Examination of Witnesses (Questions 549-559)
Mr Gareth Thomas, Mr Eoin Parker, Ms Fiona Shera
and Ms Mandeep Kaur Grewal
15 JULY 2008
Q549 Chairman: Good
morning, Minister. A very warm welcome from the Sub-Committee.
You will know that we have been conducting this inquiry for some
time now and I believe that you attended the Committee just as
we were starting. I do not think that at that time I was a member
of the Committee. We have a lot of questions to ask and we probably
have about an hour. Is that agreeable to you?
Mr Thomas: Yes.
Q550 Chairman: Before we go into
the questions, is there anything that you would like to say by
way of introduction? Perhaps you would also like, while doing
so, to introduce your colleagues.
Mr Thomas: My Lord Chairman, what I wanted
to do by way of introduction was to introduce Eoin Parker on my
left and Fiona Shera and Mandeep Kaur Grewal on my right. Fiona
Shera and Mandeep specialise in EPAs and Aid for Trade and work
in the Trade Policy Unit, which is answerable to me. Eoin Parker
specialises on the Doha Round of world trade talks.
Q551 Chairman: Last October you gave
the Committee an "optimistic and encouraging picture",
as you described it, of the Doha Round. In a few days' time there
is a Ministerial meeting that may or may not be able to take things
forward. Do you remain optimistic for a successful conclusion
of the Doha Round?
Mr Thomas: I do, and I think that the
fact that a Ministerial has been called is one powerful reason
to be optimistic. I think there is a recognition amongst the key
principals in the major trading nations or blocs of nations that
we are at a key moment in terms of a time for a deal. I think
that people recognise that the window of opportunity to secure
a deal is closing fast and, in terms of the discussion we have
had as a Government with those other trading nations, we do not
get a sign that there is any government that does not want to
conclude the negotiations. I think that the fact that the Ministerial
is going to take place is therefore reason for optimism. Having
said that, there are some big issues that we still have to get
agreement on; but the view I gave you in October I still subscribe
to.
Chairman: While we were in Geneva last week
we met with the chairs of the Agriculture Committee and of NAMA,
the non-agricultural area. Lord Renton would like to take one
or two questions forward on those points.
Q552 Lord Renton of Mount Harry:
Minister, you have said that you remain optimistic, although you
see the difficulties, and obviously what is at stake is very important.
What do you think, though, in the Government's view, would be
the minimum components of a successful deal? Would a lock-in of
existing tariff levels be acceptable?
Mr Thomas: Lord Renton, perhaps I should
say just by way of a precursor to answering your question that
I think one of the other factors that is motivating the principals
from the key trading nations and blocs of nations to be optimistic
and wanting to do a deal is recognition that, with American elections,
with Indian elections due before May, and with European elections
and a change in the European Commission due next year, if we cannot
get a deal now on the headlines, the modalities of a deal, and
then get the detail behind that locked down by the end of the
year, we risk not being able to start again before two years or
three years. I must confess that I am not sure that we could be
100 per cent confident that we would be able to pick up where
we had left off. Those political imperatives in terms of elections,
therefore, are also motivating people to want to get a deal done
next week. Lord Renton, you asked me specifically about what we
would see as being the minimum for a deal. At one level, frankly,
getting any deal would be progress, as you describe; but, in order
for that to happen, I think that we will have to see significant
reductions in trade-distorting agricultural subsidies—which
we would certainly want—not least on cotton but also more
broadly. We will have to see significant increases in market access:
so substantial reductions in tariffs, and in agricultural tariffs
in particular. On NAMA, we will have to see increased market access,
not only for developed countries into each other's markets but
also into emerging economies' markets, which will benefit both
developed countries and boost South-South trade. The third key
element of the picture for us as a Government is progress on services.
We do need to see more market opening in service areas, particularly
between developed nations but also in terms of the emerging economies.
To be honest with you, I think that those three elements, which
we would see as being fundamental to a deal, are recognised as
being fundamental to a deal by most of the other key players in
these talks too.
