EU-ACP economic partnership agreements: modern colonialism disguised in violation of the WTO.

Author:Robertson, Danielle
Position:African, Caribbean, Pacific
 
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ABSTRACT

The Economic Partnership Agreements (EPAs) between the European Union and the African, Caribbean, and Pacific (ACP) nation-states are the most recent construct in a long history of developing countries' dependency and reliance on developed European countries. Even though Preferential Trade Agreements (PTAs) are widely used by countries party to the World Trade Organization (WTO), the European Union is hiding behind illusions of non-economic trade benefits, such as increased stability and health benefits, in their EPAs with ACP countries. The European Union has the economic bargaining power, creating an upper hand in the trade negotiations with the former colonial countries and other developing countries. The EPAs, like other PTAs, consistently have provisions that should be found to violate the most-favored nation (MFN) clause. Even though GATT Article XXIV allows for PTAs, in order for the WTO to achieve one of its initiatives to liberalize world trade, the MFN clause should penetrate throughout the EU-ACP agreements.

TABLE OF CONTENTS I. INTRODUCTION II. BACKGROUND A. The WTO 1. Foundation on Non-Discrimination 2. GATT Article XXIV: Allowance of PTAs 3. The Waiver System Allowance in the GATT 4. Generalized System of Preferences 5. The WTO Dispute Resolution System B. Historical Relationship between Europe and the ACP Countries 1. Treaty of Rome 2. Yaounde Conventions 3. Lome Conventions a. The Bananas Debacle b. Banana Enforcement 4. Cotonou Agreement 5. EPAs III. GATT ARTICLE XXIV: EPAs VIOLATE THE MFN A. Problems with the WTO's Governance of PTAs B. Problems with the WTO's Governance of GSP Relationships C. Problems with EPAs IV. BREAKING THE COLONIAL TIES, ONCE AND FOR ALL V. CONCLUSION I. INTRODUCTION

The World Trade Organization (WTO) was formed in 1995 after the close of the Uruguay Round negotiations under the General Agreement on Tariffs and Trade (GATT). (1) The WTO primarily deals with international trade and currently consists of 164 nation-state members from around the world. (2) Its objectives are to liberalize global trade, negotiate trade agreements, and serve as a forum for parties to settle trade disputes. (3) In order to create uniformity in the global market, the WTO established a set of rules, set out in the Marrakesh Agreement and other agreements appended thereto. The Marrakesh Agreement serves as the constitution for the organization and its member states. Article I of the document created the WTO as an organization, superseding the GATT. (4)

The Marrakesh Agreement functions as the foundation of the WTO, where the objectives of the organization are centered on liberalizing trade while working toward global "elimination of discriminatory treatment in international trade relations." (5) The cornerstone of the original GATT, carried forward into the WTO, is the most-favored nation (MFN) clause, where "the signatories of a treaty agree to accord each other the same treatment they grant to any other nation." (6) Additionally, the other covered agreements of the WTO incorporate the MFN clause as a foundational element. (7) When the Marrakesh Agreement went into effect on January 1, 1995, most of the 123 participating countries in the Uruguay Round became original parties to the WTO. (8)

Even though the GATT had similar objectives as the WTO, its enforcement process was weak and inefficient. (9) Still, before the GATT, the incentives for each country to reduce trade barriers for the greater global good, while possibly experiencing short-term losses in their domestic economy, were not enticing. (10) And, if those countries were not experiencing any reciprocal detriment to their barriers, there was little, if any, incentive to stop trading at a preferential or solely domestic level. (11) Even after the WTO formed, there remained numerous preferential tariff treatments that violated the new agreement, resulting from years of tradition and historical relationships. (12)

One of the first dispute resolutions filed based on the MFN principle was EC-Bananas, originally arbitrated twice under the GATT regime. (13) When it was filed in 1995 through the WTO dispute resolution process, it became known as EC-Bananas III. Ecuador and other Latin American and Caribbean countries with large banana exports filed a complaint against the European Communities (EC) for their favoritism in the Lome Convention, which was a trade and aid agreement between the EC and certain African, Caribbean, and Pacific (ACP) countries. (14) Many of the ACP countries were former colonies to the United Kingdom, France, Belgium, and Portugal. (15) Over twenty other countries were third parties in the proceeding. (16) The Lome Convention allowed for lower tariff rates on ACP country bananas, whereas non-ACP countries faced a much higher tariff for bananas upon importation into the EC. (17) The Lome Convention went through four iterations; the final version, Lome IV, was signed in 1990 and had a ten-year expiration date. (18)

