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TUESDAY 11 MARCH 2003 __________ Members present: Tony Baldry, in the Chair __________ Examination of Witnesses RT HON PATRICIA HEWITT, a Member of the House, Secretary of State for Trade and Industry, examined and DR ELAINE DRAGE, Director for Trade and Development, Europe and World Trade Directorate, Department of Trade and Industry, further examined.
Chairman: Secretary of State, may I just publicly thank Dr Drage and your officials for the help they gave us in earlier evidence sessions which has been very much appreciated. Secretary of State, thank you very much for coming to help us in this inquiry. Mr Colman
(Ms Hewitt) First of all, may I underline the fact that we do believe that if we can fulfil the promises we made at Doha this round will above all be beneficial for developing countries. As far as our own and other developed countries go, we only need to look at our experience in the European Union to see the acceleration of growth and the increase in jobs which has come as a direct result of pulling down the barriers to trade across the members of the European Union. We saw the real acceleration of growth which came with the new membership, when Greece, Portugal and Spain entered the European Union. I believe we will see the same thing with the enlargement of the European Union about to take place next year. I have no doubt at all that as we liberalise markets around the world, we in the developed countries will also benefit. We also know that in our own country, in other developed countries as well as in developing countries there can be real short-term pain as a result of market opening. A very good example of that is an industry I know very well in my own city and region, which is the textiles and clothing sector, where we have seen tens of thousands of job losses, in part because of foreign competition; also, I would say, because of a failure on the part of much of our own industry to adapt, to invest, to upskill, to move into higher value added goods. That is the nature of the challenge to us. The way we should respond to the challenge from new countries as markets open, as our own markets open amongst others, is not by reverting to protectionism, it is by investing in better products, better businesses and better jobs at home. (Ms Hewitt) One of the things we have to do within the European Union is reduce our subsidised production and that includes sugar beet production. At the moment we will improve market access on sugar for the least developed countries, but not until 2009. We certainly cannot complain about a lack of warning or lack of a transitional period there. What we have to do - and Margaret Beckett and her colleagues at DEFRA are doing - is to help our own farming community to diversify and to seek new markets for their products. In the particular case of sugar beet, there is a very obvious new market, which is the market for renewable fuels. The more we can either use sugar beet itself, or alternative bio-energy crops as part of our sustainable energy strategy, the more we shall be able to achieve both our goals for our own farmers and the goals we have, for instance, for Mozambique sugar producers and other sugar producers in developing countries. Hugh Bayley (Ms Hewitt) I see the pressure for agriculture reform within Europe coming from a number of different directions. First of all, it is very clear that if we can reduce tariff and non-tariff barriers both on industrial goods and on services, which are increasingly important to our own economy, then there will be very considerable gains for British business and the British workforce in terms of increasing export opportunities, as markets in countries like India or Japan are opened up to more of our exports and more of our investment. There will be pressure from that source to make concessions on agriculture in order to secure the benefits of a round. That will be helpful. Secondly, there is the European case for Common Agricultural Policy reform, which stands in a sense separate from the additional pressures of the WTO. Those pressures are very simple, they arise from the fact that consumers are paying an average of £16 or so a week, _25 a week, per family in additional food costs as a direct result of the Common Agricultural Policy. The more the consumers are aware of that the more we can make the case for the mid-term review and radical reform to the CAP and that case is reinforced by the environmental damage, the distortion of the nature of farm production that is done by the CAP and it is reinforced again by the pressures of enlargement. When we have the farmers of ten new Member States all seeking benefits, supposedly from the Common Agricultural Policy, within an overall financial ceiling which will decline in real terms and is set to decline in real terms right through until 2013, that amounts to a strong pressure for reform in any case. Thirdly, there is the enormous imperative of enabling the developing countries to move out of poverty and that case, which is made with great force, particularly by the NGOs and the faith groups in Britain, needs to be made with equal force by their sister organisations in other European countries and indeed in the United States and that would help to build a further pressure for the radical cuts in agricultural subsidies which are needed on both sides of the Atlantic. Alistair Burt (Ms Hewitt) I absolutely share the concern