Examination of Witnesses (Questions 462-478)
Tuesday 13 May 2003
MR JEAN-CLAUDE
TYACK AND
MR JULIAN
PRICE
Q462 Hugh Bayley: Can I start by
asking what logic there is to subsidising the sugar industry in
countries which have little prospect of ever becoming competitive
sugar producers, and surely there are more efficient and less
trade-distorting ways of using European money to promote development
in such countries?
Mr Tyack: Thank you very much.
You refer there to a DFID impact study I have had the opportunity
of reading on the sugar industries of the ACP, which pointed out
that there would be losers, a medium group in-between, and winners.
And this study was carried out by LMC and we disagreed totally
with the philosophy behind it, because it was not a development-centred
philosophy, but a liberalisation-oriented philosophy. It was outrageous
to my mind that, the weakest members, those who should be protected,
should not qualify for protection, as it would be considered a
"misallocation of resources" to try to help them, notably,
the Caribbean. So I do not share at all this philosophy which
is based on liberalisation, on winners. I think, in life, there
are small, vulnerable countries, like ours, for example, the Caribbean.
Between the UK and the Caribbean there are very strong traditional,
historical and blood links, even, and I think a more development-oriented
approach should be adopted vis-a"-vis these countries; in
other words, how can we restructure the industries, for example,
to make them more competitive and not let them die just like that.
This is my very frank point of view.
Q463 Hugh Bayley: Can I ask an equally
frank question, and I understand very closely, from my family
history, the links between the UK and the Caribbean; but all Caribbean
countries have higher standards of living than the poorest countries
in Africa such as Mozambique, who, under the current EU sugar
regime, do not benefit. How can it make development sense to continue
to pay prices far higher than the world prices to middle-income
Caribbean countries, whilst freezing out, and I know this is beginning
to change under EBA, but freezing out really poor countries who
can produce at a third of the price? And you say that you need
to look at how you could improve the productivity of sugar production
in the Caribbean, but surely there is no incentive to do so, if
you are paid a high, guaranteed price; indeed, if it were possible
technically to increase productivity, you have had decades in
which that could have been done, and it has not been done, which
rather suggests the geography and the land and the factors of
production are the factors that make these high costs of production.
Mr Tyack: First of all, I would
like to demystify, if I may, the Mozambique case; this has been
used in the media and it is based totally on false facts. What
really happened in the case of Mozambique, as you all know, is
that there has been a civil war in Mozambique, and, therefore,
during that civil war, and just after, the sugar industry, which
used to produce quite a lot and which used to export quite a lot,
could not export anything, for obvious reasons. Secondly, they
have had very important climatic problems; you remember the rains,
and so on, which prevented them from producing at a time when
they were restructuring, as it were. Thirdly, and no-one mentions
this, there have been inter-African problems, because the companies
in Mozambique were relying on their own local market, about 80,000
tonnes. Because of the crash of the Zimbabwean dollar, sugar from
Zimbabwe, illegally, very often, was imported at dirt-cheap prices
and took the share of the market which normally and legally should
be that of the Mozambican producers. So, for all these reasons
they could not supply. Another point is that, historically, when
the Sugar Protocol was signed, Portugal was not a member of the
EU, and it was only later on that they joined. But to continue
then, you cannot ignore completely the historical, moral, legal
association between the producers of the ACP and the UK and the
EU. When the UK acceded to the EU, there was Protocol 22, annexed
to the Accession Treaty and that was a make or break protocol,
as you know; either you accepted the sugar from these ex-colonies,
(I disagree with the term "dependency", I know what
will be inferred by "dependency", but we were not colonies
then, we were independent countries), and it was an essential
condition of the accession that a place should be found in the
EU market for these countries' sugar. So there are extremely valid,
legal reasons, which were consolidated afterwards by the Sugar
Protocol, and by the Cotonou Agreement; you cannot just ignore
these legal, historical connections, not to speak of the moral
ones. So I think it is very important, to recall the historical
context and the legal context which unite us with the UK and the
EU.
