EU LAUNCHES NEW AID POLICY; CUBA WANTS IN

  
The European Union has concluded a new 20-year Partnership Agreement (PA) with countries in Africa, the Caribbean and the Pacific (ACP). The fourth phase of the Lomé Convention, which has governed cooperative relations between the EU and ACP countries since 1975, officially ended on February 29; however, its provisions continue in effect until the new convention is approved in May in Fiji. The new agreement provides for continuance of the current system for a few years until it is phased out. The parties reached a consensus “on the principles, objectives and schedule for implementation of the future economic partnership agreements.” Free Trade Agreements (FTAs) are to be negotiated with participating countries individually or as blocs, depending on their preference. The negotiations will begin with regional groupings in 2002.

Details of the EU - ACP Partnership Agreement

The Partnership Agreement stipulates that the ACP States and the EU “will negotiate and conclude, by 2008 at the latest, new WTO-compliant arrangements by phasing out barriers to trade among themselves and bolstering cooperation in all trade-related fields.”1 The least developed countries (LLDCs) are exempt from this provision, and the EU has committed to grant them free access for essentially all products by 2005 at the latest. The Lomé Convention includes 71 developing countries, among them 39 LLDCs; these countries now have duty-free access for all manufactured goods.

In addition to gradual withdraw of barriers to trade at an agreed pace, the PA pledges to negotiate new trading agreements that will introduce reciprocity and cover all trade-related areas while applying a maximum of flexibility provided for by the WTO. This was done to minimize the necessary adjustment efforts in the ACP countries. The agreement also provides for an examination of calendar requirements, rules of origin, sanitary and phytosanitary measures and supply side constraints in the ACP countries, with the objective of offering possibilities to exploit their existing and potential comparative advantages.

These new trading agreements are part of ongoing regional integration processes to allow for gradual integration into the world economy. As reassurance to the LLDCs they include the above-mentioned pledge to grant duty-free access for all of these countries’ products by 2005 and a high level of flexibility in implementation. The objective seems to be to further multilateral trade liberalization in a way consistent with the WTO and to integrate more closely the ACP countries into the world trading system.

Poul Nielson, European Commissioner for Development and Humanitarian Aid, described the agreement as “a remarkable, innovative achievement which faces up to the challenges of globalization by setting out an integrated and comprehensive approach to development, poverty eradication, trade and political dialogue. This agreement represents a major contribution to the effort to create international governance and promote North-South dialogue in the post-Seattle era.” Respect for human rights, democratic principles and the rule of law are essential elements of the agreement.

The EU committed itself to an overhaul of its financial cooperation programming, subjecting it to a regular review process based on analysis of needs and performance. The EU is also encouraging the ACP countries to take advantage of economic cooperation to become more competitive. As an example of such cooperation, the EU committed to a ninth European Development Fund worth EURO 13.5 billion, including EURO 10 billion for the long-term financial envelope, EURO 1.3 billion for the regional envelope and EURO 2.2 billion for the investment facility. European Investment Bank loans worth EURO 1.7 billion will also be made available. The total comes to EURO 15.2 billion.

The changes in EU development aid policy emphasize poverty reduction strategies, assessment of each country’s policy performance, consultation with civil society on these reforms and policies, and enhanced cooperation in all areas important to trade, including new issues such as labor standards and the linkages between environment and trade. Finally, the new policy strives to decentralize and rationalize decision making on aid issues to make the process more effective.

Caribbean Countries Could Benefit from FTAA as well as the PA

The Caribbean members of the Partnership Agreement will continue to benefit from its trade provisions and have the opportunity to enjoy greater market access when they negotiate an FTA with the EU. Meanwhile, the Caribbean LLDCs will benefit from the expanded opportunities in agriculture and other areas by 2005 at the latest. However, the Caribbean countries that negotiate an FTA, and in later years the LLDCs, will be prodded to liberalize their economies and become more competitive. Impetus to follow these same policies will also come from the WTO.

The negotiations for a Free Trade of the Americas (FTAA) offer greater market access to a larger and more immediate market in the Western Hemisphere, but the resulting agreement will be built around support for policies of economic opening and competition and will be WTO-consistent. The US government is expected to support a waiver from the WTO for the PA member countries in the Caribbean. (A WTO waiver is necessary when benefits received by a country or group of countries are not generalized to all WTO member countries). This would also apply to LLDCs that will benefit from free trade with the EU in 2005 or before (with the possible exception of banana exports, which are part of a separate trade complaint process).

Cuba Applies to Join the PA

The Government of Cuba participated as an observer in the negotiations for the new Partnership Agreement. In late February, Cuba made a formal application to join. No action has yet been taken, but the procedures for joining the convention are arduous and likely to take some time. In the end, required standards for human rights and democracy will probably lead to a rejection or postponement of the application. Cuba is also excluded from the ongoing FTAA negotiations. (Comment: Not only does the communist system not work well but the lack of political and economic liberty is costing the Cuban economy important trade opportunities.)

1 EU Information Memorandum No. 10.

http://EUROPA.EU.INT European Commission Office, Washington DC Joint declaration on market access in the EC-ACP Partnership

US Department of State