This Week in Europe, 13 October 2000
Executive Director of the Caribbean Council for Europe
On September 20th, Europe’s Commissioner for Trade, Pascal Lamy, announced that the European Commission (EC) had agreed to a proposal that will result in the world’s forty eight Least Developed Countries (LDC’s) being offered duty-free and quota-free access into the European Union (EU) for all of their products except arms.
Quite rightly, the decision to support, through trade measures, the world’s poorest nations was hailed as forward looking and a more than required response by Europe. It was also seen as offering an end the marginalisation of the world’s poorest countries through an initiative that it is hoped the US and Japan will match.
But beware. As the saying goes, one man’s meat may be another man’s poison.
It is now clear that if the proposal, variously described as the ‘Lamy initiative’ or the ‘everything but arms initiative’ is taken forward without significant amendment, it will seriously damage every commodity dependent Caribbean economy. So much so that it is no exaggeration to say that it could result in the destruction of much of the Caribbean’s sugar and rice industry, do serious damage to the rum industry’s last remaining chance to compete in the EU market and diminish further the prospects for Caribbean bananas in Europe.
Under the EC’s proposal, all LDCs, regardless of whether they are ACP states or not, will receive duty and quota-free access to Europe by the end of 2001. This rapid timetable has been concieved to meet the EC’s World Trade Organisation (WTO) commitment to open its market to LDCs and in order that the new measures can be incorporated into the review of the Generalised Scheme of Preferences due in 2001. Only in the case of bananas, sugar and rice will duty-free and quota-free access be phased in over a three year period up to 2005 at the latest, in order to recognise the sensitivity of these commodities.
In the case of sugar, the effect is that the EC proposes unilaterally to set aside the present sugar regime. The result, if present proposals go ahead, will be an EU market flooded with low cost sugar, possibly originating in sources other than those intended to benefit from Europe’s LDC initiative. As a result the EU sugar market will become unstable and ACP suppliers will find themselves displaced, irrespective of the legally binding nature of the existing ACP sugar protocol.
In the case of rice where no protocol exists but where the EU market is carefully regulated by a tariff/quota and a regime almost as complex as that for sugar, ACP and other producers will also experience displacement. In their case they will have to face competition with massive producers such as Bangladesh, Cambodia or Laos.
Rum producers will also face problems. Just at the moment the industry hoped to have a period of relative calm during which European assistance would become available to enhance competitiveness and enable the transition from sales of low value commodity rum to high value branded product, LDC producers will have a more advantageous tariff position in the EU market.
For banana producers the idea of tariff and quota-free entry for LDC producers will not only throw the present battle to find an acceptable EU regime into turmoil, but may well distort the whole market if some of the LDC’s presently not exporting to the EU decide to undertake production to take advantage of the new market opening.
The overall EC proposal, that still has to be the subject of consultations and eventual agreement between European ministers, is politically sensitive and difficult for the region to address. Because it offers the 39 ACP LDC’s and nine non-ACP LDC’s access to Europe in perpetuity on a non-reciprocal basis it threatens the solidarity of the ACP group.
It ignores the fact that small producers such as those in the Caribbean or Mauritius are also uniquely vulnerable. That is to say, it will discriminate in favour of the 39 poorest ACP nations through a non reciprocal relationship whilst the remaining 38 are expected by Europe to have to begin negotiations in just under two years time for a post 2008 reciprocal trade relationship with the EU. It will also bring into question in parts of Africa and elsewhere in the ACP the coherence of sub-regions and economic groupings in which some nations will have reciprocal relationships with the EU while others, sometimes with contiguous borders will not.
Apart from threatening the future of the sugar, beef and banana protocols, the Lamy initiative may also damage, perhaps terminally, the ideas being developed on commodity issues by the Caribbean Regional Negotiating Machinery for the EU/ACP negotiations for a post 2008 EU/ACP trade regime. For this next round, scheduled to start in September 2002, Caribbean negotiators had been trying to establish a basis on which a new longer-term WTO compatible arrangement might be created for sugar and bananas in particular.
Significantly, the EC’s LDC announcement was taken without reference to the Declaration XXIII of the new Cotonou Convention which provides for consultation and oversight on the likely impact of any such decision on a post Lomé, post Cotonou ACP/EU trade regime. The same declaration also makes clear that any threat during the period up to 2008 to the ACP’s competitive position should have been subject to a review based on preparatory work undertaken by the EC and the ACP Secretariat.
To further complicate matters, the way that the EC is proposing to take the matter forward is by way of an amendment to an existing regulation and will not require a joint decision with the European Parliament.
So what should the ACP Caribbean do, given that the region is also committed to support any initiative aimed at helping the world’s poorest nations?
The first step must be for governments to recognise the true nature of the threat facing regional industries and its immediacy. The second is to ensure that the rest of the ACP understands the broader implications. A third will be to engage in urgent dialogue with the EC’s Trade Directorate and to have the ACP and EU agree to have convened the Joint Trade Ministerial Committee provided for in Declaration XXIII of the Cotonou Convention. Thereafter, further steps might involve seeking delay in order to ensure that the very complex implications are fully understood by the EU. It will also involve each industry developing a strategy as to how it sees its future in a world in which LDCs have the least parity on commodities.
But more fundamentally the issue will require a significant political initiative in the ACP and in the EU. There is some suspicion that the reason the proposal emerged from EC College of Commissioners so rapidly was because they were aware that the only way their differences might be resolved was politically. That is to say through the EU Council of Ministers trying to achieve a balance between national commitments to domestic producers of products such as sugar or rice, the EC’s unavoidable WTO commitments and its desire to have a more intimate relationship with developing nations over the global trade agenda. If, as seems likely, this is the case, then the Caribbean will need to rapidly forge alliances with those European leaders who understand the implications of the Lamy proposals for the ACP group and have them recognise why the Caribbean’s interests must also be factored into this complicated equation.