Mr Price: You were alluding to
the world market price, and I think we need to understand what
the world market price is, it is a market of last resort, it is
a dumped market, as we know, it is highly distorted, it is vulnerable
to the influence of currencies and speculative funds, and you
were comparing that with the price in the EU, which is the same
price that applies to the ACP countries, signatories to the Protocol.
And I would like just to make the point that I think that the
ACP guaranteed price is a fair price, and the world market price
is a ruinous price; the world market price does not offer the
potential for ACP countries even to stand still (in terms of maintaining
their sugar industries in working order).
Q464 Hugh Bayley: I think there would
be little difference between us, that if there were a radical
change in the EU regime, with the EU price going down substantially,
the world market price would go up noticeably too. But the question
I wanted to put to you is this, which, I regret to say, you have
been evading; are you telling me, seriously, that the real cost
of production in Mozambique, or in Zimbabwe, or in Malawi, is
as high as it is in the Caribbean? If that is the case, you have
got nothing to worry about, from change; but I suspect that it
is not the case, that it is a lower price, and, therefore, to
make production in Caribbean islands viable, it needs some degree
of protection. So I go back to my original question, surely there
are more efficient ways of transferring resources from Europe
to the Caribbean for development purposes which do not have the
disadvantage of distorting trade and harming production in African
countries?
Mr Tyack: I think you might know,
perhaps, that Zimbabwe is a member of the Sugar Protocol, and
Zambia also, and I never said that the costs of production were
the same, in fact, I started off by referring to this famous DFID
impact study which separates our group into three categories,
as it were. But what I would like to say is that, apart from the
legal, and historical reasons which I have already developed,
there is not only an economic aspect to sugar production in these
countries, just as there is not only an economic aspect in sugar
production in the EU. This is what we know as multifunctionality.
My country has played a very important part in the M-6 Group in
the WTO to promote multifunctionality as a series of non-trade
concerns, and as an important issue, which has helped, in fact,
the EU, globally speaking, to transform a kind of more regional
issue (EU) into a global one (WTO). So in these countries also
you have, the socio-economic aspect, the non-trade concerns, the
multifunctional aspects, call it what you may, which forms part
of the EU position at the WTO, and which is very important, and
which concerns the social contribution of the sugar industry,
in terms of education or health services, which concerns, for
example, the contribution of the industry in terms of rural development,
which concerns the contribution of the sugar industry, as, in
Mauritius, to energy generation. We are producing from bagasse,
a sugar by-product, 40% of the electricity for the public Grid.
So there is a whole range of functions, if you want, which do
not purely concern the production of food and fibre but which
concern other aspects, socio-economic aspects, I would call them,
we can call them also multifunctional aspects, which we have listed
in our memorandum, and which are very important for us. That is
why we have teamed up with the EU in supporting them to address
this issue in the WTO. So it is not only an economic problem,
it goes beyond economics.
Q465 Mr Colman: If I can follow up
the concept of multifunctionality, which is a new word, but I
assume is the concept that the special differential price that
is given to certain ACP countries for sugar means there is, if
you like, extra money which is flowing to those economies which
could be used for general development, you were talking there,
I think, about energy production in Mauritius. Can you give us
other examples of that; would it better, if you like, to be much
more transparent about this and almost have a sinking fund, which
shows clearly the cost of producing sugar, say, in Mauritius,
which is physical cost, the price you are getting out of the European
Union, there is a difference between the two, and that goes into
a development fund for Mauritius which could be transparent? You
gave the example of Mauritius, that perhaps is a good one, but
I do not see the same sort of multifunctionality approach into
countries like Barbados, or Trinidad, or Jamaica, where they tend
to be more mono-crop, and there has been no attempt to move to
multifunctionality: a sinking fund?
