§ 7.30 p.m.
§ Baroness Young rose to ask Her Majesty's Government what is their policy towards the European Commission's negotiating directive for a post-Lomé agreement, with particular regard to the Caribbean.
§ The noble Baroness said: My Lords, this short debate concerns technical issues. But, should anything go wrong, the consequence would be political and quite possibly extremely dangerous. The issues are urgent for the small states of the Caribbean. Negotiations are proceeding rapidly and I fear that the implications of the outcome have not always been thought through. The collapse of even one small island would threaten the stability of the whole region.
§ I have said before and make no apology for repeating that small islands can and have created a disproportionate amount of difficulty and concern. We need only to think of the Falklands, Grenada and, last year, Montserrat. We have been warned. I believe this debate to be of great importance to the Caribbean region generally.
§ In September negotiations will begin between the European Union and the African Caribbean Pacific states on a successor arrangement to Lome IV. The European Commission produced a draft negotiating directive for the European Union which was considered in its final form by the Development Council of the European Union two days ago. The ACP has been working on its position, which is expected shortly. I shall return to that point.
§ This evening I want to bring to the attention of the House during the remaining days of our presidency of the EU some of the serious reservations that the ACP has in relation to the EU proposals and to press the Government to ensure that those concerns are reflected in an appropriate amendment to the EU's draft negotiating directive. I do so with specific reference to the Caribbean. I continue to be actively involved as president of the West India Committee.
§ There are three aspects of ACP concern. The first is the Commission's desire to create political and economic conditionalities in a new arrangement; the second is the way in which the Commission's proposals might result in the break-up of the ACP as a unique group of developing nations; and the third is the proposals being put forward for new trade arrangements after the years 2000 and 2005. It is the third concern on which I wish to concentrate; it is both complex and divisive.
§ In outline, the EU is proposing for the latter part of this year to the year 2000 discussion on general, political and economic principles, the roll-over of the existing Lomé trade position to the year 2005 and negotiation between 2000 and 2005 of new post-2005 trade arrangements either within the context of the Europe region-specific free trade areas or within the context of some yet to be defined new version of the generalised scheme of preferences.1082
§ To explain further, the EU is suggesting that a new post-2000 arrangement will promote partnership. But the trade proposals, if implemented as presently drafted, are likely to create divisions in organisations such as Caricom, as Caricom is seeking to complete the difficult process of economic integration in the Caribbean. So much so that if the EU's draft mandate is not modified, it will require each state to select by level of development an option for a relationship with Europe that suits best its economic circumstances rather than the regional grouping in which they find themselves at the present time.
§ In the Caribbean every economy is different. Haiti's per capita GDP in 1995 was 229 US dollars; Trinidad's was 4,369 US dollars, and the tiny Cayman Islands a staggering 28,300 US dollars. National economic objectives therefore are likely to be at great variance leading to negotiations about negotiations as each nation has to determine its own priorities. To complicate matters, other negotiations such as those for entry into the free trade area of the Americas will also have to be taken into account.
§ The proposals do not recognise the specific problems that will arise in the context of the existing protocols—the protocols on sugar, bananas, rum and rice. While the sugar industry is a protocol of unlimited duration, the banana industry's access is still subject to discussion in the context of the Commission's new compromise proposals. We are well aware of the difficulties that the loss of bananas would create for the Caribbean. It is to be profoundly hoped that the new protocols will be agreed and continue well past the date of 2010.
§ The Caribbean rum industry finds that it has had most of its post-Lomé arrangements negotiated away by the EU and the US in an agreement on white spirits signed early in 1997. That is to say nothing of the problems facing the Caribbean rice industry, which seeks a new and transparent arrangement to be put in place from the year 2000 which will give that industry significant quotas for exporting rice to Europe directly rather than by using artificial trade mechanisms aimed, I suppose, at supporting Dutch overseas territories.
§ The General Affairs Council met on 8th June to consider the EU's draft negotiating directive. I should like to ask the noble Lord, Lord Whitty, who is to reply, whether he can outline the decisions reached and, in particular, whether member states were able to agree a more flexible approach towards free trade arrangements, taking into account the particular vulnerability of small states and the need for the longest possible transition period after 2005.
§ It would also be helpful to know what discussions took place on the future of the commodity protocols contained in Lomé IV and whether member states sought a terminal date for those vital commodity arrangements. The sugar, banana and rum protocols are all vital to the economic survival of the Caribbean. While the sugar protocol is of definite duration and can stand alone as a commercial arrangement, there will be a need for a sugar protocol and any new banana protocol to be able to withstand any WTO challenge if they do not have the protection of a long life within a successor arrangement.1083
§ I was pleased to see the recommendation of the report of the International Development Committee of the House of Commons published on 2nd June that proper consideration be given by Government and the EU to the vulnerability of the least developed ACP states and its suggestion that the final version of the negotiation mandate should contain specific assurances on that matter.
