3/12/2004
Speech by Peter Mandelson, EU Trade Commissioner. "The ACP-EU Relationship in the Global Economy", ACP-EU Ministerial Brussels, 1 December 2004

Ministers, Excellencies, Ladies and Gentlemen:

I am very pleased to be with the ACP group today, one week into my mandate as EU trade commissioner. This early meeting is important to me.

There is a fundamental solidarity in the ACP “family” of nations, and there is a fundamental solidarity at the core of the EU’s partnership with you.

I have fought social and economic inequality throughout my career as a politician in the United Kingdom. In my new capacity, I want to contribute to a drive for global prosperity and social justice through more open, rules-based trade, for the benefit of all. This includes the responsibility that we Europeans have towards our friends and partners in the ACP.

There are a number of issues we need to address today, both because they have an impact on your economies, and because we have to ensure that their consequences are fully integrated into our policies.

First of all, the multilateral trade negotiations. Delivering development has been the core of the EU’s approach to the Doha Agenda. I may be the new pilot, but I can guarantee to continue to steer this course. Not because it is too late to change, but because I am totally convinced that the direction is the right one.

Trade policy and WTO rules must not be, and under my watch, never will be, the prerogative of a small club of wealthy nations. The stakes are simply too high: a small increase in export trade is worth probably twice what all the aid and debt relief can do combined, to combat poverty and promote development. Multilateral trade policy must ensure that the poorest benefit from globalisation, and do not lag further and further behind as others race ahead.

And that race is on: globalisation brings greater competition, and with it a premium to those nations that can achieve economies of scale and thereby benefit fully from the free play of comparative advantage. Yet pro competition though I am, I am not in favour of it at any price.

For my part, as a European, I want the gradual establishment of a level playing field where core values - such as social and environmental standards, transparency and good economic governance - are respected.

And for the least developed countries we need to engineer their carefully managed integration into the global trading system. This properly sequenced process I label as progressive trade liberalisation – in both senses of the word progressive.

The Doha Challenge

For the first time, a “classic” trade negotiation has a clear development remit.

This impels us to craft a global strategy for small and vulnerable economies. The Doha mandate has to be implemented in a way that takes account of the distinctive development profile of each individual developing country.

Let me be clear on this: the EU’s objective is not to try to “divide and rule” the developing world; but advanced developing countries must be aware that they can not be granted the same advantages and privileges as “weak and vulnerable” countries. If a Doha deal is to be done, they will have to contribute significantly to the package. I said this in diplomatic, but clear terms from day one, when I visited Geneva: the EU cannot be the sole banker for the Round.

The G90 played a prominent role in the July Framework Agreement, erasing the memories of division between us at Cancun. Let us emulate this approach, and through dialogue, let’s make the Hong Kong WTO Ministerial meeting a landmark for progressive trade and development.

For this to happen, it is essential to complete what we have started on agricultural issues. It is also necessary to make much faster progress on non-agricultural issues: trade in goods, services, and other issues that are relevant in a complex global economy, such as the protection of geographical indications, or the disciplining of anti-dumping practices. We need radical progress in all areas – agriculture included – in order to achieve a balanced and ambitious outcome, which delivers benefits to all. Without this, I will not be able to deliver Europe to the final outcome of the Round.

The EU-ACP Economic Partnership Agreements

But, in addition, - and importantly - we must nurture our bilateral relationship. We have a solid framework, the Cotonou Agreement. We also have the prospect of Economic Partnership Agreements, which are now being negotiated at the regional level. I am convinced that trade, and more specifically the EPAs, are crucial tools in our drive for global prosperity and for social justice.

Ever since I lived in Northern Tanzania for a year as a young man, I learned at first hand that there is no simple panacea for development. We have to use all the policy tools we have at our disposal. My fellow Commissioner, Louis Michel, and I are both committed to work constructively together to reinforce the link between trade and development.

