Select Committee on European Communities Tenth Report


118. We were impressed by the carefully considered nature of the EU negotiating position which was agreed in October 1999 for the Seattle Ministerial Conference. This mandate is still current, having been reconfirmed by the March 2000 Informal Trade Council, so it has formed the basis of our scrutiny. Given the difficult negotiations within the EU on the original mandate, it is perhaps not surprising that Member States have chosen not to re-open the issues. But had the EU really no lessons to learn from Seattle? In this Part of the Report, we consider whether the EU needs to reconsider its overall approach, looking at the ways in which the existing mandate may make progress less likely by bringing the EU into conflict with other WTO member countries. In the next Part we ask similar questions in relation to specific issues on which we have received particularly useful evidence.

A comprehensive agenda?

EU negotiating position

"The Council underlined that the overriding objective for the Seattle meeting must remain the launch of a new comprehensive Round" (paragraph 12).

"The Council confirmed the EU position that the launching, conduct and conclusion of a new comprehensive Round of negotiations should be guided by the principle of a single undertaking in order to ensure that the priorities of all WTO members are given equal attention throughout the negotiation process and that the end results are acceptable to all and achieve a generally advantageous balance of rights and obligations" (paragraph 9).

119. The objective of the Seattle Ministerial Conference was to agree the agenda for a new Round. The EU wanted it to be "comprehensive", covering:

  • agriculture (where its position is founded on the Agenda 2000 reform package on key trade issues such as market access, assistance to exports and commitment to reduce support, and an emphasis on "multifunctionality"[81])
  • services (where it seeks comprehensive negotiations for a deeper and broader package of improved commitments to market access and national treatment);
  • investment (where its aim is a multilateral framework of rules to provide a stable and predictable climate for foreign direct investment);
  • competition (where it seeks a basic framework of binding core principles on domestic law and policy and its enforcement);
  • trade and the environment (where it believes that policies should play a mutually supportive role in favour of sustainable development );
  • intellectual property (where it sees the need to examine the outstanding issues from the Uruguay Round);
  • public procurement (where its aim would be a multilateral agreement providing for transparency and non-discrimination with a broad sectoral coverage);
  • labour rights (where it argues that the WTO and ILO should create a joint standing forum on trade, globalisation and labour issues to promote a better understanding of the issues involved through a substantive dialogue between all interested parties);
  • audiovisual issues (where Member States should continue to have the right to a "cultural exception" from the usual trade rules)[82].

120. Both the Government and the EU continue to support the objective of a comprehensive Round, on the grounds that it is the best means of delivering substantial trade liberalisation consistent with sustainable development, and delivering benefits for developing countries. The Government considers that prospects for trade liberalisation outside a Round are limited, because it is necessary "to build up the broad political support necessary to reach agreement on a wide package of issues" in order to achieve wider and deeper liberalisation (p 1). Mr Byers explained that:

    "We were very committed as part of the European Union to a comprehensive trade Round … for two reasons. One is that we are at the stage of economic development within the world where a comprehensive Round was important in terms of the benefits that could come from greater trade and greater liberalisation. The second reason … is a tactical one, because the bigger the agenda, the greater chance there is that a consensus can be arrived at and that deals can be struck" (Q 524).

121. Mr Byers was in no doubt that the EU should maintain its mandate, despite the breakdown of the Seattle Conference, because "the conclusions we arrived at last October are as valid today as they were then"; they were "pretty broad-brush", giving the necessary degree of flexibility in negotiation (Q 537). Mr Carl, the Commission's chief WTO negotiator, told us that the matter had been discussed

    "with the Member States in the Council, or rather in the so-called 133 Committee in Brussels, on three occasions now since Seattle. There remains a surprising, even in my personal experience virtually astonishing, consensus between the Member States on the one hand and between the Member States and the Commission on the other hand about the substance … Nobody is putting in doubt … the pursuit of a comprehensive agenda for negotiations" (Q 109).

122. Some of our support the need for a comprehensive agenda. For example, in evidence submitted through the World Trade Law Association. Mr Michael Johnson says:

    "The EU has a highly developed position relating to the content of a new WTO negotiating Round, with which the UK government is fully associated. There is no need to revise that position now while the WTO Ministerial meeting remains adjourned. The world needs the WTO, as an essential bulwark to resist a slide back into protectionism, which remains an all-too-present danger and temptation for governments. Therefore the chief concern for both the EU and the UK must be to work for the successful launch of a new Round, and to that end to restate calmly and logically, and on every available occasion, the economic and political cases in favour of continued trade liberalisation and the need for an agreed structure of international rules to underpin that liberalisation" (p 255).

123. Others believe that the failure to agree an agenda in Seattle has given the EU the opportunity to review its present strategy, which the World Development Movement describes as "flawed" (p 60). According to CAFOD, the "EU's role within the WTO proved a distinctly mixed blessing in Seattle" (p 227). The slogan of many of the NGOs following Seattle is: "Review, repair, reform".

