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Lord Hunt of Kings Heath moved Amendments Nos. 62 and 63:

    Page 7, line 47, leave out "Secretary of State" and insert "relevant authority"

On Question, amendments agreed to.

Clause 8, as amended, agreed to.

Clause 9 [Overview and scrutiny committees: exempt information]:

Baroness Northover moved Amendment No. 64:

    Page 8, line 24, leave out subsection (4).

The noble Baroness said: The overview and scrutiny committees are of vital importance if there is to be transparency and accountability in the NHS. We have serious concerns about whether the committees will be able to achieve all that we would wish. Subsection (4) of Clause 9 rather illustrates our concern. Our amendment seeks to delete subsection (4) because it runs counter to the declared function of the

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committees. If retained, subsection (4) would allow the committees to restrict in whatever way they wished the information that they disclosed to the public, with no debate over that locally or nationally. If the committees are indeed to have a function of overseeing the NHS, it is clear that the public must know and be a party to decisions that are made about their services. What role can an overview and scrutiny committee fulfil if it operates in an unaccountable and secretive way?

The amendment therefore proposes the deletion of subsection (4), which seems to us to confer too much power without accountability. The operation of such a subsection would reduce transparency from the current standard. That would be unacceptable. Given the views and recommendations of the 12th report of the House of Lords Delegated Powers and Deregulation Committee on Clause 67 of the Bill, we ask the Government to reconsider subsection (4) of the clause, which we conclude gives an inappropriate power to the committees. I beg to move.

Earl Howe: The noble Baroness, Lady Northover, covered the ground very well in what she said. I should just like to add one or two points. Subsection (4) raises immediate questions because it contains a Henry VIII power. I should like to ask the Minister about that. As I read it, the subsection confers a great deal of power with precious little accountability. It effectively allows the Secretary of State and the Welsh Assembly carte blanche to restrict the information that may be disclosed to the public without, as the noble Baroness said, any prior debate or consultation. I question whether that is needed. The current standard of transparency in matters of this kind is one which, as far as I know, operates perfectly well. As a general rule, we should strive for a situation that provides the public with as much transparency as possible. It is right that the public should know about and be party to decisions made about their services. I hope that the Minister can clarify the background to this part of the clause.

Lord Hunt of Kings Heath: I certainly agree that we wish to have OSCs operating as openly as possible. Clause 9(4) enables the Secretary of State and the National Assembly for Wales to amend Schedule 1 by adding to it, varying it or deleting its provisions. But I hope that I can reassure the Committee as to the extent to which that is likely to take place.

Clearly, we are in a shifting environment. The NHS as an organisation needs to change from time to time. The provision in the clause to amend Schedule 1 by order allows the flexibility necessary to ensure that the public disclosure of information in the course of the scrutiny of the NHS is kept in line with the changing nature of the NHS and local government legislation. There is a specific situation that we already know may require this provision. For instance, during the passage of the Local Government Act 2000 Ministers undertook to conduct a review of the categories in Schedule 12A to the Local Government Act 1972 on which Schedule 1 to this Bill is based. Schedule 1 has

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some additional categories to reflect its health service focus. The review is being carried out by the Department of the Environment, Transport and the Regions. The intention of the review is to examine whether the list of exempt categories may be restricted. If the DETR changes the list, the department will also be able to take action to revise Schedule 1 accordingly.

It is worth explaining why we need exempt information. Where an OSC meeting is perhaps discussing NHS matters, it is possible that discussions will involve the disclosure of information relating to the NHS which should not be disclosed to the public at large. The obvious examples of that are personnel information or medical information about individual NHS patients. That is why Clause 9 and Schedule 1 make the additional provision for overview and scrutiny committees that are scrutinising the NHS which corresponds to the existing provisions of the Local Government Act 1972.

The reason for adopting a similar approach to that contained in the 1972 Act is so that, as circumstances change--for example, where changes are made to the NHS structure or legislation relating to the NHS is amended--Schedule 1 can be brought up to date or be otherwise adapted. I believe that the undertaking given by Ministers during the passage of the Local Government Act 2000 to see how this power could be further restricted provides the comfort required by the noble Baroness. Furthermore, we shall take account of any decisions that are made by the DETR at the end of its consultation.

Baroness Northover: I thank the Minister for that reply. I draw some comfort from it, but I am not fully convinced by what he has said. Nevertheless, for the moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

[Amendment No. 65 not moved.]

Schedule 1 agreed to.

Lord Burlison: I beg to move that the House do now resume. In moving this Motion, perhaps I may suggest that the Committee stage begins again not before half past eight o'clock.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

Imports from Developing Countries

7.30 p.m.

Baroness Young rose to ask Her Majesty's Government what is their view about the European Union initiative "Everything but Arms".

The noble Baroness said: My Lords, I make no apology for raising once again the important issue of the EU Initiative, "Everything but Arms". I speak in my capacity as president of the West India Committee

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and, as the House knows, I have long taken an interest in the Caribbean. I am delighted that so many speakers are taking part in the debate today.

