Contents
Summary
1. Introduction
2.
International trade and poverty eradication
3.
Trade and Investment Components of a new Partnership Agreement
3.1
The role of non-reciprocal trade preferences and commodity protocols
3.2
Institutional Development and Capacity Building
3.2.1
Cooperation to Build Trade Capacity
4.
Post Lomé Trade Options
4.1
Extending the group
4.2
Targeting countries within the group
4.3
Looking to the Future
Conclusion
A critical debate has begun on the future of European Union (EU) development cooperation which will culminate in a new generation of international agreements in the year 2000. The conclusions to this debate will have far-reaching consequences for people living in poverty and conflict across the globe.
The Treaty of Maastricht commits the EU to combat poverty, promote sustainable development, and ensure the smooth and gradual integration of the developing countries into the world economy. The negotiation of a new development cooperation agreement to replace the current Lomé IV bis agreement in the year 2000 represents a unique opportunity for the EU to put these principles into practice, and to ensure that poverty eradication and sustainable development take precedence over any other aims.
This paper sets out Eurostep’s proposals for the future of the EU’s trade and investment policies with the ACP countries, and explores some of the possible ways of trying to translate the Maastricht commitments into reality. We examine how the current international trading system undermines the interests of many of the poorest countries, and explore some of the policy options needed to underpin more equitable patterns of international trade. Our proposals draw on the positive lessons from Lomé, our own programme experience, and partners’ analysis of those development cooperation measures which have already been successful in these areas.
The basic principle underlying the renegotiation of the trade-related elements of Lomé should be that trade is not an end in itself, but rather a means to promote the aims of human development and poverty eradication. In as far as aid is involved, the major challenge to be addressed is how to pursue these aims within the obvious constraints of limited EU resources and a potentially limitless demand upon them. If poverty eradication is to be a key objective of the EU’s development cooperation with the ACP, both the EU and the ACP must accept that aid and trade agreements will need increasingly to target the poor.
We believe that the trade and investment components of a new EU development cooperation agreement should therefore include the following elements:
Another step towards achieving greater poverty focus would be to invite into the new agreement the other 9 least developed countries which are not currently included: Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, the Maldives, Nepal, and Yemen. (Burma is also an LLDC, but would be excluded because of its failure to respect the human rights conditionality already established in Lomé). This would need to be accompanied by a corresponding increase in the aid budget.
A further option would be to target a sub-group of poorer countries within the ACP group, although a difficulty with this approach is how to reach a definition of "poorer country" which is equitable. Any categorisation will inevitably be imperfect, and to some extent, arbitrary. The Least Developed Country category has the advantage of already being recognised within the WTO, but it is a very unsophisticated measure: some middle income countries have huge numbers of severely impoverished people, for example, while calculations based on per capita income do not necessarily reflect the pervasiveness of poverty in society. One way of trying to address these concerns would be to include both Least Developed Countries, and those countries which are in the low and medium categories of the Human Development Index.
The paper is divided into four main sections. The first is an introduction which sets out the principles which Eurostep believes should underpin a new trade and development agreement. In the second, we examine the relationship between international trade and poverty eradication and make the case that, under existing international trade and finance rules, globalisation is marginalising some countries, and actively threatening the livelihoods and welfare of vulnerable people. The third section outlines how a new trade and investment agreement should be based on a much closer integration of EU trade and development cooperation policies, and identifies specific components of a new partnership agreement, while the fourth explores some of the other ways in which the agreement could achieve a greater poverty focus.
The year 2000 will see the expiry of several important agreements which guide the European Union’s approach to trade and aid with developing countries, including the Lomé IV agreement and the Asia and Latin America Agreements (ALA). The renegotiation of these agreements, and the critical debate on the future of EU development cooperation which has already begun, will have far-reaching consequences for people living in poverty and conflict across the globe.
This paper focuses on the future of the Lomé Convention, and sets out Eurostep’s proposals for the future of the EU’s trade and investment policies with the ACP countries. A further paper will address aid and social investment policy. These two areas are closely interlinked, and a deeper integration of social development and trade development policies is fundamental to our proposals.
