Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 20 - 24)


Ian Pearson MP, Ms Julia Sutherland and Ms Amanda Brooks

  Q20  Lord Blackwell: We know that obviously for better or worse the UK's negotiating position is represented through the EU and we know the UK has been pushing, for example, for the EU to be as expansive as possible on agricultural reform and the impact of that, but I wondered if you could highlight were there any other areas where the UK's ideal negotiating position would have been different from where the EU is currently standing and in particular were there any bold initiatives that you would favour that might still be possible to be taken on board by the EU?

  Ian Pearson: I think the EU has been one of the countries that has been at the forefront in encouraging bold steps to be taken right throughout the negotiations. I would like to highlight CAP reform as being one of the areas where the UK at a very early stage took an advanced position. I still believe that the agreement that we got on decoupling as part of the Mid-Term Review of the Common Agricultural Policy is of enormous benefit in WTO terms. I do not think that that benefit has actually been recognised sufficiently by other countries to the negotiations. The way I like to see it is the Mid-Term review is a slow burner and we still have not really seen the economic effects of the decision to break the link between agricultural production and subsidy. In my view, we are likely to see significant drops in production levels in EU agriculture over the next few years as a result of breaking that link when farmers understand that they will get payments regardless of how much they produce. I think that is still feeding into their business plans at the moment. That is a really important area and the second important area has been on the agreement to phase out export subsidies which is within the EU mandate. We have pushed in the UK for it to be a date of 2010. We have lobbied hard within the EU to get agreement on 2010 as a date. It has not been agreed so far by all the EU Member States but within the mandate there is an agreement to phase out agricultural export subsidies as part of an overall package, and obviously the American offer also included the date of 2010, so I think the British position has been getting some traction in other quarters, and it is right to do so. The other thing that we pushed for very strongly and are continuing to push for very strongly is not to force trade liberalisation on developing countries. We do not believe that that is the right way to go. We believe that countries ought to have the opportunity to be able to sequence trade reform as part of their poverty reduction strategies. We have argued our corner very strongly within Europe. Can I just say one other thing. As the UK we would probably be prepared to sign up to an unbalanced outcome to Doha that saw the EU opening up its agricultural markets and not particularly expecting anything back in return because we do not have a mercantilist approach to these negotiations. I do not think there is any other country in Europe that would be prepared to sign up to such a deal and it shows how we have a distinctive flavour and approach to trade negotiations. Obviously with the Presidency of the European Union at the moment our major task is not to pursue our own interests, it is very much to try and ensure that there is consensus. The key point is that it does require all 25 EU Member States to agree if we are going to get the final agreement as part of the single undertaking process.

  Q21  Lord Jordan: I believe the UK has a good record on these trade negotiations. Perhaps one of the worst possible outcomes would be for the UK to make an offer that it cannot deliver on behalf of Europe. There is some talk now that people like Mandelson are saying things that a lot of people in Europe are not happy with as we go towards this set of negotiations. The question I wanted to home in on was have you got any specific indications that the less developed countries are prepared to make any real progress? India has been mentioned. It is quite clear that India, along with many others, want to make progress on the things they want to expand on and ring-fence their weaknesses. Do you have any indications that there will be a breakthrough in that area? You have talked about Brazil possibly having something in its back pocket. Is there more than just that that gives you some optimism that this particular round is going to see a breakthrough because, quite frankly, certainly the last five to almost ten years have been pretty negative?

  Ian Pearson: Let me say in response that I think there are number of areas that I want to cover. Firstly, when it comes to the least developed countries, which are recognised as a category and when it comes to weak and vulnerable countries as well, I do not see any problem and the EU does not see any problem in allowing duty-free and quota-free access to EU markets. That has been our position in the negotiations and we would like to get the United States and other countries all signed up to that. When I was talking about us wanting the more advanced developing countries to sign up to this, I just want to re-emphasise that because I believe that should be possible and would be a tremendous opportunity for those least developed countries. When it comes to China, when it comes to India and other countries, we have a category of "developing countries" which includes countries at very different stages of development. In the case of China and India these are two countries that are going to become world economic superpowers over the next ten or 15 years if not sooner. I do not think it is possible that you can actually start to say let's have new categories and some developing countries are more developed than others. That will not wash. However, I do not think it is unreasonable to expect China and India to do more as part of the negotiations, to do more when it comes to services, to do more when it comes to opening up their markets to the least developed countries. We would certainly from the UK perspective want to encourage them to do so.

