JOINT COMMITTEE ON AGRICULTURE AND FOOD debate -
Wednesday, 2 Nov 2005

World Trade Negotiations: Presentation.

Chairman

We will now hear a presentation from Trade Matters, a collection of NGOs and trade unions campaigning for justice in international trade. Representing this group we have Mr. Colin Roche, policy officer, Oxfam (Ireland), Mr. Michael O'Brien, policy and advocacy officer, Trócaire, and Ms Niamh Garvey, policy and advocacy officer, Christian Aid Ireland. They are here to make a presentation on the current world trade negotiations.

I draw the attention of witnesses to the fact that while members of the committee have absolute privilege, this does not extend to them. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the House or an official by name or in such a way as to make him or her identifiable.

Mr. O'Brien may proceed with the presentation.

Mr. Michael O’Brien

I thank the Chairman and the committee for giving us the time to make this presentation on trade issues relating to the negotiations at the World Trade Organisation. As he has indicated, Trade Matters is a collection of NGOs, environmental, development and trade union groups that came together after the Seattle ministerial meeting of the WTO in 1999 to pursue fairness within the international trade system from the perspective of developing countries.

I am joined this afternoon by Ms Garvey and Mr. Roche. Ms Garvey will lead off in terms of offering a background to the interconnection between trade and development. Mr. Roche will then look specifically at market access issues as regards the agreement on agriculture and subsidies. I will finish by examining the special and differential treatment for development countries within the negotiations. I will hand over to Ms Garvey to make the introduction.

Ms Niamh Garvey

I will highlight, briefly, how important agriculture is to developing countries, and why it is central to delivering a development round at the World Trade Organisation. Agriculture is extremely important for developing countries. Three quarters of the world's 1.2 billion poor — defined as those living on less than $1 dollar a day — live in rural areas where agriculture is the major means of livelihood. Expressed as a percentage of national wealth, agriculture is responsible for 30% of gross domestic product, GDP, across all developing countries. This figure is much higher in many countries, including the Development Cooperation Ireland programme countries. In Tanzania, for example, agriculture is responsible for 45% of GDP. This figure is 44% for Uganda and 52% for Ethiopia. This translates into higher figures again for the percentage of the population in developing countries who rely on agriculture for employment. Of the total labour force in least developed countries, LDCs, 74% were engaged in agriculture in 1999. Again, the figures for individual countries show that 81% of the labour force were engaged in agriculture in Tanzania and Uganda and 83% in Ethiopia.

If we reflect on what this means for individual families we might consider the example of a farmer, Al-Hassan, who lives on a hectare of land in Zugu village in northern Ghana. A single crop, rice, accounts for up to 60% of his income. He earns $215 from his annual rice harvest, equivalent to 27 bags, and this is sold to pay for basic needs. For example, nine bags pay for his sons to go to school. That illustrates the high level of reliance that individual families have on agriculture.

I want to focus a little on the importance of agriculture to the World Trade Organisation talks, as a development round, and specifically the talks coming up in December in Hong Kong. Ireland, in tandem with 188 other states, is committed to achieving the millennium development goals by 2015. These eight goals aim to halve the number of people living in poverty. They have set deadlines for achieving the targets on health, education and food security. Agriculture is clearly the key to achieving these aims. However, the following statistic puts the financing of the millennium development goals in perspective. While rich countries spend just over $1 billion a year in aid to developing country agriculture, they spend $1 billion a day supporting their own agricultural systems.

The Doha Declaration was signed four years ago in order to set the agenda for the development round of trade talks. It aimed in some ways to balance the concessions developing countries had been subject to under the previous Uruguay Round. I am just going to read from the second point in the ministerial declaration:

International trade can play a major role in the promotion of economic development and the alleviation of poverty. We recognize the need for all our peoples to benefit from the increased opportunities and welfare gains that the multilateral trading system generates. The majority of WTO members are developing countries. We seek to place their needs and interests at the heart of the Work Programme adopted in this Declaration. Recalling the Preamble to the Marrakesh Agreement, we shall continue to make positive efforts designed to ensure that developing countries, and especially the least-developed among them, secure a share in the growth of world trade commensurate with the needs of the economic development.

