The Dutch Presidency of the European Union and Development
Nationale Adviesraad voor Ontwikkelingssamenwerking (*)
August 1996
The Dutch Presidency of the European Union and Development
Nationale Adviesraad voor Ontwikkelingssamenwerking (*)
August 1996
Publications of the National Advisory Council for Development
Cooperation are available free of charge from the Council's Secretariat:
P.O. Box 20061, 2500 EB The Hague, The Netherlands. Tel: +31 70 3486060, Fax: +31 70 3486256, E-mail: nar-dgis@dgis.minbuza.nl. NAR Home Page.
(*) This recommendation was prepared by a working party consisting of the following members of the Council: Dr P.R.J. Hoebink (chairman), Dr R. Cohen, Dr M.P. van Dijk, Dr G. Faber, Professor J.W. Gunning, F.D. van Loon and Dr N.J. Schrijver.
1 COHERENCE AND EUROPEAN DEVELOPMENT POLICY
2 TAKING STOCK OF 25 YEARS OF LOMÉ
3 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
Annex 1 Request for recommendation
In the first half of 1997 the Netherlands will hold
the Presidency of the Council of Ministers of the European Union
(EU). The Presidency represents a challenge and an opportunity
to initiate new policy both generally and in the field of development
cooperation.
The debates on the implementation of the development
sections of the Maastricht Treaty can be said to revolve around
three Cs: coordination, coherence and complementarity. The National
Advisory Council for Development Cooperation (NAR) published a
recommendation on the Maastricht Treaty and its implications for
European development cooperation in August 1993. In the present
recommendation, the Council has, at the request of the Minister
for Development Cooperation (for the request for a recommendation,
see annex 1), concentrated on one of these three Cs in particular,
namely coherence. The term refers not only to the coherence of
development policy but also to coherence between the development
objectives mentioned in the Maastricht Treaty and other policy
of the Community. The first part of this recommendation examines
the legal basis for coherence of policy and various forms of incoherence
and also makes some proposals for increasing the coherence of
policy.
As a debate on the future of the Lomé Convention will probably be started during the Dutch presidency, the Council has taken the opportunity, in anticipation of this debate, to make some observations and recommendations on the future cooperation of the EU with developing countries. For this purpose, chapter 2 lists the forms of cooperation between the EU and the developing countries and outlines themes for the forthcoming debate. In addition, recommendations will be made for a reorganisation of this cooperation.
1 COHERENCE AND EUROPEAN DEVELOPMENT POLICY
Coherence of policy is important to every field of
government policy. Governments might lose their legitimacy and
credibility if they frustrate or hamper the attainment of objectives
in a particular field by means of activities in a different field.
Establishing coherent policy is therefore an aim of all government
action. In this connection coherence can be defined either narrowly
or broadly. A narrow definition would be that objectives of policy
in a particular field may not be undermined or obstructed by actions
or activities in this field. And a wide definition would be that
objectives of policy in a particular field may not be undermined
or obstructed by actions or activities of government in other
policy fields. However, coherence is not the only aim, and if
maximum efforts were made to achieve coherence this might gravely
impede the implementation of that policy. Incoherence of policy
is, after all, frequently a given. Since government has to deal
with many parties and pressure groups, it may well be impossible
to find optimal solutions that satisfy all parties concerned and
attain all objectives. Consequently, it is frequently necessary
to settle for second-best solutions that entail a degree of incoherence.
Various types of incoherence can be identified in
the field of development cooperation in particular, both in the
policy of the European Union and above all in that of the member
states. One reason is that among all the hubbub generated by the
pressure groups the arguments of those advocating development
objectives are often heard only indistinctly or indirectly.
1.1 Legal basis of coherence
Article 130 V of Title XVII of the Treaty on European Union - the Maastricht Treaty - states that:
This article could be called the Maastricht Treaty's "coherence article" in the field of development cooperation. Article 130 V refers to Article 130 U, which sets out the general development objectives for the Community:
2. Community policy in this area shall contribute to the general objective of developing and consolidating democracy and the rule of law, and to that of respect for human rights and fundamental freedoms".
According to the European Commission, the importance of coherence of development policy and other policy fields is also underlined in article C of the Common Provisions of the Union Treaty:
In the light of the above, coherence could be defined in the following way:
In its Declaration on development policy for the year 2000, the EC Council of Ministers of Development Cooperation emphasised the importance of coherence of policy at its meeting in November 1992. The Declaration referred among other things to the "linkage" between development cooperation policy and other areas of Community policy:
In this document the Council invited the Commission
to report in time for the meeting of the Development Council in
1993. The relevant report, which will be dealt with below, was
presented in November 1994.
It should also be noted that there is already some precedent concerning this article in the form of the Commission's decision on beef export subsidies of May 1994. The Commission stated as follows in this decision:
A little later on the Commission also proposed measures
such as the collection of data and adjustment of the subsidies
"for the purpose of ensuring coherence between the Common
Agricultural Policy and the development policy".
As far as coherence relating to the development objectives established in the Union Treaty is concerned, it is possible to draw a certain parallel with Article 130 R. This states that:
In conclusion, therefore, the term coherence does
not appear as such in the Treaty on European Union. Instead the
Treaty talks in terms of "taking account of". In a later
resolution the Council refers to "the linkage that exists"
and to "the impact". It was not until the Commission's
decision on beef export subsidies of May 1994 that the terms coherence
and incoherence were used.
