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By David Jessop




In June 2000 the African Caribbean and Pacific Group of nations (ACP) and
the European Union signed the Cotonou Convention. The Treaty, a unique trade
and development arrangement, came into being after two years of arduous
negotiations.

The Convention is particularly important for the Caribbean as it gives up to
2008 special access to the EU market for sensitive commodities such as
sugar, bananas and rice.

In order that these and other preferential aspects of the Treaty can not be
challenged by other states, a World Trade Organisation (WTO) waiver is
required. Put simply, this is an agreement by all WTO members that they will
not raise objections to the Cotonou Convention even though its content is
not in conformity with WTO rules.

To achieve this the EC has had to put forward a detailed request explaining
the Convention's trade provisions. At the same time it has had to make clear
that they form a part of a transitional trade arrangement that will lead
eventually to a further trade arrangement. This would bring ACP/EU trade
into line with WTO rules after what most probably will be a further lengthy
period of adjustment.

Despite this having happened and over a year after the signing of the
Cotonou Convention, there is still no sign of a WTO waiver being agreed.
This raises, in theory, the spectre that any third nation might challenge at
the WTO the legality of the EU continuing to provide for example the special
access and price provisions for certain ACP commodities that the Convention
contains.

Why this has happened and what may happen next provides a lesson on the ways
in which some nations now see the WTO's consensus based system as offering
the possibility of trade advantage even after agreement has been reached on
a contentious issue.

It also points to the fact that preparations for a new global round of trade
liberalisation measures that may be launched at the WTO ministerial meeting
in Doha this November has temporarily become like some black hole sucking
into its maw every trade arrangement under negotiation or still to be
finalised.

Last month the EU and US agreed after years of wrangling the final steps
required to end the long running banana dispute. Earlier they had agreed a
basis for a complex tariff and quota system lasting to 2006 and a simple
arrangement after that date. As a part of this the US agreed to lift the
sanctions it had imposed on EU goods and in return Europe agreed that by
January 1, 2002 the new banana regime would be in place.

However, differences have now emerged over obtaining the necessary WTO
waiver for the new banana arrangement that for the ACP is intimately linked
to the banana protocol contained in the Cotonou Convention.

As a result consideration of the request for a waiver for the Cotonou
Agreement by the EC was denied at a recent meeting of the WTO Council for
Trade in Goods. This procedure, which normally marks the commencement of the
waiver review process, was blocked by Panama, Honduras, Guatemala and
Nicaragua on the basis that the EC's new banana regime was incomplete due to
the lack of clarity of the new rules. Separately and more significantly
Ecuador requested that the waiver request be more specific as to the
Convention's coverage for countries and products, volume, and duration.

European Commission officials suggest that this occurred because the US had
purposely not lobbied hard enough to ensure the support of certain Latin
nations who are still far from happy with the new arrangement. They note
that EU ministers will not amend the existing banana regime unless a waiver
is agreed and point to the US's failure to support the EU proposal that the
waiver must last for the full eight years of the Cotonou Convention.

For its part the US has backed Ecuador's proposal and is suggesting that
Europe is making agreement on the waiver for the new banana arrangement and
Cotonou more difficult by insisting on it covering eight years. The US has
also said the waiver request is vague and that a four-year waiver would be
preferable and deliverable with Latin banana producing nations.

In response the EU is now saying that if it can not achieve agreement this
month on a waiver it may not be able to put the new regime in place, a step
that would almost certainly cause the US to re-impose sanctions. Moreover,
the EU has warned Washington privately that there is a danger that the stand
off over the waiver for the Cotonou Convention may affect ACP intentions in
relation to a new WTO round and may result in ACP retaliatory action in the
WTO over other issues.

In other words the future of the WTO waiver for the Cotonou Convention has
become enmeshed in the intense international power play surrounding the
opening of a new WTO round.

If agreement between the EU and the US on the scope of a new round can be
reached in such a way that the developing nations concerns can also be put
on the table, then it may be that the problems relating to the WTO waiver
for the Cotonou Convention will evaporate. Even then it is still far from
clear whether Latin nations are prepared formally to agree to the new
arrangements.

But if a new WTO round does not materialise almost any scenario is possible,
as nations have to rapidly revise their thinking on future trade
arrangements. This would most probably involve developed countries seeking
to rapidly accelerate free trade arrangements on a regional basis with blocs
seen as providing mutual economic benefit. For example the EU is rapidly
forging ahead with its free trade arrangement with Mercosur and Britain is
again suggesting the benefits that would come from a transatlantic NAFTA/EU
free trade agreement. Both options would hedge Europe's bet against the
failure to open any new WTO round but say little about the value of
transitional arrangements such as the Cotonou Convention.

August traditionally is the month when EU Governments, the European
Commission and the European Parliament close and everyone heads for the
beach or the mountains. For some, this year may be different.

David Jessop is the Executive Director of the Caribbean Council for Europe
and can be contacted at [log in to unmask]
<mailto:[log in to unmask]>   July 28th, 2001


 Note to editors: The next Week in Europe will be sent on September 7th,
2001