Select Committee on European Scrutiny Minutes of Evidence

Examination of witnesses (Questions 20 - 39)



  20. Did anyone in the EU or in the Commission consult with the ACP group of states about this timetable directly?
  (Mr Caborn) I would imagine there is a continuous dialogue going on inside the European Union and the ACP. I cannot give you specific dates. That is a question I shall try to answer in writing. A piece of paper has just been passed to me so I shall give you the facts. The first session of the ACP/EU Joint Parliamentary Assembly took place from 9 to 12 October in Brussels. Pascal Lamy presented the LDC proposals to the Joint Assembly on 10 October. The Commission proposals for access for the least-developed countries was generally welcomed by MEPs and ACP MPs, although several argued that the preferential treatment for non-LDC/ACP states and highly indebted poor countries (HIPC) should not be eroded.

  21. I have to say that the timetable you read out is an incredibly tight one. It does raise the question of just how realistic it is, given that although we are not dealing with the least-developed countries of the world we are dealing with countries whose economies are very fragile and they have been expected to move very quickly.
  (Mr Caborn) That is true and one has to bear this in mind and it is obviously a matter of political decision at the end of the day. However, when you are faced with countries like Mozambique, which is one which will be able to access this type of arrangement and you are talking there of probably one of the poorest countries in the world with 40 per cent of its people living below the poverty line on less than one dollar a day and one in every five children is dead by the age of five, what we are trying to do, as we have done, is assist in rescheduling their debt. This country has been successful in helping them, through Export Credit Guarantee and trying to build up an industrial base. We are now trying genuinely to complete the virtuous circle in allowing their product to come into the European Union. We think we have a moral and a political obligation to those countries and we believe that managing global trade in the way we are doing is the right way. That is a Government decision. I am very proud to be part of that.

  22. I understand the intentions behind this. I have no argument with them, but I think I would just put it to you that in order to help the poorest countries of the world, there is no point in them giving extra problems to the next layer up. Although they are not the poorest countries their economies are still very fragile. It seems to me that there is no point making their economies poorer by trying to help the poorest. That does not actually make sense. I have no quarrels with what the EU is probably trying to achieve here in terms of health in the poorest countries; that is not the point. What I am saying to you is that there is no point in then creating problems for other fragile economies in attempting to achieve that. That is the point I put to you. Although I did not attend the Westminster Hall debate, which I gather took place last month on the sugar regime, I have actually read the transcript of the debate and questions were asked there about impact assessment studies being done by the EU with regard to the "everything but arms" proposal. Could you confirm whether impact assessments are being done? Do we know that for certain?
  (Mr Caborn) May I first answer your first question? Of those least developed countries to which you just referred who are exporting into the Community in terms of the sugar regime, the 1.3 million tonnes quota which is already there on the sugar protocol will stop there. The area which could well be affected is the 300,000 tonnes which is a special preferential sugar regime. May I again refer back to the White Paper from the Secretary of State for DFID which says that they recognise that the EBA proposal will create adjustment challenges for some of the non-least-developed countries in the ACP group and they will work to ensure provision of sustainable assistance to help them in the adjustment process. I think that really is joined-up Government in the sense of what we are trying to do through the Treasury, through DFID, through MAFF and also through the DTI. We have a coherent strategy for how we are going to help the HIP countries but also those who are exporting into the Community at this time. In terms of the impact assessments, the answer to that is that I understand the European Union do have an impact study which they are doing at the moment and that should be available as and when; I do not know the exact timetable.

Mr Colman

  23. I am pleased that we have moved forward from essentially "all" to "everything but arms". I was in Seattle with you and I think it was a great shame that we could not move faster on that and I am pleased that in the last 12 months there has obviously been this move forward. Given that Cotonou came forward with this concept in June and the Assembly met on 9 October, I am concerned that impact assessments have not been published over this last 12 months on a regular basis. I would assume that work has been done on this over the last 12 months and I am a bit astonished that they are not able to be available for us to see now. May I explore further the nature of those assessments, whether it is simply bringing forward the "everything but arms" basis or whether it is what was wanted in Seattle which was in fact a dismantling of the Common Agricultural Policy over a period of, say, ten years. What has been done over the last 12 months? Can we have it put before this Committee? Are the impact assessments in fact looking at a wider range, taking us forward ten years, so we are not jumped like this in the future?
  (Mr Caborn) As I understand it the Commission have been making impact assessments on that and there is a Commission document which was circulated, COM (2000) 561. The impact on business and the impact on trade were two of the areas they were looking into. As far as I understand it there have been no conclusions of those impact assessments at the moment.
  (Mr Carden) The document the Minister is referring to is part of the proposal which was brought out in October, an initial impact assessment, in the way the Commission always does produce an impact assessment with a proposal which has an impact on business and on trade. They give a broad assessment of the direction of impact on business and impact on trade. They are now looking into some of the questions which have been raised in discussion in Brussels so far but it is not clear that they are going to produce another formal assessment document.

