assembl.e parlementaire paritaire acp-ue · trade appointed louis claude nyassa (cameroon) and at...

RR\580972EN.doc APP/3765/fin.

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ACP-EU JOINT PARLIAMENTARY ASSEMBLY Session document

ACP-EU/3765/05/fin. 16 September 2005

REPORT on agricultural and mining commodities

Committee on Economic Development, Finance and Trade

Co-rapporteurs: Louis Claude Nyassa (Cameroon) and Nirj Deva

APP/3765/fin. 2 RR\580972EN.doc

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CONTENTS

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PROCEDURAL PAGE................................................................................................................... 3

MOTION FOR A RESOLUTION.................................................................................................. 4

EXPLANATORY STATEMENT ................................................................................................ 13

RR\580972EN.doc 3 APP/3765/fin.

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PROCEDURAL PAGE

At its meeting of 24 November 2004, the Bureau of the ACP-EU Joint Parliamentary Assembly authorised the Committee on Economic Development, Finance and Trade to draw up a report, pursuant to Article 2(8) of the Rules of Procedure, agricultural and mining commodities. At its meeting of 20 November 2004, the Committee on Economic Development, Finance and Trade appointed Louis Claude Nyassa (Cameroon) and at its meeting of 3 February 2005 Nirj Deva, co-rapporteurs. The Committee considered the draft report at its meetings of 3 February, 16 April and 14 September 2005. At the last of these meetings it adopted the draft resolution with 23 votes in favour, 2 against, and no abstentions. The following were present for the vote: Assarid (Mali) (co-chairman), Schlyter (co-chairman), Dombrovskis, Francois (St Lucia) (1 VPs), Chulumanda (Zambia), Bushill-Matthews (for Deva) (co-rapporteur), Nyassa (Cameroon) (co-rapporteur), Agnoletto, Amon-Ago (Côte d'Ivoire), Bullmann, Conteh (Sierra Leone), Cornillet, Deerpalsing (Mauritius), Dlamini (Swaziland), dos Santos (for Kinnock), Kamotho (Kenya), McAvan, Mporogomyi (Tanzania), Obia Jacques (Rep. of Congo), Posso (Gabon), Rousseau (Trinidad and Tobago), Safuneituuga (Samoa), Sithole (South Africa), Van Lancker, Weldegiorgis (Eritrea), Yohannes (Ethiopia), Zīle. The report was tabled on 16 September 2005.


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MOTION FOR A RESOLUTION

The ACP-EU Joint Parliamentary Assembly,

- meeting in Edinburgh (United Kingdom) from 21 to 24 November 2005,

- having regard to Article 17(1) of its Rules of Procedure,

- having regard to the ACP-EC Partnership Agreement signed in Cotonou on 23 June 2000 and, in particular, to Article 68 thereof, which recognises the importance of agricultural and mining commodities for the economic stability of the ACP States, as well as to the Compendium of Cooperation Strategies approved by the members of the African, Caribbean and Pacific Group of States and by the European Community and its Member States,

- having regard to the Declaration and Resolution on Sugar adopted by the Fourth Summit of the Heads of State of the African, Caribbean and Pacific States held on 23 and 24 June 2004 in Maputo,

- having regard to the reforms relating to the common agricultural policy of the European Union currently under way and to the proposed reforms, in particular the Commission’s Communication on the Reform of the EC sugar regime,

- having regard to the conclusions of the meeting of the Council of the European Union of 27 April 2004 relating to the Commodities Action Plan and to the EU-Africa Cotonou Partnership,

- having regard to the resolution on food aid and food security adopted by the ACP-EU Joint Parliamentary Assembly meeting in The Hague from 22 to 25 November 2004,

- having regard to the resolution on cotton and other commodities: problems encountered by the ACP States adopted by the ACP-EU Joint Parliamentary Assembly meeting in Addis Ababa from 16 to 19 February 2004,

- having regard to the resolution on the promotion of the private sector under the Cotonou Partnership Agreement adopted by the ACP-EU Joint Parliamentary Assembly meeting in Brazzaville from 31 March to 3 April 2003,

- having regard to Regulation (EC) No 882/2004 of the European Parliament and of the Council of 29 April 2004 on official controls performed to ensure the verification of compliance with feed and food law, animal health and animal welfare rules,

- having regard to the proposal for a regulation of the European Parliament and of the Council on the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH), establishing a European Chemicals Agency and amending Directive 1999/45/EC and Regulation (EC) {on Persistent Organic Pollutants} and the proposal for a directive of the European Parliament and of the Council amending Council Directive 67/548/EEC in order to adapt it to the Regulation (EC) of the European Parliament and of the Council on the registration, evaluation, authorisation and restriction of chemicals,


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- having regard to concerns expressed by Ministers from 26 African countries at the Second African Mining Partnership Plenary meeting in Cape Town on 7 February 2005 about potential "unintended consequences" of REACH legislation on exports to Europe of African mineral products and the need, therefore, to ensure that REACH "will not create obstacles to economic development and poverty reduction strategies of African states", and the Communiqué of the Fourth Meeting of the African-European Troikas in Luxembourg on 11 April 2004,

