Eurostep has produced this paper as a contribution to the process that will determine the next co-operation agreement between the EU and ACP countries. The perspectives set out in this paper are drawn from the experiences gained in development by Eurostep's member organisations through their involvement in development programmes in Africa, Asia and Latin America. It builds on the positions and proposals that have been put forward in previous positions and briefing papers published by Eurostep. This paper was drafted by Phil Bloomer, Oxfam GB Policy Advisor, with contributions from Claire Godfrey, with additional comments and suggestions from member organisations and others.

The EU-ACP Negotiations: Goals and Challenges for 2000

Executive Summary

Introduction

A new era in European Union development co-operation is about to be defined. After 20 months of preparation, the European Union (EU) and the countries of Africa, the Caribbean and Pacific (ACP) start formal negotiations on 30 September 1998 on a new agreement which will cover trade, investment, aid and political co-operation. The EU is the world's largest single trading block, the largest source of foreign direct investment (FDI) and the largest provider of aid. What is decided by February 2000 between the EU and ACP will have a direct impact on the future economic opportunities of many of the world's poorest people.

There are a number of reasons to be optimistic about the outcome to the imminent negotiations. From January 1997, the European Commission has encouraged an informed debate on the future relation between EU and ACP countries. Since then, the terms of the debate in Europe have shifted to place more emphasis on poverty reduction, sustainable development and conflict prevention. The EU member states have also agreed a negotiating directive which sets out the core objective as poverty eradication.

However, without concerted pressure from ACP and EU civil society, there is a real danger that the EU negotiators will push through an agreement, particularly in trade and investment, which undermines the livelihoods of people living in poverty and exacerbates social conflict. Moreover, Eurostep recognises that the value of the decisions made will be judged not only in terms of the working of the agreement, but even more so in terms of its effective implementation.

Eurostep is a European network of 22 development organisations. Together we have programmes in many countries across all continents. Eurostep is devoted to advocacy to achieve poverty reduction and gender equity, particularly towards European targets. This paper draws on our accumulated experience and dialogue with many project partners in ACP countries, including NGOs, workers', peasants' and women's organisations, and small businesses. The views expressed, however are our own.

This briefing paper sets out Eurostep's own vision of what the next EU-ACP agreement for 2000 onwards should look like. It is not an exhaustive analysis of current positions. Rather, it explains what we see as the key goals and challenges for the negotiations.

Objectives of the Agreement

“Rampant poverty, social exclusion and marginalisation are overriding scourges that affect a large number of our countries. Eradication of the causes of poverty, attainment of food security, and the integration of all sections of our population including the civil society and private sector organisations into the mainstream of political, economic and social life remain the top priorities of our development efforts”

Parties to the agreement should respect, promote and protect all fundamental human rights including the right to development. The rights of women, children and migrants and their families need to be protected. Parties should recognise democratic principles and the rule of law. These are commitments made by all ACP and EU member states in UN conventions as well as regional treaties.

The principle purpose of the next agreement should be to promote the eradication of poverty through sustainable development as set out in the international agreements of Rio de Janeiro, Copenhagen, Beijing and Cairo. The DAC/OECD development targets should be an instrument to measure progress towards these international commitments. These include:

• A reduction by one-half in the proportion of people living in extreme poverty by 2015.
• Universal primary education in all countries by 2015.
• A reduction by two-thirds in the mortality rate for infants and children under five and a reduction by three-fourths in maternal mortality, all by 2015.

According to a recent World Bank study on whether international poverty targets are achievable, sub-Saharan Africa (SSA) presents one of the greatest challenges. SSA needs to achieve a growth rate in income per capita of over 2% per annum to 2015. This is in contrast to SSA's economic performance between 1991 and 1995 when income per capita shrank by 1.3% per annum. Even the World Bank's projected acceleration in sub-Saharan growth will be insufficient to meet the poverty reduction target. Equally in the Caribbean and Pacific there are many small island economies which, with international assistance, may be able to become active members of a thriving global economy. But, with their dependency on single commodities, lack of communications infrastructure, and high transport costs, these economies could easily decline into the marginalised backwaters of globalisation.