Q553 Lord Renton of Mount Harry:
Thank you very much, and I know that my colleagues will be taking
up some of the points specifically that you have made there. Obviously
what you are saying, in effect, is that a lock-in of existing
tariff levels would not be acceptable. However, could I come back
for a moment to the French position? What is your assessment of
the recent comments made by President Sarkozy and ministers regarding
the content of a possible trade deal? Do you wonder whether that
is reflected in their government's behaviour at Council meetings?
Some of us are probably a bit surprised by some of the remarks
that President Sarkozy makes.
Mr Thomas: I think that every major trade
negotiation is characterised by sabre-rattling in advance of a
deal. The remarks that have been made by many Member States in
the WTO, not just in Europe but beyond as well—in Brazil,
in South Africa and elsewhere—are characteristics of governments,
in a sense, making clear what their primary concerns are, before
actually going into the negotiating room. I think that the French
recognise that a deal would be a major boost to the global economy.
Equally, they have concerns about the position of their farmers,
and that is reflective similarly of the concerns of one or two
other Member States. However, I believe that the French genuinely
want a deal. Certainly the French trade minister, when I have
had discussions with him in the past, has indicated that he wants
a deal and that his government wants a deal. The French have supported
Peter Mandelson having the flexibility that he has to carry on
the negotiations in the way that he has done. I therefore put
it down to a little bit of sabre-rattling and not much more than
that.
Q554 Lord Maclennan of Rogart: I
would like to turn to the attitude of the United States, Minister,
since, in some of the evidence we have had, they have been seen
as the key player, particularly in the light of the recent Farm
Bill and the trade-distorting subsidies, which although not necessarily
activated at the moment because of the high food price levels,
none the less seem capable of making trade distortion considerably
worse. There has not been much evidence publicly from the United
States that they are looking for this as a make-or-break opportunity.
Some of the remarks, for example about India and the response
of manufacturers, seem to indicate less than an appreciation of
the fact that India has been autonomous in making reductions in
tariffs over a number of years, and China has made contributions
through coming into the WTO. There is some anxiety about serious
intransigence in that quarter, notwithstanding the attractiveness
no doubt to the President of a legacy in the field of trade. What
is your own perception?
Mr Thomas: I characterise some of the
remarks I have heard from the US in the same way as I characterise
some of the remarks that others have made, to which your colleague
Lord Renton referred previously. I think what is interesting about
the American position is what they are not saying at this
stage. We have always believed that the major progress in terms
of the American position would need to be developed at a ministerial
meeting, and that we were unlikely to see it before a ministerial
meeting. Fundamentally, the Americans will have to shift on the
huge amounts of trade-distorting agricultural subsidies that they
provide to their farmers, in particular on cotton. Cotton will
be totemic to developing countries. It was one of the things that
made the Hong Kong ministerial back in 2005 go off-track, and
there is no doubt that the Americans will have to shift on that
particular issue. I do not think that we will see much by way
of public comment until next week gets underway. However, what
is striking in the private discussions that the Prime Minister
has had with George Bush and that Douglas Alexander, my boss,
has had with Susan Schwab, the trade negotiator, is that they
do know the detail of the different positions of other key players
in the Round. They certainly know that they will be under pressure
to shift significantly, and we will have to see how they develop
their position next week. I would agree with your assessment,
however, that they are one of the fundamental, if not the
most important, players that need to shift their position if we
are to see a deal next week. I also agree with your comments,
though, in that I think that the White House do see this as potentially
part of their legacy. I think that they are genuinely committed
to wanting to get a deal. In that context, it was interesting
to hear the comments made by the President about the Farm Bill,
when it passed in Congress relatively recently. I am therefore
optimistic about the American position, but I think that Peter
Mandelson has some hard days and nights ahead of him to negotiate
their subsidies down.
Q555 Lord Watson of Richmond: Does
it not concern you, though, that so much of the rhetoric in the
primaries has actually been protectionist?
Mr Thomas: It is not only the primaries
where we have seen increasing protectionist language. I think
that we have seen increasing protectionist language in Europe.
One of my worries about our not getting a deal is that it would
be a major boost to the protectionist mood music that we are hearing.
