Memorandum from Dr Chris Stevens and Mr
Keith Bezanson, Institute of Development Studies
THE FUTURE OF THE LOMÉ CONVENTION
EXECUTIVE SUMMARY
The UK will hold the Presidency of the EU when
the negotiations for a successor to the Lomé Convention
are scheduled to begin with the African, Caribbean and Pacific
(ACP) states. Despite an extensive period of consultation by the
Commission, and the publication of a Green Paper, it is far from
clear what should follow Lomé. Yet the stakes are high,
since whatever is decided will affect many other developing countries
besides the ACP.
The faults of Lomé are clear enough.
It is discriminatory and hard to square with the World Trade Organisation
(WTO), it excludes some very poor states and includes some middle-income
ones, and it has demonstrably failed to result in ACP trade growth
and diversification. When Lomé I was signed it provided
the coherent policy and administrative framework that was noticeably
absent from other aspects of European-level development co-operation.
Following the Maastricht Treaty and the explosion of Union aid
to other destinations it appears increasingly as an anomaly.
The problem is that there is nothing in the
EU's extensive arsenal of trade accords that offers an adequate
alternative. A replacement to Lomé will involve either
the creation of a new type of regime or simply the extension of
an inferior existing system. The former, while attractive, appears
to be of questionable feasibility in the light of the dismal experience
of the South African trade negotiations. The latter would result
in a move by the EU towards illiberalism and tend to reinforce
the current bias in trade policy in favour of middle-income and
transition states.
Yet it ought to be possible to integrate Lomé
into a coherent EU trade policy through relatively modest improvements
in the regime offered to non-ACP states. The Memorandum concludes
with a proposed negotiating stance for the successor regime that
attempts to make these improvements whilst incorporation a robust
"stop-loss" position to ensure that the net result of
change is not simply: to marginalise the ACP, to shift EU aid
spending to its relatively weaker departments, and to make European
trade policy less liberal.
The proposal is to use Lomé as an umbrella
relationship with elements that are selected on an á
la carte basis by different countries, following the innovation
introduced for South Africa. This would allow the ACP to be joined
by other least developed states, Central America and the Andean
Pact (the Super GSP beneficiaries) and (more contentiously) other
areas as members of a Lomé-style Convention in which they
share certain common arrangements. The precise details of their
trade and aid relationship with the EU would, however, be subject
to individual and regional negotiation. But an essential element
is that no ACP agreement should be less favourable than the present
regime.
THE RELATIVE
POSITION OF
LOMÉ
Given the forthcoming negotiations for a successor
to the IVth Lomé Convention, which will reach a critical
point during the UK Presidency of the EU, the focus of the Committee's
enquiry is entirely justifiable. That said, it is important that
the Lomé Convention be seen in its wider context since
this has changed substantially over the past decade. A failure
to do so may result in apparently sound recommendations having
perverse effects.
When Lomé I was signed in 1975, the Convention
stood apart from Europe's other links with developing countries.
It provided the coherent policy and administrative framework that
was so noticeably absent from other aspects of European-level
development co-operation. Its extensive trade preferences created
an innovative trade relationship contrasting with most of the
rest of European commercial policy. The European Development Funds
(EDFs) offered an aid framework that was more substantial in financial
terms and more predictable than were the other Community-level
aid mechanisms.
With the signing of the Maastricht Treaty, the
proliferation of trade agreements, and the inexorable growth of
aid funded from the EU Budget, these unique features no longer
apply. Indeed, elements of the Lomé Convention appear increasingly
as an anomaly. The structural split, for example, between aid
from the EDF and from the main Budget is sidelining many of the
world's poorest countries.
The principal problem with moving beyond Lomé
to a more coherent, poverty-focused European trade and aid system
is that there is nothing in the EU's extensive arsenal of accords
that offers an adequate alternative.
— The replacement of Lomé could
represent a step forward through the creation of a new type of
regime that extends the desirable features of the current Convention
while melding them into a more coherent universal framework that
jettisons its less satisfactory characteristics.
— Unfortunately, it could also
represent a step backwards, with the current Convention being
superseded by one of the inferior off-the-peg existing systems.
The EU's recent policy moves suggest that a
step backwards is more likely than an advance. This would not
only leave the African, Caribbean and Pacific (ACP) states worse
off, but would also represent a step away from a wider liberal
trade policy for the EU and from a poverty-focused aid programme.
Yet it ought to be possible to integrate Lomé
into a coherent EU development policy through relatively modest
improvements in the regime offered to non-ACP states. An appropriate
UK negotiating stance for the successor regime would be one which
attempts to make these improvements whilst incorporating a robust
"stop-loss" position to ensure that the net result of
change is not simply: to marginalise the ACP, to shift EU aid
spending to its relatively weaker departments, and to make European
trade policy less liberal.