which underlies that question. Although I was not at Seattle, obviously I led the UK delegation at Doha. I was very struck by the huge change from Seattle to Doha and the real beginnings of trust between developing and developed countries. There were several reasons for that. One was the fact that the developing countries themselves had been coming together in the months running up to Doha, to concert their negotiating agenda, if you look at the work the African countries, including South Africa, had done together. In the closing session of Doha, I heard one trade minister after another from developing countries stand up and say they came along with their list of what they wanted. Of course they did not get everything, because you never do in a negotiation, but they certainly had enough to go back to their country and say they were right to sign up to this. I think that made a huge difference. The investment in capacity building, where Clare Short and DFID led the way, hugely helped that process and is continuing to do so. The third point which is very important here is that although of course there is this huge disparity between the size of my official team and the size of Mozambique's official team, in the WTO the developing countries are in the majority; there is no qualified majority voting in the WTO and everybody has to agree. At Doha, for instance, when the Philippines and Thailand were not happy, not prepared to sign the waiver for Cotonou unless they received an assurance of more attention paid to their particular issues, you could see the real force that developing countries could exert on the issues which were of most concern to them. The truth of the matter is that if the developed countries do not listen and respond to that, we do not get a round. (Dr Drage) What I do know is that DFID have a number of capacity-building projects with different developing countries; not all of them clearly. They are doing things like developing the ability of officials to understand the various dossiers and to negotiate. They have provided computers in a number of countries as well. Clearly that is an area DFID continues to press forward with. The need is so great that it is not going to be solved in a couple of years, but it is a case that DFID are on to. Getting the modern technology which enables them to access documents from Geneva rapidly is clearly an important part of enabling them to take a more proactive role in the negotiations. Mr Battle (Ms Hewitt) Thank you. (Ms Hewitt) May I say how much I welcome the fact that I am the first Secretary of State for Trade and Industry to appear before your Committee. It underlines the fact that this is not a trade-in-one-box agenda; this is a whole-of-government agenda. Just last week, Margaret Beckett, Clare Short and I met with senior officials from across government to make sure that the work we are doing on agriculture reform will achieve not only the agriculture objectives but the trade objectives so that those in turn can meet the development objectives. It is absolutely joined up across government. How do we judge success in terms of the development round? First of all, we have to resolve the issue of TRIPS and access to medicines. It matters in its own right, although there are many other things which need to be done to ensure that developing countries do have access to medicines, even if TRIPS were resolved, but it also matters as a confidence builder, to open the way to other progress. Secondly, do we achieve radical cuts in agricultural subsidies and import quotas and tariffs which are creating this double whammy for developing country farmers by locking them out of our markets and simultaneously undercutting them in their own markets. That is an absolutely key measure of success and if we do not get progress on agricultural market access and agricultural export subsidies, we will not get a round. That is a crucial measure of success. Thirdly, we have to deal with the industrial tariffs and non-tariff barriers which particularly damage developing countries, tariff escalation for instance which leaves so many developing countries dependent upon commodity production, but unable to move into the value added production where European or other developed countries have cornered the market and protected it with tariff escalation. Those are three key tests and I would add a fourth. The highest tariffs in the world are not those put up by the developed countries, they are those put up by developing countries against each other. Therefore part of the benchmark of progress we should expect to see in a true development round is commitment from the developing countries to reduce the barriers to each other, so that they start to benefit from the regional trade which, as we have seen in Europe, is such a great potential engine for growth. (Ms Hewitt) What we can deliver in the WTO negotiations depends upon the negotiations themselves. They are not solely within our control. The millennium development goals very much feature because one of the reasons we are so passionate about the WTO negotiations is that if we could halve the protectionist measures all around the world, we could generate an increase in developing countries' income roughly double the size of the current aid flows. So trade is going to be even more important than aid and aid will increasingly need to be trade related aid if we are indeed to achieve the millennium development goals and