Global Policy Forum

EU Move Could Bring Disaster to the Poor


By Sanjay Suri

Inter Press Service
October 4, 2006

The decision announced by the European Union to pursue bilateral trade deals in the absence of a comprehensive world trade agreement can mean disaster for poor countries.

"Europe's policy needs to be clear: rejection of protectionism at home; activism in opening markets abroad," trade commissioner Peter Mandelson announced in Brussels Wednesday. The call to end protectionism at home is likely to lead to some rumblings within Europe, but the announcement really set off alarm bells among those seeking to protect the rights of people in developing countries.

The opening of markets bilaterally will mean that small and economically backward countries will have to take on the economic might of the EU while negotiating any deal. Few are expected to withstand EU pressures. It is at least partly with the interest of such countries in mind that some of the leading developing nations like India and Brazil took a tough negotiating position at world trade talks. The principal reason that no deal emerged is that these powerful developing nations held on to their position, and stood firm in speaking for the poorer countries.

The EU declaration Wednesday circumvents the stand taken by countries such as India and Brazil. In stressing that the European Commission, the executive arm of the EU, would move towards "opening markets abroad", the EU has made it clear that the emphasis of the new policy will be on opening these markets to EU goods and services.

The EU will inevitably not just target the small countries, more vulnerable as they are. The EU is looking first at the two big markets in China and India, where the United States and Japan have moved ahead of the EU in working out bilateral trade agreements. "It is a very sinister move," John Hilary, campaigns and policy director with the group War on Want told IPS. "It is a policy that is born of failure at the WTO, and so the EU is now trying to pick off individual countries one by one."

The EU has been signing partnership agreements with countries from Africa, the Caribbean and the Pacific region (the ACP group). Moves in those countries to open up their markets have been devastating to their economies. "As shown by past experience, the blueprint for the future of EU 'competitiveness' will expose industrial and services markets in developing countries to direct competition with the world's largest multinationals, leading inevitably to bankruptcies and job losses as local firms struggle to survive," War on Want said in a statement. It pointed to the examples of Senegal, which lost one third of all manufacturing jobs when forced to open up its markets, and Ghana, which lost two thirds of its manufacturing jobs within five years of market liberalisation. Similar experiences have been registered in countries across Africa and Latin America.

The EU is now feeling left behind the United States and Japan because the Doha round of trade negotiations has failed. The move to achieve a single global regime of trade rules was launched in Doha in Qatar in 2001. The emphasis was to be on trade as supporting development, and so it came to be christened the Doha Development Round. "Now there is no talk of a development round," Hilary said. "The EU now wants to push through dramatic liberalisation for the EU business community."

The EU has been in active talks over a trade agreement with India. That raises questions now how far countries like India will want to take on global leadership of the developing world. The EU is still talking of an eventual global trade agreement. But given the results ? or the lack of them ? in the trade talks so far, few are now taking this as anything more than talk. The EU is speaking of bilateral agreements as parallel initiatives.

"The (European) Commission will set up a new programme of bilateral free trade agreements (FTAs) with key partners to build on WTO rules by tackling issues which are not ready for multilateral discussion and by preparing the ground for the next level of multilateral liberalisation," it said. "The key economic criteria for new FTAs should be market potential -- particularly the emerging markets of Asia."

"A changing global economy needs a new trade policy," Mandelson said. "An open market is not just a lowered tariff -- it is a market in which European companies get a fair deal, with freedom to compete and legal protection when they do." Quite openly now, the new trade talk is about markets for EU businesses.

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