Examination of Witnesses (Questions 80-99)
RT HON
PETER MANDELSON,
MR ROGER
LIDDLE AND
MR CLAUDE
MAERTEN
7 FEBRUARY 2005
Q80 Mr Colman: Is there
new evidence, if I could press you, to demonstrate that if these
were included within an EPA, it would be of benefit?
Mr Mandelson: For me, the best
evidence is the observation made to me by relevant ministers in
the developing countries concerned. I think this is another area
where, if I may suggest, the NGO agenda regarding EPAs does not
entirely overlap with or correspond to the agenda being pursued
by ACP countries themselves.
Q81 Hugh Bayley: I would
like to go back to the car and bicycle, and I should declare an
interest as a cyclist. I hope you would agree with me, Commissioner,
that both cars and bicycles have advantages and disadvantages.
Cars are fast and technologically advanced, but they are also
expensive and they pollute the atmosphere, and bicycles are cheap
and cheerful, maybe not as comfortable but more energy-efficient
than cars, and in many fields in developing countries they are
more appropriate technology. Least Developed Countries, when deciding
whether to sign up to a EPA, will have to choose between that
and the EBA, Everything But Arms, which of course gives them,
as you described yourself, unlimited, tariff-free market access
into the European Union, which is something which the Economic
Partnership Agreement will not give. Therefore, I would like to
ask whether the Commission has plans to facilitate . . .
Mr Mandelson: Sorry. ACP countries
will be no worse off once the EPAs kick in, from Everything But
Arms. That is very important. We are asking for EBA plus not EBA
minus.
Q82 Hugh Bayley: I am
pleased to hear that but does the Commissioner envisage special
treatment therefore for Least Developed Countries within Economic
Partnership Agreements to make sure that that is the case, and
will it be an issue which the EU seeks to address within the WTO
to guarantee that, for the Least Developed Countries who will
benefit from the EBA, all the benefits of EBA will be maintained?
Mr Mandelson: This is a very important
issue, a very important aspect—it goes back to the exchange
I had with Mr Bercow—and that is to make sure that the WTO's
rules and their application reflect that special differential
treatment, that sophistication of our approach that we are seeking,
through the partnership agreements, and I am increasingly aware
of this. We are being increasingly vigilant about this, and it
is something that I am discussing with my service at the moment.
It would be really poor if we were to try to seek to negotiate
something through the EPAs which was WTO plus only to find that
the WTO framework of rules did not support the house we were building,
as it were, and it is a discussion on this very point that I was
having with all the Commonwealth High Commissioners this morning
at a seminar organised at Marlborough House by the Commonwealth
Secretary General, and they were raising precisely these points.
But we are talking about something which is in addition to and
on top of Everything But Arms, and I think, Chairman, it is worth
recording that more than 97% of LDC exports to the EU have been
admitted duty-free. I think that is quite an achievement for the
European Union. The EU imported from LDCs in 2003 goods worth
12.5 billion, which is more than the entirety of
the US, Canada and Japan imports from LDCs put together. So our
record is pretty good, and is a very solid platform on which to
grow. That is one of the reasons why we want to improve the Rules
of Origin, and why we are working on that proposal, because it
will get more LDC imports into European markets and it is as crude
as that. But if I may just come back lastly to your bicycle, I
know the point you are making, that the technology is perhaps
more appropriate, more manageable, more learnable, less likely
to go wrong, requires fewer spare parts which might be expensive.
I could go on and on as to why a bicycle might be more appropriate
than a car, but the reason why I want to start with designing
a car is because I think we need a level of ambition for ACP countries.
Let us be blunt about it: the arrangements between ACP countries
and the European Union to date have not resulted in any growing
share of ACP exports. Frankly, the current arrangements, the preference
arrangements, have locked ACP countries into a bit of a cul-de-sac.
They are not even on the highway, let alone the motorway, as far
as trade is concerned and that is why a new approach is called
for. Yes, more adventurous; yes, more ambitious; yes, more in
trade terms technologically challenging but not, I think and I
hope, unmanageable.
Q83 Hugh Bayley: I am
very pleased to hear the Commission saying that it will ensure
the Least Developed Countries do not have to choose between an
Economic Partnership Agreement or the benefits they currently
get under Everything But Arms. One of the reasons advanced by
some people at least of the benefits of an Economic Partnership
Agreement is that it is contractual rather than unilateral. I
wonder whether the Commissioner would consider binding Everything
But Arms in the WTO so as to create a more secure and predictable
environment for the Least Developed Countries.
Mr Mandelson: It is something
that I would consider but I do not know whether it is possible
to do that. I would have to consider the requirements of the WTO
and whether I am permitted to pursue that.
Q84 Hugh Bayley: Thank
you. Finally, to go back to Rules of Origin, will the Commission
consider altering the Rules of Origin so as to allow Least Developed
Countries to choose the most competitive supplier of raw materials?