The economic power balance in the world is shifting at remarkable speed. A more complex and competitive world, with the emergence of the likes of China, Brazil and India as great economic powers, demands fresh thinking and a sophisticated response. For the ACP countries, I see this as including the promotion of regional trade integration between close neighbours, and a drive to tackle supply-side constraints. This is exactly where our negotiations on Economic Partnership Agreements should focus.

Let me take the example of Africa: EPAs should be seen as building blocks towards a longer term vision of African integration - the vision of the African Union and NEPAD. They dovetail with the objectives set out by African leaders. Let there be no mistake: as with NEPAD, you are in the driving seat. And we will support your priorities and your ambitions.

Our joint approach to EPAs is to develop regional markets, with a common set of border measures, tariff and non-tariff, as an incentive for that pivotal requirement for successful development: investment. The first priority is to develop and sustain stable, transparent and harmonised rules at regional level, so that a new entrepreneur in Burkina Faso knows that what he produces in Ouagadougou will not face unnecessary trade and administrative barriers when exported to Accra.

Setting rules for regional development are at the heart of the EPA process, at the heart of the Cotonou mandate, and are central to the roadmaps that we have jointly agreed for the negotiations. But again: you, the ACP, are free to decide which issue to tackle first in your own agenda for regional integration.

Only when regional integration is well established, should we pursue a second phase where the objective involves reciprocal access for EU goods or services. Then, at the very end of this negotiating process, comes full integration into the global trading system - but only after lengthy periods of transition.

Here, again, we should not shy away from reality. It is a mistake for people to see trade openness as a bitter pill they have to swallow; in the right conditions, it is an important means of generating growth.

But let me stress: I am not a simplistic liberal on trade. Market opening must be tailored to countries’ individual circumstances. It should be flexible and asymmetric. You will be able to protect all sensitive sectors, during a lengthy transition period.

Will the EPAs nevertheless generate unsustainable losses of tariff – and therefore fiscal – revenue? I understand the concerns. The fiscal position of many ACP countries is extremely stretched and reliable sources of government revenue are few and far between. But my answer is no. First, the evidence suggests that more reasonable levels of duty would in fact increase ACP fiscal revenue. Second, as part of the EPA process, we will assist the necessary reforms of fiscal structures, away from border taxation towards the taxation of consumer goods.

This is only one of the many areas in which we will continue to commit to capacity building in the area of trade. Today, we have projects worth around €650 million in the pipeline for regional integration and trade. Again, you should systematically build this dimension into your own national and regional strategies.

Market access in the other direction, access to EU markets, is of course also a feature of EPAs. The EU is prepared to put real additional market access opportunities on the negotiating table for those of you that do not, at this stage, benefit from the Everything But Arms initiative. And to this we will also add a revision of rules of origin, which has the potential to unlock further opportunities. And we will look at how we can help developing countries meet our own exacting product standards.

What we want in exchange is not commercial - I have no European business leaders knocking at my door demanding greater access to ACP markets – but a commitment to improving the business climate in your countries, for your benefit. And domestic policies on good governance are part of the equation.

On EPAs, a final word about the timing of negotiations, and the political context in which they take place.

There is no time to lose. The EPAs must be in place by January 2008. This is a “hard” real deadline, given the expiry of the “waiver” that allows us, in the WTO, to give you preferences above and beyond what we give to other developing countries.

But the real deadline is not legal. It is the prospect for you to reap opportunities from our relationship now.

I am acutely aware that many stakeholders – many NGOs in Europe, notably – have raised concerns about the EPAs. I believe those concerns can be met, and that it is a debate well worth having. I intend to be an advocate in favour of our partnerships, and I will be counting on your support in this effort.

My politics are very much about helping people cope with economic change. When economists praise the virtue of a dynamic economy, I will always remember they're talking about people, not statistics. And that applies as much to farmers as it does to industrial workers.