- having regard to the decision of the General Council of the World Trade Organisation (WTO) of 1 August 2004 whereby the Members adopted frameworks and other agreements designed to focus the negotiations and to raise them to a new level in the process governing the Doha Agenda work programme,

- having regard to the negotiations for economic partnership agreements currently being conducted between the European Union and the ACP States,

- having regard to the UN Declaration on the Millennium Development Goals and the Commission’s Communication on Accelerating Progress towards attaining the MDGs – Financing for Development and Aid-Effectiveness and the EU Council’s Conclusions of 24 May 2005 thereon,

- having regard to the communication from the European Commission dated 2 July 2002 entitled: 'Corporate Social Responsibility: A business contribution to Sustainable Development',

- having regard to the report by the Committee on Economic Development, Finance and Trade (ACP-EU/3765/05/fin.),

A. reaffirming the central objective of the ACP-EC Partnership Agreement set out in Article 1 thereof: '... reducing and eventually eradicating poverty consistent with the objectives of sustainable development and the gradual integration of the ACP countries into the world economy.',

B. whereas ACP states are mostly dependent on the production and export of primary products and the majority of the population, particularly women, lives and works in rural areas with subsistence food production,

C. whereas according to the 2002 UNCTAD report on LDCs, the number of people living in extreme poverty has more than doubled over the last thirty years, raising from 138 million in the 1960s to 307 million in the 1990 and if current trends persist, the number of people living on less than $1 a day will rise from 307 million to 420 million by 2015,

D. whereas almost 10 years after the 1996 World Food Summit's commitment to reduce the number of undernourished people by half by the year 2015 is far from being achieved,

E. having regard to the continuing preponderant role of agricultural and mining commodities in the economies of the African, Caribbean and Pacific States and the fact that outlets for these products and their prices have a major impact on employment for, and to the income of, the most-disadvantaged sections of society,


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F. whereas the signature of an agreement between the EU and China in order to limit the exportation of some categories of textiles to the EU territory shows how necessary and legitimate it is for ACP countries to protect their markets in the face of exports from enterprises in the various industrialised countries, which threaten the existence or the development of their processing or service enterprises,

G. recalling that commodities, the prices of most of which have not ceased to diminish as a result of neo-liberal policies for eliminating market regulatory mechanisms, to a large extent are traded on the international market, above all in their raw form, and that, in this way, they contribute to a large extent to the financing of the ACP States,

H. whereas the prices of most of the raw materials exported by ACP countries have slumped drastically, while the prices of industrial products have increased continuously, which renders the economies of the ACP countries unviable in the event of mechanisms not being adopted for the regulation of raw materials prices and if they do not diversify their production by manufacturing processed products,

I. whereas the cash crop economy put the ACP population in a situation that they produce for international market and import subsidised staple food from rich countries to cover their local needs,

J. having regard to the importance of guaranteeing a fair and stable price for commodities for the economies of the ACP States, which ranges from being a source of revenue to an element of political stability, via social cohesion and the preservation of cultural traditions, ecotourism and the campaign to halt emigration,

K. aware of the European Union's interest in and attachment to the availability of and easy access to certain commodities which are imported principally from the ACP States and are vital to the smooth functioning of the industrial sector in Europe,

L. whereas the internal development of the European Union and the pressure of multilateral trade negotiations make a reform of the European common agricultural policy an absolute necessity,

M. whereas some of the policies currently pursued by the European Union with regard to domestic support for agriculture have a disastrous impact on the production and export of certain ACP commodities,

N. whereas sustainable development of the agricultural and mining sectors of the ACP States may contribute to the achievement of MDGs, including food security and the fight against poverty,

O. anxious to ensure that the reforms of the European common agricultural policy do not maintain or exacerbate the current unacceptable conditions for the export of commodities from the ACP States, since that would result in even greater poverty for those countries' inhabitants and in the destabilisation of those countries,

P. recalling that the collapse of world market prices is the most disastrous manifestation of the policy of 'let the market decide' and of the abandoning of efforts to regulate and stabilise


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prices, and that such a collapse has a direct and dramatic impact on the poverty of the inhabitants of the African, Caribbean and Pacific States,

Q. recalling, further, the need to ensure that the commitments given by the European Union and by the ACP States under the Cotonou Agreement are honoured, in particular those set out in Article 36(4) which provide for a review of the commodity protocols with a view to safeguarding the benefits for the ACP States derived therefrom, taking into account the special legal status of the Sugar Protocol, while also recalling that the fight for social rights and development is a consideration overriding that of 'compatibility with WTO rules',

R. whereas cooperation in the WTO between the European Union and the ACP States may eventually lead to account being taken of the interests of the two groups and protect the commodity sectors and industries threatened, including the selection of sensitive products covered by the Commodity Protocols as well as the maintenance of the Special Safeguard Clause,

S. recalling the overwhelming importance of banana exports to the EU market for several ACP countries and the preparations underway by the European Union to replace its banana import regime by a single tariff of €230 per tonne - a proposal rejected by both ACP and MFN suppliers as too low and too high respectively,

T. whereas, at the WTO negotiations, discussions must focus on the reorganisation of the commodities markets and on the early abolition of export subsidies and of certain unjustifiable domestic support mechanisms that are damaging to developing countries, and with sensitive products being identified for which safeguard clauses must be devised,