As such, the Doha Declaration promised substantial progress on market access, significant reductions of export subsidies, with a view to phasing them out completely and substantial reductions to domestic support. In addition, it committed to making special and differential treatment integral to the negotiations — to make it more precise, effective and operational. After four years of negotiations, nothing has been achieved. No timetable has been set for eliminating export subsidies and developed countries are restructuring their subsidies to evade WTO disciplines.

It is clear why developing countries have prioritised agriculture as the key area they need to see process on in Hong Kong. I will now hand over to my colleagues to provide some more detail.

Mr. Colin Roche

I want to touch on two aspects of the current negotiations on agriculture, of which I am sure the committee is already aware. One is market access. I want to mention again one of the issues promoted in the Doha Declaration of the World Trade Organisation, namely, the need to provide adequate markets for developing countries. What we are really talking about here is the Doha development round — sometimes the fact that there is a round gets lost in the discussions we have on agriculture. It is clear that if we are to have a development round that must mean more opportunities for employment, growth and wealth creation in developing countries. A key to that is adequate market access for developing countries. That is something we all must face up to as part of the negotiations and in Ireland's case, as a trade reliant economy, to recognise the need for market access.

The other aspect of the negotiations I want to talk about is subsidies. Essentially, the issue is not subsidies per se, but dumping. I refer to the dumping of output produced under subsidy by the United States and European Union in particular and the effect this has on developing countries. We have seen from our experience as partners the effect this is having on the livelihood of small farmers, right across the developing world, in terms of commodity after commodity. This was agreed in Doha and confirmed under the framework agreed in Geneva last July. What we are now seeking is an early implementation date for the ending of export subsidies, to ensure an end to the competition element to which they give rise. Obviously, we fully agree with the Irish Government and the European Union in ensuring this happens in parallel with the ending of export supports by the United States, in particular, export credits and trade distorting food aid. That is a key element of the negotiations on which we look forward to progress being made.

Another element regarding dumping is to look at the domestic support situation. The European Union and the United States spend large amounts of money supporting their farm sectors. Much of that support results in the erosion of livelihoods of those in the developing world. For example, in the United States there is support for the American cotton sector. This was particularly controversial at the WTO and was highlighted in Cancun two years ago. The US cotton sector consists of 28,000 producers supported by the US Government to the tune $2 billion to $4 billion per annum. The support fluctuates year on year. They compete unfairly against producers around the world. In west Africa, there are 10 million people dependent on cotton production but, as a result of the subsidisation by the US Government, they must compete against American producers who are selling their produce at 35% of the production cost of the cotton. That is very unfair and is eroding the livelihoods of millions of people in the developing world. If we are to see people rising out of poverty — Ms Garvey already referred to the 900 million people who live on less than $1 per day — then we must address issues such as export dumping.

Mr. O’Brien

I want to specifically address the issues of special and differential treatment within the current negotiations leading to the Hong Kong ministerial meeting. Ms Garvey highlighted the importance of agriculture to development. In that context, the Uruguay round paid no particular attention to the special needs of developing countries. For example, it did not attach any particular attention to staple and special products that are vital to food security, livelihoods and rural development in developing countries. Since the Uruguay round has come into effect, liberalisation has shown evidence of significant increases in food imports to developing countries. The impact of these import surges is that they disrupt local domestic markets with negative effects on local producers. It is ironic that provision was made in the Uruguay round for special safeguards. However, these are only available to developed countries and are not available to the majority of developing countries. This reflects one of the great imbalances that exists within the agreement in agriculture.

I wish to draw the attention of members to two particular measures that are subject to the current negotiations. The first of these relates to special products, while the second relates to what is known as the special safeguard mechanism for developing countries. These special and differential mechanisms have been advocated by a group of countries within the WTO known as the group of 33. The WTO July 2004 framework has formed the basis of the current negotiations and there is a commitment in that framework to allowing designation of special products and the establishment of a special safeguard mechanism. However, what is absent in Hong Kong is the need to reach agreement on what flexible treatment for special products would be, as well as to detail what an effective special safeguard mechanism would be for developing countries.

Within the past two weeks the group of 33 submitted proposals on the development of criteria for special products and for the design of the special safeguard mechanism. The group made the case that those products on which its countries and farmers depend for food and livelihood security and rural development should be provided with special treatment. An example of this would be an exemption from any further tariff reduction under the current round. The proposal includes these three or four key indicators when determining which products would be eligible for consideration of special products. The G33 proposal on the special safeguard mechanism covers the remedies that would be appropriate for application to make the mechanism relevant to their particular needs, the conditions under which they can resort to these remedies and the duration and scope for which they could take an action.

