Memorandum from Mr Simon Maxwell and Mr
Henri-Bernard Solignac Lecomte, Overseas Development Institute
THE FUTURE OF LOMÉ: TIME FOR A POLITICAL
PROJECT
1. Introduction
1. The Overseas Development Institute has been
strongly involved in the Lomé debate over the last two
years. In particular, Adrian Hewitt, Antonique Koning and Sheila
Page contributed in various ways to the process of preparing the
Green Paper; and ODI later organised the UK National Consultation
on the Green Paper. Aidan Cox and Antonique Koning, with others,
also completed a large study on European Community Aid. Relevant
publications are listed in the bibliography.
2. This short memorandum offers some fresh thoughts
by ODI staff on the renegotiation of Lomé and, beyond,
on the future of the EU's development policies. It does not offer
an institutional view. The aid section mostly draws on the work
of Simon Maxwell; the trade part is based mostly on material by
Henri-Bernard Solignac Lecomte.
3. The challenge facing Europe is in two parts,
one easy and one difficult. The easy part—and the one where
ODI can most obviously make a contribution— is to identify
the issues and recommend ways forward. The difficult part is to
understand the policy process and map the different interests,
in order successfully to bring about change. This is an area to
which we at ODI are only beginning to turn our attention. However,
it is a neglected area and one we hope the Select Committee can
explore.
4. The Select Committee will presumably want
to start with the recent government paper containing the UK contribution
to the debate on the Future of the Lomé Convention, issued
by the General Secretariat of the Council of the EU on 29 October
1997 (Doc 242/97(ACP)). As far as substance is concerned, we think
this is rather a good document, both on the aid and trade sides.
It reflects the principles set out in the recent White Paper on
international development, and in so doing reinforces the cherished
principles of partnership which underlie the Lomé Convention.
At the same time, it makes a series of practical proposals for
the reform of the European aid programme, and for the modernisation
of trade arrangements.
5. It would not be realistic to expect the government
position paper to discuss implementation problems in any detail.
However, it would certainly be interesting for the Select Committee
to ask DFID to rank its various proposals in terms of political
and administrative acceptability to the EU as a whole; and for
the Select Committee itself to advise on how alliances might be
built to bring about the change.
6. The one issue which the government paper
does not deal with specifically is whether Lomé should
continue at all. It is certainly possible to find development
policy analysts who believe that the heterogeneity of the Lomé
Group complicates the attempt to focus both aid and trade provisions
on the poorest countries; and who also believe that there might
be alternative routes to partnership with poor countries. Has
the time passed for this debate?
2. Aid
7. The European Union aid programme is more
important to the UK than to most other large European donors,
because it absorbs a larger proportion of our programme than is
the case for other member states. On current projections, the
EU will be absorbing over 30 per cent of British aid by the end
of the century. In terms of international negotiations, this can
be presented as either good new or bad news. It is good news because
other member states might see less need to resist British initiatives.
It is bad news because other countries might care less about supporting
change.
8. Whether the disproportionate British contribution
turns out to be good news or bad news matters because of the widespread
recognition that European aid is in serious need of reform. Indeed,
some of us at ODI have argued that there is no more important
task facing the new British government in the development field
than to overhaul European aid.
9. Speaking privately, most European aid officials
will accept that European aid faces something of a crisis. In
the words of one European official, "the rivets are popping".
What needs to be done is relatively clear. The problem is making
it happen.
10. To help focus debate, Table 1 contains a
"charter of best practice" for aid donors, taken from
an evaluation of European Union Aid to Ethiopia. The list is not
specific to the EU. It was derived from focus group discussions
with aid donors, government officials and NGOs in Addis Abbaba,
in 1995. The figure lists 19 elements of good practice, with philosophical
and ideological items at the top, and administration at the bottom.
It shows that aid analysts value a clear development philosophy,
a jointly negotiated aid framework "partnership"), and
a long term commitment. At the same time, they also lay great
emphasis on decentralised decision-making, flexibility on the
ground, and quick, simple, open procedures. One can always add
to this list, but it provides a reasonably good framework for
discussion.
