Examination of Witnesses (Questions 136
- 139)
TUESDAY 6 DECEMBER 2005
MR ROGER
LIDDLE
Q136 Chairman: Thank you very much
for seeing us, Roger. As you know, the Committee is currently
doing a report on the WTO. Three Members of the Committee are
actually going to Hong Kong next week. We are extremely interested
in the negotiations. I see that you told the House of Lords that
you were not very optimistic about bridging the differences by
next week[1].
You talked about "lowering ambitions". I think we got
a term from the World Bank which was "recalibrating expectations".
You speak English, obviously. Peter Mandelson has tabled his plan,
which we had sight of last week. The basic question is what are
the prospects? What are we going to get out of Hong Kong, if anything?
Mr Liddle: Could I first of all
say what a pleasure it is to be here. I am very sorry that the
Commissioner is not here. He ought to have been here but he is
actually in one of our Member States in key discussions about
next week, so I hope you will excuse that and be content with
me in his place. I will do my best. What I said to the House of
Lords was that much against our wishes the consensus in the WTO
was that expectations for the Hong Kong meeting should be downplayed.
That did not mean—people said at the time, and I think they
believed it—that our ambitions for the Round as a whole
were being downplayed, but certainly Hong Kong was not going to
be the crunch negotiating point at which all the key elements:
like the tariff cuts in agriculture and industrial tariffs; the
main outlines of the rules on services; the main packages in other
areas like trade facilitation and anti-dumping rules; and the
development package, were settled. Peter very much regrets this,
but there we are. What can Hong Kong achieve? There has been a
very laborious process of meetings since the July Framework Agreement
of last year. It took a long time to get momentum back into these
discussions after, I suppose, there was a break, in part because
of the new Commission here and in part because of the change of
US trade representative. There has been a pause and it has taken
a long time to get momentum back into the talks. Starting in May,
when we got agreement on the very highly technical subject of
how you convert ad valorem tariffs into percentage tariffs,
momentum built up and we were hoping to get into a crunch negotiation.
Others have decided that is not possible, and there we are.
Q137 Chairman: We have just had informal
sessions this morning with three Ambassadors from the Africa,
Caribbean and Pacific Group and our own UKREP[2],
and one of the things a number of Members of the Committee are
confused about is people talk about a Trade Round and a Development
Round and there seems to be a confusion as to what is trade and
what is development and how they interplay. You said you have
not downplayed the Doha Round, just Hong Kong, but, to be honest,
what is the possibility of achieving something which the developing
countries will take as a Development Round?
Mr Liddle: I do not think it is
possible to envisage a successful outcome to this Doha Round unless
you think in terms of some kind of grand bargain. What are the
elements of this grand bargain? First of all, I think it is a
grand bargain between the rich countries and the so-called advanced
developing countries. In crude terms, as far as Europe is concerned,
that means us giving what we have to give, which is essentially
fairer competition in agriculture, additional agricultural market
access. In principle that is all agreed, although there is a question
of great debate about the extent. It is on agriculture that the
EU has something to give. It does not have much to give on lowering
industrial tariffs. The average EU industrial tariff is 2.6%.
There are some tariff peaks that could go, but it is mainly agriculture
in terms of the EU opening its markets. In terms of the advanced
developing countries, for them the crucial point is lowering their
industrial tariffs and creating much fairer access for service
providers from the rest of the world. That is the sort of grand
bargain whereby, if you like, there would be an element of mercantilist
self-interest that would be satisfied as far as Europe is concerned.
I think that grand bargain is very important to jobs and growth
in Europe, because if you look at industrial tariffs, say, the
key thing is that we are not going to be able to compete across
the full range of industry across Europe with the rise of China
and other rapidly developing countries. We have got to concentrate
on niche, top end of the market quality goods and in order for
our industry to prosper we have got to have fair access to where
there is a market for those goods, so where there are rapidly
growing middle class markets, which are now in countries like
Brazil and India and China, we need access. A very good example
which will be familiar to you, Chairman, is that India is pretty
closed as far as Scotch whisky is concerned. That is a classic
high quality good that Europe produces where we need access. The
second point is rapidly developing countries which are really
on a sustainable growth path, which are recording growth rates
of 6, 8, 10%, those very rapid growth rates, have a voracious
demand for services, a voracious demand for new infrastructure
in building, energy, transport to support their development, and
also in IT, financial services, telecoms. It is very, very important
to our industrial future in Europe that our service companies,
which are amongst the most highly competitive in the world, have
access to those markets. You can say, "What is all that to
do with development?" and I think that is a reasonable question
to ask—sorry to be longwinded but I think it is a good way
of explaining it—but the truth is, first of all, in services
it is not just a one-way street, as it were. We all know about
India's rise in the service economy through the growth of call
centres, so India is beginning to be a competitive service player
itself. Secondly, the lowering of industrial tariffs in the advanced
developing countries creates new market opportunities for even
poorer countries to develop their own industries and compete,
as it were, at the bottom end of the industrial market where Europe
and America are no longer competing. There is a very strong development
dimension to this agenda. Then you also have to look at what are
we going to do about the LDCs and the poorer countries, the ACP
and elsewhere. That has to be a vital part of this grand bargain
that I have described and it is important that we reflect the
special circumstances of those countries in the eventual deal
we do, and that is what Europe is committed to doing.