U. concerned by the European Union's commercial concessions made in various fora which significantly reduce the preferences from which exports from the ACP States currently benefit, without providing the necessary assistance to improve competitiveness,

V. recalling the commitment of the European Union and of the ACP States to conclude new trade arrangements whereby no ACP State would find itself in a situation less favourable than the one which it currently enjoys,

W. noting the discussions currently under way in the ACP States concerning the establishment of a new framework for trade cooperation in the form of economic partnership agreements (EPAs),

X. expressing its concern over the inherent inequality of ‘donor-recipient’ relations of ACP-EU and worried in particular by the fact that ACP countries with less bargaining power face considerable difficulties when negotiating with the EU,

Y. whereas the imposition of health and plant health standards, as well as standards relating to the use of chemical substances, seeks to protect consumers and safeguard the environment, and whereas, if the restrictions resulting therefrom should prove to be disproportionate when measured against the risk to human health and to the environment, such standards would simply become no more than barriers to the export of commodities from the ACP States to the European Union,


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Z. concerned at the diversity and plethora of standards and control mechanisms applied to the same products, which reduce the ACP exporters' ability to comply with those rules and procedures, bearing in mind the limited resources and capacity at their disposal,

AA. emphasising the need to provide the ACP States with the capacities which they require if they are to be able to comply with the requirements laid down by those health and plant health standards and the standards relating to the use of chemicals, and SPS measures,

AB. whereas short-term fluctuations in commodity prices hamper the implementation of viable and sustained economic policies in the ACP States,

AC. noting the existence, under ACP-EC cooperation arrangements, of a financing mechanism to offset short-term fluctuations in export revenue (FLEX) as well as the shortcomings which became apparent when that mechanism was implemented,

AD. whereas the impact of such fluctuations might also be alleviated if commodities were processed locally before being exported, noting however that the recent adjustment to FLEX does not go far enough to accommodate the problem of addressing the adverse effect of fluctuation in export earnings and reduction in earnings arising from the reform of CAP in respect of products covered by Commodity Protocol,

AE. whereas, in order to facilitate industrialisation and marketing, the development of public services and instruments and structures for providing support for the private sector must be mobilised in order to underpin processing, marketing, distribution and transport activities (PMDT),

AF. emphasising the need for clearer and more concise information about mineral deposits in the ACP States and about the investment opportunities available in terms of exploration, exploitation and processing in that sector,

AG. whereas mining commodities, for example, diamonds, titanium, cobalt, oil and gas resources have been used by rebel groups and by non-elected governments to finance the illegal purchase of weapons and have, therewith, enabled civil wars and contributed to the loss of many lives and to destruction,

AH. emphasising, further, the importance of access to relevant up-to-date information about the development of agricultural and rural activities and about the policies either pursued in the ACP States or having an impact thereon,

AI. welcoming the recent establishment of an ACP mining database created by the ACP Secretariat,

AJ. emphasising the important work that the Centre for the Development of Enterprise (CDE) and by the Technical Centre for Agricultural and Rural Cooperation (CTA) have been carrying out for more than 20 years to promote the agricultural and mining commodities of the ACP States,

AK. reaffirming the importance of the welfare, security and social rights of workers and their families and the need to protect the environment in which farming and farming activities are carried out,


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1. Calls on the Commission and the EU-ACP Council to take new initiatives at a bilateral and multilateral level to safeguard the mechanisms for ensuring a stable and fair price for the principal raw materials, and to create other, new, mechanisms that are in keeping with the new realities;

2. Reaffirms the role of socially and ecologically responsible private sector in stepping up the pace of sustainable development, more particularly, in processing commodities locally, marketing, distribution and transport activities;

3. Considers that the United Nations Declaration on the Right to Development which stipulates the duty of states to cooperate with each other in eliminating obstacles to development and fulfil their duties by promoting a new economic order based on sovereign equality, interdependence, mutual interest to encourage the realisation of human rights should be implemented;

4. Reaffirms its willingness to continue its efforts to promote the production of goods and services in the ACP States by protecting and supporting certain particularly job-creating sectors of activity and developing local and regional markets as a means of reducing poverty and fostering the prosperity of the populations of those countries;

5. Calls for the EU to reorient its trade policy in order to assert the imperatives and values of cooperation, development and complementarity over those of unfettered competition;

6. Considers that the European Union must not take advantage of the WTO negotiations and the EPAs to impose the reciprocity of trade with ACP countries, whose economies are considerably weaker, but on the contrary should assert their right to development, and acknowledge their right to protect their local and regional markets and only to open these up to products and services from industrialised countries in areas in which their economies are sufficiently strong to withstand competition from enterprises from those countries;

7. Warns from any further unfettered increase in commodity exploitation as long as price stabilisation systems do not exist, and calls on the Commission to not contribute with incentives in this direction;

8. Emphasises the importance of providing the CDE and the CTA, as joint ACP-EU institutions, with adequate resources so as to enable them to take effective action in the restructuring of the mining industry and the agricultural sector in the ACP States, through the provision on a long-term sustainable and predictable basis adequate support to make them competitive;

