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Faculty of Law and Criminology
Academic Year 2019-2020
Exam Session 2
FROM YAOUNDE TO COTONOU: A LEGAL ANALYSIS
OF EU-ACP CONVENTIONS IN A POST COTONOU
PERSPECTIVE
LLM Paper
by Laurette Azinywi Mengoh Taning
Student number : 01912987
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Table of Contents
Lists of Abbreviations ... 4
Introduction... 6
Chapter 1 ... 12
The European Economic Community – Africa, Caribbean and Pacific Preferential Agreements (1963-1999) ... 12
A. The Yaoundé Conventions ... 12
1. Preferential trade agreements between the European Economic Community and the Associated African States and Malagasy ... 14
2. Financial aid to the Associated African States and Malagasy through the European Development Fund ... 15
B The Lomé Conventions ... 16
1. Non-reciprocal preferential trading agreements ... 21
2. Trade Protocols on Sugar and Banana ... 22
3. Stabilization funds to support export earnings from ACP Group of States ... 23
C. The impact of the preferential regime on ACP States’ Development………...27
D. Chapter conclusion ... 29
Chapter 2 ... 31
The New Liberal Approach to Trade: The (Regional) Economic Partnership Agreement ... 31
A. The 2000 Cotonou Agreement ... 32
1. The new trade approach introduced by the Cotonou Agreement compared to the Yaoundé and Lomé Conventions ... 34
2. The Importance of the role on non-State actors in the Cotonou Agreement ... 35
B. The Economic Partnership Agreements: Agreements concluded between Unequal’s 39 1. New Reciprocal Regional Free Trade Agreements……… 411 2. The Interim’ Economic Partnership Agreement ... 42
3. The impact of non-preferential trading regime on ACP imports and exports ... 45
C. Chapter conclusion……….46
Chapter 3……….47
The New Perspectives for Post- Cotonou Agreements? ... 47
A. Negotiating Mandate and Envisaged Options for the Post-Cotonou Agreement ... 47
B. Main issues at stake in the current negotiations ... 51
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General conclusion and proposals ... 55 Bibliography ... 59 Appendix A: ACP Share of World Exports to the EC………...66 Appendix B: Trends for EU imports from ACP countries by eligibility to trade regime, 1973-2012……….67 Appendix C: List of ACP States (Seventy –nine in total comprised of Least-Developed, Landlocked and Island States)………..68 Appendix D: ACP - Pacific Countries, Trade with World...70
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Lists of Abbreviations
ACP African, Caribbean, and Pacific Group of States
AASM Associated African States and Malagasy
ASMM Associated African States of Madagascar and Mauritius
AU African Union
CARIFORUM Caribbean Forum
CAP Common Agricultural Policy
CEMAC Economic and Monetary Union of Central African States
CPA Cotonou Partnership Agreement
DC Developing Countries
DG Directorate General
EAC East African Community
EBA Everything But Arms
ECDPM European Centre for Development Policy Management
ECOWAS Economic Community of West African States
EDF European Development Fund
EEC European Economic Communities
EU European Union
EIB European Investment Bank
EPA Economic Partnership Agreement
FTA Free Trade Agreements
GATT General Agreement on Tariffs and Trade
GSP Generalized System of Preference
GDP Gross Domestic Product
LDC Least Developed Countries
MFN Most-Favoured-Nation
NGO Non-Governmental Organization
NSA Non-State Actors
NPTA Non-Preferential Trade Agreement
OBOR One Belt, One Road
OCT Overseas Countries and Territories
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REPA Regional Economic Partnership Agreement
SADC Southern African Development Community
STABEX System for the Stabilization of Export Earnings
SYSMIN System for the Stabilization of Export Earnings from Mining Products
WTO World Trade Organization
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Introduction
The post-World War II period was essentially characterized by a growing economic interdependence among various trading nations, and the emergence of several trading blocs around the globe.1 Emerging from over several decades of Western European colonization, many newly under developed independent Third World countries, especially former British and French colonies whose economies largely relied on colonial trade were eager to adopt and accept this economic revival that would usher them through to international trade and bring a new dawn to the degrading state of their economies2.
Shortly after the creation of the European Economic Community ( EEC) by the Treaty of Rome in 1957, which was the first treaty to establish a collective development policy for its six signatory Member States3, the idea to grant status, promote the economic and social development of its decolonized Overseas Countries and Territories (OCTs) through the
creation of a European Development Fund (EDF)4 and to establish a close economic relation
between them and the Community as a whole5 became one of the first areas of the Community’s
external relations policy. In line with this objective, a trade relationship was established between the European (Economic) Community and Africa, Caribbean and Pacific (ACP) Group of States. The history of this relationship was built on several generations of agreements between an expanding ACP Group of States (named at that time, the Associated African States and Malagasy- AASM) and an evolving European (Economic) Community that became the European Union. The desire to enhance the quality of these agreements was due to poor results in the development of these ACP States, the infringement of World Trade Organization’s
(WTO) basic principles6, criticisms from the Dispute Settlement Body (DSB) of the WTO over
1Sissoko, M. M., Osuji, L.O., & Cheng, W. I., (1998), ‘Impacts of the Yaoundé and Lomé Conventions on
EC-ACP Trade’, Vol. 1, African Economic & Business Review, p. 6
https://pdfs.semanticscholar.org/6f23/1fc36dfe1307285a8a9c666b9c0bf3471a46.pdf?_ga=2.199100136.650422 15.1586047362-1589863708.1578708400),%20accessed%20on%20the%201/04/2020, accessed on 15/02/2020. 2 Ibid
3 These Countries were Belgium, France, Luxembourg, Italy, Netherlands and Germany.
Available at: https://ec.europa.eu/romania/sites/romania/files/tratatul_de_la_roma.pdf, p. 2, accessed on 15/02/2020
4 European Commission News, ‘European Development Fund committee marks 500th meeting’, Brussels, 21 May 2019. https://ec.europa.eu/international-partnerships/news/european-development-fund-committee-marks-500th-meeting_en, accessed on 15/02/2020.
5 Articles 131 – 135 of the Treaty establishing the European Economic Community Rome, 25th March 1957. https://ec.europa.eu/romania/sites/romania/files/tratatul_de_la_roma.pdf, pp.46 &47, accessed on 15/02/2020. 6 Based on the Most-favoured-nation (MFN) Principle enshrined in Article 1 of the GATT (General Agreement on Trade and Tariffs) Agreement and restated in recital 2 of the WTO, countries cannot normally discriminate between their trading partners.
