The European UnionFacing

Global ResponsibilityPast Records, Future Challenges

Edited by

Franck Amalric and Marikki Stocchetti

The European UnionFacing

Global ResponsibilityPast Records, Future Challenges

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1st edition, April 2001

The views expressed herein do not necessarily reflect the views of the entire SID network.

© Society for International Development, 2001Permission to reproduce any part of this publication is required. Please contact the Society forInternational Development (via Panisperna, 207, 00184 Rome, Italy; Fax. +39-06-4872170; email:info@sidint.org; http://www.sidint.org). Permission will be freely granted to education or non-profit organizations. Others will be requested a small fee.

Society for International DevelopmentVia Panisperna, 207, 00184 Rome, Italyhttp://www.sidint.org

Cover designed by Gelsomina Fasano

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Table of Contents

Acknowledgements 5

Introduction 7

Heads in the sand: a track record of EU global responsibility 11

Part 1: The EU’s Influence on Globalization 29

1. The EU in Multilateral Organizations 311.1 The EU in the UN Global Conferences of the 1990s: lessons from the Social and 33

Earth Summits, by Marikki Stocchetti, Society for International Development (SID)

1.2 Brussels and Washington: two worlds apart the European Union and its relation 45with the World Bank and the IMF, by Ted van Hees, European Network on Debt andDevelopment (EURODAD)

Interlude 1: The Chad-Cameroon Oil and Pipeline Project, 63by Jaroslava Colajacomo, Campagna per la Riforma della Banca Mondiale

1.3 The EU in the WTO, by Christian Friis Bach, Danish Association for 67International Co-operation (MS)

1.4 Supervision of the EIB and EBRD, by Magda Stoczkiewicz and Jozsef Feiler, 73CEE Bankwatch Network

2. EU External Relations 812.1 European Union Development Aid, by Simon Stocker, EUROSTEP 83

2.2 The EU-ACP Partnership: an ambitious co-operation agreement and a transition 91to a new trade regime, by Kathleen van Hove, European Centre for DevelopmentPolicy Management (ECDPM)

2.3 Regional Co-operation Agreements: the Mediterranean dimension, 99by Maria Àngels Roque and Helena Oliván, Department of Studies of the InstitutCatalà de la Mediterrània (ICT)

Interlude 2: Structural Adjustments Programmes in the Mediterranean, 105by Martin Köhler, Campagna per la Riforma della Banca Mondiale

2.4 The EU’s enlargement and its Impact ondevelopment co-operation, 109by Robert Zeiner, Director of Austrian Service for Development Co-operation andPresident of the Austrian EU Platform of NGDOs

2.5 Challenging corporate control over EU trade and investment policies, 113by Olivier Hoedeman, Corporate Europe Observatory (CEO)

3. The Internal Impact of EU Internal Policies and Regulations 1173.1 Agriculture, by Rian Fokker and Jan Klugkist, Netherlands Organisation 119

for International Development Co-operation (NOVIB)

3.2 EU fisheries: rights and responsibilities in relations with the South, 127by Béatrice Gorez, Coalition for Fair Fisheries Arrangements (CFFA)

3.3 The Impact of the Monetary Union on developing countries: 133the Case of the Franc Zone, by Anne-Sophie Claeys, Centre d’Etude d’Afrique Noire(CEAN), and Alice Sindzingre, Centre National de la Recherche Scientifique (CNRS)

3.4 Refugees and asylum: Europe’s global responsibility, by Peer Baneke, 139General Secretary European Council on Refugees and Exiles, ECRE

3.5 Supervision of export credit agencies, by Nicholas Hildyard, Corner House, and 143Franck Amalric, Society for International Development (SID)

3.6 Controlling corporate wrongs: the liability of multinational corporations, 149by Mandy Macdonald, International Restructuring Education Network Europe, IRENE

3.7 The impact of the EU’s demand for goods and services, 165by Franck Amalric, Society for International Development (SID)

Interlude 3: How fair is the tropical timber business in the EU? 173by Emmanuel Heuse, World Wide Fund for Nature, WWF Belgium

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Part 2: Global Issues 175

4. Some Global Issues and the EU’s Potential Role in Addressing Them 1774.1 The impact of the EU on the global environment: the case of the global warming, 179

by Raimund Bleischwitz, Max Planck Project Group “Law on Common Goods” andWuppertal Institute

4.2 Forests, by Nicole Gerard, Jutta Kill and Saskia Ozinga, FERN 185

4.3 The EU and the HIPC Initiative: still a long way to go, by Rob Mills and Anna Collins, 193European Network on Debt and Development (EURODAD)

4.4 The European Union’s role in fighting trans-border corruption, 203by Dieter Frisch, Founding Member of Transparency International (TI)

4.5 Strategies for a Responsible European Union for Gender Equity, 209social and economic rights, by Wendy Harcourt, Society for InternationalDevelopment (SID), and Brita Neuhold, Network Women in DevelopmentEurope (WIDE)

Conclusions: The quest for a responsible EU 217

Postscript: The future of SID’s European Programme 223

Responsible EU Publication Contributors 225

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Acknowledgements

This report is the outcome a collective undertaking, and came to existence thanks to thecontributions of the following individuals and organizations:

Martin Köhler & Jaroslava Colajacomo from Campangna per la Riforma della Banca Mondiale MagdaStoczkiewicz & Josef Feiler from CEE Bankwatch Network

Ann-Sophie Claeys from Centre d’Etude d’Afrique Noire (CEAN)

Alice Sindzingre from Centre National de la Recherche Scientifique (CNRS)

Béatrice Gorez from Coalition for Fair Fisheries Agreements (CFFA)

Olivier Hoedeman from Corporate Europe Observatory (CEO)

Nicholas Hildyard from Corner House

Christian Friis Bach from Danish Association for International Co-operation (MS)

Kathleen van Hove from European Centre for Development Policy Management (ECDPM)

Anne Collins, Ted van Hees & Rob Mills from European Network on Debt and Development (Eurodad)

Peer Baneke from European Council on Refugees and Exiles (ECRE)

Simon Stocker from European Solidarity Towards Equal Participation of People (EUROSTEP)

Nicole Gerard, Jutta Kill & Saskia Ozinga from Fern

Maria Àngels Roque & Helena Oliván from Institut Català de la Mediterrània (ICI)

Mandy Macdonald & Peter Pennartz from International Restructuring Education Network Europe(IRENE)

Rian Fokker & Jan Klugkist, Netherlands Organization for International Development Co-operation(NOVIB)

Robert Zeiner from Österreichischer Entwicklungsdient (OED)

Brita Neuhold from Network Women in Development Europe (WIDE) Austrian platform

Dieter Frisch from Transparency International (TI) Brussels

Emmanuel Heuse from World Wide Fund for Nature (WWF) Belgium

Raimund Bleischwitz from Wuppertal Institute

The report has been edited by Franck Amalric and Marikki Stocchetti, SID.

Marina Ponti from ManiTese and Dr. Stepanie Pfahl from Ecologic have given key inputs in thepreparation of the piece on the UN.

Alice Green, the copy-editor, spent endless hours tirelessly reading and improving the work of thecontributors.

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SID’s European Programme received financial support from the Government of Finland throughthe Junior Professional Officer’s Program. Support from the Heinrich Böll Foundation made possiblethe holding of a contributors’ meeting in the Hanover EXPO2000 on the occasion of the “GlobalDialogue on Responsible Governance in a Global Society”, and the production of a first draft of thepresent report presented at that occasion. The Government of Italy and the Canadian InternationalDevelopment Agency have provided additional financial support.

Within the SID International Secretariat, SID’s European Programme is directed by Franck Amalricand coordinated by Marikki Stochetti. European SID members Prof. Uwe Holtz, Senator Jos vanGennip, Prof. Louk de la Rive Box and Dr. Sabine Grund have provided guidance in the initialdevelopment phase of the program. Other individuals have made key contributions in thedevelopment of the program: Klaus Linsenmeir, Jörg Haas, Frieder Wolf, Ralf Fücks from the HeinrichBöll Foundation; and all participants of the “Toward a Responsible EU” workshop in Hanover.

This report is also the result of a collective effort of the entire SID International Secretariat.

Members of the programme committee provided conceptual support: Marie-Hélène Canale, WendyHarcourt, Elena Mancusi-Materi, Arthur Muliro, Miquel de Paladella, Stefano Prato and Laura Saponaro.Kitt Bohn-Willeberg did the overall lay-out of the report. Other members of the SID staff providedcontinuous support: Silvia Bighellini, Caroline Chambers, Massimo Meuti, Laia Oto and MoniqueThibaut.

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Introduction

Franck Amalric and Marikki StocchettiSociety for International Development

Our objective must be to make Europe a global actor, with a political weightcommensurate with our economic strength; a player capable of speaking with astrong voice and of making a difference in the conduct of world affairs.1

– Communication from the Commission of the European Communities, February2000.

The process of European integration was initiated to create the conditions for the peoples of Europeto live together, in peace, and until recently, the process of European integration has proceededmainly according to internal considerations: What policies should be developed in common? Whatjoint institutions should be created? What are the common values we share as citizens of EU MemberStates?

At the same time as the process of internal integration goes ahead, the citizens of the EuropeanUnion are now called upon to define how they wish to live with the rest of the world, and how theywant to participate in the shaping of globalization. Of course the EU and its Member States havealways had privileged relations with many countries in the South and East. But for a number ofreasons, the EU must now make a bolder step and confront its own responsibility towards the restof the world, and since 75 percent of the world population lives in the South and East, in relation tothese parts of the world in particular.

One reason is that the process of economic and financial globalization has increased significantlythe level of interdependence between countries worldwide, generating a need for more elaborateforms of global governance.

A second reason is that the enlargement of the Union in the 1990s, the deepening of its economicintegration, and initial forms of political integration including the creation of a Common Foreignand Security policy (CFSP), have transformed the Union into a great economic and financial power.

A third reason is the end of the cold war, which has freed members of the European Union fromtheir dependence upon the US in foreign affairs. While this dependence remains alive for nationalsecurity reasons, traditional security concerns have themselves diminished and made room for theemergence of a wider concept of security – global human security – that calls for wider social,economic and political responses beyond the military.

1 Communication from the Commission to the European Parliament, the Council, the Economic and Social Committeeand the Committee of the Regions; Strategic Objectives 2000-2005; “Shaping the New Europe”; 9 February 2000.

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Finally, the world today needs responsible global actors, perhaps more than ever, and the EU shouldbe one of them. Convened in early September 2000 in New York for the United Nations MillenniumAssembly, heads of states adopted the United Nations Millennium Declaration, of which article 2deserves particular attention: “We [the heads of State and Government] recognize that, in additionto our separate responsibilities to our individual societies, we have a collective responsibility touphold the principles of human dignity, equality and equity at the global level. As leaders we havea duty therefore to all the world’s people, especially the most vulnerable and, in particular, thechildren of the world, to whom the future belongs”.

The purpose of this report, and of the process that has produced it, is to provide a framework forthis much needed debate: What kind of EU do we – European citizens – wish to build in relation tothe rest of the world?

The framework reflects the many different ways EU-based actors have an impact on the lives ofwomen and men living in other countries, and propose a basic structure to assess these impacts.The first chapter presents the framework and the overall picture that comes out; chapters in thefirst part of the report present in more detail specific channels through which the EU has a bearingon the rest of the world; and chapters in the second part assess the capacity of the EU and itsMember States to participate actively in addressing some of the more pressing global issues. Aconcluding chapter presents some recommendations on how to move forward.

This report is one outcome of the Society for International Development’s (SID) EuropeanProgramme, born in late 1998. The program aimed to explore a basic question: what shared identitydo EU citizens want to build through acting collectively on the global scene? After variousconsultations between SID European constituencies, the process leading to the production of thisreport was launched in January 2000. The SID International Secretariat produced an initial workingpaper, and on this basis invited leading EU based non-governmental organizations to contribute tothis report. A first draft of the report was presented in the Hanover EXPO 2000 at the occasion ofthe Global Dialogue on “Responsible Governance in a Global Society”.

The report builds and expands on previous efforts from EU-based non-governmental organizationsto present an overall picture of the EU’s relations with the South.2 It differs from them, however, inthat it does not impose an overarching objective to the EU’s relations with the rest of the world (e.g.poverty alleviation), and first and foremost aims to provide a framework that could shed some lighton complex and intricate issues.

The report is also an attempt to develop a framework for thinking about international solidaritythat would be compatible with the sustainable livelihoods approach to social justice, perhaps themore promising approach to thinking about social justice in the South. That approach emphasizesthe strengths, rather than the needs, of women, men, and local communities, and exploresdevelopment processes that build on these strengths. Eventually needs are of course also identified– the need for better institutional arrangements, or for financial support. But by emphasizingstrengths, this approach suggests that the first duty of a person involved in international solidarityis to ensure that s/he, and the organizations over which s/he has an influence, respects and helps toprotect the strengths of women, men, and local communities, living in a state of deprivation. Theframework developed in this report aspires to give substance to this basic idea.

The picture drawn by the report is alarming: the EU and its Member States act in a particularlyirresponsible manner. The point cannot be overstressed at a time when people, in the EU itself andin the rest of the world, would be inclined to turn to the EU to play a leading role in governing the

2 Some of these studies include: Jadot, Y. and J.P. Rolland (1996) Contradictions in European Policy towards developingcountries, Paris: SOLAGRAL; Liaison Committee of Development NGOs to the European Union (1996) “ImplementingHorizon 2000: poverty eradication and coherence of European policies”, Brussels; John Madeley (ed.) with CliveRobinson (1999) “Brussel’s blind spot. The Lack of Coherence between Poverty Eradication and the European Union’sother Policies”, APRODEV; Fokker, Rian and Jan Klugkist (1999) “Eurostep Dossier on Cap & Coherence. Coherence inEU policies towards Developing Countries”, Brussels: Eurostep; Van Reisen, Mirjam (1999) EU ‘Global Player’. The North-South Policy of the European Union. Utrecht: International Books.

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process of globalization. Not only is the EU unable to harness its own potential power, it is alsounable to provide a guiding vision for the power it actually has. Good intentions it appears to have,for instance, on the occasion of the United Nations processes, but as soon as concrete action andeffective power is at stake, powerlessness, irresolution, narrow national interests, and division cometo the fore.

Against this background, many EU citizens concerned with global justice are trying to give birth tonew forms of international solidarity. Choosing to be engaged in traditional development projectsis today just one option among many, as the diversity of the organizations contributing to thisreport shows. Citizen groups, and also increasingly official or semi-official development agencies,more and more frequently target global or internal issues, which appear to bear on the potential ofSouthern men, women, communities, and countries to alleviate the more acute forms of deprivationand to gain democratic control over their destinies. On the one hand the World Trade Organizations,the International Monetary Fund and the World Bank, and on the other hand, transnationalcompanies, export-credit agencies, agricultural policies, unfettered consumerism, and debt becomesites and issues for political engagement under the banner of global social justice.

As mentioned, this report is a collective effort. It is so not just because of the intention of producinga better and more encompassing report. It is so also for strategic reasons, as one step towardsbuilding a shared EU public space, and towards facilitating convergence between organizationsdealing with various aspects of what we present here as the overall problematic of a globallyresponsible EU. We hope that this report can trigger the interest and engagement of many moreorganizations in addition to the ones that have participated in this initiative, and that togetherthey can give life to a process leading to a globally more responsible European Union.

Franck Amalric and Marikki StocchettiRome, April 2 2001

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11

Heads in the Sand:a track record of EU global responsibility

Franck AmalricSociety for International Development

It has become a commonplace saying that the world has evolved into a global village, that through“globalization”, the lives of women, men and children living in distant places are becoming evermore inter-dependent and connected through a myriad of relationships. Thus, a person resident inthe EU would have an impact, either directly or indirectly, and often unintentionally, on the lives ofdistant neighbors, when consuming, producing, saving, investing, or participating in public life.

One purpose of this study was to identify, describe and list a number of mechanisms and processesthrough which residents, citizens, economic actors, and EU Member States shape and influence thelives of people living outside its borders. We call these various mechanisms and processes “channelsof external impact”, because they are the conduits through which decisions made in the EU, ordecisions over which EU-based actors hold formal responsibilities, eventually bear on distant realities.Basically, a channel of external impact comprises someone who acts or makes a decision, that setsoff a series of events and processes, that transmit the consequences of that decision, and has animpact. It is useful to complement this description by looking at the particular institutional contextwithin which actions are initiated, because it is at this level that policy recommendations may bemore useful.

The novelty of this exercise does not reside in the identification of any specific channel of externalimpact. Most of them, if not all, are well known to non-governmental organizations working onNorth-South relations. The novelty lies in bringing all this knowledge together, producing a sort ofmapping of channels of external impact, in a way that facilitates comparison across channels andhighlights the potential of and challenge for the European Union to be a force for change.

The list of channels of external impact presented in this report is, however, not exhaustive. Thechoice of these particular channels was made according to their relevance in the overall process ofeconomic and financial globalization, and according to the existence of social movementschallenging specific decisions or policies within them. Some important channels have been leftout, for instance, military organizations like NATO, or the incidence of internal legislation on migration.

Once the framework is in place, we can measure the total level of influence of EU-based actorsconsidered as a group, and eventually assess the impact of this influence on the lives of men andwomen in distant countries, directly and indirectly.

1. The general framework: channels of external impact

1.1 Spheres of impactIt is actually simpler to present the various channels of external impact working our way backwards,starting with the following question: How can we assess the impact of actions originating from the

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space1 of the European Union on people’s lives elsewhere, in particular in the South and East where75 percent of the world’s population lives?

When the impact is direct, it is relatively easy to do so. EU-sponsored development projects in ruralareas of the South, for example, have an immediate impact on the lives of men and women, and inmost cases it will be possible to measure that impact.

More often, however, significant channels of external impact collide with other processes or forcesand only indirectly and remotely affect people’s lives. The case of the EU’s common agriculturalpolicy (CAP) provides a good illustration of the complexity we must confront: the CAP affectsinternational prices and the supply of agricultural goods, but it is one of many factors doing so;international prices in turn affect national prices within a country, but again it is only one factoramong others; and national prices, among other factors, affect farmers, and this affects in differentways members of the household. In this complexity it is not possible to identify a mechanicalrelationship between the CAP and the well being of farmers in the South and their families. Andyet, the existence of a significant influence cannot be denied.

In order to capture this complexity and the various mediating effects, and, at the same time, providea framework as general as possible, we propose to assess the impact of actions coming from the EUin five “spheres of impact”: the local places; the national economy, institutional structure, and policies;the global economy; the global environment; and, finally, the global institutional structure. The reasonto keep the three global spheres separate (unlike at the national level) is that there is no worldgovernment providing an overall umbrella.

The choice of these five spheres is not neutral. It is justified by the fact that, together, the five spheresprovide a framework that corresponds well to the present inter-national arrangement of nation-states. It implicitly recognizes the national level as the main sphere for the pursuit of social justice.Yet, by treating this level as a sphere in which different forces operate, it does not fall into makingsimplistic assumptions about the existence of strong and sovereign states able and willing to pursuesocial justice, and allows the taking into account of external influences.

Another justification of this choice is that it positions men, women, and local communities at thecenter of the perspective, expanding from them by concentric circles, and offers for this reason anatural correspondence with the way men, women and local communities in the South see theissues.2

1.2 Origins of external impactWhat then are the actions, and types of action, originating from the EU space, or over which EUbased actors hold a formal responsibility, that impact on people’s lives elsewhere, in particular inthe South and East? And what is the institutional context – e.g. the relations of accountability andof responsibility — within which the actors in question act?

One cluster of origins of external impact is multilateral organizations and processes. Each multilateralorganization – United Nations agencies, the International Financial Institutions (IFIs), the World TradeOrganization, etc. — provides a channel through which a country impacts the global institutionalstructure and other countries.

A second, more traditional cluster of actions that impact on other countries, comprises the policiesaimed directly at mediating relations with other countries: traditional foreign policies, nationaldevelopment co-operation policies, EU development policy, EU-ACP partnership agreement, Euro-Mediterranean partnership agreement, and so forth.

1 “Space” of the European Union refers here to the geographical territory of the 15 Member States. Similarly, whenwe use the expression, EU-based actors, it means actors based on that territory and operating from it. The meaningof these expressions is therefore independent of the EU institutions.2 Taking this point one step further, we should also note that the framework is compatible with the SustainableLivelihoods Approach to social justice.

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And a third broad cluster of origins of external impact comprises EU-based private actors, andinternal policies and regulations of the North that have an indirect but significant impact on therest of the world. This includes: actors, based in northern countries and operating overseas, liketransnational or multinational corporations (TNCs/MNCs) or export-credit agencies (ECAs); smallconsumers and producers who, through aggregate effects, have an impact on economic relationswithin other countries, on the global economy, and on the global environment; ‘internal’ policieswhich have global consequences, like EU policies on agriculture and on fisheries, or the UnitedStates’ policy on fuel tax.

Within these three clusters, many actors, processes, or policies that link the EU to the rest of theworld can be identified. The selection presented in this report does not pretend to be complete orcomprehensive, but it aimed to capture the more relevant actions at play.

1.3 Channels of external impactA channel of external impact is a line of causality between an action or origin, and one of the fivespheres of impact. Laying down the general framework, which will then allow us to assess theglobal influence and responsibilities of the EU space, consists therefore in tracing the many lines ofcausality between origins of external impact and spheres of impact. The framework, however, doesnot tell us anything about the relative importance or strength of these various lines.

The briefing notes in the first three chapters do that in some detail. Some key features are presentedin the rest of this section. The overall framework is presented in diagram 1, with the addition of theinstitutional context from which channels of external impact originate on the facing page.

Let us note that this approach carries a certain degree of generality. It could be used, for instance, totell the story of globalization and how it generates new political tensions across the North-Southdivide. This story would be about the multiplication of channels of external impact leading to increasingexternal pressures and influences on the national spheres of countries in the South and East.

The World Bank, IMF and WTO as global organizationsOver the last twenty years, a major transformation in the landscape of multilateral organizationshas brought about the increasing influence of three of them over the national institutional structuresand policies of some of the countries within which they operate: the International Monetary Fund(IMF), the World Bank, and the General Agreement on Tariffs and Trade (GATT), more recentlytransformed into the World Trade Organization (WTO).

The roles of the IMF and the World Bank have increased significantly in the aftermath of the debtcrisis of the early 1980s, with the reform programs they have promoted throughout the South. TheStructural Adjustment Programs (SAPs) have been far-reaching and have had a profound impacton the countries that adopted them.3 While national governments have had an importantresponsibility in adopting these programs, the influence and power of the World Bank and IMFcannot be disregarded. There is sufficient evidence, from within these organizations, from civil societyand from academia, to uphold the view that economic policy-making has become a global matter,rather than a matter of public deliberation within the national space. For these reasons, the WorldBank and the IMF are regularly subjects of criticisms from civil society groups, and controlling andoverseeing their policies has become a major contest of international politics. (See Chapter 1, Briefingnote 1.2).

The 1994 Marrakesh Agreement,4 closing the GATT Uruguay Round and establishing the WorldTrade Organization, marks another important evolution in the landscape of multilateralorganizations. The functions of the WTO include administering trade agreements, acting as a forum

3 Among the abundant literature on SAPs and their history, see for critical reviews: Bello, W. Dark Victory. The UnitedStates, the World Bank, and Global Poverty (London: Polity Press, 1994) and Caufield, C. Masters of Illusion. The WorldBank and the Poverty of Nations (New York: Henry Holt and Company, 1997).4 The Marrakesh Agreement includes a number of separate agreements, including the General Agreement on Tariffsand Trade (GATT), the Agreement on Textiles and Clothing, the Agriculture Agreement, and Trade-Related Aspects ofIntellectual Property Rights (TRIPS) agreement.

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for trade negotiations, settling trade disputes and assisting developing countries in trade policyissues, through technical assistance and training programmes. The main characteristic of the WTOis that it is the first multilateral body of its kind with binding rules – with a mechanism to assesswho is right and who is wrong in trade related disputes and a system to impose sanctions, if necessary,on the party at fault.

The establishment of the WTO had a very important impact on the global institutional structure.On the one hand, with the IMF and the World Bank, it constitutes the core global governance systemof neo-liberal globalization; on the other hand, a number of tensions have arisen between the WTOand United Nations (UN) agencies: with the Food and Agriculture Organization (FAO) over therelationship between food security and trade, with the United Nations Environment Programme(UNEP) over the relationship between sustainable development and trade, and more visibly, withthe International Labour Organization (ILO) over the relationship between labour standards andtrade.

The more visible impact of the Marrakesh agreements is on the global economy. It creates a differentset of rules within which economic actors evolve and mould the global economy.

Less visibly yet politically more important, the Marrakesh agreements have far-reaching impacts atthe national level. The agreements go well beyond trade policy stricto sensu (i.e. quotas and tariffson importations and exportations), and include other issues like subsidies for agriculture, sanitaryand phytosanitary measures, technical regulations and industrial standards, and protection ofintellectual property rights (including plant variety protection). All these issues and respectiveagreements have been added on the grounds that they are closely related to trade. But in doing so,they impose a large array of constraints and measures on the internal policy-making of countriesthat are members of the WTO (See Briefing note 1.3 and 2.5).

Development co-operation policies: from aid to partnershipsIn principle, development co-operation policies should impact only the Global Institutional Context:they are a series of opportunities offered by EU Member States to some countries. However, sincethe end of the cold war and partly in response to a crisis of international development co-operation,an important shift is taking place from co-operation for development as defined and designed bya sovereign state, to intentions of establishing partnerships between countries for the pursuit ofsocial justice, on the basis of shared objectives like poverty eradication, human development andthe establishment of democratic institutions and the rule of law. Consequently, influencing nationalinstitutions and policies becomes openly one objective of development co-operation policies. Thistrend is particularly visible in the European Union’s policies: it is at the core of the Euro-Mediterraneanpartnership agreement with countries around the Mediterranean Sea, of the Partnership Agreementwith ACP countries, and of the accession procedures that Eastern European countries must followin order to join the Union. (See chapter 2, Briefing notes 2.1 – 2.4).

Transnational companies, global organisationsThe operations of TNCs have a direct impact locally, where they produce and operate, on the localenvironment, social relations, and local political setting. TNCs also have, at times, a major impact onthe national economy and on national institutions and policies. Public scandals, over the operationsof Elf, in Africa; Total, in Birmania and Shell, in Nigeria, go beyond local consequences of theiroperations, and touch upon the relation between these companies and national politicians, includinglarge scale bribery and support of dictatorial regimes. Less violently, TNCs, either directly or throughtheir affiliates, sometimes take part in shaping national legislation. Recent examples include theattempt by the pharmaceutical industry to block the implementation of a law (the Medicines andRelated Substances Control Amendment Act, Act 90 of 1997) the South African Government passedto make medicine more affordable to patients, and the design of national legislation on plant varietyprotection in a number of countries.5

5 The passing of the legislation is part of the implementation of the Trade Related Aspects of Property Rights (TRIPs)Agreement made as part of the Marrakesh Agreement concluding the GATT Uruguay Round and establishing theWorld Trade Organization. On the influence of TNCs is designing this legislation, see GRAIN (2001) “Intellectual PropertyRights: Ultimate control of agriculture R&D in Asia”, available at http://www.grain.org/publications/reports/asiaipr.htm.

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Finally, TNC corporate strategies have had an impact on the global economy and on the globalenvironment given the increasing concentration of activities in many economic sectors, and havebeen criticized for being the main actors behind recent changes in the global institutional context.6

For these many reasons legislation and regulation of TNCs in their home countries is of significantimportance for many people living in many parts of the world. Specific legal instruments andprocesses that aim to ensure the social responsibility of TNCs are presented in Chapter 3, Briefingnote 3.6.

Export-Credit AgenciesIn supporting TNCs, the work and operations of export-credit agencies (ECAs) have receivedincreasing attention. ECAs provide companies with insurance against the main commercial andpolitical risks of operating abroad, in particular, of not being paid by their creditors. With theliberalization and privatization of infrastructure development in many countries, ECAs are now ‘thesingle largest public financiers of large-scale infrastructure projects in the developing world’.7 (SeeBriefing note 3.5).

The first impact of ECAs is of course locally, by supporting large infrastructure projects. It is also atthe national level, as they subsidize at times non-economic projects, and often lead to an increasein the stock of national debt owned by the importing country. And by the scale of activities itsupports, ECAs have also an impact on the global environment.

EU agriculture and fisheries policiesThe impacts of these policies on countries of the South are well documented (See Briefing notes3.1 & 3.2). Some of the impacts are within local spaces: dumping of EU agricultural productsdestabilise local markets and production; and industrial fishing may rob local villages from theirmeans of livelihoods. The impacts are also at the national level, by reducing the national prices foragricultural products, or impeding the development of the local fishing industry. Finally, someimpacts are global: the common agricultural policy impacts the global economy of agriculturalproducts; while the fisheries policy impacts the management of fisheries worldwide.

BuyingThrough an effect of aggregation, small consumers and producers have an impact on economicrelations within other countries, on the global economy, and on the global environment (See Briefingnote 3.7). The first impact is channelled through what are called “commodity chains”, a series oflinkages between sites involved in producing part of an overall product and bringing it for sale onthe market. By the simple act of buying, consumers in the North thus support production processesthat may be socially irresponsible. In response, the movements for fair trade and ‘responsibleconsumption’ aim to transform consumption into a domain of political activism in which theconsumer chooses, not just a product, but a process of production as well.

The aggregate demand emanating from the EU for products produced elsewhere also has an impacton the global economy. The issue of market assess to EU markets for Southern products is particularlyimportant in this regard. And finally, through the demand for goods and through the act ofconsumption itself, an impact is made on the global environment, and on the distribution ofentitlements to consume in the context of ecological limits.

1.4 The EU’s real and potential influenceOur purpose in developing the framework was to assess the influence, real and potential, that allEU based actors have on the rest of the world. We look, therefore, at the aggregate impact stemmingfrom actors based in the EU, or for which EU actors hold a responsibility, relative to other, non-EUbased, actors. In the process, we clarify the various ways in which this collective impact is beingmediated by the national and European institutions. In some cases, this grouping is virtual and hasno political existence; in others, it does correspond to joint institutions that facilitate joint action.

6 Korten, David (1995) When Corporations Rule the World London: Earthscan.7 Rich, B. Memorandum: Export Credit and Investment Insurance Agencies – The International Context (Washington,D.C.: Environmental Defense Fund, 1998) at p. 22.