When the first Lomé Convention was agreed over 20 years ago, it was hailed as a contractually agreed "partnership among equals", based on mutual rights and obligations; and for all their limitations, the Lomé agreements still remain an unprecedented attempt to introduce genuine dialogue and contractuality into international relations. The challenge before the EU now is to create a new, similarly forward-looking, but updated and reinvigorated, partnership to shape its development policies into the 21st century.
Eurostep believes that the EU’s development cooperation could be greatly improved by increasing its poverty focus, ensuring greater coherence with other European policies, and by improving the mechanisms for its implementation. The Treaty of Maastricht has started a process in this direction, and commits the EU to combat poverty and promote sustainable development, as well as to ensure the smooth and gradual integration of developing countries into the world economy. This paper examines some of the policy options needed to underpin more equitable patterns of international trade and investment, as one step towards translating these Maastricht commitments to poverty eradication and sustainable development into reality.
The negotiation of a new cooperation agreement offers the EU a unique opportunity to demonstrate international leadership in promoting growth with equity for human development. Eurostep believes that the fundamental principle underlying the renegotiation of the trade related elements of Lomé should be that trade is not an end in itself, but rather a means to promote human development and poverty eradication. The trade, aid, and investment instruments open to the EU must be directed towards poverty eradication, sustainable development, and reducing conflict, which markets alone will fail to achieve. This cooperation is an essential tool to counter rising inequality -including gender inequality - which is further polarising an already divided world.
Further principles which we believe should be enshrined in new trade and investment proposals have been set out in our paper Partnership 2000 - a Eurostep Approach. According to these, a new trade and investment agreement should:
* Ensure that trade preferences, particularly non-reciprocal ones, are targeted effectively at products which are particularly helpful to poor producers and sectors where minimum standards of workers' rights are guaranteed;
* Demonstrate a reduction in EU trade barriers and more flexible rules of origin, particularly to least developed countries;
* Establish explicit development objectives. As well as poverty reduction, these would include the promotion of growth with equity, food security, workers' rights and environmental improvement, the furtherance of women's rights and the preservation of the natural resource base on which many of the poor depend for their livelihoods;
* Affirm the poverty eradication goal of the trade agreement by offering the preferences given to the ACP countries to the other 9 least developed countries not covered by the Lomé Agreement (with Burma excluded).
Government and private sector collaboration will clearly be necessary if EU assistance is to work to improve the economic conditions in ACP countries. But Eurostep also believes that NGO and civil society inclusion in this new partnership will be critical if there is to be a genuine commitment to assisting the poor and marginal sectors of society.
In this paper we draw on the best practice of existing EU-ACP relations, on research in ACP countries, and on our own experience of poverty alleviation work in over 70 countries around the world. It is intended as a contribution to the debate which will be ongoing for many months, and it will be updated and adapted as that debate develops.
2. International trade and poverty eradication
The dominant vision of the future of EU development cooperation believes that the efficiency and dynamism of free markets and foreign investment are the principal guarantor of economic growth. The European Commission’s Green Paper on relations between the EU and the ACP countries on the eve of the 21st Century partly reflects this analysis. It sets out a range of options for a new trade and investment regime between the EU and ACP countries, none of which adequately acknowledges that greater involvement in international trade does not automatically lead to poverty reduction. It ignores growing evidence which suggests that global deregulation of markets and structural adjustment in some regions of the world have actually increased inequality and poverty levels. In many areas, rapid liberalisation is destroying rural livelihoods and undermining food security, and at the same time expanding urban drift, and exerting downward pressure on labour and environmental standards.
In this paper, we question some of the assumptions underlying the unbridled optimism about the capacity of unregulated markets to sustain growth and address problems of poverty and inequality. While we do not dispute that growth and integration into the world economy have the potential to enhance human development, we do make the case that under existing international trade and finance rules, globalisation is marginalising some countries, and actively threatening the livelihoods and welfare of vulnerable people.