1.2 Incoherence in European policy
The National Advisory Council identifies three types
of incoherence. First of all, there may be incoherence between
the development objectives of the Maastricht Treaty and the external
policy of the Community (external type). Second, incoherence may
exist between Community development policy and internal Community
policy (internal type). Finally, there may be incoherence between
Community development policy and the development policy of the
individual member states (inter-European type).
| external type | development policy | external policy | commercial policy |
| internal type | environmental policy | agricultural policy / fisheries policy | |
| inter-European policy | development policy of the member states | ||
An example of the first type of incoherence - i.e. the external
type - is incoherence in European development policy itself. This
mainly involves incoherence between the different instruments
of development policy. An obvious example is food aid: aid that
is sent too late may arrive just at the moment when the local
farmers are getting in the harvest. In such circumstances the
food aid may limit the scope for them to sell the very produce
which they have been encouraged to grow by development programmes.
A second example of this type of incoherence is the overall external
activities of the Union in relation to development policy. It
was noted in the Benelux Memorandum for the Intergovernmental
Conference in Turin in March 1996 that there is a lack of "unity
in the external activities" of the Union. Arms export policy
is an example of this. Various European member states rank among
the world's main arms exporters. A major part of these arms exports
is sent to developing countries, where the arms are often used
in internal conflicts or for repression. Arms exports of this
kind, many of which do not satisfy the criterion of a legitimate
need for defence, are contrary to the development objectives of
Article 130 U and also to the international efforts to reduce
defence expenditure.
Finally, the third example of this type of incoherence is between
development objectives and commercial policy. If it is the intention
to integrate the developing countries gradually into the world
economy, they should be given sufficient opportunity to sell their
products in the European market and hence to have as far as possible
unrestricted access to it. The objectives of Article 130 U should
also be taken into account when all kinds of decisions are taken.
In practice, many different interests often have to be weighed
when such decisions are taken and the internal interests of producers
of the member states are frequently given precedence. Examples
are the so-called cocoa decision and the resistance to the importation
of cut flowers and tomatoes.
The second type of incoherence is that between the development
policy of the Community and internal European policy. The first
form which this second type of incoherence - i.e. internal incoherence
- could take is incoherence between development policy and environmental
policy. Article 130 R, which has been referred to above, records
that environmental protection requirements must be integrated
into other Community policies. This also necessitates review of
the European activities in the area of development cooperation.
European policy is this field is still underdeveloped; DG I and
DG VIII have only a small staff, there are still few detailed
policy documents and procedures and there is little cooperation
between DG I and DG VIII in the development of policy and procedures.
A second form which this type of incoherence can take is that
between development policy and other internal Community policies.
The most obvious example of this is the common agricultural policy.
Over a period of several decades, Third World groups have pointed
out that subsidising the production of sugar beet and excluding
cane sugar from the European market are inconsistent with development
policy. Another example is the fisheries policy. The absence of
measures to reduce the size of the fishing fleets means that the
problem of overcapacity has not been tackled and has in fact been
exported by the conclusion of catch quotas under fisheries agreements.
Two criticisms of these fisheries agreements are that they create
problems for the local, small-scale fishing fleets and that there
is a danger of over-fishing because catches are not inspected.
The third and last type of incoherence that can be identified
in this connection is the "inter-European" type, i.e.
incoherence between the development policy of the European Union
and that of the member states. It is conceivable, particularly
in the case of specific projects and programmes, that certain
activities which the Union finances or undertakes may be at odds
with similar activities of the member states. This could, for
example, happen in health care policy if the Union were to wish
to encourage primary health care in developing countries whereas
a member state, for economic and commercial reasons, is funding
projects in hospital health care. Hospital financing often already
takes up an excessively large proportion of the future budgetary
resources for health care of the recipient country.
Article 130 X of the Maastricht Treaty provides that the Community
and the member states should coordinate their policy in the area
of development cooperation. The article also confers on the Commission
a right to initiate policy in this field. A coordination experiment
in which the Commission and the member states are endeavouring
to coordinate their policies in four fields was started in six
developing countries in 1994. As far as the Council is aware,
no results of these experiments have yet been presented. The Council
does not therefore consider it appropriate to make any addition
to the remarks which it made on this subject in its recommendation
on the Maastricht Treaty.
1.3 Final observations and proposals for the promotion of coherence
It is unclear to what extent Article 130 V and its implementation
enjoys wide support in the European Union, the Commission and
the member states. The article has been repeatedly cited by European
NGOs and development aid ministries when incoherent policy has
been identified. However, it does not appear that there is for
the time being much enthusiasm outside these circles for implementing
Article 130 V. In the view of the National Advisory Council, therefore,
the Netherlands will have to approach this topic with a degree
of caution in order to draft feasible proposals for the further
implementation of Article 130 V and to avoid incoherence in respect
of the development objectives of the Maastricht Treaty.
In an earlier recommendation on the Maastricht Treaty, the National
Advisory Council concluded that it would be possible to increase
the coherence of policy only in those fields in which the organs
of the European Union have primary responsibility for common policy.
In view of the types of incoherence described above, these fields
would be above all the relevant development policy of the Union
itself, the commercial policy, the common agricultural and fisheries
policy and the environmental policy. The National Advisory Council
considered that the Commission should make proposals for increasing
coherence. The Council concluded that the Commission's document
of November 1994 on coherence was rather defensive and did little
more than describe the problem, without providing instruments
that could actually be used to promote coherence. The case-by-case
approach advocated by the Commission means that the supervisory
role accorded to the Commission in the Maastricht Treaty is in
practice being neglected. Since it is once again up to the European
commissioner - Pinheiro - to make new proposals for procedures,
it is starting to look very much as though delay is tantamount
to cancellation. Nonetheless, there are various ways of at least
identifying cases of incoherence.
