eu trade policy towards developing countries -...

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EU Trade Policy towards Developing Countries Challenges and Opportunities for the Next Years

Summary of Proceedings

16 March 2010

Charlemagne Conference Centre, Brussels

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Table of Contents Opening Session......................................................................................................................... 5

Introductory remarks by Mr. Joao Aguiar Machado, Deputy Director General, DG Trade (chairman) .............................................................................................................................. 5 Mr. Karel de Gucht, EU Trade Commissioner....................................................................... 5 Mr. Alfredo Bonet Baiget, Secretary General for Foreign Trade, Spain ............................... 5 Mr. Vital Moreira, Chairman of the Committee on International Trade, European Parliament............................................................................................................................... 6 Dr. Razeen Sally, Co-director, European Centre for International Political Economy and Faculty Member of the London School of Economics .......................................................... 6

Break-Out Session 1A................................................................................................................ 8 Introductory remarks by Mr. José Carlos Garcia de Quevedo, Head Trade and Economic Counsellor, Spanish Representative to the EU....................................................................... 8 Professor Michael Gasiorek, Sussex University .................................................................... 8 Ms. Andra Koke, Head of Unit Trade and Development, DG Trade .................................... 9 Mr. Adrian van den Hoven, Director International Relations, Business Europe ................... 9 Dr. Christopher Stevens, Senior Research Associate, Overseas Development Institute ....... 9 Mr. Bonapas Onguglo, Senior Economic Affairs Officer, United Nations Conference on Trade and Development ....................................................................................................... 10

Question and Answer Session .................................................................................................. 10 Impulse Statement from Euro Commerce Mr. Ralph Kamphöner, Senior Advisor, International Trade ............................................................................................................... 10 Questions.............................................................................................................................. 11 Answers................................................................................................................................ 11

Break-out Session 1 B .............................................................................................................. 13 Introductory remarks by Mr. Peter Stastny, Vice-Chairman Delegation to the ACP-EU Joint Parliamentary Assembly ...................................................................................................... 13 Dr. Ganeshan Wignaraja, Principal Economist, Office of Regional Economic Integration, Asian Development Bank,.................................................................................................... 13 Mr. Festus Fajana, African Union........................................................................................ 13 Tony Venables, Professor of Economics, Oxford University.............................................. 13 Mr. Paolo Giordano, Lead Economist, Inter-American Development Bank ....................... 14 Mr. Matthew Baldwin, Director for Market Access and Industry, DG Trade ..................... 14

Question and Answer Session .................................................................................................. 14 Questions.............................................................................................................................. 14 Answers................................................................................................................................ 15

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Break-out Session 2A............................................................................................................... 16 Introductory remarks by Mr. Paolo Garzotti, Deputy Head of Unit WTO and OECD, DG Trade..................................................................................................................................... 16 Ambassador Servansing, Permanent Representative of the Republic of Mauritius to the WTO..................................................................................................................................... 16 Mr. Luis Riera Figueras, Director for Development Policy: Thematic Issues, DG Development ........................................................................................................................ 16 Mr. Bernard Hoekman, World Bank.................................................................................... 16 Mr. Uri Dadush, Carnegie Endowment for International Peace .......................................... 17 Mr. Alejandro Jara, Deputy Director General, WTO........................................................... 17


Break Out Session 2B .............................................................................................................. 19 Introductory remarks by Mr. Peter Young, Deputy Head of Unit trade and Development, DG Trade.............................................................................................................................. 19 Ms Veronique Arnault, Director for Multilateral Relations and Human Rights, DG Relex 19 Mr. Ricardo Meléndez-Ortiz, Chief Executive, International Centre for Trade and Sustainable Development ..................................................................................................... 20 Prof. Joost H.B. Pauwelyn, Graduate Institute of International and Development Studies. 20 Mr. Stephen Pursey, Director of Policy Integration Department, International Labour Organization ......................................................................................................................... 21 Mr. Joel Decaillon, Deputy General Secretary, European Trade Union Confederation...... 21


Concluding Session .................................................................................................................. 24 Introductory remarks by Mr. Peter Thompson, Director for Development and EPAs, DG Trade..................................................................................................................................... 24 Breakout Session 1A ............................................................................................................ 24 Breakout Session 1B ............................................................................................................ 24 Breakout Session 2A ............................................................................................................ 25 Breakout Session 2B ............................................................................................................ 25

Closing Speech by Mr. David O'Sullivan, Director General, DG Trade ................................. 25 Question and Answer Session .................................................................................................. 26

Questions.............................................................................................................................. 26 Answers................................................................................................................................ 26

Concluding Remarks by Mr. Peter Thompson......................................................................... 27 Outlook................................................................................................................................. 27

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EU Trade Policy towards Developing Countries Challenges and Opportunities for the Next Years

16 March 2010

Charlemagne Conference Centre, Brussels

The Directorate-General for Trade (DG Trade) hosted a one-day conference in Brussels on 16 March 2010 that focused on shaping future EU trade policy vis-à-vis developing countries. Thereby, it discussed the various trade instruments and policy options available to the European Union, paying particular attention to the imminent reform of the generalized system of preferences. Representatives from international organizations, research centres, civil society and European institutions discussed the following topics:

• Maintaining the effectiveness of the EU GSP Scheme as a development tool • EU trade agreements with developing countries: regional trade and trade rules as a tool

for development • The place of small developing countries in a diverse world: differentiation versus

inclusiveness • Integrating sustainable development concerns into EU trade policy instruments.

Proceedings were multilingual and relayed via the website which reflected the fact that they were to be as inclusive and transparent as possible.The conference ended by presenting the

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conclusions of the various discussion groups and explaining the next steps in the reform of the GPS scheme. Opening Session

Introductory remarks by Mr. Joao Aguiar Machado, Deputy Director General, DG Trade (chairman) The overarching aim of the conference is to encourage informal debate on shaping EU trade policy to developing countries. The conference has been divided into four sessions to take account of the existing instruments. Discussions will focus on possible improvements to the GSP and EU policy within the context of bilateral and free trade agreements. However, attention will also be paid to related issues such as the participation of developing countries in the WTO and the integration of development instruments into EU trade policy. The subjects of the conference are not intended to ignore the contribution made by other instruments to developing countries. In a globalized and interdependent world it is necessary to examine how the EU can improve trade policy in relation to the broader issue of development. The conference features a remarkable list of speakers from developing and developed countries, scholars, civil society representatives, experts, practitioners and governments. The European Parliament also plays a crucial role in this debate considering that the Lisbon Treaty makes it an equal partner in the development of trade policy.

