I thank the sub-committee for allowing us to make a presentation. We have been looking at some of the issues in agricultural trade relations between the EU and developing countries, in the context of the reform of the Common Agricultural Policy, the WTO Round and the economic partnership agreement negotiations which the EU is conducting with African, Caribbean and Pacific states. That is my particular area of focus.
We are very concerned about the situation of ACP countries regarding CAP reform and the trade negotiations because these are countries which have traditionally benefited from trade preferential access to EU markets. The EU can pat itself on the back because it has done quite a good job in promoting the structural development of a significant number of these countries, though not all.
We also have the Everything But Arms initiative for least developed countries, 41 of which are members of the ACP group. We are particularly concerned about the impact of CAP reform on the value of agricultural trade preferences - not the granting of the trade preferences per se but the economic value of these trade preferences.
We are also concerned that within the EU's broad trade policy, which moves on two legs - the WTO and bilateral and regional free trade area negotiations - the particular needs of least developed countries and small, vulnerable ACP economies are being lost sight of. As we talk to people in governments, we find that everyone is interested in the big picture and the particular needs and interests of these smaller economies are being lost sight of. I presume that the Sub-Committee on Development Co-Operation shares our concern that any future trade arrangement with these economies should promote their structural transformation, moving them away from a dependence on agricultural commodities with stagnant demand growth and declining prices and towards the production and trading of commodities with stronger demand growth and more buoyant prices. If we can bring about that structural transformation we can help these countries address, for the benefit of their people, the problems of poverty they face.
Any trade negotiations in the agricultural sector between the EU and these countries should assist them in moving up the value chain, that is, away from merely producing the basic raw materials and moving up to producing higher value products. The negotiations should also enable them to diversify away from products which are declining in economic value. This should be an essential plank of EU policy towards the African, Caribbean and Pacific least developed countries. At a rhetorical level this is a central EU policy plank, but the devil is in the detail. There are major gaps in the EU approach, perhaps most significantly regarding the impact of CAP reform.
The process of CAP reform has two major impacts on these traditionally preferred countries in the African, Caribbean and Pacific group. As we move away from high prices in Europe to direct aid, the value of the trade preferences is reduced. For every ton of beef these countries export to Europe, they now get less money. They get lower prices because of the process of CAP reform whereby we have moved over to direct aid to farmers and away from price support. This is also happening in sectors such as rice and, as the sub-committee will be aware, it is likely to happen in the sugar sector which is of central significance to 19 ACP countries. Sugar is a major component of their exports to the EU, accounting for over €1 billion of these exports. Some of these sugar based economies are almost exclusively dependent on sugar. For example, 65% of Swaz-iland's agricultural GDP comes from sugar. We are very concerned that in the design of the reform process, these external effects of CAP reform are not being taken into account. This could have serious consequences for the future of these economies.
In the context of the European Presidency we believe there are initiatives which the Irish Government could take to refocus attention on some of the detailed questions and problems to be faced. The second area of impact is that the central component of the Common Agricultural Policy is to make European exports of processed food products more price competitive. It is a central plank of the whole reform process to ensure that the European industry becomes much more price competitive and can effectively compete with the main agricultural producers and traders on a global level. A by-product of this is that it improves the competitiveness of European exports vis-à-vis developing country producers as well.
There has been increased competition for developing country producers on markets that they serve from European exports of these value-added food products, particularly simple value-added food products. An example is the wheat chain, things like pasta, biscuits and flour. They are losing markets in their neighbouring countries and a particular concern is that against the background of CAP reform where the EU is becoming more price competitive in terms of its exports, the Union is pushing for something that goes way beyond the WTO, namely, economic partnership agreements. These are basically free trade area agreements with groupings of African, Caribbean and Pacific states, largely consisting of least developed countries.
We are deeply concerned that given the current WTO rules, the EU is insisting that these free trade areas cover 90% of all current trade and lead to the elimination of duties within ten years of the conclusion of an agreement. This goes way beyond what they are asking the least developed countries in the WTO context and we are concerned that the commitments which the Irish Government has supported - having special and differential treatment for least developed countries, taking into account their needs in the WTO - is not being reflected in the EU's conduct of these free trade area agreements with what constitutes a majority of the least developed countries in the ACP.
We are concerned with the lack of political oversight from the member states of this process of trade negotiations taking place with the ACP. That is why we took the opportunity to speak with what will be the Irish Chair of the Article 133 Committee, the trade committee which supervises the EU's conduct of these negotiations. We are concerned that many of the policy commitments which the Irish Government has supported should be reflected in how the European Union conducts its trade negotiations with what, after all, are vulnerable economies. They are often single commodity dependent or least developed economies whose prospects have been profoundly affected by the AIDS/HIV pandemic, which is undermining their human resource base.