  Q22  Lord Kerr of Kinlochard: I applaud you for attacking mercantilism! But of course we, I imagine, still feel that in regard to market access into Europe in products like bananas or sugar or whatever, our Commonwealth friends under the old Convention think these preferential arrangements should not be phased out too fast. How do you square that circle in the negotiation now? A general liberal position but a desire that the Windward Islands and our East African friends should not suffer too strong a cold wind too soon?

  Ian Pearson: It is difficult area and there is no denying that. Clearly, the further you reduce tariffs, when it comes to countries that have preferential arrangements at the moment you will see an erosion of those preferences, and preference erosion, I know, is of significant concern to a number of developing countries, particularly ACP countries. I do not think the response is to say, "Let's not cut tariffs too much then." I think the right response is to find transition mechanisms to help countries that will see that preference erosion taking place as a result of freeing up markets more generally. When it comes to areas like sugar, the Agricultural Council will be discussing a sugar reform package at the end of this month. A package of support is also being discussed separately that will provide assistance to countries during the transition process. I think that is the right approach. It surely cannot be right to say let us keep our tariffs higher because we are giving preference to a certain number of least developed and weak and vulnerable countries? It has got to be the right approach to try and bring down tariff barriers as far as we sensibly can. In the United Kingdom we have a long history of being free traders and supporting free trade (with one or two notable exceptions during our history as well, it must be said!) Instinctively it is right for the UK but we believe right for Europe as well that we should get to a situation where we have markets that are far more open than they are today, and whether it be for agriculture, whether it be for industrial goods or whether it be for services, we think there are benefits from world trade. The one statistic that I like to quote is that if Africa could secure a one per cent increase in its share of world trade that would account for seven times more than all the world aid that goes to that continent. That shows the opportunity that is there if we can get a deal that will, as I say, kick open the door for the least developed countries. When you put that together with the aid package that we have supported, what we are doing on debt relief, what we are doing through the Department of International Development to help the infrastructure of developing countries so they can take advantage of the opportunity of free trade, when you put those all together, I think that offers a way out of poverty through trade, which is something that the UK Government believes fundamentally in and we want to see progress being made on.

  Chairman: Any further questions?

  Q23  Lord Jordan: Could you give us one or two of the specifics that you believe are on the table now that would lead you to think that there will be a breakthrough rather than another breakdown at this particular set of talks?

  Ian Pearson: Pascal Lamy I think used the phrase that he wants to get "two-thirds of the job done" by Hong Kong. I think what we mean by that is some text which will have quite a few square brackets in but some basic agreement on what they call modalities. I would like to be able to see some agreement on agricultural domestic support, where we are in the same ball-park, on market access, where we are quite a way apart at the moment but we have to agree, I think, on a common level of ambition. I would like to be able to see agreement on a date for ending export subsidies. That might be difficult to agree in Hong Kong but we ought to have a go at that. On non-agricultural market access I would like to agree an approach. I think there is a growing consensus about what is called the Swiss formula—and I apologise for some of the information that I provided in my briefing to the Committee in terms of the equations that are used in this—and if we can get agreement on the Swiss Formula with one or two coefficients and then start to talk about what those coefficients are, then there is real progress possible there. When it comes to services, as I say, if we can agree on services an approach to go forward in terms of a timetable for further revised offers, then I think that would be regarded, in my view, as being substantial progress. I think on trade rules as well there has been a lot of good work that has been going on and I think that can be moved forward as well in Hong Kong.

  Q24  Chairman: Thank you very much, Minister. Thank you for the full way in which you have answered our questions.

  Ian Pearson: Can I just thank the Committee. It is always enjoyable to discuss trade matters. It is a hugely complicated undertaking but we are doing all we can as the UK and indeed as the Presidency of the EU to see a successful outcome to the Doha round. Thank you.

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