EU ministers approve scaled-down LDC market access package

by Brian Kenety

Brussels, 27 Feb (IPS) -- European Union (EU) ministers have agreed to grant the world’s 48 least-developed countries (LDCs) immediate duty- and tariff-free access to the trade bloc’s markets for all non-military goods with the exception of three ‘sensitive’ agricultural goods: bananas, sugar and rice.

EU Trade Commissioner Pascal Lamy’s original ‘Everything-But-Arms’ proposal, which would have abolished EU barriers to all LDC imports on these sensitive products within three-to-five years, met with fierce opposition from commodities producers who are currently sheltered from competition by price guarantees, export subsidies and other measures.

The proposal was a high-profile source of friction between EU trade and agricultural officials. With the former camp eager to announce a sweeping gesture to the developing nations and the latter looking to protect domestic interests, some officials here spoke with irony of an ‘Everything-But-Farms’ initiative.

The London-based Financial Times newspaper said in an editorial Monday that the EU’s “international credibility and honour” were on trial.  “While Brussels’ motives are not purely altruistic, the plan’s fate is a highly symbolic and visible test of western willingness to address the scourge of world poverty and economic marginalisation”.

Anthony Gooch, Lamy’s spokesman, sought to downplay the significance of squabbling between EU member states on the details of the proposal.

“The principal point to get across here - and very often we lose sight of this - is that no one has actually done 100% liberalisation for the poorest countries in the world,” said Gooch before the vote. He argued that whether that liberalisation takes places as originally proposed, in 2004, or that “we need to wait a few years more” was immaterial.

“Let’s not lose sight of the main point of this; that we provide the best market access for these countries and that we put our money where our mouth is, in terms of delivering on development and integrating development into the EU trading system,” said Gooch.

In a speech Monday to an international forum on the plight of the world’s poor children, World Bank President James Wolfensohn called on rich countries to do just that - open up their markets to developing-country exports.

He also asked them to honour their commitment to devote 0.7% of their annual gross domestic product (GDP) to overseas aid, noting that such aid to Africa had fallen drastically from $32 per head in 1990 to just $19 in 1998, despite evidence of its development effectiveness in countries with effective economic and social policies.

“It is hypocritical to give debt relief with one hand, and then deny poor countries the ability to export their way out of poverty with the other,” said Wolfensohn. “Rich countries must open their markets and reduce their agricultural subsidies. The OECD [Organisation for Economic Co-operation and Development] today spends more than 300 billion US dollars a year on agricultural subsidies, a total roughly equivalent to the entire GDP of Sub-Saharan Africa.”

For his part, Lamy again stressed Monday that while there would be costs to European interests, they were minimal as compared to the benefit that the world’s poorest countries could potentially receive.  Furthermore, he said the proposal was an important step towards coherence between EU trade and development policy.

Swedish Trade Minister Leif Pagrotsky, whose country currently holds the rotating EU presidency, sounded a triumphant note after the compromise proposal was agreed Monday, describing it as the “best and most far-reaching ever” for the LDCs by a major trading partner.

UN Secretary-General Kofi Annan had written to the Swedish prime minister last week urging the EU to swiftly approve the proposal and put it into effect ahead of the UN conference on the poorest countries, to be held in Brussels in mid-May.

The initiative would send “a clear signal that the world’s richest countries are genuinely prepared to put into practice their oft-stated intention to accord priority attention to the plight of the world’s poorest”, wrote Annan.

As agreed by EU ministers Monday, the proposal will lift the barriers on bananas by 2006, and sugar and rice by no later than 2009. It also allows for a successive phasing out of tariffs with duty-free imports already permitted this year for limited quotas of sugar and rice.

Additional quotas will be allocated based on the “best performance” of each LDC over the past decade, introduced at increases of 15% a year.

“It is gratifying that we were able to reach this compromise. This means that we can go the whole way and open up the EU market to all goods from the least-developed countries. It also shows that we are serious and that we want to try to improve the economic conditions of the least-developed countries,” said Sweden’s trade minister.

But speaking privately, trade and development officials in the European Commission, the executive arm of the EU, admit they are disappointed that the ‘Everything-But-Arms’ proposal had been weakened, with one saying that the debate had “stolen its thunder”.

Although an internal study released by EU Agricultural and Fisheries Commissioner Franz Fischler in December, said that the impact of the original initiative would cost the European sugar industry some one billion dollars, trade officials, quoting an exhaustive study prepared for the United Kingdom-based pressure group Oxfam, say that its cost to Europe would have been minimal.

The critics of Lamy’s proposal claimed that sugar exports from these 48 LDCs could very quickly rise to 4.5 million tonnes. However, according to figures from the United Nation’s Food and Agriculture Organisation, the maximum potential increase in exports of sugar that could be expected from the poorest countries was only 100,000 tonnes.

“If this group of countries are ever going to achieve the levels of export that are being alleged, then millions of tonnes of sugar would have to come from Sudan, Malawi, Madagascar and Zambia,” Glenys Kinnock, a European Parliamentarian, said after Lamy’s proposal was revised last month. “It is fanciful to claim that any of these countries are capable of exporting sugar at these levels,” she said in a statement.

“In addition, the Trade Commissioner’s anxiety about the launch of a new WTO [World Trade Organisation] Round is further imperiled by this prevarication,” said Kinnock.

Indeed, the EU has made it no secret that it hopes the move will encourage the poorest countries, which average incomes per head of less than one dollar a day, to support efforts by the EU, along with Japan and other industrialised countries, to launch a new world trade round.

Pagrotsky, calling on other trading powers such as the United States and Japan to follow suit in opening their markets to developing countries, said Monday that the proposal “gives an important signal to the UN conference on the least-developed countries this May and for the forthcoming negotiations in the World Trade Organisation, the WTO”.