enable hundreds of millions of people living in abject poverty to move out of that poverty and get on the ladder towards a decent standard of living. Alistair Burt (Ms Hewitt) Since this is the first time I have heard about the book, obviously I have not had a chance to look at it and do not know whether we shall prepare a response. I will certainly have a look at it. It is very important that we do look at this kind of critique. There is a huge amount of economic analysis and study around this and some of that is contested. That is the way of economists. I also think that there is very substantial evidence that trade, coupled with better standards of government, investment in primary education, investment in primary health care, investment in basic clean water facilities and so on, together can give you the path to development. It is very striking to look at the experience of many of the eastern Asian and south-eastern Asian economies compared with countries in Africa. We all know that 30 years ago Ghana and South Korea, for instance, were equally poor. You now look at the position: there is South Korea richer than Portugal and Greece. I am not suggesting that trade was the only factor in South Korea's development, but it was a very, very important one. All of us have observed that in many developing countries the people working in factories which are exporting, although their conditions may not be anywhere near good enough, are on higher wages and working in better conditions than those who are stuck on the rice farms and various other forms of subsistence farming. I do believe that trade is a crucial element, but it is not the only element of a development strategy. Secondly, the author's point about sequencing is very important. Particularly if one looks at liberalisation of capital markets, that is a lesson which has now been taken on board, but which was not taken on board in the past. The sequencing of market opening and making sure that there are appropriate regulatory structures in place is hugely important. Tony Worthington (Ms Hewitt) I do not think it should be a one-size-fits-all approach. That is why special and differential treatment is so important and why it is so frustrating that, along with other issues, we have not made adequate progress on SDT, where we got stuck before Christmas. Certainly the European Union, with our strong support, would have signed up to all 22 SDT measures which were being recommended by the WTO itself; in the end we got agreement on four of them, which was just pathetic in terms of the progress we needed to make. As I was saying, it is important that countries can sequence their market opening, but I do not think that should reduce the importance of committing to market opening. The work South Africa is doing with its neighbours, creating a customs union and the demand we are getting, particularly from the African countries, for market opening here in Europe, needs to be acted upon. The final point I would make is that I grew up in Australia at a time when both Australia and New Zealand were protecting their industries behind enormous tariff and quota walls and the result was disastrous frankly for the development of those industries, protected from competition and producing extremely poor quality goods. It was only when those markets, admittedly in developed countries, opened up to foreign investment and competition that they began to develop really world class competitive industries, particularly in the motorcar sector. Mr Khabra (Ms Hewitt) On the issue of terrorism, I was making a more general point. Of course terrorism is an expression in some cases of religious fundamentalism, of a particular political position expressing itself in this utterly unacceptable and violent fashion. I think we saw for ourselves in Northern Ireland how the enormous sense of injustice and economic exclusion in the minority community in Norther Ireland helped to create the recruiting ground for terrorism. In no sense am I saying that poverty or injustice is an excuse for terrorism. I am certainly not saying that Osama bin Laden has any thought at all for poverty in the world. I do not believe that is his motivation for one minute. I also believe that extremist terrorist groups will continue to find it much easier to recruit people to their cause where there is injustice and poverty in the world, including of course in some of the refugee camps. That was the argument I was making. As far as poverty and migration goes, this is an issue for the WTO talks in relation to mode four, the jargon under the GATS discussions, where India, for instance - and I was recently discussing this with colleagues in the Indian Government - is very concerned to see market opening for professional services in the form of people being able to enter developed country markets for computing services and so on. They see that as a very important part of their own path to development. (Ms Hewitt) First of all, I agree with you entirely, that we have to fight poverty on a global scale, both politically and economically. Indeed I think it is particularly important that we redouble our efforts to make progress before Cancun on the WTO negotiations precisely because it is a time of such international political and economic uncertainty. As far as migration goes, we have over the last few years opened up a very constructive debate about the role of economic migration and the enormous contribution that economic