Select Committee on Agriculture Minutes of Evidence

Examination of witnesses (Questions 40 - 59)



  40. But we have been urged to delay this for five years, by which time presumably many more children—you gave the example of the mortality rate of children in Mozambique and Angola—will be dying when they could perhaps be benefiting from a growing economy.
  (Mr Caborn) You may be right, but we are moving at a pace at which we take people with us and what we have been able to do in the last few years is move the agenda forward in terms of debt forgiveness, restructured economies and opening up the developed world's market in a systematic way. What we have seen, even though we were not successful at Seattle, is that at least countries like Canada, Australia and the European Union are now coming to the point of view that they have to get their markets to access the LDCs' goods and services. That is to be welcomed and it will eventually resolve those problems you are talking about.

  Chairman: I am trying myself to move the Committee apace but you are exciting some of our members and I am getting signals all over the Committee now.

Mr Worthington

  41. You referred to the sugar price for the EU being about two and a half times the world price and Minister Quin referred to the overproduction of sugar in some countries. Could you give us an idea of what happens to the overproduced sugar, what happens to the surpluses and in what countries is this sugar dumped?
  (Ms Quin) It is basically dumped on the world market via export subsidies, which is how the EU sugar system has worked for many, many years.

  42. What is the scale of the dumping?
  (Ms Quin) The figure for the amount which was exported last year was something in the order of three million tonnes.

  43. Refresh my memory about how much sugar is involved for the least-developed countries?
  (Ms Quin) In terms of sugar which is coming into the EU market, at the moment there is 1.3 million tonnes guaranteed under the ACP agreement and then there is something like 300,000 tonnes under the special preferential sugar system.

Mr Borrow

  44. Figures which the Committee have are showing that production in the EU of sugar last year was 16.7 million tonnes, consumption was 12.68 million tonnes, imports under the agreement were 1.3 million tonnes and there is quite a gap between what is available to be consumed and what is actually consumed. We know that three million tonnes or so are exported through the EU subsidy. I assume then that the rest of it is stockpiled and should these proposals go through and more sugar be imported from the least-developed countries as a result of these proposals, we will presumably either have to find additional subsidies to export them or additional stores to stockpile them and there could be a problem with GATT when we have already undertaken to reduce the amount each year that we export using the export subsidy scheme. Am I correct in that?
  (Ms Quin) In terms of what tends to be in stock, it is about 1.5 million tonnes but it is seasonal, because sugar beet is a seasonal industry. There are storage aids which allow the sugarbeet industry to plan over the whole of the year, so sometimes in the year the stocks will be lower than that and sometimes they may be more than that. Although the stocks are in these private storage arrangements, they are not of themselves a huge factor in the overall regime and that can be seen from the figures you quoted.

Miss McIntosh

  45. Is either department in the position to assess the quantity of sugar which might come in from least developed countries? If they are, would the main impact of that new amount of sugar coming in be on producers within the Community, as in our home producers, or on ACP suppliers?
  (Ms Quin) My instinct is that in the initial stages it would be more likely to affect the ACP special preferential sugar section simply because that is a variable component. You have the guaranteed 1.3 million tonnes which come in from the ACP but the special preferential sugar is an additional flexible arrangement. That could be substituted by LDC sugar. That seems to me to be where the impact is first likely to be felt, but I have to say that a lot still depends on what the Commission decides and what the final shape of the proposal is. That is my guess at the moment.

  46. If that is the case, would the Minister accept that not only would it be difficult in this country to get our producers to diversify, because sugar beet is a rotation crop—at the moment as you will appreciate in north Yorkshire we cannot even get it out of the ground—but that diversification problem is even more of a problem for ACP producers because under the EBA proposals we are going at both sugar and bananas which are two of their most staple crops?
  (Ms Quin) That is why the points the Minister for Trade made about the work that both the Department of Trade and Industry and DFID are doing in terms of working with the ACP countries is extremely important. It is also why a transition period has been decided for these particular products. Let me say that earlier on you referred to employment in your own area and we are very conscious of employment in the British sugarbeet industry. It is only fair to say, however, that we also get lobbied by sugar-using industries, who employ a huge number of people in the UK, about the costs that the sugar regime has on them. I am not at all decrying the importance of employment in the sector and indeed the area she referred to, but at the same time I just wanted to make the point that there are many employment considerations in this particular issue.

  47. Is that not a further argument to slow the whole procedure and decision making down?
  (Ms Quin) It is an argument in favour of an orderly transition, that is certainly true.

