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CORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 68-i

House of COMMONS

MINUTES OF EVIDENCE

TAKEN BEFORE

INTERNATIONAL DEVELOPMENT COMMITTEE

 

 

The European Union's trade agreements with African, Caribbean and Pacific countries

 

 

Tuesday 30 November 2004

MS DIANNA MELROSE and MS AMANDA BROOKS

DR CHRISTOPHER STEVENS, MS JANE NALUNGA, MR MATTHEW GRIFFITH and MR MICHAEL GIDNEY

Evidence heard in Public Questions 1-50

 

 

 

USE OF THE TRANSCRIPT

 

1. This is a corrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee, and copies have been made available by the Vote Office for the use of Members and others.

 

2. The transcript is an approved formal record of these proceedings. It will be printed in due course.


 


Oral Evidence

Taken before the International Development Committee

on Tuesday 30 November 2004

Members present

Tony Baldry, in the Chair

John Barrett

Mr John Battle

Hugh Bayley

Mr John Bercow

Tony Worthington

 

________________

 

Examination of Witnesses

 

Witnesses: Ms Dianna Melrose, Head, International Trade Department, Department for International Development (DFID) and Ms Amanda Brooks, Director, Trade Negotiations and Development, Department of Trade and Industry (DTI), examined

Q1 Chairman: Thank you very much for coming. Just to put this into context, this is a single evidence session in which we are taking evidence from senior officials in DFID and DTI on Cotonou and how we all think the Cotonou negotiating process is proceeding, what do we see as the UK's role in this, and we are also going to take evidence from NGOs. The usual thing, Dianna, if you and Amanda want to work out who is going to answer questions, and speak up because some of us are deaf, and the acoustics are awful. For most of us very often in connection with ACP[1] we hear much more about the C in the ACP than either the A or the P - that is the Caribbean. For us the Caribbean is perplexing in that 25 % of the membership of the Commonwealth is in the Caribbean; often quite small islands; many of them technically middle income countries but actually, very often, dependent on one or two crops, not least bananas from Dominica and so on. There is a DFID office in Kingston, I think?

Ms Melrose: Yes.

Q2 Chairman: In the past part of our deal when we joined the Common Market - that is us and the French - was that we sought to look after former colonies in the Caribbean. They have a collective feeling that they have been slightly forgotten, and I just wondered if you could give us a kind of philosophical view, whether DFID's view is that if they are middle income countries then they are middle income countries, they have to take their chances, what we are really concerned about is the poorest of the poor and there is a purist approach to Cotonou just as there is to WTO, or do we still have particular collective concerns for Commonwealth countries in the Caribbean, overseas territories in the Caribbean and when one is thinking of a hierarchy of policy priorities how do they fit in? We have quite a lot of technical questions, but unless one understands the background against which they are seen they do not make much sense. Perhaps you could help us on that.

Ms Melrose: In terms of the overview, obviously, Africa is the big priority and in terms of DFID's allocation of assistance, as you know, 90% will go to the Least Developed Countries (LDCs). However, we do have very significant concerns about the vulnerability of the Caribbean economies, the small island states, which will be hit hard by loss of preferences and particularly by reform of the Sugar Regime. In terms of the Foreign Office, they are also looking at the security dimension, particularly in relation to Jamaica, because they will suffer a lot from the loss of getting paid three times over the world market price for sugar. They do have a lot of access to politicians here and we are actively working with the Caribbean - in fact, DFID funds the Caribbean trade Regional Negotiating Machinery and we are in active discussion to help them on both sugar and Economic Partnership Agreements (EPAs).

Q3 Chairman: Do you think that HMG collectively should be batting for the Caribbean Commonwealth or do you see this as a position whereby these are trade negotiations which have got to go on regardless and maybe the Foreign Office does a bit at the edges to help some of our Commonwealth colleagues to more effectively negotiate?

Ms Melrose: I think that in the longer term the writing is on the wall for preferences that have really done the Caribbean no good. Jamaica is subsidising its sugar industry which really has no future in terms of export competitiveness. As to how we work with the Caribbean, obviously their position is to say no, no, no to change, although they know that it is inevitable. So it is not for us a question of letting them carry on with no change, no diversification, but really getting some timely assistance to help them diversify and compete in a changing market. That said, it is not easy for them, and what they might diversify into is an area that we are researching; it is difficult.

Q4 John Barrett: Can I follow up on that and ask if there is a conflict or a problem with the Regional Trade Agreements trying on the one hand to provide reciprocity and preferential access to EU markets, while at the same time including reciprocity in the WTO in the EPAs which are being developed. The way I see it, there are two contrary developments going on, on the one hand saying that preferential access must be maintained but at the same time moving towards a different state of affairs. Is there a conflict there?

Ms Melrose: I think there are some huge challenges posed. The whole thrust of EPAs is supposed to be, as you know, to reduce poverty, to promote sustainable development, importantly to integrate those economies into the world economy and at the same time to promote regional economic integration. The latter is the emphasis of this phase of negotiations. However, you are quite right to say that variable geometry of regional organisations and the fact that you have LDC and non-LDC members of the different regions, does make it very complicated. I hope we sent you our spaghetti soup ---[2]

Chairman: You did.

Ms Melrose: Which shows you the problems. For example, if you are Tanzania you are a member of the East African Customs Union, the Southern African Development Community (SADC) and an LDC. So you do face some real challenges. Obviously, as an LDC you benefit from EBA quota-free and tariff-free access to the EU markets, and in relation to EPAs you have a choice to say that you do not want to negotiate an EPA. But if you do that - in other words not need to move towards giving reciprocal market access to the EU - that really makes things very, very complicated in terms of integrating into a region. As you know, these are small economies and regional market integration is very significant to them. So it is a dilemma, but basically it is their choice and our aim would be to work with the ACP to help them make an informed choice.

