Examination of Witnesses (Questions 580-592)
Mr Gareth Thomas, Mr Eoin Parker, Ms Fiona Shera
and Ms Mandeep Kaur Grewal
15 JULY 2008
Q580 Lord Kerr of Kinlochard: Could
I pick up on that last point? I can see why President Sarkozy
might want to link climate change negotiations to a WTO negotiation—put
climate change into the Geneva WTO framework—and I can see
why a US Congress might want to put labour standards into a WTO
framework. I cannot conceive of any reason why a British Government
would want either of these things to happen. It seems to me that
we want as liberal a world trading system as we can possibly have,
without the environmental conditionality written in, and without
labour standards. Surely the one is for a Kyoto (or successor)
mechanism and the other is for an ILO (or successor) mechanism,
but they should be kept well away from the WTO? Is that not the
Government's view?
Mr Thomas: You may well be right. Let
us take climate change, if we may. President Sarkozy has given
a view on the links between trade and climate change. I think
that I have a different view as to what I might see as being an
agenda for trade and climate change, where there may be a role
for the World Trade Organization to play, even if it is just as
a convening body—in the way that it played a convening role
on Aid for Trade. It may well be that there are other bodies that
are more appropriate. As I say, I do not have a formed view. What
I am conscious of is that we do need to start making progress
on issues around trade and climate change. To be clear, I would
see them as being how we get emissions reductions agreed in, for
example, particular industrial sectors—which reflects competitiveness
concerns across the international community. It may be that there
are particular industrial sectors that are appropriate. Should
those discussions take place in the context of the WTO? Should
they take place in the context of the UNFCC, or should we set
up some other process? At this stage I do not have a view. What
I am clear about is that we will need to move quite quickly, once
we are through next week and hopefully into the detail of a deal,
to start looking at those additional questions. On the Aid for
Trade role that the WTO has played, the initial conference on
looking for Aid for Trade, on galvanising donors to commit more
money for Aid to Trade, took place at the World Trade Organization
headquarters; but the WTO will not be the place where the implementation
of Aid to Trade takes place. Individual donors will have to do
that themselves and will have to be held to account for what they
do or do not do within other fora beyond the WTO. The WTO itself
will not have any specific locus. Aid for Trade issues will not
go to the disputes settlement. Simply the fact that it was the
trade body, therefore, and the likes of Pascal Lamy and his staff
had an interest in this issue, provided a useful convening place
for us to come together to look at these issues.
Chairman: I have no doubt whatsoever that we
will all return to these issues, as you said, fairly quickly after
this current round, and we look forward to those discussions.
Q581 Lord Haskins: I would like to
return from the grand, hypothetical vision to the hard business
reality of what might happen next week. One of the things that
particularly struck me last week in Geneva was how sanguine people
were generally about the deepening credit crunch in the OECD areas,
the rise in inflation of food and fuel—almost as if they
were trying to get it out of their minds and as another reason
for settling sooner rather than later. If these things get worse,
they would be more of a problem further ahead. Dealing with food
on its own, however, there are two aspects to this. One could
be a concern, i.e. the protectionist barriers that people
are putting on exports of food and that will have an impact on
the arrangements; but another could be an opportunity, because
the US Farm Bill becomes rather less relevant if food prices are
as high as they are. The likelihood of interventions to support
US farmers is less likely. Do you think those things will have
any impact on people's thinking next week?
Mr Thomas: Let me take the last point,
the issue of the level of American subsidies to their farmers.
I think you are right that the fact that they are significantly
lower, as a result of higher food prices, may make the political
environment for getting a deal through Congress easier. I put
it no higher than that. Will it be the primary thing that people
are thinking about next week? I do not think that it will be.
It will be, in a sense, negotiating hard with others; but I do
think that it is an additional factor, which should give grounds
for optimism that a deal can not only be secured but can also
be ratified. On food prices more generally, the rise in food prices
is certainly being used by some to justify a more protectionist
position. President Sarkozy has said that the high food prices
are proof of the benefits of the Common Agricultural Policy. We
would not see it like that. We would see that, in the long term,
getting rid of significant levels of agricultural subsidy in Europe
and elsewhere will help to boost investment in agricultural productivity
across the globe. That can only be of benefit for food prices
in the long term, albeit there may be a slight increase in food
prices as a result of a substantial liberalisation of the subsidy
regime at the moment.
Q582 Lord Haskins: One other thing
that struck me, and I do not know whether you would agree, is
that the EU does not appear to be a big problem in these negotiations.
Most of the countries were saying that the EU is largely on side.
Would you agree with that?
