Development & Aid, Economy & Trade, Europe, Food and Agriculture, Headlines

EUROPE: Preparing to Get at Resources of the Poor

David Cronin

BRUSSELS, Sep 30 2008 (IPS) - European Union officials are drawing up a new strategy for giving multinational companies greater access to minerals and wood located in poor countries.

With Europe importing up to 80 percent of the raw materials its firms use to manufacture goods, lawmakers in Brussels have identified taxes and other measures imposed by governments as an obstacle they should strive to remove.

In November, the EU’s executive branch, the European Commission, is to issue a policy statement outlining how firms based on this continent can exploit the natural resources of other countries, including those where much of the population lives in poverty.

The strategy will address the 450 export restrictions in the world that the Commission has identified. These include taxes on exports which some governments levy in order to encourage processing of raw materials by domestic companies, subsidies, and limits on foreign investment.

Patrick Hennessy, a veteran official who has been involved in drafting the strategy, drew a distinction between differing groups of poor countries. Whereas rapid growing economies such as China and India have “huge requirements” for raw materials, countries in Africa have “huge resources but very acute problems,” he said at a meeting in Brussels Monday.

Hennessy argued that it necessary for the EU to strike “a very delicate balance” in its relations with others. “It is important to try to convince them to see it our way,” he added. “That sounds very condescending. But at least they should follow common rules as part of a sustainable industrial policy.”

Some details of the new strategy – known in Euro-speak as a ‘communication’ – were outlined at a conference in Brussels Sep. 29, which was dominated by European officials and industrial lobbyists.

Peter Mandelson, the European commissioner for trade, said that the Commission is seeking to have clauses that will ban export restrictions included in all the free trade agreements it negotiates. Such provisions have already been placed in accords with Chile and Mexico, he added, while the EU is hoping to clinch similar deals with India and South Korea.

Mandelson noted that in industries like chemicals, plastics and wood, raw materials can account for one-third of the price of goods made in Europe. “The imposition of an export tax can price a European company out of the market overnight,” he said.

“Often the public policy problems cited as the justification for export restrictions – like the strengthening of infant industry, or ensuring a stream of government revenue from commodity exports, or even restricting trade in environmentally sensitive goods like timber – can be better addressed through more focussed measures,” he added. “In economic terms an export restriction is a policy sledgehammer rather than a scalpel.”

But anti-poverty campaigners feel that many countries must retain the option of being able to restrict exports.

Marc Maes from the Belgian organisation 11.11.11 said it is “very worrying” that the Commission has been trying to convince African countries to scrap taxes on exports as part of free trade agreements it is negotiating with them.

“There are many reasons why developing countries in Africa should keep controls on exporting wood, for example,” he said. “It is very important for the environment, for indigenous people and for local processors. We need to watch this communication carefully and we need to tell the Commission that eliminating restrictions is not good for these countries’ development.”

Chocolate offers a case study of how export taxes can be a vital source of revenue for poor countries. Nearly 60 percent of cocoa used by Europe’s confectionary makers originates in just two west African countries: Ghana and Cote d’Ivoire.

Caobisco, the umbrella group for Europe’s biscuit and chocolate industry, regards a 26 percent export tax on cocoa levied by Cote d’Ivoire as excessive. Yet the group’s representative Tony Lass conceded that Cote d’Ivoire and Ghana “have few other export opportunities so you could say it is quite reasonable for them to tax cocoa.”

Alfredo Valladao, a Brazilian academic now teaching at the French political institute Sciences Po, said that poor countries regard export restrictions as a “chance to get even” with richer ones. Twenty years ago, he noted, Germany was the largest coffee producer in the world because steep tariffs dissuaded countries in which coffee beans are grown from exporting them in processed form.

If the EU wishes other countries to abandon export restrictions, it should first address how its agricultural subsidies are disadvantageous to poor farmers, he suggested. “If you want to defend free global markets, you have to throw everything on the table,” he said. “This also means to throw European import restrictions and subsidies for agriculture on the table. And this entails some big sacrifices for Europe.

“One cannot oblige any country to export some commodities and not others. Colonialism is over.”