Summary: EU Commissioner Mandelson on Economic Partnership Agreements (19 October 2006: Brussels)
Peter Mandelson, EU Trade Commissioner, Address to the European Socialist Party Conference on Economic Partnership Agreements at the European Socialist Party Conference at the European Parliament, Brussels
If I've learnt one thing in two years as Trade Commissioner it is that there is no link more politically emotive than the link between trade and development.
I've always said that Economic Partnership Agreements are the European Commission's most basic expression of the desire to put trade and development together. And sure enough, where trade and development go, politics and emotion are not far behind.
The Commission has been subjected to a fair amount of criticism over the last few months on EPAs. We've been accused of not listening. We've been accused of ignoring ACP concerns again and again. The very same people who organised this conference today chose to sell it to the media yesterday as a "clash" between myself and "poor countries". Well, that's an insult to the process and to the very goals we are trying to achieve.
We are partners, the ACP and the EU, not combatants. This is a partnership. There's no monopoly of wisdom. There is shared experience: and a duty to listen to each other, and learn from each other. I'm ready to address genuine anxieties. I always have been. I'm ready to listen and respond to genuine concerns. I'm tired of rhetoric and bored with slogans, and politicians who seem to care as much about playing the gallery as they do about the real arguments.
Why EPAs?
Our basic imperative in this work is to repair a trading partnership that is failing economically and needs to be put back on the road to sustainable development.
Put simply, after more than thirty years of bilateral trade with Europe, the ACP still exports just a few basic commodities. Most of those basic commodities fetch lower prices than they did twenty years ago. The benefits of preferential access are eroding fast and the risk - the looming risk - is that ACP economies will be stranded outside a global economy on a shrinking island of commodity trade.
The response of some is to blame globalisation and encourage ACP countries to shake their fists at it. Or to blame trade, as if trade is something you are exploited by, rather than benefit from. Yet trade drives economic growth and lifts people out of poverty. It is the only sustainable road to development.
The Economic Partnership Agreements are a road out of dependency - out of a contracting share of export trade. They are designed to help build regional markets, build up productive capacity and diversify ACP economies. And ultimately they are designed to develop trade between the EU and the ACP regions - not because we want to force open ACP markets to our imports, but because a market that is open to imports is a healthy market. It means lower cost goods, downward pressure on inflation and a
platform for a country's exports.
There obviously won't be full reciprocity - I've said that. These aren't FTAs - not in the way anyone understands that term. They are development tools.
While we can and must set out to help open these economies within a regional customs union and behind a regional tariff, there will be all the flexibility appropriate for industries that need a careful transition to exposure to wider competition. First regional competition when ready. Then wider competition later on.
Of course our agreements will have to be WTO compatible. But I've said that I will argue the case for flexibility at the WTO. Everything will be negotiated. Everything will reflect needs.
I want to focus on three issues on which the Commission has been explicitly criticised. Development assistance. Alternatives to EPAs. And the so-called Singapore issues - rules for investment.
Development Assistance
The first is money. This week the General Affairs Council took up the issue of aid for trade, and the link with EPAs. It confirmed the EU's commitment to increase trade-related assistance to 2 billion Euros a year by 2010, with a substantial share going to the ACP. Alongside this is a substantial amount of EPA-related EDF funding. If confirmation was needed, we now have it: the money to accompany EPAs is there.
But let's be clear about the value of development aid. It is a means to an end - it's a way of translating policy reform into practice. All the money in the world won't build a regional market in which ACP businesses can trade and grow without the right policy framework being put in place.
And so long as the debate focuses on the size of the financial envelope rather than the policy reform it is intended to pay for I'm very sceptical that the long term results will be there.
The money is now on the table but what we really lack are specific, quantified proposals on how to use it.
We can't get the regional balances right, we can't put the money to work in the way that it is intended if we can't identify priorities. In many EPA regions, this kind of information is still lacking, and I am simply not in a position to write blank cheques. Especially not cheques for adjustment purposes or capacity building when the foundations for these things are not yet being laid.
Rules for investment
Second is the issue of rules for investment. Building successful regional markets is of course about much more than just harmonising tariffs. To attract investors you need clear rules; legal security and transparent frameworks. Transparent markets for investment in areas like public procurement are good for taxpayers and good for good governance.
There is no question of forcing the ACP to accept rules they don't want. But it is vital to be clear-eyed about this.