Mr. Karel de Gucht, EU Trade Commissioner When discussing the nexus between trade and development, people tend to emphasize one over the other. However, this is preaching to one’s own church and does no-one any favours. Today, we will discuss practical suggestions on how development and trade can help each other. It is necessary in this context to consider the effects of the economic crisis. Although developing countries are now recovering, their economies must diversify because dependency on primary commodities is a big disadvantage and there is also a need to encourage growth in long term. The Doha trade round seeks to help the development of the poorest countries in the long term and the EU will make every effort to ensure it is completed successfully. The impending expiry of the GSP and economic crisis make it necessary to review the current scheme and consider other instruments (especially bilateral and regional agreements). The EU also wishes to establish effective partnerships with ACP countries which protect the rights and interests of both. The EPAs will improve trade with developing countries by creating a more attractive environment and thereby a bigger market. There is also a need to stress the role of entrepreneurs in developing countries who are creative, hard working and eager to succeed. Many believe that trade is dangerous for developing countries and that market liberalization should be tempered accordingly. However, this is economically untrue and poor countries stand to gain most from trade. That said, trade liberalization by itself is not enough: we must also help developing countries create good governance and social safety nets.

Mr. Alfredo Bonet Baiget, Secretary General for Foreign Trade, Spain There are a number of catalysts for this conference: the increased role of the European Parliament in defining international policy resulting from the Lisbon Treaty; the effect of the economic crisis on developing countries and the impending expiry of the GSP. Against this background, many principles and objectives identified in the past are still important today. There are a number of issues that must be discussed, including the need to ensure that regional integration and development correlate and reflect the dramatic changes in trade policy since 2002. It must also be ensured that developing countries are granted greater access to EU

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markets in a way that reflects Article 21 of the EU treaty. We must review the effectiveness of the GSP and underscore the related requirements on beneficiaries. Sustainable improvement in developing countries also depends on transparent statutes and effective measures. The need to support trade and investment is especially important considering the aftermath of the economic crisis. Developing countries need targeted support – especially smaller economies which are increasingly isolated from global markets. They require a differentiated strategy which reflects their individual capacities and supports the diversification of their economies. The EU must also take account of the social impact of trade development without encouraging protectionism. GSP+ offers one way of achieving this: it links benefits to voluntary compliance with international standards. Therefore, when compliance suffers benefits suffer too.

Mr. Vital Moreira, Chairman of the Committee on International Trade, European Parliament The conference is very timely considering the new powers of the European Parliament in the formulation of trade policy and the economic crisis, which has severely damaged international trade. Trade is a powerful force for development but it cannot reduce poverty on its own. Development also depends on natural factors of the country and therefore trade policy must reflect national peculiarities. Article 21 of the EU Treaty makes clear that promoting free and fair trade, reducing poverty and protecting human rights are mandatory constitutional policies of the EU. The spirit of this article is reflected in the GSP schemes; aid for trade and the EU’s regional trade integration efforts. Still, many challenges remain: the Doha trade round is not making progress and regional integration is proving hard to achieve. The landscape in the developing world is also changing: e.g. climate change also presents new challenges to international trade. In view of these challenges, the following statements can be made: first there is a need to critically review existing trade instruments in order to deliver real benefits; despite the impasse in the Doha trade round, the EU remains committed to multilateral trading systems as a way of protecting human rights and living standards. The GSP scheme must target countries that really need benefits and the beneficiaries of GSP+ schemes must ratify the international standards contained therein. Considering that the current GSP regime will expire on 21 December 2011, the European Parliament requests the Commission to provide a revised GSP instrument to the European Parliament by June this year. Dr. Razeen Sally, Co-director, European Centre for International Political Economy and Faculty Member of the London School of Economics

Following the economic crisis, the most likely scenario will be one of “anaemic recovery“ (which will resemble the situation of the 1970s and 1980s). The macro economic measures and micro economic interventions produce trade distorting effects and discrimination; WTO measures are weak and ‘standards protectionism’ (e.g. measures to prevent climate change) may discriminate against imports. Such developments threaten the prerequisites of international trade. Trade policy is defensive around the world and the EU is not an exception and must therefore set priorities. First of all, it must pursue its commercial interests (i.e. of EU consumers and business), which will translate into benefits for the rest of the world. Protectionism must be avoided and services and energy must form the focus of an internal liberal trade policy. Second, the Doha Round must be concluded as quickly as possible so the WTO can tackle 21st century trade issues; the EU could then play a major role in developing a post-Doha round agenda The EU needs to tackle the areas where the economic value is greatest. The development dimension in all of this lies in market access and rules rather than altruistic trade policies. In its bilateral agenda, the EU should target its major trading partners

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and think harder about new initiatives with its major trading partners (China and the US). Another priority should be deep integration FTAs which go beyond WTO disciplines and are reasonable. Aid programmes must be made more transparent: simply increasing aid is not the best thing to do in the current environment. It is dubious whether non-trade standards should be linked to trade negotiations. With regard to the Lisbon treaty, the challenge will be how to integrate the European Parliament into policy development whilst promoting a liberal and transparent trade policy.

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Break-Out Session 1A

The EU GSP Scheme: how to maintain its effectiveness as a development tool?

Introductory remarks by Mr. José Carlos Garcia de Quevedo, Head Trade and Economic Counsellor, Spanish Representative to the EU The aim of the EU GSP scheme is to extend preferential treatment to developing counties. The UNCTAD recommended the creation of this system in 1968 and the EU was the first to do so in 1972. The GSP scheme respects the WTO disciplines, according to which they must be generalized, non-reciprocal and non-discriminatory. The current GSP regime has three branches: Everything But Arms (EBA) GSP+ and the general regime. The impending expiry of the present GSP scheme provides an opportunity to review and update GSP objectives in light of new challenges. Such a review should take into account changing economic environmental and development needs and make improvements to the GSP scheme where necessary. In particular, the GSP+ regime incorporates standards relating to human rights, labour rights and environmental standards and there is also pressure to integrate new aims (e.g. relating to the climate, investment, government procurement, services, intellectual property rights etc.). The new GSP scheme is to be adopted under the new co-decision procedure involving the Council and European Parliament. The effects of these reforms cannot be predicted. We must also ensure the continuity of the scheme beyond 2011. Professor Michael Gasiorek, Sussex University The University of Sussex has carried out the most comprehensive study of the EU’s current GSP system to date with a view to evaluating the EU’s current GSP system. The results of the study suggest that the GSP scheme does appear to be effective in some respects. In particular, under-utilization does not appear to be a problem with the utilization rate remaining high even in the case of low preference margins. Trade flows confirm the benefits offered by the GSP scheme. While trade between EU and LDCs is lower, the GSP scheme tends to increase trade flows with beneficiaries which has a positive impact on investment. GSP+ also seems reasonably effective in promoting the ratification of requisite conventions. Concerning general considerations, it must be borne in mind that the benefits obtained through trade depend largely on domestic policy and individual country differences (which are masked by aggregate data). Specifically, it should be noted that there are a number of structural features which constrain the effect of GSP scheme (e.g. the low preferential margins, structure of developing countries’ trade and duty free export). Accordingly, there is a limit to what can be achieved with the scheme and so we should look at other options. In this respect, it is very important to continue to focus on aid for trade initiatives, identify trade constraints in specific countries and the role of non-tariff measures. In particular, why not offer a negative tariff? This would mean the GSP scheme would no longer be constrained by zero tariffs. However, it would be important to ensure tariff reductions and import subsidies comply with WTO disciplines.

