The Week in Europe
By David Jessop

On September 20th, Europe's Commissioner for Trade, Pascal Lamy, announced
that the European Commission (EC) had agreed to a proposal that will result
in the world's forty eight Least Developed Countries (LDC's) being offered
duty-free and quota-free access into the European Union (EU) for all of
their products except arms. 

Quite rightly, the decision to support, through trade measures, the world's
poorest nations was hailed as forward looking and a more than required
response by Europe. It was also seen as offering an end the marginalisation
of the world's poorest countries through an initiative that it is hoped the
US and Japan will match.

But beware. As the saying goes, one man's meat may be another man's poison.

It is now clear that if the proposal, variously described as the 'Lamy
initiative' or the 'everything but arms initiative' is taken forward without
significant amendment, it will seriously damage every commodity dependent
Caribbean economy. So much so that it is no exaggeration to say that it
could result in the destruction of much of the Caribbean's sugar and rice
industry, do serious damage to the rum industry's last remaining chance to
compete in the EU market and diminish further the prospects for Caribbean
bananas in Europe. 

Under the EC's proposal, all LDCs, regardless of whether they are ACP states
or not, will receive duty and quota-free access to Europe by the end of
2001. This rapid timetable has been concieved to meet the EC's World Trade
Organisation (WTO) commitment to open its market to LDCs and in order that
the new measures can be incorporated into the review of the Generalised
Scheme of Preferences due in 2001. Only in the case of bananas, sugar and
rice will duty-free and quota-free access be phased in over a three year
period up to 2005 at the latest, in order to recognise the sensitivity of
these commodities.

In the case of sugar, the effect is that the EC proposes unilaterally to set
aside the present sugar regime. The result, if present proposals go ahead,
will be an EU market flooded with low cost sugar, possibly originating in
sources other than those intended to benefit from Europe's LDC initiative.
As a result the EU sugar market will become unstable and ACP suppliers will
find themselves displaced, irrespective of the legally binding nature of the
existing ACP sugar protocol. 

In the case of rice where no protocol exists but where the EU market is
carefully regulated by a tariff/quota and a regime almost as complex as that
for sugar, ACP and other producers will also experience displacement. In
their case they will have to face competition with massive producers such as
Bangladesh, Cambodia or Laos. 

Rum producers will also face problems. Just at the moment the industry hoped
to have a period of relative calm during which European assistance would
become available to enhance competitiveness and enable the transition from
sales of low value commodity rum to high value branded product, LDC
producers will have a more advantageous tariff position in the EU market.

For banana producers the idea of tariff and quota-free entry for LDC
producers will not only throw the present battle to find an acceptable EU
regime into turmoil, but may well distort the whole market if some of the
LDC's presently not exporting to the EU decide to undertake production to
take advantage of the new market opening.

The overall EC proposal, that still has to be the subject of consultations
and eventual agreement between European ministers, is politically sensitive
and difficult for the region to address. Because it offers the 39 ACP LDC's
and nine non-ACP LDC's access to Europe in perpetuity on a non-reciprocal
basis it threatens the solidarity of the ACP group. 

It ignores the fact that small producers such as those in the Caribbean or
Mauritius are also uniquely vulnerable. That is to say, it will discriminate
in favour of the 39 poorest ACP nations through a non reciprocal
relationship whilst the remaining 38 are expected by Europe to have to begin
negotiations in just under two years time for a post 2008 reciprocal trade
relationship with the EU. It will also bring into question in parts of
Africa and elsewhere in the ACP the coherence of sub-regions and economic
groupings in which some nations will have reciprocal relationships with the
EU while others, sometimes with contiguous borders will not.

Apart from threatening the future of the sugar, beef and banana protocols,
the Lamy initiative may also damage, perhaps terminally, the ideas being
developed on commodity issues by the Caribbean Regional Negotiating
Machinery for the EU/ACP negotiations for a post 2008 EU/ACP trade regime.
For this next round, scheduled to start in September 2002, Caribbean
negotiators had been trying to establish a basis on which a new longer-term
WTO compatible arrangement might be created for sugar and bananas in
particular. 

Significantly, the EC's LDC announcement was taken without reference to the
Declaration XXIII of the new Cotonou Convention which provides for
consultation and oversight on the likely impact of any such decision on a
post Lomé, post Cotonou ACP/EU trade regime. The same declaration also makes
clear that any threat during the period up to 2008 to the ACP's competitive
position should have been subject to a review based on preparatory work
undertaken by the EC and the ACP Secretariat.

To further complicate matters, the way that the EC is proposing to take the
matter forward is by way of an amendment to an existing regulation and will
not require a joint decision with the European Parliament.

So what should the ACP Caribbean do, given that the region is also committed
to support any initiative aimed at helping the world's poorest nations?

The first step must be for governments to recognise the true nature of the
threat facing regional industries and its immediacy. The second is to ensure
that the rest of the ACP understands the broader implications. A third will
be to engage in urgent dialogue with the EC's Trade Directorate and to have
the ACP and EU agree to have convened the Joint Trade Ministerial Committee
provided for in Declaration XXIII of the Cotonou Convention. Thereafter,
further steps might involve seeking delay in order to ensure that the very
complex implications are fully understood by the EU. It will also involve
each industry developing a strategy as to how it sees its future in a world
in which LDCs have the least parity on commodities.

But more fundamentally the issue will require a significant political
initiative in the ACP and in the EU. There is some suspicion that the reason
the proposal emerged from EC College of Commissioners so rapidly was because
they were aware that the only way their differences might be resolved was
politically. That is to say through the EU Council of Ministers trying to
achieve a balance between national commitments to domestic producers of
products such as sugar or rice, the EC's unavoidable WTO commitments and its
desire to have a more intimate relationship with developing nations over the
global trade agenda. If, as seems likely, this is the case, then the
Caribbean will need to rapidly forge alliances with those European leaders
who understand the implications of the Lamy proposals for the ACP group and
have them recognise why the Caribbean's interests must also be factored into
this complicated equation.

David Jessop is the Executive Director of the Caribbean Council for Europe
and can be contacted at [log in to unmask]
October 13, 2000  


Dr. Amanda Sives
Postdoctoral Research Fellow in Caribbean and Caribbean Diaspora Studies
Institute of Commonwealth Studies
28 Russell Square
London, WC1B 5DS

Tel: +44 0207-862-8865
Fax: +44 0207-862-8820
Website: http://www.sas.ac.uk/commonwealthstudies/



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