Nowhere is this clearer than in the case of the forty eight least developed countries, who now account for less than 0.3 per cent of world trade - half the level of two decades ago. These countries are also being bypassed by private capital transfers, which have displaced aid as the main channel for North-South financial flows. This pattern of distribution is not accidental. Inequality in wealth mirrors a deep inequity in the rules governing world trade and investment, which have been structured around the interests of the most developed countries.
The Uruguay Round of the GATT has done little to change this bleak picture. Issues of vital concern to many of the world’s poorest countries - notably the management of primary commodity markets and debt - were conspicuous by their absence from the Uruguay Round agenda, while the prominence of issues like intellectual property rights and trade-related investment measures testified to the dominance of the industrialised countries’ concerns.
If the EU’s trade development cooperation is to be effective after the year 2000 a closer integration of trade and aid instruments must be used to ensure more inclusive patterns of growth which put the issues of equity, poverty eradication, sustainable development and conflict prevention at the core of the development process. This will not only involve substantial new mechanisms within a new agreement with the ACP countries, but also a commitment to work with them at international fora including the WTO, World Bank and IMF, to ensure that the interests of poor people and poor countries are at the top of the political agenda.
3. Trade and Investment Components of a new Partnership Agreement
For most developing countries, international trade and investment are far more decisive in determining their opportunities for equitable human development than aid flows. The EU’s approach to trade and investment is therefore critical to its development cooperation goals.
European Union trade and investment policy is at a watershed. Shifts in the international trade environment are eroding traditional EU preferences for poor countries; the EU and US are increasingly intolerant of poor countries which seek to protect industries, even while they subsidise and protect their own industries; and the EU appears determined to use emerging regional and cross-regional trade agreements as tools to prise open markets in developing countries still further, with little or no regard for poverty eradication, basic rights or environmental goals.
The EU needs a reshaped and integrated trade and development assistance policy for poor countries and poor people, which should be developed in dialogue with southern governments and citizens organisations, and which should place special emphasis on assisting least developed countries and those reconstructing after conflict.
3.1 The role of non-reciprocal trade preferences and commodity protocols
"It is generally recognised that many ACP countries have not been capable of taking advantage of their preferences within Lomé. This is certainly an argument for exploring ways of reinforcing capacity, particularly to produce exports, but surely not for eliminating preferences. The inability to take advantage of trade privileges is a symptom of underdevelopment, and its causes are complex and many-faceted". (Lomé NGO Caribbean Reference Group: Windward Islands Farmers Association, Haitian Platform for Alternative Development, Caribbean Policy Development Centre, Economic Research Centre for the Caribbean, Caribbean Regional office of Oxfam UK/I)
Non-reciprocal arrangements have been the mainstay of the Lomé trade preferences, involving one-way duty-free access for most of the ACP products. Industrial products from the ACP countries can enter the EU without any restrictions (provided the products comply with the EU's Rules of Origin - see page 7) Tariffs on many agricultural products are either reduced, or special preferential arrangements have been set up for certain quantities from specific ACP countries (sugar, banana's, beef, rice, etc). Eurostep believes that this non-reciprocal preferential treatment should be maintained, together with a commitment to negotiate for a waiver from the WTO rules to cover that agreement. Indeed, we believe that the EU should go further and offer greater access to all LLDCs. We therefore welcome the recent initiative from DG1 of the European Commission to improve the access of LLDCs to the markets of wealthier countries by levelling up trade preferences to all LLDCs to match the best deal under the Lomé Convention or the GSP, and by applying EU origin rules more flexibly ( Improving Market Access for Least Developed Countries, Com(97) 156 final, Brussels, 16.4.97).
It needs to be recognised, however, that the value of preferences is likely to be of relatively short-term benefit only. Global liberalisation trends mean that tariffs are decreasing, and the ACP will face more competition in their "preferred" markets. One study (Page and Davenport 1994) estimates that, as a result of the liberalisation agreements made under the Uruguay Round, three of the poorest countries in the world - Ethiopia, Mozambique, and Mali - will soon start to face export losses in excess of 4 per cent per annum (Page, S and Davenport, M: World Trade Reform: do developing countries gain or lose?, 1994). For the period while preferential margins are still of value, they should be used to buy time to enable ACP countries to develop alternative diversification strategies.
