Examination of Witnesses (Questions 20-39)|
WEDNESDAY 23 JANUARY 2002
20. Last point, which is our stance on developing
countries. How do you think we are placed to assist them in this
round, particularly in respect of agriculture, which is obviously
a critical aspect in their case?
(Mr Roberts) There is no more a developing countries'
position in the WTO than there is a developed countries' position.
Some developing countries are members of the Cairns Group and
are, therefore, liberals. Some belong to a group called "the
like-minded group", and (although it is not a member of that
group) India is in more or less the same position, which is that
it is extremely liberal as regards domestic support in the developed
countries but wanting to maintain, maybe even increase, their
own tariff protection. Then there are other groupings of developing
countries, for example the small island developing countries and
the single-commodity exporting countries, who are mainly concerned
about the impact on their preferences in the European Community's
market on reductions in Community tax. So we have quite a mosaic
of positions, and not just one position.
21. Like many Members of Parliament, I keep
receiving postcards from people who are deeply sceptical that
this round is going to do anything to help the developing countries
of which Mr Todd spoke. Why do you think the public are so sceptical;
that the WTO, as a mechanism, is, if you like, painted in the
bad corner as far as developing countries are concerned? Is the
EU going to do anything to try and help the process of education
and understanding about the way in which this round is going to
deal with developing countries, particularly because of the strong
emphasis in the Community's document about helping developing
(Mr Roberts) As to the first point, I think that the
Uruguay Round may have raised more expectations than it could
fulfill. That was very clear from the discussions in the Agriculture
Committee in Geneva, where we are doing the negotiations. The
first phase of the negotiation was examining the consequences
of the Uruguay Round. It was very clear that everybody in the
world was looking at the Uruguay Round and counting it a success
if they had increased their exports and as a failure if they had
increased their imports. But there is a zero sum game here; you
cannot have everybody increasing their exports and nobody increasing
their imports. So there was disappointment by some developing
countries because they have not increased their exports as much
as they had hoped, but, of course, it was inevitable that that
expectation would not be fulfilled. Secondly, I think there is
an increasing degree of sophistication in the way in which the
developing countries are looking at the developed countries, particularly
because they have got the services of economists who are working
out for them how much more market there would be if the developed
countries had no tariffs and no domestic support. Then they each
assume that they would all benefit from italthough I think
that is an illusion; only the most efficient would benefit from
it. So there is, if I might say, an exaggerated expectation at
the Uruguay Round and there is an exaggerated expectationat
least for many of themas to what would happen if the developed
countries more or less gave up their agriculture. These views,
sincerely held in the developing countries, are making their way
to your constituents via the NGOs (who are doing their own research
and coming to similar conclusions) and you are seeing the results
in your postbag. That is not to say that we should not and must
not address the issue of developing countries better in this round
than we did in the last. We will have to consider very seriously
how much we allow developing countries to derogate from tariff
reductions, how much we are prepared to pay for their opening
up their markets by reducing support in our own and what kind
of technical assistance we can give developing countries to ensure
that where they have a potential comparative advantage in agriculture
they can actually make use of it.
22. You have described attitudes within the
EU and the expectations of some of the countries coming in as
a result of enlargement. Of course, as you have also very well
illustrated, this issue is multidimensional, like chess, and multidimensional
moving chess as well. I was on the Jumbo Council that concluded
the agricultural part of the Uruguay Round. What characterised
that was that in the build-up to it we were made aware of, as
it were, the motifs of the demands of the different groups outside
the EUnot all of which were to do with agriculture and
many of which were nothing to do with agriculture. So we were
aware that at the end there might be a trade-off between IT and
cereals, for example. Can you tell us anything about the motifs
beginning to be discernible in the other groupings within the
WTO that would be big in the final round?
(Mr Roberts) I think the council you are talking about
was at a more advanced stage than we are at the moment.