The initiative will have a profound effect for the worse on the economic, social and political stability of those Caribbean countries, especially Guyana, Jamaica and the eastern Caribbean, which are dependent on commodities such as bananas, sugar and rice. But let there be no misunderstanding: the initiative will also affect us here in the United Kingdom.

Little has been heard about the initiative because of the speed with which it has been rushed through. It started in September of last year, barely six months ago, and was agreed by the European Council on 26th February last. It will come into effect at the end of March; that is, in around two weeks' time. The initiative is driven by the EU Commissioner, Pascal Lamy, and is a response by the EU to its desire to meet its WTO commitments to the world's poorest countries in such a way that the Americans and Japan will make similar offers. However, the more one looks at the initiative, the more one can see that it is not a good example of an ethical foreign policy.

What does the initiative say? It grants duty-free and quota-free access for all least developed country products, except arms, from the end of March. While this may help the world's poorest nations, it has the effect of setting aside existing regimes like those in the Caribbean and the more developed producers among the ACP of sugar, bananas and rice. It will have a serious impact on employment in all the more developed ACP nations producing those commodities. For example, 70 per cent of the population of Guyana is employed in sugar and rice. The initiative will erode rapidly the present arrangements in many Caribbean nations, just as they are starting the gradual process of economic transition out of preference and into free trade.

We all welcome the principle that help should be given to the world's poorest countries. Clearly, trade is much better than aid. But the way that this initiative is to work changes unilaterally existing preferential arrangements. It does so by extending duty and quota-free access immediately for all products entering the EU from the world's LDCs. Only in the case of sugar, rice and bananas will full implementation be delayed, until 2006 for bananas and 2009 for sugar and rice. The purpose of this, however, is not to benefit the Caribbean, but to help the producers of bananas, sugar and rice in the EU countries themselves. But of course prices will fall and the special quotas for all these three sensitive commodities will be opened immediately at levels which suggest that, from the end of this year, the Caribbean and other ACP producers will lose a significant share of their European market.

Not surprisingly, the Caribbean and the ACP have protested that, under the terms of the Cotonou Convention, signed only last June, they must be consulted. However, this has not happened. The convention seems to have been overruled. Indeed, in the debate that took place, EU states demanded

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concessions in order that their own agricultural producers would not be disadvantaged. The result is that the more developed ACP nations, for example, those of the Caribbean and Mauritius, now have to try and salvage what they can by arguing that, after the implementation of the initiative in two weeks' time, impact studies must be undertaken to measure the effect of the initiative on these producers. These must be undertaken by the EU and debated. This is, after all, the wrong way of dealing with this whole matter, which has been extremely disturbing, in particular to Caribbean countries.

The Prime Minister of Mauritius has told the Prime Minister and other European leaders that the initiative will initially transfer highly needed benefits from small, vulnerable island states to the least developed countries. Then, at a later stage, markets will be disrupted with serious consequences for more ACP nations and the French departments d'Outre Mer. ACP sugar producers have amplified this and have argued their own case. They suggest that the way in which the EU decision is structured means that the negative impact will be borne wholly by more ACP sugar producers and that,

    "it will be the poor, not the rich, who bear the brunt of an initiative to help the poorest".

I regard that as an extraordinary outcome for an initiative.

So far as concerns rice and bananas, the situation is little different. In both cases, the market will be progressively disrupted as the new market arrangements, again largely designed to protect European producers, result in less competitive ACP producers being displaced from the EU market.

Britain has long had close ties with the Anglophone Caribbean countries and the 500,000 people from the Caribbean who now live in this country should make us recognise that fact today. The Caribbean was once known as the "Jewel in the Crown" and I believe that we cannot, and should not, neglect the interests of these small, vulnerable but important states. No one is arguing for preferential access in perpetuity. Indeed, I support the principles of free trade. But small island nations that are heavily dependent on commodities require a reasonable period of time in which to adjust. They cannot simply go out of preference and into free trade in a matter of two weeks, such is the timetable of this initiative.

I believe that the United Kingdom will ignore their interests at its own peril. Nations such as those in the eastern Caribbean, Jamaica and Guyana, are already major sources of drugs, centres for transhipment, money laundering and organised crime, including arms trafficking. The sudden collapse of sugar, rice and bananas in already weakened economies will have a direct impact on the United Kingdom, as the temptation will be for those countries to turn to drugs. What a policy, to take away from countries those commodities which help poor people to survive and stand on their own feet, and to put in front of them something much less desirable.

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When the Minister comes to reply, I hope that he will say, first, that the treaty obligations under the Cotonou Convention must be met: there must be an impact statement. Secondly, any EU decision to undercut or to shorten the agreed eight-year preparatory period--that is, from 2001-2008--before the sugar, rice and banana industries can undertake a measured transition to World Trade Organisation compatible arrangements, would be quite unacceptable.

Finally, I hope that the Minister will accept that financial compensation is not an alternative. These three industries are the employers of most of the labour in much of the Caribbean. A gradual, integrated process of transition away from older industries to newer industries--such as tourism, financial services and information technology--is required. If this does not happen, the resultant instability will damage the future prospects for tourism and the newer industries.

All this transition will require a great deal of help from the private sector; it will require investment and it will require training. None of these things can happen overnight. I return to my original point: we have an obligation to these small, vulnerable countries, which are part of the Commonwealth.

