Examination of Witnesses (Questions 32-39)
RT HON
PETER MANDELSON
AND MR
PETER THOMPSON
23 JANUARY 2007
Q32 Chairman: You well know the way committees
work; we have a number of what we hope are forward-looking questions.
You will know that we did a Report on the Doha Round.[14]
We have also done a Report on private sector development.[15]
I think it is fair to say the Committee strongly takes the view
that if poverty is going to be reduced countries have to develop
successful economies, and trade opportunities are clearly a big
part of that, both internal and external. Your having just returned
from Washington and having been involved in trade negotiations
that the Financial Times seems to have some optimistic
take on, I wondered if perhaps it would be helpful to start from
there, whether or not you feel there is the possibility of concluding
a deal and one that the developing world would see as in the spirit
in which the Development Round at Doha was intended to be.
Mr Mandelson: First of all, thank
you very much for taking the trouble to assemble here. It is a
very pressured and intensive time in trade and notably for a Trade
Commissioner who has to represent 27 nations; we are the biggest
economic space, the biggest trading bloc, the biggest exporter
in the world, and I negotiate with a kind of exclusive competence
authority on behalf of that bloc, so it is a busy time and I am
grateful to you for coming here and making this effort to do so.
The world trade talks, to put it mildly, have gone through a period
of great uncertainty since the negotiations were suspended by
the Director-General of the WTO last July. They were suspended
then because we were unable to make any progress on the subject
of trade distorting farm subsidies because, as the US trade representative
said at the time, "There is not enough agricultural market
access on the table from Europe and from the developing countries
to make it worth our while to indicate any further flexibility
on farm subsidies". The Director-General said, "We are
not going to make progress on market access unless you indicate
the direction in which you are going on farm subsidies. Why should
India, why should many other developing countries start making
offers to the US in opening their farm markets if what they are
going to have to deal with is the import of a lot of US Treasury-subsidised
US farm products? If you want to make progress on the market access
side you are going to have to indicate where you are going on
the subsidy side." That is how we left it towards the end
of July last year. We then went through the US mid-term elections,
and it was perfectly clear to me and anyone with half a political
brain that the administration was not going to make moves on farm
subsidies on the eve of a set of very close-run elections in the
US, and so it was. We have now come out of that and there is renewed
high level political engagement. I would like to pay tribute to
two Europeans who are chiefly responsible for getting that high
level political re-engagement on the part of the President of
the United States, without whose authority we can make absolutely
no progress at all towards a breakthrough. One is your own Prime
Minister and the other is the Chancellor of Germany. The Prime
Minister in December had the most intensive and focused conversation
with President Bush on the Doha Round that he has had. He has
made openings before but they have not quite been successful in
tuning into the President's wavelength, as was the case in December,
and I saw very clearly, following his engagement with President
Bush in December, the White House moving to take this subject,
as it were, into the White House and really put it on the President's
radar in a way that it had not been previously. The second visit
was made by Chancellor Merkel at the beginning of this year. She
preceded my own visit and that of President Barosso by a few days
and she really forced and pushed the message home about Doha,
which is this, that the economic benefit to the world economy
and to developing countries in particular you can quantify in
terms of hundreds of billions of dollars in increased trade. It
is not just the increased trade flows we are talking about but
as part of the Doha agreement we have the prospect of a real trail-blazing
agreement in trade facilitation which is making trade easier,
more efficient and less costly, particularly for developing countries,
and that part of the negotiation has been completed to all intents
and purposes and is waiting for the rest of the negotiation to
come to a conclusion in the single undertaking as a whole, but
that also the dynamic effect on the global economy of increased
productivity as trade flows increase will add to that increase
in trade flows and will have a growing and cumulative effect during
the entire implementation period of the Doha Round, and therefore
the economic cost of failure can be quantified in those terms.
It would be enormous.
Q33 Chairman: Is that directed at,
if you like, the developed world or the developing world?
Mr Mandelson: It is directed at
every member of the WTO but the principal beneficiaries, those
who will disproportionately benefit, as it were, will be the developing
world, particularly the more competitive developing countries.
