Select Committee on International Development Written Evidence

Memorandum submitted by Adrian Hewitt, Overseas Development Institute (ODI)

  Unlike the four previous Lomé Conventions, Cotonou in its trade particulars is essentially "an agreement to agree" post-2008 arrangements. So the temptation to prevaricate and to sustain or perpetuate existing rent-seeking arrangements as long as possible may be tempting for either or both sides. Such a stance however would be developmentally damaging to the ACP countries themselves if it can be shown that restructuring is overdue, and to the other developing countries, on the grounds that any special trade preference is a distortion disadvantaging those non-preferred.

  However, the intended introduction of EPAs does introduce three new elements which are likely to be unwelcome to ACP countries accustomed to special treatment by the EU for the past 29 years (and by some of its Member States, and in some cases, since before then).

  First, the the abandonment of non-reciprocity. ACP countries will be extremely reluctant to offer the vastly more developed and competitive EU countries preferences, especially if complete symmetry is demanded, when the ACP states have been accustomed to receiving autonomous and unreciprocated preferences for the past three decades. Many will prefer not to sign unless offered additional incentives or compensation. They will also realise that what they offer in terms of (reciprocated) market access to the EU, they will have to offer to the other big players such as the USA, Japan, and nowadays even Brazil and India too. Under the present proposals and with EBA (the EU's Everything but Arms) applying to 39—ie exactly half—of the 78 ACP countries which are classed as Least Developed, those first 39 least-developed can simply risk opting for an EBA which they hope to be durable, and not too constrained by rules-of-origin, while the other 39 developing—including countries like Kenya, Guyana and Fiji whose income levels and development is not markedly superior to their least-developed and often regionally-integrated neighbours—will suffer new discrimination even if they sign up for EPA.

  This is because of a second change: whereas Lomé strengthened the solidarity between ACP states by asserting (in Article 174(2)(b)) non-discrimination between ACP states, the Cotonou agreement has eliminated this article.

  Third, the EU's new policy conditionalities may require ACP governments to forgo their aid and trade entitlements if they do not comply with certain norms of "good governance" and even sign up for certain treaties which may be internationally contested; ACP governments are likely to have differing views on the desirability of complying in return for (perhaps reciprocated) trade preferences or maintenance, for a few more years, of traditional post-colonial privileges.

  The cumulative effect of these three elements will however be to drive a wedge through the middle of the ACP Group, perhaps most obviously between the 39 least-developed and the rest (even though this is not a distinction which the UK uses for its bilateral development policy, using instead the criterion of low income), but also via the regions (if EPAs are going to be pursued as a purported external inducement to regional integration), and finally by detaching the C and the P ( the Caribbean and the Pacific) from the African countries or sub-groups. While only a conspiracy theorist would say that the EU has intended to "divide and rule" the ACP, this may be the unintended effect of its own mix of policies.

  While DFID's spending policy itself is increasingly focused on sub-Saharan Africa (and South Asia), HMG's overall development policy is not to detach the Caribbean countries (who have provided some of the best leaders and instigators of policy within the ACP over the years, and as robust democracies have strong political relationships with the UK) from the focus of activity, nor to neglect the increasingly fragile Pacific developing countries, especially a least developed and recently (2000-03) "failed state" such as Solomon Islands (which until the late 1970s was a direct British responsibility) or Fiji, which has suffered three coups in the past fifteen years, and from which region it has been the prerogative of the member states to designate the next ACP Secretary-General, Sir John Kaputin of Papua New Guinea, from 2005 onwards (subject to confirmation by the ACP Ministers next week).

  The danger is now that under EPA the ACP will lose their group negotiating power and coherence, just as in the WTO they are now beginning to be grouped by the G20 rump as a tiresome little groupuscule trying to sustain outmoded privileges which are damaging to the more rapidly developing countries in the South. The ACP must also ensure that they do not become their own worst enemies, for none of the new EU member states hold any particular brief for the ACP Group, and in the final analysis probably only the UK and France do from the older members (and the UK alone for maintaining or fulfilling EU obligations to the seventeen ACP countries under the Sugar Protocol).

  Fifty years of experience with non-oil commodity-dependence has revealed the validity of the Singer-Prebisch theory that terms of trade for commodity producers tend towards long-term decline (this has been accepted since the 1990s even by the IMF) and too many of the ACP continue to demonstrate the worst symptoms of narrow commodity-export dependence. Even though many developing countries are currently growing fast on the back of (essentially, China's) rapidly expanded demand for raw materials, too many ACP countries are still stuck with vulnerable dependence on agricultural commodities for which the world market is already spoilt or distorted. For too long, special preferences notwithstanding, they failed to attract the investment which would have enabled them to industrialise; now the prospect of perpetuating backward-looking preferences (as well as offering preference-donors unconditional reciprocity) will also divert them from services enterprises too (especially mode 2 and mode 4), for which market-opening negotiations are much more urgent and potentially rewarding. Ideally a deal should be struck whereby the EU offers access in these forward-looking areas and modes as "compensation" for the erosion or withdrawal of unreciprocated special preferences and privileges which will inevitably be withdrawn. For that, the ACP have to show solidarity and negotiate boldly, as a condition of pursuing EPAs, on the terms of compensation; they have yet to take this step. Similarly, a new European Commission might like to consider updating its negotiating stance on the ACP agreements to fit the requirements of the 21st century.

Adrian P Hewitt,

Head of the ODI Fellowship Scheme

November 2004

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