Mr Curry

  48. I do not want to come away with a sense of the Minister for Trade's views which may not be accurate. I understood him to say in relation to the impact assessment the European Community was going to make, that because the quantities were so small and because there was some sort of safeguard clause against surges, the impact assessment did not really matter.
  (Mr Caborn) No, that would be wrong. What we are trying to do in this and indeed many other industries, textiles is another industry we are having to deal with in the globalisation of trade, there are many industries, the MFA agreement is another area which is creating difficulty which we have to manage through ... No, there will be a continuing assessment of how we are managing that change of which this impact assessment we are talking about from the European Community will be another tool in making sure that we can manage that transition in the most effective way possible. So you would be wrong.

  49. This is an assessment then of the impact as it is happening in your terms not an assessment of the impact which might happen.
  (Mr Caborn) It is both. It would be both.

  50. But it cannot be because you said before that you would anticipate decisions being taken before an impact assessment had been concluded.
  (Mr Caborn) Yes and I said that the one thing we have in that is to make sure that effectively an assessment has been made, which I have given you today, which is the amounts which are exported by the LDCs.

  51. That is not an assessment, that is a factual situation.
  (Mr Caborn) It is a factual situation.

  52. An assessment is an impact.
  (Mr Caborn) What I have said is that we are now content with what the Commission tell us in terms of being able to safeguard any effects on the British industry and indeed the European industry because there is a safety valve in the system which says that if there is a surge we have the right to take action.

  53. Is that a surge on a national market or on the European market as a whole?
  (Mr Caborn) That is on the European market.

  54. Not a national market.
  (Mr Caborn) Then we would have to look at it in the national context as well.

  55. Hang on. What does "the national context" mean? We have a currency situation in Europe with a strong pound, weak euro, whichever way you want to look at it. That is an important impact upon the direction of trade flows. So what happens if the impact happens to be particularly severe on the UK, but in the European Union market as a whole it is relatively small because the quantities are small. What can we do to defend ourselves against that impact, even if other people are not feeling the same?
  (Mr Caborn) First of all, we would approach the Commission if we believed damage was being done and the safeguards in addition to the fraud measures and the temporary withdrawal provided within Article 22—

  56. Slow down please.
  (Mr Caborn) The safeguard in addition to the fraud measures and the temporary withdrawal provided for in Article 22 of the GSP, Article 28, provides the normal safeguard provisions. Where a product is imported on terms which cause or threaten to cause serious difficulties to a Community producer of like or directly competing products, common customs tariff duties may be reintroduced at any time at the request of a Member State or on the Commission's own initiative. That is one part of it. You know also, Mr Curry, that in the wider context of having to deal with the differences between the currencies, we have had to make some readjustments in our industrial base as well but I think overall that has been managed very effectively indeed. I am not talking just about the agricultural industry, I am talking about the manufacturing industry as well.

Mr Casale

  57. May I shift from producers to consumers and ask what the implications of the "everything but arms" proposal would be for consumers of sugar and also what the implications of these proposals would be for the Community budget?
  (Mr Caborn) On the Community budget, that will have to fit in with the Berlin agreement. I cannot give all the details about that but in terms of the Community budget, the Community budget is set and it was set in Berlin and any actions by the Commission or indeed the Community will have to be within the context of the Berlin agreement; the parameters are set.
  (Ms Quin) On the consumer side the consumer organisations have lobbied over the years very strongly in the UK for a reform of the sugar regime simply because of a distortion between the prices in the European Union and the price outside on the world market. They think very much that consumers would benefit from a reform of the regime and also from a liberalisation of trade.

Mr Bradshaw

  58. Can you say by how much? How much would the average British consumer save if we were paying normal world prices for sugar rather than prices two and a half times normal prices? With the amount of sugar we consume in all sorts of ways we must be talking about a considerable savings to the annual household budget. How much would that be?
  (Ms Quin) That is not an easy question to answer because it depends on a large number of factors such as how much price reductions in basic commodities then get passed on to the consumer, and indeed that is one of the reasons why the European Commission in its proposals on the sugar regime is saying that it will look at the issue of how much reductions in prices are passed on to consumers. It is also complicated by the fact that sugar is used in a variety of ways. One could imagine that a price reduction could be more easily passed on in terms of a bag of sugar, but in terms of sugar-using industries, for example in cakes or biscuits or whatever, since there are so many other factors to take into account it is not clear that you would necessarily have exactly the same correlation in terms of price reduction. Nonetheless, given the big difference between European Union and world sugar prices, the impact is thought to have the potential to be considerable.

Mr Wells

  59. I want to turn to bananas. As we understand it, the tariff preference enjoyed by the ACP banana producers would be crucial both during the transitional period and in the longer term in safeguarding the import arrangements for ACP suppliers from further World Trade Organisation challenges. Would this not be undermined by granting similar preferences to other suppliers, suppliers particularly who were likely to result in the reduction of tariffs from West Africa in particular? Many West African countries are now producing bananas and can increase the amount they produce very quickly, within nine months to a year, and in fact further production could be stimulated within two years.
  (Mr Caborn) The lead on bananas is MAFF, it is not a trade issue.

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