You have said that you intend to review the Rules of Origin but
are you intending to review them to make it possible for Least
Developed Countries to gain the benefits of Everything But Arms
even though they source raw materials or components for things
they manufacture from outside Least Developed Countries?
Mr Mandelson: That is a very thorny
issue. It is not my responsibility. Frankly, that is not a matter
that is either easily resolvable or has been resolved between
myself and my colleague responsible.
Q85 Tony Worthington:
Can I turn to the contentious issue of sugar? If I can quote what
you said in Guyana[3],
you said sugar reform in the EU is necessary and unavoidable but
it requires from us two things vis-a"-vis ACP producers:
that we maintain preferential access for their imports and that
we accompany this with a robust local adaptation process, so that
we have a system at the moment that is unjustifiable in terms
of European sugar prices but which the poorer countries benefit
from. We have got to get rid of that, because it is unjustifiable,
for the reasons you have said, but we are going to maintain preference.
How do you do it?
Mr Mandelson: With
some difficulty, but I do think it is possible. The Commission's
reform proposal, as you know, flows from the unsustainability
for European sugar consumers of paying for their sugar at three
times the world price and because we have been successfully challenged
and we have to become WTO-compliant. So there is an internal and
an external dynamic which is causing us to bring forward these
reform proposals. The proposal will not be brought forward in
its final form until later this year. We are awaiting the outcome
of a further WTO Panel, as you know. We appealed against the initial
decision. I think I am right in saying that a further Panel is
due to report in April, and I would envisage that the Commission's
reform proposal is brought forward on the basis of that second
Panel by about June. It is based on a combination of, first, a
significant price reduction which I accept will affect detrimentally
ACP sugar exporters to European markets but I will come back to
that in a moment. Secondly, a reduction of quotas. Thirdly, decoupling
payments presently made to EU sugar beet farmers to come in line;
70 % of payments made I think to EU farmers at the moment is not
linked to production. Some people have assumed that the price
of sugar will be brought down so dramatically as to make it level
with that of world prices. That is not our proposal. It is currently
envisaged to bring down the price of European market sugar by
about a third, and that would mean it remains substantially above
the world level and therefore there would remain a substantial
incentive to ACP producers to export to European markets. However,
that in turn depends, frankly, on their efficiency, their productivity
and their ability to face greater competition than is the case
at the moment, which would follow from the reduction of quotas.
That is why it is very important indeed that the European Union
accompanies its sugar protocol reform with an action plan backed
by substantial amounts of cash, to help ACP sugar producers both
diversify within their sugar industries but also diversify away
from their sugar industries, and that is what we are currently
discussing with ACP countries, and those discussions on that action
plan will continue over the coming months.
Q86 Tony Worthington: You
refer to substantial amounts of cash. From which budget would
that come and for what purpose? It could not simply be cash.
Mr Mandelson: It is budgeted within
the financial perspectives of the Commission, it is displacing—if
that is the point of your question—
Q87 Tony Worthington: That
expression you used, "the financial . . . "? What does
that mean?
Mr Mandelson: It is the budget,
I am sorry. It is a technical term for the EU budget.
Tony Worthington: Right.
Mr Mandelson: There was an issue,
which need not detain us because it has been resolved, about a
six month funding gap before the new stream of funding kicked
in, and there was a slight difference of opinion between the Trade
Commissioner, the Agriculture Commissioner and the Development
Commissioner as to how that shortfall should be met and out of
whose budget. I am pleased to say that the money has appeared
from an alternative source altogether, so the entire thing, the
moment the action plan kicks in, will be fully and adequately
funded from EU sources.
Q88 Tony Worthington: I
am still not clear what the cash is going to be used for?
Mr Mandelson: It will be used
to enable sugar industries within ACP countries affected by the
reform to carry out processes of adjustment, like diversification
into alternative products which would find a readier market, or
to diversify away from cane production in the first place. There
are a variety of different ways contained in the action plan which
can and should help sugar producers in ACP countries, and that
is what we have signed up to do and what my two colleagues and
I discussed with ACP ministers at a joint EU Agricultural Ministers
and ACP Ministers meeting the week before last, and which we will
carry on doing in the coming months.
Q89 Tony Worthington: It
is very, very vague.
Mr Mandelson: It is vague because
it has not yet been published, the action plan, in its final form.
It is not vague in content and in fact, but it has not yet been
published in its final form. I can assure you, this action plan,
which has not been my responsibility, which has been drawn up
by the Development Commissioner and his service, is ready for
presentation to ACP countries[4].
Q90 Tony Worthington: So
the money may not go into the agricultural sector of those particular
countries but might be more of a general subsidy to that country?
Mr Mandelson: No, it will be targeted
at the structural change and transitional needs of the sugar producing
sectors of those ACP countries. What we want to do obviously,
first of all, is ensure the reform is carried out in a way, or
designed in a way, which does not put ACP sugar producers out
of business.