I accept that the new WTO round is desirable, but it is not desirable at any cost. Special and differential treatment is desirable for small and vulnerable states such as those in the Caribbean. We were prepared to recognise this in the past; we recognised it when we entered the EU and we have recognised it on other occasions. Why have we forgotten it now? Should we not reconsider this policy, even at the eleventh hour.

7.41 p.m.

Lord Faulkner of Worcester: My Lords, we are indebted to the noble Baroness, Lady Young, for initiating the debate today. I am happy to support her plea for more sympathetic treatment for the banana, rice and sugar producers of the Caribbean. She has a distinguished record as a champion of the interests of the West Indies, and I am sure that the governments of that region will be grateful to her for securing the debate.

Why is there such concern in the commodity producing ACP states over the "Everything but Arms" initiative when, on the surface, it appears to offer such a great step forward for the world's 48 least developed countries? The problem is that one man's meat may be another man's poison. While the EBA initiative will help the LDCs, and is indeed a huge advance for them--I do not dispute that--it will in its present form do untold damage to every Caribbean economy that is dependent on commodities.

David Jessop, the executive director of the Caribbean Council for Europe, wrote on 13th October:

    "It is no exaggeration to say that it could result in the destruction of much of the Caribbean's sugar and rice industry, do serious damage to the rum industry's last remaining chance to compete in the EU market, and diminish further the prospects for Caribbean bananas in Europe".

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In November, the Guyanan Foreign Minister--I was interested that the noble Baroness referred to Guyana on two occasions in her speech--said that the proposals were a knock-out blow which his country could not sustain. If the proposals went through, he said, it would become virtually impossible for Guyana to export rice, sugar and rum. As those commodities account for 44 per cent of Guyana's total exports, this would force Guyana into becoming one of the world's poorest countries. This must not be allowed to happen.

The Ministers of the ACP states held a council meeting last December. They produced a very interesting report afterwards. They started by warmly welcoming the EBA initiative--an act of generosity on their part, I feel. They went on to say that they had considered the implications for the stability of the banana market. The report said:

    "Ministers noted that the EU market is attractive because of the effective limitations on supply from all sources. Measures which remove this limitation will inevitably lead to oversupply and the consequent further decline in prices".

My noble friend Lady Amos last week kindly sent me a briefing paper from the Department for International Development which explains why DfID supports the EBA initiative. It points out that following the passing on 26th February of a compromise regulation proposed by the Swedish presidency, there are now extended transition periods of five years for bananas and eight years for sugar and rice. The note goes on to say that the legitimate concerns of the Caribbean and other non-LDC ACP producers must be addressed, and talks about how the increased transition periods,

    "allow a reasonable time for Caribbean producers to adjust gradually to the increase in competition".

That is fine provided that it is matched by action, and there are some clear indications of how that help with transition will be given. My worry, which I know is shared by many noble Lords, is that the rural economies of the Commonwealth Caribbean face absolute ruin, and that farmers who are exhorted to diversify will see that advice as simply giving them the green light to grow illegal crops for the drugs trade. We must do much more to support the process of diversification and steer it into legitimate directions.

Governments of both parties have stood solidly by our friends in the Caribbean. The contribution that their people have made to our economy and society in peacetime, and their bravery and sacrifice in times of war, means that we must continue to do all that is within our power to ensure that they are not disadvantaged as global trade is liberalised. It would be a terrible irony if the EBA initiative removed millions from poverty in the 48 least developed countries and, at the same time--perhaps unwittingly--caused terrible hardship in the ACP states.

7.46 p.m.

Baroness Byford: My Lords, in a debate on the EU sugar regime moved by my right honourable friend Mrs Gillian Shephard on 21st November last year,

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concerns were expressed by many MPs about the impact that the "Everything but Arms" proposals would have upon both the countries concerned in the Caribbean and our UK sugar producers. Tonight my noble friend Lady Young has given us the opportunity to look at these matters again.

While I understand very well the issues about which she has spoken, I hope that she will forgive me if much of my contribution centres upon our UK producers. I understand the difficulties and the economic and social needs of the Caribbean countries--I share my noble friend's concerns--but it would be remiss of me not to reflect on the impact that that will have on our producers here.

In her reply to the debate in the other place, the Minister, Joyce Quin, said:

    "it is our responsibility to ensure a non-discriminatory effect as far as the UK is concerned".--[Official Report, Commons, 21/11/00; col. 23WH.]

Perhaps I may remind your Lordships that UK farmers are facing their lowest incomes for some 50 years, an average of just over £5,000 per annum; they are struggling against lower prices caused by the weak euro; and, in addition, since 1996, although sugar prices to the producer have gone down--they, the producers, are being paid less--the price of the product has risen.

In addition, it is not only the prime sugar producers who will be affected. A depressed sugar industry has implications for other local industries in the area--such as companies which supply the equipment used on the farms or in factories--and for those who work in sugar beet factories, whose jobs are threatened. In East Anglia, where sugar beet is grown in large amounts, farmers have had to cope with the down-turn in farming trade shared by every farmer throughout the country. They have also had the additional difficulty of swine fever and now--although it has not yet, fortunately, affected the two counties--we are in the depths of a foot and mouth epidemic which is running out of control.

