Making trade work for development is harder than it sounds
by Alexander Woollcombe, Political Advisor to Robert Sturdy, MEP (Sept 06)
In the last thirty years the share of world exports from sub-Saharan Africa, the Caribbean and the Pacific (ACP) has fallen from 3.4% to 1.1%. Despite having better access to European markets than anywhere else in the world the ACP’s share of total EU imports has halved to only 2.8% in the same period.
This is disappointing. For 50 years a lot of very clever people have worked very hard and spent large sums of our money on development assistance, and it doesn’t seem to have made things much better.
If it were simple to sort out it would have been done already and the situation isn’t universally depressing, some ACP countries have seem dramatic improvements and Africa now has more democratic Governments and fewer wars than has been the case for a long time. However, a nagging suspicion remains that a lot of money has been wasted or stolen and that just chucking loads more at the problem might not be the answer.
Live8 and the ‘Make Poverty History’ campaign highlighted public interest in how rich countries help poor ones. Bono, Bob Geldof and a powerful collection of British NGOs have called for more and better aid, writing off third world debt and trade justice. The British Government, and others, have made commitments to the first two but so far there hasn’t been much progress on the third. Essentially this is because no one can agree on what “trade justice” means.
And this is where the ongoing negotiations of a new trade agreement between the EU and African, Caribbean and Pacific countries come in. They are called Economic Partnership Agreements (EPAs) and in the words of Peter Mandelson, whose minions in the EU Trade Commission are in charge of negotiating them, EPAs will “put trade at the service of development”. Unfortunately no one can agree on what this means either. When the average annual EU income is about €25,000 and the average in West Africa is about €400 it is worth asking whether the concept of ‘economic partnership’ is appropriate. Surely for an economic partnership both partners need to be reasonably similar? Otherwise it risks turning into an economic arranged marriage. Is it really a good idea to be talking about how to increase exports of cut roses from central Ethiopia when people are starving in other parts of the country? Shouldn’t they be feeding themselves before exporting mange tout to Europe?
These sorts of questions, as well as ideological ones about the effects of globalisation, have been the backdrop to discussions about EPAs. It is widely accepted that increasing the capacity of poor countries to trade in the world market would help them develop more than just giving aid: the old adage about it being better to buy someone a fishing rod than to give them fish is self-evidently true. The problem is working out what sort of rod to give. Disagreement over why efforts have failed in the past and the complexity of the issues involved have made it difficult to reach a consensus on how to change things for the better in the future. Despite this Mandelson’s Trade Commission has not suffered from a lack of confidence in its belief that it knows exactly what needs to be done.
The EU’s analysis is that the preference schemes, where Europe paid several times the world market price for goods such as sugar and bananas, haven’t worked. A new approach is needed and it should focus on: good governance; improving trade rules and trading capacity; transparency and boosting trade within 6 regional groups (the Caribbean, Pacific and Central, West, Southern and Eastern Africa). All this sounds excellent but there have been agreements in the past which haven’t changed anything, so how will EPAs succeed where previous agreements have failed?
The commitment of the ACP to change should help, as well as increased political stability. Nonetheless when there are tough choices to be made the easiest political option is to delay them. This is one reason why trade negotiations take so long. No one disputes that reform is needed but it is the scope, timing and speed that are causing problems. It was hoped that the requirement by the WTO that the EU and ACP reform their trading arrangements before 1 January 2008, or face large fines for not being WTO compatible, would act as a stick to try to chivvy negotiations towards a timely conclusion. However, as 2008 gets closer there is still a worrying lack of progress, particularly in negotiations with the four regional groups in Africa.
Attempting to explain why these talks are so difficult to complete or get right is not easy as the topics involved are hideously complicated. It is much simpler for the Government to adopt campaigning NGOs notions about “trade justice” than it is to draw attention to something that British Governments have played down for 30 years: we don’t have an international trade policy, it is all done by Brussels.
What is particularly shocking is that in the case of EPAs Mandelson’s Trade Commission isn’t even contemplating the changes our Government, let alone the European Parliament, is suggesting to what they are doing and why. Trying to work out what is going on has been practically impossible as EPA negotiations have been unusually secretive. This is probably because not much has been happening. Commission negotiators feel they should be allowed to get on with the job that Member States gave them a mandate to do, but politically this is not feasible as the issues being negotiated are so controversial.
There are genuine concerns that the EU is trying to force through at high speed radical changes that the ACP will not be able to deal with. The fear is that overly complicated agreements will prove impossible to implement as vague promises of additional EU funding won’t pay for necessary improvements to make weak markets more attractive to investors. The only real change might well be to expose very poor countries to cheap imports, due to WTO commitments to lowering external tariffs, which could force local producers out of business.
It is impossible to know whether this worst case scenario will actually happen. In a way it doesn’t really matter. What matters is that African, Caribbean and Pacific countries don’t believe the EU when it says “we know what’s best for your development”. Ultimately many in the ACP feel they will have to sign whatever the EU asks them to – several of them rely on EU funding for over half of their Government’s budget. A severe lack of trust of Europe’s true intentions is exacerbated by British politicians saying they believe in one thing while EU trade negotiators demand another.
These negotiations will affect the daily lives of some of the world's poorest people. In a globalised, free-trading system what can Chad or the Solomon Islands give to the rest of the world that it can't get cheaper from somewhere else? There is an urgent need for a proper, public debate about how we link together our trade and development, as well as environment, policies. It isn't happening at the moment in British Government, but maybe that doesn't matter: they’re not the ones negotiating our trade agreements.