Mr Tyack: You cite an unrepresentative
example, because Barbados is a very good example of a country
which is thinking of retaining sugar cultivation for social and
environmental reasons. So, I speak under your correction, Julian,
I think this is agreed, that, in Barbados, for example, unlike
Antigua, where it has been rather negative, and where, you know,
if you fly over Antigua, you will see that it is completely brown
and desolate, the Barbadian Government has found it interesting
to continue the production of sugar for these reasons. Now, multifunctionality,
I know in the UK is not very fashionable or popular, but it is
part of the EU position.
Q466 Mr Colman: But the key is to
be transparent, and, if this can be added to the European aid,
let us have it on the table?
Mr Tyack: Let me address this
issue. We think that the price mechanism is much more transparent,
as far as we are concerned. Why? because, basically, what you
would have, eventually, would be two sources of revenue. One,
price; and, I can say, our system is very transparent, I can tell
you what goes to the Bank of England, the Bank of Mauritius, for
example, and percolates down to the growers, to the millers, to
the institutions, so it is very, very transparent, it is very
efficient also. Now, if we separate this, as you suggest, between
aid and price, where would this aid go, would it go to the producers?
Q467 Mr Colman: To the Government,
to develop other industries?
Mr Tyack: We represent industries
here, Julian and I, and we are very much in favour of a system
which would be efficient, transparent, but which would reach the
small growers in the fields. You know, Government, and this is
perhaps part of its sovereignty, may decide to do what its wants
with this aid, which has nothing to do with sugar; certainly this
has been the case elsewhere. So this system would not reach necessarily
the producer on the ground, and it could be diverted to other
destinations, to other causes, and therefore we are very cautious
about this kind of thing.
Q468 Mr Colman: Can I press you again,
one last time. If you are saying multifunctionality is the reason
why you should support these extremely high prices, and you are
saying in Mauritius, an example where there has been diversification,
in terms of what is going on, yet you are saying the entire income
should go down to those self-same small farmers, how are you encouraging
multifunctionality into other crops, into other forms of development,
if the entire price is going down to those sugar producers?
Mr Tyack: I suppose you raise
the question of diversification.
Q469 Mr Colman: No, you raised it,
multifunctionality?
Mr Tyack: Multifunctionality,
as far as I understand it, means other uses of sugar, other functions
of sugar.
Q470 Mr Colman: Ah; so there is no
example then, because the Prime Minister of Ethiopia came to see
us and said that, as far as he was concerned, preferential rates
were a good way forward because it provided a basis why investment
could be made, in that case, in Ethiopia, on more general development,
and could spread, if you like, the basis on which sustainable
development could take place beyond just sugar. We seem to be
at cross-purposes here?
Mr Tyack: I think there is an
ambiguity between diversification and multifunctionality. I would
like to address perhaps the question of this revenue which goes
to the sugar industry. Obviously the revenue goes to the main
players, that is the growers, the millers, and so on, this is
one thing; it goes also to the modernisation of the sugar industry,
obviously, restructuring, renewal of machinery, and so on, but
it goes also towards development in the larger sense. In the West
Indies, for example, you would have the use of the by-products,
in other words, molasses, to make alcohol (rum), you would have
the use of bagasse another by-product, to make electricity; therefore,
whatever is left is invested also in other types of production,
like flower production, for example, vegetables, and things like
that. And, finally, in certain countries, the surplus of money
from sugar, and I know what I am talking about, has been invested
in textiles, in tourism, mainly, and in financial services. So
that we have had a diversification of the economy based on sugar
but not necessarily all the time in the agricultural sphere, it
has gone where the profit was, textiles, but it might have been
something else, like tourism, but this is how the economy was
developed and diversified. So, really, as you were saying, it
is not sort of concentrated on sugar, this is not the case, I
think.
Mr Price: You mentioned Ethiopia,
which is a country I have visited, and I have been to a couple
of sugar mills there; it is a country similar to the one I am
representing here today, which is Tanzania, in fact, they both
have five mills. The five mills in Tanzania have recently been
privatised, and I can tell you that the total bill for the investment
that accrued to the Tanzanian sugar industry, which is investment
finance, is $260 million, and I suspect that the Ethiopian industry
is looking for a similar sum to develop their industry. But this
expansion and this development is built, as the Ethiopian Prime
Minister said, I am sure, on preferential prices, on fair prices,
and, in the case of Tanzania, the investment was double-banked
by a protected local market, thanks a little bit to the SADC Sugar
Protocol, which David Willers was mentioning, and the EU outlet,
at a fair price. The Ethiopians will not obtain the same development
finance without those guarantees that the EBA initiative gives
them, an access to the market at a fair price.
