Examination of Witnesses (Questions 1
TUESDAY 8 NOVEMBER 2005
Ian Pearson MP, Ms Julia Sutherland and Ms Amanda
Minister, would you like to introduce your team?
Ian Pearson: Yes,
I would be delighted to. On my left I have Amanda Brooks, Director
of Trade Negotiations and Development based at the Department
of Trade and Industry; and on my right I have Julia Sutherland,
who runs my private office.
Thank you very much indeed. Is there anything you would like to
say at the beginning?
Ian Pearson: Just
to emphasise the importance that the UK Government attaches to
the World Trade Organisation talks in Hong Kong in December. We
do want to see real progress being made in December. We want to
see a balanced outcome being achieved and the Doha Round being
closed in 2006 and achieving a pro-development outcome. We are
on record on many, many occasions as stressing the UK's view in
If you read the press, you might get the view that things were
not going all that well. How hopeful are you of reaching a satisfactory
Ian Pearson: We are
at a critical point. This is a huge negotiation and in any sort
of negotiation people will take up positions and then they will
move and the timing of their moving in negotiations will vary
a great deal. We have seen over the last month some real progress,
I think, with the first offer that was made by the United States.
We have also seen two offers made by the EU and we have seen an
offer from the G20. We are optimistic that we can make progress
in Hong Kong in December and we can achieve a successful round.
What do you see as the difficult points?
Ian Pearson: I think
clearly agriculture is the key to unlocking the round. When you
look at the different pillars within the agricultural negotiations
on domestic support and on export support, the major negotiators
are not that far apart. I think it is really in the area of agricultural
market access that there is still quite a way between the different
parties, and that has been the focus of recent debate and negotiations
and I think will continue to be. However, I would also want to
stress the EU's view and indeed the UK's position as well is that
we do need to see a balanced outcome. We need to see concentration
on the other elements of the DDA dossier, on non-agricultural
market access and on services as well. We hope that we can see
progress being made in these areas very shortly.
Q5 Lord Kerr of Kinlochard:
I think we would all very much agree with you, Minister. The difficulty
in a way perhaps is that someand one could cite Brazilseem
to argue that more has to be put on the table by the EU on agriculture
before on these counterpart dossiers anything much is done. How
do you break out of that circle? The EU has made its two moves
on agriculture. Do you think it is now time for a move from the
likes of Brazil?
Ian Pearson: Yes
I do. I think it would be enormously helpful to see a movement
from Brazil, India and other countries when it comes to non-agricultural
market access in particular. I think we should not under-estimate
the significance of the second EU offer. The 38.9 per cent average
tariff reduction offer is higher than the Uruguay Round and is
building on the Uruguay Round as well, so it is a significant
offer that the EU has made. We have been encouraging Brazil, India
and other countries to consider the offer and to say, "Well,
if we are really going to make progress in what is a single undertaking
to deliver a balanced outcome, we need to start seeing some signs
of progress now. I do not speak Portuguese but if you read the
Brazilian newspapers it is quite clear that they have got an offer
on NAMA in their back pocket. There has been extensive discussion
within Brazil on it. We think it is time for them to actually
make some movement and we are actively encouraging them to do
Q6 Lord Cobbold:
Might that be happening in Geneva in the meeting today?
Ian Pearson: Obviously
as we get closer and closer to Hong Kong there is an increasing
pace of meetings taking place. There was a meeting here in London
yesterday. My understanding is that that is being reconvened in
Geneva today. I would certainly like to see progress made at that
meeting. I understand that it is the intention of Pascal Lamy
to actually produce draft texts by round about the middle of this
month and if that is the caseand you do need I think texts
in advance of Hong Kongthen we need some greater clarity
than we have at the moment as to what is going to go into those
texts, so some movement today or very shortly afterwards I think
would be beneficial to the whole talks process.
Q7 Lord Cobbold :
Does the fact of still having to agree the Financial Perspective
make the negotiations easier or more difficult, do you think?