Ms Brooks: Can I add on to that? Preferences are a short term granted mechanism for developing countries, there is no guarantee that they will be there in the long term, whereas Regional Trade Agreements do provide greater and longer term assurance of where the situation will be. So as we see preferences being eroded over time with multilateral negotiations and other things, Regional Trade Agreements obviously can give developing countries greater certainty about the environment in which they are operating.

Q5 John Barrett: With EPAs coming into play in 2008, and the need to look at what sectors, what markets, what time scales, who will make the decision as to what is recommended happens at what time?

Ms Melrose: That is all down to the negotiations. There was phase one which was ACP and EU-wide. Now they are into the regional groupings. But basically that is exactly what needs to be decided: what degree of reciprocity over what time, in which sectors, and obviously the impact will vary enormously. Our NGO friends have focused on the concerns about reciprocity. Claude Maerten who is in the European Commission is leading on EPAs, and he has recently set out some possible scenarios for reciprocity - that is the extent of it - and it ranges from 67% for the Pacific to 83% for the Caribbean. So that just gives you a sense of the flexibility there is and what needs to be thought through. On the services side, there is no obligation to include reciprocal access on services. You have to opt in rather than it being an automatic assumption that service sectors are in.

Ms Brooks: The thing to add there is that the important point is that it is not one size fits all for each of the regional groupings, it is for each regional grouping to discuss with the EU which sectors and products they wish to look at in particular, so there will not be a common overprint across all of the regional groupings, it will be specific to them.

Q6 Mr Battle: Could I ask a bit about the alternatives to Economic Partnership Agreements - if you cannot get one, what else will you do? I was interested in Amanda's comment that Preferences are short term; 30 years ago I was slightly involved in the drawing up of the Sugar Protocol that was attached ---

Ms Brooks: And that has proved to be anything but short term.

Q7 Mr Battle: That was supposed to be very short term but it has lasted 30 years and done a lot of destruction in its time in some ways. In the Cotonou agreement it states that any ACP country or region not wishing to pursue an EPA should be offered an alternative arrangement which is at least as good as that offered under existing preferences. It is just to tease out what are these alternatives and how good could they be, and can they be inserted in this short term regime while we get to the long term some time, some day. Given the limits of the GSP, the fact that they are not contractual, there are very restrictive Rules of Origin as we all know, it will not prove possible to offer all developing countries Everything But Arms access, so what steps is the Government taking to ensure that there is a viable alternative that really does offer at least as good as?

Ms Brooks: Firstly it is important to put into the domain that the Commission had agreed to look at alternatives and at the ACP request have agreed now to postpone doing so until 2006. The Commission are very much putting the emphasis on allowing negotiations to progress before they begin to develop alternatives. That said, we do recognise the need to fulfil that commitment; Dianna will no doubt talk a little bit more about some research that DFID are going to undertake to look into those, but in essence at the moment the alternatives might either be GSP or GSP+, which is currently being renegotiated. The difficulty is that these negotiations cover the time span up to the start of EPAs but not beyond them. So we are not quite able to compare like with like at the moment, given that we do not know the content of EPAs and also we do not know the finalised context of the new renegotiated GSP and GSP+ schemes.

Q8 Mr Battle: That is fair enough and, accepting that, I would still be insistent if you like that we keep the developmental perspective and that it just does not go into the trade department or the agricultural department and development gets tagged on later, because even if we were to push for the opening up of the markets as provided by a more general system of preferences, then poverty alleviation might not necessarily result.

Ms Brooks: Indeed.

Q9 Mr Battle: Yet that is in the Cotonou Agreement, there is some rationale within the system to keep that as a focus. What will the Government be working on to ensure that alternatives to EPAs, the Economic Partnership Agreements, have that non-conditional, developmental aspect to them; in other words, you are still keeping your irons in the fire at the conference table?

Ms Melrose: I think you have hit on the essence of it, John. These have to be developmental and beneficial, and I think what is encouraging here is that Cotonou, as you know, makes very, very strong references that these must be good for development, good for the ACP, and that is repeated in the EU negotiating mandate and it is repeated in the Commission's utterances. So I think the first thing to say is that the Government is absolutely determined, it has committed itself in the White Paper, to make sure that these are development-led. Just to give you a sense of what is happening, there is weekly contact between ourselves and the people leading on EPAs within the Commission. Our Minister, Gareth Thomas, is in Brussels today talking about EPAs. So there is a lot of concern across the Secretaries of State that we need to deliver on this rhetoric, they must be development tools. So that is the first perspective. What does that actually mean concretely? In terms of what DFID is doing, we are working very closely with the ACP member states but also with other stakeholders like the NGOs to look at what are the alternatives, to really look in some detail. Amanda has already mentioned that GSP+ is a possibility; obviously what must underpin it all is special and differential treatment with EPAs and obviously the WTO, that is absolutely critical. So it is how you design them really and, importantly, they need to complement the poverty reduction strategies of the different countries. This raises the whole critical issue of assistance to the ACP - I do not know if you want me to cover that now or wait for subsequent questions, but that is absolutely critical and it needs to be timely and upfront - in other words learn from bananas and deliver that early and make it useful.

Mr Battle: That is very helpful, thank you.

Q10 Mr Bercow: Building on the exchange you have just had with John, I would like to know a little bit more about the mechanism that you have put in place to ensure that smooth transition to liberalisation and the priority of facilitating and not in any sense hindering or retarding the poverty alleviation objective. In asking you to tell the Committee a little more about how it will function, perhaps I could just point out that I know the NGOs have lamented what they see as the fact that since 1993 there has been a very great increase in the export of EU food products to Africa, with damaging effects on local markets. I do not want to be a theoretical pedant, but can I in association with that question put to you this proposition: is it not the case that liberalisation is in danger of getting a bad name, when actually what is taking place is not really genuine liberalisation at all. There are many of us, you will appreciate, who are sympathetic to liberalisation, who recognise that it cannot take place all at once and that there is an argument for special treatment for poor countries and so on, but we think that it is a good thing. However, what is not acceptable, surely, is for developing countries to be forced to open their markets to heavily subsidised and dumped products from rich countries? That is what is objectionable, not the fact of liberalisation, but the fact that the rich countries are effectively playing a game of football in which they are allowed to have 11 players on the field including the goalkeeper in his position all the time, and they expect the developing countries to play with five players excluding the goalkeeper.