11. The European programme rates highly on some
of the points in this table. For example, the Lomé Convention
provides a much stronger framework for partnership than that available
to most other donors. Similarly, the Maastricht Treaty and various
Council resolutions provide a clear development policy, with a
strong poverty focus. The problems lie more on the implementation
side, where the EU characteristically suffers from inadequate
analytical capacity, cumbersome procedures and long lines of accountability.
On these and other aspects, the EU was rated by our focus groups
as below the average of other donors.
12. This, however, is not necessarily the fault
of the Commission. It is true that the Commission is somewhat
centralised in its culture, and that some of the complexity of
procedures reflects the wider character of the bureaucracy. However,
it is also true that the Commission is;
(a) seriously under-staffed,
(b) hampered by an overly complex aid structure
imposed from outside, and
(c) tied down by bureaucratic procedures
designed to ensure that all important decisions are referred back
to committees of member states.
TABLE 1
Best-practice criteria: a synthesis of
focus-group discussions
|
| How to be a good donor | How to be a good recipient
| How to be a good NGO |
|
| A clear development philosophy | Respect for human rights and liberty of press
| Clear objectives |
| A wide range of instruments | Internal peace and stability
| Communication and coordination with government
|
| A high grant element | A commitment to development
| Capacity-building and use of local structures
|
| Low tying of aid | Clear long- and medium-term strategies
| Flexibility |
| A jointly negotiated aid framework | A commitment to open and constructive policy dialogue at macro and sector levels
| Community participation |
| A capacity for policy analysis | A good working relationship with donors
| Advocacy |
| Constructive policy dialogue | The technical and administrative capacity to identify, prepare, and appraise projects for donor financing
| Attention to women's issues |
| A long-term commitment | Clear lines of authority for decentralised planning and project implementation
| Accountability to the people, government, and donors
|
| A capacity for sector analysis and planning
| A commitment to beneficiary participation |
Transparency |
| Cooperation with other donors | A commitment to meeting staffing and local provisions for projects
| Low overheads and good administration |
| A commitment to genuine recipient and stake-holder participation in project selection and design
| The absence of corruption | Compliance with government guidelines
|
| Systematic and transparent procedures for project appraisal and approval
| Good administration and accounting | Ability to link relief with development by adopting an integrated approach
|
| Decentralised decision-making and management
| Timely monitoring and reporting | Co-ordination between NGOs
|
| High technical capacity in field offices and headquarters
| A commitment to self-criticism and learning
| Use of local resources and structures |
| Continuity of project management |
| Support to local NGOs |
| Flexibility on the ground in project operations
| | Few expatriate staff and many employment opportunities for nationals
|
| Quick, simple, open procedures for financing and procurement
| | Effective and efficient use of resources
|
| Effective monitoring and evaluation, leading to change
| | Quality and timeliness of reporting
|
| A high level of accountability |
| |
|
| Source: IDS and IDR 1996: Appendix VII
|
13. The need for reform is identified in the British government's
position paper. However, these underlying causes are not addressed.
14. As far as staffing is concerned, aggregate comparisons
are ambiguous and do not necessarily show the EC to be under-staffed.
However, more detailed studies do show a substantial shortfall.
For example, in Ethiopia, the evaluation showed that the EU was
much less well-staffed in the field than USAID, the World Bank
or UNDP. There was a particular shortage of local staff to support
international advisers in the Delegation. At headquarters, too,
the desk officers are very poorly supported by junior administrative
or clerical staff.
15. In terms of aid instruments, the focus group discussions
emphasised the importance of having a wide range of instruments
available, by which they meant the possibility of financial aid,
technical cooperation or commodity assistance. However, the EU
is burdened with a great number of budget lines and with many
specific instruments, like Stabex or Sysmin. The British government
is right to call for simplification, but does not address the
question of why this multiplicity of instruments has developed.
All too often new budget lines are created as a result of discussions
in the European parliament or in order to meet some short term
need to be seen as being active in a particular field. Thus, a
call for simplification needs to be accompanied by measures to
ensure that the decision-making procedures are also streamlined.