migrants have made and can make to the United Kingdom and to our prosperity as a country. As you know, David Blunkett, the Home Secretary, has been looking at ways of opening up the work permit system and so on. I do not believe in, and I do not think you are arguing for, completely uncontrolled migration because clearly we also have to think about the capacity of our social as well as our economic structures to absorb migration. We are clearly much better at absorbing economic migrants who have come as economic migrants than we are at the moment at dealing with asylum seekers. The system is under enormous strain as you and I both know from our constituencies. John Barrett (Ms Hewitt) I do not believe that it is our job in the DTI or in government to protect our industries against foreign competition and particularly I do not believe it is our job to be arguing for import tariffs and quotas and so on. Indeed I have helped to lead the way in opposing America's resort to import tariffs on our steel exports to the United States, which I strongly believe are unlawful under the WTO and we shall have the determination of that at the WTO next month. The way that we ensure that we continue to have successful manufacturing companies and manufacturing jobs and so on, is to invest in the science and the innovation which will ensure that we go on producing high value added products and we are using the best possible production processes and thereby keeping ourselves competitive. In my own constituency I have textile companies who urge me all the time to lock out clothing imports, textile imports from developing countries. I make to them exactly the same argument that I would make to this Committee. I believe that is the right thing to do. We should help them adjust to more open markets, not close our markets in what is ultimately a vain attempt to protect them. Hugh Bayley (Ms Hewitt) We would not have put these issues on the agenda if we did not believe that developing countries stood to gain. It is important to distinguish here. In the discussions around trade facilitation and government procurement there is actually quite considerable willingness, we find, on the part of developing countries, to sign up to a fairly basic set of standards on both issues. Both issues of course are directly connected with better governance and greater transparency and dealing with the problem of corruption, which of course is disastrous for development in many of the poorest countries. I do not think that there is the opposition; there is opposition from some, but there is not the scale of opposition on those two issues that you are in fact suggesting. On the issue of transparency and government procurement, there is a particular problem that the government procurement agreement which already exists is simply not suitable for developing countries because it requires such a high level of transparency and commitments to market access. It is not suitable, particularly in the light of what we were just saying about special and differential treatment. On the other two issues, as far as investment is concerned, we are very clear that developing countries are in desperate need of investment. I am not talking about speculative capital flows here, I am talking about foreign direct investment, particularly in infrastructure. At the moment developing countries are getting two per cent, a tiny fraction, of the world's FDI flows. If developing countries can opt in - and this is an opt-in not a compulsory procedure - to a basic set of standards for the treatment of foreign investment, that will encourage foreign investment. Of course that creates opportunities for investors based here, but fundamentally we are talking about opportunities to enable developing countries to develop the infrastructure they need. As far as competition is concerned, sometimes there are misunderstandings here. We are certainly not proposing that every country should have an Enterprise Act, a full-scale, fully-fledged competition regime. We are not proposing that the WTO should be the disputes resolution mechanism for competition disputes, but we are saying that poor consumers in developing countries lose out because of the prevalence of cartels in many of those developing country markets, which can operate with particular ease because there is so little in many cases in the way of independent competition authorities or non-corrupt criminal investigators and courts and so on. Again it ties up with the issue of good governance and transparency and again it is the question of saying, "Let us see whether we can agree a basic framework of basic rules, basic standards on competition and dealing with cartels into which developing countries can opt if they want to do so. It was very interesting, when I discussed this for instance with Egypt's trade minister at Doha, an extremely impressive minister, who was saying that three years' earlier he had been wholly hostile to any discussion about competition law, but the more he had looked at it and learned about it, the more he could see the very real benefits which a suitably scaled competition regime could offer. (Ms Hewitt) We are certainly not discussing a MAI proposal now. (Dr Drage) What I was implying was that in the context of this round what we wanted was a starting level of agreement. Whether it goes on to build anything more would be dependent upon the consensus within the WTO at whatever future date we get to a