paths to development through trade: eu-led trade liberalization vs south–south cooperation

This article was downloaded by: [Florida State University]On: 21 October 2014, At: 21:00Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH,UK

Socialism and DemocracyPublication details, including instructions for authorsand subscription information:http://www.tandfonline.com/loi/csad20

Paths to Developmentthrough Trade: EU-Led TradeLiberalization vs South–SouthCooperationPatrick ClairzierPublished online: 26 Jul 2011.

To cite this article: Patrick Clairzier (2011) Paths to Development through Trade: EU-Led Trade Liberalization vs South–South Cooperation, Socialism and Democracy, 25:2,64-80, DOI: 10.1080/08854300.2011.579473

To link to this article: http://dx.doi.org/10.1080/08854300.2011.579473

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all theinformation (the “Content”) contained in the publications on our platform.However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness, orsuitability for any purpose of the Content. Any opinions and views expressedin this publication are the opinions and views of the authors, and are not theviews of or endorsed by Taylor & Francis. The accuracy of the Content shouldnot be relied upon and should be independently verified with primary sourcesof information. Taylor and Francis shall not be liable for any losses, actions,claims, proceedings, demands, costs, expenses, damages, and other liabilitieswhatsoever or howsoever caused arising directly or indirectly in connectionwith, in relation to or arising out of the use of the Content.

This article may be used for research, teaching, and private study purposes.Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly

http://www.tandfonline.com/loi/csad20

http://www.tandfonline.com/action/showCitFormats?doi=10.1080/08854300.2011.579473

http://dx.doi.org/10.1080/08854300.2011.579473

forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions

Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014

http://www.tandfonline.com/page/terms-and-conditions

http://www.tandfonline.com/page/terms-and-conditions

Paths to Development through Trade:

EU-Led Trade Liberalization vs

South–South Cooperation

Patrick Clairzier

Historical background

Since its inception in 1957, the member states of the EuropeanEconomic Community (EEC) have been actively expanding theirtrade with the more dependent states in the Global South through con-secutive treaties.1 The signing of the Cariforum–European CommunityEconomic Partnership Agreement between the EU and the CaribbeanStates in 2007, is the latest in a long list of treaties promoted by theEuropean Community2 as a means of securing market access for itsgoods and services within the growing markets of the developingworld.

In April 1976 the Lome Convention came into force and set the newfoundations on which the European Community would conduct itsdevelopment and aid assistance policies with countries of theAfrican, Caribbean, and Pacific (ACP) regions. Lome replaced theYaounde agreement of 1963, which was the first official accordbetween the newly established European Economic Community

1. Macki Sissoko, Louis Osuji, and William Cheng, “Impacts of the Yaounde and LomeConventions on EC-ACP Trade,” African Economic &Business Review, Vol 1, No.1,Spring 1998, 6–24 http://www.theaebr.com/v1n1sp1998sissoko.pdf

2. In 1967, the European Coal and Steel Community (ECSC), created in 1951 by theTreaty of Paris, and the European Atomic Energy Community and European Econ-omic Community, created in 1957 by the Treaties of Rome, were united into the Euro-pean Community. The European Community acted as the central governing body,managing economic and social relations between the signatory nations, until thesigning of the Treaty on European Union, in Maastricht, February 1992. Goingforward, the European Community became one of the three pillars of the EuropeanUnion, which included the European Communities, Common Foreign and SecurityPolicy and Police and Judicial Cooperation in Criminal Matters. In December 2009,when the Lisbon Treaty came into force, establishing the European Union as alegal entity the three-pillar structure ceased to exist.

Socialism and Democracy, Vol.25, No.2, July 2011, pp.64–80

ISSN 0885-4300 print/ISSN 1745-2635 online

DOI: 10.1080/08854300.2011.579473 # 2011 The Research Group on Socialism and Democracy

Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014

http://www.theaebr.com/v1n1sp1998sissoko.pdf

(EEC – the predecessor to the European Community) and its members’former African colonies. The Yaounde agreement was the result of astipulation made by France, to the other European countries, on thesigning in 1957 of the Treaty of Rome, which created the EEC.France, wanting to retain its influence in Francophone Africa, man-dated that the Treaty of Rome must allow for future closer traderelations between EEC members and their former colonial dependentstates.3 This requirement ensured that the former colonial powerswithin the original six-member EEC could keep close ties with theeconomically dependent states in which they retained substantialinvestments. The Germans and the Dutch, with no substantial colonialties to Africa, were not willing to commit the EEC to an agreement thatwould exclude the African states that lacked a colonial history with theCommunity’s members, which at this time did not include Britain; thisdisagreement led to a two-year negotiation process, which concludedin 1963 with the EEC signing an agreement in Yaounde, Cameroon,granting all African states the right to a special trade association withthe Community.4