But while the preferences system should be maintained, it should also be reformed, and the capacity of ACP countries to benefit from it increased. In many respects, the impact of the non-reciprocal trade preferences and the Protocols offered to the ACP countries has been limited. In spite of over two decades of Lomé preferences, the ACP countries have generally failed to diversify, with over 80 per cent of their export earnings still coming from primary commodities. They have also been unable to maintain their share of the EU market, which has fallen from 6.7 per cent in 1976 to 3.4 per cent in 1994; meanwhile some less preferred developing countries have actually gained market share. Although there are some notable exceptions to this - Mauritius, Zimbabwe, and Jamaica are examples of countries which have been able to expand their exports to the EU significantly over time - it is unlikely that these good performances can be attributed to preferences alone.
There is plenty of evidence to suggest, however, that the reason why trade preferences have not been more successful to date is not because they are intrinsically a weak instrument, but because of other factors. Some of these relate to insufficient supply side capacity in the ACP countries themselves: poor infrastructure, low investment, and lack of skilled labour all hinder their trade development. This is an area where EU cooperation for trade development could have significant impact, as outlined in Section 3.2 below. Other factors are a direct consequence of continuing non-tariff restrictions within the EU. One of the most significant of these is the EU’s over rigorous rules of origin criteria, which allow duty-free access only if at least 85% of a product’s value originates from an ACP country. Rules of origin criteria should be simplified, and the ceilings for import content increased, so that they do not act as a block on South-South trade or involve poor country governments in very costly paperwork. In addition, remaining tariffs on agricultural products covered by the EU's Common Agricultural Policy should be progressively reduced.
Trade preferences and commodity protocols have also been accused of encouraging countries to remain dependent on export sectors and production methods which would be unviable in a "free market" and, therefore, of providing a disincentive to modernisation and real competitiveness. While in some cases there may be an element of truth in this, in others it is clear that there are very few diversification alternatives. In The Windward Islands, for example, bananas account for over half of total export earnings, with around one third of the labour force directly or indirectly involved in banana exports. Production is generally on small famili farms, many of which are on steep and difficult terrain, and cannot compete on price with the vast plantations of Latin America. Strenuous efforts are already being made to make the industry more competitive, and to pursue diversification options alongside it. However, there can be no question of replacing the banana industry, since no other industry could support the livelihoods of so many people across the region. The maintenance of preferential conditions of access is therefore critical to the economic survival of the Windwards.
In some cases, it is true, preferences and access for
poor countries for many products are not targeted at sectors which would
assist the poor. Instead they are generating huge profits for commercial
farms and international marketing corporations. Preferences, and indeed
wider trade development assistance, should therefore be targeted to enhance
the market opportunities of small and medium sized enterprises, and to
reach more marginal producers, as well as larger companies which adhere
to minimum environmental and social standards.
WTO Compatibility
Serious questions have been raised about the non-compatibility of Lomé’s trade provisions - and in particular trade preferences and protocols - with the Post-Uruguay Round arrangements which are being overseen by the WTO. However, within WTO rules, there is provision for a waiver for non-reciprocal trade arrangements. Given sufficient political will, it is still feasible that such waivers could be granted, provided there is the combined support of the EU and ACP member states within the WTO. Another option, which would guarantee a more secure arrangement under the WTO, would be to push for an extension of the WTO’s provisions governing Special and Differential Treatment to cover a new agreement with the ACP. Indeed, there are a number of factors which suggest that measures to support poorer countries would actually be in keeping with the spirit of the WTO. The preamble to the agreement establishing the WTO, for example, explicitly refers to trade relations being conducted in order to raise standards of living, ensure full employment, and expand production and trade with the objective of sustainable development. Lomé preferences and protocols precisely support this objective. Moreover, the WTO Ministerial Meeting in 1996 expressed concern about the possible marginalisation of some developing countries and agreed a WTO Plan of Action for LLDCs. There is plenty of scope, then, for arguing that the maintenance (and expansion) of Lomé preferences is consistent with WTO concerns and objectives.