  24. Has the document you are referring to been placed in the House of Commons Library?
  (Mr Carden) Yes. It is part of the proposal which was tabled in the House.
  (Ms Quin) The main thrust of the question relates to impact studies in terms of "everything but arms". The Commission's proposals on the reform of the sugar regime do talk about producing some other studies in relation to the operation of the sugar market, particularly competitive issues, issues to do with the future of quotas and also how far price cuts are passed through to consumers. Several studies have been put forward in the context of the sugar regime proposals, but they are following a less rapid timetable than the impact study in connection with "everything but arms".

  25. The question was: out of Seattle was very much a wish that developing countries should be able to export into Europe fully without the barriers of the Common Agricultural Policy. Is in fact an impact assessment being made which is in train at the moment, looking at how in fact, as is wished by developing countries, there can be the dismantling of the barriers, not in the four years which is described in terms of "everything but arms" initiative, but in terms of the wider situation, in terms of opening the European Union market to agriculture from developing countries?
  (Ms Quin) I would say that there is not an overall impact study of the kind you are suggesting. What there is, however, is a number of mid-term reviews of the Agenda 2000 settlement looking at a number of agricultural sectors and in what ways those might have to change, both to conform to our aspirations for least-developed countries in world trade, also in response to other events such as enlargement of the European Union.

Mr Jack

  26. May I just be clear about the decision-making timetable in the light of what you have just said about these impact studies? Will final decisions be made before the impact studies have been properly assessed?
  (Mr Caborn) The answer to that is yes.

  27. You are quite happy that the effect on UK farming and industry will not in detail be known before you agree these proposals one way or another.
  (Mr Caborn) No, what I said was that we are satisfied with the arrangements which have been made in that communique to make sure there was no surge in imports into the European Community.

  28. That was not the question I asked. Are you happy that you will make a firm and final decision on a matter that has profound impact, particularly on UK agriculture, without knowing what the impact study says?
  (Mr Caborn) If there is going to be profound impact, obviously that would be yes. What I am saying is that the wider picture, which I tried to put to you a little earlier, was that we were talking about a quarter of a million tonnes of sugar that the LDCs put onto the world market, not into the European Union, and that we are producing 18 million tonnes in the European Union. We are consuming 12 million tonnes. The LDCs themselves actually consume some three million tonnes. So we are talking a relatively—relatively—small percentage of the total sugar production. To safeguard, to make sure there are no surges in imports, we monitor month by month and if there were a surge that would be dealt with. I think the safeguards are in there and that would give us a facility to be able to manage change in the most effective and transparent way.

  29. The fact is that you will not know what the answer is. May I ask the Minister from the Ministry of Agriculture whether her department has made any assessment of the impact of these proposals on UK sugarbeet production? If so, what is the financial impact?
  (Ms Quin) In terms of the fact that we are dealing with two proposals, both the "everything but arms" and the vaguer proposals for reform of the sugar regime, some of these effects are rather difficult to quantify. In the discussions which we had about it, within the department, we have obviously been aware of the points which the Minister for Trade has mentioned in terms of the phasing in of the "everything but arms" proposal and the fact that there is a safeguard clause and therefore measures can be taken if there are disruptions to individual markets or the European market as a whole. Let me say, however, in our own department's approach to this we have actually adopted a very similar approach to the reformist line which was adopted by the previous Government and Agriculture Ministers, of whom you, Mr Jack, were one. Certainly I know that at the time of the consideration of these proposals in 1995, the British Government was arguing for something like a 12 per cent cut in the price of sugar.

Miss McIntosh

  30. Mr Caborn's remarks do alarm me. Mr Caborn seems to underestimate the impact on rural communities like the Vale of York that a staple product like sugar beet can contribute not just to the farmers but to the general economy through the sugarbeet factory just in the City of York outside the Vale of York. Could the Minister explain to me why the British Government did not oppose and challenge the choice of Article 133 as the legal base when this proposal was first put forward? Is he aware that from that choice of Article 133 two procedural implications, which have enormous import to producers in this country and to ACP producers, spring? The first is that no opinion was sought or could be sought from the European Parliament because of that choice of legal base. Secondly, the Council of Agriculture Ministers, who, I would say on the record from this Government and the last Government, do endeavour to represent farming interests, the Council of Agriculture Ministers do not formally see the proposal, as it is the preserve of Foreign Trade Ministers meeting in the General Affairs Council, as he has said. Was his department, was he himself, was the Government aware of those two procedural implications and if so, why did they not challenge that at the time the proposal was first presented?
  (Mr Caborn) Because we believe it is a trade issue and that is an Article 133 issue, that is where the Trade Ministers would take that decision and we believe that we have as a Government been putting forward as our policy the access to the developed world's markets of goods and services, including agricultural produce, from the least-developed countries and that is a Government policy and it was our Prime Minister who spelled that out very, very clearly indeed in the Mansion House speech he made, when it was not only essential he said, it was all. That is the Government's policy and therefore that has been carried through on Article 133 and we would see it as a trade issue. I cannot explain it any clearer than I have: we do not just see this in isolation. It has to be seen in the round in terms of debt forgiveness, it has to see sustainability of LDC economies and it has to be part of the managed liberalisation of global trade. That is what we are trying to achieve and in managing that there will be difficulties but we want to mitigate the worst circumstances and that is indeed what we do. May I say also that we are talking about a sugar regime inside the European Union whose prices are two and a half times greater than world prices?
  (Ms Quin) That is absolutely the case regarding the "everything but arms" proposal. In terms of the proposals for reform of the sugar regime, that will be considered by the European Parliament. I understand it is likely to be considered either in the January or February session of the Parliament. Indeed given that these things are not hermetically sealed from each other it would be rather surprising if there were a debate on the reform of the sugar regime without any reference to the "everything but arms" proposal at the same time. Since I know both she and indeed the Minister for Trade and myself have all been former members of the European Parliament, we do know that under the European Parliament's rules of procedure there are several ways for members to bring up issues which are of concern to them, even if they do not formally come under the consultation arrangements.