At the treaty’s outset all that was offered to the African states waspreferential tariffs, but the agreement was later broadened to includelarger import quotas into the EEC, greater development aid, price sup-ports for African tropical products, and establishment rights for EECcompanies operating in Africa. It also led to the EEC signing two associ-ation agreements with Commonwealth African States: the Lagos Treatywith Nigeria in 1965 and the Arusha agreement with Kenya, Tanzania,and Uganda in 1969.5

In January 1973, the first Treaty of Accession came into force, bring-ing the United Kingdom (UK), Ireland, and Denmark into the EEC. Theaccession of the UK provided the twenty British CommonwealthNations of Africa, the Caribbean, and the Pacific the opportunity toenter a special trade relationship with the newly enlarged EEC. Out-lined in Protocol 22 within the Accession Treaty were three optionsmade available to these Commonwealth countries and later extendedto non-associated states.6 The options consisted of first, an associationagreement similar to Yaounde. Second, a more traditional agreement toenhance trade between the regions, and third a more specific type of

3. JoannaMoss, The Lome Conventions and Their Implications for the United States (Boulder,CO: Westview Press, 1982), 1.

4. Ibid., 5.5. Ibid., 5–9.6. Sissoko et al., “Impacts of the Yaounde and Lome Conventions” (note 1).

Patrick Clairzier 65

Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014

convention that would consist of reciprocal rights and obligations withregard to trade relations.7 The inclusion of the Commonwealth states inthe Association raised the fears amongst existing African Yaoundemembers that the expansion “might dilute their benefits” by reducingthe funds for aid in the European Development Fund (EDF) availableto Association members and potentially reducing market access forexports into the EEC.8

In addition, a major point of contention often mentioned byYaounde countries, which the Commonwealth states also took excep-tion to, was the requirement of reverse trade preferences, providingEEC members access into African markets. This policy went againstthe generally recognized principle – “in Part IV of the General Agree-ment on Tariffs and Trade (GATT) – that the developed countries notexpect reciprocity in trade negotiations with less developedcountries.”9 The Commonwealth States also took exception to theEEC associating aid from the EDF for accepting a Yaounde-type agree-ment, and the requirement of informing the EC of their developmentplans, which they saw as a violation of their sovereignty. These pro-visions within Yaounde were seen as perpetuating the neo-colonialrelationship between EEC states and the countries of Africa. InJanuary 1973 the Commonwealth states rejected all three optionsoffered to them by Protocol 22 of the Accession Treaty. This set thestage for talks in Lome, Togo, on a new agreement. During the nego-tiation process Yaounde and Commonwealth states formed the largerACP negotiating bloc in order to have a stronger position fromwhich to reach a deal with the EEC. They also gained support fromthe Organization for African Unity (OAU) and the United NationsEconomic Commission for Africa (UNECA).10

The long and contentious negotiations led to the signing of the firstLome Convention (Lome I) on February 28, 1975 between the nine EECmembers and the 27 ACP countries. Today, ACP countries total 79,which include 48 African, 16 Caribbean, and 15 Pacific states. Theagreement was shaped by the desire of ACP countries to securebetter trade conditions and aid for their development goals and thatof European states to create a more stable pricing system for a rangeof commodities in an unstable export market environment. Lome I

7. Moss, The Lome Conventions, 15.8. Marjorie Lister, The European Community and the Developing World (Brookfield, VT:

Avebury, 1988).9. Moss, The Lome Conventions, 16–17.

10. Ibid., 17.

66 Socialism and Democracy

Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014

came into force in April 1976. It established general principles of tradewhich, by the more liberalized trade standards subsequently dictatedby the World Trade Organization (WTO – founded in 1995), wouldbe seen as overly restrictive to the free flow of goods and capital. Thefounding principles put forward by Lome I were as follows:

. non-reciprocal preferences for most exports from ACP countries tothe EEC;

. equality between partners, and respect for sovereignty, mutual inter-ests and interdependence;

. the right of each state to determine its own policies;

. security of relations based on the achievements of the cooperationsystem;

. introduction of the STABEX system (to compensate ACP countriesfor the shortfall in export earnings due to fluctuation in the pricesor supply of commodities).11

These principles went beyond the reach of the newly revisedYaounde II (1971) agreement, not only by adopting standards of non-reciprocity and thus providing ACP countries greater access to EECmarkets, but also in redefining the rules of origin and creating aspecial protocol for the trade of sugar, beef, rum and bananas, allowing96% of ACP agricultural exports to enter EEC markets duty and quotafree.12 Lome was renegotiated three times before its eventual replace-ment. Lome II, signed in 1979, expired in 1985; it did not initiate anymajor changes. However, it introduced the SYSMIN system, whichsimilarly to STABEX gave funds to ACP members to offset exportshortfalls, but in this case exclusively for the mining industry. LomeIII, signed in 1984, expired in 1990; it shifted the Convention’s focusfrom industrial development to self-reliant development and foodsecurity. Lome IV, signed in 1989, was replaced by the Cotonou Agree-ment in 2000; this final version of the Lome Treaty put a great deal ofsignificance on the promotion of democracy, human rights, and goodgovernance in the ACP member states.13

In order to put the EU’s current rhetoric regarding the benefits ofthe newly signed Cariforum–EC Economic Partnership Agreement

11. The Cotonou Agreement and Non State Actors Basics http://www.fes-tanzania.org/documents.php Stabex and Sysmin are European Commission compensatoryfinance schemes intended to stabilize ACP countries’ export earnings. Stabex is ageneral scheme, while Sysmin covers mining products.

