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1. ACP-EU Relations in a Changing World Economy

1.1

 

 The increasing integration of markets for factors of production and products, driven by technological change, new systems of control and production, and the liberalisation of trade and capital markets, has generated both costs and benefits for the ACP countries. It has eroded their traditional comparative advantages in resource based and labour intensive production. At the same time, the new technologies, combined with trade liberalisation, have also opened up new production and market opportunities, both directly for exporters and indirectly for small and medium-sized sub-contractors. But in order to take advantage of these opportunities, ACP firms, particularly micro, small and medium-sized enterprises, need a network of services and support from public and private agencies. A new ACP-EU agreement needs to concentrate on developing a strategy aimed at providing this support and enabling the ACP countries to participate more fully in the world economy.
1.2 Trade is particularly important to the growth of output and employment in the ACP countries. On average, exports of goods and non-factor services account for 30% of GDP and, in some ACP countries, 60% of GDP, reflecting the small size of the domestic market of most ACP countries.
1.3 Because the comparative advantage of ACP exports lies in utilising intensively their relatively abundant factor of production, an outward-oriented strategy of development offers the possibility of combining ‘growth with equity’. This will also fulfil the poverty-oriented focus of EU development co-operation, as stated in the Maastricht Treaty.
1.4 A key factor underpinning the continued liberalisation of world markets is the outcome of the Uruguay Round of multilateral trade negotiations. This has lowered tariff and non-tariff barriers to trade in goods and services, and strengthened the rules-based system of international trade, enhancing the degree of protection of ACP members of the World Trade Organisation (WTO) from discriminatory action on their exports.
1.5 It has also substantially lowered the margin of preferences for ACP countries, both as a result of the lowering and abolition of tariff and non-tariff barriers to trade, and because tariffs on the final stage of production have generally been reduced by more than earlier stages, by reducing effective tariff (and therefore preferential) rates.
1.6 At the same time, all members of the WTO have to accept WTO rules as a single undertaking, and, especially for ACP countries which are recent members of WTO, this implies a very substantial level of obligation. A variety of bilateral technical co-operation agreements and international organisations provide assistance to developing countries in meeting these obligations, but these are largely concerned with training individuals and preparing studies. A new ACP-EU agreement needs to assist the ACP countries in building their institutional capacity to implement their WTO obligations and explain trade rights, opportunities and obligations to the private sector. The WTO is essentially a ‘member driven’ organisation and the ACP countries, both individually and collectively, also need assistance and support in monitoring, pursuing and defending their interests in the WTO.
1.7 The period since 1989 has seen a large decrease in the relative importance of the ACP countries in EU trade. In 1990 EU non-oil imports from the Central and East European Countries (CEEC) were one-third those of the ACP, but by 1993 they already exceeded EU imports from the ACP. EU non-oil imports from China were one-fifth less than those from the ACP in 1990 and by 1993 were twice those from the ACP. South Asian non-oil exports to the EU were half those of the ACP in 1990 and are now equal to those of the ACP countries. This represents both actual or potentially increased competition for ACP exports, but it also offers new market opportunities especially in the CEEC, ASEAN and Latin American countries, as these economies industrialise and open up their markets to international trade. It is important that a new ACP-EU Agreement enables the ACP countries to diversify their exports into these new markets. EU special preferential agreements, particularly with the CEEC and NIS countries, could be used to assist this process.