16. Finally, the long lines of accountability and the administrative
complexities of the EU aid system were a frequent topic of conversation
by the focus groups in Ethiopia. One important reason for poor
performance is that the Commission and its Delegations in the
field have very little authority to approve programmes. This problem
arises because the EDF committee of member states, and other committees
in Brussels (e.g., the Food Aid Committee) insist on retaining
a high degree of control over the implementation of the programme.
This attitude is not consistent with streamlined and efficient
aid administration. It is not clear that it will be resolved by
the creation of a new implementing agency (SCOOP).
17. The above are only examples, but they illustrate the
point that the fundamental problems with the European aid programme
lie in the political structure of its governance as much as in
the thinking which takes place about development philosophy. Can
the Select Committee see a way to helping the new British government
build the necessary alliances to reform governance as well as
content?
3. Trade
18. When it comes to trade policy, a similar problem arises.
There are enormous complexities in trying to satisfy the many
political constituencies with a strong and justified interest
in trade, both on the side of the developing countries and on
the side of the Union.
19. At the end of October 1997, the EC released its proposal
for the post-Lomé negotiations that will begin in September
1998 (COM/97/537). On trade, the proposal retains the principle
of specific trade policies towards the ACP countries, that could
be differentiated by regions and by level of development.
An analysis of these proposals illustrates the problems.
20. The Commission argues that Lomé trade preferences
have had a limited impact on ACP exports and growth, discriminate
against non-ACP developing countries, and are not consistent with
WTO rules (except insofar as the Lomé Convention has a
waiver). Therefore a new policy is needed that would be both more
conductive to the "smooth and gradual integration" of
the ACP into the world economy, and WTO compatible. The EC response
to this challenge is a deeper "economic partnership",
characterised by:
(i) special preferences "Lomé style"
maintained for ACP Least-Developed Countries,[1]
(ii) separate preferential and reciprocal trade agreements
with "regional groups",
(iii) all this being in full compatibility with WTO requirements.
21. The case for special, non-reciprocal, treatment for LLDCs
is well known: they deserve special treatment because of their
limited capacity to reap the benefits of their integration into
the global economy. The case for separate trade agreements with
ACP "regions" is more dubious. In short, the EC wants
reciprocity because, it says, it is good for the ACP (it fosters
import liberalisation) and it makes the Lomé trade regime
compatible with WTO requirements by turning into free-trade agreements.
The EC proposes to conclude trade agreements with separate regions:
ACP countries should form regional trade areas, with which the
EU could sign free-trade agreements that would be implemented
progressively, along different timetables adapted to each regional
sub-group. In the case of Africa, separate trade agreements with
sub-regional groups could eventually lead in the long run to the
completion of a single EU-Africa Free Trade Area (FTA).
(b) Is it feasible? This is not clear
22. To be compatible with WTO rules, any preferential trade
agreement between the EU and a sub-regional group of ACP countries
would have to cover "substantially all trade" within
more than twelve years. Whether the EU and the ACP countries
would be ready to comply is uncertain. In the EC, the inclusion
of sensitive products would be resisted. In many ACP countries,
given the reliance of governments on customs duties collected
on imports from the EU, and the uncompetitiveness of industrial
sectors, compliance with the ten-year rule would also pose problems.
One justification put forward by the EC for "differentiated
agreements" is that they would allow for "different
degrees of reciprocity" and "adequate timetables"
for different regional groupings. However, the time limit and
the obligation to include substantially all trade leave very little
scope for this.
23. The feasibility of the EC proposals would depend on the
willingness of ACP countries to enter into free trade negotiations
with the EU, and to apply as regions. This cannot be taken for
granted. Nor can the EU impose this on ACP countries. So far,
no such will has been expressed by the ACP. On the contrary, a
report prepared for the SADC Secretariat of the future of Lomé
strongly recommended that the ACP group should stick together,
and not proceed as separate groups. This was confirmed as the
official ACP position, in the final declaration of the Meeting
of ACP Heads of States held in Libreville, in November 1997.
24. Furthermore, there are no real trade areas for the
EU to sign a FTA with. In Africa, efforts to promote regional
integration through trade liberalisation are confronted with huge
difficulties: little scope for increased intra-regional trade,
no clear political commitment to regional integration, weak institutional
capacity, etc., Even the best candidate, SADC, which has plans
to establish A FTA within eight years, faces many uncertainties.