12. Sissoko et al., “Impacts of the Yaounde and Lome Conventions.”13. European Commission, “Europa Aid Development and Cooperation”, http://ec.

europa.eu/europeaid/where/acp/overview/lome-convention/lomeitoiv_en.htm#2


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014





(EPA) into perspective, it is instructive to examine the relative effec-tiveness of these past agreements vis-a-vis the development aspirationsof the EC for the ACP member states. Part IV of the Treaty of Rome,“Association of the Overseas Countries and Territories,” states:

The Member States agree to associate with the Community the non-Europeancountries and territories which have special relations with Belgium, Denmark,France, Italy, the Netherlands and the United Kingdom. . . . The purpose ofassociation shall be to promote the economic and social development of thecountries and territories and to establish close economic relations betweenthem and the Community as a whole. In accordance with the principles setout in the Preamble to this Treaty, association shall serve primarily tofurther the interests and prosperity of the inhabitants of these countries andterritories in order to lead them to the economic, social and cultural develop-ment to which they aspire.14

These aspirations complemented those of the ACP and served togarner support for future Associations that the European stateswould pursue.

The following overview of the overall economic and trade per-formance of the ACP members, in regard to the Yaounde and Lomeconventions, must be seen in the context of the global changes sincetheir inception – further integration of European states, and thedemands and constraints placed on states by the liberalization of inter-national markets.

In a Green Paper (a consultative document) published in 1996, theEuropean Commission conducted a broad evaluation of the relationsbetween the EU and ACP countries and concluded that “(i)n the lasttwo years, the economic situation has improved appreciably in agrowing number of ACP countries.” The Commission goes on toacknowledge the poor development performance of ACP countriesover the preceding three decades, particularly in sub-Saharan Africa.The Commission further conceded that there is “no shortage of indi-cators to support this assertion,”15 offering the following examples:

. Per capita GDP in sub-Saharan Africa grew by an average of only0.4% a year between 1960 and 1992, compared with 2.3% for devel-oping countries as a whole.

14. Treaty of Rome (as amended and consolidated), Part IV, Article 131, http://eur-lex.europa.eu/en/treaties/dat/12002E/htm/12002E.html

15. European Commission, Directorate-General VIII/1 Green Paper on relations betweenthe European Union and the ACP countries on the eve of the 21st century, Challengesand options for a new partnership Brussels, 20 November 1996 http://training.itcilo.it/actrav_cdrom1/english/global/blokit/green2.htm


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014





. Sub-Saharan Africa began to lose its market share internationally inthe 1970s and continued to do so throughout the 1980s, up to 1993.

. Caribbean countries . . . GNP growth has been poor (even if oneexcludes Haiti), averaging 1% since 1990, and there is considerablepoverty.

. The eight Pacific ACP States . . . As islands, with very small-scaleeconomies, the eight countries are highly vulnerable to externalinfluences: they are heavily dependent on trade and vulnerable tonatural disasters such as cyclones.16

The lack of economic success of the ACP countries can be attributed tomultiple causes which include a colonial legacy that did a great deal ofdamage to the social fabric of these states. Nonetheless, it must also bestated that attempts at economic adjustment and reforms introduced inthe 1980s, which forced ACP states to reduce public sector spending,curtailed the effectiveness of the economic and social foundations ofthe state. As a consequence the Commission argued that only “laterdid the IMF and World Bank in particular” along with the EU as awhole see “the need to make government institutions work better.”17

In all, the three previous decades under the Yaounde and Lome con-ventions did little to reduce poverty in ACP countries. All the talk asto the benefits of more trade in reality resulted in “a continued deterio-ration of the relative ACP position in the EC markets.”18

In the post-Cold War world and with the changing character of anintegrating EU, coupled with the realization that the Lome trade pre-ferences had done little to increase export growth or diversify the econ-omies of ACP countries, the EU started to question the rationale ofcontinuing the agreement. In addition, the United States petitionedthe WTO to investigate the trade preferences of the EU–ACP agree-ment. The WTO, in 1996, ruled against the EU, proclaiming thatLome ran counter to international trade rules and should be discontin-ued. Lome was eventually replaced in 2000 by the Cotonou Agreement,which was named for the city of Cotonou in Benin, where the nego-tiations were held. Cotonou, like its predecessor, is centered on sustain-able development, poverty eradication and the gradual integration ofthe ACP countries into the global economy.19

