TUESDAY 9 JANUARY 2007

CBI

  Q140  Mr Weir: We were also told that greater investment was going to, perhaps, Chile, which is not part of Mercosur, but has a free trade agreement, presumably, of some sort with it. Do you see Mercosur expanding to take in the likes of Chile? Is the accession of Venezuela, which is a very different kettle of fish to perhaps some of the other countries, going to make a difference to the development of Mercosur?

  Mr Campkin: Your observations about Venezuela are right, and certainly the news on the front page of the FT today would reflect that. One of the issues that is, from a personal perspective, important to recognise is that President Lula himself takes his regional leadership role very strongly indeed, and my own assessment is that President Lula's brand of politics is very different to that of President Chavez. Certainly if you look at President Lula's election campaign it was what I could categorise as a consistency ticket, and that was important. It is quite obviously a worry for British companies who do have a large and important investment footprint if political decisions to expropriate are made on a whim, and that is something that we would resist very, very strongly. In terms of Chile itself, Chile has been a successful economy—a small one but successful. It has, I think, one of the largest networks of free trade agreements of any country, and that is part of its strategy. Whether it would want to associate itself with Mercosur I cannot judge at this moment in time. My sense, however, is that it will probably want to see a little bit more about how the dynamics of Mercosur evolve before it decides whether it wants to get into bed with them.

  Q141  Chairman: Before we turn to Peter Bone for the last couple of questions on a slightly different subject, can I just test your view? Your view is that Mercosur will, like so much in Latin America, have a turbulent history but it will endure. That is your judgment.

  Mr Campkin: That is our assessment at the moment, yes.

  Q142  Chairman: And its institutions will develop.

  Mr Campkin: Yes.

  Q143  Chairman: And they will be based in Uruguay.

  Mr Campkin: They are based currently in Uruguay, yes.

  Q144  Chairman: From where we are removing all UKTI support.

  Mr Campkin: One needs to be a little bit careful about this, Chairman, because the secretariat of Mercosur in Uruguay is very small and, actually, it is just an administration secretariat.

  Chairman: We have been told informally that they expect the Parliament to be meeting—I do not know whether it will or not—by the end of the year. We have heard that before.

  Q145  Rob Marris: In the eastern republic.

  Mr Campkin: We will have to wait and see whether there is truly a Latin American Parliament or a Mercosur Parliament that meets, and what power and authority it has. If I could, I would just go back to our supplementary evidence and some of the comments we made about things like the common external tariff and the difficulties between the members. These obviously need to be resolved and need to be resolved, probably, not just at practical level but at political level too.

  Chairman: I would love to pursue this but we must bring in Peter Bone for the last questions.

  Q146  Mr Bone: This probably goes back to Mr Miller's area. The Doha Round, how shall we say, is stuck, in trouble, not going anywhere—maybe because of the EU's attitude, who knows? I understand the Commission is talking about bringing in talks with Mercosur about trade relations. Having heard what you have just said it is probably not too encouraging in that field. How are you going to get these markets liberalised? Is there any hope through those mechanisms that I have just talked about?

  Mr Campkin: As I indicated earlier, the most important thing for British business on the international trade investment agenda is a successful conclusion of the WTO's Doha Development Agenda (DDA). That is the way that we will get most liberalisation; that is the way we will create most opportunities, not just for developed countries but for developing countries as well. I think it is very important to focus in on that. Only this morning, before we came here, my Director General had a meeting with Pascal Lamy, the Director General of the WTO, who is in town for a day of meetings to talk about precisely this issue. How do we move now in the window of opportunity that is still there—

  Q147  Mr Bone: It is a short window, though, is it not?

  Mr Campkin: It is very short but it is important that politicians and negotiators take and seize that opportunity to conclude the DDA. Brazil, as I have indicated earlier, has had a key role in all of this through the G20, and obviously we believe it is not just about what there is to gain, but what there is to lose if the round is not concluded effectively. You mentioned the EU/Mercosur talks. The negotiations have been going on for some time but they have been stalled. Peter Mandelson said in the autumn of last year that it was unlikely that negotiations would make any progress until it was clear about what the DDA may or may not do. That is our assessment too, because some of the most gritty issues within an EU-Mercosur negotiation, including—let us do it alphabetically—A is for agriculture, if we cannot solve them at the multilateral level, it is unlikely that they will be solved at a regional or bilateral level.

  Q148  Mr Bone: Following on from that, Chairman, it is pretty clear you are saying the CBI thinks multilateral agreements are the way forward, but you are also pretty honest by saying it is difficult to see that that is going to be achieved. You have also said in your evidence that Chile has a very successful economy by agreeing a lot of individual free trade agreements. If the multilateral approach fails—and my view is it pretty much is going to largely because of the EU's attitude on agriculture, as you say—should we then be pushing for bilateral agreements, or can we use bilateral agreements or would we be breaking EU rules?

  Mr Campkin: I will ask Nick Miller to say a little bit about the CBI's position on bilateral and regional agreements. Again, we would be happy to send the Committee our latest paper on that which goes into the pros and cons of those. Before I ask Nick to respond to that, on the DDA, I am an optimist by nature. I think negotiators and political leaders have looked over the abyss following the collapse in July, and I do think there is not just the green sprouts of the technical negotiations which have been revived in Geneva through the late autumn, but there is a real political willingness to try one more time to get this done. At the CBI we will be doing everything we can through all of our contacts with Europe, the United States, India, Brazil, China and some of the smaller developing countries, to ensure that the promise and potential of the DDA is realised.

  Mr Miller: On free trade agreements, as Gary said, obviously the multilateral route is the key. I think it is somewhat of a misunderstanding to see a stark division between the two because the WTO does have a role in regulating transparency and effectiveness of the rules for free trade agreements. That is an important part of the Doha Round and another reason why we want to see its successful conclusion. On the free trade agreements in general, we have a somewhat more nuanced position than we do vis-á-vis the WTO in the sense that free trade agreements are not necessarily in themselves always effective. What we want to see are free trade agreements that are robust, comprehensive and indeed which do not just reduce tariffs, for example, but lead to their complete elimination, that give real new investment opportunities and real deep liberalisation in terms of services where we have such a highly competitive edge. The result we want to see from free trade agreements is to do with trade creation rather than trade diversion. Is more trade being created or is it merely being diverted away from other markets? That is the litmus test. The other question is what are the costs of free trade agreements? For example, rules of origin is a classic problem. The compliance costs involved in different sets of rules of origin depending on different free trade agreements, different trading regimes, can be significant and cause a lot of problems: slowing down the process at the borders, and increasing compliance costs for companies. There are problems, there are pros and cons, but certainly when we look at a market like Mercosur we can see advantages so long as the negotiations build on the WTO process, complement that liberalisation and, in particular, expand into areas such as enforcement of intellectual property rights where the WTO is not currently involved.

  Q149  Chairman: Thank you very much, gentlemen. Finally, I was shocked to read in your supplementary evidence that Paraguay is to block beef imports from the UK because of its fears of BSE. Even the French are being persuaded now. How much emphasis should this Committee put in its final report on the need to free-up the Paraguayan beef market?

  Mr Miller: Perhaps it is another example of a barrier which is past its sell-by-date.

  Chairman: Unlike the beef! Gentlemen, thank you very much. We are most grateful to you for coming, and we look forward to seeing the additional written evidence you put forward to us.