9. Emphasises the urgent need to develop national and/or regional strategies for the development of the commodities sectors including diversification within the sugar sector and PMDT with a view to reducing the ACP States' excessive dependence on the export of raw materials and the consequent vulnerability of their economies;

10. Notes that the global prices of the main agricultural products such as corn, wheat, soy, cotton and rice have fallen by over 60% since 1996 and within certain LDC countries, most of which are African countries, the price of coffee, cocoa, sugar and palm oil have decreased by over 60%;


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11. Deplores that for the past 20 years, many public intervention instruments in the agricultural commodities sector such as state marketing boards have been dismantled as a result of structural adjustment programmes, and this policy reduced the capacity of states to regulate the market;

12. Considers that ACP countries should protect their agriculture in order to guarantee decent income for small farmers, increase local production, guarantee food security and proceed to selective market openings, as it was the case in Europe;

13. Calls on the ACP States and on the European Union to speed up the implementation of the action plans for commodities and cotton set out in the conclusions of the EU Council meeting of 27 April 2004, and to allocate adequate resources to these sectors;

14. Notes the establishment of support programmes for the banana and rice industries and calls for their proper implementation and for the establishment of an Action Plan with adequate resources so as to support the ACP States to restructure and modernise their sugar industries and that such resources be made available through a quick and automatic disbursement mechanism in order to ensure parity of treatment between the ACP and EU sugar producers as is the case at present, but considers it necessary for genuine instruments to be introduced to ensure fair prices for those raw materials;

15. Asks for an evaluation of experiences with commodity price stabilisation systems and supply side management schemes, in order to design mechanisms and policies which are primarily oriented at guaranteeing stable prices for the range of commodities that ACP countries depend on;

16. Reaffirms the urgent need to find solutions in the multilateral negotiations in the WTO and in the EPA negotiations, or outside these frameworks if they prove contrary to the realities of development and human rights needs, so as to be able to maintain the viability of the agricultural commodities sector, in compliance with the spirit of the Cotonou Agreement, in particular to safeguard the benefits derived from the Commodity Protocols as spelt out in Article 36 (4) of Cotonou;

17. Calls on the EU/ACP to undertake impact assessment of current trade liberalisation policy on ACP economies (job creation, health, education, environment, ...) under the various structural adjustment programmes, privatisation as well as EU's GSP revision, the CAP reform and the EU enlargement before any new trade arrangements are agreed upon;

18. Calls on the Commission and the European Parliament to resist pressure to use health, food safety, chemical and other regulations as mechanisms to replace tariffs and subsidies as barriers to competition from developing country imports, and for such regulations therefore to be fundamentally reasonable measures to ensure real protection to consumers and the environment;

19. Calls on the EU Council and the Commission to ensure that the reform of the EC Sugar Regime is fair and equitable to all stakeholders, including the ACP and the LDCs, and is respectful of the EU’s legal commitment under the Sugar Protocol;

20. Encourages the ACP Secretariat and the European Commission to speed up the


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implementation of support programmes to assist ACP countries to comply with reasonable standards in the health, plant health and chemical safety fields and to initiate new ones in order to respond to the changing requirements of the international rules and regulations governing those issues;

21. Calls upon the European Union to ensure that, in any reform of the import arrangements for bananas, market stability is preserved and ACP suppliers, including the most vulnerable, are able to continue to export their bananas to the EU market on remunerative basis;

22. Calls, in connection with ACP-EC cooperation, for a strengthening of the capacities of the authorities and various players in the ACP States so as to enable them to participate in the devising of the international standards which should serve as a reference point for rules and regulations in the health and plant health field;

23. Considers it necessary to amplify and implement tangibly and effectively the initiative of the European Parliament and of the European Commission which seeks to promote Corporate Social Responsibility (CSR), and to that concerning the registration, evaluation, authorisation and restriction of chemicals (REACH), as a means of improving the welfare of workers and consumers and urges the ACP Secretariat and the European Commission to keep a close watch on developments concerning those issues so as to prevent those initiatives from turning into non-tariff barriers to trade and to this end calls:

− for the EU to support impact assessment studies on EU health, plant health and chemical regulations on industries in ACP countries;

− for the rapid introduction of a system of exemptions from costly registration procedures for products which pose minimal risk to consumer welfare and the environment;

− for assistance to ACP countries to meet compliance costs with reasonable health, plant health and chemical safety regulations;

24. Calls on the ACP States and on the European Union to cooperate more fully with recognised civil society organisations, local authorities, public services and private sector organisations in order to promote 'fair-trade' initiatives which will benefit ACP producers and improve the quality of natural products from the ACP States;

25. Calls for measures to be taken to ensure that the current reform of the FLEX mechanism, including a product by product approach for agricultural products, and the allocation of the requisite resources enable this important instrument, established by the Cotonou Agreement, to help alleviate in good time the adverse effects of the instability of export revenues arising as a result of the reform of the CAP and, in this way, to safeguard the social and economic reforms undertaken, and policies pursued by the ACP States;

26. Calls on the EU and the Commission to review the terms and conditions of financing under the Investment Facility in order to facilitate access to its resources to finance the restructuring and modernisation of the ACP agricultural and mining sectors;

27. Calls on the European Commission and on the ACP Secretariat to review the possibility of establishing a Guarantee Agency in order to respond to the specific requirements of small


