The Week in Europe
By David Jessop

As is now well known, the European Commission (EC) announced in September an
initiative that if not amended will damage, possibly terminally, the
Caribbean's sugar and rice industries, create yet more problems for bananas
and it seems, cause unexpected new difficulties for rum. 

This is Europe's 'everything but arms' initiative. It offers the world's 48
poorest nations, the Least and Less Developed Countries (LLDC), duty-free
and quota free access to the European market as of January 1, 2001 for all
of their products except arms. Only in the case of sensitive products such
as sugar, rice, and bananas has the EC suggested LLDC exports should be
phased in over a three-year period. Although laudable in intent, the
proposal has the effect of precipitately setting aside existing preferential
arrangements for the ACP which were meant to last to at least 2008 and
ignores treaty obligations contained in the recently signed EU/ACP Cotonou
partnership agreement.
 
As a result, Caribbean leaders, the Regional Negotiating Machinery and the
industries at risk have been making clear the Europe can not abrogate their
commitments contained in the Cotonou Treaty. 

Specifically, Caribbean leaders have pointed to the text of Declaration
XXIII of the Convention. This sets out the procedure to be followed if the
EU were to decide to open its market to the LLDC. It recognises the need for
a range of actions if the wider process of trade liberalisation in Europe
might lead to deterioration in the competitive position of ACP countries.
The Declaration makes clear that under these circumstances preparatory work
is required of the EC in the form of prior consultations with the ACP and
the production of impact studies. Most importantly of all the declaration
requires the convening of an ACP/EU Ministerial Trade Committee to make
recommendations 'on the basis of an initial review prepared by the
Commission and the ACP Secretariat'. This the Declaration states, the 'EC
Council will examine .... on the basis of a proposal from the Commission
with a view to preserving the benefits of the ACP-EC Trade arrangements'. 

But it now appears that at best, the EC's Trade Directorate is seeking to
place its own interpretation on the meaning of this explicit text and at
worst seeking to circumvent it entirely. Moreover, because of the nature of
the LLDC proposal, the question of how to proceed is proving contentious and
is potentially divisive within the ACP group itself. So much so that it now
seems that the EC and some less developed ACP states that might benefit
substantially from the LLDC proposals may seek to avoid any early convening
of the Ministerial Trade Committee.  

On the ACP side this may have contributed to a first disturbing result for
the Caribbean.  The ACP has been unable to agree to refer the EC's
everything but arms initiative to the ministerial ACP/EU Trade Committee for
the technical reason that the terms of reference are not yet in place for
this vital body. Instead, ACP Ambassadors have agreed a minimal position.
After some debate, they accepted that the need to request joint ACP/EU
impact studies when Ambassadors meet shortly with the EC in Brussels in the
EU/ACP Trade Sub Committee. 

But worryingly, there appears to be a drive by the EC's Directorate Trade to
suggest that this same meeting is in fact the EU/ACP consultation on the
LLDC proposals. Speaking in Gabon on November 13th the EC's Trade
Commissioner, Pascal Lamy, the architect of the LLDC initiative, told
African Trade Ministers: "I am nevertheless conscious that certain countries
have expressed their fear that the transitional periods for certain
sensitive products like rice, sugar or bananas will be too short. I am of
course ready to discuss this with them on November 21 when we meet the
representatives of the ACP."

For the Caribbean, any approach that fails to observe the procedures
established by the Cotonou Convention or that seeks to avoid discussion of
the impact studies at a Ministerial level is certain to be seen as
unacceptable. But recent manoeuvring within both the EC and the ACP is
indicative of the very real political difficulties that lie ahead both
within the ACP group and with the EC and EU member states. 

To understand why the impact studies are so important it is worth looking at
some practical examples. 
 
Guyana produces rice and sugar, both of which will be negatively affected by
the LLDC decision. Together they represent approximately 44 % of total
exports. In a country classified by the World Bank as a Heavily Indebted
Poor Country (HIPC), both generate significant foreign exchange and are
central to Guyana's economic and political stability. 

In the case of rice Guyana, whose exports to the EU continue to be limited
by quota and are subject to tariffs will, under the proposal,  find
themselves competing in the EU market against vastly larger LLDC rice
producers (Bangladesh, Cambodia, Laos and Nepal) who will enjoy duty and
quota free market access. The effect will be to totally displace ACP rice in
the EU market in or before 2005. The offer to open the EU market to LLDC
rice exporters comes just as the industry is struggling to address another
contradictory European proposal on rice. This involves a reform of the EU's
own rice regime in such a way as to increase tariffs on ACP husked rice. Put
simply, the EC is proposing a strategy for bringing about the collapse of
the Caribbean rice industry by first raising the duty for ACP rice exporters
in the short-term and then gradually opening up the market to larger, lower
cost producers from LLDCs in the medium term. 

Equally as difficult will be the situation for Belize. Belize's Prime
Minister, Said Musa, is understood to have told his EU counterparts that
Europe has and will continue to be the principal and sole market for his
country's three major exports: sugar bananas, and citrus. Sugar alone makes
up 53.16 per cent of national agricultural production and provides 24.6 per
cent of foreign exchange earnings. The demise of the industry would result
in serious socio-economic disruption. The LLDC proposal, the Prime Minister
is understood to have indicated, has dire and far reaching implications. It
will, he is believed to have said, relegate us once more to the very LLDC
status that it (the EU) seeks to alleviate for the 48 beneficiary countries.


In both cases and throughout much of the rest of the Caribbean, economies
face ruin if the proposal goes ahead as drafted. It is therefore vital that
the EC and ACP separately assess the impact of the LLDC proposal and meet at
ministerial level as required by Declaration XXIII of Cotonou Convention.
That is to say, before the draft regulation is taken to the EU Council of
Ministers. Only a careful country-by-country assessment based on a detailed
understanding of the mechanisms Europe is proposing for each sensitive
commodity can begin to resolve this issue. Nothing less will do.

David Jessop is the Executive Director of the Caribbean Council for Europe
and can be contacted at [log in to unmask]
November 18th, 2000


Dr. Amanda Sives
Postdoctoral Research Fellow 
Commonwealth Policy Studies Unit
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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