The Week in Europe
By David Jessop

The European Commission's controversial Everything But Arms (EBA) proposal
is to be revised by its architect, the EC's Trade Commissioner, Pascal Lamy.
The initiative, originally announced last year, offers the world's poorest
nation's, the Least and Less Developed (LLDC) countries, duty free and quota
free access to the EU market by 2005. While welcome, it has the effect of
setting aside the EU's sugar and rice regimes. By extension it also damages,
perhaps terminally, the value of existing ACP protocol arrangements for both
sugar and bananas and disrupts the ACP rice industry's market in Europe. It
may also affect negatively the Caribbean rum industry's ability to compete
in a rapidly liberalising EU spirits market.

Although the draft regulation was agreed by the College of Commissioners and
published last October, the proposal has proved so contentious that the EC
Commissioners, unusually, agreed on January 16 to 'fine tune' it before it
goes to the Council of Ministers. Their purpose is to see how its negative
impact on EU agriculture might be modified.

Despite this, some of the changes proposed to date have proved to be so
contentious that two previous attempts by EC Commissioners to have the
College reconsider the proposal in December and early January were
postponed.

At base there is a fundamental disagreement between the EC's Trade
Commissioner, Pascal Lamy and the Agriculture Commissioner, Franz Fischler.
The latter has made public, internal Commission documents which suggest that
the impact of opening up the EU market for all agricultural products from
the LLDC would dislocate European agriculture and it's carefully managed
regimes under the Common Agricultural Policy. The documents also suggest
that the proposal as originally drafted would cost Europe billions of Euros
as EU sugar and rice would have to be taken into intervention. In this,
powerful European farm lobbies have backed the Agriculture Commissioner.
However, Commissioner Lamy denies Commissioner Fischler's contention. He
argues that the LLDC have not the production capacity to rapidly enter the
EU market. However, he recognised that to quell fears, special safeguards
may be necessary.

In all of this and despite protestations, ACP concerns have been marginal to
the wider inter-European debate on the EBA proposal. Moreover, the Trade
Directorate, supported by the Development Directorate, has continued to
resist ACP and other calls for impact studies, let alone the need for a
meeting of the ACP/EU Ministerial Trade Committee as called for in
Declaration XXIII of the ACP/EU Cotonou Convention. To make matters worse,
there is an uneasy truce between the majority of the less developed ACP
nations who stand to benefit from the proposals and the ACP's more developed
members located in regions such as the Caribbean. So much so that within
some parts of the ACP and its institutions, there is a propensity to take
the EU line. That is to say, to ignore the language of the Cotonou
Convention and only seek impact studies once the EC has determined an
approach.

As matters stand, Commissioner Lamy has, within a matter of days, to find a
technical solution based on three alternative options he has developed.
While these are still under discussion, the final solution is expected to
involve an extension of the recommended three-year transition period for
sensitive products (sugar, rice and bananas). In the case of bananas the
LLDCs transition o quota free, duty free will be between 2000 and 2006 and
for sugar and rice between 2006 and 2008. The Trade Commissioner is also
expected to recommend some form of special safeguard measures. This will
probably involve a trigger mechanism if LLDC exports exceed their best
exports in an agreed reference period. It is also probable that there will
be variable phasing during the transition period, so that the largest market
openings for sensitive products from the LLDC will occur towards the end of
any agreed transition period.

However, even these compromise proposals remain divisive within some parts
of the Commission and among certain Member States. Southern European nations
and DG agriculture have continued to argue for the removal of all sensitive
commodities from the proposal. However, is apparent that most Commissioners
and the majority of EU states see the initiative as politically important
for Europe and a key to unlocking a new WTO trade round. As a result, it
appears likely that all Commissioners and members States will now agree a
compromise around a version of Commissioner Lamy's alternative proposals.

Where does this leave Caribbean producers? At best it establishes a more
measured basis for a transition to an as yet unidentified post 2008 WTO
compatible arrangement for export commodities to the EU. It will enable
sugar and bananas a breathing space to consider carefully the type of post
2008 arrangement that will suit them best. But at worst it will not do
anything for the future of ACP sugar or bananas other than delay somewhat
the likely demise of the existing protocols and extend marginally the life
of less competitive industries. As for ACP rice exports, they will remain
subject to tariff and quota and will have to compete against LLDC producers
who by 2008 will have duty and quota free entry into Europe under EBA unless
ACP can argue successfully for identical treatment.

The EBA battle may be drawing to a conclusion, but the lessons it teaches
need to be learnt rapidly.

The first is that irrespective of its treaty obligations with the ACP, the
EC will continue to determine solutions to the problems it faces in the
light of the internal EU market. Secondly, unless industries and governments
in the Caribbean recognise that making their voice heard immediately in
Europe has a cost in time and money, they are unlikely to achieve the
results they wish. Thirdly, the ACP group is becoming less viable as a
negotiating entity. The division by the EC of the ACP into LDCs and MDCs
suggest that it will be impossible in future to have the majority of ACP
nations (i.e. the less developed) show concern about future trade
negotiations that benefit only the more developed ACP. And finally, more
developed ACP nations such as those in the Caribbean should cease to believe
that the Development Directorate at a political level any longer has their
interests at heart. The EC's Development Commissioner made clear in early
January that the EBA proposal was a joint initiative from himself and
Commissioner Lamy that they had been working on together from the beginning
of 2000.

The next steps will probably be rapid. If the College of Commissioners agree
to a revised proposal from Commissioner Lamy it is likely to go swiftly to
the EU Council of Ministers. Only thereafter will the ACP be formally
consulted. All of which seems to mean that the sugar, banana and rice
industries should be considering now to prepare for the new WTO related
environment in which they will find themselves after either 2006 or 2008.

David Jessop is the Executive Director of the Caribbean Council for Europe
and can be contacted at [log in to unmask]
January19th, 2001
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/