HL Deb 14 October 2003 vol 653 cc760-3

2.52 p.m.

Lord Hylton

asked Her Majesty's Government: Whether they will propose further reduction in European Union agricultural export subsidies, in particular the phasing out of subsidies on sugar and milk exports over the next four years.

The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Whitty)

My Lords, the WTO Doha Declaration in 2001 committed all members to negotiations aimed at reductions of all forms of export subsidies for agricultural products, with a view to phasing them out. The Government remain fully committed to this objective, although the timetable remains a matter for negotiation and I am unable to commit to precise end-dates at present. The UK continues in the forefront of those seeking liberalisation of agricultural markets.

Lord Hylton

My Lords, I am grateful for the Answer. Does the Minister agree that two-thirds of the subsidies are accounted for by sugar and milk? Does he also agree that they distort trade far more than tariffs or import levies; that they often exceed the aid given to individual developing countries; and that they destroy the livelihoods of poor people? Therefore, will the Government give a lead to the rest of Europe on this matter?

Lord Whitty

My Lords, the UK has been at the forefront of the EU's position to move to greater liberalisation in this and other areas. Indeed, we were instrumental in ensuring that the EU offered to cut all agricultural export subsidies by 45 per cent with a view to phasing them out entirely. That did not reach the point of negotiation in Cancun, but it was a significant shift in the EU's position.

The situation on sugar is particularly complicated. It is true that sugar and dairy products account for two-thirds of Europe's export subsidies, although relatively little of that—none in sugar—accrues to United Kingdom producers.

The Earl of Onslow

My Lords, how can the Minister say that Britain is in the forefront of this when Mr Chirac and Mr SchrŐder went to Berlin, stitched up the whole arrangement and ensured that no progress was made on reform of the CAP for 10 years? It is all very fine and large for Ministers to say that the British Government are in the forefront—they are not. We get stitched up on this particular issue by the French and Germans every time.

Lord Whitty

My Lords, that is a completely erroneous interpretation of the events of recent months. Let us look at the facts. We had the most dramatic change in the CAP for decades, which shifted the bulk of subsidies away from production and towards environmental and social benefits. That was a major contribution which meant that the EU could enter negotiations in Cancun having made that move.

That move did not include export subsidies, nor was it ever going to include export subsidies. However, as I have said, the EU was prepared to make a move in the WTO context on export subsidies. The fact that we did not reach agreement was not because the EU was unable to move.

Lord Tomlinson

My Lords, does my noble friend agree that approximately 50 per cent of the present EU budget goes on the common agricultural policy? In an increasingly regulated world trade order, which we all want and can see as desirable, is it not the fact that the CAP as a whole and American agricultural subsidies stand in mockery to the goals of a regulated world trade system?

Lord Whitty

My Lords, that has been the position of successive British governments for a long time. The point I was making in response to the noble Earl was that we have succeeded in achieving a major reform of the CAP. It did not go as far as we would like, but it was substantial and in multilateral talks it put the European Union in a position to lead towards greater liberalisation of world markets. It is true that the EU has the largest number of direct export subsidies and it is important that we commit ourselves to phasing those out as rapidly as possible. My noble friend referred to the United States. It is also true that there are other ways of subsidising exports. Direct export subsidies, food aid and export credits are used by the United States to equal effect of those in the European Union.

I fully accept that we need to make progress on this front. However, the EU as a whole, at the behest largely of the United Kingdom, has moved substantially in that direction.

Baroness Miller of Chilthorne Domer

My Lords, does the Minister agree that export subsidies in the milk sector are doubly damaging? They are damaging to the developing countries on which the products are dumped and damaging to our small family dairy farmers who, instead of being encouraged by governments to produce value-added products—such as yoghurt and cheese—still produce low-value products such as milk powder. Will the Minister do his best to ensure that those farmers are enabled to produce value-added products?

Lord Whitty

My Lords, reform of the CAP went less far in relation to dairy and in relation to livestock and arable farming—although further than it has gone on sugar. It is important that we get closer to a market situation in dairy and that the British dairy industry in particular makes its money from value-added products. However, as regards export subsidies, we do not export a significant amount of liquid milk and we tend to export milk products and skimmed milk. The subsidies we receive in that area come from that side of milk production and not from liquid milk. In negotiations on the EU agricultural policy, it was disappointing that the dairy reform—removing quotas, export subsidies and price support—did not go further.

Baroness Byford

My Lords, does the Minister agree that the detail and the phasing-out is the biggest challenge faced by the Government and the EU? I want to raise the problem of sugar. We are concerned that some of the ACP countries which now have favourable conditions may be the losers in some way. How are Her Majesty's Government going to approach that problem?

Lord Whitty

My Lords, that is why I said that the problem surrounding sugar is more complex than simply removing the export subsidy and the guaranteed high European price. Removing the guaranteed price and the export subsidy will have an effect on the world price which will not necessarily be to the benefit of sugar producers. One is then in danger of shifting the burden from the poorest to the poor, or among the poor. That is perhaps why sugar is the least reformed part of the CAP because the development effect is differential.

It will take time to reform the sugar regime, but we must make a start on it. It is one of the most objectionable aspects of the EU's CAP and it hits many developing countries, both those which benefit from access to what is basically the British part of the EU market and those which do not.

Lord Carter

My Lords, in considering this subject, should we not remember that, at present, virtually every dairy farmer in the UK is producing milk at a loss and has been doing so for a number of years? I declare an interest as president of the Royal Association of British Dairy Farmers. I entirely agree with, and support, the thrust of the Government's policy. However, would my noble friend care to speculate on the effect on the UK dairy farmer if, in fact, export subsidies on milk products were phased out?

Lord Whitty

My Lords, as I said, as far as concerns the British dairy farmer, the export subsidies received are not for liquid milk, which we hardly export. Therefore, the phasing out is not relevant to the liquid milk price. Clearly the phasing out will not happen overnight. The reduction in export subsidies will take place in a phased way as part of a total reform of the dairy policy. In the short term, if people continued to produce to quota and if there were no subsidised export markets, then obviously the price would go down further. However, it would probably hit the intervention price and therefore make no significant difference to the income of dairy farmers. But this must be part of a planned phasing out of the totality of the dairy regime.

Lord Mackie of Benshie

My Lords, I wonder whether the Minister—

Noble Lords

Next Question!

Lord Mackie of Benshie

No, my Lords.

The Lord President of the Council (Baroness Amos)

My Lords, I think it is time for us to move on to the next Question.