Examination of Witnesses (Questions 73-79)
26 APRIL 2004
MR KEVIN
WATKINS AND
MR MATT
GRIFFITH
Q73 Chairman: Welcome to you both. I
think both Oxfam and CAFOD have done quite a lot of work recently,
looking at the sugar regime, and have come forward with proposals
for change. Could you outline those, fairly briefly? Can we start
with you, Mr Watkins, your report has had some publicity over
the past few weeks?
Mr Watkins: We really appreciate
the fact that you are listening to people who have a development
background in this. Our starting point is that in a sector like
sugar, where you have very powerful interests involved in the
European Union, it is often very easy to lose sight of how decisions
which are taken in Brussels really impact on the lives of an awful
lot of people across the developing world. I think there is a
sense, in the case of the sugar regime, where we all throw up
our hands and say, "We wish we did not start from here"
and there are sensible ways to get somewhere better. The problem
we have is that we have a regime that causes immense damage to
the world's poorest countries, largely because of the simple fact
that we produce too much of the stuff. We are not an efficient
producer. British Sugar may argue otherwise but we produce these
vast surpluses which we dump on international markets and which
drive down international prices. We allow very limited access
for some of the world's poorest countries. Set against that, there
is a group of countries within the ACP group that clearly benefits
from the current regime and equally clearly stands to lose in
the face of any radical shift towards open markets and liberalisation.
Both those countries and some of the potentially more efficient
producers in Africa, Malawi, Ethiopia and Mozambique clearly could
not compete tomorrow in an open market with Brazil. Our reform
scenario in brief is that there is no point coming up with some
very ideological solutions like throwing the market open tomorrow.
Politically it is not feasible and it would hurt a lot of developing
countries. We believe that some form of managed market is going
to survive but two things need to happen. First of all, there
need to be very deep cuts in the European sugar quota to eliminate
quota and non-quota sugar exports which are cross-subsidised in
the latter case, so that Europe should not be exporting at all.
Secondly, there should be a redistribution of the remaining quota
away from the sugar beet sector in Europe and towards some of
the poorest countries in Africa that stand to benefit from that.
I am not going to go into the numbers but that is the broad proposition:
deep cuts in quota and a redistribution of the quota towards some
of the world's poorest countries.
Q74 Chairman: What timescale have you
in mind for this?
Mr Watkins: We need a timescale
that takes into account external developments, including developments
in the World Trade Organisation, but I think broadly we are talking
about a time frame that runs from around 2006 to 2013.
Q75 Chairman: As there will be gainers
from that approach there will be losers too. Clearly, as an international
organisation, you have looked at the losers. Who will be the losers?
Mr Watkins: If the regime is reformed
in the way that we advocate so that you do not have a deep cut,
I think we have to be realistic and say that there is going to
be a cut in the EU guaranteed price for sugar, if only because
of the agreement of the World Trade Organisation. Even if we were
not deliberating on reform of the sugar sector, tariffs would
come down as a consequence of any WTO agreement and that would
be reflected in prices. In all probability, the reform process
in Europe will generate a deeper price cut. Starting from a proposition
that we are still going to have guaranteed prices, if the poorest
countries in Africa are allowed a very significantly expanded
quota—we believe it should be in the order of 2.5 million
tonnes—that would clearly protect that group of countries.
In the case of the ACP quotas, different countries in that group
are in different positions. Countries like Mauritius, Fiji and
Guyana clearly stand to suffer in a very fundamental way in terms
of the overall economy because of any reform of the sugar regime.
Europe has to come up with a proper compensation package and adjustment
support package for those countries.
Q76 Mr Wiggin: I do not understand why
you want to give money to people to reduce their quota but you
do not actually want to give money to the poorest countries who
may not want to produce sugar and may wish to do something else
but their fundamental problem is that they are poor. Why do we
not give the money to the people who are poor? Why do you want
to give it to someone else?
Mr Watkins: I was asked a question
about winners and losers in the context of the reform. I will
answer that question separately if you want me to.
Q77 Mr Wiggin: I am curious. Please try.
Mr Watkins: We should do both.
The whole purpose of the European Union's aid programme is to
provide support to the world's poorest countries. If we are talking
about how do we protect countries that we are going to impose
an adjustment cost on as a result of reform of the sugar sector,
I think we have to look at the range of options available. We
can either support industries in restructuring, support the creation
of social welfare safety nets or we can support exit strategies.
If some ACP countries believe that they are not going to be viable
under any conceivable future regime, potentially Europe could
buy back the quota and transfer it to somebody else. That would
provide a financial benefit to the quota holding country and it
would provide options for Europe to transfer that to other countries.
Mr Griffith: Europe clearly has
obligations to ACP producers. If we are going to have a CAP reform
in which we compensate our own producers, it would seem slightly
unfair that we would then push through a reform which does not
compensate ACP producers, who will have a more difficult transitional
period if reform goes through.
Q78 Alan Simpson: I wanted Kevin to talk
us through why Oxfam has changed its position from 2002 when you
were arguing that LDCs should have unrestricted access to EU markets.
Mr Watkins: If you look at the
position that we put out in 2002, it was not as unequivocal as
that. We were reflecting the fact that the LDCs themselves were
lobbying very intensively under the Everything But Arms proposal
for unrestricted market access. There was one major actor in Britain
that was trying to obstruct that and that is now the company that
stands and presents itself as the champion of the ACPs, which
is British Sugar, which fought a two year campaign to block the
Everything But Arms Agreement. In the face of that, we did argue
very strongly for improved access for the LDCs. The preferred
LDC option at that stage was to go for what would eventually become
a tariff free, quota free arrangement. The LDCs themselves have
signalled very clearly that they no longer regard that option
as being in their best interests. To be honest with you, we were
somewhat agnostic at that stage about whether the best way to
support LDC industries was through the EBA type of arrangement
or a reformed quota arrangement. What our current position reflects
is some fairly intensive dialogue with the LDCs and a reflection
ourselves on the political realities of where we are at the moment
and what is possible.
Q79 Alan Simpson: If I read this properly,
it seems to me that, in moving from the presumption that LDCs
should be entitled to export into the EU on a tariff and quota
free basis, you are trying to identify something that may be a
quota that is tariff free. What do your instincts tell you about
the maximum quota that we should be looking at in terms of that
entitlement?
Mr Watkins: It is a really important
question and it is a very difficult one to answer for all sorts
of reasons. There are a lot of projections as to what LDC export
capacity is and those projections range from fewer than a million
tonnes to 2.7 million tonnes on current scenarios. If you speak
to people who are actively involved as investors in the industries
of Malawi, Zambia, Mozambique, Ethiopia and elsewhere, almost
unanimously they say that these projections are a wild and massive
understatement. If we know that the opportunities are going to
be there in the European market and we have some guarantee with
regard to future price stability, we would be expecting to make
significant new investments in updating old refineries, bringing
new capacity on stream. The honest answer to this is that I think
nobody really knows what the net export capacity of the LDCs as
a group is. We think the best projection is probably somewhere
in the order of 2.5 million tonnes. That is what we have incorporated
into our proposal.
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