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EUROPE: Trade Policy Backs Western Firms
By David Cronin
BRUSSELS, Apr 21 (IPS) - The European Union is using trade policy to ensure that western firms enjoy considerable leverage over the economies of poor countries, a new report has alleged.
In 2006, the European Commission published a strategy known as Global Europe, which stated that its international trade agenda should strive to remove any obstacles that the bloc's companies encounter in doing business abroad.
A study published Apr. 21 by the World Development Movement (WDM) argues that the blueprint is "about as close as it is possible to get to a plan for entrenching European economic dominance without using the military."
The WDM, a London-based anti-poverty group, likens the actions recommended in the EU's strategy to those taken by Europe's imperial powers in the 19th and early 20th centuries. During that era, Britain foisted free trade on its colonies, for example, by banning them from taxing imports.
Tim Jones, a WDM campaigner and the report's author, said that Global Europe "marks a turning point" for EU trade strategy. Until then, the EU had presented trade liberalisation as advantageous for poor countries and their development. "In Global Europe by contrast, much of the development rhetoric has been ditched and a more brazen strategy to open markets for the benefit of European business has been set out," he added.
But he also suggested that previous arguments about the purported benefits of free trade can be exposed as hollow, when the situations facing countries like South Africa and Mexico are examined.
Through an accord between the EU and Mexico that came into effect in 2000, foreign firms have been able to gain control of key sectors of the Mexican economy, such as banking and electricity. Some 553 million euros (878 million dollars) in profit was reaped by European energy companies operating in Mexico during 2006, without any requirement that they have to re-invest any of their revenues in the country.
A similar deal that the EU signed with South Africa in 1999 was found to have benefited the former, but disadvantaged the latter. Under the accord, the EU did not have to cut any of the trade taxes it levied on wine, one of South Africa's main exports. But South Africa was required to begin reducing its tariffs on European wine in 2004 and to scrap them completely by 2012.
The study also finds that a surge in certain types of imports has proved detrimental to jobs in South Africa, a country where 40 percent of the labour force is unemployed. After tariffs on imported confectionery began to be reduced - as required by the agreement - in 2004, employment in South Africa's sweets industry dropped by 24 percent that year.
The Global Europe strategy was debated at a conference in Brussels earlier this month.
Charles Santiago, a member of parliament in Malaysia, told the conference that the EU is seeking to use free trade accords negotiated on a bilateral basis with poor countries to coax them into accepting provisions that have been removed from the agenda of multilateral discussions held under the aegis of the World Trade Organisation.
Bilateral accords, he said, "provide an avenue where developed countries isolate individual countries." He added: "This is not about promoting trade and promoting investment. It is about control of trade."
Santiago noted that the EU is seeking to conclude free trade accords with South Korea, India and the Association of South East Asian Nations (ASEAN). In the case of Korea, it has been estimated that a free trade accord would lead EU exports to Korea to rise by more than 13 percent. But Korean exports to the EU would only increase by 2.5 percent.
The consequences for agriculture would be disastrous if free trade agreements are introduced with different parts of Asia. "If tariffs are eliminated, the Korean dairy and pork industries will be destroyed (by imports of subsidised European food)," he said. "Asia can kiss goodbye to the family farmer."
In a separate report, also published Apr. 21, Oxfam predicted that the so-called Economic Partnership Agreements that the EU is negotiating with African and Pacific countries could cause "irrevocable damage".
Last week Peter Mandelson, the European commissioner for trade, defended the EPAs which he has so far reached with 18 African governments. Mandelson refused to renegotiate any of the commitments contained in them, citing concerns that doing so would cause "legal uncertainty and risk unravelling everything we have achieved."
But Oxfam suggests that claims made by Mandelson about the agreements are bogus.
While the European Commission had promised that African countries would be allowed up to 25 years to fully open their markets to imports, such a transition period has only been granted to a small number of states and for a small number of products, it says.
Mouhamet Lamine Ndiaye, an Oxfam spokesman, said that the tariff reductions required by the EPAs could deprive Africa of 360 million dollars per year in government revenues.
"Our analysis shows that these deals have strayed far from the development template they were supposed to follow," said Ndiaye. "The cost will be enormous." (END/2008)
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