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the EC- Banana III case7 and the changing world order at the eve of the 21st century. From non-reciprocal trade preferences that granted duty free access to the European markets for nearly all products originating from the ACP Group of States under the Yaoundé and Lomé Conventions to the Cotonou Agreement, challenges became more and more visible. The Cotonou Agreement laid the basis for ending non-reciprocal trade preferences through the adoption of (Regional) Economic Partnership Agreements (EPAs), a scheme designed to create Free Trade Areas between the EU and sub-regional entities of the ACP Group of States. This new trade relationship became a big challenge both for ACP countries and the European Union. For ACP countries, especially the Least Developed Countries (LDCs) which had benefitted from the previous preferential system, it became more difficult to integrate into the world’s economy notably given their low domestic saving rate. The situation was worsened by the abolishment of the STABEX and SYSMIN mechanisms which had provided compensation for revenue losses resulting from fluctuating commodity prices and support for the development of mineral resources in ACP countries. The EU was confronted with how to reconcile the preferential status of the ACP Group of states with its obligation towards the World Trade Organization (WTO). More so, with globalization and increased competition, the smooth and gradual integration into the world economy was becoming a major challenge for these countries. Despite these inherent challenges, both parties are still committed to negotiate new trade agreements compatible with WTO obligations and to create new ways for cooperation. Thus, at the verge of negotiations for a new partnership agreement in 2020, there are some costly and painful adjustments to be made. However, the ‘post Cotonou Agreement’ is seen by policy makers and stakeholders as a last resort for ACP countries negotiating or already implementing Economic Partnership Agreements to develop a more robust economic partnership that would help them to generate more trade benefits and stimulate their development.
Furthermore, the 11th European Development Fund which was adopted to cover the period 2014- 2020 is due to expire in 2020 which coincides with the same year the Cotonou Agreement expires. This development fund is the main aid instrument of the European Union towards ACP countries and there has been contemplations and debates between EU Member States on
7 The Appellate Body upheld the Panel's finding that the allocation of benefits to some member states in supplying bananas, but not to others was inconsistent with Art. XIII: 1 GATT Agreement.
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whether or not to ‘budgetise’8 this fund. This necessitates an analysis of the previous trade regimes in order to permit the EU to have a better appreciation of the need to include this fund in its budget. Also, given that the past best explains the present and lays the foundation for the future, it is important to identify the features of the different trade regimes that existed, the gaps that existed and suggestions for a trade policy that would be beneficial to this partnership which from the outset is controversial notably regarding its objectives. Uncovering these past events will therefore offer lessons for the present and future of this partnership most especially for the ACP Group of States to re-assess their strategies and objectives in the face of ongoing negotiations for a successor of the Cotonou Agreement in December 2020. At the end, this LLM Paper will present some policy proposals.
Vast literature on the EU-ACP trade Conventions principally address the question on whether or not this relationship has been effective in achieving its desired objectives. This has led to varying conclusions. On one hand, while some authors state that the agreement has been beneficial and should be upgraded and continued, others assert that it is a failure and should be discontinued when it expires. Sophie and Alex9 in analysing the EU-ACP trade regime, highlighted that over the years, this relationship has embraced and recognized changes of the 21st Century by extending the scope of the partnership from an expansive ideology of mere trade liberalization to social protection. Gauthier, S10 on his part highlighted that prospects for the post-Cotonou agreement should consider incorporating environmental concerns in the renewed agreement which has over the years been lacking in the agreement. With a change in context from Brexit to the Corona pandemia, in analysing future prospects for a post- Cotonou agreement, this thesis takes into consideration the current state of art that has resulted to uncertainties and speculations on how and what the future agreement should reflect.
This LLM Paper will focus on the trade and economic related aspects of the EU-ACP relations more specifically, trade in commodities while analysing its inter-linkage with development.
8 Budgetization as referred in the text refers to the fact that one expects the European Development Fund (EDF) to be integrated into the European Union (EU) budget so that there should be a single financial instrument. 9 Price, S and Nunn, A., (2018), ‘Managing neo-liberalisation through the Sustainable Development Agenda: the EU-ACP trade relationship and world market expansion’ in book: ‘Sustainable Development in Africa-EU Relations’, Research Gate, p. 5
https://www.researchgate.net/publication/329653271_Managing_neo-
liberalisation_through_the_Sustainable_Development_Agenda_the_EU-ACP_trade_relationship_and_world_market_expansion, accessed on 15/04/2020
10 Schefer, G., (2019), “Post-Cotonou and the EU-African relationship: A green light for a renewed cooperation? Bruges Political Research Papers 77 / 2019, pp. 1- 56
https://www.coleurope.eu/news/bruges-political-research-paper-no-77-gauthier-schefer, accessed on the 15/04/2020
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These aspects have always provoked reactions ranging from a positive to a negative and critical attitude. Trade related aspects have also always revealed an overlap of interests between the trading partners, had the most substantive far reaching changes and have always been the subject of contentious agreement between the parties. The thesis will not exceed the scope of the research to other domains like trade in services, the political domain, human rights, environmental or migratory aspects of the agreement.
The general objective of trade cooperation between the EEC and the Third World is to assist in the promotion and diversification of trade, and to spur export oriented industrialization so that these countries can integrate into the world economy. Therefore, the main research question guiding the study is:
“- Have the changes introduced in EU-ACP trade regimes fostered the smooth and gradual integration of ACP countries into the world economy or not?”
Subsequently, identified sub- research questions are:
“-How have (Pre-Cotonou) trade regimes affected EU-ACP trade relations?”
“- How has the new approach to trade (conclusion of EPAs) affected EU-ACP trade relations?” “-What are the perspectives offered by a future Post- Cotonou agreement in 2020?”
Given the current pandemia at the time of writing this LLM Paper, the research method will be consequently adapted. The research method will be an analytical method. That is, a greater part of the study constitutes an analysis of documents. In this light, primary sources of information like the Treaty of Rome 1957, the consolidated version of the Cotonou Agreement 2010 and secondary sources like reports of the European Commission, the European Court of Auditors, and the European Centre for Development Policy Management will be used. This method will be adopted because in order to understand the current state of events governing EU-ACP trade relations, why certain actions and legal provisions govern the present trade relations, a historical analysis of past trading agreements is the key. Furthermore, to avoid the study from being entirely a mere description of past events, qualitative and quantitative analysis of events and data obtained from sources like the European Commission DG Trade, Eurostat, will permit suggestions for feasible alternative choices on what measures could be considered prior the post- Cotonou Agreement and future trade agreements between EU-ACP Group of States. This thesis has been structured on the basis of three main chapters. An intermediary conclusion is made after each chapter. One should stress that basically, the history of the EU-ACP trade
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relations covers two major eras. The period prior to the creation of the World Trade Organization (WTO) (Prior 1994) and the period post 1994. However, there was a delay in the translation of this major event at the level of the EU and ACP countries though this was taken into account within the Cotonou Agreement in 2000. That notwithstanding, the situation evolved positively with the conclusion of the first EPAs in 2008 after four years of
negotiations11. From this time onwards, major changes have progressively been made to trade
arrangements that is shaping the destiny of trade relations between the EU and ACP countries. In order to understand the depth of these changes, the first chapter probes into the time of preferential treatment without reciprocity. It examines principally the features of the Yaoundé Conventions and the Lomé Conventions and why changes were made in this regard. Furthermore, this chapter examines the effects these trade regimes had on the trading capacity of ACP states. This will be done by interpreting and analysing the trade statistics of the European Commission.