The EBA proposals could result in a 25 to 40 per cent sugar quota cut, affecting both the EU and ACP producers. In the UK, some 23,000 jobs are at risk. I believe that the UK should not accept any quota cut as we have a deficit in our production. We produce about 50 per cent of our country's sugar needs. If any quota cuts are agreed, they should fall first on countries within the EU which have sugar surpluses.

As my noble friend suggested, the two proposals we are discussing today are contradictory and completely incompatible. Instead of tinkering with the sugar regime, this matter should be delayed and considered with the fundamental reform of the CAP. In the meantime, a full impact assessment should be undertaken to evaluate the effect of the EBA proposals on UK sugar producers. Perhaps I may ask the Minister why such an in-depth impact study has not been undertaken. Will the Minister not acknowledge that, if the EU is expected to reduce domestic sugar beet quotas, the UK would be unfairly disadvantaged?

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I again thank my noble friend for raising this very important issue. Although I have concentrated on the effects that these proposals will have on the UK, I am deeply concerned about the Caribbean countries. While I, like others, accept that there will have to be changes in the future, I think we are unnecessarily rushing through this matter. We should stop and rethink even at this late hour.

7.50 p.m.

Lord Judd: My Lords, I join other noble Lords in thanking the noble Baroness, Lady Young, for having provided an opportunity to debate this important subject. I declare an interest as a member of the Oxfam Association and a trustee of the Overseas Development Institute.

The 48 least developed countries to which the European Commission's proposal would apply include 32 of the 35 countries in the lowest category of the United Nations development programme's Human Development Index. Just imagine what that means in terms of human misery, suffering and wasted human potential. Aid alone can never provide the answer. There has to be a genuine opportunity to gain access to the markets of the world. Anything that inhibits this is indefensible.

Increasingly, free trade and the benefits of trade liberalisation have been preached to the developing countries as the route to their salvation. What, frankly, is deplorable is when too often from exactly the same quarters as those from which the sermons on market principles are preached comes the pressure for protectionism when self-interest is perceived as threatened. Northern protectionism currently costs developing countries an estimated 700 billion US dollars a year. Against that background, what the Commission proposes is very modest.

Research by the Institute of Development Studies has, I gather, indicated that the immediate impact of the new scheme will be limited to frozen beef, cheddar, sweetcorn, bananas, maize, long grain rice--husked and wholly milled--raw cane sugar, white sugar and molasses. There is not much prospect of the volume of exports of most of these products increasing significantly over the next few years. The 48 countries in question account for only 0.003 per cent of European Union imports and 0.4 per cent of world trade. They do not have the capacity rapidly to increase the volume of their exports.

However, in the case of beef, maize, rice and sugar there could be an increase in exports to the European Union as a result of diversion from other markets with less favourable terms of trade. But it seems likely from the research carried out by the IDS that the only significant such diversion would be sugar from Malawi, Mozambique and Sudan. Of these, the country most likely to gain is Mozambique. Even this increase would be small in absolute terms, although very important for Mozambique, whose global sugar exports in 1997 were only 59,000 tonnes. We should do well to remember that 40 per cent of Mozambicans live below the poverty line on less than one dollar a day.

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One in five children in Mozambique is dead by the age of five; it is one of the most educationally deprived countries in the world; and the country is still reeling from devastating floods both last year and earlier this year. Improved access to the European Union could help a great deal; and, of course, Mozambique happens to be a member of the Commonwealth.

Of course, there are real anxieties about the implications of all this. Sugar and bananas are the principal concern. They are of great value to vulnerable communities in the Caribbean. Convincing transitional arrangements will, therefore, be essential, as will real help in improving competitiveness and diversification. This cannot be left to chance. But what will no longer be acceptable is that historic accidents should debar equally poor or even poorer countries from their right to access.

The Everything but Arms initiative could prove a valuable, if modest, contribution by the European Union to generating confidence that the multilateral trade system can be made to look to the needs of the poor as well as of the rich. There will then be the ability--which is desperately needed--to say to the United States and to the World Trade Organisation not merely "Do as we say" but "Do as we do". However, in taking this road, it is essential to remember that every bit as important as the level playing fields themselves are the tailor-made arrangements to bring countries to the point at which they can play on them, for no two countries in the developing world and their needs are ever exactly the same.

7.54 p.m.

Lord Haskel: My Lords, this initiative is but one part of an international movement to reduce third world poverty. The movement is led by Great Britain, and especially by my right honourable friend the Chancellor of the Exchequer.

We have recognised that the least developed countries are stuck in a vicious cycle of debt, poverty and under-development because they are excluded from world trade and are unable to develop their economies. We have realised that by our actions we can turn this vicious cycle into a virtuous circle of debt relief, poverty reduction and sustainable development. No single change will make a greater contribution to fulfilling that virtuous circle than opening the markets of prosperous countries to the goods produced by poor countries.

