Examination of Witnesses (Questions 120-129)
Dr Péter Balas and Mr Jean Charles Van Eeckhaute
23 JUNE 2008
Q120 Lord Woolmer of Leeds: Taking
agriculture, industry and services, this sounds as if in the Doha
Round it is really the other countries who are giving more up
and we are offering agriculture but we want industrial concessions
and service industry concessions. Is that fair?
Dr Balas: If I look at the expected new
trade opportunities created by the Round, I think that most new
trade will come in agriculture. New trade import opportunities
will be more limited in industry and services, but much more consolidation.
Chairman: Thank you very much. I would like
to go on to agriculture and oil and food products with Lord Maclennan.
Q121 Lord Maclennan of Rogart: If
I may just latch on to that point that you made. Do you think
that what has been agreed so far, or what is looking like being
agreed in the agricultural sphere, can be parked as an achievement,
an agreement, without balancing action on the other fronts?
Dr Balas: No, it is impossible, agricultural
Member States will never accept it.
Q122 Lord Maclennan of Rogart: So
what has been agreed is not good for everyone?
Dr Balas: I was speaking about 27 Member
States of the EU. There is a very fine balance among various interests
and positions. There are agricultural Member States who are not
happy to see any liberalisation to start with, market opening
or reduction of subsidies, but they could live with it if, on
the one hand, the Member States that have a major interest in
industry and services could see their own interests being fulfilled.
If I think about a country like France, which has a very strong
agricultural interest, at the same it also has industrial and
services interests. Based on a balanced deal there is a chance
to sell an agricultural liberalisation. Just agriculture is not
saleable.
Q123 Lord Maclennan of Rogart: What
has been the impact, if any, so far of the sharp increase in oil
prices, commodity prices, upon the negotiations on agriculture,
both in respect of developed countries and developing countries?
Dr Balas: Historically, this could be
a rare occasion for having an ambitious agricultural deal based
on the present market conditions. If there was a time when a little
subsidisation was needed, this is it. The EU is not giving export
subsidies for the overproduction because it is simply not needed.
Even if farmers grumble, because they are farmers, and this is
their job, they are doing very well, thank you very much. If you
look at it objectively the circumstances are really good. However,
politics come into it, and I referred to the US Farm Bill where
lobbying interests proved to be stronger than the intention of
the Administration to have a similar reform as the EU had under
their Common Agricultural Policy. The present Farm Bill, to put
it politely, is not a reformist Farm Bill at all, it is basically
business as usual, the same type of politics and benefits that
was the case during the previous Farm Bill. Another interesting
element is that the value of agriculture market opening is somewhat
diminished. Those agricultural exporters who look in a short-sighted,
short-term manner at their present world farm market say, "We
have a problem meeting demand as it is. Some countries like Argentina
and others even apply export restrictions and export taxes to
stop exports going out too cheaply to depress domestic prices",
so they claim that under the present circumstances they feel even
less compelled to give major access to industrial products. This
is one possible effect of the food prices, but overall I think
responsible governments everywhere should use this opportunity
to undertake major reforms and get something in return for it
as others who are doing the same and opening up markets across
the board.
Q124 Lord Maclennan of Rogart: In
the case of the poorest developing countries where food shortages
may be apprehended following this rise because of the attraction
of the export markets, what response would you see from them in
this Round?
Dr Balas: The first response is that
the poorest countries are unfortunately in the worst situation
because they are hit in parallel by fuel and food prices with
very little to rely on. There are short-term measures which, irrespective
of the Doha Round, the EU and other responsible countries could
and should do: stepping up Food Aid, helping them to foot the
import bills. It is also clear that when it comes to poverty reduction
then liberalisation in developing countries', agricultural sectors,
will be as important as liberalisation of developed countries'
agricultural markets. Countries like India, for instance, put
their emphasis on what developed countries do and this is an exclusive
interest while they maintain defensive positions under the Doha
Round when it comes to agriculture. I recently saw some analysis
which underpinned the view that while developing countries' agricultural
liberalisation is very important and it is a basic part of the
deal, developing countries should also liberalise in order to
deal with poverty reduction. Liberalised agricultural markets
give a boost to efficient producers to step up their production
and thereby, at least in the medium-term, deal with their supply
side shortages of food.
Q125 Chairman: Thank you very much,
that is very clear. I think you really told us that if through
no fault of the EU the Doha Round stalls or fails, probably not
until the autumn, that you then see the way forward as bilateral
agreements. Is this very much faute de mieux or do you
think they work quite well?
Dr Balas: I think it is faute de mieux
because there is no question that multilateral liberalisation
is the best, but still it is better than having no liberalisation
at all. There might also be attempts to have plurilateral agreements
among interested companies, but based on the experiences of the
previous period I feel that these plurilateral agreements would
be mostly among developed countries, or a few advanced developing
countries. So far developing countries with large emerging economies
have not shown very much interest in going into plurilateral agreements.
Q126 Chairman: Your view would apply
also to the so-called regional agreements?
Dr Balas: When I speak about preferential
agreements, these are bilateral or regional preferential agreements,
yes.
Q127 Lord Woolmer of Leeds: When
you talked about the consequences of the breakdown of Doha you
said there would be a number of developing countries who would
be disappointed because they expect significant benefits. Can
you give us examples of the kind of country you have got in mind
because the average citizen prefers to understand which countries
they are talking about. Who are likely to be concerned if Doha
breaks down?
Dr Balas: Basically developing countries
which are competitive in agriculture or industry, or both, because
they would lose out on new export opportunities. It is our impression
in the Commission that Brazil would like to see a Round on terms
which are acceptable to themselves because they are perhaps the
most significant efficient agricultural exporter, so they would
lose a lot and they look on a longer term basis than is the case
with a country like Argentina which seems to be very focused on
what is the situation currently.
Q128 Lord Woolmer of Leeds: One witness
said to us that countries like Brazil do not think the Doha Round
goals are ambitious enough and they would not be too worried if
it did not go forward.
Dr Balas: I think Brazil thinks the agricultural
negotiations are not ambitious enough but the NAMA negotiations
are too ambitious for their liking, but that is normal. China,
without question, would be the single major beneficiary from a
NAMA outcome and yet China seems to be more defensive. They claim
that they have huge problems in digesting the effects of their
WTO accession and the liberalisation undertaken. Without question,
it is true that China's import protection is much lower than is
the case with comparable large developing country economies so
they feel there is a lack of balance. In our view at least they
do not show the kind of ambition which objectively should be there
and we do not see that they are putting enough weight behind having
a successful Round.
Q129 Lord Kerr of Kinlochard: Is
that not partly because they do not need anything to change, they
are doing extremely well under the present rules of the game,
they are a status quo power now?
Dr Balas: China has fully bound tariffs
unlike other developing countries which means every tariff cut,
as is the case for the EU and US, counts and it would be a real
cut in their protection. As they have an average industrial tariff
level of seven per cent they think these are exempt from ambitious
commitments under the Doha Round and for better or worse they
are more defensive because some of their sensitive industries
might be affected. To be frank, I do not think that is the case
because they seem to be competitive across the board.
Chairman: Thank you very much. Dr Balas, I feel
we have taken enough of your time. It was very good of you to
see us and you have made a lot of things clear that were floating
about in our minds. Thank you very much indeed.
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