Caribbean to lose in EU’s ‘Everything-But-Arms’ deal

by Bert Wilkinson

Georgetown, 1 Mar (IPS) -- When it was first proposed late last year, Caribbean governments painted a picture of doom, saying any move by the European Union to abandon decades of preferential treatment for their traditional exports would devastate their economies.

But a mere five months after the EU revealed plans to open up its market to goods from the 48 Least Developed Countries (LDCs) in the world, the plan has become a reality.

This week, EU foreign ministers agreed to allow these poor countries immediate tariff-free access to the trade bloc’s markets for all non-military goods in what is being called the ‘Everything-But-Arms’ deal. The move is designed to level the playing field among developing nations.

For the Caribbean, whose exports get preferential access to the EU because of a past colonial relationship with Europe, the agreement spells trouble, officials say.

Major regional exports like bananas, sugar and rice, although exempted from the agreement now, will soon face competition from countries that have traditionally produced at much lower costs than in this part of the world.

In the case of rice, the Guyana Rice Development Board is already saying that no producer in the Caribbean can beat Asian growers because labour and other costs are extremely cheap in that region. Eventually, the vagaries of the free market will push Caribbean producers out of Europe, the Board says.

Caribbean rice exports to Europe amount to more than 200,000 tons per year.

In the case of sugar, the EU has decided to chop the annual quota assigned to the 77-nation African, Caribbean and Pacific (ACP) group of countries, instead of increasing it, to accommodate African and Asian countries that are likely to take advantage of the new opening.

“They have robbed the poor to give to the poorest,” says Brian Webb, chief executive officer of the Guyana Sugar Corporation, the largest producer in the English-speaking Caribbean. “They have not conceded anything, not an inch. They have not interfered with their beet farmers or anything and they will get kudos for this.”

But while duties for sugar and rice from the LDCs will gradually start to reduce by 20% per annum in 2006, banana farmers will have to face up to the fact that tariffs will come down, also by 20%, from as early as July next year. In the following year, sugar and rice tariffs will come down by 50% and by an astonishing 80% by July 2008.

The banana levy will be eliminated altogether by the start of January 2006. The Caribbean produces a mere 2% of world banana production. The industry had already been threatened by US efforts to dismantle the EU’s preferential treatment, which the Americans say, has discriminated against their Latin American-based banana growers.

Banana accounts for as much as 70% of the revenue for several Eastern Caribbean states.

“The unilateral action by the EU breached the Cotonou Agreement by not allowing Caribbean countries the opportunity to negotiate adequate transition provisions on their major exports to the preferential markets in Europe,” a Guyana foreign ministry release said Thursday.

The Cotonou accord, signed only last year, replaced the Lome Convention that had governed trade and aid arrangements between the EU and the ACP states for more than a decade.

Detailing how the new moves will affect the $500 million per year sugar export industry, Webb said that the previous system of allocating production shortfalls among fellow ACP members has been abandoned. Such a quota, up 300,000 tonnes per year, will now be set aside for the newcomers.

The loss to regional members will be $31 million when it becomes effective and $83 million five years later.

He said Mauritius, Fiji and Guyana, the three largest sugar exporters in the ACP, would be among the hardest hit by the move.

But both Webb and the foreign ministry were careful to make clear that they do not object to the market opening in principle since many of the new beneficiaries are countries listed as developing or under-developed.

The alternative, they say, would be for exporting states to begin to look outside the EU for third-country markets for sugar, rice and bananas.

Caribbean officials say they will continue to argue that such a radical step should not have been undertaken unless the EU was prepared to commit itself to reviewing the ‘Everything-But-Arms’ deal and its effects on the Caribbean and to find ways of maintaining some of the traditional benefits to ACP countries, for sugar in particular.

They also say the decision has implications for EU-ACP relations and could hurt any new round of negotiations of the World Trade Organisation.