European Affairs

We Must Fight Poverty, and Terrorism, with Both Trade and Aid     Print Email
François Huwart

The democratic countries are today fighting a new cold war. It is a war both against terrorism and against the roots of terrorism, which are grinding poverty and blinding ignorance.

During the Cuban missile crisis of 1962, the first foreign leader to side publicly with President John F. Kennedy was General de Gaulle, who linked the fate of France to that of the United States. Today, in this new war, France remains a sincere and genuine friend of the United States and remains as firmly as ever at America's side.


In our joint war against poverty, our two equally crucial weapons are trade and aid. Although it was once fashionable to set aid against trade in debating how best to help the developing world, we have moved past that dichotomy and come to realize that both are essential.

Much has been done for developing countries by the European Union, and by France, in terms of both trade and aid. But much still needs to be done, in particular through the Doha development agenda. Firmly held beliefs sometimes turn out to be wrong.

Let me start with trade, in particular by stressing the huge increases that have taken place in EU trade with developing countries in recent years. In 2000, for instance, total EU imports from developing countries amounted to e 432 billion, double the 1990 figure. The European Union imports over half of all developing country exports to the Quad countries (the United States, the European Union, Japan and Canada), compared with 38 percent for the United States.

In 1999, 97 percent of imports from the least developed countries entered the European Union duty free, and that was before the "everything but arms initiative," to which I shall return shortly. Since the creation of the World Trade Organization in 1995, developing country exports to the European Union have grown by an average of 15 percent annually - a higher rate than overall EU trade.

And here is another fact Americans might find surprising in view of the widespread denunciation of the European Common Agricultural Policy: The European Union is the biggest importer of agricultural goods from developing countries, with purchases worth $33 billion in 2000. The U.S. figure was about $20 billion.

But while the exports of developing countries have grown from a quarter of world exports in 1970 to a third in 1996, let us not forget that this does not apply to all of them. Africa, in particular, is lagging behind: its share of world markets has shrunk from five percent in the early 1980s to less than two percent today.

Developing countries have special access to the EU market through three channels: the generalized system of preference (GSP), the Cotonou Agreement with countries in Africa, the Caribbean and the Pacific (the ACP countries), and, more recently, the "everything but arms initiative."

  • GSP schemes are determined unilaterally by importing countries. In 1999, the European scheme covered $45 billion worth of imports, against the U.S. scheme's $18 billion, according to the U.S. General Accounting Office.

    The Cotonou Convention was the model for the recent U.S. African Growth and Opportunity Act (AGOA), involving 36 countries from sub-Saharan Africa. AGOA is rightly presented by the U.S. Administration as a major effort to involve Africa more actively in world trade.

    Generally speaking, however, the Cotonou agreement is more favorable to our African partners than AGOA. Oil products represent 90 percent of imports under the AGOA preferences, against only 20 percent of preferential imports under the Cotonou Convention - the remaining 80 percent being equally divided between agricultural and industrial imports.
  • The "everything but arms" initiative (known as EBA) was launched in advance of the WTO ministerial meeting in Doha as a confidence-building measure for least developed countries. This scheme offers duty free access to the European Union for all exports from least developed countries, with three sectors to be phased in later. The World Bank estimates that adoption of the initiative by the other three Quad partners would mean an annual increase of 11 percent in exports of the least developed countries.

    Looking toward the future, the European Union and the United States must ensure that the Doha development agenda is implemented. Let us show the world that we do not regard it as a mere public relations exercise but as a goal we have set ourselves.