We would like to see somewhat more openness from the European Union to the concerns of these African, Caribbean and Pacific and least developed countries during the period of the Irish Presidency. The first phase of these trade negotiations ended in September 2003 and when the major issues of concern to the ACP are reviewed it will be seen that after a year of talks very few of these have been addressed, for example, the impact of CAP reform. For sugar exporters to the EU, under the sugar protocol, if the Union goes ahead with the falling price strategy for reforming its sugar sector, they are going to lose €300 million a year in income. Many of these countries will be pushed out of supplying the European Union market. That means they must look around for alternative markets, which means that countries that all produce sugar will start to trade into each other's markets and undermine their respective sugar industries. We are concerned that this could undermine attempts to create regional trading blocs because it could generate serious tensions and pressures. Members of the Oireachtas do not need me to tell them how angry sugar farmers can get when they see their privileged positions under threat. The same applies in some of the developing countries in Africa.
We would like to see the European Union much more open to putting its cards on the table. It is no good having these countries investing in supplying the European market with sugar to find out that the market changes in five or six years time and they are left high and dry. We would like to see the European Commission being much more open to discussion on these agricultural issues. At present it refuses to comprehensively discuss these matters. Similarly, another major issue is WTO rules on free trade areas. Currently it insists that free trade areas cover 90% of all trade and should be in place within ten to 12 years. The ACP group does not feel this is appropriate, where most of its members are least developed countries which face profound difficulties in producing competitively.
The European Union seems to think that if the trade policy is right everything else will follow. To be frank, it does not improve the road infrastructure or supply the technicians needed to keep the telephone service working, when most of the trained people are dying off with AIDS-HIV. Neither does it provide the railway drivers to ensure that trains are driven along the newly rehabilitated railway lines. There are many supply side constraints which need to be addressed if these countries are to gain the benefits of moves towards free trade. This is a third major area where the ACP is deeply concerned with the EU's approach. It is not willing to discuss in a comprehensive manner what supply side measures are needed which go beyond the existing arrangements to help these countries prepare for free trade with the European Union.
During the European Presidency it would be useful if the Irish Government could take the opportunity through its chairing of the Article 133 Committee to try to assert some kind of political oversight over the conduct of the negotiations so that the substantive issues of concern to the ACP are more effectively taken up and addressed. I mention this in particular given that following the failure of the Cancún ministerial meeting, Commissioner Lamy identified the fact that ACP countries saw themselves as having little interest in the outcome of a multilateral round because they were concerned over the erosion of trade preferences. This is a genuine problem. If one looks at these states objectively, everything is a problem for them. They do not see benefits arising from any of these trade arrangements. They just see CAP reform eroding the value of preferences, WTO agreements increasing competition from other developing countries and increasingly strict EU hygiene standards being introduced that they must struggle to meet at an economic cost. If a small country has to make a big investment in meeting EU hygiene standards, that must be spread across a high volume of production, otherwise the unit cost is too high. These particular problems of the small and vulnerable countries are not being properly addressed in the WTO. Neither are they being addressed in the context of economic partnership agreement negotiations.
We would like to see the Irish Government using its Presidency to review what has happened so far in these negotiations to see how the needs of the vulnerable least developed and small poor countries can be protected so that we all end up in a win-win situation from moves towards free trade and the burden of adjustment is not shifted to the poorest economies. In the set of recommendations distributed to members the committee will see a number in italics that relates to what we believe the Irish Government should do. I will not go through them in detail, but we have come up with notions such as compensatory trade measures to help address the preference erosion arising from CAP reform. This is where the EU looks to removing the residual market access restrictions which it has on higher value food products. Exports of raw sugar are allowed but not canned pineapples, which contain 25% sugar, for example, because the duties are too high on the sugar content of the pineapples. We will not allow them to export sweets or chocolate, again because the duty is too high on the sugar content. We are locking into the production of raw materials in which there is no long-term future. We need to help them move up the value chain if they are to develop.
Finally, the scale of the production by these countries in the ACP is so small that it is not going to be a major threat to European interests. If Namibia moved away from exporting chilled beef to Europe and sent 150g packets of smoked game meats to Dunnes Stores, it would not affect Irish beef farmers in the least, but it would enable the Namibians to move up the value chain, create employment and pursue more environmental forms of livestock raising in what is basically a desert country.
We need to get the European Union to refocus on how it is going to translate special and differential treatment into these free trade area negotiations for least developed countries. I will not go into the details because these are all set out in the text which has been circulated. It gets somewhat tedious if we go into sanitary and proto-sanitary measures and the problems thereof.