There are, of course, different sorts and categories of developing
country and I readily accept that it will be the more competitive
developing countries which will gain principally from a successful
outcome of this Round and I acknowledge immediately that there
are other developing countries, poorer, less competitive developing
countries, for whom trade liberalisation in agriculture is a threat
rather than an opportunity. There will be the Brazils and the
Argentinas and the South Africas and the Thailands, just thinking
round the world, those developing countries who in a sense have
offensive interests in agriculture and liberalisation of agriculture,
but equally there are many other developing countries who are
saying to me, "Hold back. You are going too far. You are
liberalising too much too quickly. Do not forget us". They
are the developing countries who rely not on lower farm tariffs
but preferential access to markets which are protected by those
tariffs, so you have different sets of developing countries with
completely different interests. One of the obvious complexities
of this negotiation, and certainly for me as Europe's negotiator,
is that I have to make an ambitious offer and a generous offer
in agriculture to one set of developing countries while reassuring
another that I am not going further than they can bear because
it has an obvious knock-on effect on their access to Europe when
I am reducing tariffs for all and therefore also reducing their
tariff preferences. On the one hand I am being pushed on; on the
other hand I am being pulled back by different sets of developing
countries, but it is manageable. You just have to strike the right
balance, and to those who say, "This Round is all about agriculture"
I say first of all it is not because the greatest trade gains
will be in industrial goods and the liberalisation of services,
not in agriculture, because it is in those other two areas where
the bulk of trade takes place and where the bulk of the benefits
in increased trade flows will return to the global economy as
a whole, including in developing countries. The greatest number
and most expensive payments that developing countries make in
tariffs are in industrial goods not to the developed world but
to other developing countries, and so if we can get a measurable
lowering of industrial tariffs in the developing world that will
represent a huge boost potentially for those developing countries.
But it has to be done in a measured way, it has to be done in
a sensible way, and it is not something where you just throw a
switch as if you are turning on a light and have these changes
implemented overnight. You need an adjustment period because there
is an adjustment cost but the long-term gains are undeniable.
Lastly, "Is this going to be brought to a successful conclusion
or not?", you will be asking. I would say the odds are better
now than they were at the end of last year. The US is re-engaging
seriously. I believe President Bush is genuinely committed, so
that is more positive. I have broadly speaking on a good day unity
amongst Europe's member states. Broadly speaking I have a mandate,
I have European member states lined up behind that mandate, they
are giving me flexibility and I can and will make the very best
possible offer that I have within my means to offer. As for the
G20 countries, the emerging economies, it is a bit more mixed
but broadly speaking they are very favourable and strongly disposed
to a successful outcome, with India worried about what will happen
to farm incomes in India as a result of this Round, so even within
the G20 countries you get countries with different interests and
different emphases. The G90 developing countries, as I have explained,
are rather more conservative and rather more cautious, but there
is a critical mass of members of the WTO to do this deal, there
is a deal to be done, it is definitely doable but it has to be
done within the next few months before the US administration's
mandate and trade promotion authority that Congress give it expires
in June.
Chairman: Thank you very much for that.
You have touched on issues which three colleagues have caught
my eye on.
Q34 Hugh Bayley: Given that there
is so much to be gained from people who trade in manufactured
goods and services why is there not a stronger voice from the
CBI[16],
from the European Business Association and others saying that
we have to make some concessions on agriculture and the other
sticking points in order to get the trade benefits that we need?
Mr Mandelson: For two reasons:
partly because those who know what the employment value will be
of a successful Round, both in the developed and in the developing
world, have become more muted. Why? Because they see these talks
struggling on, talks which actually have not gone on for as long
as the previous Uruguay Round did by a number of years but we
feel as if we have been going on for a longer time, and so they
are a bit more muted, but also, when the CBI and others do speak
up, and they do so regularly, unless they have something to say
about agriculture they tend not to be reported. Everyone is so
agriculturally fixated by this Round, both the negotiators and
those who report what we are doing, that those who know that their
interests lie outside agriculture either despair of the lack of
interest shown or speak up but are then not reported, but their
interests are real and these are real interests, not just in the
developed world but also in the developing world.
Q35 Hugh Bayley: At the end of the
Uruguay Round it was European industry, particularly French industry,
which said that there had to be movement so a deal could be made.
I would have thought that in this Round too if they were more
vocal it would give you more space to cut a deal.
Mr Mandelson: I agree, and I believe
that when they do realise finally that we are in the end game
and that this end game is going to lead to success or failure—it
is going to lead to one of the two things in the next few months—when
the penny really drops that we are in the end game, you will see
them more active. They are already more active since the beginning
of the year, I can assure you. I wrote last week to the President
of the European Round Table, Peter Sutherland, and to the President
of the International Chamber of Commerce in Europe, Marcus Wallenberg,
and said, "I know I have said this before but this time I
mean it: we are in the end game. Please activate your members,
bring pressure to bear. The global economy needs it, developing
countries will benefit most of all but we in Europe need it as
well. Please make your voice heard", and I think that, for
example, in the World Economic Forum later this week you will
hear that voice.
