Examination of Witnesses (Questions 160-175)
Ms Andra Koke, Mr Gareth Steel, Mr Douglas Brew and
Mr Jean Charles Van Eeckhaute
23 JUNE 2008
Q160 Lord Maclennan of Rogart: I
wonder if you could give us an indication about the progress on
Economic Partnership Agreements. There is some indication that
at least in Africa it has been a bit spotty with not the kind
of regional agreements that were apparently being aspired to.
Mr Brew: In the Caribbean we have a very
good and very high benchmark for the kind of agreement that we
would be looking for. It has got some very ambitious and very,
very generous development clauses in it. We were not able to get
that far in the other regions. The Pacific is a very unique region
because we have extremely limited trade with the vast majority
of the people there, scattered small islands, and they do not
have the same regional integration view of the world. Africa suffered
precisely from this problem, there was a division between least
developed and developing countries and the time pressure on the
negotiations came from the threat from the WTO of legal action
against their trade regime which the least developed countries
did not feel was fair. and in that atmosphere it was enormously
difficult to bring people round the table with a single objective.
Correct, we certainly did not get as far as we would have liked
to have seen nor where our partners on the African side would
have liked to have got. What we did get to was a far better platform
and one of the biggest calls from the ACP side was that they were
not ready, they needed a bit of extra time to negotiate and they
wanted to see the end of any threat or external pressure. They
have got that. We have everybody who wants it and needs it pretty
well on a duty-free, quota-free access regime, both least developed
and developing. We have got the ministerial level and everybody
says they are still at the table. Negotiations are moving. We
have got a list of concerns on the table and we have the ability
to sit down and discuss them free from what was a very poisonous
atmosphere towards the end of last year. Where and exactly how
far we are going to get is precisely an issue of negotiation.
It is up to both sides now to determine the level of ambition.
One thing is clear, that we are not in the game of pressing any
region into commitments they are unable or unwilling to accept.
We all know that it is simply not realistic for very poor countries
to start to take on the kind of extensive services commitments
that you see in the Caribbean, so we will need a different kind
of approach. We are now in that ground of working our way through
the issues and there are positive signals, positive engagements
in the different regions. Over the next year or so is when we
will start to see where the landing zone is for these.
Q161 Lord Maclennan of Rogart: Can
you give us any global indication of the economic impact of those
partnership agreements on trade costs?
Mr Brew: It depends how you define all
the trade costs. If you have a genuine regional agreement then
you will cut the costs of doing trade substantially. Cargoes are
sitting in the major African ports 20/30 days before they are
moving, they are having to cross 15/16 separate permitting processes
and trade is being badly held up. The kind of vision that we have
of the way EPAs will work will go a long way to helping to cut
that down. It will certainly make trade an awful lot easier both
within the regions and between the regions and Europe. Our big
goal in terms of the economic costs is that we have been in a
situation where for over 30 years we have seen a continual decline
in the share of ACP trade and a continuing concentration of that
trade in primary unprocessed commodities, and reversing that and
getting value added processing for economic development in the
region is where the main economic benefits of this lie.
Q162 Lord Maclennan of Rogart: Some
of the, I do not know whether it is fair to call them holes but
in Africa a country like Nigeria has not been participating in
this, I understand, and that does make it more difficult to achieve.
What can we in the Union do to push this process forward in the
sort of timeframe you might have in mind?
Mr Brew: In terms of the question, in
a country like Nigeria it is very much a political question. It
is continual encouragement to those countries to engage within
the region, because this is very much a regional vision which
we will be following within the ACP regions, to send the message
that Europe is there for the long-term, we do not see this as
a one-off signing, we see this as a 15-20 year process, that we
are there with our development programmes to make sure we do not
only provide the trade agreement but we are there to make sure
that the rest of the measures which genuinely make trade work
are there in place.
