JOINT COMMITTEE ON EUROPEAN AFFAIRS debate -
Tuesday, 8 Jul 2008

EU Partnership Agreements with ACP Countries: Discussion with Trade Matters.

Chairman

Item No. 1 is a discussion on the European Union's economic partnership agreements with African, Caribbean and Pacific countries with representatives of Trade Matters, including Trócaire and Oxfam. Apologies have been received from Deputies Creighton and O'Rourke and Senator Donohoe. I draw attention to the fact that while members of the joint committee have absolute privilege, the same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

On behalf of the joint committee, I welcome the representatives of Trade Matters, Mr. Michael O'Brien of Trócaire, Mr. Colin Roche of Oxfam and Mr. José Antonio Gutierrez of Latin American Solidarity, who are with us to discuss aspects of European trade policy. The first topic is the European Union's economic partnership agreements with African, Caribbean and Pacific countries. We will hear the delegates seriatim. I call on Mr. O’Brien to make his presentation which will be followed by questions and answers.

Mr. Michael O’Brien

I am here on behalf of the Trade Matters group, a coalition of non-governmental organisations, including development, environmental and trade union groups. Since 1999 we have been engaged in dialogue with Irish decision makers on the development impact of multilateral and bilateral trade rules. The value of trade to developing countries is more than 30 times what they receive in aid. Therefore, we welcome this opportunity to address the European Union's proposed new trading arrangements with 76 of the world's poorest countries in Africa, the Caribbean and the Pacific, the ACP group.

At a time of rising food prices and related food insecurity, hunger and poverty, addressing the interests and needs of poor people should be at the heart of new trade agreements. I will briefly outline the origin of the new trade agreements, their objectives and the current state of play in the negotiations between the European Union and the ACP, focusing on the economic partnership agreements, EPAs. My colleague, Mr. Roche, will elaborate on some of the major development concerns and consider opportunities to actively follow up on some of the issues highlighted.

For more than 30 years the European Union's political and economic relations with ACP countries have been governed by a series of conventions which allowed ACP countries preferential access to the European market, while giving them policy space to protect their own domestic agriculture and industry. However, with the signing of the latest of these conventions in 2000, the Cotonou Agreement, the ACP and the European Union agreed to work out new trade arrangements that would be compatible with World Trade Organisation rules.

The Cotonou Agreement gave us the preferred, but not the only, option, namely the creation of EPAs. The basis on which EPAs are negotiated is that ECP countries will continue to have preferential access, although the value of that access is being eroded by multilateral and bilateral trade agreements. However, unlike previous trade terms, ACP countries will also open up their markets to face direct competition from European business, while also facing the budgetary losses of the trade taxes they would previously have levied on European goods.

I will outline the objectives of the negotiations for new trade agreements with the European Union. Compatibility with World Trade Organisation rules was the setting in which the negotiations commenced but they were to achieve the following four objectives: to promote poverty reduction; sustainable development; the gradual integration of ACP countries into the world economy; and to bolster regional economic integration. The Cotonou Agreement stipulated the principles which would inform the negotiations, making explicit reference to recognition of the political choices and development priorities of the African, Caribbean and Pacific countries. The new trade agreements were to be completed by 31 December 2007, so as to enter into force by 1 January this year. Negotiations to achieve this deadline were pursued by the European Union, initially at the all-ACP level but then in six regional negotiating groups which break down as central Africa, west Africa, east and southern African, the Caribbean, the Southern African Development Community and the Pacific.

I will now deal with the current state of play. Despite the deadline of 31 December 2007, as of today, 8 July 2008, no comprehensive agreements have been signed. With the need to maintain predictable trade flows and avoid costly trade disruption, at the end of 2007, 18 African countries, including most of the non-least developed countries, initialled an interim EPA, as did two specific non-LDCs. Only the Caribbean region has gone further and agreed to a comprehensive EPA. The remaining countries, apart from South Africa, now export to the European Union under various trade regimes. The least developed countries trade under the Everything But Arms agreement and the non-LDCs under the global system of preferences.