round beyond this one. That is what I meant by that. (Ms Hewitt) No; of course not. We have to deliver on TRIPS. Before Christmas we were very, very close to agreeing the compromise text on the implementation of the Doha principles on TRIPS. The European Union and the developing countries were in agreement on that text. The United States was not able to agree. I shall be in Washington next week for talks on trade and I shall continue to urge them to sign up to that compromise agreement. It is also true on agriculture. I was saying earlier that if we do not deliver significant market opening on agriculture and significant cuts in export subsidies, including the food aid and the American version of export subsidies, then we will not get a round. It is as simple as that and that is why we are redoubling our efforts to link these issues together and get the progress on the medium-term review that we need in Europe in order to be able to make a further offer on agricultural access and export subsidies before we get to Cancun. Chairman (Ms Hewitt) It is a very, very fair point. This is an enormous organisation, over 142 members and others queuing up to join. It is one which depends on the consent of every country, so it is inevitably hugely complicated because each country will have issues which are absolutely vital to its own interests and its own political ability to sell the agreement back home. Of course it is going to put those issues on the agenda and then they have to be traded off against everybody else's issues. We just have to understand that and build capacity, not only within individual governments, but to build the institution as a whole as part of trying to strengthen international institutions which we have to do if we are to make globalisation work in the interests of the whole world. It is very, very tough, but on the issue of environmental protection specifically, this is a matter of enormous concern to European consumers. I know in many other countries that this is regarded with great puzzlement, but it is a fact, our consumers are hugely worried and for very obvious and good reasons about food safety and environmental issues. We do pursue those issues. We did not frankly make very much progress at Doha apart from an agreement to have further discussion about the relationship between the WTO rules and the MEAs and we shall pursue those. That is not overloading the WTO agenda per se. Tony Worthington (Ms Hewitt) Perhaps this Committee could help and it would be wonderful if you could. I absolutely share your frustration on this and we do indeed receive thousands of postcards and letters - every Member of Parliament does. I do find it very frustrating. We are working very closely with the trade and trade justice NGOs in particular. There is a broad measure of agreement between us but on this issue of GATS we have one or two NGOs who have simply decided that this is their cause and no amount of going through the arguments seems to have any impact at all on what they like to say about GATS. This is not a question of edging towards the truth, it is totally a matter of legal fact that GATS does not and cannot require any government, whether it is us or one of the poorest countries in the world, to privatise public services or indeed to open markets that a government does not want to open. That is a matter of fact about the legal impact of GATS. The thing I find even more puzzling is that when I talk to developing countries, as I do all the time about these issues, they do not talk to me about GATS. They talk to me about agriculture and TRIPS and tariff escalation and special and differential treatment, and quite right too, but GATS is actually seen by most developing country governments as a model of a trade agreement precisely because it is bottom up and it allows governments to determine the pace and the extent of market opening for themselves. It is a frustrating dialogue of the deaf and if your Committee, in a sense seen as perhaps more dispassionate on this issues, can pronounce on it then I think that would be very helpful. (Ms Hewitt) Passionate but perhaps not parti pris in the way that government is assumed to have some line to peddle here. (Ms Hewitt) I do not think so. The whole GATS process depends on governments making requests and then governments making offers. Obviously nobody has to accept a request if they do not want to. For instance, we will make requests. If you look at Japan or India, we are constantly urging those governments to make it easier for UK insurance services or legal and professional business services to move into those markets because there is very clearly business demand for those services and we are very good at providing them. Of course we would expect to pursue that sort of discussion with GATS. Where in different countries there are parts of education or health services which are offered by a range of providers or entirely by private providers, then of course we would expect to be making some requests. A growing number of our universities is in the business of educational exports and that is very much in the interests of developing countries' students as well as in the interests of our own universities and other educational establishments. That has nothing to do with forcing the privatisation of the public state school sector. (Ms Hewitt) There are a couple of advantages. One is that if this is done within the WTO framework, then there is much greater