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and medium-sized undertakings with regard to the protection of their investment in the ACP States, as advocated in Chapter 5 of Annex II to the Cotonou Agreement;

28. Underlines the importance of the control of trade in raw materials; urges all countries involved in trade in diamonds to acceed to the Kimberley process certification scheme for the international trade in rough diamonds; underscores the importance of progressing towards independent monitoring of compliance with the guidelines concerning the trade in diamonds;

29. Encourages the setting up and proper use of information systems such as the mining database;

30. Calls on the ACP governments to publish extractive industry revenues and implement the Extractive Industry Transparency Initiative and calls on companies to publish what they pay to the government;

31. Urges the ACP Secretariat and the European Commission to strengthen the existing instruments in view of supporting local private sector and to create new ones in order to enhance ACP countries private sector capacity of commodity processing, distribution systems and transport sectors, and to boost those countries' national and regional markets and the export of products to other regions;

32. Instructs its Co-Presidents to forward this resolution to the ACP-EU Council and to the European Commission.


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EXPLANATORY STATEMENT

Introduction

The ACP States1 are rich in natural resources and have potential in these sectors which, if exploited rationally, will contribute to their economic and social development. Article 68 of the ACP-EU2 Partnership Agreement, signed in Cotonou on 23 June 2000, recognises the key role that commodities play in the economic stability of the ACP States:

‘1. The Parties recognise that instability of export earnings, particularly in the agricultural and mining sectors, may adversely affect the development of the ACP States and jeopardise the attainment of their development requirements (...)’.

In addition, the ACP-EU Compendium on Cooperation Strategies details the key contributions of agricultural and mining commodities:

‘ 2.1.3. Agriculture 13. The development of agriculture remains an essential component of economic development as agriculture stimulates growth in other sectors and contributes substantially to poverty reduction both in rural and urban areas. Agriculture shall remain the backbone of strategies aimed at improving rural wellbeing provided its own long-term sustainability is addressed by adopting sustainable natural resource management practices.’ ‘2.4 Mineral resources development 35. The sector has potential to be an even more important contributor to sustained growth, through the development of the private sector, since minerals are a key productive resource of many ACP countries. Its development lies with the objectives of the Partnership Agreement. The importance of the access to productive resources is a component of sustainable and equitable development and beyond, a factor for a stable and democratic political environment. The development of a competitive mining sector, while encouraging private sector involvement and development, is a component of the productive resources encompassed in the Agreement. The objective of the parties is to develop the access to these resources and facilitate their sustainable exploitation.’

In this context, this report seeks to provide guidelines to ensure that the efforts agreed under ACP-EU cooperation support the sustainable development of the ACP States by means of the rational and effective production, exploitation and marketing of these natural resources, thereby contributing to the attainment of the central objective of the ACP-EU partnership:

1 The African, Caribbean and Pacific States party to the Georgetown Agreement. 2 European Union.


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Article 1 – (…) The partnership shall be centred on the objective of reducing and eventually eradicating poverty consistent with the objectives of sustainable development and the gradual integration of the ACP countries into the world economy (…).

I - Importance of agricultural and mining commodities in the ACP economies

The economy of the ACP States remains broadly structured around the commodities sectors. These commodities, agricultural and mining, make an essential contribution to the economy of the ACP States in meeting the needs of local industry for raw materials and providing a large number of jobs as well as ensuring subsistence income for a considerable percentage of the most-disadvantaged sections of society. On the international market, these products are essentially traded in their raw form. In this context, they represent the main sources of budget revenue for a majority of the ACP States, thereby contributing to macro-economic stability through the balance of payments. Accordingly, around 40 ACP States depend on one single agricultural commodity for more than 20% of their economy; in the case of 15 or so of those countries, the rate of dependence is 40%. Similarly, almost two thirds of the ACP States are mining countries or have mining potential which, if exploited rationally, could contribute to their economic and social development. Twenty ACP States, from all the regions throughout the Group, depend on mining exports for more than 10% of their total revenue; in the case of 16 of those countries, this sector accounts for more than 30% of exports. The Cotonou Agreement and the ACP States’ economic strategy were principally drawn up with a view to the reduction of poverty. The policy pursued vis-à-vis the agricultural and mining commodities sectors must therefore be viewed as a fundamental element of this strategy of poverty reduction, taking account of the contribution that these sectors make to the economies concerned. Recent developments on the international market, the reform of the European Community’s common agricultural policy and the discussions under way in the World Trade Organisation (WTO) have revived the interest of the ACP States and their development partners in restoring agriculture to the heart of development policies by drawing up better strategies for the long-term management of the agricultural commodities sector. The management of mining commodities falls mainly under the heading of support for the development of the private sector. In this context, the joint strategy of the European Union and the ACP States in support of the private sector has laid down guidelines and developed a range of instruments which provide a support framework for the development of the mining sector in the ACP States. In addition, the industrial growth of the European Union depends on raw materials originating in the developing countries, especially the ACP States. By the same token, exploitation of the mining and agricultural potential of the ACP States largely depends on European demand.


