EU Trade Commissioner
European Parliament Mini-Session
This is a very important debate. In just over one week the Hong Kong WTO Ministerial will begin. I know some of you will be there. But it is also essential that I report to you formally where we stand, and that we discuss the situation.
We are far from where we hoped to be. Like Pascal Lamy I had hoped that in Hong Kong we would be able to complete two thirds of the work of the Round, notably by agreeing full modalities in the main areas of negotiation.
The reason we have not achieved this stage is simply that, after we agreed the Framework Agreement in July 2004, the talks were becalmed. Some negotiators went through a period of posturing, which we were able to break only last July. Although the United States finally put forward an agriculture offer in October, this was many months later than hoped for. The EU responded within the same month, with our own agriculture market access offer. Still others continued to posture. For far too long we have been stuck on one issue and one set of interests – that of agriculture exporters - rather than pushing ahead on the whole Doha agenda.
It is fashionable to blame the EU for holding up this Round by being reticent on agriculture. This is the opposite of the truth. We have moved the Round forward in agriculture not just once but three times in the last 18 months. The truth is that others have been holding back, not because we have done or offered too little, but because they have been demanding too much.
This is a development Round, not an agricultural exporters’ Round. The two should not be confused.
In view of this delay, rather than go to HK with great expectations, and an equally great risk of failure, WTO members, on the advice of Pascal Lamy, decided to lower the ambition for this meeting.
I was the last one reluctantly to accept this. In doing so I made clear that it cannot mean lowering ambition for the Round as such. We must still aim for a successful outcome across the whole negotiating agenda, delivering significant development gains, by the end of next year.
The Doha Round is too big to fail. It is not just about trade. It is about maintaining the credibility of multilateral cooperation; showing that multilateral institutions can find global answers to global issues; proving that trade can be put at the service of development.
The best way to promote development is to open new trading opportunities to developing countries, and then help them with aid to exploit those opportunities. This is even more true for industrial goods and services than for agricultural trade. And it is true especially for trade between developing countries. The biggest trade opportunities for developing countries are with other developing countries. The biggest obstacles to this trade are the tariffs on industrial goods that exist between developing countries.
I regret that we will not be able to advance this substantially in Hong Kong. That is why we need a tailored development package for the poorest countries, not as a substitute for what we can achieve later, but as a down payment on it.
The main elements of my development proposal are these.
First, all industrialised WTO members should commit to provide duty and quota-free access to all products from all LDCs;
Second, we should adopt a package of special and differential treatment proposals to confirm the flexibilities for LDCs that exist in the WTO;
Third, we must enshrine in the WTO’s intellectual property agreements conditions for better access to cheap drugs against pandemics;
Fourth, we should adopt a strong Aid for Trade package along the lines of what was agreed at the Gleneagles G8 Summit. The Commission has set an example with the €1bn per year pledge made by President Barroso.
I hope WTO partners can agree to these ideas in Hong Kong.
Let me turn to other aspects of the negotiation.
On 28 October the EU put a comprehensive negotiating offer on the table, including on agricultural market access. This created a much needed opportunity to move the whole Round forward.
It was necessary and right to do this. And it allowed us to have the first real negotiations at the political level on industrial goods and services, anti-dumping rules and development – so beginning to rebalance the Round.
I deeply regret that, rather than seizing this opportunity and building on it, our negotiating partners decided on the easy way out: rejecting our offer on agriculture and criticising it – often in immoderate terms.
The truth is this. Our offer on agriculture goes much further than we did in the Uruguay Round. It has to be seen as a whole – including our major contributions on reducing domestic support through CAP reform, and our offer to eliminate export subsidies. We will reduce trade distorting subsidies by 70%. Already under the 2003 CAP reform 90% of direct payments to farmers will no longer distort trade. Under our proposal, our average agricultural tariff will fall from 23% to 12% – which is the same as the current US level.
Taken as a whole, this is the most substantial offer ever made by the European Union in any trade round. Each element of it – not just the tariff cuts - will provide substantial improvement in market access – as required under the 2004 Framework Agreement. It will create significant opportunities for agricultural exporters without wiping out preferential access for poor developing countries or doing excessive damage to our own agricultural sector.
We have to strike a balance, and this is the right one. Of course we have a primary responsibility to take into account the impact of reform on European farming communities. Also, this is a round for all developing countries, notably poor and needy ones, not just for competitive agriculture producers who should not seek to maximise their own competitive advantage in world markets at the expense of other developing countries in the WTO. We saw last week with sugar how sensitive the problem of preference erosion is.
We ignore this at everyone’s peril – those whose livelihoods are threatened by it, and those who bear responsibility for not responding to it.
So our offer is substantial, measured and credible. It has injected realism into the agricultural negotiations. Whereas the US demands on tariff reductions, and to a lesser extent the G20 proposals too, would benefit them - but have devastating employment effects on our own farmers, and on poor countries in Africa, the Caribbean and the Pacific, much of whose agricultural trade would be wiped out.
Let me be clear. I have no plan to make a further offer in agriculture. This is not justified and would further unbalance the negotiations. The time has come for others to match the effort we have made. Governments and citizens in Europe need to believe that structural change and possible job losses in agriculture will be balanced by creation of new jobs and opportunities in other sectors. And I will of course vigorously pursue our own interests, including agreement on and extension of a register of geographical indications.
That is how multilateral negotiation works: there have to be gains all round. That means that others now have to engage seriously on creating new market access for goods and services, which matter to Europe but also to the world economy and also, crucially, to development.
This means cutting industrial tariffs as they are actually applied, not only lowering bound levels agreed twelve years ago in the Uruguay Round. This will be the effect of our proposals in agriculture, because unlike many developing countries our bound and applied tariffs are usually the same.
This does not mean going back on our commitment that developed countries will do more than developing countries. Of course we will. We do not expect offers from the least developed and other weak and vulnerable countries. Nor do we expect other developing countries to match the level of market opening by developed countries. But they must do something. That is a principle of this Round.
We also need progress in trade in services. The current negotiating approach based on requests and offers has not yielded satisfactory results. We need to create a platform for genuine multilateral negotiation, which so far does not exist. This reflects the importance of services in the modern world economy.
But of course countries must remain free to pursue national policy objectives and fully safeguard their right to regulate. What we seek is equal treatment for foreign service suppliers in some sectors, not a commitment to deregulate markets or privatise existing operators. And here again our proposal excludes weak and vulnerable countries, and gives flexibilities to other developing countries.
To conclude, I will do my utmost to make a success of Hong Kong, to lock in the progress we have made and to establish a platform for us to finish the job. Above all it is essential that the meeting does not end in acrimony. I will defend and explain Europe’s proposals. I will pursue Europe’s interests. And I will maintain the ambition of the Round as a whole.
I hope our negotiating partners will do likewise. They must stop hiding behind unfounded criticism of the EU, or patently unrealistic and tactical demands, and join in a real negotiation on all issues. If they continue merely to ask for more from Europe, without paying into the pot themselves, they (not we) risk destroying the Round - and they will come away with nothing. Let us rather work together for an outcome that boosts the world’s economy, generates political confidence and helps the poor. That’s how we went into this Round, that’s how we want to come out of it.
The possibility still exists. The need is as urgent. Now everyone must pull together to make it happen.