Examination of Witnesses (Questions 200-219)
11 MAY 2004
LORD WHITTY
AND MR
ANDREW KUYK
Q200 Chairman: There are budget pressures
for the EU because, in effect, the CAP budget is capped in the
long term. Presumably compensation payments would have to come
out of the CAP budget with reductions elsewhere.
Lord Whitty: We are not at the
ceiling yet, but yes they would be subject to the Pillar 1 ceiling.
There would be some savings, however, to offset that in relation
to export refunds, which of course is another very important aspect
of the development and trade negotiations.
Q201 Chairman: I think the Commission
announced yesterday that they were very keen to stop export subsidies.
Lord Whitty: That is right.
Q202 Chairman: Presumably you would endorse
that approach?
Lord Whitty: It has been our approach
throughout that we ought to move to elimination of export subsidies.
The EU, as a whole, has not quite moved to that position but the
recent Lamy/Fischler letter does take us a good way down that
road without absolutely committing ourselves.
Q203 Mr Wiggin: To what extent do you
feel that Europe and the UK, in particular, should be obliged
to continue to source sugar cane from ACP countries?
Lord Whitty: I think we have an
obligation to recognise that if we are making drastic changes
in the situation then the interests of those countries who have
hitherto supplied the UK and, subsequently, the EU do have to
be borne in mind. Whether that means that we provide a continued
differential access or whether we provide some transitional arrangement
to diversify their economies, I think, depends both on the way
in which the reform is phased in and on how efficient in the long
term those economies are likely to be and what alternatives they
have to their current—in the case of some countries—dependence
for export earnings on sugar. There are differential levels of
efficiency and competitiveness amongst the ACP countries, and
some, I think, in the long-run—maybe not in the very long-run—would
not be able to compete in a liberalised market. Others would stand
a better chance. However, all of them, if you just did it overnight,
would be subject to the whole market being swept up by Brazil,
but that may not be the case if we take a phased approach to it.
Q204 Mr Wiggin: Do you think ACP countries
should be compensated for losses incurred by their sugar producers
caused by EU reform?
Lord Whitty: I am called to a
vote in the House of Lords, Chairman. I wonder if you could excuse
me a moment.
Chairman: Of course.
The Committee suspended from 4.19pm to
4.29pm for a division in the House of Lords
Q205 Chairman: We were talking about
ACP countries and whether the British Government had a special
interest where they ought to be representing their interests.
I think you were saying yes, we ought to try, but it would be
difficult.
Lord Whitty: Well, I would say
it has to be taken into account. I think that should not be interpreted
as saying that we will always maintain sugar supplies into Europe
from those traditional countries. In the long run, opening up
trade in general, including agricultural trade, in a wide range
of developing countries is a bigger contribution to development,
but there are particular problems, particularly in some of the
Caribbean countries.
Q206 Mr Wiggin: I just wanted to ask
if the compensation paid to ACP producers should come from CAP
funds rather than development funds?
Lord Whitty: Well, that would
be a matter which would have to be discussed and clearly there
are precedents which would need to be considered. I am not talking
about compensation really, but I am talking about transitional
aid. I think to regard it as compensation is probably the wrong
way to approach it. It does have development implications but
it comes about as a consequence of agricultural reform. I think
that would have to form part of the negotiations and I would not
like to commit myself either way on that.
Q207 Mr Wiggin: They were very passionately
keen on having it as agricultural money rather than aid because
they felt that would shut off another avenue of income, so to
speak.
Lord Whitty: Well, I can understand
that, but a lot of this will be subject to detailed negotiations.
Q208 Mr Mitchell: Sugar is a bit complicated
in the sense that more departments have got interests in it, have
they not? How do you co-ordinate policy between the different
departments? Who takes the lead?
Lord Whitty: Well, we talk to
each other. I know there are clearly other occasions on which
we do not and I think there was an impression at one point that
we were taking different views. But I think there is a broad co-ordination
of views. DTI clearly are leading on the trade negotiations and
we are supporting broadly the trade liberalisation process. We
lead on agricultural reform—
Q209 Mr Mitchell: But DfID have a very
different interest indeed from either of the others.
Lord Whitty: Well, DfID's interests
are largely in opening up access to developing countries into
the European agricultural market. Of course they are also interested
in making sure that, on the one hand, the poorest countries benefit
to the largest degree and, on the other, that how we open up the
market does not lead to disruption and serious social and economic
problems in particular economies. Clearly in some cases where
we should move overnight away from sugar in closing off the sugar
market to some of the Caribbean countries, then there is the question
of what they are going to do to replace those sugar earnings.
That is where issues like transitional aid come in But the central
DfID objective is to open up access and that is also DTI's position
and ours.
Q210 Mr Mitchell: So there is a broad
agreement between the departments involved?
Lord Whitty: There is more than
broad agreement; there is a wide range of strategic coherence.