These are not reasons for pessimism. The future EU-ACP agreement should be designed to meet these challenges. Before the East Asian crisis, some countries in the region demonstrated that poverty reduction could be achieved when policies that encouraged expansion in trade and investment were combined with significant commitments to social development. The same World Bank study demonstrates that inequality has a powerful influence of the future opportunities for poverty reduction. A reduction in inequality would mean that less growth in income per capita is required to reach international development targets. However the recent crisis in Asia shows that rapid economic growth without political transparency and accountability is not sustainable. The eradication of poverty requires the integration of sound macro-economic management with responsive and accountable government.

The next agreement will have to respond to a very different international context to that of Lomé IV. The impact of globalisation has been far-reaching. The blast of technological revolution and rapid liberalisation of trade and investment has brought greater instability as well as prosperity to many countries and peoples across the world. But for the world's poorer and more vulnerable economies, the gains have often been few and the damage to people's livelihoods has been considerable. Globalisation has raised living standards for many, but it is also excluding a large number of the world's most marginalised people and unleashing forces which undermine their economic opportunities. Many of these people live in ACP countries. The negotiations provide the European Union with a key opportunity to begin to tackle this exclusion, as well as to work with ACP states to take this new agenda to other international fora such as the World Trade Organisation (WTO) and IMF.

Unless Europe takes a determined lead on a more equitable, pro-poor approach to globalisation, we can only expect those who feel excluded and abused by this process to oppose it. The rise of xenophobia and 'fortress-Europe' arguments are one expression of it, as is the global opposition to WTO power and the proposed Multilateral Investment Agreement. The surge of fundamentalist militancy and international organised crime are another. As Peter Sutherland, ex-President of the GATT Uruguay Round negotiations, has put it: “the foremost challenge of globalisation is to ensure that its fruits extend to all countries and peoples.” The reality is that this challenge has not been met. To put it another way: any international system which doubles inequality between the richest and poorest 20% of the world's population in just 30 years is either unsustainable, or requires an international governance system which resembles that of apartheid South Africa.

The primary responsibility for ensuring that the poor and vulnerable of our planet have their basic rights to a livelihood, health and education respected lies with their governments. However, in a world which is now so interconnected and where globalisation has eroded many policy instruments of national governments, the EU as the world's largest single trading block and source of FDI cannot expect to escape responsibilities for what happens in poor and vulnerable regions of the world. Nor will it remain unaffected by the maelstrom of frustration and impoverishment which arises when the rights of people living in poverty are denied in a planet of plenty.

Recommendations:

• The principle purpose of the next agreement should be to promote the eradication of poverty through sustainable development as set out in the international agreements of Rio de Janeiro, Copenhagen, Beijing and Cairo. The DAC/OECD development targets should be instruments to measure progress towards these international commitments.
• Europe should collaborate closely with the ACP to change the rules and policies of the WTO and IMF which act to undermine the long term livelihoods of people living in poverty and block effective international collaboration for achieving sustainable development.

An Institutional Framework for Partnership and Political Dialogue between the ACP and the EU

“The North-South is an association similar to that of a 'horse and rider' because the North is not ready to allow Africa to take full advantage of her resource potentials or to negotiate a form of relationship that can truly lead to the removal of mass poverty, economic recovery and self-sustained growth”

Bingu Wa Mutharika, Secretary General of the Common Market for Eastern and Southern Africa.

The Lomé Convention was built on a principle of partnership between the EU and ACP states. For much of the time this principle has seemed more theoretical than real, and has even been seen by many as an obstacle to implementation. The future agreement must re-validate this principle and identify practical mechanisms to make it work. Central to this is a process of dialogue in which all actors, inside and outside government, are involved. There needs to be a broadening from the existing political institutions involving government representatives, to include mechanisms that provide opportunities, as well as encourage, the involvement of non-state actors.

The implementation of the agreement and negotiations concerning its follow-up need to be overseen by a political process that creates an accountable and transparent environment for negotiations between the EU and the governments of the ACP. This should enable decisions to be taken in openness and full knowledge of all available information, and not by dictate. To this end an institutional framework should be established in which those who are party to the agreement are represented. This joint EU-ACP political assembly will have decision-making powers to set out:

(1) the broad framework for the implementation of the agreement, including the definition of standards, indicators and procedures to handle breaches or infringement of agreed principles; and

(2) the substantive elements of and political structure of future negotiations concerning the agreement.

This assembly should be accessible to observers and the media.

