Debate Series on Trade and the Developing Countries
- visions for the future trade agreements
between Europe and the developing countries
The Danish North/South Coalition and Mellemfolkeligt Samvirke
From the North Cape to the Cape of Good Hope
- visions for the future trade agreements between Europe and the developing countries
Summary 1 1 Introduction 4 2 The EU’s Pyramid of Preferences 6
2.2 The Trade Agreements with the Mediterranean Countries 10
2.4 The Trade Agreements with the LDC Countries 18
3. The Preference System Seen in the Light of the Uruguay Round 18 4 WTO Rules and Preference Agreements 22 5 The Food Markets of the Future 24 6 The EU Commission’s Proposal: The Green Paper 25 7 Future Trade Agreements between the EU and the Developing Countries 27
7.1 The Pyramid of Preferences: The Short Term 27
7.2 From the North Cape to the Cape of Good Hope: The Long Term. 32
8 Trade Agreements Are not Enough 34 9 Conclusion 36 10 Bibliography 37 From the North Cape to the Cape of Good HopeSummary
Europe stands at the threshold of the 21st century with a historical opportunity to create
a long-term, visionary strategy for future trade cooperation with developing countries.
The Lomé Convention, which covers the EU and 70 countries in Africa, the Caribbean
and the Pacific (ACP), is to be revised from the year 2000. In the Mediterranean area a
process has been initiated towards an overall free trade area. The Generalized System of
Preferences (GSP) will be further debated and revised over the coming years, and for a
number of country groups, including the less developed countries and the countries in South
America and Central America, new initiatives are under way.
The present system of preferences is based more on historical coincidences than on
economic and political arguments. In addition, the system is limited by rules of origin and
quantitative, geographical and temporal restrictions - hardly a proper foundation to base
investments. These restrictions make it something of a weary journey between rules, clauses,
tariffs, formulae and footnotes. Patchwork initiatives based on the current time-limited
framework would do little to solve these problems.
In the short-term, EU trade preferences need to be simplified and reoriented to make
them more consistent with aid objectives and requirements. This involves targeting the most
comprehensive preference agreements towards the poorest developing countries, and
completing and and implementing the association agreements with the Mediterranean
countries. The rest of the developing countries should be offered preferences under an
improved and uniform Generalized System of Preferences (GSP).
For all three groups of agreements the system must be simplified so that quota and time
restrictions are abolished and rules of origin are eased. In addition, the preferences must be
improved for agricultural products, in particular fruit, vegetables, sugar and other temperate
agricultural products, fishery products and, in the short-term, clothing and textiles and, in the
long-term, services. At the same time the preferences should be extended to include the
numerous non-tariff barriers. Finally, the tariff preferences should be made binding and
indefinite so that they can provide a fertile soil for investments. These changes should be
In the long-term, there is a need for a stronger political vision to get Africa back on a
viable path of optimism and economic growth. One element in such a vision could be the
creation of a free trade area from the North Cape to the Cape of Good Hope. The magic of
the year 2000 provides the right occasion to begin this effort and the year 2020 could be a
target year for full implementation.
This vision would be preferable from a political viewpoint. Currently, the interest of EU
member states to engage with Africa is eroding. A free trade area is perhaps the only way that
From the North Cape to the Cape of Good Hope
we can revitalise the political interest and commitment to renewed cooperation between
African and European countries, just as the integration of Central European countries in the
EU has drawn our attention to their problems.
A free trade area would have clear technical advantages. Unlike the Lomé Convention, it
would be consistent with WTO rules and be based on a familiar concept rather than vague
preferential agreements. It would also have beneficial economic effects if properly addressed.
Bringing down trade barriers should take place in three steps:
The first step should be to remove the existing trade barriers in the EU on products of
particular interest to African low-income countries - especially agricultural products, fish and
possibly even certain services. Removing these barriers would only have a minor effect on
European producers. In fact, the combined GDP of all African countries is less than that of
Spain, and total exports from Africa are only slightly higher than Spain's. Creating a free trade
area from the North Cape to the Cape of Good Hope would thus be equivalent to including
another Spain in the free trade area (EU plus EFTA) comprising most of Western Europe. But
while Spain only has around 40 million inhabitants, more than 700 million people in Africa
The second and perhaps most important step towards a free trade area would be to bring
down trade barriers among African countries. If African industrialisation is to gain speed,
regional competition and cooperation between equally-positioned firms must be strengthened.
It is also necessary to create a larger home market to create a demand side pull for African
industrial products. Development economists from Lewis to Nurkse have for centuries, and
almost unanimously, called for trade liberalisation among countries in the South. This has
resulted in very little progress. A vision of a European/African free trade area could have this
Finally, the third step would be bringing down trade barriers in African countries
towards Europe. This could prove difficult as trade liberalisation in developing countries is
currently meeting resistance due to experiences with unemployment and impoverishment of
small-scale farmers. This resistance occurs primarily because of a misplaced belief that free
trade can solve all problems. This is certainly not the case, and for Africa free trade could even
add to some problems. Free trade must be supported by a range of other policies. There is
nothing inherently wrong with free trade, but it must not lead to "laissez-faire economics".
Free trade must go hand in hand with "welfare economics" and be combined with a much
more active state: redistribution, environmental policies, infant industry protection, targeted
industrial policies and investments in human capital, agriculture and infrastructure. This burden
should be borne jointly by Africa and Europe. The slogan should not be "trade, not aid" but
Consequently, trade liberalisation in Africa should be coupled with other policies, and
From the North Cape to the Cape of Good Hope
take place in a selective manner. However, all evidence from East Asia shows that an
important part of successful infant industry protection and selective industrial policies consists
of phasing out protection from world markets. It is also important to realise that the current
protectionism in Africa is not predominantly shaped by appropriate industrial policies or
protection of the environment, the poor or the rural population. Protectionism in Africa is
often shaped by political interest, urban bias, and rent-seeking activities. There is nothing
visionary in protecting these policies because of an ideological distaste towards the concept of
Importantly, the vision of a free trade area should be an offer to the African countries,
not an unavoidable demand. If some African countries do not wish to engage in the process
they should be given the possibility of remaining in a framework such as the current Lomé
To conclude, Europe should formulate a vision of a free trade area from the North Cape
to the Cape of Good Hope, giving priority to social and environmental development and
recognizing the need for an active State and the different requirements and possibilities of
A free trade area from the North Cape to the Cape of Good Hope could revive some of
the optimism in Africa and revitalise political interest and commitment to the enormous task of
getting the continent on the right track. From the North Cape to the Cape of Good Hope1 Introduction
The coming years provide a historic opportunity to renew the trade agreements between
the EU and the developing countries. The Lomé Convention, which covers the EU and 70
countries in Africa, the Caribbean and the Pacific (ACP), is to be revised from the year 2000.
In November 1996 the EU Commission produced a Green Paper which presents ideas about
the future co-operation between the EU and the ACP countries. In the Mediterranean area a
process has been initiated towards an overall free trade area. The Generalized System of
Preferences (GSP) is to be further debated and revised over the coming years, and for a
number of country groups, including the less developed countries and the countries in South
America and Central America, new initiatives are under way.
In 1991 more than 17 per cent of total EU imports entered the European market under
specially favourable terms as part of trade agreements between the EU and the developing
countries. Of this figure 7.1 per cent was given easier access through the agreements with the
Mediterranean countries. 6.2 per cent was allowed to enter under the preferences granted
under the Generalized System of Preferences (GSP) and, finally, 3.9 per cent came from
countries which enjoy specially favourable terms on the European market under the Lomé
Convention (GATT, 1993). Preference agreements thus constitute a central part of the
European window towards the developing countries.
Generally speaking, the systems of preferences directed at the poorest developing
countries have not had the expected positive effect on the trade between these countries and
the EU. The ACP countries’ share of total EU imports decreased from 6.7 per cent in 1976 to
only 3.4 per cent in 1994 (EC, 1997). The main reason for this decrease is internal barriers in
the developing countries, but limitations on the preferences with regard to goods, countries,
origin and time frame play a role. The experience gained must be used to create new types of
Innovative thinking is also required to create coherence between the various contacts
which the EU has with the group of developing countries. The aid must be linked with trade
and debt relief. The EU’s Common Agricultural Policy must be planned so that it does not
have any negative effects on the developing countries. While the debate on better coherence
between the various policies has often been conducted in terms of individual cases, there is a
need to look at the problem from a more holistic perspective. The central objectives for
poverty orientation in the aid policy of both Denmark and the EU should be reflected in the
preference agreements. The increasing focus on the development of agriculture and food
security, not least in the Danish aid policy, should result in better trade agreements for the
agricultural sector. And, in the long term, the objectives must be translated into more binding
relations between Europe and the developing countries. From the North Cape to the Cape of Good Hope
Precisely the EU’s Common Agricultural Policy represents one of the greatest political
obstacles to a reorientation of EU trade relations with the developing countries. For decades,
the Common Agricultural Policy has been a straitjacket for European consumers and tax
payers, but it has now also become a straitjacket in connection with the efforts to enter into
visionary trade agreements with the poorest developing countries in the world. But also in this
field there are new possibilities. The very positive development in income in the agricultural
sector represents an opportunity to implement reforms without this having drastic
consequences for farmers in the EU. The real disposable income of European farmers
increased by more than five per cent in 1996 to the highest level for more than 20 years and
has now increased for four consecutive years (Eurostat, news release no. 21 and 81/96).