This week's UNCTAD report on global investment in developing countries highlighted the extent to which Sub Saharan Africa is falling far behind the rest of the developing world in attracting the foreign investment that is vital for development. Asia and Latin America are channelling foreign investment into the infrastructure and job creation their developing economies need. They use it to pump prime economic growth.
Africa is trapped by barriers to inward investment, nationalised industrial fiefdoms, and fractured regional markets. Africa's own investors choose to invest outside of the continent.
African capital flight is an expression of despair about the future. The continent is leaking hope and confidence. And the UNCTAD report offers the clearest imaginable argument why the argument for clearer investor rules in these regional markets is a pro-development agenda.
Those who dismiss the EU's position in these negotiations as 'forcing open' these markets to unwanted EU investment, or accuse the EU of 'peddling a corporate agenda' not only misrepresent the EU's intentions, but are wilfully misrepresenting the economic evidence. The only force being applied is by those closing the door to investment that Africa urgently, urgently needs.
In the SADC region, for example, we're disappointed by the lack of willingness so far to talk about these issues. In other regions, we see more openness. Again, the choice lies with the regions themselves. But I'm not going to shy away from the intellectual arguments on this. I can live with criticisms from a few NGOs if this is the price to pay to help genuine progressives and reformers in the ACP who want to put in place the conditions for investment and growth.
Alternatives to EPAs
Thirdly, and lastly, a word about alternatives. Successful change is about balancing risks and opportunities. I don't deny that there are risks in the EPA project. That's inevitable in anything involving ambition and innovation. And I don't deny that are difficult political and economic choices. We always said that we would offer an alternative to countries that wanted who weighed those risks and wanted to opt out of the EPA process.
So the question of alternatives to the path we have chosen is a valid one. I'm always open to the arguments, but I don't believe there is any remotely realistic alternative to EPAs that have the same content and potential.
We could push on with unilateral preferences. Something like Generalised System of Preferences: tariff only, less generous access than under Cotonou for many and no economic governance framework. Is this a long term development model? Not in my book.
The WTO waiver for the EPAs to be negotiated was obtained on a time-limited basis. Extending it is not an option. The idea of a new waiver sometimes comes up. But those who know the WTO will know that it's far from clear we could even obtain a new waiver. It wasn't in the deal at Doha in 2000.
Non-ACP countries, some of whom are actually poorer than some ACP countries, already resent the favourable discriminatory benefits we provide the ACP.
Make no mistake: if we were to obtain a waiver extension a hefty price would be paid in the form of further ACP preference erosion. The best we could hope for would be to secure more years of a failing agreement and we would secure it on weaker terms, with ACP countries paying the long term price. Again that is not my idea of a superior development model.
Conclusion
A few words in conclusion. The EU cannot make the challenges of globalisation disappear for the ACP. Where so many developing countries have done well, using trade to build businesses and jobs and long-term prosperity, ACP countries have struggled. That will not change while ACP economies remain dependent on volatile commodities. Undiversified; poor conditions for investment; dependent on rapidly eroding preferences.
Our objective has always been and it remains to foster incremental, sustainable change. I fully understand the difficult constraints under which so many ACP regional and national administrations operate. But we are making progress. The politically difficult decisions that confront us are the mark of a negotiation that has moved well beyond the easy choices.
West Africa, for instance, has defined a regional policy framework for competition and an external tariff for 2007 - and no-one bullied them into it. In the Caribbean, all regional members are now involved in a substantial negotiation. Countries are addressing the problem of overlapping trade agreements. The African Union, for its part, has acknowledged that EPAs are supportive of their own efforts to rationalise Regional Economic Communities.
So what I'm going to do, with Louis Michel and with fellow ACP negotiators, is simply this: I want to keep working on the difficult but vital work of policy reform and regional market building. We now know the money is there to help implement the right choices. We now have to make the choices.
Second, I want to have a rational negotiation on regional integration and market opening. The EU has offered the clearest possible reassurances on extended timeframes and sectoral flexibilities. But I'm going to start from the principle that in the right conditions the only sustainable economy is one that is progressively open and diversified. How we get from here to there is up to the ACP. But we have to get there. And don't expect me to opt for political correctness and go silent on clearer
rules for investment - because I've read the economic evidence and I won't.
And third, Louis Michel and I will be working on targeting Europe's development support even more closely to the adjustment needs that will flow from these plans. That's our responsibility and our commitment.
And I look forward to being back here in the months to come to update you on our progress.
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