This submission from the Institute of Development
Studies begins with a general review of the wider, European context
and then addresses the four questions specifically identified
by the Committee. These are the effectiveness of Lomé,
its relationship with the WTO, the European Commission's Green
Paper and the requirements for the renegotiation.
The Maastricht framework
Two innovations of the Maastricht Treaty were
to establish policy objectives for Europe's relations with developing
countries and to set out the relative roles of the Union and national
tiers of government. Before then, Union-level development co-operation
policies had been based on a hotchpotch of arrangements. Some
were rooted in powers that had clearly been transferred from national
to Union level (e.g., trade preferences). For others the justification
and objectives of Union-level policy were more obscure (e.g.,
aid). One consequence was that there was insufficient clarity
on the relative roles of the Commission and national governments
to sustain a coherent Europe-wise strategy of development co-operation.
This absence of general framework for development
co-operation gave the full exposition of the Lomé text
and its comprehensive set of supporting institutions a considerable
importance. This has now changed.
The old regime, based to a significant extent
on broad interpretation of clauses in the Treaty of Rome and administrative
regulations, were superseded in Maastricht by a clearly defined
set of objectives. Titles XVII of the Maastricht Treaty establishes
the legal basis for Union level activities. Article 130u includes
the provision that:
Community policy in the sphere of development
co-operation, which shall be complementary to the policies pursued
by the Member States, shall foster:
— the sustainable economic and social
development of the developing countries, and more particularly
the most disadvantaged among them;
— the smooth and gradual integration
of the developing countries into the world economy;
— the campaign against poverty in the
developing countries.
The phrase "which shall be complementary"
has been taken to imply that development co-operation is not an
area in which the principle of subsidiarity is dominant, i.e.,
aid is not an instrument that must be exercised at either a Union
or a national level. On the contrary, the phrase provides legal
justification to the view that there are 16 aid programmes, one
each for the Member States plus one for the Commission. Union-level
aid policy is neither superior nor inferior to national policy.
How should these 16 aid programmes relate to
one another? Article 130x of Masstricht calls on the 16 to co-ordinate.
It specifies that:
The Community and Member States shall co-ordinate
their policies on development co-operation and shall consult each
other on their aid programmes, including in international organisations
and during international conferences. They may undertake joint
action. Member States shall contribute if necessary to the implementation
of Community aid programmes.
Another consequence of the Maastricht Treaty
for development co-operation, that is not specifically referred
to in Article 130, concerns decision-making. Along with other
areas of Union decision-making, action on development co-operation
can be approved by majority voting in place of the unanimity previously
required.
One very important exception to this rule, however,
is the EDF. As an extra-budgetary arrangement, unanimity remains
the rule. This difference in the structure of decision-making
between aid for developing countries funded out of the European
budget (majority voting) and out of the EDF (unanimity) had important
policy consequences in 1995.
Also excluded from Article 130 (because they
do not concern developing countries), and therefore still
subject to unanimity, are the provision of domestic aid to the
countries of Central and Eastern Europe under the PHARE programme
and the provision of technical assistance for economic reform
and recovery in the former Soviet Union (FSU) and Mongolia under
the TACIS programme.
Trade policy
Just as Lomé is now only one element
of the EU development co-operation policies, so is it also just
a part of a wider trade policy system that has grown up over time
and is particularly complex. The criticism that it is difficult
to justify under WTO criteria is shared with many of the other
elements.
The system provides different degrees of preference
to various groups of countries, developed and developing. The
depth and breadth of these preferences are not necessarily related
to any objective criteria, such as the level of development of
the recipient country. Figure 1 provides a simplified view of
the multiple layers of trade policy. It identifies five bands,
but also shows that the top three bands have much in common and
are distinguishable as a broader grouping from the bottom two
bands.
The details of the differences between the bands
is summarised in Annex A, but in broad terms it is helpful to
think of the EU's trade policy as defining three groups of states
of roughly equal importance in trade terms.
— The most favourable access is made
available to the 121 developed, developing and transition states
that fall into the three top tiers of the pyramid of privilege.
— Next come the newly industrialised,
middle-income and poor countries that benefit only from the standard
Generalised System of Preferences (GSP), numbering some 54.
— At the base, with the least favourable
access, are the five industrialised states that receive the misnamed
most-favoured-nation (MFN) treatment by virtue of their
WTO membership together with states that are not in the WTO but
to which the EU offers autonomously MFN access.
Each of the groups accounted for approximately
one-third of EU imports in 1995.
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