Ms Melrose: I think your analogy is spot on. It is a highly uneven playing field and the most stark illustration in terms of the ACP is cotton and the West African cotton producers which became a totemic issue in Cancún, for very good reasons. They have liberalised, they have got rid of their subsidies and, as one of their ministers put it here recently: "We can compete with US farmers but not with the US Treasury". So you are absolutely right. Again, we should not overlook the fact that the level of subsidies for sugar per farmer is even higher in the EU. We are determined that we must end trade-distorting subsidies, in terms of domestic support. The good news from the Commission is commitment that we need to agree an end date for export subsidies. This goes beyond what was in the Doha mandate. So absolutely, CAP reform and obviously similar reforms in other OECD countries are necessary. Where you mentioned concern over cheaper food flooding into ACP and other more vulnerable developing country markets, it is an issue, and this is why we are doing research in a number of areas. We are commissioning research from the Food and Agriculture Organisation jointly with ActionAid - we are going to work together - to look at a number of things. One is the impact of import surges - that is, what is the evidence from the past, i.e. what is the poverty impact and what can be done? We are also commissioning separate work on how a Special Safeguard Mechanism might be developed within the WTO that will protect the livelihoods of vulnerable and developing country producers and protect their rural developments; similarly with Special Products, how do we define these, how do we designate them so that they are really targeted at crops that are really essential in terms of poverty, whilst avoiding the sort of abuse where country X declares 600 products as special products and as a result there is no liberalisation. I am encouraged to see that the Commission has actually talked in the EPAs context and certainly has not ruled out the need for some sort of special safeguard mechanism there. With EPAs there is everything to play for, nothing is closed at this stage. Working backwards, on the smooth transition to liberalisation, you are absolutely right. I think probably the most worrying area is the fiscal one: that if the ACP or indeed the WTO negotiations forced the ACP, particularly African countries, to reduce their tariffs too fast, they would have a huge problem in terms of their revenue. The World Bank has come up with some figures and it looks extremely grave from their evidence, where they have estimated that offering the EU duty free access would incur losses amounting to one per cent of GDP and seven to ten per cent of government revenue for sub-Saharan Africa. Obviously, therefore, you need to pace tariff reductions and you need assistance for substantial fiscal reform. That is not the only area. I would like at some point to say what funding mechanisms there are because I think it will be an issue of particular concern for you that the EDF does not get raided. That is a long answer, but should I cover that issue now?

Q11 Mr Bercow: It is an extremely helpful answer. Had you finished?

Ms Melrose: Except for the funding sources.

Q12 Mr Bercow: Yes?

Ms Melrose: In relation to funding, basically it is premised on the suggestion that money should be upfront now, that you need the support for transition now. There are different dimensions to it: the Commission and ourselves are already assisting the ACP in terms of evidence for the negotiations. But in terms of the much more significant, big, supply side export competitiveness changes that we need to see, EDF has been fingered. Technically, it would be possible to include funding for the ACP as part of EDF10 and the increases expected in EDF10. The negotiations are starting in January. But DFID's view is why raid the EDF? That has a clear development purpose as have EPAs but it is heavily committed to social sectors and others. Our view is that it would be much better to use the European budget, and it would seem that one of the six new instruments - the Development and Economic Co-operation instrument - makes a lot of sense. That would mean increased money under the new Financial Perspective. The only concern there is that this is money mainly allocated to Asia and Latin America and Africa only gets 10%, so there could be an issue there. One final thing to flag up, the UK as you know is very keen to see conditionality attached to EDF in terms of good governance and properly targeted development, but we certainly would not want to see any new conditionality attached to implementing trade reforms. Basically, the work needs to be done, we need a dialogue with the Commission, but it is obviously helpful if the Committee and others can be saying do not let us rob Peter to pay Paul.

Q13 Mr Bercow: Thanks very much, that is a hugely informative answer. Call me a bit of a cynic if you like, but I will believe that the European Union has abolished export subsidies when it is writ large on every wall in the Palace of Westminster, and therefore I just want to have some idea from you when you think that the people of Burkina Faso, Benin, Mali and Chad - the ones who variously depend for 30 to 40 per cent of their export earnings on cotton - can obtain relief from the agreement that has been meted out to them by the European Union and the US cotton farmers? Then a quite unrelated question, what plans (if any) does the European Union have to include the temporary movement of migrant, mainly unskilled, labour in the EBAs; if there are no such grounds is it the intention of the British Government to advocate it?

Ms Melrose: I'll leave to DTI the difficult questions on when are we going to see an end to export subsidies, particularly on cotton?

Ms Brooks: The difficulty is that the Commission is now waiting for the parallel movement of other developed countries on export subsidies before they will commit to a final date. That is the broad position, and there is nothing that I have heard to the contrary, that there is any date for agreement within the Commission at the moment. They really are seeking that parallel movement before committing further to that. On cotton the situation is obviously slightly more complex. The Americans have just lost a ruling on cotton from the WTO Panel which will change the way that that is now taken forward, but I am not very au fait with the details on that, so if you want I can come back to you on that.[3]

Mr Bercow: Thank you, that would be most helpful.

Q14 Chairman: Then GATS?

