Examination of Witnesses (Questions 220-236)
11 MAY 2004
LORD WHITTY
AND MR
ANDREW KUYK
Q220 Mr Wiggin: Who from your Department?
Lord Whitty: Margaret Beckett
would be, as she was at Cancún. In terms of sugar negotiations
within the EU, then it almost certainly would be me, assuming
I am still in this position. At the moment I do not think I am
able to satisfy your question of where exactly we are proposing
to be partly because we need to take into account the latest developments
there and partly the latest developments with the LDC proposal
and so on. We also need to get a clearer idea of where the rest
of our EU partners are on this, so we are not yet nailing our
colours to a precise mast. All I have said earlier is that we
are at the end of the spectrum, which is very much closer to full
liberalisation and there will be some very detailed discussions
on how we get there.
Q221 Mr Wiggin: I see you holding the
flag as the mast whips backwards and forwards in front of you,
desperately having a swipe at it! Let me ask you an easier one
in the meantime. To what extent does recent press speculation
on a possible trade deal with Mercosur suggest that access to
the Latin American market for investments and services is regarded
more highly by the EU trade negotiators than the continued protection
of internal markets, such as sugar?
Lord Whitty: I think that clearly
with the collapse of Cancu«n, there has been some talk about
bilateral deals with Mercosur and other trading partners. There
is some interest in the EU, particularly Spain and Portugal obviously,
in trying to ensure that we do have a reasonable deal with Mercosur.
But that is not a substitute for WTO global agreements, nor do
I think it would of itself, be sufficient to convince the EU to
radically change the sugar regime in the direction we are talking
about, because there are so many other interests involved. Brazil
obviously is a huge sugar producer, but the rest of the LDC and
ACP countries would not covered by any Mercosur deal.
Q222 Mr Wiggin: So does the Government
regard the potential benefits of the deal with Mercosur as being
more important than the losses to the UK sugar industry?
Lord Whitty: No, and it is not
a trade-off that remotely bears any resemblance to anything that
is being talked about. What the UK Government is clear on is we
want a process which is agreed globally. Clearly the EU/Mercosur
discussions are also important, but it is not a trade-off between
that and the protection of the existing sugar beet industry; it
is the change of the present distorting regime to a situation
where there is a globally agreed structure for trade in sugar
and you cannot do that on a partial deal with Mercosur or anybody
else as it will just complicate the issue yet further.
Q223 Mr Wiggin: Just finally, do you
think the same team of people who went to Cancu«n will be
dealing with the WTO?
Lord Whitty: Are you talking about
UK-wise?
Q224 Mr Wiggin: Yes.
Lord Whitty: Well, subject to
the Prime Minister's decisions on various placements between now
and then, yes.
Q225 Mr Wiggin: Do you know anything
about that?
Lord Whitty: Regrettably not,
but the three Secretaries of State involved will be those who
will be at the next stage of the WTO talks certainly.
Q226 Mr Mitchell: Europe seems pretty
disunited on the issue and there is a range of opinion from the
French, saying, "Wait and see" on this and other issues,
to the Danes, total liberalisation, and with us and Holland near
the liberal end of the spectrum. Is there a consensus or is this
yet to be opened up?
Lord Whitty: There clearly is
not yet a consensus. Many of the countries have not formally expressed
their position, but one can guess at them. I do not think this
is any different from the position we entered into in the Mid-Term
Review negotiations where basically at that time it would appear
that the UK and Sweden were taking an extreme liberalising reform
position and the Commission, by and large, followed that position.
If you were at the same stage in the argument as we are now on
sugar, the chances of actually getting consensus for a radical
reform look a bit remote. But I think the Mid-Term Review discussions,
which were transformed into radical reform of the Common Agricultural
Policy do show that actually the way the wind is blowing, we can
bring our partners with us to a more open and liberalised regime.
It is also true that no Member State is really defending the absolute
status quo, which was not quite the case in relation to the Mid-Term
Review.
Q227 Mr Mitchell: You are saying effectively
that there is not a consensus, but you expect to get one and that
would be at the liberal end of the spectrum?
