Examination of Witnesses (Questions 740
- 759)
THURSDAY 6 DECEMBER 2007
Mr Peter Mandleson
Q740 Chairman: Good
afternoon.
Mr Mandelson: I am the Trade Commissioner, not
the Agriculture Commissioner by the way. I just thought I would
enter that caveat.
Q741 Lord Plumb:
Agriculture relies on trade.
Mr Mandelson: Yes, and we are doing rather well
on that basis in Europe. I think we are probably the biggest agricultural
exporter in the world, just about. Why is that? It is because
we have become more efficient, more market-oriented with a rather
useful and beneficial reform process that needs to continue, and
I suspect will.
Q742 Chairman:
We have got very high hopes that it will with a degree of acceleration.
Mr Mandelson: You were kind enough to indicate
the areas of questions you wanted to put to me. I have got wonderful
answers for you here. I am not at all sure whether it would not
be better for us to have a political conversation and I simply
leave you with the answers. They are quite interesting answers
and they are very full.
Q743 Chairman:
They are going to take a long time for you to read out.
Mr Mandelson: Yes.
Q744 Lord Cameron of Dillington:
That is a good idea.
Mr Mandelson: I honestly do not see why not.
It does not make too many disparaging remarks about our Member
States, I hope, the less reform-minded of them! Anyway, how would
you like to play this?
Q745 Chairman:
I think it might be useful to have a general discussion.
Mr Mandelson: Bearing in mind that you must
throw me out by twenty past three because I have got to receive
somebody at half past.
Q746 Chairman:
It would be useful if we could have the formal answers and spend
the time on a discussion.
Mr Mandelson: Do you want to know in the first
instance what is going on in the Doha Round?
Q747 Chairman:
I think that would be a useful start. That was the first question
in any case.
Mr Mandelson: The agriculture negotiations are
the most complex, the most detailed and most advanced. It does
not say a great deal for the other sectors in the negotiation,
but they are. They are now text driven. We had the chairman's
text before the summer. On domestic support, I would say that
we are close to an agreement for the final language that we want
to see and can agree on the "green box" which allows
us to continue with the Single Farm Payment scheme to allow the
transfer of entitlements and to assure the continuation of our
rural development programme. It is very important for us to be
able to protect the "green box" because that "green
box" represents, and is the vehicle for, the non-production
linked rural development driven basis of our reform policies.
We are well ahead of the United States in our reforms, as you
know, because they are nowhere on their reforms, they have not
agreed any reforms, and the Farm Bill which has now been agreed
in Congress is certainly not reform driven. It is marginally different
but in its overall effect just as bad as the 2002 Farm Bill. They
are not yet signed up finally either to the reforms of their trade
distortion programmes in their "amber box" and their
"blue box" or to the overall ceiling on their trade
distorting subsidies. The US will come on board at the last moment
in the endgame, if we ever get to the endgame in these ovetly
negotiated negotiations. On market access we have got the proposed
ranges of the tiered formula for tariff reductions which are a
perfectly acceptable basis for a political agreement in my view.
The chairman is not proposing in the range that he has tabled
anything that we cannot live with, assuming that we are coming
somewhere in the mid or upper end of the range which is not the
most extreme. There you get into a lot of very detailed fine-tuning
of our offer: what sensitive products are agreed within the overall
tariff reduction formula that is in place; the treatment of our
sensitive products. They cannot ask us to do everything, they
cannot ask us to have the most ambitious tariff reduction overall
and the most generous treatment of our sensitive products, generous
from an exporter's point of view rather than our own, with the
most extreme consumption data used as the basis for this treatment
of sensitive products. They cannot have everything. With due swings
and roundabouts we can get to a point where we are certainly arriving
at an ambitious and generous outcome in this negotiation, but
we have to have flexibility in how we arrive at that generosity
and that ambition. I think they understand this. This is the most
sensitive area for our Member States, right down to the last cut
of beef. This is the most sensitive for our Member States and
the most difficult for us to handle internally within the EU and,
therefore, in negotiations we are undertaking with our partners.