16. Ibid.17. Ibid.18. Sissoko et al., “Impacts of the Yaounde and Lome Conventions.”19. Justice Nwobike, “The Application of Human Rights in African Caribbean,” German

Law Journal, Vol. 6, No.1, 2005, 1381–1406, http://www.germanlawjournal.com/index.php?pageID=11&artID=640


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014



The Cotonou Agreement bases the relationship between the EUand ACP countries on three major pillars, which include a politicaldimension, development aid and trade assistance. The agreement isset for a 20-year period from 2000–2020 divided into five-yearperiods in which revisions are undertaken with respect to current inter-national trade conditions. The fundamental principles that underpinthis agreement are outlined in Article 2:

equality of the partners and ownership of the development strategies: for thepurposes of implementing the objectives of the partnership, the ACP Statesshall determine the development strategies for their economies and societiesin all sovereignty. . .participation: apart from central government as the main partner, the partner-ship shall be open to different kinds of other actors in order to encourage theintegration of all sections of society, including the private sector and civilsociety organisations, into the mainstream of political, economic and social life;the pivotal role of dialogue and the fulfillment of mutual obligations: theobligations assumed by the Parties in the framework of their dialogue shallbe central to their partnership and cooperation relations;differentiation and regionalisation: cooperation arrangements and prioritiesshall vary according to a partner’s level of development, its needs, its perform-ance and its long term development strategy. Particular emphasis shall beplaced on the regional dimension. Special treatment shall be given to theleast developed countries. The vulnerability of landlocked and island countriesshall be taken into account.20

The addition of the political dimension to the agreement has madethe principles of good governance and human rights integral for ACPcountries seeking development aid from the EU. However, it is the areaof trade itself that comprises the most significant aspect of the agree-ment. Having been required by the WTO to end the special preferencesto ACP countries under Lome, the EU attained a temporary waiver tocontinue its trade preferences under Cotonou. The rationale for attain-ing the waiver was to give the EU and ACP countries time to negotiatenew trading agreements. These Economic Partnership Agreements(EPAs) did not violate WTO rules by favoring one group of tradingpartners over another. The EU and ACPs were given until 31 December2007 to implement the EPAs. If the EPAs were not implemented by theexpiration date the EU would not be allowed to extend the waiver, andon January 1, 2008, it would have to cancel the Cotonou Preferences.

20. Partnership Agreement ACP–EC. Signed in Cotonou on 23 June 2000, revised inLuxembourg on 25 June 2005, European Union Publications Office, 2006, http://www.europarl.europa.eu/intcoop/acp/03_01/pdf/cotonou_2006_en.pdf, 6–7


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014



The EPA negotiations were complex and difficult, because unlikein the case of the non-reciprocal trade preferences that characterizedthe Lome Agreements, the EU was looking to establish reciprocaltrade access into ACP countries for its products in order “tofurther its own aggressive market access strategy.”21 The supposedinitial goal of these talks was to conclude EPAs “that wouldpromote ‘poverty reduction, sustainable development and thegradual integration of ACP countries into the world economy,’ andwhich would bolster regional economic integration.”22 By allowingthe Cotonou Preferences to expire and follow the rules of theWTO, the EU made a major shift to a more neoliberal developmentpolicy.23

The EU is currently in the process of implementing EPAs whichhave been criticized as requiring too much trade liberalization fromthe developing countries, opening up their vulnerable markets to aflood of EU products and services.24 The EU was widely criticizedfor its approach to these negotiations when it used “the expiration ofthe WTO waiver to coerce ACP countries into accepting free tradeagreements (FTAs).”25 At issue was that if an FTA or EPA was notsigned, least developed countries (LDCs) would be able to use Every-thing But Arms (EBAs) agreements to continue getting duty-free accessto export their products to the EU. However, non-LDCs such as Coted’Ivoire and Nigeria would have to revert to the Generalized Systemof Preferences (GSPs), which would negatively impact some of theirexport sectors. However, more than half of ACPs refused to sign adeal “because they faced immediate costs: hundreds of thousands ofjobs in their major export sectors, including horticulture, bananas,and tuna, were put at risk.”26 Today, the EU has several interimEPAs with countries such as Cote d’Ivoire, Cameroon, Mozambiqueand others but, has been able to sign only one full regional EPA, theCariforum–EC EPA, finalized with the Caribbean states on October15, 2008.

21. Traidcraft, Economic Partnership Agreements: The EU’s New Trade Battleground, Sep-tember 2003, http://www.ongd.lu/article.php3?id_article=375

22. Oxfam Briefing Paper, Partnership or Power play? April 2008, 2.23. Traidcraft, Economic Partnership Agreements.24. Oxfam, Partnership or Power play?25. Ibid.26. Ibid.


