From Africa Recovery, Vol.14#1, page 5

EU and ACP agree on post-Lomé package

'Fiji Convention,' due for signature in May, covers 20-year period

After 17 months of sometimes difficult negotiations, the European Union (EU) and the 71-member African, Caribbean and Pacific (ACP) group reached agreement in early February on a 20-year trade and aid treaty to succeed the expiring Lomé IV pact. The majority of ACP countries - 48 - are African. The new accord includes a development assistance package worth nearly $15 bn over seven years and the phasing out of preferential EU tariffs on ACP exports. Such preferences are deemed incompatible with World Trade Organization (WTO) rules. The agreement is scheduled for signature in Fiji in late May.

The "Fiji Convention" differs markedly from its predecessors in two key respects. The first is its emphasis on political issues. The Fiji pact elevates "good governance" and the fight against corruption to core principles of the agreement. It also requires greater ACP cooperation on the repatriation of illegal ACP immigrants to the EU. The second important change concerns the phasing out of non-reciprocal trade preferences for ACP goods entering EU markets by 2008 and their replacement by WTO-compliant regional trade agreements. The regional agreements are also intended to assist economic integration by requiring the lowering of trade barriers between ACP countries.

The loss of preferential access to European markets is potentially very serious for ACP countries; their trade with the EU was already in decline in recent years despite the favourable Lomé provisions. In response, the EU promises faster and more flexible assistance to ACP countries hurt by the loss of markets under the new agreement. It agreed to permit duty-free access by 2005 of "substantially all" imports from the 39 ACP members classified as least developed countries. The EU also agreed to a fundamental overhaul of its compensation mechanisms for shortfalls in export prices.

An increase in development aid is intended to ease the transition to WTO rules. The Fiji Convention sets base funding for the first five years of the agreement at $13 bn - up from the $12.4 bn authorized under Lomé IV. An additional $1.6 bn will be made available as loans through the European Investment Bank. Some $9.7 bn in unspent aid from previous Lomé agreements will also be available. The parties will revisit the aid package in 2007 and assess its impact. EU development minister Poul Neilsen hailed the accord as "the biggest financial and political framework for cooperation between North and South in the world."

EU pact with South Africa

South Africa and the EU also initialed a major trade deal in the new year, concluding a sweeping bilateral agreement that liberalizes some $20 bn worth of annual EU-South Africa trade. The deal nearly came apart in January when Italy and Greece refused to ratify it due to a revived dispute with South Africa over liquor labels. The last-minute hurdle consisted of the demand by the two wine-producing European countries that South Africa should stop using the trademark names "grappa" and "ouzo" for two of its beverage exports. The issue prompted South African President Thabo Mbeki to accuse the EU of "bad-faith negotiations" at the World Economic Forum in Davos, Switzerland, on 31 January. It took an exchange of letters between Mr. Mbeki and the heads of the European Commission to resolve the issue.

The EU-South Africa deal, which also includes agreements on development aid and governance issues, commits the EU to removing barriers to 99 per cent of South Africa's industrial exports and 75 per cent of its agricultural exports over 10 years. South Africa is to reciprocate over 12 years on about 86 per cent of EU exports.

WTO talks begin

At WTO headquarters in Geneva, meanwhile, negotiations on the "built-in" agenda of trade in services opened in mid-February, followed a month later by the beginning of negotiations on the other built-in agenda item, agriculture. This was the first good news for the trade body since its disastrous December 1999 ministerial meeting in Seattle, which failed to launch a new round of trade liberalization talks and highlighted bitter disputes between its members.

WTO Director-General Mike Moore put the best possible face on the talks, declaring that, "The WTO is back on track and in business." The talks on trade and agriculture, however, were mandated long before Seattle and are more a sign of continued deadlock among the major trading nations than a sign of emerging agreement. Despite months of post-Seattle shuttle diplomacy by Mr. Moore to patch up the battered consensus in favor of trade liberalization, the industrialized countries remain sharply divided over industrial protectionism and agricultural subsidies. European diplomats say privately that domestic political considerations make it impossible to make progress in trade negotiations until after the US presidential election in November.

Developing countries in the WTO continue to demand a greater share of the benefits of free trade and a more explicit link between globalization and development.

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