Ms Melrose: It is included in Cotonou in the original agreement and in terms of what the ACP want, they see the issue of temporary movement of unskilled labour as particularly important. Certainly from a Government perspective, Mode 4 is incredibly important in the WTO Round. Our problem is the political realities that certainly our ministers are well aware of Mode 4. But it is difficult, not just in the UK of course but in other EU countries.

Q15 Tony Worthington: Can I turn to the Singapore issues, the new issues? Perhaps you could clarify what it says in the brief for us - this was through Pascal Lamy - that the EU as a whole has made clear that we do not have 'offensive' market access objectives. What does that mean?

Ms Brooks: That is where the European Union is seeking opportunities for its own businesses effectively, so opportunities that will bring a benefit directly to European Union businesses as opposed to beneficiary countries.

Q16 Tony Worthington: I do not understand that really. We would want to trade with these countries, would we not?

Ms Melrose: It is basically pushing mercantilist interests rather than putting the interests of the ACP as the first thing, on the development criteria, rather than what can we get out of it.

Q17 Tony Worthington: How can the Government speak for private industry and saying you are going to be thinking about the good of a developing country rather than whether you can make a buck out of it?

Ms Melrose: It is no different, surely, to the Doha Round where the Government has committed to a good development outcome, which certainly UK industry shares. We have just started talking to the CBI and others about EPAs, really to ask them are the new issues of interest to you or is this not something you are pushing? In terms of the new issues themselves, it is true that from Phase One the ACP expressed concerns about the inclusion of new issues. At the same time we obviously cannot treat all the ACP as monolith: different regions have very different views. For example, the Caribbean are very keen to start looking at an investment agreement sooner rather than later, as are COMESA[4], and this is because in terms of regional integration they are very clear that they need some common investment rules. So we cannot give a blanket answer that the ACP as a whole objects to the new issues; it is not the case, there are different views. I should have said investment and competition issues were in Cotonou, but the one area where we really will have more of a dialogue with the Commission is over government procurement because here the EU mandate does go beyond the Cotonou language: Government procurement does not actually feature in the Cotonou agreement, and the EU mandate goes beyond the proposed WTO agreement.

Q18 Tony Worthington: Coming out of Doha I thought there was an agreement, as one of the stumbling blocks had been the Singapore issues, to withdraw those.

Ms Brooks: That is exactly right.

Q19 Tony Worthington: So who is it that is pushing them?

Ms Brooks: You are exactly right, they were taken out of the Doha development agenda, they were withdrawn; however, the Cotonou Agreement was drawn up before the Doha development agenda was developed and investment, competition and trade facilitation were all put into that at that time, a year before, so that continues outside the WTO framework.

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.


Witnesses: Dr Christopher Stevens, research fellow, Institute of Development Studies, Sussex, Ms Jane Nalunga, Country Director, Southern and Eastern African Trade Information and Negotiations Institute (SEATINI), Uganda, Mr Matthew Griffith, Trade Policy Analyst, CAFOD and Mr Michael Gidney, Director of Policy, Traidcraft, examined, Ms Dianna Melrose, Head, International Trade Department, DFID, further examined.

Q39 Chairman: Thank you very much for coming and helping us out. If I can make a few general points, if you would like between you to decide who will answer the questions, I think there are one or two which might just be directed to one of you, you might all want to answer one, or some of you might just want to answer. Secondly, if you could be very kind and help us by speaking up because the acoustics are not brilliant. Having heard officials give their evidence, are there any general overarching themes that you want to pick up by way of general statements to set them in context. Michael, do you want to start and then Matthew?

Mr Gidney: Thank you. First of all, we welcome the chance to come and talk to you and also we welcome your scrutiny of EPAs: we think it is very timely and necessary. I think you put your finger on it in your last questions to the officials - it is our view that we lack a really coherent Government policy towards EPAs in terms of vision, but also in terms of how that vision is going to be realised. This policy should explain how the statements on development which are in the Cotonou Agreement and in the EC's negotiating mandate are going to be translated into action, and how we are really going to know before the conclusion of negotiations that the intended development outcomes are going to be achieved. Very specifically, we have some quite serious differences of opinion with the Government's position on the inclusion of the 'new issues' in EPA negotiations, which I think various of us might wish to talk about. I will just make one comment and then pass over to Matt. The officials were saying just now that as related to the 'new issues' it is up to the ACP to tell us what they want; but it is our view that the ACP have told us very clearly what they want. Your suggestion that this is three-dimensional chess, i.e. over-complicated, is right, but I do not think it needs to be seen as being as complicated as that. Possibly there is a certain amount of deliberate muddying of the waters by the Commission, because the ACP have made it very clear in their negotiating mandate on EPAs and also in their statement reviewing Phase 1 of the negotiations that they do not want to negotiate on 'new issues' at all now, as this has been their position at the WTO. It is a point of stated fact.

Q40 Chairman: Right.

Mr Griffith: Just an initial request, we would value it if you tabled a question asking the Government for their position. The White Paper that is going to be forwarded to you I think is six or seven paragraphs and it does not flesh out a lot of the questions that we will be asking. I would also specifically like to pick up on some points that were made on the Singapore issues around ACP opposition and what was agreed at Cotonou. Amanda mentioned that the new issues were included in Cotonou, but it is important to look at the detail of how they were included. Of the four issues, three were included but they were mentioned in the context of development co-operation and regional integration, they were not mentioned in the context of trade negotiation based on a principle of non-discrimination, which is how they were included in the European Union negotiating mandate. The fourth, Government procurement, is not in the Cotonou agreement at all. It is also worth looking at the differences between what the Cotonou agreement says and what the European Union negotiating mandate says. We have a couple of examples. The Cotonou agreement around investment talks about co-operation "aimed at creating a more favourable environment for private investment", but the EU negotiating mandate goes much further and asks for "a regulatory framework based on principles of non-discrimination, openness, transparency and stability". The second one, on Government procurement, Cotonou does not make any reference to it, as already stated, but the EU negotiating mandate asks for "progressive liberalisation of procurement markets on the principle of non-discrimination". From our point of view those are clearly offensive interests, they have been opposed by the ACP at the all-ACP level, and we think the Government should put pressure on the Commission to drop them.