certainty, there is greater transparency and there is likely to be much wider coverage of the market opening. That is really the most important point. If we take a scenario where we do not succeed in the Doha development round and those negotiations collapse - and we are doing everything possible to prevent that from happening, but if that were to happen - the result would be that the world would fall back into a system of regional trade blocs, bilateral deals, a slow and messy process. I was talking to Alec Irwin recently, the trade minister in South Africa, and he is very clear about this. In order for the developing countries to grow, they have to have access to the biggest, richest markets. The way to get that access is through the multilateral framework of the WTO. If they cannot get that, then they will make other deals, they will reach agreements with China or with Brazil or with Egypt or with India, wherever they can reach an agreement. He said that it will be a 20-year detour to development. That is why I would say, do not regard that patchwork of bilateral and regional agreements as any kind of alternative to a proper system which effectively covers the whole world, very nearly the whole world, a proper system of rules for free and fair trade. Alistair Burt (Ms Hewitt) First of all, it is absolutely clear that there are examples of water privatisation which have worked and there are examples which have not worked. They do not have anything to do with GATS. They have been a matter of decisions by individual governments, or in some cases particular cities or regions, to bring foreign direct investment via privatisation into their water services. The advantage for governments of doing this within the GATS framework, if they want to, is that it provides the certainty that will encourage foreign investors to come in. Foreign investors, for very obvious reasons, are going to be very reluctant to come into a country to make what has to be by definition a very large and long-term investment, if they think that a few years later it might be reversed for political reasons. What that underlines is the importance of getting the regulatory structure right, if the problem of modernising water supplies in a developing country is tackled through foreign direct investment and possibly privatisation, competition and so on, is done in a way which ensures that poor consumers are able to afford water supplies. (Dr Drage) On GATS VI.4 and proportionality, clearly it would be for an individual government to decide initially on what it thinks are the right measures to put in place. Because the agreement is within the WTO, it is feasible that if another government who is a member of the WTO feels that they have been disadvantaged by that decision by government X, they could in theory take them to the dispute settlement of the WTO. It would need to be fairly clearly provable for them to want to risk doing so and they would want to think about what the consequences of any decision might be. (Dr Drage) That is a transparent process and therefore gives greater protection to developing countries in that you are in a multilateral forum, you are in a transparent process. You have to think what the relative balance of power is between the multilateral and the bilateral system. (Ms Hewitt) The other point I would make on this is that that is a government process, it is not one where a multinational company can invoke the WTO against the government of a poor country. That is important and quite a big difference, if I recall correctly, with the MAI attempt some years ago. On the issue of imbalances of power, it is a statement of fact about the current conditions of the world. Ultimately what this comes back to is how we best support the governments and the people of developing countries to use trade as one of the levers to become wealthier and to get greater power. As countries become better off, governments become much stronger and much more confident in dealing with multinational companies and one hopes in some cases in dealing with companies within their own countries as well. We have seen that very clearly with India as it has grown. Tony Worthington (Ms Hewitt) I do not know about that. (Dr Drage) The thing to say is that the offer deadline is not a deadline in the terms you might understand it. It is an indicative date by which the developed countries are encouraged to put their offers in. Everybody accepts, particularly for the developing countries, it will take them longer and some of them are still submitting requests, which is the previous stage. We think the DFID report is likely to be ready sometime in the summer and we do not think that is any great problem in terms of assisting developing countries to assess what sort of offers they want to put in. (Dr Drage) It is when is a deadline not a deadline? (Ms Hewitt) This one will run and run. Mr Battle (Ms Hewitt) Yes. (Ms Hewitt) Let me just make a quick comment on your preliminary point about needing to communicate as well as we govern. I completely agree with that and it is one reason why we have pushed very hard the case for being as transparent and open as we possibly can in this whole negotiating process. We have probably been in the lead within the European Union in urging openness in offers and requests and all the rest of it. In some cases of course developing countries themselves do not want to publish requests and offers which they are making, but