EU Sugar Regime (EUC Report)

rose to move, That this House takes note of the report of the European Union Committee, Too much or too little? Changes to the EU Sugar Regime (18th Report, HL Paper 80) in the context of the Doha development round of WTO negotiations. The noble Lord said: My Lords, it gives me great pleasure to move the Motion. I am very pleased that the powers that be have agreed to add the words,"““in the context of the Doha development round of WTO negotiations””." The WTO appeals tribunal decided in April last year, at the request of Brazil, Thailand and Australia, that the EU sugar regime broke WTO export rules. That decision led to the change in the EU sugar regime that we are talking about today. It would also be helpful if we looked a little further forward to what might happen next in the WTO Doha development round. I am grateful to the Clerk to our committee, Suzanne Todd, and Professor Sir John Marsh, our specialist adviser, who are largely responsible for the compactness and clarity that are the hallmark of the report. I thank all my colleagues who were involved in our Sub-Committee in this inquiry, and I have been particularly asked by the noble Lord, Lord Sewel, to say how sorry he is that he is not here today. He spoke in the January debate about development aid, but he is on his way to the Ukraine to be one of the supervisors of the Ukraine elections on Sunday. This is doubtless an interesting time to be in the Ukraine. I think that noble Lords would agree that there is at least one unique feature to our report. In the very solemn context and appearance that House of Lords reports always have, we have a somewhat frivolous title. We ask a question:"““Too much, or too little?””" Three months have passed since we published the report and I still think that it is an appropriate question. Of course, we welcome the reform of the sugar regime. We very much agree with the remarks of the Government in June 2005 that the regime was,"““anomalous and indefensible in its present form””." During our inquiries, we were very pleased to talk to Commissioner Mariann Fischer Boel at length in Brussels. She was obviously going out of her way to try to achieve a golden mean—a reform that would be quite substantial but which would, in a sense, be fair to all parties. It is too early to be certain whether she achieved that. Overall, the proposals that, as we all know, were subsequently modified from her first proposals, were all right for the European Union, but the position of the African, Caribbean and Pacific countries and India—about which I would like to talk in a few minutes—is more questionable. As most of your Lordships know, the price cut was originally to be 39 per cent. It was reduced to the still formidable figure of 36 per cent. The reductions were phased in slightly more gently than was suggested at the start; over four years, with the final cut in price in 2009-10. It is generally agreed that European Union producers receive a generous, ongoing compensation package of 64 per cent of the price cut for four years, with added diversification aid for those giving up more than 50 per cent of their quotas. I know that Commissioner Boel expects the EU of 25 countries to reduce production substantially over the whole period—once this is complete and in action—from about 19 million tonnes a year to 10 million or 11 million tonnes. I am delighted to note that my noble friend Lord Plumb is intending to speak. I expect that he will tell us something about the effect on British farmers. I might add that my noble friend Lord Jopling—who shares a room with me and whom I told we were having this debate—was somewhat doubtful, as a sugar-beet grower himself, whether he was really going to benefit. I assured him that my impression is that he, as a grower in the north of England, was not going to do too badly. I seek clarification on one point in our report, though I do not want to dwell on it too long as it is, in a sense, now a done deal. The EU ministers agreed in February to this going ahead and the details are to be finally settled by July this year. Yet there is one point which I would be grateful if the Minister could clarify for us when he replies. That is on the question of job losses. In paragraph 44 of our report, we quote Commissioner Boel telling us that, on the basis of the proposals, there would be,"““a loss of 54 factories, a reduction in agricultural jobs of about 6,500, industrial jobs of about 25,000, and indirect jobs 51,000””." On a rough summing-up, that means about 80,000 jobs being lost overall in the EU. Then, in paragraph 46 on the same page the noble Lord, Lord Bach, as a relevant Minister, told us that"““failure to reform would mean twice as many jobs would be lost””." Well, twice 80,000 would mean 160,000. Slightly to my surprise, therefore, when we received the Government’s response to our report a few days ago, paragraph 125—on, I think, page 5—states that,"““The Government agrees with the Committee’s conclusions which reflect the findings in the European Commission’s own analysis that, without reform around 15,000 jobs would be lost in the European sugar industry by 2012””." 15,000, not 160,000; was a zero perhaps omitted when that paragraph went through the typographer’s hands? If the Minister could correct that when he replies, then I thank him in advance for that. To sum up, it is generally expected that EU producers will receive about €7 billion over the years in compensation, to cushion the impact of the price falling by 36 per cent over that period. Then one comes to the more difficult part of the equation. What the ACP countries and India get as guaranteed export into the EU is spelt out in our report. Chapter 5 deals with the problems and pages 24 and 25 go into the detail. In essence, ACP countries and India have, since 1975, been guaranteed that the EU will purchase specific quantities of cane sugar at a guaranteed price. Therefore, as the EU farmers’ price for sugar beet now falls, as I have described, the ACP countries and India will get reduced prices for their 1.3 million tonnes of quota exports to Europe. Understandably, this immediately led to cries of anguish and protest from speakers for the ACP countries. I have here a document produced by the general secretariat of the ACP, dated 15 December:"““The ACP have justifiably argued that €500 million per year will be necessary to allow them to adapt and survive””." This was at a time when all the EU had said was that it would be €40 million for the first year."