3.2 Institutional Development and Capacity Building
3.2.1 Cooperation to Build Trade Capacity
For many ACP countries, building the domestic economy and trade capacity is more important than the need for an extension of the Lomé preferences themselves. The following section outlines those trade development measures which the EU should offer ACP countries in order to ensure that the benefits of trade policy reach the poor, and reduce inequality of income and access to resources.
Measures to build trade capacity have received little attention in previous Lomé Conventions. The next generation of aid and trade cooperation should focus on trade capacity measures which increase the potential of poor countries to take advantage of preferential access. More importantly, cooperation for trade capacity should be designed to maximise the benefits of trade to the poor. This requires the EU to provide assistance which strengthens the domestic economy, and particularly small and medium-sized business, including trade, rather than adopting policies which promote the discredited export-led growth model.
Throughout this paper we also emphasise the need for greater political partnership at key international economic fora to begin to transform the rules for international trade and investment so that they take full account of the challenges facing poor countries and can ensure that ACP/LLDC trade and investment will lead to broader human development. Some key aspects of building trade capacity, employed previously by the Asian tiger economies and the EU members would now be outlawed by the WTO.
Existing EU cooperation for trade capacity in ACP countries is principally based on a market-friendly policy package seeking increased levels of free trade and liberalised investment. While increased exports can lead to economic growth and that in turn can lead to a decline in poverty, there are at least three important caveats. Firstly the evidence of the 1980’s contradicts this blanket approach for least developed countries secondly there is even less evidence that the virtual absence of barriers to trade is the optimal policy; and thirdly, the differential effect of trade liberalisation on women is not taken into account.
If EU trade capacity measures are to help tackle key economic and social issues in least developed countries they need to be targeted to address issues such as gender inequality and conflict prevention. There is strong evidence that liberalisation can have positive or negative outcomes for women, depending on the policy environment. While women’s job opportunities in the formal sector have increased in many developing countries, their jobs tend to be concentrated in low-paid, low-skill sectors with poor working conditions. The rapid opening of domestic markets to cheap imports undermines the local subsistence economy and poses a threat to the majority of women who work in the informal sector.
In December 1995, the European Council passed a resolution on women and development as a follow-up to the political commitments made in the Platform for Action agreed at the UN’s Beijing Women’s Conference (1995). That resolution, which commits the EU to mainstream gender analysis at all levels of policy-making, and in monitoring and evaluation, should be fully incorporated into the EU’s trade cooperation with the ACP countries. The EU should therefore commission further research into the impact of trade liberalisation on women (particularly in the light of the Green Paper’s presentation of liberalisation as the effective way of achieving growth and poverty eradication), and undertake a gender evaluation of existing, and newly proposed, development cooperation policies between the EU and ACP.
The existence of violent conflict in Africa is a major obstacle to the EU achieving its declared policy goals: fostering peace, stability, democracy and human rights (The European Union and the Issue of Conflicts in Africa: Peace-building, Conflict Prevention and Beyond. Sec (96) 332). It is therefore vital that national and regional trade development policy promotes conflict prevention through measures to assist states to avoid severe economic shocks, highly unequal development, and the concentration of benefits of trade in one social or ethnic group. Since many internal wars are generated, at least in part, by competition for resources, the development of trade must be designed to strengthen social cohesion and give the majority a far greater stake in peace than in war.
Evidence from some of the most successful developing economies, including south-east Asia, together with Eurostep’s own programme experience, suggests that, in order to promote poverty eradication and sustainable development, as well as international competitiveness, the following issues must be addressed through trade development policy:
Working together, the EU and ACP/LLDCs could build an integrated trade and development policy for the next era, and lead global debates on international trade and investment. The WTO is an organisation with one country one vote, where together the EU and ACP/LLDCs would form a substantial bloc if they acted together. The EU, as the largest trading bloc, acting in concert with the ACP/LLDCs in international fora, could play a decisive role in the creation of global institutions for regulating international markets to improve human welfare, and create conditions for stability, job creation and sustainable economic growth.