In its above-mentioned recommendation, the National Advisory Council
advocated that the Commission should report annually to the EC
Council and to the European Parliament, describing the progress
made in this field and identifying problems encountered in achieving
greater coherence between development policy and other European
policies. The Council takes this opportunity to repeat this recommendation.
Another way of achieving coherence would be to use a procedure
analogous to that of article 130 R. The Commission announced in
June 1993 that it would take account of the impact of all its
activities on the environment and would have an environmental
impact study prepared where the impact was expected to be significant.
The National Advisory Council does not know precisely how this
procedure operates at present and what effect it has, but such
a review could also be considered in relation to development objectives.
If such a development review were to be introduced, it would have
to be public.
In addition to these proposals, consideration could also be given to the idea of instituting a complaints procedure comparable to that of the Inspection Panel of the World Bank. Such a panel could consist of a small number (three or five) independent members nominated by the member states and the Commission and appointed by the EC Development Cooperation Council. Governments and organisations from developing countries and member states of the European Union could file complaints with such a panel concerning incoherences in European policy. The relevant panel would require the powers and capacity to investigate and report on complaints systematically. It could then make recommendations to the EC Council for ending or reducing incoherence.
2 TAKING STOCK OF 25 YEARS OF LOMÉ
The first Lomé Convention was welcomed in 1975 as a new
model for shaping North-South relations. Long experience has
been gained of the "Lomé model" since then, and
the context of the Convention has changed dramatically. Indeed,
the Convention itself has been modified on several occasions.
This report would not be the place in which to give an exhaustive
evaluation of the Convention. However, the National Advisory Council
would like to review the positive and negative aspects of the
Convention before making proposals for a review of relations with
the ACP countries.
2.1 Advantages of the Lomé Convention
Combination of instruments
The Convention enables aid instruments and trade instruments to
be used together. Trade preferences boost production and exports
to the EU and strengthen the economic structure (growth and diversification).
Financial and technical assistance can be used to combat poverty
directly and to increase investment in education, health care,
infrastructure and sectors of the economy. Export promotion and
industrial cooperation too are objectives of the assistance. More
recently, assistance with structural adjustment has been added.
Contractual nature of the relations
As this aid is provided under a treaty, the ACP countries are
able to enforce rights to the advantages granted to them for the
duration of the Convention. At the start of every period, the
amount of aid which each ACP country can count upon and the total
amount available for the instruments not programmed in advance
for each country are announced. This creates a certain predictability.
This is also true of the trade preferences.
Equality of the partners
Each Lomé Convention emphasises that the parties are equal. One way in which this is expressed is in common organs in which an exchange of ideas and political views is possible. As the ACP countries negotiate as a group, they can provide a maximum counterweight to the EU. The ACP countries also have an important say in the implementation of the Convention. They submit the proposals for the disbursement of the aid and are responsible for the awarding of supply contracts. The EC is obliged to ensure that the trade preferences and aid moneys that have been committed actually benefit the ACP countries. Nonetheless, even in this Convention the donor/recipient relationship still tends to dominate matters.
Innovations in aid instruments
Stabex and Sysmin are mechanisms which are deemed to provide the
ACP countries with a measure of protection against falls in income
from the export of commodities. The system chosen for this purpose
(i.e. assistance per commodity, almost exclusively in the form
of grants and only as regards exports to the EC, and until Lomé
IV, without strict conditions on disbursement) is unique.
2.2 Disadvantages of the Lomé Convention
Discrimination between developing countries
The Convention was concluded with the ACP countries. The selection
of the beneficiary countries stem from the time the EEC was established,
i.e. when some of the countries concerned were still colonies
of member states. A selection based on purely development criteria
would produce a different result. In addition, the trade preferences
under Lomé can hardly be defended as an exception to the
non-discrimination rule of the GATT/WTO because the preferences
distinguish between developing countries on the basis of geographical
criteria.
Slow procedures and centralisation
The formal equality of the partners means that the majority of
decisions on the implementation of the Convention have to be taken
by mutual agreement (ACP country and Commission or other EC organs).
It is not always entirely clear how the responsibilities for management,
monitoring and implementation are precisely divided. As a result,
it often takes a long time before the aid is actually provided.
The services of the Commission are organised in a centralist fashion.
Only minor powers are delegated to the EC representatives in the
ACP countries. This is unconducive to the rapid implementation
of the Convention.
Effectiveness
Since the arrangements are made by treaty, the aid and trade preferences
are not quickly discontinued, even if a domestic policy is pursued
in the relevant ACP country which, in the eyes of the EU, is incompatible
with the objectives laid down in the Convention regarding human
rights, democracy, good management or macroeconomic policy. This
is because the sovereignty of the ACP countries is one of the
fundamental pillars of the Convention. Aid is suspended only after
gross violations of human rights. Poor economic policy does not
result in termination of the aid or of the trade preferences,
and good economic policy is not rewarded.
The effectiveness of the EU aid also depends to a large extent
on the quality and scope of the support services of the Commission.
In a previous report, the National Advisory Council pointed out
the limited capacity of the Commission services in Brussels and
made proposals for improvements. The Council repeats this recommendation
here since, in its view, there has been barely any improvement
in the situation since then.
Since Stabex was introduced, it has been the subject of much criticism.
First of all, when producers suffer loss of income as a result
of declining exports, they are not necessarily indemnified by
moneys from Stabex (microeconomic effectiveness not guaranteed).
Second, governments often receive Stabex funds even when total
export income is not falling (macroeconomic effectiveness not
guaranteed). Another drawback of the system is felt to be the
fact that in practice the funds benefit a limited group of ACP
countries (cocoa producers). It has been reported that an evaluation
of this instrument, carried out on behalf of the EU Commission,
will shortly be published. This can serve as the basis for changes
to the design and application of this instrument.
