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EU Faces The 'Aid For Trade' Conundrum

by Ulrika Lomas, Tax-News.com, Brussels

24 October 2006


Peter Mandelson, European Union trade commissioner, was doing his best last week to parlay the conflicting interests of the ACP countries, the EU member states, the WTO's 'Aid for Trade' program and the quarrelsome European Parliament into a coherent developing country strategy.

This is a bone-breaking dossier. The ACP countries want to retain preferential access to the EU for products such as sugar and bananas, plus they want more development aid, but they don't want to liberalize their own tariff barriers; the WTO wants an end to all preferential arrangements; the EU member states want to protect their old colonies, but not to spend any more money on aid. And so on.

In an effort to square the circle, the EU at the beginning of the week proposed economic partnership agreements (EPAs) with the 70 plus ACP developing countries, which would combine increased development aid with extended liberalization periods. Predictably, no-one liked what they saw.

EU member states didn't exactly rush forward to find the EUR$2bn that the Commission wants to offer. And the ACP countries have been saying for years that EU aid is much promised but often delivered slowly or not at all.

Mr Mandelson told the European Parliament, which had criticized the Commission's package: "Let's be clear about the value of development aid. It is a means to an end - it's a way of translating policy reform into practice. The money is now on the table but what we really lack are specific, quantified proposals on how to use it."

Specific programmes are often hobbled by protectionist member states and/or cash-strapped producer countries. Sugar and bananas are two examples. The Commission wasn't allowed to cut the EU's sugar price by as much as the WTO demanded because of resistance from Caribbean producers, while at the same time hopelessly uneconomic EU sugar-beet producers were bribed to accept a new regime with five times as much money as was being offered in aid to the Caribbean.

British Trade Minister Ian McCartney and Development Minister Gareth Thomas wrote in a letter to the Commission: "The EU must allow ACP countries as much time as they reasonably need to open their own markets, while providing effective safeguards to prevent unfair competition from subsidized European products undermining African products on their own doorstep." Easy to say, but hard to achieve, especially against the looming 2008 WTO deadline for an end to protectionist regimes.

Mr Mandelson told development ministers said that the EU was highly conscious of the difficulties involved in regional integration for some ACP states, but he insisted that the EU and the ACP could not "substitute development assistance for policy when it is the right policies that will drive economic growth and development".

He told the ministers: "Economic Partnership Agreements will fundamentally change our relationship, from one that offers tariff preferences - an eroding lifeline, to one that builds lasting regional and international markets for the ACP."

"In short, we aim to create prosperous trading partners out of development aid recipients, moving progressively, over time, from dependency to opportunity".


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