Investment
With falling levels of aid from OECD countries, great emphasis is being placed on the role of foreign direct investment. And yet, for least developed countries, significant FDI is little more than a reverie. Just 10 countries received 80% of FDI to developing countries while Sub-Saharan Africa (excluding RSA) received only 4% of the world’s FDI in 1994. For ACP countries, international investment flows have been predominantly to the larger and richer economies. The bulk of EU investment to the ACP has been directed to tax havens, oil-producing and mining states (Greenidge, C.B.; Conference speech, Bradford, 17.10.96).
However the drive to attract FDI has led states across the world to reduce taxation for corporations, offer extraordinary incentives and subsidies, and rapidly deregulate and liberalise markets. Currently the EU is strongly promoting the OECD’s Multilateral Agreement on Investment (MIA) which essentially prevents national governments imposing trade-related restrictions on investments. It "guarantees generally free entry and establishment for foreign investors, full national treatment for established investors and high standards of investment protection" (Sir Leon Brittan, A Level Playing Field for Direct Investment Worldwide, Communications presented by the European Commission, 1995). These same principles are enshrined in hundreds of Investment Promotion and Protection Agreements signed bilaterally between ACP states and EU member states.
Eurostep believes that FDI can be of great benefit, provided that it is properly regulated. There is strong evidence in Europe and Asia that appropriate business regulation can both enhance the effectiveness of markets and assist in directing capital towards economic and social priorities. EU cooperation could assist nations, but more particularly regions, in establishing a register of regional corporations which would include numbers of employees, numbers of national subsidiaries and the amount of assets and sales in the region. The registering institution could establish common regional standards for corporate governance, taxation, annual reporting requirements, as well as facilities including laboratories to review products, processes and services for conformity with standards (Exploring Regulation of Transnationals: a regional approach; 1996; CIIR).
The EU should further ensure that its own companies operating in ACP countries respect minimum standards, including the OECD code of conduct, and the UNCTAD Set on Restrictive Business Practices. Technical and financial assistance should be made available to enable ACP countries to meet agreed minimum social and environmental standards.
As developing countries become further integrated into the global economy, so they need to enhance their regulatory frameworks for competition and monopolies and mergers. There are already effective principles for competition policy which are applicable to developing countries. However, given the strong vested interests, the EU could play a helpful advisory role in assisting regions to develop effective regional competition policy. This might well reduce the levels of distrust towards FDI, as ACP citizens would see guarantees against large corporations’ predatory manipulation of markets to establish effective monopolies. Similarly, the EU could help the ACP states to develop strong regulatory regimes for privatisation programmes which would allow adequate appraisal of the potential benefits and disbenefits of proposed programmes, and guarantee accountability of privatised industry in terms of competition, and consumer, worker, and environmental protection.
The Promotion of Regional Economic Integration
Regional integration has considerable potential to assist many ACP countries achieve economic growth and human development goals. The experience and enthusiasm of the EU to promote regional and inter-regional trade agreements indicates that a post-Lomé IV agreement should pay particular attention to this issue.
Currently, the European Commission is promoting a form of regional integration in developing countries which focuses on rapid and indiscriminate liberalisation of trade and investment ( European Community support for regional economic integration efforts among developing countries, Commission of European Communities COM (95) 219, 1995) whilst maintaining its own protectionist reflex - as evidenced most recently in its negotiations with South Africa on a regional trade agreement (Kinnock G., Financial Times, 17.1.97).
This approach not only endangers sustainable development, but also misses key opportunities for the creation of competitive and equitable markets; poverty eradication; improved policy frameworks for social and environmental goals; and the opportunity to promote stability and security between neighbouring countries and peoples.
Rather than a model of regional economic integration which puts a premium on maximising liberalisation, the EU could assist developing regions to organise integration to maximise human development. For example, unregulated liberalisation often only exacerbates inequalities between provinces and countries, sometimes leading to conflict. The EU should therefore promote models of integration which address structural inequalities in a region. An equitable approach which militates against social dumping might include structural funds and the use of adjustment compensation funds for hard-hit provinces. Some of these funds could be created by debt relief and concessional finance. Competition policy, as outlined above, is another area which lends itself particularly to regional economic integration: neighbouring countries could pool resources to establish one institution to monitor larger companies, investigate suspected abuses and penalise companies abusing their market position. The EU can offer substantial technical assistance in this area. Business regulation can also be more effectively implemented on a regional basis.