Other parts of the world are seeing rapid developments. The USA and Canada have
entered into a free trade agreement on the North American Free Trade Area, NAFTA, with
Mexico. Canada has just signed a free trade agreement with Chile. In 1994, 34 countries in
North and South America, from Canada and the USA to Chile, agreed on setting up a Free
Trade Area for the Americas (FTAA) from the year 2005, although this process has since lost
some momentum. Together with Japan, the USA and Canada are also negotiating on the
creation of a free trade area covering the whole Pacific region (APEC). Recently, the USA
have announced a “African Growth and Opportunity Act” which calls for the negotiation of
free trade agreements with African countries.
In terms of political visions for trade co-operation with the world’s poorest countries,
The World Trade Organization’s Secretary-General, Renato Ruggiero, has proposed
that the less developed countries (the LDC countries), many of which are becoming
increasingly marginalized, be offered completely free access to the market of the rich
countries. A proposal which, on the initiative of the EU, found support at the meeting of the
G7 countries in the autumn of 1996. When the proposal was tabled at the WTO’s meeting of
Ministers in Singapore in December, it was, however, greatly watered down, and the poorest
countries had to settle for a vague, noncommittal plan of action which promises increased
market access. The EU’s Council of Ministers has, in principle, acceded to the proposal that
the less developed countries be given free access to the European market, but concrete
measures are far from forthcoming. Once more, EU visions are failing to materialize.
In sum, there is every reason to commence the work, and there are very few excuses for
not doing so. In this pamphlet, we will be looking more closely at the existing agreements and
their faults and shortcomings. We will subsequently try to present our proposal for what future
trade agreements between the EU and the developing countries could look like. In the short
From the North Cape to the Cape of Good Hope2 The EU’s Pyramid of Preferences
The way in which the EU Member States protect themselves towards the developing
countries has often been described as a pyramid of preferences. At the top of the pyramid we
find the group of countries in Africa, the Caribbean and the Pacific (the ACP countries) which
have concluded the Lomé Convention with the EU Member States. The next layer is the
countries around the Mediterranean, from Morocco to Israel and the former Yugoslavia. They
have entered into agreements with the EU individually. The third group is the group of less
developed countries, the LDC countries. Their preferences are less favourable than those of
the other two groups, but more favourable than the preferences in the bottom part of the
pyramid. Here we find the Generalized System of Preferences (GSP), which covers largely all
developing countries as well as the countries in the former Soviet Union.
However, the structure of the pyramid of preferences is not quite as simple as it used to
be. Special agreements with individual countries, such as the agreements with a number of
countries in Latin America, make the demarcation lines more blurred and the agreement
Figure 1. The EU’s current pyramid of preferences for the developing countries
A country may have access to different layers of the pyramid. For example, Tanzania has
access to the preferences in GSP, to the extended preferences given to the LDC countries and
to the somewhat more extensive trade advantages offered under the Lomé Convention. In a
concrete case, Tanzania will naturally choose the most favourable agreement - the Lomé
Convention. A characteristic feature of all layers in the pyramid is that, in addition to simple
tariff preferences, there may be quota restrictions and other restrictions attached to the origin
From the North Cape to the Cape of Good Hope
of the goods. The problems are smallest at the top and largest at the bottom of the pyramid.
The pyramid of preferences gives the developing countries very different trade
advantages on the European market. The advantages which a country receives are, however,
typically not based on its actual needs, but more on historical accidents. For example, the ACP
countries are not a natural economic or political group, but have mainly been categorized as a
group on the basis of their historical ties with the European colonial powers. From a poverty
angle, it may seem strange that a country like Botswana with a GDP per inhabitant of around
USD 3000 is to be offered more favourable trade conditions than Bangladesh with a GDP per
inhabitant of less than USD 300. Or that, under the Lomé Convention, the Bahamas, which is
classified as a high-income country by the World Bank, has virtually the same preferences on
the European market as the world’s poorest countries, Rwanda and Mozambique. These
imbalances are one more reason for taking the pyramid of preferences up for debate.
But let us first look in more detail at the trade restrictions which still exist towards the
various groups of developing countries.
The Lomé Convention is the best described and most analyzed part of the EU’s trade
co-operation with the developing countries (see, for example, (Davenport, Hewitt & Koning,
1995: Kanafani, 1996; Pedersen, 1996)), and it will be dealt here with relatively summarily.
The first Lomé Convention was drawn up in 1976 with 47 developing countries and has since
grown to comprise 70 developing countries in the present Lomé IV Convention. The recent
agreement to include South Africa in the political part of the Lomé Convention will increase
this number to 71. In the same period, the number of EU Member States has increased from 6
to 15. The Lomé Convention covers a wide range of co-operation types, including a number
of programmes which aim at increasing the exports of the ACP countries. Only trade
In principle, the ACP countries have free access to the European market for all their
exports to the EU. This applies to, not least, manufactured goods and minerals (see group 4 in
Table 1). And around 95 per cent of their total exports to the EU does, in fact, enter the EU
without either tariffs or quotas. However, what tends to be forgotten in this connection is that
the goods which never enter the EU are not included in the statistics. There are, especially two
main exemptions from the principle of free access. Products which fall under the EU’s
Common Agricultural Policy and products which do not meet the origin criteria.
Agricultural products covered by the EU’s Common Agricultural Policy can also be
divided into two groups: protocol products and other temperate agricultural products.
Protocol products cover sugar, rum, bananas (group 3 in Table 1) and beef and veal (included
in group 2 in Table 1). Here a number of countries are granted tariff-free quotas for exports to
From the North Cape to the Cape of Good Hope
the EU and, for some products, even at very favourable prices. For example, the sugar scheme
offers guaranteed prices and has been very advantageous for the 13 ACP countries which have
had quotas. The countries have even consistently exported more sugar to the EU than their
quota (for example, in 1992 the quota was 1,265,700 tonnes, whereas exports were 1,464,000
Table 1. Outline of the Lomé Convention’s trade preferences and the ACP countries’ exports (Davenport, Hewitt, & Koning, 1995) Total agricultural products 4. Non-agricultural products
The ACP countries have been less successful with bananas and beef where they have had
difficulties in filling their tariff-free quotas, although they are making progress. And again the
country and quota restrictions make things unnecessarily complicated. For example, Ethiopia,
which could develop into an exporter of beef, has no quotas (Davenport, Hewitt, & Koning,
Regarding the second group with other temperate agricultural products (group 2 in
Table 1), the situation is somewhat different. Here processed vegetables and fruit, raw tobacco
and certain oil seeds are exported freely to the EU. Problems only arise for fresh fruit,
vegetables and sensitive agricultural products, which are generally all the products which can
be grown in the EU or replace EU-produced products. These products are often subject to
quota restrictions. This applies to, among others, produce such as cassava and tobacco where
the developing countries could have good possibilities for competing and produce such as
millet and durra despite the fact that they are virtually not grown in the EU. The preferences
are very limited when it comes to the most sensitive products. The ACP countries’ total tariff-
free quota for apples is, on a yearly basis, equivalent to approx. one apple for every 50 EU
In addition, the preferences for these agricultural products are very complicated and
subject to continous adjustments through Regulations issued by the Commission. In the period
before 1995, when the EU’s import protection mainly consisted of variable import duties, the
preferences were often expressed either in percentage of the import duty or in concrete figures
such as ECU per kilo. This made it rather difficult to calculate, let alone assess, the actual
From the North Cape to the Cape of Good Hope
preference. From 1995, the import protection is to be by tariff rates instead of variable import
duties. This will make the general tariff rates far more transparent, but some preferences are
still expressed as fixed discounts in ECU. And in many cases (e.g. sugar), the quantitative
restrictions are laid down on the basis of the internal market situation and other current
criteria. Again, the complexity is striking. Considering how difficult it is to have a clear view
of the system from an office at the centre of Copenhagen, one may wonder how a business in
Nairobi or Accra will ever succeed in finding out, for example, whether and when they can
export fresh apples to European consumers. Table 2. Examples of quota restrictions on agricultural products from the ACP countries (EC, 1995a)
Finally, preferences for fish should be mentioned. Here the ACP countries have both
good export possibilities and favourable preferences. But the preferences have been linked to
complicated rules of origin, which, among other things, stipulate that the fishing vessel must
be registered in either the ACP countries or the EU and owned at least 50 per cent by citizens
from the Lomé region. In return for the preferences, the ACP countries have had to grant
fishing rights to European fishing vessels. This is contrary to the general principle in the Lomé
Convention, i.e. that the preferences are unilateral concessions from the EU. All these rules
have, however, been eased slightly, but they still constitute a hidden trade barrier. Fish and,
not least, processed fishery products are otherwise precisely an area in which the ACP
countries have succeeded in increasing their share of EU imports (from 5 per cent of total EU
fish imports in 1976 to 5.3 per cent in 1992) (Davenport, Hewitt, & Koning, 1995).
The general comments on the Lomé Conventions is that they have generally not had the
desired effect. Taken as one, the ACP countries have not managed to increase their share of
the EU market or spread out their exports on more and new products. The countries are still
greatly dependent on relatively few primary commodities. This is primarily due to the internal
problems in the countries, but also to the restrictions laid down in the Conventions. Those
ACP countries, such as Mauritius, Botswana, the Ivory Coast, Jamaica and Zimbabwe, which
have succeeded in developing their exports have, however, benefitted from the trade
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preferences. For these countries, better preferences will mean greater opportunities.