within those constraints we put 86 pages of summary material on our website in relation to GATS, we are constantly communicating with the NGOs, we try to put out as much material as possible to interested Members of Parliament and so on and we shall keep stepping up those efforts. On the issue of how we align special and differential treatment with the progress made in a particular country, I am not sure. This is slightly more a matter for DFID. (Dr Drage) It is a very long-term issue about how you really reflect an individual country's state of development and getting towards the millennium development goals. I know research is going on which looks in the long term at building on the integrated framework and PRSPs of countries and tying in therefore how they should sequence their compliance with various aspects of the WTO agreements. There is a real short-term problem in terms of this round because to be fair to developing countries, we need a much more variable geometry for country classification than the three bands we have at present. It is an issue which developing countries understandably get very agitated about and they are very reluctant to discuss it. That is one reason why we have not made more progress on SDT, because they want to know what might happen; they have various ideas in terms of country classification and nobody likes to graduate off a beneficial system. (Ms Hewitt) It is a bit like being an objective one area in the United Kingdom. You do not really want to become objective two; you have a perverse incentive. Chairman (Ms Hewitt) First of all agreement on TRIPS, preferably before we get to Cancun, but certainly at Cancun if not before. Progress on agriculture for all the reasons I spelled out earlier. Progress on industrial tariffs, including tariff escalation. Real progress on special and differential treatment, because without that you simply will not be able to bring developing countries along with us. I hope also agreement to launch negotiations on the new issues. (Ms Hewitt) It is a big agenda, but in the services and industrial tariff discussions we are at least making some progress. We need a breakthrough on agriculture and we need agreement on TRIPS. (Ms Hewitt) First of all, Everything But Arms was a hugely important initiative. It still has to deliver its full results because some of those agricultural products have been left until the very end date, up until 2009. However, we are already seeing results and imports into Europe from sub-Saharan Africa grew last year at a time when world trade generally was shrinking. So that is good. Australia has followed our example. We want to see all developed countries sign up to Everything But Arms as part of the WTO commitment. As far as President Chirac's proposals for sub-Saharan Africa are concerned, obviously this is enormously interesting and we have been looking at them very closely. There are some welcome elements in what President Chirac said and the accompanying background paper, in particular the acceptance that subsidised exports, whether from the European Union or elsewhere, including American food aid, can be very damaging to agricultural development in poorer countries. That is very, very important. What we are not so happy about is the proposal to try to deal with the problems in sub-Saharan Africa by way of preferences to those countries alone, partly because of all the disadvantage of relying on preference regimes rather than broader liberalisation, but partly because although some of the world's poorest people live in Africa, there are twice as many poor people outside Africa as there are inside it. So what we should do is build on the French proposals and particularly that acceptance that export subsidies are damaging, in order to make reforms within the Common Agricultural Policy and pursue the multilateral negotiations within WTO. Hugh Bayley (Ms Hewitt) That is absolutely the implication of what President Chirac is saying, which is why it is a very welcome recognition of the need for reform, as you say, at least in the export subsidy area. I agree with you that if we are really to tackle this problem, then we have to reduce, possibly very significantly, production of sugar, for instance, within the European Union. There are various ways of doing that, one of which is the way you referred to, by simply bearing down on the quotas. The mid-term review proposals which we have had so far from Commissioner Fischler, which are very, very welcome and which we endorse as an absolutely and necessary and good first step, do not of course deal with the sugar regime and we are still waiting for proposals in that area. The basic principle of the MTR proposals is absolutely right and that is to decouple support for farming incomes from support for production. The further we can go down that route the better. Tony Worthington (Ms Hewitt) You mean they are involved in trying to stop them. (Ms Hewitt) Yes, we are and we absolutely support that proposal. If we can get more and more governments of developing countries signed up to that, and then get all the companies involved in the extractive industries implementing it, it will make a very real difference and bear down on corruption and bribery and the rest of it. Alistair Burt: As a non-controversial end, do you want to offer any other general comments about President Chirac while you are here? Chairman (Ms Hewitt) Thank you. We shall be delighted to help post Cancun. |