16

Origins ofexternal impact

InternationalagreementsTrade agreements

IMF policiesWorld Bank policiesUN specializedagencies (WHO,FAO…) policies

Development co-operation policy

EU development co-operation policy

Internationalagreements

Enlargement process

Common agriculturalpolicyCommon policy onfisheries/ InternationalagreementsFinancing needs ofTNCsCorporate strategies

Strategies offinancial actors

Buying

Consuming

Institutional context

Non-state State level EU level Global Levelactors

Multilateral Organizations

Citizens Foreign ministry Co-ordination by UN ProcessesEU President

Citizens Trade ministry Trade DG/ Council WTOOrganizedbusinessCitizens Finance ministry - IMFCitizens Finance ministry - World BankCitizens Line ministries Co-ordination by UN specialized

EU President agencies (WHO,FAO…)

Bilateral RelationsDevelopment Development Council OECD DACco-operation Ad-hoc co-ordinationministries mechanismsDevelopment Development DG/ OECD DACco-operation Council Ad-hoc co-ordinationministers mechanismsForeign Affairs External Relations -Ministers DG/ General Affairs

CouncilEnlargement DG -

Internal policies and regulationsCitizens Ministry of Agriculture DG/ WTOFarmers Agriculture Agriculture Council FAOFisherfolk Ministry for Fisheries DG/ FAOCitizens fisheries Fisheries Council

Export-credit National legislation - OECDagenciesTNCs National legislation - OECD, ILO

Finance National legislation - Ad-hoc committees onIndustry the new financial

architectureConsumers Nat. legislation and Relevant EU

policy legislationConsumers Nat. legislation andProducers policy Relevant EU legislation

Channels of External Impact: Institutional Context

17

Diagram 1: Channels of external impact

�Global institutional

structure

Global economy

Global environment

National institutions and policies

Local places

UN agreements

Trade agreements

IMF policies

World Bank policies

National development pol.

EU development policy

Enlargement

CAP

Common pol. on fisheries

ECAs support to TNCs

TNC corporate strategies

Buying

Consuming

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The economyThe first dimension is related to basic economic activities, consumption, production, exports, savingsand investments. Considered as a whole the EU economy is the largest in the world, with a stronginfluence on the rest of the world:

● The EU’s GNP represents 36 percent of the World GNP;● The EU provides 51 percent of the World’s Foreign Direct Investment outflows;● The EU exports, specifically goods and services, take a share of 38 percent of the world market.

With the creation of the single market, most decisions related to the regulation of the economyand economic actors (apart from economic policies as such) are made at the EU-level under theimpulse of the European Commission.

Despite this general rule, there is no EU-level co-ordination within the OECD or elsewhere for thesupervision of some key economic actors, namely TNCs and Export Credit Agencies, who have asignificant impact beyond the borders of the EU. This lack of co-ordination has not resulted inparticularly progressive policies at the level of each Member State, as their respective legislation onthese matters, as on the issue of corruption, is lagging behind the United States’ legislation.

Amid the common policies of the EU, two have particular significance for the rest of the world: theCommon Agricultural Policy, and the Fisheries Policy. These policies regulate the actions of farmersand fisherfolk throughout the EU, and are primarily designed according to their interests and relatedinternal considerations. Despite undisputable evidence of some negative effects of these policieson non-EU populations, the impact of the common agriculture policy and of the common fisherypolicy on southern populations is not taken into account in the design of these policies (See Briefingnotes 3.1 – 3.2).

The key forum for international co-operation on economic issues with direct impact on the EU’seconomy is today the World Trade Organization. Within the WTO, the EU speaks with one voiceexpressed by the European Commission. In this forum, where the EU has the largest collectivenumber of votes, it defends with strength its self-interest, under the strong influence of EU basedTNCs (See Briefing note 3.6).

International co-operationEuropean citizens also have a stake and responsibility in ensuring that their respective nation-states participate actively in international co-operation. In this area also, the EU as a whole could bea leading player, but the incapacity and lack of political will of European Member States to act inconcert undermines the realization of this potential.

By providing 55 percent of Official Development Assistance, the EU and its Members States aretogether the foremost financier of the global institutional structure (including United Nationsspecialized agencies and World Bank managed trust funds), and the foremost provider of financialopportunities to countries of the South and East. However, the lack of co-ordination among MemberStates in development co-operation is notorious, undermining the efficiency of their respectiveefforts; the relation between the common EU development policy, and the development policiesof nation-states remains difficult; EU Member States do not co-ordinate their efforts and policiestowards United Nations agencies. (See Briefing notes 1.2, 2.1).

The gap between potential power and actual influence is particularly large in relation to the BrettonWoods Institutions: EU Member States together control 23 percent of the votes in the World Bank(largest total), and 29 percent of the votes in the IMF (largest total). Yet there is no effective EU co-ordination or vision within the World Bank and IMF, impeding the realization of the potential powerinto concrete influence. (See Briefing note 1.2).

In any case, nothing indicates that if the EU acted as a group the World Bank and the IMF would bedifferent organizations. The record in this regard is not particularly encouraging: two multilateralorganizations actually controlled by the EU, like the European Bank for Reconstruction and Development(EBRD) and European Investment Bank (EIB), are particularly un-democratic and show a particularly lowlevel of social responsibility when compared with the World Bank (See Briefing note 1.4).

19

Finally, although EU Member States formerly co-ordinate within United Nations processes, there isno building up of a EU identity in the process, because the President in turn, rather than a sharedorganization, does the co-ordination. The EU position thus tends to reflect the priorities of thenation-state speaking for the EU. Furthermore, there is no active co-ordination in the implementationphase (with some exceptions, like over the Climatic Change Convention), which further underminesthe credibility and power of the EU as a group. (See Briefing papers 1.1, 4.1).

In synthesisEuropean citizens are, together, willingly or not, a global player.8 They are a global player by thestrength of their common economy, regulated and to some extent managed by common institutions.They are also a global player through some of their common policies: agriculture, fisheries, andtrade. By doing so they participate together in fostering the process of globalization.

At the same time, despite the Amsterdam Treaty, which states that the EU should assert an externalidentity (art. 2) and ensure coherence, effectiveness and unity in its foreign policy (art. 13), EU MemberStates make few efforts to co-ordinate their national policies to foster international co-operation,for instance, to govern the process of globalization. They are weak in the United Nations, do not acttogether in the OECD, and shy away from their potential power in the World Bank and IMF.

The experience of the European Union, citizens and Member States, in the process of globalizationis thus a paradox. While the EU, with its Member States, is one of the two more influential actors inall dimensions of the globalization process, and often the most influential one, it does not exercisea visible influence on the process of globalization as a whole. The reason and also symptom of thisparadox is the lack of either an institutional co-ordination mechanism or ideological consistencybetween its various channels of external impact. As a consequence, the EU can neither articulateand express an external identity in the global arena, i.e. “a strong voice”, nor act effectively to addressglobal issues, i.e. “make a difference in the conduct of global affairs”.

2. Assessing the EU’s responsibility towards the rest of the world

2.1 Assessing the impact of EU-originated actions on the rest of the worldBy choosing five spheres of impact, we have responded to the question “Where should the impactof actions from the EU space be assessed, if we wish to link them to people’s well-being around theworld?” But, within each sphere, it does not tell us how to make the assessment. Consider oneexample: we know that the common agricultural policy has a bearing on the international supply andprices of agricultural products – but according to what criteria can we say that this is good, or bad?

A basic remark: in order to be in line with the choice of separate spheres of impact, we should selectcriteria that are specific to each sphere, i.e. not to use a criterion like respect for human rights, whichbelongs to local places, in order to assess the global institutional order (a criterion that may applyat that level is the existence of global institutional mechanisms that can support and defendeffectively local activists for human rights).

In order to enter the complexity of the issues, we propose the following:Step 1: Within a particular sphere, we try to identify one minimum, uncontroversial criterion;Step 2: This criterion is used to assess the impact coming from the EU;Step 3: We explore whether this first criterion logically implies the consideration of othercriteria. If so, these new criteria take us back to step 2. (And so forth).

Global institutional structure: The incoherence of the EU’s position on multilateralismEU Member States have expressed and continue to express strong support for multilateralism.9

According to this view, global issues should be addressed through a high level of international co-

8 See Mirjam van Reisen (1999) EU ‘Global Player’ The North-South Policy of the European Union. Utrecht, TheNetherlands: International Books.9 See for instance: Romano Prodi, “Europe and Global Governance”, speech at the “2nd congress of the Commission ofthe Bishop’s Conferences of the European Community (COMECE), Brussels, 31 March 2000; European Commission,Forward Studies Unit (1997) The Future of North-South Relations, Luxembourg: The European Commission.

20

operation, rather than through unilateral action. This defines one criterion to assess the globalinstitutional structure.

To defend multilateralism raises new questions such as “what kind of multilateralism” or “what kindof multilateral organizations”? And in order to answer these questions, new criteria will have to beintroduced. Potential ones are: the level of participation of all countries in shaping the world order;the effectiveness and efficiency of multilateral institutions; the transparency and accountability ofsingle organizations; the balance of power between various organizations; and so on.

Although the EU firmly defends the principle of multilateralism, it is difficult to identify the kind ofmultilateralism it represents. Significant in relation to concerns of the South, is the EU’s lack ofcoherence with respect to: the degree of participation of all countries in setting the global agendaand global policies; the balance of power and competence between various multilateralorganizations; and in particular, between the International Financial Institutions (IFIs) on the oneside and the United Nations agencies on the other side.

While the EU, as a whole, gives great importance to the concept of political partnership in its relationswith ACP and Mediterranean countries, the EU Member States continue to support the increasingrole of the World Bank and of the IMF – although these organizations do not allow countries theyserve substantial participation in the design of their policies (see Interlude 2).

During the 1995 Social Summit in Copenhagen and the five year review in Geneva (see BriefingNote 1.1), the problem of domains of responsibility and relations between the international financinginstitutions and the United Nations strongly emerged. When the Group of 77, representing theSouth, was questioning the increasing power of the IFIs and the decreasing influence of the UnitedNations, the EU was unable to respond in any strong manner or to give support to any progressiveagenda with regard to the global institutional arrangement.

There is a fine line between multilateral co-operation, and the use of multilateral organizations bypowerful countries to impose upon others their preferred policies. If the EU wants “to speak with astrong voice and make a difference in the conduct of world affairs”, through close dialogue andconsultation with its partners, it will have to complement its support to multilateralism by defininga number of principles that it will defend and promote in global discussions regarding theinternational system.

Global economyCurrently, there is a profound split between North and South on what criterion should be used toassess the global economy. There is a tendency within the North to reduce that discussion toprocedural criteria over the management of trade within the WTO. According to this view, theexistence of the multilateral rule-based trading system embodied by the WTO would be sufficient,in itself, to ensure the justice of the global economy. This position leaves open the question aboutthe nature of the multilateral arrangement, in line with the issues discussed in the previous sub-section.

The South, by contrast, tends to assess the global economy according to the opportunities andsupport it provides for their development efforts. Key in this perspective are the internationalstructures of supply and demand of goods and services, market access, terms of trade, and so forth.

After the failure in Seattle to launch a new round of negotiations, and the resistance of developingcountries on that occasion to follow blindly Northern leadership, the North has made some effortto show that the WTO could also be the instrument to create a just global economy according tothe South’s criteria. As Pascal Lamy put it in a press conference one year after Seattle, “We must getready to go further towards a position acceptable to less developed countries, as it is clear thatthese countries are not yet convinced [about the benefits of a new round].”10

10 See article “Towards a new round” posted on the European Commission website: europa.eu.int/comm/trade/2000_round/index_en.htm

21

Recognition by the EU of the validity of the Southern criteria to assess the global economy mustlead logically to the recognition that, among others:

● The common agricultural policy deteriorates the global economic context for many countriesof the South and East;

● Within the WTO, the EU defends its own interests at times against the interests of countries inthe South and East and in this way contributes to the strengthening of an unjust global economicorder.

More generally, Lamy’s acceptance (to some extent) of the position of developing countries shouldlead to recognizing the injustices built into the WTO, which have beeen denounced by manysouthern voices, and are the root causes of the present resistance by the South to a new round.They include: injustices in some of the original Marakesh agreements, in particular the agricultureagreement and the agreement on textiles and clothing that discriminate against developingcountries; injustice in the lack of respect for the procedures of negotiations, which sparked theresistance of Least Developed Countries (LDCs) to the negotiations in Seattle.11

Global environmentThere is no agreed criterion to assess the impact of EU-based activities on the global environment.What must be said, however, is that the EU uses more than its share of natural resources, whenmeasured according to the fair environmental space criterion (see Briefing Note 3.7).

National institutions and policiesTwo general criteria can be used without controversy to assess EU’s external impact at the nationallevel of other countries: the criterion of respecting a good polity, defined as respect for humanrights, democratic principles and the rule of law; respect of the right of these countries to sustainabledevelopment.

These criteria have both static and dynamic dimensions. Respecting a good polity means, not onlyrespecting established democratic regimes, but also respecting democratisation processes, as wellas the various circumstances that make democracy possible. For instance, evidence suggests thatover-dependence on the export of primary commodities generates a powerful risk of civil conflictin the country, motivated by the desire to take control over the key resources.12 Other evidencesuggests that the deterioration of the natural environment may also lead to civil conflicts, byexacerbating competition for access to natural resources beyond the capacity of social institutionsto manage it.13

Similarly, respecting the right of a country to sustainable development means respecting sustainabledevelopment processes per se, but also the various assets that a country may derive benefit from inthe course of the development process.

Relative to the criteria of (1) respect for the economic, ecological, social, and political conditions forthe development of democratization processes, (2) sustainable development, a number of EU-originated actions fare negatively:

11 On the evening of December 2, angry and frustrated African ministers met and denounced the non-transparentprocess of negotiation. Eventually, they issued a statement asserting that they would not comply with the deal thatthe more powerful countries were trying to reach: “There is no transparency in the proceedings and African countriesare being marginalized... We are particularly concerned over the stated intentions to produce a ministerial text atany cost including at the cost of procedures designed to secure participation and consensus. We reject the approachthat is being employed and we must point out that under the present circumstances, we will not be able to join theconsensus required to meet the objectives of this ministerial conference”. Cited in Farida Akhter (1998) “ChangingStrategies for Future Action and Solidarity”,Asian Exchange, Vol 14, N. 2, pp. 77-92. Available at www.asianexchange.org.12 See Collier, Paul (2000) “Economic Causes of Civil Conflict and Their Implications for Policy” Unpublished Manuscript,Washington: World Bank; Annan, Kofi (1998) “The causes of conflict and the promotion of durable peace andsustainable development in Africa”, Report of the Secretary General to the General Assembly Security Council, FiftySecond Session.13 See Homer-Dixon, Thomas (1999) The Environment, Scarcity, and Violence, Princeton, NJ: Princeton University Press.

22

● There are cases in which EU-based TNCs have impacted negatively on democratization processesin countries of the South and East, by supporting undemocratic governments, fosteringcorruption, degrading the natural environment, concentrating economic activities around theexport of primary products, etc.

● There are cases in which support from EU-based export-credit agencies has had a negativeimpact on democratization processes and the economy in countries of the South and East, bysupporting projects with negative social and environmental consequences, and projects thatled to the accumulation of national debt without creating economic sound productive capacities.

● The common agricultural policy hinders the development of the national agriculture by pushingdown prices.

● The common fisheries policy may have a negative consequence on democratization andsustainable development by degrading the natural environment; and hindering thedevelopment of the national fishing industry.

● Trade practices and commodity chains that lead to the increasing concentration of exports inprimary goods undermine democratization processes.

Respect and support for democracy and sustainable development raise additional conceptualquestions: What is the range of institutional arrangements and policy options that the EU thinkscompatible with these objectives?

With the end of the polarized ideological debates that characterized the cold war, these questionshave taken central stage in discussions over national development strategies in the South and East,and over democracy. Let us mention, en passant, Stiglitz’s criticism of the transition process in Russiacentred on a lack of attention given to the institutional basis of a market economy, the failure offormal multi-party democracy to bring about genuine political democracy in Africa, or the failureof Structural Adjustment Programs to bring about positive change in the absence of country-ownedprocesses.

In this context the degree of tolerance for institutional and policy diversity presents itself as acomplementary criterion to the criteria of respect for democracy and sustainable development. Inrelation to this new criterion, different EU actors express very different positions.

On the one hand, the EU stands strongly on the side of institutional diversity. As a starter, it defendsthis principle in order to organize its own house and likes to mention the existence of differentforms of capitalism to defend its particular social-democratic model. The political dimensions ofthe Cotonou agreement between the EU and ACP countries, and the Meda agreement betweenthe EU and countries of the Mediterranean, also defend this position, implicitly by recognizing aspace for politics, explicitly in passages like the following: “the right of the ACP States to determinethe direction and sequencing of their development strategies and priorities shall be recognizedand respected; the pace of reforms shall be realistic and compatible with each ACP State’s capacitiesand resources.”14

But on the other hand, EU Member States, through the World Bank and the IMF, and the EU itselfthrough the WTO, reduce the scope for institutional diversity by imposing specific forms of societalorganization legitimated by discourses of “good governance”. The view here is that there are only asmall number of institutional arrangements that are compatible with criteria like respect for humanrights, democratic principles and the rule of law. In this line of thought, external interventions arepositive if they constrain national changes towards the establishment of one of these institutionalarrangements, and negative otherwise.

This lack of coherence undermines, obviously, not only the EU’s capacity of influence, but also itsattempt to establish constructive and responsible partnerships with many countries around theworld.

14 Cotonou Agreement, Art. 22 c) and d).

23

Local placesRespect of human rights, poverty alleviation, right to participate in decisions that affect one’s lives,are some unambiguous criteria to assess the external impacts of EU-based actions on local placesin distant countries.

On the basis of these basic criteria only, the record contains negative entries:

● There are cases in which EU-based TNCs have impacted negatively on local places, not respectinghuman rights, degrading the local environment, etc.

● There are cases in which support from EU-based export-credit agencies has had a negativeimpact on local places by supporting projects with negative social and environmentalconsequences.

● There are cases of destabilization of local markets due to the dumping of agricultural productsby the EU.

● There are cases where the livelihoods of fisherfolk are threatened by EU industrial fishing fleet● Commodity chains may support production processes that do not respect workers’ rights, the

natural environment, etc.

2.2 Can the EU contribute by addressing global issues?Until now we have been concerned with measuring and assessing the impact of EU actions andresponsibilities on the rest of the world. We now turn to a different yet also central question regardingthe EU’s responsibility in the world: How can the EU contribute by addressing global issues, likeglobal warming, the fight against corruption, or the protection of bio-diversity and forests?

The second part of this report provides evidence on this point. The briefing notes therein present ashort analysis of some global issues – debt, global warming, gender justice, de-forestation, andcorruption – and how the European Union could contribute by addressing them. In each case, theauthors emphasize the important role the EU could play and even place hope in its leadership. Andin each case, they highlight the need to act with a variety of instruments, that is, through the variouschannels of external impact identified in the first part of the report.

For instance, a coherent forest policy would require action by the WTO to ensure that trade rules donot foster further de-forestation, action by the World Bank to improve its forest policy, action bydevelopment co-operation projects, and action by consumers to deflate the impact of demand onforests worldwide. All these actions require co-ordination. An effective policy to promote genderjustice and implement the Beijing Platform of Action will require actions at the country level, at theEU level, within multilateral organizations (WTO, IFIs, UN, OECD), and co-ordination among all ofthem. Similarly, fighting corruption cannot be done unless action is taken on the bribe receiversAND on the bribe givers. EU Member States can participate in these efforts through developmentco-operation, and through changes in national legislation.

The conclusion we draw from this analysis is that, not only the EU must specify the criteria thatshould guide its actions in the five spheres of impact, but it must also do this in a way that ensurescoherence between the five spheres. This coherence is a requirement for effective action to betaken to address a number of global issues.

24

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2.3 Some factors behind the EU’s lack of responsibilityHow do we account for the way the EU, its Member States and citizens, behave towards the rest ofthe world? How do we account for the manifest lack of responsibility that seems to conflict withthe European political philosophy, political intentions, and values?

There are two noteworthy dynamics at play. One dynamic springs from the structural problem ofover-capacity of production, which leads private actors to seek political solutions to their economicpredicament. The other dynamic is the use of state power to “externalize” the problem onto othercountries in the absence of strong democratic deliberation.

Over-capacity of productionA thread runs through the EU based activities that have a negative impact on the South and East:the problem of over-capacity of production.

The great American economist, J.K. Galbraith, once remarked that ‘production is now more necessaryfor the employment it provides than for the goods and services it supplies.’ It is not forcing the traittoo much to state that in industrialized countries consumption is needed for production ratherthan the other way around. The traditional relation between consumption and production is thusreversed. One reason, as underlined by Galbraith, is the recurrent need to generate new employmentopportunities in a context of continuous productivity gains, and another reason stems from thereproduction of capital. The particular structural problem generated by this relationship betweenproduction and consumption is what we call over-capacity of production (or, equivalently, under-consumption).

The problem of over-capacity of production manifests itself in a number of channels of externalimpact. It is a fundamental problem of the EU’s agriculture and fishing industry, which is addressedrespectively by subsidizing exports and by purchasing fishing rights from developing countries.Liberalization of trade, investment, and financial markets is being pushed by the quest for higherreturns by northern financial interests, which is also in its way an over-capacity issue: there is toomuch capital and not enough opportunities for high returns in the North. Support given by stateagencies like the export-credit agencies to TNCs is also justified by the need to support “national”capitalism and defend jobs at home. Consumption in the North is also today largely driven by theneed to produce, and in so doing reproducing capital, rather than by people’s need or even genuinedesire to consume.

Democratic deficitChannels of external impact are regulated by state decisions, either at the national or Europeanlevels. A private problem like over-capacity of production is being transferred to the rest of theworld only with the implicit or explicit support of public authorities.

We can characterize the interaction between private interests and public authorities according totwo criteria: the degree to which the issue is debated democratically; the degree to which thepublic will act in a self-interested manner or in solidarity with the rest of the world.

Self-interest

Technocratic Highly democratic

Respect for others

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It is a matter of fact that many of the decisions, which lead to irresponsible decisions towards theEast and South, do not generate broad democratic public debates. The decisions are relevant toonly a minority of actors within the EU, and are often of a highly technical nature. The institutionalsetting, as well as the nature of the problems, thus, favour technocratic over democratic decision-making.

These domains include most of foreign affairs in which citizens do not have any immediate interestto defend or promote (e.g. policies towards multilateral organizations), as well as some internalpolicies that affect a small minority of the northern populations while having consequences globally.It also includes trade negotiations whose neo-mercantilist nature reveal the dominant influence ofprivate interests over considerations of the public good – at least according to standard economics.

In a technocratic context, lobbying becomes the dominant strategy to influence policy-making.And through lobbying efforts, small interest groups capture state power in domains that are not ofimmediate interest to the population at large. The ideal of democratic deliberation on a particulartopic is distorted by the existence of a strong interest by a small group combined with indifferenceof the vast majority. As a consequence, private interests may rule over the public good. Agricultureis the prime example: farmers in the North represent around 2 percent of the population whileworld-wide the proportion is around 50 percent. Yet, eventually this 0.5 percent of the worldpopulation is the one designing global rules in agriculture through the northern states.

A very broad story line that explains the irresponsibility of the EU towards the rest of the worldgoes like this: the economic success in the EU over the last 40 years has rendered more acuteproblems of over-capacity; these problems are often of a technical nature and of relevance only tosmall groups, and for these reasons do not raise much public attention; consequently, decisions aremade in a technocratic manner; in the competition for influence, economic interests are muchstronger and better organized than groups defending solidarity with the rest of the world;consequently, decisions made often include some “externalization” of the problem onto othercountries.

3. European integration and EU responsibilityAn analysis of the various channels of external impact, according to the level of European integration,presents a negative picture of the consequences of the integration process for the rest of the world.

Some of the leading EU policies – agriculture, fisheries, and trade – are also the sectors withinwhich the EU and its Member States acts more irresponsibly towards the South and East. On theother hand, there is no institutional integration or other forms of co-ordination among EU MemberStates, neither on topics where the gains from co-ordination are the more obvious (monitoring ofTNCs, imposition of social and environmental standards on export-credit agencies), nor on topicsin which co-ordination would enhance substantially the effectiveness of interventions (developmentco-operation, governing the World Bank or IMF, etc.). EU Member States are able to abandon theirnational sovereignty over such a crucial matter as national currency, but strangely enough, findgreat difficulties in agreeing on secondary matters like the ones just mentioned.

The record is therefore grim: until now, European integration has generated irresponsibility towardsthe rest of the world. A tempting simple, mechanical explanation presents itself : the“communitarization” of policies increases the capacity of EU Member States to “externalize” theirproblems by aggregating their power together, while reducing the scope for democratic debategiven the democratic deficit prevalent at the Union level. Consequently, it creates a favourableinstitutional environment for lobbying efforts, and for finding solutions that pass the burden ontoothers.

The purpose of the integration process, of course, was not to create the conditions for EU MemberStates to act irresponsibly towards the East and South. The record of the EU’s behaviour towardsother parts of the world is the unforeseen consequence of a process of integration that wasconducted primarily according to internal considerations, due to the emergence of the EU, the EUemerged as a leading economic and financial power in a context of increasing global inter-dependences.

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The nature of the problem is not just a question of ethics and responsibility towards the rest of theworld. It also touches upon the interaction between the “internal” and “external” identities of theEuropean Union, and the open question about the borders of the Union. Simply put: a process ofintegration that generates irresponsible behaviour towards the East and the South mechanicallydeepens the gap between Member and non-Member States.

Take the case of agriculture, as the EU has not put forward an alternative to a liberal organization ofworld agriculture (i.e. an external identity on the matter) it finds itself on the defensive. It defendsits own interests in the WTO at a time when different principles for the organization of agricultureare being adopted worldwide. In this situation, Polish farmers can soon hope to be protected fromtough international competition; while Ukrainian farmers cannot because the Ukraine will not jointhe EU in the near future, and will even suffer enhanced competition from their Polish counterpartsreceiving EU support. In the near future, the cost of greater intra-European solidarity towards Polishfarmers may be imposed on Ukrainian farmers, thereby raising a wall between the two countries.

It seems essential for the EU, which has no natural border, to avoid this kind of processes, or whatwe may call “discontinuities in solidarity.”15 The more so, as the European process is historically builton a form of solidarity that is not geographically bound. In contrast to the form of solidarity prevalentwith nation-states, grounded in a sense of shared destiny based on a cultural national conscience,the form of solidarity that underlies the process of European integration comes from a sense ofshared destiny due to the existence of clashing economic, social, and political interdependencies.Whereas nations are built on the desire to live together; the European process was launched by thenecessity to live together. And this form of solidarity easily expands geographically to countrieswith which the EU shares an economic, social or political destiny, East and South. The process ofenlargement, the Meda agreement, and beyond it the Sula agreement try to express this idea, butas we have argued they are not sufficient to make EU Member States responsible actors on theworld scene.

There are, therefore, a number of arguments that suggest that “To ensure that all EU based actorsbehave responsibly towards the East and South” should become one of the stated objectives of theEuropean Union. (Article 2 of the Treaty that lists the objectives of the Union just mentions in thisregard that the Union should assert its identity on the international scene). The pursuit of thatobjective through the creation of appropriate institutional mechanisms could become an importantnew pillar of the process of European integration. That process, because of its very objective, mayalso be instrumental in making the Union more democratic. The concluding chapter of this reportpresents some suggestions on how to move forward in this direction.

15 One key issue in this regard is migration. While Poland and Hungary want to keep their oriental borders open,some EU members are calling for greater control at the borders of the EU to retain the principle of free circulationwithin the EU. See Foucher, Michel (2000) Des Europes, à Géographie Variable, Paris: Belin, pp. 94-97.

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PART I

THE EU’S INFLUENCE ON GLOBALIZATION

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1. THE EU IN MULTILATERAL ORGANIZATIONS

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1.1 The EU in the UN Global Conferences of the 1990s:lessons from the Social and Earth Summits

Marikki StocchettiSociety for International Development (SID)1

IntroductionThe United Nations (UN) system has provided the main forum for international co-operation at theglobal level for more than 50 years. It has played and continues to play a critical role in the promotionof international peace as well as the setting of global agendas and principles.

This article focuses on the latter function, with particular attention to the rounds of UN conferencesof the 1990s and their follow-up, which have resulted in ambitious agreements for sustainabledevelopment, social development, human rights, gender justice and food security (see table 1.).Together, these high profile meetings have produced a global consensus on how some of the mostpressing problems facing the world today should be addressed collectively. Taken individually, eachconference marked the culmination of many months of consultations among the 185 UN MemberStates, UN experts and non-governmental representatives, who reviewed vast amounts ofinformation and shared a broad spectrum of experiences on specific issue areas.

1 This article was written in collaboration with various individuals based on interviews and informal discussions.Marina Ponti, from Mani Tese/Social Watch, provided key information on the Social Summit, which was completedwith views from persons working with UN agencies. Regarding the Earth Summit, Dr. Stefanie Pfahl, from the EcologicInstitute for International and European Environmental Policy, gave her insights to the issues at stake.

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Also in this framework, the European Commission and the EU Member States, have expressed astrong commitment to a global development which is centred on human beings, their needs, rightsand aspirations, fostered by sustainable global economic growth and supported by a revitalizedand equitable system of multilateral co-operation. In financial terms, the EU’s support tomultilateralism through the UN system has been undisputable. The EU Member Countries aretogether the largest contributor to the UN and the most important financier of the UN organizations.Furthermore, the EU Member States have fulfilled their obligations in accordance with the scale ofquotas adopted by the General Assembly.2

However, a review of the EU’s financial engagement with the UN organization would not give acomprehensive picture of the EU’s role in the United Nations system and in particular, processesorganized under its mandate. This is why this article has chosen to approach the question of theEU’s support to multilateralism through the UN from a perspective of the global conferences anddynamics around them3. More specifically, this article looks at the World Summit for SocialDevelopment and the Conference on Environment and Development, their follow-up and the EUand the European Member States in these conferences.

Both conferences have played a leading role in building a global vision of strategies needed forsustainable development and social justice. What makes the analysis of the European Commissionand the EU Member States in this context particularly interesting is that at the same time they arealso key contributors to the other multilateral organizations, like the World Bank (WB), theInternational Monetary Fund (IMF) and the World Trade Organization (WTO). During the last decade,these organizations have stated seeking a stronger role in the international development communityand getting more involved in areas of work that traditionally were the domain of the UN (SeeBriefing Notes 1.2 and 1.3). Given this weight the EU has in the Multilateral fora, a lot of expectationshave been raised in terms of potential leadership at the preparatory sessions, negotiations as wellas the in the implementation of the common commitments. This article looks at issues in twocontexts, first as a retrospective to the World Summit for Social Development (WSSD) and, second,its follow-up, the World Conference on Environment and Development focusing on the keychallenges ahead.

1. The EU in the World Summit for Social DevelopmentThe World Summit for Social Development (WSSD) convened by the United Nations in Copenhagenin March 1995, brought together 122 heads of state and government to strengthen socialdevelopment and to agree on strategies for improving the human condition. For the first time inhistory, core issues such as the fight against poverty, unemployment and social exclusion, werediscussed as an integral part of development strategy for all societies, both at the national andinternational levels.

The summit resulted in a progressive agreement with 10 commitments:

1) Create an economic, political, social, cultural and legal environment that will enable peopleto achieve social development;

2) Eradicate absolute poverty by a target date to be set by each country;3) Support full employment as a basic policy goal;4) Promote social integration based on the enhancement and protection of all human rights;5) Achieve equality and equity between women and men;6) Attain universal and equitable access to education and primary health care;

2 For instance, in 1998 the 15 Member States of the European Union contributed around 36 percent to theorganization’s regular budget and around 39 percent to the UN budget for peacekeeping. In 1997, the totalcontribution of the EU Member States, Norway and Switzerland to the core budgets of the UNDP equalled 60,6percent, UNFPA 60,6 percent and UNICEF 52,5 percent. Source: ECOSOC Operational activities of the United Nations(1997).3 The Commission is the Union’s voice in areas of exclusive EU responsibility such as trade, agriculture and fisheries.The EU is a full member of the Food and Agriculture Organization (FAO). In other areas, the common EU position isusually expressed by the country holding the Council (EU) presidency.