Dr Stevens: I think the discussion on new issues illustrates a much more general problem which would be greatly reduced if the Government were to make a very clear and detailed statement of what it wishes to see in an EPA. The general problem is that the ACP are negotiating under considerable duress; they do not want these negotiations but they are faced with the prospect that unless they come to a conclusion by the end of 2007, or these ephemeral alternative arrangements are in place, then they will have imposed upon them significant market access barriers for their exports to the EU, and in the case of new issues what they fear is that the EU will twist their arm to accept within EPAs things that they would never have to accept on the more level playing field negotiating environment of the Doha Round. The official position is that these fears are misplaced, and I do not necessarily think these official views are incorrect. I do not think that the European Union is hell-bent on forcing ACP countries to do highly undesirable things, but if I were an ACP minister I would fear the worst because there have been no statements of what the European Union want in specific terms, and if these negotiations are to take place in a reasonable atmosphere and come out with a good development solution, then the worst fears have got to be alleviated, and they can easily alleviated by ideally a European Union statement and, failing that, a Government one of the maximum that the EU will be looking for. For example, in the earlier discussion we talked about the undesirability of countries being forced to accept dumped agricultural exports from the EU and it was suggested that a special safeguard clause should not be ruled out. Why not say it should be definitely ruled in, that all EPAs will contain provisions that would allow Governments which wish to do so to restrict the imports of goods which are being sold below the cost of production? That would go a long way to getting some sort of Governmental statement to reinforce the information we were given from the Commission officials that the degree of reciprocity would range between I think it was 70 % and 83 %. That would do a great deal to calm the atmosphere and allow the negotiations to focus on specifics.

Chairman: I think that is a good point for you, John, to ask your point about the relationship between Cotonou and Doha.

Q41 John Barrett: Given the issue of WTO compatibility which features quite strongly in the EU's negotiating mandate and given the delay in the conclusion of the Doha Development Agreement, what would be the benefits and the disadvantages of postponing the conclusion of EPAs until after the completion of the WTO Round?

Dr Stevens: If it were feasible it would be quite desirable for a whole range of reasons. There is a strong economic case to be made that the benefits from liberalisation, to the extent that they exist, result from multilateral liberalisation and not strictly liberalisation towards a specific trading partner, so to build upon the outcome of Doha rather than to try and pre-judge the outcome would be desirable. Secondly, of course, the rules within which these EPAs are trying to be convoluted might well have changed and, thirdly of course, it would remove this deadline of the world as we know it coming to an end on 1 January 2008. The practical problem is that the reason why we are in negotiations is because of the increased difficulty of obtaining waivers which have, over the history of GATT, been the traditional way in which industrialised countries justified preferential trade agreements, and the waiver expires in 2007. Again, in practical terms it would take at least two years for any challenge to a continuation of preferences to go through the WTO system, so even without an extension to the waiver it is probably possible to continue with the current regime until 2009, and one can think of all sorts of little ruses which would extend that possibility, such as, for example, agreeing EPAs which had a phase one for immediate implementation under which ACP agreed to reduce to zero all the products which they currently have zero tariffs on, and left to a decision within the next five years the next phase. If the EU were willing it could find ways to extend the lifetime of the current regime in order to allow negotiations to finish after the Doha Round.

Mr Gidney: I would like to add that there could be some very significant logistical as well as development gains from phasing the negotiations in this way, because it was always the intention, of course, that EPAs would follow on from what was agreed at the WTO. The Cotonou Agreement, talks about negotiations "remaining in conformity with WTO rules then prevailing"[11]; at the moment we are asking the ACP to hit a moving target because of course the DDA[12] is not complete and so we do not know the circumstances which are "prevailing", and it is impossible therefore to predict. Ultimately decisions about phasing the negotiations should be up to the ACP and we would expect the ACP to have a line on this. It is not for us to tell the ACP how it should conduct their negotiations.

Q42 John Barrett: I wonder if you could just elaborate on why the revised GSPs fall short as an alternative to EPAs and what could be done to make these into a viable alternative?

Dr Stevens: To the extent that there exists an alternative, the only one on the horizon at the moment is the GSP, hence the need to try and make it in some way an adequate alternative, but it is a difficult beast to make adequate because its basic rationale is to treat all developing countries the same, except you can treat Least Developed Countries more favourably than other developing countries, and a large part of the value to the ACP of the Cotonou Agreement is that they are treated better than some other developing countries like Brazil or Malaysia. The only obvious way in which the current proposed new GSP for the period up to 2008 could be made a halfway acceptable alternative would be if all the ACP countries or a majority of them were classified for inclusion under a special prong to the proposed GSP which would provide a special incentive for countries which satisfy a range of labour, social and environmental standards. Even if that went ahead though, there would be at least three shortcomings to GSP; one is that there is no guarantee that this proposed special regime will be shown to be WTO-compatible. The reason why it has been created is that the EU has lost the case with the WTO over its existing GSP special preferences for countries which are engaged in the struggle against narcotics. The current special preferences proposal seeks to provide a similar level of preferences but in a fashion which is more compliant with the WTO, but it is by no means certain that it will succeed a challenge because it excludes a priori a certain number of countries which, however good their social, labour and environmental policies, can never benefit from special preferences. The second problem is that of course it does nothing for the protocol products; further elaboration of the GSP would be required to do that - and the third problem is that the Rules of Origin are very poor in terms of cumulation which is allowing different countries in the group to add bits to the final product. A fourth problem to add to the three I have identified is the lack of any connection to aid, and as I think came out of the previous round of evidence, there is a huge need to provide positive support to ACP countries to improve their supply capacity and to improve the poverty impact of any trade preferences.