Q36 Chairman: I heard what you said
about agriculture, and I believe Quentin Davies did, that British
Ministers, and certainly Hilary Benn, have never made that a major
point for the poorest countries: agriculture is key from a development
point of view, so what you have said on the record is extremely
helpful and instructive.
Mr Mandelson: It is key, but I
am afraid it is key both ways, both in an ambitious way but also
in a very cautious way. Hilary and other members of the British
Government need to realise this. Sometimes when I hear them clamouring
for the dismantling of agricultural protection, the break-up of
the CAP[17],
I wonder whether they realise that with the dispatch of the CAP
would go the agricultural preferential access to the poorest developing
countries in the world. Remember their access to European markets
is quota-free and tariff-free except in sugar until 2009, so it
is not protection that is keeping them out; it is protection which
is in place which we allow them to jump over which gives them
their special access to European markets in agriculture. That
is why we very proudly in Europe can boast of the fact that we
import to Europe 75% of all agricultural exports from Africa,
and they do that because of the special access arrangements they
have. If you got rid of the border protection you would be getting
rid of the special access as well.
Q37 Mr Davies: There is a problem anyway
with bananas and so on. You say you have got a mandate, which
you have, and you have got the member states behind you, but in
practice are you not operating now already on the edge of your
negotiating mandate and to get a deal are you not going to have
to go beyond that and are the member states going to allow you
to expand that mandate, and specifically will the French do so?
Mr Mandelson: They will not allow
me to exceed my mandate, nor will I be asking them to extend my
mandate, because I am properly advised about the impact that the
offer and the further flexibility that I have in agriculture will
have on prices and revenues in Europe's agricultural sector. This
is not a science. I cannot predict or project with absolute precision
what the effect will be on different agricultural sectors but
I receive professional consistent advice from agricultural officials
in the Commission. They advise me how far I can go and what I
can do in different sectors and I firmly believe and emphatically
state that I am within the mandate given to me even with the additional—
Q38 Mr Davies: You are today but
in order to clinch the deal can you stay within it?
Mr Mandelson: —even with
the additional flexibility that I believe I can offer to these
talks. I cannot and will not go back for a new mandate.
Q39 Ann McKechin: You mentioned that
in your opinion the G20 nations were favourable to a positive
outcome on the current talks. I just wonder to what extent you
believe that their concerns about having the necessary adjustment
period to cope with liberalisation can be answered by the EU and
also the US in reaching a settlement.
Mr Mandelson: There are different
interests within the G20. Brazil is an extremely ambitious and
competitive agricultural exporter; therefore it wants to take
the agricultural settlement to the very Nth degree possible. India
has almost the opposite interest in agriculture and would like
the agricultural settlement to stay well within that Nth degree
that Brazil wants, so they strike a compromise, a balance, within
the G20 on agriculture. On industrial goods there you have to
remember that already agreed within the framework of this Round
the effort and obligations and commitments of the developed world
will be significantly greater than those placed on the developing
countries of the G20 and, of course, for the G90 developing countries
the least-developed countries are exempted from making any effort
at all. There is a group of developing countries between the LDCs
and the most competitive who feel a bit vulnerable. They feel
that they are not being exempted as the LDCs are and they are
not in a position to make the commitments that the most competitive
are, and there is within those countries a group who rightly are
fearful about the preference erosion in industrial trade that
they would suffer as industrial tariffs are reduced as a result
of a successful round. My view of that is that we have to recognise
the sensitivities of those developing countries and we have to
find a way for that group of rather more vulnerable developing
countries to have a longer implementation period than for others.
Believe me, this is a development round in reality as well as
name and the framework agreement within which we negotiate everything
is very proportionately measured, gauged and negotiated so that
the developed world have significantly and substantially greater
obligations and have to enter into considerably greater commitments
and effort than do the developing countries, and, of course, for
the least-developed they are exempted entirely.
14 International Development Committee, Seventh Report
of Session 2002-03, Trade and development at the WTO: Issues
for Cancu«n, HC 400; First Report of Session 2003-04,
Trade and development at the WTO: Learning the Lessons of Cancu«n
to revive a genuine development round, HC 92. Back
15
International Development Committee, Fourth Report of Session
2005-06, Private Sector Development, HC 921-I. Back
16
Confederation of British Industry. Back
17
Common Agricultural Policy. Back
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