JOINT COMMITTEE ON EUROPEAN AFFAIRS debate -
Wednesday, 14 Feb 2007

EU Trade Relations: Discussion with Trade Matters.

Acting Chairman (Deputy Andrews)

I remind members to ensure that their mobile phones are switched off for the duration of the meeting. That is important as, apart from the discourtesy to witnesses and other committee members, it causes serious problems for the broadcasting, editorial and sound staff. Apologies have been received from Deputies Walsh, Deasy, Sexton and Connolly.

The purpose of today's meeting is to advance our discussions on the European Commission's trade relations with less-developed countries. Members will recall that we have already had an instructive discussion with Mr. David O'Sullivan. Today we welcome Ms Niamh Garvey from Christian Aid, Mr. Colin Roche from Oxfam, and Mr. David Joyce from ICTU. The format is a simple one. I will ask Ms Garvey to begin by making a presentation and if Mr. Roche and Mr. Joyce wish to add anything they may do so. We will then open the discussion up to members for their comments and questions before coming back to the witnesses.

Ms Niamh Garvey

I thank the joint committee for the opportunity of making a presentation. Following Mr. David O'Sullivan's presentation to the committee in December on European trade policy, we welcome this opportunity to highlight the importance of new trade deals to developing countries. We are here on behalf of Trade Matters, so as well as the organisations represented today, we also represent Comhlámh, Trócaire, Friends of the Earth Ireland, and the Fairtrade Mark Ireland.

Trade is of great importance to developing countries. Committee members are probably familiar with the idea of poor countries trading their way out of poverty. Certainly, the examples of South Korea, Malaysia, India, China and Mauritius have demonstrated how developing countries have successfully developed industries that compete in global markets. Getting trade right can therefore be a powerful tool for tackling poverty, but this is not automatic. Trade and, most specifically, unfair trade deals can also be a threat to developing countries. It is estimated that trade liberalisation has cost sub-Saharan Africa approximately $272 billion over the past 20 years. With this amount, sub-Saharan countries could have had enough extra income to wipe out their debts, with sufficient left over to pay for every child to go to school and be immunised.

In a number of countries where our organisations work, we have also seen how inappropriate liberalisation has directly affected the lives of small farmers. For example, in Senegal the premature opening of markets has pitted local onion farmers against imported onions from Holland. Bolosai, whose family has farmed their small plot for three generations, said:

When we come back from the market it is heart-breaking. The money we get is not worth our hard labour. We now have almost no cattle because we had a succession of bad years and have had to sell them. What happens when we have no more cattle to sell?

Multilateral trade deals made at the World Trade Organisation set the rules by which countries engage in international trade and are therefore vital. They must work to enable developing countries to meet their development goals, rather than undermine them. Previous rounds have failed developing countries. Under the Uruguay Round, developing countries made deep concessions and it was in recognition of this failure that the current round — started in 2001 and known as the Doha Development Round — explicitly set out to address the interests of developing countries.

At the last ministerial meeting in December 2005, negotiations stalled and were finally suspended in July 2006. Just last week, the negotiations were relaunched but today, as in July 2006, the interests of developing countries across the whole set of negotiations are being marginalised. The requests in each area of the talks, whether concerning agriculture or industrial products, are far from balanced. For example, the European proposal on agriculture is much less ambitious than the outcomes it wants to see in industrialised products from poor countries. Unless significant progress is made on behalf of developing countries across the whole range of the negotiations, the WTO deal will fail poor countries again.

We want to emphasise that poor countries must be guaranteed the right to use trade, investment and industrial policy tools to promote economic development and reduce poverty. Each of the success stories I mentioned in my introduction carefully nurtured and protected their industries as they grew. We must ensure that trade agreements allow this flexibility for other poor countries so that they too can trade their way out of poverty. Member states, including Ireland, must exercise more parliamentary oversight over the European Commission as it engages in trade negotiations at the WTO but also as it engages in bilateral trade deals outside the WTO — areas which David O'Sullivan's presentation in December demonstrated are of increasing importance to the European Union.

Mr. Colin Roche

I will speak a little about regional trade agreements and other free trade agreements between rich countries and developing ones. Outside the World Trade Organisation, which provides the multilateral framework for trade rules and the international trading system, there has been a proliferation of other trading agreements — free trade and regional trade agreements — between rich countries in the north and southern ones. We have some major concerns about some of these agreements.

