Sunday, 14 October 2007

EU rethink on trade threat to ex-colonies

By Alan Beattie in London and Andrew Bounds in Brussels

Published: October 8 2007 02:01 | Last updated: October 8 2007 02:01

The European Union appears to have backed away from a threat made just last month to end unilaterally trade privileges extended to its former colonies unless they sign new trade deals.

Peter Mandelson, the European trade commissioner, had warned the so-called African, Caribbean and Pacific (ACP) countries that, unless they agreed to open up their services and government procurement sectors, he would be forced to reduce their tariff-free access to the 500m-strong market on January 1.

The news sent shockwaves through the business community in the 31 richer ACP countries, which would find themselves having to apply for import permits. The rest of the 70-plus ACP states are so poor as to benefit from World Trade Organisation rules allowing quota-free, duty-free access.

Last week, however, Mr Mandelson announced he was prepared to sign an interim deal with the Pacific region of about 20 island states covering goods only. Other controversial areas Brussels had fought for, where its companies have an edge – such as services trade, investment rules and opening the government procurement market – could wait until a second stage.

Campaigners said that second stage might never come. “Finally the cracks are beginning to show and the Commission is facing the reality that it cannot impose provisions in EPAs [Economic Partnership Agreements] that the ACP does not want,” said Alexander Woollcombe, of Oxfam. “Nonetheless a goods-only agreement could still be harmful. The devil is in the detail. Now is the time to focus on development, not a WTO deadline.”

The EU offered the same terms to west African countries this month, in a letter seen by the Financial Times. However, a goods-only deal has been rejected by the region. An official from the Economic Community of West African States said on Friday that it wanted instead to extend talks by two years.

In the letter Mr Mandelson and Louis Michel, the development commissioner, said it would be illegal to continue policies struck down by the WTO once an initial five-year waiver ended on December 31. The WTO also required some market opening by ACP countries, though this would be less than for the EU, which would immediately scrap tariffs on more than 99 per cent of products, whereas west African countries could have up to 25 years on the most sensitive products.

The Commission is under intense pressure to avoid a clash. The UK and other EU countries pressed Mr Mandelson to settle for a goods-only deal at a meeting in Madeira last month. Don McKinnon, the secretary-general of the Commonwealth of 53 mainly English-speaking countries, also met Mr Mandelson and emphasised that point.

“This sort of thing is of concern to us because you are dealing with a heavyweight against many flyweights. They are not equal. The deadline is all about creating a crisis and in those situations the big guy is going to win,” he said in an interview with the FT. “The EU has to give more than it is getting.”

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