The WTO Appellate Body found in favor of Ecuador and the other non-ACP third party complainants in EC-Bananas III. (19) However, the EC, later known as the European Union, continued to act preferentially toward post-colonial countries through certain tariff preferences, as seen in the 2004 Appellate Body decision EC-Tariff Preferen ces, (20) Additionally, the increase of Regional Trade Agreements (RTAs) and Bilateral Trade Agreements (BTAs) have afforded an easier regime for countries to disguise preferential treatment. (21) Even though the European Union eventually complied with the EC-Bananas III findings through numerous Economic Partnership Agreements (EPAs), the EPAs have long time frames to achieve the goals of the agreement, with vast amounts of discretion afforded to the states party to the agreements. (22) Thus, the European Union is not gradually decreasing its preferences toward post-colonized countries in an efficient manner. When those agreements expire, as many of them have ten-year deadlines, the post-colonial countries will experience severe negative economic effects with the severance of EU preferential treatment. (23) Thus, it is unlikely that complete elimination of EU preferential treatment will occur. Additionally, even though any WTO member state may file a complaint against the European Union for violating WTO trade provisions, those third-party member states that are negatively affected as a result of the preferential trade treatment might not have an incentive to do so, as the European Union is both politically and economically influential on the global stage. (24)

The WTO must take a stronger stand in its role pushing for liberalized international trade. There must be a better monitoring system for a lack of true compliance with a regulatory component that allows the WTO to be proactive. If third parties are not incentivized to complain against a larger, more powerful country or entity, there must still be measures taken to rid the global system of discriminatory trade preferences and to increase global wealth. Additionally, there must be improved transparency in the organization to allow for better oversight by the member states.

This Note argues that, through the use of Article XXIV of the GATT, as well as the adopted Enabling Clause, the European Union is creating agreements, free of trade-barriers, which results in virtually the same entity that was found to be in violation of the MFN clause in the EC-Bananas cases. And, even though preferential trade barriers are valid under GATT Article XXIV, the European Union is hiding behind the illusions of non-economic trade benefits, such as increased stability and health concerns, in its EPAs with ACP countries. Additionally, these ACP countries do not experience near as great an increase in trade, as do the European countries. Evidence suggests that some of the regional partnership agreements have even debilitated some ACP countries in their political and economic stances.

Part II of this Note will focus on both the background and structure of the WTO and the historical relationship between the European countries and the former-colonial ACP countries. It will establish the framework of the WTO dispute resolution system, with its advantages and strong disadvantages, such as easy incentives for countries to not comply with GATT or WTO decisions. Additionally, it will provide evidence of the WTO's foundation on the MFN clause. It will cover the modern timeline following the historical relationship between the EU and ACP countries by explaining the Treaty of Rome (during colonial rule), the Yaounde Conventions, the Lome Conventions, the Cotonou Agreement, and the current EPAs between the European Union and different ACP regions.

Part III of this Note will criticize the current EPAs and show similarities between the status of the EPAs today and the Lome Convention IV that was found in violation of the GATT MFN provision. Additionally, it will explain that even though the Preferential Trade Agreement (PTA) clause in GATT Article XXIV allows for preferential treatment of trade, the EPAs, as they stand, are not consistent with the ideals and foundation of the WTO. Part IV will cover the need for PTAs to incorporate more MFN principles, which is needed for the self-sufficiency of the ACP states, as well as for the good of the global economy.

As the number of PTAs increases, especially PTAs between developed and developing countries, the gap between the world's rich and the world's poor will continue to grow until those developing countries become completely dependent on their relationships with the developed countries. Many of the same countries that were previously colonized by European countries have once again begun losing their economic independence. Therefore, in order to achieve one of the primary goals of the WTO--equality among countries with respect to trade--the WTO must enforce the MFN clause above all other...

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