In order to increase coherence between policies in various areas, political dialogue on other issues should be carried out at ambassadorial and ministerial level, inter-governmental fora and the Joint Parliamentary Assembly. This dialogue should be extended to include issues that concern the two regions, including key problems such as the protection of the rights of immigrants and refugees in the EU from ACP countries, the arms trade and drug-trafficking.

The Joint Parliamentary Assembly should be strengthened to give it an increased role in monitoring the implementation of EU-ACP co-operation. Parties to the agreement should ensure that parliamentarians can carry out this task in all freedom.

Recommendations:

• A political EU-ACP Inter-Governmental Assembly should be established in which those who are party to the agreement are represented. It should meet on a regular basis and be accessible to accreditable observers and media representatives. This joint EU-ACP political assembly will have decision-making powers to set out the broad framework for the implementation and future negotiations concerning the agreement. This should complement existing fora for dialogue.
• The Joint Parliamentary Assembly should be strengthened with greater capacity to monitor and influence the conceptualisation and implementation of the agreement;
• An information policy should be incorporated within the agreement that requires the European Commission and individual governments to publish proposals, assessments, evaluations and progress reports on all aspects of the agreement.

Participation towards Accountable and Transparent Implementation

“Participatory development requires commitments to open space for, and strengthen civil society. If the EU and ACP governments are committed to development, there is no alternative to the involvement of stakeholder groups and communities” Report of SADC NGO Meeting, April 1998.

The broadening of the political dialogue between the ACP and the EU needs to be accompanied by an open and transparent process for the planning and implementation of the agreement. This will require a strong governmental role, complemented by the active participation of civil society and the private sector. The implementation process should proceed according to nationally agreed procedures which are accountable and transparent and decentralise decision-making and implementation.

Most multilateral aid institutions offer intended beneficiaries of development projects and programmes a means of having a fair and reasonably independent hearing should problems, that can not be settled through the usual channels, arise. People in ACP countries, who may have suffered adverse material harm as a result of the programmes or projects implemented under the agreement, should he able to have their complaints independently assessed. A complaints mechanism should be established as part of the agreement to enable people directly affected by projects and programmes undertaken as part of the agreement to seek redress and compensation for any loss or damage that they suffer as a result. The new agreement should set up an expert group which should consider questions related to the establishment of a complaints procedure.

The new agreement should also incorporate an information policy that requires the Commission and individual governments to publish all assessments, proposals and evaluations as well as implementation reports in a timely way to allow reactions to be made, particularly by those directly affected.

The participation of civil society and the private sector in development is now widely accepted as beneficial in most instances. The European Commission's approach to promoting participation has been through decentralised co-operation, which was one of the innovations of the fourth Lomé Convention signed in 1989. This new approach allows a range of local authorities and civil society organisations to receive funding support from the European Development Fund (EDF). Decentralised co-operation has been slow to take off, with civil society organisations largely marginalised from the decision-making processes. Currently its funding is at a very low level.

Recommendations:

• The new agreement should ensure the establishment of nationally agreed procedures. This agreement must be accountable and transparent, involving and informing civil society, for implementing the agreement.
• Establish a complaints mechanism to enable individuals and communities, who incur loss damage and hardship as a direct result of projects and programmes implemented under the agreement, the opportunity to receive an independent hearing, redress and compensation. This mechanism should be extended to parties with complaints not directly related to the Lomé agreement but stemming from other EU policies that are incoherent with it.
• Strengthen decentralised co-operation by its fuller incorporation into national and regional indicative programmes and establish round-tables between government, civil society and private sector to discuss national and regional priorities in all aspects of implementation.

Trade

“The WTO is the cathedral in which we are supposed to worship, and the ACP are increasingly agnostic...If these negotiated arrangements are to be WTO compatible, and if the WTO itself looks like being incompatible with a regime of global equity...we could face the most serious of difficulties. For us in the Caribbean this is no theoretical exercise. We are living through the terrible experience of the threat to our small societies and fragile economies at the level of bananas” Sir Shridath Ramphal, 1998

Eurostep believes the next agreement must maximise EU market access for developing countries, while accepting ACP trade reform which is commensurate with sustainable and equitable development. This would demand a new form of 'trade and investment development pact' as an alternative to Free Trade Agreements (FTAs). For the development pacts to be fairly negotiated, there should be a genuine guarantee that there will be no increase in European protectionism against any ACP country.

