Development and Cooperation


	Contributions from the Column Focus Regional integration in Africa The price is not right yet ACP countries need reforms Mercosul dilemmas ASEAN + 3 ECOWAS’ unfinished agenda 01/2007		Regional integration in Africa Germany faces the challenge of making optimal use of presiding over the EU Council and the G8 at the same time. On the development front, the Federal Government attaches great importance to trade agreements with African partners. These agreements should promote growth and broad-based prosperity as well as strengthen cross-border cooperation in Africa. [ By Heidemarie Wieczorek-Zeul ] We are on the threshold of an important year. In the first six months of 2007, Germany will hold the presidency of the Council of the European Union, and for the full 12 months, the country will assume the G8 chairmanship. This is an historic opportunity, unlikely to return for a long time. The EU Council presidency is not set to rotate round to Germany again until 2020, and unless there are changes in the G8 group, the next German G8 chairmanship is due only in 2015. To take maximum advantage of this year’s coinciding presidencies, we have set an ambitious development agenda. Harnessing double-presidency opportunities Of course, the EU and G8 are two very different organisations, each with specific mechanisms and institutions. Nonetheless, chairing both will provide chances to boost and reinforce the processes we launch. Therefore, we have defined an overarching policy framework for Germany’s presidency of the EU Council and its G8 chairmanship. This framework will enable us to make real and rigorous progress towards solving global problems, attaining the Millennium Development Goals (MDGs) and meeting the budget targets the EU defined in terms of official development assistance. During our double presidency, we will focus above all on Africa, our neighbouring continent, which faces incredible challenges, but also gives much cause for hope. In recent years, for example, Africa’s economy has grown at a steady five – and more – percent per year. If the MDGs are to be achieved in Africa, we must rise to our pledges of providing more and better ODA. At the same time, it is vitally important to provide stimuli for the kind of sustainable economic growth that creates decent jobs and helps to reduce poverty. Good governance is of crucial relevance, because affluence only spreads where the necessary institutional and legal foundations are in place. Both the private sector in Africa and international investors need confidence in predictable governance, if the flow of capital is to increase – particularly through direct foreign investment. What is needed, therefore, are efficient governmental institutions, adequate infrastructures, operational financial markets, dependable competition rules, safe ownership rights as well as the introduction of social and environmental standards – to mention just a few. In short, there is a need for radical internal reform. Africa’s regional and supra-regional institutions, such as the African Union or NePAD (New Partnership for Africa’s Development), form a crucial platform for launching the reform processes we support. Worldwide, more than six million people a year die of HIV/AIDS, tuberculosis or malaria. 65 % of the world’s 40 million people who are HIV-positive live in sub-Saharan Africa, 60 % of them women. For many sub-Saharan countries, HIV/Aids is becoming the major obstacle to development. Particularly worrisome is the fact that infection rates are rising among women. During our presidency, we will work for more effective programmes to protect women from HIV/AIDS, promote measures to improve prevention, treatment and care, and address systemic issues as a matter of priority. This will include strengthening the Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM) and, in the context of the European Union, swiftly implementing Europe’s action plan on HIV/AIDS. Another central issue is access to energy. Available and affordable energy is not a luxury in developing countries; it is a basic requirement for economic development and poverty reduction. In Uganda, for example, 25 % of investment capital is spent on private generators because public electricity supply is unreliable. Oil and gas prices are currently at a record high, which means high costs for energy-importing countries in the years ahead – but also massively increased revenues for oil exporters such as Nigeria and Angola. Those revenues offer major development opportunities, provided that the countries concerned handle their oil income responsibly. Consequently, we will stress the relevance of harnessing energy resources for development, the role of renewable sources and the importance of energy efficiency for EU development cooperation during our presidency. One priority, for example, will be to heighten transparency, by strengthening the Extractive Industries Transparency Initiative (EITI). Promoting Economic Partnership Agreements It is very important that Africa’s economy become more profitably integrated in the global economy. However, the preferences the European Union granted to the countries of Africa, the Caribbean and the Pacific Region (ACP) over the last 30 years – under the Lomé conventions and since 2000 under the Cotonou Partnership Agreement – have not had the desired effect. The ACP countries have been unable to step up their exports to the EU, and intra-regional trade has not increased among them. On the contrary, since the introduction of trade preferences, the ACP countries’ market share in the EU has halved to a mere three percent; and only six percent of African trade is conducted in Africa itself. Moreover, many countries are not big enough individually to go solo in the trading regime of a globalising world. Put together, the economy of 78 ACP countries is 35 times smaller than that of the EU with only 25 members. Half of the ACP countries have populations of less than five million. Together, the world’s 50 poorest countries, the so-called least developed countries (LDCs), account for only 0.64% of global exports. 