With the interim agreements finalised in a rush at the end of 2007 and under pressure, discrepancies between the various texts initialled are many. The picture that has emerged is that countries have received a deal that reflects their negotiating capacity. Countries able to negotiate hard with well defined interests have obtained a much better deal than those lacking those characteristics. Most recently the conclusions of the European Union's May Council meeting recognise the disparate provisions of different EPA texts and recognise the value of adopting a more flexible approach to the negotiations. While there is awareness of the need to reopen negotiations and provisions in the interim texts, the Commission is vehemently focused on concluding comprehensive economic partnership agreements on a wide range of issues going beyond trade in goods and including issues that go beyond the requirement for WTO rules compatibility.

Mr. Roche of Oxfam will now address in more detail some of the specific problems with the interim texts and the most problematic elements of negotiating comprehensive EPAs.

Mr. Colin Roche

I would like to start with a quotation from Mr. Peter Mandelson. He said: "The EU's goal [...] remains using trade to promote economic development, build regional markets and help lift people out of poverty." It is worthwhile examining whether what he has said is being lived up to in reality. Another statement to match it is the verdict of the Financial Times on the conclusion of the interim economic partnership agreements at the end of last year: that the European Union had tried stuffing the deals with familiar excess baggage, including rules on foreign investment, and used the threat of a less generous scheme to dragoon reluctant countries into signing. That seems to be a very accurate description of what happened at the end of last year.

I would like to briefly look at some of the specifics of the agreements. What do the agreements ask developing countries to do? One thing they ask them to do is to eliminate 80% of their tariffs vis-à-vis the European Union, that is, vis-à-vis a highly developed, rich block of economies. What will the impact of this vast unprecedented opening be on developing countries, 39 of which are among the poorest in the world? They are the 39 least developed countries and include several of Ireland’s partner priority aid countries. The first impact is job losses. When a country opens up its markets to a developed economy with competitive industries overseas, there are job losses. The second is revenue losses. Many developing countries rely heavily on trade taxes as a form of government revenue simply because they are easy to generate. If they are removed, it removes some government revenue. Some estimates of the costs of this which we have seen include the fact that African countries are expected to lose $359 million per year. Côte d’Ivoire, one of the countries that initialled an interim partnership agreement, is likely to lose an estimated $83 million per annum, equivalent to its current health spending for 500,000 people. We are talking about very significant losses of jobs and revenue.

Part of the trade agreements goes beyond what is necessary under WTO agreements. The Commission has sought to maximise its position vis-à-vis the very poorest countries and included a whole range of measures which have no standing under WTO rules and there is no requirement that they be included. It has, therefore, insisted that developing countries stand their trade taxes still - that they do not raise them in the short term - as well as eliminating them in the long term. It has also asked for most favoured nation clauses which means that the European Union will automatically gain the same privileged access that any other country gains to the markets of ACP countries. That removes the incentives for ACP countries in doing trade deals with developing countries. That is a barrier to development.

Alongside this, the European Union has insisted, also with no legal requirements to do so, on agreements on investment, services and intellectual property, among other matters. What will this mean?

In the area of intellectual property those members who are familiar with the World Trade Organisation talks in the mid-1990s will know how badly the developing world emerged from them. For example, many developing countries have experienced problems with access to medicines as a result of intellectual property trade rules but the European Union now proposes to extend these rules across the ACP countries. Their very nature is to raise the cost of technology and make it more difficult to access. For developing countries, it means they will find it more difficult to bridge the digital divide, use on-line educational materials and share seed technology. We are all aware of the crisis in food prices and the need to boost food production. Ultimately, it may affect any number of technologies for developing countries.

The European Union is looking to liberalise services in developing countries. Past experience tells us that this often leads to a diminution in services. For example, the International Monetary Fund has shown that liberalisation of financial services has led to a diminution in access to credit, with less available as a result of opening up the market to foreign service providers. The price of services in developing countries has risen since they liberalised their markets and opened them up to foreign investors. Oxfam has seen water charges escalate by up to 600% in some developing countries once liberalisation occurs.

