Select Committee on Business and Enterprise Minutes of Evidence


Examination of Witnesses (Questions 40-59)

LORD JONES OF BIRMINGHAM AND MR GARETH THOMAS MP

8 JANUARY 2008

  Q40  Mr Weir: There is a huge difference between continuing negotiations and agreeing a deal. Given you are talking about a deadline at the end of this year, the American presidential elections are going on until the early part of November. Is the reality that you are not going to get a deal until a new president is sworn in in the early part of next year and they take a decision on whatever the negotiating position taken in the Doha Round is?

  Mr Thomas: I am not going to accept that scenario because the temptation that your scenario presents is that we can all sit back and wait for the next 12 months, that I can concentrate on consumer affairs and perhaps just come in in the mornings.

  Q41  Mr Weir: I am trying to get the reality of the situation. I am not suggesting you do that at all. Everyone supports the Doha agreement providing it is a clean agreement, but given that four years have passed, you have talked a lot about negotiations and possibilities and ifs and buts if this is agreed, but it does not seem to me there is a road map to reach an agreement by the end of this year. The International Development Committee suggested it will be completed and put out of its misery. Do you agree with that situation?

  Mr Thomas: No, I do not agree with that at all. I think you have to look at how previous trade rounds have gone, and previous trade rounds have been very lengthy. The Uruguay Round, for example, was very lengthy. There have been some regional trade agreement discussion that have taken a considerable period of time to conclude as well. Trade negotiations are, by definition, highly complex and do take a considerable length of time to resolve, and with something of the complexity of the Doha deal we should not have been surprised, and I suspect members of the Committee are not surprised, that the deal has taken longer than perhaps some pundits initially suggested it might. I come back to my opening comment in response to your question. We are seeing progress, we believe, in the talks in Geneva and that is why we think it is important that we continue to give strong support to Peter Mandelson, who is obviously negotiating for the European Union, but also why it is important that we continue to have discussions at Prime Ministerial level with Prime Minister's counterparts in the US, in Brazil, India and across the European Union to try to unlock that last flexibility that is necessary to close a deal on the headlines.

  Q42  Mr Weir: Do you believe it will be concluded by the end of this year?

  Mr Thomas: I hope so.

  Q43  Anne Moffat: On India and the EU, will the new trade negotiations between the EU and India distract them from a multi-lateral deal?

  Mr Thomas: I do not think so, is my view. The Indians are engaging very heavily in the discussions in Geneva. Equally, they were very keen that we kicked off negotiations on a regional trade agreement back in June. There have been, I think, now two or three rounds of discussions between the EU and India. India is very keen for an ambitious regional trade agreement. They have said the agreement will be concluded by the end of 2008. We are very much up for a very ambitious agreement between the EU, and India and if it takes a bit more time than the next 12 months to conclude such an ambitious agreement, then we think we should take that time, but our sense is that Kamal Nath, who is the Indian Trade Minister, and his officials, and even government more generally, are up both for completing the Doha Round and completing the RTA discussions with the EU.

  Q44  Anne Moffat: Do you think it might encourage other countries to do the same thing?

  Mr Thomas: Again, I hope so. The EU has got a series of regional trade agreement discussions under way. The one that looks most promising at the moment is with South Korea, but also there are negotiations that being kicked off with the ASEAN block of countries. I suspect we may need to see the EU negotiating individually with specific ASEAN countries rather than with the whole block, for all sorts of reasons, but I think you are right in saying that other countries see the benefit of the EU's market and want to open up their own markets to the expertise that the EU can offer through our businesses and will want to get involved in all sorts of discussions. I wonder if I can add one more thing, Mr Luff. I think, beyond just direct discussions on regional trade agreements, there are also discussions that you can have about some of the non-regulatory barriers that you see in-country—sanitary and phytosanitary standards, differences in understanding about how particular products should be allowed to happen or not—and one of the things that we have welcomed is the Commission's willingness to try to focus on some of those issues alongside wanting to open up new regional trade agreement discussions.