Chapter two of the study examines the new approach to trade now governing EU-ACP trade relations. That is, when reciprocity was introduced by the Cotonou Agreement. The main features of this Agreement, with a particular emphasis on the provisions devoted to the Economic Partnership Agreement will be analysed as the EPAs include the most significant changes to trade relations between EU-ACP countries. The chapter will further examine the impact of EPAs on ACP states trading capacity and trade prospects between the EU-ACP states while analysing the issue of Brexit (Britain’s exit from the EU) and how it could affect trade relations between the EU and ACP states given that some ACP states, were associated with the EEC as a result of UK’s accession to the later in 1973. Chapter three examines the new perspectives for the post- Cotonou Agreement due to expire in December 2020. The negotiating mandates of both parties and available trade options envisaged for both parties as well as the main issues at stake in the current negotiations.
The concluding chapter will take into account the different suggestions made for cooperation from the preceding chapters and whether it would be possible to have a win-win trade deal between the EU and its ACP counterparts.
As with the majority of papers, this LLM study is subject to limitations. Firstly, it is limited by the fact that it is subject to biases of the researcher based on observational studies. Moreover,
11 The CARIFORUM- EU Economic Partnership Agreement (EPA) was the first economic partnership agreement concluded with the EU.
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the effect estimates of trade between EU and ACP countries are based on trade statistics established by the European Commission and Eurostat. Therefore, statistical data used in the thesis was not personally carried out by the researcher. Also, the current pandemia (Covid-19) affects access to a number of documents and sources.
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Chapter 1
The European Economic Community – Africa, Caribbean and Pacific Preferential Agreements (1963-1999)
In the aftermath of the Treaty of Rome in 1957 and the decolonization of most former French and British colonies in the 1960’s, the EEC sought to consolidate solidarity links at a multilateral level with its former colonies and territories that had gained their independence. The reason for this new form of cooperation was the desire to guarantee the development of these newly independent ‘Overseas Countries and Territories’ who were not well equipped to withstand global competition12. To achieve this ultimate objective, resort was made to a preferential system of trade following early trading agreements that were signed (the Yaoundé Conventions and the Lomé Conventions) and this had a profound impact on the import and export capacities of these states. This chapter therefore seeks to examine the framework that governed the Yaoundé and Lomé Conventions. It further seeks to probe into the effects these schemes had on these group of states.
A. The Yaoundé Conventions
In 1960, a few years after the Treaty of Rome was signed in 1957, most African states especially former colonies of the EEC member states (now the EU) got their independence though they expressed the desire to continue relations with their former colonial masters. However, this was to be based on legal parity and the recognition of their sovereignty. During this time, the EEC was in search of new markets to expand, hence, this initiative was welcomed
and the governments of eighteen of these states13 and Madagascar agreed to strengthen trade
relations. This led to the signing of the two Yaoundé Conventions, named after the capital of Cameroon. These Conventions covered two main periods that is, the period from 1963-1969 during which the first Convention was operational (known as the Yaoundé I Convention and
12In Article 131 of the Treaty of Rome 25 March 1957, the Member States declared their intention to consolidate solidarity links with overseas countries and territories and to ensure the development of the latter.
https://ec.europa.eu/romania/sites/romania/files/tratatul_de_la_roma.pdf, p. 46, accessed on 13/02/2020
13 These Countries were: the Federal Republic of Cameroon (now the Republic of Cameroon), Burundi, Central African Republic, Congo Brazzaville, Republic of Congo-Léopoldville (now called the Democratic Republic of Congo, Côte-d’Ivoire, Republic of Dahomey (now called Republic of Benin), Togo, Chad, Rwanda, Somalia, Senegal, Niger, Somalia, Mauritania, Mali, Malgache (now called Madagascar), Republic of Upper-Volta (now called Burkina Faso). Most of these States were former French colonies.
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had a duration of five years) and the period from 1969-1975 when the second Convention (the Yaoundé II Convention and had a duration of five years) was operational.
The Yaoundé I Convention was signed between the EEC and Associated African States and Malagasy (AASM). It was considered a continuation of the Rome Treaty14 because its framework was construed based on the provisions that governed the Rome Treaty. The commercial advantages that flowed from this Convention were favourable and suitable for these developing states who lacked the comparative advantage and access to the global market. For the EEC, the Convention guaranteed continuous access to raw materials which they had become dependent on through colonialism. To further strengthen this link and ensure that any subsequent disputes would be amicably resolved, joint institutions (an Association Council, an Association Committee, a Parliamentary Conference and an Arbitration Court) were set up and the partners were represented on an equal footing15. This Convention was operational until 1969 when it expired. It was replaced by a new agreement called the Yaoundé II Convention that was equally mandated to cover a period of five years.
In principle, the Yaoundé II Convention was basically considered an extension of the previous Convention (the Yaoundé I Convention) given that few changes were being made. These changes were both in the structure and the trading regime. For the structure, the number of states increased from eighteen to nineteen when Mauritius Island joined the group. This increase in number brought about a change of name from AASM to the Associated States of Madagascar and Mauritius (ASMM). While the group was expanding, the EEC was equally expanding its trade relations to other developing countries. This was the Arusha Agreement that was signed between the EEC and three East African States (Kenya, Uganda and Tanzania)
on the 24th November 196916. Therefore, this agreement was operational concomitantly with
the Yaoundé II Convention.
Despite the change in structure, the Yaoundé Conventions were essentially marked by certain features. These were preferential reciprocal trade and financial aid that were granted to these states through the European Development Fund (EDF).
14 There were no significant changes to the trade regime compared with the 1957 Treaty of Rome.: Most of the ‘acquis’ from Part IV of the Treaty of Rome was included in to the Yaoundé Conventions.
https://www.cvce.eu/en/education/unit-content/-/unit/dd10d6bf-e14d-40b5-9ee6-37f978c87a01/c303f9ae-1356-4fd2-ad61-b650f07f10ec, accessed on 21/02/2020
15 https://www.cvce.eu/en/obj/the_yaounde_convention-en-27978269-7eba-4c89-8280-a8b231a3bf93.html, p. 2, accessed on 21/02/2020
16 https://www.cvce.eu/en/education/unit-content/-/unit/dd10d6bf-e14d-40b5-9ee6 37f978c87a01/c303f9ae-1356-4fd2-ad61-b650f07f10ec, accessed on the 4 /4/ 2020.
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1. Preferential trade agreements between the European Economic Community and the Associated African States and Malagasy
The trade regime during the Yaoundé Conventions was a reflection of the Treaty of Rome given that the provisions of Part IV were transposed to the Conventions. The Convention was aimed at creating a free trade zone through market access that was provided under a preferential reciprocal trade model. Through this model, AASM had access to export their products duty free to the Community’s market while the Community imposed a Common External Tariffs (CET) on imports originating from third countries. In this Convention not all products benefitted from access to the EEC market. This was the case with agricultural products which had certain restrictions because preferential access to the EEC would have undermined the
provisions of the Common Agricultural Policy17 (CAP) which protected EEC farmers from the
fluctuating prices of agricultural products.
In return for preferential treatment, the AASM states were required to accept goods from the Community and to progressively abolish custom duties, quantitative restrictions (to be abolished within four years)18 and other restrictive measures within six months after the
Convention entered in to force.19 While they traded with states within the Community, they
were obliged to apply the principle of non-discrimination 20 and were also expected not to grant more favourable treatment to a Community Member State than was granted to another Member State21. That notwithstanding, reciprocity was limited by its nature given the very limited number and type of products that were exported from Africa to the EEC.