The Trade Agreements with the Mediterranean Countries
The first trade agreements containing trade preferences were signed with Algeria,
Tunisia and Morocco in 1976. The following year saw similar agreements with Egypt, Jordan,
Syria and Lebanon and subsequently with Yugoslavia in 1980. At first, the intention was to
enter into an overall agreement with the Mediterranean countries around the time of the first
Lomé Convention, but instead separate agreements were negotiated. Libya is the only country
The EU’s current Mediterranean policy is covered by a new long-term Framework
Agreement between 27 countries which aims at association/free trade agreements with
Association Agreements have been entered into with Morocco, Tunisia and Israel;
agreements with Lebanon and Jordan are in the offing; much progress has been made in the
negotiations with Egypt, but they have, however, reached a deadlock; the negotiations with
Algeria, which is not exactly regarded as the well-behaved boy of the class, are proceeding
somewhat slowly; a Joint Consultation Committee has been set up for Syria, but that
agreement is still quite a long way from being concluded. Finally, there is much to indicate that
a so-called Interim Agreement will be entered into with the Palestinian autonomous areas
relatively quickly. Here there are certain political obstacles to calling the agreement an
association agreement, but, in practice, it constitutes the framework for an association
agreement. The agreement with Palestine will probably be the agreement which grants the
most extensive preferences for agricultural products, but as the autonomous areas currently
only sell two product groups, strawberries and cut flowers, to the EU, the result of this
Table 3. The agreements with the countries in the Mediterranean area.
A number of Northern European countries have supported far more extensive
concessions to the Mediterranean countries in all these negotiations, but within agriculture
there has, as expected, been heavy opposition from the Southern European countries. From the North Cape to the Cape of Good Hope
Therefore, in most cases, the Association Agreements only take a tiny step forward in relation
to the previous Co-operation Agreements. And whether the promises of a further development
into actual free trade agreements will be kept still remains to be seen.
The many separate agreements with specific trade and co-operation elements make it
difficult to form a clear view. In general, the agreements provide tariff exemptions in
connection with export of manufactured goods to the EU, although some clothing and textile
products are governed by so-called administrative arrangements in order to avoid large
“disturbances” on the EU market. Regarding agricultural products, there is unrestricted access
for products which are not covered by the Common Agricultural Policy and tariff-free quotas
for products covered by the Common Agricultural Policy. A look at the most central
agreements gives some insight into the situation:
The Association Agreement with Tunisia
In 1995 the Co-operation Agreement with Tunisia from 1976 was replaced by an actual
Association Agreement (EC, 1995b). The main difference in relation to the preference
agreements is that the Agreement will lead to an actual free trade area between the EU and
Tunisia in the course of the next 12 years. This must take place in accordance with the WTO
Rules. The Agreement thus marks both a political interest in greater focus on the region and a
technical recognition that the WTO Rules are increasingly blocking loose and unspecific co-
operation agreements but allow free trade agreements (see section 4). At the same time, the
establishment of reciprocal preferences constitutes an economic gain for the EU. So far, the
Co-operation Agreement has been based on unilateral EU preferences.
The free trade area has the effect that Tunisia must grant free access for manufactured
goods from the EU as well as preferential tariff rates on agricultural products from the EU. In
return, the EU promises to ease the market access for Tunisian agricultural products. In
addition, the free trade area will involve free right of establishment, liberalization of service
markets and free movements of capital. The introduction of the free trade area is monitored by
an Association Council and an Association Committee.
To give an impression of the remaining restrictions on agricultural products, a number of
examples are shown in Table 4. As the Table shows, there are often quotas or the possibility
for quotas as well as limited time periods in which products can be exported. Furthermore, in
some cases, for example for melons, the tariff reduction only applies to the tariff rates and not
to the variable import duties (which were previously the most important protection mechanism
in the agricultural sector). For wine, some must come from specific regions. One of the most
sensitive products regarding Tunisia is olive oil. Here the trade restriction has been laid down
in a special Article in the Agreement. In addition to the quota, a safety clause has been
specified which ensures that imports can be stopped if they constitute a threat to the “market
From the North Cape to the Cape of Good HopeTabel 4. Tunisia: Examples of quotas and other restrictions on agricultural products to the EU (EC, 1995b).
Note 1. . A quota may be introduced at any time in consideration of the market situation in the EU. Note2. 100% reduction in variable import duty.
In other words, the EU is wearing both belt and braces. And there is little prospect of
any marked improvements. The quota increases in relation to the previous agreements have
not been impressive, nor do they look likely to be so in the future. For products such as cut
flowers and new potatoes, Tunisia is promised a not very impressive quota increase of four
times three per cent up to the year 2000. The Association Agreement with Morocco
The Co-operation Agreement with Morocco from 1976 was also replaced by an
Association Agreement in 1995 (EC, 1995c). Again, the Agreement has the effect that a free
trade area is to be established over the next 12 years. The Agreement contains the same
elements as the Agreement between the EU and Tunisia. Morocco is to grant free access for
manufactured goods from the EU as well as preferential tariff rates for agricultural products
from the EU. The EU undertakes to improve the market access for Moroccan agricultural
products. Again, the free trade area will involve the free right of establishment, liberalization
of service markets and free movements of capital. The whole Agreement is monitored by an
Association Council and an Association Committee.
Table 5 shows examples of remaining restrictions for agricultural products. Again, the
restrictions are very detailed with quotas, time periods, exemptions, specific areas (for wine)
and further safety clauses. Whereas one of the most sensitive products for Tunisia was olive
oil, for Morocco it is tomatoes. This can be seen from the Table. The total quota for tomatoes
is distributed on the months October to March with 5000 tonnes in October, 18,601 tonnes in
November, 36,170 tonnes in December, 30,749 tonnes in January, 33,091 tonnes in February
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and 27,065 tonnes in March. The overall logic on which these very specific are calculated
remains unclear. And as if that was not enough, Morocco has agreed that the tomatoes are to
be exported at a fixed reference price (ECU 500 per tonne) so that the competition does not
become too harsh for their colleagues in the EU. Similar restrictions, i.e. quotas and minimum
prices, apply to fresh courgettes, artichokes, cucumbers, clementines and oranges. Table 5. Morocco: Examples of quotas and other restrictions on agricultural products to the EU (EC, 1995c).
Note 1. A quota may be introduced at any time in consideration of the market situation in the EU.
Despite the restrictions, Morocco succeeded in exporting considerably more potatoes
and tomatoes than specified in the tariff-free quotas. This is one indication of how competitive
Again, there is not much prospect of any marked improvements in the market access.
For some products these quotas will also increase by four times three per cent. For cut flowers
the increase has been directly specified: from 3600 tonnes in 1995/96 to 5000 tonnes from the
The Association Agreement with Israel
Although Israel is not considered to belong to the group of developing countries, it is of
interest to make a brief comparison with the other Agreements. This also concludes the review
of the Association Agreements which have already been entered into.
The preferences are subject to the same types of restrictions which apply to Tunisia and
Morocco. Thus, there is no clear favourable treatment of either Israel or the Muslim countries.
Israel is in a favourable position regarding, for example, fresh oranges and cut flowers, but in a
less favourable position regarding tomatoes and wine. From the North Cape to the Cape of Good HopeTable 6. Israel: Examples of quotas and other restrictions on agricultural products to the EU (Ministry of Foreign Affairs, 1995).
It was actually the EC which showed the way when tariff preference agreements were
made legal in 1971 through an exemption clause in GATT. In mid-1971, a decision was made
on the conclusion of the EC’s first GSP Preference Agreement. The fundamental difference
compared with, for example, the Lomé Conventions is that the GSP system is dictated
politically from Brussels. No formal negotiations are conducted with the developing countries.
The latest GSP Agreement on manufactured goods entered into force from January
1995 (EC, 1994) and is expected to remain in force for up to 10 years, but with amendments
already from 1998. A GSP Agreement on certain agricultural products followed in 1996 (EC,
1996). The text of this Agreement is very similar to the Agreement on manufactured goods.
The GSP Agreements grant relatively extensive preferences on a number of
manufactured goods and on certain agricultural products. In the previous versions of the GSP
system, the goods were divided up into so-called non-sensitive goods with tariff-free and
quota-free access to the EU and sensitive goods for which country-specific quotas or tariff
ceilings applied. In the new GSP Agreements, this system has been changed so that the goods
which are given preferences are divided up into four groups:
1) Very sensitive. The GSP tariff is 85 per cent of the normal tariff rate.
2) Sensitive. The GSP tariff is 70 per cent of the normal tariff rate.
3) Semi-sensitive. The GSP tariff is 35 per cent of the normal tariff rate.
4) Non-sensitive. The GSP tariff is 0.