This brings me to raise three particularly sensitive sectors in EU-ACP trade relations, which I know affect directly the social fabric of your countries: sugar, bananas and textiles.

Sugar

Let me start with sugar.

We have good reasons to reform our sugar regime. We need to align the sugar sector with the overall direction of our reforms of the common agricultural policy, to remove the trade distortions and set the basis for a more sustainable, market-oriented agricultural production. When EU sugar prices are almost three times world levels, the Commission’s proposal of a 33% cut is, in my view, a realistic but not revolutionary first step. But I know this will have a deep impact on the economies of those ACP states that depend on preferential access to the EU market.

I am sensitive to our responsibilities. I hear what you say about the Commission’s reform proposals: but there are cases where economic adjustments are unavoidable and we cannot put them off forever. Indeed, the longer we do so, the harder it will be to make the necessary adjustment.

Let me say this: the Commission as a whole is committed to supporting you through this adjustment process. We will issue an Action Plan that covers both trade and adjustment measures, and that must be the basis for an intense dialogue between us over the coming months. I am available for this, together with my Commission colleagues.

We are committed to maintaining the access into our market that the Sugar Protocol provides today.

At reduced prices, there will of course be losers, but there will be winners too: all those ACP countries that can produce larger quantities of sugar competitively will still find the reduced EU prices to be remunerative.

I have seen the LDC proposal on sugar but its rationale is hard to understand. This rationale (to organise trade volumes at high prices) is doubtful in view of the constraints on the EU sugar regime, and is unsustainable as trade liberalisation proceeds. It would be a mistake to think that putting a cap on LDC imports would enable the EU to maintain the current level of prices. EU sugar prices will in any case go down: you would only lose out yourselves by self-limiting your exports.

Bananas

We are at the same time entering into the next, and I hope final, chapter of the ongoing story of bananas and of the EU’s preferential arrangements for ACP access. We have all known that 2006 would bring a tariff only regime and we have now started to prepare for this. My predecessor, Pascal Lamy, announced the proposed level for the MFN import tariff to you a month ago.

I have taken note of the concerns since expressed, whether coming from Latin American producers saying that the tariff is too high, or from you that it is too low. But I can tell you that the tariff is our neutral translation of the protection at the border that is presently provided by the quota system. There should be no losers and no winners in this switch to a tariff only system; it should not in itself change the current shares in the EU market. I stress: we are not changing the conditions for preferential access for your trade. This access will be covered as part of our joint general market access discussions within EPA negotiations. It is not on the table in Geneva.

Textiles

Finally, on textiles, I am very conscious of the increasing pressure on the ACP textile and clothing industry due to the disappearance of the remaining textiles quotas on 1 January 2005.

I will pursue avenues to mitigate the likely shock on the most vulnerable countries.

First, we aim to improve the use of preferences given to the ACP countries. This means we will examine different options for ACP countries to source intermediate textiles inputs for the manufacture of garments, which can be exported to the EU without losing trade preferences.

Second, we aim to ensure a smooth transitional period after the end of quotas. We are monitoring the evolution of textile imports from China and are examining concrete measures that China could take to avoid an export surge.

Conclusion

These sectors – sugar, bananas, and textiles – are all examples of the dangers of prolonging the artificial insulation of ACP countries from the global economy, and the risks of enforced dependency on commodity exports. The whole purpose of the EPAs is to move away from this cycle of dependency and vulnerability.

My objective is for the EU to be an effective force in improving the global trading conditions of the more vulnerable of our partners.

Trade is a tool to be used to spur economic growth and social justice, but one to be used wisely and with care.

Hence my commitment to you today. We will support your objectives, in particular for regional integration. And we will do our best to match your needs, where and when adjustment is needed.

I am very grateful to you for hosting me tonight at ACP House. This is the beginning of a long friendship between us. We will not agree on everything, all the time. But I am confident that we can be partners, and convinced of a good outcome for you as a result of our work together.