The Impact of the EU's Everything but Arms Proposal: A report to Oxfam

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This study, commissioned from the Institute of Development Studies, provides rigorous analysis that counters the arguments of the anti-EBA (Everything But Arms) lobby. It shows that the costs to the EU of implementing the EBA are very small, in comparison to the positive benefits it will bring for the least-developed countries. Some developing countries that already benefit from preferential access to the EU market have legitimate concerns about the impact of the EBA on their trade with the EU. But these concerns can and should be addressed through positive measures, rather than an EU retreat from the EBA proposal.
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    The Impact of the EU’s ‘Everything but Arms’ Proposal: A Report to Oxfam Final Report Christopher Stevens and Jane Kennan Institute of Development Studies January 2001  Preface Oxfam supports the European Commission’s proposal to improve access to the EU market for all products, except armaments, exported from the world’s 48 poorest countries as a small but welcome step towards fairer trade in the world. The so-called ‘Everything But Arms’ (EBA) proposal will bring economic benefits to the world’s poorest countries and people. It also represents an important political gesture indicating the EU’s commitment to promote a more equitable distribution of the benefits of international trade. Unfortunately, the EBA proposal has attracted extremely strong resistance from some EU Member States, European farmers, and parts of the multinational sugar industry. Many of their arguments are ill-informed, however, and appear to be based on over-stated and implausible claims about the likely impact of the EBA. This study, commissioned from the Institute of Development Studies, provides rigorous analysis that counters the arguments of the anti-EBA lobby. It shows that the costs to the EU of implementing the EBA are very small, in comparison to the positive benefits it will bring for the least-developed countries. Some developing countries that already benefit from preferential access to the EU market have legitimate concerns about the impact of the EBA on their trade with the EU. But these concerns can and should be addressed through positive measures, rather than an EU retreat from the EBA proposal. Oxfam hopes that this study will encourage a more constructive and informed debate about the impact of the EBA proposal. Within the context of continuing high levels of northern protectionism against developing country exports, the EBA proposal is extremely modest. We would like to see the proposal accepted by the EU Member States and implemented as soon possible as an important step towards achieving internationally-agreed targets to reduce poverty. David Bryer Director, Oxfam  Contents 1. Summary 1 The positive impact of EBA 1 The implausibility of massively increased exports 1 Genuine developing country concerns 1 2. Background 1 3. How Will Countries Be Affected? 2 Changes to market access 2 Supply capacity 3 Illegitimate effects 4 4. Changes to Market Access 4 5. Which Countries Will Be Affected? 6 Potential beneficiaries 8 Potential casualties 8 6. Potential Dynamic Effects 9 Trend in exports to the EU 9 Global exports 10 The broad picture 10 The special case of sugar 12 Production 13 Sugar 13 Beef 14 Bananas 14 Maize 15 Rice 15 7. Conclusions 15 References 15  1. Summary The positive impact of EBA If adopted, the ‘Everything but Arms’ (EBA) proposal will make an important contribution to development, although its greatest impact may be indirect. The direct effects on the least developed states (LLDCs) will be  positive, although the absolute impact will be modest given these countries’ limited supply capacity. From a development perspective, the principal immediate effects of EBA will be: ♦ to improve access to the EU market for the exports of African, Caribbean and Pacific (ACP) LLDCs and, to a much smaller extent, non-ACP LLDCs; ♦ to increase competition for industrialised countries, other ACP states and the Standard GSP beneficiaries of South Asia, Mercosur, 1  South East Asia, Eastern Europe and the Mediterranean. In both cases the absolute change will be limited to a handful of commodities, notably beef, rice and sugar. EBA is also likely to have an indirect impact on the stalled WTO multilateral trade negotiations as a gesture of EU good faith. By contrast, a failure to adopt EBA is likely to have a disproportionately large adverse  impact in the WTO. The ‘cost’ to the EU of EBA is so small that its derailment by vocal lobbies would be seen by the  broader group of developing countries as clear evidence that the EU is unable to enter into meaningful negotiations on further multilateral liberalisation. The implausibility of massively increased exports Modest though EBA is it has provoked vociferous opposition, notably from the European sugar industry. Yet claims that EBA will result in a substantial increase in imports, to the detriment of other developing countries and EU producers, are counter-intuitive and not supported by the available data. The supply capacity of LLDCs is very limited. Moreover, many of their exports already receive duty-free access to the EU, and so only a very small number will be affected by EBA. For example, it has been alleged that LLDC sugar exports to the EU could rise to 4.5 million tonnes over five years. Food and Agriculture Organization of the United Nations (FAO) figures on LLDC production and trade suggest that this is fanciful. The total   raw sugar production of all LLDCs that have any significant exports is only 1.8 million tonnes (1993–7 average). In the short term FAO figures indicate a potential maximum increase in LLDC sugar exports to the EU of only 100,000 tonnes. Since statistics for LLDCs are poor, the critics of EBA may  be able to produce contrary evidence. The ball is in their court, however, to explain why the figures they have presented (so far without explanation or an indication of the source) are compatible with the publicly available data from FAO, which is the most authoritative source of world agricultural statistics. Further doubt on the feasibility of substantial increases in LLDC exports arises from the Safeguard Clause in EBA. This allows the EU to withdraw preferences whenever LLDC exports rise much above ‘usual’ levels. Genuine developing country concerns At the same time, non-LLDC developing countries do have legitimate concerns that wild, implausible talk about a flood of LLDC exports is obscuring. The ACP in particular have plausible grounds to fear that any  increase in LLDC sugar exports will be at their expense. This is because the EU is already in surplus supply. Even if the imports initially displace domestic EU production rather than ACP exports (which is unlikely, given the high cost of Caribbean cane sugar), the result will be an increase in EU dumped exports onto the world market where they will lower prices still further for ACP states. 1  Argentina, Brazil, Paraguay and Uruguay. 1
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