Trade preferences seem to be fairly ineffective, given the declining
market shares of the ACP countries and the rather rigid nature
of the export package. The ability to make use of the preferences
is hampered by complicated rules of origin. These require a relatively
high added value in the ACP country before use can be made of
the free access provision. In addition, the EC has in the past
threatened to use the safeguard clause to introduce quantitative
restrictions on products that could harm the interests of EC producers.
Moreover, sensitive agricultural products do not have free access
and are limited by quotas. However, it is clear from a recent
study of EU commercial policy in the last ten years in relation
to developing countries and the countries of Central and Eastern
Europe that the non-tariff measures of the EU have not succeeded
in preventing the developing countries from penetrating the European
market to an increasing extent. It should be noted that the EU
commercial policy remains more protectionist towards the industrialising
developing countries than towards the other developing countries.
2.3 Brief survey of the EU's relations with third countries
Since around 1990 a number of far-reaching changes have occurred
in the overall external relations of the EU. These are briefly
described below.
Reciprocal trade relations
After the upheavals in Eastern and Central Europe, the nature
of the relations with most of these countries changed completely.
A system of regulated trade gave way to a series of bilateral
agreements. The so-called Europe agreements with the Central European
countries are intended to bring about the creation of free trade
zones. The aim of these agreements is to help the countries concerned
to prepare for full membership of the EU. The same applies to
the three Baltic states. Less far-reaching cooperation agreements
with the countries of the CIS are planned. Besides trade, these
agreement cover financial, technical and political cooperation.
The ultimate aim of the relations with Cyprus and Malta is full
membership of the EU. Here too, the gradual creation of free trade
zones is the gateway to further progress.
During the Euro Mediterranean summit in November 1995, the EU
expressed the wish to have a politically stable and safe Mediterranean
region. The cooperation in a variety of areas which is proposed
for this purpose includes free trade zones between the EU and
the various Mediterranean countries. These will replace the non-reciprocal
trade preferences. Other aims of the EU include a strengthening
of the regional integration between the relevant non-EU countries,
introduction of competition policy and coordination of the rules
of origin. Agreements of this new generation have now been concluded
with Turkey, Israel, Tunisia and Morocco. Negotiations have been
started with Egypt, Jordan and Lebanon. These agreements will
in due course lead to free trade areas. The discussions with the
Gulf states (Conseil de Coopération du Golfe) are
currently being reactivated.
Reciprocal free trade agreements have now been concluded - or
are in the process of being negotiated - with various other countries
and regions. The agreement with Mercosur has now been concluded
(Mercosur is one of the EU's fastest growing markets) and is intended
to create a free trade zone consisting of the EU and Mercosur.
The negotiations with South Africa are at an advanced stage, but
those with Mexico are still in their infancy. However, the rapid
growth in the number of free trade agreements of the EU will not
continue at the present pace, because some member states of the
EU have objections to them.
Non-reciprocal relations
In addition to the relations based on reciprocity, the EU concludes
non-reciprocal agreements and relations. The Lomé Convention
is the best known example. This Convention contains trade preferences
for the exports of the partner countries in Africa, the Caribbean
and the Pacific (ACP countries), but leaves them free to pursue
their own trade policy. In addition, the EU operates a Generalised
System of Preferences (GSP) to boost the exports of other developing
countries.
The non-reciprocal arrangements are attracting increasing criticism.
First of all, it is argued that the beneficiary countries are
unduly shielded from competition in the world market. Second,
the non-reciprocity means that the countries concerned have a
weak position in international negotiations, and that the industrialised
countries have carte blanche to flout the non-discrimination principle.
In practice, the position of the non-reciprocal arrangements is
being undermined by global liberalisation (reduction of preferential
margins) and by the strong growth of regional free trade arrangements
as discussed above. For example, if Brazil has free access to
the EU under the EU-Mercosur agreement, it will no longer make
use of the GSP. Furthermore, the Lomé preferences are encountering
growing opposition within the WTO. The WTO's complaints procedure
for the Lomé banana arrangement has meant that the entire
Lomé trade arrangement has been critically reviewed. The
conclusion is that the Convention is not in keeping with the rules
of the WTO (in particular MFN) because the preferences are not
reciprocal and do not therefore come within the exception for
customs unions and free trade areas (article 25 (5) of the GATT).
What does still come under the WTO is the provision, included
in part IV of GATT, that developing countries may apply more favourable
provisions in granting support to businesses (the so-called infant
industry argument, article 18). Nor, it was observed, does the
enabling clause apply because there is discrimination between
developing countries However, in December 1994 the GATT did give
a waiver for the Lomé preferences until the end of the
Lomé period. If the EU were to exert sufficient political
pressure, continuation of the Lomé preferences might be
feasible, but the National Advisory Council considers that such
action would be at odds with the desirability of strengthening
the legal nature of the world trade order.
Conclusions: The following trends in the external relations of the EU will make their presence felt in the future:
2.4 Lomé after 2000
To reflect on the future of the Lomé Convention it is necessary
to take a position on the question of what countries will and
may take part in the Convention, on solutions to the extent of
differentiation between the participating countries, on the nature
of the future trade and aid relations and on the objectives which
these relations are intended to serve. Naturally, there are many
options open with regard to the Lomé Convention, varying
from maintenance of the status quo at one extreme through moderate
or radical amendment to abolition of the Convention at the other.
In this recommendation, the National Advisory Council has chosen
radical amendment.