However, I am not entirely carried away with euphoria. I listened with great interest to the careful words of caution of the noble Baroness, Lady Young. I agree that there need to be safeguards against corruption and exploitation. The legitimate concerns of the Caribbean producers must be addressed. But equally, there must be no dumping of subsidised food crops or other products in the 48 poorest countries. I am sure that my noble friend the Minister will be able to reassure us on this point.

The point that I want to explore is how long these kinds of arrangements are sustainable. Let me explain. Take the sugar industry, for example. The price of

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sugar in Europe is three times the world price. An elaborate system of quotas, subsidies and price guarantees has provided Europe's sugar industry with a profitable, protected, captive market. I simply ask: for how long will consumers allow this to go on?

This business is operated by companies. Today, companies are as heavily judged by image and reputation, by brand quality and by business ethics as they are by economic or financial factors. All these factors are very vulnerable to the bad publicity of profits from artificially maintained high prices and protected markets. Some say that corporate citizenship is just a matter of clever public relations. That may be the case. But it also makes for good business. It enhances the brand, it encourages staff loyalty by making employees feel good about the company and it pleases customers because today consumers have ethical commitments too.

Once consumers begin to target well-known brands with ethical demands, the brands react very quickly. That is why Nike shoes and Levi jeans are now made only in factories where there are adequate standards in wages and working conditions. It is why suppliers to McDonald's have to maintain high environmental standards; and it is why the major pharmaceutical companies are offering discounted drugs to help combat HIV in some of the world's poorest countries. In addition, thanks to such developments as cheap solar power and micro-credit, these poor countries are starting to become profitable markets for major companies.

Surely what the increasing liberalisation of world trade means in practice is that, instead of relying on quotas and subsidies, we all have to lift our performance. That is why consumers can make a difference. I congratulate the European Union on having taken this step.

7.59 p.m.

Baroness Trumpington: My Lords, I applaud my noble friend Lady Young for initiating this short debate. It is very important that the interests of the Caribbean islands are supported by the United Kingdom. That is not only in their interest; it is also in ours.

Poor countries such as the small Caribbean islands have to grow what is possible. I suggest to the noble Lord, Lord Haskel, that ethical consumers might buy Caribbean bananas. If the market is adverse, regrettably such countries turn to narcotics production and transhipment, money laundering and trafficking in arms. The relationship of these activities to organised crime and terrorism was pointed out by my noble friend Lady Young.

When the European Council agreed to the Everything but Arms initiative, it recognised the plight of the poorest countries, which, of course, was right. But at the same time it ignored the effect that it would have on the future economic, social and political stability of any Caribbean nations dependent on commodities. The Caribbean and the ACP countries

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have protested that, under the terms of the Cotonou Convention signed in June 2000, they must be consulted. However, the EU chose not to see this as an issue. As a result, more developed ACP nations--for example, the Caribbean and Mauritius--now have to try to salvage what they can through arguing after the event that impact studies on the effect on ACP commodity producers must be undertaken by the EC and discussed.

Surely the Minister will agree that treaty obligations under the Cotonou Convention must be met. ACP sugar producers have suggested that the way in which the EU decision is structured means that, in effect, it will be the poor, not the rich, who bear the brunt of an initiative to help the poorest.

It is now some time since I had the privilege of visiting some of these beautiful islands. I am probably out of date, but I cannot believe that their difficulties have lessened with the passage of time--rather they have worsened. I add my plea to that expressed by my noble friend Lady Young, that the British Government should seek partners with a vested interest in the outcome; in other words, that they should establish a position of leadership in the EU and with the United States in relation to the Caribbean and build a new vehicle with the private sector that is able to foster the delivery of rapid results.

8.1 p.m.

Lord Tomlinson: My Lords, when looking into the World Trade Organisation and the EU mandate post Seattle in June of last year, the Select Committee of your Lordships' House on the European Union made two comments in its report that I should like to quote. First, at paragraph 159, it said that,

    "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".

Then, at paragraph 290, the report quite specifically said:

    "While the EU procrastinates on the Common Agricultural Policy, and thus continues to impose restrictions on agricultural imports, it weakens its bargaining power in persuading others to go further in the concessions they offer to developing countries. We think that the EU should seriously consider giving a lead by allowing duty-free access for all imports"--

the committee emphasised the word "all"--

    "from least developed countries, without waiting for other developed countries to follow suit".

When the report was debated in your Lordships' House, no one took issue with either of those points.

Originally, Everything but Arms was a proposal to allow duty-free, quota free access to the European Union for all goods from the world's least developed countries, except arms and munitions. We are now debating a proposal that has been changed--essentially changing the current generalised system of preferences in order to extend duty-free access without the quantitative restrictions to all commodities from the least developed countries, but with a recognition of the specific problems of three sensitive products:

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bananas, rice and sugar. There are very clear proposals now before Her Majesty's Government, which are not yet agreed but which the Government appear to be supporting. They are being brokered by the Swedish presidency in order to get a timetabled arrangement for dealing with those three sensitive products.