““This view is shared by certain Member States, including the UK, where the House of Lords this week warned the amount of assistance currently earmarked for the ACP is ““desperately inadequate””." I do not think that we ever used the word ““desperately””, but we said that it was, in our judgment, very inadequate. That statement was picked up by a further document from the general secretariat of the ACP a week later:"““The current situation is gravely unjust. It is a complete contradiction of the EU’s stated commitment to the developing world. The ACP are the collateral damage of this reform and nothing is being done to help us””." This shows how difficult it is to do good in the world. In fact, Commissioner Fischer Boel had done what had, for many years, been asked for but had not happened: reform of the EU sugar regime. In the process of reforming, she had cut the price so that, instead of being three to four times the world price, it would now only be twice the world price. The fact of the matter is, however, that there will definitely be a loss of export earnings for some ACP countries—such as Fiji, Saint Kitts and Jamaica—which depend on their 150-160,000 tonnes of EU exports at a favourable price. They find this an important part of their export earnings, and have made a number of protests saying that they do not know what they are going to do instead. What is the Commission’s position? It said originally that there would be €40 million for the first year, 2006. I understand that that has now changed to 2007, but that it is saying that it then hopes to make €190 million a year available for adjustment in the ACP countries—but, of course, the EU budget is not yet totally fixed for the next period. There will continue to be debate about this figure; that is obvious. At least it is a big step up from what was originally proposed. The question still arises, however, of how this aid is to be delivered. What are to be the mechanisms for delivery? The point has been made to me that it is important that it should not just go to the multinational companies, who are important in the world sugar industry, but that there should be specific aid for farmers and smallholders, and help in seeing how new industries—compatible with the climate, environment and workforce traditions—could be started in some of these countries. No-one could pretend that this is going to be very easy. There is a new development and economic co-operation instrument in the Commission, which I think will be responsible for handling this money. It will have to learn about trade reform in the developing world. ACP countries will not necessarily want exactly the same as the LDCs. The comment has been made to me that the LDCs have been completely sidelined in the argument about the sugar regime. They do not have the same imperial link, or the same ability to make their views know as, for example, Mauritius. Therefore, this becomes a complicated trade development and we should ask what we can learn from it for aid for trade generally in Africa and other parts of the developing world. How can we make sure that when there is aid for trade it gets there, it goes to the right people and the right people are given better market access? These are all lessons to be learnt. That is the broader question of the WTO and the Doha development round. This morning, I learnt that Oxfam is about to publish a pamphlet about the Doha development round, of which the headline will be, ““A recipe for disaster””. The reason is that Oxfam thinks that when the least developed countries agreed to join the development round they were concerned with the agricultural pillar only and how export subsidies and support in the agricultural world could be removed. However, it is now becoming clear that changes in access for industrial subsidies and the services world are every bit as important to the EU and the USA as what happens in the agricultural world, perhaps more so. The EU wants access in the developing world for its transport, IT, telecoms and financial services. Similarly, the USA is considering the removal of subsidies or import tariffs of about €4 billion and is demanding reciprocal access for its established industries in the developing world. There is a real danger that this could be locking developing countries into low-value agricultural production while much of the new industrial production and access is taken over by the developed world, particularly the EU and the USA. In essence, that is the point that Oxfam wishes to make. It leads on to the thought that developing countries must be very careful about what they sign up to in any Doha development round because once a country has signed up to the WTO, it cannot unsign. It might be better to have further delay because no deal this year is better than a bad deal. Thus, the sugar regime has become a litmus test for Doha and for making reasonable deals that will help development and trade in the developing world. How can the EU and the USA help locally financed industry to grow in the developing world and then give tariff-free market access for those manufactured products to their domestic markets? If we are to succeed in this programme to help Africa, to cut its debt and improve standards of life in developing countries, those are the key questions that have to be answered. This is the most important element in fighting to reduce poverty in the developing world. I have no doubt that all of us will hope for success in this field. I hope that the Minister will be able to tell us some of the Government’s thoughts about where Doha and the WTO discussions go in this important year before the United States president’s fast-track provision runs out early in 2007. All of us will hope for success, but I hope that the Minister may feel that he does not have to use the usual words, ““the Government remain committed to a successful conclusion””. It would be much better if he could substitute ““the Government are determined to achieve a successful conclusion””. I beg to move. Moved, That this House takes note of the report of the European Union Committee, Too much or too little? Changes to the EU Sugar Regime (18th Report, HL Paper 80) in the context of the Doha development round of WTO negotiations.—(Lord Renton of Mount Harry.)