Despite these free access requirements, trade was not fully liberalized because AASM states were permitted to impose restrictions to protect sensitive sectors in their economies. Therefore,
17The Common Agricultural Policy was a partnership policy that was launched by the EU in 1962 to support European Union farmers, improve the agricultural productivity in Europe and keep the rural economy alive. https://ec.europa.eu/info/food-farming-fisheries/key-policies/common-agricultural-policy/cap-glance_en, accessed on the 4/4/2020
18 Article 6, La convention de Yaoundé, 20 Juillet 1963
https://www.cvce.eu/en/obj/the_yaounde_convention_20_july_1963-en-52d35693-845a-49ae-b6f9-ddbc48276546.html, p. 7, accessed on the 4/4/2020
19 Ibid, Chapter 1, Article 2 (1) (2), Article 3. p. 6 20 Ibid Article 3 (1).
21 Article 132 of the Treaty of Rome 1957 (restated in Article 3 of the Yaoundé Convention 1963) https://ec.europa.eu/romania/sites/romania/files/tratatul_de_la_roma.pdf, p. 46, accessed 4/4/2020 https://www.cvce.eu/en/obj/the_yaounde_convention_20_july_1963-en-52d35693-845a-49ae-b6f9-ddbc48276546.html, p.6, accessed on the 4/04/2020
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the EEC specifically granted these states the authorization to impose tariffs on products originating from the EEC which had the potential to threaten their infant industries22.
Based on a study carried out (Macki, M. S., Louis, O.O, & William, I.C. (1998) P.12)23, the trading capacity of AASM states during the Yaoundé Conventions did not experience a big change as was expected. Rather, despite the reciprocal trade preferences, their total share of exports to the Community dropped from 39.40% during the period 1953 – 1957 (pre-Rome
Treaty period) to 32.57% in 1970- 75 (Yaoundé II)24. Among the African region, they equally
experienced the largest loss in the share of exports which dropped from 14.20% between the period 1953-57 to 12.00% within the period 1958- 63, then 9% within 1964- 69 and finally to 5.71% between 1970-7525. Therefore, from these figures, conclusions can be drawn that the partnership was not so beneficial to the AASM and these states remained exporters of primary products.
2. Financial aid to the Associated African States and Malagasy through the European Development Fund
A second major pillar of the Yaoundé Conventions was financial aid (voluntary donations) and loans that were granted by the EEC to the AASM. Grants were made available through the second European Development Fund (EDF) and the legal basis for this generous act was rooted in Article 132 (3) (4) of the Treaty of Rome which obliged Member states to contribute to investments and the progressive development of these countries26. To give effect to this, funds worth $730 million were contributed by EEC member states to support the socio-economic development of these states and promote diversification in production27.
22Article 3 (2), La convention de Yaoundé 20 Juillet 1963
https://www.cvce.eu/en/obj/the_yaounde_convention_20_july_1963-en-52d35693-845a-49ae-b6f9-ddbc48276546.html, p. 7, accessed on 4/4/2020
23Macki M. S, Louis O. O, & William, I. C. (1998), ‘Impacts of the Yaoundé and Lome Conventions on EC-ACP
Trade’, African Economic & Business Review, Vol. 1, N°. 1, p. 12
https://pdfs.semanticscholar.org/6f23/1fc36dfe1307285a8a9c666b9c0bf3471a46.pdf?_ga=2.199100136.650422 15.1586047362-1589863708.1578708400), accessed on the 4/4/2020
24 Appendix A 25 Ibid
26 https://ec.europa.eu/romania/sites/romania/files/tratatul_de_la_roma.pdf, p.46, accessed on 5/4/2020
27Article 16 (a) of the Convention of Yaoundé 20 July 1963. Out of this amount, $620 million was to be administered by the Development Fund in the form of grants and the remaining was to be provided by the European Investment Bank.
https://www.cvce.eu/en/obj/the_yaounde_convention_20_july_1963-en-52d35693-845a-49ae-b6f9-ddbc48276546.html, accessed on14/04/2020
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The Yaoundé Conventions equally provided aid through another financial body called the
European Investment Bank (EIB)28 whose activities were initially solely confined to Europe.
The bank granted loans at interest rate that could be paid within an extended duration of twenty-five years depending on the duration of the economic scheme to be accomplished and the capacity of the given state to pay the loan29. To assist these countries alleviate the burden of interests accrued on loans collected from the bank, the EDF repaid 3% of the interest on loans made by the EIB. These funds paved the way for social investments in these states like the construction of roads, hospitals, educational establishments. As for the economic benefits, critics hold that these loans were a misplaced priority given that one of the intended objectives of the financial aid to increase and diversify production of goods in these states on the global market was not achieved. Production was still low and less diversified.
To sum up this section, from the outset, the vision of the EC included developing countries (even though their ultimate mission was to create a unified Europe). This is reflected in the provisions of the two Yaoundé Conventions that transposed most of the provisions of the Treaty of Rome. Also, in an attempt to help their former colonies and territories improve their trading capacity and development, the EEC introduced a system of reciprocal preferential trade that was backed with financial aid. However, the intentions were good but the results proved otherwise because these states still registered poor performance on the global market and the system rather made them more dependent on their ‘rich’ counterparts (the EC). Politically, the two Conventions were criticised for being a neo-colonial system hence, when the second Yaoundé Convention expired, it was immediately replaced by another Convention based on different terms and rules. Also, the accession of Denmark, Ireland and the United Kingdom (UK) in 1973 to the EC required a change to accommodate the Common wealth countries most especially British colonies who came knocking at Europe’s door for partnership. This accounts for the reason why the Caribbean and Pacific States later joined the partnership.
B The Lomé Conventions
When the Yaoundé II Convention expired, a series of successive trade agreements were signed in Togo, in the city of Lomé that became known as the Lomé Conventions. The signing of these Conventions started in the first half of the 1970s which witnessed not only a quadrupling of
28 Ibid, Article 16 (b), p. 10 29 Ibid, Article 19, p.11
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OPEC oil prices but also a rapid increase in the price of commodities like coffee, sugar, tea. The Lomé Conventions had certain characteristics which distinguished them from the Yaoundé Conventions. Unlike the Yaoundé Conventions, these Conventions were contractual in nature, meaning preferences were jointly agreed by both parties and the EC could not unilaterally alter the terms of trade. They were negotiated for a continuous period of five years, except Lomé 1V which was negotiated for a period of ten years. Also, for the first time, trade was based on non-reciprocal preferences which meant that commodities from these states could be exported to the European market on a duty free, quota-free basis with no reciprocal obligation to offer same for products originating from the EC member states as was the system under the Yaoundé Conventions. There were in all four Lomé Conventions, the first signed in 1975, the second, signed in 1979, the third in 1985, and the fourth signed in 1990 with a mid-term review in 1995 (usually called Lomé IV Rev).