§ Time does not allow for all the points I should like to make. Britain enjoys a special relationship with almost all the countries of the ACP. Many are linked intimately to the United Kingdom through history, and are members of the Commonwealth and important trading partners. The implications of the present approach being taken by the European Union are that over time those nations will cease to be special. They will be just small economies, cast adrift and subject to, and even possibly drowned by, the strong tides of international trade. It sometimes seems that the EU and the US are both involved in a neck and neck race in almost every part of the world to achieve a trade advantage at any cost. While this may be a logical approach when faced with economic globalisation, it is unlikely to do anything to support the interests of small and vulnerable states such as those in the Caribbean. Policy driven by the need to obtain trade advantage is a process in which there is little equity for small vulnerable states which need time to establish more viable and diverse economies.
§ Britain has much experience of diversification and setting out to help small countries. The ACP is presently deeply unhappy, and with some justification, about the negotiating directive that the European Commission has put forward. While the ACP will be making its own counter-proposals, it is desirable that the EU itself recognises that unless its proposed negotiating strategy is flexible, offering in September this year—in only two months' time—an opportunity to discuss all aspects of the EU/ACP relationship on an ACP-wide basis and allowing for the longest possible period of adjustment in trade, Britain will have presided over the demise of its own special relationship with much of the developing world.
§ Speaking in Barbados, Prime Minister Arthur made it clear that the ACP cannot negotiate unless it agrees with the EU what they are to negotiate about. I should add that he was deeply concerned at the conditionalities which had been attached to some of the protocols. As he pointed out, Caribbean small states have been democracies for very many years; indeed, far longer than some countries in the EU. Britain has the unique opportunity, as President of the EU, to guide our EU partners to make the negotiating directive flexible, pragmatic and less prescriptive. Let me urge the Government to encourage the amendments necessary to achieve this. It is not only in the interests of the ACP; it is in the particular interests of the small states of the Caribbean where we have great obligations and strong ties of history. Those states look to us for help and support. I hope that the Government will view all this in a positive light.1084
§ 7.42 p.m.
§ Lord Judd
My Lords, I am sure that the whole House will want to thank the noble Baroness, Lady Young, for introducing, with her characteristic vigour and incisiveness, this important debate. She was quite right to emphasise the enduring and important relationship between us and many ACP countries, and in particular some of those of the Caribbean.
In the time available I want simply to reinforce some of the points which she made. I hope I will be forgiven if I do so by posing what I see as five mutually reinforcing questions. First, has the European Union fully considered the inevitable impact on the Caribbean if the banana regime collapses? Mass unemployment, rising deprivation and poverty, social unrest and an increase in drug production are all predictable. How exactly would the European Union respond to a crisis of this magnitude in the region?
Secondly, in view of all these dangers, will the European Union therefore seize the opportunity of the renegotiation of the Lomé agreement to make a bold defence of the banana regime, which has, as the noble Baroness argued, safeguarded the interests of smallholder banana farmers in the Caribbean in particular by giving guarantees of traditional market access?
Thirdly, how else does the European Union propose to aid and protect the weakest ACP producers, like those of the Windward Islands?
Fourthly, in this context, precisely what foolproof mechanisms does the European Union propose to prevent the weakest ACP producers from anyway being squeezed out of the market? Will it advocate country-specific export ceilings within any global ACP quota?
Fifthly, does the European Union recognise that the revenue for banana sales is more essential than ever if desperately needed economic diversification in the vulnerable single-commodity-dependent island economies of the Caribbean is to be achieved?
Turning more widely to the Lomé agreement renegotiations as a whole, I hope I can be forgiven for saying that, for many of us, the Commission's proposed negotiating mandate in January 1998 was profoundly disappointing. I do not think it is an exaggeration to say that, in effect, it gave but one option to all ACP countries; namely, free trade agreements beginning in the year 2005. This led many of us to believe that the proposals lack any poverty reduction rationale and were almost designed to damage still further the economic prospects of poor people in ACP countries.
However, I am glad to say that the statement from the General Affairs Council at the end of March was much more encouraging, reflecting to their credit the work of the British Government. It proposed that the arrangements should at least maintain the current market access for ACP countries while at the same time being World Trade Organisation compatible. It seems that the objective was to improve the preferences under the GSP for ACP exports to the European Union which currently have a significant tariff differential. This would bring the GSP offer up to or above the current level of the Lomé Convention. Can my noble friend confirm that 1085 any such preferences will be bound at the WTO so that they provide an effective incentive for investors by being predictable? Can my noble friend also confirm that such preferences will be generous enough to compensate for the loss of the differential tariff which was previously only available to ACP countries but which will now be available to competitors from Latin America and Asia?