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7) Accelerate the development of Africa and the least developed countries;8) Ensure that structural adjustment programmes include social development goals;9) Increase resources allocated to social development; and10) Strengthen co-operation for social development through the UN.

Many civil society actors as well as some governments regarded these commitments as well as theoverall social summit as something that was hoped to bring about a major change in seeing theinter-linkages between Social and Economic development. According to some participants, thepreparations and the actual negotiations were marked by enthusiasm and energy, which was alsoreflected in the way the governmental representatives came together to seek new ways forward. Inthe aftermath of the conference, people were talking about “the spirit of Copenhagen”, as a newtype of consent to counterbalance the prevailing “Washington Consensus”, which was seen as thedriving force of the International Financial Institutions.

To a certain extent, the spirit of Copenhagen could be sensed also in the EU group. At thenegotiations, the European Union was speaking with 16 voices4 based on a common EU positionpresented by France which was holding the Council presidency. Although the EU stance couldhave been considered relatively progressive, it was France in its capacity as an individual MemberState that tried to push the coalition forward. It was President François Mitterand himself, whoencouraged the Countries of the North to take the leadership in promoting what he saw as the keyin the creation of enabling economic environment: the fight against financial speculations oncurrency transactions. In his speech, he gave a normative reminder on how “we should not allowour societies to act according to the rules of the jungle and let financial speculations ruin in a fewhours the work and the efforts of millions of people.”

Unfortunately, the time was not ripe for the other EU states to immediately build on it and hisprogressive aim at a greater economic responsibility was made empty by the silence of the otherEU Member States. However, in the closing statement, Jacques Santer, President of the EuropeanCommission at the time, returned to the point stressing the importance of the Social Summit forthe World Economic Order:

…Our summit is the expression of a simple assertion: the globalizationof our economies has become a fact and it is time for it now to be givena sense. Through our shared determination, it must be made to serve aplan for human development -a plan in which social and sustainabledevelopment will be inextricably be linked.5

In its 53rd session of the General Assembly, it was decided to hold a five-year review of the SocialSummit in Geneva, 24-30 June 2000. A preparatory committee (PrepCom) was set up, which met forthe first time in May 1999, launching a process of inter-governmental negotiations and civil societylobbying over the agenda of Geneva 2000.

There was divergence in the expectations of the review process. The G77 group saw the process asan important political forum for discussion and reflection while evaluating efforts to advance socialdevelopment. By contrast, some countries, including the EU group, aimed for a technical appraisalof progress made, and for identifying new initiatives that could be put in place to promote socialdevelopment.

The key issues at stake during the review process were closely linked to the global economy, finance,and North-South relations: liberalization of trade, capital flows, the role of private sector, structuraladjustment programmes, debt, and the declining resources for development. These discussionswere related to the first and eighth commitments of the Copenhagen Declaration, respectivelyregarding the need for an enabling economic and political environment and the inclusion of social

4 The 15 Member States + the European Commission.5 Statement by President of the European Commission Mr. Jacques Santer at the World Summit for Social Developmentin Copenhagen, 12 March 1995. Source: UN DESA Gateway to Social Policy and Development.

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development goals in the Structural Adjustment Programmes6 of the World Bank and IMF. Underlyingthese discussions was a confrontation between the respective roles of the different multilateralinstitutions in social development.

Formulation of the Common EU positionAt the Social Summit and its follow-up, the EU presented a common position in the review processthrough the President of the Council in turn. In the negotiation dynamics the role of individualcountry’s statements is largely to underline specific issues, and ideally, drive the debate in a moreprogressive direction for other countries to build on.

The definition of the common EU position does not follow any clear rules, but is a matter ofnegotiations among the 15 Member States. Experience shows that the position thereby reached isthe smallest common denominator, being more a compromise solution between diverse nationalpositions than a forward looking political position. The higher the issue is on the national agenda,the stronger the commitment of country delegation. Furthermore, the common position presentedis very much dependent on the political will, level of expertise and preparedness, and the nationalinterests of the chairing country.

Also, the EU chairing is problematic. The six-month rotating presidency works clearly againstcontinuity and accumulation of expertise. In the review process, Germany, Finland and finally Portugalheld the Presidency. Given the extremely broad range of issues that the Social Summit agendacovers and the large group of participating countries, successful chairing requires a lot of specificknowledge that the representatives do not always have.

Keeping a low profile, the EU at the Special Session in GenevaThroughout the review process the EU and its Member States seemed to have lost the spirit ofCopenhagen. It became clear in the early stages in setting-up the official agenda, and was confirmedin Geneva. Far from being a progressive voice, the EU kept a low profile on key issues and revealeda flagrant lack of leadership.

In the first Prep.com, the EU argued that macro-economic issues, such as the consequences offinancial crises for social development, could not be discussed at the Geneva summit.7 In part, as aresult of that position, the preparatory document on Further Initiatives for the Special Session wascut to half of its original length, dropping a number of key issues of priority to the G77, notablyones related to the first commitment of Copenhagen on an enabling environment (market access,domestic revenues, debt initiatives), the Special Initiatives for Africa, and on Structural AdjustmentProgrammes. This severely downgraded the political relevance of the review process with respectto economic aspects. The narrowing of the preparatory document’s focus reveals the basic stanceof the official agenda to be already in contradiction with the aspirations of Copenhagen.8

The lack of flexibility within the EU group to move beyond the EU position in the negotiationsseemed to be another major obstacle to its leadership. Only the issues which were clearly in linewith national objectives were pushed forward beyond the commonly agreed EU position. Forinstance, this was the case with the United Kingdom, which strongly promoting ‘Principles and

6 According to the first results of Structural Adjustment Participatory Review Initiative (SAPRI), a trilateral assessmentof the SAPs by the World Bank, the national government and civil society in about 10 countries, tend to show thatpolicies on the ground have not been modified so far, which has had a grave impact on various sectors and groupsof the population; that the IMF is particularly slow in introducing changes in the agreed direction. See DoughHellinger, Stephanie Weinberg and Yao Graham in Development Vol. 43:2 June 2000, SAPRIN: Civil society impacts oneconomic policy-making pp. 47-50. This concern was also expressed by the SAPRIN Co-ordinator Dough Hellinger ata SID panel on Institutional Responses to Globalization: Civil Society, Finance, Trade and Social Development at theGeneva2000 forum on June 29, 2000.7 Example taken from Mirjam van Reisen, Chapter on European Union, The reality of aid 2000, an independent reviewof poverty reduction and development assistance, Earthscan, London, p. 87.8 If the preparatory process was not satisfactory, it was not only the EU states to blame. Also the group of 77 lackeddiscipline and capacity that hindered the group from participating more effectively. However, evolutions took placewithin the ranks of each regional grouping as the process went on and eventually resulted in 40 rhetoric advancesmade to the text.

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Good Practices in Social Policy’ the concept used in the World Bank documents with the supportfrom France and Germany. During the closed meeting between the EU delegates, this conservativecaucus used the language of the World Bank that puts the emphasis on the responsibility ofdeveloping countries. This approach was criticized by many delegations from the South, which inturn wanted to highlight the importance of the commitments that were already made by the North,such as the 0,7 percent principle and the need to renew this commitment at the Special Session.

Despite the strong aspirations of the civil society groups, disappointingly enough, the EU MemberStates were not willing to move beyond the Highly Indebted Poor Countries (HIPC) initiative andopen up the debate for new initiatives, further comments or discussion of debts in the context ofmiddle income countries. This was causing a lot of frustration to the participants and delegatesthat knew very well that the language around HIPC was already agreed at IMF, WB and G7 meetingsand were expecting more from Copenhagen review. The prevailing notion, also in the EU group,was that the issues around the debt were discussed recently at the World Bank and in Cologne andthey did not see the need for opening up the discussion at the Special Session. Based on mererational reasoning this certainly made sense, but given the debate over the Bretton WoodsInstitutions, it could also be interpreted as a missed opportunity to use a more impartial UN processto rethink these issues.

Another related obstacle to the EU leadership seems to be the way by which progressive initiativesat a national level do not translate into a statement at the UN level. This was very much the casewith Italy and president Ciampi who had already declared in April 1999 that Italy was ready toprogress unilaterally with the debt cancellation but this statement was never expressed at the UN’sSpecial session.

This seemed to be the case also regarding one of the hottest issues under “New and innovativeresources for social development”: the regulation and monitoring of international speculative flowsof capital. In the aftermath of the financial crisis, the need for radical recipes to reduce excessivevolume and volatility of speculative activity was felt at the Social Summit review. The famous “TobinTax”, taxation on financial transactions, was tabled in the Canadadian Parliament, and in March 1999the motion was passed calling for taxes on financial transactions. Thanks to the strong Civil Societylobbying and like-mindedness of Belgium, Italy and Finland, the Canadian delegation felt encouragedenough to try a similar breakthrough also at the UN forum. Unfortunately, during the decisivemoments of the negotiation process, Canada was left alone before the opposing front led by theUnited States. The United States and Australian delegations were adamantly opposed to even callfor a study of a currency transaction tax. Luckily, Japan was wavering and all other delegations weresupportive or at least neutral. Theoretically, there could have been a momentum for the EU Statesto take the floor and support the Canadian initiative, like some of the countries had already done ata national level. Nevertheless, it was agreed as a compromise that a study on currency transactiontax and its feasibility will be made, which can be considered a major step forward.

In positive terms, the EU played a constructive role in supporting the international employmentstrategy (led by ILO); advancing a new global target for poverty reduction; confirming the need fornew resources for development and post-conflict situations; re-confirming the commitment to the0,7 percent target of GNP for Official Development Assistance and Member States aim to strivetowards it. In addition, Corporate Social Responsibility was put on the table by Denmark.9

Moving beyond GenevaThe document produced by the Special Session consists of three parts: a political declaration, anassessment of the 1995 summit, and further initiatives to implement the 1995 commitments.Regarding the Assessment part, all the governments were tasked to contribute with reports byAugust 2000. Out of 185 member states only 60 could meet this deadline, the EU Countries were notmuch better. Regrettably, very little can be said about the mechanism of co-ordination between theMember States. There is no formal co-ordination between the EU Members for the implementation tothe commitments made. However, informal ways take place between like-minded countries.

9 However, some developing countries were unfamiliar with the idea and equated that for the UN Global Compactor attempts to interfere with their labour laws so the proposal was not agreed.

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Regardless of the official non-co-ordination, the EU States are not doing too badly in terms ofimplementing the commitments themselves: four countries have reached the aid target of 0.7%and in addition, market access has been significantly improved by the recent anything but armsinitiative for the Least Developed Countries (LDCs). However, there are still 11 States that need toreach the target, and in order to do that they need to put clear intermediate targets in place.

Some lessons from the Social Summit processGiven the weight the EU has in the multilateral organizations, a lot of expectations and hopes havebeen raised (and lost) in terms of potential leadership and what could have been done at thepreparatory sessions, negotiations as well as the in the implementation of the commoncommitments. Pessimistically, one can state that in light of the Social Summit process, the EU’spassive stance is causing a major impediment to advance internationally, and that its reluctance toaddress issues related to an enabling economic environment has undermined the transparent UNforum in this respect. On the one hand, a possible explanation can be the fact that these questionsare negotiated parallel in other institutional contexts which leads to the question of effectivenessand discipline also within the EU group. On the other hand, also the more optimistic view, suggeststhat the EU is not doing its utmost to balance the multilateral system but shows disengagementand the selection of fora in favour of the International Financial Institutions. This was not seen onlyin the narrowing of the review agenda, but also in the way in which the efforts and expertize wereconcentrated elsewhere.

However, a balancing role is needed, especially regarding the cross-cutting issues, between the UNon the one hand, the Bretton Woods institutions and the WTO on the other hand. There is a necessityfor a more open forum like the UN where all the countries can come together on an equal basis.Ideally, the EU states could in a more impartial context make the debate over macro economic andfinancing issues more open as well as to facilitate the integration of views from the South and theEast to the resulting Global Agendas. In addition, the EU should do its utmost to implement thesecommitments. This is particularly important because the international financial and tradeorganizations continue taking decisions that have had or risk to have strongly negative socialconsequences.

The new occasions, such as the Financing for Development, the aspirations of the UN Millenniumdeclaration, G-8 meeting in Genoa in July 2001, will indicate whether the political will is there toenforce the UN System through the processes.

2. The EU and the UN Conference on Environment and DevelopmentThe UN Conference on Environment and development (UNCED) “Earth Summit” organized in Riode Janeiro in June 1992 was unprecedented for an international conference. Although therelationship between the economic development and environmental degradation was first placedon the international agenda in 1972, at the UN Conference on the Human Environment, held inStockholm, it took two decades until environmental degradation was considered a matter of survivalfor developing countries -and for the entire globe.

A critical push in this direction came from the UN World Commission on Environment andDevelopment (WCED), established in 1983, which played a critical role in putting forward the conceptof sustainable development as an alternative approach to development and it was the Our CommonFuture report from the Commission in 1987 which gave the idea the international prominence thatmade the Earth Summit happen.

The primary goals of the Earth summit were nothing less than to come to the understanding ofdevelopment that would support socio-economic development and prevent the continueddeterioration of the environment, and to lay a foundation for a global partnership between thedeveloping and the more industrialized countries, based on mutual needs and common interests,that would ensure a healthy future for the planet.10 A major step in to this direction was taken

10 The World Conferences Developing Priorities for the 21st Century, UN Briefing Papers, 1997.

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when 172 governments –108 represented by heads of state or government – adopted threebreakthrough agreements aimed at changing the traditional approach to development:

● Agenda 21: a comprehensive plan of action consisting of 40 chapters, over 100 programmeareas and 3000 recommendations to be taken globally, nationally and locally by the organizationsof the United Nations System, governments, and major groups in every area in which humanshave an impact on the environment;

● The Rio Declaration on Environment and Development, defining the rights and responsibilitiesof States; and

● The Statement of Forest Principles, a set of principles for the sustainable management of forestsworldwide.

Two legally binding Conventions were opened for signature:

● The United Nations Framework Convention on Climate Change (UNFCCC); and● The Convention on Biological Diversity.

In addition, negotiations started on a Desertification Convention and the Barbados programme ofAction for Small Island Developing States.11

Now, nearly ten years after Rio, despite of some progress made, the high expectations put forwardin Rio remain largely unrealised while the need for fulfilling these commitments is more pressingthen ever. This concern was also recognized at the 19th Special Session of the UN General Assembly(Rio +5) in 1997, which was marked by dissatisfaction at the rate and quality of actual implementation.To overcome this, new targets were set: to make the review progress more measurable and to havenational sustainable development strategies in place for the 10-year follow-up.

The potential role of the EU in the Earth Summit +10 The European Union made a significant contribution to the Rio Summit. It has worked hard to keepAgenda 21 high on the list of political priorities in Europe and the world. Europe remains the catalystin global socio-economic co-operation. The EU should continue to show leadership in 2002.12

While assessing the EU’s role in the implementation of the Agenda 21 would be too complicatedwithin the limits of this briefing paper, in the following we focus on the Conventions on BiologicalDiversity and on Climate Change. Regarding the former, on a very general level one can state theEU Member States have been progressive in terms of precaution principles and in exercising moreself-restraint as compared to the other regions. However, as the Briefing paper (4.2) on Forestsshows, greater efforts to achieve policy coherence as well as a serious reform of the EuropeanBiodiversity Strategy is needed. In its present form, it focuses too much on commercial aspects ofusing forests and neglects the conservation of biological diversity.

Regarding the United Nations Framework Convention on Climate Change (UNFCCC), more than170 countries have signed the agreement. The European Community and the 15 Member Stateswere among the first. However, the litmus test, the ratification of the Kyoto Protocol13 is still

11 Both concluded in 1994.12 Communication from the Commission to the Council and European Parliament, Ten years after Rio: Preparing forthe World Summit on Sustainable Development in 2002, Commission of the European Communities Brussels, 6.2.2001. COM (2001) 53 Final, p. 4.13 According to the European Commission, the ratification of the Kyoto Protocol remains perhaps the most important,but also that of the Rotterdam Convention, the Cartagena Protocol on Bio-safety and a future POPs Convention. Inaddition, advances at the EU level: EU Sustainable Development Strategy and the sectoral integration strategiesimplementing it, the mandate given by the Cardiff European Council, forthcoming Environmental Action Plan, Bio-diversity Strategy, European Climate Change programme and a EU Chemicals Strategy as well as the newDevelopment Policy aiming at greater coherence between environment, development, trade, energy, transport,agriculture, fisheries, and research and technological development policies. Communication from the Commissionto the Council and European Parliament, Ten years after Rio: Preparing for the World Summit on SustainableDevelopment in 2002, Commission of the European Communities Brussels, 6.2. 2001. COM (2001) 53 Final, p. 5.

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ahead.14 Adopted at the Third Conference of the Parties (COP-3) in Kyoto, it states that industrializedcountries should reduce their emissions of six greenhouse gases by an overall 5 percent of 1990levels by 2008-2012. (See Briefing note 4.1 on Global Warming and 4.2 Forests). So far, only some 30countries have ratified the agreement, all from the developing world. To be a binding internationallaw, however, the protocol has to be ratified by 55 parties to the UNFCCC, representing 55 percentof all emissions.

Although the European Commission and the EU Member States as well as the United States havesigned it, the Protocol still has to come into force. Given that the previous Conference of the parties(COP-6) in the Hague, 14–24 November 2000, was closed without any decision concerning theoperational issues of primarily carbon sinks, compliance measures and supplementarity. In the Hague,the negotiations ended with the United States and EU blaming each other for the collapse of thetalks. The United States regarded the failure of the EU negotiators to obtain a mandate from all 15Member States as the main factor that undermined the process, after an apparent bargain betweenthe EU and the United States was rejected by dissenting states. For its part, Europe saw the UnitedStates’ lack of commitment and its insistence on including sink activities as the principle causes forfailure.

As this example shows, due to the diverse interests of the EU Member States, it takes a long time tocome up with a common position. The Commission has been very much the driving force playing atwo-level game to get through European legislation at the same time. However, the process ofagreeing on a common stance is very complex since the policy issues negotiated in the internationalrealm are usually not totally congruent with existing EC regulations. In addition, the Member Statesare also very reluctant to give the entire negotiation authority which could work to the disadvantageof their national interests. In the Hague the EU governments realized that their national policies arealso stuck, if the EU does not take a more progressive role. This is very much the case with Germanyand Scandinavian countries, whose national policies will only be effective if there are similar effortsin the other EU Member States. Given the global scope of the Climate Changes agreement, it will beeffective only if the majority of the countries will commit to it.

According to the European Environment Commissioner, Margot Wallström, climate change shouldbe given priority as part of its international development agenda. Similarly, Sustainable Developmentand environmental impact should be integrated in all Community policies. Thus, the EU’s positionis to see an agreement that will result in the real abatements of carbon dioxide emissions inindustrialized countries. The Commissioner warned that it was imperative that any (future) dealresulted in real and continued reductions by industrialized countries, particularly the main polluters,such as the United States, in their emissions of greenhouse gases.15 Given the announcement ofthe United States Administration on 29 March 2001, not to implement the Kyoto treaty on thegrounds that it does not seek to limit pollution from developing countries and puts too heavy aburden on the United States economy, the EU leadership and the use of its full potential is becomingincreasingly crucial.

At the same time, developing countries are waiting for a real action to curb emissions from theindustrialized countries. For a responsible EU this could mean addressing developing countries’needs and interest (without compromising on ecological effectiveness) while following a strategythat would be coherent with the various dimensions of the external relations in the EU-South co-operation. A key issue related to this, is to decide on fair and equitable allocations of emissionrights.16

In this situation, a successful outcome of the resumed COP-6 of the Climate Convention in Bonn inJuly 2001, will be crucial. It is really unusual that the decision was taken to keep the momentumgoing by continuing the meeting. According to Dr. Stefanie Pfahl from the Ecologic (Institute for

14 For a comprehensive study on the EU in this context, see Joeeta Gupta and Michael Grupp (2000), Climate Changeand European Leadership: a sustainable role for Europe? Kluwer Academic Publishers, Dordrecth, The Netherlands.15 EuropaWorld No. 11, 1 December 2000 pp.1-2.16 See a policy paper by Hermann E. Ott & Sebastian Oberthür (1999) Breaking the Impasse: Forging an EU LeadershipInitiative on Climate Change. Heinrich Böll Foundation, Berlin.

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International and European Environment Policy), the ratification of the protocol would simply bethe best way to advance Sustainable Global Development and the targets of the Rio Summit. Thiswould be also in line with the pledges made at the United Nations Millennium Summit.The question of leadership is not limited to the ratification. Implementation and compliance is thecrucial point, especially since any enforcement competencies must rely on its Member Statesenforcing international commitments on the national level. In its own house, theoretically, theEuropean Court of Justice can be the mechanism that could force EU Member States to comply viarulings and fine setting. However, the mechanisms need to be defined soon. This is particularlycrucial in the context of emission trading.

Getting ready for the Rio +10 reviewThe EU’s ratification and implementation of all relevant international agreements according to thetargets set will be important contributions to a credible EU position for the Earth Summit follow-upof the year 2002. In the Communication to the Council and European Parliament on the preparationsfor the World Summit on Sustainable Development in 2002,17 the European Commission statesthat the EU has a responsibility to show leadership throughout preparations for the Summit and atthe conference itself.

On the basis of the assessment of progress since Rio, the Commission suggests four strategicobjectives that the EU should seek to obtain through the Rio +10 process:

● Increased global equity and an effective partnership for sustainable development;● Better integration and coherence at the international level;● Adoption of environment and development targets to revitalize and sharpen the political

commitment; and● More effective action at national level, and international monitoring.

Based on the Agenda 21 and other outcomes of Rio, the Commission suggests four sets of issuesfor the Summit agenda:

● Protecting the natural resource base of economic development;● Integrating environment and poverty eradication;● Making globalization sustainable;● Enhancing good governance and participation.

In official Communication, the European Commission is underlining the links with other processesat the EU level to ensure that they are complementary and mutually reinforcing. It also states thatthe EU has to take a leading role in making contributions to sustainable development worldwide.18

However, what this ambitious task requires –to start with- is an agreement on a commoncommitment between the EU Member States’ diverse interests and developing new mechanismsto achieve the target set at the Earth Summit. But in order to be really successful, the Commissionas well as the Member States have to face an even greater challenge, the challenge of co-ordinationand better policy coherence between the various institutional structures the EU, the EU MemberStates as well as the operational activities of EU based actors.

17 Communication from the Commission to the Council and European Parliament, Ten years after Rio: Preparing forthe World Summit on Sustainable Development in 2002, Commission of the European Communities Brussels, 6.2.2001 COM (2001) 53 Final.18 Communication from the Commission to the Council and European Parliament, Ten years after Rio: Preparing forthe World Summit on Sustainable Development in 2002, Commission of the European Communities Brussels, 6.2.2001. COM (2001) 53 Final.

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UNITED NATIONS GLOBAL CONFERENCESCONFERENCE

World Conferenceon Education for All“The JomtienConference”Jomtien, March 1990

World Summit forChildrenNew York, September1990

Conference onEnvironment andDevelopment“Earth Summit”Rio de Janeiro, June1992

World Conferenceon Human RightsVienna, 1993

InternationalConference onPopulation andDevelopment,Cairo, 1994

PRINCIPLE THEMES

BASIC EDUCATION,literacy, basic learningNEEDS

Goals for the year2000 for children’shealth, nutrition,education and accessto safe water andsanitation

ENVIRONMENT andSUSTAINABLEDEVELOPMENT

The promotion andprotection of humanrights

POPULATION,SUSTAINEDECONOMIC GROWTHand SUSTAINABLEDEVELOPMENT

RESULTINGDOCUMENTS

World Declaration onEducation for All andFramework for Action toMeet Basic LearningNeeds

World Declaration andPlan of Action on theSurvival, Protection andDevelopment ofChildren

Agenda 21, the RioDeclaration onEnvironment andDevelopment, theStatement of ForestPrinciples, UNFramework Conventionon Climate Change andthe UN Convention onBiological DiversityThe Vienna Declarationand Programme ofAction

Programme of Action ofthe InternationalConference onPopulation andDevelopment

FOLLOW-UPMECHANISMS

Education for All (EFA)Forum and SteeringCommittee, Secretariat atUNESCO Headquarters,Paris; Education for AllSummit of Nine High-Population Countries (E9Summit) culminating inthe Delhi Declaration andthe Framework for Actionon 16 December 1993.Mid-decade review, withSecretary-General’sprogress report presentedat the 1996 GeneralAssembly session on theanniversary of theChildren’s Summit; UNInter-Agency Task Force;the Joint Committee onHealth Policy and the JointCommittee on Education;National programmes ofAction for Children withineach national Government;UNICEF is the lead UNagencyCommission onSustainable Development;Inter-agency Committeeon SustainableDevelopment, High-levelAdvisory Board onSustainable Development

Commission on HumanRights and its sub-commission; HighCommissioner/Centre forHuman Rights; HumanRights Treaty monitoringbodies; SpecialRapporteurs; Commissionon the Status of WomenUN Commission onPopulation andDevelopment; ACC TaskForce on Basic SocialServices for All (BSSA)

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Other major conferences● UN Global Conference on the Sustainable Development of Small Island Developing States (1994)● International Conference on Natural Disaster Reduction (1994)● Ninth UN Congress on the Prevention of Crime and the Treatment of Offenders (1995)● Ninth UN Conference on Trade and Development (UNCTAD IX) (1996)

World Summit forSocial DevelopmentCopenhagen, March1995

Social Summit +5Follow-upGeneva, June 2000Fourth WorldConference onWomenBeijing, September1995

Beijing +5follow-up”New York, June, 2000

Second UnitedNations Conferenceon HumanSettlements(Habitat II)

“The City Summit”Istanbul, June 1996

World Food SummitRome, November1996

SOCIALDEVELOPMENT:eradication of poverty,expansion ofproductiveemployment,reduction ofunemployment, socialintegrationThe advancement ofwomen in relation towomen’s humanrights, women andpoverty, women anddecision-making, thegirl-child, violenceagainst women

Sustainable humansettlementsdevelopment in theurbanizing world;adequate shelter forall

FOOD SECURITY for all

CopenhagenDeclaration on SocialDevelopment andProgramme of Action

Geneva Declaration

The Beijing Declarationand Platform of Action

Further actions andinitiatives to implementthe Beijing Declarationand Platform of Action

Habitat Agenda,Istanbul Declaration onHuman Settlements

Rome Declaration onWood Security andWorld Food SummitPlan of Action

Commission for socialDevelopment; theEconomic and SocialCouncil and the GeneralAssembly; and the UNInter-agency Task force

National mechanisms;Commission on the Statusof Women; the Committeeon the Elimination ofDiscrimination AgainstWomen (CEDAW);International Research andTraining Institute for theAdvancement of Women(INSTRAW); and theDivision for theAdvancement of WomenUN Commission onHuman Settlements; UNCentre for HumanSettlements

ECOSOC, the GeneralAssembly and FAO

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45

1.2 Brussels and Washington: two worlds apartthe European Union and its relation with

the World Bank and the IMF

Ted van HeesEuropean Network on Debt and Development, EURODAD

‘We do not have sufficient common positions in, for example the IMF (…) our voice is disparate, at times contradictory’,ex-President of the European Commission, Jacques Santer, in September 1998, just before the Annual Meetings ofthe IMF and World Bank, concerning the lack of the European Union’s (EU) impact on both institutions.1

IntroductionSince the early 1980s, the World Bank (WB) and the International Monetary Fund (IMF) have promotedStructural Adjustment Programmes (SAPs) in developing countries. Since the 1990s, they did thesame in transition countries and provided ‘rescue packages’ to countries hit by financial crisis (SouthEast Asia, Russia, Brazil, Ecuador…). They have, therefore, played a very important role in reshapingnational economies and, as a consequence, the global economy as well.

European governments usually supported these programmes, but with the resurgence of social-democratic governments in the 1990s many of them felt uncomfortable with the policy of thestrongly neo-liberalist ‘Washington Consensus’. The European Commission (EC), in particular DGDevelopment, was challenged to develop its own approach to structural adjustment. In general,

1 Europe, no. 7310, 28-29 September 1998, p. 8.

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the question of how EU Member States and the EC as such interact with the Bretton WoodsInstitutions (BWIs) is critical to the process of globalization.

EU Member States (and at times the EU itself through the Commission) have the capacity to influenceboth the WB and IMF mainly through two channels. First, through the Boards in which they arepotentially the single biggest political bloc and second, by being the main financier of key policiesand programmes led by these organizations, like SAPs and more recently Poverty ReductionStrategies (PRS) or the Highly Indebted Poor Country (HIPC) initiative.

However, as Santer’s statement perfectly illustrates, neither EU Member States, nor the Commissionhave achieved any significant co-ordination vis-à-vis the two institutions.

1. EU countries and the BWI: the means of influencing the governance structureThe World Bank (WB) and the International Monetary Fund (IMF) are under the jurisdiction ofmember states’ finance, ministries, and their central banks. The EU Member States are, throughexecutive directors (EDs), represented in the administrative boards of both institutions and acttwice a year as their governors. The European Commission (EC) is permitted to send its Commissionerfor Economic and Finance Affairs and the President of the European Central Bank (ECB) to thebiannual meetings of the policy-making body of the IMF (since 2000, the International Monetaryand Financial Committee – IMFC, before the Interim Committee). The EC Development Commissionerusually attends the meetings of the Development Committee, which is the World Bank and theIMF’s policy-making body on development.2

EU Member States are potentially the biggest single political bloc on the Board of the IMF,representing some 28 percent of the votes, compared to 17.7 percent for the US and 5.5 percent forJapan. If one sums up the total of the country-groups led by European countries, this results inapproximately 36 percent including Spain with a range of Latin American countries, but excludingIreland, which is in a group of Caribbean countries led by Canada.3 Thus, although the EU clearly isthe single largest bloc, note that the USA, with its share of voting power, is able to veto decisions oncertain major issues in the IMF Board.4

As a collective actor, the EU controls approximately 27 percent of the voting power in the board ofthe World Bank Group, which makes it the largest shareholder.5 Furthermore, Switzerland, Norwayand Iceland control 3 percent, increasing the ‘European’ total to 30 percent. Germany, France andthe United Kingdom alone control 13,2 of the votes in the World Bank (or IBRD), and 22 percent inits concessional finance window, the International Development Association (IDA). This comparesto 16.5 percent for the US in the IBRD and to 15 percent in IDA. In addition, the EU provides abouthalf of the total IDA funding.6

Thus, in the Boards of both the BWI the EU is a potentially leading force in terms of voting power.We say potentially, because the EU rarely acts as a unified alliance, or as a political bloc in the WorldBank and IMF boards. To counterbalance the power of the US, Germany and France have discussedthe possibility of pooling their voting power in the IMF, so far without concrete results.7

2 The official name of the Development Committee is the Joint Ministerial Committee of the Boards of Governors ofthe Bank and the Fund on the transfer of real resources to developing countries, and actually is a committee to boththe World Bank and the IMF.3 IMF Executive Directors and Voting Power, see http://www.imf.org/external/4 Note that for major decisions in the IMF Board a majority of 85 percent of the votes is needed. We have seen thatthe US alone has 17,7 percent.5 The World Bank Group contain five agencies, among which the International Bank for Reconstruction andDevelopment (IBRD), core organization created in 1944, and the International Development Agency (IDA), soft-loanarm of the World Bank, created in 1960.6 Jean-Francois Richard, The World Bank Group on the eve of the new Millennium, Annual Bank Conference onDevelopment Economics-Europe, Paris, June 21-23, 1999.7 Franck Amalric and Marikki Stocchetti, Exploring EU’s powers in a Global Society, SID Occasional Paper, Rome,January 2000, pp. 3-4.