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Ms. Andra Koke, Head of Unit Trade and Development, DG Trade As part of the review of the GSP scheme, the Commission is scrutinizing its objectives and effectiveness as well as reform proposals. In fact, the EU could review any aspect of the GSP regulation including the range of benefits offered and whether the beneficiaries are the most deserving countries. There are a number of reasons why the time is right for carrying out such a review, including the results of the study by Sussex University, the effects of the global economic crisis and the structural reforms of the Lisbon Treaty. The European Parliament now has more powers in relation to trade policy and must participate in the process. The ways it can or should do so must be examined. The decision-making process will certainly be different although its exact form cannot be predicted. What is clear is that the current GSP scheme must be adapted to the new decision-making process. This public consultation forms an important part of the policy review and the state of play is as follows: the Commission has published information on its website including questions to be asked. The process will be open for two months and involve all stakeholders. The results of public consultation and impact assessment will then be announced and the revision proposal published next year. Owing to the changes in decision-making process by the Lisbon treaty, it will take longer to adopt a new instrument. Therefore, it cannot be predicted with certainty when the European Parliament and Council will adopt the new instrument. For this reason, the Commission will propose a roll-over regulation to avoid an interruption in the GSP scheme. Mr. Adrian van den Hoven, Director International Relations, Business Europe It is important that the GSP reflects the realities of international trade. Figures show that the largest users of the GSP are emerging economies (e.g. India, Brazil and Thailand), The EU has started FTA negotiations with most of these countries, suggesting that reciprocal trade liberalization is a better instrument for economic development. We also need to examine how the GSP fits into the EU’s overall trade policy: e.g. the substantial benefits granted by GSP limits the EU’s bargaining power during trade negotiations (e.g. Doha Round). For the next period of GSP, the graduation system should be reformed to ensure that it excludes high income countries like Saudi Arabia, is based on the calculation of total exports and also takes into account the competitiveness of sub-sectors. Further issues include the integration of broader trade issues in GSP and GSP+ (e.g. the dismantling of export restrictions, enforcement of intellectual property rights and liberalization of government procurement markets. Aid for trade could help LDCs develop their export profile and achieve EU quality standards (e.g. in agriculture) provided they receive the necessary assistance. The reform of customs administrations is fundamental because they have an impact on trade flows and good governance. In this context it should be noted that countries have difficulties in understanding EU regulations and suffer from inadequate foreign investment (e.g. Sub-Saharan Africa), which affects their ability to export. We need instruments to support such investment. However, this necessitates political and reputational risk coverage for companies that do invest. Dr. Christopher Stevens, Senior Research Associate, Overseas Development Institute

When contemplating the future form of the GSP one must first recognize that, historically, the GSP has been the means by which the EU liberalizes. There are legitimate questions as to whether this approach should continue, especially if one desires more liberalization. Clearly, the process has been patchy: on the one hand, the impact of the GSP scheme has been determined by product and country and, on the other, the process has been stalled by Doha which has held up changes to the GSP and given preference to tariff reductions. If we want the GSP to continue to be the major form of liberalization by the EU we need to take action:

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this would include extending the existing GSP and shifting it into the area of services. Widening the standard GSP will lower EU tariffs while Doha is stalled. Offering deeper cuts to states only eligible for standard GSP and which face discrimination when competing with countries having higher tranches of the GSP or FTAs will lower the average tariff paid by the importers of goods from developing countries. In this respect, the rules of origin could be relaxed e.g. to allow beneficiary countries to use more inputs from low-cost Asian suppliers. Regarding the GSP innovation to services, the GSP could, on principle, play the same role here as it does in relation to goods. There are plenty of problems in connection with this (e.g. can beneficiaries supply services effectively and what is their commercial relevance?). Nevertheless, such problems also arise in relation to FTAs which liberalize services as well. The first step is to offer services GSP to LDCs and SVEs (small vulnerable economies) following the traditional GSP pattern. Mr. Bonapas Onguglo, Senior Economic Affairs Officer, United Nations Conference on Trade and Development It is important that the EU places development at the heart of its trade policy in order to improve global living conditions. The positive trade pattern in high, middle and low income economies came to an abrupt halt during 2008 owing to the economic crisis. This has had a wide range of impacts: including the loss of demand, jobs and other effects on countries exporting to key markets. Developing countries are therefore looking at ways of diversifying their output and markets. They need support and other instruments to do this and this is where the GSP plays an important role. The GSP is not only a traditional tool for assistance but also a means of enabling developing countries to move out of the crisis. It is characterized by high utilization rates which include EBAs and GSP+ (thereby proving that countries have put much effort into complying with international standards). There is room for improvement, through endogenous measures (i.e. internal to GSP scheme including coverage and utilization rates) and exogenous measures (i.e. those outside the GSP scheme). The latter must reflect the fact that ACP countries have not benefited from the Cotonou preferences (i.e. by providing supply-side capacity building via aid for trade programmes and combining preferences in certain countries to improve their productive capacity). The broader issue here is to ensure the coherence of policy at country level for those that need it. Finally, the Millennium Development Goals are due to be reviewed this year. Goal 8 (provision of trade preferences) is a key target, especially for LDCs. We must remember that market access is important but not sufficient and more needs to be done.

Question and Answer Session Impulse Statement from Euro Commerce Mr. Ralph Kamphöner, Senior Advisor, International Trade In order to make the GSP more effective we must view the scheme from the importers’ point of view. They make the decision to buy products from a GSP country simply on an economic basis: GSP imports cost less than imports from other countries. Over 95 % of importers in the EU are SMEs and therefore their needs must be reflected in the consultation process. The GSP system has improved over the years, including no more graduation and the adoption of the simpler GSP+ scheme. A simpler product classification will help users apply the system. However, further improvements are needed. In particular, importers need enough time to prepare. For example fashion manufacturers plan their lines and conclude contracts well in advance. The importers must therefore be able to predict the GSP tariff for clearing customs

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and be spared unpleasant surprises. Regulators must be mindful of buying cycles and publish all details of GSP (including GSP +) at least one year before entry into force to achieve the necessary level of predictability. The GSP must also be simple in order to encourage its use by SMEs. Overall, Euro Commerce calls on the European Parliament, European Commission and Member States to speed up the process to achieve these improvements. Finally, the best GSP is useless without effective rules of origin to support it. Importers must be able to actually apply these rules and to this end, they must be made business-friendly. Questions Ms Luisa Santos – European Textile and Clothing Producers (Euro Tex) questioned whether the rules of origin should be made more flexible in order to improve utilization. Considering that the major beneficiaries of GSP are big players rather than LDCs, would more flexible rules of origin only benefit them still further? In addition, who is going to pay for negative tariffs? The representative of Unison asked under what circumstances the EU would withdraw GSP arrangements from countries that violate human and labour rights. How much worse must the situation get in Columbia before the EU takes action? Could the Commission also clarify whether, in such cases, GSP will be withdrawn only to be replaced by a free trade agreement? Mr. Roderick Abbot of ESIPE stated that he found the notion of a negative tariff difficult to conceptualize: in particular, how could this be achieved in the services sector which does not have tariff? Would this also mean a discriminatory opening of the services sector? The representative of the Sri Lankan Permanent Representative in Brussels commented that GSP has certainly enhanced market access for GSP and GSP+ countries but asked how the GSP scheme is to be reshaped for weak and vulnerable countries. Although the draft contained positive elements relating to regional cumulation and draft of rules of origin how could they benefit certain sectors of LDCs? There needed to be a specialized investigation of certain countries undertaken in this respect. The representative of the Canadian International Development Agency drew attention to the fact that Canada is one of the few countries that has actually simplified rules of origin for LDCs to allow for cumulation from any other developing country. Considering the overriding importance of standards, there may be an urgent need to examine Paris Declaration principles to deliver capacity building measures at country level. Also, it is a fact that half of the world’s population lives in countries which account for just 7.3 % of world trade: what are we doing wrong and what action can we take? Joost Pauwelyn, Professor of International Law Institute in Geneva: Considering that the GSP system has been found incompatible with WTO rules, would the EU wish to see a reform of the WTO’s rules in this area? A member of the audience expressed surprise that not much attention would be paid to a review of GSP+: is it true that the Commission is not planning to undertake a real review of GSP+ scheme with regard to avoiding human rights abuses in e.g. Columbia? Answers Professor Gasiorek started with the last question: reiterated that you are limited in what you can achieve with preferences. Making rules of origin more flexible could indeed help bigger

