Negotiations between the European Union (EU) and the African, Caribbean and Pacific (ACP) countries for a post-Cotonou trade and development agreement have started four years ago with a first round to discuss matters of common interest to all ACP countries, the so-called “cross cutting” issues. The second phase of negotiations now in process is geared to Economic Partnership Agreements based on geographical grouping of ACP countries of which there will be seven. Mauritius has chosen to be part of the Eastern and Southern African group. There is general agreement that the EU have managed to have their way on a number of important issues in the negotiations up to now and many observers are worried that the net result might prove anything but development-oriented if there is no drastic change in direction.

The gist of this article lies on the events that have occurred on the global trade scene and in Europe recently, which might provide a serious window of opportunity for the premise of the current negotiations process to be challenged in favour of the ACP. The basis of the engagement of the EU in these negotiations is to replace the actual non-reciprocal trade preferences with a series of free-trade areas between the Union and a number of regional groupings of the ACP countries.

First is the reaction of the United States and the European Union when confronted with the surge in imports of textiles and garments from China following the end of the Multi-Fibre Agreement since the beginning of this year. These two most powerful economies have cried foul and protested against the disruptive effects of such a sudden and huge upsurge of imports on their industrial fabric and its social consequences. The United States have introduced quotas to limit export of garments from China, thus challenging the very foundation of free trade as embodied in multilateral fora.

In so doing, they have certainly demonstrated the genuineness of the case of ACP countries, which have been contending that reciprocity will cause irreversible damage to their economic development by opening up their markets to goods from the EU. In a recent article in the Financial Times, journalist Martin Wolf has written: “Trade liberalisation, as an aim, regardless of the circumstances, will not generate rapid growth. On this there is no disagreement, and never has been among serious analysts.”

The second development which has occurred and which may have a direct impact on the ongoing negotiations is the publication of the work of the Commission for Africa, which was set up by British prime minister Tony Blair. The Commission has come out with some powerful comments on the blatantly anti-development approach taken by the EU in the negotiations up to now.

Knowing that Tony Blair will be the President of the European Union, this opens up an opportunity for ACP countries to redirect the negotiations towards its original objective, which according to the Cotonou Agreement is “to reduce poverty by supporting the sustainable development and the integration of the ACP countries into the world economy.”

To understand the dilemma with which we are faced as an ACP country, it is important that we shed some of the assumptions concerning our “very special relationship” with the EU. There has been a marked shift in the approach of the EU to these negotiations, which should lead to a World Trade Organisation (WTO) compatible trade agreement between the two blocs. In comparison, the preceding negotiations for successive Lomé Conventions, were more development- oriented.

Whereas the Lomé Conventions were for a long time regarded as a model of cooperation between developing and developed countries, they came under increasing criticism by the EU for having failed to deliver on their development promises since some time prior to the opening of the latest round of negotiations. This change of tack was not a mere objective reassessment of the cooperation between the two parties over nearly a quarter of a century. It reflected a deep change in the approach of the EU as it shed the cloak of former colonial power having an obligation to its former colonies and took on a stance more appropriate to the role which it defined for itself in the new global geopolitics.

One of the basic tenets of this new role of the EU is the more active part it intends to play in the new multilateralism driven by globalisation and the recent election of Pascal Lamy to the post of Director of the WTO is certainly not alien to this new policy. This is the most significant reason why the EU had to get rid of the Lomé type convention, which, by discriminating in the treatment it meted out to countries at the same level of development, was challenging one of the fundamental rules of the WTO. Thus in 1997, the European Commission wrote in one of its position papers “the Union must redesign its aid policy towards the ACP countries from scratch…. The colonial and post colonial era is over.”

In light of the above the recommendations of the Commission for Africa are significant to the extent that they challenge the very premises on which the European Commission, which acts on behalf of the EU in matters of trade have approached the Economic Partnership Agreements (EPA) negotiations up to now. The Commission for Africa, thus writes: “While Free Trade Areas (FTAs) may provide benefits, it is important that they do not railroad developing country governments into undertaking commitments that go beyond existing multilateral agreements.”

The preoccupation of the EU for WTO compatibility may imply that ACP countries should re- focus their efforts at multilateral negotiations to ensure that Article XXIV of the General Agreement on Trade and Transport (GATT) which sets out requirements for reciprocal opening, be modified so as to allow developing countries more flexibility to protect certain sectors as dictated by their development needs. For EPAs to be development friendly the European Commission need to take a less mercantilist approach and allow individual African countries to time and sequence their trade liberalisation approach according to their level of development and their human and social development objectives.

A clarification of the requirement for “substantially all trade” to be liberalised within a “reasonable” time will go a long way towards making this realisable. The Commission states that for EPAs to be development oriented they should: not force poor countries to liberalise; pursue a non-mercantilist approach; allow individual African countries to sequence their trade reforms in line with their own poverty reduction and development plans; and provide additional financial assistance to support developing countries in building the capacity to trade and adjust to more open markets.

<B>Economic progress, far from irreversible</B>

An important bone of contention which divides the EU and ACP negotiators is the issue of financing the transition costs. The ACP countries contend that the ongoing negotiations are exceptional in their objectives and to that extent additional financing must be provided to ensure that they are in a position to undertake the preparatory investments and funding to cope with the demands being made on them. The EU on its part states that the funds provided for, under the traditional funding instruments, principally the European Development Fund, should be sufficient to meet the needs of the ACP. For a country like Mauritius, we are here speaking about the funds needed for the transition from a preference dependent country to a globally competitive economy.

Whereas the case for financing less developed countries and other countries with severe poverty problems may be relatively easier to establish, it is trickier to justify the need for middle income countries such as Mauritius and some of the more fortunate islands of the Caribbean to benefit from such financing. It is important however to introduce some elements of differentiation so that the development needs of each participant in the negotiations is safeguarded. Whereas their needs may differ, these countries still have to face the traumas of natural disaster and the constant threat posed to small vulnerable economies. In this connection, it is useful to remember that the special arrangements such as the Sugar Protocol or the Banana Regime which have often acted as an engine of growth for such countries are under threat today.

The Sugar Protocol and the Banana Regime which are the subject of so much criticisms today were put in place at a time when the Europeans wanted to ensure reliable supply to their markets by their former colonies. These took the form of contractual agreements, which the Europeans were more than happy to enter into. Although there is no question that in some cases these were eminently beneficial to some of the producers it would be most unfair to claim that they were not mutually beneficial. Mauritius, for example, has ensured throughout the years, through thick and thin, that Tate and Lyle were supplied with our quota of raw sugar for its refineries.

One of the negative effects of such arrangements was the production dependence it induced in the “beneficiary” countries. The radical nature of the price cuts announced by the EU for sugar provided by the ACP and the very short notice for these to come into force is a denial of both the supply predictability ensured for long periods of time as well as the production dependence inducement inherent in all preferential commodity arrangements. It has often been stated that the ACP countries should have seen the writings on the wall and prepare accordingly.

Allow us to argue here that when one is bound in a contractual agreement with another party, one is more prone to read the content of the contract than what is written on the wall. A more development oriented approach which is also respectful of the spirit of our contractual arrangement would surely be to schedule the fall in price over a much longer period while ensuring that economic diversification is pursued through financing of capacity building and other infrastructure development. Lessons from other parts of the world teach us that economic progress is far from irreversible.

<B> Rajendra Tagore Servansingh Deputy Secretary-General</B> <I>Mauritius Chamber of Commerce and Industry</I>