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Revealingly, it took the EU until the 1990’s - thus 45 years since the founding of the BWI - to establishcloser relations with both institutions. Formal relations with the IMF began in 1990 through anexchange of letters. It was agreed that the EC and the IMF would exchange information, establishcontacts between its staff, informally discuss the preparation of Policy Framework Papers (PFP) andorganize bilateral consultations on monetary, financial and economic policy. In the run-up to theintroduction of the euro, the IMF and the EU intensified contacts, for instance by organizing jointseminars during Annual Meetings.

With the World Bank it took even longer to achieve closer collaboration, which came about as theBank increasingly led programmes requiring development co-operation funds.

Programme fundsUntil the 1980s, the World Bank’s activities were mainly financed by funds raised on the financialmarkets. The deployment of Structural Adjustment Programmes is in response to the debt crisis inthe early 1980s, the multiplication of loans in non-productive areas and the rescue packagesprovided to countries hit by financial crisis in the 1990s led both the Bank and the Fund to relyincreasingly on funds from development co-operation budgets. As the EU and its Member Statesare the major providers of international development assistance, this evolution increased thepotential leverage of EU Member States as a whole on the World Bank and IMF.8

There are great differences in the percentage of aid that EU countries direct to the World Bank andthe IMF. Three major European G7 governments – France, the United Kingdom and Germany –concentrate their multilateral aid effort on the World Bank, in particular, financing structuraladjustment programmes through IDA. Other EU countries, like The Netherlands and the Nordiccountries give relatively more support to United Nations agencies. In the first half of the 1990’s TheNetherlands allocated 34 percent of its multilateral aid to the United Nations (19 percent beingmultilateral from a total of 0.8 percent of GDP in 1998), while this percentage was only 12 percentfor Germany (15 percent being multilateral of 0.26 percent of GDP in 1998) and 7.5 percent forFrance (10 percent being multilateral from a total in steady decline, to just below 0.4 percent ofGDP in 1997, excluding French Overseas Territories-TOM).9

The European Commission itself allocates a significant amount of funds to the World Bank and theIMF. In the 1990’s, the Commission became the largest financier of structural adjustment. In the late1990’s, the EU was financing 64 percent of the costs of SAPs in Africa.10 The EC also contributed 1billion euro to the heavily HIPC initiative co-managed by the Bank and the Fund, thereby breakingthe deadlock when G7 governments failed to commit the finances to back up their own rhetoric.11

8 The EU and its Member States together provide 55 percent of total international Official Development Assistance(ODA), and more than two thirds of the total grant aid. The EC is responsible for more than 10 percent of total ODA,and 17 percent if the European Investment Bank (EIB) is included. The EC is also the largest humanitarian donor. Total(committed) external aid went from 3.3 billion euro in 1990 to 8.6 billion euro in 1999, of which 6.8 billion euro wasreal ODA, according to OECD/DAC criteria. See for more details the chapter on development aid in this publication.This picture could become even more striking in the next few years. Both the US and Japan have announced cuts inaid budgets. Ex-president Clinton announced for 2001 an aid budget of US$10.7 billion , which is only 0.11 percentof US GDP, or, just 0.6 of the federal budget. Japan announced the most drastic cut in aid ever, which led even to avisit by the Japanese development minister to the European Commission with the request for pressure from Brusselsto influence this policy.9 See Report on the communication from the Commission to the Council and the European Parliament oncomplementarities between the Community’s development co-operation and the policy of the Member States,Committee on Development and Co-operation, 29 January 1997, p. 16. See also the relevant country chapters in TheReality of Aid 2000, London, 2000.10 Towards true partnership: EU-Africa Summit, A CIDSE Position paper, Brussels, March 2000, p. 13.11 This amount of 1 billion euro has been taken from blocked resources in the eighth European Development Fund.This money still could be used when certain blocked funds are freed when the political situation in respectivecountries change, e.g. Nigeria after the relative democratisation. It would have been much more preferable if resourceswould have been taken from the almost 1 billion euro of the ‘closed’ EDF 6 and 7, which is to be returned to the EUMember States, see Paul Goodison, European Research Office (ERO), his EU-ACP Agreement Briefings, published in1998. EDF resources are voluntary contributions from Member States, which, if remaining unused, can be returnedto them. See also briefing paper 4.3 by Anna Collins, Rob Mills, The EU and the HIPC Initiative: still long way to go.

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The EC-World Bank relations have increased, as a direct consequence of the growth of EC financialinvolvement. In July 1996, for example, a Commission-World Bank meeting defined modalities forco-operation on structural adjustment in the context of the World Bank led Special Programme forAssistance to Africa (SPA12). SPA is a forum of bilateral and multilateral donors, including the WorldBank, IMF, African Development Bank (AfDB), and EC. It co-ordinates funding and discussesconditionality for adjustment for Africa. A director of the EC DG Development led for some yearsone of the two SPA working groups, the one on economic policy reform. When the central role ofStrategies Poverty Reduction was agreed internationally in 1999, SPA merged the two workinggroups on macro-economic policy and poverty reduction in one Working Group, led by DGDevelopment and the UK. The bi-annual SPAplenary was reduced to one a year, but the workinggroup and the seven related task teams13 that were established were to meet more often.

Furthermore, the EC and World Bank agreed to closely collaborate through joint missions,consultative groups, co-financing and joint analysis in the area of sectoral co-operation. In February1998, high-level delegations of both institutions met in Baltimore, which resulted amongst otherthings in an agreement on joint country reviews.14 A delegation of the European Commission, ledby Bernard Petit, who became in 1999 Director Development Policy and Sectoral Issues, visitedWorld Bank Headquarters 23-26 January 2001. The EC delegation consisted of ten specialists fromdifferent directorates of the Commission, principally of DGs Development and Foreign Relations(Relex), but also including Trade. The aim of the meetings was to take forward the collaborationwith the Bank and the Fund and the EC participation in the PRSP process.

Another area of close collaboration between the World Bank and EC has become the reconstructionaid programmes for the Western Balkans. This started with donor group consultations held in Brusselsunder the auspices of the EC and World Bank for Bosnia-Herzegovina and later for Macedonia andKosovo. The EU and the World Bank have set up a joint office in Brussels to co-ordinate their workon the West Balkan Programme.

Washington comes to BrusselsIn the 1990s the World Bank has begun to acknowledge the importance of Europe, as a globalplayer in development, and as the biggest financier of World Bank programmes. Another reason forthis was the decreasing financial support from the US. In particular the soft loan window of theBank, the International Development Agency (IDA), which finances World Bank programmes andprojects in the poorest countries, became more and more dependent on European funding.European countries wanted to see this financial support translated into more influence on thepolicies of the Bank, and managed to exclude the US from decisions on IDA programmes, as long asWashington did not pay its contribution to IDA.

In 1998, the Paris based European office of the Bank was upgraded. The office was enlarged and theposition of Vice President for Europe was created, to which Jean-Francois Rischard, former vice-president for private sector development was appointed. In 2000, the Brussels office of the Bank,that used to play mostly an informational and public relations role, has become more operationalin managing relations with the European institutions.

Supporting this trend, in June the then head of the less important London office, Andrew Rogerson,was also nominated as the director of the World Bank’s Brussels office. Rogerson’s job is to conduct‘strategic dialogue with the European Commission, the European Investment Bank (EIB), theEuropean Parliament, and the EU Member States’ representatives’. Furthermore, the Bank has specialrepresentatives, ‘counsellors’, for German speaking countries; Nordic countries; France; Belgium andLuxembourg; the four Southern European countries; the United Kingdom and Ireland; and The

12 Renamed recently Strategic Partnership with Africa.13 These seven task teams, which are chaired by either Bank, DG Development or donor goverrnments are on povertymonitoring (Indicators, poverty profiles); growth and equity (how move from BoP deficit to fiscal needs approach tosupport PRS, thus shifting from an external macro view to a domestic capacity approach in delivering a nationalstrategy); financial management (fiscal management, accountability; public expenditures); PRSP process: consultationand participation; Reform of conditionality and selectivity; sector programming; aid and fiscal policy.14 Mirjam van Reisen, EU ‘Global Player’, The North-South policy of the European Union, Utrecht, 1999, p. 70.

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Netherlands. Most of these staff work from the relatively large Paris or Brussels offices, but besidesthese (and the London office), there are also small special World Bank offices in Frankfurt (financialcapital, and seat of European Central Bank) and Geneva (United Nations and World TradeOrganisation).15

The IMF has had for many years a European office in Paris - in the same building as the Bank, but itsstaff was relatively low key and the resources more limited than those of the World Bank. In 2000,following the example of the World Bank and forced by the increasing criticism of its operations(mishandling of financial crises in Asia, Russia etc.), the Fund decided to upgrade its presence inEurope. Fleming Larsen, a senior official who had worked for many years in Washington and agreedon some of the failures the IMF had been making, was appointed director of the IMF’s Paris office.In the second part of the 1990s, the Managing Director of the IMF (Camdessus, Köhler) and thePresident of the World Bank (Wolfensohn) and other Bank staff members began to pay regularvisits to the European Commission. After the EC offered one billion euro from the EuropeanDevelopment Fund (EDF) to the World Bank Highly Indebted Poor Country (HIPC) Trust Fund forfinancing multilateral debt reduction, the Commission’s popularity boomed in Washington. Staff ofboth institutions met several times to work out the details of this deal.

Both Michel Camdessus and his successor Horst Köhler as well as James Wolfensohn have startedto speak on a regular basis with the European Parliament (EP), more specifically to discuss IMF andWorld Bank policy with the EP’s Development Committee. In May 2000, in the Hague, anothermanifestation of the broader engagement and gaining a broader understanding of both institutions’policies from parliamentarians, was the first conference ever of the World Bank with parliamentariansfrom EU countries, hosted by the Dutch Parliament. The core group of participants were membersof the national parliaments in the fifteen EU Member States, plus a smaller group from Norway,Switzerland, Iceland, the European Parliament, the US Congress, EU-accession countries and a fewdeveloping countries.

By having this annual conference, the World Bank aims at informing parliamentarians, and throughthem, citizens and public opinion. Secondly, to have an in-depth exchange on the role of Europe asa whole, as well as European countries and parliamentarians in international development, and tocontribute to the emergence of a European voice on development and the work of the World Bank.Thirdly, to establish a standing information and consultation process and network withparliamentarians in and outside Europe on development co-operation in general and the work ofthe World Bank in particular.16 Although participants evaluated the first conference as too shortand covering too many topics for an ‘in-depth exchange’, the vast majority of representatives andBank staff found it useful, and confirmed their intention to hold the conference annually.

This conference to be held annually, is to rotate throughout Europe. Indeed, at the end of January2001, in London, a second conference took place with a larger representation of parliamentariansfrom developing countries. One of the outcomes could be a regular or permanent parliamentaryassembly on the World Bank (and the IMF?). One real outcome already is that more parliamentsthan ever debate World Bank and IMF policies at least twice a year with the responsible ministersbefore the IMF-World Bank’s annual and spring meetings.

2. European G4 in the G7: no common development policy in IMF and World BankIn political terms Europe has four of the G7 countries and would potentially be the most powerfulglobal alliance. However, it often looks as if the US on its own exerts more power than the EuropeanG4 countries. Japan’s attitude is rather to follow the others, although it may work with a gradualiststrategy on its own specific agenda, e.g. on the promotion of an Asian IMF. Why is it that the EuropeanG4, which has the political backing of the rest of Europe on many issuest, cannot push through itsown agenda? First of all, because the European G4 does not have an explicit common agenda, andsecondly they do not entrust anyone of them, let alone the European Commission, to voice possiblejoint views or proposals. On development policy they badly need to protect their own interests

15 See European Vice Presidency, Information leaflet, May 2000.16 Background note on Meeting of parliamentarians with the World Bank. May 28/29, 2000, The Hague, The Netherlands.

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both towards the public at home (‘who is the world’s debt relief champion?’) and to their naturalallies or (what they perceive as their) constituencies in the South.

In this respect European governments often prefer to act on a bilateral basis rather than as a group.Both France and the United Kingdom often act on development issues, including those related toIMF and World Bank policy, with one eye on their interest as ex-colonial powers and as protectors offormer colony interests. Again, debt policy presents a good example. The annual CommonwealthConference of Finance Ministers, which usually takes place in September, just before the IMF/WorldBank annual meetings, provides the United Kingdom with a stage to herald its good intentions ondebt and poverty reduction. In 1991, when the then Finance Minister John Mayor launched hisTrinidad (& Tobago) Terms for bilateral debt relief proposal, for which he received much praise,nothing substantial ever came of it. Only after much pressure from the British Jubilee 2000 debtcampaign (Christian Aid, Oxfam, Cafod etc.) did Kenneth Clarke (Mayor’s successor) promise to go italone, if other major creditors would not follow. By then, however, London was already embracingthe HIPC Initiative. In 1998, in his first year as Chancellor of the Exchequer, Gordon Brown launchedhis own five-point debt cancellation plan at the Commonwealth Conference in Mauritius, knownsince then as the Mauritius Mandate. The British Labour Government only took real action when itfunded the World Bank based HIPC Trust Fund, and promised more bilateral debt cancellation afterheavy pressure from the powerful British Jubilee 2000 Campaign. In fact, there were complaintsfrom non-G7 European creditors that Britain and other G7 governments were very good at pledgingand promising support, but that they ‘should put their money where their mouth is’. The UnitedKingdom was the first G7 government to finally follow through.

The British Government and its allies, Canada, Australia, and New Zealand, at times simply overruledviews and proposals of southern Commonwealth members, if they thought that these did not fitinto their conception of the Washington Consensus. In September 1999, for example, at theCommonwealth gathering, Malaysia tried to get endorsement for its fairly successful strategy offinding a way out of its financial crisis without the IMF and the right to regulate volatile capitalinflows with temporary controls. Given all the criticism of the IMF for its mishandling of the Asiacrisis this was not at all a revolutionary viewpoint. It received support from all the southernCommonwealth Members, but ultimately did not obtain Commonwealth endorsement becausethe United Kingdom and Canada were opposed to it.

France followed the example of the British Commonwealth with organizing francophone summits,but they never became as successful. France made proposals on debt at the summits of la Baule,and Dakar I and II. In September 1992, at one of the summits in Libreville, France announced that itwould create a debt conversion fund worth 4 billion francs for heavily indebted middle-incomecountries, such as Congo Brazzaville, Côte d’Ivoire, Cameroon and Gabon. This programme neverreally came off the ground.17 18

Another French trump card has always been the monetary union of its French franc with the CFAcountries in Central and West Africa and the political influence related to that. The franc-CFA relationwas managed not by the French Central Bank and central banks in the CFA region, but by theFrench finance ministry. With the introduction of the euro, however, and the new ties between theeuro and the CFA franc, the French Government negotiated to maintain its central role. In the longrun, however, it will probably lose its grip and will have to hand it over to the European Central Bank(ECB) in Frankfurt. This transition will probably be easiest when it is France’s turn to chair the ECB.19

3. Timid attempts at exercising influenceUtstein group: a new kind of like-mindedness?In 1999, the Norwegian Minister of Development Co-operation, Hilde Johnson,20 a Christian-Democrat, invited her female colleagues from the United Kingdom, the Netherlands and Germany

17 ACDE, Projet de création des fonds de contrepartie dans le cadre de l’initiative PPTE, January 2000, annex 4.18 Report on: Rencontre au Ministère des Affaires Etrangères, Mardi 29 février 2000, p. 1 and p.5, footnote 5.19 The French Government still seems to expect the first ECB president Duisenberg to step down halfway throughhis term in favour of a French candidate, ex-Central Bank president Jean-Claude Trichet.20 In early 2000, after Norway’s change in government, Johnson had a social democrat successor.

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to a meeting at a monastery on the island of Utstein. While it is worth noting that what became theUtstein Four are an all-female and since Johnson’s handover, a social democratic group, what iseven more interesting is that two of them represented G7 governments, and the other two managesome of the largest and most pro-poor development budgets. Much to the distress of the EuropeanCommission and DG Development, they represent a new sort of unifying force of Europeandevelopment policy that is reminiscent of the like-minded group in the 1970’s-early 1980s.21

In April 1999, they paid a visit to Tanzania to demonstrate how to co-ordinate donor actions towardsdeveloping countries. In November 2000, they went together with the same objective to Zambia.

What makes the actions of the Utstein group particularly interesting is the four governments’common position towards the policies of the World Bank and the IMF. They are used the substantialbudgets they manage as development ministers as leverage to influence the positions ofinternational financial institutions. They pressured IMF ex-managing director Michel Camdessus tomake IMF policies more poverty oriented, using the argument that they are the ones, in theirgovernments, responsible for funds allocation or denial to the Enhanced Structural AdjustmentFacility (ESAF). Their message to Camdessus was that if the IMF would not consider changing itsESAF policy, the funding could decrease. The ministers claim that this has brought about the changein the IMF’s position on debt and ESAF.

Also vis-à-vis the World Bank, where Dutch Minister Eveline Herfkens was for six years the DutchExecutive Director, they follow as much as possible a common course. When together in Washingtonfor IMF/World Bank (spring and annual) meetings they started to give joint press conferences.

The Utstein group is also having an indirect impact on IMF policy-making and policy positionsthrough a common philosophy regarding the relationship between themselves as developmentministers and their colleagues from Finance and the Central Bank. In the United Kingdom andGermany (and Norway) moreover, they have the advantage of being ministers from the same political- social democratic – party. In the Netherlands collaboration between the Progressive MinisterHerfkens and the Conservative Liberal Minister Zalm is functioning relatively well, also due to thelatter’s lack of interest in international development.

There is a striking contrast in the way EU development ministers assess IMF/WB failures and EUfailures. The Utstein group continues to give credit to the IMF and World Bank despite the problemsand low quality of their policies and practices. The four ministers tend to cover the enormous failuresand mistakes of the World Bank (lacking the success rate of a Bank lending portfolio) and particularlythe IMF (Asian crisis, ESAF and other adjustment lending) with the cloak of charity. Contrary to this,the development programme of the European Commission is continuously criticized, for example,in May 2000, at a conference on Africa in Utrecht, comparable to Clare Short’s disqualification of theEU performance.22 This might be justified due to the lack of positive change in the Europeandevelopment policy, but it sounds at least unbalanced compared to the collegial treatment theWashington based institutions receive.

One possible explanation for this unequal treatment is that, according to the Utstein ministers,Washington listens to them. Former IMF Managing Director Michel Camdessus appeared to havebeen impressed by Herfkens and her colleagues’‘threat’ to withdraw financing for ESAF, if the IMFwould not change the IMF policy to be more poverty oriented.23 Furthermore, in April 2000, whenGordon Brown chaired the first IMF International Finance and Monetary Committee meeting, he

21 This like-minded group, consisted of the Nordic countries, the Netherlands and Canada followed in many respects aprogressive common programme on development and foreign policy. This was largely governed by their commonbelief in and support for the project of a New International Economic Order. The like-minded group was a mostlyEuropean alternative to the neo-liberalist ideology of the Reagan and Thatcher era, which later became known as theWashington Consensus, led by the thinking and policies of the US Treasury. The like-minded group vanished in thecourse of the 1980’s as a result of ideological pressure from the US Government and the Washington based institutions.22 On 13 May 2000, at the annual conference of the EVS, the development agency of the Dutch labour party (PvdA), thefour Utstein ministers were interviewed for an hour on their joint visit to Tanzania and the EC development programme.23 Statement by Minister Herfkens at the same conference.

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was able to make a direct impact on IMF policy-making. Moreover, as former World Bank boardmember, Herfkens worked for several years with Jim Wolfensohn and other Bank staff.24

Competition for hegemony over AfricaLate in the 1980’s, after the United Nations (Unicef, UNDP) started to criticise the Washingtonapproach on structural adjustment and advocated ‘adjustment with a human face’, the Commissionchanged the focus of its adjustment support towards the social dimension of adjustment: health,education, gender and regional adjustment. In this way, EU development assistance helped tomitigate the negative effects and costs caused by IMF and World Bank policies. However, EC staffrealised that with such a division of labour – IMF and World Bank responsible for the ‘hard’ macroand structural reform policies, the Commission the ‘soft’ social sectors - the EC enabled the IMF andWorld Bank to carry out their tough adjustment programmes, without giving the Commission muchsay on their content. This, combined with the increasing criticism of adjustment policies as suchand the high failure rate of these policies, led the European Union, in tandem with the Commission,to come out with proposals for change. This happened in a forum where the Commission, MemberStates, World Bank and IMF discussed and co-ordinated their funding and policies on structuraladjustment to Africa, the Special Programme for Assistance to Africa (SPA).25

In the second half of the 1990s, the debate in the SPA became the arena in which Commission, IMFand World Bank disputed the hegemony on the design and leadership of the next generation ofstructural adjustment programmes. The EU was not satisfied with the practice of stop-and-go, i.e.the continuous interruption of financial flows conditioned on compliance with the IMF macro-economic and World Bank’s structural reform policies. The Commission proposed to de-linkperformance on social development from IMF macro-economic and World Bank structuraladjustment conditionality, in such a way that if a country managed to achieve agreed social targets,financing of social programmes would continue even if the IMF would be unsatisfied withperformance on macro-economic policies. This meant that the de-coupling of performance andrelated financial flows for each of the three policy areas, which would break the implicit power ofthe IMF in the other two areas, namely of structural reforms and social policies.

In 1997/98, the Commission proposed to experiment with such a new approach in Burkina Faso,but initially it met with little support from most Member States, and with opposition or at leastindifference from the IMF and the World Bank. Apparently, the World Bank sought to out-competethe EC by giving priority to renewing its own approach to adjustment, after internal evaluationshad indicated the weakness of the Bank’s policy prescriptions in this area. The result was a projectfor more effective adjustment operations, Higher Impact Adjustment Lending (HIAL) or High ImpactStructural Adjustment (HISA). In 1997, the IMF ESAF also came under attack after an internalevaluation gave ambiguous results on its success rate: two thirds of ESAF programmes wereinterrupted either for being over-ambitious or somehow flawed. In 1998/99 the first-ever externalevaluation of an IMF programme on ESAF was even more critical.

Due to the above and possibly as a result of pressure from some of the Member States, theCommission compromised by focusing on the development of indicators for social performance,increasingly winning in this way the support of Member States, the World Bank and the IMF. Insteadof de-linking financial flows from conditionality and performance in the three policy areas, theCommission started to speak of ‘diversification’ of flows on the one hand and conditions on theother. This finally turned into the pilot programme in Burkina Faso, improving the quality of publicfinance by assessing it on the basis of indicators relating to the speed, transparency and effectiveimplementation of measures and outcome targets foreseen in the budget. Conditionality essentiallyhad to change from conditions for meeting certain macro targets imposed by the IMF and intentionsfor structural reforms (such as privatization and social spending, in jointly agreed targets. Theevaluation of the governments’ performance would no longer be a unilateral matter of the IMF orWorld Bank, but a joint government-donor assessment. Later, this approach was extended fromBurkina Faso to other countries, such as Senegal, Madagascar and Guyana.

24 In May 2000, another example of the good collaboration between the Bank and the Dutch minister was the one-day conference on the World Bank with a global group of parliamentarians that she hosted with Wolfensohn.25 Recently renamed Strategic Partnership with Africa.

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A similar programme to that in Burkina Faso was the Public Expenditure Reform Credit (PERC)prepared in Benin, it was led by the World Bank with the Commission’s participation. In both pilotsthe emphasis is on the quality of the budget and its implementation.

The Commission considered the Burkina Faso pilot as a model for the EC’s future adjustment supportas a multi-donor initiative. In the Burkina case the following Member States participated: Austria,Belgium, Denmark, France, Germany and The Netherlands. Such co-ordination with Member Statesis taking place in countries where the Commission’s delegates have a special mandate to that effect.In its resolution adopted May 18, 2000, the Development Council noted that

The Community has been able to make significant contributions to theinternational debate on economic development and structuraladjustment, in particular within the framework of the SPA.

After ‘a long time’ the Council reached a consensus on issues such as the link between economicreforms and their social impact, the fight against poverty, the need of home-grown programmes,the appropriate sequencing of reforms and wider sectoral reform policies.26

The Commission prepared a Communication (to the Council and the Parliament) on ‘CommunitySupport for Economic Reform Programmes and Structural Adjustment: Review and Prospects’, takingon board some of the findings from the pilots. The preliminary conclusion was that the existingconcern for the sound management of public finances would be intensified. Support for soundpublic finance management was defined as one of the four priority issues for more far-reachingstructural and sector reforms, for example, the development of adequate control mechanisms,capacity-building, efficient and effective resource management, strengthening the rule of law tocombat corruption and enhancing transparency and civil society participation.

Development Commissioner Nielson promised that audits to assess the quality of public finance incountries receiving EC adjustment support were to be completed by mid 2000. Some findings ofthese audits (e.g. Ivory Coast) and their analysis and discussion have revealed already weaknessesin public finance management, which the Commission intended to address with institutionalsupport. In 1999, moreover, many financing proposals to the EDF Committee for EC support onadjustment already contained conditions and/or indicators on the quality of public finance, suchas the execution rate of the budget, delay in payments, share of budget to less central parts of theadministration, and ‘the consistency of the budget with the declared objectives of the government’.27

On 18 May 2000, the EU Council of Development Ministers met and evaluated the support foreconomic reform programmes and structural adjustment in the ACP countries and southern andeastern Mediterranean countries. The Council noted that:

The Union’s influence over the preparation and negotiation of adjustmentprogrammes is still insufficient and reform of the arrangements foradministering the instrument, including the role of conditionality, is necessary.

One limiting factor: lack of a common EU development policyA major problem for the EU and its Member States to exercise more influence on World Bank andIMF programmes remains the lack of a common development policy. Policy papers of theCommission tend to refer to the EU’s and Commission’s policies as if this was a single actor. Thispoints not only to the need of addressing the inadequacy of the analysis and policy developmentof joint Commission’s or Union’s development policies, but also those of Member States’ own policies,both ‘horizontally’ and ‘vertically’. There is no such thing as the EU’s development policy. There exists

26 The 2263rd Council meeting, Development, The European Community’s Development Policy, Structural adjustmentin developing countries – resolution, 18 May 2000, p. 11.27 A lot of information in this section has been taken from the 1998 discharge procedure, second questionnaire byMr. Van den Berg, Commission replies, January 2000, pp. 17-18. The 1998 discharge procedure has been used by Vanden Berg (MEP) for engaging the Commission and the European Court of Auditors in a dialogue on how to improvethe effectiveness and efficiency of European development policy.

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at best an – incoherent - European Commission’s development policy and various – non-co-ordinated- EU Member States’ development policies.

This is also reflected by the problem of coherence and co-ordination of the EU with the BWIs andthe UN. The EU Council of Ministers agreed that the co-ordination between Member States and theCommission would be enhanced through consultations on Country Support Strategies (CSPs).Furthermore, they would put these in the broader framework of the World Bank’s ComprehensiveDevelopment Framework and IMF/World Bank Poverty Reduction Strategic Papers (PRSPs) andorganize regular EU co-ordination meetings in partner countries. Furthermore, priority should begiven to supporting the country in the framing of a national strategy, involving dialogue witheconomic and social interest groups and civil society. The Council of Ministers wants the Commissionand Member States:

To work together in taking a more proactive role in the new co-ordinationarrangements established by the BWI (and the UN). (Furthermore, it wantsto) step up co-ordination between them, in order to contribute to theeffectiveness of those new extended co-ordination arrangements so thatthe European Union speaks with a more coherent voice, and in this sensehas greater influence.28

Indeed, co-ordination between EU countries’ aid programmes and with the European Commissionoften appears more difficult than with the World Bank or other multilateral aid or financialinstitutions. Examples are the UNDP chaired Round Tables, and even more the World BankConsultative Groups and Consortia. Co-ordination with multilaterals may also be easier because oftheir leading role in programme aid.

Manifestations of such policy incoherence were in the recent past the policies on structuraladjustment, and particularly the role of the IMF in stabilization and adjustment – e.g. in 1999, theFund’s Enhanced Structural Adjustment Facility (ESAF), was renamed Poverty Reduction and GrowthFacility (PRGF). ESAF/PRGF conditionality is hardly co-ordinated with the structural adjustment policyof DG Development in the context of EU-ACP co-operation. Another example is the policy on debt– e.g. the role of DG ECFIN (or, alternatively at Member State level, finance ministers and centralbankers) in the decisions on the October 1996 agreed Highly Indebted Poor Counties (HIPC) DebtInitiative. The latter often decide on policy, while DG Development and development ministriesfinance the agreement from their budgets and are responsible for its implementation. In general,these other policy areas also need to be screened on their coherence with human, social, gender-based, poverty oriented and environmentally sound sustainable development.

Another example of such incoherence was the position of the EU in the follow up to the CopenhagenSocial Summit (WSSD+5), June 2000 in Geneva. Five years ago, in the Copenhagen Declaration itwas recognized that an enabling economic and political environment was indispensable for socialdevelopment. In other words, designing social policy is not possible without looking into macro-economic policies, as also has been established in the EU Council resolutions. However, in the run-up to the Geneva WSSD+5, the EU undermined the review process by arguing that macro-economicissues, such as the consequences of financial crises for social development, could not be discussedat the Geneva summit.29

28 The European Community’s Development Policy, Operational Co-ordination between the Community and MemberStates – Conclusions, Provisional Version, the 2263rd Council meeting, Development, Brussels, 18 May 2000, pp. 8-10.29 Example taken from Mirjam van Reisen, Chapter on European Union, The reality of aid 2000, an independentreview of poverty reduction and development assistance, Earthscan, London, p. 87.

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Debt and Poverty Eradication Campaign, an example of Europe’s impact on globalpolicy-making regarding development at the World Bank and IMF30

Advocacy, lobbying and campaigning for the cancellation of poor country debt and for the investmentof freed debt resources in poverty eradication towards the World Bank and International MonetaryFund (IMF), culminating in the global Jubilee 2000 Campaign, has probably brought about major policychanges in these institutions. In the past five years debt advocates of Jubilee 2000, Eurodad, OxfamInternational and many allies in the South and North managed to make developing country debt themain issue on the agenda of successive IMF/World Bank Annual/Spring meetings and the G7 Summits.The campaign started in Europe, Eurodad being its first point of reference. This successful endeavorillustrates the interaction between Europe and the Bretton Woods Institutions and shows how EuropeanNGOs and their governments built their impact on both institutions.

In 1992/93, at the first meeting held between the members of Eurodad and the World Bank and IMFstaff, on the problem of multilateral debt, the problem was denied. Johannes Linn from the Bank andJack Boorman from the IMF said that multilateral debt was merely a problem ‘of a small handful ofcountries’, and that ‘this problem could be solved case by case’.

