1. General Remarks
Eurostep welcomes the considerable advances that this current document makes over the ideas set out in the Green Paper of November 1996. The unprecedented process of consultation within the EU and ACP has greatly improved the approach in this latest Commission paper. We particularly welcome the focus on poverty and the emphasis on investing in social development, on gender equity and on conflict prevention. Our greatest concern lies in the trade and investment aspects of these Guidelines which we believe contain serious dangers for the Union’s poverty eradication goals. The initial results of our research into the impact of these proposals indicates that they could result in a dramatic loss of export earnings for all non-least developed countries of the ACP group.
2. Revitalising the Partnership with a New Political Contract:
The emphasis on building a stronger political relation between the ACP and EU is welcome. The aims of conflict prevention, adherence to human rights, confronting global risks and contributing to international poverty eradication will provide powerful goals for partnership. This partnership will also require the EU to put in practice its commitments for its policies in trade, fisheries, agriculture and in other areas to be consistent with the objectives of development, a commitment which is re-iterated within the Communication.
Eurostep believes this political partnership should extend to coordinating at multilateral fora to reach common goals in poverty eradication and appropriate rules in trade and investment to achieve them.
3. Bringing the EU-ACP Partnership into the Union’s Foreign Policy
Eurostep agrees with the emphasis on conflict prevention in this section and supports its approach. This goal would have far more credibility if the EU were to take measures to prevent its own trade in arms from fuelling conflict through a restrictive arms code of conduct.
It is refreshing to read a paper which speaks explicitly of the political challenges of seeking "fundamental changes in social structures and power relationships" (section 3.1) which are central to achieving the goals in poverty eradication and equity. The support to civil society in this context is a vital step.
The assertion that "development cooperation must serve the objectives of the common foreign and security policy" (section 3.1) is perhaps unsurprising, but needs a number of heavy caveats. Far too often, development cooperation has become little more than a vehicle for foreign policy. Consistency demands that the CFSP should also serve development cooperation objectives, particularly in regions of instability. Equally the search for "ownership" (section 2.2) is not assisted by ACP states believing that Lome V is primarily a vehicle for EU strategic foreign policy.
We are disappointed that in Section 3.2 the issue of redress and compensation for those adversely affected by EU-ACP programmes is not addressed, and particularly the EU’s responsibility to fulfil its own obligations on this issue. A statement of commitment would make this section far more coherent with the aspirations to support basic rights and poverty eradication.
4. Refocusing Community Policy:
The emphasis on "poor people’s economy" is welcome (section 4.1) as well as the enhancement of the social dimension of cooperation in line with the commitments made by the European Community, Member States and many ACP countries at UN conferences. To become effective however, practical measures that will have to be established that will make tangible contributions to achieving those commitments together with the targets set by the Council and in the OECD. The proposed full integration of a gender dimension into economic, social and humanitarian action (section 4.3.2) could transform the effectiveness of poverty eradication measures. This proposal would require a major effort on the part of the Commission for it to be achieved, particularly given the current lack of resources and skills in this area.
The proposals regarding supply-side constraints are excellent with priority given to labour intensive industry (and protection for labour rights), SMEs and access to resources. The Guidelines emphasise the duty of states to ensure the "proper operation of markets and take action to remedy their failure". This is welcome, but in an increasingly integrated global market, international collaboration is needed for regulation to address market failures derived from speculative financial flows, and social and environmental dumping. The EU-ACP political partnership could become a powerful advocate of these measures.
5. Opening Up Cooperation to Economic Partnership:
The proposals in this section fall well below those necessary to achieve the stated goals of "sustainable economic and social development, the alleviation of poverty and gradual integration into the world economy". The proposal appears to suggest that there will only be winners from rapid and unconditional liberalisation. While liberalisation has created significant winners, all studies show that the weakest economies often lose, and the poorest and most vulnerable people are those who usually absorb the majority of the costs of adjustment. While the EU’s proposed cooperation with ACP to address supply-side constraints would assist in reducing costs, this section on trade appears to ignore the impact on the poor.