There is a high degree of mistrust from ACP and European civil society regarding the Union's intentions on trade and investment. This arises from the Union's treatment of developmental consequences of the Common Agricultural Policy and the Free Trade Agreement with South Africa, to name just two.

The EU negotiating mandate elevates FTAs to Europe's principal strategy for trade relations with the ACP. However, the current rules for FTAs were created for regions of similar levels of development. They were never meant to be applied to trade between the poorest country on Earth, Mozambique, with a per capita income of $80 (or even Zimbabwe with a per capita income of $540) and the industrial colossus of Germany with a per capita income of $27,510. Within the European Union one of the richest countries, Denmark, has a per capita income 3.8 times greater than the poorest (Greece). Between the EU and SADC that difference rises to around 280. It would be perverse to coerce weak and vulnerable economies into such FTAs. The likely impact would be de-industrialisation, unemployment and rising social tension. Expert impact assessment of future FTAs contracted by the Commission have yet to be released. Yet these are important for informing the debate on the consequence FTAs could have on ACP countries.

The experience of the EU-ACP debate so far has been mixed: the Commission's original proposal to leave almost no other option than Free Trade Agreements was interpreted as an ominous portent. On the other hand, leadership from some EU member states, alongside efforts by some Commission staff, has led to the final negotiating directive asserting that the EU will “examine all alternative possibilities (to Free Trade Agreements)...to provide these countries with a new framework for trade...equivalent to their existing situation.” This statement, although far from a guarantee, does give ACP states a sense that the EU will find it difficult to increase its level of protectionism towards ACP countries who choose not to enter a Free Trade Agreement (FTA). The EU decision to grant least developed countries duty free access on 'essentially all products' from 2005 and allow more flexible rules of origin is also welcome, though Eurostep believes this could be offered from 2000.

Eurostep wants to see an assertive Europe and ACP show international leadership in defining the first international trade and investment development pacts between rich and poor regions of the world. These pacts would set out a combination of asymmetric regional or country deals which would open the European market to products from ACP countries, while providing phased and partial opening by developing countries. The pacts would combine this measured approach to liberalisation/protection with substantial technical and financial resources to enhance trade and investment capacity. As with many current trade instruments for poverty reduction, it is unlikely these pacts would be immediately WTO-compatible - a change of rules and their narrow interpretation would have to be sought.

The litmus test of the next agreement will not only be the EU-ACP agreement itself, but whether each party commits to collaborate at the WTO to change the rules for trade and investment agreements between regions of vastly different levels of development. While the WTO rules remain focused entirely on liberalisation at the expense of any other goal, then this institution will remain an obstacle to development rather than a facilitator of an enabling environment for poverty reduction. According to the European Commission's own Forward Studies Unit a top priority for international institutions is to “integrate more systematically the development dimension in all other policy areas, notably trade and macro-economic policy-making” in response to the need to move from a “narrow focus on growth and the preservation of trade, to the more complex goal of sustainable development, which means integrating economic efficiency, macroeconomic stability, social justice and environmental sustainability.” Eurostep endorses such an approach.

Eurostep's proposed trade and investment development pacts would take the best elements of FTAs (regional agreements, long term, predictable and transparent), and marry the required trade reforms with phased economic and social reforms at a pace commensurate with the country's ability to absorb adjustment costs. This would avoid creating a second wave of the 1980's adjustment shocks from which many ACP countries are still trying to recover.

A further option is for an enhanced GSP in which:

• preferences would be generous enough to compensate for the loss of differential tariff which was previously only available to the ACP countries and will now be available to competitors from Latin America and Asia.
• preferences would be 'bound' at the WTO for them to be predictable and, therefore, an effective incentive for investors.

Finally, the European Union accepts that its complex and restrictive rules of origin act as a brake on the development of processing and assembly industries in ACP countries. It should now simplify its rules of origin for all ACP countries, and not just the least developed countries as currently proposed.

Whatever options are agreed by the EU and ACP states, their effective implementation will require an adequate transition period. Eurostep believes this demands a ten year waiver to be negotiated at the WTO for the existing trade preferences, and the retention (or alteration in the case of rum) of the commodity protocols, as they are of specific importance to some of the most vulnerable ACP countries.

