20 Import arrangements for rice
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(25817)
11294/04
COM(04) 485
(b)
(25818)
11295/04
COM(04) 484
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Draft Council Decision on the conclusion of an Agreement in the form of an exchange of letters between the European Community and India pursuant to Article XXVIII of GATT 1994 relating to the modification of concessions with respect to the rice provided for in Schedule CXL annexed to the GATT 1994
Draft Council Decision on the conclusion of an Agreement in the form of an exchange of letters between the European Community and Pakistan pursuant to Article XXVIII of GATT 1994 relating to the modification of concessions with respect to the rice provided for in Schedule CXL annexed to the GATT 1994
Draft Council Decision modifying the Community import regime for rice
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| Legal base | Articles 133 and 300(2)EC; QMV
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| Department | Environment, Food and Rural Affairs
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| Basis of consideration | EM of 30 September 2004
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| Previous Committee Report | HC 42-xxix (2003-04), para 1 (21 July 2004)
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| Discussed in Council | 19 July 2004
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
20.1 Following the GATT Uruguay Round negotiations, the system
under the Community's rice regime whereby import levies varied
according to the difference between the Community threshold price
and world prices was replaced by a series of fixed tariffs, operating
alongside a ceiling on the price of imported rice linked to the
intervention price.
20.2 In 2000, the Commission put forward proposals
for reforming the rice regime, which would have involved the abolition
of the intervention price system, and would thus have had major
implications for the import arrangements. In the event, these
proposals were overtaken by the more general mid-term review of
the Agenda 2000 reforms, which eventually resulted in the retention
of an intervention price, albeit with the level of support reduced
by 50% as from 1 September 2004. However, although this turned
out to be a much less radical change than envisaged, it does nevertheless
still have an impact on imports, because of the corresponding
reduction in the ceiling prices. The Council therefore authorised
the Commission in June 2003 to notify the WTO that the Community
intended to modify the tariff arrangements in this area, in order
to safeguard the position of its own producers.
20.3 In the light of its subsequent discussions with
the Community's principal suppliers, the Commission put forward
on 7 July 2004 these two documents, which reflect the agreement
it had reached with India and Pakistan on the application of a
fixed tariff of €65 per tonne for husked rice and one of
€175 per tonne for milled rice, and which would apply from
1 September 2004 until 30 June 2005 (in the expectation that the
Commission would in the interim table an amendment to the basic
instrument setting up the Community rice regime (Regulation (EC)
No. 1783/2003)). However, the Commission also said that it had
not been able to negotiate an acceptable agreement with two other
important suppliers (the United States and Thailand).
20.4 We considered on 21 July a letter from the Parliamentary
Under-Secretary of State (Farming, Foods and Sustainable Energy)
at the Department for Environment, Food and Rural Affairs (Lord
Whitty), indicating that, although the position of Thailand was
still unclear, the United States had said that the proposed tariff
on husked rice would make its produce completely uncompetitive
on the European market. The Minister also said that, although
the Commission had only just produced these two documents, it
would be seeking agreement on them at the meeting of the Agriculture
and Fisheries Council being held on 19 July, and that the Government
was likely therefore to be faced with the need to cast a vote
on them before parliamentary scrutiny clearance had been obtained
in the normal way. He also believed that there was a possibility
of a qualified majority in the Council in favour of the Commission's
proposals, and said that the Government was consulting urgently
with a range of interests on the best way ahead, but had not yet
reached a decision on which way to vote.
20.5 In our Report, we said that we found it unacceptable
that such an issue should be rushed through the Council in this
manner, and we drew attention to the Protocol on the role of national
parliaments annexed to the Treaty of Amsterdam,[44]
noting that there did not appear to be any such grounds in this
case for an exception on grounds of urgency, and that no such
grounds had been stated (as the Protocol requires) on the draft
Decision itself. We therefore asked the Minister to tell us what
justification the Commission had given for placing the draft Decision
on the Council agenda for decision within the six-week period
provided for in the Protocol, and what discussion there had been
in the Council of the requirements of the Protocol.
20.6 We also said that we assumed the Explanatory
Memorandum promised by the Minister would indicate what decision
(if any) the Council had reached on 19 July, but that it would
also be helpful if, in addition to confirming that the outcome
meets the needs of the UK's main ACP/OCT suppliers, it could also
spell out the implications of the failure to reach agreement with
Thailand and the United States, bearing in mind a tendency in
the latter case for disputes to escalate into potentially damaging
retaliatory action.
