Examination of Witnesses (Questions 1-19)
Mr Gareth Thomas, Ms Rosalind McCarthy-Ward and Mr
Fergus Harradence
16 OCTOBER 2007
Q1 Chairman:Good
morning, Minister. When we get started I would like to ask you
to introduce your colleagues for the benefit of the shorthand
writer. This session, as I am sure you know, is on the record,
and is being recorded for web cast. You will get a transcript
of what is said during the session. I would like to start by thanking
you for your July explanatory memorandum on Free Trade Agreements.
I do not know how you want to do this—you have had a list
of our questions—but would you like to introduce the subject
by making an opening statement, or would you like just to get
started?
Mr Thomas: Baroness Cohen, I am happy just to answer
your questions.
Q2 Chairman: In which case, if we
may, I will start. This Committee has not really thought about
Doha and trade for a year because we have all sat hoping that
there would be huge developments about which we could ask you.
In the lack of enormous developments we are going to use this
session as a start-up, if you like, to decide where we are as
the government of the United Kingdom, and what your views are
on the future of the Doha Round. If I may start with a background
question? The government's position is that an "ambitious
and pro-development outcome to the Doha Development Round should
remain the European Union's top priority". What is your current
assessment of the likelihood of this outcome occurring?
Mr Thomas: Baroness Cohen, thank you for that
question and in line with your instructions at the beginning of
the session can I introduce Rosalind McCarthy-Ward, who is the
Director of Trade Operations at the Department for Business and
Enterprise, and Fergus Harradence who is the Head of the Multilateral
Negotiations Unit. To take your question, I think we are at a
particularly important moment in the Doha Round. If we cannot
get agreement soon on the modalities, the exchange rate between
the key issues, where the bulk of the energy is at the moment
in Geneva, then we risk not getting agreement before the American
Presidential elections and then the benefits, of which I am sure
the Committee are aware, that potentially flow from a Doha Round
would obviously be substantially delayed. Our assessment is that
there is progress in Geneva; that the publication of the Agriculture
and NAMA[1]
texts in July was a particularly significant moment. The fact
that all the key players are using these texts as the basis for
further negotiations we think is encouraging. What we are hoping
we will see shortly is revised texts being published, particularly
on agriculture and NAMA, but also in other areas too—environment,
rules, trade facilitation and potentially, too, a general statement
on services, and we hope that will happen in early November. That
potentially leaves the way open for further agreement discussions
and ultimately, we hope, a WTO appeal meeting to close progress
on the headlines. I believe I give you what I hope is an optimistic
and encouraging picture. I do not think that the gap between the
key players is that huge but obviously all the key players will
have to give some more ground if we are to reach agreement within
the timescale that I have set out.
Q3Chairman: Can I
ask a supplementary question, what do you see as the principle
stumbling blocks? What are the principle things in the way?
Mr Thomas: I think there are three issues at
the moment which form the trinity of issues where the real energy
is focused in Geneva at the moment. The first is the levels of
market access that developed countries are going to have to offer
in the agricultural market access negotiations. The second is
the level of domestic support for agriculture in terms of the
cuts that will be required, again by developed countries, particularly
the US but also the European Union. The third issue is the level
of market access that developing countries will have to offer
up in the NAMA negotiations. Those three issues and the inter-relationships
between the three is where the key dynamic is at the moment and
where the gaps, relatively speaking, are not huge, but obviously
in terms of domestic audiences there are, nevertheless, all sorts
of concerns domestically in the various key countries as to what
giving further progress in those areas, further concessions would
mean. I should also say that there is at the moment a difference
of ambition in the services negotiations and there are obviously
different views on other parts of the dossier, but the key are
the three issues that I have described. As I say, the gaps there
are not huge but they are there and we have to try and close them
over the next few weeks.
Chairman: I know that colleagues will want to ask
about the detail. Lord Blackwell.
Q4 Lord Blackwell: Can I ask one
supplementary on that? Clearly opening up of the agricultural
markets to developing countries has in the past been seen as a
very important part of the development process. Over the last
year there has started to be a counter-argument coming from the
climate change lobby over the dangers of long-distance transport,
etcetera, and I wonder whether that is becoming a complicating
factor in these negotiations in terms of it potentially being
used as an argument to slow down or block liberalisation of agricultural
opportunities?