During talks held by members of the working party with representatives
of the ACP countries, it transpired that these countries had a
marked preference for continuation of the present Lomé
arrangements wherever possible. They felt that any changes would
not be of benefit to them; indeed, they were afraid that the EU's
waning interest in the ACP countries would be reflected in moves
aimed at reducing the level of cooperation. The National Advisory
Council shares their concern about the last matter, but takes
the view that the radical amendments advocated by it would actually
increase rather than reduce the intended benefits to the relevant
countries.
Participation in the Lomé Convention has hitherto been
restricted to the EU on the one hand and the ACP countries on
the other. The National Advisory Council considers that this geographical
limitation - essentially a colonial legacy - is no longer defensible.
It is unclear why Uganda, for example, should have rights to EU
aid or trade preferences that differ from those of Bangladesh.
The Council proposes that the countries eligible for cooperation
should be extended in the successor to the present Lomé
Convention to include the least developed countries, in so far
as they are not already covered by this Convention.
To be more specific, this would be countries such as Afghanistan,
Bangladesh, Laos, Vietnam, Cambodia, Bhutan, Yemen, Maldives and
Nepal. If the Convention were to be applicable to the category
of low income countries rather than the least developed, this
would mean that countries such as China and India would also be
invited. The Council would in this connection request that attention
be paid to the increasing use that is being made of purchasing
power parities when determining and comparing the prosperity levels
of countries. This shows for example that when judged by this
indicator China and India score more highly than on the basis
of GNP per capita. In addition, if the available aid funds were
to be distributed in this way among the developing countries,
China and India would receive such a large share of the funds
(the funds are divided among the countries in accordance with
the ratio of the size of the population and the level of development)
that there would either be little left for the other countries
or the aid would have to be increased by several billion ECUs
to enable the expansion to take place without the other countries
receiving less (or a lot less). The National Advisory Council
would therefore prefer to limit the expansion to the group of
least developed countries, in so far as they are not already covered
by the Lomé Convention.
One of the pillars of the Lomé Convention is the equality
of the contracting parties. In the view of the Council, it is
therefore important that the relationship between the EU and the
developing countries should continue to take the form of a treaty.
It is partly because of the great importance attached to the principle
of equality, in any event in the first treaties, that there has
hitherto been little if any evidence of a differentiated approach
to the ACP countries. Trade preferences of the EU therefore apply
- and have always applied - to all ACP countries equally. It is
increasingly realised that this does not do justice to the very
diverse nature of these countries. This awareness also exists
in Brussels: "The ACP countries present great diversity.
The European Commission wants to show flexibility, support developments
and find solutions adapted to individual cases." There is
a danger that to achieve flexibility the EU will increasingly
try to provide tailor-made solutions for individual countries.
The National Advisory Council fears that this will make the negotiating
positions of the EU and the developing countries even more unequal
than at present. This is illustrated very effectively by the discussions
with South Africa on a free trade zone.
This problem can to some extent be avoided by what may be termed
a "menu approach". Negotiations would no longer be held
with a separate country (or group of countries), and the least
developed countries would instead be offered a menu of possible
agreements with the EU. In such a case, the Convention would no
longer set out a particular combination of aid and trade relations
which is the same for all countries, but would offer various options.
The EU would elaborate the actual options for the relations between
the EU and groups of developing countries or separate countries.
The Convention would describe all these options and thereby define
a "menu": it would indicate the options that are acceptable
to the EU and leave the choice to the developing countries. The
EU would then have to indicate clearly in the menu the extent
of its obligations for each of the options and the conditions
which the other party is required to satisfy. The menu would be
presented in its entirety, and would not be open to negotiation
with separate developing countries or groups of developing countries.
The development aid provided by the European Union under the Lomé
Convention is already fairly flexible. The calculation of the
amount of aid already takes account, for example, of the size
of the population, level of prosperity and so forth, and various
aid programmes are available. In the field of trade, however,
Lomé takes much less account of the different starting
points and interests within the group of ACP countries. An à
la carte Lomé would in practice mean that countries could
choose from various options: (i) an agreement in which only aid
relations are recorded; (ii) an agreement recording aid relations
with unilateral trade preferences given by the EU (non-reciprocity),
like the present Lomé Convention; (iii) an agreement in
which not only aid but also reciprocal trade preferences are given
(reciprocity); (iv) an agreement containing only reciprocal trade
preferences; and, finally (v) an agreement in which trade is left
entirely free, in other words a free trade agreement (with or
without development aid), which could be concluded either with
individual countries or with economic communities of countries.
The National Advisory Council itself prefers the options that
make provision for reciprocity. Just as the Lomé Convention
already makes provisions with regard to human rights, so the new
Convention could offer the possibility of cooperation in matters
of democratisation, security and the environment. In the view
of the National Advisory Council, the EU should, before entering
into relations, naturally check whether the countries with which
relations or closer relations will be negotiated actually have
an acceptable policy on human rights, good governance and the
environment. Where countries make extra efforts in these fields,
the Council would be in favour of rewarding them with more far-reaching
cooperation and/or support. If the menu approach were to be adopted,
the Council believes that an option could be included for monetary
cooperation. However, the options would have to be drafted in
such a way that there is a trade-off between the constituent parts
of the options on the menu (e.g. more trade preferences means
less aid etc.).
Developing countries, whether in groups or otherwise, would be
free to choose one of the options offered by the EU. Differentiation
would then occur as a result of selection by the developing countries
themselves: a group of countries could decide that an option is
not an attractive proposition for them, whereas another group
might choose that very option.
An à la carte Lomé of this kind would be very different
from the present situation. First, because of the breadth of choice.
