The unimportance of trade preferences

Abstract

In 1975 the EU operated a pyramid of preference in terms of market access and disbursement of development assistance to non-member states. The ACP countries were at the top of this pyramid, enjoying the most preferred status in the EU market for their exports, including duty free access for all industrial products and 80 per cent of agricultural exports. In addition there were special Protocols for bananas, sugar, beef and rum which guaranteed access to the EU market for specific quotas of these products. It is now argued that the ACP no longer occupies this position, or at least that the pyramid has changed shape. Hill, for example, argued that there are now concentric circles of favoured nations rather than a pyramid (1993: 324). Other partners are being offered virtually the same level of preferences, and tariffs have in general been gradually lowered throughout the period. For example, the Community has offered a GSP scheme since 1971, which allows preferential access for industrial exports (and limited agricultural exports) from all developing countries. Extension and enhancement of the GSP meant that the tariff difference between Lomé and the GSP became only 2 per cent (Dickson, 2000). Many ACP states will have their preferences further reduced under the Cotonou Agreement and will probably enter new reciprocal regional or sub-regional agreements by 2008. Thus the comparative advantage which the ACP states had in 1975 has been significantly eroded. This chapter seeks to identify the main determinants of EU trade policy in relation to the developing countries. It asks why the EU has adopted trade liberalisation (and the conclusion of regional and sub-regional partnership agreements) rather than any other option for the future of its relations with the ACP, and in stark contrast to previous policies. The working hypothesis is that the EU has committed itself publicly to trade liberalisation for a number of reasons. In part this occurred as a result of external pressures-for example to reform the CAP-which increased during the Uruguay Round of GATT negotiations. The Commission is keen to be seen to be moving in the right direc