Select Committee on International Development Minutes of Evidence


Examination of Witnesses (Questions 20-38)

MS DIANNA MELROSE AND MS AMANDA BROOKS

30 NOVEMBER 2004

  Q20 Tony Worthington: Surely we can have a situation where we are not bound by what we did a year ago?

  Ms Melrose: Trade facilitation is not in EPAs and yet that is actually considered to be one of the most useful. I think the issue here is that you are quite right and our Secretaries of State are saying—certainly Hilary Benn has said—we want to see the evidence for how these could be developmentally useful and in what way could investment and competition be usefully included in the EPAs negotiations. So it is basically a question of looking at what is useful. The other very important thing is that there is absolutely no need for each regional EPA to be the same. For example, ECOWAS[5] and COMESA could say we want an investment agreement, whereas SADC can say no way, we are not interested. So there is some flexibility. The problem around inclusion of these new issues in the WTO—as your Committee were the first to flag up—is that this was just complete overload. They were nowhere on developing countries' priorities when so little progress had been made on agriculture. EPAs are different because some of the ACP members have expressed an interest in them; however, some were very hostile, so basically we need the ACP to say what they want, rather than the UK Government or indeed the NGOs.


  Q21 Tony Worthington: I am still puzzled by this. There came to be a recognition at Doha that the new issues, the Singapore issues, were in the way, that this was not a development round, that this was in there because of our interests or someone's interest, it was not the developing countries' interests. Then we move to another forum where we say that development has to be at the centre of what we are doing here and these new issues are back in there.

  Ms Melrose: I think part of the answer is that these are not, of course, multilateral negotiations. The point of Cotonou is to promote regional integration; let us say you are Tanzania within SADC and you want to promote regional integration, you are extremely interested in Foreign Direct Investment (FDI) from South Africa, and you may be more interested in that than from the EU, in which case—this is theoretical because I cannot recall what Tanzania's position on the investment agreement is—but that they are interested in South African FDI is definitely the case. They may within the region see that it is hugely to their advantage to have common rules for investment, competition and the other areas, but what you are concerned about is extending it towards the EU.

  Q22 Tony Worthington: It seems to me that you are saying that there is no policy basically. You are negotiating something regionally and we are seeking some kind of regional agreement, but recognising that some of the developing countries will not put these issues on the table. At the end of it, it does not really mean anything, does it?

  Ms Brooks: The issues are already on the table because they are part of the Cotonou Agreement, albeit that the Government has put them slightly to one side, given the concerns that Dianna has already raised. Therefore, in the Cotonou Agreement—which was negotiated before the Doha development round was commenced, different ACP groupings will have different approaches to the new issues. This will be part of the negotiations between the EU and the regional groupings. How it differs to the multilateral round is that that would push much more the "one size fits all" approach, whereas in taking it by regional groupings the individual wishes can be tailored much more to the development needs of those regional groupings.

  Q23 Chairman: I think what you are saying is that we are now into sort of three-dimensional chess. You have got the WTO negotiations from which the new issues were dropped, you have got the Cotonou Agreement where the new issues are still in place, everyone is having to negotiate these two completely parallel sets of negotiations simultaneously, under different rules.

  Ms Brooks: Yes.

  Q24 Chairman: If it is confusing for us it must be a complete and utter nightmare for developing and poorer countries, I imagine.

  Ms Melrose: Absolutely. St Kitts and St Nevis's trade minister said that he had four officials in his department and they were negotiating in the WTO, on EPAs, the Free Trade Area of the Americas and within CARICOM[6]. Yes, the capacity issues are real and it could be the capacity constraints that make different ACP regions a lot less interested in these issues. The point is that they are in Cotonou. But the regions do not have to agree them. One of the things that the EU is doing now is providing support for independent country level assessments where the ACP can look at their transitional needs. The ACP countries have also set up national development and training policy forums where they can bring together all the stakeholders—the private sector, NGOs—and that is just the sort of place where the ACP can identify what is in their interests. Our whole role is to support them in that, not to tell them what they need; at the same time it really is down to the regions now. We could ask why did not the Commission not take on board more of the ACP concerns in Phase 1 but the decision was to let EPA negotiations proceed.


  Q25 Tony Worthington: Who is it within the EU who is pushing the new issues?

  Ms Brooks: It is the Commission.

  Q26 Tony Worthington: What is Mr Mandelson's view on this? Is he pushing the new issues?

  Ms Brooks: He as yet has not given any indication on this. He is meeting ACP ministers this week where, no doubt, EPAs in general and perhaps these issues will be discussed, but we are not party to those discussions at this end.

  Ms Melrose: We have had some very good sessions with him where we have flagged up all these development concerns and he was certainly very receptive. It is a good question: when we asked industry who is really wanting investment and competition agreement, it was certainly not our industry.

  Q27 Tony Worthington: So Lamy was out of control was he?