The Lomé I Convention was operational from 1975-1979. It was marked by the need to incorporate new members into the EC and subsequently, their respective previous colonies into the partnership agreement. Therefore, at the start of this Convention, there was an increase in the number of participating states from initially six EC member states (as in the Yaoundé
Conventions) to nine members30. On the other hand, the number of AASM also increased from
twenty to forty-six states31. Despite a great disparity that existed in the socio-economic, political and cultural systems of these former colonies, they nevertheless agreed to negotiate as a group hence, on the 6th of July 1987, in Georgetown, Guyana, these states signed the Georgetown Convention founding the ‘ACP Group’32. For the first time, they identified themselves as a group of states with common international interests.
In the field of trade co-operation, the objective of this Convention was to promote trade between the contracting parties taking into account their respective levels of development33. Also, it aimed at securing additional benefits of trade for the ACP countries in order to accelerate their growth rate as far as trade was concerned and improve the conditions of access of their products to the European market so as to ensure a balance in trade between the parties.
30 ACP-EEC Convention signed at Lomé on 28 February 1975
http://www.acp.int/sites/acpsec.waw.be/files/Lome-Convention-I-en.pdf, pp.1 and 2, accessed on the 12/4/2020 31 https://www.cvce.eu/en/education/unit-content/-/unit/dd10d6bf-e14d-40b5-9ee6-37f978c87a01/9a69c7f9-1ea2-4e6c-8cdb-1dee40ac5714, accessed on 12/04/2020
32Article 1 of the Georgetown Agreement on the organisation of the African, Caribbean and Pacific Group of
States (ACP). concluded at Georgetown on 6 June 1975, N° 20345, Vol. 1247.
https://www.files.ethz.ch/isn/125455/1399_Georgetown_Agreement.pdf, p.149
33 Title 1, Article 1 of the ACP-EEC Convention signed in Lomé on the 28th February 1975
18
Apart from the non-reciprocal preferential aspect of trade, trade protocols and stabilization funds to assist exporters were important features of this Convention. At the end of its five years mandate, another Convention was signed called the Lomé II Convention.
The Lomé II Convention was signed on October 31 1979 34 in Togo in the city of Lomé. Like
its predecessor, it was mandated to operate for five years duration, that is, from 1975- 1984. It was generally considered to be an extension of the Lomé I Convention given that no major innovations were made. Trade remained on a non-reciprocal preferential basis and the lone innovation was the introduction of the SYSMIN mechanism to support the industrial sector of ACP countries. At the end of its mandate, this Convention was replaced with a third Convention called the Lomé III Convention.
The Lomé III Convention was signed in Lomé in Togo on December 8 198435 to operate from1984 - 1990.Unlike the previous two Conventions (that is, Lome I & II), this Convention was more ambitious in its provisions and vast in scope. In the 1980s, with the enlarging size of both the EC and the ACP Group of States, the development policies of the EC widened. The EC sought to expand the scope of its activities to explore new areas beyond trade. Therefore, significant steps were taken to establish a new model of relations which was not solely trade centric in nature, but a relationship that would be built on self-sufficiency and food security. To realize this ambition, the EC increased the development fund from 4.542 billion European Community unit (BECU) (the fifth EDF in Lome II) to 7.440 billion European Community Unit (BECU) in Lome III36.
Another important feature that marked the period when the Convention was operational was the food crises the plagued many ACP States most especially the African Continent37. Therefore, the Convention was also aimed at resolving the food crisis, increase rural development by assisting small farmers, improve measures to halt soil erosion and retard the advancing desert to Africa due to drought and deforestation activities. In view of this; the EC approved a plan called the Dublin Plan through which the Community in general and its
34 The Second ACP-EEC Lomé Convention 31 October 1979
https://www.cvce.eu/content/publication/1999/1/1/416ece3a-4e44-4771-8c0e-52a754f2e007/publishable_en.pdf, accessed on 15/04/2020
35 The Third ACP-EEC Convention signed at Lomé on 8 December 1984
https://op.europa.eu/en/publication-detail/-/publication/851e7cf4-1d67-4c13-9d1a-abb8a220feef, accessed on 15/04/2020
36http://www.acp.int/content/lome-convention, accessed on 15/04/2020
37 Commission of the European Communities, (1990), ‘Lomé IV 1990-2000, Background, Innovations, Improvements’, Directorate-General for Information, Communication and Culture, Brussels.
19
member states in particular were obliged to supply food before 1985 worth the target of 1.2 million tonnes of cereals, estimated to cover at least one half of Africa’s needs during the period of the crisis 38. In the trade related aspect, there were no new innovations and when it expired, it was replaced by another Convention called the Lomé IV Convention.
The Lomé IV Convention was signed on December 15 1989 in Lomé in Togo39. Unlike the
previous Conventions that were mandated to operate for five years, this Convention covered a longer duration of time. It was operational for ten years and agreed that it will have a mid-term review after five years to check if any modifications were necessary. This is the reason why in 1995, there was a review of the Convention. Lomé IV marked another turning point in the EC-ACP relations given that at the time the Convention was operational, there was a political change in the institutional structure of the EEC. That is, the EEC changed its name to the European Union (EU) in 1992 through the Treaty of Maastricht. The creation of an EU Single Internal Market40 that same year consolidated EU’s external action in the field of common commercial policies based on Article 207 of the Treaty of the Functioning of the European Union (TFEU)41. These institutional and functional changes slowly influenced the EU-ACP trade relations because the preferential treatment of access to the European market began to fade away. The EU’s new external policy warranted their priorities and interest to be taken into consideration in its external relations with third countries (ACP states inclusive). Also, for the first time, the EU embarked on a dialogue with the World Bank (WB) and the International
Monetary Fund (IMF) on how to support structural adjustments to foster economic growth42.
In view of this initiative, many ACP states and the EU agreed that the support for an efficient balance of payments should be included in respective National Indicative Programmes (NIPs),
38 Lake, M. (1985), ‘The Lomé III Convention - Europe's New Model for Dialogue and Development’, Volume 5, Issue 1, Yearbook of European Law, p. 1
https://academic.oup.com/yel/article-abstract/5/1/21/1707923?redirectedFrom=fulltext, accessed on 15/04/2020 39 The Fourth ACP-EEC Convention, OJEC N° L 229, Volume 34, 17/ 8/ 9, p. 3-132
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:1991:229:FULL&from=FR The Fourth ACP-EEC Convention 15 December 1989
https://eur-lex.europa.eu/resource.html?uri=cellar:5fc60e77-0b35-4b68-88bf-de7b2cf8edd4.0008.02/DOC_1&format=PDF, accessed on 15/04/2020
40 https://europa.eu/european-union/about-eu/history/1990-1999/1992_en, accessed on 15/04/2020
41 Consolidated version of the Treaty of the Functioning of the European Union, OJ C 326, 26/10/2012, p. 140 26/10/2012.
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:12012E/TXT&from=EN, accessed on 15/04/2020
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sectorial and general import programmes so that subsequent profits would raise money for other sectors like health and education.43
Also, the scope of this Convention was broadened than was the case in the Lome III Convention. It had provisions like the protection of the forests, the environment, good governance, and democratic rules. It became the first development agreement to include a human rights clause as a fundamental aspect of the cooperation44. Human rights became an essential element and pre-condition for cooperation45. The legal basis for this provision was Article 5 of the Convention which established that cooperation operations will be conceived in accordance with a positive approach where the respect for human rights is recognized as a basic factor of real development and where cooperation is conceived as a contribution to the promotion of these rights46.
