Examination of Witnesses (Questions 840
- 848)
WEDNESDAY 12 DECEMBER 2007
Mr Callton Young, Ms Ruth Rawling, Mr Tim Innocent
and Mr Simon Harris
Q840 Viscount Ullswater:
The sugar regime was a very false regime anyway, from some way
back, of maintaining prices which were not equivalent to world
prices. Are there any other sectors which have slipped into this
position which we ought to be taking note of?
Ms Rawling: I think the sugar regime has always
been somewhat unique.
Q841 Chairman:
I do not want to distort our discussion actually because we have
done quite a bit on sugar in the past, so I do not think we ought
to spend too much time on it. I appreciate its importance and
I think if there are general comments that you want to make on
sugar, fair enough, let us hear them now and then finish it for
sugar.
Mr Innocent: I think the more general comment
would be that should the reform go through in the way that is
envisaged then there would be a shortfall of sugar at the European
Union level, and therefore imports of sugar and ready access is
very important, so in all of the reform we should keep our eye
on that and make sure that that access is maintained.
Ms Rawling: Simon, one last word?
Mr Harris: Two points. I would like to agree
very much with what Tim has said about the way the reform of the
reform has changed the original premise. The original premise
was that you were going to take out the least efficient capacity.
That has turned out not to be working properly for a whole host
of reasons. The reform of the reform in effect means that everyone
has to share the pain of adjustment, which means some of your
most efficient capacity is going to have to come out. We are going
to have to give up some capacity. We are the lowest cost processor
in Europe and we are going to have to give up some, which is perverse,
so that is one issue. That leads into the second issue which is
that the Commission has set this up to provide scope for increased
imports from developing countries, and here we are talking not
only the least developed countries, of which we know of about
50 on the United Nations classification, but also now the whole
of the ACP, that is the rest of the African Caribbean and Pacific
countries which are not LDCs, so the effect is you are going to
have quota free and duty free access from a very large chunk of
the developing world, including virtually the entire African sub-continent
plus parts of the Caribbean and the Pacific and Asia. The question
then becomes whether they are actually going to be able to take
this up or whether the European Commission has been rather too
gung-ho in saying we need to cut back on quota.
Chairman: Fine, let us move on to the
environment and Baroness Jones.
Q842 Baroness Jones of Whitchurch:
We have touched on the whole issue of the environment already
and the impact that the pressure that we are under to switch money
from Pillar I to Pillar II is having. I understand your argument
for compulsory modulation and a level playing field and so on,
but do you have some sympathy with the argument that we should
be giving more of the CAP money to Pillar II to have those wider
environmental concerns taken into account, perhaps moving away
from just a concentration on food security and price?
Ms Rawling: Yes, I think overall our members
believe that for the market in food and agriculture to operate
efficiently you need the market determining what farmers produce
and what the food industry is producing for consumers and what
government money is there for is public goods and where the market
is failing. Therefore we certainly are fully behind the overall
move from supporting prices (which is market distortion) into
supporting other public goods such as the environment, which is
clearly becoming a concern for all of us. I think on a broad level,
yes indeed, that is not a concern to our members. What is a concern
is whether for example UK farmers will have to face a lot more
environmental constraints than farmers in other parts of Europe,
and indeed farmers globally. Our overall preference—and
again this is something that is going to take some time to get
there—is to see environmental externalities taken into account
internationally. That would be our ultimate aim here so that not
only UK farmers but if there are environmental concerns these
are taken into account broadly. It is the level playing field
argument for us and our competition as manufacturers vis-a"-vis
other manufacturers as well.
Q843 Baroness Jones of Whitchurch:
But do you feel you are having pressure from consumers on the
organisations you represent almost to be one step ahead, to champion
some of these issues? It seems that there is an increasing consumer
concern out there. People who are buying your products would want
you to have a strong environmental or at least an environmental
bent. Do you do that?