Recommendations

• The EU and ACP member states should explore an alternative to free trade agreements which would take the good elements of FTAs and marry them with other development considerations. These would be 'trade and investment development agreements' which would open the EU market to ACP products while also planning phased and partial liberalisation of ACP economies in sectors which would benefit from gradual exposure to international competition. This form of agreement would also allow long term protection of sectors where little, if any, justification exists for liberalisation. This would include agriculture, where massively subsidised exports of European produce undermine the livelihoods of people living in poverty.
• The EU must guarantee that it will not increase its levels of protectionism towards ACP states.
• There should be an improved GSP offer, that at the very least is generous enough to compensate for the loss of current ACP preferences and is bound at the WTO.
• The EU should simplify its rules of origin for products from all ACP countries.
• The EU and ACP should act at the WTO to extend the current special treatment of least developed countries to vulnerable single commodity dependent economies.
• A realistic transition period for any future agreement will be at least ten years. This will require a ten year waiver at the WTO, and the retention of protocols, as the ACP have stated.

Investment Agreements

“We must challenge the prescriptive notion that free flows of trade, finance and information advance prosperity in all areas. Recent events, especially in Asia, have given the lie to the widely held belief that the ultimate objective should be the health of the financial markets.” EU-ACP Joint Assembly Working Party on the Future of ACP-EU Relations. Rapporteur: Glenys Kinnock

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Investment, both domestic and inward, is of critical importance to sustainable investment in ACP states. Eurostep believes that the rights of investors need to be recognised to encourage capital accumulation, but this cannot be at the expense of the rights of governments to regulate investment in accordance with their human development priorities and need for financial stability.

Investment measures are now at least as important as trade issues for wealth creation, equity and economic opportunities of the poor. Equally, new markets are being increasingly served not by trade but by inward investment. There is also intense international competition for foreign direct investment (FDI) amongst developed and developing countries alike.

The EU's negotiating directive calls for the co-operation of all ACP countries in international negotiations to achieve a satisfactory level of protection for intellectual, industrial and commercial property; promotion of competition policy; promotion and protection of investments; the right of establishment of enterprises on an MFN basis; liberalisation of current account transactions and free repatriation of foreign direct investment and any profits stemming therefrom. Some of these measures are important to sound regulation, however elements of this list reflect some of the dangerously unbalanced approach to investment, reflected in the proposed Multilateral Agreement on Investment (MAI). The references to “confirming the parties' attachment to internationally recognised labour standards” are welcome. However it is a disappointment that the section advocates measures to expand investors' rights without any serious mention of confirming their responsibilities to act with social and environmental responsibility or contribute to government revenue or national development.

What is needed is an investment agreement which builds on best practice regarding investment measures which promote poverty eradication and sustainable development. One clear lesson from East Asia, Africa and Latin America is that 'big bang' approaches to liberalisation, in which foreign investment controls are abandoned, financial systems are liberalised and trade restrictions are withdrawn, do not succeed. Initially East Asian countries paced and sequenced their liberalisation of investment and trade carefully. They developed a close public partnership. They invested heavily in productive capacity and skills levels before liberalisation and still have strong protection for some strategic sectors. They employed measures such as controls on profit repatriation, technology transfer and local content requirements, skills transfer, and balance of payments requirements. However, subsequent deregulation of international financial markets and the lack of regulation of banks in the region has resulted in the current crisis, bringing with it enormous suffering and damage to people, particularly those living in poverty. The next agreement should learn the lessons of capital account liberalisation. The right of poor countries to employ these same measures is now under attack at the WTO and in the MAI negotiations. The next agreement must learn the lessons from capital account liberalisation in East Asia, and the lack of prudent regulation of banking. Unregulated financial markets have brought enormous and unnecessary damage to people living in poverty in East Asia and Latin America.

Recommendations:

Eurostep believes that the European Union should negotiate an investment agreement with the ACP which incorporates the best practice of developing countries at using investment for economic growth and poverty reduction. An agreement of this nature would include:

• There should be EU-ACP co-operation at the WTO to ensure that developing countries have the right to regulate inward investment to support domestic capacity through profit re-investment, technology transfer and local content requirements, skills training and balance of payments requirements.
• Technical assistance should be provided for competition policy and investment regulation and monitoring in poor countries to ensure corporations are accountable and comply with technical, social and environmental regulation, including tax and labour standards. This will help prevent responsible investors being undercut by less scrupulous investors.
• An EU-ACP agreement should be sought between the EU and the ACP to investigate the potential for a code of conduct for European and ACP companies' extra-territorial action covering human rights, workers' rights, environmental protection, and corruption.