There are approximately 250 regional and bilateral trade agreements which now cover approximately 30% of international trade, so a very significant amount of international commerce is governed by these non-WTO agreements. By their very nature, they go above and beyond the WTO trade rules which, essentially, lay the basic framework for international trade. In the proper circumstances, some of these trade agreements can be beneficial. The European Union has one such trading arrangement which has gone much further than WTO negotiations.

However, our main concern is around these agreements between northern rich countries, such as the United States and those in Europe, and southern developing countries. At the WTO, there are multilateral negotiations where groups of developing countries can come together, fight their corner and, more successfully as we have seen in this round of negotiations, fight off the demands of rich countries, although there is still a huge imbalance. In bilateral trading agreements between rich countries and developing ones, essentially poor countries are left on their own to face the economic might of the United States or Europe. Their negotiating weight in these relationships is much less than it is, or could be, at the World Trade Organisation.

I will give one simple example of where we have concerns. If one looks at the trading arrangements of the United States in the series of bilateral trade agreements which it has made, or is in the process of making, with a number of developing countries, such as Thailand, Jordan, Bolivia, Colombia and Peru, we have very serious concerns about the impact that will have on access to medicines. The access to medicines issue comes under the rubric of intellectual property. The United States has gone beyond WTO rules where there are certain flexibilities to protect access to medicines and the public's access to medicines as carve outs from intellectual property rules. In the bilateral agreements, however, the United States has systematically attempted to further intellectual property rules and provide greater protection for pharmaceutical companies and longer monopolies on their patents for pharmaceutical products. The results have serious consequences for the possibility of poor people accessing medicines.

I will provide a couple of examples of studies where we might see an impact. I refer to the United States-Colombia free trade agreement. The Pan-American Health Organisation has done a study on what impact it will have if this agreement is ratified and comes into effect. Its study confirms that by 2020, the Colombian health system will pay an additional €940 million per annum to cover the cost of medicines and around 6 million users will have no access to medicines through the public health system. That is a very profound impact for a very basic good. After all in the developing world, poor people generally pay health care costs out of pocket and medicines are a significant element of health care costs.

In Peru, prices for medicines would rise 9.6% on average in the first year, 100% in ten years and 162% in 18 years. In ten years, Peru would incur additional medicine expenses of €199 million, of which €110 million would have to be met by Peruvian households. Again, there would be considerable extra costs on poor countries as a result of these bilateral trade deals. This also contradicts the spirit of the Doha Declaration on access to medicines concluded by nations in 2001 which was supposed to solve some of the problems which arose from the TRIPS agreement.

In Europe, we have a number of existing bilateral trade deals with South Africa, Chile, Mexico and various Mediterranean countries. As David O'Sullivan pointed out before Christmas, we are in the process of beginning negotiations with a series of other countries, such as India which provides the bulk of generic medicines for developing countries — that is, cheap medicines — which would be affected by any such strict intellectual property rules.

We have new agreements with ASEAN, the Association of South East Asian Nations, as well as Central America, the Andean countries and the economic partnership agreements with ACP countries. We are very much in the process of concluding deals. If the European Union goes down the route — it is by no means certain it will — of the United States, then we could see even further impacts for poor people in terms of their access to medicines.

There are other issues in bilateral agreements, such as the right to regulate and the possibility of accessing services which can be affected by bilateral trade agreements. However, I will not go into them unless members have further questions. Mr. Joyce will speak about one of these agreements — economic partnership agreements — which affect African, Caribbean and Pacific countries and some of our priority eight partners, in particular.

Mr. David Joyce

As Mr. Roche said, I wish to spend a couple of minutes outlining the little known trade talks led by the EU which, in our view, threaten millions of jobs and livelihoods across the developing world — economic partnership agreements, or EPAs as they are known in the trade jargon. The EU is currently negotiating new trade deals with 75 poor countries in Africa, the Caribbean and the Pacific — the ACP region — which is a group of countries that includes most of the world's poorest countries. The new deals — the EPAs — are supposed to be good for poor countries and help them develop. We have not come here to say they do not have the potential to do so but in their current form, we have serious concerns about them.

The proposals on the table look set to have the opposite effect to development and poverty eradication. They go beyond the most damaging proposals which have been under discussion at the world trade talks while at the same time, ACP countries' wishes for the deals to focus on development are not being taken seriously.

In terms of how they might hurt poor countries, the results of the deals could be devastating in a number of areas, including massive job losses, deteriorating working conditions and reduced spending on health and education as revenues slump for developing countries. That final point was confirmed in a recent study carried out for Irish Aid in regard to some our partner countries. Many people, including ACP governments, community groups and trade unions in those countries are very concerned about these issues and about a race to the bottom in terms of employment standards.