23. Yes, yes, but the point I am making is that
there have been fairly accurate predictions about the kind of
sticking points and the sorts of commodities that would finally
be involved in those sticking points all the way through the preliminary
stages. It could be that you are not even at that stage yet, which
I totally accept, but I wonder if there are any glimmers.
(Mr Roberts) I can say where our position is under
greatest pressure from the greatest number. It is clear that our
position on export subsidies is the most difficult. The reason
for that is rather simple. The kind of export subsidies we give
are the kinds which were disciplined in the Uruguay Round. Through
the process I have already described, we have, every yearand
so has everybody elsehad to say how much export subsidies
we have paid, both the value and the volume. The only other big
grouping or country which could spend a lot on export subsidies
was the United States. The United States gave up giving export
subsidies on cereals because they discovered that with NAFTA it
made no sensebecause if they exported their cereals with
subsidies they simply imported more from Canada. So they have
turned that necessity into a virtue and have not been using export
subsidies for cereals, and so they go round the world saying "The
Community gives 85 per cent (or whatever it is) of the total export
subsidies given in the world." That is total nonsense, because
they give a lot of subsidies through different means, but through
the particular kind defined in the Uruguay Round we give 85 per
cent, and, therefore, we are the target for everybody. That is
where we are under greatest pressure. We are also under pressure
with regard to blue box payments, which are direct payments arising
from the MacSharry reforms, because not many other countries are
using the blue box. Once again, the Americans have changed position;
they were entitled to use blue box payments but with the FAIR
Act they changed their system from blue to green. Therefore, they
and all the countries that do not use the blue box are calling
for the abolition of the blue box. I suppose the topic less in
evidence is the degree to which we have to give increases in tariff
quotas. We have not discussed increases in tariff quotas as yet,
but I think there will be a lot of pressure there and that will
be difficult to meet if we are also cutting our export subsidies.
I think those are the areas where we will be under greatest pressure.
What we might be gaining from ityou spoke about telecommunicationsis
more difficult to perceive at this stage, because the other negotiations
are not as advanced as the agricultural negotiations.
Mrs Shephard: Thank you very much.
24. The appendix to your document says that
the objectives should be to increase market access to the benefit
of all WTO members. That is a nice, professional, free-trade principle.
How far is it just a kind of virtuous facade in view of CAP's
appalling record on agricultural protectionism, and how far is
it an assessment that European agriculture is, in fact, now competitive
and efficient, particularly compared to lower-cost producers like
Australia, New Zealand and Canada? Could the EU internally and
externally stand up to competition from those low-cost producers?
(Mr Roberts) It is not just an empty phrase. What
the council was saying in that statement was an affirmation, as
you say, of the view that trade increases wealth. When you are
in Geneva, I may say, you do not get that impression very often.
You have the impression that only exports increase wealth. That
was an affirmation of that principle. I believe the council sincerely
meant it. We are not in the position of, say, the Japanese, where
the main object of their negotiating strategy is to avoid reducing
tariffs. We recognise that tariff reductions are a part of the
process of wealth creation. Can we stand up to competition from
the most competitive? It depends a little on what structure we
are prepared to see our agriculture change to and what direct
subsidies we are allowed to pay. Increasingly, our subsidies are
less production-linked than they were in the past, but they are
somewhat structure-linked. They enable us to keep a pattern of
farming which we sometimes call the European model of agriculture,
which is possible with this degree of subsidisation even with
increased international trade. If we are not able to keep the
subsidies then it does not mean that we are necessarily not going
to be competitive but we would have a very different structure.
25. Comparing Europe and the Japanese is like
the pan calling the kettle grimy behind. This conversion to principles
of free trade is very much a deathbed conversion on the part of
the CPP. You are still envisaging in that answer some form of
subsidy. Could European agriculture compete if it were not given
some form of subsidy which Australia, New Zealand and Canada do
(Mr Roberts) Canada does give subsidies, actually.
I would describe them as semi-detached members of the Cairns Group.
