PAF ProActive File - Regular News Update from Eurostep

No. 328

26 September 2003

1. EU GEARS UP FOR FREE TRADE NEGOTIATIONS WITH WEST AFRICA AND CENTRAL AFRICA WITHOUT HAVING MET REQUEST OF ACP FOR BINDING OUTCOME OF FIRST PHASE OF ACP-EU NEGOTIATIONS

Hot on the heels of the collapse of the WTO Ministerial Negotiations, the EU will begin trade talks with some of the poorest groupings of countries in the ACP that again involve subsidy-fuelled products to those countries. Central Africa and West Africa begin their second phase of the ACP negotiations with the EU on October 4 in Congo Brazzaville and Benin on 6 October respectively. The Economic and Monetary Community of Central Africa (CEMAC) will represent Central Africa, while the Economic Community of West African States (ECOWAS) will represent West Africa. Negotiations between the entire ACP Group and the EU will also be held on 2 October as part of the first phase of the negotiations.

When the ACP-EU negotiations started in September 2002, it was agreed that the first phase of the negotiation between the ACP Group as a whole and the EU should be concluded by September 2003. The second phase of negotiations would then begin, with the sub-regions of the ACP directly negotiating with the EU. The ACP has called for the first phase of the negotiations to be concluded with a binding outcome, but the EU has refused to agree to this. Indeed very little has been agreed during this first phase of the negotiations, and most of the ACP States have stated that they are not yet ready to begin regional negotiations with the EU. It is now unclear when the first phase will end. Nevertheless the second phase will already begin with West Africa and Central Africa in accordance with their wishes.

According to an ACP spokesman, “ACP countries are still hoping to reach an agreement with the EU this week. In the absence of any agreement; the Europeans have to take note that if the two regions feel obliged to begin negotiations on their own initiative, ACP countries will not be happy about entering these negotiations”.

Eurostep and many other observers are calling on the EU to agree to close the first phase of the Agreement with a binding agreement. Such an Agreement could provide a tool through which the different sub-regions of the ACP could use to draw in the backing of the entire ACP Group to balance the EU’s strength in the negotiations. According to Guggi Laryea, Policy Advisor at Eurostep “One of the clear lessons from Cancun is that if developing countries group together they have the power to resist the demands of developed countries”. The ACP is the largest official grouping of developing countries. In Cancun the coalition of the so called G 90 group, involving the ACP Group, the Africa Union group and the LDC Group, was instrumental in helping developing countries stand firm against the pressure from rich countries.

For ACP countries the stakes could not be higher after the collapse in Cancun. Many ACP economies, particularly least developed countries are poorly placed to face free trade with an economic giant like the EU. Major constraints exist in the ability of ACP enterprises to compete effectively with EU enterprises. These range from the unreliable provision of public utilities and poor public infrastructure through weak institutional and policy frameworks to low labour productivity arising from poor education, health and housing provisions. As Simon Stocker the Director of Eurostep states, “The CAP coupled with free trade could drive ACP agricultural sector producers out of their own national and regional markets, as EU goods made cheaper by CAP subsidies flood ACP markets in the absence of protective tariffs and quotas.” Without any agreement from Cancun to curb EU subsidies, or to modify trade rules between rich and developing countries, the EU is now free to negotiate with the ACP from a position of complete strength.

Eurostep point out that that adopting a binding agreement between all ACP countries and the EU at this stage, in itself will not guarantee the success of the regional negotiations. The Cancun Ministerial shows that if costly collapses of trade negotiations are to be averted in the future, then richer countries including the EU are going to have to respond to the concerns of developing countries put forward by their coalitions.

The ACP Council of Ministers in Brussels on the 25^th –26^th September is expected to set up the ‘All ACP’ permanent structure, which will be in charge of closely following the regional negotiations of preserving the integrity, solidarity and overall interests of the ACP group.

2. EUROPEAN COMMISSION SUPPORTS BUDGETISATION OF THE EDF

After years of debate of budgetisation of the European Development Fund (EDF) the European Commission is now prepared to publish a communication on the subject. Proposed on the joint initiative of European Commissioners Poul Nielson (Development) and Michaele Schreyer (Budget), this communication on budgetisation of the EDF is expected to be submitted to the College for adoption on 8 October. The Commission is expected to vote in favour of the proposal, notably because it gives the Commission greater flexibility with aid.

Since the Yaoundé Convention, the EDF has been out of the control of the Community’s budgetary authority. Constituted via voluntary contributions of Member States and the won resources or the European Investment Bank, it is managed by a committee composed of representatives from Member States – the EDF Committee. The Commission and the Parliament expect that by budgeting the EDF there will be a greater democratic control and increased efficiency when it comes to aid.

The ACP-EU Joint Parliamentary Assembly will also adopt a report on the EDF at its October session.

3. EUROPEAN COMMISSION SUSPENDS COOPERATION WITH CUBA

After a request from the Cuban authorities the European Commission to suspend all EU projects in Cuba the Commission has decided to close the only running project. The project, know as DEADE, was on training Cuban executives by European business schools with a view to promoting Cuba’s transition to another economic model. Jean-Charles Ellerman, spokesman for Poul Nielson, confirmed that the only humanitarian activity in favour of Cuba and implemented by European Community’s Humanitarian Office – a programme preparing local communities to defend themselves against hurricanes – was continuing with a budget of 500.000 €.

‘At the moment, discussions are in progress at the Council for determining what will come out of the Cuban decision. The Commission, for its part, is still in favour of maintaining political dialogue with Cuba and considers that the presence of its delegation in La Havana is more important than even’, the Spokesperson said.

4. IMF-WB MEETING ATTACK SUBSIDIES

The two-day meeting held in Dubai also urged richer country to increase aid to the developing world and to lower their subsidies to agriculture in order to allow poor countries to increase exports. About 16,000 delegates - led by finance ministers, central bankers, bankers and institutional investors - and journalists flocked from 184 countries to the meeting.

In reports released ahead of the meeting, the IMF said the global economic outlook has brightened since the April end of major combat in Iraq, but the recovery from the sluggishness of the past two years remained fragile. It noted that the United States was the main engine of global growth, thanks to massive spending, while Europe was struggling to turn the corner.

Meanwhile, the European Commission, Tuesday announced long-awaited proposals to reform some of the most criticised aspects of its subsidy-laden common agricultural policy. The Commission outlined three options to overhaul the way EU aid is handed out to the sugar and cotton industries. Option one is to maintain the current regime beyond 2006; option two is partial reform, cutting guaranteed internal EU prices and slashing production quotas, and option three is complete liberalisation. Oxfam said the plan fell far short of what was needed and did little for the world's poor. Kevin Watkins of Oxfam said: "The EU places the defence of the indefensible CAP above any commitment to reduce poverty…and when it comes to agriculture the right of big farms to collect large subsidy checks comes before Europe's obligations to the multilateral trading system and its commitment to reducing world poverty. The commission countered that it had not yet decided which option to plump for.”