Q471 Mr Colman: And has Tanzania
followed the Mauritian model by actually using the income out
of the preferential sugar prices to develop other parts, like
tourism, like textiles?
Mr Price: If I may mention Kilombero,
which is a mill I know quite well in Tanzania, it is next-door
to a national park, with all sorts of wildlife, and so on, $28
million has been spent so far in Kilombero, they have rehabilitated
the houses, they have rehabilitated the infrastructure, the roads,
the bridges, they have brought schools, services, and so forth,
to a region where there was nothing before, a little like the
Caribbean where the islands are surrounded by sea, and these sugar
mills in Africa are surrounded by a sea of subsistence agriculture,
so really there is not very much there. And the sugar industry,
with its engineers, its agricultural specialists, and so forth,
really bring development into these regions; but it has done so,
and can only be done so, certainly in the countries that I know,
Tanzania, Malawi and Ethiopia, on the basis of a fair return for
their sugar production, which the world market cannot provide.
The world market currently is at seven cents American a pound,
and I think that David Willers was referring to a study whereby,
if we had complete liberalisation in the OECD, we would find the
price rising by 63%, well, that sounds quite dramatic, but it
brings the price up to 11 cents, and the EU price, just to put
things in context, is 26 cents. And these are the sorts of prices,
or close to them, that these industries need to develop, who do
not have the natural advantages of countries like Brazil.
Q472 Tony Worthington: Let us look
at the bigger picture. What you are defending is a policy whose
major beneficiaries are northern beet growers who produce a product
that would not have a market unless it were heavily subsidised.
That is the fact, is it not, that here you have got a world in
which the WTO has rules, and where there is a major push now against
agricultural subsidy, because that agricultural subsidy is a major
enemy of developing countries; that is the truth, is it not?
Mr Tyack: In my memorandum, I
accepted the fact that there were subsidies, and that CAP, for
example, had certain negative consequences, let us put it this
way; notably, if an industry in southern Africa, for example,
is trying to set up a new business and there is competition from
EU-subsidised goods then it is bad. What I find myself, concerning
CAP reform, is that in the UK it has become a very ideological
question, in other words, people cannot any more think in a rational
way, weighing the pros and cons; whenever the words CAP reform
are mentioned, there is a kind of instinctive emotional reaction.
What I am pleading for, in fact, in this context, is, the following:
okay, there are certain bad consequences of CAP reform, but what
about the Net Food Importing Developing countries, which is a
category in the WTO; let me explain this. The net food importing
developing countries would rely on subsidies to import food and
it would make their food cheaper, this is one case I quote just
like that; others could be quoted so we have got to have a kind
of balanced attitude towards this question.
Q473 Tony Worthington: But let us
forget UK irrationality; we have got the Doha round, and the number
one priority of the developing countries is to stop the developed
world dumping product upon them, in order to give fairer access
to wealthy markets; that is the truth, that is the view of the
developing countries, not UK irrationalists, is it not?
Mr Tyack: First of all, I would
not generalise on the word "developing" because there
are at least 10 constituencies inside developing countries, and
the ACP happen to be one, the Cairns Group happen to be another.
You are quoting perhaps the views of the Cairns Group, not the
views of the ACP, not the views of India and Pakistan, all these
different countries have different views, I am sorry to say. So
if we are on the WTO agenda, for example, I think that there is
an important question, as far as I am concerned, which is the
access to northern markets, access to the EU markets, as it were.
It is important, therefore, that the percentage of reduction for
these markets should be kept within control, and our plea, in
fact, is that the UR [Uruguay Round] method should be adopted
rather than the Harbinson method, or the Swiss formula. So it
is important for us that markets should be protected, it is important
for India, also, perhaps, that their market should be protected.