26. It is driving me back to New Zealand.
(Mr Roberts) I do not think that we could compete
with our existing structure. If we want to keep our existing structure
we have to have domestic subsidies but ideally they should be
the kind of subsidies which allow us to maintain the structure
of farming that we want to see in Europe rather than the subsidies
which inflate our production over what we could achieve if we
were to go over to highly efficient, industrialised farming systems.
That is why we have all the debate about multifunctionality.
27. Are there any assumptions built into that
statement about the exchange rate? European agriculture must be
more competitive now because the euro has gone down about 20 per
cent. If it begins to achieve its objectivewhich I assume
is to look the dollar in the faceit implies that it rises
and, therefore, European agriculture becomes less competitive.
Is that taken into account in this statement?
(Mr Roberts) I think there are two kinds of situations,
one is where a currency change gives a real change in comparative
advantage. If a zone with a single currency becomes very efficient
in some other industry then agriculture falls further down the
pecking order, and that is manifested in a change in the exchange
rate. It is possible that that is what has been happening to the
Americans and they have not liked to recognise it. The other situation
is when you have aberrant movement of currencies due to speculative
forces. There you may have a situation where at least for some
years a country appears to have a comparative advantage of nothing.
That, of course, is mathematically impossible but it can appear
to happen if you have a currency being driven to an absurd height.
When we make our projections on what we can achieve within given
constraints, we always have within it our exchange rate assumptions.
Of course, our exchange rate assumptions can always turn out to
28. Are they higher than the euro or lower than
(Mr Roberts) The lower the euro the more competitive
are all our exports and all our industries which are directly
affected by international competition.
29. The lower the euro the more miserable British
(Mr Roberts) The lower the euro compared to sterling,
yes. What we have seen in the last few years has been sterling
losing strength against the dollar but gaining strength against
30. But it is basically over-valued against
both. Anyway, that is another argument. Your statement is qualified
by the fact that there should be a reduction of export subsidies
in return for a reduction in all other forms of export subsidisation.
The WTO has just outlawed the American tax concessions through
export corporations. If these other forms of subsidy are abolished,
is the EU prepared to go the whole hog and abolish export subsidies?
(Mr Roberts) I do not think I can answer that question.
31. Would that be acceptable to other Member
(Mr Roberts) The reason I cannot answer the question
is that our mandate does not cover that. What we have said is
we are prepared to reduce, provided other forms of export subsidy
are similarly disciplined. The Community has not taken a decision
on whether it would be prepared to abolish. It has not given us
a mandateput it that wayto accept abolition. I took
it your question was meaning some hypothetical date in the future.
32. No. The export subsidies are a major bone
of contention, are they not? They are the major point of objection
by the Cairns Group to what is going on. The WTO decision on the
American tax corporations does clear the way for a general abolition
of subsidy regimes.
(Mr Roberts) The WTO decision is a decision of the
dispute settlement system which rules that the US system is in
conflict both with the general rules on export subsidies set out
in the subsidies code and with the agriculture rules, because
they were giving a subsidy through their tax system. That is not
a negotiating decision, that is simply a statement that the US
legislation is not in conformity with its obligations. It has
got nothing to do with the negotiation of new obligations to get
rid of export subsidies.
33. The WTO does want a general reduction in
export subsidies in agriculture.
(Mr Roberts) Yes, because we do not want to end up
in a situation where we have cut, yet again, our export subsidies
and yet we are facing fierce competition through the misuse of
food aid and through the use of unlimited credit, when we are
severely constrained on our form of export subsidies. Yes, we
do, from a purely competitive point of view, want to see that
the subsidies that we do not use are disciplined as well as the
ones we do use.