We must appreciate that in order to take advantage of trade opportunities in Europe ACP countries will, of course, have to develop their trade capacity. Will, therefore, my noble friend confirm that the EU's mandate will include the commitment of resources for poverty-focused trade development with the aim of increasing supply side capacity? Will it also include support for basic health and education as well as for asset redistribution—by, for example, land reform—and support for training, micro-credit and technology transfers?
The Lomé Convention has the potential, as the noble Baroness argued, to play a vital part in the Government's poverty eradication strategy, but the Government's approach will have to be rigorous and imaginative if that potential is not to be thrown away.
§ 7.47 p.m.
§ Baroness Nicholson of Winterbourne
My Lords, it is a pleasure to follow the noble Lord, Lord Judd, in his thanks to the noble Baroness, Lady Young, for initiating this important and excellent debate. In her capacity as president of the West Indies Committee, I know that she has a most laudable record and that the committee's work in developing the West Indies in trade and aid relationships has been remarkable. I am so delighted to have the opportunity to speak in her Unstarred Question debate.
The attitude of the Leader of the Official Opposition does not reflect that interest. I put down for the record that, as far as I can tell, the 7,000 words of the Fontainebleau speech, entitled "Potential for Europe", by the Leader of the Opposition contains not one comment nor gives support of any nature on links with the developing world, on the Lomé Convention or on the goal of co-partnership with the developing world of all the European Union members when we signed the first Lomé Convention in 1975. This was a vital agreement. The explanatory memorandum from the European Commission on the current post Lomé debate comments on the need to look clearly at major international events which confer,on a player of the Union's stature new political and economic responsibilities, especially in its dealings with the regions of the South most vulnerable to poverty and marginalisation".That is well in line with both the ethical foreign policy declared by the Secretary of State for Foreign Affairs and with the Secretary of State for International Development's challenge in her department's White Paper to all of us to conquer world poverty within a reasonable timescale. Within the EU we have always recognised through Lomé our obligation, as a large world power, to support the poorer countries.
1086 However, I suggest that in the search for a revised Lomé the virtuous circle the private sector offers in development has been insufficiently regarded. The remarkable and excellent Fourth Report of 21st May 1998 of the International Development Committee, although it takes up considerable acreage of paper on trade, does not give trade as great a weight as aid. The peculiarity and fascination of Lomé is that it has these two key elements of development bound together; namely trade and aid. I do not think that there is any other major development policy instrument like it in the remainder of the developed world. Indeed, the European Union, particularly through Lomé, now seems to be the world's largest aid donor and developer globally. In fact, the International Development Committee report comments,Trade was a vital source of wealth creation and growth for a growing economy".I suggest to the Minister that trade is the vital source of wealth creation. The Lomé negotiations' involvement with the private sector now needs to be addressed most strenuously. The British African Business Association, chaired by Peter Pooley, formerly Director General of DGVIII of the European Commission, states that,The private sector has been largely ignored in previous Lomé. Treaties".Therefore it is of great importance now, in our presidency, that the British support the indigenous ACP private sector and address its needs most clearly. Most of the ACP governments pay more than lip service to privatisation and the private sector, but even today, with Lomé 4 now coming to an end, private sector European investment flows do not get the attention that they deserve.
I turn now to the sugar industry. Much is made of the need to diversify, and yet where are the new industries without investment into the indigenous private sector? Much of the argument and debate on trade in Lomé seems somewhat old fashioned to my ears. We are not discussing the new electronic trading global capabilities as we should be. We are not looking at the provision for the developing world of the sort of equipment and technology that enables that magical level playing field of trade competitiveness to be electronically created. Surely those are the ways in which the developing world can be true equal partners. Perhaps there is the rub. Do we want them to be equal competitors? Lomé does. It is a genuine partnership and I suggest that we look more closely at it.
Finally, I ask the Government to think about education. We need to educate the consumers and the young and elderly, because in two decades of anti-Europeanism I honestly believe that the Lomé convention benefits worldwide to the developing countries have been vastly underrated.
§ 7.53 p.m.
§ Lord Palmer
My Lords, I, too, once again want to pay tribute to the noble Baroness, Lady Young, for introducing this important subject. I really do not believe that anyone quite realises how serious the situation has become and indeed how increasingly complex it is.
1087 Bearing in mind the comments of the Lord Privy Seal on Monday, across the road, I feel that I must point out that over half the speakers in tonight's debate are hereditary Peers, all of whom have special knowledge of the ACP countries. I care passionately for the Caribbean Islands and, more importantly, for their inhabitants.
