Beyond Lomé IV
Future Relations between the EU and the ACP Countries

NGO Discussion Document, March 1997

Chapter 6 - Trade and Investment

The key issue is how the future ACP-EU partnership can tackle the inherent contradictions between poverty eradication and development rooted in ACP societies on the one hand and improving competitiveness in the world market on the other. NGOs and their partners have experienced many cases where the effects of trade liberaalisation block the struggle against poverty. For instance, women generate income for families and are considered an important factor in poverty eradication, but in Ghana cheap imports, due to trade liberalisation (to increase competitiveness), have outcompeted women farmers who sell their rice on the local market as well as women selling products in the informal sector.

The trade and investment cooperation and arrangements following up the Lomé

Convention should be based on :

1) the goal of poverty eradication and sustainable development;

2) the reality that ACP countries' export earnings come for more than 80 %

from commodities (including oil) with declining terms of trade;

3) building the capacity to benefit from preferences in Lomé and WTO

arrangements, which for many ACP countries is more important than the need

for more preferences;

4) ensuring that the export situation does not become less favourable for the ACP countries and respecting Lomé trade principles:

• trade should come before aid as a source of income for developing countries
• no fall in export earnings
• guaranteed contractual access to the Community markets which cannot be changed by one party
• strengthening of trade sector performance
• promoting diversification towards processed goods through zero tariffs
• maintenance of the possibility of non-reciprocal preferences to the ACP;

5) the most efficient and appropriate use of trade and investment instruments.

The form and instruments of trade and investment could be quite different than the ones in the current Lomé Convention since many economic factors have changed and experiences have showed the flaws of some instruments. For example, differentiation among ACP countries could be build around the needs of capacity building and poverty eradication.

The reformed or new instruments and principles that should be considered are:

(I) A separate Export Earning Stabilisation and Diversification Instrument with a fund for each country separate from, in coherence with and in addition to NIPs and RIPs, with two components (see below).

1) continued STABEX, SYSMIN and commodity mechanisms for countries where a large part of the population is dependent on these incomes, with special attention for LLDCs, landlocked and island countries; this could be gradually reduced parallel with measures to increase export income.

Funds should not be totally cut for countries and populations in danger of total marginalisation.

The EU should commit itself to the political will to address with the ACP the commodity problem and explore varied initiatives, commitments and measures in the following areas:

• new style commodity agreements;
• well-developed diversification and processing-marketing-distribution-transport (PMDT) efforts;

2) trade and investment cooperation measures and programmes with funding

for each ACP country depending on its needs, using capacity-building methods, to:

• select sectors that would respectively or together (a) reduce dependence on commodities and Lomé preferences, (b) benefit a large part of the population and (c) become competitive in the world market; increase the development of services and trade in services;
• assess the benefits of trade and investment measures in Lomé, WTO and other agreements in relation to sustainable development, poverty eradication, promoting social and cultural rights and gender equity, reduction of foreign debt and meeting the needs of a large part of the population;
• promote and support dialogue among and between the government, the private sector and other stakeholders in society;
• build capacity to negotiate with the EU and in international fora such as the WTO;
• remove administrative and institutional barriers to exports, including in the area of standards of certification.

One of the aims of the Export Earning Stabilisation and Diversification Instrument would be to allow the reduction of non-WTO compatible preferences where possible.

(II) POLITICAL PARTNERSHIP ON TRADE POLICIES

The EU greatly influences the kind of world market structures that are shaped through the WTO: rapid liberalisation is adapted to the EU's interests rather than those of the ACP. In order to ensure EU sensitivity to ACP interests in the WTO and other fora and in order to increase coherence between trade, agriculture and development policies, the political dialogue between the EU and the ACP (including DG I and the ACP-EU Ministerial meetings), should fully cover trade policy. Joint strategies could be developed to prevent negative consequences for the ACP. The WTO's Trade Policy Reviews of the EU (every two years) could include special attention to the consequences of EU trade policy on ACP countries. This dialogue should be based on the common interest in building a stable and sustainable international trade regime that promotes rising standards of living (as called for in the WTO preamble).

