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A poisoned present for the poorest countries

by Dr Raoul Marc Jennar

Brussels, 4 May 2001 - Opening the European markets to the products of the countries of the South is one of the most elementary factors of a fair global exchange order based on free trade. For years now, the countries of the South, under constant pressure from industrialized countries to increasingly open up their own markets, have been waiting for westerners to do the same. A recent EU initiative appears as a positive response to this expectation. Yet, beyond all appearances and after a close examination of the initiative, its modalities and implications, what transpires is nothing more than a super-fraud.

It is important to recall the context of this initiative, that is, the preparation of the next WTO ministerial conference. Since Seattle, the European Trade Commissioner, Pascal Lamy, has been actively campaigning to influence developing countries in the hope of enticing them to join the European position, which favours a large round of negotiations aiming to impose a greater liberalization of all of the economic, social and cultural sectors of life. He has issued a number of proposals aiming to convince these countries. The most spectacular of these is entitled ‘Everything but Arms’ (EBA). It was adopted by the European ministers on the 26 of February.

The EBA initiative will allow free - without quotas and taxes - access for “all” products which could be exported by the 49 least developed countries (LDCs), except arms and munitions. This means that all agricultural products and those derived from agriculture originating from the poorest countries (39 of which are ACP countries) will have a totally free-access to EU markets. This initiative has been presented as the will of Europeans to contribute to the economic development of these countries. It appears as a great show of generosity.

An in-depth study of the initiative and an evaluation of its impact on the agricultural sector of LDCs confirms that it amounts to nothing more than a facade. The real positive impact for the countries of the South will be very limited while the long-term consequences will reinforce dependency. The aim of the initiative is merely to seduce. Seduce those sectors of the European public opinion who are demanding that real efforts be made by rich countries to correct the imbalances affecting the planet. Seduce the LDCs so that they give in at the WTO and stop the resistance they have been putting up for nearly two years now against a new round of negotiations before the existing agreements have been evaluated and changed and before a necessary reform of the WTO. The EU’s Swedish presidency has not even tried to hide Europe’s real intentions and has indicated that the initiative is “an important signal to the LDCs in view of the upcoming WTO negotiations” The question is, what signal? That of European hypocrisy, no doubt. Indeed, behind a facade of generosity lurks a rather different reality.

Firstly, the proposal will be implemented only through progressive phases which will extend through to 2009. Particular modalities have been included for bananas (for which the European market will open between 2002 and 2006), for rice and sugar (the opening for these products has been phased between 2006 and 2009). LDCs are kindly being asked to follow the proposals of the EU at the WTO as from this year. Yet, for the main bulk of their exports, LDCs will receive the present - if it can be called a present - in only 8 years!

The Lamy initiative stems from a fundamental choice: that of free-exchange over sustainable development.

The EBA initiative invalidates market regulation instruments such as the system of quotas and prices. Prices will thus decrease and the poorest countries will lose their comparative advantage. The victims of this liberalization are the producers. Those who will profit are traders and, up to a certain extent and for a limited period of time, consumers. Such a system will induce a concentration and industrialization of the production sector, which, in the long-term, will be harmful to consumers. The EU has learnt nothing from the dramatic errors that resulted from its hyper-productive agricultural policy.

For the three products for which the opening is delayed, the European Commission’s initiative annuls the agreement’s mechanism established with the ACP countries. The mechanism offered a European price guarantee for their products. Even though the Cotonou agreements were signed only 8 months ago, they are already being transgressed unilaterally by the EU. In the name of development, the EU will replace imports from ACP countries benefiting from a price guaranteed by imports with no price guaranteed. For the same quantities, ACP countries will sell their products more cheaply. In short, they will lose out.

The EBA initiative invalidates the sugar protocol, the only instrument which regulates the market for this product. Sugar, like other agricultural products, cannot be left to the erratic - but by no means innocent - market fluctuations if the aim is to protect the revenues of farmers-producers rather than those of traders. The latter are the only real beneficiaries of the European initiative.  By eliminating quotas, production is left without a framework. Overproduction leads to a fall of prices, which will mean that producing countries will lose their comparative advantage. The price on the global market for a product like sugar is extremely unstable and, on average, inferior to the production cost for all countries. This means that, in the absence of a control mechanism on the supply side - the counterpart of which is a price guaranteed - the only law applicable is that of austere free-trade which the effect is a collapse of prices.

Farmers everywhere, those of LDCs as much as European farmers, will lose out.  The only winner is the free-trade dogma. LDCs will be incited to export agricultural products at a loss only to re-import them afterwards from the global market. This is exactly the opposite of what sustainable development is meant to be. It means an increasing dependency on Europe. Colonialism pursues the same objective through different methods, the objective being the exploitation of the countries of the South.

The opening of European markets for the producers of the South, a sincere and fair opening which truly contributes to sustainable development, implies giving up the European Commission’s neo-liberal dogmatism. It implies setting up a framework to regulate the market and opening preferential duty-free import quotas and establishing a price guaranteed.

Inspired by the Lome protocol, this alternative is more flexible than the irreversible Lamy initiative since it offers the possibility of being reviewed.  It enables changes to be taken into account and forecasts to be made in terms of, for example, the possibility of a regular review of quotas. In addition, this alternative ensures a price guaranteed for the poorest countries. This formula is by far preferable to the negotiated prices which would result from the EBA initiative rendering these countries dependent on Europe and which would entail a price between that of the European Union and the global market.  Finally, the alternative is non-discriminatory since it is applicable to everyone. The EBA initiative, on the other hand, imposes a market access regime to some, but not to others.

The EBA initiative has been taken without prior consultation of the Agriculture Ministers of the European Council nor, of course, of the European Parliament. It forces LDCs to be flexible at the WTO. This is its only objective. As reported by the French newspaper ‘Le Monde’, quoting one Commission’s senior official, “in this type of situation, leaders pay less attention to figures than to political facts”.

It is not surprising to witness the strong support in favour of the EBA initiative at the Geneva WTO headquarters.

Indeed, this is where, against the opinion of a majority of Member states, the European will favouring a large cycle of negotiations is being strongly supported. The WTO Director-General’s comments leave no doubts as to the real

intentions of the Europen Union. According to a WTO press release, “Mr. Moore congratulated Mr. Pascal Lamy, EU Trade Commissioner, for the tangible contribution to global trade and for firmly placing EU trade policy in the interests of development concerns. He also hailed the decision as a concrete demonstration of the EU’s goodwill in the context of preparations for a new round of WTO trade negotiations” – SUNS 4889

(*Dr Raoul Marc Jennar is a member of the Research, Training and Information Unit on Globalization - URFIG. An abridged version of this was published in the Belgian daily ‘Le Soir’ on 30 March 2001; the full analysis can be found at URFIG website, www.urfig.org).

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

[c] 2001, SUNS - All rights reserved. May not be reproduced, reprinted or posted to any system or service without specific permission from SUNS. This limitation includes incorporation into a database, distribution via Usenet News, bulletin board systems, mailing lists, print media or broadcast. For information about reproduction or multi-user subscriptions please contact: suns@igc.org

 


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