The preferences have thus been changed from being a complicated and non-transparent
tariff quota systems to simple percentage rates. This new system is not half bad. We will return
From the North Cape to the Cape of Good Hope
The preferences are, however, linked to the sensitivity of the goods, and which means
that several of the goods with particularly good export potential for the developing countries
Within manufactured goods this applies to, for example, textiles and clothing, which are
in group 1 (and which are, in addition, still subject to export quotas for the most competitive
countries) and hides, skin and footwear, which are in group 2 (see Table 7). Conversely, it is
doubtable whether many of the developing countries are able to utilize the more lucrative
preferences on goods such as boilers for nuclear reactors, locomotives, spacecrafts and
Regarding agricultural products, it is also clear that the preferences are closely linked to
the production in the EU. For fruit and vegetables there is, moreover, a tendency so that the
more processed the product, the more generous the preferences. While citrus fruit is very
sensitive, soft drinks are not sensitive at all. In other words, this is a sort of tariff escalation in
reverse, where the preferences increase in line with the level of processing. Or in a more
critical interpretation: the preferences are linked to the developing countries’ ability to produce
the goods. The opposite picture is, in fact, found for other groups of commodities such as
coffee and cocoa where cocoa beans and raw coffee are in the group of non-sensitive goods,
whereas chocolate, roasted coffee and caffeine-free coffee move further up the sensitivity
The other innovation in the new GSP scheme is the way in which the EU is trying to
target the preferences towards its weakest trade partners - or in other words - the way in
which the EU is trying to keep particularly successful exporters out. This is called graduation,
and it excludes individual countries or individual goods from individual countries from the
preferences. The graduation scheme enters into force if the countries and the goods are on a
special list and further meet the requirements for a so-called development index and a
The development index is an overall weighing of the income per inhabitant in relation to
the EU and the value of industrial exports in relation to the EU. If the index is equal to zero,
the country is regarded as being identical to the EU in terms of industrial development.
The specialization index is, for each sector, the ratio between the share of imports from
the developing country in question of total EU imports and imports in the whole sector in
relation to total EU imports of manufactured goods.
Confused? It gets worse. The criterion for whether the preferences are to be removed is
an overall weighing of the two indices. Without going into the specific criteria, the trick is that
if a country has a very low development index (below minus 2), it will always be given
preferences. Conversely, a developing country which has climbed further up the development
ladder risks losing its preferences if its share of total EU imports in the sector in question is
From the North Cape to the Cape of Good HopeTable 7. Examples of the distribution of goods in the GSP Agreement (EC, 1996: EC, 1994). Manufactured goods:
Natural silk; wool; cotton; carpets of textile materials; garments and accessories; ferroalloys; etc. Agricultural products: Live donkeys; trout; cut flowers (except orchids from 1/6-31/10); new potatoes from 1/1- 1/5; leeks; lettuce; carrots; legumes; vegetable mixes; wine grapes; almonds; bananas; tangerines from 1/3-31/10; grapes; fresh melons; fresh or dried apples; fresh strawberries from 1/1-30/4; raspberries; preserved strawberries; sunflower oil; whole fish; chocolate; pasta products; jam; citrus fruit, pears, etc. with added alcohol or more than 13 per cent sugar; orange juice with a value of more than ECU 30/100 kg; tobacco. Manufactured goods: Ammonia; ether; camphor; citric acid; amines; chemical fertilizers; casein; gelatine; sheets of plastic; new rubber tyres; raw hides and skins as well as leather; chipboards; plywood; wickerwork; children’s picture books; globes; post cards; footwear; kitchen utensils; statues of ceramic material; glass fibre; fork-lift trucks; sewing machines; toasters; video recorders; records, tapes; television sets; motor cars; bicycles; wrist watches; grand pianos; brooms and brushes. Agricultural products: Frozen poultry liver; other meat from reindeer; piked dogfish; live mussels; yoghurt; spreadable milk fat products; roses; potatoes except for new potatoes from 1/1-15/5; sweet corn; fresh dates; fresh avocados; raw coffee; decaf; fat from poultry; margarine; cocoa paste; chocolate glazing; couscous; pastry; preserved olives; peanut butter; orange juice with a value below ECU 30/100 kg; tomato ketchup; vodka; cigarettes. Manufactured goods:
Sodium hydroxide; phthalic acid anhydride; polyamides; suitcases; briefcases; school bags, etc.; umbrellas; walking sticks; riding whips; steam turbines; refrigerators; freezers; washing machines; lathes; calculators; microphones; electric capacitors; perambulators; outboard motors; binoculars; cameras; microscopes; compasses; bed bottoms; lamps. Agricultural products: Live piked dogfish; fresh and frozen Greenland halibut; frozen cod fillet; frozen lobster; squid; cut orchids from 1/6-31/10; fresh almonds; fresh grapefruit; roasted coffee; vanilla; beeswax; processed or preserved cod; caviar; cocoa powder; pasta products with filling; nuts; fruit and vegetable juices with a value of more than ECU 30/100 kg; dog food and cat food. Manufactured goods:
Magnesium oxide; burnt lime; soap; proteins; saddle bags; furs; wood; cork; other paper and cardboard; natural pearls; rails; bridges and lock gates; barbed wire; anchors; boilers for nuclear reactors; locomotives; tractors; vehicles for the disabled; aircraft and spacecraft; sofa beds; prefabricated buildings. Agricultural products: Horses for slaughtering; liver and tongues; live saltwater aquarium fish; vines with roots; dried peas; raw coffee with caffeine; green tea; nutmeg; liquorice root; tallow oil; cocoa beans, preserved pineapple; soft drinks; beer; whisky.
Finally, it depends on a concrete product and country list. On the list of countries which
may lose their GSP preference we find relatively rich countries such as South Korea and Hong
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Kong, but also poorer countries such as China, India, Pakistan, Thailand, Indonesia and Brazil.
Also the states in the former Soviet Union risk being “graduated out”.
This type of discrimination has been criticized for punishing precisely those developing
countries in which the preferences have worked, which does, in fact, seem slightly strange.
Conversely, the system ensures that the largest preferences remain with the countries which
are far down the development ladder and which have particularly large problems in getting
Finally, a look at the third new element in the new GSP schemes: the introduction of
conditions based on environmental or social criteria. The idea is that countries which behave
particularly well are to be offered further preferences. This is known as “Special incentive
arrangements” in the Agreements. The arrangements will only enter into force from 1998, so
they are still being drafted. But the fundamental criteria are included in the Agreements.
Further preferences may be given if the countries meet one of the following criteria:
In the GSP Agreement on Manufactured Goods (EC, 1994):
n The standards in the International Labour Organization’s Convention nos. 87 and 98
on the right to organize and conduct collective negotiations and the International
Labour Organization’s Convention no. 138 on the minimum age for access to
n Standards for sustainable management of forests
and in the GSP Agreement on Agricultural Products (EC, 1996):
n International environmental standards in the agricultural sector.
It is clear that the GSP Agreement on Manufactured Goods entered into in 1994 has
been based on specific issues such as child labour and tropical trees, whereas the agricultural
equivalent from 1996 includes the wider formulation on environmental standards in the
agricultural sector. No specific environmental standards are mentioned, but ecological
How the requirements are to be met, how the goods are to be labelled and how large the
additional preferences will be remain to be seen. This debate will be of central importance in
1997. There is already an ongoing debate on the fairness of this type of conditions.
In general, the GSP Agreements have not had a large effect on the poorest developing
countries either. But the more successful developing countries, such as Hong Kong and South
Korea, have had nice gains. It is a well-known fact that trade preferences work best for those
countries which have something with which to trade. Part of the problem has again been the
many non-transparent restrictions which have characterized the Agreements and their short-
From the North Cape to the Cape of Good Hope
term and uncertain nature. These problems have partly been remedied in the new GSP
Agreements, which, in many ways, are a step in the right direction.
The Trade Agreements with the LDC Countries
The group of less developed countries (the LDC countries) can be divided up into two
logical groups. Those LDC countries which have acceded to the Lomé Convention (and thus
already enjoy the extended Lomé preferences) and those who have not. By far the majority of
LDC countries are included in the Lomé co-operation, which comprises 70 developing
countries (71 with South Africa). In fact, only nine out of the 48 LDC countries, Afghanistan,
Bangladesh, Bhutan, Cambodia, Laos, the Maldive Islands, Burma, Nepal and Yemen, are not
These nine countries are offered extended GSP preferences (EC, 1996: EC, 1994).
Changes are that they are granted tariff-free access for all their manufactured goods and
extended preferences for agricultural products covered by the GSP Agreement within the
Four countries in South America, Bolivia, Columbia, Ecuador and Peru, are offered
preferences similar to those offered to the LDC countries as a special contribution to their
fight against the production of and trade in drugs. For six countries in Central America, Costa
Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama, there have also been
extended GSP preferences on agricultural products since 1991.
Negotiations are still pending with a number of Latin American countries from Mexico
to MERCOSUR (Argentina, Brazil, Paraguay and Uruguay) and Chile on further trade
agreements. This may seem strange seen in relation to the overall priorities, the increasing
pressure on the other preference agreements and the need for an overall and cohesive strategy
for the EU’s trade pattern with developing countries as a whole. But it is clear that there are
clear political interests in establishing closer ties between the EU and the Latin American
3. The Preference System Seen in the Light of the Uruguay Round
When the general tariff level is falling, there is not much advantage in having tariff
preferences. And this is precisely what will happen after the Uruguay Round. The problem has,
in fact, existed for a long time for the majority of the manufactured goods for which the tariff
level is so low that the difference compared with the preferential rate is often minimal. For
manufactured goods the average tariff level in the rich countries will be below four per cent
From the North Cape to the Cape of Good Hope
after the GATT Uruguay Round have been implemented (Hertel, Martin, Yanagashima, &
Dimaranan, 1995), and most preference agreements with developing countries already offer
virtually free access for manufactured goods to the European market. There are therefore no
longer great opportunities for lucrative preferences on manufactured goods.
