10:11 AM Dec 20, 1996

EU FLAGS NEW RELATIONSHIP WITH SOUTH

Brighton, Dec 19 (Simon Maxwell/IPS-PANOS) -- The European Union is a serious and grown-up institution. It has a flag. Indeed, the little gold stars appear not just on a flag, but on Land Rovers, sacks of grain, mugs, watches, pens, plates -- a profusion of merchandise to make even Disney green with envy.

Actually, this is worrying. Merchandising can be a confidence trick. It can set out to create the illusion of shared values, where no common interest exists. Europe, as Metternich said of Italy, may be nothing more than a geographical expression. But if one swears allegiance to the flag often enough, one may end up believing the rhetoric.

Developing countries need to know whether the fluttering flag is a consumer come-on or something more substantial. And they need to know it now, because Europe's relations with developing countries are approaching the most important cross-roads for twenty-five years.

On Nov. 20, the European Commission adopted a Green Paper discussion document which throws into play as never before its political, trade and aid relations with the African, Caribbean and Pacific nations (ACP), and with developing countries more widely.

The debate will last officially eighteen months. If developing countries don't think their relations with Europe through quickly, it will be too late.

Developing countries face a dilemma. It is deeply ironic that the vigour of Europe's relations with the developing world should be in inverse proportion to the vigour of the integrationist project in Europe itself.

In 1975, the European Community was little more than a fledgling free trade area. Yet, the first Lome Agreement, signed in that year with 46 ACP countries, cemented a strong political relationship between Europe and at least part of the Third World.

The relationship was built on the twin foundations of aid and trade. It was imbued with the principles of contractuality, mutuality, reciprocity and partnership. From an ACP perspective, the flag was much more than a symbol.

At the end of 1996, the picture is different. Internally, Europe has become stronger. The single market has been completed. A single currency is planned. A common foreign and security policy is in the pipeline. Following the Maastricht Treaty in 1992, the terminology has changed, from European Community to European Union. And a rolling Inter-governmental Conference, the IGC, is preparing the ground for Maastricht Two, and yet closer integration.

Externally, however, the certainties of the 1970s have been eroded. The number of ACP countries has grown to 70. Yet, politically, the intrinsic value of the ACP relationship has been challenged by growing differences in income and development status within the ACP group, and by the manifest inequity of excluding Europe's important partners in South Asia from the special relationship.

In trade terms, Lome preferences are still worth having, but are less valuable and more difficult to sustain in the new free trade environment established by the completion of the GATT Uruguay Round in 1994. And even on the aid front, a traditional bastion of EU relations with developing countries, money is tight: the mid term review of Lome IV, completed in November 1995, froze aid flows in real terms, despite the accession of three new EU members.

More worrying, the principles of the relationship have changed.

Contractuality and partnership are less in evidence, policy dialogue and aid conditionality more so. This is perhaps not surprising. When it came to automatic aid flows, the EU had its fingers burnt by tyrants like Idi Amin in Uganda and Mengistu Haile Mariam in Ethiopia.

Like other aid donors, the EU has found it necessary to emphasise peace, good government, and economic reform, even at the expense of a partnership of equals.

So, the EU is in theory a stronger partner for developing countries, but in practice a weaker one -- or at least one beset by uncertainty in a world where the room for manoeuvre is increasingly restricted. How will the forthcoming debate help the EU to determine its future relations with developing countries? More important, what kind of partnership should developing countries themselves be seeking?

There are many options on offer, though by focusing on the ACP countries the Green Paper fails to consider the wider developing world. Nevertheless, it sets out a variety of options, which range from continuation of the status quo when the Lome agreement runs out in 2000, to new regional agreements, or even a family of individual bilateral agreements, perhaps under an overall umbrella.

Regionalism is obviously going to be a key element in the debate.

On the trade side, the options include removing trade from negotiations entirely, relying instead on the EU Generalised Scheme of Preferences to provide access to EU markets, and a variety of options to do with negotiated access to markets on a reciprocal basis.

Only on the politics is the outcome unambiguous: introducing the Green Paper, Professor Pinheiro, the EU's Development Commissioner, says that "ACP-EU relations are still a key part of the Union's identity... (and) our goal is clear -- to revitalise ACP-EU relations".

In responding to these options, developing countries should recognise three principles.

First, Europe matters to developing countries, and will matter more as time goes on. In the crucial area of trade, the EU speaks for all its 15 member states. On aid, the EU currently accounts for only 20% or so of all aid from member states to developing countries, but that proportion is growing fast. In any case, an annual aid flow from the EU of over five billion dollars a year, the figure for 1994, is not to be sneezed at.

Secondly, Europe matters to all developing countries, and not just to the ACP. The commission has actually done developing countries a disservice by publishing a Green Paper which deals only with the ACP - reflecting the idiosyncrasies of its own internal organisation, rather than the logic of the argument. Professor Pinheiro may or may not be right to argue in favour of sustaining the ACP, but the key issues revolve as much around relations between the ACP and other groups as they do around relations between the ACP and the EU.

To take just one example, aid diversion to middle income countries in the Mediterranean and Eastern Europe has reached scandalous proportions and will get worse. In 1995, very nearly half of European aid was directed to the Mediterranean, the Former Soviet Union and Eastern Europe. This is an affront to all those who believe that the first purpose of aid is the relief of absolute poverty in the poorest developing countries.

Last, but not least, if the EU is to fulfil the potential of its relations with developing countries, not to say its destiny, then developing countries must insist on a quantum leap in efficiency, good house-keeping and accountability. Recent evaluations have shown that the EU needs to simplify aid instruments, decentralise aid administration, improve project planning, and improve reporting.

A seasoned observer of the EU, Mirjam van Reisen of EUROSTEP, has pointed to "important limitations constraining the quality of the work of the European Commission on development cooperation". Developing countries deserve better from the Commission, and should insist they get it.

The flag, then, is not an empty symbol. Europe cannot be ignored, nor should it be. But this leaves developing countries with much to do.

The future of the ACP, of trade regimes, of aid arrangements, all these have been tossed into the arena. Developing countries need shared values of their own in the forthcoming negotiation. Perhaps they should start with a flag?

(Simon Maxwell is a Fellow of the Institute of Development Studies, University of Sussex, and member of the Independent Group on British Aid.)