Examination of Witnesses (Questions 20
- 39)
TUESDAY 7 NOVEMBER 2006
UKTI
Q20 Mr Bone: Could you tell me one
story as to why they do it that way?
Mr Timmins: No, I am sorry. I
do not have the detail of that but I am very happy to investigate
that.
Q21 Chairman: Peter Bone has a very
important point here. A lot of the big companies which happen
to invest in Britain are Anglo-Dutch companies and so they have
their headquarters technically somewhere else, so it is half-British,
half-Dutch, because of the asset history in Shell and Unilever
particularly. Is that anywhere near it?
Mr Timmins: It is that sort of
thing, but quite why it is not counted as a British export and
an export from the Netherlands, I do not know the answer to that.
I am sure our colleagues in Sao Paulo in Brazil will be able to
answer that question better than I can.
Q22 Mark Hunter: I want to ask a
question with regard to the document that you have already sent
in to us and refer to annex D, which sets out the agreement between
the UK and Brazil to establish a joint economic and trade committee
called "JETCO". The Select Committee, of course, understands
this concept from our recent inquiry into trade with India, as
you will be aware, but I would like to know a little bit more
about JETCO as an organisation. Has it met yet? Has it got established
priorities? Does it have an action plan? Could you tell us a little
bit more about the organisation and those specifics?
Mr Timmins: Sure. I will say a
little bit generally about JETCO and ask my colleague to spell
out a little bit more of the detail for you. You will probably
be familiar with JETCO because it is the mechanism that applies
to India and China. It is a Joint Economic and Trade Committee—it
is not a body, it is a committee—and it is essentially a
ministerially-led committee. The history of JETCO for Brazil is
quite recent. It goes back to the state visit in March, and in
thinking through how we wished to approach the state visit and
what deliverables we wished to obtain from the state visit we
were looking at the sorts of mechanisms that were used for other
markets, including India and China. The JETCO mechanism seemed
to us to be one that we could usefully apply to Brazil and so
during the state visit we pursued with the Brazilians the establishment
of this committee. It is ministerially led, it is designed to
address the issues which affect our trading relationship and this
is recognising, of course, that some of these are susceptible
to government-to-government intervention in order to find a resolution,
so we agreed with the Brazilians that there was a mutuality of
interest in establishing a JETCO for Brazil. That was one of the
deliverables from the state visit back in March. Since then, the
Secretary of State, Alistair Darling, has approved the terms of
reference for the JETCO, he had an initial meeting with his opposite
number, Luiz Furlan, the Brazilian industry minister, in May when
he was in the UK. We have moved forward from that meeting to the
formal inauguration of the JETCO which took place in September
when Alistair Darling visited Brazil. During the period from March,
when we were starting to develop this concept or mechanism, through
to September, we have developed the JETCO, we have established
it, inaugurated it, it has had its first meeting and it is beginning—
Q23 Mark Hunter: That is what I was
particularly keen on, it has had its first meeting?
Mr Timmins: Yes.
Q24 Mark Hunter: But only the one
so far?
Mr Timmins: Yes, indeed. It is
intended it should only meet once a year in terms of its joint
chairmanship by ministers.
Q25 Mark Hunter: Were its priorities
agreed at the first meeting?
Mr Timmins: Indeed. Adrian can
tell you a little bit about that.
Mr Hockney: As Ken says, Alistair
Darling went out to Brazil in September and we had the first meeting
and out of that meeting came 15 recommendations. Now these are
practical recommendations, things like developing co-operation
between the UK Accreditation Service and the Government in Brazil,
the Patent Office and the patent office equivalent in Brazil and
also developing joint trade activity looking at specific sectors,
going through a whole range, and I can certainly give the Committee
these 15.
Q26 Mark Hunter: We would be interested
to see a full breakdown of these, the Secretary of State's 15
recommendations.
Mr Hockney: These were joint recommendations
between the Brazilians and ourselves, so there are some in there
which are more akin to the Brazilian needs and some towards our
needs.
Q27 Mark Hunter: It would be very
helpful if we could have a copy of that. Finally on this particular
point, there is a great deal of store being set by the establishment
of this JETCO organisation. Could you tell me whether or not there
has been much interest in it from UK companies looking to get
involved in it?
Mr Timmins: Very much so.
Q28 Mark Hunter: Could you quantify
that when you say "very much so"?
Mr Timmins: What I was going to
say was I may have given the impression that this was, as it is,
a government mechanism. It is certainly that, but feeding into
the mechanism is a very strong thread of interest by British companies
and that is manifested through the CBI, which have been partners
with us in developing the mechanism. Indeed, as we move forward
with JETCO, the CBI will be instrumental in helping us identify
the issues that are of concern to British companies in trading
with Brazil, so there is a very strong private sector input here.
Q29 Mark Hunter: Could you give us
a flavour of what kind of companies and what companies specifically
have shown an interest?
Mr Hockney: I have got a list
back at the office, but a lot of the companies have already got
an interest in Brazil naturally. Paul, you might be able to help
me out here?
Q30 Mark Hunter: It would be useful
if you could confirm it.
Mr Hockney: One extra thing I
would add to what Ken has said is the day before the first meeting
we had a private sector gathering of about 30 companies to get
their views as to what they wanted included in this statement,
so we have had the private sector.
Q31 Mark Hunter: Were they invited
companies on the basis that you knew they had an interest in it?
Mr Hockney: Yes, and through the
CBI.
Mark Hunter: It would be helpful and
I think it would be interesting to know who attended, which 30
companies you are talking about there, but also this wider interest
that you have had so far expressed, which companies are involved
and also what sector—I guess we might know from the names—if
it is not immediately obvious, that would be useful as well.
