‘Global Europe’, Government rocurement and MFN
By Dr. Clive Thomas
As we approach the end of this analysis of the CARIFORUM-EU, EPA it is becoming clearer that to appreciate its full significance an understanding of the Global Europe project, which underlines and motivates the European Commission’s actions is necessary. I shall outline this Project in this and next week’s columns. From this vantage point the moral duplicity, dishonesty and contradictions inherent to several of the EU’s actions reviewed in this series are best understood.
Let us consider as a prelude to this two concrete instances where an appreciation of the Global Europe vision is crucial to an understanding of the EPA, namely, Government Procurement and the Most Favoured Nation (MFN) provisions of the Agreement
Government procurement
In the face of widely expressed concern about the Public Procurement provision in the EPA the EU has been adamant that it is not seeking market access opportunities. It claims its sole concern is to introduce best practices, and raise the level of transparency, accountability and efficiency in this area of the Region’s economy. It is, however, difficult to accept this at face value when the Global Europe project identifies Government Procurement as a number one target for its efforts in multilateral and bilateral fora.
The EU has unabashedly portrayed Government Procurement as a major new frontier for trade and investments, which EU firms are well positioned to capture. On its Global Europe Website, this is what the EU says about Government Procurement:
“[An] area of significant untapped potential for EU exporters. EU companies are world leaders in areas such as transport equipment, public works and utilities. But they face discriminatory practices in almost all our trading partners, which effectively close off exporting opportunities. This is probably the biggest trade sector remaining sheltered from multilateral disciplines” (EC. 2006)
When the EU can state unambiguously that Government Procurement is one of the crucial frontiers for new business for EU firms one has to be extraordinarily trustful or naïve to accept the claims of EU negotiators that its inclusion in the EPA is benign and motivated solely by concern for CARIFORUM’s well being.
Most Favoured Nation (MFN)
A similar situation exists in regard to the MFN stipulation of the Agreement. While multilateral liberalization under the rubric of the WTO is grounded in the universal application of MFN treatment to all Member States this can hardly apply to North-South bilateral arrangements between asymmetric regions. The primary reason for this is that the Enabling Clause of the WTO specifically permits a greater degree of preferential South-South trade liberalization, in recognition of their developmental needs and the prevailing structures and workings of the global economy.
The EU claims the legal right to extract preferences from EPA signatories in exchange for the preferences that they grant them. It also claims that the EPAs have a development dimension and are intended to promote South-South integration arrangements within and across the respective EPA regions and more generally among countries of the South. In an effort no doubt to balance these positions, it is stipulated in the Agreement that the MFN provision applies where any CARIFORUM Member State offers superior market access to a country or a region, which accounts for more than 1 and 1.5% of world merchandise trade, respectively.
Several key developing and emerging economies are likely sooner or later to be affected by this provision including: China, India, Australia, South Africa, Malaysia, Paraguay, Indonesia, Mexico, and Brazil. For most of these countries one or more CARIFORUM States and CARICOM itself have been negotiating trade and economic agreements.
The EU has described these countries as the “competitive new players” with which they have to engage in the fight for export markets. Brazil, a neighbouring CARICOM state has already declared the matter at the WTO during the recent General Council meeting (February 5, 2008) indicating that a formal complaint against the MFN clause might be laid there.
Brazil currently exports more than half of its merchandise trade to developing countries. Its interest in the matter is therefore not only legal and systemic but reflects the “concrete” conditions of a developing country promoting South-South trade and economic linkages as a strategic element of its development policies.
As we shall see later trade policy projections of the impact of the EPAs indicate substantial collateral damage to non-EU exporters, with their exports falling by several billion euros when full implementation of all six of the EPAs are in force (2035). In contrast, the EU’s trade gains are substantial estimated at 29 billion euros at the time of full implementation. Brazil is therefore aware of the potential negative effects of the MFN clause on South-South trade.
Indeed Australia had objected to this clause when raised in the Pacific region. It should also be noted that China is the third largest trading nation with Africa, even though its merchandise exports to the region average only 3% of its total exports. It has displaced Germany from this position and overall the EU’s share of Africa’s trade is declining.
The most serious aspect of the MFN provision is that it creates a disincentive for CARIFORUM States to seek better trade deals with developing countries/regions above the 1% / 1.5% cap referred to earlier as being stipulated in the EPA. Several critics have denounced these arrangements on two principal counts.
First, it effectively “disables” the enabling clause, which seeks to promote South-South trade deals as a strategy for global development. Second, it limits the range of options for future CARIFORUM external trade deals. In effect the provision gives up all that CARIFORUM “might one day” negotiate with other developing countries or regions.
This provision will not pose significant difficulties for developed economies like USA and Canada, which are next in line to negotiate trade and economic deals with CARICOM.
The EU has denied that there is a legal conflict between the Enabling Clause and the MFN provisions. The former it claims permits South-South preferences but does not rule out preferences to other WTO members and it does not cover FTAs. FTAs relate to MFN while preferences relate to the Enabling Clause.
The Global Europe project sees the “competitive new players” as rivals rather than developing countries. The position of the EU is captured in the statement of Louis Michel, Director General, of the Development Commission who when interviewed on this subject stated: “The EU is generous but not naïve” (Louis Michel 2008).