Mr Thomas: We are not seeing the so-called food
miles debate playing out in the negotiations as such. We have
been very clear that of course we have to look at the contribution
that aviation makes to carbon dioxide emissions, but we have to
be equally careful that we do not penalise the poorest people
in the world who are least responsible for the amount of carbon
dioxide emissions that we are seeing. So I do not think that that
is a dynamic that we are seeing in the negotiations, but I agree
with you that we are very alive to it and have started to run
in some circles here in the UK and elsewhere. The Soil Association,
with which you may be familiar, initiated a consultation process
which has generated particular interest in the whole food miles
question, and we have taken part in that and given clear views
in that and we will wait to see what follows.
Chairman: Lord Cobbold.
Q5 Lord Cobbold: Given the length
of negotiations and the difficulties experienced, particularly
with the United States and the Doha Round, can the Doha Round
still be said to be alive and is there still an appetite for Multilateral
Trade Agreements?
Mr Thomas: I think the Doha Round is very much
alive. As I have said, it is at a critical point but we have seen
and are seeing energy in Geneva. When I have been and when I have
talked to ambassadors who have taken part in those negotiations
they are certainly not sitting around in the mornings at home
not taking part unable to think about other things; they are very
focused on the negotiations and there is real energy there. I
accept the point that in a sense the round has taken a long time
but the previous round, the Uruguay Round, took a considerable
period of time—many ups and many downs. I think the key
will come in the next couple of weeks when we see whether or not
the two ambassadors who chair the Agriculture and NAMA negotiating
groups can narrow the so-called landing zone, which they encapsulated
in the two texts that they published first in July. If they can
do that then I think we can have real optimism that we may well
be able to get a deal and get the headlines of a deal agreed by
the end of the year. But I was honest and said that that is an
optimistic scenario.
Q6 Lord Blackwell: Is the USA still
involved positively in any discussions?
Mr Thomas: The Americans are involved positively
in the discussions. We welcomed the fact that they did accept
the agriculture text as the basis for negotiations. We have been
very clear in the conversations that the Prime Minister has had
with President Bush and that other ministers have had with their
trade negotiators that we want the Americans to give more ground,
in particular in terms of their domestic subsidies, and we await
to see what progress takes place over the next couple of weeks.
But, yes, they are very much engaged.
Chairman: Lord Giddens is going to ask about the
effect on so-called third world countries.
Q7 Lord Giddens: I am going to ask
a two-pronged question. The first one, is that given all the struggles
between the developing countries during the course of the round
do you think that the Doha Round can deliver clear benefits for
the least developed nations, as was originally envisaged?
Mr Thomas: I think it can do. At one of the
previous ministerial meetings that took place in Hong Kong we
did see focus on the particular interests of developing countries,
so there was an acceptance that there needed to be 97% duty free,
quota free market access for the least developed countries and
much more market access for cotton products, for all LDCs, for
example. There was agreement on the need for special and differential
treatment for the least developed countries; there was agreement
on the need to cut export subsidies. So all of those things will
bring additional benefits to developing countries. We will actually
go further than that; we want to get agreement to a timescale
for 100% duty and quota free access, for example, and we still
think that that is very much part of the discussions that need
to take place in Geneva as part of the Doha Round of talks. That
is one of the reasons why we continue to stay as closely involved
with the concerns of the LDC group and other developing countries
as we do. So I have held talks with the key negotiators who currently
chair the LDC group and we have had conversations too with those
who represent the African group in the round too. So I think there
will be benefits but we think that there could be more benefits
and we are very much continuing to argue for those additional
benefits.
Q8 Lord Giddens: This is not my second
question, this is a supplementary question in that given that
there is a 2008 review of CAP and the EU budget do you think that
it might make things easier by actually changing the CAP and then
more can be achieved than at the moment? Most of the developing
countries obviously see the developed countries' agricultural
policies as one of the main barriers to reaching agreement anyway.