Q32 Chairman: Am I right to see JETCOs
in general in Brazil and elsewhere as more of an integral general
annual meeting to make sure progress is being made? Is that their
purpose, to keep people up to the mark?
Mr Timmins: I think it is important
not to see JETCOs as the solution to all of our problems, if I
can put it that way. There are some markets which are suitable
for JETCOs, particularly where business can be influenced on a
government-to-government basis. Brazil is a market of that sort,
as is China and India, but there will be other emerging markets—Mexico,
for example—where it may not be wholly appropriate or necessary
to have a JETCO, so there is something here of horses for courses.
The mechanism itself in the way it works involves officials meeting
twice yearly in order to prepare the ground for the main ministerial
meeting. I think it is more than ministers receiving details of
progress, it is about the secretary of state, for example, being
able to influence the work of the JETCO, not just receiving a
progress report.
Q33 Chairman: There is a limit to
the number of JETCOs that a country can establish. The fact that
you have chosen one for Brazil suggests that you have a higher
priority for Brazil than perhaps some British businesses have
for Brazil.
Mr Timmins: Brazil is, in effect,
the third market for which we have established a JETCO and what
we are doing now is looking in the round at emerging markets to
take a more strategic view of those for which we feel JETCOs are
appropriate. Part of the problem, or the issue, is ministerial
time.
Q34 Mr Wright: All through this we
have been talking about trying to build up trade with Brazil and
in your memorandum you listed a number of the barriers to trade
between the UK and Brazil, such as excessive bureaucracy and regulation,
complex tax issues, employment law, protectionist taxes and customs.
Many of these, of course, also apply to India and China. Would
you say it is more difficult to do business in Brazil than those
two countries?
Mr Timmins: That is difficult
for me because I do not have any responsibility for India or China.
Of course, India has very strong ties born out of our history
which, without being an expert, perhaps makes it easier for British
companies to trade there. China is not in that category but it
is a rapidly expanding economy and growth in China is far more
than in Brazil, for example. So that may be a factor there, that
the opportunities are more widespread.
Q35 Mr Wright: You also suggest that
the government of Brazil is more willing to go further than Congress
to dismantle some of the barriers that you have listed. In what
areas do you think the government may be willing to take action?
Mr Timmins: I think there are
particular issues around the regulatory burden. British companies
can find this quite stifling, it is one of the areas that we will
be looking at through a JETCO. The issue of tax is also quite
central to British companies' perception of the ease or difficulty
of doing business in Brazil. The tax burden in Brazil is something
like 36% of GDP, it is far in excess of the tax burden in China
and India, so that too is an issue that we are pursuing within
the JETCO.
Q36 Mr Wright: Do you see that the
government is accepting these arguments and do you consider that
they will accept that they need to do something to reduce some
of that bureaucracy?
Mr Timmins: These are complex
issues. We are at the very early stages of identifying them and
raising them through the JETCO on a government-to-government basis.
It is perhaps wrong to say that we have not raised them before,
we have raised them before. People in Brazil have raised them,
raised them in relation to the interests of individual companies,
there is no doubt about that. What we are talking about here and
now is a rather more strategic approach through the JETCO where
we can raise those issues at a more strategic level, at a higher
level within government and seek to secure some benefit that way,
instead of pursuing them one by one in relation to individual
companies.
Mr Hockney: I think a couple of
good examples in the recommendations from the JETCO are that we
should support the ratification of an investment promotion protection
agreement and also a double taxation agreement, which we have
not got with Brazil yet. As you pointed out, the Investment Promotion
and Protection Agreement (IPPA) was stuck in Congress so we have
a problem there. At least now we have got it in a document which
has been signed by the Brazilian Minister of Industry and Alistair
Darling, so it is a step forward. I cannot promise that the Brazilian
Government is going to change its attitude overnight, but at least
we are pushing it forward.
Q37 Mr Wright: Do you see that a
change has been made since the recent election? Do you see any
difference there in the way that we communicate?
Mr Hockney: It is early days.
It is the same party, as you know, and we do not anticipate any
major changes in attitudes at the moment but hopefully we will
see more in the New Year.
Q38 Chairman: Mr Hockney, you referred
very helpfully to the conclusions of the JETCO and you promised
an answer to an earlier question on the consensus on the conclusions
and it would be helpful to have them quite urgently, perhaps in
the next day or two, because we are off there next Friday and
it would be very helpful to be informed on discussions in detail
prior to our visit.
Mr Hockney: Yes, I will get these
through to you this afternoon.
Q39 Mark Hunter: Again on the memorandum
which you have already supplied, it discusses seven sectors which
would appear to be promising from the point of view of developing
trade with Brazil. Could you tell us whether or not UKTI has identified
any other sectors which it should be concentrating on, which are
ripe for the potential to be exploited? Could you also tell me
how well the UK is already doing in what are deemed to be the
strong sectors?
Mr Timmins: The sectoral approach
which we have adopted here is for Brazil and is part of our sectoral
approach for markets worldwide. The choice of these sectors, if
I can put it that way, as priority sectors for Brazil is derived
from discussions with British industry with each of those sectors
in terms of how they see Brazil as a market in relation to other
markets where there are similar opportunities for them. That process
is an annual process. We have just embarked on the process of
inviting our Posts overseas, our commercial teams, to indicate
for Brazil and for other markets which are the areas of opportunity
they see looking ahead over the next three years, and that is
an exercise which is done annually. We are keeping on top of this
constantly and for the moment the sectors that you see in the
memorandum are those that are a priority, however, that might
change based on the current exercise and there may be a different
view taken on which sectors should be a priority for Brazil.
| 