Mr Griffith: To follow up on that, as well as within the GSP there are other possible alternatives, and the most obvious secondary one would be for there to be a revision of the WTO rules on regional trade agreements, what is called Article XXIV, to incorporate Special and Differential Treatment (S&DT). At the moment there is no S and DT within Article XXIV and that is something of an anomaly if you look at the rest of the WTO where S and DT runs throughout; that could be revised. The ACP has tabled a proposal to revise Article 24 which the EU has not supported, so that is an area where we think the UK Government could put pressure on the Commission. I would also like to flag up our perspective on the Government efforts so far with alternatives. In 1998 the UK Government was very good in pushing the Commission to give a commitment to alternatives within the Cotonou Agreement, and the UK Government also gave a pledge to this Committee - which is partly why we are here today - that they would provide strong alternatives. In the past year or so we have been encouraging the Government to actually demonstrate what alternatives would look like and also to put concrete plans in place. A few months ago our efforts were rewarded with a one and a half pager which we were concerned was slightly inadequate, given the Government's pledge. I have been reading through the submission that the Government recently put to this evidence session on what work they plan on alternatives, which we welcome, it is a step forward, but I would like to flag up where we think it rolls back from what they committed to the IDC in 1998, and I would just like to highlight why we think it rolls back. This is under paragraph 44 of the Government's submission[13]. The current IDC submission only promises research which would be shared with others to help analysis, and it goes on to say that this could possibly lead to a more in depth examination of alternatives, but there is no commitment made within the Government's current submission that this will happen. There is also no explicit commitment to provide an alternative and any further work on alternatives would be dependent on an ACP country "opting out", which we interpret as saying that an alternative would only be presented after an ACP country had explicitly rejected an EPA, so it would be quite late in the day and it would require an ACP country to really go out on a limb, whereas in 1998 the Government said that alternatives "are to be made available" and it said that this would happen before the finalisation of an EPA. So we would say the Government still has much more work to do to make sure that alternatives are presented as a choice alongside a final EPA, and it needs to get moving on this quite quickly because the expiry date is 2006.

Chairman: John, I think you have a question for Jane.

Q43 Mr Bercow: Yes, my question is to Jane Nalunga. If Economic Partnership Agreements were to proceed as currently envisaged by the EU, what in your judgment would be the impact of such an agreement on the development of Uganda?

Ms Nalunga: The EPAs are basically about the liberalisation of ACP economies in more areas than agriculture and market access, and as we have been discussing here they go far beyond into 'new issues', into labour standards and so on. When you look at a country like Uganda which has undergone a Structural Adjustment Programme (SAP) under the World Bank, at the moment you find that a number of the industries have collapsed, for example the textile industry and cotton growing because of liberalisation, and further liberalisation I believe will lead to more de-industrialisation because our industries cannot compete with the subsidised goods from the EU. A number of impact assessments have been carried out in the region; Uganda carried out one, but it was a small study, which was funded by the EU, and the study really brings it out that in Uganda, if the EPAs are signed the way they are it would lead to de-industrialisation, the agriculture will collapse, there will be massive unemployment and also the reduction in livelihoods. So it is a clearly stated outcome from the assessment study, not just for Uganda, but for Mauritius, Kenya, and all the ESA (Eastern and Southern African) countries. There is an argument that EPAs will be good for consumers because of cheap things which will come in, but I think consumption has to be sustainable because at the end of the day where are you going to get the money to buy those cheap consumer goods? Today, in Uganda, foreign exchange is got from immigrant workers from outside because there are no industries, and this is going to continue. Maybe another issue which is also important in consideration of the effect of EPAs on Uganda is regional integration. The East African Countries will sign the customs protocol in January 2005 but in the EPA negotiations Uganda and Kenya are in the ESA group while Tanzania is in SADC, and we have been asking what is going to happen, will we sign the protocol and, if we sign it, how are we going to sign the EPAs? SADC also has problems, because SADC is minus South Africa, minus the SACU countries. In SADC it is Tanzania, Mozambique and Angola who are supposed to negotiate the EPAs and all these are LDCs. So there is a problem when it comes to regional integration. Another problem also is that of the negotiating capacity in the ACP countries in terms of human resources. Today in our Ministry of Trade there is one person who is working on the EPAs and he shuttles between Brussels, between COMESA and all the various meetings at home. There is also a problem with the financial resources; the EU is funding almost 100 % of the negotiations - the tickets, the studies and so on. It is good that we are getting funding but it is sort of a double-edged sword in a way; you cannot negotiate objectively, you cannot say no, and also there is no ownership of the process. Most ACP countries are also not ready. There is supposed to be a National Development Trade Forum in each country to look at the national position for the EPAs. To date we have had in Uganda maybe just two meetings in that forum, we have not yet come up with any position; the 16 ESA countries have their Regional Negotiating Forum which is supposed to come up with a regional position to present to the EU, but to date there is no position that has been tabled in that group. There is no position on any of the issues in that negotiating forum.

Q44 Mr Bercow: It certainly seems clear, Jane, from your response that you have a welter of objections and of course the argument for EPAs under the Regional Trade Agreements tend to favour the stronger negotiating party. Can I just extrapolate a bit from what you have said and just try to establish a more precise position. I understand what you are saying about negotiating issues, the funding and all the rest of it; however, in the event - I know it is not yet on the table - that the proposal were that you grant market access not to subsidised products but to unsubsidised products, would you then be content, would your other objections evaporate, or would you still be against the whole idea?

Ms Nalunga: If what? Could you repeat it?

Q45 Mr Bercow: If the proposal were that Uganda were obliged as part of that EPA to open its markets to European agricultural products, not to subsidised or dumped produce but to unsubsidised produce, would you then be content with such an arrangement?