    We shall need to achieve four essential objectives:
  • In terms of market access, we must fulfill our commitments to reduce tariffs on products of particular interest to least developed countries. This is obviously a politically difficult objective, since both textiles and agriculture are essential exports for the least developed countries. But we must strive hard and honestly to move in this direction. I can confirm, as I strongly emphasized in Doha, that the European Union is committed to going even further in reforming the Common Agricultural Policy.
  • It will be of paramount importance to extend the concept of "special and differential treatment," by taking into account the different stages of economic development among developing countries. The developing world is more and more diverse, and strong emerging economies have to accept the reciprocal nature of trade negotiations, including the possibility of granting better access to poorer countries.
  • We must devote urgent attention to making drugs accessible in the case of pandemics, especially for countries that do not have drug-manufacturing facilities. In Doha I insisted, along with others, that this problem be addressed by the WTO, which has been done. We now have to reach a conclusion by the end of this year.

    Let me insist on this: we must make good on the hopes that we have raised. It is vital for patients in developing countries, and it is the only way we can sustain our claims that globalization brings new opportunities for everyone. With pandemics raging around the world, history may judge our generation on this single issue alone.
  • The most important task is "capacity building," so as to help the least developed countries participate in and benefit from trade negotiations by strengthening their diplomatic expertise and their ability to trade. At a pledging conference in March, the European Union contributed 63 percent of a total of more than $18 million. France will contribute an extra $26 million bilaterally, over a three year period.

Let me now turn to the issue of aid, in the wake of the recent United Nations conference on finance for development in Monterrey, Mexico. The so-called "Monterrey consensus" was clearly minimal and did not offer immediate answers to the various concerns expressed by developing countries and representatives of non-governmental organizations (NGOs).

The conference itself, however, was an important step in the right direction. It may have been the first time that world leaders, as well as all relevant multilateral institutions, came together to "brainstorm" on this central issue of development.

France took part in this conference with an open mind and with the hope of making progress on all fronts:

  • There is a need for more official development assistance, and all of us should contribute to that common effort. The European Union has decided to increase its aid to 0.39 percent of gross domestic product, or e7 billion by 2006. France is still the number one donor among G7 countries.
  • Private investment can and should be an important tool for financing development. But it is a very selective one (for instance, 40 percent of direct foreign investment in developing countries goes to one country - China), and it does not answer the needs of the poorest and smallest countries.
  • The quality of aid is as important as its volume. France has recently decided to untie completely its bilateral aid to poor countries, and we are looking at other ways to improve our efficiency.
  • We should not exclude a priori new ways of financing development, such as issues of IMF special drawing rights or some kind of international taxation. I know there are strong objections to some of these ideas. But we must pursue this debate and try to find long term, sustainable solutions. As Seneca so rightly pointed out, it is not because things are difficult that we dare not; it is because we dare not that things are difficult.

I hope I have made my point that aid and trade are two equally crucial weapons in our war on poverty. Those countries that do not have the necessary infrastructures, the educational and training skills, will never be able to benefit from greater access to our markets.

The question is not only how much we give, but also how well we give. Developing countries certainly need more aid, but they also need advice and rules, for both donors and recipients.

It is time we thought about an institution that would devise and enforce such rules, so as to achieve a "globalization of opportunities." This could be the responsibility of a new United Nations social and economic security council, as recently proposed by Lionel Jospin, the former French Prime Minister.

Such a body would enjoy wider legitimacy than the G8 and would promote greater coherence among the specialized international institutions, such as the World Trade Organization, the World Health Organization, the International Labor Organization and perhaps a future World Environmental Organization.

If we are serious about improving the way we trade and deliver aid, we cannot but heed popular concerns over sustainable development, social norms and the environment. Social progress and the environment are at the core of good governance, which is such a major concern in our aid policies.

Similarly, trade policies are often linked to human rights. NGOs are sometimes na¥ve, but we must admit that most of the time they are right on target. Public opinion will not go along with a "business as usual" trade policy.

In this long and frustrating fight to uproot terrorism and poverty, we are partners, and our duty is to help create a safer world, that is to say a less unequal one. Most of all, in these days of crisis, we must remain united and focused on the problems ahead.

 

This article was published in European Affairs: Volume number III, Issue number II in the Spring of 2002.