The dangers are the following:
a. The proposal on trade and investment is unbalanced. If implemented it would pitch countries of different levels of development against each other in highly unfair ‘competition’. This will be worsened by the stronger party to the negotiation (EU) achieving exemptions in the FTA from the key product lines which are of most benefit to ACP countries (e.g. agriculture and textiles).
b. The proposal is unrealistic in its complexity and timetable. It is impractical to expect diverse and underdeveloped regions to create regional free trade agreements for themselves and agree an inter-regional free trade agreement with Europe simultaneously, all within three years from 2000. The experience of NAFTA, Mercosur, ASEAN, and the EU itself, all suggest these are completely unrealistic timelines. The document proposes that where "negotiations break down, or initial commitments are not fulfilled, (the agreement) would allow countries to continue to benefit from trade preferences under the GSP on expiry of the three year period" (Section 5.4). The most likely outcome from this proposal would be a mass graduation of non-LLDCs to GSP. This would imply not only a serious and sudden erosion of poor people’s opportunities to trade their way out of poverty, but also a significant rise in the EU’s level of protectionism towards developing countries. The initial results of our research into the impact of graduation to the GSP indicate static transfer of the European Union from non-LDC ACP countries equivalent to 40% of total EDF transfers in 1994 (assuming current GSP rates).
c. The LLDC proposal is compromised: The proposal for least developed countries to receive continuing non-reciprocal preferences is welcome. However the offer is deeply compromised by their inclusion in future FTAs. The assertion that "the benefits of taking part in an area of enhanced economic cooperation with the EU should outweigh any interim costs of liberalisation" is little more than an article of faith. This faith is not borne out by the experience of many least developed countries which liberalised too fast in the 1980s: most of them have yet to recover even 1980 levels of GNP.
d. WTO Compatibility is an Obstacle: The Guideline’s treatment of WTO compatibility is flawed. Firstly, whatever proposal (waiver or FTA) is advanced by the EU and ACP will meet problems at the WTO and will require negotiation with other WTO members.
The document proposes a rising complexity and number of agreements. The multifarious and overlapping nature of the agreements is likely to reduce the possibility of their approval at the WTO. The Guideline proposes a broad waiver would have to be achieved for EU-ACP trade arrangements between 2000-2003 under Article XXV. Then further waivers would have to be sought for any economic cooperation agreements which are developed. Simultaneously FTA proposals would have to be approved by consensus of all members of the WTO (rather than a three quarters majority necessary for a waiver) under Article XXIV. These would then be followed by further intercontinental FTA proposals as they develop over the next period.
The formal requirements for the legitimisation of an FTA are high (as of January 1995, 98 agreements had been notified under Article XXIV, but only six had been acknowledged as in conformity with Article XXIV). While in the past, failure to achieve conformity had few implications, there has been a hardening of attitudes towards discrimination. Only one WTO member has to object and demonstrate trade diversion for the FTA to be blocked.
Alternatives:
Given these obstacles to the trade proposal being effective in terms of poverty eradication, sustainable development, and gradual integration into the global economy, Eurostep believes the proposal from the commission on ‘economic partnership’ should not be approved by member states. Instead, there are three alternative approaches to explore:
Simplicity would dictate that seeking a repeat ten year waiver for the ACP group would have greater impact upon poverty reduction and would have more chance of approval at the WTO. Given that global liberalisation over the next ten years is predicted to erode significantly these preferences, this will lead to a gradual integration into the global economy and exposure to international competition. It would be necessary to ensure that there was a removal of CAP tariffs and quotas, the abandonment of rules of origin restrictions to LLDCs and the removal of textile restrictions for ACP countries at least 5 years before the expiry of the waiver. The agreement could state clearly now that after ten years the non-LLDCs would be expected to either graduate to GSP or establish appropriate reciprocity, while those still in the LLDC category would continue to benefit from preferences extended to all LLDCs by the EU.
An alternative could be to negotiate a five year waiver to 2005 combined with immediate liberalisation by the EU of sectors from which ACP can most benefit. This would include removing CAP tariffs and quotas from 2000; abandoning all rules of origin restrictions for LLDCs from 2000; and removal of textile restrictions for ACP countries by 2000. These measures would allow industry to adjust and become more competitive internationally before the end of the waiver in 2005 followed by graduation to GSP or other appropriate reciprocal arrangements and LLDC preferences.
The EU should complement A. or B. with a commitment act with the ACP to reform the WTO rules in the following areas:
i. expanded infant industry protection.
ii. a food security clause to allow long term protection for agriculture in the face of continuing highly subsidised exports from the EU and USA.
iii. action at the WTO to make special allowances which would secure continued preferential access to ACP countries with economies dependent on banana exports.
iv. trade related investment measures to respect the right of governments to regulate investment for social and environmental goals. Balancing investor rights with their obligations to comply with international standards relating to the rights of workers, affected communities and consumer and environmental protection by the addition of a binding code of conduct for TNCs.
19 November 1997