Q474 Tony Worthington: Do you accept
that some reform is going to happen, and what shape do you think
those reforms will take in the global sugar regime, including
the EU?
Mr Tyack: I think, if we talk
about the EU, and we talk about the sugar regime reform, or CAP
reform, it would seem that, as regards CAP reform, there is a
definite trend to go towards decoupled payments, and my point
of view and my problem, as far as this type of reform is concerned
is the following: you decrease prices and you give direct payments
to producers in return for certain services, non-trade concerns,
you know, environment, landscapes, etc and multifunctionality
exists even in England. So, in relation to this, where do we stand,
where do we, ACP, stand, what happens to us; it is a very inward-looking
type of policy, in fact, it is inward-looking in relation to the
EU, and, therefore, I would say that if this happens we would
have a problem, we would say: We will have a price decrease, but
what would happen to us, and what is going to happen to us? So
it is a big question-mark.
Q475 Tony Worthington: What should
happen to you?
Mr Tyack: What should happen to
us is? I do not know if you read the report by Arlindo Cunha who
is the Rapporteur for the European Parliament on Agriculture,
but he had something very interesting to say about the outermost
territories, and he suggested that decoupled payments should not
apply to outermost territories, and therefore I would go for that
choice, personally, if you asked me; but I am reasonable also,
and I think that there will be a certain amount of reduction of
our benefits. So what is going to happen? This is what you asked
me; there have been four options put forward by the Commission,
you may know about these four options. There is one which is called
Status Quo, and this we would not like. Because although you might
think we would like the status quo because we benefit from it
somehow, yet the "status quo" has changed recently,
the "status quo" has changed because of the EBA initiative.
And, therefore, the EBA imports run the risk, in 2008-09 of undermining
the market. I think I see someone in this room who has written
about that[9],
and I have quoted her also in my memorandum; so I think what is
going to happen is that the market will be destabilised, and that
our guarantees will be jeopardised, and therefore this "status
quo" we would not like it, because it means simply that larger
and larger quantities of EBA and West Balkans imports are going
to get into this market, are going to destabilise the mechanisms
of the market, that is price, quotas, and we would not like that.
But there are certain elements in these options which are not
too bad. The one which we think might suit our case better would
be the third one, according to the Commission, and, as far as
I remember, it is the return to fixed quotas option. The return
to the fixed quota option, is suggested, I must say, not by me
but by the Commission. I would like to specify this because I
would not like to be quoted as saying anything about the EBA.
The Commission says that, in order to prevent the disruption of
the market then quotas should be imposed on the West Balkans,
and LDC sugar so that, eventually, they can get a price which
is interesting for them. In fact, some EBA countries to whom I
have talked have complained that if ever they reach a situation
in 2008-09 where liberalisation will have taken place completely,
they will access the market at the world price. They point out
that this kind of scenario is not interesting for them and that
they would prefer perhaps to have a form of quantitative restriction
in return for a higher price. In this scenario also, we have lower
reductions of prices. So, in a certain sense, we would have liked
the status quo of before the present status quo, but now perhaps
this third option would seem to be something which although not
completely ideal would be nearest to our interests, as it were.
Now in the WTO, to continue, as far as reform is concerned, I
would like the UK to be more supportive, I would like you to be
more supportive, of the position of some developing countries
in the WTO. I refer, for example, to this question of access,
and to the disastrous consequences which the Harbinson method,
or the other method, the Swiss formula, could have. Since 75 signatories
to the WTO have supported the UR method, I think the EU and other
countries should support this formula. The second one is that,
for the first time, preferences are recognised in a WTO document,
and therefore there are provisions in favour of preferences in
the Harbinson text; but there are two or three problems, as far
as we are concerned. First of all, there is the fact that, to
qualify, your preferential goods must represent about 20% of your
total merchandise exports; we think that is too high, and we think
that a different benchmark should be adopted, such as, for example,
20% of our agricultural exports, or of net exports, something
which would make this provision rather accessible to us. I do
not want to go on, but, if certain countries notably the UK could
support measures like these, this would help us tremendously in
the WTO arena, because, as you can imagine, we do not have a lot
of friends in the WTO. But I must say that Harbinson, for the
first time, has recognised that there is a problem there and is
doing something about preferential access, although it is not
completely ideal.