Broadly, in Africa, all other regional groupings have similar
or worse problems than SADC.
(c) Is it good for the ACP? Not necessarily.
25. There are some positive aspects to the concept of deeper
economic association put forward by the EC. In particular, it
could be conducive to greater synergy between EU aid and trade
policies. However, there are also several reasons to believe that
it does not address the limitations of the current trade agreement,
and even contradicts the EU's pledge to "foster the smooth
and gradual integration of developing counties into the worked
economy"[2], as well
as that of supporting regional integration.
26. If LLDCs enjoy better terms of market access to the EU
than non-LLDCs, rules of origin must be set up to avoid
that the latter unduly use the formers' preferences to export
its own products. The problem is that all existing ACP regions
have both LLDCs and other Developing countries; SADC even contains
a developed country, South Africa (as well as seven Least Developed
and six Developing countries). Rules of origin would not only
represent additional costs but also be detrimental to regional
co-operation, since they would impede trade between members
of the region.
27. ACP countries that are not Least Developed would experience
serious worsening of market access. The 30 non-LLDCs (e.g.,
Ghana, Kenya, Senegal, Zimbabwe etc., in Africa, most Caribbean,
Fiji and PNG in the Pacific; See Table 1) would be graduated into
the General System of Preferences. This would represent a serious
worsening of market access for them (particularly for food products).
As the EC sees it, the only way for those countries not to suffer
such a loss in trade preferences would be to enter into FTA negotiations
with the EU. As it is very improbable that they could do it on
a bilateral basis, they should seek to apply as regions. That
would require all members of the different regions to reach consensus
and formulate "regional" applications vis-á-vis
the EU. For instance, Zimbabwe (a non-LLDC and a member of SADC
alongside Zambia has the choice between: (a) being graduated into
a less generous GSP and experience a worsening of its market access;
or (b) pushing for a EU-SADC free-trade agreement.
28. The EC proposal does not address the issue of restrictions
affecting ACP exports of sensitive products. Contrary to what
several Member-States (including the UK) suggested in their own
proposals on the future of Lomé, there is heavy suspicion
that the proposed preferential trade agreements would still have
restrictions on sensitive products (as in the EU-MED trade agreements
and the EU proposals to South Africa). Those include agricultural
products in which developing countries could build a strong comparative
advantage.
29. It would be a mistake for the ACP to open their markets
to the EU alone. Import liberalisation may be a key element of
economic reforms, and many ACP countries still need to proceed
further with such reforms to overcome pervasive supply-side constraints.
However, benefits from trade liberalisation are less if ACP countries
open only to imports from Europe, rather than to all their existing
or potential economic partners. There are risks of trade diversion
that would impede the diversification of their import sources,
and in particular from the most dynamic economies in Asia and
America.
30. There are already several import liberalisation schemes
in train in the ACP: unilaterally (as part of domestic reforms),
as the multilateral level (following commitments under the GATT/WTO),
or at the regional level (within SADC, etc.). Import liberalisation
towards the EU would be yet a further tier, adding one more timetable
for phasing out tariffs overlapping with others, with the risk
of undermining the overall process of import liberalisation. This
could contradict the EC's pledge to help ACP countries integrate
into the multilateral system.
(d) An alternative: seize the opportunity to change the
way the EU trades with developing countries.
31. The EC has a point when it recognises that helping ACP
countries to integrate into the world economy implies more than
providing preferential market access for their products. It rightly
highlights several key areas, in which it can, in collaboration
with other donors, help ACP countries enhance their capacity to
trade. The EU could certainly combine its efforts in capacity-building
with initiatives taken at the multilateral level.[3]
Finance for new and improved infrastructure in transport,
communication, etc. is also necessary. Finally, financial support
can help cushion the negative economic and social impacts of import
liberalisation under multilateral commitments, through budgetary
and/or balance of payments support, "social safety nets",
etc.
32. What is questionable, as argued above, are the EC's proposals
for the future EU trade regime vis-á-vis the ACP.