In the spring of 1994, Eurodad and the Swiss Coalition of Development NGOs brought together inGeneva both radical and moderate European, southern NGOs, and the United States in an effort todesign a common campaign on multilateral debt. Some NGOs wanted the full cancellation of multilateraldebt without further reference to any policy or mechanism whatsoever. Others wanted to take intoaccount the so-called preferred creditor status of multilaterals, such as World Bank and IMF, whichmeant that if debt was to be repaid they were the first to receive repayment. Advised by various debtspecialists and academics, such as Matthew Martin, Percy Mistry and Gerry Helleiner, NGOs arrived atthe compromise shared by everyone that multilateral debt of the poorest countries had to be cancelled,respecting the preferred, but not the – then actual - exempt creditor status of IMF and World Bank. Inother words, if debtors were only able or willing to repay some creditors, IMF and World Bank would befirst in line, but would not be repaid at any cost.

Before 1994, strategic lessons were learned in campaigns on commercial bank debt and bilateral officialParis Club debt. From the late 1980s onwards, there had been campaigning on commercial bank debt,e.g. with Latin American NGOs and the Philippine Freedom from Debt Coalition - FDC and on bilateralParis Club debt in Eurodad’s Target ’92 Campaign with the sister network in Africa, Afrodad. At thesame time, some progressive European governments were prepared to go beyond the then fragmentedand haphazard approach. Notably the Swiss and Swedish governments organized a conference onmultilateral debt in the same period, with the Netherlands, Norway, Denmark (Social Summit) and theUnited Kingdom as the strongest supporters. Eurodad and its partners, the then newly founded networkof Oxfam International, and increasingly also southern NGOs, took the lead in global campaigning fora comprehensive policy on debt cancellation. They started to communicate closely with the debt teamof the World Bank and some of the progressive creditor governments.

In September 1995, this resulted in the World Bank’s plan for a so-called Multilateral Debt Facility (MDF).In September 1996, more than a year later, the World Bank and IMF launched their HIPC Initiative, acompromise, reflecting the different views and interests of the staff of both institutions anddevelopment respectively finance ministers and central bankers backing them. Though HIPC was astep back compared to the MDF proposal, NGOs acknowledged it as progress, but were also stronglycritical. Debt cancellation was not deep enough, not incorporating human development concerns, theHIPC scheme was too complicated and wrongly conditioned on failing IMF-adjustment (ESAF)programmes.

The two years of HIPC implementation, that was accompanied by ongoing NGO criticism stating thatHIPC was ‘too little, too slow, too late’ and the enormous growth of the Jubilee 2000 campaign (whichin 1998 was strongly moving forward, before the G7 in Birmingham), resulted in a fundamental reviewof the HIPC Initiative in 1999. In addition, the criticism to HIPC was further supported by leading media,such as The Guardian and after U2’s Bono and other musicians became Jubilee 2000 ambassadors,even by the Financial Times. People ranging from the Pope to Jeffrey Sachs went to endorse thecampaign for debt cancellation.

30 For a more extensive account of the multilateral debt campaign, see Sasja Bökkerink and Ted van Hees, Eurodad’scampaign on multilateral debt: the 1996 HIPC debt initiative and beyond, Development in Practice, Vol. 8, no. 3,August 1998.

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This stimulated the enhanced HIPC Initiative or HIPC II. However, when HIPC II was adopted by the G7in Cologne in June 1999, and confirmed by the IMF/World Bank Annual Meetings in September 1999,it was already overhauled by some of the G7 governments. They were pressed by the Jubilee campaignsin their countries to go beyond HIPC II. In many developing countries Jubilee campaigns were joiningthe merging Jubilee South movement, which demanded full debt cancellation for all indebteddeveloping countries, arguing that the debt was repaid since long, and that much debt was contractedillegitimately and odiously.

Thus, in 1999 G7 leaders started to compete for the prize of debt relief champion, starting with theUnited States, followed by Britain, Germany and later Italy, France and Japan. Canada had alreadystarted debt reduction in practice with smaller progressive European governments for several years,while other G7 governments were mainly making commitments. Smaller European governments ledby The Netherlands threatened to stop contributing to debt reduction if big G7 governments wouldnot put ‘their money where their mouth’ was. The newly formed Utstein Group of four femaledevelopment ministers – Norway, Germany, The Netherlands, the United Kingdom – successfully pressedto make debt reduction conditional on using the proceeds for investment in the social sectors and tothe formulation of a macro-economically integrated, participatory, civil society co-designed povertyreduction plan. Although this made debt cancellation hostage to a complicated scheme, which willcause delays in debt cancellation, the good thing is that such participatory anti-poverty programminghas shifted policy-making on debt into the area of – potentially nationally owned and designeddevelopment programming, no longer governed from Washington.

4. Looking aheadEU positions on IMF/World Bank reformGermany has taken the lead in the EU in replying to proposals for radical reform of the roles of theIMF and World Bank. In March 2000, a United States congressional advisory commission, chaired byeconomist Allan Meltzer, recommended fundamental change in the role and mandates of the IMFand World Bank. Although the Meltzer Report is inspired by conservative Republican thinking onthe United States role in the global economy, it echoed some of the major problems concerningthe role of the IMF, which were also raised by United States Treasurer Larry Summers in December1999. Meltzer’s proposals were to stop the IMF role in longer term development lending and reduceit to address global financial instability; focus the role of the World Bank on poverty reduction inAfrica, and not any more on Latin America (for the IDB) or Asia (AsDB); and stop its lending tocountries with a per capita income above US$4000.31 The Meltzer Report gained more politicalrelevance again after George W. Bush became United States president.32

Hans Eichel, German Minister of Finance, and Development Minister Heidemarie Wieczorek-Zeulcriticized the proposals. The latter published with her Utstein colleagues a highly critical evaluationof the Meltzer report titled ‘The world needs strong multilateral development institutions’. Theyonly agreed with Meltzer’s recommendation of further debt cancellation. In contrast to Meltzer,they said that to overcome the inequalities and the massive changes caused by globalization andmarket forces, the world was in need of multilateral development organizations, such as the WorldBank, and they called for closer co-operation between the IMF and World Bank. According to theUtstein Four, the IMF needed to better understand the linkages between stability, poverty andgrowth. Another influential German voice, however, stated almost the opposite. In an interview inApril 2000, German Bundesbank President Ernst Welteke declared that the IMF should concentrateon the tasks it was set up for, e.g., the provision of short-term aid, surveillance, and crisis prevention.He also wondered whether it was necessary for the IMF to provide loans to countries that alreadyhad access to international capital markets. The World Bank could then be responsible for

31 NGOs have reacted to the report with sympathy for discussing fundamental issues regarding the IMF’s role in thepoorer developing countries, but also with criticism for ignoring ‘many of the more fundamental problems associatedwith its (the IMF’s – TvH) operation’. Meltzer’s proposals have ‘the danger of throwing the baby of multilateralism outwith the bath water’. Both quotes are taken from Reforming the IMF, an Oxfam International media brief for the 2000Spring Meetings, p. 2.32 However, the United States reaction to the IMF’s intervention in the financial crisis in Turkey (February/March2001) indicated that for the Bush Administration, the protection and promotion of what is perceived as vital UnitedStates foreign and military interests dominate the agenda on international financial crisis management.

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development aid and the fight against poverty, he said, echoing some of the main points of theMeltzer report.33

In February 2000, when assuming his role as the new Managing Director of the IMF, Horst Köhlerargued against Meltzer’s radical prescriptions in favour of modest changes in the role of the IMF.Köhler has pledged reforms at the Fund to concentrate on short-term lending, but stressing alsothat the IMF still needed to assist developing countries. After these initial moderate statements, hebegan to support more radical reforms of the IMF that would limit its longer-term involvement indevelopment finance. After having visited sub-Saharan Africa, Köhler said he was committed to along term involvement of the IMF in poverty reduction in Africa.

EU and EC on Poverty Reduction Strategies - PRSPsIn September 1999, at their Annual Meeting, the World Bank and the IMF adopted the PovertyReduction Strategy Papers (PRSP) and declared poverty reduction their core commitment. The EU,for its part, adopted the internationally agreed to DAC criteria (laid down in 1996 in a developmentand growth strategy to reduce poverty by half by the year 2015), as the major guiding principles forits development policy. In 1999, it also endorsed the World Bank’s Comprehensive DevelopmentFramework (CDF) and the IMF/World Bank promoted PRSPs as guiding policy documents. The EU’sdevelopment policy would form part of an emerging comprehensive international strategy with“poverty reduction as its over-arching objective: that should “focus Community activities on areaswhere it can offer comparative advantages”.34

For a genuine overhaul of the EC’s and other development efforts, the major missing element is theparticipation of the citizens in the design, implementation and monitoring of a nationally designeddevelopment programme. Examples of national participatory development programming in thecontext of PRSPs are illustrated by the cases of Uganda and Bolivia. In both countries the role ofcivil society organizations, led by the most prominent groups in the national Jubilee 2000 coalitions,have been crucial in the organization of a national process for designing a national developmentprogramme, which combines the fight against poverty with macro-economic and structural reformpolicies.35 The process of drafting participatory poverty reduction strategies could become thecommon effort that will enforce co-ordination and coherence in the whole international financialand development community.

On 15 April 2000, the EC Development Commissioner, Poul Nielson, speaking at a DevelopmentCommittee meeting held during the IMF/World Bank Spring meeting, said, that the European Unionwas‘fully supportive of this approach’, i.e. to reduce poverty under the framework of PRSP. He addedthat:

The EC Country Strategy Papers (CSPs) are being prepared on the samebasis, seeking to promote ownership and an integrated approach topoverty reduction and stimulate the integration of developing countriesin the world economy.

In this context, he alluded to coherence and the common approach of ‘norms and standards setting’of the Bretton Woods Institutions, the WTO, United Nations agencies and bilateral donors, includingthe EU. However, the major part of his speech then relates to trade and the WTO, maybeunderstandable because the new ACP-EU Partnership Agreement is primarily a trade co-operationagreement. This is disappointing, as one would expect that Nielson would have addressed the

33 In an interview with the Frankfurter Allgemeine Zeitung, April 2000.34 Communication from the Commission to the Council and the European Parliament, The European Community’sDevelopment Policy, May 2000, pp. 3-4 and also EC Development Council - Development ministers welcomeCommission’s proposals for review of EC aid, Eurostep Proactive File, Regular News Update, no. 181, 19 May 2000.35 For an account of both processes, see a range of documents available from Eurodad, and partially accessiblethrough the Eurodad website www.oneworld.org/eurodad and the websites of the Uganda Debt Network and theBolivian Catholic Church/Foro Jubileo 2000. For documents on PRSP see the website of the World Bank and IMF, orEurodad Independent Guide to PRSP, Brussels, April 2000, that analyses, reviews and comments most of the relevantWorld Bank and IMF documents on PRSP.

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question of how EC development co-operation instruments would, more specifically, bring abouteconomic growth (delivered as he says by markets), and how they would fight poverty and ‘deliverequity and humanity’.36 For the moment, it remains therefore unclear how CSPs relate to PRSPs,both in terms of content and process. It is unclear if and how the new EU-ACP Partnership agreementcould be made operational in relation to the PRSP process, and consequently how National IndicativePlans (NIPs), could be integrated with the production of PRSPs and possibly be one and the same.

As we have seen, the EC repeatedly has made statements emphasising its willingness to make‘poverty eradication the central focus of the Community’s development policy efforts’. TheCommission reiterates that issues such as trade liberalization, developing countries integrationinto the global economy, and private sector co-operation remain important features of Europeandevelopment policy, ‘but only in so far as they directly contribute to the overarching objective ofraising the standard of living of the poor’. The Commission aims to improve the effectiveness andefficiency of aid programmes by ‘radically refocusing its policy on poverty eradication’ and byreducing EU’s development activities to ‘core tasks’, offering ‘comparative advantages’ and ‘addedvalue’ on poverty eradication.37 These and similar statements will only have a real impact if theybecome concrete policy. In fact, they sound very similar to the statements made by top IMF officialsin the initial period following the adoption of the PRSP framework. It was also promised that adviceon macro-economic policy (such as on budget deficits) or structural reforms (such as privatization)would be guided by the new focus on poverty. So far, the IMF has not fulfilled these promises.Changing the Enhanced Structural Adjustment Facility (ESAF) into the Poverty Reduction and GrowthFacility (PRGF) has just been changing names. The IMF’s macro-economic advice seems to remainbusiness as usual.

However. the meeting between World Bank, IMF and European Commission, that was held 23-26January 2001, aimed to concretise the general consensus on PRSP. At the meeting Bernard Petitand his delegation discussed with IMF and World Bank top management generic policy issues anda series of country cases - Moldova, Mozambique, Benin and Ethiopia. The EC agreed to contributeroughly 2 million euro to a Bank multi-donor trust fund on public expenditure management. Themost controversial discussion was on how the Bank and the Fund could move forward with the EUon results-based budget support to low-income countries. Both Bank and IMF, though reluctantly,agreed to such a joint approach. The EC decided to co-finance the new (IDA) Poverty ReductionReduction Support Credits (PRSC). While this EC contribution comes in the form of grants - up to 20percent of a PRSC - will make these loans even more concessional than IDA Ten African countrieswere tentativily identified for co-financing in 2001: Burkina Faso, Chad, Ghana, Guinea. Mali,Mauritania, Mozambique, Niger, Uganda and Zambia. However, most of this EU assistance will bedelivered in 2002 when the Cotonou Agreement will be ratified by the EU. Countries beingconsidered for 2002 are Benin, Cameroon, Ethiopia, The Gambia, Kenya, Madagascar, Rwanda, Senegaland Tanzania. To the extent possible the work on these countries will entail joint missions, withparallel evaluations and disbursements.38

The May 2000 EU Development Council: a step towards coherence?The Development Council strongly supported PRSPs as the ‘new generation of economic reforms’.The Council made a reference to the practice of the early 1990s, when the EU and World Bank/IMFeach had its own approach to adjustment: ‘It must be stressed that there can only be a single macro-economic reform programme in any given country’. Furthermore, the Council stated that the principalmultilateral providers of funds (at least) must recognize and support or agree to this programme,even if they do not necessarily support it financially.

With respect to this last requirement, it is important that donors, including the EU, support such aprogramme. However, the resulting programme is a direct outcome of the national participatory

36 Statement by Poul Nielson, Commissioner for Development and Humanitarian Aid, European Commision,Development Committee, 17 April 2000, DC/S/2000-04, 15 April 2000.37 Brian Kenety/IPS, Development: Poverty eradication high on EU agenda, South-North Development Monitor, 1May, 2000, pp. 7-8.38 Based on information from DG Development and the World Bank in Brussels.

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process, it is the quality of this process that will determine how good or bad the programme is inthe end. What will the EU do, if the process has been fine, but for instance the IMF, or the World Bank,or a donor (or a group of them) does not like the result? In such a situation one should think twicebefore demanding renegotiations or rejecting such a potentially less desirable outcome. In principle,the EU should support national governments and their civil society organizations and resist theefforts of the IMF, when it tries to impose its traditional recipes. This is not a sheer theoreticalpossibility, but is happening in countries already engaged in PRSP processes.

Overemphasizing balanced budgets or budget surplus at the expense of cuts in social sectorexpenditures was a common feature of IMF ESAF programmes, and it looks like they will remain soin the PRGF. In Bolivia, the IMF representative commented on the other possible outcome of theexcellent civil society process and the subsequent national dialogue with the Government, thatthis could not change the agreed on terms under ESAF/PRGF. In addition, in Honduras and Zambiathe IMF is singing the old song of squeezing the budget and playing the gatekeeper on overallconditionality. In other words, the EU may strive for donor and IFI consensus, but not at all costs.39

39 Information from reporters in these countries to the Eurodad PRS-Watch Listserve.

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A new European Commission mandate on poverty reduction strategies?

The EU Development ministers give the Commission the mandate to play its role: ‘The Councilencourages the Commission to take part and to assume an active role in that process (of PRSP – TvH),bearing in mind the matters of concern and the specific aspects of Community support.’ This is specifiedas consolidating the achievements of support for the economic reform programme: a macro-economicframework that fosters the process of growth as a necessary condition to fight poverty; giving priorityto basic social services (health, education) and infrastructure; budget balance between investmentand operating expenditure; support for reforms fostering regional integration, the strengthening ofintra-regional exchanges and the creation of regional free trade areas, also with the EU; and activeinvolvement in the HIPC debt reduction initiative.

The Council then invites the Commission ‘to take up the challenge of the new international and co-operation context, by giving increased attention to the following areas.

In summary:

● Encouragement of the design and implementation of home made reform programmesthrough democratic dialogue and consultation.

● Make poverty reduction a central feature of the new programme, not just aiming at financingsocial budgets, but also at the quality of public services. Problems of equity, distribution ofgrowth, access to basic services, and how distribution effects the impact of budget and fiscalpolicies will also be examined.

● Sound and efficient administration of public finances, through support for the developmentof appropriate monitoring mechanisms, fighting corruption, increasing transparency andparticipation by civil society.

● Support to effective, equitable and administratively feasible tax reforms, e.g. dealing with thereduction of customs revenue because of liberalization.

● Development of the private sector, the driving force for sustainable growth, through theeffective creation of a regulatory, legislative and institutional framework favouring investmentand private initiative.

● Specific actions on horizontal dimensions, such as the protection of natural and environmentalresources and the promotion of equality between the sexes.

On the basis of the Commission’s proposals, the Council proposes certain changes on how the supportof the Community should be implemented. Again, in summary, the main points of action are thefollowing:

● Continue progress towards direct budgetary support, except in the case of countries withnon-convertible currencies; continue sectoral budgetary support and, if necessary, theprogressive introduction of general budgetary support in countries with a satisfactoryadministration of public finances. Further discussions, together with other donors, on theimprovement of mechanisms to monitor the sound administration of public finances.

● Make the objectives and the expected results of reforms explicit and public, as demonstratedwith the development of performance indicators in the Burkina Faso SPA pilot. This will makeselective financial support possible without, however, penalizing the poorest countries;monitoring and assessing programmes with these performance indicators will enable theidentification of causes responsible for failures and successes, and will allow sensible actionsto be taken in order to adjust and redirect the overall program appropriately while in progress.

● Incorporate support programmes into the global frameworks for co-operation with therecipient countries, such as the new association agreements with the Mediterranean countriesand the Post-Lomé regional economic partnerships; increase Community participation in thepreparation and discussion of economic reform programmes within each country; encouragethe consultation of civil society in these discussions; use the PRSPs in countries where thoseexist as a benchmark for Community support.40

40 The 2263rd Development Council, pp. 13-14.

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41 Ibidem, p. 14.42 Ibidem, p. 15.

More explicitly than ever, the Council has advocated for a stronger EU influence in the BrettonWoods institutions, in particular in relation to PRSP:

The pursuit of greater influence for Europe’s voice in the design,preparation and implementation of programmes requires special effortsto improve co-ordination between the Commission and the MemberStates and other donors, in particular the Bretton Woods Institutions.

Given ‘its financial weight’ the objective is to improve co-ordination and the influence of the Unionas a whole. ‘While taking into account the system of electoral groups in the Bretton WoodsInstitutions’, the Council invites the Member States to increase the consistency and influence ofEurope’s voice on their administrative boards, emphasizing the PRSP framework. Besides theexchanges in the context of the SPA, the Commission is asked:

(To) continue regular exchanges with the Bretton Woods Institutions onthe global approach to economic reform and on co-ordination of specificintervention in consultation with the Member States.

The Commission should concentrate its intervention in each country on the preparation, discussionand follow-up of PRSPs, in order to influence the content, after close consultation with the MemberStates.41 As agreed in January 2001 in the context of SPA, the overall EU development programming,such as the National Indicative Programmes (NIPs) in the context of the new EU-ACP PartnershipAgreement, should be integrated in these efforts as well.

In addition, the EU Development Council has discussed the linkages between the fight againstpoverty, as the overarching objective of Community development co-operation, environmentalconcerns and sustainable development. It proposes to integrate both policy areas in a single strategyfor human sustainable development.42 Reminding the Council of its reference ‘that there can onlybe one reform programme’, this calls for integrating the design and implementation of PRSPs andof National Sustainable Development Plans or Strategies (NSPs, NSSDs) into a single process. DGDeevelopment seems to be less aware of the need for coherence between these two policy areas.An exchange of views with EU delegations of Commissions of Sustainable Development (CSDs)demonstrated a similar lack of awareness from the side of environmentalists. The run-up to thefollow-up of the 1992 Rio Conference in 2002 in Johannnesburg is offering an excellent opportunityto integrate the two strategies in one human sustainable development strategy takling povertyboth from the donor government side and from the developing country side.

ConclusionThe crucial question is: How firm is the EU’s Development Council and the Commission’s commitmentto use their influence to bring about a successful, home-grown, participatory PRSP, that is integratedwith a sustainable macro-economic and structural reform framework, in practice. Finally, the povertyreduction strategy process will determine to what extent both IMF/World Bank and the EU MemberStates/European Commission will leave room for genuine ownership and participation in processesaimed at designing and implementing sustainable, human development planning. European NGOs,from the Eurodad network and its partners in the South and other OECD countries, will monitor thepolicies and actions of IMF and World Bank, EU Member States and the European Commission onthe intentions and criteria discussed above. This NGO effort will, amongst others, build on thecommon experiences and the lessons from national and international civil society organisations.

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Interlude 1:The Chad-Cameroon Oil and Pipeline Project

Jaroslava ColajacomoCampagna per la Riforma della Banca Mondiale

The Chadian oil extraction and transportation project, which was discussed for the first time some30 years ago, is now becoming a reality. The World Bank has approved its contribution to the US$3.5 billion project, and that contribution is seen as a guarantee for private investors and commercialbanks, including the European Investment Bank. The Bank’s decision was made after an internationalcampaign, that bringing together environmental and human rights NGOs from Northern countriesas well as from Chad and Cameroon, actively opposed, for three years, a project that is at the centreof the political dissensions in the two countries. As a consequence of this campaign, an independentmonitoring mechanism has been created to supervise respect for human rights and for internationalenvironmental legislation.

The extraction and transportation project:In its current version, the project includes the construction of a 1100 km long oil pipeline, 170 km inChad and the rest in Cameroon through the bio-diversity rich Deng Deng tropical forest and areasinhabited by the Bakola Pigmees. 300 oil wells are envisaged in the region of Doba, spread aroundthree main areas (Miandoum, Komé and Berò) with a total production of 225 barrels a day. Anoffshore platform will be built in Cameroon off the cost of Kibri, a pristine place with the only fresh-water cascade flowing into the ocean of the entire Gulf of Guinea.

Engagement of multinational companies:Exxon (45 percent), Chevron (35 percent) and Petronas (25 percent) control the consortium thatholds the extraction rights. Shell and Elf pulled out of the project at the end of 1999. The licence forexploitation is valid for 25 years and is renewable. COTCO and TOCTO, state controlled by Cameroonand Chad respectively, are the companies responsible for transportation.

The H permit:It is the licence for extraction obtained by the multinationals. It covers an area much more extensivethan the one covered by the environmental impact assessments. It extends to the borders withNiger and the Republic of Central Africa and includes Lake Chad, Salamat, Bongor, and Dosea overa total area of 105.000 sq. km.

The financiers:In June 2000, the World Bank approved loans of US$55 million to the Government of Cameroon, andof US$35 million to the Government of Chad to support the costs of the oil pipeline and transportation.The International Finance Corporation – the private sector arm of the World Bank Group – approveda first loan of US$140 million for extraction (loan A), to be followed up by another credit line worthUS$300 million (loan B). Following the World Bank, the European Investment Bank approved loanswith a total worth of 144 million Euros in the framework of the Lomé agreements: 88 millions to theconsortium, 20 millions to the Government of Chad, 36 millions to the Government of Cameroon.

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The governments:Since 1991, Idriss Deby has been the President of Chad and is the latest of the political leaders tohave held the project as his banner. In the course of his Presidency, he has been involved, more thanonce, in arms trafficing, money laundering, and corruption; while the army continues to fuel therepression and war in the Southern part of the country.

The civil war has raged on for the last thirty years. It opposes the government army dominated byMuslim ethnic groups from the North, and Christian-animist rebellious groups from the South wherethe oil fields are located. Oil has always been the trigger of conflicts in the area. In the 1999 peaceaccords the rebel army FARF asked for 50 percent of the oil revenues, but the peace accords wassubsequently violated and nothing came out of the request. In 1998 more than 300 persons, mostof them civilians according to Amnesty International, were killed when repressive measures wereused against the population in the South. Impunity is the rule in Chad, and violations of humanrights, assassinations, disappearances, and torture have touched mainly people who stood inopposition to the oil project or who asked for guarantees from the Government.

In Cameroon, Transparency International considers the President, Paul Biya, the most corruptedofficial in the world. The rates of deforestation and illegal logging are very high in the country.

The international campaign against the project: the role of European NGOsSince 1997, a coalition of many international NGOs initiated a campaign to stop the World Bankfrom financing the project and, in the meantime, ask for further guarantees from the governmentsand the private consortium for the social and environmental impact of the project.

One outcome of the NGOs’ efforts was the Bebedja Declaration of April 1998, formulated by groupsfrom Chad and Cameroon and transmitted by Northern NGOs, it demanded a two-year moratoriumon the financing of the project. The Chad NGO co-ordinating organization, CILONG then carriedout a counter study on compensatory measures, after the assessment carried out by the WorldBank and the consortium had been found inadequate.

At the European level, a number of co-ordinated actions were carried out to put pressure on theEuropean Parliament. Greens and socialists were more than once mobilized to pass urgentresolutions condemning violations of human rights in Chad linked to the project. In June 1998 andagain in January 1999, the European Parliament passed two urgent resolutions requesting the WorldBank, the consortium, and the governments of Chad and Cameroon, to release a jailed Chadianparliamentarian who opposed the project, and to not extend financing until human rights arerespected and peace is restored in the region.1 The Parliament also asked EU governments to workin this direction, in particular to protect opponents of the project threatened by the Chadian army.2

In 1998, some organizations presented a document to the Sub-commission for the Prevention ofDiscrimination and Protection of Minorities within the United Nations Commission for HumanRights.3 The document recommended the creation of a commission of inquiry to assess theenvironmental impacts of the project, the effective implementation of international conventionson political, economic and social rights, and respect for the World Bank’s directives on indigenouspopulations (OD 4.20), relocation (OD 4.30), environmental assessment (OD 4.01), and of its policieson natural habitats (OP 4.04), and disclosure of information (OP 17.50). The document also askedfor the respect of national and international legislation relative to environmental management,human rights and the rights of peoples, in the agreements between the governments and the

1 The European Parliament: session of 18/06/98 - Human rights- B4-0636, 0646 and 0651/98- Resolution on Chad; EP,Session of 20 January, 2000 -Human rights - B5-0078, 0081 and 0088/2000- “on human rights violations in connectionwith the Chad/Cameroon oil and pipeline project”.2 Demands in session or presented in writing have also been presented at joint meetings of the European Parliamentwith ACP countries.3 E/CN.4/Sub.2/1998/NGO/5 20 July 1998, “The Adverse effects of the Chad-Cameroon oil and pipeline project onthe enjoyment of human, economic, social, environmental and cultural rights of the local populations: the role of theoil consortium Exxon-Shell-Elf”.

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consortium. In February 2000, the same document was submitted directly to the Commission forHuman Rights, including the two-year moratorium on financing.4

The international campaign acted mainly at the national level by lobbying Ministries of Treasury orof Finance in countries with high voting power in the World Bank. The campaign was particularlyactive in Italy, France, Germany, The Netherlands, Switzerland and the United Kingdom. Pressurewas also mounted on the Executive Directors of the World Bank, through political means, directindividual interactions, and the sending of letters and petitions.5 The Parliaments of Italy andGermany have passed motions and questioned ministers in charge about the project and askedrepeatedly their governments to suspend the World Bank’s decision over financing.6

Within the World Bank, the governments mentioned above have been allied, apart from Francewho has always supported the project, in requesting more guarantees. The Government of theNetherlands, in particular, commissioned two independent assessments of the environmentalimpact, measures of compensation and other proposals put forth by the consortium, which shedlight on significant shortcomings and asked for the creation of an independent monitoringmechanism. But these efforts were not sufficient to resist the pressure to extend lending thatcharacterize discussions of all World Bank projects and pressures from the Consortium. With thenotable dissenting voice of the Italian Executive Director, the Executive Board of the Bank approvedthe project on 6 June 2000, even though concerns over respect for human rights and a justdistribution of the revenues for the local population had not been properly resolved.

One lesson to be derived from the campaign is in regard to the institutional mechanisms withinthe European Union. The motions and resolutions passed by the European Parliament and somenational parliaments have not been carried out in the decisions eventually made by the respectivegovernments and executives. Furthermore, the geographical remoteness of the World Bank’sdecision-making centre has impeded European NGOs from spreading information and lobbying ina quick and effective manner. Most of this task has actually been left to North-American NGOs.

The World Bank agreed to set-up an independent mechanism of monitoring and has taken up theresponsibility of both creating it and making it effective. A process of negotiations with NGOs fromChad and Cameroon is underway to that effect. International NGOs are also trying to get involvedto ensure that the mechanism is truly independent, that all information be disclosed, and that it isaccessible to local populations. They also insist on giving power to actors of civil society to suggestand implement changes in the implementation of the project, including the possibility to suspendfinancing in situations of emergency, for instance, in cases of human rights violations in the area ofextraction.

4 E/CN.4/2000/ NGO7101 11 Feruary 2000 “The Chad-Cameroon oil and pipeline project and its impact on theenjoyment of human rights: heading another Ogoniland?”.5 Open Letter to Mr. Wolfensohn from 115 organizations from 29 countries concerning the Chad-Cameroon Oil andPipeline Project, 15th March 1999.6 The German Government recommended that the Parliament discuss the principle of the loan before a decision ismade within the World Bank(BWZ letter to Dr. Schaffer,21 settembre 1999, Chad export Project-EA-SummarizingAnalysis/Questions); while in Italy the Parliament engaged the Government through a motion (23 settembre 1999,Senato della Repubblica Assembela allegato B) and a series of questions were put to the Minister of Foreign Affairs(Camera dei Deputati Atti Parlamentari, Allegato B ai resoconti, 12 marzo 1998).

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Who led the campaign?