Ms Nalunga: I do not think Uganda can compete whether products are subsidised or not because even if they are not subsidised, when you look at the cost of production, you do not have the production capacity constraints that we have, our production capacity is very low, we do not have the infrastructure - we have so many internal problems that even if your products are not subsidised and they come on our market our products will not compete. Let me give you an example of some of the problems in West Africa where there is the issue of the chicken parts. I understand here they say that chicken is not subsidised directly, but because agriculture is subsidised the feeds are cheaper. Even if the chicken parts are not subsidised, the chicken industry in West Africa cannot compete. So even if they are not subsidised I doubt whether our economies, as they are now, can compete.

Mr Bercow: I am very grateful for that, that is a very clear answer.

Chairman: Does anybody want to say anything about new issues that has not already been said? No. Then let us go onto Everything But Arms. John.

Q46 John Barrett: Do you have any idea as to how the Rules of Origin could be altered to increase access to the EBA agreements?

Dr Stevens: Thank you very much. I am glad the Rules of Origin came up in the previous evidence, and I strongly support what was said then. The problem with the Rules of Origin is that they reflect a pattern of global production which applied 40 years ago and they have not changed. In those days it was quite normal for a large part of any product to be made in one single country; now the norm is global production and both within the GSP, and also within the Cotonou Agreement, the Rules of Origin have done a great deal to prevent countries taking advantage of the preferences on offer because they would require the countries to do something which is commercially unviable. The great merit of the US example that was quoted is that for the first time, and in relation to only one product, clothing, they have allowed the lesser developed countries of Africa to do what is effectively known in the jargon as "simple assembly" of imported goods. Both the GSP and the Cotonou Agreement state that simple assembly can never give a country originating status, and that needs to be changed - not just for clothing but for the whole range of manufactured goods so that we could see the possibility of countries exporting footwear, leather goods, processed agricultural products. It would require a very substantial change in the Rules of Origin which, at the moment, are very complicated, but they require in broad terms 30, 40 or 50 % value to be added in a country. Industry studies of electronics and video components in South-East Asia suggest that a realistic target is five, six or seven per cent, so we are talking not about a minor modification but a root and branch change to bring the Rules of Origin up to date and relevant to the industry sector concerned.

Q47 John Barrett: Would you agree with the suggestion by ODI that the EU "bind" or secure the EBA access in the WTO?

Dr Stevens: I think it would be a very good idea, I think it would be a good idea from a whole range of perspectives. The idea was floated at one stage by Renato Ruggiero when he was head of the WTO and it has never been acted upon. It would certainly give a guarantee of continued availability to EBA which is absent at the moment - I think I agree with the previous evidence that it is unlikely the EU would withdraw it, but this would give a guarantee that they could not. It would also be good in the WTO because it would give more concrete manifestation to special and differential treatment, that you can bind different levels of tariff for different groups of countries and it would lead directly on to the sort of change in the WTO that Matthew was talking about in terms of getting an alternative to EPAs. If the WTO accepts that you can have different tariffs bound in the WTO without requiring countries to go through the hoops of Article XXIV, then that would be a highly desirable way to go.

Mr Griffith: To follow up on that and echoing why improving EBA is so important, this whole question of an alternative came out in our submission[14] and it also came out in the ODI submission[15] that, at present, LDCs have very little reason to sign up to an EBA. The Commission is asking them to reciprocate at the same level to market access, yet they are not getting any commensurate benefits in return. We do not think that is a very good idea, so it is very important that an alternative is available for them and that for an EPA to be a suitable alternative these sorts of measures have to be put in place, otherwise LDCs will have nowhere to jump. The concern that we have is that at present the Government is not really looking at the problems created by EPAs in terms of regional integration. The difference in incentives for LDC and non-LDC groups within the ACP group is very big and we cannot see any clear reason why LDCs would want to join an EPA. This is a major problem. For example, in COMESA 13 of the 16 are LDCs; if 13 of them say we do not want to join a regional grouping you will have three fairly random, non-LDC groups who would have to join up, but the Government's submission did not admit that this was a problem, it did not tell us anything about the solutions to this problem and how to get round it, and we have not got any convincing solutions or attempts to address this problem from either the Government or the Commission, which we think is a fairly fundamental one.

Mr Gidney: Can I just add a line about urgency on this? The Government persists in stating that EPAs are at a preliminary stage - indeed, that was contained also in the Government's evidence - but we think differently. The Eastern and Southern Africa EPA will be agreed in outline form by next year and substantial provisions on market access will be agreed by next March. So the fact that the Government is only at this stage beginning to think about what might constitute support to the regional integration process, and what are the potential alternatives, we feel is too little too late.

Chairman: Let us just have a quick tour de table. John.

Q48 Mr Battle: I think the pressure in the immediate term is going to be on reform of the protocol for sugar. What would you recommend as the best policy to help ACP states, particularly the Caribbean at the present time, if those changes go ahead, which we all want, but could damage the Millennium Development Goals going forward?

Mr Griffith: Unless Chris wants to say something on this would it be possible to give a written reply[16] because we have had limited numbers for sugar expertise within our group and we cannot really comment to a level that would be useful.

Mr Battle: That is very welcome, thank you.

Q49 Chairman: As this is the only session we are doing on this, Dianna, is there anything that you would like to say, not in reply, but is there any comment you would like to make on the comments that have just been made?

Ms Melrose: Yes, if I might. It is a very interesting idea there on the WTO challenge taking a long time, we had not thought of that one. I just wanted to clarify in relation to what Matt in particular said, that there is no way in which the Government is rowing back on its commitment to look at viable alternatives. The point is that it was the ACP themselves that asked for a delay until 2006 to look at the alternatives and, basically, we do not see that it makes sense for the Government to come up with a blueprint because we do not know - without looking at the detail - what is best for development, hence the emphasis on research is precisely because we need to get it right. That is the critical point and we also think that our primary target should be to inform the ACP, and obviously we would use the same evidence to influence the Commission as hard as we can. I certainly want to say that there is no sense of complacency here. Our Ministers are very exercised about the issue.