Clothing and textiles are, however, an important exception, as a number of the most
competitive producers in Asia are subject to tight export quotas. This has actually
strengthened Africa’s position on the European clothing market, as shown in Table 8. Of total
EU imports from the developing countries in 1993, 15.1 per cent came from Africa, compared
with only 7.2 per cent in 1974. Here the preferences seem to have worked. . If we look more
closely at the figures for Africa, it is, however, mainly Mauritius and some of the North
African countries which have used this opportunity. By far the majority of ACP countries have
not had much benefit from the preferences.
For textiles, which is increasingly a highly capital-intensive production, the preferences
have not had the same effect. In fact, Africa’s share of total EU imports from the developing
countries has remained almost unchanged over the 20 years
Table 8. EU Imports of clothing and textiles from the developing countries, Eastern Europe and the former USSR (WTO, 1996).
One of the problems is the rules of origin. It has not been possible to import cheap
textiles from Asia and then make clothes for European consumers. The general rule is that
only if the production is based on yarn, can the export take place on the specially favourable
conditions, and this requirement can be difficult to meet. Another problem is the so-called
safety clauses, which give the EU Member States the right to introduce quotas if the imports is
From the North Cape to the Cape of Good Hope
considered to “constitute a threat” to the EU’s own producers. For five of the Mediterranean
countries, including Egypt, Morocco and Tunisia, “administrative” schemes have thus been
entered into under which exports are monitored closely in order to ensure that they do not
develop into a threat. The safety clause has also been used to force Mauritius to limit its
exports of acrylic yarn to the EU, and Zimbabwe has also been threatened with quotas
(Pedersen, 1996). So despite the lofty words on free access, there has been an underlying
threat of restrictions. This type of hidden protectionism may effectively counteract investments
in increased production and exports.
In principle, the quota system is to be phased out by the year 2005. However, this does
not automatically mean free access to the European market, as it will still be possible to
impose tariffs. But it will result in a loss of preferences for the ACP countries, the LDC
countries and the countries in the Mediterranean region. They will be faced with even sharper
competition from the dynamic producers in Asia.
In the period up to 2005, lucrative preferences may, however, still be offered within
clothing and textiles and, depending on the future tariff level, this will also be the case after the
The loss of tariff preferences is also seen within tropical agricultural products where,
after the Uruguay Round, the tariff level will be so low as to make the preferences banal. For
coffee, for example, the preference will disappear completely when the ordinary tariff rate falls
For minerals and oil, the situation is even worse. Here the tariff rates have virtually all
been reduced to zero, resulting in a total erosion of the preference margin. Minerals and oil
made up more than 40 per cent of total EU imports from the ACP countries in the period
This leaves the so-called temperate agricultural products. As shown in section 2.1, the
preferences were generally modest for these products. The question is then whether the
Uruguay Round will erode the possibility of offering the poorest developing countries new
trade advantages within these product categories. This has turned out not to be the case.
There was great optimism when the negotiations on a global reform of the trade in
agricultural products under the auspices of GATT were commenced in 1986. A sense of
optimism was still intact when the final Uruguay Round Agreement was drawn up in 1994. On
paper, it did, in fact, look good. All non-tariff import restrictions, such as quotas and variable
import duties, were to be turned into tariff rates, which were subsequently to be reduced by 36
per cent over a 6-year period. Export subsidies were to be reduced by 36 per cent in value and
21 per cent in the subsidized quantity. At the same time the markets were to be opened so that
at least five per cent of the total consumption could be covered by imports. Total domestic
subsidies were to be reduced by 20 per cent. All in all, it sounded very promising. From the North Cape to the Cape of Good Hope
Recently, this sense of optimism has, however, nosedived. The Agreement on export
subsidies has turned out to be robust vis-à-vis the countries’ attempts to get around the
requirements. But as the agricultural reforms have typically resulted in direct subsidies rather
than price subsidies, and as world market prices have increased, the need for export subsidies
has decreased by itself. The change to direct subsidies through hectare premiums also meant
that the requirement for a 20 per cent reduction in domestic subsidies became irrelevant.
Direct subsidies are exempted from the requirement for cuts, and this applies to both the
European hectare premiums and the American deficiency payments.
What remained were the hopes of marked reductions in import barriers. Here, as
mentioned, the Agreement contains two elements. The first step was to convert the existing
protection schemes, in particular quotas and variable import duties, to regular tariff rates. But
already here things went wrong. - for two different reasons. Firstly, the years 1986-88 were
chosen as the so-called reference period. This period was characterized by very low world
market prices, resulting in a large difference between domestic prices and world market prices.
In terms of tariff barriers, this results in tariff rates which are higher than the actual level of
protection in the period right before the starting point of the Agreement. This is illustrated by
the base tariff rates in the second row in Table 9. Secondly, it turns out that there are divided
opinions on how the base tariff rates are to be calculated. The base tariff rates arrived at by the
EU Commission in its calculations (third row in Table 9) were much higher than the tariff rates
calculated by the World Bank (second row in Table 9). This difference has been called dirty
tariffication, and it reflects the strong political interests in protecting EU farmers from outside
Table 9. Tariff rates (or tariff equivalents) in per cent for the EU, before and after GATT’s Uruguay Round (Ingco, 1996).
Final tariff, EU proposal, in the year 2001
The striking aspect is that even after the heroic round of liberalizations which was
agreed in the Uruguay Round, in the year 2001 the tariff rates on a number of goods in the EU
will be higher than the actual level of protection in the period from 1989-1993. Two steps
A lot can still happen up to the year 2001, and it already looks as if the EU’s tariff rates
will be lower than in the first proposal. But it is quite clear that GATT’s Uruguay Round has
only resulted in fairly limited changes within agricultural products. In the short term, this will
From the North Cape to the Cape of Good Hope
have a positive effect on food-importing countries, as world market prices are increasing by
less than originally assumed. Conversely, it will have a negative effect on farmers in
developing countries in general and, in particular, on food-exporting countries.
In any circumstance, the effect is that there will be ample possibilities for offering the
developing countries considerable preferences on agricultural products even after the year
On the positive side, the GATT Round has resulted in a considerable simplification of
the protection pattern in the agricultural sector. The many non-tariff restrictions will, as
mentioned, be converted into ordinary tariff rates, and this will result in much greater
transparency. This is an important feature from which the e preference agreements can learn.
The last group which should be mentioned is fish. Here the tariff level is still high, and
the possibilities for preferences and, not least, a reform of the complicated rules of origin are
The conclusion is that future preference agreements must be based primarily on
agricultural products. In addition, it will be possible to continue and extend the preferences
within fish, clothing and textiles and, to a lesser extent, for manufactured goods. 4 WTO Rules and Preference Agreements
One thing is that the GATT/WTO Agreement still leaves room for using trade
preferences as a development policy instrument. Whether it is legal is quite another thing.
One of the most fundamental GATT/WTO principles is non-discrimination, which
applies between both products and countries. Regarding countries, the principle is reflected in
the so-called “most-favoured-nation principle”. All countries are to be treated just as well as
However, after the establishment in 1964, the UN’s trade organization, UNCTAD,
pressed to have developing countries granted particularly favourable conditions. It succeeded
in this with the adoption in 1971 of an exemption clause in the GATT Rules which made it
possible to introduce general systems of preferences for the developing countries. The
exemption clause had a duration of 10 years and was followed up in 1979 by a resolution on
“Preferential and Differential Treatment of Developing Countries” (the so-called enabling
clause) (WTO, 1995). In other words, both resolutions introduced a deviation from the normal
GATT principle on most-favoured-nation treatment.
However, the central aspect of the resolution on preferential and differential treatment of
developing countries is that, in principle, different groups of developing countries must not be
discriminated against. An exception is the less developed countries (the LDC countries), which
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can be offered further preferences. This conclusion was clear in the report on the panel case
regarding EU import rules for bananas (GATT, 1994). After 20 years, it was thus established
in one fell swoop that the whole Lomé Convention is actually in conflict with the GATT
Rules, as there is, in fact, clear discrimination between the ACP countries and the other
developing countries. Nor could it be justified under the exemptions for free trade agreements,
The problem was, at first, solved by a provisional exemption clause adopted on 9
December 1994 and valid until the year 2000 (however, to be reconsidered in 1996 and 1998).
The EU and the ACP countries were therefore let off the hook for the time being, but the
problem still remains. And behind it lurks the pending banana case (discrimination against
Latin American “dollar” bananas) and other cases as a potential threat to the whole Lomé
Convention. The Uruguay Round and the far more stringent dispute settlement mechanisms in
the new World Trade Organization only make matters worse.
The problem is one of the reasons why the EU’s trade agreements with the developing
countries must be subjected to a comprehensive review. The agreements with the
Mediterranean countries are slowly being brought into accordance with the WTO Rules by
changing status towards free trade agreements. When the concessions involved are reciprocal
and not unilateral, there is a much better chance of the agreements being in accordance with
the WTO Rules (as long as the concessions are of a certain size). The extended preferences for
the LDC countries can also be defended on the basis of their special status in the original
GATT resolution. But the Lomé Convention and the special agreements with, for example,
countries in Latin America must either be adjusted or legalized. From the North Cape to the Cape of Good Hope5 The Food Markets of the Future
The last question which one can ask before we look more closely at the future system of
preferences is whether preferences on agricultural products are at all sensible and usable.
