Global Policy Forum

The EU is Bullying the World’s Poor to


By Madeleine Bunting

November 19, 2007

Gordon Brown's commitment to Africa has been one of the most consistent themes of his political career, and as he arrives in Kampala, Uganda, at the end of this week for the Commonwealth summit, he might reasonably expect plenty of appreciation and warmth. Instead, what he's likely to face is some intense presidential lobbying that will range from the privately furious to the deeply anxious. What threatens to ambush Brown at the ceremonials is a trade deal with the European Union that has come seriously unstuck. In the next few days the pressure will be on Peter Mandelson, the European trade commissioner, to convince trade ministers he can extricate the EU from a very tight corner and what could be a public relations disaster.

At stake are the millions of jobs and thousands of companies in 76 of the poorest countries in the world that depend on exports to the EU. Kenya's horticultural industry, for instance, which lands beans on your plate and carnations on your dinner table. It's a sector worth $700m in foreign exchange to Kenya, but come January, Kenya could face a 10% to 20% hike in tariffs on all its exports to the EU, and that could be sufficient to bankrupt some of its most successful export companies, carefully nurtured through aid programmes - including those of the UK. It could be a story replicated across the globe from Lesotho to Namibia, from Papua New Guinea to the Pacific island of Vanuatu, from the Caribbean to Mozambique. The commission would stand accused of slamming the first tariff increase in more than 40 years on some of the least developed countries in the world.

This would hardly make for flattering headlines. The EU likes to claim credentials for promoting development, and it would wake up to a nasty new year hangover as the villain of the piece. The tempo of negotiations to avoid this is becoming increasingly fraught as EU trade negotiators bully and cajole their counterparts in developing countries. The EU insists it has just six weeks to stitch together hugely complex trade deals; developing countries are furious that they are being rushed into agreements that will have far-reaching consequences for their economies.

So how did this pickle come about? How does trade policy end up being made on the hoof like this? Cast your mind back to 2005, and the talk during that year was that trade was as crucial as aid and debt relief to the long-term development of poor countries. The UK's Department for International Development made "fighting poverty through trade" part of its mission statement. But trade proved the failure of 2005, the Doha round of the World Trade Organisation talks ended in stalemate. The fallout of that failure to reform key rules of the WTO is now being felt, as the EU presses on to implement what many argue shouldn't still be in the WTO rulebook.

The basis of the present mess is that 76 former colonies of European countries have for more than 40 years benefited from a system of preferential, lower tariffs on their exports to the EU: it was a small gesture of colonial guilt. By the mid-1990s, other developing countries which didn't have access to the system challenged it, and the WTO ruled it as discriminatory. The hunt was launched to replace it with a system that still benefited these former colonies but wasn't going to land the EU in breach of WTO rules. The WTO gave the EU until December 2007 to sort it out. Without a deal, these countries would be subject to tariffs on their exports.

Fair enough, but the sting was that the new system - Economic Partnership Agreements (EPAs) - had to meet the WTO requirement for reciprocity: what had started out as the EU doing some poor countries a favour became a trade deal in which the EU was given duty-free access to the markets of developing countries. In return for its generosity, the EU would get a handsome dose of trade liberalisation.

Needless to say this agenda, which has been energetically pursued by the EU's small army of trade negotiators, has made plenty of developing countries very jumpy - and has made campaigning groups extremely suspicious. They fear that this is an instance of how the old trade liberalisation agenda that achieved notoriety in Seattle in 1999 is reappearing through the back door; the US and the EU are skirting the much higher profile negotiations in the WTO to use bilateral negotiations that barely surface on the media radar in order to achieve the same objectives - market access for their companies

For the developing countries herded into six regional negotiating blocs, the EPAs have become a nightmare. They have a Damoclean sword hanging over their heads in the form of the December deadline, with all the economic disruption and chaos that would entail, but they also have deep anxieties about what they're being rushed into agreeing.

There are three big concerns on EPAs. First, every developed country has used tariff protection in its history to develop industry, but EPAs restrict that capability and could unleash a surge in European imports that could wipe out fledgling industries such as Kenya's dairy sector, as well as undercut prices of agricultural products. Second, governments themselves stand to lose a major chunk of their revenue that comes from tariffs; for instance, Zambia would lose $15.8m - the equivalent of its annual HIV/Aids budget. EU assurances that there would be aid to compensate only underline how this would increase dependency on aid. Third, the most complex and most important issue of all is how EPAs will affect regional trade. If you can get cheap widgets from the EU, why bother importing from your neighbour in Africa or the Pacific? UN studies have indicated that EPAs could lead to contraction in exactly those low and medium technology industries that are the basis for successful industrialisation.

The stakes are too big to rush into this, insist a growing chorus of voices in the developing world that are demanding to know why exactly this is the one WTO deadline the EU is insisting must be met. There are plenty of ways to postpone the deadline, but having snarled up the negotiations in unnecessary complications, the commission is now using the deadline as "a battering ram", as one of those involved put it. There are plenty of rumours of heavy lobbying of individual governments - "We just talked to them as a friend of what was in their best interests," said one official of recent discussions with Ghana, hotly denying any suggestion that this amounted to lobbying. And there have been squeals of outrage from the Pacific, where a commission email seemed to tie future promises of aid explicitly to getting an EPA signed.

It sounds grim. One of the biggest economic trading blocs in the world, on which the fortunes of many of these 76 countries are entirely dependent through both aid and trade, and here it is behaving like a bully-boy in the playground. But its bad behaviour is all behind closed doors; the arm-twisting is behind the bike shed, to play out the metaphor. International trade is such a complex subject and public attention so fleeting and rare that the EU is gambling on getting away with it.

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