Q163 Chairman: We are rather grimly
asking everybody what happens if the Doha Round fails. If it fails,
what does it do and what can be saved, what can go on being done
in the event of a formal end to the Doha Round?
Ms Koke: That is certainly not a cheerful
perspective or scenario to play out in our minds but, at the same
time, while the Commission believes that developing trade at a
multilateral level is the most efficient for all parties involved,
it is a pretty slow process, as we can see, and we can also see
it is a quite uncertain process. We can look at the other levels
which we can do and where we are more in control of obtaining
a result, a certain outcome, and that is on the bilateral or regional
agreements. The Commission is now working on autonomous trade
preferences which are not only tariff preferences but which would
be seen as an element of a larger trade and development policy
where development is linked also to autonomous trade preferences.
That is ongoing work. However, looking at the preferences at the
multilateral level, it is not only north/south trade which is
important to be liberalised or developed but also south/south
trade which is picking up and gaining more and more of a share
of global trade. Secondly, that is also where barriers exist,
both tariff and non-tariff barriers, as was mentioned, to a much
higher degree than in north/south trade. That is where we see
multilateral trade liberalisation and trade facilitation will
be more beneficial than bilateral, regional or even autonomous.
Q164 Lord Kerr of Kinlochard: So
we would favour regional free trade areas?
Ms Koke: I do not see any harm in that.
Whether it is something the Commission can do or achieve, that
is another question. As part of the EPA negotiations that will
be one of the directions we move towards.
Q165 Chairman: In the course of long,
drawn-out Doha negotiations quite a lot of things were taken off
the table in Singapore. Did we make a mistake there? Would it
have been helpful particularly to the less developed and developing
countries to go on with the Singapore agenda? I am thinking of
things like IP and investment protection.
Mr Brew: Yes, it would have been good
for developing countries to keep those on the agenda.
Q166 Chairman: We thought so, we
just wanted to clarify.
Mr Van Eeckhaute: The real question is
did we make a mistake in the very context of the WTO negotiations
as they were going on at that time. At that time in the context
of the WTO we had no choice because, as we said before, the WTO
is a democratic organisation and if there is a majority, and we
are talking about a majority of the members, who do not want an
issue on the agenda and if there are those who think if it is
on the agenda a price should be paid for this that is not a real
price or cannot be calculated then we have no choice but to withdraw
the issue. It depends how you see it in the context of the negotiations.
In an overall context we were probably right to say these issues
are the future of trade policy because, as was rightly pointed
out, tariffs, et cetera, become less and less important. The point
is that the context of the WTO did not allow us to pursue this,
so from that perspective it was not a mistake.
Mr Brew: I did not phrase my answer perhaps
in the most correct way.
Mr Van Eeckhaute: No, you were right.
Mr Brew: The international community,
I believe, made an error in taking this decision.
Mr Van Eeckhaute: Absolutely. I know
that was what you meant.
Q167 Chairman: I suppose this is
really in the context of in the event that this Round simply fails,
where does that leave the WTO? What can they do? We fished around
and thought perhaps they could take some of the Singapore issues
which are not the non-tariff issues.
Ms Koke: That is also a question about
the WTO with all the international community represented there.
As I say, I think the Singapore issues will be supported more
globally once the developing countries realise that once they
develop productive capacity and are producing more value added
in their countries they will see that those issues are something
which are really important for them and then we can resume our
discussion on those issues.
Q168 Lord Woolmer of Leeds: Some,
I would not say critics of the European Union, critics of the
richer countries, often say in EPAs that deal with some of the
smaller and weaker and least developed countries in the world
they have got the least ability to negotiate and are suspicious
of whether these are even-handed arrangements. What would be your
answer to those kinds of critics?