The present position
20.7 We have now received from the Minister an Explanatory
Memorandum of 30 September, in which he confirms that the proposal
was approved by the Council on 19 July by a qualified majority,
but that, whilst welcoming the agreement reached with India and
Pakistan, the UK had voted against because of the lack of agreement
with Thailand and the United States, and because it was not convinced
by the basis on which the Commission had calculated the new tariff
rates. He adds that the Government had urged the Commission to
continue negotiations with Thailand and the United States with
a view to finding a mutually acceptable outcome.
20.8 On the questions raised in our Report of 21
July, the Minister says that:
- the Decisions needed to be
adopted urgently, so that the new arrangements would be in place
by 1 September 2004, when the substantial cut in intervention
price, and in the resulting duties, was due to take effect: talks
with Thailand and the United States had continued up to the last
possible minute, but, in the absence of agreement, the Commission
had felt obliged to present the Council with the results of its
efforts up to that point;
- there was no discussion in the Council of the
Protocol to the Amsterdam Treaty, the focus being on the substance
and implications of the proposals: had the adoption of the Decisions
been delayed in accordance with the six-week rule, this would
have involved the written procedure, giving the UK no opportunity
to voice its views in the Council, whilst we would still have
had no chance to examine the proposal because of the summer recess;
- the agreed arrangements will continue to give
the UK's main ACP/OCT suppliers an advantage in respect of husked
and milled rice relative to what they would otherwise have received
following the CAP reform: on the other hand, their position is
severely eroded as compared with the situation prior to that reform,
in that the value of their exports to the Community will be reduced
and subject to increased competition;
- a substantial liberalisation of international
markets under the Doha Development Agenda would, however, have
"huge" potential benefits for developing countries;
- though the Commission is continuing to negotiate
with Thailand and the United States, there is no clear indication
at this stage as to what action, if any, they may take: the Government
hopes that a mutually satisfactory outcome will be possible before
the Commission tables its proposals for a permanent import system
later this year, but, in the absence of an agreement, there is
a risk of dispute settlement procedures being initiated and the
aggrieved parties seeking compensation and/or retaliation (where
the United States is said to be consulting interested parties
on what products might be targeted under such a scenario).
20.9 The Minister has also provided a short assessment
of the implications of these two Decisions, whilst pointing out
that it is difficult to quantify the impact of a short-term measure
on which negotiations are continuing. In the meantime, however,
he suggests that, as compared with the situation immediately following
the CAP reform, Community rice production could be expected to
increase by 7% (10% if yield improvements are taken into account)
as a result of the increased price arising from greater import
protection; that this price increase could result in a 15% reduction
in rice consumption, the effects of which would be felt more by
imports than by rice produced within the Community; that imports
of milled rice could be reduced by over 60% (though the opposite
would be true of husked and basmati rice); that import duties
could increase by some €38
million a year; and that millers, particularly in the rice-producing
Member States, are likely to be better off as the new arrangements
maintain a margin for husked over milled supplies. However, the
Minister also says that the UK milling industry has expressed
concern that this differential is at a lower level than prior
to the CAP reform, and that its operating margins will be eroded.
Conclusion
20.10 Whilst we appreciate the significance of
an implementation date of 1 September 2004 for these two Decisions
and the Commission's wish to allow as much time as possible for
completing the outstanding negotiations with Thailand and the
United States before tabling a proposal, we remain of the view
that it would still have been possible for the proposal to have
been discussed at the Council on 19 July 2004 but formally agreed
by written procedure at a later date, thereby enabling us to consider
it prior to adoption, and not after the event. Also, although
the UK voted against the measure, we continue to be uneasy about
the implications of the agreement, not least for millers in the
UK, and about the implications of the failure to reach agreement
with the United States, bearing in mind that some sort of retaliation
now appears to be contemplated.
20.11 As it is, we can do little more at this
stage than note the present position, and record our concerns.
However, in clearing the present document, we would like both
to draw to the attention of the House the unsatisfactory nature
of the current agreement (and the way in which it was presented
for parliamentary scrutiny) and to put up a marker that we would
want to be able to consider in a much more measured way the proposals
which the Minister expects the Commission to table before the
end of the year on a more definitive import regime.
44 This provides for six weeks to elapse between a
legislative proposal being made available in all languages and
the date when it is placed on a Council agenda for decision, subject
to exceptions on grounds of urgency. Back
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