/IPS DEVELOPMENT BULLETIN/ LOME CONVENTION: Change, Yes, But For Whose Needs?

By Moyiga Nduru Reprint | | Print |

Moyiga Nduru and Dipankar de Sarkar

NAIROBI/LONDON, Nov 23 1996 (IPS) - The start Wednesday of the European Union’s year long debate on the future of its Lome trade and aid pact with the 70 nation African, Caribbean and Pacific (ACP) group has been welcomed by NGOs and trade experts north and south.

But while almost all recognised the need, as European Union Development Commissioner Joao de Deus Pinheiro said in Brussels, to adapt the Convention to changing circumstances in both Europe and their own regions, all were anxious that the best aspects of the two decade old pact be preserved.

“I think the Lome Convention, in some form, should be maintained,” said economist John Kasangaki of Agric Consultant in Nairobi, voicing a commonly held view on both sides. “It is helping those countries which are trying to open up their trade borders.”

Banker John Ngungi of Nairobi money market traders Loita Asset Management Limited agreed, adding that African leaders should take a lead in lobbying for favourable change. “We are underdeveloped and we need trade outlets offered through organs like the Lome Convention.”

But, particularly in the north, NGOs and analysts noted that the pact was showing its age.

“Many changes have taken place since it was drawn up in the 70s, which call now for a deep look at the Convention, said Roger Blein of the Paris based Solidarity In Food and Agriculture (SOLAGRAL). “Two critical elements make changes necessary: worldwide trade liberalisation and cuts in development assistance programmes.”

And he and others agreed that the Lome Convention had failed to deliver the kind of results needed to reverse the spread of poverty and increase economic growth in Africa.

A report by the London-based Overseas Development Institute (ODI) detailed figures behind the cautiously expressed view of the European Union that Africa in particular had failed to benefit from the trade and aid advantages enshrined by Lome.

Despite duty- and quota-free access for most of their exports to the EU and the trade-related provisions of the Convention, the trade performance of the ACP has been disappointing, said the ODI in a special report produced to contribute towards the debate.

“The share of ACP exports in the EU market declined from 6.7 percent to 3.7 percent between 1976 and 1992, while developing countries which have enjoyed less favourable treatment — in particular Asian countries — have been more successful in penetrating the EU market.

“This is particularly serious, given that the ACP countries have remained largely dependent on the EU market for their export earnings (41 percent on average between 1990 and 1992).”

One problem highlighted by Pinheiro, Blein and others was the significant differences between the various ACP states, a group that has little in common beyond their group membership and their history as former European colonies.

“Large differences in the volume and structure of exports exist among the 70 countries,” said the ODI report. “They are far from homogeneous although some of them might face similar obstacles in expanding their export base.

Most ACP exports tend to come in greatest volumes from a small number of states, and concentrate on raw materials and traditional, mainly agricultural exports. “In general, Lome preferences have failed to stimulate ACP countries to diversify their exports into non-traditional ones,” the ODI report added.

One special concern is the need to ensure that whatever replaces the Lome Convention when it expires in the year 2000, that it should retain its role as a bulwark against the worst effects of the globalised free market, as championed and enforced by the World Trade Organisation (WTO).

“The Lome Convention is encouraging countries in Africa by offering them trade preferences,” said Kasangaki in Nairobi. “That is important, because Europe and North America, to which the WTO is tilted, enjoy some preferential treatment with their (own choice of) partners. “The best example is the preferential trade arrangement that the United States offers China.”

Nichola Gor, chairman of the state-run Kenya External Trade Authority, agreed. “The establishment of the WTO, and GATT, has brought a lot of confusion in Africa. And, as a result, all the preferences provided to Africa are being taken away.”

It is the WTO that is providing the forum for the most serious challenges to the legality, in world trade terms, of the trading advantages provided to Lome partners.

The Convention is covered by a waiver from WTO non- discrimination rules, granted in late 1994, but this has not prevented the U.S. from complaining about aspects of Lome to a WTO tribunal, most significantly over EU’s rules covering banana imports from Lome countries in the Caribbean.

Not all was bad news, say NGOs, but it was clear that the success stories reported so far could not credit the Lome system as the exclusive key to their achievement. The ODI singled out Mauritius, Jamaica and Zimbabwe as Lome countries which have increased exports to the EU significantly over time, and then diversified into more manufactured and processed goods under its cover.

“However,” said the ODI, “it is unlikely that these good performances can be attributed solely to the Lome preferences.

“Although in these countries the Lome trade provisions may have played a catalytic role in developing dynamic export sectors, experience in other countries suggests that they may be neither a necessary nor a sufficient condition for developing a dynamic export sector.”

Blein theorised that Lome had led ACP states to concentrate too heavily on exports to the EU, at the expense of encouraging regional trade initiatives closer to home. “It might be better to promote trade within regions, for example in trade among west African, which would in turn better prepare them to conquer international markets later,” he told IPS.

The ODI’s view was that Lome could have done more to help countries overcome the structural problems of some ACP countries that limit trade development, such as the lack of adequate infrastructure, capacity to attract private investment, under- developed financial sectors and training and education to boost human resources.

“It could be argued that the non-trade elements of the Lome Convention might have addressed precisely these deficiencies, and so complemented the trade provisions,” commented the ODI report, “but that would be asking a lot from what is, after all, a relatively modest set of instruments.”

Blein said that however the Lome revision process went, the Lome Convention as it now stood had one paramount advantage; in that it allowed both the beneficiaries of development aid and their donors an equal hand in managing it. He hoped that transparency in all aspects of the process would preserve this feature.

And all agreed on what should be the desired final result — self-reliance, not dependency.

“It is counter-productive to rely on the IMF and World Bank loans and on relief aid,” Ali Mohamed Jrearz, a Hong Kong businessman with Nairobi-based Afro-Asian Export Commodities Limited, told IPS.

“Preferential treatment should be given to the Third World so that it can become self-reliant in the future.”