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players but this is not a reason for not making them more flexible. Graduation mechanisms can deal with the rise of countries in certain sectors. However, why make it more difficult for developing countries including the LDCs to source inputs from most efficient suppliers? Concerning the question of import subsidies and who would pay for it: first, the suggestion was not made in relation to services. One way of financing it could be e.g. to take the loss of tariff revenue that the EU faces owing to preferences and construct an equivalent import subsidy regime. This would also avoid any distortions. In response to the question by Euro Tex, Dr. Stevens stated that rules of origin must indeed be balanced so they allow beneficiaries to export and be sufficiently rigorous to avoid exploitation by more powerful countries. The current rules are outdated and need to be made more flexible. As concerns services, the benefits should also be offered to small, poor countries as well to see if they have any benefits. Finally, concerning Columbia, one has to look at the terms of the new EU free trade agreement with this country. If the Central American and Andean FTAS go through, there will be few beneficiaries of GSP+ in a few years time and rules of export with EU will be determined by FTAs not by the GSP+. Ms. Koke The GSP regulation is a tariff preference and does not address non-tariff barriers. However, the Commission is aware of the standards issues and is looking into the ability of developing countries to comply with standards. Concerning human and labour rights in Columbia, the Commission is obliged to follow the monitoring reports of e.g. the UN and ILO. Concerning Prof. Pauwelyn’s question, the current GSP scheme is fully WTO-compliant and the new scheme will be as well. As far as a review of GSP+ is concerned, it must be remembered that this instrument is voluntary and its scope of application limited by the small number of members. Therefore, its aims must also be bolstered by political tools as well. Mr. Onguglo reiterated that the general objective of EU GSP must be to promote diversification and development in beneficiary countries. If its aim has not been achieved we should examine what needs to be done to help LDC and vulnerable economies. Other aspects should be looked at as well, including the promotion of development sector. We need an integrated package of support together with the GSP scheme to promote diversification. With respect to rules of origin, Mr. Van den Hoven stated that a positive reaction from business depended on the EU taking a pragmatic approach to the simplification issue. As far as services were concerned, this is a valuable issue to examine. However, there may be difficulties to get such benefits through the GSP scheme. There must also be a link to the development strategies, plans and strengths of developing countries in this respect.

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Break-out Session 1 B

EU Trade Agreements with developing countries:

regional trade and trade rules as a tool for development

Introductory remarks by Mr. Peter Stastny, Vice-Chairman Delegation to the ACP-EU Joint Parliamentary Assembly This session is aimed at encouraging informal debate on how the EU can take the different characteristics of its partners into account in trade negotiations. Given the marginal share of ACPs and other vulnerable economies in world trade, the session will explore the design of trade agreements as a way of promoting regional integration. Dr. Ganeshan Wignaraja, Principal Economist, Office of Regional Economic Integration, Asian Development Bank, There are two main messages to deliver: closer EU-Asia trade is good for both Asia and Europe, and the diversity of Asian economies requires a differentiated policy of FTAs between Europe and Asia. There has been a surge in Asian FTAs, with 44 in operation in 2010, most of which are cross-regional. Generally speaking, firms in Asia see net benefits in the FTAs, and there is a move towards large region-wide FTAs. Asian diversity requires a differentiated approach between industrialized countries (using the EU-Korea FTA as a benchmark) and other countries including LDCs or transition economies. Within such agreements, faster liberalization is required for middle-income economies and a slower pace for the LDCs. It is important to avoid protectionism, including green protectionism. It is also important to implement results-oriented aid for trade for LDCs, sharing good EU practices throughout Asia. Timely information from EU agencies on investment regulations in Asia is required, and Asia-Europe business links should be encouraged. Mr. Festus Fajana, African Union When reshaping EU policy, it is important to focus more on how that policy can promote sustainable development in developing countries. There is no automatic link between trade liberalization and economic growth. Simply promoting trade liberalization will therefore not be sufficient. The emphasis should be on building capacities in developing countries, and this can be measured through appropriate development benchmarks such as an increased share of exports in manufactured goods. Protection of intellectual property rights should not serve as an instrument for protectionism. For developing countries with little or no R&D capacity, it is necessary to protect rights to traditional knowledge and natural resources, while facilitating knowledge transfer. To date, the EPAs have been used to promote Europe’s commercial interests rather than as instruments for promoting economic development. Very critical consideration must be given to the EPAs if they are to attain their stated objectives. Tony Venables, Professor of Economics, Oxford University There are four facts that apply to international trade. First, during periods of rapid economic growth, non-traditional exports grow faster than the economy as a whole. Second, the bulk of world trade is represented by trade in tasks rather than trade in goods. This is good news for Africa, which could have a comparative advantage with respect to certain tasks. Third, a

