Union split over loophole in OCT trade deals

Date: 18/04/1996

IT is called the 'Curaçao connection' in rice-producing circles, and it is stirring up relations between the EU and 20 overseas countries and territories (OCTs) attached to its member states.

Although islands such as New Caledonia, Greenland, Aruba and the Falklands are only effectively linked to the Union through the individual nations in whose jurisdiction they lie - France, Denmark, the Netherlands and the UK - they benefit from EU development funding and social programmes.

The European Commission has been trying to strengthen the islands' links with the EU through association accords approved in 1990. These include trade concessions more generous than those given to any other non-EU nation, bringing them into the Union's single market in all but name.

But shipments of rice grown in Guyana and sold to the EU through the Netherlands' Antilles island of Curaçao are giving the Commission - and member states - cause to rethink that policy.

Last year, 220,000 tonnes of Guyana-grown rice passed through the Antilles and entered the Union duty-free.

That figure, which has been growing steadily since 1991, is sizeable, given production levels in the Union and the volume of EU imports, and it is causing mounting concern among EU rice-growers. (In 1993, the EU produced 1.5 million tonnes of rice and imported 374,000 tonnes.)

In recent months, sugar-producers have also begun to worry that shipments from the Antilles contain, in fact, sugar grown in the Dominican Republic.

Commission officials say the sugar and rice shipments are not examples of fraud. Exporters are merely capitalising on a loophole which has existed in EU law since 1991, when the Union gave OCTs a new trade regime under which their products - even agricultural goods - could enter the EU free of duties, levies or quotas.

When they created that rule, EU governments did not alter an earlier provision allowing goods made in African, Caribbean or Pacific (ACP) countries to acquire the status of OCT origin even if they were only slightly modified on OCT soil.

Commission officials say, however, that the Dutch islands have been used as a staging post in fraudulent transactions, with milk shipped from the Netherlands to the Antilles, being made into cheese and then sold back to the EU. Milk-sellers get the export subsidy and the islands' dairy processors get a sale.

The Commission now wants to correct the mistake to allow only goods which could conceivably be produced on the islands to enter the Union duty-free.

But talk of modifying the rules designed to apply from 1990-2000 has exposed rifts between member states. Calls for action are opposed by the Dutch, who do not want the current mid-term review to result in any changes, but France - typically the ACP's biggest champion - advocates reform in order to protect its own producers and is supported by Spain, Italy and Portugal.

The UK, France and the Netherlands are also at odds over the allocation of OCT development funds. During their summit in Cannes last June, EU leaders earmarked 200 million ecu to the OCTs, placing them ahead of Lomé countries in per-capita aid. While the 900,000 OCT inhabitants receive some 220 ecu per head, the 600 million ACP citizens get just 23 ecu per head.

But EU officials say that each of the member states concerned feels their own islands have not been given enough.