Sep 22, 1998

EU PROPOSAL MAY HARM NON-LDC ACP COUNTRIES

 

London, Sep 18 (Panos/Alex Whiting) -- A group of developing countries, currently poised to renegotiate one of the world's biggest aid and trade agreements, stand to lose out if they decide to join an existing system that guarantees all developing countries reduced tariffs on their exports to Europe, according to an influential research paper.  

Currently, this group of countries has a better deal. They are among 71 African, Caribbean and Pacific (ACP) countries covered by the Lome Convention, which has governed their trade with the European Union (EU) for the last 25 years. 

But the Convention is set to expire in the year 2000 -- although the EU is considering extending it until 2005 -- and renegotiations for the successor agreement are to begin Sep 30.  

While the poorest 41 ACP countries will continue to receive benefits which are currently available under the Convention, the remaining 29 will have to agree to a new deal. One country -- the newest Lome member, South Africa -- is not covered by Lome trade provisions and is not involved in the renegotiations.  

Researchers at Britain's Sussex University have found that if these 29 countries choose to join the EU's Generalised System of Preferences (GSP), available to all developing countries outside the Lome system, every one of them will lose out, with some facing possible large drops in revenue.  

The countries are: Antigua & Barbados, Bahamas, Barbados, Belize, Cameroon, Congo, Cote d'Ivoire, Dominica, Dominican Republic, Fiji, Gabon, Ghana, Grenada, Guyana, Jamaica, Kenya, Mauritius, Namibia, Nigeria, Papua New Guinea, Senegal, Seychelles, St Kitts & Nevis, St Lucia, St Vincent, Surinam, Swaziland, Trinidad & Tobago and Zimbabwe. 

"In most cases the ACP's major competitors which would gain from the change are middle-income or rich states," says the research paper, 'From Lome to the GSP: Implications for the ACP of Losing Lome Trade Preferences', by Jane Kennan and Christopher Stevens of the Institute of Development Studies in Sussex. 

Most developing countries benefit from the current GSP, which offers reduced import taxes on certain products being purchased by the EU. But, under the Lome Convention, all ACP countries have enjoyed even lower taxes on a wider range of products than the GSP would offer. 

Stevens and Kennan found that if these 29 countries choose the GSP option under the current system, they could pay in import taxes the equivalent to around 40 percent of the amount they receive in aid from the EU. 

According to Stevens, the GSP option would see "a return flow from ACP states to the European treasury." 

"There would have to be a lot done to the GSP option for it to even approach providing the same benefits as Lome," said Carl Greenidge, the deputy secretary general for the Brussels-based secretariat of ACP states. 

The research paper is said to have been influential in changing some EU member states' view of the GSP option and there has been a recent push to consider an 'Enhanced GSP' that would give the ACP countries tariff reductions which are closer to the current Lome tariffs. 

But there are other problems associated with it -- mostly to do with the free trade rules of the Geneva-based World Trade Organisation (WTO), which frown upon any kind of preferential trading arrangements.  

All trade agreements which favour a select group of countries have to be agreed by the WTO -- the international regulator of trade rules. In September last year, the WTO ruled against EU concessions granted to bananas exported from Caribbean countries, upholding a complaint by the United States.  

"The Enhanced GSP option could be an attractive option but to achieve it the WTO's rules would need to be changed. And this is far from being a certainty," said Edwin Laurent, the EC ambassador representing the eastern Caribbean states. 

"If the EU simply accepts that the WTO is an authority over which it has no power, then rules laid down will essentially be agreements between developed countries for developed countries," said Philip Bloomer, senior policy officer at Oxfam, the international aid agency which commissioned the GSP research.  

"But if the EU decides to learn from what has happened in the past with development agreements which have been blocked by the WTO then by 2005 we may have a very different set of rules," he added.  

Part of the problem, the research paper points out, is that because "the European Commission's public pronouncements have given no clues as to the changes [to GSP] that it might be envisaging, there is no basis other than the current GSP for assessing the implications for the ACP of a change in trade regime."  

The EU's known alternative proposal -- and the one it is pressing hardest for -- is that ACP countries should liberalise their markets with the aim to "foster the gradual and smooth integration of the ACP countries into the world economy and thereby promote their sustainable development."  

It proposes to do this is by negotiating separate agreements with six regional Free Trade Areas (FTAs), which would be formed by the ACP between 2000 and 2005. These FTAs would eventually open up their markets to EU goods while maintaining their access to the EU at lower import taxes.  

The proposal is controversial. "It would be suicidal for us to open our markets before they are more fully developed," Laurent said. He believes it would take at least ten years for ACP economies to achieve the required "maturity."  

"In principle we think it is appropriate for us to enter into reciprocal free trade arrangements with the EU. However, our economies are not yet ready to lower the tariffs on EU goods but we agree this should take place over a period and we should get ready for this," he added. 

But there is a note of optimism -- some involved in the Lome renegotiations say the EU has shifted its position significantly since it put forward its original GSP proposal.  

According to British European parliamentarian, Glenys Kinnock, who has been working closely with Lome negotiators, recent revisions mean that if the 29 ACP countries are not in a position to join regional free trade agreements by 2004, "an alternative -- which is equivalent to their existing situation under the Lome Convention -- will be considered."