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014


Global Europe

To understand the EU’s approach in seeking a set of treaties that,by all measurements, require far more domestic market liberalizationfrom developing countries than demanded by the WTO, one needsto analyze the EU’s overall share of world trade and access to domesticmarkets of developing countries. In October 2006 the European Com-mission revealed its strategic vision in a report titled Global Europe:Competing in the World. The report outlines the EC’s view that inorder “to deliver growth and jobs” in Europe, markets within theUnion must be further liberalized. However, this internal liberalization“must be complemented with an external agenda for creating opportu-nity in a globalised economy,” which includes their “trade and otherexternal policies.”27 Though this document is bold and direct in itsstatement of the EU’s goals with regard to trade liberalization, amore candid confidential draft version dated 28 June 2006, leaked tothe public, titled “Draft Communication on External aspects of Compe-titiveness”, was produced by the Directorate General for Trade of theCommission (DG Trade).

The document states bluntly that in order to stay ahead of inter-national competition “it is essential to adopt a dynamic approachthat looks at the position of EU firms in a globalizing internationaleconomy.” In addition, the EU must promote “activism abroad” and“should be resolutely outward looking.” According to DG Trade,28

securing the competitive edge of the EU via this “activism abroad”must address non-tariff barriers to EU trade. First, the documentargues, “it is useless to get tariff reductions if the market remainsclosed by e.g. sanitary and phytosanitary (SPS) requirements, publicprocurement regulations, excessive customs controls or if exports areunprofitable due to specific norms to be adopted.” Second, “EU produ-cers need a better access to raw material inputs in order to compete on afair basis.” Third, “we need to further strengthen the presence of EUcompanies in third countries through a permanent establishment. A‘physical’ presence in a foreign country consolidates the image of thefirm, and that of the country of origin; adds predictability to the flow

27. European Commission, Directorate General of Trade, Global Europe: Competing in theWorld: A Contribution to the EU’s Growth and Jobs Strategy, October 2006, http://trade.ec.europa.eu/doclib/docs/2006/october/tradoc_130376.pdf, 2

28. The European Commission is comprised of several departments and services. Thedepartments are referred to as Directorates-General (DGs). The DirectorateGeneral for Trade (DG Trade) is responsible for implementing the EuropeanUnion’s common trade policy.


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014



of trade, not relying on local importers.” This third quote is quiterevealing because the EU has actively rejected the criticism that theEPAs it seeks to sign with ACP countries harm the capacity buildingof local industry and hinder South-South regional integration. Lastly,the EU “should open public procurement markets abroad. This is anarea of enormous untapped potential for EU exporters. EU companiesare world leaders in many areas such as transport equipment, publicworks and utilities.”29

This aggressive posture from the EU results from the realizationthat its overall economic output has “increased by 40% over the lasttwo decades” due to the high quality and brand name recognition ofthe region’s products and services in comparison to those of its compe-titors such as the US and Japan. Nonetheless, the EU recognizes that itmust be able to continue this overall performance if it is going to be ableto stay competitive. In other words, it is the ability to maintain andincrease access to additional markets for its industries that is the trueobjective behind its “activism abroad” in the form of EPAs with ACPcountries, and not the desire to contribute “to the reduction and event-ual eradication of poverty through the establishment of a trade partner-ship”30 and the development of regional integration as is stated in theCariforum–EC EPA.

Cariforum–EC EPA vs South–South cooperation

The emergence of South–South Cooperation is a direct response bydeveloping countries which seeks to offer an alternative to the domi-nance of Western countries in the realm of international developmentassistance. Specifically, South–South Cooperation is a rejoinder to theconditionality, in the guise of free market reforms, which Westernlending institutions such as the EU impose on developing countriesseeking development or temporary financing assistance. Cooperationbetween countries of the South has led to alternative financing insti-tutions such as the Bank of the South, a lending institution establishedin 2009 by Brazil, Paraguay, Uruguay, Ecuador, Bolivia, Argentina andVenezuela to provide funding to countries in the region for infrastruc-ture and social development projects. Other projects include the

29. European Commission, Directorate General for Trade, Draft Communication on Exter-nal Aspects of Competitiveness, Brussels, 28 June 2006, Ref. 318/06.

30. Economic Partnership Agreement: CARIFORUM States and the European Commu-nity and its Member States, October 30, 2008, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:289:0003:1955:EN:PDF, 1.


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014



Caribbean Single Market and Economy (CSME), an effort by the Carib-bean Community (CARICOM) states to establish a single marketamong its members in order to foster sustained economic growthand build capabilities of their industries. The establishment of theseregional institutions and partnerships is vital to the efforts of develop-ing countries to develop their industries and infrastructure to a levelthat would allow them to compete with the larger establish multina-tional industrial and financial institutions of Western countries.