At present, this House should be encouraging the Government to encourage the Swedish presidency in the arrangements that it is seeking to make for those sensitive products, while at the same time bearing in mind the very clear cautionary words that are expressed in the Government's Explanatory Memorandum on the policy issue. Paragraph 15 of that memorandum, which talks about policy implications, says--and I welcome this--that the,

    "UK Government strongly supports the original Commission proposal. The 48 LDCs have become increasingly marginalised in the world economy, their peoples are amongst the world's poorest, and they are desperately in need of assistance to stimulate their own development and growth. The LDCs are characterised by their exclusion from international trade, accounting collectively for less than 0.5% of world trade".

That is the Government's own statement of policy implications. I believe that they are right. I hope that this compromise succeeds, because I believe that it will achieve improved access to EU markets by the LDCs, while giving sufficient time for the countries that are affected to adjust to change--an adjustment that I hope will be fully supported by the ACP, the European Union and the DfID. If they support and encourage the process of transition and change, I believe that we shall have a truly free international economy.

8.6 p.m.

Lord Roper: My Lords, I am most grateful to the noble Baroness, Lady Young, for having raised the subject this evening. It is obviously important that proper attention should be paid to this important advance of the European Union to improve access to its markets by the least developed countries. I am especially glad that the noble Lord, Lord Tomlinson, has just referred to the report last year of your Lordships' Select Committee on the European Union which welcomed such proposals.

Among those of us on these Benches there is a strong belief in the advantages of free trade. Therefore, we welcome the Everything but Arms agreement, not only in its own right but also as a confidence-building measure that increases the chance of starting a further major trade round of the World Trade Organisation at Qatar this November, and restarting a process which went so seriously wrong in Seattle last year. However, as the noble Baroness, Lady Young, and the noble Lord, Lord Faulkner, rightly said, this presents problems for the other ACP countries. I shall return later to that issue.

Some people would criticise the relatively limited concessions and the very long transitional periods as far as concerns bananas, sugar and rice, which, as the noble Baroness said, are primarily designed to protect the interests of the European producers rather--I fear--than those of the ACP countries. This proposal shows a need for an aggregate strategy towards the

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least developed countries and the ACP countries. I hope that the Everything but Arms agreement will shame the other wealthy countries into making similar concessions. We need to pursue debt relief, as has been advocated by the current Government. However, we also need to structure bilateral aid to the ACP countries to ensure that they will be able to diversify, as has been recommended.

In conclusion, I should like to make one further point. There seems to me to be a need for the Government to spend more effort in making the case for free trade so as to give the developing countries market access. The curious coalition that we saw last year at Seattle must be countered by the powerful arguments that exist and which, I believe, are shared in many parts of your Lordships' House. In that respect, these Benches would certainly not wish to claim any monopoly on the term "liberal". We hope that everyone will be liberal, as far as concerns the liberalisation of international trade.

Those arguments were made most effectively last year in the DfID White Paper, which pointed out the value that can be achieved in this way. We have seen the need for this in much of the discussion in the negotiations taking place in Geneva this week on the general agreement in trade and services. Once again, we have heard alarmist arguments that freer trade in services would merely be advantageous to large enterprises from developed countries to the cost of the less developed countries.

In spite of the problems which have rightly been pointed out by the noble Baroness, the Everything but Arms initiative which we are considering is, I believe, a credit to the European Union. I hope that it will take us forward to the further liberalisation of world trade which, if it is introduced properly and with the other measures, including the structural aid for diversification for the Caribbean countries, could only be to the great advantage of the least developed countries.

8.10 p.m.

Baroness Miller of Hendon: My Lords, I thank my noble friend Lady Young for introducing this debate so well. The Conservative Party believes in free trade and compliance with the rules of the WTO and in assisting the most disadvantaged third world countries.

However, I must point out to your Lordships that there is no such thing as free free trade. The least developed countries (LDCs) have no industrial base and the only way to boost their external trade is through agriculture. But what we are looking at is a see-saw. As there is a finite demand for such products as sugar, rice and bananas, if one group of countries is given preferential treatment, inevitably another area will suffer. Then that already struggling group will be dragged down the economic ladder--a classic case of robbing Peter to pay Paul.

The aims of the Everything but Arms initiative are to provide help to the LDCs, but the way that it has been written and the way that it is intended to be

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initiated have not been thought through. The timing of the initiative turns on its head the Cotonou agreement which gave limited preferential trading arrangements to ACP states but would be totally negated by the EBA initiative. The agreement was signed as recently as June 2000 and the EU Commission announced the Everything but Arms initiative before the ink had time to dry on 22nd September. Under the Cotonou agreement there should have been consultation and an assessment of the effect on the Caribbean economies. There was none.

Also, before the initiative can be brought into effect, there should be an examination of the problem of countries of origin; otherwise, we are in danger of creating the potential for fraud and deceit. Nepalese rice is a good example. Rice can enter Nepal from another country and be subjected to minimal processing as there will not be an army of inspectors to check what is going on. Then that same rice will qualify for lower tariffs to the detriment of other rice producers, some of them only marginally less poor.

The initiative will have a serious negative effect on every ACP country exporting the three important products I have just mentioned and will erode the arrangements in many Caribbean nations just as they are beginning the process of transition out of economic preferences that they have hitherto enjoyed. The measure has the effect of unilaterally modifying existing preferential arrangements by extending duty and quota free access to the EU from the LDCs, although in the case of bananas, sugar and rice the implementation will be delayed. Even then the special quotas given to LDCs for those three sensitive commodities will undoubtedly result in ACP producers, and especially those in the Caribbean, immediately losing significant shares of the European market.