I suppose for that reason we are involved in this issue in solidarity with trade unions in developing countries. In terms of that race to the bottom, to compete in the race to attract investment, etc., countries have had to accept the principle of creating these export processing zones. We have been involved in discussions on various committees over the years on the working conditions in some of those zones where labour standards are deliberately waived in an effort to attract foreign investment.

We would like the Government to listen to the repeated concerns of developing countries involved in these negotiations, to call on the European Commission to change its approach to the negotiations and propose alternative deals that will help to reduce poverty, to champion a thorough review of economic partnership agreements and confirm that those negotiations will be adjusted to take account of the findings of any of those reviews, to ensure that respect for core ILO labour standards are an integral part of any agreement and that there are rigorous impact assessments to evaluate what the intersect is like for those, and to push for changes to the EU's negotiating mandate so that it drops its unfair demands for trade liberalisation and negotiations on issues that have already been rejected, as has been stated a number of times, at the World Trade Organisation. We are back here to what were previously known as the Singapore issues such as investment in those negotiations.

Acting Chairman

I will put to the delegation what Mr. O'Sullivan stated, as far as I recall, that the EU had no malign intent in regard to sub-Saharan Africa. I focus on sub-Saharan Africa because Irish aid is concentrated there. The EU has a vast aid budget for that area which is bigger than that of any other contributor to aid. It has no strategic interest, to use a phrase which was used in these islands previously, and wants to see sub-Saharan Africa benefit, and yet the delegation in its presentation is imputing to it some malign intent to undermine the poorest of the poor in those areas. Somewhere somebody is not really representing the circumstances. We have heard those two points of view. Would one of the delegation like to deal with that?

Ms Garvey

It is quite confusing. The Acting Chairman is correct. The European Union and the Commission have stated on a number of occasions that the economic partnership agreements will be primarily about development and that they are about supporting developing countries to make the most out of trade deals to improve development.

If the European Commission were trying to support developing countries to meet their own development objectives then one would expect to see the Commission listening to developing countries on what they want to get out of the negotiations because they, as poor nations, know what is in their own best interests, as opposed to them being told what is in their best interests, for example, by the Commission.

When we look at how the negotiations are panning out, what we see is that the Commission is not listening to what the ACP is saying will be in its interests. For example, in a leaked document, which was a response in the negotiations by the Commission to proposals that the Pacific region had put forward on how best an economic partnership agreement, or EPA, would serve their interests, the Commission rejected almost every proposition made by the Pacific region as to what should be in these negotiations. It is difficult to see how we can square up that idea that the Commission is trying to support developing countries when it is refusing to include propositions made by the different regions and is also refusing to even meet the commitments that the Commission has already made, for example, to provide alternatives to the EPA negotiations should the development countries not want to sign up.

Acting Chairman

Why is the Commission doing that? That is the core of my question. I have heard previously that perhaps the Commission is trying to get an advantage over the US in gaining access to these markets, but Mr. O'Sullivan's point is that as the markets there are so backward, one must question the advantage which would really accrue to the European Union to be ahead of the US. I do not know what the delegation is imputing is the motivation behind not listening or not taking on board these points.

Mr. Roche

It is difficult to impute motive in any circumstance, but I could speculate on a number of avenues. As development organisations, we have a long history of changing our approach to one where we listen and the people who know best about poverty reduction and about what should happen to themselves are those with whom we work overseas. As development organisations, we have a long history of moving towards listening to the people with whom we work and, hopefully, that is increasingly what we do. However, DG Trade and the Commission trade negotiators do not have such a history. Indeed, the practice of trade negotiation across the board is essentially about getting the most that one can get. One possible interpretation is that the Commission simply does not have a culture or background of development.

Another is that the economic partnership agreements form part of this international set-up of agreements — regional agreements and bilateral agreements. We have seen similar cases with accession states to the World Trade Organisation where new members of the WTO, even if they are the least developed countries and even if they are the poorest of the poor, are being asked to sign up to ever higher standards and commitments. The reason this is happening is that it is part of an overall push for ever higher standards and commitments from developing countries. That is just another possible avenue.

In some parts of sub-Saharan Africa one can see little prospect for commercial gain in the short term, but of course many of the countries would be rich in resources such as minerals and oil. It is not entirely true to state that commercial interests are not at play in our trade relationships with Africa, the Caribbean and the Pacific.

