This is the first in a four-part series on future SADC-EU relations under the Lomé Convention.
As negotiations on future relations between African-Caribbean-Pacific (ACP) states and the European Union (EU) under the two-decade Lomé framework of agreements steadily continue, trade issues remain a major bone of contention with the two regions differing on negotiating positions and strategies.
The Lomé convention, a trade and aid pact that has shaped relations between the two regions since 1975, falls away in February 2000, a time by which a new framework of agreement should be in place.
Since the official negotiations began in September last year, the EU's apparent priority has been to make its future relations with the ACP compatible with the World Trade Organisation (WTO) rules which forbid discriminatory market access. To this end, the EU put forward a proposal for gradual introduction of trade reciprocity with particular emphasis on the establishment of Regional Economic Partnership Agreements in Free Trade Areas (FTAs).
By contrast, the ACP negotiating mandate calls for an agreement which is equivalent to the current situation under Lomé, as opposed to the EU proposal to replace non-reciprocal trade preferences with several regional free trade agreements, which may eventually lead to a possible dissolution of the group that currently has 71 states.
The ACP states argue that while trade reciprocity may be considered as a long term objective, the current diversity of situations, levels of development and interests within the ACP sub-regions make trade reciprocity unrealistic.
In addition, the EU represents a single commercial entity with a single negotiating body - the European Commission (EC). On the other hand, regional bodies within the ACP group have limited, if any, negotiating powers. For instance, the Southern African Development Community (SADC) Secretariat has no mandate to negotiate trade agreements on behalf of member countries.
Maintaining the status quo, is therefore a natural option for the ACP. The current Lomé framework exists under a five year WTO waiver which expires next year. All ACP and EU countries are parties to the WTO, which replaced the General Agreement on Tariffs and Trade (GATT) after the Marrakesh Agreement of 1995.
WTO rules stipulate that preferential treatment by a developed country or group of countries should be extended to all developing countries at the same level of development. For the status quo under Lomé to be maintained or improved as the ACP states wish, a second waiver is needed. But here lies another bone of contention.
The EU wants a waiver of no more than five years. In fact the EU wants negotiations on REPAs to commence in 2000 and the agreements to be sealed by 2005. On the other hand, the ACP, while recognising that non-reciprocal trade is a short-term solution, is asking for ten years as a means of transition. What do WTO rules say?
Article 25 of the WTO, as well as other articles that refer to trade liberalisation and the development of developing countries, are subject to a lot of hazy interpretation.
According to a recent policy brief by the Dutch-based European Centre for Development Policy Management (ECDPM), waivers are "usually granted as a matter of political expediency and after intense negotiations between members. The view has been expressed that a WTO waiver may not be granted for a period exceeding ten years, but since the rules are silent on this issue, it could be granted for a longer period, depending on the circumstances of the case."
Given that all EU members are developed countries, the disparity in the levels of development among the ACP group can be used as an argument for seeking a waiver to enable ACP countries to adjust to the new competitive environment. More than 80 percent of ACP countries are among the world's poorest.
Different trading partners have always used WTO waivers. For instance, the EU has a waiver for its agricultural products which are heavily subsidised and the United States has got a waiver for its arrangements with Latin American countries. These countries will most likely still need waivers when existing ones expire.
The challenge for ACP states is to mobilise support from the EU and other sympathisers in the WTO. A three-quarter majority vote is needed for a waiver to be granted.
It is however, not going to be easy for the ACP especially when it comes to dealing with the EU which has been known to interpret rules in a manner that suits them. The EU manipulation of WTO rules was a subject of hot debate during a one-day workshop on a New Lomé Trade Regime organised by the Foundation for Global Dialogue and the South African Trade and Industrial Policy Secretariat in Johannesburg end of February this year.
Presenting a paper during the workshop, Ros Thomas of the Development Bank of Southern Africa accused the EU of manipulating WTO rules to its advantage. She cited two cases as examples: rulings by the two banana panels which the EU defied, and the sluggish Common Agricultural Policy (CAP) reforms.
Three years ago Ecuador, Guatemala, Honduras and Mexico challenged the legality of an EU move to limit the quantity and type of bananas that could be imported into Europe within the Lomé framework. In 1997, a WTO dispute settlement committee ruled that the EU's banana regime violated several WTO provisions but in July the same year, the EU appealed against the findings. The Appellate Body upheld the panel findings.
In January 1998, the WTO arbitrator gave the EU until January 1999 to comply with the rulings. How did the EU respond? In apparent defiance, the EU's "Agricultural Council adopted modifications to the banana regime and unilaterally declared that they were WTO consistent," said Thomas.
"The fact that they (the EU) have refused to abide by it (banana panel decision) and now they are facing USA unilateral Super 301 action against them shows that there is just such intransigence in not wanting to follow through but dictate the rules," said the DBSA official.
Another participant at the workshop in Johannesburg questioned why the EU has been allowed to continue with subsidies on its agricultural products. Subsidies are not consistent with WTO provisions. Many developing countries especially those in SADC have complained about unfair trading practices in the pricing of EU beef under its CAP. Beef from Botswana, Namibia, South Africa and Zimbabwe has been displaced by the heavily subsidised EU beef.
CAP currently exists under a WTO waiver. Although the EU is under pressure to reform CAP, it will likely seek another waiver. It is amazing how the EU got away with its subsidies in the first place yet the removal of such trade barriers is a top pre-requisite for trade liberalisation as advanced by the WTO and international financial institutions.
Given the record of the EU in its interpretation of trade-related rules, the ACP needs to advance cautiously and should rely less on what the former understands of WTO compatibility.
In the short term, it appears there are no options for the ACP states. The underlying disparities in levels of development, among other factors, require that the status quo be maintained. However, in the long term, the option for non-reciprocal trade suffers from lack of realism given the tide of globalisation.
Under such circumstances, the long-term strategy is to consider trade reciprocity bound by regional partnership agreements with FTAs. (SARDC)