And second because the non-reciprocity which characterises Lomé
at present would vanish from nearly all the options. Commitments
of the EU would in such cases be offset by commitments of the
developing countries. This reciprocity is not only desirable but
also necessary. The WTO, for example, offers scope for preferential
trade relations without reciprocity. In due course, special preferential
relations are consistent with the WTO provisions only if they
come under the rules for a free trade agreement, and this implies
reciprocity.
In the view of the Council, it would be fruitless for the EU to
try to impose differentiation within the group of least developed
countries, for example by excluding the freedom to choose between
the options, or by linkage to a more precise classification on
the basis of the income level of the relevant countries. A link
of this kind is sometimes advocated. It is implicitly assumed
in this connection that there is a close link between the income
level of a country and the combination of aid and trade relations
that is most attractive to that country. The Council denies the
existence of any such close relationship on the basis of which
it could be submitted for example that a relationship based purely
on aid is of interest to the very poor countries and that a given
income level must be reached before trade relations with the EU
become attractive. The Council recommends that the choice be left
to the developing countries, so that what is on offer has a take-it-or-leave-it
character. The advantage of the menu approach is that the individual
responsibility of the governments of developing countries is clearly
underlined. In addition, it avoids a situation in which officials
in The Hague or Brussels decide whether countries with a particular
income level have or do not have an interest in the liberalisation
of trade, possibly in a multilateral context.
Naturally, a certain amount of differentiation will occur: not
all least developed countries which are eligible will wish to
accede to the Convention and those countries that do could choose
between the different options on the menu. However, these forms
of differentiation will be the consequence of choices made by
the developing countries themselves: there would be no graduation
formula for calculating which package of measures a particular
country is eligible to receive.
The Council is aware that the problem of the poorest countries,
especially those in Africa, can be solved by trade policy measures
only to a limited extent. Reference is often made in this connection
to the fact that the growth of exports of ACP countries to Europe
has lagged far behind the growth of world trade, despite the preferential
treatment. It is also evident that exports from these countries
to the EU of the categories of goods which are subject to quantitative
restrictions have been less than the permitted amounts. It would
therefore seem unnecessary to increase their access to the European
market still further.
It should be emphasised in this connection that regardless of
whether or not preferential tariffs have the desired effect, this
instrument has become virtually unusable. As a result of the Uruguay
Round and other developments, the tariffs applicable to imports
from non-ACP countries have been lowered to such an extent that
the ACP countries now have little if any advantage. The debate
has therefore switched from the amount of import duties to the
certainty of access to the European market. This access is by
no means certain for many products, especially as a result of
new forms of protectionism (including the threat of anti-dumping
measures).
The trade relations between the EU and the developing countries
could be put on an entirely different footing if Europe, as explained
above, were to include free trade agreements as one of the menu
options. This would be a North-South free trade area similar to
that of NAFTA. The partner of the EU could be an individual country
(negotiations on this possibility are presently being conducted
with South Africa) or a regional group. A regional group could
put itself under supranational control in order that the members
submit to external discipline. The agreement would entail reciprocity:
the participating developing countries would open their borders
to exports from Europe or from fellow members of the regional
group, and Europe would fully open its borders to the relevant
country of group of countries.
Such free trade agreements would have two major advantages. First
of all, they would prevent a situation in which the weaker developing
countries become the victim of new forms of EU protectionism in
a world trade order in which the authority of the WTO has not
yet been sufficiently established. The threat of anti-dumping
measures is one example of these new forms of protectionism. The
inclusion of a provision in the agreement (as recently occurred
in the EU's agreement with Iceland) that the parties waive the
right to take anti-dumping measures for a given period (e.g. one
year) would be of great importance.
Besides this protection, a free trade agreement of this kind would
also have the advantage of greatly reducing the chance that the
government of a participating developing country would renege
on the liberalisation of its trade policy. Such a change of policy
would then be faced with a credible deterrent: the country concerned
would automatically lose the advantage of guaranteed access to
the European market. This situation would require the country
to exercise discipline in its external policy and could therefore
result in a "lock-in": the policy reforms to bring about
free trade could no longer be revoked because of the very high
costs that this would entail. By including this option, the EU
would also be signalling that post-2000 Lomé will indeed
be entirely different. This trade policy would therefore be in
definite contrast to European aid policy, where it is unclear
what the EU can add to the bilateral efforts and the multilateral
work of the IMF and the World Bank.
In recent years, regional trade agreements have become a more
attractive proposition because they shield a member country from
the protectionism of a stronger importer. Indeed, it is this defensive
motivation which explains the enthusiasm with which European countries
have queued up to join the EU. This defensive argument is of great
importance to the African ACP countries in particular: the EU's
interest in this continent appears to be on the wane.
In recent years there has been a very extensive and heated debate
on the question of whether regional trade blocs constitute a barrier
to the further integration of the world economy or can, on the
contrary, make a contribution to it. The WTO is itself inclined
to be optimistic about this and no longer regards regional trade
blocs as a threat to the international trade order regulated by
the WTO. Now that the Uruguay Round has been successfully concluded,
the question is no longer whether the case of worldwide trade
liberalisation would be better served by multilateral negotiations
or by free trade within regional trade blocs, combined with more
far-reaching liberalisation between such blocs. However, it is
questionable whether regional agreements are compatible with the
WTO order. In the view of the Council, the answer is in the affirmative.