The European Union has sought to impose investment agreements on developing countries. What does that mean? Investment agreements rule out a number of strategies that other developing countries such as east Asian countries have used successfully. They rule out tools that have been successfully used to develop economies. Included in that are joint ownership schemes which provide for technology transfer to build up local skills. Investment agreements will also open developing countries to being sued by foreign investors who feel they are negatively affected by local regulations. This will affect the ability of developing countries to regulate foreign investors, with huge implications for public policy.

The European Commission has stated investment agreements are good for regional development but they split up regions in the developing world. For example, Ghana and Côte d'Ivoire which are part of the west African region are now in separate trade agreements to the rest of the region, which acts against the supposed rationale for the agreements in the first place. This has happened across several regions of the Pacific and elsewhere in Africa.

Mr. Hans-Joachim Keil, Associate Minister of Trade in Samoa, said at the Council of ACP Trade Ministers at the end of last year: "Ministers deplore the enormous pressure that has been brought to bear on the ACP states by the European Commission to initial trade arrangements." The Foreign Minister of the Cook Islands, Mr. Wilkie Rasmussen, in reference to negotiations held last year, said:

We suffered the indignity of the rudeness of the European Commissioner, Mr. Peter Mandelson, on all the Pacific islands. In my eyes and those of other people he threw tantrums to get us into positions where we would agree to negotiate with him but we were absolutely railroaded by him in the negotiations, which drove a wedge into the Pacific Islands' sense of working together.

We have very serious problems with the process of negotiation in terms of the pressure developing countries were put under. Many who had already signed or initialled agreements faced the prospect of higher tariffs at the end of last year. The European Commission needs to undertake a serious review of its approach. Ireland can play a useful part as a partner for some of the countries involved in the negotiations. We hope the committee can urge the Minister of State, Deputy Peter Power, to speak to the Commission with a view to allowing developing countries to renegotiate those deals that are harmful to development, to allow the maximum flexibility in further negotiations and to allow for a review and an impact assessment of what has previously been agreed. While I may have taken more time than I should have, I hope it was enlightening.

Chairman

We will now have time for questions and answers and will take Mr. Gutierrez immediately after that.

Deputy Joe Costello

I welcome the representatives of Oxfam and Trócaire and thank them for their comprehensive presentations. I will not go into any great detail but will ask a few questions. The thrust of EPAs in 2000 was to bring them in line with WTO compatibility. There is a major question as to what is WTO compatibility now given that there has been no WTO agreement since 2000. One would have thought any of the EPAs negotiated would be up in the air in the same fashion that the WTO is up in the air because nobody can define precisely what that compatibility is. I ask the witnesses to cover that aspect. Obviously Commissioner Mandelson is involved in both sets of negotiations. The soundings we hear from President Sarkozy indicate that Commissioner Mandelson's proposals are not likely to see the light of day if the French have their way. As we all know the veto still stands and would have still stood if the Lisbon treaty had been accepted, but that is another day's work.

In that respect are these negotiations taking place in a vacuum? What will be their standing if there is no new WTO agreement? As the witnesses have indicated, there have been some EPA agreements - there is a wide variety of agreements in place. However, the comprehensive set of EPAs that was expected has not transpired. Where do we stand in that regard? What is the power of our Minister in terms of a veto on EPA that seems to be out of kilter with Irish policy? I understand the Irish developmental policy is fairly solid in this direction. These are to be pro-development and pro-real trade. They should not abandon tariffs willy-nilly, which would have a negative effect. Some 80% of tariffs eliminated in one fell swoop would be pretty disastrous for any country's economy.

Mr. Roche said we should urge the Minister of State, Deputy Peter Power, to get involved in this area. I would like to know what power he has. It would seem desirable to get economic partnership agreements with the countries in line with the intention established in the first instance. Where undue pressure has been brought to bear on a country because it did not have the capacity to negotiate a good deal, such agreements should be regarded as null and void and subject to renegotiation. I would support that. I would like the witnesses to outline where they believe the Government stands on the issue. Has it given commitments along the lines of the witnesses' thinking?