  Q45  Chairman: Is there not a risk that what will happen is, as other countries see the EU entering into bilateral and regional deals, those other countries will decide to enter into their own bilateral and regional deals with third countries' areas, so reducing their capacity to negotiate with the WTO for a multi-lateral deal. So, as the EU drives towards its own regional bilateral agenda, it actually undermines the whole Doha process? I think that was your question, Anne, but I do not think it is the answer you got. You asked a question about the EU's relationship with other countries. I think that was what you wanted to ask.

  Mr Thomas: I think we have to be very clear and are very clear in our discussions within Europe in trying to shape the mandate for Commissioner Mandelson that any regional trade agreement negotiations that we get involved in must supplement and—

  Q46  Chairman: I think again you are avoiding the question.

  Mr Thomas: I am not, I am going to come to your specific question. ----must supplement and support the Doha process. Do I think individual countries are going to stop negotiating Doha in the round because of all these RTAs? No, I do not think they are. I think all the key countries, all the key players and the key blocks of countries within the WTO process are very clear that they want to see a completion for the Doha Round, a completion of these talks, but it would be, I think, a huge mistake for the EU to stop trying to negotiate regional trade agreements because all sorts of other of our competitors are already negotiating regional trade agreements. We have got to absolutely make sure that RTAs that we negotiate can support and supplement and do not undermine the Doha Round, and that is what we seek to make sure happens.

  Q47  Anne Moffat: Thank you Gareth. Unfortunately my next question is a negative one. If Doha fails what can we do to mitigate the fallout? Do we have a Plan B?

  Mr Thomas: I do not think Doha is going to fail. I do think we are going to get a completion to the round. I cannot give the Committee a specific timescale, much as I would like to do so, but, as I have said, we are seeing the progress, and I do not get a sense—

  Q48  Chairman: I thought it was 2008. I thought we had a timescale.

  Mr Thomas: I would like it to be completed by the end of the year. I cannot tell you when it is going to be completed within this year. The sooner the better, I am sure, for everybody's benefit, but all the key players within the negotiations have been clear that they want to the Doha Round to be concluded, so I think to focus on a Plan B at this stage would be an admission of defeat and I see no reason why we should admit defeat.

  Q49  Mr Bailey: Can we continue the theme of the EU trade policy on the Global Europe Trade Strategy which seems to have remarkably little information on the BERR website. How do you think it has developed since it was launched in 2006?

  Mr Thomas: I will obviously have to look at the BERR website, but I think there will be a series of different ways in which the EU has progressed its trade strategy since 2006. The first is by, as we were just discussing, launching a series of new regional trade agreement negotiations—South Korea, India, ASEAN—trying to inject new life into some of those regional trade agreement negotiations that have been ongoing for sometime, such as with the Mercosur block of countries the Euro-Med block of countries and, indeed, also with the Gulf Co-operation Council. The second element I should perhaps flag up, Mr Bailey, is there has been a renewed attempt by the Commission and Member States to co-ordinate much more closely our work on looking at some of the barriers to trade in particular countries. Just as we always face a challenge in making sure that Whitehall departments are working closely together, so the Commission has acknowledged that Member States need to work much more closely with each other and with the Commission to look at what the barriers are in key countries. A series of working groups have been set up in Brussels looking at key focused countries (and they are the obvious ones—the Chinas, the Indias the Russias the Brazils, et cetera) looking at what are the key concerns for European Union businesses within those countries and what are the key blockages to trade that they are facing. For example, Mr Bailey, working groups have been set up to look at issues around vaccines in Japan and textiles and clothing in various Asian markets, sanitary and phytosanitary issues in China, looking at some of the detail behind those blockages to trade, looking at what we can do in country with the regulatory authorities in those countries to unblock some of those barriers. They are not always deliberately in place, sometimes it is a lack of understanding as to what is required. Sometimes they are deliberate, and then you obviously need to confront those directly in face-to-face negotiations. The third element in terms of the EU strategy is there has been a Green Paper published on trade defence instruments, what we do about anti-dumping. Those discussions have been underway for some time. We are expecting the College of Commissioners to give their response to the different submissions that Member States have put in. So there have been a series of ways in which the EU Trade Strategy has been taken forward.

  Q50  Mr Bailey: I can see the benefits of some of the measures that you have outlined. What would your response be to the point made by War on Want which says the EU's trade strategy explicitly favours the interests of European exporters over the development means of the global south? Obviously I have no problem with, shall we say, meeting the needs of EU business exporters; it is the second issue. If in the long-term these needs were prejudicial to the development of other countries, how do you see the policy developing? Is that a fair accusation?