Mr Thomas: One of the particular benefits we
think for developing countries will be if we can make progress
on reducing export subsidies in agricultural terms, and they are
absolutely right to make that point. I think we have seen already
the significant reform of the Common Agricultural Policy and indeed
if we had not then the negotiating that Peter Mandelson has been
able to adopt in the talks would obviously be much more limited
than indeed it is. We do want to see further progress on the Common
Agricultural Policy; not least we want to see a reduction in the
overall budget for the Common Agricultural Policy, and we are
involved in a whole series of preparatory work for the budget
review next year. But I do not think that the Common Agricultural
Policy as it is currently constituted is hindering the EU's negotiating
position—I think that Peter Mandelson has the flexibility
he needs. But there are also other benefits that we think will
come to the European Union if we can make further progress in
terms of CAP reform.
Q9 Lord Giddens: It is very widely
resented.
Mr Thomas: There are a lot of concerns about
the Common Agricultural Policy.
Q10 Lord Giddens: They may be ill-informed
concerns but when you go around the world a lot of people feel
strongly about it.
Mr Thomas: They do feel strongly about it and
they also feel strongly about the subsidies and tariffs of a whole
series of other countries in terms of agriculture. As I say, the
position that the Commissioner has been able to adopt I think
has demonstrated considerable flexibility from the EU, a real
willingness to cut our subsidies and to increase access into European
markets. But I think there are a whole series of other benefits
to CAP reform, for British consumers and for European Union consumers
more generally. So CAP reform is potentially a win-win for developing
countries on the one hand but also for consumers here in the European
Union as well.
Q11 Lord Giddens: The second question
was about services. You mentioned services in passing and Pascal
Lamy recently said that concluding a deal on services is crucial
to concluding the Doha Round given that 68% of the economy now
consists of services and I wondered what your views were on that
and on the difficulties of assessing the nature of the services,
and he said that it is not a north-south issue any more because
of the crucial importance of services to developing countries,
and I would tend to agree with that and think that it is obviously
a slippery, elusive kind of thing compared to things where you
have clear quotas. So can you give us the benefit of your thinking
on that?
Mr Thomas: I think he is right to say that it
is no longer the north-south issue as it was perhaps once seen,
and we certainly want to see ambitious progress in terms of the
services negotiations. We are not likely to see that if we cannot
make progress on the three key issues in terms of agriculture
and NAMA that I mentioned at the beginning, and it is the exchange
rate between those three which I think will be key to our lock-in
progress in the services negotiations. We are very clear that
we want to see progress in that part of the dossier, just as much
as we do in agriculture and NAMA. Indeed, those are the concerns
in particular of British businesses where we think, in a sense,
most benefits potentially lie alongside NAMA, is in the services,
is in opening up services markets.
Chairman: Lord Jordan.
Q12 Lord Jordan: I was able to attend
a number of the trade round meetings, including Doha, and it seemed
fairly obvious to me, and others, that the big players from the
developed and developing world were soon going to reach the politically
super-sensitive issues and start to back off. I think we have
reached that point now, and while we hear the British Government
and others preaching commitment to the Doha Round they are actually
acting on alternatives to that. So much so that the WTO has reported
that the EU's bilateral trade negotiations with countries such
as India, South Korea and the ASEAN states "could further
complicate its trade regime, and divert interest from the multilateral
trading system". Does the government agree? If so, why are
these negotiations occurring? And as a supplementary to that how
does the Commission choose with whom they are going to negotiate
on these Bilateral Agreements?
Mr Thomas: I do not think there is any lack
of commitment to the Doha Round from both the UK and the European
Commission more generally. As I have said, there is real energy
in Geneva. The Prime Minister and both the Secretaries of States
for Business Enterprise and for Development have been engaged
in very heavy lobbing work, as indeed have I, and indeed a number
of other ministers, which I think is a reflection of our determination
to prioritise Doha over the coming weeks and months. That being
said, we have supported the Commission's desire to open negotiations
with, in particular South Korea, India and the ASEAN nations.
I do recognise the concerns that if you just continue to have
Regional Trade Agreements being negotiated you end up—somebody
used the phrase—with a spaghetti bowl of confusing trade
rules that undermine the multilateral negotiations. We just need
to recognise the reality that Regional Trade Agreements and Bilateral
Trade Agreements are part of the modern world economy and do bring
substantial benefits to the various parties involved. In order
to try and make sure that Regional Trade Agreements can be in
a sense locked into multilateral processes we have supported the
EU adopting a common framework for its Regional Trade Agreements,
so that there is not that undermining process. You also asked
then how we choose. Obviously in part we look at the appetite
for negotiating with the European Union from particular countries
and the potential for progress in the negotiations that will benefit
European Union interests.