124. Some of those favouring a change of approach suggest that the very idea of a new Round should be abandoned, at least for the foreseeable future. This is the position of Friends of the Earth (p 46). The Green Party agrees, on the basis that

    "over 1500 organisations from nearly 100 countries have signed a declaration demanding no further liberalisation until social and environmental impacts of existing free trade commitments have been assessed, problems fully addressed, and significant steps taken to put international trade on a more sustainable and equitable footing" (p 258).

Others, while accepting the need for a full Round, consider that its agenda should be less comprehensive than that envisaged in the EU mandate. The RSPB suggests that the EU should prioritise its mandate according to the social and economic impacts of existing trade rules, and the capacity of developing countries to implement the existing and proposed new agreements (p 279). The Institute for European Environmental Policy[83] suggests that

    "with the current pause in negotiations there is an opportunity to reconsider priorities, procedures and the use of resources within the EU itself—both to develop a more convincing, coherent and better elaborated policy and to grasp the nettle of environmental integration" (p 253).

Sally and Woolcock argue that the EU's main objective should be to find a consensus on the role of the WTO (p 280)—with the implication that only issues contributing to that objective should appear in the mandate.

125. WTO officials are not, of course, in a position to express a formal view. But Mr Jorge Viganó of the WTO Trade and Environment Division did say that in his personal opinion the EU (and indeed other member countries) should be

    "a little bit more flexible on the scope of the agenda. The wider the agenda is the more difficult it is to agree on it. That is a fact. At the same time the wider the agenda the more possibilities there are to make cross-negotiations and find benefits for everybody … The US, Cairns Group and the EU will always have differences on agriculture and there will be tough negotiations … But you need at least the basic consensus on the whole scope of the exercise. That will give you the political will to go ahead. Then we are going to fight on the substance" (Q 401).

126. Mr Stoler told us categorically that the differences between the major developed countries were a bigger problem in Seattle that those between developed countries and developing countries (Q 469). Before (and during) the Ministerial Conference, the argument about the scope of the agenda became polarised between the EU and Japan on the one hand and the US (backed by most developing countries[84]) on the other. The US went to Seattle seeking a narrow agenda, with the possibility of an "early harvest" (that is, agreement on some issues of substance as well as simply on an agenda). It hoped that this might include reform of the dispute settlement procedure, the quick reduction of tariffs in 8 sectors[85], transparency in public procurement, an extension of duty-free status of e-commerce, a broader information technology pact, and increased WTO transparency.

127. There is no doubt that, as Mr Stewart-Brown[86] says, "the WTO would have a much better prospect of launching a new trade Round if the EU narrowed its focus to basic issues" (p 285). The question is whether this would damage the EU's prospect of achieving its objectives from the Round. The argument for a broad agenda hinges mainly on the need for trade-offs. As the World Development Movement says, it has to be recognised that trade negotiations are based on self-interest—"gaining advantage for the 'national champions'" (p 62). Sally and Woolcock query the justification for trade-offs:

    "it is not clear what the economic rationale is of trading off greater international harmonisation of regulation in one sector against the right to continue protection in another industry. For example, agreeing to harmonise food safety standards in return for retaining protection in agriculture is a 'lose-lose', not a 'win-win', scenario for international trade" (p 280).

The RSPB claims that the same would have been true of the deal which the Commission favoured on biotechnology, which in its view would have resulted in a small gain (a weak commitment to look at environment issues in the WTO) in return for a large loss (the creation of a working group within the WTO to consider, among other things, GMO market access); it sees this as an attempt to barter the public interest (environment) against private interests (market access for biotechnology firms) (p 278). The World Development Movement suggests that the EU negotiating position on agriculture is driven by the inability of Member States to agree on agricultural reform, which leads them to seek trade-offs to satisfy "narrow industrial interests" (p 62). Nevertheless, Sally and Woolcock point out that multilateral trade liberalisation can also be a win-win game:

    "By seriously taking on board developing country demands for greater market access, particularly in agriculture, textiles and clothing, there is a much better chance to prise open developing country markets to the benefit of EU exporters and investors" (p 281).

Explaining that developing countries need technical assistance "to fulfil the obligations which they have signed up to in order to get something else", Dr Peter Holmes (Jean Monnet Reader in the Economics of European Integration, University of Sussex) said: "You sign up to one obligation in order to get something on another front"(Q 175).

128. We think that the EU Council of Ministers should have reviewed its mandate to the Commission in the light of what happened in Seattle. The EU must be seen to have considered whether there are lessons to be learnt from the strongly-expressed views of other member countries. This is presentationally extremely important; not to have done it will reinforce the preconceptions of others about the intransigence of the EU.

129. From the beginning the GATT has depended on a process of wide negotiation and trade-offs—and it has worked well. We consider that the EU should maintain the principle of a comprehensive mandate, but that it will need to be pragmatic and flexible in its execution of that mandate.

"Anything but agriculture"?