Trade and Investment Capacity

Government revenues from import and export taxes in a liberalised environment will decline rapidly. As many developing countries are highly dependent on this source of revenue, liberalisation without major tax adjustments constitutes a major threat to responsive and accountable government. The EU should assist ACP states in a phased adjustment to its fiscal base.

The ACP group contains most of the least developed countries, as well as many who struggle with high dependence on a single commodity or who struggle with particular vulnerabilities such as being landlocked or a small island state. If these countries are to avoid becoming detached from the global economy, then there will have to be substantial aid and trade co-operation to shift the economic base from stagnating commodities such as bauxite, cocoa, tea and palm oil to value-added processing of these commodities and basic manufactures.

The European and ACP Negotiating Directives are strong and positive on building trade and investment capacity to enhance competitiveness. Eurostep welcomes their emphasis on increasing employment and productivity and improving and widening access to productive resources; improving education and training; developing technological capacities; supporting food security policies; support for economic and technological infrastructure; developing information and communication infrastructure; and protecting workers' and basic social rights.

Recommendations:

A new agreement needs to incorporate aspects of financial and technical assistance for the development of trade and investment capacity. This is probably best done through sectoral support to ensure a comprehensive approach. For pro-poor growth, the areas of special attention should include:

• Assisting progressive tax reform to maintain state capacity in the context of declining revenues from tariffs.
• Diversification to promote growth in value-added and labour-intensive industry.
• Investing in Human Capital: (See Social Development section below).
• Balanced labour market reform.
• Sustainable rural development including land reform and measures to raise productivity in small-scale agriculture and strengthen linkages to processing.
• Integrated support to small and medium-sized enterprises which generate decent employment, particularly for women.
• Time-bound assistance to business associations to develop technical competence.
• Support for fair trade products.
• Economic infrastructure for efficient transport, communications and energy.

Technology/Knowledge

The importance of technology in determining a country's economic destiny is possibly second only to education and skills' levels. Currently we live in a divided world of technology-rich and technology-poor. For instance, over 90% of all patents are owned by transnational corporations based in OECD countries, and Manhattan Island has more phone lines than the whole of sub-Saharan Africa. These two facts demonstrate that many ACP countries are switched off from the major technological changes in the world, and secondly that it is not just your ability to use technology which is important but also who owns it, who has access, and under what rules and regulations.

Information technology determines a country's access and ability to generate wealth, power and knowledge. This should therefore become a central issue for the next EU-ACP agreement. Unless this technological under-development is tackled, it is impossible for ACP states to compete internationally in either manufacturing or services. Even the markets for traditional primary commodities from mining and agriculture are increasingly dependent on information technology and, as in tourism, the division of profits reflects closely the control of marketing information of each of the parties in the supply chain.

Recommendations:

• The EU can assist directly in transferring technologies which enhance employment creation, education and an efficient state administration, and could offer technical assistance to ACP governments regarding the inclusion of technology transfer and skills training in contracts with international corporations: something the East Asian governments have been assiduous in negotiating.
• The next agreement should include a skills transfers programme to complement efforts to get technology infrastructure established in ACP states.
• It should also include a programme of support for education in information technology involving skills training, and tertiary education.
• The EU and ACP should co-operate at the WTO to call for a full review of Trade Related Intellectual Property Rights (TRIPs), and the impact of its increased cost of technology through extended patent protection, particularly to developing countries.

Social Development and Gender Mainstreaming

The eradication of poverty requires increased investment in basic social services such as clean water, sanitation and primary health and education. These are basic human rights. However, effective social development and gender equity can only be achieved through a coherent policy approach which integrates social and economic policy and mainstreams gender equity. EU-ACP policy dialogue and resources utilisation can play a significant role in promoting this approach.

The past three decades have seen impressive achievements in social development by developing countries: infant mortality has halved; combined primary and secondary enrolment has doubled; life expectancy has increased from 46 to 62 years, and women's life expectancy increased 20% more than men's.

However, much still needs to be done: over one billion people have no access to basic health services and 900 million are illiterate; Some 130 million children - two thirds of them girls - do not receive any basic education. In many poor countries budget cuts under structural adjustment have removed these basic social services from the reach of people living in poverty. In Africa the number of children out of school is two million higher than in 1990 and infant mortality is five times the rate for East Asia.