Q13 Lord Jordan: You have mentioned
the appetite of the countries in the European Union and you have
also mentioned the Bilateral Agreements. There were always Bilateral
Agreements but it was under that system that a large part of the
world was losing out and we wanted trade to engulf them and enrich
them. The direction that is now seen to be taken is going to turn
us back down that road and it does seem to me and others that
Bilateral Trade Agreements by the EU in fact will not help the
less developed. In fact it is almost a corollary of the fact that
the big boys get to the politically sensitive issues so they then
choose a system where they can politically safely cherry-pick
with the countries they want and the issues they want. How are
you going to avoid those that have least being left out?
Mr Thomas: I would not be as negative in terms
of the scenario that you paint but I do recognise the concerns.
One of the reasons why we are prioritising Doha and putting as
much energy in to trying to unlock the momentum that is necessary
to get agreement is because we do think that a multilateral round
offers the most potential for developing countries in terms of
the benefits available. But we do also think that you can secure
a whole series of benefits for developing countries through Regional
Agreements. The idea, for example, that India or South Korea are
going to be bullied into agreements that they do not want to have
I think is just unrealistic. I think they have the capacity to
negotiate, they have the appetite, they are very clear on what
they want from the European Union, and the ministers who lead
on those negotiations and the calibre of officials in their trade
negotiating teams does not suggest that India and South Korea
are going to suffer as a result of negotiating a Regional Trade
Agreement with the European Union. Where perhaps we do need to
continue to focus attention is on the needs of the least developed
countries and one of the things that we have been particularly
keen to support, for example in the European Union's negotiations
with the ACP regions through the Economic Partnership Agreements
is an offer of 100% duty and quota free access to the European
Union's market. That was one of the things that we argued for
in the position paper that we published back in March 2005 and
we have been encouraged by the growing support for that position
and indeed by the Commission's willingness back in March of this
year to put that offer on the table.
Q14 Lord Jordan: India and Korea
are not the first countries that come to mind as poor developing
countries. When I was asking the question I was thinking more
of what you were going to do for Burkino Faso and I hope that
as this development unfolds that the government will build in
a higher commitment to the European policy that does help the
ACP countries.
Mr Thomas: Let me just say India has 350 million
people who live on less than a dollar a day and so we see huge
potential for India in terms of the Regional Trade Agreement,
in terms of being able to sell goods into the European market
to help further drive economic growth in India to lift its own
citizens out of poverty. But I take the point about Burkino Faso.
Again, that is one of the reasons why we have welcomed the European
Union's "Everything But Arms" initiative, which again
gives considerable access into the European Union's market. It
is one of the reasons too why, as you say, we have put a lot of
time and effort into keeping in touch with the negotiators for
the six different regions in the EPA negotiations, to make sure
that we understand their concerns. We have helped to fund some
of the negotiating teams, for example in the Caribbean and some
of the African groups who have been negotiating with the Commission,
precisely to make sure that they can negotiate from a position
of knowing what particular proposals in those negotiations will
mean for their countries. So, Lord Jordan, I think we are very
focused on the needs of the least developed countries, whilst
also recognising the benefits more generally speaking of Regional
Trade Agreements for British business and for European business
interests as well.
Q15 Chairman: Can I pick away a little
on this because it seems to me to be a very critical point as
to whether Bilateral Agreements are fundamentally undermining
the Doha Round. Take the example of a country like Pakistan, which
is desperate to get into bilateral negotiations with the EU. Why
so? Because they believe that this is the way forward and that
there is not another way forward for them. How far has all this
got? The EU has picked three sets of people to negotiate with,
by whatever means; is there a shadowy list of people waiting to
negotiate Bilateral Agreements with the EU? Is there a lot of
pressure from other people? I just happen to know about the Pakistani
pressure but is there a list of people waiting, hoping to engage
in bilateral negotiations?
