Speech by EU Trade Commissioner Mandelson on Doha for Development

Speech by Peter Mandelson, EU Trade Commissioner, "Doha for Development" at the Informal Meeting of EU Development Ministers, Leeds, UK

In this speech to EU Development Ministers in Leeds, EU Trade Commissioner Peter Mandelson sets out the case for cuts in EU agricultural tariffs as part of the Doha Round. He notes that there is a while there is a trade off in agriculture for EU interests in services and industrial goods, and to reduce similar barriers in the US, ultimately reductions are needed to fulfil the Doha Round's development goals. He argues this is true both in agriculture, but also to unlock the development potential of wider trade in services and non-agricultural goods and to reach not just the agricultural poor, but the urban poor in advanced developing countries such as Brazil and China.

Commissioner Mandelson:

argues that the Hong Kong Ministerial meeting is "on a knife edge".

cites the EU's preferential access schemes for agricultural imports and recalls that Europe has the best record in the developed world in providing agricultural market access for the developing world. Mandelson says that Europe will never allow itself to "be cast as selfish or indifferent".

argues that "if we want greater market access in advanced developing countries for our top quality manufactures and services, we have to give increased agricultural market access in return...If we want the US to reform its own domestic subsidy regime - and if we want the Brazilians to cut industrial tariffs and open up on services - we have to move on agricultural tariffs, there's no other way."

argues that "there are huge differences in competitive advantage among developing countries. That is why we should allow continued margins of preference for poor country producers. It is also why developing countries, especially the poorest ones, will not be required to make the same tariff cuts in their own markets that the rich countries will be expected to make. But Europe and other developed countries cannot hide behind the concerns of those faced with preference erosion in order to escape from the obligations contained in last year's Framework Agreement. The world's poor do not only live in the smaller and more vulnerable countries that benefit from our preferences: they also work the land in big agricultural exporting countries such as Brazil or China".

argues that trade in industrial goods and services is a development issue. 80% of developing countries' exports are accounted for by manufactures, and south-south opening of markets can unlock major gains. Services liberalisation will strengthen infrastructure in developing countries - a vital precursor to development.

repeats his call for all developed countries to "follow the example of the EU's Everything But Arms proposals and by ensuring that there is tariff and quota-free access to EU markets for everything, including agricultural products for the Least Developed Countries."

We are as you know at a crucial point of decision this week in the WTO trade talks. I do not exaggerate when I say that the Hong Kong ministerial meeting is on a knife-edge.

My message to you this afternoon, and the message I appeal to you to take back to the most senior level of your governments, is a simple one. Let us decide this week to give Doha a chance. Let us demonstrate that the European Union is ready to take the necessary steps to put trade policy at the service of development. Let us act in Europe's long term economic and strategic interests and reinforce the Union's claim to be a force for good in the world.

For all the criticisms made, some legitimate - which we are seeking to address - some less so - to which I will refer later - Europe can take a lot of pride in its trade and development record. Our goal of an integrated trade and development policy, that we implement on your behalf, is the fruit of years of work to improve policy coherence between these two areas.

I submitted earlier this year to the European Parliament, and to EU governments, a report on developing countries' access to our markets. Its findings can be summarized in one sentence: the European Union now, today, already gives developing countries a chance to climb out of poverty, through trade, but we can do better.

First, we have been steadily and progressively opening up our markets to poor countries, for the last 30 years, through preferential trade arrangements. In 2003, no less than 40% of our imports came from developing countries.

Secondly, our policy is particularly supportive of the efforts of the poorer and most vulnerable exporters. 63% of the whole of LDC exports (excluding petrol) to the rich nations of the United States, EU, Canada and Japan put together were bought by us in 2003. The European Union is by far the most open market for the world's poorer countries. Of course, we can support further the trading efforts of poor countries, but we should never allow ourselves to be cast as selfish or indifferent.