I personally would not mind giving up my right to vote in a reformed House of Lords, but I would be deeply saddened at not being allowed to take part in a debate such as this.
I must declare an interest as I am a residual beneficiary of a large banana planation in St. Lucia. Most of it, sadly, is totally unproductive. The few tenants who have bought their plots are unable even to pay the deposit. It is not altogether surprising when one thinks that four years ago, for example, a St. Lucian farmer received six pence per pound for his bananas and those same bananas were selling on Oxford Street at 80p per pound.
For most of the ACP countries, 65 per cent. of their income is derived from bananas, which only goes to prove how vital this crop is for the whole infrastructure of so many Caribbean islands. These islands are literally now in a life and death situation. Without a profitable banana trade there would be economic and social disaster throughout the Caribbean.
What on this occasion seem to be the bully-boy and unprincipled tactics currently deployed by the United States of America are completely unacceptable. I urge Her Majesty's Government most strongly to ensure that these tactics do not destroy the Caribbean banana industry. In particular it is vital that the amendments to the current regime do not deprive the Caribbean states of the guaranteed access and economic return which they have enjoyed under the existing Lomé Convention.
I earnestly hope that Her Majesty's Government will crown their achievement in the European Union presidency by securing a satisfactory deal for the ACP countries. If so, this must not be destroyed by yet another maverick attack by the USA in the WTO. Her Majesty's Government must exert their influence to secure recognition in the WTO of the need for special provision to protect these small and extremely fragile economies.
The ACP countries realise that they must try to diversify, but, as the noble Baroness, Lady Nicholson, mentioned, that diversification is somewhat limited. At the end of the day it must be on the back of banana production. There is very limited extent for that diversification. For example, how many new hotels can one build? One of my greatest worries about the Caribbean is the unemployment situation. I speak from experience. Sadly, it is a difficult, if not impossible, job to train a banana worker to take a job in a hotel. There is simply nothing else for them to do except to grow bananas.
I pray that the Caribbean farmers do not turn to the only alternative crop, and here, of course, I refer to the illicit production of drugs. Her Majesty's Government have so rightly declared war against drugs, their 1088 producers and their distributors. I just hope and pray that Her Majesty's Government will not let the Caribbean go to pot!
§ 7.58 p.m.
§ The Earl of Sandwich
My Lords, I, too, am grateful to the noble Baroness, Lady Young, with whom I served nearly a decade ago on the Save the Children Africa Review Group. She is a formidable ally of developing countries. It is easy to forget, amid all the technical arguments, that poverty alleviation is a major objective of Lomé and is therefore of great importance to the non-governmental organisations. The lead NGOs are led by the UK Presidency Project and I am sure that the noble Lord, Lord Whitty, will join with me in paying tribute to the work that they have done alongside the DfID officials who are preparing the UK position.
In fact, the UK and NGO positions coincide very nicely on many points. The importance of the DAC poverty eradication targets—especially halving poverty by the year 2015—is one area of agreement. The necessity for reversing the decline in sub-Saharan African economies is as much a condition of meeting these international targets as it will be an objective of the new aid provisions of the convention. It is encouraging to see these targets mentioned in the preamble.
Lomé provides a unique opportunity for the EU to review its relations with all developing countries, not just the 71 covered by the convention. The Maastricht Treaty recognised that there must be smooth and gradual integration, but it is, as others have said, the icy Atlantic wind blowing from the WTO into Lomé which concerns those countries. It cannot be good for the world economy for the EU to accept the WTO at face value, without proper safeguards for the poorest and most vulnerable states, including the Caribbean.
The NGOs have three particular concerns in this context which they hope that the UK will continue to press in the hope of persuading our Southern European partners in particular. On this issue, the north-south divide within the EU must be taken very seriously, especially in a German election year. I hope that the noble Lord will comment on that danger.
First, the EU proposals for free trade agreements are too prescriptive. Reciprocity is not the right approach for Lomé countries, and the unequal terms offered to South Africa make them especially wary. Although ACP countries undoubtedly need to be encouraged towards greater competitiveness and freer trade, Article XXIV of the WTO needs to be reformed to take account of the vastly different levels of development in the Lomé countries.
Secondly, ACP countries need more time to adjust to the new economic climate. A five-year waiver for current preferences is simply not long enough for that adjustment. Commissioner Pinheiro himself, after meeting UNCTAD on 26th May, seemed doubtful about the timeframe. Can the noble Lord confirm that the Government will continue to press for the 10-year waiver?
1089 Thirdly, as the Government proposed and the Select Committee pointed out, the alternative option of an enhanced generalised system of preferences (GSP) is a realistic one and should not be dismissed out of hand. The enhanced GSP route has the advantage of being WTO-friendly and it would extend the existing GSP to Lomé, even at some risk to the concept of partnership. Can the noble Lord confirm that he has been encouraged by the strong support for that given by the Select Committee?