Mr Thomas: I think the European Union's market
is hugely attractive to all sorts of countries and I am sure there
is a real appetite to get even further access to the European
Union's market. We see the best route to do that as being through
the Doha Round, albeit there are these other Regional Trade Agreement
discussions beginning to start, and we think it is perfectly right
and proper that they should do so. To try and make sure that we
properly understand the impact of those Regional Trade Agreements,
we have been very clear that the EU needs to carry out proper
Impact Assessments to see whether there is any displacement of
trade between countries as a result of the Regional Trade Agreement
and obviously if those Impact Assessments generate real concerns
then we will factor that into our negotiating stance.
Chairman: Thank you. Lord Blackwell.
Q16 Lord Blackwell: Can I ask about
the parliamentary scrutiny of negotiating mandates? I think we
all understand that it is very difficult for the EU to disclose
to the world those red lines, as it were, on negotiating mandates
before going into the negotiations. On the other hand, it is quite
difficult for Parliament to scrutinise the negotiations until
the end point is reached if the mandates are—I think they
described as "limite" documents—which are not
available to Parliamentarians. Do you have any thoughts on the
proper role that Parliament can play in that process?
Mr Thomas: You are right, there is a balance
between needing to protect our negotiating position and the need
for scrutiny of that negotiating position and tactics. We see
the way to make sure that the parliamentary scrutiny process is
observed and respected is through the provision of explanatory
memoranda and through appearances before Committees like this
one. I have five appearances before Select Committees in the next
five parliamentary days so I hope you think that I am trying to
respond to the needs of Parliament as a result.
Q17 Lord Blackwell: As part of that
you very kindly sent us an explanatory memorandum on the EU's
Bilateral Trade Negotiations covering the point you have just
been talking about—India, South Korea and ASEAN states—and
one of the things we therefore have been trying to understand
is what are the objectives and what are the potential outcomes
from those negotiations. I am in the camp of those who believes
that, given the difficulties of a multilateral approach and the
complexities that evolve from that, actually it is a right thing
to do, to pursue bilateral approaches on the grounds that enough
bilateral approaches can add up to quite large liberalisation
of global trade. Is there anything more that you can tell us to
help us understand what would be a successful outcome in your
eyes to those bilateral negotiations?
Mr Thomas: Perhaps the other thing, Lord Blackwell,
I should mention in terms of the case for pursuing Regional Trade
Agreements alongside pursuing the Doha is that of course other
competitors in the world economy are already themselves negotiating
Regional Trade Agreements and we obviously do not want British
business, European business and interests to lose out on the opportunities
that there are world-wide. I also think that if developing countries
want to negotiate with the European Union for Regional Trade Agreements
then why should we, in a sense, stand in the way of that progress,
particularly if it offers alternative markets to the ones that
are available? In terms of South Korea and India, for example,
we do want to see progress on services and very much so—financial
services, legal services and telecom, for example, are areas where
we think that liberalisation could take place to the mutual benefit
of those countries not only in our business interests but also
to the Indian and South Korean interests too. So those are just
some of the areas that we are looking at.
Q18 Lord Blackwell: So there might
be a policy of where services being our priority maybe trading
some of their goods being their priority and getting a balance
there?
Mr Thomas: Indeed.
Q19 Chairman: A supplementary question,
if I may. I think there is a more difficult question here. In
terms of bilateral negotiations, in terms of any negotiations,
whether Doha or bilateral, the UK on the whole has a traditional
commitment to free trade which has not historically been true
of some of our European Union partners. Do you see any real differences
between the UK position and the position of some of our EU partners?
Does not the EU negotiating mandate entirely reflect the UK position?
Mr Thomas: It is no secret that we would have
wanted an even more ambitious CAP reform earlier in the process
and one takes particular stances in negotiations and we recognise
that you are not always going to achieve everything that you want
first off. However, we do have in terms of Doha and in terms of
agriculture, I think, significant flexibility to show. I think
that Peter Mandelson has played Europe's hand extremely well and
I think that developing countries have appreciated the flexibility
that the EU has shown. That does not mean to say that we are not
going to be engaging very actively in the budget review discussions,
as I alluded to in answering Lord Giddens' question. Inevitably
when you prepare your negotiating position amongst 25 States there
are going to be differences of view and there are always robust
discussions before the negotiating mandate is finally concluded.
That was true when we were preparing for Doha and it has been
true since, as we have Commissioner Mandelson who has reported
back on the outcome of those negotiations to date.
1 Non-Agricultural Market Access (manufactured goods) Back
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