The EU strategy on trade and development in Africa – Challenges in agriculture in Africa in the context of liberalisation

Contribution to the Conference: Africa and Europe in new global geopolitics, by Helmuth Markov, Dakar/Senegal 24.01.2008

„The EU strategy on trade and development in Africa“

Dear colleagues, comrades and friends,

I. Intro

First of all I would like to thank you very much for your kind invitation to this very interesting and important conference about a number of interrelated topics that are of crucial importance for people and society in all our countries.

After my president and comrade, Francis Wurtz, already yesterday presented the new EU-Africa strategy and the previous speaker made an introduction to the EU-ACP Economic Partnership Agreements, I will first summarise the global idea and the main strategic points of the so called ‚Global Europe‘ strategy.

As we will see, the key elements of this strategy are represented by the EU Commission in basically all trade negotiations in which it is involved – in the WTO, as well as in regional and bilateral agreements.

The aim is to show that neither the basic approach nor the attitude of the Commission is likely become a real success story because it fails to serve the interests of the masses of working people in Africa and in Europe.

I should maybe mention, as a preliminary note, that for EU Member States it is the EU Commission, mandated by the EU Council (Member States‘ governments) that exercises authority in the field of external trade policy. Although there are coordination meetings with representatives of the Member States (in so called 133 Committee), my personal feeling is that the Commission is given plenty of rope as regards its external trade policy action.

Involvement of national and the European Parliaments is very much limited. Only when agreements have already been concluded, national parliaments have to ratify. The European Parliament is more or less regularly informed about trade policy. It can be ‚heard‘ about important questions and it may adopt opinions towards the Council and the Commission, but it has rather few formal power. This will only change when the EU reform treaty, which requires EP’s assent to all trade agreements, enters into force.

As we have seen in the case of the assent procedure on the amended TRIPS protocol,
such de facto right to veto give enormous pressure power to the Parliament.
(Brief explanation: EP had demanded an outlook about what the Council is planning to do in order to simplify rules for the application of compulsory licensing for medical products, which was allowed by this protocol, but obviously very difficult for developing countries to make use of. Parliament did refuse to vote at all until Council provided a – more of less – sufficient answer to its request.)

II. The overall EU external trade strategy in a nutshell
Within the strategy ‚Global Europe – competing in the world‘, issued in October 2006, the Commission sets out its overall priorities as regards external trade aspects. These priorities form the basis of various other communications and activities.

The key idea: promoting market access for European companies worldwide. This means reduction of tariffs and non-tariff barriers to the extent possible for EU exports, for EU investment and EU companies‘ overseas branches.

The strategy also aims at access to raw materials and energy resources; at the opening of public procurement and the services markets in general; and at so called protection of intellectual property rights.

There is a description of what is going on in global trade politics which is very illustrative: ‚The cart is put in front of the horse‘.

And indeed:
a) Whenever talking to the public and in all its publications, the Commission re-emphasises its commitment to the Doha Development Round. Bilateral and regional agreements are said to be intended as ‚complementary‘ to the WTO rules. But then, I do not see the logic of insisting on bilateral deals concerning topics that are in fact the most controversial subjects in the multilateral negotiations. Doha has stalled because of persistent disagreement on questions of tariff reduction, subsidies in the agricultural sector and market opening for services.

Additionally, investment protection, competition policy and government procurement – three of the so called Singapore issues – are not even very likely to be further discussed in the WTO in the next future. So from my point of view, it is out of reason to include them in EPAs with exactly those countries that were the most hesitant on those issues.

And it is at minimum very questionable whether the conclusion of more and more bilateral treaties will enhance the chances for any agreement on the multilateral level.

b) I am even very critical about attempts towards an EU-US free trade zone – because of unequal social and ecologic standards among these two economically more or less alike developed regions. The more I pose the question: If 30 years of non-reciprocal market access into the EU could not improve the situation in ACP countries, how could reciprocal trade agreements achieve anything better? But this is what the EU intends with the EPAs. The same is the case for proposals for free trade agreements with other regions or countries – for example Mercosur, CAN, South Korea, Brazil . Indeed, it is more or less the same ‚template‘ that is used for all these drafts – I don’t see any differentiated approach towards the very, very different regions.

But let’s stick to the EPAs:

Although, for example, the Senegal in the previous years had been somewhat ‚privileged‘ as concerns development cooperation – because of its strategic position in West Africa and its special relation with France – and it has benefited from the EU-ACP trade schemes agreed on in Yaoundé, Lomé and Cotonou, it is still one of the poorest countries in the world (human development index 156 of 177 (2006)).