Mr Brew: My answer would be, yes, these
are countries with very low capacity to engage and that is why
we have provided them with extensive support to engage for which
we do not see the results. We provide studies which they have
access to and we do not, we fund their attendance according to
their schedules when they want to come and we are very, very conscious
of it. The real question that is being assumed underneath this
is that there is a strong commercial interest or some offensive
interest of the Commission that is leading us to push these agreements
forward, and there is not. We trade more with Switzerland than
we do with the whole of the ACP put together. We trade more with
South Korea than we do with the rest of sub-Saharan Africa. We
have six desks compared to one for China. We would not allocate
that if we had commercial interest. Similarly, the markets are
just not small enough. We need to look at the industries. We would
love to have industries coming in talking about offensive interests
in the ACP, but the only industries I have ever had come and talk
to me are interests concerned about their imports from the ACP
into Europe being sustained. A lot of this is around that word
"suspicion". Yes, it is an area where we are treading
very carefully and one reason we are in that situation now is
we took that step of agreeing interim agreements, even though
they are not perfect, in order to provide the extra time and space
that these countries need.
Q169 Lord Woolmer of Leeds: China
is putting a lot of effort into Africa. How would you compare
the Chinese approach to sustainable development in their relations
with countries in Africa with the European Union's approach?
Mr Brew: I will probably hand most of
that over to Gareth. These things have to be placed very, very
much in context, that although China is very much more engaged
in Africa, it is concentrated in a smaller number of countries
and very heavily in a specific number of sectors and through state-owned
trading entities which affects how it operates. It has also got
very different political operations, a very, very small aid programme
relative to us, and the whole context in which it operates is
miniscule compared to the European Union. The context is very
different in which they operate and the industries are at a very
different operating stage, they operate on far slimmer margins,
and there are a number of questions over how sustainable that
is and over time they will find themselves, as they recently did
in a number of countries, drawn into the same kinds of debates
about the role of foreign companies inside an African context
that thus far they have been by and large insulated from. We have
completely different economic trade and development relationships
framing the way we operate.
Mr Steel: I do not think I have much
to add to what Douglas has said. There is a slight definitional
question hovering over all of this in terms of development issues
and sustainable development. Development in the sense of bringing
those countries on, economic development, is part of a larger
picture of sustainable development in our book. When we talk to
the Chinese about sustainable development issues we have a different
definitional problem because they tend to see it very strongly
in environmental only terms, they have environment blinkers on,
which is quite widespread and obviously it is a very big component.
I would say that the Chinese are becoming very sensitised themselves
to environmental issues and slowly and surely this percolates
through to their dealings with developing countries where obviously
they are not starting from the same place as us. It is also true
to say that the Chinese would like to limit the term "sustainable
development" to its environmental sides when talking to the
European Union and there are openings also in China's own terms,
talk of "harmonious society", which link in a little
bit to the social aspects of sustainable development.
Ms Koke: I would like to share my observations.
Recently at the UNCTAD Conference in Ghana there was a side event
which was entirely devoted to trade between Africa and emerging
economies. Surprisingly, China was not present at that meeting
at all. However, Brazil, India, Russia and Kazakhstan were there
sharing their experiences in how trade has developed and it was
demonstrated that there have been notable increases. The most
interesting part of that was the reaction from the African participants
who were listening to these presentations and were very unhappy.
They said the trade increases are only on account of the exports
of raw materials and do not do much to the development of those
countries. Emerging countries, particularly Russia, responded
what were the trade and development aspects they could bring to
the African countries rather than simply going and increasing
trade in raw materials and minerals. Those are my observations
that I have heard and noticed.
Q170 Chairman: We were discussing
anti-dumping measures and trade protection measures. There have
not been all that many anti-dumping cases but we wondered whether,
in fact, the anti-dumping measures that are allowed under the
last regime have had an inadvertent impact on less developed countries?
Do we know anything about it, or does it only really hit the developing
countries?
Mr Van Eeckhaute: Most of the measures
we do take are mostly vis-a"-vis emerging economies. I do
not know whether we have—
Mr Brew: We have not ever taken an action
against the ACP countries.