On the Caribbean, some have advanced the argument that Lome has benefited middle-income countries through the protocols and that they do not need more protection. Oxfam and others, however, have argued that vulnerable and small island economies do deserve longer-term preference and the Select Committee is recommending that the WTO accepts them into a new category. Will the noble Lord confirm that the Government will support that proposal?
Much has been said about aid and diversification, not least by the Secretary of State, but diversification could be a death trap for many farmers, men and women, in the Caribbean states, as the noble Lord, Lord Palmer, so vividly pointed out. It is not a realistic option. It seems that bananas and sugar cane may be more resistant to strong winds than they are to the WTO. The Caribbean has been buffeted by pressure from the dollar banana states, most recently via the disgraceful WTO attacks on the banana protocol, abetted by the US. Surely it is better to avoid such confrontation and to preserve the protocol within the WTO framework through a waiver. Does the noble Lord believe, as others do, that that is still politically possible? If not, what are the genuine chances of meeting ACP individual country guarantees within the global quota?
Finally, I should like to have some reassurance that policy coherence will be kept firmly in mind and that our concerns about CAP reform and eastern Europe in particular, which are bound to have very serious consequences, are not allowed to interfere with our commitments to the developing world.
§ 8.3 p.m.
§ Viscount Waverley
My Lords, my noble friend Lord Palmer hit on the nub of the problem. Farmers simply do not receive a fair return from either Western intermediaries or cavalier supermarkets. This needs somehow to be addressed seriously.
These negotiations allow the United Kingdom to respond to global changes and fulfil its commitment to development. The alternatives are too awful to contemplate. Increased migration, with a sharp increase of asylum-seekers; a region that will turn itself to drug production together with an increased level of poverty—indeed, undoing all previous good work.
The joint ACP-EU framework for political dialogue should be used as a unique forum to define new strategies, all of which the UK is committed to under the Maastricht Treaty: campaigning for poverty eradication; fostering sustainable economic and social development; promoting the gradual integration of the developing countries into the world economy; and the promotion of democracy, the rule of law and respect for human rights.
1090 The recent judicial review of the banana regime has highlighted the vulnerable status of Caribbean economies in the global economy.
This Government must now pursue a coherent development strategy supported by the allocation of adequate resources and the creation of mechanisms for its implementation. In fact, the new EU/ACP contract should include joint partnership in international fora, such as the WTO, the UN and international financial bodies.
That said, difficulties have already manifested themselves. Professor Pinheiro, in his presentation of the EU mandate, recently went to Barbados and has succeeded in creating fault-lines.
There is now ACP consensus against the breakup of the negotiations into a political agreement between 1998 and 2000 and regional FTAs between 2000 and 2004. The ACP is now resolute that there should only be a single negotiation, which would cover all issues of concern, including political dialogue. The concept of regionalisation must not be allowed to cause fragmentation.
The Caribbean countries, in confronting the challenges of a liberalised global economy, need the security provided by preferential markets and the related commodity protocols, as it allows them to intensify their efforts at economic diversification.
In addition, we must maintain the provisions for stabilising commodity export earnings, which are an important part of the preferential arrangements. Indeed, financial instruments such as STABEX and SYSMIN should be strengthened, particularly in the light of the competitive pressures which the Caribbean and other ACP countries face in their major export markets as liberalisation becomes a greater feature in those markets.
We can all agree that development is about people, so I am delighted to note that there is an overwhelming emphasis on human resource development and poverty alleviation as the hallmarks of a new development co-operation. However, global poverty eradication objectives must not lead to poverty creation in the small and vulnerable Caribbean economies.
The Lomé Convention has brought the ACP impressive benefits without which the ACP states would have been worse off. We cannot hide the fact, however, that some of these benefits have been minimised by circumstances.
The failure of the European Union to translate access into entry; the continuous worsening of the terms of trade; the overall decline in the real value of development assistance; the excessive debt burden; the continuing instability in the industrial countries' interest and exchange rates and in their stock markets; the difficulties in honouring commitments as regards bananas, rice and rum, resulting from the adoption of narrow and insensitive interpretations of their obligations by EU partners—all occur under the guise of international discipline.
1091 The ACP states intend to secure a new bargain, a new quality of partnership with the European Union, and the translation into practice of the very principles to which the international community now holds itself to be dedicated.
§ 8.8 p.m.