  Mr Thomas: I am not sure I would characterise it in that way in just one sentence. There are, quite clearly, a number of ways in which the world trading system does need to be changed to help developing countries, and that is one of the key reasons why this current round of trade talks was specifically given a development dimension. Equally, we needed to make sure that we are focusing on the needs of EU businesses, particularly our own UK businesses, and we are, but I think you can open up the EU's market to developing countries, and that is in the interests of British consumers and European consumers and British consumers and businesses just as it is in the interests of developing countries to have their access into the EU's markets. I do not think it is an either/or. I do not think if you are helping British business you are damaging the interests of the south. I will give you one example to illustrate that from my, I suppose, previous responsibilities. In many African countries there is often a shortage of finance to help businesses set up, to help existing businesses expand; so if we can encourage our financial service industries to expand more into African nations and developing nations, we in a sense meet the needs of those industries for more finance for their businesses to expand and lift people out of poverty through employment. Equally, at the same time we are helping our own domestic businesses generate more jobs here in the UK too potentially.

  Q51  Mr Bailey: Can I quickly say: do you think there is potential in the context of this strategy for opening up the European market to developing countries?

  Mr Thomas: I think absolutely there is. That is a key element of the EU's position in the Doha round of talks; it was a key part of the discussions during the Economic Partnership Agreements too where we saw the EU putting forward a willingness to offer full duty and quota-free access to its markets for even those countries that are not the poorest countries, the least developed countries, and for some countries like Botswana they are very significant.

  Chairman: We are moving into some of the other areas someone else wants to ask about. Mike Weir wants to ask some questions that directly relate to that in a minute. Can I bring in Julie Kirkbride?

  Q52  Miss Kirkbride: Minister, from what you have said I assume you support the European Union's new approach to free trade agreements. Can you highlight any that the British Government is particularly interested in, what it is that we want to get out of them and what you think the chances of success are?

  Mr Thomas: India and extensive services liberalisation. We want better opportunities for British legal businesses, retail businesses, financial services businesses. That is one particularly important example.

  Q53  Miss Kirkbride: Any others. Any chances of getting that?

  Mr Thomas: I think the chances of getting that in India are quite high. India has said that it wants an ambitious agreement, one that does allow its markets to be opened up. In return it wants to see the EU's markets more opened up to its products. I do not think that is a challenge—

  Q54  Miss Kirkbride: Which products?

  Mr Thomas: Again, some of its services, the market software industry, telecoms, again, some of its legal firms want to be able to do business in a range of EU countries where they cannot operate at the moment. As I say, I do not think what India wants is a particular challenge for the UK, I think it is going to be more of a challenge for some of our EU partners, but I do think there is a significant chance of opening up India's services markets on the basis of the comments we have heard from Indian ministers and their officials to date. Equally, I would not want to suggest to you that the negotiation is going to be easy. Kamal Nath is a formidable negotiator. His officials are very clear as to what they want and what they are willing to concede on. Thus far the discussions are going okay, they are proceeding. We want to concentrate on the quality of what is agreed. That is why we have been careful to say it would be great if we could conclude this agreement by the end of this year, but we think we should focus on getting a good outcome to those negotiations and if that means we roll over into 2009 a little then we should be willing to do that.

  Q55  Miss Kirkbride: If there was a Doha settlement, would any of these individual deals have to be reappraised or unpicked or is that something that has to be specifically borne in mind in whatever is done in the meantime?

  Mr Thomas: It has to be borne in mind. The Commission has a very good idea of what the dynamic is around particular parts of the Doha negotiations and they are obviously able to factor that into the stance they take in particular regional trade agreements. I think it is something we have to keep abreast of and keep understanding the links between the two, but I do not think it is a significant problem.

  Q56  Mr Weir: We have received vocal submissions criticising the recent rush to reach WTO-compatible agreements by the end of last year and, in particular, that the ACP countries have been put under a great deal of pressure to sign up to EPAs to ensure their exports were not disrupted. Would you agree it was a bit of a mess?