The Minister for Agriculture and Food, Deputy Coughlan, commented on special and differential treatment during her recent meeting with the director general of the WTO, Pascal Lamy. We welcome her comments on accepting the concept of special and differential treatment. We would like to highlight the importance of special products and the special safeguard mechanism and we encourage this committee to consider asking the Minister to indicate her support for these specific special and differential measures. The G33 and the least developed countries which constitute the majority within that group, includes many of Ireland's priority development co-operation countries. These countries need the support of Ireland and other developed countries if these proposals are to be advanced at the sixth ministerial meeting.

Deputy Naughten

I welcome the delegation and thank its members for their informative presentation. It is important that we try to address the issue of fairness in this round of negotiations. We have examples of support mechanisms in place that were supporting some poorer farmers. However, the proposals that are coming out now will not benefit the poor farmers in these Third World countries. They will instead benefit countries where the land is in the control of a very small number of wealthy people. We need to obtain a balance to ensure that the steps that are taken directly benefit the people we want to benefit out of these structural reforms.

I refer, in particular, to sugar which has been debated in detail on this committee. The APC countries are opposed to this because they see that they will lose out and that the main beneficiaries will be Brazil and Australia. Sugar production in Brazil is controlled mainly by a small number of sugar barons. Australia cannot be considered a developing country because it is a First World country, yet it is these countries that will benefit from this. We need to see a structure put in place that will benefit the small growers in these APC countries and that they can have preferential access to the European Union, as they have had in the past but which is now being taken away from them under these negotiations. As Oxfam articulated in favour of removal of the structure in place, perhaps Mr. Roche might like to comment on that issue.

The issue of export subsidies will be very thorny but we will have to come to some resolution on it. The delegation is correct. The Americans have a long way to go if we are to reach any agreement on it. I want to ask a question on the issue of domestic support. The European Union has been trying to move away from direct support on production and Ireland has been the first country to move away from it directly. We no longer have support on production. This will lead to a reduction — the extent of which is not yet known — in production and the amount of product leaving the European Union. The delegation might comment on decoupling and the introduction of the single farm payment.

Deputy Upton

I welcome the delegation and thank it for its presentation. My heart is very much with most of what was said. Realistically, we would all want fairness and a fair crack of the whip for those most in need. Most of all, we would like those in need to be helped to be self-sufficient, a point which underpins the aspirations of all the groups represented.

Earlier this year I visited Zambia with Development Cooperation Ireland. I was struck by the fact it had very large tracts of unused land which, although I am not an agriculturalist, I thought could be developed. My question, therefore, relates to governance in such countries and what they are doing to make land available. The land in Zambia is mostly state owned and seems fertile. One Irish person has made a positive and seemingly lucrative development in the area. Despite the political factors involved, why can these countries not be helped to develop for themselves? The question deserves consideration.

While subsidies are in place, others will suffer as a result. However, we must also bear in mind the people in Ireland who would be likely to lose out from a removal of subsidies in one fell swoop, which I accept the delegation does not recommend. Small farmers would be most at risk. I am interested to hear the delegation's comments on the timeframe with regard to subsidies. We need to be realistic with respect to our own economy also.

I agree with much of Deputy Naughten's contribution on sugar reform and the ownership in Brazil of large tracts of land by a small number of landowners. The delegation might comment on this point, which has been the subject of misinformation.

Deputy Blaney

I welcome the delegation representing Christian Aid Ireland, Oxfam Ireland and Trócaire. I thank it for its presentation. All committee members are at one in recognising that the statistics presented are startling. We would all like those who are less well off to move into a similar category to ourselves. I suggest that the delegation gives its proposals to the committee in writing so the committee can bring them to the Minister.

Mr. Roche

I thank members for their questions and kind comments. Several issues arise and I will deal with them in turn. I am glad members referred to the issue of sugar. While I did not intend to talk in depth on the subject, it is useful that it was raised. The committee previously discussed the matter but it has not had the opportunity to hear the Oxfam position. Oxfam believes the sugar regime resulted in large amounts of European sugar being exported below the cost of production, causing huge damage to livelihoods around the world, not just in Australia but in developing countries such as Brazil, Thailand and African countries, which lost market share within Africa. The European Union produces 20 million tonnes of sugar annually and exports 5.5 million tonnes — a significant volume of subsidised exports. Whereas Ireland's sugar production and consumption are closely aligned, it was the collective EU regime with which we found fault. Therefore, the major thrust of Oxfam's policy was to try to stop this practice of dumping, which resulted in harm to developing countries' prospects for export growth.

