ACP chief urges caution over reform

Date: 07/05/1998

By Mark Turner

EUROPEAN Commission calls for inter-regional free trade agreements with African, Caribbean and Pacific countries by 2005 are probably motivated by the best of intentions, says ACP secretary-general Peter Magande.

The trouble is that Europe might have no one to negotiate them with.

"While this may be a very good proposal, I think the grass-roots capacity is going to put a lot of limitations on what we want to do and how quickly we can do it," warned the Zambian economist.

He points out that free trade even between members of the Southern African Development Community - a relatively advanced regional grouping - is unlikely to become a reality until 2004, and suggests it will need even longer to prepare for negotiations with the EU.

"While we are very ambitious, it will take some time to create viable regional free trade areas. We might be looking to over 15 years," he said.

Magande's comments reflect growing alarm amongst Europe's developing trade partners that the Commission's free trade push could in practice destroy their vulnerable economies.

Whilst accepting that the past 20 years of trade preferences have not produced the hoped-for economic growth, they fear that if Europe abandons the ACP countries to the free market now, they might never be in a position to compete globally.

"At the moment we have limited capacity to produce and process the kind of goods that would be able to compete effectively on European markets," said Magande. "If we go for free trade, where would we have reciprocity? We might end up being basically a market for Europe. That would not develop our capacity for industrialisation, the development of our resources.

One is a believer in free trade, but to be an active participant we need a minimum level of infrastructure."

The trouble is that the alternative originally suggested by the Commission - entry to the EU's Generalised System of Preferences (GSP) - would have offered a serious reduction in market access. It is a choice which few ACP countries relish.

Recently, however, the Commission does seem to have softened its stance. Development Director-General Philip Lowe told a conference last month that where no free trade agreement was possible, "the EU would endeavour to maintain preferences for the country concerned at least at the Lomé level".

Although countries such as Germany are likely to resist an 'enhanced GSP', Magande insists that privileged access should be maintained. "Those who have had the capacity to use trade preferences have managed to use them. It was not the trade preferences which were at fault - it was something else," he said. "Let us leave the pipe open; but let us attend to unblocking it where the problem is."

He argues that the ACP countries should, for example, be helped to boost their private sectors and to develop the regional institutions which could lead to free trade at a later stage.

"The governments of the EU must help their private sectors to go to ACP countries and invest there," he insisted.

"If there is investment on a commercial basis, then we know that the produce that comes out will be competitive."

Concretely, Magande argues that semi-governmental financial institutions should be set up to give potential investors access to cheap loans, and a guarantee scheme established which would impose limitations on intervention by ACP governments.

At the same time, he says, the Union could offer technical expertise to burgeoning ACP regional bodies. "There should be input in terms of developing regional institutions. Let us see if we can make them become viable entities we can deal with," he said.

"That requires an input in manpower, basically, and also infrastructure. The EU is a regional institution, so it must know how to create viable structures."

For their part, Magande says, the ACP countries must urgently diversify away from commodity dependence into new sectors such as tourism, and develop the capacity to process raw materials (at least to the level of semi-finished goods).

But cynics note that much of this has been said before, with little result, and suggest that a serious deadline is needed to provide the necessary impetus for change.

Magande accepts the criticism, but insists that ACP governments have finally accepted the urgent need to act. "Over the last five to ten years, our members have realised the limitations of governmental involvement. Our finances are diminishing, whether through structural adjustment programmes or dwindling tariff revenues," he said. "We all now realise that something else must fill the vacuum, and that is the private sector."

Interview with Peter Magande, Secretary-General of the ACP group of countries.