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Minerals EU dependence1 on mineral imports (1997)2

Imports from the ACP States as a percentage of total EU imports (2003)3

Aluminium ore and concentrate

- 59%

Bauxite 82% 58% Cobalt 100% 27% Lead ore 56% 25% Tungsten ore 48% 23% Diamonds 100% 22% Zinc ore 82% 19% Copper ore 78% 11% Iron phosphate 82% 8% Gold and gold plated with platinum

- 6%

Accordingly, the signatories to the Cotonou Agreement have a common interest in ensuring a constant flow of high-quality raw materials and, in that connection, investment and technology transfer capable of guaranteeing the sustainable exploitation of the ACP States' natural resources. Agricultural products Imports from the ACP States4 as a

percentage of total EU imports (2003)5 Cocoa beans 96% Sugar 74% Peas 59% Pineapples6 54% Tea 35% French beans 34% Raw cotton 33% Bananas7 23% Natural rubber 20% Coffee 18% Palm oil 13% In the light of the above, there is a need to identify clearly the problems and challenges facing the commodities sector in the ACP States, to provide information about the policies, instruments and mechanisms made available by ACP-EU cooperation to address those problems and challenges and then to identify the additional measures and new initiatives required in order to draw up recommendations for the development of the agricultural and mining commodities sector in the ACP States.

1 All figures relate to the Europe of the Fifteen. 2 Source: Bureau of Geological and Mining Research (BRGM), European Mining Yearbook, 1997. 3 Source: Eurostat. 4 Excluding South Africa. 5 Source: Coleacp (EU-ACP Liaison Committee). 6 2002. 7 2002.


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II - Challenges facing ACP-EC cooperation The heavy dependence of the ACP economies on commodities has been highlighted. In the agricultural sector, it is family holdings which, in general, are directly affected by income from export commodities. Consequently, any problem affecting this sector has a direct impact on the means of subsistence of the poorest people. In many ACP States, the exploitation of agricultural commodities operates on a multifunctional level over a wide spectrum ranging from a source of income to an element of political stability, via social cohesion and the preservation of cultural traditions, ecotourism and the campaign to halt emigration. The situation appears to be different for mining products. In general, the exploitation of mining resources requires considerable funds which call for the intervention of already formalised and well-organised structures. The problems and challenges in this sector are similar to those which apply to the management of businesses in general. However, small-scale mining is also very widespread in the ACP States. The challenges faced by such mining activities are similar to those faced by agricultural commodities, even if this type of activity has its own particular environmental and safety risks.

A - The agricultural sector The general problems faced by agricultural commodities produced by the ACP States lie in the need for access, under optimum competitive conditions, to international markets and the concern to secure an income which is both sufficiently profitable and predictable for all the products involved.

(i) Market access

Consideration of this matter involves that part of the production process which concerns exports. There are two issues to consider here: the tariff preferences granted to ACP exports and the non-tariff barriers which hamper the access of those exports to the EC market. As regards preferences, the Cotonou Agreement provides for a general system of exemption from customs duties and equivalent taxes for exports of ACP agricultural products to the European market. In certain cases, such as sugar, the Cotonou Agreement provides for particular conditions, on the basis of a protocol, governing those exports. The ‘everything but arms’ initiative supplements the range of preferences by offering broader exemption for the least-developed countries. However, the ACP States, in common with the LDCs, face restrictions in the case of sectors or products which are covered by a common organisation of the market or are subject to particular rules under the common agricultural policy. These restrictions also constitute a threat to access to the EC market for ACP agricultural commodities, since the common organisation of the markets and the common agricultural policy are likely to develop in response to political reforms initiated by the EU of its own volition or under pressure from multilateral trade negotiations.


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Another type of problem faced by exporters of agricultural commodities in terms of preference concerns the erosion of granted preferences, which arises from the fact that the EC is increasingly developing partnerships with third countries to which preferential access is also granted, thereby reducing the relative advantages enjoyed by the ACP States. Finally, access to the European market for ACP agricultural products requires compliance with health and plant health measures and with the numerous standards imposed by European rules and regulations. For several countries, this constitutes a genuine barrier to exports, given the limited means at their disposal to meet their obligations. One example of this threat is the ban on the import of kava1 imposed by several Member States of the EU in the light of allegations about the toxicity of this vegetable essence.

(ii) Influences on the pricing of products

Price problems are principally connected with the fact that, as a general rule, commodities are traded internationally in their raw form. A distinction between products should be drawn on the basis of whether the marketing of the products is governed by a protocol or not. In the case of the protocols, the prices offered for exports from the ACP States are index-linked to those guaranteed for domestic production on the European market. Therefore, any European initiatives which, in order to comply with multilateral rules, aim to lower the level of support for domestic prices, or to abandon the tariff quota system, directly affect the level of ACP export revenue. In certain cases, such as sugar, the preferred options in the current discussions on the reform of the European sugar regime seem to suggest that ACP exports will lose the guarantee of a profitable price. In other cases, such as bananas, where the common organisation of the market does not provide for a price guarantee mechanism, the proposed changeover to a system based solely on customs duties may well further undermine the price paid to ACP exporters, a price which has already fallen considerably following the increase in quotas allocated to third countries and the reduction in the number of importers holding a licence. For the other products, the situation is almost the reverse, since it is the domestic support or export subsidy policies which help distort the prices paid for ACP States' exports, as in the case of cotton.