Q91 Tony Worthington: So
it is targeted at the sugar producers?
Mr Mandelson: Yes.
Q92 Tony Worthington: It
is something directed to them rather than to the general economy?
Mr Mandelson: If you take, for
example, the sugar sector in Guyana where I was at the beginning
of the year, I am not saying the sugar sector is the economy of
Guyana but it is a very large portion of it and sugar is not just
an economic mainstay, an economic lifeline for that country: what
that industry does, what it produces, how it organises itself
in the communities from which people are drawn to work in that
industry, makes it the foundation of Guyanese society. That is
why many of these industries and their circumstances are so fragile
and that is why the reform has such huge implications both for
the economies and the societies of the countries involved. We
have to tread very carefully in making sure that the transitional
assistance, the restructuring assistance, that we offer, takes
account of that fragility, takes account of the fact we do not
want to run those industries out of business but instead makes
them more competitive, more able to compete with oftentimes larger
scale suppliers which enjoy economies of scale, which enable them
to diversify their products, as I have said, and find a more ready
market for those products, but also gives social help to the people
who are affected by these changes. That is what the action plan
aims to do. It will be rolled out on the basis of a country by
country assessment, it is not some sort of generalised plan, a
single blue-print, take it or leave it, it is a plan which will
be based on the assessment of the countries concerned, specific
studies will be launched to evaluate the impact of the reform
country by country. The first financial assistance, I think I
am right in saying, to be rolled out under the action plan will
be at the beginning of next year, the beginning of 2006, so we
are not allowing the grass to grow under our feet, as it were.
In a sense, we are further ahead on our action plan than we are
on the agreement of the reform proposal itself within the Commission,
but that of course is because we decided to appeal and go back
to the WTO Panel.
Q93 Chairman: I know how
contentious sugar is and we could spend a whole day just discussing
sugar. Perhaps, when we have had more of a written briefing on
this from you, we could come back with some written questions?
Mr Mandelson: Yes. Could I say
that the reason it is important is because the EPAs are a means,
a vehicle, for incorporating our response to this situation for
the ACP countries concerned.
Chairman: It is important because there
are so many ACP countries who are largely dependent on sugar.
Many of the Commonwealth countries and countries in the Caribbean
are dependent on sugar.
Q94 Mr Colman: The London
Sugar Group have said they would like to see, amongst other things,
a ten-year transitional programme and that price cuts should bite
for the ACP countries in 2016. The very first question by Mr Bercow
was in terms of flexibility but Article XXIV talks about a ten
year transition period. Are you intending a ten year transition
period for the ACP countries, ie that the cuts in prices will
not come until 2016?
Mr Mandelson: I am not envisaging
that. When I say "I am not", I should correct myself
and say that my Agricultural Commissioner colleague is not envisaging
that. We are, however, envisaging a two-stage price adjustment
to enable the transition to be properly phased. We are not proposing
to do this in one go and we are not proposing to do it overnight.
Q95 Mr Colman: But a ten
year benchmark?
Mr Mandelson: I cannot give a
commitment to a ten year transitional period for the introduction
of these changes, but the reform proposal has yet to be finalised
and will not be put to the Council I think until June of this
year.
Q96 Mr Bercow: I would
like to come back to the whole rationale behind the trade, justice
and development agenda and the rationale on which, I hope, we
can all explicitly agree. It is not about us, it is not about
the European Commission, it is not actually about ACP countries,
it is about giving the poorest and in some cases the most destitute
people on the planet a chance to compete and to grow. I do not
know, Commissioner Mandelson, just how far your tentacles can
be expected to spread. I do not know what the furthest reaches
of your crusading zeal will prove to be but I wonder if—
Mr Mandelson: I do not know where
this is leading you but anyway!
Q97 Mr Bercow: I know
exactly where it is leading me!
Mr Mandelson: I want absolutely
nothing to do with campaigning zeal, thank you very much! I had
my first taste of campaigning zeal on the Today programme!
Q98 Mr Bercow: Surely
you are not losing your appetite for that now. We would be very
distressed if you were.
Mr Mandelson: Appetites can change
with age!
Q99 Mr Bercow: On the
wider trade agenda, if you take some of those countries which
are not principally concerned about sugar but, for example, cotton,
and you reflect on the debacle of Cancún, you will recall
Benin, Burkina Faso, Mali and Chad depend on cotton for something
like 30 to 40 % of their export earnings, and they were frankly
presented with the height of arrogance by the United States.
Mr Mandelson: The United States.
3 Putting development first: EU-ACP relations,
EPAs and the Doha Round. Statement by EU Trade Commissioner
Peter Mandelson at Press Conference, Gerogetown, Guyana, 6 January.
Copy placed in the Library. Back
4
Note from the witness: The Commission Staff Working Paper
was published on 17th January 2005 under reference SEC(2005)61. Back
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