The initialing of the Cariforum–EC EPA in December 2007 rep-resents the mise au point of the EU’s Global Europe strategy. The agree-ment was signed in October 2008 and provisionally applied fromDecember 2008. The two parties to the agreement are the EC (sinceDecember 2009 and the coming into force of the Lisbon Treaty, theEU) and the 15 ACP member states from the Caribbean region. Itwas completed to replace the Cotonou Agreement, which has gov-erned trade relations between the two parties since 2000. The Agree-ment has not yet entered into force “because neither all EU nor allCARIFORUM member states have completed the procedures of ratifi-cation and notification as required by article 243 of CF EC EPA.”31 Thislegally binding treaty has no defined expiration date, promotes fullintegration into the world economic system, enforces “national treat-ment” rules preventing the Caribbean states from discriminatingbetween local and foreign firms in trade practices, and establishesintergovernmental institutions that may supersede state sovereigntyand undermine the region’s efforts to establish the CSME, which isessential to building their collective economic bargaining powerinternationally.32

EPAs have been roundly criticized as simply the imposition ofunfair free market “reforms” by the EU on ACP countries, measuresthat bring unfair competition to ACP domestic markets, impede theirsovereignty with respect to governance issues, hurt poverty alleviationthrough local industry development, and hinder regional integrationefforts among these countries. These criticisms have been aggressivelydenied by the EU. In the EU’s opinion, while these agreements are“ambitious” on their part, they are pursued in a “balanced and just”manner to “liberalise international trade further, opening markets in

31. Joyce van Genderen-Naar and Anthony Morgan, “The CARIFORUM–EC EPA:Where do we stand two years later?” December 2010. http://www.normangirvan.info/wp-content/uploads/2010/12/naar-morgan-epa-update-dec-2010.htm

32. Norman Girvan, The EPA: Fact vs. Fiction Issue 3, April 10 2008, http://www.crnm.org/epa_fact_fiction3htm and “Implications of the Cariforum–EC EPA.”


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014






which European companies can compete and providing new opportu-nities for growth and development.”33 If we are to understand the EU’sargument, we are being asked to believe that aggressively liberalizingACP countries’ domestic markets will not only enable these states toincrease their internal domestic capacity but will also enhance theirregional markets, bringing about long term sustainable development.However, as we have seen from the historical analysis of EU–ACPtrade and development agreements, even under the non-reciprocalpreferences of Lome, which allowed 99.2% of ACP exports to enterduty-free and quota-free34 into European markets, the developmentbenefits did not materialize.

The non-reciprocal preferences meant that for more than twodecades ACP countries were allowed to freely export their productsto EU markets and simultaneously protect their internal marketsfrom EU competition. As the EC’s analysis in its 1996 Green Paperdemonstrated, this generous trade policy had little to no positiveeffects on alleviating poverty, or on fostering development andregional integration in these regions. Nevertheless, we are now askedto believe that reversing this trend and allowing EU firms full accessinto ACP domestic economies will be the deus ex machina to the devel-opment and regional woes of ACP countries. This is after it has beenrevealed in the draft strategy paper that the EU is more concernedwith establishing a “physical” presence in a foreign country for itsfirms so as to not rely on any “local importer.” This particular argu-ment in favor of further liberalization has been repeated ad nauseamby free trade advocates in the majority of developed countries, andnot just by the EU. The problem for these free trade supporters isthat 30-plus years of these policies within the countries where theyhave been applied has demonstrated great disparity between the pre-dicted outcomes promoted by supporters and the observed results onthe ground.

An example of this disparity is provided by liberal market suppor-ters such as David Dollar and Aart Kraay, who claim that in looking atthe high rate of growth in China, India, and South-East Asia, specifi-cally Vietnam, we see a decline in overall inequality.35 But a quickanalysis of that statement shows that the East Asia & Pacific region

33. European Commission, Global Europe (note 27).34. Sissoko et al., “Impacts of the Yaounde and Lome Conventions.”35. David Dollar and Aart Kraay, “Spreading the Wealth,” Foreign Affairs, Jan./Feb.

2002, http://faculty.virginia.edu/usdiphis/readings/Dollar%20and%20Kraay,%20Spreading%20the%20Wealth.pdf


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014



has seen its share of world output grow from 9% in 1995 to 14% in 2006,while South Asia went from 4% to 6%. The Latin America and Carib-bean regions saw a decline in their share of world output from 9% to8% and Sub-Saharan Africa saw no growth at all in its 2% share.36

These numbers are more questionable when we look more deeply atthe individual countries. Liberalization promoters like to point outthat if we take a global perspective of the effects of these policies wesee positive outcomes. But again all of the positive outcomes of thesepolicies come from the disproportionate growth we see in a smallnumber of countries, principally China and India, which have hadan uneven share of the world’s economic output, thus skewing theresults in comparison to the less developed countries in otherregions. It is this exact point that economist James K. Galbraithmakes regarding Dollar and Kraay’s argument.