Our contacts with politicians and journalists suggest that an impression has been abroad that Oxfam calls for an elimination of supports within the EU sugar regime. Instead, we call for a managed regime within the Union which would maintain a decent price for producers across Europe, manage access for LDC and APC countries and end the dumping of European sugar outside the Union. We still hope that this will come to pass.

We have been supportive of the Government's call, along with its counterparts in nine other member states, for the reduction of quotas in the European countries that produce most sugar and have surplus production, which is then exported. It is perfectly reasonable that this is where the cuts should apply. We have also supported calls for a higher price, which was recommended by the European Commission in its latest proposals on the EU sugar regime. We seek a managed regime that tries to achieve the various objectives of ensuring an end to the dumping of subsidised EU sugar abroad while maintaining market access at a reasonable price for ACP and LDC countries. The committee will be aware that LDC countries have had their access to the free market in sugar staggered over a long period. We would like this process speeded up to allow immediate access to the EU market.

I understand the concern with regard to Brazil. From a development perspective, however, exports of sugar from Brazil or Thailand provide jobs, growth and employment. We may all have problems with the labour structure or the land structure in these countries — Oxfam works with disadvantaged people on the ground in Brazil and other countries and is well aware of the difficulties they face. However, the industry provides employment opportunities.

Mr. O'Brien will deal with the land issue in Zambia. To consider a similar and neighbouring country, Mozambique has experienced a rehabilitation of land and sugar mills as a result of market access for sugar to the European Union. We must ensure a decent price for sugar. When the European Commission and the Council of Europe consider reform of the regime in the next month, this must be borne in mind.

With regard to the timeframe for subsidies, it is proposed that the present CAP budget remains in place until 2013. There has been much talk of a reduction in subsidies in the context of the ongoing WTO negotiations. However, according to Oxfam's estimates, the proposals put forward thus far by the European Union and the United States will not result in any reduction of budgetary payments to producers in the European Union or the United States. Hence the ceilings placed on agricultural supports as a result of the Uruguay round in both the European Union and the United States have a very high margin for reduction. While the current proposals would eat into those margins, they would not be fully removed by the proposals from either the United States or the European Union. Currently, neither the European Union nor the United States has a proposal on the table which would cut domestic subsidies in Europe.

As for the structure and method of payment of domestic subsidies, I take the point made by Deputy Upton in respect of small farmers here in Ireland. As the joint committee members are well aware, it must be emphasised that we have never called for the elimination of subsidies. However, we believe there is much scope for change in the manner of the provision of subsidies within the European Union which could be of benefit to developing countries. As an example of the inequities in payments, while the Duke of Marlborough in the United Kingdom is the 14th richest man in the world, he receives €1.4 million from the CAP budget. By way of contrast, the Northern Ireland governmental website provides full published figures for Common Agricultural Policy payments and one farmer receives 2p. When one examines the published figures from the Commission, there are massive disparities both in Ireland and right across the European Union in terms of the structure of payments, whereby large sums of money go to very large farmers. In Ireland, according to the Irish Independent some weeks ago, the largest recipient receives approximately €600,000. Much can be reformed within the structure of European agricultural payments to ensure that we actually meet the objectives and do not undermine small-scale farming in places like Ireland. I take the Deputy’s point in terms of the proposals and we will forward something in writing to the joint committee.

Mr. O’Brien

I wish to respond to Deputy Upton's question relating to land usage in Zambia. Zambia was my home for many years and I certainly enjoyed the open spaces which are——

Deputy Upton

There are plenty of them.

Mr. O’Brien

There are. There are two main reasons for the situation there. A similar situation is not found in countries such as Rwanda, Uganda and so on in the Great Lakes area, in which the size of an average farm, which is densely cultivated, is approximately 1 hectare. In Zambia, historic factors apply. Moreover, the question as to why the land is so under-utilised is related to poverty. In Zambia, the historic factor is linked to the post-independence development of the copper industry, which led to enormous migration and urbanisation in the copper belt, in order that outside of South Africa, I believe it is the most urbanised country in sub-Saharan Africa. The South African Minister who attended the recent consultation on the White Paper in Dublin Castle drew attention to the phenomenon of migration to towns and cities which is taking place across sub-Saharan Africa. It is largely due to poverty and lack of opportunity in rural areas.