(iii) Stabilisation of export revenue

Here, too, the problems encountered are connected principally with the export of products in their raw form. It is not only the level of export prices that pose problems for the ACP economies, it is also the fact that those prices fluctuate. The ACP States have to consider two aspects of this problem, i.e. they need to be covered by sectoral or general, national or international compensation mechanisms to help them in the event of short-term price fluctuations

1 Kava is a traditional plant which has been used in the Pacific islands since time immemorial for the preparation of energy drinks.


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and to reduce the exposure of their economies to the effects of such fluctuations by providing for an initial form of local processing of products traded.

B - The mining sector In order to flourish, one of the needs of the ACP mining industry is to have substantial flows of capital and new technologies, as well as a regulatory framework capable of facilitating those flows. Regardless of their scale, information concerning the considerable mining resources of the ACP States is not accessible in a clear and concise form to prospective investors or to the governments themselves. There is, therefore, a need to set up efficient mechanisms for disseminating information about the opportunities for investment in the ACP States. As a general rule, ACP minerals are exported in the state in which they were extracted or after rudimentary processing. To enable the ACP States to acquire greater benefits and integrate this activity into the national and regional industrial fabric, the national added value must be increased, e.g. by cutting and polishing precious and ornamental stones and by purifying and alloying metallic ores. In this context, the promotion of processing, marketing, distribution and transport (PMDT) remains a priority for the ACP States in their quest for sustainable development based on their comparative advantage, as required by the new world trading order. It should also be noted that mining products face market access problems similar to those which affect agricultural products. The safety and welfare of workers and their families also remain important aspects of mining and should also receive close attention. Apart from miners proper, large numbers of 'diggers', small-scale miners, work in the mining industry in the ACP States. As a rule, they are poorly paid for the ores that they extract, but they do have a social impact on their direct environment. Measures must be taken which are capable of helping these small-scale miners to improve significantly the social welfare of their local community. Given the fact that, if mining does not take place under appropriate conditions, it may have disastrous environmental consequences and, in the long term, compromise the future of entire communities, the ACP States must also set up systems to ensure the sustainable development of this important economic activity. Those reforms must take into account the capacity of the ACP States and undertakings to adapt to the new international rules and regulations. Such rules should, therefore, be introduced gradually and as part of a national or regional policy, with the support of the various loan providers. Accordingly, both sides must pay particular attention to the measures taken by the European Union with a view to promoting corporate social responsibility, and to the EC Regulation on the registration, evaluation, authorisation and restriction of chemicals (REACH), so as to prevent


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them from turning into non-tariff barriers to trade, whilst ensuring that the inhabitants of the ACP States and of the European Union are the real social beneficiaries of those measures.

III - Current policies, instruments and mechanisms in support of these sectors Apart from the FLEX mechanism, which is designed to ensure continuity of funding in the event of short-term fluctuations in export revenues, the specific policies and instruments provided for in the Cotonou Agreement to support the commodity sectors relate solely to the agricultural sector. The provisions essentially take the form of protocols and trading arrangements which lay down the framework for the export of certain products to the European market on preferential terms. There is now a question mark hanging over these protocols and arrangements because of the reform of the CAP and the multilateral trading negotiations. Aid programmes have now been set up to support the development of the sector concerned, to improve its competitiveness and, hence, to enable the ACP States to maintain their exports. To take account of non-tariff barriers, programmes have also been set up on behalf of the ACP States with a view to strengthening the capacity of their public and private players in areas relating to health and plant health checks. As regards FLEX, which covers both agricultural and mining commodities, very few of the ACP States have been able to secure access to its resources because of the poor definition of the conditions of eligibility. These conditions were relaxed to some degree in 2004 so that the particular characteristics of the ACP economies could be better accommodated. Furthermore, when the Cotonou Agreement was reviewed, the ACP States and the EU agreed to review the mechanism with a view to relaxing the conditions even further. As regards the mining sector specifically, and, therefore, support for businesses and the private sector, the Cotonou Agreement stresses the role played by the private sector in the sustainable development of the ACP States. In that agreement, the ACP States and the European Union set specific objectives for the development of the private sector and provide for institutions, instruments and structures which will link the principles to implementation. A strategy was agreed based on four points1:

creation of a business-friendly environment; creation and modernisation of economic infrastructure; strengthening of the intermediary institutions; and granting of direct assistance to selected businesses.

Still with regard to the mining sector, initiatives like the Kimberley Process are being implemented to improve transparency in the exploitation and marketing of the resources. Those initiatives are designed to reduce the covetous glances being cast at ACP mineral resources,

1 With the same ideas in view, the Compendium on Cooperation Strategies states that ‘Both Parties recognise the

need to support, through integrated and coherent initiatives, business development in the ACP countries with a view to improving substantially the macro as well as the micro-foundations of competitiveness’.


