The third African, Caribbean and Pacific (ACP) summit being held in Fiji this week has a dilemma on its hands.
On the one hand is the positive aspect of trade liberalisation with proposals aimed at securing access to Europe’s sugar, banana and rice markets by the South’s developing countries.
On the other hand is the negative impact of the ACP’s trade ministers’ recommendation that customs tariffs currently imposed on European Union (EU) member states be done away with, which would allow the free flow of goods from Europe into ACP member markets.
The recommendation was among draft guidelines on trade partnerships discussed during the three-day Council of ACP Ministers held two weeks ago in the Dominican Republic.
The most contentious issue in the draft guidelines is the ACP’s call for a subsidy system to be introduced to compensate for the possible loss of revenue that may come with the lifting of the tariffs. The ACP wants the subsidies as a safeguard in case increased imports from the EU pose a threat to its members’ domestic industries.
The Dominican Republic talks were followed by a joint session of the ACP and EU council of ministers, which focused on the draft guidelines. In a joint press briefing after the meeting ACP Secretary General Jean-Robert Goulongana refused to speculate on the cost of a subsidy system, and EU commissioner Pol Nielson would not say if the EU would accept the proposal.
At the heart of the trade talks are agreements entered into as far back as 1975. They include the Lome Convention and the Cotonou Agreement signed by the EU and ACP in June 2000.
This accord provides for the creation of economic partnership agreements to “remove progressively barriers to trade” between the two blocs and “enhance cooperation in all areas relevant to trade”.
Though 57 ACP countries have ratified the Cotonou Agreement, so far only seven European countries have signed on.
The tariff issue is one small part of the overall aim of the agreements which also includes the eradication of poverty, promoting sustainable development and creating access to resources.
This first phase of talks to discuss the draft guidelines is scheduled to start on September 27 and must be concluded by September next year. They will be followed by tariff negotiations.
The guidelines call for member states to develop their ability to negotiate over trade issues and to analyse the implications of trade developments at both regional and international levels.
The rationale behind them is that it is easier for ACP members to secure a better deal from the EU if they negotiate collectively rather than as individual countries.
The guidelines also urge ACP member states to determine the impact of trade liberalisation on their economies and to establish what adjustments they would have to make to benefit from economic partnership agreements and the cost of such adjustments.
According to the draft guidelines, the negotiation process for economic partnership agreements should create a special economic and trade compact for addressing issues such as diversification, improving productivity, competitiveness and trade governance as well as attracting foreign investment though promotion, protection and double taxation agreements.
The result of successful negotiations would be a trade environment which enables an economy to grow.
Successful negotiations could also lead to job creation and structural transformation.
The draft guidelines require these talks to be compatible with World Trade Organisation (WTO) discussions and decisions.
Because the WTO’s rules are currently tilted against developing countries, the guidelines call for more flexibility and special differential treatment from both the world body and the EU.
A shift in position by the WTO and EU in this respect would make the implementation of partnership agreements in the ACP sustainable.
Other issues on the ACP negotiation agenda include intellectual property rights, standardisation and certification, differences in quality assurance and labour standards.
Talks on intellectual property emphasise both the importance of the disclosure of sources of traditional knowledge and its protection, and the role intellectual property plays in meeting public and social objectives in ACP countries.
In respect of quality assurance, both the ACP and EU will need to actively reduce the differences between them in order to facilitate trade. Labour standards in ACP countries must conform with those defined by the International Labour Organisation.
Transition to a free trade environment must be precipitated by the introduction of institutional support mechanisms.
So far three institutions have been established. They are the European Development Fund (EDF), the Centre for the Development of Enterprise (CDE) and the European Development Finance Institution (EDFI).
The EDF was created to facilitate the integration of ACP countries into the world economy, promote the eradication of poverty in ACP countries and encourage the long-term viable development of member-state economies.
The CDE and the EDFI promote private enterprise in ACP countries by combining subsidised support services with investment finance.
The CDE also offers a specialised two-phase support mechanism. The first phase involves pre-investment support and includes market and feasibility studies, technological advice, partnership agreements and financial engineering and negotiations.
The second phase is instituted once a project is established and makes expertise available in the fields of management, technical support, marketing and restructuring.
The EDFI consists of 12 European countries that provide project financing through short-term and long-term loans and co-financing for private enterprises in developing countries.