It may, in fact, seem self-contradictory that developing countries are to be offered
particularly favourable opportunities to build up exports of agricultural products in a situation
in which up to 800 million people in these countries are starving. But in this connection it is
important to recall that famine is usually not about shortage of food but about lack of
purchasing power. The developing countries’ comparative advantage does not lie within wheat
production or other large-scale production of basic foods, but rather within labour-intensive
crops such as fruit and vegetables. If these crops can be exported to European consumers, the
income can be used to purchase grain and other basic foods from European and American
farmers. Studies in China have shown that small peasants could import twenty times more
grain than they can produce themselves if they switched to labour-intensive production of
melons and sold them to Japan. The small farmers’ certainty of food supplies could therefore
be improved through export of melons.
A similar division of labour could be developed between Africa and the EU. It is, in fact,
precisely the preferences on fruit and vegetables which have been utilized the best. The ACP
countries’ exports of fruit and vegetables have more than doubled since 1976, and their share
of the EU market for fresh and processed vegetables has increased from 5 to 7 per cent. The
most important vegetables are beans and peas, peppers, avocado and asparagus, and the most
important fruits are oranges, tangerines, apples and pears. Regarding processed fruit, which
has relatively large preferences, exports increased from next to nothing in 1976 to ECU 60
million in 1992, which was nine per cent of total EU imports. Here, the most important groups
are various types of tinned fruit juice. Even though other developing countries have done
better, it is quite impressive compared with the decline which the ACP countries have
experienced on most other product groups [Koning, 1994 as quoted in Davenport and Hewitt,
The developing countries also have good possibilities when it comes to sugar. The mere
fact that the ACP countries have exported more sugar than their quotas shows how
In addition to this, there are numerous individual examples: exports of cut flowers and
tropical plants from the ACP countries, in particular Kenya, Zimbabwe and Uganda, increased
markedly from ECU 7 million in 1976 to ECU 75 million in 1992 (Davenport, Hewitt, &
Koning, 1995). In Namibia there are good possibilities for producing seedless grapes, but the
import quota of 400 tonnes is close to symbolic (Pedersen, 1996). And in Morocco, farmers
are, as mentioned, very keen to be allowed to sell tomatoes to European consumers. From the North Cape to the Cape of Good Hope
And it is not as if European farmers will run out of export possibilities. In fact, the
outlook for the world’s food supply is so pessimistic that there will be a need for heavy
growth in the world trade in grain and meat in the decades to come. The developing countries’
estimated net imports of grain alone will increase from 89 million tonnes in 1990 to 162 tonnes
in the year 2010 (Alexandratos, 1996).
In Africa the present grain deficit is expected to double up to the year 2010. If the
poorest countries are not given new and better possibilities to earn foreign currency via
exports to European consumers, they quite simply cannot afford to buy the amount of food
which the population will need. Further trade preferences and further technical aid to build up
an export industry are therefore part of the solution if we are to avoid famine disasters of an
Finally, and in continuation hereof, the issue can be seen from a narrow national-
egotistical perspective. If the developing countries are given the opportunity to export more
goods to us, we will have greater opportunities to export goods to them. The European
farmers who will lose out from increased competition from poor developing countries in the
short term can profit in the long term. 6 The EU Commission’s Proposal: The Green Paper
Following this outline of the existing agreements and the practical possibilities for
improving them, it is time to look at concrete proposals for future trade agreements.
In the autumn of 1996, the EU Commission published a Green Paper containing ideas on
the future co-operation between the EU and the ACP countries (EC, 1996). The Green Paper
covers all elements of the co-operation, from aid to trade, but in this pamphlet we will only be
looking at the trade part of the Lomé Convention. There is definitely a need to link trade and
aid (see section 8), but this could take place in separate agreements.
Regarding the trade agreements between the EU and the developing countries, the
Green Paper is a breath of fresh air, as it opens many doors and throws many ideas up in the
air. Before we start the actual analysis, let us first examine the various ideas in brief. The
Green Paper points at four options for future trade agreements between the EU and the
1) Status quo. The present trade preferences in the Lomé Convention are largely kept
unchanged, but are possibly improved with further concessions and supplementary
agreements in other fields. Another possibility is to restrict the present Lomé
preferences so that they only apply to the less developed ACP countries and then
offer the more advanced ACP countries other possibilities.
2) Integration into the GSP system. Trade would be removed completely from the From the North Cape to the Cape of Good Hope
Lomé Convention. The less developed ACP countries would then be left with the
preferences which are offered to the LDC countries (section 2.4), while the other
ACP countries had their trade preferences reduced to the same level as in the GSP
Agreements (section 2.3). In order to avoid that the less developed ACP countries
incur excessive losses, the preference agreement with the LDC countries could be
extended to the same level as the present Lomé preferences.
3) Uniform reciprocity. After a transitional period the ACP countries would
reciprocate their advantages on the European market by offering the EU lower tariff
rates. This will give the agreements the nature of actual free trade agreements
(instead of preference agreements) and thus make them consistent with the WTO
Rules (see section 4). Maybe the speed for the less developed countries could be
different from the rest of the group and, as in option 1, there could be supplementary
4) Differential reciprocity. Groups of ACP countries or individual ACP countries
reciprocate the EU’s trade concessions and thus enter into actual trade agreements
with the EU (which will again comply with the WTO Rules). The agreements could
possibly be entered into between regional trade areas and the EU.
It is envisaged in the Green Paper that the four options can be combined so that, for
example, free trade agreements are entered into with some ACP countries, whereas the rest of
the countries are integrated in the GSP system. Or that some ACP countries are offered
unilateral preferences like today, whereas bilateral free trade agreements are entered into with
other countries. In addition, the whole process can take place in an overall agreement between
the EU and all ACP countries or in a number of different agreements. The negotiations may be
multilateral and linked to the World Trade Organization or they may be conducted bilaterally.
The advantage of option 1 is that it is convenient, as it maintains the present structure
and requires few changes. The disadvantage is that it will be contrary to the WTO Rules, and
the future of the whole agreement will therefore be uncertain and will be debated continuously.
The agreement would be subject to annual revisions in the WTO. Thus, it would not have the
long-term nature which can attract the necessary investments.
Option 2 has the clear advantage that a uniform and simple system of preferences is
created which would be in complete accordance with the WTO Rules. Disadvantages are that
the ACP countries and the Lomé Convention are broken up, and that the more developed
ACP countries will have their present trade advantages drastically reduced. Therefore, in
practice, this solution would mean fewer, instead of more, possibilities, and it may have
negative consequences for, for example, investments in Africa. From the North Cape to the Cape of Good Hope
Options 3 and 4 have the advantage that they would be in accordance with the WTO
Rules. In addition, they would strengthen the whole partnership accession to the co-operation
and make the agreements indefinite. Option 4 is far more flexible than option 3, which requires
complicated negotiations between all the 85 countries under the Lomé Convention. The
advantages and disadvantages of a more ambitious version of option 4 are discussed in section
The Green Paper does not choose a specific solution but points out that ACP countries
must themselves choose the solution which is best suited to their development requirements. It
is also pointed out that the less developed countries, and, in particular, Africa have special
requirements which should be taken into account, and it is acknowledged that the ACP group
is neither a politically nor an economically well-defined group. The idea of breaking up the
present group of ACP countries into more logical groupings is thus aired. It is pointed out that
future trade agreements can be looked at separately from the future aid work, although trade
The EU Commission’s Green Paper keeps all options open, but definitely points at more
binding and comprehensive trade agreements with specific groups of developing countries as
an option. We will deal with this option in the sections below. 7 Future Trade Agreements between the EU and the Developing Countries
The EU Commission’s catalogue of ideas opens up for many possibilities, but without
making specific recommendations. We will try to do so below.
The debate on the EU’s system of preferences must be viewed from both a short-term
and a long-term angle. In the short term, the conclusion must be that the preference
agreements must be targeted towards the poorest developing countries and must be simplified,
improved and made binding and indefinite.
In the long term, there is a need for far stronger political visions if optimism in Africa is
to be restored. There is a need for ambitious objectives for the overall co-operation between
Europe and Africa. A free trade area from the North Cape to the Cape of Good Hope.
We will be looking more closely at these proposals in the following sections - in the
The Pyramid of Preferences: The Short Term
In the short term, there is a need for a comprehensive simplification and reorientation of
the EU’s trade agreements so that they become far more consistent with aid objectives and
requirements. This involves targeting the trade preferences at the poorest developing
From the North Cape to the Cape of Good Hope
countries, granting far more concessions within the agricultural sector and simplifying the
system so that quota restrictions are abolished and rules of origin are eased. Regarding the
simplification of the system of preferences, a number of recommendations can be made:
1. All preferences must be in the form of tariff reductions. Quantitative restrictions in
connection with tariff preferences are to be abolished (the system of preferences is to
2. All preferential tariff rates are to be made binding and indefinite in line with the tariff
3. The rules of origin are to be eased: the threshold limit for how large a part of the
value of a given product which is allowed to come from non-Member States should
be increased, and cumulation should reciprocally comprise the ACP countries, the
LDC countries and the countries in the Mediterranean region.
