Examination of Witnesses (Questions 560-579)
Mr Gareth Thomas, Mr Eoin Parker, Ms Fiona Shera
and Ms Mandeep Kaur Grewal
15 JULY 2008
Q560 Lord Kerr of Kinlochard: I am
sure we all agree with you that it would be highly desirable,
Minister. I think that our doubts, on the basis of the evidence
we have taken, are more about whether it is actually feasible.
If it happens, what would be in it on services—assuming
that, for the UK economy, a more liberal world order on services
is the number one desideratum? Sometimes it seems as if services
are squeezed out by the attention on NAMA and the attention on
agriculture. Would there be enough time left to get a services
deal on your timescale, assuming this coming Geneva meeting goes
well? On your timescale, one is trying by the end of the year
to produce a complete package. How long, by the way, would it
take to agree the resulting schedules, if there were an agreement
next week, and then a final package that includes services and
all the various rules resulting from the negotiations that are
part of the DDR? These are, I assume, quite big jobs. How long
would they take? Is it doable by the end of the year, and what
would be in it, particularly on services, for the UK?
Mr Thomas: First, in order to answer
your question on services, just a reminder about the opening context
for the Round, which was that, following the Uruguay Round, there
was a real sense that this current round of trade talks needed
to focus on development; and the primary concern of developing
countries has been around agriculture. There has been a recognition
that we needed to make substantial progress on agriculture in
order to unlock ambition in terms of access to industrial markets
and, similarly, access to services markets. I cannot give you
an explicit and definitive view, therefore, as to what is likely
to emerge from next week in terms of the services negotiations.
There is a signalling conference in the middle of next week. I
think that the level of ambition that we see on services will
be dependent on the level of ambition that is being achieved on
agriculture and on NAMA. Having said that, our priorities as the
UK—and I think that they reflect broader EU priorities too—would
be, for example, to see opening up in terms of financial services
markets, in terms of professional services, legal services, retail,
et cetera: some of the traditional areas where we have considerable
strength in our economy. In terms of the timescales for concluding
this round by the end of the year, I do think that it is achievable.
I think that there will be an awful lot of work to do for negotiators,
once the headlines are done; but I do think that it is achievable.
However, I would not want to give you specific timescales of what
would happen by what date and in what way.
Q561 Lord Kerr of Kinlochard: Can
you be a little more specific and tell us what you think would
be an acceptable deal for the UK on services?
Mr Thomas: We would obviously want to
see some opening up of services markets and we would want to see
some locking in of market opening that has already happened. As
I indicated in answer to your first question on services, I would
want as much market opening as is possible. Equally, we would
want to look at the balance of market opening; so taking into
account what happens on agriculture and what happens on industrial
markets. We have welcomed the increased attention that Pascal
Lamy has personally been giving to services. We have pushed, along
with the Commission, for the services signalling conference to
take place and have welcomed the fact that, perhaps beneath the
headline issues of agriculture and NAMA, further discussions at
official level have been taking place to explore what individual
states might do in terms of opening up their markets.
Q562 Lord Kerr of Kinlochard: I do
not quite understand the argument when you say you are taking
account—you said it twice—of the degree of ambition
shown in the NAMA negotiation. It surely is not mercantilist.
Surely we want as much liberalisation as possible on both dossiers:
on NAMA and on services? When deciding what is acceptable for
the UK, why would you want to look at the other dossier?
Mr Thomas: No, you are right. We would
want as much market opening in terms of industrial markets and
in terms of services. I think the context to my comments is that
the reality is that other players in Geneva next week will use
the level of ambition that they are seeing—in terms of subsidies
coming down and in terms of agricultural tariffs coming down—to
justify the positions they take on the levels of market opening
they are willing to allow in terms of their industrial markets,
and in terms of the services.
Q563 Lord Kerr of Kinlochard: Yes,
but I am trying to discover what you thought would be acceptable,
and I think your answer is "Whatever is available".
