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December 1997 Insights Issue #24
Back to Insights #24
Options in the Green paper:
can they mesh with the WTO?
Matching Europe's trading habits to WTO rules
could spell an end to traditional 'sweetheart deals' on aid and trade.
The EU's proposals for future trade relations with the ACP indicates a
renewed enthusiasm for Free Trade Areas (FTAs), but with a difference.
Their intention is to use these devices as vehicles for 'new issues' of
trade policy such as environmental or social 'harmonisation'. But such a
twist could bend WTO rules and undermine principles behind a more
liberal economic world order. Such engineering, linked to 'fair trade'
claims, might turn out to be misleading or at worst could cover up
back-door protectionism.
Critical to the debate over any agreement that might take the place
of the current Lomé agreement, is the question: will it be compatible
with the principles of the WTO regime as refined by the GATT Uruguay
Round negotiations? In disputes over the EU's banana trade policy, Lomé
was declared by two GATT panels in 1993 and 1994 to be inconsistent with
several GATT principles, including that of non-discrimination. This
conclusion forced the EU to seek a waiver under GATT Article XXV. The
Commission's November 1996 Green Paper on EU-ACP relations,
acknowledging that things have changed, asserts that:
- WTO-compatibility of differentiated,
non-reciprocal schemes is in doubt
- the value of trade preferences is affected
by trade liberalisation trends, and
- any future agreement must reflect new issues
in international trade.
The Green Paper outlines four main options for consideration, with
variations that might be adjusted according to any country's level of
development. Broadly, available options are to:
- leave things as they are and seek to renew
Lomé IV for a further term
- merge Lomé with the Generalised System of
Preferences (GSP)
- introduce FTAs requiring both parties to
open up their markets, between the EU and either all ACP countries
('uniform reciprocity'), or
- between just some of the ACPcountries
('differentiated reciprocity').
But the Commission draws no distinction between options that are
compatible with WTO rules as they stand and those that hinge on revision
of those rules.
The status quo option would mean keeping the current non-reciprocal
preferences specific to the ACP. It is - and will continue to be -
incompatible with the WTO non-discrimination rule because it is
selective. The EU and ACP must therefore either continue to obtain
waivers (under Article XXV) or pursue efforts within the WTO to amend
the rules to allow selective, non-reciprocal trade deals to be made
between developed and developing countries. In any case preferences
should be a short-term strategy, aimed at buying time for ACP states to
restructure their economies more effectively.
A Generalised System approach makes trade preferences a unilateral
decision of the EU. In this scenario, normal GSP would apply to
'advanced' ACP developing countries (LDCs), while the least developed
ACP states (LLDCs) received enhanced GSP equivalent to current Lomé
benefits. GSP arrangements are certainly compatible with WTO (under the
Enabling Clause that defines the latter's parameters) but splitting the
ACP into sub-groups is bound to collide with WTO's non-discrimination
principle.
A modification provides that the LLDC preferences are 'bound' within
the WTO (that is, they are commitments which are made and contained in
the Member's Schedule of Offers). This is a new approach to treating
tariffs and would require fundamental changes to WTO agreements
(especially Articles I, II and XXIV of GATT 1994, the difficulty of
which should not be underestimated). The big question is whether normal
GSP (available to all LDCs) will also be bound, or whether it will
remain subject to unilateral decision. The main proposal in the Green
Paper hinges on replacing Lomé's one-way preferences with a reciprocal
FTA concluded either with all the ACP (as a single group or a set of
sub-regions) or, in its 'differentiated' variant, with single ACP
members. Though this move would get round some of the obstacles, it
would run into pitfalls of other kinds.
Even after 23 years of preferential access, ACP members have not
increased their share of European markets. Now they will be expected to
open up to EU exports. Yet with the Common Agricultural and Fisheries
Policies in place, and due to be phased out only very slowly, the ACP
will not be able to gain optimum benefit from Free Trade Area deals with
the EU.
Though some forms of preferences are permitted under the WTO, they
are by nature only short-term (for least developed countries, however,
they are of indefinite application) and their survival as a policy
objective is not on the cards in the longer term. Multilateral
liberalisation is bringing down tariffs and the ACP will face more
competition in their 'preferred' markets regardless of the outcome of
current EU debates on Lomé.
Problems with Free Trade
Areas
Rosalind H. Thomas
Formerly with Clifford Chance, London,
Ms Thomas is currently Legal Advisor and Policy Analyst
in the Policy Unit of the Development Bank of Southern Africa,
Box 1234,
Halfway House 1685,
Johannesburg,
South Africa.
T: +27 (0) 11 313 3594
F: +27 (0) 11 313 3533
E: rost@dbsa.org |
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