§ Lord Redesdale
My Lords, I thank the noble Baroness, Lady Young, for initiating this debate. Her timing is impeccable. I am not sure whether she intended to seek the debate so soon after publication of the Select Committee's fourth report on Lomé renegotiation, but it is gratifying to be able to refer to Lomé yet again. I know that the noble Baroness has referred to Lomé many times in the past and there have been a number of debates on it in your Lordships' House. I am glad, however, that we have been given this opportunity to consider the report. I know that there is a major problem in the other place in that although the White Paper was published some months ago it still has not been debated there. That is disappointing.
I know that we have only a short time in which to debate Lomé this evening, but I should like to press the Government on the question of meeting some of the commitments they made on entering office. International development, they said, was one of the areas they would push most strongly.
I should like to put to the Minister one or two questions although he is probably unable to provide answers this evening since they fall outside the immediate area of interest. First, when is the Ottawa Convention on Anti-Personnel Landmines to be ratified? That has a bearing on ACP countries. Secondly and more importantly, when will the Government consider increasing the DfID's aid budget? I link that with the Lomé negotiations because I had not realised until I looked carefully at the report just how large a percentage of the DfID budget goes into Lomé. In 1998–99 10 per cent. of the whole of the DfID budget will be spent on the Lomé Agreement. When one considers the European Union, that equates to 30 per cent. of the budget. Because of its very large impact I hope that the Government will look closely at the process of renegotiation so that it closely matches the principles set out in the White Paper; namely, that Lome has the purpose of reducing poverty among the poorest in the world.
Further, Lomé has the very real responsibility of meeting DAC targets. The report brought out some of the problems associated with the DAC targets set by the OECD. When one is seeking to reduce poverty it is not simply a matter of setting a target and trying to meet it in each country. There are many variable factors. The report touches upon some very interesting areas that should perhaps be considered during the renegotiation. For example, when discussing Lomé in the past one of the big problems has been the lack of flexibility in the distribution of Lomé aid.
One suggestion—I hope that the Government will push for it—is that there should be greater decentralisation away from the central bureaucracy to 1092 people working under the agreement in the individual countries. Another factor that will have a great effect is the possibility of aid being distributed in tranches by Lomé so that if, for example, a project is seen to be unsuccessful no further aid will be spent on it. That has worked well on many projects throughout the world and can be used effectively under the Lomé Agreement.
One of my difficulties with the method by which the Lomé Agreement is being renegotiated is widespread use of the word "conditionality". There has been a fundamental shift in the method of dealing with Lomé. The matter has been handled insensitively by the WTO. Many Caribbean countries face disaster through the destruction of their main industries, in particular bananas. One should not forget that there is a possibility of diversification, but perhaps not the kind of diversification one would wish to see, for example, drug production in the Caribbean. There is the very real problem that diversification in many sub-Saharan African countries will mean social unrest and upheaval.
The free trade agreements may prove to be one of the most disastrous measures to be implemented. As has been shown in the canned tomato industry in South Africa, many third world and developing countries will suffer severely. Chapter 88 of the report makes clear that the committee does not accept that the negotiations towards FTAs between the EU and ACP proposed by the Commission are at present either realistic or desirable since they are not in the interests of the ACP countries. I very much hope that the Government adopt the principles set out in the White Paper when renegotiating Lomé.
§ 8.15 p.m.
My Lords, I am grateful to my noble friend Lady Young for tabling this Motion for debate. She made a most authoritative presentation which has been followed by a number of speeches that betray noble Lords' depth of knowledge that I cannot hope to equal and to which I have enormously enjoyed listening. Together they make a disturbing history. Our interests and friends appear to be in the process of being abandoned, although of course not by this Government.
The Government have argued strongly against the inadequacies and errors of the approach of the European Union. It is just that they have not been very successful in their arguments. There has been no shortage of political will and commitment on the part of the Government, as I am sure the noble Lord, Lord Whitty, will agree. There has been no lack of attention to detail. Ministers of this Government are always attentive to detail. No key documents have been left out of red boxes—nor are there any unread boxes. But the result is as if that had been the case: a regrettable, unsurprising betrayal of our friends and interests.
Of course change is needed, particularly in the Caribbean and other areas of the ACP. There have been years of subsidies and controls. We must help those countries find a way forward to competitiveness and economic vigour but that takes time and a great deal of support and encouragement. There will always be a need for protection. When a farmer receives sixpence for a 1093 pound of bananas that sells for 80 pence, the price at which that farmer sells his bananas is not the problem. His efficiency is not the problem. The problem lies in the distribution system. If one is dealing with an area like the Caribbean that is probably a matter that cannot he remedied. We will always have to look after our friends and our old connections in the area. It is much the same with neighbourhood shops in this country. If one does not go out of one's way to shop at those establishments sometimes, even though they charge more, one loses them. The consequences for Caribbean countries will be rather more dramatic if we do not continue to support them.