4. The rules on the use of safety clauses should be narrowed considerably to avoid
random increases in the level of protection during times with sharp import
The tarification of the preferences is an important element in improving transparency. As
described above, it is today virtually impossible to form a clear view of the actual level of
preferences and the many quantitative restrictions. This makes it very difficult for the
developing countries to utilize their trade advantages. The easing of the rules of origin is a
current demand from the developing countries and would contribute to increasing South-
South trade and making local production far more flexible and independent of complex codes.
Making the preference agreements binding and without time limitations are fundamental
prerequisites if they are to result in actual investments. The present fixed-term preference
agreements have not resulted in the creation of the necessary stable investment climate. The
term of the Lomé Convention has been extended from five to ten years, and it is now time to
make the tariff preferences binding and of an indefinite term. It is interesting to note that for
sugar, where the ACP countries have been good at maintaining large exports, the agreements
are of an indefinite term, as the predecessor of the Sugar Protocol existed already before the
Lomé Convention. The agreement has thus provided the necessary basis for long-term
investments which the rest of the Lomé Convention lacks.
Binding tariff agreements are completely in line with the way in which tariff rates are
fixed in the ordinary WTO/GATT negotiations where top priority is given to transparency and
safety. A narrowing of the possibilities for a sudden introduction of higher tariff rates with
reference to the safety clause could also stimulate increased investments.
The next point is for which products the preferences can be extended and improved. As
From the North Cape to the Cape of Good Hope
shown, there are particularly good possibilities within the following:
Temperate agricultural products, including fruit, vegetables and sugar
Clothing and textiles (in particular rules of origin and safeguard clause).
In addition, in the future there will be good possibilities for preferences within services.
Services have only recently been the object of discussions on trade liberalizations, but are
typically labour-intensive areas in which a number of developing countries could be
Finally, it is important to realize that today market access is not only a question of tariff
rates, but also of far more complex mechanisms such as anti-dumping duties and safeguard
clauses, competition policy, technical, sanitary and phytosanitary standards, subsidies,
environmental and social regulations, intellectual property rights, investment rules, etc. Trade
agreements must increasingly ensure that the developing countries’ market access is eased
when it comes to these non-tariff barriers.
The last necessary change in the EU’s system of preferences from the year 2000 is a
revision of the very structure of the pyramid of preferences, or to put it more simply: the
choice of countries. In the short term, a concrete proposal for the future country structure
regarding trade agreements is as follows:
1. An expanded group of the poorest countries, the present LDCs plus a number of, in
particular, African low-income countries, are to be offered free access to the
European market for all products including agricultural products. No reciprocity in
2. The group of Mediterranean countries is to be given actual free trade agreements
with reciprocal liberalizations. Free access to the European market, but with the
possibility of exemptions being negotiated between the parties.
3. The GSP system is to be simplified (cf. above), and the level of preferences is to be
increased towards the level in the present Lomé Convention. The agreement is to
include the remaining group of developing countries, but possibly with clearer
This structure resembles option number 2 in the EU Commission’s Green Paper, but
with a far more marked acknowledgement of the need also to improve the content of the
From the North Cape to the Cape of Good Hope
Improved preferences for an expanded group of LDC countries are in line with both aid
objectives and requirements, trade problems and the world’s unequal distribution of
investments. There is a need for far greater focus on the less developed countries, which are
slowly but surely being marginalized on the global markets. The expanded group of LDC
countries should therefore be at the top of the pyramid of preferences.
The present Association Agreements already place the countries in the Mediterranean
region as an intermediate layer in the trade pyramid. As a peripheral region with close cultural,
economic and historical ties with Europe, the Mediterranean countries are natural candidates
for the conclusion of actual free trade agreements as early as from the start of the next
century. The process is already well under way for Tunisia and Morocco. Algeria will follow
suit shortly, and the other countries should be offered the same status (although political
considerations will probably delay any agreements with Libya for a number of years). The
difference from the group of LDC countries will be that the agreements with the
Mediterranean countries will involve reciprocal concessions, but thus also reciprocal
exemptions. The present negotiations with Tunisia and Morocco point at a number of
exemptions for agricultural products.
Finally, the remaining group of developing countries will be found at the bottom of the
pyramid of preferences. This does not mean that they will not benefit from the short-term
reform of the EU’s system of preferences. Firstly, the above-mentioned simplifications will
result in a much more transparent and usable system of preferences. Secondly, the preference
level should be improved, and it could be argued that, as a number of the present Lomé
countries will form part of this group, the preference level should closely resemble the present
level under the Lomé Convention. In return, it could be made possible for the more affluent
developing countries to be removed from the GSP system more quickly.
It is important that the African countries which risk losing trade advantages by being
transferred to the GSP system are given the prospect of new and better opportunities. We will
be looking at this in the next section.
What will this mean for the individual country groupings in the short term? Only nine of
the 48 LDC countries, Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, the Maldive
Islands, Burma, Nepal and Yemen, are not covered by the Lomé Convention. It is this group
of countries which, in such case, would climb up the pyramid of preferences. Three of these
nine countries, Bangladesh, Bhutan and Nepal, are Danish programme partners. It would
therefore be completely in line with Danish aid priorities to offer these countries further trade
preferences. The same arguments could be used for Afghanistan, Cambodia, Laos, the Maldive
Islands and Yemen. Conversely, it is debatable whether Burma should be offered further trade
advantages considering the present political situation. The trend seems to be exactly the
From the North Cape to the Cape of Good HopeFigure 2. Proposal for the EU’s pyramid of preferences in the year 2000.
Which countries will then slide out of the top of the pyramid of preferences? Naturally,
all the Lomé countries which are not LDC countries, or a total of 31 out of the 70 Lomé
countries (71 with South Africa). This group contains countries such as Ghana, Kenya and
Zimbabwe, where trade preferences could make a difference. There are thus many arguments
in favour of offering the African low-income countries preferences in line with the group of
LDC countries. In fact, several of the African low-income countries have a GDP per inhabitant
which is currently below the level for some of the LDC countries. For example, Kenya had a
GDP per inhabitant of USD 250 in 1994, whereas Lesotho, one of the LDC countries, had as
much as USD 720 per inhabitant (World Bank, 1996). The group of LDC countries should
therefore be redefined to cover a wider group of poor countries with the joint characteristic
that they are becoming marginalized on the world market for both goods and investments. One
possibility could be to use the group of LDC countries plus those countries which, according
to the World Bank’s classification, are low-income countries and also have a human
development index (as defined by UNDP) of less than 0.75. In addition, there may be social
and environmental criteria so that the expanded LDC group became a mechanism for
promoting basic social rights and environmental policies. Regardless of which classification is
chosen, it is of decisive importance that the group is well defined if the legality of a special
system of preferences is to have any chance in relation to the WTO Rules. The EU should
therefore work to have a group of developing countries defined under the auspices of the
WTO with the purpose of targeting the system of preferences after the year 2000 at the
From the North Cape to the Cape of Good Hope
poorest and most marginalized developing countries. It is also important to develop
procedures, possibly under the auspices of the World Trade Organization for current
evaluation and debate of the country participation.
These changes in the EU’s trade agreements with the developing countries should enter
into force already from the year 2000 so that they can form a transition from the present
agreements to the more ambitious agreements which are discussed in the following section.
From the North Cape to the Cape of Good Hope: The Long Term.
In addition to the short-term revision of the EU’s preference agreements, there is an
acute need for special focus on Africa. Here, patchwork solutions based on the present
preference agreements will not be sufficient. If optimism is to be restored in Africa, far
stronger political visions are required. It could be the idea of an overall free trade area from
the North Cape in Norway to the Cape of Good Hope in South Africa. The magic of the year
2000 would be the right occasion for launching this vision, and the year 2020 could be a
realistic target for its implementation.
As mentioned, the EU is already negotiating free trade agreements with several groups
of developing countries, for example in North Africa, and the strategy of an overall
European/African free trade area closely resembles option 4 in the EU Commission’s Green
Paper. But in a more concrete and ambitious version. Regarding the concrete measures and
broad visions, the EU is trailing behind the USA and Canada, which have already formulated
the vision of an overall Free Trade area for the Americas. Recently, the USA even engaged in
a debate about free trade agreements with African countries.
The idea of a free trade area would send a clear signal about Africa as the growth area
of the future and give a concrete promise that the EU Member States are willing to enter into
long-term, binding co-operation. It is also the, perhaps only, vision which can reestablish the
otherwise waning European interest in Africa, just as the free trade agreements with Eastern
Europe have made us take an interest in their problems. The negotiation and implementation
of a free trade area will also provide a natural platform for much closer political co-operation
The vision of a free trade area also has clear technical advantages. As opposed to the
Lomé Convention, a free trade area would be in accordance with the WTO Rules and would
be based on a well-known concept instead of the more unclear preference agreements.
Finally, a free trade area could, if implemented correctly, have clear economic
advantages. The implementation should take place in three stages:
In the first stage, the EU Member States should remove the existing trade barriers for, in
particular, agricultural and fishery products and perhaps some services vis-à-vis the African
From the North Cape to the Cape of Good Hope
countries. In addition, it is of vital importance that the African countries’ access to the
European market is eased regarding many, often new, non-tariff barriers (antidumping, safety
clauses, technical standards, environmental controls, investment rules, competition policy,
intellectual property rights, etc.).
As described in section 7.1, this step should take place already from the year 2000 for
the less developed of the African countries and over the next 10-15 years for the rest of the
African countries. As the whole agreement complex must be negotiated bilaterally with the
individual countries/regions, there will be an opportunity to favour those countries which will
lose preferences as a result of the changes discussed in the previous section.