Mr Thomas: I think that is an unfair
characterisation of my position, Lord Kerr. I would want as much
as is possible, but I do not think that it is possible to give
you a definitive view now, given that we will have to look at
what happens next week. But, yes, I want as much liberalisation
in terms of services and industrial markets as is possible, because
I believe that is not only in Britain's interest but also in the
interest of developing countries, albeit that there are caveats
one would want to put in in terms of particular services at different
times. However, I think that it is good for consumers if market
opening takes place. It will be good for trade generally. It will
be good for growth in those countries.
Q564 Lord Renton of Mount Harry:
Minister, I do not think that we want to add to your obviously
serious workload, but we do break up next week and we do not come
back until 8 October and it would be very helpful to members of
this Committee if you could write to us over the summer recess
with your assessment of the outcome of the ministerial meeting.
It would be very helpful to us if you could do that.
Mr Thomas: I would be very happy to do
that.
Q565 Lord Watson of Richmond: That
is particularly important, because what is coming through loud
and clear from what you are saying this morning is that actually
you see next week as make or break. It is not the completion of
the negotiation, but if next week does not mark progress then
I imagine your optimism will wane considerably.
Mr Thomas: I am optimistic about what
will happen next week. As I have said to you before, if we do
not get a deal on the headlines next week, it is very difficult
to see how we will get a deal before two or three years' time.
To be honest with you, I worry as to whether or not in two or
three years' time we would be able to pick up where we have left
off.
Lord Watson of Richmond: That is why I think
that your assessment post-next week's meeting would be very important
for this Committee.
Chairman: That leads on very neatly to Lord
Steinberg.
Q566 Lord Steinberg: I am afraid
that I am going to be a bit provocative as well, Minister. The
first part of my question that I want to ask you, following on
from what my colleagues Lord Kerr, Lord Watson and Lord Renton
have all said, is that you seem unable to give a date, because
you say it is impossible to give a date when this is likely to
happen. You point to the meeting taking place next week, which
I am sure we all agree is an extremely important meeting; but
all the hurdles that have been mentioned—protectionism,
the United States, India, hard negotiation, your own comment when
you said that the window was closing fast—all these things
surely make it rather more difficult? Whilst I admire your optimism
and nailing the flag to the mast, I am not certain whether your
optimism is not wildly misplaced.
Mr Thomas: Pascal Lamy has talked of
seeing a deal as being 50:50. My own sense from the conversations
I have been party to is that I think the prospects for a deal
are 60:40. That is me being cautious. I am Methodist by religion
and we do not bet, as you know, Lord Steinberg! So I would not
want to gamble on the outcome—
Q567 Lord Steinberg: You are talking
in my area now, Minister!
Mr Thomas: Genuinely, I am optimistic
about a deal, because I think all the key principals recognise
just how much is at stake. The level of detail that people as
varied as President Lula and President Bush have, in terms of
their knowledge about what are the sticking points regarding the
Round, does lead me to have confidence that they are seriously
engaged in wanting to do a deal next week. In something as complex
as world trade talks you will always see sceptics and you will
always see people sabre-rattling, as we have discussed. However,
I do think that there are grounds for optimism. I recognise that
you may call me back if we do not do a deal and I will have to
try and explain why my optimism was misplaced; but at the moment
I think there are good grounds for it.
Q568 Lord Steinberg: I admire your
continued optimism. Can I go on and ask what would happen to EU
policy if the talks failed?
Mr Thomas: I think that there will be
two elements to it. First, we will want to look at how we revive
world trade talks, what timescale there might be for getting talks
back underway. That would obviously be the first part. Whether
any elements of the talks could be saved and secured, personally
I doubt whether that would be doable, but I certainly think that
we would want to look at that. Then, inevitably, we would want
to look at what free trade agreements—bilateral free trade
agreements—between the EU and a range of other countries
or blocs of nations were possible. We already have a large number
of negotiations underway, from groups of countries as varied as
South Korea, through to the Latin American Mercosur group, through
to a range of countries in the Gulf, and I think that those conversations
would inevitably accelerate. To be honest with you, though, whether
we secure a Doha deal or not, those conversations will take place;
I just think that they would take place at a slightly slower pace,
while the detail of the Doha deal was locked down.
