Brussels, 12/02/2004 (Agence Europe) - On Thursday, the European Commission unveiled an action plan on Thursday in which it proposes that the EU help developing countries, particularly ACP countries (Africa, Caribbean, Pacific) deal with fluctuating prices of basic agricultural commodities such as coffee, sugar, cotton, cocoa on the world market (EUROPE 7 February p 9). This action plan is the subject of two communications jointly prepared by Commissioners Poul Nielson (development policy) and Pascal Lamy (trade policy). the first is entitle basic agricultural commodities dependency and poverty - draft EU action plan" and involves basic agricultural commodities and looks at the instruments available to the EU and for which the Commission recommends a subtle dose in its integrated and global approach to the problem. The second communication, "EU-Africa partnership proposal in support of development of the cotton sector" sets out the orientations outlined in the general communication. The choice of cotton as a case study was requested by the current negotiations at the WTO where the issue has become particularly delicate due to the joint pressure exerted by the 4 West African country producers of cotton, who are demanding that the issue is dealt with urgently and separately. This choice also responds to the request made by the Council to the Commission last November to examine the issue, following, a French demand that promoting an initiative in support of African cotton. As the same time, the Commission adopted on Thursday (this is the most practical part of its action plan) a draft Council decision, prepared by Commissioner Nielson to make the methods for employing the Flex instrument more flexible. This instrument allows (within the Cotonou Agreement between the EU and ACP) for the granting of compensation for short term fluctuations in export income from ACP countries (Annex II of the Cotonou Agreement). The Commission hopes that this proposal can be implemented in the spring, will need the approval of the Joint ACP-EU Council.
Poul Nielson: No miracle remedy but array of different instruments
In his presentation to the press of these initiatives, Poul Nielson set the scene, stressing that "the trade n basic agricultural commodities on the world market is a major source of jobs and direct and indirect income for millions of people in developing countries.
He said that in West and Central Africa, more 15 million people depend on cotton as a means of subsistence and more than 50 developing countries are dependent for more than 20% of their export income from three basic products (indeed less than three). The Commissioner also said that they were convinced that traditional basic products still had a key role to play as a source of jobs, income and export income as well as for reducing poverty in dependent countries.
The Commission acknowledged that the problem of falling world prices and investment linked to stagnant competition, as well as poverty and persistent dependency in these countries and the need for an urgent response but said that this could not be overcome in a single day.
He said that there was no miracle cure and that a general compensation regime is not up for grabs. He did not offer any details but proposed an integrated approach for basic agricultural commodities, with special attention to producers.
He said that fund brokers had encouraged the LDCs to grow coffee for diversifying their production with the result of a crisis in coffee as Vietnam, (which is not a traditional coffee grower) becoming one of the largest producers. This means that the Commission has a choice between proposing an array of instruments: support for global strategies for all chains of basic products in counties highly dependent on these products, support for new financial instruments and insurance systems for covering risks linked to fluctuating prices, promoting social responsibility of companies internationally, support for improving capacity and aid services at producer level and improving supply.
According to Poul Nielson, cotton clearly illustrates the traditional schema of basic agricultural products: most downstream activities seeking added value is ensured by industrial countries, whereas the least profitable upstream part is ensured by the LDCs. According to Nielson it is necessary to ensure good coordination between development and trade policies of the EU.
Spending some time on the proposal aiming to make Flex use more flexible, the Commissioner explained that that the Commission was going to propose the making more flexible of eligibility criteria, with experience demonstrating that they are not flexible enough for countries being able to benefit from available resources.
This will partly involve the lowering of the threshold for triggering the instrument (bringing the threshold to 2% of lost export revenue instead of 10% currently, and remove the criterion of impact of public deficit of the country, currently set at 10%), and also to extend this instrument (currently limited to just the least advanced ACP countries), to landlocked and island countries. "We have undertaken a simulation exercise retrospectively to measure the impact of these changes. If the Flex mechanism had done this from the start, it would have maid 255 million EUR available to 29 countries, rather than 35.6 million for just six countries, as was the case between 2000 and 2002, with the existing criteria".
Pascal Lamy: the EU is open, but the others should do as much
Commissioner Pascal Lamy presented the commercial plank of this initiative to the press. This part "brings coherence to what we are doing multilaterally and unilaterally, and what we are starting to do bilaterally", including a positive response to African demands on cotton, which he says are "100% aimed at the United States". The three component axes are:
1. Market openness. That of the EU is "already fully open or will be [for sensitive products such as sugar: Ed] at the and of the Everything But Arms (EBA) transition period", as the EU's initiative undertakes to reserve access free of duty and quotas to all products from the least developed countries. "We still need others to do the same", especially the US, which still declines to follow Europe's lead in this EBA openness, but the European initiative has had "a certain amount of success" in Canada and New Zealand, said Mr Lamy. "We will continue to ask them to do it and we will ask the G20 countries to offer preferences to LDCs", promised Mr Lamy;
2. Tariff scales (very low customs on raw materials, rising for processed products). "Despite complaints on this from our industries, we are prepared to discuss this in a WTO context" and to reduce duty as long as others do the same (as this is a multilateral context), said Mr Lamy;
3. Ways to improve the LDCs' offer. "Developing countries which depend on raw materials are at a particular disadvantage in their efforts to draw from the international trade system", explained Mr Lamy. He quoted the example of African cotton producers, which he feels clearly illustrates that access to the market is important, but that trade is not a panacea (the prove is that opening up the European market completely to African cotton is not enough to solve the problem). Other actions are therefore necessary, and "we must support the development of supply and continue our efforts to reduce aid which works to distort trade", he said, pointing out that "these are key objectives in negotiations underway at the WTO, which must start again as soon as possible".