Q476 John Barrett: You mentioned
that if liberalisation of the sugar regime happens you will have
a problem. Can you say, has there been adequate impact assessment
and consultation of countries which would be affected by that
reduction in sugar price?
Mr Tyack: Can I go back a little
bit, because I would like to go back to EBA, and ask ourselves
what kind of impact assessment there has been in the case of EBA,
what kind of consultations. The Cotonou Agreement, Article 12,
provides for consultations, whenever major disruption happen in
the relationship between the EU and the ACP, and I can tell you
Article 12 was never put into practice, there were no consultations.
I am looking at my mentor over there, and she has written a very
good article in the Development Journal about that, and I would
like to commend it to you[10]
What she says, which is very interesting also, and which I as
an argument very often, is that Article 37(9) provides for "essentially
all the products". When the EBA was launched, this was not
respected, and suddenly it became "all the products".
The reason why "essentially all", was specified was
to provide exceptions for sugar, rice and banana, three commodities
which are essential for the Caribbean, I would say, for all of
us, but the Caribbean, most of all. So this was completely forgotten,
so much so that it has been said, in this Learned Journal, that
we could have applied to the WTO for getting compensation for
that, because it could have been a case of impairment or annulment
of certain benefits and we could have obtained compensation for
those lost benefits. So, basically, what I am telling you there
is that, in the case of the EBA initiative, whatever the end,
whatever the purpose, which were very good, very beneficial for
the poorest, what happened there was there was no consultation,
there was no impact assessment, it was only the political agenda
which was considered and that was all, not the practical consequences
at all. The other thing is that when this happened we, the ACP,
were the only ones who paid for it, in other words, our SPS agreement
was gradually eroded by the access of new EBA countries, the EU
did not pay for it, the EU producers did not lose any of their
quotas; it was our quota which was gradually eroded, so much so
that we called it, in our slogan, "the poor have paid for
the poorest", or "the poor will pay for the poorest";
again, not much consultation. While we have been talking a lot
about "burden-sharing", so far there has been no "burden-sharing"
at all. Now all this shows, basically, that, whenever a political
agenda is very important and becomes uppermost in the minds of
politicians, there is not a lot of consultation which takes place,
and that is very regrettable. Regarding the sugar regime reform,
I must say that, so far, this is a different picture, and I would
concur with David there, that at least we have been presented
with the four options, we have been invited to meetings, our views
are sought, and this is before the actual decision is taken, before
the actual law is enacted. So, basically, I tend to think that,
this time, in the EU, the process of consultation is much better
and that we are being involved, and that we can give our point
of view and say how for example Harbinson is going to impact upon
us.
Q477 Chairman: I think we need to press
on. Thank you, this has been very comprehensive, but, Mr Price,
sometimes the High Court Judge says, is there anything you would
like to say in your defence which you have not yet had an opportunity
of saying to the jury before sentence is passed?
Mr Price: No, thank you very much.
I cannot think of anything else.
Q478 Chairman: There is nothing you
would like to add; so I think we have covered your case fairly
comprehensively. Mr Tyack, is there anything else that you would
like to have said that you have not had the opportunity of saying?
Mr Tyack: I do not think there
is anything else that we have not said.
Chairman: You have been very comprehensive
and very helpful, and I think you have put it very clearly, and
I think you have put the nuances and the subtleties and we are
very grateful for that, but I think we are in danger of repeating
ourselves. Thank you very much.
9 Mr Tyack was referring here to Sheila Page of the
Overseas Development Institute who is a Special Adviser to the
Committee's inquiry and was at this evidence session. Back
10
Ibid Back
|