Mr Thomas: I would agree that the big
issues next week will be about the level of agricultural subsidy
reductions that the US are willing to make and, secondly, the
level of access into emerging economies' industrial markets that
the so-called "NAMA eleven" are willing to offer. Both
will then read across into every other area of the negotiations,
including services, which we were talking about.
Q583 Lord Maclennan of Rogart: To
settle back a little from Doha, can you give us any picture of
how you view the development of the Economic Partnership Agreements?
Do you see them, as some of your critics who have spoken to us
about them do, as potentially distorting? An obstacle to multilateral
agreements and anyway not achieving a great deal, perhaps, outside
of the Caribbean area?
Mr Thomas: I think EPAs are a work in
progress rather than a completed exercise. I do not see them as
distorting. I suppose I would have more sympathy with that argument
if it had been made about bilateral agreements, which on occasion
do have the potential to be distorting. I do not think EPAs are
of themselves distorting. They are, in a sense, a continuation
of the trading regime that we have had with the ACP countries,
encapsulated in the Lomé Convention and then in the Cotonou
Convention. We have to bring those trading arrangements into line
with World Trade Organization rules, and that is the reason for
the EPA discussions that are taking place. The Caribbean, as you
say, is the most advanced and I hope that we will see those agreements
being signed fairly shortly. It is still a work in progress in
terms of the four African regions and the Pacific. I think that
the big benefits for developing countries have been twofold. For
those developing countries that are not least developed countries—not
the very poorest countries—they will get 100 per cent duty
and quota-free access into Europe's markets. I was in Botswana
last week, and having that duty and quota-free access for their
beef farmers is a huge benefit for them. The second area is around
Rules of Origin. Substantial liberalisation of Rules of Origin
offers, for example, opportunities for the likes of Lesotho to
be able to sell textile products much more easily into Europe's
markets than it has been able up to now. Those are two of the
biggest benefits of EPAs.
Q584 Lord Maclennan of Rogart: It
has also been suggested to us by other witnesses that the European
Union uses divide and conquer tactics when dealing with some of
the smaller nations' trade issues. What justice is there in that
perception?
Mr Thomas: I do not think that is a fair
accusation. However, I do not think anybody, even Peter Mandelson,
would claim that the process in the EPA negotiations in the run-up
to the 31 December deadline was anything other than, let me put
it delicately, bumpy. That was in part because the duty and quota-free
access offer was not put on the table for the ACP until March
last year, so relatively late in the day, and the Rules of Origin
package was not put on the table until September. That reflected
bluntly difficulties in getting agreement to those packages within
the European Union and that did mean negotiations were left very
late. I think the irony of the difficulties we had in the run-up
to 31 December was that the whole debate around trade and regional
integration had been put on the desks of presidents and finance
ministers as well as trade ministers, and that was an enormously
helpful thing. I hope out of the political tensions that there
were in the run-up to 31 December we may see a whole range of
positives develop in terms of faster regional integration and
better arrangements for south-south trade as a result. EPAs, as
a package, I think are going to take quite a bit more time to
complete the negotiations.
Q585 Lord Watson of Richmond: On
that last point, bumpy not brutal is what you are saying?
Mr Thomas: I think some developing countries
felt it was brutal. I do not think this is Peter Mandelson's fault,
although he has been the target of some fairly vociferous criticism
from civil society groups here, but the European Union was too
late in offering the Rules of Origin package and, in particular,
the duty and quota-free access package. As a country, we called
for that to be made as early as March 2005 and if it had been
put on the table much earlier, then the context for the negotiations
would have been much more positive.
Q586 Lord Watson of Richmond: One
can understand why that sort of pressure was resented in some
cases.
Mr Thomas: Indeed. Equally, that deadline
of 31 December last year had been known about for the better part
of eight years so it is not an entirely fair criticism, but I
think the other issue we have to recognise as a European Union
is that you are dealing often with countries that do not have
huge negotiating capacity, notwithstanding the fact that we have
given money, as a government, to help countries negotiate EPA
agreements and, indeed, in the Doha round. I think now we are
through the 31 December deadline and we have got the chance to
reflect on the interim EPAs that have been agreed and particularly
in developing countries we need to have a bit more recognition
of those negotiating capacity constraints. I was in South Africa,
Namibia and Botswana last week looking at the progress that had
been made in the SANAT region on EPAs. What was striking was the
appetite of all three countries for progress on EPAs. South Africa
and Namibia have been the most hostile to a deal apparently and
they do have what I think are genuine concerns in a number of
areas, but they do want to do a deal, and that is quite striking.
Q587 Lord Watson of Richmond: It
would make sense when one is really looking at the future development
of the WTO if there was some real attention paid to the negotiating
difficulties that the poorest countries inevitably have, because
they just do not have the expertise on the negotiating front and
that leads to the sense that the big boys are all in one set of
rooms making all the decisions and everybody else is outside.