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country’s comparative advantage will be learnt and acquired during the development process. It can therefore be expected to change over time, and there is potential scope for policy intervention in this area. Fourth, Asia has ridden on these three characteristics in the past, growing its productivity and capacity. Africa has missed out, and the question now is whether it will be able to catch up. On the basis of these four facts, there is a strong case for trade preferences for Africa provided they are temporary, are based on relaxed rules of origin, and are at least OECD-wide. There is a case for focusing on Africa given that Asia, for the most part, is already on its way. Such preferences will not work everywhere, but they can be expected to have a positive impact in some countries. Mr. Paolo Giordano, Lead Economist, Inter-American Development Bank Trade can contribute to development. However, in Latin America there is a risk of a backlash against trade integration, even though most people remain in favour of the concept. Latin America has the specificity of being a middle income region and the drivers for internationalization have changed notably in the last decade. Most EU and LAC businesses believe that deeper integration will help EU-LAC relations, and that regional integration will help them do business better. Nevertheless, firms believe that that integration potential is not being fully utilized. There is little awareness of the mechanisms available, such as GSPs, and most firms are unfamiliar with processes to overcome non-tariff barriers. EU-LAC association can serve as the missing link towards virtual global free trade. Europe can also offer Latin America the value added of a trade-cooperation nexus, whereby market access opportunities are combined with development assistance. Finally, Europe provides incentives for deeper regional integration. In this context, aid for trade is a key tool in bringing together both trade software and hardware, needed to harness trade integration for development. Mr. Matthew Baldwin, Director for Market Access and Industry, DG Trade The underlying objective is to achieve the integration of developing countries into the world economy. There is no intention to impose a one size fits all agenda on negotiations. Rather the aim is to customise negotiations as a way of meeting country and region specific needs. Trade preferences are necessary but not sufficient. Instead it is necessary to achieve two-way trade and target those countries that are most in need. It is necessary to promote better regional integration and more South-South trade. Rules of origin should also be reformed, and aid for trade increased. With respect to EPAs, negotiations have been underway with seven regions since 2004. A number of interim agreements have been entered into, and the EU will continue to work with all ACP regions and countries for the successful implementation of these agreements. In this context, the existence of the Export Help Desk, which is aimed at helping developing countries improve their trade opportunities in the EU, should be noted. This free, online service provides information to developing countries on how to access the EU market.

Question and Answer Session Questions Audience members noted that the rationale for preferences for Africa should disappear if Doha comes to a conclusion on tariff profiles. Others admonished the EU for promoting its own commercial interests – there is no direct link between de-regulation and reductions in poverty or improvements in human rights. What recourse is there for the victims of trade

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policies? Will the EU focus on increasing manufacturing capacity in developing countries? What role will the WTO play in the regional agreements? Answers Dr. Ganeshan Wignaraja agreed that any process, including trade reform, has winners and losers. What is important is how those losers are dealt with, and appropriate mechanisms should be built into the trade programmes themselves. The WTO could play a valuable role in spreading voluntary best practices in the EPAs. It could also help by linking the various region-wide agreements that are emerging. Mr. Festus Fajana referred to the need to focus on the manufacturing sector. Africa’s heavy dependency on trade in primary commodities meant that it was very hard hit by the crisis. If Africa is to use trade as an engine for growth, it should be able to increase its share of exports of manufactured goods. Africa must be integrated into the value chain process. Levels of intra-African trade remain low and will not improve without good governance and political stability. For Prof. Tony Venables intra-African trade or industrial subsidies will not create booming, export-oriented African cities. Preferences could possibly do this if they are properly designed. In particular, it will be necessary to reform the rules of origin. Mr. Paolo Giordano noted that action was required to dismantle remaining pockets of protectionism. More importantly, it was necessary to build capacity and infrastructure so that developing countries could take advantage of trade opportunities as they emerge. Aid was important but trade agreements could act as magnets for that aid. Mr. Matthew Baldwin explained that aid for trade would obviously be provided in the manufacturing sector for those countries that need it. Much work has already been done to improve the rules of origin although there was clearly still room to do more. Mr. Peter Stastny concluded by thanking speakers for their valuable contributions both in their presentations and in their discussions with the floor.

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Break-out Session 2A

The place for small developing countries in a diverse world:

differentiation versus inclusiveness Introductory remarks by Mr. Paolo Garzotti, Deputy Head of Unit WTO and OECD, DG Trade We welcome participants to this session on small developing countries, which in fact represent over half of the world’s sovereign states. These countries face specific challenges when it comes to integrating world trade, including availability of finance, the high cost of governance, and geographical constraints. The session will consider how these economies can integrate world trade successfully, and how the EU should adapt its instruments to favour that integration. Ambassador Servansing, Permanent Representative of the Republic of Mauritius to the WTO It must be recognized that WTO negotiations are currently bogged down in tension between development and liberalization, leading to offensive/defensive interests being expressed by exporters and importers. SVEs have an ambiguous interface with globalization. A more meaningful global integration is necessary for their survival but they need to move away from a preference paradigm towards a competitiveness and diversification paradigm. In terms of the EU-ACP partnership, considerable efforts are required to rebuild political trust and confidence in the EPAs. GSPs can serve some purpose in the immediate future during the transition phase, but they will not play a role in the mid to long-term. A different kind of policy sensitivity is needed for SVEs – they need policy flexibility. Finally, aid for trade is definitely part of the agenda for building competitiveness. This should be shadowed by a new agenda on building competitiveness rather than simply resorting to a preferences approach. Mr. Luis Riera Figueras, Director for Development Policy: Thematic Issues, DG Development The focus of this presentation is regional integration, and on small countries from an LDC perspective. The very existence of the WTO gives LDCs a voice in international negotiations. Regional integration is one way of responding to the constraints faced by these countries, and is probably the answer to the economic challenges faced by small countries. It is also the answer to the management of public goods, and can have positive political consequences on stability. The EC is sensitive to this matter, and regional integration is in fact the ultimate objective of the EPAs. To that end, regional institutions must be strengthened, regional markets must be built, and thematic policies must be developed at the regional level (for example, food security, natural resources, health, etc.). The Commission is clearly aware of the need to restore confidence in the EPA process. The move from a preference paradigm to a competitiveness paradigm will lead to certain tensions being created, and these tensions will have to be addressed. Mr. Bernard Hoekman, World Bank This presentation will explore a more multilateral setting. The WTO is driven by reciprocity mechanics but, by definition, small countries have small markets and therefore have less to offer. Trade policy may therefore not be the most effective instrument with which to pursue

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development goals. In terms of the special and differential treatment available, tariff preferences cannot be legally enforced. Negotiations can, however, result in less than full reciprocity, transition periods, and opt-outs. The aid for trade initiative recognizes that small countries can only benefit from trade opportunities if they have the capacity to trade. For very small countries, that may not be possible at all. As to which countries should be eligible, the LDC group is the only sub-category recognized in WTO texts. In practice, regardless of the rules in operation, de facto exemptions will exist for small countries. Once those countries develop sufficiently, reciprocity will be demanded. Economic research suggests that special and differential treatment does not have a significant impact on increasing growth or reducing poverty. An alternative perspective involves rules and market access. Going forward, it will be necessary to (a) focus on mechanisms that reduce trade costs, (b) boost incentives for trade related policy reforms, and (c) differentiate between very small and low-income countries in the GSP. For LDCs, in particular, it will be necessary to focus on rules of origin. Mr. Uri Dadush, Carnegie Endowment for International Peace The ground is shifting and long-established policies are rapidly becoming outdated. Developing countries are catching up at a fast rate. By 2050, four of the six largest economies will be developing countries, which will represent two-thirds of world trade compared to one-third today. EU trade policy will therefore have to change radically, and new issues such as climate change will require a more flexible world trading system. Much movement has occurred towards bilateral and regional agreements, and this should continue. More attention should, however, be given to plurilateral agreements raising the question of what the post-Doha WTO will look like. The implications of all this for vulnerable countries are, first, that there are huge opportunities to trade with the major emerging powers. Second, a more holistic approach is required to achieve greater regional integration. Development and trade policy will have to bring in large players such as China and India to help vulnerable economies. Mr. Alejandro Jara, Deputy Director General, WTO Small countries have been regrouping along various lines in order to increase their negotiating power. The least developed countries were the first to differentiate themselves, followed by land-locked countries, islands, food importing countries, recently acceded members etc. By being more specific and flexible through à la carte arrangements, countries can hope to achieve more. Having an à la carte GSP could also be valuable in that context. Market access alone will not resolve the issues, and aid for trade will continue to play an important role. Each country would define its needs, and seek the aid and capacity building it requires to meet those needs. That may be more effective than having a preference system. The underlying pre-condition for success is to build more flexibility into the system. When a system lacks flexibility, it is bound to fail.