At this stage we have not declared any final list of sensitive
products and ultimately that designation will depend on the treatment
that is agreed within these negotiations of those sensitive products,
what the outcome is on the special safeguard measure that currently
exists and we want maintained. We have not reached that stage
yet but our negotiating partners and those who have the most ambitious
designs on our agricultural markets—the US, Australia, New
Zealand, Brazil, Argentina—know pretty well what we can
do in the final endgame of this negotiation. That depends not
only on what we can and will do, it depends on what others are
prepared to do both within agriculture and other sectors of the
negotiation. We are not going to be taken to the cleaners and
back whilst everyone else is sitting in roadside cafes having
their third cappuccino, thank you very much. They have got to
make efforts of their own. This is particularly the case in export
subsidies. We have given a commitment, as you no doubt know, to
phase out all our export subsidies by 2013 and to frontload a
lot of their removal two or three years before that, but the United
States has got obligations and Australia and New Zealand have
got obligations. You asked me a question about New Zealand and
if you look at the small print of what they do and get up to,
New Zealand has rather carefully maintained export arrangements
that favour their producers and exporters. They are not completely
pure, the New Zealanders, and they have got to step up to the
table and deal with the export subsidising aspects of their own
policies in their own machinery. On geographical indications,
those are very, very important for our southern Member States.
We do not have many friends on geographical indications in these
negotiations. They say it is a matter of legality and economic
interest, but I think it is more a question of ignorance, prejudice
and cultural misunderstanding on their part. Anyway, we continue
to fight for a reasonable outcome on geographical indications.
We will know where we are finally when we have the revised chairman's
negotiating text and that is due to appear at the end of January.
That will reflect all the detailed negotiation that has taken
place since the previous chairman's text. It is very, very important,
not only for its own agricultural sake but also because it is
the key to the negotiations in other parts of this round. Brazil
will say to you, "Well, we will see what we can do on industrial
tariffs or services when we see how much of the lemon we have
been successful in squeezing every last drop from" and that
will be reflected in the chairman's next revised text. The end
of January, beginning of February will be a very crucial time
for these negotiations. If you are ask me what I think the chances
are of agreement being made in 2008, I would have to say no more
than 50/50, and perhaps I am being my usual optimistic, sunny
self in saying that. These are hard. If we do not manage to get
a breakthrough in 2008, and early in 2008 because it will then
take six months to do the detailed negotiating, we will have a
change of administration in the United States and even an incoming
US President who was keen and interested and committed to taking
up where President Bush left off would need a good six to nine
months to see themselves into the negotiation. As we have already
learned from Mrs Clinton in her interview in the Financial
Times, she is not going to take up where President Bush left
off. She is sceptical about trade, she says. Whether this is simply
for the purposes of winning votes in primaries or whether she
would carry that view into office should she be elected, it is
very difficult to say. We will certainly strive for a balanced
deal in 2008. This is the only way in which we can make the maximum
use of the CAP reform of 2003 is to get that bound into the WTO
and made irreversible in international trade terms. We need this
agreement and our trading partners need this agreement from us.
Q748 Chairman:
Some ten years ago we had an EU which was pretty reluctant to
reform its agricultural policies and we had the threat of the
WTO there to sort of prod CAP reform on. Is it right to say that
the emphasis has changed a bit now, that the 2003 reforms have
set the direction of reform of European agriculture and really
it is not that WTO has ceased to be a prod but we are not as far
off the game as we were ten years ago?
Mr Mandelson: I think the main drivers of reform
have been internal considerations, not external pressure. I am
not saying the external pressure has been non-existent or unimportant,
it has been present and we in Europe are good boy scouts and girl
guides and if we see an international negotiation coming along
we prepare properly for it, we carry out our reforms so that we
can then use those reforms as the basis of tabling a generous
offer in a multilateral trade round. We are the first, second
and third multilateralists in the world. We believe in, and also
benefit from, a rules-based international trading system with
a strong WTO at its heart. For us, seeing the success of the world
trade round is very, very important. When it was launched in 2001
we knew that agriculture would be a dominant issue, quite rightly.
Agricultural reform internationally negotiated and multilaterally
driven did not take place in the previous Uruguay Round and we
took on commitments but, frankly, we were pretty evasive about
implementing them. There was no real reform in Europe driven by
the outcome of the Uruguay Round. Is that too strong a statement?
I do not think so. We knew that the time would come with this
round, should it be launched, when we had to step up to the table
and be instrumental in bringing about a fundamental restructuring
of agricultural trade which requires a very substantial reform
of our internal arrangements. The United States tends to do it
differently. Rather than reform first, table second and then negotiate
a satisfactory outcome, the United States has chosen to negotiate
first and then reform afterwards should the negotiation be successful.