(III) AN ANTI-DUMPING MECHANISM

Part of the remit of the coherence complaints mechanism (see Chapter 3) should be to:

• look into all complaints ( including from citizens and civil society, from commercial bodies or ACP governments) of EU dumping in ACP countries; look favourably at dropping EU anti-dumping complaints, which are often protectionist, against ACP producers;
• investigate the use and threat of use of the Lomé safeguard measures against a "surge" of ACP goods

(IV) MEASURES UNDER EU RESPONSIBILITY

In an integrated world economy, large trading powers such as the EU have an impact on other countries such as the ACP. This gives the EU the responsibility to act in areas such as:

• improving EU policy coherence and consistency (see above, also Chapter 3);
• controlling and acting against damaging behaviour by European economic actors, such as: excessive speculation on commodities and currencies; non-respect by
• European TNCs operating in ACP countries of (OECD and voluntary) codes of conduct and ILO conventions; ecological destruction (e.g. Shell in Nigeria);
• undertaking all necessary measures to avoid oligopolies or monopolies in ACP countries by EU TNCs;
• implementing special WTO commitments such as (1) the Marrakesh declaration on the net-food importing countries suffering from higher world prices due to the Uruguay Round, which specifies that the donors should contribute to increasing agricultural production;

(2) Continued technical assistance to ACP countries on the WTO as called for in the WTO Plan of Action;

(V) EXPANDED HUMAN RIGHTS BODY OF THE JOINT ASSEMBLY

The Human Rights Committee of the ACP-EU Joint Assembly could also look into the gross abuses of labour rights, especially those related to the basic ILO Conventions, that occur in the ACP and EU countries with particular attention in sectors of ACP-EU trade.

(VI) PREFERENCES AND PROTOCOLS

It will be up to the ACP to carefully assess and decide if they want to keep one agreement covering all the ACP or if they see that they can defend their differentiated interests better in separate arrangements. The Export Earning Stabilisation and Diversification Instrument could be incorporated in an overall agreement or in each of the separate agreements.

In the choice of options, including an overall agreement with different trade arrangements, each of the ACP countries should not be worse off than under the current Lomé Convention. The arrangements also need to allow a regional perspective and promote regional dynamism. The following arguments should be taken into account:

• It is not clear how much more market access the EU would be able to give to the ACP countries under a Free Trade Agreement;
• Given that the WTO's preamble envisages that trade relations should be conducted to raise standards of living, ensure full employment, expand production and trade with the objective of sustainable development; that the WTO allows differentiation between developing countries (LDCs) and LLDCs although on a MFN basis; that the WTO Ministerial Conference in 1996 expressed concern about possible marginalisation of some developing countries and started a WTO Plan of Action for LLDCs; Lomé preferences and protocols which effectively contribute to eradication of poverty and avoiding marginalisation of ACP countries or sectors of ACP society should be maintained. Protocols protected by a waiver could include fair trade quotas for production made in accordance with basic international labour and environmental standards.

Additional preferences can be given to all the least developed countries, with special attention to the ACP, under the WTO Plan of Action.

This would imply that the proposed post-Lomé trade and investment mechanisms should exclude the options of replacement by GSP, an across-the-board ACP-EU investment agreement, a free trade agreement with all the ACP countries, or total abandonment of the trade preferences.

(VII) ADDITIONAL INVESTMENT MEASURES

Any selective investment measures such as mentioned above should contain a balance in rights and obligations, including a Code of Conduct for TNCs and assessment of how the investment contributes to sustainable production and trade.

The successor agreement to Lomé IV will have to tackle the real problems of investment, such as lack of infrastructure. Given the lack of FDI, it could promote domestic investment, notably via small-scale credit facilities. It should also contain measures to combat capital flight and corruption, including addressing the role of EU companies (see proposals by Transparency International).

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Updated on April 3, 1997
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