In the field of trade cooperation, like the previous Lomé Conventions, it aimed at promoting trade between the Community and ACP Group of States while taking into account their respective levels of development47. Title X, Articles 135 to 138 of the Convention focused on trade development and obliged the contracting parties to develop trade ‘at all stages up to final distribution of the product’48 though it did not introduce any major innovations in the trade related aspect because it maintained former trade agreements that were established in the previous Conventions.
43 Ibid
44 The idea of linking human rights to trade agreements grew from the fact governments in developing countries were reluctant to accept the implementation of human rights within their respective countries as they saw this as undermining their competitiveness in international trade and an interference in their internal affairs. Therefore, in order to compel them to accept this clause, human rights was connected to trade cooperation. Moreover, the human rights clause (HRC) was also intended as a mechanism to allow the EU to suspend its obligations under international agreements in situations of egregious violations of human rights because in the 1970s, the EU wanted to suspend its development aid payments to Uganda in response to atrocities committed by a bloody dictatorship, but it lacked a legal mechanism to do so.
Zamfir, I., (2019), ‘Human rights in EU trade agreements- The human rights clause and its application’, European Parliamentary Research Service (EPRS), pp.2 and 3.
https://www.europarl.europa.eu/RegData/etudes/BRIE/2019/637975/EPRS_BRI(2019)637975_EN.pdf, accessed on the 15/04/2020
45 www.acp.int/content/lome-convention, accessed on the 15/04/2020
46 Article 5, The Fourth ACP-EEC Convention, Volume 34, OJ N° L 229, 17/8/ 1991, pp. 19
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:1991:229:FULL&from=FR 47 Ibid, Part three; Title 1; Chapter 1, Article 167 (1), p. 60
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In the financial aspect, though the Convention was concluded for a duration of ten years, the attached financial protocol rather had a duration of five years. That is, from 1990-199549. Through this, financial and technical support were given to ACP countries to support structural adjustments (a new motivation for aid that wasn’t present in the former Conventions) programmes that were considered necessary. This motivation was backed by an increase in the
EDF was increased from 7.440 BECU (Lomé III) to 12 billion ECU50.
In the mid-term review of the Convention in 1995 (Lomé IV rev), there were no major changes in the trade related aspect given that the provisions of the former Convention (Lomé IV) were
transposed to the Convention. Rather, Lomé IV rev laid emphasis on issues like thepromotion
of human rights, democracy, good governance; strengthening of the position of women; the protection of the environment; decentralized cooperation; diversification of ACP economies; the promotion of the private sector; and an increasing regional cooperation51.
During the entire period of the Lomé Conventions, three major innovations made to the EC-ACP trade relations that differentiated it from the Yaoundé Conventions were the non- reciprocal preferential trade model, trade protocols and stabilization funds to support export earnings.
1. Non-reciprocal preferential trading agreements
In this new system of trade, goods that originated from ACP countries to be exported to the European market were exempted from customs duties and any charges having equivalent effect. Similarly, member states of the Union were obliged not to impose quantitative restrictions or measures having equivalent effect on imports from these countries though they were permitted to impose all these duties and restrictions to products originating from
non-ACP countries except those who benefitted from the Most Favoured Nation Clause (MFN)52.
49 http://www.acp.int/content/lome-convention, accessed on the 16/04/2020 50 Ibid
51Agreement Amending the Fourth ACP- EC Convention of Lomé, Volume 41, OJ N° L 156, 29/05/1998, pp. 3-78
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:1998:156:FULL&from=FR, accessed on the 16/04/2020
52 Articles 2 and 3 of Council Regulation (EEC) N° 199/76 on the conclusion of the ACP-EEC Convention of Lomé, Volume 19, OJ N° L 25, 30/01/1976
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:L:1976:025:FULL&from=FR, accessed on th 16/04/2020
22
Moreover, to benefit from trade preferences, ACP States were subjected to the ‘doctrine of rules of origin’. This doctrine was used to determine the conditions under which an ACP State will benefit from preferential treatment in exporting its products. It was done through the requirement that for a particular product to be exported to the Union, it must fulfil the requirement of sufficient processing in that particular state. Therefore, products which failed to fulfil this criterion of sufficient processing were not granted preferential access to the European market. This requirement attracted criticisms from ACP countries who saw this as a disguised form of restriction on their products entering the European market. Despite this, these states could not protest against this doctrine because they were at the receiving end hence, subjected to the dictates of their trading counterparts.
2. Trade Protocols on Sugar and Banana
Trade protocols were also an important component of trade preferences. During the entire period when the successive Lomé Conventions were operational, the EC granted fixed rates of exports to ACP exporters of sugar, banana, veal, beef and rum. These preferences were granted through trade protocols for each of these commodities. The focus of this section will be on the sugar and banana trade protocols.
The protocol on sugar was attached to the Lomé I Convention in 197553 and it granted
non-reciprocal preferential access to the European market for sugar that was exported from a group of nineteen ACP countries. Moreover, the Community agreed to import a fixed annual quantity
of cane sugar (raw or white) from these producers54 through annual quotas for each country.
Apart from quantitative preferences, this protocol guaranteed a stable price for the purchase of sugar on the European market. Through this price- based safeguard clause, the price of sugar was fixed by a mutual agreement between the buyers and the sellers. Despite this, these prices were still aligned to EC’s own internal price for sugar55 in order to protect its home based producers and prevent competition. This protocol was considered valuable for the economic development of ACP countries because it guaranteed stability in the supply and price of sugar cane for exporters. However, despite these benefits, the protocol was criticized for haven
53 Protocol N° 3 on ACP sugar, The ACP-EEC Convention signed in Lomé on the 28th February 1975, p. 67 http://www.acp.int/sites/acpsec.waw.be/files/Lome-Convention-I-en.pdf, accessed on 16/04/2020
54 Protocol N° 3, Article 4 (1) on ACP sugar, The ACP-EEC Convention signed in Lomé on the 28th February 1975, p. 68
23
increased the dependence of these states on the EC for survival. Moreover, it had quantitative restrictions on sugar that was to be exported and there was no valid reason why this protocol was never granted to all ACP countries but only a few nineteen states although many were signatories to the Convention. The protocol on sugar expired in October 2009 but some of its benefits continued until 2015 through Economic Partnership Agreements (EPAs) and the ‘Everything but Arms’ (EBA) regimes. These benefits are no longer limited to a few nineteen countries but under the EPA regime they are now offered to all countries who sign an EPA or are under the EBA regime.
The protocol on banana was enshrined in Protocol N° 6 of the Lomé 1 Convention56. It provided preferential treatment to bananas to the European market by granting duty-free access for a specific quota of banana. Like the protocol on sugar, preference was given to a few ACP countries and only twelve ACP countries benefitted from this protocol. In 1992, with the establishment of the European Single Market, the preferential access these states had was threatened and many Caribbean bananas farmers requested to continue to benefit under the preferential regime because they feared the EU will be flooded with cheap bananas from Central American plantations and these would restrict their access to the European market. In 1993, through negotiations, the EU granted the request of these Caribbean producers to continue to benefit from a preferential access of their bananas to the European market until the end of Lomé IV pending any possible negotiations to extend this time. However, in 1995, this dream was short lived when the United States (US) petitioned the WTO to investigate the compatibility of this practice with the principles of the Organization. Moreover, the WTO Dispute Settlement Body in the EU- Banana Case57 ruled against this practice hence, its abolition and the Lomé preferential regime as a whole.