EU negotiating position

"Negotiations will be based upon the mandate provided by Article 20 of the Agreement on Agriculture. This conditions the long-term objective of substantive, progressive reduction in support and protection, resulting in fundamental reform, by other concerns, notably by experience and effects of implementing reduction commitments agreed in 1994, special and differential treatment of developing countries, the objective to establish a fair and market oriented agricultural trading system, and non-trade concerns … The Union's position will be founded on the full Agenda 2000 package decided by the European Council in Berlin on key trade issues such as access, assistance to exports and commitment to reduce support … The Union is prepared to negotiate reductions in support provided that, in particular, the concept of "blue and green" boxes will continue … On the non-trade concerns, the Union will take forward the multifunctional role of agriculture, food safety, including the precautionary principle, food quality and animal welfare" (paragraph 11a).

130. For this inquiry, we did not specifically seek evidence on agriculture. We had already formed a very clear view on the inadequacy of the agreement reached at the March 1999 Berlin European Council on the reform of the Common Agricultural Policy. In our Report on that agreement, we said[87]:

    "Recent rounds of international trade negotiations have opened more and more markets to competition. Progress in the area of agriculture has been slow, but the EU's protectionist régime is likely to find itself increasingly challenged by the WTO. A new international trade Round will begin at the end of this year [1999], and much attention is likely to be given to subsidies which affect the level of agricultural production, of which the CAP commodity régimes are a prime example. It is clear that the EU has made only a half-hearted attempt to move away from these subsidies … This failure is made all the more serious by the expiry in 2003 of the 'Peace Clause' agreed in the Uruguay Round which provided that individual agricultural subsidies would not be the subject of complaints to the WTO. The expiry of this clause may lead the EU's trading partners, such as the US and the Cairns Group of countries, testing the compatibility of the CAP with existing trade commitments, let alone those that may be negotiated in the near future. The possibility that this might lead to confrontation and a trade war between the EU and its major trading partners represents a grave threat to the global economy. The Cairns Group have already said that the EU reforms were not a satisfactory contribution to the forthcoming WTO talks and would 'continue to shield EU producers from international market signals'[88]".

We concluded then:

    "[Even] the Commission's proposals in Agenda 2000 would not have been sufficient to equip European agriculture for the challenges of the next decade, in particular the needs to improve productivity; to facilitate enlargement of the Union; to develop a policy consistent with international trading agreements; better to protect the environment; and to promote rural development. The Berlin European Council agreement is substantially worse than the Commission's proposals, and is a bad outcome for the Community: its agricultural industry, its taxpayers and its consumers. [The Government] and others … have said that the deal will not be able to withstand the pressures acting against it and will have to be reformed before 2006. We hope that they will be proved right" [89].

We have not changed our position.

131. For EU agricultural policy, there is a crucial inter-relationship between the imperatives of enlargement and the requirements of the WTO. In our Report on the enlargement of the EU, we said that we remained convinced that more radical reform of the CAP was needed to make the EU ready to accept new members, and that we hoped and expected that the forthcoming WTO negotiations would increase the pressure for this[90]. In his evidence to the present inquiry, Mr Byers claimed that the EU was adopting an increasingly flexible position on agriculture in the knowledge that the CAP would have to be reformed "pretty fundamentally" as a result of enlargement (Q 539). As Mr Stoler of the WTO said:

    "Everybody understands in the European Community that overall levels of [agricultural] subsidy will have to be reduced before new members like Poland come in or everybody is going to go broke paying for thousands of tiny little farmers that cannot make it any other way. It is an acceptance of the theology. It is just a question of how fast we go" (Q 467).

132. We note that this is an issue on which the EU is virtually isolated within the WTO[91]. It is also an issue where the Government is not in whole-hearted agreement with the EU position. The Ministry of Agriculture, Fisheries and Food (MAFF) says that

    "the government supports the phasing out of market price support and direct payments which are linked to production, in order to reduce substantially the costs of the CAP to consumers and taxpayers, and to encourage the development of a viable and sustainable farming industry which is capable of competing without ongoing production support. (p 264).

For DTI, Mr Hutton claimed that Commissioner Lamy would have to reflect the UK view in handling his portfolio, even though there were "what I might call differences of emphasis" between the Member States. He maintained that in Seattle a form of words was nearly agreed with which the Government could have lived "very easily" (and the French and Germans "less easily") [92], but—like the other tentative Seattle texts—it was lost when the Conference broke down (Q 11). But in any case CAFOD maintains that although this text might have bridged the gap between EU on the one side and the US and the Cairns Group on the other, it did not address the concerns of developing countries (p 231).

133. In any case, whether the EU likes it or not, negotiations on agriculture cannot be avoided. As we noted in our previous Report, the "Peace Clause" incorporated in the Marrakesh Agreement on Agriculture is due to expire at the end of 2003. The agricultural negotiations which form part of the built-in agenda have already started. MAFF says (pp 263 et seqq) that these negotiations will be based on Article 20 of the Agreement on Agriculture, which "sets the negotiations in the context of a continuing process of reform, drawing on the experience of implementing the commitments made in the Uruguay Round. Account is also to be taken of non-trade concerns, special treatment for developing countries and the objective of establishing a fair and market-oriented trading system". The Government expects the negotiations to focus on three broad areas:

  • further improvement in market access;
  • further reductions in the volume of and expenditure on subsidised exports; and
  • further reductions in domestic support where this is linked to the amount of production.

