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Cutting EU aid should be resisted, but begging bowl not enough

Sir Ronald Sanders

Sunday, September 09, 2012    

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Except Haiti, all the Caribbean countries that are members of the 79-member African, Caribbean and Pacific (ACP) Group are in danger of losing the level of aid they receive from the European Union (EU) under a differentiated approach being considered by the European Commission.

The differentiated approach would make the status of Caribbean states as Middle Income Countries the basis for reducing aid to them.

This is a very serious matter. It is one that should command the urgent attention of all Caribbean governments, the Caribbean Community (Caricom) Secretariat and the Caribbean Development Bank.

It is not overstating the case to say that EU assistance to the Caribbean for its productive sector and infrastructure is an essential component of government revenues, allowing them to spend on social welfare programmes. If EU assistance is reduced, Caribbean countries can expect to see an expansion of poverty and a reduction of social welfare programmes, with an attendant increase in unemployment and violent crime.

The one thing that the Caribbean countries have to resist this "graduation" is the Cotonou Agreement — a treaty between the EU and the ACP that was negotiated in 2000. Under the Cotonou Agreement, the terms of development assistance to ACP countries should not be altered unless there is an amendment to the treaty when it comes up for review in 2015.

I say "should not be altered" instead of "cannot be altered", because the EU walked away unilaterally from a 'Sugar Protocol' that ACP countries thought was unbreakable. Effectively, the preferential market for ACP sugar in the EU eroded overnight, creating havoc in the sugar industry and leading to unemployment and loss of revenues. It has to be hoped that a similar approach will not be taken by an EU unilateral imposition of its "differentiated approach".

It is now up to Caribbean governments and their embassies accredited to the EU to do the hard work necessary to ensure that the terms of the Cotonou Agreement are not altered in 2015 to allow for them to be "graduated" from the levels of aid they now receive.

The status of most Caribbean states as Middle Income Countries is the criterion that has been used by institutions such as the World Bank for "graduating" them from eligibility for concessionary loans. It is also the criterion used in the World Trade Organisation (WTO) to deny them special and differential treatment for trade.

Thus, under existing WTO regimes, Caribbean countries are treated in the same way as, for instance, the US, Canada, Japan, India and Brazil. In this connection, the EU could try to apply its new differentiated approach in arrangements for Middle Income ACP countries.

If the terms of the Cotonou Agreement are altered in 2015, then the Caribbean countries will fall under the Differentiated Development Co-Operation Instrument that the European Commission wishes to introduce for more than 60 countries. The only ones that will be spared will be Less Developed Countries — the poorest of the poor — and in that regard only Haiti in the Caribbean will qualify.

There are Middle Income Countries in Africa and the Pacific that would be as adversely affected as the Caribbean by the attempt to reduce aid to Middle Income States. These states should be the Caribbean's natural allies and work should begin urgently to join them to the cause of laying out the case to the EU about why per capita income should not be the only criterion by which decisions on the level of aid should be made.

But in 2006, ACP solidarity was shattered when the 79 member states were divided into several distinct groups to negotiate separate Economic Partnership Agreements with the EU. In this connection, it will be difficult to pull the entire ACP Group together again to resist amendments to the Cotonou Agreement in 2105. Yet, this is work that must start immediately.

The reuniting of the ACP and the rejuvenation and re-invigoration of its purposes are essential to the process of standing up collectively for its member states. The Caribbean should waste no time in organising a process of weaving the strands of the ACP into the collective whole they were in the effective negotiations for the beneficial Cotonou Agreement and the Lomé Convention that preceded it.

It is these two treaties with the EU that set the framework and terms for the non-reciprocal trade, aid and investment benefits that have helped to lift ACP countries over the last 30 years.

Worryingly, officials in the European Commission are now calculating allocations to ACP countries for the 11th European Development Fund for the period 2014-2020. If they conduct the calculations and allocations on the basis of "graduating" Middle Income Countries, then the battle to resist amendments to the Cotonou Agreement in 2015 will be lost even before it begins.

This is why the ACP countries should lose no time in organising a united front to resist the European Commission's proposal. Solid technical reasoning is as necessary to the process as are vibrant diplomatic arguments and high-level government contacts between the ACP and the EU. The technical work should be carried out by a single Caribbean unit utilising the best skills available to the region, and it should set out measurable outcomes for the funds that are being requested.

For if ACP Middle Income Countries are to justify why aid should not be reduced now, they must be prepared to show how it will be used effectively to transition to diversifying their economies, enhancing their productive sector, and standing on their own feet. A begging bowl is not enough.

The work must start now to make the ACP cohesive again. The Caribbean, which has much to lose, should be in the forefront of that effort.

Sir Ronald Sanders is a consultant and former Caribbean diplomat

Responses and previous commentaries: www.sirronaldsanders.com

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