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EU must not threaten Pacific islands

The National, Papua New Guinea

EU must not threaten Pacific islands

By Eileen Kolma

4 May 2007

In an recent article headlined “Economic Partnership Agreements: tackling the myths”, the European Union’s trade commissioner, Peter Mandelson, sought to justify the EU’s position on agreements being negotiated with the African, Caribbean and Pacific (ACP) group of countries.

However, there has been increasing concern, both in Europe and the ACP, that the proposed Economic Partnership Agreements (EPA) may harm, rather than promote, development. This concern was amply demonstrated on April 19 when groups in more than 20 countries, from Fiji to Germany, staged protests, made presentations to EU delegations, and undertook media stunts to raise awareness of the high stakes involved in these negotiations. These issues are vital for PNG’s future.
The commissioner, in his article, made several assertions that require some examination and response. First, he asserted that the EU “isn’t steam rolling ACP regions into having these negotiations completed by the start of next year” but that “if we don’t have the new system in place we will have to fall back on alternative with less-generous market access”.

However, the Cotonou Agreement that sets out the rules on how these negotiations should proceed, states if a country does not sign an EPA, then the EU must “provide these countries with a new framework for trade which is equivalent to their existing situation and in conformity with WTO rules”. Therefore, to say that a failure to sign an EPA will mean that “we will have to fall back on alternative with less-generous market access” is in breach of the Cotonou Agreement.

The EU must live up to its Cotonou promises and not threaten the ACP with worse access than is currently the case. This is particularly important for processed fish exports from PNG that would face hefty tariffs if preferences were removed.

Second, Mandelson argues “our real challenge is not signing EPAs on time but signing EPAs that deliver development”. There is no argument here. This is why the EU should recommit now to guarantee that preferences will not expire at the end of this year, thereby allowing time for negotiators to reach an agreement that will be pro-development. Not to do so would threaten the livelihood of thousands of Papua New Guineans.

Third, Mandelson has promised that if the EPA is signed, “the EU will completely open its market to ACP exporters. No more duties, no more quotas, full stop”. This offer is very close to what is currently the case, and so the EU is required by the Cotonou Agreement to deliver it anyway. Unfortunately, there are still problems with this offer, such as restrictive Rules of Origin (ROO) that make it difficult for the ACP to make the most of access to the EU market.

ROO determine whether products exported from a country are deemed to have “originated” in that country and so are eligible for duty-free access. In PNG, for instance, restrictive ROO mean that even fish caught within our economic zone and canned here are not necessarily deemed to have come from PNG, and so must pay a high tariff rate.

The EU must listen to the ACP’s concerns on this issue and put in place a system to help countries take advantage of trading opportunities offered by the EU. The Pacific negotiators have proposed a simplified system for ROO, but there is no positive response from the EU.

Fourth, Mandelson contends that the EU is not “looking out only for its own commercial interests” and that “even in the highly contentious area of investment, the EU’s chief concern is putting in place the rules that will help ACP countries attract the new capital they urgently need”. While the Pacific is keen to encourage investment, it is difficult to understand why the EU has refused to make existing lending organisations such as the European Investment Bank (EIB) and the Centre for the Development of Enterprise (CDE) more suitable for the small and medium-sized enterprises that characterise Pacific businesses.

This gives the impression that the EU is more interested in helping its own companies than those in the Pacific. The EU has also rejected an agreement proposed by the Pacific that sets tough rules on corruption, ensures that foreign investors have binding responsibilities towards the societies in which they invest, and prohibits lowering of labour and environmental standards in order to attract investment. The EU now seems to be saying that it does not want an investment agreement after all if it is not one that focuses solely on the protection of foreign investors.

Fifth, the letter states that “the EU is backing EPAs with real money” and has made “commitments to increase Aid for Trade”. The EU’s involvement in the Pacific as a donor has been invaluable, and is a helpful contributor to the reduction of poverty in the region. Unfortunately, the costs of an EPA are likely to be significant, and it is important that existing funds are not diverted from vital projects such as investment in infrastructure, education, etc, to compensate for the EPA.

Pacific negotiators have argued that existing funding is only enough to maintain existing aid levels, and have called for additional funding that is tied to liberalisation commitments made in the EPA. The EU has refused to tie new funding to new commitments made by the Pacific.

Lastly, Mandelson argues that it is “essential there is strong debate over EPAs but we must not fall into the trap of calling for a halt or a delay” and that he is “acutely aware of Europe’s historical links to the ACP”. As the Pacific Islands Forum has noted, “the importance of what we are doing with the EU cannot be exaggerated because we are rewriting the trading and commercial rules that have governed relations between the Pacific and the EU since independence. What will emerge from these negotiations will shape the economic future of an entire generation ... if we agree to an EPA with the EU that does not serve our economic interests, the implications for our economic development will be very grave indeed, and as a result, the stakes in an EPA negotiation are high”.

It is precisely for this reason that the negotiations must not be rushed, considering that the terms of any deal with the EU are likely to be replicated with the region’s largest trading partners, Australia and New Zealand. It is time the EU stopped threatening Pacific countries with the spectre of raised tariff rates after December 2007, and started listening to legitimate concerns over the direction of these negotiations, with a view to finding a solution that will really help the two parties move forward in a genuine partnership.

Note: The writer is Oxfam International’s country programme director for PNG.