‘Trade not aid’ best tsunami poverty cure

Date: 20/01/05

THE European Commission has acknowledged that to bring tangible benefits, it is necessary to rewrite the trade rules applying to the countries affected by the tsunami. Peter Mandelson, the trade commissioner, has asked the Article 133 committee, a body covering trade policy in the Council of Ministers, to see how the terms of access for goods from the countries affected can be made more preferential.

Anti-poverty advocates consider that the current duties applying to imports from Sri Lanka and Indonesia are too onerous.

Textiles account for 50% of Sri Lanka's export earnings, providing 350,000 jobs. In 2003, according to Oxfam, the EU levied €57 million on imports of Sri Lankan clothing and €136m on Indonesian textiles. The two figures combined are almost equivalent to one-third of the €628m which the EU has pledged in tsunami relief, Terraviva, the development news service, has pointed out.

"The EU has been generous with its aid to the tsunami victims but by charging these import taxes they are giving with one hand and taking with the other," says Oxfam spokeswoman Jo Leadbeater.

The charity also berates the way the rules of origin apply to the Maldives. As things stand, the archipelago is unable to take advantage of the system whereby the world's poorest countries can sell textiles to the EU market without paying duties provided both the fabric and the clothing is made domestically. As clothes-makers in the Maldives import much of the material they use, it has to pay heavy duties on 75% of sales to the EU. Mandelson has pledged to examine how the rules of origin can be amended to address concerns of the industry in countries like the Maldives and Sri Lanka.

In addition, he has requested that EU governments speed up the process of revising the trade arrangements applying to developing countries, the Generalised System of Preferences (GSP).

Under changes to the GSP to come into effect in July, the number of products which can enter the EU duty-free would rise from 6,900 to 7,200; most of the extra goods concerned are food, including fish. Mandelson has requested EU governments to consider introducing the changes earlier than planned, as India, Sri Lanka, Indonesia and Thailand will be among the beneficiaries.

"We have decided why don't we try to accelerate the process," explained a trade official in the Commission. "If we could gain a couple of months, then it is worth trying."

But campaigners feel that the revised GSP does not put enough emphasis on poverty reduction and attaches more importance to political criteria like whether countries benefiting have ratified international conventions. "They had better make sure the fine print improves in terms of market access," says Matt Griffith from the Catholic Agency for Overseas Development (CAFOD). "Otherwise, it would be quite pointless."

Anja Osterhaus from Fair Trade Advocacy in Brussels is worried that the acceleration could have adverse consequences. "Rushing the process would not allow time for a thorough assessment," she said.

Sheila Page of the London-based Overseas Development Institute suggests that the EU could extend the 'Everything But Arms' system to the countries affected. This duty-free access scheme only applies to countries recognised as least developed countries. Of the countries affected by the tsunami, only the Maldives has such status.

Commission sources say that any deal discriminating in favour of the tsunami-hit countries must avoid clashing with the rules of the World Trade Organization. But Page feels it is unlikely that any challenges would be mounted to the measures. "The rules do allow discrimination in trade under certain circumstances…pyou can have discrimination if you are transparent and it is for a well-defined purpose."

The European Commission acknowledged that to bring tangible benefits, it was necessary to rewrite the trade rules applying to the countries affected by the tsunami. Peter Mandelson, the European Commissioner for Trade, asked the Article 133 committee, a body covering trade policy in the Council of Ministers, to see how the terms of access for goods from the countries affected could be made more preferential.