The UK should have a special concern about the Caribbean. Some 56 per cent of the workforce in the five Commonwealth countries in the Caribbean work in preference-dependent industries. These countries will remain stable only as long as the region is stable. We have substantial export and investment interests in the area. If we impoverish this area, which is already targeted by criminal elements because of its proximity to the US, there will inevitably be an upsurge in the production and transhipment of drugs, trafficking in arms and money laundering. The UK, the EU and, indeed, the US have a vested interest in not upsetting the delicate balance of trade by sudden changes in the regime. Private sector involvement and capital are essential to the future growth of the area. Such investment will not be available if the area is deemed to be unstable, thus pushing it into a rapidly descending spiral of new deprivation.

What is needed is a far more gradual and tapered process rather than the uncontrolled upheaval that is projected. The initiative will, to begin with, transfer much needed benefits from highly vulnerable island states to the least developed countries. Markets will be distorted and disrupted with dire consequences for other countries as well as the possible destabilisation

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of the areas that are prejudiced. The Government should use their influence in the corridors of Brussels to adopt a more gradualist approach. If they do not, the poor, not the rich, will bear the brunt of a good initiative designed to help the very poorest.

8.15 p.m.

The Minister for Science, Department of Trade and Industry (Lord Sainsbury of Turville): My Lords, I welcome the opportunity given by the Unstarred Question of the noble Baroness, Lady Young--to ask Her Majesty's Government what is their view about the European Union initiative Everything but Arms--to explain the Government's position on this important recent agreement in the European Union.

There seem to me to be three issues here which have to be carefully balanced: free trade, the reform of the common agricultural policy and our moral duty to the poorest people in the world. I hope that Members of this House can accept all three of those issues and that they also agree that the most difficult aspect is balancing those three conflicting issues. Our moral duty to the poorest people in the world was well expressed by your Lordships' Select Committee on the European Union's important report of last June, The World Trade Organisation: The EU Mandate After Seattle. That stated,

    "We think that the EU should seriously consider giving a lead by allowing duty free access for all imports from least developed countries, without waiting for other developed countries to follow suit".

Let me start with some facts. Some 98 per cent of tariff lines covering the EU's imports from the 48 least developed countries in the world have been free of tariffs and quotas for some time. I note in passing that these products have never proved disruptive to EU markets.

Last October the Commission produced a proposal for the abolition of tariffs with effect from 1st January 2001 on all the remaining 900 or so tariff lines still subject to import duties, except for arms. The sole exceptions to this proposed early removal of tariffs were around 12 tariff lines covering raw sugar, rice and bananas where a three-year transitional period to phase out tariffs was suggested as a recognition of the relative sensitivity of these agricultural products.

As the Government explained in their Explanatory Memorandum submitted to your Lordships' Scrutiny Committee on European Legislation on 13th November, we believe that the proposal would benefit the poorest countries in the world. It would open to their relatively early stage industries and primary producers the largest market of consumers in the world.

Among these 48 poorest countries of the world, whose citizens--as the noble Lord, Lord Judd, rightly pointed out--subsist on less than one dollar a day, are Commonwealth countries such as Tanzania, Mozambique and Zambia. Their current state of economic development and poor infrastructure means that they are only likely relatively slowly to be able to take advantage of this new market access. But the EBA

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initiative gives them the certainty that our markets are open to them which should help them to attract the investment and development they so desperately need. Of course, it is not possible to be certain about either the speed or volume of their supply response to the opportunity of the EBA initiative. The Commission's impact study, finally published in February--but largely irrelevant as it was based on the superseded initial proposal--suggested EU imports of sugar from LDCs of between 900,000 and 2.7 million tonnes in the short to medium term. Oxfam's study estimated only 100,000 tonnes of sugar in the short term. Another study suggested 1.9 million tonnes in the medium term and the International Sugar Organisation suggested 900,000 tonnes after 10 years. The variables in all this are huge, not least the current attractiveness of an EU internal sugar price at over 2½ times world market price--a differential which the imminent reform of the sugar regime will probably reduce.

Indeed, the rightness of the EU's wish to help the poorest has been recognised by developing countries themselves. Before Christmas at the regular meeting of parliamentarians from the EU and its African, Caribbean and Pacific counterparts under the auspices of the Cotonou Agreement the EBA initiative was welcomed. The Prime Minister of Barbados in writing to the Prime Minister endorsed the objective of helping the least developed countries in order to draw them into the wider globalised marketplace. While noting with concern the possible negative impact of the Commission's original proposal, the Prime Minister of Barbados said,

    "We therefore have no hesitation in expressing our fullest support for the implementation of such an objective".

We therefore supported a presidency proposal made on 19th February, finally agreed at the 26th February General Affairs Council, which committed the EU to removing all remaining tariffs (except on arms imports) from the LDCs. Already tariffs have been removed on nearly 900 tariff lines. They remain now only on the three sensitive products of bananas, rice and sugar. I do not think, therefore, that it is true to say, as did the noble Baroness, Lady Trumpington, that the interests of ACP countries were not taken into account. Perhaps I may say to the noble Lord, Lord Tomlinson, that the transitional arrangements have now been put in place.