The challenges awaiting ACP countries and other developing countries
will be more adequately dealt with at the multilateral level,
with concessions in terms of market access negotiated with all
WTO members, not just the EU. Europe could usefully help ACP countries
voice their concerns within this framework, and push for multilateral
preferences.
33. There has been a proposal by the Director-General of
the WTO, to remove all tariff and non-tariff barriers for LLDCs
on the OECD markets. That means that all LLDCs would enjoy
preferences similar to those granted under Lome, but;
(i) from all developed countries and not just from the
EU;
(ii) for all products including the "sensitive"
ones (including temperate agricultural commodities); and
(iii) as a right, secured by a multilateral institution,
rather than a favour granted by a regional body.
At the WTO High-Level Meeting on Least Developed Countries
that took place in October 1997, members made individual offers
of enhanced market access for LLDCs through their GSPs. The EU
had already made such an offer: from January 1998, it will upgrade
its GSP for LLDCs to parity with current Lomé preferences,
i.e., non-reciprocal trade preferences "Lomé style"
are extended to eight non-ACP LLDCs.[4]
Overall, the fact that many developed countries, but also middle-income
developing countries (in Asia, North Africa, etc.,) have made
offers is an encouraging result, but the outcome of the High-Level
Meeting falls short of the Ruggiero proposal. The following limitations
remain:
(i) individual offers are allowed to exclude "sensitive"
products;
(ii) offers are non-binding and, like the GSP, can be
reversed[5];
(iii) the issue of origin (to allow cumulation of origin
at a regional level with non-LLDC and/or non-ACP countries) has
not been tackled;
(iv) safeguard mechanisms remain a potential threat as
they can be used for protectionist purposes.
34. Therefore, there is still scope for making concessions
to Least-Developed countries a permanent mechanism under the WTO
that would bind all members, as the EU Ministers themselves have
proposed. Beyond that, the EU could trigger an ambitious reshaping
of its external trade policies towards all developing countries.
As proposed in DFID's White Paper, it could explore ways of levelling
up its GSP for all of them (not just LLDCs, not just the ACP)
to match Lomé provisions and also offering longer-term
support. This might be more helpful for the ACP than tying them
into one more discriminatory preferential trade agreement, and
it would be better for the multilateral system. This could be
done in 1999, when the GSP is revised, and/or during the next
multilateral trade round.
(e) How to implement change?
35. The Commission is obviously in a difficult position,
under pressure from different interests within and outside the
EU to come up with a mandate that will satisfy all parties. Its
proposals reflect a difficult attempt to reconcile European commercial
interests, the "specificity" of the EU-ACP relationship,
its own commitments under the multilateral trade system, and the
Maastricht Treaty. There is a need for a political initiative—from
the Member States—to cut through the complications and give
a fresh start to European trade policies towards developing countries.
While the principles for action are clear, the difficulty lies
in building a constituency for change. The review of Member States'
positions on the future of Lomé suggests that support for
new approaches does exist in several of them, beyond the UK. The
Select Committee could well consider whether such support constitutes
a critical mass, and how new energies can be mobilised.
4. Conclusion
36. On both aid and trade, it seems there is much to do.
We have argued, however, that the real challenge is not to come
up with good ideas, but rather to think about how they can be
implemented. This is an intensely political project. Can the Select
Committee help?
1
Table 1 distinguishes between Least Developed and other ACP countries. Back
2
Maastricht Treaty, Article 130u. Back
3
At the WTO High-Level Meeting on Integrated Initiatives for Least-Developed
Countries Trade Development (27-28 October 1997), an Integrated
Framework for Trade-Related Technical Assistance, including for
Human and Institutional Capacity Building, to support Least Developed
Countries in their Trade and Trade Related Activities was jointly
set up by the WTO, the World Bank, the International Monetary
Fund, the UN Conference on Trade and Development, the UN Development
Programme and the International Trade Centre. Back
4
Afghanistan, Bhutan, Cambodia, Lao DPR, Maldives, Nepal and Yemen.
The EU did not include Myanmar, the ninth non-ACP LLDC, because
of the situation of human rights in this country. Back
5
The EU had said previously they may become binding if other WTO
members supported the idea. Back
|