I want to raise two specifics—it is tied to it in a way—first
of all, what the Government's view is on Special & Differential
Treatment and, secondly, on Aid for Trade, which we have talked
about but mainly in the context of whether this is a legitimate
area of future activity for the WTO. First of all, on S&DT,
what is the Government's view?
Mr Thomas: We are a strong supporter
of meaningful Special & Differential Treatment. We would see,
as part of that, longer implementation periods for countries to
liberalise tariff schedules, on occasion lower tariff production
and subsidy reductions being required and recognition that developing
countries will have particular circumstances which may mean that
they need to reintroduce tariffs or lower tariffs at a lower rate
in particular areas, so food security and rural development issues
being two obvious examples.
Q588 Lord Watson of Richmond: It
is those sorts of considerations which make it meaningful because
we have had expressed to us the view that so often S&DT is
actually irrelevant.
Mr Thomas: I do not think that is the
case at all. I think perhaps the most obvious example of, in a
sense, the benefits of S&DT comes from the TRIPS agreement
on access to the intellectual property underpinning essential
medicines where there are certain waivers to those IP rules for
developing countries facing public emergency. You see now a range
of countries slowly using the provisions in the TRIPS deal to
get access to lower cost antiretroviral drugs to help them fight
HIV and AIDS. I think that is a very meaningful example of S&DT
at its best.
Q589 Lord Watson of Richmond: Yes,
that is a rather dramatic example, it is a good one. On Aid for
Trade, how active actually is our Government in seeking to persuade
developed country members of the WTO really to get on with allocating
and spending Aid for Trade?
Mr Thomas: The Aid for Trade conference
that took place in Geneva in the WTO's headquarters in November
last year was in part a British invention. I wish I could take
credit for it myself; it was the idea of a number of my officials
and they deserve credit for suggesting it. What that conference
did do was to put pressure on a range of developed countries outside
of the European Union to provide more money for Aid for Trade.
The Gleneagles agreement back in 2005 and the Commission for Africa
did focus on Aid for Trade as well and the dialogue that developed
there led to the EU, both the Commission and Member States, committing
to I think—forgive me, let me check—€2 billion
to be spent on Aid for Trade a year by 2010.
Ms Shera: Yes.
Q590 Lord Watson of Richmond: Your
view is that the hold-up of the deployment of these funds is more
to do with non-EU members than EU members?
Mr Thomas: I think a number of Member
States and donors have been perhaps late to the issue of Aid for
Trade. It is an issue which we are focusing on quite significantly
in our Southern Africa aid programmes. I was looking specifically
last week in South Africa and Botswana at examples of what our
Aid for Trade work is helping to fund at the moment. What is striking
is the huge infrastructure of constraints that there are in sub-Saharan
Africa to helping trade flow so the level of investment that is
needed in roads, power supplies and rail to help trade flow faster
is very significant. Equally, the difficulties in terms of slow
customs procedures and just the need to try and harmonise customs
procedures more effectively in the area are striking. To give
you one example, we funded some work in Lesotho through the trade
investment facility that exists there which is helping Lesotho
exporters experience dramatically lower delays and borders. Export
applications used to take seven days to process; they are now
taking 15 minutes. They used to have to fill in 23 forms; it is
now down to two. You get a sense both of what is possible there
but the scale of the problems.
Q591 Lord Watson of Richmond: There
is a learning curve both on the side of the donors and recipients,
that is clear, so hopefully both sides are getting better at it.
I want to ask you one other question on the infrastructure side
of Aid for Trade because we have seen quite dramatic developments
with Chinese involvement in Africa, which very often has an infrastructure
focus. What lessons do you learn from that?
Mr Thomas: There is Chinese engagement
on the issue but there is also substantial investment via the
Commission itself, the World Bank, the African Development Bank
and a number of other donors. I suppose the main lesson I took
from my visit last week is we need to step up the engagement of
all the different players in investment in infrastructure. What
I think we can bring, as a government, to that particular issue
is our convening power, convening influence and our ability to
help unlock problems in particular countries because one of the
problems in sub-Saharan Africa is the number of different stakeholders
you have to get to agree to make progress in particular works
if you want to build a road, and I think we can help with that.
We need to do more to interest the private sector in Africa and
outside Africa in that investment in infrastructure that is necessary
and over the next 12 months this is something that we are certainly
going to be looking at, how we can step up our work in this area.
Q592 Chairman: Minister, you have
given us a considerable amount of your time and we are enormously
grateful. It has been wide-ranging and you have been frank, ranging
from optimism to detailed enthusiasm, and thank you very much
indeed. We are very grateful to you.
Mr Thomas: Thank you very much.
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