Q171 Lord Kerr of Kinlochard: Have
they started actually manufacturing something?
Mr Brew: I think they have got so far
to go before there is any chance of them coming close to taking
on the Asian manufacturing economies that it would be extremely
unlikely in my view. It would probably be a good indicator of
a successful development programme if we felt that they were a
big enough risk that we would take an anti-dumping action.
Q172 Chairman: I am glad to know.
When you think about it, it sounds like the sort of thing that
is very damaging to a less developed country but, as you say,
they have not got there.
Mr Van Eeckhaute: Even if we had a complaint
we would really put everything in the balance.
Q173 Lord Kerr of Kinlochard: Can
I ask a very simple question. Was it a good idea to call this
Round a "Development Round"?
Ms Koke: It is a question of intentions.
Mr Van Eeckhaute: It was the only thing
that we could do given the negotiating dynamics and politics at
the time when it was launched. I spoke earlier about what happened
in Seattle where there was this strong outcry from the poorest
developing countries saying, "What is in it for us? Do we
really count in this system?" The question is whether we
should not have made very clear at the beginning what we meant
by this because the term "Development Round" has so
many interpretations that it is a problem. It is a difficult question.
The jury is out on that.
Q174 Lord Woolmer of Leeds: When
free trade areas are negotiated with some of the bigger players,
quite clearly that could have knock-on effects that damage some
of the least developed countries, dealing with India, the effect
on Bangladesh, and so on. Where do you come into that? Where do
your sustainable development interests fit in with people who
see the possibility of an FTA but you can see problems of knock-on
effects? How does that get dealt with within the Commission?
Mr Steel: How that principally gets dealt
with is through trade sustainability impact assessments which
have to be conducted for every trade negotiation and we look at
the impacts. It is true principally of the two regions concerned,
but they do indeed look at other repercussions.
Q175 Lord Woolmer of Leeds: Having
looked at them, what can be done about it?
Mr Steel: That is often raised about
SIAs. The point of SIAs is to be available for negotiators even
before the thing is agreed, so it is not just a matter of wringing
hands after the event, the negotiators can take those considerations
into account and back off if they are pushing something which
is clearly going to have a deleterious effect or, conversely,
to identify accompanying measures that would help palliate the
effect, cushion the effect.
Mr Brew: I think it is fair to say that
this is something where in the context of the ACP we are not in
the game of maintaining residual tariff barriers on one set of
poor countries in order to favour another. At the start of the
Lomé trade preferences everybody had very high tariffs
and we maintained very low access for the ACP at the time, but
we are now in a different situation where what we have is a series
of tariffs on goods we do not produce on countries, some of which
are poorer than their ACP partners, who legitimately have a complaint
that this is discrimination. We are very conscious that that kind
of change is very difficult, very far-reaching and very deep,
which is why we are pushing our transition times as long as possible
and, as Gareth said, we are opting for it. Fundamentally, that
is not a path to development if the only reason that you are in
production is because of a tax on somebody else. That is the context
we are working in. We are not going to oppose that change, we
think it is essential, but we will do everything we can and we
are very conscious that it is a real problem for countries.
Ms Koke: All least developed countries
have duty-free, quota-free access at all times and you cannot
get any better in terms of market access than that. The one thing
which is ongoing now is the reform of the Rules of Origin which
also impacts the trend of market access and the purpose of that
reform is to make them more development friendly and transparent.
Mr Van Eeckhaute: This underscores the
superiority of multilateral trade arrangements in WTO because
the countries that are hit by an erosion of their preferences
that is a result of any liberalisation that takes place, whether
it is bilateral or multilateral, will have knock-on effects on
those who have preferences. At least in the WTO they can negotiate
compensatory measures as is being done for the time being. That
is less the case in bilateral deals.
Chairman: I think we have trespassed enough
upon the time of the Commission. Have we left a question unanswered?
No. It remains for me to say thank you very much indeed, we found
that extremely helpful.
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