Ian Pearson: I do
not think it makes a significant amount of difference in the sense
that Peter Mandelson and Mariann Fischer Boel have a negotiating
mandate that has been set by the Council of Ministers and they
are negotiating within that mandate at the moment and we firmly
believe that the second EU offer is within the mandate, so the
circumstances do not really arise that there is any read across
to discussions on the future financing of the EU.
Q8 Lord Jordan:
Could you expand a bit on the non-tariff barriers and whether
you believe that there will be any success in this area. Which
ones are proving problematical and why?
Ian Pearson: As you
drive tariffs down then non-tariff barriers become an increasing
cause for concern. We do not expect Hong Kong to actually go into
any great detail about non-tariff barriers and many of those countries
that originally notified non-tariff barriers have since concluded
that they can be discussed and negotiated and addressed more appropriately
through a forum, such as the area of technical barriers to trade.
So it is an area where we do not expect to see substantial progress
in Hong Kong but we think a lot of progress can be made in other
areas. Of course, one person's non-tariff barrier might be another
person's decent labour standards or decent environmental practices,
so there is a whole set of issues there when it comes to non-tariff
barriers that we are happy to discuss, but in some cases it is
better that they are discussed outside of the WTO negotiations
process on the talks.
Q9 Lord Blackwell:
Minister, given what you have said about non-tariff barriers,
how realistic is it to expect significant progress on the services
agenda (where non-tariff barriers are quite important)? If I can
just add to that, in your note here you raise concerns about parallel
plurilateral discussions and multilateral negotiations. If it
is an area where it is difficult to make progress, is there not
the risk that other countries do start going down that route and
unless the UK is flexible in recognising that it may be able to
negotiate a deal that could not be negotiated in Open Plenary
that the UK ends up being left behind on that?
Ian Pearson: We believe
that services is a very important area. 69 per cent of EU industry
will be classified as services, so it is an area where the EU
has a strong concern. Of course, from a UK perspective we have
world-class financial and legal services and we believe that it
would be beneficial to other countries if they opened up their
markets and got some of the expertise that is readily available
in the City of London. Where we are at the moment I am personally
disappointed about the level of services offers that have been
secured so far. You will be aware that the Commission has been
looking at alternative approaches to the request-offer process.
There has been some controversy in that and the UK position is
that we would have been prepared to support reluctantly the Commission
in going down the benchmarking approach when it comes to services,
but we have said very clearly that we do not believe in forcing
countries to liberalise their services and we think the best approach
would be the request-offer process. However, it seems to be a
little bit stalled at the moment. I would hope that out of Hong
Kong in December we could see some sort of agreement that moves
the debate forward on services. The sort of things that I think
might be possible would be to agree another date at which revised
best and final services offers could be secured. It is an area
where we need to continue to do work and it is important for the
EU that we see a balanced outcome to the negotiations. So it is
not just an agricultural roundalthough agriculture is the
key to unlocking a successful conclusion to thatwe do see
progress on services and in NAMA and on trade rules as well.
Q10 Lord Blackwell:
If I could follow up quickly. Given that services, particularly
financial services are more important to the UK than some of our
other EU colleagues, you could imagine a situation where if it
is difficult to make progress there could be a significant interest
in the UK in reaching some kind of way forward with major countriesChina,
India, et ceterathat will take much longer to reach through
the existing process. Is there a point at which the UK would say
we have tried our best but we now have to consider our own interests
in this and try and push the EU into that route?
Ian Pearson: We strongly
believe that the multilateral approach is the best approach. What
we do not want to see is a failure of the Round which would bring
into question the whole WTO system and would, in my view, be likely
to see a further impetus to bilateral free trade agreements. I
think in those circumstances it is the least developed and less
advanced developing countries that lose out and that is not what
the British Government wants to see happen. So we would be very
reluctant to go down that route and we have been strongly supporting
the Commission in focusing its energies on a successful conclusion
to the Doha Round.
Q11 Lord Steinberg:
If I can change the tone a little bit. Everybody recognises that
China is becoming one of the top two trading countries in the
world and in fact speculation exists that they will take over
from the United States some time within the next 20 years as being
the number one power economically, militarily, financially, people
wise, and so on. We have had a lingering problem for many years
about human rights abuses and they just do not seem to go away.
