TRADE: EU May Have To Cut Ambitions

By IPS Correspondents Reprint | | Print |

David Cronin

BRUSSELS, Oct 28 2007 (IPS) - Just two months before a deadline set by the European Union for signing all-embracing free trade accords with some of the world&#39s poorest countries, the EU has admitted that it will have to reduce its ambition.

As a result, most of the so-called Economic Partnership Agreements it wants to reach with almost 80 African, Caribbean and Pacific (ACP) countries by Dec. 31 are likely to be restricted to trade in goods, leaving such issues as the opening up of service markets and new rules on investment and competition to further discussion.

An announcement on Oct. 22 by Peter Mandelson, European commissioner for trade, that the initial EPAs will be goods only followed a chorus of warnings that African countries are not sufficiently prepared for unfettered free trade. Some EU governments including that of Mandelson&#39s home country, Britain, had also exhorted him not to crowd the EPA talks with too many issues.

Yet anti-poverty campaigners and representatives of African industry do not feel that Mandelson has become more receptive to the arguments they have put forward than he had been heretofore.

This, they say, was illustrated two days after his announcement, when the Commission rejected a set of proposals made by governments from Central Africa. The eight countries negotiating on behalf of that region were told that the talks scheduled for Oct. 29 would have to continue on the basis of a paper drawn up by the EU side.

Whereas Central Africa had offered to reduce barriers to 60 percent of exports from the EU to their markets, the Commission insisted that as a "strict minimum", they must open up 80 percent of trade over a 15-year period.

Mandelson has told the European Parliament that longer transition periods favoured by the ACP countries "will get us nowhere" at the World Trade Organisation as they would not comply with WTO rules. A clause in the General Agreement on Tariffs and Trade (GATT), which led to formation of the WTO stipulates that "substantially all" export markets should be liberalised as a result of free trade agreements.

There is much debate about what "substantially all" means in practice.

Martin Abéga, a spokesman for the Central African employers&#39 union UNIPACE called on Mandelson to provide firmer evidence to support his assertion. "Let us go together and talk to the WTO," Abéga told IPS. "Where are the documents to back up what Mr Mandelson has been saying?"

As five of the eight Central African countries in the EPA talks are recognised as least developed countries by the United Nations, they will be able to avail of an EU scheme known as Everything But Arms, regardless of whether they sign a free trade agreement. The scheme allows most of their exports to enter the EU free of duties or quotas.

Yet Mandelson has threatened to impose punitive tariffs on the three slightly less poor remaining countries – Cameroon, Gabon and Congo – if they decline to sign EPAs. This would deprive them of 350 million euros (503 million dollars) per year, according to a paper published recently by Christian Aid.

Offering goods from these countries a more favourable treatment in the absence of a free trade agreement would be challenged at the WTO, Mandelson has said. A set of trade preferences given to the ACP in 2000 has been subject to a waiver from WTO rules, but it will expire at the beginning of next year.

Mandelson has pointed out that central and South American countries have already challenged the banana preferences given by the EU to some fruit growers in the ACP, suggesting that they will similarly dispute other treatment that they consider as discriminatory.

Abéga is unimpressed by how the banana issue has been raised. "By saying that, Mr Mandelson is trying to create divisions between our countries," he said. "Only one country in Central Africa – Cameroon – is a banana producer. Bananas are important to our economy but they are not the total economy." Central Africa may not be a prime target for EU exporters. European companies are showing a rising level of interest in other parts of the continent.

ACP countries account for more than half of EU flour exports, for example. Eager to expand further, flour manufacturers in Europe have complained about how they can face tariffs of 50 percent if selling to West Africa, and asked the Commission to seek to have these trade taxes slashed.

Fruit and vegetable exports from Europe to South Africa, meanwhile, grew by more than 100 percent in 1995-2005, with chocolate exports rising by almost 40 percent.

Paul Goodison from the European Research Office, which monitors EU-Africa trade, says that ACP countries will need to be able to take safeguard measures if they need to protect a vitally important sector from a flood of European imports. Whereas he believes that safeguards could be needed for many years, the Commission appears only willing to permit ACP measures that last two or three years.

"Clearly there are EU offensive interests in the EPA negotiations with regard to food and agricultural products," said Goodison. "Given the vast inequalities in size between the EU and individual ACP economies – where one shipload from the EU can be the equivalent of the entire annual national consumption of a product – there is a need for the Commission to demonstrate far more flexibility on the scope for special ACP safeguard measures than has been the case to date."

Jacob Kotcho from ACDIC, a campaign group in Cameroon, accused the Commission of demonstrating "bad faith" during the organisations by not taking African concerns seriously.

"European markets have been open for many years to African countries, but we have not benefited," he said. "If we want trade to be at the service of development, we have to build up our capacity. We need transition periods to do so."