But they "are not expected to make rapid progress pending the launch of a wider Round of negotiations".

134. This is not surprising, with not only the Cairns Group but also developing countries ranged against the EU. CAFOD says that in Seattle developing countries "showed almost unanimous suspicion of the EU's position on agriculture" (p 231). According to the World Development Movement:

    "There is evidence that massive subsidies, high effective protection and other trade distorting measures under CAP have caused major disruptions to the agricultural markets in developing countries, undermining food security, the livelihood of farmers and development in the poorest countries … The problem of CAP (and the Common Fisheries Policy) should not be loaded on to developing countries. Reform is up to the EU" (p 62).

The distortion in world markets due to the dumping of surpluses under the current WTO arrangements is particularly damaging to developing countries. Dr Edward Clay[93] has said:

    "Agreements such as the Marrakesh Agreement on agriculture, which allows the US in particular to dump its surplus grain on developing countries in the name of humanitarian aid or food security when at the same time Caribbean banana producers are forced out of business have damaged the WTO. The EU should take up the issue of negotiating for a genuinely level playing field. The future credibility of the WTO depends on that".

135. Oxfam argues that "the CAP causes massive market distortions, and directly contradicts other policies which aim to promote development", emphasising that:

    "Developing countries' trade interests are not homogeneous in [the agricultural] sector: some are big exporters and support further liberalisation, while others wish to maintain their domestic production in the interests of food security and maintaining livelihoods for vulnerable communities. [But] all developing countries would like to see greater fairness in international trade through a reduction in Northern subsidies[94] and greater access to Northern markets … The dumping of subsidised Northern exports in developing countries distorts markets, undermines the competitiveness of often highly efficient local producers, and threatens rural livelihoods and food security"[95] (p 271).

136. Friends of the Earth take the more radical view that the Agreement on Agriculture is so heavily biased in favour of agribusiness and large farms that it should be abandoned entirely (pp 47-48), arguing that the EU should explore whether alternative fora for these negotiations might exist, particularly within the UN system[96]. For Friends of the Earth, Mr McLaren said that developing countries had suggested that the multifunctional nature of agriculture meant that it should not be in the domain of trade negotiators and trade rules, "because of the imbalance in power which sanctions and mechanisms … give to that procedure" (Q 64).

137. The EU also sets much store on the "multifunctionality" of its agriculture[97]. The Government endorses this view: "it is important for the WTO negotiations to take account of non-trade issues" (MAFF: p 264). English Nature emphasises the importance not only of the concept that agriculture has many purposes, but also of the actual term 'multifunctionality', claiming that it "has important symbolic value and it is essential that it is included in any future negotiating agenda and agreements". But English Nature considers that the broader objectives which the term reflects should be pursued not through "perverse subsidies", but by domestic measures (recognising that even these might have some trade-distorting effects) (pp 237 and 238-239).

138. Of course, policies in the agricultural sector impact on other sectors. For example, the UK Industrial Sugar Users Group (UKISUG)[98] points out that price support for EU agricultural products penalises EU food and drink manufacturers: "sugar users in the EU are currently paying more than three times the world price for sugar", and because of the phased reduction in export refunds they will "soon struggle to remain competitive on international markets". It concludes that any changes in the WTO arrangements for agricultural products should take account of the foodstuffs which use them as ingredients (pp 285-286). A similar point is made by the Food and Drink Federation, which advises the Government and the EU to "beware any further commitments on processed product export refunds in isolation of further CAP reform" (p 251).

139. We should like to see explicit acknowledgement within the WTO of the fact that agriculture serves many purposes (though preferably avoiding the barbarous term "multifunctionality"). But we do not agree that this provides a justification for continuing the Common Agricultural Policy in its present form—and we understand why others deride the EU's position on the agenda for the next WTO Round as "anything but agriculture". In our Report in November 1999 on the enlargement of the EU we said that, in order for the EU to be ready to accept new members, "we remain convinced that more radical reform of the CAP is needed, and we hope—and expect—that the forthcoming WTO negotiations will bring renewed pressure for this". We have certainly detected such pressure in the course of the present inquiry, though it was suggested that on the present timetables the needs of enlargement might now overtake those of WTO negotiations. Whichever motive is the main driver for CAP reform, radical reform there must be. Continued delay in such reform can only make further progress in WTO negotiations extremely difficult.

"A development round"?