Clare Short is quoted in the report of the committee of another place as saying that it is not a matter of protection but diversification. I do not believe that she is right. That betrays a deep misunderstanding of the potential for diversification and the need for continuing and permanent protection. But I suspect that we could do it better than we do at the moment.
Our interests are deeply tied up with those particular countries. Not least, we have a substantial and growing area of dependent territories in the Caribbean. If living standards drop there then trades that flourish in small, isolated places will move in. Should that happen it is likely to be to our great disadvantage and that of America.
The European Union's plans are of great concern to us as they were to the International Development Committee of another place. There appears to be no recognition of, let alone plans to deal with, their own shortcomings: inefficient and opaque aid allocation; shortcomings in the staff who are concerned with Lomé, particularly those on the ground; and facing up to the consequences of CAP reform for Lomé and the EU's relationship with developing countries. There appears to be an underlying direction of international aggrandisement, an effort to compete with the United States on equal terms, bureaucracy against democracy, and an imposition of FTAs through blackmail and bureaucracy which is entirely inappropriate and just will not work.
This debate takes place at a crucial moment. We have the presidency of the European Union for a little while yet and the Government may have a chance to succeed in changing the direction of the European Union. I shall be delighted if the noble Lord, Lord Whitty, can confirm that he is confident of success. I would have been even more delighted had the noble Baroness, Lady Symons, been able to be here. I believe that for a debate like this and at a time like this her presence would have made a difference. The noble Lord, Lord Whitty, will as usual fill her place with great charm and skill. He is a great reader of a brief and a real pleasure to listen to.
§ 8.20 p.m.
§ Lord Whitty
My Lords, I suppose I should thank the noble Lord for that remark. It has been a well informed debate. I pay tribute to the noble Baroness, Lady Young, for raising the matter. As the noble Lord, Lord Lucas, indicated there is great expertise, hereditary 1094 and otherwise, in this House relating to issues of development and in particular the issues of the Caribbean.
The Government are well aware of the importance of the next phase of the Lomé Convention. That convention has been the basis of relations between the EU and the ACP for 20 years. It is a vitally important tool of both development and diplomacy and is valued both by EU countries and the ACP countries, 38 of which are also Commonwealth countries. The UK therefore has a strong interest in seeing Lomé renewed, modernised and strengthened. We have been consulting in particular our closer partners in the ACP for some time, for example at CHOGM in Edinburgh last year; and subsequently when we paid particular attention to the needs of the Caribbean, for example, in convening the UK/Caribbean forum in the Bahamas in February. We are aware how sensitive Lomé is for the Caribbean and will continue to press for access for the Caribbean and seek a deal which protects its commodity interests as far as possible.
In relation to the mandate, as the noble Lord, Lord Judd, and the noble Baroness, Lady Young, pointed out, the Commission has produced a draft memorandum for discussion. At this stage it remains an internal EU document until it is finalised. Therefore we can only comment in general terms. However, it reflects the wide ranging consultation process that the Commission has carried out over the past 18 months, starting with the Green Paper in December 1996 and followed up by seminars in EU and ACP countries.
The UK position paper last October set out Her Majesty's Government's approach and much of it was subsequently reflected in the Commission Paper. We therefore believe that it is a good basis for obtaining agreement. That agreement will be based on partnership, sustainable development and a modernised system of trade preferences.
The current Lomé preferences are among the most generous the EC offers to any group of third countries. But not all ACP countries have profited from them. The ACP market share in the EU has fallen over the past 20 years from 6.7 per cent. to 3.4 per cent. Although some ACP countries have been successful in using the background of those trade measures—for instance, Mauritius and Fiji—most of the ACP countries, including, regrettably, most of the Caribbean countries, have not managed to strengthen their competitiveness or diversified their exports sufficiently away from basic commodities to a wider range of higher value products.
We recognise the difficulties but we need to use this process to help the ACP integrate into the world trading system. Globalisation means that they and we have to adapt. The ACP will need time to do that. The UK has proposed that the current level of preferences be extended for at least five years from the year 2000 to allow a proper transition period. The Commission has taken that on board.
The noble Baroness, Lady Young, inquired about the future beyond the year 2005. It is not obviously clear at this point how the international trading environment will look. A further WTO round and, we hope, substantial 1095 CAP reforms may bring about many changes. It is too early to say exactly how the future regime for the ACP will look. But we believe that the least developed countries should receive the most generous level of access possible in accordance with commitments given by the EU last year. We are on course to achieve that. Noble Lords referred to the General Affairs Council in March, which committed the EU at least to maintaining current levels of access and made explicit reference to an enhanced general system of preferences as a valid alternative to the FTA approach, which is still favoured by many member states.