Deputy Timmy Dooley

I thank Trócaire and Oxfam for their presentations and I recognise their input generally into debate in this area. In addition to what Deputy Costello has said, I ask the witnesses to expand on the relationship between the WTO and the stance they take in this matter. In particular I ask them to give more detail on Commissioner Mandelson's proposals. Mr. Roche referred to Mr. Mandelson's comments that his proposals would assist the developing countries through their involvement in more liberalised trade. There is obviously real concern in Europe, particularly among members of the farming community here, about his proposals and the impact they will have on their livelihoods. I ask the delegates, therefore, to comment on how they see the opening up of trade in developing countries, which we all recognise as important, and the importance of having a structured approach so that it will not wipe out an entire industry here and impact on European agriculture, in particular.

The French also strongly believe that Mr. Mandelson's proposals go too far in terms of the impact they will have on agriculture, whereas the delegates seem to be suggesting that, overall, they will have little or no impact on the countries we are asked to believe we are assisting by accepting or even countenancing some of the proposals being put forward. I believe the proposals are based on the view, held by some people on this committee, and by the Chairman, that so-called liberalisation and so-called efforts to assist developing countries in terms of their ability to trade have more to do with a central European desire to ensure a cheap supply of food than they have to do with improving the capacity of developing countries to develop, evolve and grow stronger economies.

Deputy Billy Timmins

I welcome the representatives of Oxfam and Trócaire. I compliment Oxfam on trying to highlight in recent weeks the unintended consequences of the policy on bio-fuels. It is important that it be highlighted and that governments across the EU take cognisance of the issues raised.

I have two brief questions which I wish to put to Mr. O'Brien and Mr. Roche. First, is the Commission serious about fair trade with undeveloped countries or is it trying to buy off the EU's moral obligations by providing aid - it is claimed that the EU is the largest donor of economic aid on the globe - while trying to manipulate trade to the EU's benefit so that the EU gains far more than it gives? Second, Mr. Mandelson has been depicted in Ireland as a modern day Trevelyan and has been the target of vile comment. How do Mr. O'Brien and Mr. Roche reconcile that view with the message I am getting from them that he is not giving the undeveloped countries a fair deal? Is Mr. Mandelson merely representing the views of the member states and an easy target, or is he going on a frolic of his own, to quote a member of the legal profession?

Chairman

In regard to the issues that have been raised by the delegates and the questions the members have put, it is generally recognised among members of the committee - and they have had reason to be critical of Mr. Mandelson in the past - that the agreements in anticipation of the WTO, to which the delegates referred, were not as beneficial as they appeared in the first instance. There are also people who say that prior to these agreements, better provision had been made for the poorer producers, whereas afterwards there appeared to be more emphasis on the multinational corporations involved in mass production, as a result of which, as mentioned by Deputy Timmy Dooley there was more of an attempt to introduce cheap food by factory farming. We are also aware that poorer farmers in ACP countries seem to have had better access to the European Union prior to that under the arrangement that operated then. The delegates have also referred to this.

It is important the delegates come up with four or five points that they think we should pursue with the Minister. They might come back to us for a review of how matters are progressing because we do not know unless they tell us. We hear things on the grapevine and in discussions we hold with European colleagues but no more.

Mr. Michael O’Brien

I thank the Chairman for his observations on the advantages for ACP countries under previous trade regimes, particularly the Lomé Convention and the Cotonou Agreement. One of the principles on which the negotiations on new trade relations began was that no country should be worse off than previously. However, some countries in the ACP group trade with the European Union on less preferential terms than before and that does not meet the original objective.

We welcome the invitation to continue discussions with the joint committee on the ongoing negotiations. I will answer the questions from Deputies Costello and Dooley on the World Trade Organisation and its relationship with economic partnership agreements. I was asked whether one would exist without the other and about the dynamics of the relationship. The economic partnership agreements were meant to be concluded after the current trade round of the World Trade Organisation had concluded. The WTO Doha Round was to have been concluded at the end of 2005 and bilateral trade arrangements with the ACP were to be compliant with its rules. That is obviously not the case but liberalisation is dealt with in GATT Article XXIV which provides that in new regional trade agreements liberalisation means substantially all trade, although it does not actually define what is meant by "substantially all trade". That leaves a lot of flexibility for the European Commission to interpret what level of liberalisation should be sought in new trade arrangements with ACP countries. The Commission seems to interpret the term in the standard way, without taking cognisance of the rate and state of development in ACP countries, particularly the least developed. I anticipate that the flexibility it adopts will go beyond the standard level of liberalisation required for WTO rules compatibility. The World Trade Organisation does not create a problem for the European Commission if it decides to adopt a more flexible approach to liberalisation in economic partnership agreements.