I know that when you are doing a lot of business with a big customer
it becomes very difficult to question their morality in certain
areas. Does the British Government make representations about
human rights abuses in China, how regularly, and would they be
raised during this next series of talks?
Ian Pearson: Yes,
we do raise the issue of human rights at every appropriate opportunity
with the Chinese. The Prime Minister raised the issue of human
rights in September during his visit to China. I have got no doubt
that he will raise the issue of human rights with the Chinese
over the next couple of days. When I visited China in July I raised
human rights issues. The Foreign Secretary has raised them this
year. I spoke in the debate in the House of Commons about the
human rights situation and raised the issue of China there. We
are very clear as a UK government that we have concerns about
human rights abuses in China and we do seek to raise them, as
I say, at every appropriate opportunity. Could I just say something
about China and indeed India and Asia and its significance for
the future because I believe China and India and the Asia region
have the ability to transform our world over the next 20 years.
The way I see it is if the UK was the first nation to go through
the industrial revolution and the 19th Century was Britain's,
you can plausibly argue that the 20th Century belonged to the
United States in terms of its economic power, but I firmly believe
that the 21st Century will belong to Asia, and China and India
in particular. We will also see strongly growing economies throughout
Asia. That presents an enormous challenge in trade terms but tremendous
opportunities, I believe, for EU and UK businesses. It is one
of the reasons why these trade talks are very important. Trade
rounds do not come round every few minutes; they take sometimes,
as everybody's experience with the Uruguay Round proved, a long
time. So we need to bear in mind the growing economic strength
of China and India and to a lesser extent Brazil and South Africa
when we are engaged in negotiations as part of these trade talks.
Q12 Lord Steinberg:
Chairman, if I can come back. I am pleased to note that representations
are continually being made but would you agree with me that as
China becomes more powerful the possibility of persuasion lessens
because of the dependence the rest of the world has on their efforts,
and would you say that the lead that the Government has taken
in relation to trying to help the African countries escape from
poverty, that whilst it is good to make protestations and so on
are there not some practical steps that could be taken that would
make China realise that the rest of the world is extremely unhappy
with the human rights abuse?
Ian Pearson: I would
like to say that you talk about poverty and it is important to
recognise that over the last 20 years China has taken something
like one-third of a billion people out of extreme poverty, largely
as a result of its trade performance. Clearly we want to improve
the lives of Chinese workers, we do want to address human rights
abuses, but we believe that the way forward is to engage with
China and so support its integration into the world trading system
rather than limit it through trade and investment. I think that
that is the fundamentally right approach to take.
Q13 Lord Kerr of Kinlochard:
Yes. Disagreeing slightly with Lord Steinberg, it seems to me
that economic autarchy is a licence to run your internal affairs
without much concern for world opinion. Take, for example, Russiahuman
rights abuses in the Soviet Union were, as we all know now, very
severe. Contact including through trade but also through the CSCE
Basket One process of human contact had an effect, as we now know.
I believe that the more open the Chinese economy becomes, the
more liberal Chinese society is likely to become. I do not think
outside influence diminishes as contacts grow; I think it increases.
On your point about India, Minister, I very much agree with you;
India is becoming a service economy. Linking three of your points,
I mentioned Brazil but is not India the place where one could
expect to see a real interest in a move on services? Is it not
surprising that the Indians seem reluctant to move? Would not
a move by the Indians be most likely to deal with the problem
that Lord Blackwell has drawn attention to?
Ian Pearson: Can
I support your view on the development process? I do think that
there are strongly positive aspects to China's development. Its
further development can help take people out of poverty and can
help deliver the progress on human rights issues which we all
want to see. But we will not forget those human rights issues
and we will continue to raise them as a UK Government, including
through the regular human rights dialogue process that we have.
We have that process with other countries such as Russia, as was
mentioned. You are right as well to emphasise the interests that
India has when it comes to services. I think that if you talk
to Kamal Nath, the Indian Trade Minister, he will tell you very
clearly about the benefits of Indian services companies and what
they have to offer and that he wants to see progress on the services
efforts at the negotiations. He will also tell you that when it
comes to non-agricultural market access that he is not particularly
worried about opening up markets to the EU or indeed the United
States but he is concerned about opening up markets to China.