  Mr Thomas: I think it was a less smooth process than everybody would have liked, Mr Weir.

  Q57  Chairman: That is a yes!

  Mr Thomas: I think mess is too strong a description of what happened. There were very intensive discussions amongst ourselves, (the EU Member States), as to what we should offer up and they were not easy discussions. Equally, many of the African, Caribbean and Pacific countries had to look at what they wanted to get. For the Caribbean in particular, they wanted to fully realise the benefits of regional integration that the Economic Partnership Agreement offered and that involved some very hard discussions between different countries in the Caribbean. These were extremely complex agreements that have been being negotiated for seven years. I think the suggestion that there was a sudden rush is an unfair characterisation. There was a real deadline because of the waiver in terms of the Cotonou Agreement which had underpinned trade relations between the EU and the ACP up-to-date. That waiver was coming to an end as of 31 December this year. So we did need to get those countries that do not have access to the `Everything but Arms' agreement onto a new agreement otherwise there could have been substantial tariff rises for some of those countries in terms of selling their goods into the European Union.

  Q58  Mr Weir: It seems Doha has a very moveable end date, but this other agreement you mentioned did not. Is there any reason why negotiations could not have continued on these? Christian Aid has been quite vociferous in saying the UK Government has gone back on earlier support given in 2005 by taking up the EU position. What do you say to that?

  Mr Thomas: I think Christian Aid is wrong. We have supported the European Commission in these negotiations, but we have also been pressing the European Commission in a series of ways to show additional flexibility. We have engaged very strongly in support of trying to get substantial changes to the rules of origin package and then sought to protect that from other Member States who wanted to weaken what we were going to be offering developing countries. A number of countries wanted to add further exemptions to the full duty free and quota free offer that was being made to non-LDCs and again we pushed very hard for the existing offer to be maintained. I think to suggest that we simply rolled over and just allowed discussions to carry on and did not engage is a travesty of what actually happened. I believe in general terms market opening is going to be good for all of these countries. What is very clear is that the vast bulk of the trade negotiators and ministers that I spoke to about how EPA discussions were proceeding were very keen to conclude EPAs because they could see the benefits to their own country never mind the need to comply with the WTO deadline. You have said Doha is a moving feast. Could not the EPA discussions have been a moving feast? One of the things we were always pushing for was for the Commission's mandate for the discussions to really change. When the Commission started off they had a mandate that included discussions about goods, about services and about the so-called Singapore issues. We were saying by the end of this year concentrate on getting a goods agreement that is WTO compatible. The Commission came round to our position and stopped talking to the vast bulk of ACP countries about services and the Singapore Issues because they recognised the stance that we had taken was right, that you just needed to concentrate on those issues which were key to providing huge tariff rises and in recognition of the capacity constraints that many ACP countries had.

  Q59  Mr Weir: You mentioned that most countries wanted an EPA and that is true, but there is a difference between wanting an EPA at any cost and wanting an EPA on reasonable terms. You have talked about the interim EPAs. What is the UK's approach going to be for the more comprehensive EPAs that have been promised to take the place of these interim ones?

  Mr Thomas: The first thing we have got to do is to look at the agreements that have been concluded, see whether there are any problems with the interim agreements and then work out how we are going to proceed with different groups of countries and different individual countries on the range of other issues. What is clear is that many countries do want to have a negotiation with the EU on services, on investment, on competition and on procurement and we should be willing to go down that route. One of the reasons why the Department for International Development has given funding to support different groups of countries and negotiated with the European Union is because they asked for our support financially. They recognised that it was in their interests to conclude agreements in these areas because it will help to make the conditions for business to develop in their countries much better than they are at the moment and it might help to attract foreign direct investment into their countries and attract jobs. We need to review how these interim EPAs are going to fall. We need to sit down with individual countries and work out what we want to prioritise for discussions and agree a timescale to take them forward. Some of the people who have engaged with me about EPAs would have been against anything that could have been characterised as an EPA. Economic Partnership Agreements took on a sort of mythology which I do not think they deserved. I think they will offer significant development benefits, particularly to the non-LDCs which you are now going to see being able to supply into the EU market, if they can get buyers, on unrestricted amount of goods. For some countries there are huge opportunities as a result of these agreements.


 
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