This broad recognition of social development and gender equity as a key to sustainable development, has led to global commitments from governments North and South to provide universal access to basic social services. The World Summit for Social Development, the International Conference on Population and Development and the World Conference on Women all confirmed the priority of basic health care, reproductive health, clean water and sanitation, nutrition, and primary education.

In a global economy which is being transformed by the communication revolution, education, alongside technology, will determine whether whole regions will be switched off from the wealth of the global economy. In this way, education policy will also play an important role in determining both individuals' opportunity but also international inequality. Education for girls can have a powerful influence on social justice, on improving child health and effective community action. The crucial question is not whether universal basic education is affordable. It is whether any government can afford not to educate its citizens.

However, social development and gender equity cannot be detached from economic policy. In the 1970's and 80's East Asia was able to promote and efficiently use its investment because there was strong integration between social and economic policy. Investment in human capital has been part of growth-oriented economic policy. Enhancing poor people's access to basic health and primary education unleashes the productive potential of people living in poverty and foments productive investment.

A comprehensive approach of social development and gender mainstreaming requires balanced national policies, implemented within the framework of sound fiscal policies. This, in turn, also requires new approaches for development co-operation, in which policy - dialogue between recipient and donor government become a central issue. This implies that an ad hoc project support is replaced with programme, or budgetary, support.

The Commission has a mixed record on allocating support to health and education. In health care, the EC aid programme has seen a marked shift in the last ten years. The amount of resources targeted at the health sector has more than trebled, and there has been far greater emphasis on primary health care. In education, there has also been a substantial shift towards primary education in EDF 8, amounting to almost 60% of education resources. However, the overall proportion of EDF programmable funds devoted to education and training has fallen from 11% of EDF 5 to just 5.4% under EDF 7. This needs to be reversed.

Policy planning and implementation requires specific expertise. Very little expertise is available, be it in the European Commission, European delegation or the ACP governments, when social areas or gender mainstreaming are concerned. While the success of budgetary support is dependent upon policy formulation and implementation, greater investments are needed in expertise in these areas.

Recommendations:

Programme quality and effectiveness should be improved in the next agreement by the following EU measures:

• A commitment to increase investment in health and education linked to the achievement of the international development targets. Specific allocations should be given to key social sectors, such as basic health and primary education, and the recipient government should also be willing to contribute resources to this end. This should be negotiated within a single and consistent budgetary policy.

• Mainstream gender equity into political, economic and social aspects of the next agreement and enhance training in gender.
• A substantial package of support for the empowerment of women through improving literacy, access to primary education, basic health care and reproductive health care, preferably through programme aid.
  • The EU and the ACP need to increase their capacity in providing adequate expertise in social areas and in gender mainstreaming.
  • Mechanisms must be developed for EU policies to avoid major contradictions in programme aid policies through enhanced co-ordination.

Peace Building and Conflict Prevention

The next EU-ACP agreement has a key role to play in conflict prevention. Of the 30 or so wars currently being fought, 13 are within ACP countries, and a further 10 ACP countries have either recently emerged from war or are suffering substantially from the impact of neighbouring conflicts. These wars have heavy costs in human suffering. 33 million people are currently refugees or displaced, of which 80% are women and children. In addition to the vast human cost, whole regions are destabilised and their people impoverished. Resulting humanitarian and peace-keeping operations place huge demands on donors.

The European Union recognises the important contribution it could make to conflict prevention if its development, trade, debt, and diplomatic policies are aimed at attacking the root causes of conflict, and reducing tension. A coherent approach would aim to encourage growth with equity, reduce exclusion, promote responsive and accountable government and the rule of law, and prevent the proliferation of arms.

Recently ECHO and DGVIII have co-operated more intensely to ensure their activities are coherent. This could be further enhanced through integration of their strategies to reduce conflict, relieve humanitarian suffering and support the re-establishment of poor people's livelihoods after conflict.