It is extraordinary that India, China, and Vietnam should be offered as three ofthe five major examples of globalizing success stories. India’s relative successbegan in the 1980s, partly because strict capital controls and long-term officialdevelopment assistance helped protect it from the debt crisis that occurred inLatin America and elsewhere. China grew at first on the strength of agricul-tural reform and then through a program of industrialization financedmainly by internal savings; it has to this day not liberalized its capitalaccount. Vietnam and China remain under the control of their communistparties; these are not “Washington consensus” countries by any means.37

As stated by Galbraith, it is the countries that have not allowed fullunrestricted access to their domestic markets that have managed togrow their economies and are now considered the future source of con-tinuing growth in the world market. Regardless of the documentedfailure of the liberalization leads to development and prosperity mantra,the EU is pushing this questionable ideological trade policy on a setof countries ill-equipped to handle its effects. As more than oneanalyst has noted, “The EPA itself is replete with development rheto-ric, and references to the development objectives of the Agreement.”38

36. World Bank’s World Development Indicators data files – World output is measured in2005 international dollars (GDP in purchasing power parity terms).

37. James K. Galbraith, “By the Numbers”, Foreign Affairs, July/August, 2002, http://www.foreignaffairs.com/articles/58047/james-k-galbraith/by-the-numbers

38. Havelock R. Brewster, “The anti-development dimension of the European Commu-nity’s Economic Partnership Agreement for the Caribbean.” Paper presented at theCommonwealth Secretariat High Level Technical Meeting: “EPAs: The WayForward for the ACP.” Cape Town, South Africa, 7–8 April, 2008, http://www.normangirvan.info/the-anti-development-dimension-of-the-european-communitys-economic-partnership-agreement-for-caribbean-havelock-brewster/


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014






However, the lofty language on the benefits to development found inthe Cariforum–EC EPA does not measure up to close scrutiny. TheOffice of Trade Negotiations (OTN) previously called the CaribbeanRegional Negotiating Machinery (CRNM) provided a breakdown oftrade liberalization of the Cariforum–EC EPA (see Table 1):

By adding together the first four figures of the total for CARICOM(the bottom row), it can be calculated that over 80% of EU imports tothe Caribbean states will be liberalized within 15-years of the signing

Table 1: CARIFORUM timing and percentage of imports to beliberalized, from a base year of 2008.a

COUNTRY 0

5

Years

10

Years

15

Years

20

Years

25

Years

Excluded products

and sectors (no

liberalization

required)

ANTIGUA /

BARBUDA

7 7 25 35 2 2 22

BAHAMAS 32 2 13 34 3 2 13

BARBADOS 48 0 2 24 1 1 23

BELIZE 13 6 10 27 1 3 39

DOMINICA 17 3 18 27 2 1 27

DOMINICAN

REPUBLIC

53 8 5 21 3 5 5

GRENADA 9 14 20 25 2 3 28

GUYANA 53 1 7 18 2 1 18

HAITI 60 0 1 7 2 4 27

JAMAICA 56 0 1 26 2 1 13

ST. KITTS AND

NEVIS

18 16 16 17 2 2 29

ST. LUCIA 38 0 4 22 5 2 29

ST. VINCENT/

GREN

8 7 14 30 2 2 37

SURINAME 9 9 20 27 2 3 28

TRINIDAD/

TOBAGO

73 0 1 18 0 1 6

CARIFORUM 53 3 5 22 2 2 13

Note. aCRNM Note on CARIFORUM Economic Partnership Agreement: What Europe is Offering

Africa: the Pros and Cons of EPAs London, 2 April 2008 http://www.odi.org.uk/events/documents/

252-outline-presentation-junior-lodge.pdf


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014



of the agreement. “This heavy front-loading of the liberalization sche-dule should have been reversed, especially given the very large dispar-ities in competitiveness between the CF [Cariforum] and the EU.”39

This front-loaded schedule will have several effects, amongst whichit will allow the EU’s largest Multi-National Corporations (MNCs) tocompete against smaller local firms in the Caribbean region, andreduce local government revenue due to reduction or elimination oftariffs. In addition, the EPA commitment to “National treatment”requires that EU firms operating in the Caribbean be treated in asimilar manner to local firms. This means that the Caribbean Statesare not allowed to impose any preferential treatment to support theirlocal firms in terms of laws, requirements and regulations, thoughthey are not restricted in providing domestic subsidies.

Yet how are the Caribbean states able to compete in terms of sub-sidies? “In 2006, Europe spent E50bn on support to its farmers”40 in theform of subsidies, an amount that at current rate of exchange with theUS dollar almost equals the total GDP of the Caribbean region in 2006of $89.5 billion.41 Overall ‘National treatment’ deprives Caribbean gov-ernments of a means of fostering the growth of national firms andregional production integration via preferential government pur-chases, tax incentives, subsidies etc.42 Moreover, the EPA calls for lib-eralization in the services sectors such as postal services, education andhealthcare, requiring rules that go beyond the WTO’s General Agree-ment on Trade in Services (GATS). Specifically, “Cariforum countrieswill liberalize access to EU firms and service providers in 75% oftheir service sectors for the More Developed Countries of the regionand 65% in the Less Developed Countries.”43 In general, the liberaliza-tion of local Caribbean economies greatly hinders the ability of thesecountries to build their infrastructure and production capacity,which is a necessary step to being able to compete on the globalmarkets.