Ms Rawling: Absolutely. In fact, very recently,
in October this year, the FDF launched its environmental ambition,
which is the ambition of our members to focus on particular areas
of the environment in the next few years and reduce emissions,
reduce resource use, et cetera. Callton, I do not know if you
just want to explain a bit more in detail about that.
Mr Young: We launched our five-fold environmental
ambition on 25 October. Those are ambitions to reduce our CO2
footprint by an absolute reduction of 20% by 2010, to aspire to
a 30% reduction by 2020. If we achieve the 30% reduction that
is equivalent to saving 1.5 million tonnes of CO2 per year or
taking 350,000 cars off the road per annum, so it is quite a significant
commitment. We have also made similar commitments in relation
to our water use and in relation to producing fewer and friendlier
transport miles. To answer the question, you are really saying
is the drive coming from consumers. I have quickly flicked to
some IGD research which shows how consumers react, and this was
also done by Defra in the context of sustainable consumption and
production, which shows that price is king. It always has been
in the sense that consumers put that at the very top. Then it
is taste, then it is sell-by date, then it is brand, then it is
healthy, then it is appearance, convenience, and it gets down
to country of origin and quality marks. If you ask the consumer
in the street is the environment important they would say yes
but whether that translates into behaviour remains to be seen.
What we at FDF are doing is making sure that we behave as good
corporate citizens and so we have got our five-fold ambitions.
We are going to be more resource efficient and there will be a
degree of choice in this. We are making sure that our products
are environmentally friendly and that is what the consumers would
expect of us, even though they would not necessarily be prepared
to put it at the top of their list.
Q844 Chairman:
I know it is undeliverable but if there was an environmental requirement
built into WTO would you support it?
Mr Young: It depends what the requirement is,
I guess.
Q845 Chairman:
That would give you a level playing field, would it not?
Mr Young: Exactly, and on that basis, yes, because
our 30% aspiration on CO2 reduction really is a recognition that
at the moment many UK food manufacturers operate internationally
and want to lead by example by going for that much tougher target
in advance of the Climate Change Bill, in advance of anything
being proposed by government for our sector, because we think
it is right and proper and because climate change really is the
biggest issue facing this planet. If you galvanise that at WTO
level then I think it has got to be something we would consider
very seriously and want to support.
Chairman: Last question.
Q846 Earl of Arron:
Two very simple questions to end up with. Under the subject of
enlargement I would imagine that your companies would be able
to extend their marketing activities into the new Member States.
Is it probable that some will wish to relocate to areas where
labour costs currently will be lower and markets for processed
foods seem likely to grow reasonably rapidly?
Ms Rawling: I think, as I mentioned before,
this whole shifting of manufacturing locations issue is not something
we really want to make a great play of. At the time of enlargement
there was a limited amount of relocation into the countries which
were newly joining the EU, but it was limited, as I said before,
mostly to the confectionary sector. I think today already the
conditions in those countries are changing such that it would
be less advantageous than it was a few years ago to move, and
since we only saw limited movement then I think we are not likely
to see a great movement in the next few years. Labour costs of
course are significant but they are only one factor in the whole
range of factors that go into a food manufacturing facility. If
we have a level playing field on raw material prices, across the
EU at least, raw material prices being a significant part of our
cost, then that would be something mitigating against moving a
facility. There are lots of things that come into it here and
labour costs are only one of them.
Q847 Earl of Arron:
You mentioned changing conditions in your first answer. Where
are the conditions changing?
Ms Rawling: What has happened as these countries
have joined the EU and joined the various EU systems and schemes—and
I do not have data in front of me and I do not know if Callton
you do—what you see then is rising wage levels, you see
rising prices, et cetera, from the levels they were at just before
they joined the EU for example, and I am sure that can be documented.
Mr Young: Yes.
Q848 Chairman:
Right, I think that is it. Thank you very much indeed all of you,
you have been most helpful.
Ms Rawling: Thank you very much for inviting
us, Lord Chairman.
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