Mr Breed

  31. May I just explore the situation concerning quotas of sugar? The Commission is proposing a cut in production quota. Will this not lead to a general rise in the price of sugar, and as sugar seems to be involved in almost all processes, inevitably lead to rises there? Is it not really a retrograde step in preventing an evolution of the market-led policy for sugar generally? The Court of Auditors' special report concluded that the allocation of quotas had had the effect of preserving sugar production in regions which were not very well suited to it, so that the most efficient production regions were not having all of the increased quota that perhaps they should. All that is going to have an impact on quota in this country. What assessment has been made of the way in which quotas are going to be handled in respect of our sugar beet industry?
  (Ms Quin) It is a very important question. It seems to us that the Commission is proposing the reduction in quota in order to meet WTO commitments which have already been entered into. However, the quota system as such tends to be a very unsatisfactory element of the overall sugar regime and is one of the reasons why the Government is keen to reform the sugar regime. It tends to ossify the system, it tends to make it a good deal removed from market realities. Also, it does not do anything to affect those countries who are very much overproducing sugar, of which there is a large number in the European Union, as opposed to countries like ourselves where beet production is less than overall consumption. It is an unsatisfactory aspect of the regime, but it is virtually about the only management tool which is available to the Commission at the moment in order to meet the WTO commitments.

  32. Will that mean a reduced or an increased quota for the sugar beet industry in this country?
  (Ms Quin) It will mean a proportional reduction in sugar beet quotas of all countries.

  33. Including the UK.
  (Ms Quin) Including us; absolutely.

Mr Todd

  34. We have talked about impact assessments on the UK and on ACP. One of the impact assessments which does not appear to have been done is on the least-developed countries themselves. Which countries are likely to take advantage of this market opportunity?
  (Ms Quin) We do have figures about that. There are of course some ACP countries who are also least-developed countries. It is important to bear those in mind. There are other countries in Africa and also in Asia, including Bangladesh, who could in theory benefit from the "everything but arms" proposal. However, a lot depends on their capacity, capabilities; a lot also depends on whether the pattern of trade which exists at the moment is switched towards the European market to take advantage of the higher prices in the European market.
  (Mr Caborn) There are six LDCs which are exporting at the moment and the 1998 figures are: Sudan, 120,000 tonnes a year, Malawi, 60,000 tonnes, Zambia, 70,000 tonnes, Tanzania, 20,000 tonnes, Madagascar, 60,000 tonnes and Mozambique 20,000 tonnes. They are the current ones which are exporting and that is the amount they exported in 1998.

  35. The figure you gave which was 250,000 tonnes overall against a European marketplace of 18 million tonnes would indicate a proportion of about two per cent, something like that.
  (Mr Caborn) That is what is being exported at the moment, 250,000 to 300,000 tonnes from those countries.

  36. What projection has been given of the likely outcome of this in terms of investment and development in those countries?
  (Mr Caborn) I do not have any statistics for that.

  37. We have seen some efforts from the protagonists who wish us not to do this which indicate a possible ceiling of five million tonnes or something like that which, based on one's knowledge of the economy of these countries, would be hard to conceive of in any realistic short- or medium-term future.
  (Mr Caborn) The safeguard, as I have said and I shall repeat it, inside the communique from the Commission is that there is a safety valve in that on surge.

  38. But there is a realism valve as well which is that surely these countries are not likely to be able to develop this opportunity as rapidly as some appear to wish us to fear.
  (Mr Caborn) No; no way. You are absolutely right there. All the experience has shown, not just in this area but in other areas as well, that it takes a long time.

  39. Is there not another impact assessment which could be made on the relief of poverty in these countries which might happen in the five-year period in which opponents of this wish the proposal to be kicked into touch and not acted on? Is there a view which could be taken on the impact that might have?
  (Mr Caborn) In part that is what we are talking about: the poverty reduction programmes we are expecting countries to sign up to when we go for the restructuring of the debt, the debt forgiveness which we are looking at through the IMF. An assessment is made there and that could very quickly be crossed over.

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