EU negotiating position

"The Council emphasised the particular importance it attaches to ensuring that the new Round responds to the particular interests and concerns of developing countries, and that a development agenda be reflected in all areas of negotiation. The Council confirmed its view that the developed countries should be open to consider constructively, as a part of a comprehensive package, proposals from developing countries, aimed at their fuller integration into the multilateral trading system, including proposals to make the special and differential treatment more operational and to improve market access in areas of interest to developing countries. The Council also noted that there are a number of other areas, such as those relating to trade defence and other WTO rules and disciplines, which are of particular concern to developing countries. The Council confirmed that the EU would be open to consider the inclusion in the new Round of any issue relating to the functioning and implementation of the Uruguay Round agreements requested by developing countries. A development agenda for the new Round should be accompanied by the following actions at the Seattle Conference:

·  WTO members should take the decision to enter into a commitment to ensure duty-free market access by no later than the end of the new Round for essentially all products exported by the least developed countries. Such a commitment should be taken by all industrialised countries and most advanced developing countries should pledge to contribute as well;

·  A work programme should be built providing for a co-ordinated approach to trade-related capacity building …" (paragraph 10)

140. The UK took the lead in proclaiming that the next WTO Round must be "a development Round". The Government told us that there is a very strong "development" case for a comprehensive Round, and that it "sees full consistency between trade and its policies towards developing countries, which have the objective of eliminating poverty" (p 3). And it has broader support for this: Commonwealth Heads of Government, meeting in South Africa before Seattle, "agreed that the new Round of WTO trade negotiations should have a development focus …"[99]. We consider it particularly important that the EU mandate should reflect that commitment.

141. Two-thirds of the member countries of the WTO members are developing countries. For them, the most crucial benefit of membership is that it puts them formally on equal terms with the rich countries which dominate world trade. Mr Hutton (for DTI) said that one of the functions of the WTO was "to place inhibitions and constraints on the exercise of economic power by the major economies". Without it, the world economy would be dominated by the US, the EU and Japan, whereas since all decisions within the WTO were taken by consensus the powerful nations needed the consent of the less powerful to move forward, and some developing countries were now "extremely influential" (Q 6). But this does not imply that everything the WTO does or seeks to do is necessarily in the interests of developing countries, who see rich countries as conspiring to keep their own markets closed (for example by anti-dumping duties on imports which are seen as undermining domestic industries, especially agricultural products, textiles and clothing). Holmes and Rollo suggest that even though most developing countries tend to favour a rules-based system of trade, they do not want to be subject to rules which allow industrial countries to restrict imports on the grounds of how they are produced, or to be subject to labour codes "drawn up by unions in the US" (pp 89-90).

142. We were fortunate to hear an authoritative view on the perspective of developing countries from Mr Ricupero, the Secretary General of UNCTAD. He said that they did want negotiations in the WTO,

    "but they do not see prospects of progress in the areas of free trade that are of concern to them … The fact of the matter is that the trading system after 53 years of existence has not been able to incorporate the two sectors which are central to developing countries: agriculture, and textiles and clothing. There are no encouraging signs that significant progress will be made in either of those sectors".

On agriculture, he said that it was "well known that the EU, Japan, Korea, Norway, Switzerland, have a deeply rooted objection to full liberalisation of agricultural trade". As to progress on textiles and clothing, he said that the Multifibre Arrangement (MFA)[100] had been discriminatory because it set quotas only for exports from developing countries. Under the new WTO Agreement on Textiles and Clothing (ATC), 50 per cent of products should by now have been brought under GATT rules (that is, freed from quota restrictions), but in fact the dismantling of quotas had so far benefited only some 6 per cent of exports (in terms of value)[101] (Q 508).

143. Mr Ricupero also made a crucial distinction, which we have borne strongly in mind, between two groups of developing countries: those whose main problem was market access for their exports, and those whose main problem was that their export earnings depended on two or three commodities. The first group could benefit from trade liberalisation, because they faced barriers in the form of tariff quotas, anti-dumping provisions, and so on. But the second group had "nothing to gain from trade negotiations. Their problem does not stem from tariffs, from quotas. Their problem is how to diversify their economy, how to get investment that would help them to export" (Q 512).

144. Mr Stoler made another salient point when he said that the main divisions between developed and developing countries

    "have to do not with objection on the part of the developing countries to [negotiating on] a particular subject matter in the WTO but with these countries' capacity to adequately digest the results of the negotiation in a way that then does not leave them subject to potential dispute settlement action by the other members".

In his view, the problem with the "single undertaking" approach adopted in the Uruguay Round was that it forced everyone to proceed at the same speed; having experienced difficulties in implementing the agreements to which they are already committed, developing countries will be more reluctant to enter into new agreements (Q 466).

145. In the light of these points, we considered whether the comprehensive approach taken in the EU was really in the interests of developing countries. In the view of British Invisibles[102], it is:

    "Those NGOs carrying forward their work, among other objectives, to … improve conditions for the poorest countries and people of the world are wide of the mark when they attack the WTO and the benefits of free trade … Opening markets is the way forward to greater world prosperity … [Otherwise] the real losers will be the peoples of the developing world" (p 118).