Q138 Hugh Bayley: Roger, does the
Commission accept the principle of "less than full reciprocity"
for developing countries on agricultural tariffs?
Mr Liddle: Yes, it does. For instance,
the offer that we made does this in a number of ways. First of
all, we made an offer with a top rate of 60%, the top agricultural
tariff cut proposed was 60%, and we said that no developing country
should be asked to make a cut higher than two-thirds of that.
So as far as India is concerned, the highest tariff cut that they
would be making would be 40%. There was a general principle accepted
in our agriculture offer that developing countries would only
have to cut their tariffs by two-thirds of what the developed
countries were cutting their tariffs by. Not all of our trading
partners were terribly happy with this proposition. I think the
Americans, who do see market access opportunities for US agriculture
in the developing world, are much less enthusiastic about this
differential between developed and developing countries in the
tariff formulae, but there we are, that is our position. Next,
of course, we have always recognised that just as we have "sensitive
products" which are going to be treated differently from
the general tariff formula, we recognise that our developing country
partners also have sensitivities. Thirdly, we have recognised
that when you liberalise you cannot be certain of the consequences,
no-one can be absolutely certain what is going to happen and,
therefore, there is a case for what in the trade they call a Special
Safeguard Mechanism, in other words, you have made the commitment,
you are going ahead with it, if it looks as though the economic
consequences are adverse you can do something to reverse the position
under WTO Rules. Fourthly, we have always said that for the very
poorest countries we have generally supported what Pascal Lamy
called a "round for free", in other words they would
not be required to give anything at all. I hope I have managed
to answer that point fairly fully.
Q139 Hugh Bayley: Thank you, Roger,
you have. You talk about your grand bargain and you see a need
to strike a mercantilist deal with the advanced developing countries,
but there is no need to do that with the poorest countries. Since
there is this political commitment post-9/11 to a Development
Round, would it not be feasible to agree a package for the G90,
say, or for Least Developed Countries, or for low income countries,
for a group of poor countries, and put that on one side so that
you can focus on the trade gains we want as developed countries
and the trade concessions we want for the advanced developing
countries, otherwise it seems that the needs of the poor will
just get squeezed and lost?
Mr Liddle: We are hoping that
there is going to be such a package produced and agreed at Hong
Kong. The main elements of it are probably familiar to you. They
would be the extension of the EU's `Everything But Arms' policy,
that is tariff and quota-free access for everything from Least
Developed Countries, but the extension of that on the part of
all the rich countries in the world—including United States,
Japan, Australia, and Canada—plus those advanced developing
countries that felt able to do so, so pushing very, very hard
for the principle of tariff and quota-free access for everything
from LDCs. Secondly would be tackling some of the really specific
product problems that affect LDCs. Of course, here we are very,
very mindful of the criticisms that the ACP has mounted at the
sugar reform. Actually, I think the sugar reform is quite a bold
reform in the right direction. This is where we have to go but
there is no doubt that the adjustment assistance for the poor
countries that are going to suffer in the Caribbean and Mauritius
does look extremely small by comparison with what the EU's own
sugar producers are going to get. This is all bound up—we
can talk about this later on—with questions to do with the
EU budget and what we can afford and what role Member States ought
to play as well as the EU in trying to offer this adjustment assistance.
Certainly I think we need to look at that. We need to look at
cotton where, as you know, world cotton prices are very low. There
are countries in West Africa which would be reasonably competitive
cotton producers but, because of US subsidies to their cotton
growers, US cotton is sold at very, very subsidised prices on
the world markets. We are hoping that the US will make some moves
on that at Hong Kong. There is also the banana sector, which is
a very, very tricky issue indeed. So dealing with some of the
specific product issues but recognising also the principles of
special and differential treatment would be an important part
of the development package, and getting the TRIPs[3]
exemption right. I think the most important thing of all is something
on Aid for Trade. This is not something that trade ministers can
do much about, it is not something that Peter Mandelson on his
own can do much about it, although at the G8 in July President
Barroso did make clear that the Commission did have an Aid for
Trade package that it was putting forward. Of course, as the Prime
Minister announced in his Mansion House speech[4],
the UK has an increased UK provision in Aid for Trade, but we
have got to see this matched by other people. I think this is
essential because it is quite clear from the experience of preference
regimes, including `Everything But Arms', that opportunity to
trade is not enough, it is also a question of capacity to trade.
The urgent question for the poorest countries in the world is
improving their capacity to trade, not improving their opportunity
to trade, because the very poorest already have it, certainly
as far as the EU is concerned.
1 House of Lords, oral evidence taken before the Select
Committee on the European Union on 15 November 2005, HL (2005-06)
77, Q26 [Chairman] Back
2
United Kingdom Permanent Representation to the European Union. Back
3
Trade Related aspects of Intellectual Property Rights. Back
4
Tony Blair's Mansion House speech, Tuesday 15 November 2005,
http://politics.guardian.co.uk/development/story/0,15709,1643023,00.html Back
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