Question and Answer Session Questions Audience members asked how special and differential treatment would work with respect to services. While there was a general consensus on the need for multilateralism, no mention was made of the need to enforce bilateral agreements. How could regional negotiations be reconciled with bilateral negotiations?

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Answers For Mr. Bernard Hoekman, special and differential treatment can be achieved through aid for trade. There was potential to be open in certain areas, for example, with respect to the movement of workers. Mr. Paolo Garzotti explained that negotiations were underway on Article XXIV:6 under the DDA, but progress had been slow to date. Ambassador Servansing added that most trade liberalization had been unilateral in nature. However, bilateral trade agreements were also important for developing countries – more so than trade liberalization itself. Mr. Uri Dadush noted that countries were looking for greater latitude and flexibility. Article 24 had not proved very effective in introducing discipline into these agreements. Nevertheless, there was an opportunity for the WTO to set up a voluntary system of guidelines and best practices for regional agreements. Mr. Luis Riera Figueras advised that agreements signed with a certain number of countries rather than with a region as a whole should be considered as interim agreements – a step along the way to region-wide agreements.

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Break Out Session 2B

Integrating sustainable development concerns into EU trade policy instruments

Introductory remarks by Mr. Peter Young, Deputy Head of Unit trade and Development, DG Trade Earlier in the conference we heard a number of references to the subject of this session including a cautionary note from Professor Sally, arguing that the EU Commission should keep away from sustained development because it runs the risk of disguised protectionism and that the EU should restrain itself from exporting its values through trade policy instruments. On the other hand, it has also been pointed out that the European trade policy is obliged by the Lisbon and EU Treaty to pursue sustainable development and other non-trade related issues (e.g. environmental standards and the respect for labour and human rights). This constitutional obligation implicitly requires the EU to pursue the improvement of human rights and other non-trade interests etc through trade measures.

Ms Veronique Arnault, Director for Multilateral Relations and Human Rights, DG Relex Following the changes introduced by the Lisbon Treaty, Title II on the Common Commercial Policy and Title III on Development Co-operation of the Treaty on the Functioning of the European Union are made subject to the provisions of Article 21 of Treaty on European Union. Accordingly, the commercial and development policies of the EU shall be guided by the goal of ensuring respect for human rights. The Lisbon Treaty had also given the European Parliament a more important role in the conclusion of trade agreements than hitherto and, in the light of the Parliament’s traditional interest in human rights, it was likely that the Parliament would scrutinise carefully the human rights impact of EU trade agreements in future. There were already a number of trade instruments in place which the EU used to promote human rights including the GSP+ system, Regulation 1236/2005 concerning trade in certain goods which could be used for capital punishment, torture or other cruel, inhuman or degrading treatment and the Dual Use Regulation (Regulation 428/2009 setting up a Community regime for the control of exports, transfer, brokering and transit of dual use items). Trade measures can also be used in a punitive way and the EU had imposed autonomous sanctions in various forms (e.g. sanctions imposed on Burma and Zimbabwe). The EU includes a human rights clause in framework agreements with third countries, including the Cotonou agreement, which could constitute the legal basis for suspension of the agreement in the event of human rights violations. The perception that human rights and trade were opposed was misplaced. Trade, premised on negotiation and the development of international co-operation, could help to underpin the development of human rights. Access to the WTO was predicated on applicants taking steps to improve the rule of law and administrative transparency. For example, China had been required to administer its laws equally throughout its territory, including in Export Processing Zones. Nevertheless, greater use of a human rights paradigm should be made when analysing trade policy. A human rights approach can be especially useful in looking at the impact of trade policies on the individual and, in particular, on vulnerable groups. The Commission was open to considering whether greater use of human rights indicators should be made when analysing the impact of trade agreements on economic and social rights. In the framework of Corporate Social

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Responsibility, the EU also needed to ask whether companies should be required to export their values and rules to countries where they establish branches. To conclude, trade and human rights should not be seen as opposed but as complementary; at the same time, one must remember that external influence is always limited and fundamental changes can only come from within. Mr. Ricardo Meléndez-Ortiz, Chief Executive, International Centre for Trade and Sustainable Development Sustainable development has a definite role in trade policy and is supported by the preamble to the WTO agreement. We know what is required from a developing country perspective (e.g. regarding to market access) and so we should learn from these rules and seek to create permanent arrangements which are effective in terms of their avowed purpose. In this connection, development measures should deliver their social promises. Our objective should reflect the fact that developing countries are at different levels of development. With regard to ensuring sustainable development in WTO, there is an obligation to realize the aspiration of developing countries in the absence of the political conditions necessary for concluding the Doha round. Therefore, we recommend that countries move towards an early harvest of deliveries (i.e. in the form of a trade facilitation agreement, duty free quota free access for LDCs etc.). The EU’s approach must not only better incorporate the needs of developing countries but also pay regard to pressing issues such as climate change and the need for sources of renewable energy. Concerns have been articulated in terms of products and food, employment and other areas. However, standards such as those relating to climate change would have real effects on the competitiveness of the trade system. Is the spectre of climate change simply being used as an excuse for protectionism? To conclude, trade and sustainability are inseparable but must be united through coherent instruments. EU has the instruments to achieve this - of which this consultation session today is one example.

Prof. Joost H.B. Pauwelyn, Graduate Institute of International and Development Studies Development policy is a very complex, multi-faceted subject. Yet, both researchers and policy makers engage in ever more specialisation. What we need to “make things work” is not sealed-off compartments but problem-oriented research (holistic analysis) and policy coherence (holistic application). A core question where trade and sustainability meet is that of figuring out when internal EU rules related to sustainability can be applied also to imports (think of labour standards, environmental criteria of biofuels or human rights). The traditional GATT view was that taxes and regulations which deal with production abroad (rather than consumption in the EU) cannot be imposed on imports. However, this approach was shattered by the Appellate Body in its Shrimp-Turtle decision allowing for US import restrictions based on production abroad (i.e. fishing techniques killing endangered turtle in Malaysia). The language and principles of that decision remain vague. The significance of knowing where to draw the line between rules that can, and those that cannot, be imposed on imports is especially significant nowadays where there are many non-trade-related issues which demand attention – climate change being amongst the most important. Before we can redraw the line effectively we must adopt a coherent approach, think of a new paradigm. One model would be to examine the level of trade restriction, consider the type and importance of the non-trade objective pursued; the feasibility of control and implementation; international consensus on the need for action and the level of contribution that the measure makes to the objective. A related question is: who should do this balancing? This is ultimately a national, political decision subject to some level of review by the Appellate Body which, to ensure coherence, must be sensitive to what happens in other international fora.