In 2007, Heads of Government in the Caribbean approved theCaricom Development Vision report, which outlined a frameworkfor regional development and set a timetable for the completion ofthe Caricom Single Market and Economy by 2015. Regional

39. Brewster, “The anti-development dimension.”40. Oxfam, Partnership or Power Play?41. IMF World Economic Outlook Database, April 2010.42. Norman Girvan, “Implications of the Cariforum–EC EPA,” 21 January 2008, http://

www.normangirvan.info/wp-content/uploads/2008/01/girvanimplicationsepa10jan.pdf

43. Ibid.


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014




integration lies at the core of the Caribbean’s development aspirationsover the next five to ten years, but “there are a number of features of[the EPA] that are distinctly anti-integration.”44 The EPA sets up agovernance structure led by the Joint Cariforum–EC Council, themain body with the power to make binding decisions on all Partiesrelated to the Agreement, which gives the Joint Council greater auth-ority than any other organ of the CARICOM.45 The Council’s influ-ence gives the EU the ability to exert more pressure on the weakerCaribbean members by the virtue of its control over developmentassistance.46 In addition, the EPA has preempted the CSME inseveral policy areas it has yet to consider, gaining commitment onissues such as financial services, investment, public procurement, e-commerce, intellectual property and the environment.47 Moreover,the EPA’s Revision Clause is broad and focuses on extending thescope of the Agreement in the future, leaving the Caribbean Statesvulnerable to more liberalization requirements from the EU.48 Also,with regard to provision on the Rules of Origin, the EU has placednarrow limits on the extent to which third party materials and ser-vices can be included in products to be exported to its market.Lastly, the implementation cost of the Agreement will create a largefinancial burden for CARICOM states. In his comprehensive report,An Assessment of the Overall Implementation and Adjustment Costs forthe ACP Countries of Economic Partnership Agreements with the EU(2005), Chris Milner School of Economics estimated the “overallcost of EPA adjustment for all ACP regions to be about E9 billionwith the Cariforum–EC EPA costing E924 million.49 The amount pro-grammed for the Cariforum Regional Indicative Programme for2008–2013 under the 10th European Development Fund is E165million. Of this, E33 million is earmarked for EPA Implementation.

44. Brewster, “The anti-development dimension.”45. Girvan, “Implications of the Cariforum–EC EPA.”46. Ibid.47. Brewster, “The anti-development dimension.”48. Norman Girvan, “Caricom’s Single Develoment Vision and the EPA: ‘The Fork in

the Road’,” ILO/CCL Round Table, 23-25 June 2008, Power Point presentation avail-able via http://www.normangirvan.info/category/epa-text-and-commentaries/norman-girvans-epa-papers/page/2/

49. Chris Milner, An Assessment of the Overall Implementation and Adjustment Costs for theACP Countries of Economic Partnership Agreements with the EU. Report to the Com-monwealth Secretariat. School of Economics, University of Nottingham, 2005,http://www.acp-eu-trade.org/library/files/Milner_EN_011005_Commonwealth-Sec_Assessment-of-impl-and-adj-costs-of-EPAs.pdf


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014





This is no more than 4% of the total EPA adjustment and implemen-tation costs estimated in the Milner Report.50

Conclusion

The EU from the start of the negotiation process has used veryaggressive tactics to force ACP countries to agree to EPAs and otherFree Trade Agreements that encompass reciprocal trade rules andsupport the “Singapore issues,” which include the more sensitivetrade areas such as public procurement, investment, competitionpolicy and intellectual property, all of which were roundly rejectedby developing countries within the WTO Doha Development Roundnegotiations. These issues were not included in the trade rounds, pre-cisely because they are the areas that developing countries consider themost crucial for development, poverty reduction and fostering a strongbase for future regional integration.

The implications for the Caribbean states and other ACP regionsare nothing short of grave. The EU’s “activism abroad” policy is endan-gering developing countries’ ability to build a viable infrastructure,establish firms that are able to compete internationally and integrateregional production networks that are essential for achieving theirdevelopment goals. South–South Cooperation within this environ-ment will be undermined by the interests of Western countries ifACP countries do not stand together in order to speak with a collectivevoice and contest the domination of the international economic systemby the EU and other Western powers.

50. Girvan, “Caricom’s Single Develoment Vision and the EPA.”


Dow

nloa

ded

by [

Flor

ida

Stat

e U

nive

rsity

] at

21:

00 2

1 O

ctob

er 2

014

paths to development through trade: eu-led trade liberalization vs south–south cooperation

Documents