3. Stabilization funds to support export earnings from ACP Group of States
Like trade protocols, stabilization funds were a product of the Lomé I & II Conventions. They formed part of the EC’s agenda on financial aid to ACP countries to compensate the latter for losses in export earnings that resulted from fluctuations in prices, or the production of agricultural products exported to the European market. These funds were granted through two
56 The ACP-EEC Convention signed in Lomé on the 28th February 1975, p. 70.
(http://www.acp.int/sites/acpsec.waw.be/files/Lome-Convention-I-en.pdf), accessed on 16/04/2020 57https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds27_e.htm, accessed on 16/04/2020
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mechanisms; the Stabilization of Export Earnings (STABEX) instrument (established in the Lomé I Convention) and the SYSMIN instrument (established in the Lomé II Convention). The STABEX mechanism was usually considered to be the most innovative feature of the Lomé Conventions because it seemed to have met most of the demands voiced by these states in the context of the New International Economic Order (NIEO) on the problem of commodities58. Prior to the establishment of this system, and being exporters of primary products, the African countries, most especially the Least Developed Countries (LDC) faced two major problems on the global market. Firstly, the prices of commodities (industrial or agricultural in nature) were subjected to sharp fluctuations. Secondly, these prices were sometimes below the price of manufactured goods imported from developed countries. Therefore, this mechanism had as major aim to remedy the harmful effects resulting from instability in export earnings. It was also aimed at enabling ACP countries to achieve greater stability, profitability and sustained growth.59 It was against this background that the system of STABEX was established to mitigate losses that ACP exporters were subjected to as well as open them up to the European market.
Through STABEX, a system of minimum unit purchasing price for products that came from ACP countries was established in order to compensate these states for losses resulting from changes in prices on the market. It was different from trade protocols in that while trade protocols dealt with exemptions of custom duties for some products originating from ACP countries, the STABEX mechanism was more of a compensatory financial scheme through which financial aid was given to ACP exporters to stabilise export earnings.
Critics hold that, the system of STABEX benefitted the EC more than ACP countries and this
gratuitous gesture of the EC was a ‘game of interest’ because during the time of colonialism, the EC had developed a high and insatiable dependence on their
colonies (now ACP countries) for raw materials that was needed for their growing industries. Another criticism of STABEX was the fact that the objective for its establishment, being to increase the export earnings of ACP countries in view of increasing their development, was not
58 Guy. M, (1984), ‘African-European Economic Relations under the Lome Convention: Commodities and the Scheme of Stabilization of Export Earnings’, African Studies Review, Vol. 27, No. 3, Cambridge University Press, p. 41.
https://www.jstor.org/stable/pdf/524023.pdf?ab_segments=0%252Fbasic_SYC-5055%252Ftest&refreqid=excelsior%3Ad95d72cd139925727312765e0240d33a, accessed on the 31/ 03/2020. 59 Title 2, Chapter 1, Article 16 of The ACP-EEC Convention signed in Lomé on the 28th February 1975, p. 6 http://www.acp.int/sites/acpsec.waw.be/files/Lome-Convention-I-en.pdf, accessed on the 31/03/2020
25
attained. Also, not all ACP countries benefitted from the system. This was due to an eligibility criteria that was required to be fulfilled by a State before it could benefit from it60. These criteria were a dependency threshold and a trigger threshold. Given that the system was principally aimed at supporting the export of agricultural products, the dependency threshold meant the economy of a given ACP country wishing to benefit from the system had to be dependent on the production of the stated primary product. On the other hand, the trigger criterion provided that an ACP state would became eligible to benefit from the system based on the results of its export earnings61. That is, if its export earnings dropped below the standard established by the EC, it would be eligible to apply for aid under the system. This mechanism caused ACP countries to be dependent on the EC and it rather fostered specialization in primary production hence, retarding their capacity to diversify production and enjoy its benefits.
Also; the Commission to whom applications were submitted was the sole competent authority to examine the cause of the drop in export earnings and upon examination, it could refuse to transfer funds to the requesting ACP State if it considered that the drop was not as a result of changes on the market but that a drop in prices was caused by trade policy measures adopted by the government of that ACP state. Therefore, in such a system corruption and favouritism were definitely unavoidable given the absence of a check mechanism. The STABEX mechanism was abolished when the Cotonou Agreement was signed in 2000. This is because it was likened to the International Monetary Fund (IMF) compensatory package.
Similar to the mechanism of STABEX was the establishment of the system of SYSMIN during the Lomé II Convention. While the economies of some ACP countries largely depended on agricultural products, others depended on the extraction of minerals. Mining had long been an important activity for many ACP countries, being a source of foreign exchange, jobs and funds for the national exchequer62. During the period of recession in the 1980s, the industry's viability was seriously threatened, forcing the EC to take steps to protect the profitability and the capacity of these industries to produce.
The two major objectives of the SYSMIN mechanism were that firstly, it was aimed at establishing a secured and economic development base for ACP countries by safeguarding the ability of the mining industries of these states to produce and export and also, to diversify and
60 Guy. M, (1984), op-cit, p. 49 61 Ibid, p. 229
62 The European Commission, (1996), ‘SYSMIN and Mining Development – Cooperation between the European Union and the ACP States’, p. 5
26
expand the extraction of minerals. Secondly, this mechanism also sought to address the economic consequences that resulted from a decline in the mining industry caused by a drop in the export revenue of products. Therefore, SYSMIN was intended to ensure that the mining industry was viable in terms of local and export markets.
Like the system of STABEX, assistance under the mechanism of SYSMIN did not cover all products. It was limited to copper, cobalt, phosphates, manganese, bauxite, alumina, tin and iron ore63 and this assistance was also based on a trigger criterion that required ACP countries to fulfil certain macroeconomic conditions. Firstly, these states had to be exporters of minerals to the European market and mining had to occupy a prominent position in the country’s economy. Secondly, these states had to show proof that the mining industry has been seriously affected by a temporal and unforeseeable technical, economic or political consequences outside the control of the country concerned or the company’s control.
The procedure for assistance under this system was that applications were submitted by the requesting ACP state to the Commission. The Commission examined the file and either approved the application or rejected it. If approved, the Commission ordered the European Development Fund to disburse funds to the applicant country but if the request was rejected, no funds were granted.
Despite its tremendous role in boosting the mining sector of the ACP Group of States, the mechanism of SYSMIN was criticized for its limited scope of application. Aid was granted to mining industries specifically for eight mineral products out of the numerous that existed. Also, just like the mechanism of STABEX, SYSMIN had the same effect of creating dependency of the ACP countries on the EC. It also encouraged a mono-cultural system of production which discouraged the diversification of production.
To conclude this section, the Lomé Conventions brought remarkable changes to the EU-ACP trade relations given that they were the most generous and innovative trade and aid arrangements that was ever offered by the EU to the ACP countries. All these benefits impacted the import and export capacity of ACP countries.