Granting the African countries free access to the European market would be of minor
importance to European producers. In fact, the total gross national product for the whole of
Africa, from North to South Africa, is smaller than the gross national product of Spain, and
total exports from the Continent are only slightly higher than Spain’s total exports. The
integration of the whole of Africa in the Western European free trade area (the EU and EFTA)
would therefore only be equivalent to admitting another Spain. But while Spain only has
approx. 40 million inhabitants, 700 million inhabitants in Africa could benefit.
The next stage would be to break down internal trade barriers between the African
countries. The responsibility for this step lies with the African countries, but it could be one of
the most important elements of the whole agreement. If African industrialization is to take off,
there is an acute need for both more co-operation and more competition between African
enterprises. And there is a need to create a large domestic African market which can buy the
increased production of manufactured goods. The potential importance is indicated by the
experience from West Africa, where the beginning regional integration has contributed to
improving the economic prospects. And in East Africa there are also positive signals from the
budding regional co-operation. Development economists, from Arthur Lewis to Ragnar
Nurkse, have, in fact, for decades been advocating the benefits of internal liberalization
between the developing countries, but very little has happened. An overall vision of an
African-European free trade area could incorporate this strategy as an important element.
The final stage would be to reduce the trade barriers in Africa towards Europe. This step
could be difficult, as there is growing scepticism in many developing countries towards
liberalizations because of the experience with increasing unemployment and problems for small
farmers. This scepticism is mainly founded on the previously prevailing uncritical confidence
that free trade would solve all the developing countries’ problems. This is definitely not the
case, and free trade could even increase the problems in Africa if it is not supplemented by a
number of other policies. More on this in the next section. The liberalization process in Africa
should therefore take place in a number of steps in which the weakest industries are protected
during a transitional period and are supported by targeted industrial policies precisely as in the
Asian miracle economies. But experience from Asia also shows that it is important to phase
From the North Cape to the Cape of Good Hope
out the various protection schemes so that the industries do not grow dependent on subsidies.
Finally, it should be noted that, generally, the present trade barriers in Africa are not
shaped by appropriate industrial policies or protection of the environment, the poor or the
rural population. A number of the present trade barriers in Africa have been created as a result
of political interests, urban bias and rent-seeking activities. There is nothing visionary in
protecting these policies simply because of an ideological distaste towards the concept of free
If the EU directs its attention towards Africa in the long term, the countries in the
Caribbean and the Pacific region, which currently benefit from the Lomé Convention, could be
the losers. These countries are, however, in general in a better position than many African
countries, and have more natural trading partners than the EU. It is natural and unavoidable
for the countries in the Caribbean to increase their contacts with the North American Free
Trade Area (NAFTA) and the wider American co-operation which is being established. In
addition, the countries in the Caribbean could keep their ties with Europe through the
agreements which exist between Latin America and the EU. For the countries in the Pacific
there are natural links with the successful Asian economies, possibly through the wider APEC
co-operation (Asia Pacific Economic Cooperation). All ACP countries in the Pacific are
already members of regional organizations. In addition, there are possibilities for support from
the rich countries in the region, not least Australia and New Zealand (EC, 1996). Contacts
with the EU are founded on historical conditions rather than natural geographical and
economic arguments. For both country groups, and, in particular, for those countries which
benefit from the special agricultural protocols, it is, however, important that their present
advantages are phased out over a long period of time and with adequate compensation.
Importantly, the vision of a free trade area should be an offer to the African countries,
not an unavoidable demand. If some African countries do not wish to engage in the process
they should be given the possibility of remaining in a framework such as the current Lomé
In addition, it should be stressed that the vision of a free trade area from the North Cape
to the Cape of Good Hope should not stand in the way of the more short-term solutions
described in the previous section. Free access for the poorest countries to the European
market and the free trade agreements for the Mediterranean countries should be implemented
far earlier than in the year 2020 and are important steps towards an overall free trade area. But
the long-term objective should be close and binding co-operation between Europe and Africa. 8 Trade Agreements Are not Enough
Regardless of the structure of the EU’s future trade agreements, it is clear that such
agreements are not enough. A drastic simplification of the EU’s preference agreements and
From the North Cape to the Cape of Good Hope
indefinite preferences to the group of the poorest developing countries will undoubtedly
remedy some of the problems which these countries experience in connection with exports to
the EU. A vision of a free trade area from the North Cape to the Cape of Good Hope would
undoubtedly restore some of the optimism in Africa. But, as the experience with preference
agreements has shown so far, much more is needed.
The problems faced by a number of the poorest developing countries on the world
market cannot be solved merely through a 5, 10 or 20 per cent reduction in EU tariff rates.
Tariff preferences are not enough to create economic growth and development. And, as
mentioned in section 7.2, more free trade without adequate accompanying policies may even
exacerbate the existing problems in Africa.
This is not least the case because free trade is often equated with what could be called
laissez-faire economics. Economics in which everything is left to take care of itself based on a
blue-eyed belief that free trade and market forces can solve all problems. This is not the case at
all, and the limitations of the free market are, in fact, increasingly being recognized even in
international organizations such as the World Bank and the World Trade Organization. As the
representative of the World Bank said recently at the UN’s ninth conference on trade and
“Far from a reduced role for the state, globalization calls for a stronger and more
This is a recognition which is spreading slowly but surely. A free trade area must focus
on social and environmental development. Free trade must go hand in hand with “welfare
economics” and be combined with a much more active state: redistribution of economic gains
to all layers of the population, social policies, environmental policies, infant industry
protection, targeted industrial policies, competition policies, consumer protection and, not
least, investments in human capital (training and education), infrastructure as well as research
and extension especially in the agricultural sector. In addition, in many developing countries
there is an acute need for an improvement of the judicial system, the fiscal system, the financial
Regarding more concrete measures to create increased trade, there is also a need for
increased help for education and training; better private sector co-operation; support for
regional co-operation; export promoting schemes, investments in telecommunications and
more effective port and customs clearance systems, technical aid for product development and
marketing; support for participation in sales fairs and exhibitions and a large number of other
The costs are to be borne by both Africa and Europe. So the slogan of the future is not
“trade not aid”, but instead “more trade and more aid”. There is a need for a further
development of European aid policy. And solving the large debt problems of the poorest
From the North Cape to the Cape of Good Hope
countries will be of decisive importance. The strategy for trade, debt and aid must be co-
Finally, it is important to acknowledge that the developing countries and, not least, the
African countries are very different with different requirements and possibilities. While it will
be possible to help some countries through better trade possibilities and increased integration
into the world community, other countries will require support, special trade rules and local
protectionism (Vilby, 1997). Future trade agreements must acknowledge this diversity. 9 Conclusion
Europe stands at the threshold of the 21st century with a historical opportunity to create
a long-term, visionary strategy for the future trade co-operation with the developing countries.
The present system of preferences is based more on historical coincidences than on
economic and political arguments. In addition, the system is characterized by its complexity
and restrictions regarding goods, countries, origin, quantities and time. These restrictions
make it something of a weary journey between rules, clauses, tariffs, formulae and footnotes.
The result is that the necessary investments are not made.
In the short term, there is a need for a simplification and reorientation of EU trade
preferences to make them more consistent with aid objectives and requirements. This involves
targeting the most comprehensive preference agreements towards the poorest developing
countries, whereas actual free trade agreements should be entered into with the countries in
the Mediterranean region. The rest of the developing countries must be offered preferences
under the Generalized System of Preferences (GSP). The system must be simplified for all
three groups of agreements so that quota and time restrictions are abolished and rules of origin
are eased. In addition, the preferences must be improved for agricultural products, in
particular fruit, vegetables, sugar and other temperate agricultural products, fishery products
and, in the short term, clothing and textiles and, in the long term, services. At the same time
the preferences should be extended to include the many non-tariff barriers. Finally, the tariff
preferences should be made binding and indefinite so that they can provide a fertile soil for
investments. These changes should be implemented for the year 2000.
In the long term, there is a need for stronger political visions, in particular regarding the
African Continent. Europe should formulate a vision of a free trade area from the North Cape
to the Cape of Good Hope. The year 2000 would be the right occasion for launching this idea,
and the year 2020 could be a realistic target for full implementation. The free trade area must
give priority to social and environmental development and recognize the need for an active
State and the different requirements and possibilities of the African countries. Importantly, the
vision of a free trade area should be an offer to the African countries, not an unavoidable
From the North Cape to the Cape of Good Hope
If handled correctly, the idea of an overall European/African free trade area with more
than one billion people could help restore optimism in Africa and put the Continent on the
The Millennium should mark a new vision for the EU’s co-operation with the developing
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This is the first in a series of concept papers commissioned by the International Trachoma Initiative (ITI) to bridge the mission and programmatic work of ITI with the current discussions in other fields related to health and development issues in poor countries. The general aim of the concept papers is to assist ITI to clarify and articulate the success of its current programs to eliminate blind
P R O S T A T E Original Article I NTERNATIONAL Prostate Int 2013;1(1):37-41 • http://dx.doi.org/10.12954/PI.12005 Efficacy and safety of low-dose anticholinergics to treat men with lower urinary tract symptoms with overactive bladder: a retrospective study based on real life practice Kyung Kgi Park, Seung Hwan Lee1, Byung Ha Chung1, Su Jin Kim2, Cheol Kwak3, Hwan Cheol Son