Jun 9, 1998

EU 'BLACKMAILS' ACP OVER FREE TRADE AREA SCHEMES

London, Jun 5 (IPS/Dipankar De Sarkar) -- Proposals to partially replace the world's largest trade and aid pact with a network of free trade areas have been damned here as an "immoral" bid to coerce some the world's poorest nations into surrendering their markets to western goods.  

On Monday the European Union expects to finalise a list of negotiating options for forthcoming talks on a replacement for the Lome Convention, the giant trade and aid pact linking the EU and the 71 member Africa, Caribbean and Pacific group of states.  

The Convention expires in 2000 and must be replaced with a pact or pacts that meet rules set by the Geneva based World Trade Organisation (WTO). They presently preclude the Lome Convention's system of trade preferences and a five year aid package currently worth 14.6 billion ECU (16.2 billion dollars).  

The issue of what should replace it preoccupies the ACP states, some of whom depend on Lome preferences for their very economic survival. It also vexes the EU, which releases a Draft Negotiating Mandate on Monday to guide talks on the issue in the run up to 2000.  

Among the most controversial of the Mandate proposals, is a plan to set up a series of regional Free Trade Agreements (FTAs) between the EU's executive European Commission (EC) and various regionally based blocs of states within the ACP membership. 

This will be achieved, it says, through the creation of "highly integrated EC-ACP economic areas". The proposal aims to introduce "reciprocity into trade relations" -- opening up southern markets to EU goods in return for export access to the EU. 

The regional agreements are meant to be negotiated between 2000 and 2005 and would be aimed at "gradually liberalising trade between the partners, consolidating the ACP countries' current access to the (European) Community market and introducing reciprocity for Community exports..."  

The problem is that the ACP states, both individually and as sub-blocs of the 71 nation group, are not equipped to compete with the marketing power and price advantage enjoyed by EU exports, many of which are heavily subsidised under the EU's massive Common Agricultural Policy (CAP) farm trade funding regime.  

Subsidised EU beef, paid for by EU taxpayers to maintain EU farmers' incomes and then dumped on the markets of the Sahel states of Africa, nearly wrecked its domestic cattle trade. The impact of CAP-subsidised produce is blamed for the loss of 2,000 jobs in the South African fruit industry; EU canned tomatoes already undercut South African produce in Europe, Asia and even in South Africa itself.  

"The current proposals for free trade areas would transform Lome into a battering ram for free trade, forcing the infant industries of the developing countries in the ACP into unfair competition with the industrialised economies of Europe," said Liz Clements of the UK Presidency Project, an umbrella group linking development NGOs in Britain, current holder of the presidency of the EU. 

The Mandate offers to balance the effect of the FTAs on local trade by "extending cooperation to other trade-related areas," hitherto closed to the ACP states. It also says the talks will take account of each country's level of development and capacity to adapt to the liberalisation process. And it also says reciprocity would not be forced on ACP states officially recognised as Least Developed Countries.  

Nevertheless the proposals failed the tests set by a high-powered cross-party group of British members of Parliament this week.  

Members of the all-party International Development Committee condemned the Mandate in unusually strong terms in a report published Wednesday on the future of the Lome Convention.  

It describes the trade and investment proposals that form the basis of the EU's opening negotiation bid as "blackmail," and reject them as both "immoral" and "unacceptable". The report also criticised the EU's failure to take account of the effects of Europe's own protectionist policies and the CAP's effect on it.  

The MPs said the proposals for FTAs "are unacceptable without a clear commitment from the EU to reform the CAP, reduce its export subsidies and open up its markets to sensitive agricultural products."  

They said negotiations on the establishment of reciprocal liberalising agreements leading to FTAs "will have behind them the threat of an increase in tariffs for ACP countries.  

"To put the matter crudely, ACP countries will have the choice of either opening up their markets to EU products or suffering an increase in taxes on their exports to the EU. A number of witnesses (to the Committee) pointed out that this amounted to blackmail and was certainly not an appropriate way to encourage regional integration and trade liberalisation." 

They warned the EU that forcing the pace of market liberalisation could do "serious damage to the ACP economies," and added that it was "immoral for the EU to misuse its economic strength to dictate clearly unfavourable terms to the ACP". 

WTO rules generally frown on trade pacts exclusive to certain nations only, but under the General Agreement on Tariffs and Trade (GATT), which gave birth to the WTO, the EU and all or parts of the ACP could create FTAs or Customs Unions that limited their trading advantages to their members.  

However approval must be given to the FTAs by unanimous agreement among the WTO's membership. This could be a difficult task. The death knell for the Lome accord was originally sounded by the US fruit trade multinationals and Central American countries opposed to Lome's special deal on banana exports to the EU from ACP states in the Caribbean. They can be expected to maintain their opposition.  

The European Commission has warmed to the idea of different EU-ACP FTAs as a less problematic option among a handful on offer. It also argues that it would allow flexibility in dealing with countries as economically mixed as Sierra Leone and South Africa, and geographically diverse as Mauritius and Martinique.  

Agricultural goods will predominate among the ACP goods on offer to FTA-linked markets, yet with the EU's CAP funding regimes not due for reform until 2010, trade in these goods would be seriously limited while CAP and its fishing trade sister system are still in place.  

However the WTO, under the GATT's Article XXIV also requires FTAs to cover "substantially all trade," which may force the EU to speed up CAP reform in order to see the FTAs approved.  

The GATT rules will also only permit FTAs as a temporary stage and allow them only ten years of life before the preferential trading arrangements have to be opened up to the whole world in the name of 'non-discrimination'.  

The EU Commission has proposed asking the WTO for a five year waiver excluding the ACP states from WTO/GATT rules while they prepare for the changes. The British parliamentary committee report Wednesday called for a ten year waiver.  

British NGOs echoed the Parliamentary Committee's criticism. "The International Development Committee's unequivocal condemnation of the EC's free trade proposals," said Clements, "echoes the concerns development groups have voiced since the EU first released its draft mandate."  

"It could not have been more critical!" added Cindy Baxter of the same group. NGOs say the EU proposals must prioritise poverty-focused trade evelopment and "make trade and investment the vehicle for human and social development".