Q569 Lord Steinberg: Talking a little
more about the implications, only this morning in the Daily
Telegraph there was an article relating to Spain being in
a crisis situation and also Italy. If this round fails, are there
not some invalids within the EU that will dramatically affect
the union's trade policy? It mentioned Greece as well, by the
way.
Mr Thomas: All of those Member States
have signed up to the negotiating mandate that Commissioner Mandelson
has. All have publicly supported their ambition for a Doha deal,
both next week and beyond. Each has its own specific issues of
interest, as we do. Each will be pressing Commissioner Mandelson,
and indeed other Member States, to do as much as they can to promote
those interests next week. That is perfectly logical and perfectly
understandable. The Commission has done some analysis of the benefits
of a Doha deal and estimate that it could potentially represent
a boost to the global economy of some €120 billion per year,
of which about €30 billion would be for the European Union
and €15 billion for the developing countries. You begin to
get a sense of the scale of what is at stake next week, and I
think that those figures are understood by all the major players.
They recognise the potential for increased economic growth that
a deal will do.
Q570 Lord Steinberg: Finally, who
stands to lose more if there is no agreement: the developing countries
or the least developed countries?
Mr Thomas: I think that we all stand
to lose. As I indicated, we will lose—if the Commission's
analysis turns out to be right—some €30 billion of
extra trade that might have resulted; developing countries will
lose out on the opportunity to see substantial reductions in trade-distorting
agricultural support and, as a result, the opportunities to sell
their goods into the EU market, the US market, and other rich
countries' markets. Many other players in the international economy
will lose out substantially too. I think that the biggest losers
in the long term will be developing countries; because, in the
end, the only way to tackle poverty is through economic growth.
We will be closing off one obvious route—developing your
agricultural economy—for those least developed countries
to benefit from. They will not lose out dramatically in the short
term but, over the long term, I think that they will lose out
significantly.
Q571 Lord Moser: Minister, I also
admire your optimism.
Mr Thomas: Oh, dear!
Q572 Lord Moser: I admire it because
I am by nature a pessimist but also because we had nine separate
meetings in Geneva last week, all with people who were either
deeply involved in the whole business or were experts on it. The
atmosphere of the talks ranged all the way from fairly extreme
pessimism to fairly extreme optimism; so I came away feeling that
probably the best advice was from the final meeting, which was
with one of the chairs of the negotiating groups who said that
it is absolutely impossible to tell whether it is good news or
bad news; that it is 50:50. I therefore settled for 50:50 in my
assessment, which is the easy way out. One of the reasons, in
addition to complexity and all that, which came up again and again
was that a lot of countries, after seven years of Doha, were not
exactly bored but were cynical; that, into the whole operation
next week and later, was a feeling of bored cynicism—especially
if they felt more secure in bilateral negotiations, which are
easier and less complex. In other words, in addition to the crucial
things with America or India or China, which we have talked about,
there is a general feeling of "We've been round all this
again". I felt that probably WTO was clever enough to avoid
a totally black outcome. It probably would not get a white outcome,
but it would be grey, somewhere in the middle, and things would
continue in some way. Against that background, a sort of semi-failure,
could you comment on the future of WTO? Is the future more in
bilateral negotiations? Will the dispute settlement mechanism
remain? Would you favour, would the EU favour, a change in structure
and voting, and for more attention to all members? We were also
struck in one meeting by the developing country voice feeling
that it is all done in closed rooms by the big boys. Could you
therefore comment about the future of WTO against that background?