Lord Whitty: I am reasonably confident
on that, yes. Clearly Commissioner Fischler, in the Mid-Term Review,
played his cards very effectively with our support and I would
hope we would go through a similar process on this one. It is
by no means certain, but to say that there is not a consensus
at the moment does not fill me with despair. I think, if anything,
precedent suggests we will make progress.
Q228 Mr Mitchell: And the UK will be
playing a role in that to build a consensus?
Lord Whitty: Indeed.
Q229 Mr Mitchell: How about enlargement?
How is that going to affect the issue?
Lord Whitty: Well, there are some
accession countries, new members, who have a significant sugar
beet interest, the principal one being Poland. I suspect they
will be at the more defensive end of it, although there is a problem
for the Poles because entry into the Common Agricultural Policy,
acquis, for sugar has meant a huge hike in sugar price for their
consumers and their processing industries, which is not necessarily
particularly welcome. Therefore, they are not necessarily going
to go completely down the road of maintaining the status quo,
although they have a big beet industry interest. There are other
countries which have a smaller beet interest, but really not as
big as Poland's.
Q230 Mr Mitchell: Does that make it more
difficult? The Pole producers must be fairly low cost, so they
could compete on a low price regime, could they not?
Lord Whitty: I do not think that
is necessarily true. I think that at present some of them, and
I think this includes Poland, are actually in sugar surplus at
the moment and they are having difficulty exporting at present
prices because they are not as competitive as that would suggest.
Q231 Chairman: Could I ask you what you
think the current timetable within the Commission is for dealing
with this? Commissioner Fischler has promised something, I am
not entirely sure what, in the summer. What is your understanding
of the process?
Lord Whitty: Not yet clear. This
is a guess rather than any precise timetable having been agreed,
but even if there is a further discussion on sugar before the
summer break, I do not think it is likely that there will be any
legislative proposals on sugar before the summer break. The Commission
might state in that timescale their preferred approach, which
everybody would have to react to. But I do not think we are going
to get detailed propositions and, therefore, not a detailed negotiation
before the change of Commission.
Q232 Chairman: Which is the autumn. Can
I just ask you a final question about the consequences of reform.
There is going to be change, I think we all know there is going
to be change, so what work has been done on the job losses which
might occur in the UK or the effects on British sugar and Tate
& Lyle? Have you got any research under way on that?
Lord Whitty: There is research
being conducted at the moment by Cambridge University, looking
at the impacts on farm businesses and the sugar beet industry,
including the employment and social impacts.
Q233 Mr Mitchell: Who is financing it?
Lord Whitty: I think Defra are
paying 100% of it, or certainly paying the bulk of that, and it
also is looking at the environmental impacts. There is another
study which is looking particularly at the health impacts conducted
by Food International, and of course DfID are also looking at
the impact of reform generally and its particular impact on the
ACPs and separately on the LDCs in particular so all of this information
needs to go together to inform our negotiations.
Q234 Chairman: What is the timetable
on that Cambridge study?
Lord Whitty: I would need notice
of that question, but it will be in time, or at least the interim
results would be in time to inform our negotiating. I am just
informed that it is the summer.
Q235 Chairman: Could you make a final
comment about how you see the way forward. You were very firm
to say to us at the beginning that Option One is not the status
quo, that there is going to be change over a period of time and
it will take negotiation, but that the present system and situation
really is not sustainable. Is that putting words into your mouth?
Lord Whitty: No, I said that the
status quo Option One, or variants of it as advocated by the NFU
and British Sugar which are not quite the status quo do not move
sufficiently to the radical reform which we believe is needed
and we believe the Commission will eventually at least propose.
Nor would they meet the requirements of either having a logical,
internal agricultural policy or the commitments that the EU is
going to have to make in the WTO negotiations. So I do not think
something around Option One or a variant thereof is viable at
all, and the issue is how far beyond Option Two into full liberalisation
we can move, in what timescale, and with what qualifications.
Q236 Chairman: So producers and manufacturers
ought to be planning for change now?
Lord Whitty: I think they recognise
that change is necessary. Obviously the degree of change and the
pace of change is what they want and need to know. But I regret
that may not be very clear for several months, possibly longer.
I do not even think the final position may be clear in the course
of this year, unless there is some precipitate move on the WTO
front, in which case things may happen slightly faster.
Chairman: Thank you very much, as always,
for all of your help, and to Mr Kuyk.
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