilaterally, but we need time. Time to convince, in some instances,
our political and our business constituencies that this is the
way we really should be going. Time to learn what it is all about".
In the past two years since Doha, we have put on huge programmes
of technical assistance in all of these new areas. "Time
to assess how results in this area may affect our development
prospects, situation, and so on." At present, developing
countries want to attract as much foreign investment as possible,
debt financing has dried up; ODA is not increasing. The only two
things available for them are increased exports of goods and services
and attracting foreign investment, be that foreign direct investment
or foreign portfolio investment. If you look at their laws, Ghana,
for example, has the most liberal investment laws I have seen.
It is not a problem of seeing in this negotiation something which
is against their development interests. It is partly capacity—do
they have the capacity to negotiate in this area? It is partly
overload of the agenda because we are starting to see all sorts
of things put onto an agenda, the core of which is market access,
which has already been expanded out to implementation, Special
and Differential Treatment, TRIPS and what-have-you. Now we are
looking at an even larger proposition. Is this do-able? Can we
digest this lot at a multilateral level in one go? However, I
would dispute the statement—if that is what it was that
you heard—that developing countries, in the plural, are
opposed to seeing the WTO move ahead on investment. The situation
is the same for the other Singapore issues as well. Most are not
opposed to it.
Q316 Tony Worthington: The issue
is that, when your economy and some subsections of your economy
are so weak, when you are largely an agricultural economy where
your professional services and other services have not developed
to be inviting the outsiders in, you may be negotiating away your
policy space, or you may be making premature decisions that you
cannot go back on.
Mr Eglin: There are two aspects
of that. One is policy space or development space—flexibility
for development. That would clearly need to be built into any
framework of rules on investment that emerged. The GATS is, in
certain respects, an investment agreement. It is viewed by quite
a lot of people as being the most development-friendly of the
WTO's agreements. We can argue the toss on that, but something
that was, for example, designed along those lines would be designed
with developing country interests in place. Again, nobody has
an interest in forcing on developing countries agreements which
are going to set them back or damage them economically, or that
are impossible to implement. There is a big dose of realism that
needs to go along with this. I am beginning to hear myself sound
a bit too much on the side of persuading you, and I do not want
to do that. There are huge problems for developing countries in
participating in the system. There are some issues which developing
countries would probably rather were not there than were there.
I do not think that is the same, however, as saying that they
are opposed to having it in. I think that there is a broad sense
of realism amongst developing countries that this is going to
be a trade-off; that, in some areas where they are looking for
specific results, that is the way a multilateral negotiation works—they
need something to trade off, as leverage.
Q317 Mr Khabra: What do you think
about the prospects for duty and quota-free access, particularly
for agricultural products, being granted to all least developed
countries? Following that, another question is what are your views
of the Chirac proposal for a moratorium on the use of export subsidies,
the misuse of export credits and food aid in agricultural exports
to Africa?
Mr Eglin: On the second question,
Stuart Harbinson will be here with the Director-General and he
is the agricultural expert, so I would rather leave that up to
him. Other than to say that, generally, I think people here see
that as a welcome recognition that these kinds of measures are
damaging agricultural production in Africa; that trade-distorting
measures of that nature can damage developing countries' agriculture.
On the first question, the duty and quota-free access, that has
now been accomplished to a very large extent, either through the
EU's Everything-but-Arms initiative, or the US's African Growth
and Opportunity Act, AGOA. There is still more that could be done.
However, the problem for least developed and other low income
countries is not so much that they do not have the market access;
it is that they cannot supply the goods to a sufficient level
of quality or quantity. They have a supply side problem. Market
access, in some areas, yes, it is still a serious problem—and
they are sensitive areas. From the last figures I saw, however,
something like 96% of poor countries' imports/exports to the EU
come in duty-free, quota-free. It is not a market access problem.
It is a supply side problem. What is needed there is large-scale
investment in the supply side of their economies, to raise their
capacity to export. Related to that there is a problem, namely
preference erosion. If certain countries benefit at the moment
from preferences, and a multilateral negotiation that lowers,
on an MFN basis, trade restrictions across the board leads to
an erosion of those preferences, is this detrimental to the export
interests of those countries? The IMF, the World Bank and WTO
have done some work on that. By and large, these preferences are
not of enormous economic importance to these countries. They can
be compensated for through adjustment assistance, to allow them
to adjust. However, what 10 years ago was seen as being an important
initiative to provide better preferences for the least developed
has come somewhat around to saying, "Better to get multilateral
liberalisation across the board for everybody", and deal
with the problem of the losers on the preference side, than to
make the argument that we sometimes hear that "You mustn't
reduce agricultural import restrictions, because this would damage
those countries that rely upon there being a big margin of preference
between their import barrier and the import barrier that faces
the rest of the world". People are starting to understand
that that is an extremely damaging argument, and one which is
not borne out empirically by the facts. Some countries would suffer.
>From the figures we have seen, Malawi is one. If you removed
preferences tomorrow, about 10% of their exports would suffer.
There are not many countries in that situation. We certainly need
to address the problem of Malawi and any others who are in that
sort of situation; but it is not an argument to hold up reducing
levels of protection into Europe or the United States, because
of preference erosion elsewhere.
Q318 Mr Khabra: What is the current
attitude of America towards preferences?
Mr Eglin: Under President Clinton
they launched this African Growth and Opportunity Act; they have
also the Caribbean basin system of preferences. So the US has
been providing—I say generous preferences, I do not know
the exact scale of them — but the US certainly has been
providing preferential treatment. Perhaps not to such an extent
as the EU, but it has certainly been joining in that.
Q319 Mr Khabra: What would be the
implications for the WTO if the Peace Clause was not extended?
Mr Eglin: The subsidies agreement
would apply in agriculture and that would provide the means for
WTO members to challenge EU or US subsidy practices under the
subsidies agreement.
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