TRADE-EU: WTO Rules Used to Kill Lome Convention, NGOs Say

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Linus Atarah

HELSINKI, Oct 5 1999 (IPS) - Under the banner of trade liberalisation, the European Union (EU) is attempting to cancel its preferential relationship with former colonies of Africa, the Caribbean and the Pacific (ACP), non governmental experts meeting in Helsinki agreed.

The current system of preferential trade between the EU and ACP – known as the Lome convention – can no longer be maintained because it is incompatible with the rules of the World Trade Organisation (WTO), European officials claim.

The EU has proposed that the ACP countries form instead free trade areas known as Regional Economic Partnership Agreements (REPAs) which will then in turn enter into separate treaties with the European group.

Time is fast running out against negotiators of the Lome IV convention. For one year the EU and the 71 ACP countries have been locked in difficult negotiations. The current treaty expires at the end of February 2000

The meeting in Helsinki (Sep 25-26) was organised by the Finnish Platform of the EU-NDGO Liaison Committee, a coalition of various non- governmental organisations (NGO) in the European Union.

“They are not close to coming to a conclusion and there is no likelihood that they will come to a conclusion before the end of February next year”, said Carl Greenidge, vice chairman of the ACP group.

The EU proposal is rejected by the ACP countries and has also come under fierce attack by both European and ACP NGOs who say the EU is hiding behind the façade of World Trade Organisation (WTO) to push ACP countries towards a rapid trade liberalisation.

Besides creating a competition between unequals, regional agreements will cause severe damage to their fragile economies. They stand to lose revenues from tariffs and will also create balance of payments difficulties, de-industrialisation and unemployment as consequence of liberalising imports, ACP countries argue.

“It is one thing to create a free trade agreement between economies as diverse as those of Portugal and Sweden and another to create a free trade agreement between economies as diverse as an industrial colossus like Germany and Zimbabwe with its embryonic industries. Zimbabwe’s GDP per capita is two per cent that of Germany”, Greenidge said.

Phil Bloomer, a policy advisor at Oxfam (London) echoed Greenidge’s view. A free trade agreement creates a level playing field between different businesses to trade and invest but is far from creating a level playing for competition between industries of the ACP and EU, he said.

Explaining the EU’s position, Tuomas Tapio, Finland’s chief negotiator at the trade talks said a new trade arrangement should be built on the existing legal structure of the WTO, which allows bilateral agreements, a free trade agreement, or a customs union.

But regional discrimination is not allowed and countries at similar levels of economic development should be given similar trade concessions, he stressed.

According to Tapio, the proposed regional agreements would promote horizontal co-operation between ACP countries, bringing down trade barriers between them, and help governments to implement reforms.

The EU has proposed that negotiations for such agreements should begin next year and be implemented in 2005. The ACP countries say the transition period is too short and have proposed a ten-year timeframe instead, during which an assessment should be made of the economic impact.

Greenidge pointed out that it took the EU countries – structurally stronger than those of ACP – 36 years to move from the European Coal and Steel Community to the single market.

The first Lome convention was signed in 1975 in the Togolese capital of Lome between the then European Community and 71 former European colonies of Africa the Caribbean and the Pacific.

The agreement set out in that convention provided non- reciprocal trade preferences – goods from the ACP countries were allowed to enter European markets without tariffs but without a corresponding treatment.

Trade experts say that under the WTO such a trade arrangement constitutes an unfair trading practice because it discriminates against trading partners outside the ACP-EU trading block.

However, Simon Stocker, director of the Brussels-based Eurostep coalition of NGOs , argued that the WTO rules are not set in stone. According to him, it is possible to seek a waiver from the WTO that would enable the EU put an alternative proposal can on the table. It is a question of political will and not hard fact, he said.

“The EU is consistent that whatever new trade arrangements have to be WTO-compatible but first all compatibility with the rules as they stand now is open to interpretation and certainly the EU interprets the rules more narrowly than the WTO secretariat.” he said.

The contents of a waiver have to be negotiated with the WTO and have to be approved by three-quarters of its members. Securing such a large majority does not pose an insurmountable problem because the ACP and the EU as a block constitute more than half of the members of the WTO, participants said.

Stocker strongly suspected that the EU is unwilling to negotiate a waiver because of deep fears that it would have to give back something in return, namely its common agricultural policy that allows subsidies to European farmers.

Greenidge pointed out that of 48 countries designated by the United Nations and the World Bank as least developed countries (LDC), 39 are ACP members, thus the bulk of the low-income are there. They are also more dependent on trade than any of the other LDCs.

The ACP countries extremely depend on commodities as the main source of foreign earnings just as they depend on a few markets for their goods.

“Bangladesh is a least developed country but Bangladesh is not going to die tomorrow if two commodities end up in trouble, but if bananas or sugar goes belly up that is the end of a whole set of countries”, Greenidge said.

The lost of revenues from the deterioration of commodity markets is around 11 billion dollars per annum. But the EU aid budget to the whole of the ACP is 13 billion dollars. “In other words in one year these countries lose as much as what the EU provides in a five-year period”, he said.

In the face of such evidence, it does not augur well for the principle of poverty alleviation, which is a central part of the EU development policy, he added.

Similarly, Muthoni Muriu a representative of the ACP civil society forum, a grouping of NGOs around the ACP region, said that the EU’s position lacks coherence.

“The EU is only looking at expanding markets for its goods while overlooking livelihoods, economic self-sufficiency and political stability” she said.

The trade talks between the EU and the ACP countries are taking place under Finland’s presidency of the EU and Finland’s position was also criticised for adopting an uncritical support for the EU proposal.

After a brief lobbying tour of a number of the Finnish ministries Bloomer pointed out that unlike the U.K., Netherlands and Denmark, who are increasingly critical of the free trade agreement option at the moment, Finland’s stand indicates a step behind recent analysis of how trade liberalisation contributes to poverty reduction.

“The sad irony is that the European Commission has devised a proposal which is compatible with WTO rules yet these same rules are essentially incompatible with the promotion of pro-poor growth that we need to achieve to half the number of people living in absolute poverty in the world by 2015”, said Bloomer.