Eurostep is committed to seeing the maintenance of a strong, unified ACP group, which is needed to maximise the ACP’s bargaining power with the EU in ongoing negotiations. Many share this view, and this has led some of them to the position of supporting no major change to the ACP group in any new agreement. An enhanced status quo would have the advantage of already being a known quantity, and because of the preservation of its more generous preferences (relative to other developing countries) it would convey the message that the ACP trade relationship is still a key EU priority. Some believe it is the "safest" option, with least threat to existing benefits. There are also dangers in the status quo option, however: it could be a serious missed opportunity in shaping a more forward-looking poverty-focused approach to European development cooperation into the next century. Moreover, it would not be equitable to countries at the same level of development.
As well as the trade capacity building measures outlined above, we believe that there are a number of other ways in which the agreement could be shifted to a greater poverty-focused approach without jeopardising the integrity of the group. All of them would need to be subject to social, environmental, and economic impact assessments, and would need appropriate transition periods and support.
One way to increase poverty focus would be to invite into the new agreement those 9 LLDCs which are not currently included: Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Maldives, Nepal, and Yemen. (Burma is also an LLDC, but would be excluded because of its failure to respect the human rights conditionality already established in Lomé). This would need to be accompanied by a corresponding increase in the EDF. Impact assessments would also need to be undertaken prior to their joining to ensure that it would be in their best interests, and that any potential disbenefits are addressed. In particular, special care would need to be taken to make sure that environmental sustainability is a key objective, and that any increase in exports is not based on further degradation of natural resources.
Most of these countries, with the exception of Bangladesh, are still dependent on primary commodity exports, and could benefit from assistance to diversify their economies. Perhaps most useful of all would be EU support in building domestic and regional markets, together with financial and technical assistance in supply side capacity building, including education and training.
These countries are currently beneficiaries of the EU’s GSP scheme which, while its preference levels are less generous than those of Lomé, is more secure under WTO rules. One way to increase the security of a renegotiated Lomé agreement incorporating these 9 LLDCs would be to lobby at the WTO to have it incorporated under the Special and Differential Treatment clause of the WTO. This would be an important litmus test of whether the EU and ACP are able to act in concert at the WTO to achieve significant change.
4.2 Targeting countries within the group
A further measure could be to target poorer countries within the ACP group. These countries would receive the greatest benefits of trade and social development cooperation and the greater part of concessional finance, although all countries would still remain part of a Single Framework Agreement, with continuing access to the commodity protocols and Stabex. These provisions are particularly critical to single commodity dependent Small Island States, like the Windward Islands.
One of the difficulties of this approach is to reach a definition of "poorer country" which is equitable. Any categorisation will inevitably be imperfect, and to some extent, arbitrary. The least developed category has the advantage of already being recognised within the WTO, and of being most likely to be WTO compatible (by treating all developing countries of similar levels of development in the same way, it would comply with the non-discrimination principle of the WTO). However, it is a very crude and unsophisticated measure: some middle income countries have huge numbers of severely impoverished people, for example, while calculations based on per capita income do not necessarily reflect the pervasiveness of poverty in society. One way of trying to address some of these concerns would be extend the definition to include those countries which fall into the low and medium categories of the Human Development Index. However, if HDI were used, it would be important to ensure that incentives were incorporated to reward progress and human development indicators.
"(A new framework needs to provide) support for the creation of more productive and competitive economies in the international arena by designing viable strategies for transition from the current non-reciprocal trade status to a reciprocal one and strengthen local capacities for international trade using instruments such as proper timing, selective protection of products and markets, financial and technical support for specific sectors and debt relief". Lomé-NGO Caribbean Reference Group
Looking to the longer term, some in the ACP countries are beginning to anticipate the advent of more reciprocal arrangements. The region where some are more prepared to exchange current trade provisions for a regional agreement based on some degree of reciprocity is the Caribbean. Potential advantages include increased security and transparency that benefits trade and investment, opportunities to negotiate further access for agricultural products and to restore some of the lost value of other preferences, and the scope for using it as a bargaining tool for increased market access, together with increased aid, credit, debt relief, and cooperation assistance for trade development.