Free trade agreements are permitted under the WTO provided that
they relate to "substantially all trade". This wording
still leaves scope for protectionism, as recently became clear
during the preparatory discussions on a free trade agreement between
the EU and South Africa. Another objection to this wording is
that the assessment is made on the basis of actual rather than
potential trade flows. This is a particular problem for some of
the poorest African countries whose exports at present consist
almost entirely of commodities but which could in principle compete
in other markets. Notwithstanding these objections, the proposed
arrangement is compatible with the WTO. This is why the Council
emphatically proposes that a free trade agreement be included
as an option in a new à la carte Lomé.
The National Advisory Council recommends that the Netherlands enters into in consultation with the other EU member states concerning the proposals in this recommendation: i.e. the change in the composition of the group of countries entitled under the Lomé Convention, the possibility of differentiation on the basis of choices made by the developing countries themselves, the options defined by the new Convention, and the conclusion of free trade agreements on the basis of reciprocity with countries which wish to safeguard their reform policy in this way. In view of the discussion documents being prepared by the European Commission (the Commission's green paper on an outline for the Lomé negotiations will be published in October 1996 and the Commission's proposals will be submitted to the Council of Ministers in November 1997) and in view of the time left for preparation before Lomé V, the Council is convinced that the period of the Dutch Presidency will be important for a debate in the EU on these points.
3 SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
This recommendation has been prepared for the benefit of the Dutch
Presidency of the EU Council of Ministers in the first half of
1997. It concentrates on two aspects of development policy. The
first - dealt with at the express request of the Minister for
Development Cooperation - is the issue of the coherence of European
development policy, as formulated on the basis of the provisions
of the Maastricht Treaty. In addition, the Council has felt obliged
to express its views on an important debate that will require
attention during the Netherlands' presidency, i.e. the future
of cooperation with developing countries after the present Lomé
Convention has expired.
Coherence
The debate on coherence revolves around a provision of the Maastricht Treaty, included under Title XVII: development policy, which reads as follows:
Article 130 U lists the objectives of the EU's development policy. In Brussels jargon, article 130 V has become known as the "coherence article". The National Advisory Council would like to see coherence in this context defeined as follows:
According to the Council, coherence should therefore be an objective
of all government policy. However, it is an objective that must
not be pursued at any price. This is because government has to
deal with any number of parties, each of which wishes to see its
own interests reflected in policy. Sometimes these interests are
compatible, sometimes not. It follows that an element of incoherence
cannot be excluded from policy in practice. However, it is necessary
to ensure that the interests of development cooperation do not
continually lose out to more powerful domestic interests.
Clearly, this subject is full of pitfalls. It is by no means certain,
for example, that coherent policy would always militate in favour
of development interests. Development cooperation is a field that
has traditionally attracted the interest of a variety of pressure
groups in the donor community itself. It is also hard to see how
priority could be determined in advance when a decision has to
be made in a specific case on which interest must be given precedence.
This often comes down to a matter of relative political strength.
It is, therefore, hardly surprising that there seems to be little
enthusiasm for elaborating and applying this provision of the
Maastricht Treaty. In a statement the Council of Ministers requested
the Commission to produce a report. The Commission has in its
turn confined itself to what seems to be a rather defensive description,
without developing a range of instruments for promoting coherence.
Hitherto the action in this field has been limited to the invocation
of the coherence article on a one-off basis (e.g. the limitation
of subsidies on the export of beef to West Africa, Commission
decision of May 1994).
The Council recommends that the Minister for Development Cooperation should tackle this problem with due caution in order to avoid causing disappointment or acting in a manner that is counterproductive. The Council would like to make the following three suggestions, which would be worth examining and elaborating in more detail:
À la carte Lomé
By the end of the present period of the Lomé Convention,
under which the 15 EU member states cooperate with 70 countries
in Africa, the Caribbean and the Pacific (ACP), 25 years' experience
of this development instrument will have been obtained. The National
Advisory Council believes that this is a good moment at which
to take stock of this form of cooperation.
The Council considers that Lomé's strengths are the following.
First of all, the cooperation consists of a unique combination
of instruments. Aid and trade can be deployed together in order
to achieve the objectives of development. Second, these instruments
form part of a contractual, multi-year relationship between the
countries of the EU and the ACP, which is conducive to predictability.
Third, this cooperation provides for the formal equality of the
partners to a greater extent than other donor-recipient relationships.
There are joint consultative bodies and the commitments are entered
into on a reciprocal basis. Finally, the introduction of mechanisms
to stabilise export earnings from certain commodities (Stabex
and Sysmin) is an example of the innovative way in which this
cooperation is effectuated.
A few weaknesses of the Convention have also been exposed in practice.
It is felt to be a drawback that the cooperation of the EU has
been limited to a selection of countries which had colonial ties
with the EU member states. From the point of view of development
policy, this form of discrimination on a regional basis is hardly
defensible. A second criticism is that the implementation of the
Convention has been hampered by the centralist and bureaucratic
arrangement of the implementation provisions and the procedure
of the Commission services. This has caused serious delays and
loss of capacity.
Finally, the Council notes a number of factors that greatly curb
the effectiveness of the cooperation. Since the aid is provided
by treaty, there is only limited scope for altering commitments
once they have been entered into. The cooperation can be ended
only if an ACP country pursues a policy in relation to human rights,
good governance or the macroeconomy which is, in the view of the
EU, entirely incompatible with the objectives laid down in the
Convention. The Commission's services, the scope and quality of
which are limited, can be proved only with great difficulty. No
funds are being voted to expand these services. There is also
criticism of Stabex. It is said that the funds do not benefit
those for whom the mechanism was intended, the funds are released
at the wrong moment and they are distributed to only a small group
of (cocoa producing) ACP countries. Finally, Lomé's trade
preferences evidently have only a limited impact. The market shares
of the ACP in EU imports are declining and the export package
of most ACP countries remains more or less unchanging.