Deputy Dooley asked about our relationship with the World Trade Organisation and the position of the European Commissioner, Mr. Mandelson, in the negotiations for an agreement on agriculture. In the context of the current food crisis, one of the key outcomes would be an increase in agricultural productivity. Many ACP countries have the potential to increase agricultural productivity but trade rules have compromised their ability to realise that productive capacity. Our emphasis is on achieving the objectives set out by the African Union, the least developed countries and the ACP countries within the World Trade Organisation in promoting food security, livelihood security and rural development in order that agricultural productivity is boosted. However, the approach to this objective has been totally insufficient and it is deeply worrying to learn of the mini-ministerial meeting to be held on 21 July in Geneva on the basis of the texts available. Those texts would clearly disadvantage the least developed and developing countries further, particularly in their treatment of special products, products of critical livelihood and food security value to developing countries.

The argument of developing countries is that these products should be exempt from the same tariff reductions as other agricultural commodities. The treatment of special products is totally inadequate. Similarly, developing countries need the right to protect local producers and farmers from import surges when there is a significant fall in prices resulting from import surges of heavily subsidised northern agricultural products. The special safeguard mechanism they seek is already available to northern countries. Again, the treatment of this mechanism has been totally insufficient in the 19 May texts. We are seeking to have them strengthened significantly.

Deputy Timmins asked about the intent of the European Commission as regards fair trade. It is hugely questionable. Obviously, it was the setting for the Doha Round of WTO trade negotiations. This round would never have been launched had it not been, supposedly, a development round. However, we have seen a total erosion of that development commitment. Similarly, the economic partnership agreements were based on the principle that they would promote poverty reduction, be about sustainable development and promote regional integration, etc. However, they seem to be more in line with the European Commission's broader vision for free trade agreements generally, as set out in its 2006 communication, Global Europe: Competing in the World, which makes it clear that it seeks to promote the European Union's competitiveness advantage without taking into account the particular development needs of developing countries, in this case ACP countries.

I will ask Mr. Roche to deal with the questions about the Minister of State, Deputy Peter Power, and to elaborate on other aspects of the matter.

Mr. Colin Roche

I will speak about WTO rules compatibility. Negotiations are ongoing in the Doha Round. It is often forgotten that it is supposed to be a development round. At the same time the European Commission is negotiating separate bilateral agreements with ACP regions. Within this process, obviously, one strand undermines the other. At the World Trade Organisation the European Union sought investment liberalisation and competition rules from ACP countries but was rejected. Nevertheless, it turned around and, in the context of economic partnership agreements, reiterated its requests and has begun to make progress with some regions. It is still trying to secure those concessions. Rather than adopting a sensible approach whereby we would complete the Doha Round and then consider liberalisation in ACP countries, we have mixed them up, which is undermining the ability of poor countries to secure a fair deal.

I thank Deputy Timmins for his comments on bio-fuels. It is a discussion that will continue for quite a while. The subject of bio-fuels is before the European Parliament for debate and will be referred back to member states later in the year. I am sure there will be plenty of negotiations and discussion on the subject.

The Deputy also asked whether Commissioner Mandelson was serious about development. As Mr. O'Brien said, it is questionable. We can only judge the Directorate General for Trade and the European Community on their actions. What we have seen is not supportive of development. We have concerns. The quotes are taken from the local press in Pacific countries. We would be concerned if that was the personal conduct of the European Union's negotiator. We have a difficulty in knowing whether these are his opinions alone or the expressed views of the member states, given that the instructions they have given Commissioner Mandelson are not available to us. There is obscurity about European trade policy.