63 Article 50, The Second Lomé Convention signed in Lomé on the 31st of October 1979, p. 67
https://op.europa.eu/en/publication-detail/-/publication/f06ebd58-a3d7-4b11-966d-02548c8cb918, accessed on 11/04/2020
27
C. The impact of the preferential regime on ACP States’ Development
The Yaoundé and Lomé Conventions ensured that the New International Economic Order (NIEO) sought was realized through the introduction of new ideas to trade and development policies. These Conventions channelled significant amounts of development aid to ACP countries. In the trade domain, the EC preferences on exports from ACP countries had an impact on the economies of these countries who were faced with limited domestic demand. Firstly, preferences were intended to act as a stimulus in expanding ACP exports to the European market. Secondly, it aimed at promoting diversification of exports in order to improve the terms of trade and liberate ACP countries from diminishing returns as a result of high dependence on agricultural production. Thirdly, preferences sought to increase the attractiveness foreign direct investment of these recipient states.
Based on a study carried out in 1998 on the impact of the Yaoundé and Lomé Conventions on EC-ACP trade,64 the ACP’s share of world’s export to the EC region rather declined during the period 1970-1990. Among the LDCs, the ACP countries suffered export losses, given that its share on the world's total exports to the Community decreased from 4.44% in 1970 to 1.78% in 1990 as reflected on Appendix A and this was the period when the preferential regime (Lomé Conventions) was in operational. Similarly, another study carried out for the European
CommissionDirectorate-General for International Cooperation and Development (DEVCO) in
2015 on the assessment of the economic benefits generated by the EU trade regimes towards the developing countries65 revealed that during the period 1975- 1999, when the Lomé Conventions were signed, there was an insignificant increase in the volume of EC Imports from developing countries (ACP States inclusive) as reflected on Appendix B. This was also a period when the preferential regime was operational. Therefore, from these studies, it can be concluded that trade preferences had an insignificant impact on ACP countries given their low rates of trade on the world trade market.
64 Macki M. S, Louis O. O, & William I. C, (1998), op-cit, pp. 11- 20
https://pdfs.semanticscholar.org/6f23/1fc36dfe1307285a8a9c666b9c0bf3471a46.pdf?_ga=2.199100136.650422 15.1586047362-1589863708.1578708400), accessed on the 1/04/2020.
65Martin, H, T, Tine, J, Christian, G, L & Johannes V, B, (2015), ‘Assessment of Economic Benefits Generated
by the EU Trade Regimes Towards Developing Countries”, Volume 1, European Commission, Copenhagen, p.
34
28
Possible explanations to this downtrend effect of trade preferences are firstly the implementation of the doctrine of the ‘Rule of Origin’66 which formed an integral part of the preferential trading model. These rules of origin are either preferential or non-preferential in nature. They are preferential when used to determine whether or not a good qualifies for the preferential tariff offered under an agreement and are non-preferential when they apply in the absence of any trade preferences. The potential for ACP countries to benefit under the Lomé Conventions largely depended on whether they complied with the preferential rules of origin requirements. It conferred an ‘economic nationality’ on goods attributed to the country from which it was shipped67. This doctrine further set out the criteria to determine whether a product came from a particular country and based on the results, trade measures like tariffs, quotas and trade remedies were implemented. The system was a disincentive to the diversification of production because it rather encouraged ACP countries to continuously produce primary products in order to keep benefitting from the privileges offered by the system. With the fluctuating prices of primary products on the global market, the export capacity of these states also remained low.
Moreover, another reason for the low export capacity of the ACP countries were quotas on exports that were imposed by the EC on products originating from the ACP countries. From the Yaoundé Conventions to the Lomé Conventions, a restrictive quota was placed on the products from the ACP countries. The effects of this quantification meant states which had the capacity to export more products were prevented from doing so and in such a situation, production is bound to be low and consequently export capacity.
Also, custom controls and the award of financial aid under the compensatory systems were subjected to an evaluation by the Commission. That is, the authorities of ACP countries who sought to benefit from the compensatory aid grants had to submit their respective files to the Commission who examined if the requesting state was eligible for the grant or not based on records from its declining exports to the Community68. The effectiveness of this system of administrative control is questionable due to the several reasons. Firstly, there were no
66 Rules of origin, in international trade are legal standards supporting the differential treatment of some products on the basis of their country or region of origin. They are used to make more precise any aspect of trade law or trade policy that treats goods differently depending upon their country of origin. For example, quotas, countervailing duties, and anti-dumping measures restrict goods imported from specific producing countries. https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm, accessed on 1/04/2020
67Eckart, N, (2010), ‘Rules of Origin in EU-ACP Economic Partnership Agreements’, Issue Paper N°. 7, International Centre for Trade and Sustainable Development (ICTSD), p.11
68 Title II, Chapter 1, Article 19 (3), (4) & (5) of the ACP- EEC Convention signed at Lomé on the 28th February 1975, p.7
29
secondary bodies to check whether the goods are eligible to benefit from preferences or not, secondly, if the Commission’s report was correct and legitimate and with the absence of an anti-fraud clause in the provisions of the Convention, there are doubts and uncertainties whether the aid mechanisms were not void of corrupt practices. This view was also reflected in an observation report of the European Court of Auditors in 201469 which stated that:
“The capacity of the countries benefiting from preferential treatment to
administer the arrangements has rarely been evaluated by the Commission. In addition, no monitoring visits have been made. The Commission therefore has no assurance that these countries are able to ensure that only eligible goods are exported under PTAs”.70
D. Chapter conclusion
Trade, most especially with third countries has always been a key area and priority of EU’s North- South external policy. This was reflected in its cooperation agreements with former colonies through the Yaoundé and Lomé Conventions. Historically, this cooperation was considered to be a favourable and reliable approach to these newly found states who craved to be recognized and integrated into the world economy yet lacked the comparative skills to ascend. Therefore, to help these states (ex-colonies) realize their dreams, the EC first adopted a system of reciprocal preferential trade as was the case in the Yaoundé Conventions and was later transformed into a discriminatory system of non-reciprocal trade preferences in the Lomé Conventions. Furthermore, an institutionalized financial system was equally established through the EDF and the EIB through which financial assistance was given to these states to boost their exporting capacities and spur domestic production. Features of these trade models have continuously shaped the EU-ACP trade relations till date. Overtime, the preferential non-reciprocal trade model proved not to be the best trading practice because its intended objective to integrate the ACP countries into the global economy and subsequently increase their export capacity was not achieved. Moreover, with the coming into force of the WTO, this ‘artificial system’ of trade that did not reflect a perfect market economy was considered a breach of
69European Court of Auditors. “Are preferential trade arrangements appropriately managed? Special Report N° 02/2014, Luxembourg, p. 34
https://www.eca.europa.eu/Lists/ECADocuments/SR14_02/QJAB14002ENC.pdf. Accessed on 5/04/2020 70 Ibid
30
international trading rules. This led to the quest for a new and modernized system of trade that would govern the EU- ACP relations and would comply with international trade standards. These reasons paved the way for the signing of a new partnership agreement in 2000 that was known as the Cotonou Partnership Agreement.