Statistics reveal that the vast majority of people who live on less than a dollar a day live in rural areas. They are the small producers who try to earn a livelihood. In fact, they are unable to do so. While there are many reasons for this, I will draw attention to two, in particular. One relates to the difficulty in earning a living without a road over which to get one's goods to market. This is very much the case in Zambia. Obviously, there is a need for what are increasingly known as inputs to be provided by governments. However, this raises the question of the role of the state, which, for many of these countries, has been circumscribed by the World Bank or the International Monetary Fund. Often, such countries do not enjoy the policy space in which to allocate budget resources that would improve the infrastructure.

There is a need to provide inputs to farmers for trade-related capacity building. Within the United Nations, support for an integrated framework which provides capacity building support to farmers is increasingly under discussion. However, many least developed countries are ineligible or do not meet the criteria for gaining resources from the integrated framework. Approximately half receive funding. Hence, there is a question of aid for trade to build capacity.

There is also the issue of market access and of value-added market access, in particular. A move from dependence on primary commodities is required given what has happened to the relative value of primary commodities across the board. Essentially, their value has declined hugely in the past decade. Therefore, value-added market access is also critical. I hope this explains the issues in some way.

As for Deputy Blaney's suggestion, we will put our proposals in writing before the joint committee by the end of the week.

Deputy Naughten

I asked a question concerning the decoupled payment.

Mr. Roche

Oxfam was in favour of the move to decoupling, having examined the research that was published at the time, particularly by FAPRI Ireland, which informed the position of both the Government and many people within the agricultural community, to the effect that it would lead to some reduction in production and exports. Other figures that have been published subsequently, by the OECD for example, suggest that decoupling payments across the European Union will result in very small reductions in production. We feel that decoupled payments will still be an export subsidy because they affect farmers' production decisions in a manner that allows them to produce. Essentially, it is a subsidy.

The final effects on production are unclear. The process has only just begun in Ireland and in other countries, partial decoupling, with linkages across different payments is still in operation. Hence, we are concerned that decoupling is not the answer. Oxfam believes the green box payments made within the European Union under decoupling must be disciplined in some way. There must be some criteria to ensure these payments do not result in the dumping of produce overseas below the cost of production. Hence, whereas initially we were optimistic that the proposals put forward two years ago would resolve the issue, we are now somewhat less so.

Deputy Naughten

No one can evaluate the impact of decoupling until it happens and it is its first year. We can all see that there has not been an impact in Ireland. To date, this is the only country which has fully decoupled. Hence, any research coming from the OECD or any other source at this stage would be very premature. The development organisations should take a more positive view on the issue until it is proven otherwise. I believe it will have a direct impact on the scale of production in Ireland. Within the European Union as a whole, I do not believe it will have an enormous impact, because Ireland is one of the few countries which has opted for full decoupling. However, it may be an example of what could happen in other member states in the future and may ensure that there will not be overproduction and dumping, which was the key issue raised by the delegates.

Mr. Roche

It is important to remember that while we can talk about full decoupling here in Ireland, other member states opted for partial decoupling which has clearer production effects that it would have had here. The Deputy is right to state that we do not know what the production effects in Ireland will be in the future, but we can see that if partial decoupling remains in effect in other countries, it will have a clear effect on production. In the context of the WTO negotiations, we feel we must have some sort of rules as to how such payments are made, to ensure they do not end up being dumped.

Chairman

Can Mr. Roche send us a copy of his presentation?

Mr. Roche

Yes.

Chairman

Can he send a copy to the clerk of the committee in order that it can be referred to the Minister as soon as possible? The views of the members will be also passed on to the Minister. Is that agreed? Agreed.

On behalf of the committee, I thank Mr. Roche, Ms Garvey and Mr. O'Brien for attending today. I also thank them for their presentation and for the way in which they responded to members' questions. I compliment them on their great work and wish them well in the future. They are always welcome to appear before this committee.

The joint committee went into private session at 5.50 p.m and adjourned at 5.55 p.m until 3 p.m. on Wednesday, 16 November 2005.