The problem with that approach is it has left a lot of open-ended
question marks about where the US will end up, what they will
be prepared to do, what they are negotiating into this round and
it has bedevilled us in these negotiations that those who have
met the demands of the United States have never been clear, and
are not clear even now, what the US at the end of the day will
be prepared to sign up to and do, whereas in the case of the European
Union they know full well, they have taken us further beyond what
we initially envisaged doing but, nonetheless, we had a solid
base of reform which provided the mandate in the negotiating envelope
for me on the trade side. I would maintain my view that although
we have chosen to approach these negotiations in that way we have
nonetheless seen reform being driven more by an internal recognition
and desire to reform for its own sake than to provide us with
a basis for negotiation in a world trade round, and that is what
I think will remain the case.
Q749 Chairman:
Can you help us solve the riddle of Mr Sarkozy, on the one hand
saying things which are fairly liberal—
Mr Mandelson: Really, what were those?
Q750 Chairman:
Every now and then there is a word but basically there is still
a lot of semi-protectionist stuff coming out.
Mr Mandelson: If you look at the small print
of what President Sarkozy said in his CAP speech, which was before
the summer, he said that we must continue reform but what he actually
has in mind is reforming the CAP back towards the original state
that it found itself in before the 2003 reforms kicked in.
Q751 Chairman:
Community preference.
Mr Mandelson: Just be guarded slightly that
when he talks of reform he may be talking about reform that takes
the CAP backwards to what it was rather than forwards to what
it may become.
Q752 Lord Cameron of Dillington:
Apologies, I have to go, I have a formal dinner in Taunton at
eight o'clock tonight.
Mr Mandelson: Have a good time.
Q753 Lord Cameron of Dillington:
I must go in a minute. My question is about the integration of
the Health Check and your negotiations. Is there anything that
really stands out that you would like to see further and more
in the Health Check that might help you? My second question is
on the question of risk management. The Commission have put forward
a proposal in the Health Check that there is a possibility in
the future, which we strongly support, for the CAP to be reformed
or even abolished. We feel that farmers should be able to take
on more risk management and perhaps there could be a role for
the EU to subsidise that, part-fund it maybe through insurance
premiums or something like that. There is clearly a risk and talking
to Mariann Fischer Boel we heard that might impinge on the "green
box" in the WTO talks.
Mr Mandelson: I would be a bit nervous of reform
moving in that direction because we are starting to become close
to the sorts of trade distorting programmes that the United States
like to operate. I would be a bit wary of that, without anticipating
where Mariann wants to take the reform process. The straight answer
to your original question is there is nothing happening in the
Health Check that I would either want or expect to impinge on
the offers we are making in this trade round. Frankly, in Mr Sarkozy's
view, we are taking our offers beyond what we can afford.
Q754 Lord Cameron of Dillington:
Can it go further?
Mr Mandelson: I would say up to the limit of
what we can afford, but there is room for disagreement and there
is a very strong view that I am stepping outside the mandate,
I am stretching the 2003 reforms to breaking point, that a combination
of domestic support reduction plus the tariffs that we are dramatically
reducing, plus the progressive phasing out of export subsidies,
is going to leave European agriculture in an extremely vulnerable
state. I do not accept that. Our agricultural sector in Europe
is both shrinking and becoming more efficient and competitive
as it becomes more market-oriented. Our demand for agricultural
produce and food is outgrowing our ability and the capacity of
our shrinking farm sector to provide for that. We need to import
more because demand is growing. Frankly, we will be importing
more of what we cannot compete with on efficiency and cost and
price terms through domestic production. That does not mean to
say that the agricultural sector in Europe is disappearing, it
is becoming more lean, more specialist and more competitive, driving
growth in agricultural good and processed good exports. It is
doing very well but it is changing, it is not the same as it was,
and it does not have the same mass commodity production that it
once had. Why? Because we can get things cheaper from elsewhere
and in the meantime produce those things that we are best at and
good at exporting and see ourselves in premier place in the export
league tables. We are sustaining whilst changing. Our competitiveness
and export capacity is growing whilst our demand for food is also
growing and, therefore, our imports are increasing. We are also
coming out of certain international markets as we grow in others.
There is a lot of change. The end that we will see is a more market-oriented,
more competitive and, therefore, more sustainable agricultural
sector in Europe than the one we have seen in recent decades.
Do we have to do more to take European agriculture in that direction
through the Health Check or the ensuing reforms in order to meet
our commitments in the world trade talks? No, we do not and I
would say that we are at the outer limit of what we can offer
in those trade talks and I would not ask for or expect any Health
Check to deliver a better offer which is more within our means
in the agricultural part of those negotiations.