  Ms Melrose: I think that is somewhat overstating it. He did have a mandate from the member states and Council and in Cancún the mandate was changed. There was certainly some controversy about what was agreed, but his mandate was changed so that he could take the new issues off the table.

  Mr Bercow: I think we ought to get Mr Mandelson to appear before us[7].

  Chairman: We are hoping to find time when the Committee will go to Brussels and meet with the Commissioners at some stage, both on this and other issues. John.

  Q28 John Barrett: If I could turn to the Everything But Arms Agreements, can you say why there has been a relatively poor uptake to this very generous access to market, and also what is the Government doing about it? Are there any proposals to increase the uptake of these by LDCs?

  Ms Brooks: There is no single answer to that question. There are certainly some issues around Rules of Origin within the scheme which are quite restrictive. Many of the ACP countries, for example, choose to use the Cotonou preferences as their Rules of Origin are less restrictive and also they are familiar with them, they have been available to them for longer. But there are also supply side and capacity constraints within the countries to take these preferences up, so it is a whole host of factors and there is no single solution.

  Ms Melrose: If I could just add to that, Rules of Origin are certainly a key area and one that we are very much hoping the UK can take up during its G8 presidency, because at the Evian summit one of the areas on trade where there was clear agreement was that Rules of Origin should not be allowed to get in the way of the take-up of preferences. As Amanda has said, the Rules of Origin are much worse under EBA, so what could the model be? Under the US Africa Growth and Opportunity Act they have got very relaxed Rules of Origin so that, for example, Lesotho is able to buy its cotton from very competitive suppliers in China and India, which means that their garments are very competitive and, as a result, their exports to the US have trebled within three years, and the garment sector is now the single largest employer and very important for women.

  Q29 John Barrett: You could not do that under EBA?

  Ms Melrose: It should be like that, but this is why we would really like to tackle Rules of Origin, not just to make them less restrictive but also to encourage export competitiveness in the long term and, built into Cotonou, is agreement that Rules of Origin will be revised. There is one other issue in terms of take-up and that is the growing problem of standards. Because of the ratcheting up of standards all the time, both by standard setting bodies within the EU but also within the supermarket sector, it becomes harder and harder for some of the poorer countries to meet the standards or at the very least to demonstrate that they do. This is an area where we are giving assistance and there is now a Standards Trade and Development Facility that DFID is funding, but there is a lot more to be done on that, and perhaps more engagement with the private sector in this country could be helpful.

  Q30 John Barrett: Is it an issue that these are non-contractual or temporary agreements?

  Ms Melrose: The Rules of Origin?

  Q31 John Barrett: No, the Everything-But-Arms Agreements.

  Ms Brooks: I do not think that is the problem, it is really more to do with a combination of supply side capacity plus, to some extent, Rules of Origin. The Commission have run a consultation process over liberalising preferential Rules of Origin and that is currently under consultation at the moment.

  Q32 John Barrett: And is the DTI pushing on that as well?

  Ms Brooks: Yes, we recently submitted a full response to that[8].

  Ms Melrose: We are hoping that the more collegiate Commission will mean that the joining up is not just DG Development, DG Trade and DG Agriculture, but DG TAXUD and other DGs, particularly say on Mode 4. I forget which DGs, but there are a lot that impinge on trade and development.

  Q33 Mr Battle: Just a final word on sugar really, there is a lot of pressure to reshape the Sugar Protocol. There was a phrase in it saying it would be of indefinite duration, but I think that has been translated to mean that it is of infinite duration. I worry about two things: one, a lot of focus is on the Caribbean and price, but many African countries were encouraged to move into sugar cane as a way of extending their reach in agricultural products and now they cannot get them in. What is the Government recommending for the protocol countries to help them either diversify or restructure, or compensate if they lose access to the market? Who will be giving them compensation as the Common Agricultural Policy already does to farmers in East Anglia, for example, and will that money come out of the development budget, if that is the arrangement?

  Ms Brooks: The Commission have committed to producing an action plan to support those countries that are outside the EU and are affected by reform of the sugar regime. They have said that they anticipate that they will produce a first draft of that by the end of this year, but as yet we have received no detail of that. On the funding, we understand that that is due to come from the development budget, at the moment.