However, Eurostep partners in the Caribbean have made very clear that the commodity protocols and the agricultural preferences are still critically important for some Caribbean countries, and that any transitional phaseout period would need to be carefully managed. This could include ongoing adherence to preferential regimes while at the same time FTAs are put in place.
Many in the region foresee a prior step in this process to be the option of negotiating an overall framework as part of the ACP group, while at the same time complementing it by a specific regional agreement. As the Caribbean Reference Group (CRG) observes: "in a rapidly globalising planet, regional isolation may be a handicap, but dispersion of our interests may be a burden". The CRG further notes that this strategy addresses the different needs of different ACP countries at different stages of development: "responding to the specificities of a region can be successfully achieved through negotiation of regionally sensitive agreement within a framework of a general ACP-EU agreement in the spirit of the best Lomé principles. Such an option not only accommodates the heterogeneity and different needs of the ACP group, but it also meets the EU's requirement for more effective use of development resources.
Whatever option is finally agreed, it will be critical that it addresses the different needs of ACP countries, that it has the support of ACP governments and peoples, and that agreed changes are introduced gradually, with full support and assistance during the key transitional period. In this way, the EU and ACP together can look forward to a new agreement which strengthens their partnership in the fight against poverty.
European Union relations with countries in poverty and conflict are at a crossroads. Global inequality is increasing and over 3 billion people - more than half the people on the planet - have income of less than $2 a day. The negotiation of the next generation of EU development cooperation presents a rare opportunity for member states to commit themselves to promote international economic justice and human rights.
The proposals set out in this paper offer one way of translating the poverty eradication commitments in the Maastricht Treaty into reality, and of achieving coherence within the EU’s policies. This will not be easy, particularly at a time when the EU is wrestling with the major internal debates concerning enlargement and EMU. However, the advantages of showing leadership in this area of world trade are considerable. The ACP and LLDCs form a growing potential market; and action to promote poverty eradication as an objective in the management of international trade will be welcomed by a broader group of developing countries. Opinion polling consistently shows that European citizens believe that national and European governments and institutions must act to assist people in poverty and conflict. This solidarity is a product of moral outrage at the unequal distribution of wealth between developed and developing countries, but also of enlightened self-interest; in a rapidly globalizing world economy, the interdependence of North and South cannot be ignored. In the post-Lomé process, the EU must show its citizens that it is ready to meet that challenge of interdependence.
Eurostep has produced this paper as a contribution to the debates that are now taking place on the future shape and form of the European Union development co-operation agreements. The perspectives set out in the paper are drawn from the experiences gain in development of Eurostep’s member organisations through their involvement in development programmes in Africa, Asia and Latin America. This paper was written by Caroline LeQuesne, Oxfam UK/I Policy Adviser, on behalf of Eurostep. It draws on work by Penny Fowler (CIIR), Miriam vander Stichele (TNI), Jonathan Pitts (PAPDA, OXFAM Caribbean Reference Group), David Lewis (Caribbean Policy Project), Babar Sobhan, and on ECDPM’s report Beyond Lomé IV: Exploring Options for Future ACP-EU Cooperation.]
The membership of Eurostep includes: ACTIONAID, UK; CNCD, Belgium; CONCERN Worldwide, Ireland; Deutsche Welthungerhilfe, Germany; Forum Syd, Sweden; Frères des Hommes, France; Helinas, Greece; Hivos, Netherlands; Ibis, Denmark; Intermon, Spain; Kepa, Finland; Manitese, Italy; Mellemfolkeligt Samvirke, Denmark; MOVIMONDO, Italy; NCOS, Belgium; Norwegian People’s Aid, Norway; Novib, Netherlands; OIKOS, Portugal; Oxfam, United Kingdom and Ireland; Rädda Barnen, Sweden; Swiss Coalition of Development Organisations, Switzerland; terre des hommes, Germany.