Deputy Costello

I thank the members of the delegation for coming before the committee to expound the position as they see it and represent all the organisations in Trade Matters. To add to what has been said by the Chairman, when we spoke to Mr. David O'Sullivan here a few weeks ago he indicated to us that the World Trade Organisation talks had a narrow window of opportunity between now and June or thereabouts and they would either come to fruition or fail. Has Trade Matters any input into the talks or any locus standi in the negotiations, and to what extent will the issues raised here have a forum where it really counts in that respect?

Has Trade Matters a model or blueprint for progressive trade liberalisation that will not disadvantage the countries of sub-Saharan Africa where the larger competitive markets would not be able to take advantage? If we look at our own track record, Ireland was an impoverished country for so long until quite a large number of different issues — transfer of funds, investment, education — came together to bring about a successful society and economy. Does Trade Matters operate from a blueprint or model which it would like to see in operation?

Senator Quinn

This is particularly interesting to me because I spent yesterday in Brussels at a number of meetings. One meeting was with EuroCommerce and the other was with the Foreign Trade Association. Both of these organisations are anxious to import what customers want. One of their concerns is the Doha agreement, which, they believe, is at a crucial point in trying to get agreements to enable the importation of products from all around the world because in general they want to give their customers a choice. Until very recently, they stated, there was a strong feeling developing among customers, which had nothing to do with governments, that they wanted fair trade, whether in textiles or in food. They increasingly wanted to buy from countries where the producers were getting a fair price.

Another social responsibility, namely, the environment, has recently cropped up. Customers are suddenly asking questions regarding the distances over which products have been transported, the number of air miles used in their transportation and the level of carbon emissions produced as a result. When we discuss governance and democracy, we must be cognisant of the fact that regardless of whether the US or the European Union is involved in the negotiating, the authorities in each have their customers, namely, those who elected them to power. The concerns of electors and customers are, therefore, one and the same.

There is likely to be a dichotomy or difference of opinion among individuals who say they want to purchase products from developing countries. Customers in Ireland are of the view that, given a choice, we should not support inefficient producers here through the provision of subsidies and that we should buy from countries where the producers reap the benefits.

The challenge relating to the environment has really only arisen to any great extent in recent weeks. To what extent are our guests in a position to help us, as democrats and politicians — whether at European level or individual level — such as through Irish Aid, and also help customers rest easy when they purchase textiles or clothing? This is going to be a major challenge in the future and it has really only gained momentum in recent weeks. I hear about it on the shop floor but we, as elected representatives, are also beginning to hear about it.

Mr. Joyce

The Chair's initial question was extremely good and goes straight to the heart of the matter. I do not believe that we are impugning any malign intent on the part of the Commission, other than that it is a moot point as to whether trade liberalisation, per se, leads to poverty reduction. The Commission clearly believes it will ultimately lead to poverty reduction. We are saying that it will do so but that there are a number of concerns with which we must also deal.

Deputy Costello inquired whether there is a model of trade liberalisation that would be beneficial to poorer countries. That is what we are all striving towards in a sense. I wish to mention one particular initiative which had important things to say but which has gathered dust on a shelf since it was originally published. I refer to the report of the ILO commission on the social dimensions of globalisation. We are saying that social and environmental issues are not being taken into account in the context of the current model of globalisation. That deficit clearly needs to be addressed. Those in the constituency we represent are becoming increasingly concerned about labour conditions vis-à-vis the products that arrive on our shelves, etc. In the context of globalisation, one could consider the relevant bodies that deal with trade, such as the World Trade Organisation — which governments take very seriously because it has real clout in terms of enforcing what is agreed at its negotiations in respect of sanctions and so forth — and compare them with the International Labour Organisation, ILO, which negotiates international labour standards, etc., but which has no powers with regard to their enforcement. The ILO can produce reports stating that Burma systematically uses forced labour and ask governments to review their relationships with that country. However, that is where it ends.

There is an imbalance in the system that needs to be addressed. From our point of view, if there was a global trading system which ensured that people's rights at work were respected, the benefits of that trade would begin to flow more towards the producers, workers, families and communities in the countries in question than is the case at present.