However, other witnesses have suggested that many developing countries simply do not have the capability to negotiate on a wide range of issues at once, let alone the financial or technical ability to implement the wide range of agreements which might result (RSPB: p 277). Clare Short conceded that there were differences of views among developing countries, but suggested it would not really be in their interests for trade liberalisation to slow down; globalisation would not slow down, so the result of reducing the pace of trade liberalisation would be to slow down their economic growth (Q 546). Nevertheless, if developing countries do wish to slow down the pace of movement towards freer trade (as Friends of the Earth says: p 49), it follows that the UK and the EU are arguing against what developing countries perceive as their interests. For example, CAFOD says that "if the EU does indeed support a development-based Round of talks, it should begin by listening to and concentrating on the many concerns of developing countries", instead of attempting to maximise the possible range of trade-offs in return for action on the CAP (p 229).

146. One of the concerns of developing countries is the difficulties they are encountering in implementing the agreements into which they have entered as part of the Uruguay Round. The reviews of these agreements provided for by the built-in agenda are confined to issues of implementation; they do not cover reviews of the substance of the agreements. The EU mandate picks up this point, saying that the EU "would be open to consider the inclusion in the new Round of any issue relating to the functioning and implementation of the Uruguay Round agreements requested by developing countries".

147. The real scale of the problems of implementation is not clear. Oxfam says that many poor countries had little understanding of the financial implications of their commitments in the Uruguay Round (p 270), and CAFOD says that there has been virtually no attempt on the ground (rather than through simulation models) to establish what the effect of the Round actually was (pp 229-230)[103]. The Government claims that many developing countries have already implemented successfully, suggesting that only the least developed countries need special attention (p 3). For the WTO, Mr Eglin, Director of the Trade and Finance Division, said that the real problems, at least on TRIMs, were confined to four or five countries, who "have tried and really are having capacity problems or resource problems"[104] (Q 416). Clare Short acknowledged that problems of implementation were generally due not to lack of will, but to lack of capacity. The solution was to increase capacity, not to encourage countries to opt out (Q 550).

148. "Capacity building" for developing countries was so universally seen as crucial that the words became almost a cliché in the course of our inquiry. But the need for it is very real, at all levels. The EU mandate seeks "a work programme … providing for a co-ordinated approach to trade-related capacity building".

149. At its most basic, there is often a lack of capacity to cope with WTO negotiations themselves. The World Development Movement says that at Seattle

    "many developing countries had only one or two negotiators, whereas the US had around 200 and the EU Member States had a combined delegation of 594 representatives[105]" (p 62).

For example, recent figures[106] show that in the first half of 1999 15 of the sub-Saharan member countries had no resident representative at all to the WTO[107], and only 7 of them had a delegation of 4 or more[108]. But the needs in national capitals are much greater than those in Geneva. The World Development Movement considers that in order to assess the likely effects of trade liberalisation

    "each country will need to embark on a multi-year effort, including processes such as planning, consultation within government, recruiting and training staff, surveys of industry and civil society, research into specific trade impacts, development of policy options, consultation domestically and internationally and preparation of specific proposals" (p 64).

And then there is the task of implementing what has been agreed. Wang and Winters[109] cite estimates that it would cost on average $130-150 million per country to meet the WTO rules in just three areas (intellectual property, sanitary and phyto-sanitary standards and customs valuation[110]).

150. Who should be responsible for capacity building? The responsibility should ideally lie with member countries themselves, but some of them may not even be in a position to know what they need, in the context of all the difficulties they face. Asked whose fault it was that capacity building had not already taken place, Mr Ouedraogo said:

    "The primary responsibility for the programme of development lies in the hands of the governments [concerned] … But one could easily understand also that the developing countries' governments do not have the means to have a policy because … they face human resources problems and problems with capital programmes for investment and infrastructure in order to have sustainable economies" (Q 339).

151. The WTO itself needs to be in a position to give assistance on the technicalities of its rules and dispute settlement procedure. Sally and Woolcock argue that the EU should be pressing for a significant increase in the ("presently minuscule") WTO budget for technical assistance (p 283).

152. Dr Robert Black[111] suggests that the EU should give more assistance itself (p 224)[112]. However, we know that a previous offer from the EU to finance stagiaires from developing countries within the Commission to gain experience in this field was not taken up by the potential recipients (Q 87). And Mr Carl told us that the Commission at present simply did not have the expertise to undertake the necessary training for stagiaires (Q 130).

153. UNCTAD is obviously particularly well-placed to help, because it is seen by developing countries as "belonging" to them, and Mr Ricupero told us that it had indeed taken a lead in this field. In 1997, it had found that only 2 per cent of total technical assistance was trade-related; sadly matters were not much better now (Q 513). In the days of GATT, most developing countries "had an almost purely negative or defensive strategy because of the limited national capacity to formulate commercial policies. They knew what they did not want but they did not know what they should want". So UNCTAD had encouraged them to form positive agendas (QQ 514-516)[113]. He said:

    "We help the developing countries to prepare for negotiations, to conduct negotiations. We provide them with the inputs, technical support, and after the agreements are negotiated we try to help them to take advantage in practical ways, but we do not interfere with negotiations themselves" (Q 499).

