Mandelson Answers to Trade Committee of European Parliament (23 May, 2005)

Peter Mandelson



EU Trade Commissioner




Remarks to the Trade Committee of the European Parliament
























Trade Committee of the European Parliament
Brussels, 23 May 2005


Today, I would like to focus my remarks primarily on EPAs and our report on the take up of preferences to our markets by Developing Countries. I will also say a few words about the latest developments in relation to textiles and Airbus/Boeing and the ASEAN meeting. As ever I am happy to deal with any questions you might have on any other subject.

1. The White Paper on preferences

My commitment is to put trade at the service of development. In this context I asked my Services to provide a documented, sober assessment of the EU's openness to developing countries and I announced to the Development Committee, on 17 March, my intention to publish an annual White Paper monitoring the take up of our various trade preference programmes. My services have brought along copies for you and they are available at the distribution point at the entrance to the meeting room.

The White Paper’s findings can be summarized in one sentence: the European Union is already today through its trade policy, giving developing countries many of the chances they desperately deserve.

We have been steadily and progressively opening up our markets to poor countries, through preferential trade arrangements, for the last 30 years. By 2003, no less than 40% of our imports came from all developing countries, including rapidly developing countries like China.

However, our policy, as it should be, is particularly favourable to the poorer and more vulnerable exporters. Amongst the rich so-called Quad of the United States, Europe, Canada and Japan, Europe’s share of total LDC exports (excluding petrol) was 63% in 2003. This makes us, by far the most open market for the world’s poorer, least developed countries.

What’s more, the preferences we offer are of real and increasing help. The proportion of goods entering the EU at zero tariff or at reduced rates of duty steadily increased between 1999 and 2003 from 71% to 79%. Only 3% of goods imported from the ACP family of nations was charged full duties in 2003. And LDCs benefit, of course, from full tariff and quota free access under Everything but Arms.

In this, Europe compares well with other rich countries. The data shows that we take in close to 70% of LDC agricultural exports, against only 17% for the United States. I know there are plenty of people who argue that the workings of the Common Agricultural Policy are iniquitous for the poorest countries and of course I accept the case for reform: but the figures tell a different story. The constraints operating are more to do with capacity of supply and challenges of logistics and transportation, than market access.

So the Summary of the facts shows we are giving significant help to the poorest. My Conclusion, however, is that rather than be complacent, there is more work still to do. Where do we go from here?

2. Economic Partnership Agreements with the ACP countries.

We are making good progress on substance with all six regions. Our immediate focus is on helping our partners integrate their economies regionally: for the impetus given to growth of regional markets is one of the most important innovations of this EPA process.

By this autumn we’ll be holding Joint Ministerial meetings for each region following the technical discussions. By then we should have a negotiating road map for each region.

These roadmaps will be tailored to the needs of each region. They cover capacity issues such as customs and revenue, trade facilitation, help with meeting standards and managing change in specific sectors. With some regions, if they wish, we are also discussing a broader agenda of trade in services, competition and investment policies, IPR issues and public procurement. The interests of our ACP partners are always put first.

The negotiation deadline agreed in Cotonou is 1st January 2008. Talks must conclude by mid 2007. Agreement will send a powerful signal that ACP countries are taking the desired steps to integrate progressively into the world economy.

Let me stress, up front, that our EPA agenda is emphatically not about opening markets to our own exports: it is about opening European, as well as crucial regional markets to developing countries and enabling them to take advantage of these opportunities. To comply with our WTO obligations there has to be an element of reciprocity in these agreements, but there will be no equality in these obligations. Our ACP partners will only be expected to open their markets progressively over a long period, and only as their capacity to trade allows. And further access to our markets will be part of the package for ACP countries which are not LDCs.

At the very beginning of my mandate, I decided to inject a greater development focus to the EPAs. Louis Michel and I have set up, in partnership with the ACP, a development review mechanism, to ensure that the support we are giving for supply side development and regional integration actually translates into capacity building. This is about building markets and the ability to trade, rather than opening markets to our own exports. Today, the structures in the Commission are in place, and we are now in the implementation phase, as I indicated last month to the Joint ACP Parliamentary Assembly in Mali.

NGOs, as campaigning organisations, are always in need of issues to mobilise public opinion – and EPAs are currently high on the list. Of course, they are entitled – and right - to pose challenging and hard questions about the negotiations. I shall listen very carefully to these, if they are designed to get the best deal for ACP countries. But I want to offer one word of caution to NGOs and those who are supporting them. EPAs aim to be pro-development, pro-reform instruments. Be careful that your campaigning zeal against EPAs does not lead you to oppose innovation, frustrate change and undermine the case for reform in developing countries because, in this case, you will not be helping these countries and the progressive ministers in their governments. There is a danger of ACP countries being locked into the past, forever dependent on eroding, single commodity preferences. In any developing country, there are some who are forward – looking reform-minded people who seek global opportunities and there are conservatives who see every possible change as a potential threat. NGOs, through their desire to identify with developing countries, should be careful not to align themselves with those who are simply anti-change. That’s disastrous for development.