Another option would be for free trade agreements for those who felt ready and able to negotiate WTO-compatible reciprocity. For others, we think that an enhanced general system of preferences is probably the most secure and predictable route in the medium term.
The relationship with the ACP also has to take into account political dialogue. That has been most useful in developing contacts among the ACPs. That dialogue process needs reinvigorating to make it more focused and relevant.
That is the background. The noble Baroness, Lady Young, referred to the meeting of the Development Council this week. It is true that at one point it was hoped that the EU mandate would have been concluded for the EU side of the negotiations at that meeting. However, although there was good discussion on Monday on the trade aspects of Lomé, this discussion failed to resolve differences which still exist between member states. The matter is due to be discussed, as we always half expected, at the subsequent GAC on 29th June. We hope to reach agreement there.
In addition to the general trade preferences issue, much reference has been made to the position on commodities, in particular bananas. It is a complex issue. As noble Lords will know, the banana regime which has operated to substantial benefit of the Caribbean banana producers was challenged by a group of countries led by the United States and including Latin American countries. It was found by the WTO body that it was not WTO compatible. It is important to recognise that it was aspects of the regime which were found non-compatible, not preferential access for banana producers.
This Government and many other EU countries regarded the banana regime as important. It represented a serious attempt to meet our obligations to developing countries in the Caribbean and elsewhere. However, in the EU, EC and United Kingdom we are also firm adherents of the WTO process. We accept its procedural arrangements. We accept that Community arrangements will need to be brought into conformity with WTO rules. This means that the Commission's efforts to draw up an alternative regime will have to be WTO compatible. That is the basis on which the EU proposition now exists.
A number of noble Lords attacked the EU in relation to that. As I think the noble Earl, Lord Sandwich, indicated, it is true that there different opinions within 1096 the EU on this issue. Nevertheless, a firm majority is behind trying to get a new banana regime which is WTO compatible. We believe that the draft now produced by the Commission will be WTO compatible. As many noble Lords will know, that is challenged by the Americans.
I also recognise that a number of banana producers, in particular in the West Indies, are concerned that the Commission proposals are inadequate. They are particularly concerned about the fact that the quotas—part of the Commission proposals—are not allocated by country. It is clear that that part of the agreement could not be allocated country by country because that would make the whole proposition clearly and unequivocally WTO incompatible. They fear pressure from West African producers. Nevertheless, we believe that it is overall in the interests of the banana producers to gain a WTO compatible agreement. We believe that the Commission proposal represents the best way of achieving that.
It is important therefore that we support the Commission in these efforts. It is vulnerable, both because of pressures within the EC, but more particularly because of the attitude of the United States Government. On a number of occasions, we have drawn to the attention of the United States the seriousness of the regime collapsing and its effect on the vulnerable island economies of the Caribbean. Many of the scenarios referred to by the noble Lord, Lord Palmer, and in particular, the noble Viscount, Lord Waverley, are real. Although we have raised the matter at all levels of the United States Administration, it has remained resolutely on an uncompromising agenda on the WTO banana dispute. It regards the Commission proposal as not compatible and insists that it will challenge that at the earliest opportunity. We believe that we are on strong legal ground in resisting that, but we still feel that politically the United States needs to be persuaded that theirs is not a sensible course.
As the noble Lord, Lord Palmer, emphasised, the alternative for many of those regimes would be not simply a descent into poverty but possibly the development of alternative products in the drugs trade, either as producers or as entrepôts, which would seriously endanger the United States. Therefore, there are important points of United States self interest which must be taken into account. We are vigorously pursuing that with the United States Government.
The best prospects for the future of the banana regime rest in us pursuing Commission proposals in a united way from the EU end and trying at the same time politically to persuade our American friends not to go further down the road on which they have apparently embarked.
Part of the future of these economies will be a greater aim to improve the competitiveness of the banana trade and of diversification. Although diversification will be limited, there is scope for it. We believe that the aid programme and private investments such as those suggested by the noble Baroness, Lady Nicholson—for instance, the flow of private investment and a change in technology—could help those economies. The flow of 1097 aid from the UK and the European Union will also help. I accept that aspects of the EU aid regime need serious attention. Nevertheless, substantial EU and British aid is going to the Caribbean and we are committed to continuing that.
The renegotiation of the Lomé Convention gives us an opportunity to address many of the problems which have been outlined in the debate. The agreement of the EU mandate on Lomé is one of the principal presidency objectives. I assure noble Lords whose concerns are well registered with this Government that the work over the next few weeks to 29th June will be intensive. We wish to produce the mandate and we wish also to produce a solution to the banana regime in particular which will help our Caribbean friends into the 21st century and put them on a better economic basis than currently looks likely.