Supplementary memorandum
submitted by the Overseas Development Institute
***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 thirty-nine
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 thirty-nine 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, such as the Kyoto Agreement; 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 this 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 (2000-2003)
"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
ODI, London 25 November 2004.
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