Recommendations:

The next EU-ACP agreement could make a substantial contribution to conflict prevention and building stakes in peace by:

• Support for responsive and accountable government to avoid its collapse. This is a sensitive area but could include assistance in constitutional reform and minority rights where there is the active involvement of cross-communal civil society.
• Promote the active participation of ACP civil society and private sector in all aspects of regional and national programming. Of particular importance for conflict prevention are organisations of civil society which establish links across society, and promote representation, particularly of women, or which promote and protect human rights.
• Promote more inclusive patterns of development which encourage growth with equity, poverty reduction and conflict prevention. The arguments used in most of the above sections reflect Eurostep's approach to this. Alongside promoting growth with equity, the EU could establish floors of acceptable business practice for EU businesses operating in regions of conflict (usually in minerals, oil and lumber).
• EU member states must now implement their code of conduct on arms control agreed at the Heads of State Summit in June 1998, and take this approach forward to international fora in collaboration with ACP states.
• Promote regional integration based on creating political dialogue and economic integration at a pace which brings countries together through common interest. Aspects of regional integration could include common resource management, strengthening regional organisations and the development of stability pacts or similar.
• Mainstream conflict impact assessment in the work of DGVIII and the common service and enhance co-operation with ECHO. This will allow the implementors of trade, investment and foreign policy to decide how best to interpret policy in order to diminish the factors which exacerbating the risk of violent conflict in vulnerable countries. This approach should be applied to all EU policy to identify incoherence which may worsen existing tensions or undermine EU conflict prevention efforts.

Funding and Implementation of the Agreement

This paper has argued for major improvements in the focus and quality of the next agreements aid resources. However, the quantity of aid and its efficient disbursal are likely to become contentious points in the negotiation. Current trends leave Eurostep suspicious that the next agreement will experience a substantial drop in real funding. EDF 8, agreed in 1995, came into effect in June this year more than three years into the five year period to only which it relates, because of its slow ratification by some EU Member States. Financial decisions under the EDF decreased from 1,550 MECU in 1,995, to 965 MECU 1996 and 616 MECU in 1997. The 8th EDF is endowed with 12,967 MECU which would require a yearly average spending of 2,583 MECU. At the present implementation rate it is unthinkable that this will be managed. The Commission has already stated that payments under EDF 8 (which runs from 1995-2000) will not begin until the year 2002. The under-spending is caused both by under-staffing, as well as the complexity of procedures within the Commission and its dealings with the member States.

At the same time resources to the ACP disbursed by the Commission have been greatly reduced, both in real terms and in comparative terms to other regions. The Commission already provides over twice as much aid per capita to middle income countries than it does to low income and least developed countries. It provides over six times more aid per capita to Eastern European countries.

A new EDF will be negotiated around the same time as the budget for Agenda 2000 and fierce competition over resources can be expected. As the ACP constitutes the poorest countries of the world, Eurostep believes that cuts in aid to these countries is unjustifiable. Solutions should, consequentially, not be sought trimming of the agreement, its resources and the Commission's managerial capacity. On the contrary, the capacity in the Commission and its delegations must be upgraded, so that it is compatible with the size of the financial allocations that need to be made. Equally a rationalisation and simplification of procedures will help to speed up disbursement. The EDF to be negotiated with the next agreement must provide adequate resources and the management in the Commission will need to be adapted to implement the agreement more effectively and efficiently.

Another major issue regarding resources for development is debt relief. The Heavily Indebted Poor Countries (HIPC) initiative is now central to international debt relief strategies. However, results to date have been disappointing. The EU and ACP member states should collaborate to achieve faster and deeper debt relief, especially for countries willing to make commitments to use the freed resources for implementation of poverty eradication strategies.

Recommendations:

• The EU should earmark a minimum percentage of its funds for Agenda 2000 to countries in the low human development category and those defined as vulnerable countries through single export dependency, and small populations.
• The EU and ACP should agree a level of resources adequate to make a significant and proportionate contribution to the achievement of international commitments on development. These should not merely be recycled moneys from previous EDFs.
• To speed up approval, authority must be delegated to field offices, procedures must be simplified, and adequate staff levels achieved.

Conclusion

As World Bank President, James Wolfenson put it in a keynote speech recently: “The time has come to get back to the dream: the dream of inclusive development. What we are seeing in the world today is the tragedy of exclusion. Whether you broach it from the social or the economic or the moral perspective, this is a challenge we cannot afford to ignore. We must recognise that we are living with a time-bomb, and unless we take action now, it could explode in our children's faces.”

The European Union and ACP governments have a unique opportunity to create a new agreement which contributes to the dream of poverty eradication and sustainable development becoming a reality for many people living in poverty.

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