40 LDCs are ACP members. To strengthen their role and to support regional integration, the ACP countries and the EU have, since September 2002, been negotiating so-called Economic Partnership Agreements (EPAs), which will come into force in January 2008. Because the German presidency of the European Council coincides with an important phase of the talks, the EPAs will be a key issue of our presidency. EPAs are not plain trade agreements, but rather combine development and trade components, attempting to promote sustainable development in the ACP countries. Under the Cotonou Agreement, the primary objective of EPAs is to reduce poverty in Europe’s partner countries. That is what I worked for when the Cotonou Agreement was concluded, and that goal can only be achieved through coherent action on the double front of trade and development. Development is a key aspect of the EPA agenda. On the one hand, the goal is better market access for ACP states in the EU; on the other, it is to open ACP markets with care, taking into account their stage of development, by excluding sensitive products and allowing long transitional periods, for example. Institutionalising a review and monitoring mechanism might usefully support the liberalisation process and, if necessary, permit corrective action to be taken. However, coherent action on trade and development also means that our ACP partners need to embrace reform and incorporate trade in their national development strategies. By closely gearing development programmes to liberalisation, we see a special opportunity to build capacities in the ACP countries, set sustainable reform processes in motion and address problems of adaptation. So far, many developing countries have been unable to take adequate advantage of the chances globalisation offers. One reason is that they lack exportable products. In Africa, for example, the climate would permit much greater volumes of agricultural, animal and marine exports. Too often, however, small farmers cannot prove that their products meet the standards of importing countries. As a result, the number of ACP products rejected by the EU trebled between 2002 and 2005. Trade-related development cooperation starts with promoting trade and diversifying a country’s exports by strengthening the private sector and creating institutions for quality assurance and international-standard observation. This is essential to enable developing countries to take advantage of the opportunities better access to EU markets will present. Regional integration promotes development Regional integration of the various geographical groupings is another important EPA objective. In this matter, the European Union is leading by example. It is, after all, one of the most successful integration projects in history. Common economic interests have ensured peace between former enemies and heightened affluence in Europe for nearly 50 years. In Africa today, numerous regional and supra-regional initiatives are already in place. The African Union (AU), the Southern African Development Community (SADC) and the Economic Community of Western African States (ECOWAS) are notable examples. African integration presents tremendous opportunities; it is also a vital step forward because without greater regional integration it will be virtually impossible for countries to speak with one voice in international negotiations. And that is essential for representing common interests effectively in a globalised world. With these initiatives on the one hand and European integration on the other, a new symmetrical institutional framework is taking shape for relations between Africa and Europe. One EPA goal is to strengthen regional integration between the ACP members. As a result of EPAs, regional trade barriers will be lowered between the countries of each regional grouping – for example by creating customs unions with common external tariffs. The economic potential of the individual countries will thus be pooled, the regional value-added increased and competitive strength enhanced. Where regional trade barriers are removed, trade links between countries are promoted and economic growth speeds up. After all, the obstacles to trade within a region are often greater than those between the Global North and South. Regional integration makes for the creation of larger and more homogeneous economic areas, which hold greater appeal for investors. EPAs will thus pave the way for attracting capital and know-how. Regional integration processes are difficult and call for patience. The history of European integration teaches us that political affinities and cultural identities play important roles, alongside economic interests. The negotiations between the ACP countries and the European Union are based on two central Cotonou principles: partnership and ownership. For the regional configuration of the partner countries, this means that countries choose for themselves which regional EPA group they wish to join; the integration agenda is not dictated by the EU. A look at the present state of regional integration in Africa shows very clear overlaps between economic areas. Some countries are members of two or more regional organisations, with different – and sometimes incompatible – integration agendas. By definition, for example, it is impossible to be a member of two customs unions applying different external tariffs. As the various regional communities have not yet reached a very advanced stage of development, however, multiple memberships have so far been fairly unproblematic. The EPA negotiations now make these contradictions apparent and require the individual ACP states to decide where their trade and economic allegiances lie. A good example can be seen in the regional configuration in Southern and East Africa: Tanzania belongs to the Southern African Development Community (SADC), which will form a customs union in 2010. But Tanzania is also a member of the East African Community (EAC) and forms a customs union with Kenya and Uganda. Kenya and Uganda, for their part, belong to the Common Market for Eastern and Southern Africa (COMESA), which has been trying to establish a customs union since 2004. What Europe needs to do is support the various integration efforts during the EPA process through political dialogue and development cooperation. In the case of the Caribbean, this has been achieved. Cooperation between CARICOM and the Dominican Republic increased considerably in the wake of EU regional financing mechanisms and the EPA negotiating process. So another effect of the EPAs is to promote open discussion of the issue of overlapping multiple memberships and to move the integration process forward. The ACP countries are thus better poised to integrate in regional liberalisation processes first and in multilateral ones later and, as a result, assume an appropriate role in the global economic system – in line with the stated aim of the Doha Development Round. Outlook As mentioned above, Germany’s upcoming double presidency marks an important year for us – especially with regard to the EPA agenda and its crucial negotiating phase. During the German EU presidency, we will lend constructive support to the negotiations to ensure a successful outcome and EPAs geared for development. But the finalisation of negotiations, which will hopefully be achieved in the course of this year, does not mean the job is done. On the contrary, EPAs need to be seen as vehicles for a long-term process, building on the concept of partnership enshrined in the Cotonou Agreement. What will be needed in the years ahead is support for implementation, including targeted development programmes, verification of the pro-development characteristics of EPAs and any modification that might be required. Given a coherent approach on trade and development, the EU is offering to contribute to fairer globalisation. Against the backdrop of the current deadlock in the Doha Development Round, this is doubly important. The EU and its partner countries could send a signal to the world of stymiers and stonewallers: there is a trade round for the developing countries, and it is working! Heidemarie Wieczorek-Zeul is Germany’s Federal Minister for Economic Cooperation and Development. http://www.bmz.de