Q50 Chairman: Can I just make an overall comment, having heard the evidence this afternoon? All of us - the development community, the NGOs, the Parliamentarians, Ministers, the media and others - have spent huge amounts of time talking about WTO and this Committee has done two very substantial reports on WTO[17] and there have been acres of media coverage. Cotonou has got practically no coverage at all, absolutely nothing, yet we heard Jane this afternoon saying look, if these proposals go through as they are, there will be a devastating outcome for agriculture. I have a concern that everyone is focused on the WTO but there are some potentially serious negotiations going on in Cotonou in which we have not sufficiently engaged - and that may be our fault. Firstly, I think, as this Committee, we should create an early opportunity in 2005 to try and seek a meeting with Commissioner Mandelson to start to engage on these issues. Those of us who were at Cancún and saw how the Commission operated under the previous Commissioner know that these are essentially issues of community competence and it is therefore quite important to do that, but I also want to publicly say that I think there is an issue in which the NGOs collectively - the usual suspects - can assist. I noticed just the other day on Making Poverty History, postcards on trade policy, fair trade and so on, and maybe we ought to say to Oxfam and all those who are very much engaged in WTO that they ought to be thinking about doing some immediate briefing to us as Members of Parliament and also to MEPs on Cotonou and the usual groups that lobby MPs and MEPs on Cotonou, because I do not think that sufficient people are starting to get their minds around this. One senses that there are two things, that whilst in terms of the language of these - there is no criticism here of DFID - there has been nothing written in stone, actually as Chris has said quite a lot has been written in stone quite quickly, so to a certain extent speed is of the essence, and I think this is a topic on which we all need to focus rather more attention. Michael.

Mr Gidney: Might I be permitted to make a summing-up statement from our side?

Chairman: Yes.

Mr Gidney: We would welcome your suggestions and agree that it would be extremely helpful if the Committee were able to meet with Commissioner Mandelson on EPAs. Equally, we would welcome more engagement between the NGOs and the various Parliamentary groupings who are able to exercise such valuable scrutiny over this process. We are starting to work now with the Government and we look forward to this being a constructive dialogue. This is quite new, I have to say that as recently as March/April of this year we were told by officials in both DFID and DTI that the Government was not prepared to expend "political capital" on EPAs. That has now changed and that is welcome, but as it is a new development the jury is out on the outcome. It is our view that the ACP are very clear that they cannot cope with the level and speed of negotiations on EPAs and they have serious concerns, expressed in their negotiating mandate and their press statements after their meetings, about some aspects of EPAs, particularly to do with the pace and scope of reciprocity and the inclusion of 'new issues' when they had fought successfully against them in the WTO. If we really wanted to show good faith and a strong commitment to development, then the British Government is well placed to lobby for the removal of 'new issues' from the Commission's mandate and, again, the removal of the excessive focus on fast liberalisation which has characterised the Commission's activities so far.

Chairman: What I would say on that, Michael, is that some of the policy dance that we have had on this, the policy dialogue, is that usually the NGOs or the staff from the NGOs draw up an agenda of objectives which you tend to agree amongst yourselves, and which you manage to communicate to Parliamentarians. I think we would welcome that because there is a lot of confusion here about what is wood, what is forest, what is trees and who is on whose side on what and so on. If it were possible to give some thought to that between now and the end of the year, I think that would be very helpful. Government departments here - the Department of Trade and DFID - are themselves having to cope with a lot in terms of WTO and Cotonou, and of course a lot of these issues are cross-departmental. If you take an issue like sugar, one can imagine that what DEFRA is saying on sugar is different - they are concerned about ensuring that the interests of sugar beet farmers in East Anglia are heard, so there are various tensions here that we have to recognise on many of these commodities. Having heard all the evidence this afternoon, both from officials and from you, I am concerned that this is something that all of us, the whole development community and the media, are not paying sufficient attention to.

John Barrett: Can I add one point and it is something that I can perhaps fire at both the NGOs and the officials, and that is one of the pressing issues for getting it right and up to speed is that particularly with the Caribbean states there is the imperative that that trade goes on outwith the negotiations, and that now that the American Government has been successful in Columbia in restricting the narcotics trade there, there is pressure for that to move on to the Caribbean. We have seen what happened, for example, in Afghanistan and it is something the DTI, DFID and the NGOs will be aware of, and we need to move on because there are alternative products which are not necessarily covered by these agreements that can actually start to grow in the fields. It is another reason for keeping the pressure up.

Chairman: Okay. We could carry on all night, but I think we are all of one mind on this so let us move forward. Thank you very much for coming to give us your evidence.


[1] African, Caribbean and Pacific (countries)

[2] See page xx of the Committee's report

[3] Ev

[4] Common Market for Eastern and Southern Africa

[5] The Economic Community Of West African States

[6] The Caribbean Community (CARICOM)

[7] Evidence session, Monday 7 February 2005

[8] UK Response to the Commission Green Paper on the Future of Rules of Origin in Preferential Trade Agreements. Not printed. Copy placed in the Library.

[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

[10] Ev

[11] Article 37.7

[12] Doha Development Agenda

[13] Ev

[14] Ev

[15] Ev

[16] Ev

[17] International Development Committee, First Report of Session 2003-04, Trade and Development at the WTO: Learning the lessons of Cancún to revive a genuine development round, HC 92-I. Available at http://www.publications.parliament.uk/pa/cm200304/cmselect/cmintdev/92/92.pdf. International Development Committee, Seventh Report of Session 2002-03, Trade and Development at the WTO: Issues for Cancún, HC 400-I. Available at http://www.publications.parliament.uk/pa/cm200203/cmselect/cmintdev/400/400.pdf