154. British Invisibles suggests that the private sector could help (p 117). Interestingly, except in the context of legal assistance[114], none of our other witnesses made this suggestion (even the CBI, who do explicitly recognise the importance of capacity building (p 33)).

155. There is a real need for co-ordination among the relevant international organisations in this area. It appears that a programme of co-operation to provide technical assistance was developed in 1997 (involving the WTO, the World Bank, the IMF, UNCTAD, UNDP and the ITC): it is known as the "Integrated Framework". However, CAFOD says that only two countries (Uganda and Tanzania) have so far benefited from it (p 230), and the fact that it was barely mentioned during our inquiry suggests that its effectiveness may be limited[115].

156. As the TUC says, "if developing countries are to be convinced to change their negative viewpoint concerning their interests in trade liberalisation at the WTO, they need further measures to establish a strong reason for them to do so" (p 21). Guaranteeing a good capacity building programme should help, but a number of witnesses[116] made suggestions as to other measures which the EU should seek to have included in a "confidence-building package":

  • elimination of agricultural export subsidies, and the redesign of domestic subsidies (for which the Government should lobby its EU partners);
  • improved market access for developing country products, including the elimination of escalating tariffs[117] and the reduction of non-tariff barriers;
  • agreement that anti-dumping legislation would not be used for protectionist purposes;
  • agreement to allow developing countries to protect their agricultural sectors until they achieved self-sufficiency, to safeguard food security and rural employment[118], and to protect their industrial sectors until they are in a position to cope with competition;
  • establishment by the major agricultural exporting countries of a fund to help import-dependent countries to meet food import bills at times of high world prices (to implement the decision taken at Marrakesh[119]);
  • the arrangements for Special and Differential Treatment should be extended.

157. Asked how significant Special and Differential Treatment was, Mr Ricupero said that the present provisions did not offer very much help to developing countries. Their main effect was to allow transition periods before various agreements had to be applied; this was potentially helpful, but "transition periods without the means to change do not mean very much" (Q 512). Wang and Winters suggest that the concept should be "re-invented for the twenty-first century", arguing that the past approach of exempting developing countries from liberalisation should be replaced by a system recognising the genuine difference in institutions and tailoring liberalisation and new regulations to them. They suggest that if developing countries are allowed transition periods, there should be "monitorable mileposts, so that both the international community and their own citizens can see that adjustment is actually occurring". And developing countries might be exempted from implementing some rules even in the long-term if they were clearly inappropriate to their circumstances[120].

158. As War on Want says, developing countries are suspicious of a new Round because "despite promises made in the Uruguay Round the industrialised countries have continued to protect themselves against the most dynamic exports of the South"(p 292). Holmes and Rollo contend that if EU were really serious about helping developing countries it would hugely liberalise the CAP, "not inveigle developing countries into patchy preferential liberalisation deals", and not use anti-dumping action to claw back gains to developing countries from market opening (for example, delaying the implementation of the Multifibre Arrangement). They suggest that

    "the EU should be ready to acknowledge that it will have to take some unilateral steps here if it is to deliver on its rhetoric, it will have to take some unilateral steps. There is little in its wider negotiating agenda, with the enormous exception of agricultural liberalisation, of great interest to less developed countries" (p 91).

159. If the developing countries are to be persuaded to continue to co-operate in the multilateral trading system, they will need to be convinced that the system has the ability and the will to understand and address their problems. We therefore regard it as crucial that the EU should sustain its efforts to make this a real development Round. First, the EU must change its agricultural policies both to prevent the dumping of its surplus production on to world markets in a way which is damaging to developing countries, and to allow access to its markets for the agricultural exports on which developing countries depend. Secondly, the EU should press for co-ordination of the help which developing countries need if they are to play a full role in the WTO (as in other international fora). This can best be achieved through the "Integrated Framework", which has already been formed to assist in capacity building. If there is a resource constraint, then the EU should ensure that it is addressed.

81   Term applied to agriculture in recognition of the fact that it not only provides food and employment, but also preserves the rural landscape and provides a social and cultural structure for rural communities; sometimes extended to cover health and safety, forestry, environmental protection and animal welfare aspects. For more on agriculture, see paragraphs 130-139. Back

82   A position held strongly by the French Government, but not explored in this inquiry. Back

83   "A leading centre for the analysis and development of European environmental policy". Back

84   Whose position is considered more fully in paragraphs 140-159. Back

85   Known as the accelerated tariff liberalisation initiative (ATL), to apply to chemicals, energy products, environmental products, fish, forest products, jewellery, medical and scientific equipment, and toys. Back

86   See footnote to paragraph 94. Back

87   A Reformed CAP? The outcome of Agenda 2000, HL Paper 61, 8th Report Session 1998-99, paragraph 14. Back

88   Financial Times, 21 April 1999. Back

89   Op cit, paragraph 23: emphasis added. Back

90   Enlargement of the EU: progress and problems, HL Paper 118, 21st Report Session 1998-99, paragraph 91. Back

91   According to Ms Westin, who draws a parallel with the isolation of the US on anti-dumping (p 198). Mr Stewart-Brown says: "I believe that the EU's intransigence on [the elimination of agricultural export subsidies] against the combined opposition of the USA, the Cairns Group and many developing countries was the principal trade issue on which Seattle foundered" (p 285). Back