International NGOsAmong the more active organizations in Europe:Agir Ici (France); www.globenet.org/agiriciAmnesty International (Germany); www.amnesty.orgBerne Declaration (Switzerland); www.evb.ch/bd/index.htmlBretton Woods Project (UK) – www.brettonwoodsproject.org;Campagna per la riforma della Banca mondiale (Italy)- www.crocevia.org/cbm;CETIM (Switzerland); www.gael.ch/cetim/Federatione Internazionale des Droits de L’Homme (France); www.fidh.orgFERN (Belgio/UK); www.fern.orgFIAN (Germany); www.fian.orgLega Internazionale per il Diritto e la Liberazione dei Popoli (Italy/ Switzerland);Milieudefensie/Friends of the Earth (Netherlands); www.foei.orgUrgewald (Germany); urgewald@koel.netsurf.deWEED (Germany);www.comlink.apc.org/weed

In the US:Bank Information Center - http://www.bicusa.orgCenter for International Environmental Law (CIEL) - www.ciel.orgEnvironmental Defense Fund - http://www.edf.orgFifty Years is Enough - http://www.50years.orgFriends of the Earth US - http://www.foe.orgFriends of the Earth International- http://www.foe.org/international/finance/worldbankInstitute for Policy Studies - www.ipc-dc.orgProject Underground - http: www.moles.orgRainforest Action Network - http://www.ran.org

Organized civil society in Chad and CameroonCommission Permanente Petrole (CPP)/Cilong: Respectively 54 and 130 organizations working ondevelopment and human rights based N’Djamena.Commissione Permanente Petrolio Locale (CPPL): 23 organizations based in Moundou, capital ofthe extraction areaEPOZOP (Entente des Populations des Zones Petrolières): organization of the villages in the area ofextraction. Declared illegal and threatened by the government in December 1999.Centre pour l’Environment et le Developpement (Camerun)Service Oecumenique pour la Paix (Camerun)

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1.3 The EU in the WTO

Christian Friis BachChairman

Danish Association for International Co-operation (MS)

IntroductionThe World Trade Organisation (WTO) negotiates and administers the global trade rules, and hassince its creation in 1995 become one of the world’s most powerful organizations. The WTO’s strengthand uniqueness lies in that it operates with binding rules in contrast to most UN agreements anddeclarations. It has a strong dispute settlement process where decisions automatically enter intoforce – except when there is unanimity to reject them. And finally, it operates with collectiveenforcement where panel rulings are implemented and enforced by collectively agreed-uponmeasures. However, the WTO is still founded upon a tradition of consensus – or in the case of voting– upon the principle of one-country-one-vote.

This system of international co-operation is unrivalled. It makes the WTO a pioneer at a time whereinternational co-operation still retains a tradition for non-binding declarations and conventionswithout possibilities for enforcement. By contrast, the WTO is an institution in which even thestrongest trading powers are subjected to binding rules and must abide by the possibility ofsanctions.

1. The EU in the WTO: opportunities and hindrancesThe WTO as a core organization pursues a strong multilateral framework and seeks to promote the

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international rule of law – two of the cornerstones in the European Union’s (EU) foreign policy. Thisbackground is important when discussing the EU’s power in the WTO.

As the WTO builds on a rule based system the influence of a member country on the actualimplementation and interpretation of the rules is limited. However, when it comes to the negotiationsit is clear that the member countries gain influence; determined by their share of world trade andon historical patterns of political influence.

The EU is the world’s largest trading unit with around 20 percent of world trade. It is therefore oneof the driving forces of WTO negotiations. This role has become even stronger in recent years becauseof three different factors:

Firstly, the US has become increasingly protectionistic and reluctant to give away trading concessionsespecially to developing countries. President Clinton failed to ensure the fast-track negotiationmandate that is essential to ensure a strong American negotiation profile. This means that the US haslost its position as the driving force in the global trade negotiations – a position that it has held sincethe creation of the predecessor to the WTO, General Agreement on Tariffs and Trade (GATT), in 1947.

Secondly, the EU countries have increasingly managed to develop a strong and (almost) unanimousnegotiation mandate. This was especially clear in Seattle where the EU countries acted as a strongand united regional group. Back at the ministerial conference in Singapore in 1997 the EU groupdid not manage to stand united especially because the British government at that time could notsupport the EU position on labour rights. With the Labour government in place this disagreementis less severe, and in Seattle the EU managed to keep a number of other disagreements behindclosed doors, e.g. on issues such as agriculture, textiles and clothing and anti-dumping. This wasprimarily because the EU countries in Seattle were better prepared. The WTO policies have movedaway from being an issue for the Commission and from being negotiated behind closed doors, tobeing an issue where national parliaments, politicians and the public engage in a broader andmore profound debate on the EU mandate and strategy. This qualifies the debate and strengthensthe EU position.

Thirdly, the EU countries have managed to position themselves as a bridge between the US and thedeveloping countries. While the EU had very little to offer developing countries in Seattle, the UShad even less to offer on issues such as textiles and clothing, market access for Least DevelopedCountries (LDC), antidumping, intellectual property rights and other implementation issues.

Moreover, the better track record of the EU countries in development aid and the formal ties to anumber of developing countries, most notably the African, Caribbean and Pacific (ACP) countries,have improved the EU image in the South. These formal and informal ties to developing countrieshelp the EU countries to appear to be more participatory in their negotiation process while muchof the blame for the collapse in Seattle was put on the US for having conducted the negotiations ina very non-transparent and undemocratic manner.

These three factors —US problems at home, an increasingly unified EU and an EU that has managedto position itself between the US and the developing countries — has put the EU in a critical positionin the WTO negotiations. Moreover, the EU has formulated an ambitious agenda for the future WTO,comprising not only of progress in the traditional trade issues, but also a range of new issues likeinvestments, competition policy, the environment and labour rules. Therefore, the EU could becomedecisive in shaping future trade arrangements.

There remain, however, three main hindrances for this to happen. The first is the EU agriculturalpolicy. It has become a major straitjacket on any attempt for the EU to engage in negotiations oninternational trade. As such, the farm lobby has become the single most important obstacle to avisionary EU trade policy. For instance, in the negotiations between the EU and South Africa on afree trade agreement, minor issues such as geographic indications on sherry, port, ouzo and grappaalmost crippled the entire agreement. In Seattle the EU was constantly blamed for giving lip serviceto the objective of free trade because of its track record in agriculture. It is evident that the EU canonly gain leadership in the WTO negotiations and find backing for its ambitious trade agendawhen it has done its homework and engaged in a profound reform of the agricultural policies. Until

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now the reform attempts have been far too limited and may only enable the EU to adhere to itsobligations under the last round of negotiations, the Uruguay Round.

Secondly, the EU’s track record on other sensitive issues like textile and clothing is the second obstacleto a more visionary EU strategy in the WTO. While strong developing countries such as India andPakistan may not have much at stake in the agricultural negotiations, they do have strong interestsin textiles and clothing. Here the EU has implemented the Uruguay Agreement in a manner thathas been quite unfair to the spirit of the Uruguay Round Agreement on textiles and clothing. Similarly,the EU positions on other specific trade issues, most notably anti-dumping and intellectual propertyrights (TRIPs), have damaged the EU’s emerging image as the world leader in the WTO.

Thirdly, the EU has been dragging its heels when affected by the rulings of the WTO dispute panels.This is the case both in the banana ruling where the first ruling came already in 1993 and where theEU has since lost all panel and appellate cases and each time made only minor changes to theimport scheme for bananas. The ultimate embarrassment for the EU came just recently when Ecuadorwas allowed - by the WTO dispute settlement mechanism - to retaliate against the EU. Similarly, theEU in the hormone case against the US has behaved in a manner that has undermined the image ofthe EU as a strong supporter of the multilateral trading system and has been detrimental to thedispute settlement process.

In summary, the EU stands in a position where it is the single most powerful actor in the WTO, withan ambitious and visionary agenda to pursue. However, the EU agricultural policy, its protectionistpolicies in other areas and the handling of the dispute settlement rulings have prevented the EUfrom acting accordingly.

2. The decision- making process in the EUAccording to article 133 EF in the treaty, trade policy is the EU’s area of competence. On tradematters, the Commission negotiates on behalf of the EU and the member countries are not allowedto negotiate externally by themselves. On trade related WTO issues, such as investments, intellectualproperty rights and services, competence is mixed, meaning that either the Commission or themember states may negotiate agreements on the issues. In practice the Commission negotiates allthe WTO issues and it is then settled whether it is EU competence or mixed competence.

The decision-making process starts with a proposal from the Commission, which can be subject todiscussion within and outside the Commission. The proposal then enters the Article 133 Committeecomposed of one representative from each member country. The Article 133 Committee is adeviation from the normal EU-decision process. However, after treatment in the Article 133Committee the proposals enter the formal decision-making process: first the Committee ofpermanent representatives (COREPER), the Council of Ministers of Foreign Affairs and in the case ofsignificant events in trade policy, the European Council; whereas the European Parliament plays aminor role in trade policy. Article 133 of the Treaty does not demand a hearing process in theParliament, even though an informal hearing process often takes place.

Without a doubt, trade policy is one of the areas where the influence and power of the Commissionis quite large, both because of the decision-making process and because trade policy issues areoften complicated issues where a large degree of expert knowledge is needed.

However, behind the closed doors there is an ongoing power struggle between the member statesand the Commission. This power struggle became quite visible during the Uruguay Round where anumber of member states, led by France, accused the Commission of having gone beyond theirmandate. It was also visible during the negotiation of the Treaty of Amsterdam where theCommission managed to get an extension to article 133 EF so that the Council, by unanimity, cangrant the Commission single competence over the negotiations on services and intellectual propertyrights. This would strengthen the role of the Commission. This process is certain to go even furtherat the EU summit in Nice.

The position of the Commission has also been strong, because the decision-making process ineach member state has not been very open or transparent. In many countries the WTO position has

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not even been up for debate in the national parliaments, but has only been a case for the government.With the growing power and influence of the WTO this is changing. In a number of EU countries thegovernment position is now developed in a more open and democratic manner whenparliamentarians and NGOs are involved. However, more progress is necessary, and in many EUcountries trade policies are still one of the most secretive, closed and technical parts of the foreignaffairs policy. [See briefing note on Challenging Corporate Control over EU Trade and InvestmentPolicies for further elaboration of trade policies].

3. Setting a different vision: the Global EUThe GATT/WTO rules have until now been quite narrowly focused on promoting free trade. As such,we have seen a GATT/WTO without broader visions and with an agenda, which is detached from –and often in contradiction with – the desire for sustainable development. Instead, there is now aneed for setting the course towards what could be called “The Global EU” - a WTO with socialimprovements, environmental protection and security policy as its key issues.

In this process there are several things we can learn from the EU. Firstly, it is obvious that it is necessaryto create a broader vision for WTO, and that it will be necessary in the future to focus increasinglyon issues of peace and stability in the international trade negotiations. Security policy was thedriving force behind the establishment of the European Coal and Steel Union that has since beentransformed into the EU. Moreover, it is still security policy that is the driving force for the extensionof the EU towards Eastern Europe. Joining together the countries of Europe into a binding andgoal-oriented economic co-operation for peace and stability has been far more important in theEuropean structure than many economic details and market shares. This is in extreme contrast withthe WTO, where aspects of peace and stability have been almost absent. In the best European spirit,the WTO negotiators and politicians should engage in laying down a conscious economic strategytowards a more stable and peaceful world. Security policy must be incorporated in the internationaleconomic co-operation – and in the WTO.

Secondly, an important lesson from the EU is how economic agreements can be used as leveragefor stronger political co-operation, and that the most important argument for free trade is political.Free trade creates much needed pressure for international co-operation. European development ischaracterized by the fact that economic agreements have been used deliberately for strengtheningthe political structure. When Jacques Delors promoted the idea of creating a common market inEurope in the 1980’s, it was not only because of the economic effects. It was because he knew thatfree trade in Europe would act as a lever for political harmonization in other areas – and it didmaterialize. The common market placed an automatic pressure for harmonization and commonstandards on issues such as the environment and labour rules. It is here that the most importantarguments for a freer world trade should be found. Freer world trade is neither good nor bad initself, but it would function as a political mechanism that urges countries to cooperate.

Thirdly, it is clear from the EU process that if free trade is to work as a lever for better internationalagreements and standards, the international negotiations should comprise many issues and belinked closely together in order to ensure that all countries benefit from the agreements. As itstands today, the international negotiations are all too fragmented and confusing. The experiencesfrom the EU, from the North American Free Trade Agreement (NAFTA), from several internationalenvironmental conventions etc. show that closer and more formal links among internationalnegotiations on a broader range of issues leads to better results as it allows the necessary trade-offs between different areas. This will be one of the main challenges in WTO. If we want to succeedin putting social and environmental issues on the agenda of WTO, it would require a far broaderapproach to the negotiations. Again, the EU is well poised to set this agenda internationally.

Finally, as the last lesson learnt from the EU, it is necessary to create a far greater political dynamismand participation through an improved internal democracy and the greater involvement ofparliamentarians and NGOs. Again, the WTO could learn something from the EU. Much can be saidabout the negotiations in the EU, but the structure of the EU negotiations ensures that even thesmallest countries are able to exercise their influence. This is definitely not the case in WTO. Inreality, many developing countries are left out of the negotiations. And until now, the negotiationprocess has been far too closed and inaccessible for the larger public. Here the EU could set a newagenda of participation and openness.

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To conclude, the EU is ideally positioned to set a progressive agenda in the WTO towards whatcould be labelled The Global EU. However, as already mentioned, the European agricultural policy,the problematic implementation of the previous WTO agreements, and the many bruises from theWTO cases on bananas and hormones, prevent the EU today from playing a leading role in a morevisionary approach in the WTO. Moreover, a further development of the WTO must also lead tomarked changes in the structure of the EU. A simple employment of the principle of subsidiaryreveals that a range of decisions taken in the EU ought to be transferred to the global level. Theprinciple of subsidiary should also be used “upwards” to strengthen the international society andnot only “downwards” to strengthen the competence of the nation states. The struggle for socialand environmental standards must not end at the borders of Europe. In this respect, it is possiblethat the great efforts made today to build the European structure may pose an obstacle to a globalstructure. There is the danger that the EU is going to become self-centred and self-sufficient.

Meanwhile, it is only the EU – in co-operation with a broad coalition of development, environmentand consumer organizations, trade unions and progressive companies – that is able to set a differentand visionary agenda for the future negotiations in WTO. It is about time it happens.

Sources:Bach, C.F. (2000): The Global EU, Visions for the future World Trade Organisation. MS Publish, Denmark

(forthcoming at http://www.ms.dk/wto/)Bach, C.F., Nordbo, J. (1999): Den Globale Markedsplads. Introduktion til Verdenshandelsorganisationen,

WTO. 92-gruppen og Mellemfolkeligt Samvirke, Copenhagen, Denmark.Holm, K.A., Knudsen U.V., Nielsen, K.V. (1999): WTO og den nye handelspolitik. Jurist- og Økonomforbundets

Forlag, Copenhagen, Denmark.

Selected network organisations working on trade issues and the WTOEurostep, http://www.eurostep.org/International Center for Trade and Sustainable Development (ICTSD), http://www.ictsd.org/International Coalition for Development Action (ICDA), http://www.icda.be/Belgian NGO Network (NCOS) Tel.: +32 2 536 11 36 Fax; +32 2 536 19 02(please see homepages for an extended list of organizations working on the WTO)

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1.4 Supervision of the EIB and EBRD

Magda Stoczkiewicz and Jozsef FeilerCEE Bankwatch Network

IntroductionMultilateral development banks are an essential part of the economic restructuring of the world.Yet the public awareness of the role of institutions, like the European Investment Bank (EIB) and theEuropean Bank for Reconstruction and Development (EBRD), remains poor. While some Europeanand EU financing structures maintain a high profile and enjoy considerable popularity (for examplethe education programme SOCRATES), these financial institutions are, to a large extent, shroudedin mystery.

A cursory glance at the EIB and EBRD balance sheets, however, shows their international importance.For every dollar or EURO invested from these institutions in projects, other investments, both fromprivate and public sources, are guaranteed. However, this is not the only basis for seeking to promotethe awareness of their importance. They are public institutions supported by public (tax payer)money and therefore: a) should serve the public interest, and b) should be accountable to thepublic.

To these institutions governance is an important issue, as they have a double identity: they areboth a bank and a development agency with a public mission. Experience has shown that if thereis no clear guidance and control from the outside, institutions can easily lose the delicate balancenecessary for optimal fulfillment of their mission. Also, recent debates, on the importance of anti-corruption mechanisms and measures, indicate the importance of public control and transparency.

In the following presentation, we give a brief description of the European Investment Bank, thegrey eminence of the EU’s financing, and the European Bank for Reconstruction and Development,which plays a key role in countries of transition. The common feature of the two developmentbanks, that the majority of their shares are controlled by EU member states, provides a good basisfor a comparison of their conception and practice of governance.

1. European Investment Bank: a descriptionThe European Investment Bank was founded in 1958, under the Treaty of Rome, as the EuropeanCommunity’s financing institution. Its institutional framework is defined by the Treaty establishingthe European Community, other Community Treaties and the Bank’s own Statute. Thus, the decisionto establish the EIB was an integral part of the formation of the European Economic Community. Itwas acknowledged that in order to extend the sectoral co-operation, under the European Coal andSteel Community, into a comprehensive common market, dedicated funds would be needed.

Initially, the major goal of the EIB was to finance the development of the extensive physicalinfrastructure, to inter-link the national economies of the countries involved. A large amount offinancial support was also required for investments in less-developed regions. Over the last 41years its missions and areas of operation have grown substantially.

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The EIB serves the European Community’s objectives by providing long-term financial support(loans and guarantees)1 to investment projects. The majority of the lending is within the EuropeanUnion, but a significant and rapidly growing amount of money is channeled to non-EU countriesunder Article 18 of the Bank’s statute:

However, by way of derogation authorized by the Board of Governors,acting unanimously on a proposal from the Board of Directors, the Bankmay grant loans for investment projects to be carried out, in whole or inpart, outside the European territories of Member States.

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ResourcesThe EIB’s resources consist of capital, which is subscribed by Member States, and funds borrowedon the world’s capital markets. When the EIB was set up in 1958, its subscribed capital amounted toECU 1000 million; by 1999, after 9 capital increases, it had risen to 100,000 million.2

The volume of EIB borrowing climbed from ECU 150 million in the mid-60s to 5 billion in 1985, and29 billion in 2000. The strength of the EIB’s shareholders has led to its receiving the highest ratingfrom rating agencies, which has helped establish the EIB as the leading non-sovereign internationalborrower with a ‘AAA’ credit rating.3 By borrowing ‘cheap’ and ‘saving’ on administration costs, theEIB is able to offer substantially lower interest payments and lower fees than normally charged byother international financial institutions (IFIs), such as the World Bank (WB) and the European Bankfor Reconstruction and Development (EBRD).4

Although the owners of the EIB are clearly the Member States of the European Union, which havesubscribed the capital to it, the EIB describes itself as ‘an autonomous body with an independentdecision-making structure.’5 It sees itself as a part of the EU ‘family’, yet has insisted on wide financial

1 The EIB has a 40 percent stake in the European Investment Fund (EIF), which was set up in 1994 to provide long-term guarantees for financing Trans-European Networks (TENs) projects and for small and medium-sized enterprises(SMEs).2 See EIB 40 years activity, p. 2, EIB Annual Report 1998, p.7. It can be noted that one of the most important opportunitiesfor agreeing on reforms at other IFIs has arisen during the debates over a proposed capital increase. This opportunitywas not really used in the case of EIB.3 See EIB 40 years activity, pp. 2-4.4 Also, EIB costs are lower than other IFIs because it has such a relatively small staff, doesn’t have an open informationand document disclosure policy, and lacks similar procedures for public consultation.5 See EIB Information, 2/1998, p. 7.

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and administrative autonomy.6 The dependence of the EIB on European Community institutions isnot fully defined, rendering notions of the governance and accountability of the EIB problematic.The EIB’s Statute provides administrative connection with the European Commission. Article 11states that the Commission nominates one member and one alternate on the EIB’s Board ofDirectors7. Article 21 of the Statute states, that for every loan, it must seek the Commission’s opinionas to whether EIB financing is considered consistent with Community’s economic objectives. Still,even with a negative opinion of the Commission, a loan can be approved by an unanimous vote ofthe Board of Directors, with the Commission Director being ignored. In practise, the Board merelyrubber stamps proposed loans. As one of the EIB’s documents underlines

…the Bank remains the final arbiter of its financing decisions, adoptedon a project-by-project basis by its Board of Directors after having soughtthe Opinion of the Commission and the Member State concerned.8

At least in theory, the EIB, as one of the EU’s main institutions, is accountable to the EuropeanParliament. The EIB President reports to Members of the European Parliament (MEPs) on the Bank’sactivities. The Budget and Budgetary Control Committees have advisory roles in deciding onCommunity guarantees for the EIB. In actuality, many EU institutions having contact with the EIBface problems with its lack of transparency. The European Parliament Committee on BudgetaryControl in its report dated March 13, 2000 states:

The EIB continues to block all attempts by Parliament and the Council tomake it open and transparent because it fears further exposure of itsmismanagement. It is hoped that the new President will co-operate fullywith Parliament and the Commission to ensure a rapid and efficienttransformation of policy and practice. An open door to the Court ofAuditors and European Anti-Fraud office (OLAF) would confirm theconfidence.9

The EIB structureThe EIB’s highest decision-making body is the Board of Governors, consisting of one member fromeach Community member state. The governors are in most cases ministers of finance in the countrythey represent and meet once a year. They define the Bank’s lending and operational policies aswell as make decisions on capital increases. As in other IFIs, they delegate much of their power tothe Board of Directors.

The Board of Directors has the sole power to make decisions about loans, guarantees and borrowings.Members of the Board are appointed by the governors for a (renewable) period of 5 years, followingnomination by the Member States. The Board of Directors consists of 25 directors and 13 alternates,out of whom one director and one alternate are nominated by the European Commission. Thelarger EU countries have more directors than other EU Members, and each director has one vote.Germany, France, Italy and the UK each have three directors, while Spain has two, and the remainingcountries have one each. Some members of the Board are high-ranking central bank or financeministries officials from particular countries, but some directors have come from outside governmentministries, including private sector actors. The Board is non-resident (which is not the case for otherIFIs), but travels to Luxembourg headquarters to meet around 10 times a year.

During each of these short meetings, the directors have the responsibility to make decisions on anumber of loans which equal to the amount of loans that the directors of EBRD (who work fulltime) decide on in a year. Thus, it is likely that Board discussions do not contain too much about the

6 ‘In its day-to-day practise, the Bank is constantly seeking to establish a balance between autonomy andresponsiveness, which includes that its actions are not simply consistent with Community policies but are positivelysupporting them’, EIB Information 2/1998, p. 7.7 Director-General for Economic and Financial Affairs (DG II) is appointed as a Director and the Director-General forRegional Policy and Cohesion (DG XVI) serves as an Alternate Director. See EIB Information 2/1998, p. 9.8 EIB Information 2/1998, p. 10.9 European Parliament Committee on Budgetary Control, Working Document on the 1998 discharge procedure:Lending and Borrowing, 13.03.2000.

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substance of projects as the directors do not have the institutional capacity and time to get intodetails. Their approval tends to be merely a formality. Contrary to other IFIs, the EIB Board of Directorsdoes not represent recipient countries, which are the subject of EIB activities.

The highest level in the staff hierarchy is the Management Committee, composed of the presidentand seven vice-presidents, all of whom are appointed by the governors based on nominations bythe directors. They serve six-year terms and control all operations, recommend decisions to thegovernors, and ensure that these are implemented.

2. The European Bank for Reconstruction and Development (EBRD) - descriptionOn 29 May 1990, in Paris, the Agreement Establishing the European Bank for Reconstruction andDevelopment was signed and entered into force on 28 March 1991. The focus of activities for theEBRD is to help the 26 countries from the former Soviet block10, in their transition from a planned toa market economy, and to serve as a regional development bank for those countries.

The EBRD finances both private and public sector projects, providing lending for financial institutions,infrastructure and other key areas. In theory, its role should be ‘additional’ to the private sector, butcertain cases show that the EBRD sometimes crowds out private investment.

The 60 members/shareholders of the EBRD are 58 countries, the European Community and theEuropean Investment Bank.

It is interesting to note that the EBRD is the only multilateral development bank with anenvironmental mandate built into its funding agreement.11 However, the fulfillment of this mandateis questionable.

ResourcesThe EBRD has an ‘AAA’ credit rating, which enables it to raise funds on the international financialmarkets on favourable terms. The bank’s initial capital base was Euro 10 billion, which was doubledto Euro 20 billion in 1997, in response to increased operations.

By the end of 1998, the EBRD’s Board of Directors had approved 629 projects, totaling Euro 14.5billion. Of this total, 551 were signed projects, with a total net value of Euro 10.2 billion, making theBank the largest single foreign direct investor in the region.

StructureThe governors of the Bank are in most of the cases the finance ministers of the member countriesof the EBRD. They meet once a year at the annual meeting to decide on general issues concerningthe institution.

The EBRD Board has 23 executive directors who are based in London. Each of them represents agroup of member countries, both donors and recipients. The grouping of these countries is unlikethat in the World Bank; where donor and recipient representation is mixed and the same executivedirector (ED’s) represents the interests of countries from both groups. In the case of the EBRD, asignificant number of recipient countries are represented by ED-s from other recipient countries.The issue of representation in this system has two sides: on the one hand, it is more likely that theEDs from recipient countries know more about the issues important to their represented countries;on the other hand, this system increases the changes for conflicts of interest to occur betweendifferent countries represented on the Board.

The voting powers, on the Board of Executive Directors, are an important issue in shaping the Bank’spolicies and operations. We can say that the countries of the European Union control the majority

10 Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, FormerYugoslav Republic of Macedonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Poland,Romania, Russian Federation, Slovak Republic, Slovenia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan.11 ‘To promote, in the full range of its activities, environmentally sound and sustainable development’ AgreementEstablishing the EBRD, Chapter I, art. 2, para. Vii.

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of votes on the board. However, the presence of other donor countries, such as the USA, makes adifference to the bank’s internal dynamics. The USA, with 10.41 percent of voting rights, has broughtoccasional moves towards more transparency and efficiency, due to the influence of US domesticlegislation, contributing to a less secretive administrative operation.

Voting power of major shareholders in the EBRD

Country Percentage of the votes as

of 31 December 1998

France 8.87 %

Germany 8.87 %

Italy 8.87 %

United Kingdom 8.87 %

Japan 8.87 %

USA 10.41%

Russia 4.16 %

As would be expected, the G-7 countries constitute the majority on the Board of the Bank. Themanagement of the bank is divided into three parts: banking, finance and personnel/management.The Bank has three vice-presidents which represent the three divisions. The most important ofthese is the vice-president for banking, who takes the role of acting president when the chair isvacant or the president is absent.

Governors

President

Directors

Banking Finance Personnel

Front office OSG

OGC Sector teams

Project Evaluation

OCE

Country teams Internal Audit Communications

Ops. Support units, incl. Environmental Unit

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12 The closure of the Chernobyl nuclear power plant was made conditional for G-7 support to the completion of theKhmelnitsky 2 and Rovno 4 nuclear reactors. This replacement nuclear alternative would not increase nuclear safetyand security in the Ukraine. The G7 wanted to use the EBRD as a cash box for financing a politically based decision,which was not financially and economically sound. It had a negative impact on the morale of the Bank’s staff, as theirmission is to make financially and economically sound decisions, thus the G7 roughly side stepped the interests ofthe Bank for the political support of the Ukrainian ‘nuclear blackmail’.

Other issuesHistorically, the personality of the president of the bank has been of key importance to how thebank was run. Until now there have been three presidents of the EBRD and in each case theircharacter has left an imprint on the Bank. The first, Jacques Attalie, became infamous for his imageas a ‘fat-cat, more concerned for the luxuries his position afforded him, than the responsibility ofthe role and financial soundness’. The second president, Jacques de Larosier, is probably the mostrespected as his experience and personality provided a firm direction for the bank, but under hisdirection it acquired the reputation of being the ‘French Bank for Reconstruction and Development’.His resignation was widely perceived as a protest against extensive external pressure on the Bank’soperations from G 7 political leaders.12 The third president of the Bank, Horst Köhler, was a hesitatingleader, easily subject to different influences and didn’t show enough strong leadership for theoptimal management of the institution. He was holding the office only for a couple of monthsbefore moving to the International Monetary Fund. The current president, Jean Lemierre has notgiven either a clear strategy of how he is going to manage the institution. However, it was under hispresidency that the infamous K2/R4 project to finish two nuclear reactors in Ukraine was approved.The high ratio of staff turnover, remarkable particularly in the important parts of the structure,indicates problems with the management of the Bank.

3. EIB versus EBRDThe EIB does not like to think of itself as a multilateral development bank, and uses this as an excusefor not following procedures similar to other international financial institutions (IFIs), but it doeshave a clear development mission, defined in Article 130 of the Treaty of Rome. This provision becameArticle 267 of the Amsterdam Treaty: ‘to contribute to the balanced and steady development of theCommon Market in the interest of the Community’. Its development-related activities are very clearin the context of its lending outside the EU, where it is engaged in the same projects (through co-financing) or the same type of projects, as the other IFIs. Moreover, all of the other IFIs play extensiveprivate sector roles that are indistinguishable from that of the EIB.

It is useful to compare some core features of the EIB to similar areas in the EBRD. In terms of itsgovernance structure, the EIB differs from the EBRD in that the shareholder countries do not includeany of the non-EU borrowers, and thus there are no seats on the Board for those countries. Thismade sense when all EIB lending was inside the EU, but with the percentage of non-EU lendingsteadily rising, perhaps it is time to review the legal structure. However, such a situation puts evenmore responsibility on the EU for the quality of the EIB activities.

There is a sharp contrast between the way the boards of the EIB and the EBRD function, with thelatter being engaged on a day-to-day basis in ensuring the oversight of projects, both prior toformal approval and while they are being implemented. EBRD Executive Directors work full-timeand have professional staff to help them review the large number of loan documents; whereas theEIB directors are only adding this job to their ‘normal’ jobs and generally lack the same assistancefrom professional staff.

The two areas of lending operations, inside and outside EU countries, can be distinguished to agreat extent because of the legal framework and the conditions of the loans. Within the EU, there isa much more solid legal framework which the EIB is obliged to follow, than outside the Union(although it is not clear how the EIB actually implements this legislation in its operations). On theone hand, there are no clear sectoral policies or guidelines that describe the way the EIB is supposedto implement relevant policies, directives and other legislation in their operations outside the EU,so here the situation is even worse. Thus, the EIB has extensive manoeuvring space with essentiallyunfettered freedom to interpret the definition of ‘Community policy’ in any particular loan, outside

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the EU. The EBRD, on the other hand, since the beginning of its establishment in 1990, was obligedto come up with sectoral policies, and after some time also outline environmental guidelines andan information disclosure policy. Being the youngest of the IFIs, and having US representatives onthe Board, the EBRD definitely seems to be a more flexible institution than the EIB.

The EBRD, following the practise of the World Bank, prepares lending policy for the recipient country(Country Assistance Policy). Lending of the EIB outside the EU is project based, generally withoutexplicit linkage to policy reform objectives. However, this does not mean that EIB lending does notinfluence domestic policies and the regulatory framework in countries of operation. The conditionsattached to its loans can have a significant impact on sectors and sectoral policies in those countries.