These are some of the dynamics of the negotiations that are taking
place at the moment, which just gives you a flavour of how complex
some of these are.
What you have just mentioned there is an interesting point. What
would India have to gain from China to make a deal possible? I
know it is not a bilateral deal but how would the Chinese position
become more acceptable to India?
Ian Pearson: My reading
of the situationand let me emphasise it is my reading of
the situation and I cannot speak obviously for the Indian Government
and their negotiating positionis that India has offensive
interests when it comes to services. It would like to be able
to see substantial services liberalisation. It believes that it
would benefit by selling services into the EU, the United States
and indeed, I believe, China as well. India has defensive interests
when it comes to industrial goods particularly relating to China
but, as I say, not particularly relating to the EU or indeed the
United States. It has those concerns for some fairly obvious reasons,
I think, when you look at the Indian economy and its relative
proximity to China, and given the competitive nature of industrial
goods in China at the moment.
Q15 Lord Blackwell:
That does go back to the argument I was making that if India could
see that it was in its interests to have an arrangement to open
up trade with Europe but did not want to do it in a framework
that exposed itself to China, both the EU and India could benefit
from doing that and yet within a total negotiation it may not
be a possible outcome. I just wonder if there is not a point where
we need to recognise that the suboptimal that is achievable may
be better than the optimal that is not achievable?
Ian Pearson: I think
we need to be very careful that the best does not drive out the
good and that we actually achieve a good outcome to the Doha Round.
You are right, you can envisage specific areas where bilateral
agreements might achieve more than a multilateral agreement. But
I still believe fundamentally in the importance of having a multilateral
agreement across 148 member countries: this has got to be the
best way forward in terms of producing a pro-development outcome.
This is what was envisaged at the start of this round and we are
very keen as a UK Government to make sure that we deliver on these
development objectives that were set right back in Doha.
Q16 Lord Cobbold:
Are the American and European negotiating positions now more or
less in harmony? There was a time when there were worries that
the dispute between Boeing and Airbus might poison the run-up
to the Hong Kong meeting?
Ian Pearson: I do
not believe the dispute that is currently taking place between
Boeing and Airbus has any influence at all on the WTO negotiations.
I think we are mature and grown-up enough as an EU to be able
to recognise that that is in a different place and is being dealt
with in a different way to the negotiations. I think there is
quite a good level of personal chemistry between the key negotiators,
not just the EU and the United States but also with India and
Brazil as well. We are not in the same place when it comes to
agricultural market access when it comes to the United States.
There is absolutely no doubt about that. There is an average tariff
reduction in the EU proposal of 38.9 per cent, the G20 are asking
us for 54 per cent and the Americans are asking for 60 per cent.
So there is a significant gap at the moment, which is why there
have been such intensive negotiations over the last few days.
The way you have described it means that it is very problematic
whether there is going to be a successful outcome given the different
expectations on the agricultural access side by the different
Ian Pearson: This
really gets to the nub of it, does it not? The EU has made its
second offer. It is very difficult to see
It cannot make a better one.
Ian Pearson: It is
very difficult to see it can make a better one within the mandate
it has agreed. There are some countries within the EU that believe
the Commission may already have exceeded its mandate. We emphatically
do not believe that. The last time this was discussed at the General
Affairs Council there was support for the Commission in its approach
and them acting within their mandate.
Q19 Lord Steinberg:
That answers that question!
Ian Pearson: I wanted
to re-emphasise as well that the average 38.9 per cent reduction
was higher than was achieved in the Uruguay Round and it is, I
believe, a deal worth having. I would like to see us making more
progress when it comes to the least developed countries and them
securing duty-free and quota-free access. I do believe that we
should be able to get developed countries and the more advanced
developing countries to sign up to making sure that there is a
round for free for the LDCs and to kick the door open so that
LDCs can trade without duties or quotas in world markets. That
was envisaged as part of the July 2004 Framework Agreement. It
has not been delivered yet. I would like to see it being delivered
as part of the negotiations over the next few weeks.