It would be a big blow to the multilateral trading system, quite
apart from it being politically a daft decision in terms of the
global economy. You are therefore right that, yes, the protectionist
comments that we have heard do concern me; equally, I think that
to some extent we should also see it in the sabre-rattling camp.
Q556 Chairman: India was regularly
mentioned to us in our discussions in Geneva as being a very important
player in this and a key element of the negotiations. What is
your assessment of the position of India? Are they as keen on
a settlement as we are, for example?
Mr Thomas: I think that India is one
of a number of countries that is key to the outcome of a deal.
They obviously have huge interests in agriculture, given the considerable
numbers of subsistence farmers in India. Their trade minister
and negotiators are very keen to make sure that there is recognition
in a deal of the position of their subsistence farmers. Kamal
Nath, who is the Indian trade minister, and indeed their ambassador
in Geneva, have always been clear that they wanted to see a deal.
Understandably, they do not want a deal at any price and I am
sure that they will negotiate very hard next week to protect their
interests. What is interesting about the Indian position is their
enthusiasm for a free trade agreement with the EU. The idea—and
I am not suggesting you advanced it—that some have suggested,
that India does not want a deal in the trade negotiations, does
not fit with their enthusiasm for a free trade agreement, and
also with the EU in terms of our bilateral deal. I therefore think
that India wants to do a deal, but they will negotiate very hard.
They have a tough negotiating team.
Q557 Chairman: In answer to Lord
Renton, you did not quite confirm that a lock-in of existing tariff
levels would not be an acceptable outcome. Can I ask you to confirm
whether, if it got to that, it would be an acceptable position?
Mr Thomas: We would welcome that, but
I think that we would be disappointed by the fact that we were
not more ambitious as an international community.
Q558 Lord Kerr of Kinlochard: If
you were an Indian negotiator, Minister, you might worry about
the possibility of being made to pay twice if you do a deal now.
You would be thinking about America. You would be much less worried
about the European Union. I do not find any paradox between the
Indians being very tough negotiators in the Doha Round and very
keen to have a bilateral agreement with the European Union.
Mr Thomas: Lord Kerr, there are tough
negotiators in the EU free trade agreement discussions as well.
Q559 Lord Kerr of Kinlochard: I think
that you would look at America and say, "Why should I do
a deal now, given that I know there will be a Democratic Congress;
I know there will be no fast track; and there is a high chance
of a deal being unpicked and further concessions demanded of me
next year?" I am just probing your optimism, Minister, because,
as you said, you are standing by the optimistic view—and
you described it yourself as optimistic—you gave us in October.
I cannot see anything that has happened since that is encouraging,
and it seems to me that the American scene is extremely discouraging
to the prospects of progress next week. Is that wrong?
Mr Thomas: In a sense, the concern you
have raised, that people will have to pay twice, is not just a
concern that India has voiced but a concern that others have voiced.
I do not see it in those terms, although I recognise that it is
perhaps an understandable concern that some have. In a sense,
I come back to my opening view of what is helping to motivate
people to want to do a deal next week, and that is the political
situation not just in the States but also within Europe and within
India itself. There is also potentially a range of other factors
that make it difficult to perceive a deal being done—if
it is not done in the next six months, with the headlines being
done next week—for another two or three years. I think that
India and others will recognise the benefits of getting a deal
done now. I recognise that it does have to pass through Congress
and that there are sceptics in Congress, but I think that the
sceptics in Congress on trade deals have been particularly sceptical
over issues like environmental standards and labour standards,
which are less significant issues in the Doha Round of talks.
For example, the US-Colombia free trade deal has not gone through
Congress at the moment and, as I understand it, that has primarily
been over concerns about labour standards. I therefore do not
think it is reasonable to write off completely, as some have wanted
to do, the idea that Congress will not accept a Doha deal. Clearly
it would be the dominant and primary international issue for a
new President to have to sell to Congress. We would expect them
to sell that deal to Congress, if the deal has been done in good
faith by the rest of the international community. I have met with
Congressmen and women and Douglas Alexander and our embassy in
Washington have met with a range of Congress people. On the basis
of those contacts, I remain optimistic that a deal would be ratified;
but there will no doubt be lots of bumps and hurdles to cross
along that particular journey.
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