Beyond the EPAs themselves, let me also say a few words on preferences more broadly. And, specifically, how we can go further, ensuring these preferences are utilised.

First, we will give further market access. On agriculture, I am fully committed to the full implementation of quota and tariff – free access through EBA, at the end of the transition periods for sensitive products. Going back on our EBA commitments will not happen

Second, and more importantly, enable developing countries to take full advantage of new trading opportunities, I want the EU to lead the G8 push for “aid for trade”.

Third, our trade policy will continue to focus on the more vulnerable countries. The new GSP, when adopted, will increase preferences to the poorest beneficiaries and I deplore the fact that the Council has failed to adopt the proposal. As a result some powerful players, notably China in textiles, are still enjoying preferences under the previous system. I will continue to work hard to broker an agreement to ensure the EU implements what is our single most important pro-development trade instrument.

Fourth, through a review of the rules of origin, we can make preferential access perform better for need countries. My colleague Lazlo Kovacs and I will continue to push through this agenda, starting with a review of rules of origin for the GSP, but reviewing them across all our preferential trade agreements and arrangements, with the purpose of both simplifying and relaxing them where we can.

Last but by no means least, I am committed to a tangible pro-development outcome of the Doha talks. I cannot overstate the importance of this to developing countries. To get there requires a major contribution from the EU. But it also means getting all countries on board to deliver pro-poor outcomes for the most vulnerable countries of the WTO membership, including the achievement of an ambitious level of South-South market opening. I will continue to invest as much time and energy as necessary to achieve this.

3. Textiles - China

As you know on 29 April, the Commission began an investigation into 9 categories of textiles and clothing imported from China under the EU guidelines introduced on 6 April. In two of the nine categories of textile products, evidence suggesting the possibility of serious damage has become so clear that I considered it necessary to advance immediately to formal consultations with China under the WTO special safeguards provisions. The Commission approved this step last week.

Formal consultations will be requested concerning Chinese exports of t-shirts and flax yarn, after approval by Textiles Committee (meeting today Monday, 23 May, at 14.30).

Upon receipt of request for consultations, China is bound to limit exports to the levels reached during the preceding 12 months of the last 14 months, plus 7.5%, prior to the request. If China does not respect this obligation, the Community is entitled unilaterally to set an import quota at this level.

Investigations will continue for the other products and bilateral contacts continue in order to find a settlement with China.

At the same time the Commission is still in negotiations with the Chinese on the measures to be adopted to alleviate the situation in the EU import market. I am seeing the Chinese negotiator tomorrow.

China has recently announced a series of additional measures aimed at dampening their export growth. We want to analyse these measures in detail to measure their likely impact, and to explore whether an agreed solution is possible rather than the imposition of safeguard measures.

As I have frequently said, I believe that this would be the best outcome. We want to work with the Chinese to handle the transition from quota based trade. There can be no question of returning to quotas.

4. Now turning to Asia, I would like to give you a brief report on the ASEAN meeting which I attended at the end of April.

ASEAN’s current priority is negotiating regional FTA agreements, for example with (China, Japan, India, Korea, Australia/NZ).

They want the DDA to deliver primarily on agriculture. We want to encourage all ASEAN members to engage more actively.

On EU-ASEAN trade relations, we need to raise our game not least in view of the impact of ASEAN/Australian and Japanese FTAs on European business interests in the region.

We need to send a clear message of our engagement in the region. The DDA is our highest priority but it is not our only priority. Time to consider priorities after Hong Kong and to start preparations for the future.

I regard Asia as an important economic and political priority for the EU. Agreed with ASEAN Economic Ministers during our meeting in Vietnam to create a high-level "Vision Group" to investigate the feasibility of an EU/ASEAN FTA. This will start work soon.

Without commitment to a specific pre-judged for the negotiations - regional, bilateral and sub regional.

5. EU-US Negotiations on Large Civil Aircraft

I have stressed on many occasions that I do not believe it is desirable, appropriate or necessary to ask the WTO to referee Boeing and Airbus’ commercial rivalry. I think that subsidies to both sides can be reduced and even eliminated in time, but this can only be achieved by negotiation not litigation. Indeed I would go further in suggesting that we could spend years in expensive, distracting litigation, only to come back to negotiation when this process is finished. Of course we shall take a case to the WTO should the US ‘shoot’ first, as Boeing is actively campaigning for. They are clearly in the driving seat of this manouver.

–Boeing seem determined to get their retaliation in first, in view of the systematic and persistent subsidisation of the Company over many years by a variety of government sources. I sought and engaged in serious negotiations with a view to securing a balanced and equitable agreement regarding subsidies for both companies. I was not responsible for these talks being stopped.

We remain committed and prepared to negotiate a balanced, phased agreement. Nobody realistically imagines we can make comprehensive changes in one single, swift step. The picture is far too complex for that. The new USTR, Mr. Portman, agrees that a negotiated solution remains the most desirable option. I intend to continue exploring the prospects of an amicable solution with him while fully defending Europe’s legitimate interests.



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