For bananas, tariffs will be reduced by 20 per cent a year from 1st January 2002, becoming completely tariff free on 1st January 2006. This aligns these arrangements with the recent agreement on the EU banana regime, which will move from a quota system to a tariff only system from 1st January 2006. For rice and sugar, tariffs will be reduced at the beginning of their relevant marketing years (1st September for rice and 1st July for sugar) by 20 per cent in 2006, 50 per cent in 2007 and 80 per cent in 2008. They become completely tariff free during 2009. But meanwhile in order to phase-in access, tariff quotas are to be introduced based on the best figures for LDC imports during the 1990s, plus 15 per cent. That is a considerable period of time.

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The noble Baroness, Lady Young, said that she did not argue for protection in perpetuity. But in the light of these arrangements we have protection which runs for some considerable time into the future. This is designed to smooth the adjustment, particularly for other EU suppliers. This also aligns the graduated entry for LDC sugar and rice to the EU market with the period envisaged under last year's Cotonou Agreement with the ACPs for the setting up of new regional economic partnership agreements which are due to come into effect by 1st January 2008.

The Government approach to this complex subject was laid out in last December's important White Paper from the Department for International Development, Eliminating World Poverty: Making Globalisation Work for the Poor. This committed the Government to working to improve the access of developing countries to EU markets including duty and quota free access to EU markets for all least developed countries.

The UK has therefore been supportive of the Commission's proposal throughout. We believe, as does Oxfam, that the adjustment costs from this change, which will accrue in part to long-established non-LDC ACP suppliers, should be dealt with sympathetically through EU and bilateral aid. Indeed, many Caribbean countries, even though they retain a guaranteed market for 80 per cent of their sugar exports to the EU under the terms of the Sugar Protocol, have already begun to diversify their economies away from too great a dependence on a single crop and a single market. Some 80 per cent of their sugar sendings are guaranteed under the Sugar Protocol, which is not affected by the EBA arrangements.

For bananas there is little risk of competition from the LDC before 2006. These costs should not, and did not, deter us from seeking to aid the very poorest. For EU suppliers of sugar and rice, we believe that the impact of tariff-free access for LDC suppliers will be relatively small, not least since the Government and EU are committed, well before full access for the LDC suppliers in 2009, to reforms of the EU regimes for both these products. It is right that consideration of the impact of the Everything but Arms initiative should be taken into account in discussions on reforming those regimes.

The noble Baroness, Lady Young, raised the question of consultation on Cotonou. The Commission proposal was first sent to the ACP secretariat at the same time that it was transmitted to member states, in October 2000. The EU ACP Trade Sub-Committee met in November 2000 to discuss the issues. Both sides welcomed the proposals. The joint EU-ACP parliamentary assembly met in October 2000 and welcomed the proposals. Do not let us forget that Article 37(9) of the Cotonou Agreement explicitly commits the EU to providing duty and quota free access to the LDCs for essentially all the products by 2005 at the latest.

The noble Baroness also raised the spectre of the ACP countries turning to drug production. I do not think that there is evidence to support that claim. Even with guaranteed access to EU markets at some high

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prices, some countries already have drug problems. Other poorer countries which do not have preferences do not have drug problems.

The noble Baroness, Lady Byford, raised the question of the impact on British sugar beet farmers and producers. I believe that the current sugar regime is unsustainable. It will be increasingly difficult to defend in the WTO. Enlargement will make it impossible to maintain in its current form. The EBA agreement will have no impact on British beet farmers while transitional quotas are in place. By the time they are removed, other factors such as enlargement and reform of the CAP sugar regime will have necessitated change anyway.

The noble Baroness, Lady Miller, raised the question of fraud. Safeguard action can be taken if substantial quantities of LDC products over and above reasonable expectation from previous statistics start coming into the EU; and safeguard measures allow all trade preferences to be suspended. That is a significant deterrent against fraud.

The Government believe that the EU's commitment to the Everything but Arms initiative represents a very good outcome for the least developed countries. It proves that the EU is serious in its commitment to putting the needs and priorities of developing countries--and particularly the poorest--at the centre of its approach to global issues.

The Government believe that the Community agreement strikes a reasonable balance between the interests of the least developed countries, those of the non-LDC, African, Caribbean and Pacific producers and those of our own domestic producers.

Your Lordships' Select Committee Report on The World Trade Organisation: The EU Mandate After Seattle rightly noted that,

    "If the developing countries are to be persuaded to continue to co-operate in the multi-lateral trading system, they will need to be convinced that the system has the ability and the will to understand and address their problems".

The Government believe that the EU has, through the Everything but Arms initiative, demonstrated its commitment to putting the needs of the world's poorest people at the centre of its trading policies. The Government will be urging the EU to continue down this road, focusing on development in the next world trade round. This is the best way to ensure that the benefits of free trade are shared more equitably so that every citizen of the world can hope to enjoy the benefits that we too often take for granted.

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