  Ms Melrose: On sugar the UK wants to see significant reform because it will benefit some ACP countries that have lost out if they are non Sugar Protocol countries. However, the concern obviously is that some will be hit very hard—for example Guyana is going to be hit on sugar and rice, as will Jamaica. In terms of the action plan that Amanda mentioned, Margaret Beckett only last week was saying that while the Commission works up its proposals on sugar in the light of the WTO dispute settlement ruling, we must fast track work on the action plan. DFID has commissioned research on what is the best way to design transitional assistance so that it is timely, it is significant, it is meaningful and targeted. The Commission are saying "We are waiting on your research" so the UK actually has quite a major input. On the funding side, what has been discussed from 2007 is not EDF. The Commission communication has a rather esoteric footnote which talks about "mobilising the flexibility instrument", or FLEX. This is the thing that replaced STABEX—the mechanism to help out when export earnings collapse. So they see that as coming into play up to the end of 2006, and following 2006 from within the new Financial Perspective. What they are suggesting is a thematic appropriation within the Development Co-operation and Economic Co-operation instrument, i.e. the EU budget. Essentially what has happened is that they have got about 60 different regulations—sorry this is all rather convoluted—which they are collapsing into a smaller number of thematic and geographical funding mechanisms. It is work in progress. The key thing for us, learning from the past, is to tackle slow disbursement, wherever the funds come from. Our strong preference is not to raid the EDF. Indeed, in an ideal world we would have liked to have seen the assistance come from CAP savings; however, our DEFRA colleagues are pretty convinced that there are not going to be any savings that can be transferred to the ACP. They are going to be transferred to EU farmers. So it is work in progress.

  Q34 Chairman: I just have a couple of final questions. This is all fairly Nurofen-inducing stuff and there are eight of us who are looking at this. The idea that four officials from St Kitts and St Nevis or other states can manage all this and attend to other things—I was in Sierra Leone and there are only about three people running the country—I mean top senior civil servants for competency-based reasons—because of conflict a lot of people have left. I am interested in a couple of things; firstly, is there a coherent piece of text by way of speech or anything which sets out HMG's overarching objectives on Cotonou?

  Ms Melrose: Not a recent one, but I can foresee there being one on EPAs.

  Q35 Chairman: I can foresee the tabling of a Parliamentary question on exactly that point, which I think would be helpful. You have been brilliant on the detail and we are very grateful to you but what I feel I have not got at the end of this session—and I do not know how my colleagues feel, and this is no criticism of you—is a sense of what are our overarching objectives and how do they fit in? Maybe we can assist that—

  Ms Brooks: Could I just clarify, there is actually, it has been handily passed from behind me, and it is in our White Paper. There is a very clear statement there.

  Q36 Chairman: Maybe you could share that with the Committee, because it is always good in a collective Government to share something with the other partners, so if you could let us have that.

  Ms Brooks: We will do that.[9]

  Ms Melrose: There is no problem with the overarching objectives because the Government will always stress to you development, development, development. The question is what does that mean in practice in EPAs? So I am afraid this is where you do get into neuralgic detail.

  Q37 Chairman: Maybe we will still table a question to DFID and maybe then DFID can translate it into DFID-speak. The second point is I think there was a lot of talk at the time of the WTO discussions about HMG helping these countries with capacity for the WTO talks. It seems to me that these discussions are as complex as certainly the WTO negotiations, and I sense that the WTO negotiations are organised around quite big groupings and so people can hide in these groupings; here in the ACP it seems that you have all sorts of groupings coming apart because they have different interests, or they have not got the same interests they had when they were originally set up 20 or 30 years ago. Maybe we might also table a Parliamentary question to ask what we are doing in terms of helping on capacity issues, capacity assistance, for particularly the smaller countries that might be affected by the Cotonou Agreement in terms of hard cash, in terms of seconded officials and so forth, all those people we are losing under the Gershon, there are some places they can be sent off to. I mean that seriously—

  Ms Brooks: Volunteers.

  Q38 Chairman: Yes, volunteers. It would be fascinating to go to assist and would be very worthwhile, because when ACP was first negotiated, a lot of the negotiation was done by European Union countries seeking to deliver on what they believed was the mandate to disengage, but that is not now the case. We would welcome some thoughts on that. Is there anything that we have missed out that you think in your wonderful briefing—I do not mean to be pejorative—your very full briefing note we should have asked you about? Is there anything you would like to unburden yourself of?

  Ms Melrose: I would like to add to your last point. You will see in paragraphs 41 and 42 of our evidence[10] that we have given some details of what the UK is already doing, including EPA-specific capacity building support for the ACP through the European Centre for Development Policy Management. I would just like to mention that we are also developing a programme of research on how EPAs might work for the ACP. I cannot stress enough that our Secretaries of State want to know what the ACP Governments want rather than have anybody in this country tell them what they want. So the Government is listening and responding to their needs.

  Chairman: Thank you very much indeed.





5   The Economic Community Of West African States Back

6   The Caribbean Community (CARICOM) Back

7   Evidence session, Monday 7 February 2005 Back

8   Commission Green Paper on the Future of Roles of Origin in Preferential Trade Agreements: UK Response. Copy placed in the Library. Back

9   See pages 96-100, DTI: Trade and Investments White Paper 2004: Making globalisation a force for good. Available at http://www.dti.gov.uk/ewt/whitepaper.htm Back

10   Ev 37 Back


 
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