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which constitute a distant cause of several conflicts and instances of instability in the ACP States. Finally, it should be noted that the Centre for the Development of Enterprise (CDE) and the Technical Centre for Agricultural and Rural Cooperation (CTA) play an essential role in promoting the competitiveness of ACP agricultural and mining commodities. IV - New initiatives in support of the development of the sector Given the constraints identified in developing the agricultural and mining commodities sectors and the relative lack of interest in these sectors shown by development policies, several new guidelines have been adopted and changes introduced into ACP-EC cooperation. Accordingly, in consultation with the ACP States, the European Commission published a communication in February 2004 proposing a specific action plan to reduce the dependence of the ACP economies on agricultural commodities, support the development of that sector and reduce the poverty of the players from the communities involved. An instance of the application of this action plan to the cotton industry was the subject of an additional specific communication. In April 2004, the Council of the EU adopted conclusions on that subject and gave the green light to the proposals set out in the Commission communication. The implementation of the action plan is being formalised and should be completed during the first half of 2005. The application of the plan to the cotton sector has begun; an action plan was adopted in July 2004, and a steering committee has been set up to monitor the action plan. As an accompanying measure to the reform of the common organisation of the European sugar market, an action plan which includes support measures is also currently being considered. As regards access to the market, a new support programme to strengthen capacities in the field of health and plant health controls is in prospect as a result of the new European Community food and feed regulation. As regards the initiatives affecting the mining sector, the Commission also published in 2003 a communication entitled: ‘European Community cooperation with third countries: the Commission’s approach to future support for the development of the business sector’. In 2004, with a view to facilitating further development of the ACP mining industry by attracting investment, the ACP Secretariat launched on its Internet site a database combining all the information available on this important sector of the ACP economies. The ACP mining database, financed from European Development Fund (EDF) resources, aims to assist the ACP States by strengthening their ability to attract foreign investment and provides information for businessmen who wish to become involved in the exploitation and marketing of ACP mining resources.


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V – Recommendations One of the first steps to take is the provision of support for the ACP States for the drawing up of a national or regional commodities strategy. This strategy, allowing for a global approach to the problems, will represent the ideal framework through which to channel not only state intervention and European Community support but also all support which is available for the development of the sector. Since most of the problems in the commodities sector arise from the fact that they are exported in their raw state, one of the strategies' core activities must involve the initial processing of the products with a view to their being marketed locally or exported. With that in mind, support for the establishment of industries based on traditional ACP pharmacology may play a key role. Essentially, the ACP States have requested assistance to improve their competitiveness and to strengthen their industries. That being the case, the European Commission must be persuaded to implement flexibly and effectively, and to expand, the existing aid programmes for bananas and rice, for example, and those in preparation for sugar, cotton and other products which are important for the ACP States. In this attempt to improve competitiveness, the use of genetically modified organisms, which promises better yields, must be properly considered, but with all due caution. Pending a reorganisation of the sectors affected, the ACP States are also concerned to secure, during a transitional period, financial compensation similar to the direct aid given to European producers as a component of development, social and environmental policies. As regards the current discussions on the future alterations to the systems applied to various commodities, the ACP States have called on the European Community, with reference to the relevant articles of the Cotonou Agreement, to take account of the concerns that it has expressed and to guarantee a sufficiently profitable price for its exports. In instances where public intervention by the EC has harmed ACP exports, as on the cotton market, the ACP States simply ask for the elimination of distortions on the cotton market and for due account to be taken of their efforts. As regards access to the market, there is a need to work towards the acceptance and application by all countries of the health and plant health standards most widely recognised at international level and towards a strengthening of the ACP States’ capacities. Those new capacities must enable the ACP States, firstly, to play an active part in the devising of those standards at international level and, secondly, to supply products which comply with the standards adopted. By the same token, ACP producers must, where appropriate, improve the 'organic' or 'chemical-free' aspect of their products. As regards FLEX, there was an initial need for practical measures to adapt, and to facilitate access for the greatest number of ACP States to, the compensation mechanism created under the Cotonou Agreement with a view to offsetting short-term fluctuations in export revenue. Now, other precautionary provisions should be introduced in the context of ACP-EC cooperation and the multilateral framework and implemented either at national or regional level. This will ensure that each country has a degree of predictability in its estimates of revenue, something which is necessary if it is to be able to plan and carry out development measures in the long term.


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Insurance mechanisms should therefore be identified and established to enable the countries involved and producers to maintain a sufficiently high level of income at all times. To this end, the setting up of an ACP-EC Guarantee Agency to provide and manage investment guarantee programmes, as set out in Article 77 of the Cotonou Agreement, should make a significant contribution. Issues relating to corporate social responsibility (CSR), based on the UN World Pact, are becoming a sine qua non for all operations on the ‘world market’. Consequently, bearing in mind local conditions and practicalities, the ACP States should review the possibility of promoting initiatives relating to corporate social responsibility in the context of the various current ACP-EC instruments in support of the private sector and/or of establishing specific instruments to promote that objective. Initiatives such as the Kimberley Process, which provide for greater transparency in the exploitation of mines and the management of mining contracts, should be strengthened in order to promote greater stability in the ACP States. Furthermore, given the impact of certain commodities on the environment, particularly mining products, specific measures are needed to ensure that the promotion of these activities in the ACP States is of a sustainable nature and gives due consideration to the future of local communities. Finally, the ACP States should also make a contribution to the devising, implementation, coordination and assessment of the ACP-EC instruments in support of the private sector in the light of their specific needs as regards the processing of products, market access, distribution systems and transport networks (PMDT).

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