Clearly on the actual details of the negotiation, particularly
in the light of the new proposition from the LDC countries, we
have yet to formalise precisely our negotiating position, but
all three departments and others would no doubt have their twopence
worth in relation to that. Broadly our strategic outcomes from
these negotiations I think are very much shared by the three main
departments involved.
Q211 Mr Mitchell: But there have been
reports, and on a priori grounds it must be true, that
there is a battle between the interests of British producers and
the interests of developing countries and that has been fought
out partly in government. Are you saying there has not been?
Lord Whitty: Yes, I am saying
there has not been. There have been allegations occasionally that
efra (and before it MAFF) have been too defensive of the British
sugar beet position which I have been obliged to deny. Defra has,
I think, a very good understanding that change is necessary and
it fits in very well with our general approach to CAP reform in
other regimes. So there is not any basic lack of agreement between
ourselves and DTI or ourselves and DfID on this. The idea that
Defra is there simply to represent the interests of the British
sugar industry and British sugar growers is not the case. We want
a rational and sustainable agricultural policy for Europe and
a better trading system generally, including for agriculture,
and within agriculture, including for sugar. So we are not on
different tracks. There are different emphases and maybe different
weights to put to some of the difficulties in getting there, but
we have the same objective.
Q212 Mr Mitchell: Is the British Government
making the running or arguing for a positive case? You said earlier
that you had not made your mind up, though I would have thought
it was in the interests of the British Government in this situation
where there are some differences of view, however you classify
them, between departments and between producers and developing
countries. In that situation is it actually just not making its
mind up, letting other people make the running and seeing what
comes out in the end? Why expose yourself to arguments and divisions
when you can just hang back?
Lord Whitty: Well, we are certainly
hanging back to the extent of taking everything into account,
including various developments for our negotiating partners and
also—
Q213 Mr Mitchell: But are you making
the running on what policy should be or are you waiting for that
to be made by—
Lord Whitty: Well, I think it
is pretty well known in the Commission and amongst our partners
and indeed within the sugar industry that we do not think that
the present regime is sustainable and that we want to move to
substantial and radical liberalisation of that regime. So I think
the Brits are at that end of the argument and have been throughout.
I think that is understood. There are some practicalities in this
and it is different from the position that was taken by the sugar
industry here who, while not arguing for the status quo under
Option One want a variant of it which would keep closer to that
position.. Just to underline that, the way we described our position
at that point in the letter at the beginning of the consultation
back in October was, as you may be aware, that, "The UK Government
has consistently made clear its view that the current regime is
unsustainable in its present form . . . believes that the Commission
analysis confirms that . . . and is minded to approach sugar reform
in the same spirit as the rest of CAP reforms, seeking a more
liberalised regime open to market forces with prices closer to
world levels". So I do not think any party should be in any
doubt where the UK Government's position lies.
The Committee suspended from 4.37pm to
4.49pm for a division in the House
Q214 Chairman: I think you just finished
talking to Austin about where compensation might come from, whether
it was from the CAP budget or whether it was out of the aid budget.
In a sense, there has already been movement in the sugar regime
because of the Everything But Arms Initiative. Now, a number of
our witnesses have tried to indicate that they would like that
Initiative reopened because of the sugar regime. What would your
view be on that? Is it a possibility?
Lord Whitty: Not expressed in
those terms, no. We are committed to the Everything But Arms Initiative
and clearly WTO negotiations might overtake that or WTO panel
decisions might have an influence on that, but, of itself, then
we are not in favour of reopening the EBA. Indeed its existence
is a driver for reform and it is, therefore, part of the pattern
where there is pressure on the current regime to change radically.
Q215 Mr Wiggin: To what extent will future
WTO agreements on tariff reductions and market access lead to
the eventual death of the managed market for sugar?
Lord Whitty: Well, managed markets
exist in varying forms, but I think their historic structure and
the more complicated forms of management, which are being proposed
by some parties here, are not compatible with the liberalisation
that we are proposing and that the WTO are likely to go along
with.
Q216 Mr Wiggin: I am not completely confident
that I know exactly what you are proposing. How do you really
see it?
Lord Whitty: How do I really see
it?
Q217 Mr Wiggin: Well, we are not talking
about Option Two, so we are sort of similar to that, but not quite.
What actually are you going to propose? Are you going to be there
at the negotiations? Who will be there with you or will it be
some other Department doing it? What is actually going to happen?
Lord Whitty: Well, there will
be negotiations within the EU and there will also be negotiations
in the WTO to which the EU will come.
Q218 Mr Wiggin: They will negotiate on
our behalf.
Lord Whitty: We will be there
as well, so in terms of who is there, we are involved in all areas
of discussion.
Q219 Mr Wiggin: But will you be there?
Will you, as a Minister, be there?
Lord Whitty: Not in the WTO, I
would not have thought, no.
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