According to a number of studies and impact assessments, the situation for developing countries would even worsen, if from now on trade relations were to be based on more reciprocity (although with transition periods).

Currently, ACP trade is of relatively insignificant importance for the EU, but access to the EU market is essential to the ACP countries.

Let’s have a look at some figures:

We have already heard that – much different from Europe – around 60% of the population in West Africa live on agriculture. 75 % of the poor live in rural areas. The GNP share of agriculture accounts for no more than 20% of the GNP. At the same time 40 % of basic food is imported.

Total exports of goods from the ACP are no more than 4.3 % of EU imports (2003); corresponding EU exports to ACP are 4.1 %. At the same time die EU received 42 % of ACP exports and supplied 29 % of their imports. All regions except Central Africa are net exporters (not necessarily all countries) and have increased on different rates, in West Africa by 61.1% during the years 2000-2004. In the same time EU-imports of agro-food from the entire world increased by 61.7 %, EU exports by 166.5%.
In 2006, Africa, even without South Africa as its largest economy, accounted for 68% of all ACP trade with the EU. West Africa is the largest destination for EU agro-food exports (47.5%). Still total agro-food exports of ACP countries to the EU were 4.5 % of the EU’s total agro-food imports and vice verso EU.

As regards losses of tariffs after the EPA tariff elimination proposed for West Africa, Senegal for example would have lost 7,83 % of its revenue. (See table 1)
(If I’m not mistaken this is 1,39 % of the countries budget – that doesn’t sound too much – but for example in the EU we are arguing about 0.1 percents more or less for Member States contribution to the EU budget.)

If tariffs were reduced to the extend that was foreseen in EPAs drafts, this would have meant:
– a budgetary shock
– an inflow of processed agricultural products at the expense of local production, food sovereignty would be out of any reach
– impairment of slowly developing, infant processing industries in developing countries.

Additionally, we should not forget farm subsidies and other support that the EU and Member States are providing to its farmers, but developing countries are certainly not able to do so. I am not against a reasonable (!) support for the agricultural sector in Europe, but
a) I am not at all supporting trade distorting domestic support and export subsidies to agribusiness and
b) the situation of public finances in partner countries is another point for consideration when negotiating trade agreements. I also do absolutely support tariff and quota free access for LDCs exports to the EU. But we see already now that LDCs produce specific goods solely as export goods (bananas, rice or cotton just to mention few). At the same time local markets never see these products (worse than in the GDR ;-)).

There are these and more reasons why ACP countries rejected signing or initialling EPAs or now interim agreements. Some did, because they would not fall under the Everything But Arms (EBA) scheme that provides tariff and quota free access to the EU market for LDCs. Those countries feared to lose important parts of their – little – income.

But these interim agreements, if I have been informed correctly, are not so much different in their final goals than the drafted EPAs: They may for now be just concluded as agreements on goods, excluding for example sensitive agricultural and processed products. But they foresee negotiation on ‚comprehensive‘ agreements, and I am afraid, those will not look much different from the original EPA drafts.

And by the way: It was already a problem that the EPA negotiations took place among the EU and regional groups, that did not correspond to the existing regional groupings. Especially on the African continent there is a risk for existing regional cooperation and south-south trade.

IV. Conclusions

Take into account enormous differences in development and needs
While it may well be a nice intention to promote employment, consumer and environment protection, lower prices of food, foodstuff, goods and energy for EU citizens, this must not go against the needs of people in other parts of the world.

On the contrary, in an unfortunately high number of countries, the very basic preconditions for human everyday live still have to be build up – such as peace, food sovereignty, and access to public services. This has to be insured before even thinking about liberalisation and privatisation. Therefore, demand for special and differential treatment as a precondition should be maintained by ACP countries and accepted by the EU.

Another, obviously most pressing problem is that of negotiation capacity of ACP countries: While industrialised countries‘ governments are able to employ a vast number of staff for the manifold aspects of international relations, one single representative of a developing country sometimes has to negotiate in a number of meetings negotiating about several complex issues.

Regional cooperation and integration
Pooling of sovereignty in regional – political and economic – integration frameworks such as ECOWAS, the AU, can and to a certain extend already does play a decisive role in conflict prevention and peace-keeping, the fight against poverty and for sustainable development. It may lead to an enhanced capacity of governments to protect the interests of their citizens, rather than a loss of sovereignty. But only if it is intelligently managed.