Third, the trade preferences we offer are actually used. The proportion of developing country goods entering the EU at zero tariff or at reduced rates of duty increased in the four years from 1999 and 2003 - the latest for which we have full figures - from 71% to 79%. Only 3% of goods imported from the ACP family of nations were charged full duties in 2003. And LDCs benefit, of course, from Everything But Arms that permits tariff and quota free entry for all they export to us.

And frankly, we compare well with the large industrialised trading nations. This is not a beauty parade. But the data shows that we take in close to 70% of LDC agricultural exports, against around 17% for the United States. It is simply not true that the Common Agricultural Policy prevents the world's poorest countries getting access to European markets. The facts show otherwise. When I hear the argument made, as it is from time to time in the Member State I know best, that if only Europe scrapped the CAP, the problems of poverty in Africa would be solved, I despair of decent people's informed debate.

So, where do we go from here? As the European Union, we have responsibilities to the Doha negotiations that we must fulfil, including in the field of agriculture. There are actions that we cannot avoid either economically and morally, and are essential to unlock the potential development gains of the Doha Round.

Our approach is to maximise development gains in all key sectors of the negotiations, while at the same time pursuing Europe's own legitimate interests in wanting to widen market access opportunities for our own providers of top quality goods and services, especially in the growing middle class markets of rapidly emerging countries.

I interpret my negotiating mandate in this broad sense: to be pro-jobs in Europe and to be pro-poor in the world. I see no inconsistency in these responsibilities. In Europe, we need to generate jobs in the knowledge economy sectors where we have a long term comparative advantage. At the same time, developing countries should, through trade, realise the opportunities offered by their own comparative advantages. That is the basis of free, and fair, trade.

Often, growing south-south trade will provide the chief export outlets for developing country exports. Otherwise, our markets will accommodate these new trade flows, involving necessary adjustment.

Agriculture is an inescapable part of this mix, including the reduction in agricultural tariffs. In Europe we cannot deny this reality. We made more than a paper commitment to greater market access in the Geneva Framework of July 2004. We signed up to a "substantial improvement" in market access. We have to make an offer on this basis that can be both prudent and real.

It is said by some that the poorest countries will not be beneficiaries of European moves on agricultural market access, that only the agri-businesses of the United States, Australia, Brazil and other well advantaged agricultural producers will gain. Indeed, some further argue that reducing our tariffs is a bad thing for development because it erodes the preferences that the poorest presently receive. In other words our defence of agricultural protectionism is for the sake of the poorest in the world.

I understand the point. We cannot make overnight switches in policies. But let me explain why changes in policy are, nonetheless justified.

First, if we want greater market access in advanced developing countries for our top quality manufactures and services, we have to give increased agricultural market access in return. In effect, we are trading in our presently agreed Common Agricultural Policy reforms for access to others' markets. Our dramatic reduction in trade distorting subsidies under the current CAP reform will improve the competitiveness of developing countries, as will our conditional pledge to phase out export subsidies. But subsidies are one half of the issue. The other is the lowering of tariffs. If we want the US to reform its own domestic subsidy regime - and if we want the Brazilians to cut industrial tariffs and open up on services - we have to move on agricultural tariffs, there's no other way.

Of course, there are huge differences in competitive advantage among developing countries. That is why we should allow continued margins of preference for poor country producers. It is also why developing countries, especially the poorest ones, will not be required to make the same tariff cuts in their own markets that the rich countries will be expected to make. Finally, net food importing and subsistence farming countries will benefit from recourse to sensitive and special products.

But Europe and other developed countries cannot hide behind the concerns of those faced with preference erosion in order to escape from the obligations contained in last year's Framework Agreement. The world's poor do not only live in the smaller and more vulnerable countries that benefit from our preferences: they also work the land in big agricultural exporting countries such as Brazil or China.

The Round must therefore provide for opportunities across the developing world - and this world is a diverse one. Moreover, by improving agricultural market access we can in turn get the bigger developing countries to open their markets - in agriculture, industrial goods and services - to other developing countries who need access to these markets as they become more efficient agricultural exporters and begin a successful process of industrialisation, starting with the most basic products and sectors.