92   This text, sent to us by MAFF, is at pp 265-266. Back

93   Expert on food aid; private communication. Back

94   Oxfam says that in 1998 farmers in the EU, Japan and the US received around $20,000 each in subsidies, compared with average per capita incomes of $228 per year in 1996 in the least developed countries.  Back

95   This can apply to processed agriculture products as well: Oxfam claims that "EU subsidised exports of tomato concentrate to West Africa in the 1990s have damaged the livelihoods of local tomato producers and destroyed local processing industries" (p 271). Back

96   And indeed suggesting the creation of a wholly new forum: see paragraph 61. Back

97   Compassion in World Farming believes that farm animal welfare should be among the "non-trade concerns" mentioned in the EU negotiating position (pp 234-235). Back

98   Which represents the major industrial users of sugar in the UK. Back

99   B Jay of Paddington, HL Deb, 24 November 1999, col WA10. Back

100   Set up in 1974, the MFA provided a framework for bilateral agreements or unilateral actions to establish quotas limiting imports of textiles and clothing products into countries whose domestic industries were facing serious damage from rapidly increasing imports. The 1995 ATC provided that these arrangements would be progressively phased out, coming to an end completely in 2005. Back

101   As an example of the reasons for the lack of progress, he cited the interests of big US textile groups with investment in Mexico, where "what we have been witnessing is the emergence [in Mexico] of providers, suppliers, of textiles on the basis of a preferential arrangement" (Q 508). Back

102   A private sector organisation promoting the UK-based financial services industry. Back

103   CAFOD does not accept the assertion of the Department for International Development that such an exercise would be impossible. See also paragraphs 36-40. Back

104   The problems related mainly to local content requirements in the motor industry (QQ 421-422). Back

105   Though ODI suggested that in Seattle this was not the main problem: see paragraph 93. Back

106   Richard Blackhurst, Bill Lyakurwa and Ademola Oyedije, "Options for improving Africa's participation in the WTO", paper commissioned by the World Bank for a Conference at the WTO in September 1999, forthcoming in The World Economy, Appendix Table 1. Back

107   In descending order of population, these were Mozambique, Burkina Faso, Malawi, Mali, Niger, Chad, Benin, Sierra Leone, Togo, Central African Republic, Namibia, Botswana, Gambia, Guinea-Bissau and Swaziland. Back

108   Nigeria, South Africa, Tanzania, Uganda, Zimbabwe, Zambia and Mauritius. Back

109   Op cit, p 15. Back

110   The agreement on the implementation of Article VII of the GATT, providing a system of valuation of goods for customs purposes (which Wang and Winters suggest is in any case not appropriate for developing countries: ibid, p 14). Back

111   Principal Scientist (Plant Quarantine and Regulatory Affairs), Natural Resources Institute, University of Greenwich, who submitted evidence through the World Trade Law Association. Back

112   And notes that the US does not allow technical assistance in agriculture to be given in areas potentially competitive with its own production. Back

113   Focusing on the training of trainers, because of the problem that once people were trained they tended to move (mainly to other government posts). Back

114   See paragraph 259. Back

115   There are now plans to revivify it: see paragraph 286. Back

116   For example CAFOD (p 230), Oxfam (p 272) and the Green Party (p 256). Back

117   Oxfam claims that escalating tariffs (which increase according to the level of processing) deter the progression of developing countries into the production and export of higher value products; "for example, high tariffs on cocoa powder and chocolate bars make it unviable for some developing countries to diversify away from the production and export of raw cocoa beans into processed chocolate products" (pp 271-272). Back

118   It is suggested that this might be achieved by creating a new "food security box" within the Agreement on Agriculture. The Government says that it will consider any suggestions of proposed exemptions on the grounds of "justified food security concerns" (p 264). Back

119   The "Decision on measures concerning the possible negative effects of the reform programme on least developed and net-food importing developing countries", adopted as a last-minute measure in the Uruguay Round. It provides for the establishment of "appropriate mechanisms to ensure that the implementation of the results of the Uruguay Round on trade in agriculture does not adversely affect the availability of food aid at a level which is sufficient to continue to provide assistance in meeting the food needs of developing countries, especially least developed and net-food importing developing countries"; agrees to ensure that "any agreement relating to agricultural export credits makes appropriate provision for differential treatment in favour of least developed and net-food importing developing countries; and recognises that "as a result of the Uruguay Round certain developing countries may experience short-term difficulties in financing normal levels of commercial imports and that these countries may be eligible to draw on the resources of international financial institutions under existing facilities, or such facilities as may be established, in the context of adjustment programmes, in order to address such financing difficulties". As yet, this Decision has given rise to no real action. Back

120   Op cit, pp 13-15. Back

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