IFIs should have a double role. As financial institutions, they must focus on their long-term financialintegrity and fiduciary responsibilities to shareholders. At the same time, each one has a set of‘social’ missions, which include fostering development that is environmentally sustainable andsocially responsible, promoting democracy, etc. Shareholders set the basic rules and design of eachinstitution, and from time to time put forward new mandates and revised priorities. The shareholdersmust periodically update the mandate based on the changing pressures and priorities that emergefrom outside, but when making these changes, they must consider how the internal set up andstaff incentives should also be reviewed and modified.13

The EBRD has made much stronger environmental commitments than the EIB. This is partlyattributable to US shareholder pressure in this institution, which is absent in the EIB. But this is notthe only explanation, given that many of the EIB’s shareholders also are part of what can be describedas the “progressive” group at the EBRD or the World Bank. Perhaps there is also a difference in theleadership of the various banks. For a variety of reasons, the leaders of the World Bank, EBRD andother regional IFIs have been motivated during the past fifteen years to put considerable emphasison greatly increased transparency, accountability to the public and the promotion of sustainabledevelopment. The EIB is strikingly different. It continues to carry out its activities largely in thebackground, with a relatively low public profile, and therefore minimal public knowledge of itsoperations.14

The EIB has never faced strong pressure to change the way it takes environmental issues into accountor to become more transparent and accountable. No single shareholder has launched a major effortto guide the EIB in new directions, nor has there been any noisy negative publicity about EIB projectsthat would spark such a campaign.

For non-governmental organizations (NGOs) and community organizations, access to informationis the foundation that enables them to participate meaningfully in IFI’s work. The EIB lags far behindEBRD and the WB in providing access to their information. The only project-related informationpublicly available is a press release published after the signing of a loan. A comparison of the policies,structure and operations of different IFIs demonstrates that the EIB has the weakest and leastintegrated commitment towards transparency, public participation as part of a democratic processes,and protection of the environment. Recently the European Commission in its 6th Environment ActionProgramme also underlines the necessity for “strengthening the integration of environmentalobjectives and considerations into lending by the European Investment Bank”.15 Therefore, the roleof the European Community, as the only shareholder of the bank, is crucial here to bring aboutmeaningful change.

4. Recommendations for EIB and EBRDDue to the extensive differences in the nature and performance of the two organizations, it is difficultto formulate recommendations for both institutions with the same phrases. The EBRD is in a more

13 Gutner T., Banking on the Environment: Multilateral Development Banks and Environmental Policymaking in Centraland Eastern Europe, Manuscript 1999, p. 114.14 In February 2001 EIB put on its web site a new document called “Towards a new Information Policy”. However thestatus of this document is still unknown. It presumes disclosing project related information but does not provideany rules or procedures for this disclosure.15 EC, 6th Environment Action Programme, Brussels 2001, p. 20.

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advanced structure of institutional development than the EIB, the reasons for it are understandablefrom the previous pages. However, it does not mean that the EBRD is perfect and that there is noneed for further development.

In the following, we enumerate the key recommendations to both institutions:

European Investment BankStrengthen the role of controlling institutions. These include the European Parliament, the EuropeanCourt of Auditors or the European Anti-Fraud office (Olaf ) to oversee the EIB activities. In general,better use must be made of the European Parliament and its committees, and relevant parts of theEuropean Commission’s structure for oversight, including conducting and/or reviewing various typesof “due diligence” reviews. Full endorsement should be given to the Ombudsman’s potential role.Revise the existing formal policy on information disclosure to require that all relevant environmental,economic and financial appraisals project information is made available in a timely way to interestedNGOs and affected communities. Promulgate substantive policies on key issues, such as energyand transport, and comply with the EU requirement for the integration of environmental protectionand the sustainable development dimension into all policies and practice.

Strengthen the Environmental Impact Assessment (EIA) procedures. The EIB should introduce thesame approach as the World Bank and EBRD, with clear and transparent criteria for A, B and Ccategory projects.

Require public consultations in the process of considering EIB-financed projects that have significantenvironmental and social implications. The EIB should establish stronger commitments and anindependent infrastructure to fight corruption, which is a significant factor in some countries of itsoperation. If firms receiving loans from the bank are involved in corruption, those firms should bebanned from any further bank financed activities.

European Bank for Reconstruction and DevelopmentStrengthen the role of the major EBRD shareholder countries in the direction of a more transparentand realistic development mandate to include genuine social and environmental concerns in theproject cycle, changing the face of the portfolio of the bank. Major shareholder countries shouldnot press the Bank to finance projects which are not in line with sound financial and economicbanking principles, has questionable transition implications, and has significantly negative social and/or environmental consequences. It should not finance nuclear projects, as these are in conflict with itssustainable development mandate, as well as the interests of the people in its countries of operation.

The EBRD should behave more as a development institution than a commercial bank; and shouldestablish a soft loan window for countries of operation where the per capita income is low. It shouldalso use innovative, small scale financing techniques as microcredits to a greater extent.

The EBRD should not take on board projects which could be financed without its intervention. TheEBRD should establish strong commitments and a powerful infrastructure to fight corruption, whichis a significant factor in some countries of its operation. If firms receiving loans from the bank areinvolved in corruption those firms should be banned from any further bank financed activity.

NGOs work on EIB and EBRDOver the last 20 years, more attention has been paid to the biggest of IFIs, the World Bank. Groups,such as Friends of the Earth, Bretton Woods Project, Urgewald, BothEnds, Jubilee or 50 Years is Enough,are well known players in challenging the WB changes. The EBRD, as a relatively new institution, hasbeen of less interest to environmental or development groups. Yet several of its projects, such as forthe former nuclear power plant Mochovce in Slovakia, or two nuclear reactors in the Ukraine (Rovne4/Khmelnicky2) have managed to bring about international campaigns.

While institutions like the World Bank are followed by many Western organizations, the EIB stilldoes not receive the attention of environmental NGOs that it warrants. The only NGO performingmore comprehensive activities on the EIB is the CEE Bankwatch Network (http://www.bankwatch.org) although the situation is changing gradually.

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2. EU EXTERNAL RELATIONS

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2.1 European Union Development Aid

Simon StockerEUROSTEP

IntroductionThe European Union provides some 55 percent of all Official Development Assistance (ODA), thatis taking together the contributions managed by the European Commission with the bilateralprogrammes of the 15 Member States. In 1996, the EU’s aid, taken altogether, amounted to US$31.3billion (compared to US$ 9.1058 billion for the USA and US$ 9.437 billion for Japan). The EuropeanCommunity programme managed by the Commission accounts for 17 percent of the total EUprogramme, making it the fifth largest individual donor (following the USA, Japan, France andGermany). This paper looks at the focus and contribution of the EU’s aid programme.

Since 1963, the European Community has had a development co-operation programme, but it wasonly incorporated into EU Treaties with the adoption of the Maastricht Treaty in 1992. This establishedcompetence for development co-operation within the EU as a shared responsibility between theCommunity and the Member States. Under the Treaty, Community policy should be complementaryto policies pursued by the Member States, with three principal objectives: the promotion ofsustainable economic and social development of developing countries; a smooth and gradualintegration of developing countries into the world economy; and a campaign against poverty indeveloping countries.1 Since 1992, however, there has been little substantive consideration of therespective roles and responsibilities of the Community and the Member States.

1. The origins of the EU’s aid programmeThe European Community development programme was originally established to maintain closeties to the former colonies of the EEC’s Member States, initially focusing on 18 African States. Todaythe European Community has co-operation agreements with most developing countries in allregions of the world, including assistance aid programmes.

From Yaoundé to LoméIn 1963, the first co-operation agreement was established, known as the Yaoundé Convention. In1975, with the entry of the United Kingdom into the EEC, this agreement was superseded by thefirst Lomé Convention which was signed with 46 associated countries from Africa, the Caribbeanand the Pacific. The Convention was a comprehensive co-operation agreement, it not only includedaid for the ACP countries, but also trade preferences for ACP products entering the EEC. The fundsavailable for the first Lomé Convention were provided through the European Development Fund(EDF), established outside the regular budget of the EEC by an intergovernmental agreementbetween the Member States. For the first Convention the aid package was modest2. By the time the

1 Title XX, article 177 of the Consolidated Versions of the Treaty on the European Union and the Treaty establishingthe European Community.2 Each EDF was established to cover the five years of the Convention. For the Fourth Lomé Convention, whichcovered a ten year period, there were two financial protocols, each covering five years.

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4th Lomé Convention expired in early 2000, its financial provision had reached 14.625 billion Eurocovering 71 ACP countries for the five-year period up to 20003. The replacement agreement betweenthe EU and African, Caribbean and Pacific (ACP) states, signed in Cotonou in June, lasts for 20 yearswith the aid packages being agreed every 5 years. [See briefing note 2.2 on the EU-ACP PartnershipAgreement].

Building the programme on vested interestsApart from food aid, it was not until the 1970’s that provision was made for aid to be provided fromwithin the European Community’s budget. The EC’s development programmes towards Asia andLatin America started at this time, initially involving some 40 countries. When Spain and Portugalentered the EC in the 1980’s they called for an increase in support to their ex-colonies in LatinAmerica, and there was a subsequent rise in the level of the aid programmes towards Asia andLatin America.

During the 1990’s, with the dramatic changes in Eastern Europe, there was a rapid increase in aidprogrammes towards Central and Eastern Europe and also towards the Mediterranean countries.These were the result of changing priorities for the European Union, and of the different interestswithin the EU. Northern Member States wanted increases for Eastern Europe, while Spain and Italyargued that this was not possible without substantial increases for Mediterranean countries. Inprinciple, the decisions for these increases were made while maintaining the EC’s co-operationwith developing countries. Consequently the EC’s aid programme increased, even though the sizeof many Member States’ own programmes were being reduced.4

Although the overall level of the EC’s aid commitments increased substantially, those for poordeveloping countries remained the same.5 According to the European Commission, out of a total of8.6 billion Euro in aid commitments for 1999, some 6.8 billion Euro was defined as ‘developmentassistance’ according to commonly agreed (OECD Development Assistance Committee, DAC)definitions.6 Two thirds of it now goes to areas outside the ACP – to Central and Eastern Europe, theNewly Independent States, Balkans, the Middle East, the Mediterranean Countries, Asia and LatinAmerica. The programme has also expanded beyond development policy to include reconstruction,institution-building, macroeconomic support, and human rights. In geographical terms, theCommission has delegations and offices in 128 countries throughout the world, both to ensure apolitical presence and to manage EC aid.7

3 South Africa partially acceded to the Lomé Convention in 1997.Under the terms of its accession, its financialassistance was derived from resources taken from the regular budget, and not from the EDF.4 Reisen, Van M., EU ‘Global Player’, International Books, 1999, p. 37.5 The large fluctuations for commitments under the EDF are the result of the five-year planning cycle. According tothe European Commission, the reductions in 1996/97 were due to the slow ratification of EDF 8 covering the period1995 to 2000, which only came into force in June 1998.6 Commission of the European Communities, Communication from the Commission to the Council and the EuropeanParliament – The European Community’s Development Policy, April 2000.7 Commission of the European Communities, Communication to the Commission on the Reform of the Managementof External Assistance, May 2000.

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Table 1. Commitment appropriations by Geographical Area, including ACP (1992 – 1998) inmillion Euro8

ALA MED CEEC/NIS South Africa Other9 ACP1992 566 412 1 465 - 1 302 2 0621993 634 399 1 514 90 1 468 1 6311994 524 436 1 466 102 1 835 2 4801995 808 491 1 678 123 1 895 1 5201996 670 654 1 855 129 2 197 9651997 655 1 078 1 774 123 1 811 616

1998 657 1 101 1 729 145 1 919 2 219

Source: Reisen, Van M., EU ‘Global Player’

The Commission has also become one of the major donors of humanitarian aid, managed throughthe European Community’s Humanitarian Office (ECHO) and provides substantial quantities of foodaid as well.

2. The growing gap between commitments and paymentsWhile there has been a sharp increase in commitment levels during the past decade, the actuallevel of disbursements has increased at a much lower rate than commitments. For much of thisperiod the actual level of payments for allocations within the annual budget has been less thanhalf the level of commitments. The proportion of spending against commitments for the EDF isbetter, but even here there is a gap. By the end of 1999, as a consequence, the backlog of unspentcommitments was more than 20 billion Euro, which for some programmes represented some 8.5year’s payments.10

8 Originally drawn from European Communities, InfoFinance. This table does not include the destination of otherbudget lines, some of which are relatively large, such as food aid, humanitarian assistance, NGOs, Southern Africa,etc. Commission Européenne, Compte de Gestion et Bilan Financier, Afférent aux Opérations du budget de l’exercise1998, Volume I (Section III-Commission), SEC (99) 412, Bruxelles, 1999.9 This proportion does not include aid from other budget lines, to either developing or Eastern European countries.10 Commission of the European Communities, Communication to the Commission on the Reform of the Managementof External Assistance, May 2000.

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Table 2. EC aid – sectoral allocation: Commitments

1986 1986 1998 1998(million •) (percent of (million •) (percent

total) of total)

Programme aid (struct adj, Stabex, Sysmin) 159 6.2 974 11.3

Food aid 655 26.0 690 8.0

Humanitarian aid 80 3.1 936 10.9

Aid through NGOs 49 1.9 204 2.4

Natural resources 163 6.4 437 5.1

Other productive sectors 214 8.4 592 6.9

Economic infrastructure and services: 249 9.8 1850 21.5

of which transport & com 130 5.1 928 10.8

of which energy 112 4.4 434 5.0

of which banking & finance 8 0.3 488 5.7

Social infrastructure & services: 86 3.4 1291 15.0

of which education 13 0.5 450 5.2

health & population 24 0.9 313 3.6

water supply 49 1.9 293 3.4

other social 1 - 235 2.7

Governance & civil society 3 0.1 525 6.1

Crosscutting 89 3.5 481 5.6

of which environment 4 0.1 146 1.7

gender 0 0 13 0.2

rural development 7 0.3 215 2.5

other 78 3.1 107 1.2

Not attributable by sector 796 31.2 632 7.3

TOTAL 2553 100 8614 100

Source: Overseas Development Institute, The European Community External Co-operationProgrammes, 1999.

This substantive backlog not only has implications for the effectiveness of the EC’s developmentprogramme, but also involves an effective loss of resources for development. Even thoughappropriations to the budget and EDF are allocated from the development co-operation budgetsof Member States, in most countries the non-utilized resources, particularly for under spending inthe budget, returns to the Ministries of Finance.11

The growing size of the EC programme, and particularly the increases towards Eastern Europeanand Mediterranean countries, has also given rise to increased criticism of what is seen as theprogramme’s diminished focus on poverty. While the list of the EC’s top 15 recipients in the early70’s were all developing countries, a significant number of them being amongst the category ofLeast Developed (LDCs), many of these were displaced from that position by the mid 1990’s bycountries from Eastern Europe or the Mediterranean. In overall terms, while 51.3 percent of the EC’sODA went to LDCs in 1986/7, this was reduced to 33.6 percent in 1996/97.12

11 Reisen, Van M. Ibid, p. 99.12 Commission of the European Communities, Communication to the Council and European Parliament – TheEuropean Community’s Development Policy, April 2000.

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3. Policy and practiceIn addition to a legal basis for development co-operation being established within the Maastricht,three principles were also defined on which EC development policy should be based. First, thedevelopment policies of the Member States and the EC programme were required to becomplementary so as to avoid duplication of actions. Secondly, co-ordination was envisagedbetween the actions of Member States and the EC, both in Europe and in recipient countries, toensure effective implementation. Thirdly, there was a requirement for the coherence of allCommunity policies and actions, taking into account the development co-operation objectives ofthe EU. A fourth was added when the Treaty was revised in Amsterdam which required there to bea consistency of all external activities of the EU – security, economy and development.13 On thebasis of the development co-operation objectives and principles set out in the Treaty, the Councilof Ministers adopted a series of resolutions that sought to elaborate more specifically the objectivesand policies for the European Union’s co-operation. These sought to incorporate the conclusions ofthe United Nations conferences and Summits that took place during the first part of the 1990’s. Intheory, these resolutions not only applied to the EC programme, but also to those of the MemberStates as well.14

Table 3. List of EC Resolutions adopted by the Council of Ministers

Resolution Topic

1992 Development co-operation in the run up to 2000 Co-ordination

Family planning in population policies in developing countries Population

1993 Co-ordination of development policies Co-ordination

Fight against poverty Poverty

Procedures for co-ordination between the EC and Member States Co-ordination

1994 Co-operation with developing countries in the field of Health Health

Food security policies and practices Food aid

Education and training Education

Fight against HIV/AIDS in the developing countries Health

1995 Complementarity between the development policies and Complementarity

actions of the Union and the Member States

Integrating gender issues in development co-operation Gender

Structural Adjustment Structural

Adjustment

1996 Gender and crisis prevention, emergency operations and Gender

rehabilitation

Human and social development and European Union development Social Policy

1997 Coherence of the EC’s development co-operation with its other policies Coherence

1998 Guidelines for operational co-ordination Co-ordination

Integrating gender issues in development co-operation Gender

1999 Conflict prevention and management (small arms and weapons, Conflict

anti-personnel mines)

Development of the private sector Private sector

Integrating environment and sustainable development (conclusions) Environment

Source: Reisen, Van M., EU ‘Global Player’

13 Reisen, Van M., Ibid, p. 39.14 An assessment of the degree to which Member States’ attitudes towards their own implementation of theseresolutions can be found in Annex 6 of EU ‘Global Player’ by Mirjam van Reisen, published by International Books(1999) in association with Eurostep.

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While these policies have been adopted, the ability of the EC to actually translate these into practicehas been weak due to a number of factors.

First, the planning processes for the EC programme takes time. Under the EDF, for instance, theprocess formally spans a five year cycle, although on average the period over which each EDF isspent has spanned an average 13 to 15 years. This means that much of the programming currentlybeing implemented was effectively programmed some time ago. In order to respond to the criticismthat the ‘EC programme has been too slow in its transition towards social development policyobjectives’, the Commission has sought to show the progress it is making. However, the changesthat the Commission is emphasising are largely focused on changes in the orientation ofcommitments – or even prospective commitments, rather than actual spending. It is unlikely thatthis will change very quickly, both because of the time that it takes for changes to be implemented,and because of the large backlog of commitments that have yet to be paid from commitmentdecisions of past years.

Commission capacitySecondly, the capacity of the EC to manage and implement the programme has been constrained.While the EC programme has grown rapidly over the 1990s, both in volume and geographical scope,the human resources in the Commission that manage the programme have grown much moreslowly. The Commission estimates that on the basis of the programme’s size, as it stood in 1989, theCommission lacked some 1300 posts for the 1999 programme.15 Comparing the capacity of theCommission against other multi-lateral donors, the ratio of staff to the quantity of aid disbursed isvery low. In 1997, the Commission had 2534 staff managing an aid programme of US$ 8.658 billion,a ratio of 2.9 staff for every US$10 million of aid. This compared to a staff size for France of 3073managing US$ 6.429 billion of aid (4.78 staff per US$ 10 million) and in Germany some 3904 stafffor an aid programme of US$ 4.815 billion (8.11 staff per US$10 million). For the World Bank theratio of staff to US$ 10 million of aid was 4.26 in 1995.16

Given the size and scope of the EC programme there has inevitably been a substantial emphasis onadministering the programme. The understaffing of the Commission has been compounded bythe requirements made in the programme’s administration to service the elaborate committeestructure established by the Member States, and the time consuming procedures for makingdecisions. This has not only led to a heavy centralization of decision- making to Brussels, but alsohad a direct impact on the Commission’s ability to translate sectoral policies into operationalstrategies for the programme. The DAC review of the EC programme drew attention to the shortageof specialised staff covering social development, gender issues, population, the environment andother sectoral and cross cutting issues.17

A fragmented programmeA third factor has been the fragmentation of the external programme, with different strategiestowards geographical regions being effectively driven by different policy objectives. This is partlythe result of the original motivations for the different regional programmes, which have beenestablished on the basis of specific interests of particular Member States; co-operation with ACPcountries originating from the ex-colonial interests of France and the UK, for example, the increasedfocus on Latin America following the entry of Spain and Portugal into the Community; theprogrammes in Eastern Europe and the Mediterranean being rapidly developed as part of acompromise approach between different groups of Member States. These differences wereemphasized further under the Santer Commission with four separate Commissioners taking specificresponsibility for different parts of the programme. This led not only to the different regionalprogrammes developing their own rationales further, but also led to different procedures beingestablished for managing the programme.

15 Commission of the European Communities, Communication to the Commission on the Reform of the Managementof External Assistance, May 2000, p. 5.16 Commission of the European Communities, Communication to the Council and European Parliament – TheEuropean Community’s Development Policy, April 2000, p. 41.17 DAC, European Community, Development Co-operation Review Series No. 28, OECD, Paris, 1998.

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Under the Prodi Commission some attempts have been made to reverse this trend. This has beenmade somewhat easier by having much of the programme, that is directed at Eastern Europe,changing into a pre-accession process for the Central and Eastern European states which haveapplied for membership of the EU. However, the rest of the aid programme still remains veryfragmented. The designation of a single Commission for Development and Humanitarian Assistancewas intended to give some emphasis to the existence of a single development programme for theEC. However, this designation exists more in name than reality as many parts of the EC’s programmetowards developing countries – particularly towards Asia, Latin America and the Mediterraneancountries- remain located within the Directorate for External Relations, as is the service that hadbeen set up in 1998 to provide a common service to implement all of the EC’s external programmes.

Asserting external political prioritiesTo a large extent asserting external political priorities reflects the changing reality in which the ECdevelopment programme is now set. Increasingly, other priorities of the EU are taking precedence,not least the Common Foreign and Security Policy that was established within the Treaty of EuropeanUnion in Maastricht and Amsterdam. Developing the political dimensions of the EU’s external policiesis the main priority of the Commissioner for External Relations. The debate on how this will be donehas only just begun and will run alongside the current internal review process that is expected toresult in substantial reforms in the way in which the Commission works by the year 2002.

The external services already started this process, based on the adoption by the Commission of astrategy presented in May 2000.18 This seeks to address some of the political questions that previousreform proposals have avoided. In particular, the lack of staff resources for managing the programmeand the involvement of the Member States in micro-management of the programme. The reform,therefore, involves significant additional recruiting, a simplification of the administrative procedures,and decentralization of decision-making to EC delegations. The reforms have also resulted in arationalization of the external services with the establishment from 1 January 2001 of a separateEuropeAid office which takes over all responsibilities for the “project cycle” of the Commission’s aidprogramme. The Directorates General for Development and External Relations remain responsiblefor managing polical dialogue with developing countries, and for establishing the overall countrysupport strategies through this dialogue.

Proposing new development prioritiesThe proposals for re-organizing the external services were presented at the same time as theCommission’s adoption of new proposals for guiding the EC’s development policy.19 Subsequentlyadopted by the Development Council, these proposals seek to strengthen the focus of the ECprogramme on poverty reduction, making this the over-arching objective of all the EC’s co-operationwith developing countries, including non-aid aspects of the relationship including trade. Theproposals also seek to emphasize the need for the EC programme to focus on its areas of ‘addedvalue’. In other words, to give some substance to the requirement for the EC programme to becomplementary with the programmes of Member States. Strategically, the priority activities for theEC’s aid programme will focus on six key areas:

18 Commission of the European Communities, Communication to the Commission on the reform of the managementof External Assistance, May 2000.19 Commission of the European Communities, Communication from the Commission to the Council and the EuropeanParliament – the European Community’s Development Policy, Brussels, April 2000.

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Table 4. Proposed priority activities for EC development aid20

1 Trade and development, which includes the development of trade and investment policies;assistance with integration into the multilateral trading system and into the world market, whichincludes trade related technical assistance and support for increasing capacity in trade andstrengthening the competitiveness of the private sector.

2 Regional integration and co-operation, which includes tackling trans-boundary economic, socialand environmental problems.

3 Support to macroeconomic policies with an explicit link to poverty reduction strategies, in particularsector programmes in social areas (health and education).

4 Transport.5 Food security and sustainable development strategies.6 Institutional capacity-building, good governance and the rule of law.

Source: Commission of the European Communities

ConclusionGiven the way the EC development programme and its implementation has been criticized, it hasbecome increasingly important to define the potential areas in which the EC programme has acomparative advantage. However, the degree to which these can be effectively taken forwarddepends on the willingness of Member States to recognize that the EC programme has a uniquerole to play, and should not be necessarily defined by the individual interests of Member States. Italso remains to be seen whether the areas that have been identified for a priority focus are onesthat the EC can really justify having some additionality – in terms of experience and competence.

It is within this context that there is a potential contradiction between the approaches adopted inthe revised development policy and the results of the re-organization of the Commission’s externalservices. On the one hand, there is an emphasis on poverty reduction and social development,while on the other the potential weakening of development policies and its prospectivemarginalization within the Commission’s institutional structures could result in an increaseddominance of the EU’s own interests in its external relations.

It becomes difficult to see how a viable strategy for strengthening the focus on poverty objectivescan be developed when the Commission’s capacity, and in particular the instruments forimplementation, becomes increasingly influenced by the political external policy agenda. Indeed,in the wake of the recent re-organization of the Commission’s external services, there is anexpectation that in the medium to long term the Directorate for Development will disappear. Shouldthat happen, the provision made in the Amsterdam revisions of the Treaty for consistency in externalactions of the EU’s policies will be closer to being achieved, but in a way in which EC developmentaid has become a mere instrument of the EU external political strategies derived principally fromthe internal interests of the EU.

20 Ibid.

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2.2 The EU-ACP Partnership: an ambitiousco-operation agreement and a transition

to a new trade regime

Kathleen Van HoveEuropean Centre for Development Policy Management (ECDPM)1

IntroductionAfter one and a half years of intense negotiations, the 77 ACP2 and 15 EU Member States concludeda new Partnership Agreement for political and economic co-operation in the new millennium. Thenew Cotonou agreement replaces the Lomé Conventions, which in the past 25 years havedetermined the relations between the two parties. Profound changes in the political and economicworld order and in Europe in the past ten years have accelerated the replacement of Lomé by anew type of Convention. The new Convention provides a comprehensive and integrated approachto a strengthened partnership which, at least on paper, should be more effective in addressing themajor challenges of poverty alleviation, sustainable development, and the gradual integration ofdeveloping countries into the world economy.

The new ACP-EU agreement entails four major innovations:

● The strengthened political dimension of the partnership;● The extension of the partnership to new actors;● A new performance based aid management; and● The preparation of a new WTO compatible trade regime.

1. Stronger political partnershipThe first major innovation in the new agreement is the stronger political foundation given to theACP-EU co-operation. The new Cotonou Agreement contains a wide range of provisions that dealdirectly or indirectly with the political dimensions of ACP-EU co-operation.

The Agreement seeks to deepen and widen the present political dialogue between the ACP andthe EU (i.e. to include new areas such as peace and conflict prevention, arms trade, etc); to work outmore flexible and diversified institutional arrangements for dialogue (i.e. to avoid excessiveformalism); and to involve non-state actors in these political dialogue processes.

The concept of a fundamental element was introduced. Lomé IV saw the respect for human rights,democratic principles and the rule of law, as ‘essential elements’ of ACP-EU co-operation, whose

1 This article was prepared by Kathleen Van Hove on the basis of ECDPM’s Cotonou Infokits 4, 8, 14, 18 and 21. Theinfokits were written by Jean Bossuyt, Geert Laporte and Henri-Bernard Solignac Lecomte. They can be downloadedfrom the ECDPM web site www.ecdpm.org.2 Cuba has recently joined the ACP group (78 countries), but is not a signatory to the Cotonou Agreement.

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violation could lead to a suspension of aid. During the negotiation process of a successor agreementto Lomé IV, the topic of ‘good governance’ was widely debated. Defined as “the transparent andresponsible management of human, natural, economic and financial resources for the purposes ofequitable and sustainable development”, it was finally considered to be a ‘fundamental element’ inthe new Agreement.

The parties are also committed to pursue an ‘active, comprehensive and integrated policy of peace-building and conflict prevention and resolution’. Particular focus is placed on capacity building andtargeting the root causes of conflict.

Finally, the Partnership Agreement introduces a set of provisions to address the thorny issue ofasylum and migration. It notes that the EU will initiate negotiations with ACP states aimed atconcluding bilateral agreements requiring specific obligations for the readmission and return oftheir nationals. Ultimately this will help to define ways to repatriate immigrants illegally present onthe territories of each party, subject to the constraint of international convention and law. Bindingtexts will be negotiated bilaterally, instead of being included in the Agreement, due to ACPreservations as to the legality of requiring that they accept return of non-nationals or statelesspersons who transit their territory.

2. The extension of the partnership to new actorsThe second major new feature of the new ACP-EU agreement is related to the participation of non-state actors and local authorities. Whereas previous Lomé Conventions virtually excluded thepractical involvement of actors other than central government, the new arrangement placessignificant emphasis on achieving development through non-government players. The inclusionof a special chapter on the actors of the ACP-EU partnership underlines the priority given toparticipatory development.

The chapter defines the role of new actors (including civil society, social partners, private sector,local government...) who, alongside ACP governments when appropriate, will be:

● Informed and consulted on co-operation policies and strategies, especially in areas that directlyaffect or concern them and on political dialogue;

● Provided with access to financial resources;● Involved in the implementation of projects and programmes that concern them or where they

have a comparative advantage; and● Granted support for capacity building in order to strengthen their organizations and

representation.

This innovation of the new Convention is timely. Political reforms, economic liberalization anddecentralization processes in ACP countries have stimulated a new role for the State and createdmore space for other actors. Private sector, civil society and local governments are now expected towork in close co-operation with the central government to tackle the challenges of globalizationpoverty alleviation, delivery of social services and so forth. This extending of the ACP-EU partnershipto non-state actors and local governments remains a major challenge and requires political support(from both the ACP and the EU), commitment by the actors themselves, country-specific approaches,as well as time and experimentation. Several challenges are to be tackled:

Identifying and selecting the actorsPractical questions that need answers include: Who should participate in dialogue or get access tofunding? What selection criteria should be used? Who should do the selection? What guaranteesare needed for a transparent selection process? How can participation be kept ‘manageable’ (as theACP and the EU can only enter into dialogue with a finite number of actors)? How can the legitimacyand capacity of non-state actors be assessed?

The Cotonou Agreement provides a rather short answer to these questions. First, ‘recognition’ ofnon-state actors will be done ‘by the parties’ – ACP governments and the EU. Second, the selectioncriteria will be the extent to which non-state actors address the needs of the population; havespecific competencies; and are organized and managed democratically and transparently. Non-

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state actors are concerned that these provisions leave scope for arbitrary selection processes,particularly in countries confronted with governance problems or hostile to the idea of participatorydevelopment. While these fears may appear legitimate, an open-ended system also has advantages.It allows country-specific processes to select actors, based on local realities, rather than use of arigid set of formal criteria (which may exclude relevant non-state actors).

Lack of informationThe actors need to be informed if they are to participate effectively. Presently, most ACP non-stateactors and local governments are unaware of the existence of a Cotonou Agreement let alone ofthe opportunities it provides. Both sides have committed themselves to inform non-state actors onthe overall partnership agreement, on the programming, dialogue and co-operation strategies, andon ways to obtain financial resources. It is still unclear how this commitment will be operationalized.In this context, European non-state actors can play a major role in supporting information flowsand awareness raising events.

Political resistanceThe opposition of local power groups and top-down attitudes (entrenched in the public serviceafter decades of centralized government) may reduce the scope for participation in many ACPcountries. The Cotonou Agreement has two mechanisms to ‘protect’ participation. First, the provisionson participation are ‘legal commitments’ whose effective implementation can be monitored byACP-EU institutions (such as the Joint Parliamentary Assembly), by other bodies (such as theEconomic and Social Committee), or by non-state actors themselves. Second, the CotonouAgreement has provisions to review the ‘performance’ of partner countries on a regular basis.Depending on the performance, additional resources may or may not be provided. It is agreed thatthe quality of participation by non-state actors will be one of the performance indicators to beused in the review process.