This is the unique value of a multi-lateral trade round: it binds in balanced benefits for all, creating a virtuous circle of market and trade openings.

Outside agriculture, it is also in market access that Doha can achieve the best pro-poor outcomes.

Let me just highlight 3 key facts:

in manufacturing tariffs, the potential is huge. 80% of developing countries' exports are accounted for by manufactures, and south-south opening of markets can unlock major gains. Today 70% of all tariffs are paid by developing countries to other developing countries. This is why non-agricultural market access (NAMA) is both an EU offensive interest and a key development interest in which the big developing countries can and must help the small ones.

Services liberalisation will strengthen infrastructure in developing countries in key sectors such as transport, telecoms, computer services or financial services. And many of these same countries will benefit from a strong comparative advantage in labour intensive services.

Finally, an ambitious new WTO agreement on trade facilitation, covering the modernisation of customs procedures, is inherently pro-development: independent studies show that two thirds of the economic gains of an ambitious agreement will go to developing countries, while they can double their customs revenue through modern procedures.

There is another, more specific development agenda that the WTO membership should deliver to the poorer and more vulnerable countries in the short term.

I have recently made proposals in these areas, arguing for a Hong Kong "down payment":

By ensuring all developed countries - and perhaps all countries in a position to do so, including some advanced developing countries - follow the example of the EU's Everything But Arms proposals and by ensuring that there is tariff and quota-free access to EU markets for everything, including agricultural products for the Least Developed Countries.

By ensuring the right degree of differentiation between developing countries in the implementation of trade rules, or by enshrining in the WTO's intellectual property agreements the conditions for a better access to cheap drugs against pandemics.

And finally Doha must ensure that we create new opportunities to trade by building up developing country capacity to trade, through the development of infrastructure. On this, we need further action; both at the international and EU level and - critically at the national level. I encourage you to dedicate more resources to these areas within national development programme envelopes, so that we can collectively up our game, in line with President's Barroso's pledge at the G8.

Let me say, last of all, we are also putting trade at the service of development in our relations with our traditional partners of the ACP group of countries, through the Economic Partnership Agreements.

We are using these Agreements as sustainable development vehicles, linking progressive liberalisation to the capacity to trade. They can do this, first, by actively promoting regional economic and market integration. A single set of rules for trade in goods, services and investment makes it easier to trade - regionally, then more widely, as we have experienced in Europe. I believe this European example can work in the developing world.

EPAs are not about Europe trying to force open markets for our benefit or impose an ultra-liberal free trade ideology on poor countries. The EU is not seeking concessions from the developing world, since these are not major markets for us - nor is it sticking to a strict programme of reciprocity.

The progressive opening of ACP markets should not be rushed; it should be phased in, over a decade or more, and at a pace defined by each individual region according to their capacity to trade on world markets. I agree that poor developing countries need "policy space" of their own. And that market opening should be properly sequenced: first build capacity and build regional markets, underpinned by strong and transparent rules, then open them to the world.

So, in conclusion, we face major challenges together. But the biggest challenge of today is to make a success of Doha. We cannot falter now. Europe owes it to the developing world to ensure that we deliver on what we promised and I count on your support in this.

| Arriba |

• Doha and Development: some academic perspectives (30/11/2005)
• EU Council Conclusions - WTO/DDA (21/11/2005)
• EU Presidency Statement - Least Developed Countries (10/11/2005)
• EU Commissioner Mandelson's Remarks to General Affairs and External Relations Council (7/11/2005)
• EU tables new offer on services and industrial goods in Doha talks (28/10/2005)
• EU Council Conclusions - WTO Doha Development Agenda (18/10/2005)
• EU Trade Commissioner Mandelson on Doha Round negotiations and EU Commission mandate (18/10/2005)
• Speech by EU Trade Commissioner Mandelson - The right choices for the Doha Round (13/9/2005)
• Commissioner Mandelson's Speech 'Putting development first - EU-ACP relations, EPAs and the Doha Round' (6/1/2005)