One of the difficulties is that we are not entirely sure what position Ireland is taking. Ireland has spoken more positively than other member states. It would be wrong of us to be entirely critical of the Government and the Minister of State, Deputy Peter Power, and his predecessor. However, none of the European Union member states has been sufficiently vocal or sufficiently challenged the approach the European Commission has taken. We need to see Ireland being more vocal. We have a particular relationship with a number of countries involved in the negotiations. It fits very well with our approach to development for us to take a strong pro-development stance.

On the issue of market access, the Chairman answered the question himself. There is very little additional market access to be gained by ACP countries from the negotiations. There is very little for developing countries to gain in the talks but much to lose. The European Commission continues to seek concessions from them. As I have outlined, we have many fears about what that might mean for their prospects of developing out of poverty.

Chairman

Is there evidence, as suggested to us, that some poorer producers in African, Caribbean and Pacific countries are being squeezed out and advantage taken of access to the European market by commercial producers who, in some cases, have contracts with multinational corporations involved in the food processing, food production or food industry generally?

Mr. Colin Roche

That is a difficult question but allow me to draw from one sector, the coffee industry, about which I know a little more than I do about some of the others. There are small and large producers. There are small producers in Africa involved in the international coffee industry. It is not a sector in which we will gain additional market access in these agreements. Essentially, there is free trade in coffee. There is huge market concentration for large multinational corporations. Four or five countries dominate the market and they affect the price paid to small and large producers alike. We are seeing this replicated across other sectors. There is a concern - perhaps it is an issue to which we might return, perhaps outside the context of the committee - regarding the concentration of agribusiness around the world and the concentration of agri-chemical companies which own seeds and other inputs. Part of Oxfam's concern about the promotion of intellectual property in developing countries is that it puts more and more power into the hands of those who own so much of the chain and leaves people at the bottom of the chain with less and less power and less and less of a say over their destiny and economic future.

Mr. Michael O’Brien

To supplement what Mr. Roche said about access to the European Union market and the constraints posed, the main constraints we have observed relate to productive capacity, local constraints within ACP countries and trade rules. Despite what seem to be very generous trade regimes, within them there are hidden rules, some of which are related to non-tariff barriers. Uganda, for example, has Lake Victoria and an opportunity to develop a fishing industry. The restrictive rules of origin that the European Union has applied include a rule regarding the nationality of fish which discriminates against a Ugandan boat crewed by, perhaps, a Kenyan in terms of the eligibility of fish caught by that boat for duty free and quota free access to the European Union under the Everything But Arms regulation. Clearly, there are non-tariff barriers and hidden trade rules which also compromise and work in parallel with the productive capacity constraints that apply locally.

Chairman

There is evidence to suggest there is large-scale clearing of rain forests to permit commercial food production. It would appear to be in conflict with climate change guidelines. As members have stated, this is a food producing country. While recognition will be given at all times to producers on the ground, there will be less concern for the multinational corporations.

I thank the delegates very much for their submission. It would be a good idea if they would correspond again with the committee with regard to the ongoing situation. It would be beneficial to the committee if they would return in the new year or, if necessary, before that.

Deputy Noel Treacy

I apologise for being late. I was at another meeting. I am sorry I missed the presentations. I listened with interest to both my colleagues and the delegates. I have a simple question. Taking into account the positive reaffirmation given at the G8 meeting over the past 24 hours by both President Bush and Chancellor Merkel, is there any optimism in regard to the WTO ministerial meeting on 21 July?

Mr. Colin Roche

That is real guesswork. I understand it has been signalled that progress will be made. However, it does not sound like progress to me or a political signal that is particularly new or significant compared to what we have heard previously in regard to world trade relations talks. Oxfam's view of the WTO negotiations is that what was on the table two years ago, the shape of the deal, and the deal that is now likely, if there is one, was not something that would have supported development or lived up to the hope we all had in 2001 when the Doha Development Round was launched. I am not optimistic about the outcome. I am not a betting man but if I were I would not bet on there being an outcome in two weeks.

Chairman

I thank Mr. Roche.