Q755 Viscount Ullswater:
I think you explained that the reforms of 2003, the introduction
of the Single Farm Payment, had allowed you to negotiate on the
fact that we were not supporting farmers with national aids which
might contradict your negotiating position. The marketplace has
improved the situation for the arable side but there has been
a certain amount of comment about whether the beef and sheep sectors
can manage just with the Single Farm Payment. You touched on it
a moment ago saying that we will be importing a huge amount of
sheep and beef from South America and other parts of the world.
That might severely damage the European beef and sheep markets.
Is it possible that things introduced under Pillar II in rural
development can be undertaken to support these sectors without
running up against your problems with trade?
Mr Mandelson: They can, but without re-coupling
payments to production. At the end of the day they have to produce
the sort of quality at the sort of price that people want to buy
and are prepared to pay for in Europe and elsewhere. That is the
bottom line. Of course, the Single Farm Payment scheme, which
necessarily provides fully decoupled payments to farmers, can
sustain a local production capacity and quality of life and integration
of the rural economy and rural way of life which would support
beef and sheep farming. In my view, a condition for that cannot
and will not be a reversion to the sort of production linked subsidies
that have had such an impact on world markets in the past.
Q756 Chairman:
One of the moans that we frequently get from our producers is
that on the one hand they have been urged to become more market-oriented,
which they have undoubtedly become, yet on the other hand they
are being landed with increasing costs, specific costs on the
environmental side, animal welfare and stuff like this, and saying,
"We are trying to be more market-oriented but we are having
these costs put on us which significantly disadvantage us in the
global marketplace". What is the response to that moan?
Mr Mandelson: I suppose the response I would
make is the obligations that we are placing on them, the standards
that we require of them, are designed to make them competitive.
In a sense, we are going where the market is heading in any case
and we are going to produce quality products which people can
absolutely rely on in health and other terms which will correspond
to the sorts of high standards that European consumers, and people
like European consumers, want to pay for. We are at that end of
the market and, frankly, in that sense agriculture is no different
from any other production sector in Europe. We are competing in
a very, very tough global economy with premium products, added
value, high standards, whether it be high technology linked manufactured
goods or agricultural produce and foodstuffs.
Q757 Lord Greaves:
I agree with all that but at the moment the farmers who are holding
their heads above water, or some doing very well perhaps, are
being subsidised to do that and if you take away the subsidy can
they still survive in that market?
Mr Mandelson: If it is non-trade distorting
and if we can reflect this in the payments that we make in a continuing
progressive move towards a "green box" from the most
to the more trade distorting forms of expenditure, yes, we can
maintain that. Look at what they are getting back. What they are
getting back when they have to operate high animal health standards
is protection from the sudden and savage economic impact of an
outbreak of animal disease, whether it be BSE, avian flu or bluetongue
disease. They might think, "Thank you very much for helping
us save us from ourselves, as it were, but you had better continue
to support us otherwise it is just going to become so onerous
for us to operate and maintain these standards when others in
the world are failing to do so", and my answer to that is
we cannot in this sector, animal originated goods, see a race
to the bottom. Our task is to drive standards up. If people cannot
meet our standards then they will not get their products into
our market. I face another pressure on me from developing countries
who then say that this is just protectionism by another name or
by another means.
Viscount Ullswater: Non-financial tariffs.
Q758 Chairman:
Mr Sarkozy.
Mr Mandelson: "What you are doing is saying
with one hand you are getting rid of your trade distorting subsidies
but, on the other hand, you are setting the bar so high in the
standards you require that you know we could not possibly compete
with you and that is how you are favouring your domestic producers".
It does not happen quite like that, although we will face a difficult
decision possibly in the next week. Perhaps I should not discuss
the success with which Brazilian beef is now—
Q759 Chairman:
That was what I was going to raise.
Mr Mandelson: —meeting our SPS standards.
Let us not anticipate the discussion that I am going to have to
have with one or two other Commissioners in the coming week, but
Brazil needs to know that if it is producing safely and supplying
meat that corresponds to our standards there will be no penalisation
of their produce by our trade distorting subsidies and no artificially
high SPS standards which will be a bar which is impossible for
them to get over. They need to know that, but at the same time
they need to put in place operational arrangements, which at the
moment they are not doing entirely and fully, and if they choose
to step in line in ways that we are entitled to expect and ask
them to do then there will be no barrier to their products, however
painful it is for us to take in so much of their meat.
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