Because regional integration can also entail risks, such as loss of transparency and democratic accountability in decision-making, increased crime through the abolition of border controls or social repercussions through hasty liberalisation and wage competition.) It is also problematic that some ACP sub-regions and states have entered into interim EPA arrangements in a way that may split ACP regional economic groupings and could undermine their integration process.

In the ongoing process of EPA negotiations it should be ensured that the European Partnership Agreements are consistent with and contribute to the strengthening of ACP regional integration initiatives and do not undermine regional integration efforts. Any agreements adopted by sub-regions should be open to other members of their respective regional organisation in order not to impede but rather enhance South-South trade.

Enhanced efforts towards cohesion and cautiousness in liberalisation
Even the European economic integration process has not only been based on liberalisation alone but has been complemented by regulatory policies for supporting and protecting certain sectors.

If I were – and I am certainly not – ignorant or indifferent about the effects of EU policy in the ‚rest of the world‘, I could ask whether the EU Commission’s approach would serve the interest of EU citizens alone. Even then I would have to conclude: No, it does not. The combination of neoliberal policy approaches and unconditional privatisation are a great danger also within the EU. Social dumping, which means the pressure for lower wages, longer working times, less protection of employees, ‚flexicurity‘ are the results of less and less regulated competition. Workers within the EU are played off against each other. And the same happens more and more on the global level:

For example, I have read up on the case of the Dakar – Bamako railway which has been a pride of Senegal and Mali – before pressure by the IMF lead to its privatisation and sale to the French-Canadian railway company Transrail. The results read similar to what we can see in European remote areas after (partly) liberalisation of public services: dismissal of employees, a lack of passenger transport, closure of train stations, a serious neglect of much needed investment, growing prices. Trade unions find themselves in a powerless situation, local economy around former train stations is disappearing, people don’t have access to their doctors, working places and service centres, and infrastructure is run-down. Still the enterprise is profitable for the owners.

Regional cohesion mechanisms, structural and solidarity funds for helping weaker Member States to adjust to costs of challenges and to ensure proper financing will be necessary even more in ACP regional organisations. Investment in regional infrastructural networks will be crucial to enable cross-border economic activities. Trade unions and trade unions‘ cooperation need to be empowered again.

A real partnership on development
The EU could support these mechanisms with both expertise and funding without pre-defining the model and form of such policies instruments which have to be adapted to the particular interests and circumstances in each region. Instead of focussing on trade liberalisation and market access for Western companies, the EU should put more emphasis on supporting regional institution-building, capacity-building and human resource development in regional integration, functional cooperation that works towards redistributive and regulatory policy-making within the regions.

Improvement of ACP-EU cooperation on parliamentary level
On the parliamentary level there is already the EU-ACP parliamentary assembly. During the recent meeting in Kigali/Ruanda last December, the assembly adopted a common resolution. By this declaration, parliamentarians urged the European Commission not to pressure ACP countries to quickly sign EPAs, but to acknowledge that more time is needed for ACP States to assess, in a comprehensive way, the implications of the agreements proposed.

It was stressed that any initiative that might undermine ongoing ACP regional integration processes, must be avoided and that all agreements reached must ensure that no country is left worse off.

They claim for appropriate asymmetries in the agreements, in particular concerning: the definition of ‘substantially all the trade’; coverage of sensitive products; length of transition periods and pace of liberalisation based on development benchmarks; safeguards; and dispute settlement. It has been made clear that in the areas of services, competition, intellectual property, and government procurement some ACP regions do not want to address these issues and that the Commission should accept this.

Adequate financial and technical assistance to ACP States was called for, to enable them to meet EU import regulations and standards and thus fully benefit from improved market access.

I personally found this quite encouraging because ACP and EU parliamentarians together raised the long standig demands of ACP countries which I also heard in many meetings, be it in the EP or also in the WTO-steering committee meetings in Geneva.

Broad efficient consultation process with civil society, grass root organisations
As I said in the beginning of my contribution, fundamental decisions in economic and trade policy affect everyday live of all of us. The work of the NGOs represented here as well as the efforts of the Gabriel Peri Foundation are encouraging and obviously such initiatives finally prevented some governments from signing treaties that would go against the interest of people. But certainly, the Commission will go on with its neoliberal approach that threatens sustainable development in Europe and in developing countries. Only strong civil societies together with progressive political forces will be able to resist this approach and may reach change for the better.

Thank your very much for your attention.