DEVELOPMENT: Small Island States Stand Up To EU

By IPS Correspondents Reprint | | Print |

David Cronin

BRUSSELS, Aug 3 2007 (IPS) - Governments in the Pacific region have reacted furiously to a threat by the European Union that it will reduce the amount of development aid they receive if they delay on signing a free trade deal with the 27-nation bloc.

Fourteen island states in the Pacific are currently involved in negotiations aimed at reaching an Economic Partnership Agreement (EPA) with the EU by the end of this year.

Although the accord is supposed to relate to trade rather than development assistance, the EU&#39s executive arm, the European Commission, has now warned the Pacific it can expect less aid if the Dec. 31 deadline is not met.

In an e-mail seen by IPS, the Commission told Pacific governments that they can expect some 95 million euros (130 million dollars) in a regional finance programme under the European Development Fund for 2008-13. Yet if no comprehensive trade agreement is reached this year, 48 percent of that sum would have to be "re-programmed", the e-mail message said.

The message, dated Jul. 29, was signed by Francesco Affinito, deputy head of a European Commission department handling relations with the Pacific.

Affinito also warned that if an accord can only be reached on trade in goods – rather than one extending to services – the regional funding would be cut by 25 percent.

James Bule, the trade minister for Vanuatu, a Pacific island with 209,000 inhabitants, has lodged a complaint over this threat with Louis Michel, the European commissioner for development.

In his letter, Bule said that ministers from the Pacific wished to register their "grave concern and deep disappointment" at the threat.

The 14 countries, which have a combined population of eight million, "will not accept the EC (European Commission) imposing this type of linkage" between aid and trade, he added.

Bule contended that the "resources that the EC proposes to cut" would be needed to foster regional integration in the Pacific "irrespective of the outcome of the EPA negotiations."

Anti-poverty activists have described the Commission&#39s threat as tantamount to bullying.

Marc Maes, a trade campaigner with the Belgian organisation 11.11.11 said he would be asking EU governments to investigate the Commission&#39s threat.

"EU member states seem to have agreed to get off the Commission&#39s back for the next couple of months and to give it the necessary space to drive these negotiations forward," he told IPS. "If they knew that the Commission was resorting to these tactics, I hope they would signal to the Commission that they are not acceptable."

Maes claimed that the Commission is trying to dictate the terms of an agreement with the Pacific, without seriously examining proposals put forward by the islands&#39 representatives.

For example, the islands have suggested that a section in the agreement dealing with investment should cover both the rights and obligations of foreign firms. The Commission, on the other hand, has argued that the investment clauses should only deal with ensuring that investors have access to the Pacific markets.

Barry Coates, director of Oxfam New Zealand, said that the Commission had resorted to similarly aggressive tactics in other talks on proposed EPAs with Africa and the Caribbean.

He said that ministers from the Pacific "are shocked that the European Commission is moving the goalposts five months before the deadline" as "until now there had been no direct linkage between EPAs and the EDF."

But he noted that the threat to the Pacific is "not an isolated incident."

The Commission recently told a number of governments from Eastern and Southern Africa that the amount of development aid they are to receive will depend on the extent of trade liberalisation they will sign up to. "Some of these countries rely on EU aid for up to 50 percent of their national budgets," said Coates. "It is understandable that they feel threatened."

African diplomats have alleged, too, that one of the EU&#39s top trade negotiators has been seeking to create a rift between their governments.

Botswana, Namibia and Lesotho and Swaziland are known to be perturbed at how the EU has been trying to persuade South Africa to liberalise its economy. These states are fearful that far-reaching liberalisation could have adverse consequences for their trade with South Africa.

Diplomats allege that when these concerns were raised with Karl Friedrich Falkenberg, a deputy director-general for trade with the European Commission, in June, he suggested that the countries should consider taking their own measures against South African firms.

Asked if there was any truth in this allegation, Falkenberg replied: "Absolutely not".

"I am arguing for region-wide commitments (in Southern Africa) to allow locally established service providers to take advantage of a larger regional market," he told IPS. "South Africa refuses to take any commitments."

In a new report, Oxfam has concluded that the Commission is taking an "uncompromising approach" towards the Pacific and is "essentially seeking a free trade agreement that is likely to provide better access for EU companies and goods while being damaging to Pacific businesses and people."

Some two-thirds of tariffs that the Pacific governments currently impose on imports from Europe would be eliminated under an EPA, depriving the countries concerned of the possibility to protect often "fragile" local firms from outside competitors.

"Pacific countries are being asked to take a major leap into the dark by making these commitments," the report says.