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Mr. Stephen Pursey, Director of Policy Integration Department, International Labour Organization Sustainable development has been a term that has evolved quite well over the last few years and it rests on three pillars – economic, social and environmental. At least in the field of employment we have moved to agreement on key aspects on the way that labour markets should work. The major question is how companies can work together to achieve shared aims. This is a major challenge for EU and trade partners as well as the ILO and UN. In 2009, the economic crisis had a huge impact on jobs and there are few countries which are seeing signs of a jobs recovery. Developing countries are very committed to the ILO agenda and there is no doubt that labour standards are more important today than ever. With the world labour force estimated at around 3 billion, 40 percent of workers still cannot earn enough to feed themselves and their families. We therefore need to ask ourselves how we can achieve a virtuous spiral (i.e. more and better jobs contributing to higher living standards?). Therefore, it is very important to establish good labour market institutions (i.e. minimum wages, health and safety, labour inspection systems etc.). According to the findings of joint studies by ILO and WTO, trade may be positive overall but there are also losers. The EU is starting to understand all of this and there have been some encouraging agreements (EU - Korea agreement on sustainable development). As far as the ILO is concerned, it needs to retain its legitimacy as a source of standards, develop technical standards and collaborate with the WTO. For its part, the EU needs to do more to build up labour market institutions. Overall, the WTO and ILO are making progress on parallel agendas which support each other but which are not linked.

Mr. Joel Decaillon, Deputy General Secretary, European Trade Union Confederation First of all, we agree that sustainable development is a lever for guaranteeing respect for human rights. We have also seen how climate change creates inequality in different countries and were amongst the first to advocate ‘green jobs’. However, we find in relation to environmental issues that it is difficult to take action on social issues at the WTO. Our initial proposal is therefore to improve cooperation with the WTO and UNCTAD and try to find synergies with international organizations so they can all be consulted on sustainable development. We have also carried out a study into fundamental human rights both at work and in international trade and what role can be played by the WTO in this regard. Action needs to be taken on the trend towards informal working conditions and the lack of regulation internationally. Transparency and accountability are very important here and Europe has proved that it can promote transparency by its 2006 REACH Regulation. We also need to clarify what we mean by “developing countries”; we cannot treat emerging countries (e.g. India and China with their high growth rates) the same as LDCs. Also, we are in favour of GSP and GSP+ but must nevertheless express caveats. We are very concerned that individual agreements (e.g. with Columbia and Peru) are being pursued instead of a multilateral Andean agreement. It is of paramount importance that the EU enforces the principles contained in the agreements (e.g. with regard to Columbia). Another point is that civil society, unions and social partners should also promote voluntary measures amongst multinationals that take into account environmental standards etc. Finally, it should be possible for civil society to submit amicus curiae briefs to make its views known.

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Question and Answer Session Questions A representative from the International Metal Workers Association pointed out that only the last two speakers had referred to employment and jobs. Trade unions have raised the issue of employment issues as central questions, indicators and goals with regard to trade. We believe that any discussion regarding development and sustainability is completely meaningless unless governments and institutions undertake a responsible assessment of the impact of trade policies on employment. Nowadays, trade liberalization is no longer automatically seen as a generator of employment but it is clear that trade can also destroy jobs and the quality of work. The EU could therefore carry out employment impact assessment as a development issue and thereby promote the decent work agenda. The representative of the European Institute for Asian studies stressed that solutions must also be found to carry out proper monitoring which can help solve problems effectively. The ILO can provide assistance in this respect. The representative of Unison drew attention to the importance of trade unions in the promotion of decent work. However, we only see good words in the trade agreements: some countries are failing to adhere to the relevant standards and the EU is also failing to use the sanction clauses in those agreements. For example, the Philippines, Israel and Columbia have not been the subject of sanctions, despite clear evidence of non-compliance. How do we bridge the gap between the good words in the agreements and action on the ground? A final comment was made by the representative of a church organization in Germany who pointed out that many trade agreements contain measures that limit the protection of human rights in particular states (e.g by prohibiting protective measures with regard to agriculture and intellectual property rights). Therefore, human rights indicators should be used to measure the impact of trade agreements. Answers Mr. Meléndez-Ortiz stated that it was important for the EU to carry out social impact assessments. Indeed, they have taking place for 6 to 7 years now. On the other hand, its counterparts should also be undertaking assessments (which would probably provide more interesting results). Indeed, they may well be doing so: e.g. Columbia has a very active civil society. More should be done to improve the institutions in developing countries make decisions by policy-makers more accountable. Mr. Decaillon Impact studies represent a tool for studies at international level and deserve more attention in the EU. The real issue concerns how we should undertake them and make them more holistic and inclusive? Globalization does have an effect on jobs and we need to find the right instruments to protect labour rights. We have considered appointing union representatives at international level (rather like you see in the maritime sector) with regard to GSP in order to monitor the implementation of sanctions. Ms. Arnault argued that sanctions should only be used as a last resort. They require consensus at UN level which is difficult to achieve. They also present problems in terms of efficacy and in terms of their social and economic impact on the population (e.g. Iraq). Once sanctions are put in place, it is also difficult to engage with the countries concerned.

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Alternative measures include GSP benefits and the monitoring and inspections carried out at international level.

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Concluding Session

Introductory remarks by Mr. Peter Thompson, Director for Development and EPAs, DG Trade The concluding session provides some feedback on the sessions to ensure the participants’ views are represented and also to provide those not in attendance to obtain an impression of the conference. It also provides the opportunity for further interventions. It is worth reiterating that the objective of today’s meeting was to encourage debate on shaping the future EU trade policy vis-à-vis developing countries. At the same time, there is no intention of ignoring or denying the importance of other instruments that are available to achieve this objective. The four moderators reported on the break-out sessions below. Breakout Session 1A Mr. José Carlos Garcia de Quevedo stated that there had been a fruitful and lively debate but no definite conclusions. Evidence suggests that the GSP is working effectively with regard to the utilization rate, benefit application by beneficiary countries and product coverage. However, there was also room for improvement regarding the promotion of export diversification in LDCs. The GSP review must reflect economic realities: considering the competitiveness of emerging countries in certain sectors, it must be ensured that the benefits of development schemes are reaching the right countries. As far as the GSP scheme is concerned, we have to consider trade liberalization at multilateral level (i.e. within the framework of EPA negotiations and bilateral and regional agreement). Improvements are needed regarding the stability and predictability of the scheme, product coverage and utilization, targeted beneficiaries, definition of the vulnerability index, enforcement of the sustainable development agenda etc.. Areas to explore include a preferential scheme for services (despite doubts); government requirements for beneficiary countries and disciplines in certain areas (i.e. linking trade benefits to human rights) Further issues raised by speakers and the public include customs and business facilitation in beneficiary countries; aid for trade, technical assistance and capacity building. Finally GSP must remain one of the key features of the EU trade policy. Breakout Session 1B Ms Marta Moya Diaz (representing Mr. Peter Stastny), began by affirming that although Asia represented considerable opportunities for trade and investment, poorer countries within the region needed to be addressed through a differentiated approached. There was no automatic link between trade liberalization and growth, and focus should be given to capacity building, measured through appropriate development benchmarks. Liberalization should be progressive, backed by rules and accompanied by aid for trade. There was a strong case to focus on sub-Saharan African countries and not only on LDCs. There was a rationale for trade preferences for Africa, provided they were temporary, based on relaxed rules of origin, and were as simple and wide as possible. Evidence was necessary of their effectiveness. Regarding EU-LAC, firms lacked awareness of the instruments available to promote trade, and the trade facilitation agenda was therefore key here. The EU reiterated that it was not trying to impose a one size fits all agenda on negotiations; rather, it sought a customised approach. Market access was crucial, and the EU was the world’s most open market. It was also the main partner of developing countries. EPA negotiations were underway, and some interim agreements had been entered into. The EU will continue its efforts for the implementation of these agreements.