Ms Garvey

Deputy Costello inquired about a blueprint. We do not have a blueprint, per se, but we do have guidelines to the effect that whatever kind of trade liberalisation happens must be specific to the conditions that apply in individual countries. We can see, from developing countries that have been successful in obtaining benefits from liberalisation, that choosing the correct timing and sequencing for liberalisation in different sectors across national economies is vital. Such timing and sequencing varies from country to country so there needs to be maximum flexibility in the outcomes from negotiations that allows each country or region to choose what suits them in this regard rather than being obliged to adhere to strict timeframes that do not reflect kind of flexibility to which I refer. A related issue could be benchmarking, where the commitment to which developing countries sign up in respect of liberalisation would only come into force when they have met given indicators relating to social or economic development. Rather than there being a static commitment in respect of targets countries should reach in five or ten years’ time — regardless of what has happened to their economies in the interim — the commitment would only come into force when they hit a level of development appropriate to that level of liberalisation.

Another matter that guides Christian Aid's work is an emphasis on small and medium enterprises in developing countries. The private sector is obviously incredibly important for economic growth and, therefore, we encourage, as much as possible, small and medium local companies and businesses. The latter are placed most under threat when liberalisation happens at an inappropriate time. That is part not of our blueprint but of how we approach trade development.

Mr. Roche

WTO and bilateral agreements contain an increasing set of rigid structures and trade rules, which hem in the possibilities for developing countries to make their own development choices and gain the real benefits of trade and commerce. It must be stated that this is not simply an ideological set up, it is based on the interests of rich countries or those of companies within individual countries. The evidence of this can be seen in the intellectual property negotiations the United States conducted, which were dominated by an agenda set by the pharmaceutical companies. What we need is a move away from those rigid structures and high demands placed on poor countries, which must be allowed to develop at their own pace. Even though these poor countries are our development partners, the European Commission is failing to listen and to provide the necessary alternatives so we can reach trade deals that will benefit both them and the European Union.

Our only input to the negotiations is essentially through the committee and the Government. We can only hope that the Government will listen to us because, ultimately, it is members thereof that are involved in negotiations and make decisions. In the case of the European Union, the Commission negotiates on behalf of the member states. The latter are consulted by the former every step of the way. It is our responsibility and that of members and the Government to make Ireland's position known, namely, that we want developing countries to be given choices.

Unfortunately much of this agenda is obscure and it is like a slow death by obscurity. It is so obscure that few people know what is going on, whether they be in Government circles or beyond. It is therefore very difficult to make an input into this process. All we can do is try to get a handle on what is happening and try to inform this committee, the Government and the wider public about the issues.

Acting Chairman

Senator Quinn asked a specific question.

Mr. Joyce

In response to the Senator's question on responsible consumerism, it is a growing movement in Ireland and across the world. We have seen the growth of fair trade products across the country. Other initiatives, including environmentally friendly initiatives, will also grow. While such issues will always have a key role to play in allowing individuals to take action according to their convictions, they will never be the complete solution. Unless the bigger issues are dealt with, the implication of a product being fairly traded is that there is a problem with the other products on the shelf and this is a significant issue.

To add to what Mr. Roche said about our input, we meet officials from the Department of Enterprise, Trade and Employment on a regular basis and they are very open to discussions and consultations with us. There is a national trade forum which does not meet very often in which the NGOs and social partners have had an input in the past. We therefore have some input for making our views known but it is difficult to judge how that influences the national agenda. In the case of the European negotiations the Article 133 committee is a closed group and we have no idea what is represented on behalf of Ireland in that committee.

Acting Chairman

I thank the delegation for attending. I emphasise that the committee is listening to the views of the delegation as this is an issue which has been on the agenda of this committee and of the Joint Committee on Foreign Affairs. We are doing our bit and we have tried to broadcast that to the Ministers when they come to our meetings.

Senator Quinn

I accept what Mr. Roche has said. I emphasise that the customer has a significant say and the Government, elected Members and store owners take notice. All it needs is for the individual citizen and customer to say in a shop that he or she will not shop there because it does not stock what they want. This is significant power and in a democracy such as the European Union it will influence the individual governments. I remember being on a shop floor more than 20 years ago and I met Deputy Pat Rabbitte and his wife doing their shopping. He complained to me that our company was selling South African oranges during the time of apartheid.

Acting Chairman

The shop must not have had enough smoked salmon.

Senator Quinn

Maybe not. I explained to him that at that time of the year we had to buy from the southern hemisphere but we made sure to give the customer a choice. I informed him we also stocked oranges from Chile but he replied, "I would not buy from that country either". The power of the customer is probably more powerful than the power of governments because the people will change those governments if they do not respond.

Acting Chairman

I thank the delegation.

The joint committee went into private session at 2.45 p.m. and adjourned at 2.50 p.m. until 2.30 p.m. on Wednesday, 28 February 2007.