In addition to the cooperation with the countries covered by the Lomé Convention, the EU has now established relations with numerous countries and groups of countries with which it has entered into diverse forms of development cooperation. In the view of the Council, the varied pattern of development cooperation to which this has given rise reveals the following trend in the external policy of the EU and future cooperation with the countries that will be covered by the Lomé Convention should be viewed partly against this background:
It is against this background that the Council makes the following
recommendations to the Minister for Development Cooperation regarding
the debate on the future cooperation of the EU with the developing
countries.
First of all, the Council proposes that the group of countries
eligible for cooperation under the convention succeeding the present
Lomé Convention should be expanded to include the least
developed countries, in so far as they do not already form part
of this Convention. The Council explicitly chooses the category
of least developed countries for the purpose of the expansion.
Application of the category more usually applied in the context
of Bretton Woods institutions, i.e. low income countries, would
cause the EU extra problems. In particular, the accession of countries
such as China and India would necessitate an enormous increase
in the aid funds or an equally radical change in the distribution
of the available funds. The Council would prefer to exclude these
countries from participation, partly for another development-related
reason. Countries such as China and India score much more highly
on the basis of the increasingly frequently applied criterion
of purchasing power parity than in terms of income expressed in
GNP per capita. In this respect, they are less eligible for assistance
than countries with a lower purchasing power parity.
Second, the Council is in favour of creating opportunities for the adoption of a more differentiated approach to the cooperation. To put it another way, à la carte Lomé. The Council proposes a "menu approach". The EU offers the countries concerned a choice from a menu of different agreements. In this way, the EU indicates the options which it considers acceptable, and the developing countries or group of countries can choose the options they find the most appealing. In practice the following options are conceivable:
Before entering into relations, the EU should naturally check
whether the countries with which relations or closer relations
will be negotiated actually have an acceptable policy on human
rights, good governance and the environment. Where countries make
extra efforts in these fields, the Council would be in favour
of rewarding them with more far-reaching cooperation and/or support.
If the menu approach were to be adopted, the Council believes
that an option could be included for monetary cooperation. Also,
the Council believes that an option could then be included for
monetary cooperation. The options would have to be drafted in
such a way as to provide a balanced trade-off between the constituent
parts of the options on the menu (e.g. more trade preferences
means less aid etc.). Since it would be up to the developing countries
to choose from the menu, this would give rise to a form of differentiation
(within the limits of the menu) chosen by the developing countries
themselves. The Council points out here that it does not share
the commonly expressed idea that an aid-only relationship is appealing
to very poor countries and that developing countries must have
reached a given income level before trade relations with the EU
become an attractive proposition.
The Council prefers the options that make provision for reciprocity, for example in the form of a free trade agreement. Such agreements have two main advantages. First of all, they would prevent a situation in which the weaker developing countries become the victim of new forms of EU protectionism in a world trade order in which the authority of the WTO has not yet been sufficiently established. The threat of anti-dumping measures is one example of the new forms of protectionism. The waiving by the EU of the right to take protectionist measures of this kind for a given period (e.g. ten years) would be of great importance to the countries concerned. Besides this protection, a free trade agreement of this kind would also have the advantage of greatly reducing the chance that the government of a participating developing country would renege on the liberalisation of its trade policy. Such a change of policy would then be faced with a credible deterrent: the country concerned would automatically lose the advantage of guaranteed access to the European market. This external discipline would also lead to a lock-in: the policy reforms to bring about free trade could no longer be revoked because of the very high costs that this would entail. The Council is convinced that full use should be made of the period of the Dutch Presidency to promote a debate on these points.
Annex 1: Request for recommendation
To the Chairman of the
National Advisory Council for Development Cooperation
Professor E.W. Hommes
Directorate-General for International Cooperation
29 January 1996
Request for recommendation regarding the
presidency of the EU Council of Ministers
for Development
DGIS/SA-136/1996
The Netherlands will hold the President of the Council of Ministers
of the European Union in the first half of 1997. I would therefore
invite you to make suggestions for spearhead topics for the preparation
of the Development Council. I am thinking in particular in this
connection of the specific implementation of the instruction contained
in article 130 V of the Maastricht Treaty. To enable the preparations
for the presidency to be made, I would like to receive your recommendation
before the summer of 1996.
(signed)
J.P. Pronk
MINISTER FOR DEVELOPMENT COOPERATION
cc.Minister for Foreign Affairs, State Secretary for Foreign Affairs
ACP African, Caribbean, Pacific Countries. The countries in Africa, the Caribbean and the Pacific with which the EC has concluded the Lomé Convention.
ADB African Development Bank
CFFA Coalition for Fair Fisheries Agreements
CIS Commonwealth of Independent States (successor to the Soviet Union)
DG Directorate General of the Commission of the European Union
DGIS Directorate General for International Cooperation of the Netherlands Ministry of Foreign Affairs
EC European Community
ECDPM European Centre for Development Policy Management
ECU European Currency Unit
EDF European Development Fund
EEC European Economic Community
EU European Union
FAO Food and Agricultural Organisation of the United Nations
GATT General Agreement on Tariffs and Trade
GKKE Gemeinsame Konferenz, Kirche und Entwicklung
GNP Gross National Product
GSP Generalised System of Preferences (GSP)
IMF International Monetary Fund
MFN Most Favoured Nation
NAFTA North American Free Trade Area
NAR National Advisory Council for Development Cooperation
NGO Non-governmental organisation
SOLAGRAL French research institute
STABEX System to Stabilise Export Earnings (of the ACP countries to the EC)
WTO World Trade Organisation