Mr Thomas: The great beauty of the World
Trade Organization, but also the thing that leads to the frustrations
about the WTO, is the one member, one vote. That both helps to
ensure that even the smallest and the poorest who are members
of the WTO have to have their concerns recognised in order for
a deal to be done, but also the process of making sure that everybody's
concerns have been heard does mean that trade rounds are inevitably
very lengthy and very complex. We would not want to lose what
I think is the great strength of the WTO—the one member,
one vote. Equally, as you say, seven years is an awfully long
time for a trade round to take place, and we clearly do need to
look at the WTO's procedures. To be honest with you, I have an
open mind on the idea of a reform agenda for the WTO. Clearly,
as the UK Government, we do need to do some work to look at what
the WTO holds. Once we are through and, I hope, into the locking
down of the detail behind a ministerial agreement next week, we
will start to do some more detailed work as a department on what
the future of the World Trade Organization might look like; but
we do not have a definitive position at this stage. We are seeking
to hold a conference on trade issues in the autumn, which will
look at a number of things. No doubt reform of the World Trade
Organization will be one of them. I have given you a long-winded
answer but, essentially, we know that reform is necessary; we
recognise the strengths of the WTO and we do not want to lose
those; but we have an open mind as to what the future holds for
the WTO.
Q573 Lord Moser: Is there a general
EU view on the need for reform, or were you expressing the Government's
view?
Mr Thomas: I was expressing the Government's
view.
Q574 Lord Moser: Do you see any major
differences within the EU?
Mr Thomas: The truth is that it is too
early to say at the moment. There has not been that type of a
debate as yet. In a sense, one of the things that we potentially
see as being a benefit of our trade conference is to re-kick start
that debate. A former EU Commissioner and head of the WTO, Peter
Sutherland, did produce a series of reform proposals a number
of years ago. Essentially, they have not been looked at because
people have started to get stuck into the detail of the Doha Round
of talks; but, once we hopefully reach an end of this round, then
I think that reform agenda will be something we would want to
come back to.
Q575 Lord Watson of Richmond: It
would be surprising in a way if Peter Mandelson did not come forward
with some suggestions of EU-based reform for the WTO in the wake
of his experience. Will you be asking him for his view?
Mr Thomas: I will certainly be asking
him either to come himself or send the officials that he trusts
the most along to the conference, to give us a view on the prospects
for trade going forward. There are a whole series of trade-related
issues where we do need to make progress, where the World Trade
Organization may be a vehicle. It may not be the right vehicle.
For example, climate change. There are a series of trade implications
for climate change that we need to start taking forward. Is the
WTO the place for those? The truth is that I am not sure.
Q576 Lord Watson of Richmond: These
are very important questions going forward, are they not, and
the one you have named is perhaps the most important?
Mr Thomas: With respect, I think there
are a series of others that are almost as important. There is
a big issue around Aid for Trade; in a sense, helping developing
countries unlock the potential that the Round might offer them.
The WTO has started to look at Aid for Trade issues, as you may
have picked up last week. It is slightly shifting into new areas
of work, therefore.
Q577 Lord Watson of Richmond: Others?
Mr Thomas: Let me stick with Aid for
Trade and climate change for now, as areas where it may or may
not have a future role going forward. I genuinely do not have
a definitive view.
Q578 Lord Watson of Richmond: It
is very interesting, is it not? Because if the view taken both
by the UK and rather more generally within the EU were that the
WTO was not the right vehicle for those two issues, that says
a great deal about the continuing relevance of the WTO.
Mr Thomas: No, I do not think it does,
with respect. There are climate change talks that are taking place
through the UNFCC process. It may well be that that is the appropriate
vehicle for the trade and climate change talks. It may well be
that Aid for Trade issues, given that they are also about how
we do development in general terms, may be more appropriate through,
for example, the OECD's Development Assistance Committee. Essentially,
I think that we need to make a judgment call on those questions.
Q579 Lord Watson of Richmond: The
reason we are trying to bring you out a little on this is to get
the feeling of what you do see, given an acceptable deal, as the
future of the WTO. These big areas you are saying may be yes,
may be no, but what is the imperative behind continuing with the
WTO if this is a reasonable outcome?
Mr Thomas: Without doubt, the dispute
settlement area of the WTO's work will be fundamental to its continued
role. The fact that it provides a way in the international community
for resolving trade disputes, notwithstanding that some of the
disputes and the way in which they have been resolved have had
their bumps—that may be an area of reform that we would
want to look at, and I suspect it probably will be—there
are these other questions where the WTO may have a role to play.
At this stage we just do not have a definitive position.
|