Chairman: If you had not divined it, Mr Mitchell
is our resident New Zealander. I am now moving on to our resident
34. Can I go on to look at the impact on domestic
support, Mr Roberts? Where are we with the Americans in terms
of outcomes of the Uruguay Round? I never quite understand exactly
what these wonderful terms are; it is a bit like a permanent yellow
card and you never quite get to the red card; people are threatened
with the possibility of being sent off. Where are we with those
negotiations? Are the Americans actually likely to shift their
(Mr Roberts) I am sorry, in relation to what?
35. In relation to the peace clause, in relation
to actually making sure that the domestic support system is less
interventionist than it once was.
(Mr Roberts) As regards the peace clause, the US has
not said very much. The last time the American administration
said something rather ruminative about its peace clause it might
have been a lever to get a settlement, but I do not think they
have said very much about it in the recent past. Their agricultural
industry said they do not want the peace clause continued because
they think it is a means by which other countries maintain subsidies
to the detriment of the United States. I think that was a position
which had not been very carefully worked out. The governmentboth
the last American administration and this onehas been fairly
quiet about the issue. A lot of other countries, particularly
the Cairns Group, have said they do not want to see the renewal
of the peace clause. I expect that what they really mean is that
to renew the peace clause they would expect to see a very good
settlement on the things which concern them. Their formal position
at the moment is they do not want the peace clause renewed. As
regards subsidies, the present situation in the United States
is very interesting. We have got the debate going on in relation
to the new Farm Bill and it looks as though the consensus is growing
that they should have a new Farm Bill which takes them to the
limit of their domestic support obligations in the Uruguay Round.
In other words, they are not going to cut their domestic support
now in order to create a negotiating margin for accepting further
cuts later. Their position in the talks remains, however, that
trade distorting support should be substantially reduced. They
square that circle by saying that if there is a decision and when
there is a decision then the Farm Bill, once adopted, will be
adapted through administrative action to bring it into line with
their new commitments.
36. Moving on to look at the way in which the
reductions are taking place, if I understand it correctly, the
total aggregate measures of support mean that you would reduce
across the board. What is the thinking behind continuing in that
format as against looking at individual product reductions?
(Mr Roberts) Our position is that we think it should
be an across-the-board reduction, not tied to individual products,
because we think that if you try to negotiate tight limits on
individual products, in effect you are trying to run your agriculture
policy directly from Geneva, and there should be room for a country
to say they will give less support to pigs or to beef, or the
other way round. There has to be some degree of fine-tuning left
to WTO members. It is true, however, that some of the Cairns Group
have argued that it should be more specific to commodities than
it was in the Uruguay round. That debate has not got very far
in the negotiations we have had so far. Positions have been stated
but not analysed in very great detail.
37. There are none within the EU who would want
the product reductions.
(Mr Roberts) No. Our position in our mandateand
that is a unanimous mandateis clear; it is a reduction
in the AMS.
38. If we are looking for a further reduction
in the AMS, which products would feel the pain most, if you are
not going for a product-by-product reduction? Some products and
commodities would be under greater pressure than others, so which
would feel the pain most?
(Mr Roberts) As they stand, none, because we have
a margin. We are well within our existing AMS commitments, so
we could make a substantial reduction without having to take immediate
action. It would mean that the scope for agricultural policy to
be made more generous would be reduced. In the context of an enlarged
Community, the scope in our AMS is rather less. To try to envisage
how many countries would be entering at what time, and then assessing
how big the AMS reduction would be and which commodities it would
hit, takes me rather too far into the future.
39. We have mentioned the US. Do you have any
feeling for the volume of American farm supports stacked up against
the European level? One keeps reading about the new supports coming
out in agriculture, and then you have radical bills to cut support.
One gets the impression there are quite radical extremes in the
United States, whereas in the European Union it all has an incremental
feel about it. Have you anything that is quantifiable?
(Mr Roberts) Yes. The OECD publishes annually the
measure of support in all OECD members, the producer support equivalent
(PSE) measure, which is somewhat different from the WTO/AMS measure.
On that measure, the level of support per hectare in the United
States is still lower than in the Community, but the level of
support per farmer is much higher in the US than here.