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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