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Breakout Session 2A Mr. Paolo Garzotti underlined that the "preference model" where small and vulnerable economies primarily traded with developed countries will not be the solution for the future. Greater global integration was required. SVEs need to move out of the preference dependency model towards a competitiveness and diversification paradigm. This could be achieved through by several means, including regional integration. EPAs represented a good model but needed a significant injection of trust from the parties involved in the negotiations. More generally, trade is only an instrument on the way to development; and market access may not be the most effective tool for small economies (as they have anyway little to offer both as export and import market): other instruments are likely to give better results: aid for trade, trade facilitation and also services liberalisation. There was a need for more flexible systems to provide solutions that were fit for each situation. This applied both at the multilateral level and in the GSPs. The main message that emerged from the session was that SVEs must move out of the preference dependency paradigm towards one of greater competitiveness. Breakout Session 2B Mr. Peter Young reported that there are an important number of links between trade and sustainable development regarding human rights, labour and climate change etc. The entry into force of the Lisbon Treaty has reinforced the obligation on the European Union to seek greater coherence across these areas. Trade and development enjoy an essentially positive relationship but the benefits are not always automatic. Therefore, the implications of trade agreements and regulatory action by the EU need to be carefully considered. Some agreements with non-EU countries include provisions that address this area. Concerning the work of WTO, one speaker pointed to the possible early harvest of pro development deliverables if the Doha Round was not successfully concluded. Another speaker advocated broadening access to WTO dispute settlement proceedings by civil society groups. He argued that there was a deficit of international regulation, particularly regarding labour standards and encouraged the WTO to cooperate more actively with the ILO and other bodies. It was also pointed out that developing countries embrace many of these notions such as decent work but need support in realizing these principles. There were calls for more effective and sustained monitoring of trade agreements, greater implementation of GSP+ rules and more effective capacity building activities.

Closing Speech by Mr. David O'Sullivan, Director General, DG Trade The question of the EU’s trade policy towards developing countries is an extremely important and controversial subject. Is trade productive or counter-productive to development? History shows that a country’s integration into the system of global trade is a precondition for its growth and development. Nevertheless, trade does come with a health warning and must be carefully managed. Every effort must be made to bring the Doha round to a successful conclusion. Unlike previous trade rounds: it is not solely about economic advantage but also about contributing to the development of weaker countries. The review of the GSP scheme is also significant because it will be the first time that the European Parliament is seriously involved in the debate. Roll-over measures are necessary to avoid interruptions in the scheme. It is understandable that developing countries are sceptical of whether the EU is actually acting in their best interests. Therefore, we must improve the content and scope of international standards that developing countries feel comfortable singing up to. With the greater involvement of European Parliament, this subject will occupy centre stage for years to

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come. Trade should be at the service of development and take account of the interests of developing countries as well as companies, business and entrepreneurs (which ultimately pay for development measures). Overall, there are no simple answers to the issues we have discussed today but the conference has given new impetus to the debate. The EU Trade Commissioner was a former Development Commissioner and can therefore be expected to bring development perspectives into these issues. DG Trade has a strong commitment to free trade but is also very sensitive to the need for flexibility. This is only the beginning of a longer debate and we need to maintain the quality of the dialogue.

Question and Answer Session Questions The representative of Euro Commerce directed his question to David O’ Sullivan. It is of the utmost importance that importers can predict what import tariff they will have to pay. Can you guarantee that importers will know at the end of this year what conditions will apply at the beginning of 2012? Importers need at least one year’s advance notice. An effective GSP also needs effective rules of origin. We are afraid that the Commission is making a mistake of abolishing the “A certificate of origin” and replacing it with statements of origin by registered exporters. This will severely diminish the attractiveness of the GSP and undermine its legal certainty. Mr. Roderick Abbot of Esipe pointed out that, during the day, discussions centred on what we should do for developing countries but we also have to think about what our trade partners are doing (e.g. the United States). We would find it easier to proceed if we knew that other players were moving in the same direction. Could the Panel imagine a similar debate being held in the United States with senior officials from USTR? The European Services Forum drew attention to the fact that special and differential treatment has not produced the desired results, especially regarding the promotion of economic development. Are we are making the right decisions for developing countries? Concerning services, it is not possible to give preferences to developing countries because the EU is already very open already and so special and differential treatment would be impossible to offer: it could even mean that the EU would have to create barriers with regard to services. Answers

Mr. David O’ Sullivan was not able to guarantee Euro Commerce that they would have one year’s notice; in the past, the period of notice was actually six months. The purpose of rolling over the existing scheme is to ensure legal certainty while the EU is creating a new scheme. This process of review may take longer owing to the involvement of the European Parliament and so it is not possible to predict when the new regulation will be passed. Concerning rules of origin, the Commission are trying to adjust standard rules of origin for GSP in response to criticism. Mr. O’Sullivan also believed that such a meeting could well take place in the US. However, there would probably not be the same pressure in relation to development issues in the US for historical reasons. Concerning the issue of special and differentiated treatment we must recognize that a one size fits all approach does not work and that liberalization must be tailored to the needs of developing countries. Special and differential treatment could be the pre-condition for liberalization in some cases. It is difficult to bring services into this discussion but the LDC waiver is one example of how additional service openings could be granted to countries which are not necessarily reciprocal. Services may even prove a promising way forward for some developing countries.

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Concluding Remarks by Mr. Peter Thompson

Outlook The new GSP consultation process is now underway and will proceed in three steps:

• The website will be opened within the next few days with a request for input from interested parties between April and May 2010. The input will then be analysed and a report of the consultation process issued in the summer.

• The Commission will carry out an impact assessment during Autumn 2010

• A new proposal will be expected at the beginning of 2011.

We realize the importance of rules of origin but this subject has not been synchronized with the GSP regulation per se. The notion of services in the GSP has arisen during this conference but it has not formed part of our plans so far. We also have a broader agenda here and fitting trade and development into it has formed an important part of today’s discussions. Protests outside the building show that some people are concerned that we are not representing views properly. However, we do try to take all views into account and speak to the wider civil society. We have one such meeting involving civil society in Prague on 24th March and there will be other stand-alone discussions thereafter.

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