Organizing structured dialoguesDialogue is a key feature of future ACP-EU co-operation. However, it is not clear how such a public-private dialogue will be organized at national, regional and global levels. The Agreement providesno detailed guidance in this area, but rather opts for pragmatism and country specific approaches.

Obtaining fundsThis is likely to be another major battlefield. The Agreement clearly opens up access to the resourcesof the National and Regional Indicative Programmes to non-state actors. It remains vague on whatthis means in practise.

Capacity buildingEffective implementation will be hampered by capacity problems in each of the actors (centralgovernments, non-state actors, EU delegations and EC headquarters). In most ACP countries,governments are not used to involving non-state actors in major decision-making processes. Non-state actors are also mostly not ready to actively participate in ACP-EU co-operation. They needinformation, they need time for dialogue among themselves, and they need skills and capacitysupport. In many countries, non-state actors may face serious problems of legitimacy or lack thecapacity to search for new partnerships with government. The understaffed EU delegations arehardly equipped, at this stage, to play a meaningful role in promoting participation. To make progress,extensive use of Article 4 of the Agreement – which foresees funding for capacity building – will beessential.

3. Performance based and decentralized aid programmingThe third innovative element in the new Convention is related to performance based aidmanagement, the simplification of instruments and rolling programming.

The Cotonou Agreement marks the end of the ‘aid entitlements’ (i.e. fixed allocations regardless ofperformance). From now on, the possibility exists to use the resources of the ACP in a more selectiveand flexible way. Aid allocations will be based on an assessment of each country’s needs andperformance with the possibility to regularly adjust financial resources in the light of this assessment,through a system of rolling programming. In practise, it means that more money can be channelled

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to ‘good performers’ and that the share of ‘bad performers’ can be reduced. All this means that theprogramming of aid resources becomes a strategic management tool, aimed at ensuring that theEU support to a given country or region is deployed in a much more effective and coherent manner.

The success of a performance-based partnership will depend, to a large extent, on the way it is putinto practice. A performance-based partnership is preferable only insofar as it helps to transformthe current, largely inefficient system of donor-imposed conditions onto a locally owned set ofobjectives and performance criteria. Participation and ownership are essential elements of such anapproach.

The Cotonou Agreement, to some extent, recognizes the need for a locally driven process ofperformance assessment. To this end, it foresees that the programming of EU aid will be ‘rolling’ soas to ensure flexibility in managing EU aid resources. This means that the national and regionalindicative programmes will be subjected to an annual operational review, as well as to a mid-termand end-of-term review in order to adapt the programmes to evolving circumstances and to ensurethat they are correctly implemented. This could entail an increase in resources (for “good performers”)or a reduction (for “bad performers”). These reviews will consist of a joint assessment of theimplementation of the programme by both parties on the basis of jointly defined parameters andcriteria. Non-state actors will be associated to the performance reviews (which may render theprocess more participatory and transparent).

Promoting and implementing a performance-based partnership will require time for learning andexperimentation. The Cotonou Agreement provides a basic framework to assess performance, buta number of open questions remain, including:

● Penalizing the poor? The application of performance criteria may lead to a further marginalizationof the poorest countries and populations (e.g. in cases where aid is suspended). How will the EUreconcile ‘selectivity’ with its stated ambition to fight poverty? How can aid be re-directed incases of interruption of aid?

● Politically fragile countries. A growing number of ACP countries confront serious problems ofgovernance, political instability or conflict. How should performance criteria be applied topolitically fragile countries? How effective are existing co-operation policies and instrumentsfor these countries?

● Joint Monitoring. The mechanisms to jointly assess performance in a balanced, participatoryand decentralized way have not been fully elaborated. Inevitably, final decision-making willremain the political responsibility of central agencies, particularly at the EU level (e.g. decisionswith regard to resource allocations). However, all other aspects of a performance assessmentlend themselves to participatory approaches, involving central and local governments, civilsociety, private sector, independent institutions, etc. This broad-based involvement of local actorsmay help to avoid a biased, centralized assessment that is disconnected from complex localrealities.

● Donor performance. Even within an ‘unequal partnership’, donor performance criteria could alsobe envisaged with a view to ensuring credibility (e.g. avoiding hidden agendas and doublestandards) and effectiveness (e.g. in terms of providing effective support to reforminggovernments). Possible donor performance criteria include simplicity and transparency ofdecision-making; the level of consistency and co-ordination between the EU and the MemberStates; improved policy coherence; and bureaucratic performance (e.g. the quality and speed ofaid delivery).

4. New trade relationsAs it stands, the trade chapter of the Cotonou Agreement is primarily an “agreement to agree”, at alater stage, to replace the non-reciprocal, preferential regime currently granted by the EU to all ACPcountries (except South Africa) with several new, reciprocal, WTO-compatible trade regimes betweenthe EU and ACP countries, named Economic Partnership Agreements (EPAs). These EPAs may proceedeither as regional groups, an option which the EU favours, or individually, and are based on threeprinciples:

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● Reciprocity. The EU now grants almost free access to ACP products, but the reverse is not true.ACP countries do not grant preferential treatment to European products. EPAs foresee that ACPcountries will offer reciprocity, i.e. that they will progressively open their markets to Europeanproducts. Financial aid should compensate the costs of trade liberalization and of the economicrestructuring implied. ACP countries not wishing to sign a Free Trade Agreement (FTA) withEurope would lose the benefit of their present preferences, except for Least Developed Countries(LDCs), and instead would presumably benefit from the EU’s Generalized System of Preferences(GSP).

● Regions. The EU encourages ACP countries to sign free trade agreements, not individually butcollectively as regional groups. This would limit the number of agreements (there are now 77ACP countries) and contribute to sustaining regional integration efforts. It is up to the ACPcountries to take the initiative to eventually entrust their negotiating mandate to a regionalgrouping.

● Special treatment for LDCs. In accordance with EU proposals, the 39 least developed ACP countries(LDCs), in view of the special fragility of their economies, are not obliged to sign an EPA in orderto retain their present level of access to the EU. If they do not wish to open their own markets tothe EU, they can choose to keep existing non-reciprocal trade preferences and are assured thatwhatever happens they will continue to have free access to the EU market for ‘essentially all’products from 2005 on at the latest. If the project of ‘Everything But Arms’ of the Commission isadopted, then all LDC products, including agricultural products, could enjoy free access evenbefore 2005.

The key question to be asked is whether these EPAs can help the ACP in attaining their developmentgoals? The impact of the proposals on the development of ACP countries has been the subject ofintense dispute during the negotiations. The defenders of the EPA emphasize their expected positiveimpact on the flow of direct European investments to the ACP countries; on the ‘locking-in’ of thetrade liberalization process in these countries; on the deepening of the regional integration processand on the restructuring of ACP economies, by combining a modification of the framework ofincentives for economic agents (propelling them towards a more efficient use of resources) withthe financial and technical support of the EU.

However, in both ACP countries and Europe, certain analysts are sceptical, fearing that the EPAs willhave several negative effects. It is to be feared that the profit margins of European exporters willincrease, rather than that the prices to consumers and ACP importers will be lowered. A sharpreduction in customs duty revenues is to be expected, which will be difficult to compensate in theshort and medium term by a diversification of fiscal receipts. Fixing the timetable for the EPAsmight push ACP countries to liberalize their trade regimes at a ‘sub-optimal’ rate as compared towhat they would do unilaterally. Making EU products artificially cheaper will hinder the diversificationof ACP trade with non-EU trade partners (trade diversion). As the proposed regime will be treatingdifferent countries belonging to the same regional grouping in a different manner, it will certainlycomplicate regional integration. Finally, by strengthening the old Lomé reflexes which focus ACPattention on obtaining trade preferences (in Brussels), little capacity will be left to adopt a moreactive stance within the multilateral trade system (in Geneva).

Several preconditions are needed to enable the negotiation/establishment of EPAs. First of all, theeffectiveness of ACP participation as regional groups depends on the progress of regionalintegration which needs to take place in a very short time before the launch of the negotiations. Tosign an FTA with the EU, a regional grouping must be an effective free trade zone or a customsunion. Apart from SACU, very few ACP regions have reached this stage. Secondly, the tradenegotiation capacities of ACP countries are very weak and those of the regions are almost non-existent and thus must be considerably strengthened if true negotiations are to be the result. TheEU‘s capacities are also insufficient to conduct several negotiations simultaneously with the ACP, inaddition to other bilateral negotiations and of course those within the WTO.

In view of these difficulties, a strong political will is needed, on both the EU and ACP side, to putEPAs into place. The ACP accepted the reciprocity principle in Cotonou, but with reticence. Indeed,this move was driven by pragmatism, rather than by a firm belief in the gains to be expected fromEPAs. Most ACP countries accepted reciprocity either because they gave the priority to their political

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links with the EU and its Member States over their own sovereignty in trade policy matters; orbecause they feared that the refusal of economic partnership proposed by EU would imply indirectsanctions (less aid); or in the hope of facilitating the preservation of other privileges (such as benefitsof the product protocols), a particularly profitable calculation for countries with little trade withEurope (Caribbean, Pacific).

The consensus of the ACP group at Cotonou about ’fatalistic pragmatism’ should be transformed inthe coming months under the influence of a double phenomenon. First, at the level of the ACPgroup, the study of options may risk to fragment their common position into different national andregional positions. The dismantling of the all-ACP trade regime requires that the ACP group reaffirmsits raison d’être without this trade pillar, which was so important until now. Second, the various ACPactors whose interests are at stake - in particular the private sector (producers, exporters etc) andACP civil society (consumers, trade unions, NGOs) - will endeavour to influence the position of theirgovernments at the national, regional and global levels. It is accordingly very difficult to have aclear idea of what situation will prevail after 2008. Certain ACP countries will choose not to negotiateand will ‘keep Lomé.’ Others will negotiate EPAs as regional groups, others will negotiate individually,others may try to obtain an alternative trade arrangement (ATA) with the EU.

The European case is also complex. To simplify, the Commission and its Member States are confrontedwith two indirectly opposing concepts: The ‘bilateralists’ consider trade policy as a tool of foreignpolicy towards a given country or region. This is the vision which has inspired the EPA concept, aswas the case with the EU-South Africa FTA or the Euro-Med Agreements. In fact, the concept of FTAsbetween Europe and its former colonies dates back from 1960. It failed then due to objections fromthe USA; resistance from French companies; and protectionist strategies by newly-independentAfrican countries. The ‘multilateralists’ think that European trade policy objectives must be pursuedwithin the WTO framework, by directly influencing the establishment and application of worldtrade rules. They ague that the recent FTAs between the EU and Morocco, Tunisia, Mexico, and SouthAfrica etc. fragment and undermine the multilateral trade system, and inspire a certain degree ofscepticism.

It is up to the European Commission’s rather ‘multilateralist’ DG Trade to put in place a project (theEPAs) that was developed by a more ‘bilateralist’ DG Development. If DG Trade were to judge thatEPAs were not the best way of trading with the ACP in the future, the EC could be tempted to freeitself of its Cotonou commitments by, for example, invoking other undertakings within the WTOframework. So it is not certain that the enlarged Union, with a reformed Commission would still bedevoted in 2008 to applying ambitious preferential trade agreements with the ACP.

5. Where to go from here?The New Partnership Agreement, once signed by all the parties, will last for 20 years but will enterinto force only when ratified by ACP and EU Member States. This process is expected to take up to2 years. For the first time in the history of ACP-EU relations, a Convention has been concluded thatdoes not respond entirely to the original proposals put forward by the EU in its negotiating mandate,but the shift from Lomé to Cotonou is less abrupt than could have been expected at the start of thenegotiations in September 1998.

Several factors may have influenced this outcome. First of all, after the rather frustrating SeattleWTO Round, the EU needed to restore its credibility as a global player in development. Seattlecontributed to altering perceptions about the nature and pace of trade liberalization and causednegotiators to look at what was politically desirable and realistic.

A second major factor that has contributed to the relatively good outcome for the ACP, was thestrong internal solidarity within the ACP Group right from the beginning of the negotiations, inspite of the huge divergences between the various countries and sub-regions.

Finally, the preparations of the negotiations and the whole negotiating process itself has led to anunseen investment by different ACP regions and individual countries in strengthening theirknowledge, vision and negotiating capacities on the design of future ACP- EU relations. A case inpoint, in this respect, was the Caribbean Regional Negotiating Machinery (RNM).

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In conclusion, the Convention offers, at least on paper, a comprehensive framework to address mostof the major problems of the ACP. Putting into practice the grand objectives of ACP-EU cooperationwill not be an easy thing to achieve. Major challenges will need to be overcome to make thepartnership agreement an effective tool. In the relatively new policy areas (such as conflictprevention) and instruments (e.g. budgetary support, rolling programming) more appropriateknowledge and capacity is required. The Cotonou Agreement remains fairly vague on how to involvenon-state actors and local authorities in future ACP-EU cooperation. In the trade area, both partieswill need a dramatic rise in their capacity if they are to negotiate and implement such complexarrangements while also handling trade negotiations in regional and multilateral fora. Technicaland political issues related to each country’s decision to sign EPA’s (or not) may put a strain on therelations among ACP Member States. And finally, the EC has to implement the Cotonou Agreementwhile it is engaged in a major reform of its overall management system. It may prove difficult tocombine such an arduous internal reform process with an efficient and innovative policy towardsACP countries.

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2.3 Regional Co-operation Agreements: theMediterranean dimension

Maria Àngels Roque and Helena OlivánDepartment of Studies of the Institut Català de la Mediterrània (ICI)

IntroductionThe southern and eastern regions of the Mediterranean basin (Maghreb, Arabian Mashrek, Israeland Turkey1) are very important areas to Europe, not only for security and stability reasons, butmore importantly for their progressively interdependent strategic sectors: energy, environment,migration, trade and investment. Europe’s southern neighbours represent 20 percent of its energyneeds and half of its exports (two-thirds in the Maghrebian case).

However, despite the above trend, various sources indicate that North-South polarization continuesto exist in the area: the ratio for the per capita income is now 1:10 respectively.

In the international context, trade is conducted vertically; while trade between the southerncountries represents less than 10 percent of the total volume; this for a region where the populationis expected to exceed 300 million by 2025.

In 1995, the Barcelona process was launched with the objective of strengthening the partnershipsin the Mediterranean region. In order to fully appreciate its progress, one must consider the historicaland geographic context from which it has emerged. Its launching in 1995 took place at the end ofthe cold war when the emergence of multiple actors in the international political arena madenecessary the creation of new mechanisms and forums of negotiation.

1. The origins of the processIn 1972, in Paris, the initial framework that guided European policy towards the Mediterraneanregion was established. The agreement included mainly commercial concessions, technical andfinancial co-operation, the establishment of financial protocols (in force until 1996), and establishedinstitutional contacts with all the Third Mediterranean countries, except for Libya and Albania. Shortlythereafter, in 1973, tensions in the Middle East led to the establishment of a Euro-Arab Dialogue inCopenhagen. This served to further complement the economic dimension of Euro-Mediterraneanrelations.

The geo-political changes that took place in Europe at the end of the 80s and early 90s: the extensionof the European Union (EU) to the Mediterranean countries, the fall of the Berlin wall, the MaastrichtTreaty; called for the adoption of a new model to replace the conventional bilateral system of Euro-Mediterranean relations.

1 The Maghrebian countries are Algeria, Morocco and Tunisia. The Mashrek Countries are Egypt, Jordan, Lebanon andSyria.

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In addition, the 1991 Gulf war acted as a catalyst to the multilateral dimension of the peace processthat started at the Madrid conference the same year. Since that time, the EU has stated that thepeace process in the Middle East is a global challenge for the whole basin.

In 1992, a revised Mediterranean Policy was articulated introducing some initial changes: an increasein financial aid; the easing of the conditions for accession to the EU market; the establishment ofnew approaches to co-operation; the inclusion of clauses to promote respect for human rights anddemocratic values; and the creation of new programmes of decentralized co-operation (such asMed-Urbs, Med-Campus, Med-Media, Med-Invest, Med-Avicena and Med-Migration).

The same year, the idea of a Euro-Mediteranean global partnership was mentioned for the firsttime in the European Council meeting of Heads of State and Government in Lisbon. In 1994, thecommitment to the partnership was confirmed and given greater substance by the EuropeanCouncil in Corfu in June, and again in Essen in December. In June 1995, the European Council meetingin Cannes endorsed the proposals of the European Commission recommending ‘the establishmentof a Euro-Mediterranean partnership’.

While the above was taking place, the EU took its first steps towards enlargement of the EuropeanUnion to include Eastern Europe. In 1997, taking into account its responsibility on the Europeancontinent, it initiated a process of convergence for the new states that applied for EU membership:stable institutions to promote democracy, the rule of law, respect for human rights, respect andprotection for minorities, and the existence of a viable economy able to face competition in theUnion. The Mediterranean process, however, took shape differently.

The southern countries of Europe played an important role in the development of a Euro-Mediterranean area, and have a clear vision of what the South should represent to the area forshared prosperity in the Mediterranean. Thus, it requires that Europe’s Mediterranean countriesfulfill their role as ‘frontier’, which situates them in a strategic standpoint within the search for co-operation with the South.

Looking at the issue from the standpoint of a frontier, consisting of Portugal, Spain, France, Italy andGreece, we may reflect on the necessity for them to increase their contacts in order to construct a‘Mediterranean alternative’. It is a way to establish an integrated diffusion of effects of the Europeancentre. Some prospective studies about the Mediterranean area are not very optimistic concerningthe scenarios for the future, foreseeing on the one hand how the equilibrating measures establishedby the European Union (Cohesion Funds…) will have to take into account the enlargement to theEast, and on the other hand, the increasing pressure from the South due to demographic pressures,migration, and the economic situation. It is clear that the European countries in the South shouldbenefit from their location in the Mediterranean, particularly from the perspective of the free tradearea, by becoming an interconnected regional area with the Mediterranean countries on thesouthern shore.

Taking this perspective, the framework of Euro-Mediterranean co-operation that was launched in1995 emerges as an innovation and a desire to create a different situation, even if this stems in partfrom relations that existed earlier with neighbouring countries around the Mediterranean. The desireof the European Union’s Mediterranean countries as well as the shifting scenario in internationalrelations, have in large part furnished the context for the concept under consideration here.

From an analytical point of view, the Euro-Mediterranean processes can be classified as a hybridand asymmetric type of regionalism. We only have to mention here the asymmetry in tradingrelations between the European Union and the countries from the South, and the hybridization ofthe enterprise as a regional project given the background of different cultures, a fact that makesthe creation of mutual confidence between the countries the primary objective.

2. The Barcelona conference and the Euro-Mediterranean framework ofco-operationIn accordance with the Barcelona declaration, which came into effect in 1995 with the first Euro-Mediterranean governmental conference, the goal of the partnership is to create a region where

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prosperity is shared, and the members have mutual rights and obligations. Its overall aim is to forgelasting links in all fields of common interest: political and security issues, economic and financialissues, social, cultural and human issues.

In contrast to the traditional vertical approach to relations between the different actors, ‘partnership’is to connote that a process is taking place. This perspective is to open new forms of relations andinterdependence between the North and South, and (even more so) globally.

The framework for the Euro-Mediterranean partnership has a more powerful actor, the EuropeanUnion, which negotiates with the other partner countries. The twelve countries in the partnershipare Morocco, Algeria, Tunisia, Jordan, Egypt, Lebanon, the Palestinian National Authority, Israel, Syria,Malta, Cyprus, and Turkey.

The Euro-Mediterranean Partnership gave rise to various projects and activities for which theEuropean Union, at the European Council in Cannes in June 1995, decided to devote budgetaryresources that exceed those previously allocated to the region. This is achieved primarily throughthe MEDA Programme, which grants subsidies and is supplemented in turn by loans from theEuropean Investment Bank.

The construction of the partnership is achieved through a ‘work programme’ (signed by 27 countries)that is divided into three spheres of activities:

● Political;● Economic;● Social, cultural and human spheres.

The Euro-Mediterranean committee, consisting of representatives from the European Union andone member from each of the third countries in accordance with the ‘Barcelona process’, organizesthe programme into the spheres.

The political sphere has as its goal: the achievement of preventative diplomacy which is clearlylinked to security in the Mediterranean. Aside from the other areas for collaboration that have beencreated: the Mediterranean Forum (Forum Méditerranée), the Conference on Security andCooperation in the Mediterranean (la Conférence sur la Sécurité et Coopération en Méditerranée);the line of action taken by the European Union and in the Euro-Mediterranean framework seeks todefine a common area of peace and stability. The main instrument currently in the process of beingdrafted is the Charter for Peace and Stability, a political declaration to be signed by the 27 Partners.The underlying intention of the Charter is to ‘investigate ways in the Charter to mechanisms ofpolitical dialogue that promote and preserve peace in the region’.

The economic sphere of the partnership seeks to create an industrial free trade area for sharedprosperity. The importance and weight of the European Union in trading relations with theMediterranean is fundamental. In this respect, it is the most developed of the three spheres. TheEuropean Union, after signing partnership agreements with the different third countries, proposesa period of twelve years for transition and progressive liberalization of trade. The impact of thispolicy has been criticized particularly with regard to its social consequences on the southern shore.Partnership agreements have been signed with Morocco, the National Palestinian Authority, Israeland Tunisia. The others are being negotiated.

A third innovative feature relates to the social, cultural and human aspects of cooperation. In itsfinal draft form, the 1995 Declaration agrees to:

Reinforce and/or put in place, the instruments necessary for decentralizedco-operation to encourage discussion between the implementers ofdevelopment in the framework of national legislations: that is, thoseresponsible for the political and civil society, the cultural and religiouslife, the universities, research, the media, the associations, the trade unions,and public and private companies.

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And to this end, ‘supportive action will be encouraged to favour of democratic institutions and thereinforcement of the rule of law and civil society.’

The funding instrument for co-operation that is used and worked out on the basis of this new approachis the MEDA regulation, which observes that the measures of support can be directed to states, regions,local groups, and other different agents of civil society. The first objective of the MEDA programme isto support activities and projects falling under the National Indicative Programmes (NIP). These aredocuments based on economic transition (structural adjustment, private sector development),improving the socio-economic balance (education, health, rural development, etc.) and enhancingthe role of civil society. The NIP involves 9 of the 12 partners as the Palestinian Territories aresupplemented with an aid programme, which falls under the support framework of the Peace Process.The national Indicative Programmes of Cyprus and Malta are funded outside the scope of MEDAwhile that of Turkey is supplemented with a pre-existing financial instrument. Israel is not entitled toa National Indicative Programme on account of its high level of development.

Most of the activities and projects described are implemented through the State or dependentinstitutions, such as development agencies, regional entities, central banks, public bodies, etc.

Since it is financed by European public funds, the MEDA programme must comply with a numberof internal legislative texts of the Union and texts founding the Partnership.

The European Commission, Directorate F in the Directorate General for External Relations,administers MEDA. MEDA draws its resources from a heading of the General Budget of the EuropeanCommunities. Commitment and payment appropriations are determined every year according tothe normal procedure for drawing up the General Budget.

Finally, the European Commission implements the project in collaboration with the appropriatebeneficiaries by means of a system called ‘project cycle management’ that consists of theidentification of projects, planning, funding, follow-up and assessment. The second objective is tosupport activities and projects launched by the Euro-Mediterranean partners on the regional frontprovided that they are appropriate and realistic. Support is mainly given to activities falling underthe Work Programme appended to the Barcelona Declaration as well as those activities and projectsemanating from sectoral ministerial conferences in the wake of Barcelona. Such activities andprojects are contained in the MEDA Regional Indicative Programme.

3. Follow-up of the Barcelona ProcessIn the initial phase of the MEDA programme, the European Council of Cannes established an amountof 3,425 Million Euro for this programme, complemented by loans from the Investment EuropeanBank for a total of 4,685 Million Euro (see distribution below).

Financial Execution of MEDA Programme (1996-1998)*

Types of operation Total in MEDA budget(milions of euros)

A Support to economic transition and creation of a Free Trade Area 739,6

A+C 78,5

B Support to structural adjustment 350,0

C Support to socio-economic balance improvement 1047,3

D Support to regional cooperation 160,5

Total 2375,8

European Commission, DG IB

*Some of the programmes are still in execution

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Chris Patten, the European Commission’s Commissioner for External Relations, has announced thatcertain changes are foreseen for the implementation of the 2000-2006 period, notably those relatedto making more accessible the mechanisms enabling access to the programmes. Economic freedomis undoubtedly important and necessary in the framework of globalization. In order to do this,however, regionalism and the need to recognize that actors must be capable of creating mutualconfidence and intercultural dialogue are essential.

The initial impulse given by Barcelona to the Euro-Mediterranean partnership has suffered fromsome ‘lethargy’ and delays in the application of some programmes that has disappointed thosewho envisioned improvement in Mediterranean co-operation. The paralysis of the Middle EastProcess on some occasions, as well as the weakness shown by the EU, has made the Barcelonaprocess less successful than hoped.

The role that civil society and decentralized co-operation has played during the first five years ofEuro-Mediterranean co-operation should be highlighted. Two aspects are fundamental in theconstruction of decentralized co-operation: the actual definitions of Euro-Mediterranean partnershipand the interaction with civil society. Civil actors and civil society have emerged as centrally importantand necessary elements: partnerships cannot be limited to links between states, if this is really tolead to co-development. Without decentralized co-operation, and with only the fostering of inter-governmental agreements, the concept will lack content, and its realization will run up againstserious difficulties in its impact on the socio-economic fabric of the countries concerned. Despitethe importance of the civil society, however, it must be said that the MEDA regulation devotes only10 percent of its total aid to multilateral co-operation (regional and decentralized).

The idea of decentralized co-operation, which was developed prior to the Euro-Mediterraneanconference, has meant that Barcelona has become a meeting point for diverse initiatives, forumsand debates which have all originated in civil society. Among these, the Euromed Civil Forum hasapproved 200 resolutions, proposals and specific projects intended to give content to the Euro-Mediterranean programme over the medium and long term. After Barcelona, however, the differentcivil meetings (Malta in April 1997, Naples December 1997, and Stuttgart in 1999) made little progressin terms of a new definition of Euro-Mediterranean relations.

The diversity of certain programmes (Med Campus) and the imbalance of power in certain actorsare some of the limits of the co-operation framework. In addition, the third sphere includes amultitude of actors, and is ambiguously defined compared with the clarity of the first two spheres.However, the reports observe that the beneficial aspect of the decentralized mechanism will beevident in the progress that is made over time, as well as the increasing responsibility of the actors,the elimination of political obstacles and the increased number of projects that promote co-operation. This is expected to lead, in time, to the increased mobilization of civil society, even if thequality of the projects is not increased.

From the perspective of the fourth Euro-Mediterranean conference to take place in France at theend of the year, and the Civil Forum that will follow it, emphasis needs to be placed on avoiding thedegree of institutional weakness shown by the European Union. In fact, examination of the initialapplication of the MEDA regulation, which has been evaluated by independent experts, has revealedsome inflexibility as well as the so-called ‘democratic deficit’ of the European Union. The system ofinfluences by which aid is administered, the diversity of the countries to which it is directed, andthe lack of coherence between the instruments and the financial sources are some of the pointsthat have been criticized.

Another programme, which could be termed intermediate, deserves mention. The DemocracyMeda, created as a result of an initiative by the European Parliament, seeks to fill a void that is asimportant for its content as for the populations that it serves. Evaluation of the Democracy Medaprogramme stresses the need to improve the coherence and maintain the continuity of trade,and to act at a more local level, with the participation of its citizens. As such, the issues whichshould be priorities for the European Union: human rights, democratization, migration andgovernance strategies, and those which are not priorities, could now regain their importancethrough this programme.

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The development of civil society as an actor must be recognized as one of the key factors inimproving co-operation in the Euro-Mediterranean region, particularly with regard to the southerncountries. The debate has demonstrated that a type of co-operation must be instituted whichgradually seeks to outgrow assistance and humanitarian aid. Features that would help define thisco-operation would include the need to find a more embracing definition of the term and to alsoidentify the degree of dependence with regard to civil society and the state.

This approach and critical analysis of the programmes can find its strength in alternative venues, incontrast to the bilateral approach to decision-making, and the dominance of the economic spherefor EU trade. That is, in its capacity to establish or develop, according to the case or the country,decentralized and equal exchanges in the three spheres mentioned. This is one of the positiveaspects to be encouraged. And above all, there are many actors that can be brought into play in thissense. This is especially true of intermediate ‘key’ actors who bridge the gap between civil societyand government institutions (associations, trade unions, universities) to develop more completeand durable strategies for cooperation.

The dispersion of funds and the unequal results of the programme reinforce the need for partnershiparrangements as a new instrument of collaboration. Namely, to obtain results, the new concept ofrelations should be given greater weight than strictly bilateral decision-making.

SourcesFòrum Civil Euromed (1996): Towards a New Scenario of Partnership in the Euro-Mediterranean Area.

Institut Català de la Mediterrània, Barcelona.L’espai mediterrani llatí (1999): És possible un lobby mediterrani dins la UE? Institut Català de la Mediterrània

Ed. Proa. Barcelona.Euro-Mediterranean Partnership. European Commission. Brussels, Directorate General IB External Relations,

1997.Gobernabilidad y libre cambio en el Mediterráneo. Una perspectiva institucional. Prats, J. (coord.), Valencia,

Esade/Tirant lo blanc, 1996.Human Movements in the Western Mediterranean, Roque, M.A. (ed.) Institut Català d’Estudis Mediterranis.

Barcelona1992.The Meda Programme. European Commission. Brussels, Directorate General IB External Relations, 1999.Las políticas mediterráneas. Aubarell G. (ed.): Ed. Icaria, Barcelona.Preparing for Membership: The Eastward and Southern Enlargement of the EU (1996) Ludlow, Peter et al.

(eds.) Brussels, Centre for European Policy Studies.Spaventa, Alessandro (1999): The Lomé Convention: Objectives, Instruments, Results. Roskilde, Federico

Caffè Centre, Roskilde University.

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Interlude 2:Structural Adjustments Programmes in the

Mediterranean

Martin KöhlerCampagna per la Riforma della Banca Mondiale

In 1995, in Barcelona, the Euro-Mediterranean Partnership (EMP) was inaugurated. The partnershipprovides a framework for strategic relations that go far beyond the traditional areas of trade andco-operation in development assistance. It set out to create the conditions for the extensiveintegration of the Unions’ southern periphery into the European economy.1 Its primary goal is toestablish a fully-fledged Euro-Mediterranean Free Trade Area by the year 2010.

While the EMP and WTO timelines for trade liberalization are in agreement, hinting at the importanceof global frameworks for the setting of regional policy goals, it would be reductive to assume thatWTO requirements - co-formulated and fully supported by the EU’s external trade policy - couldclaim exclusive parenthood of the EMP. At least two factors can be identified which motivate aregional EU policy that strives to go beyond trade and towards deeper social and political integration.The first is the region’s strategic importance in the maintenance of peace at the outer southernborders of the Union; which is threatened by a range of unresolved political problems and socialconflicts related to an historically and culturally based resistance to a western type of modernizationprocess, and, consequently, a falling behind of the region in the economic globalization process.The second is a lack of economic complimentarity between the two shores of the Mediterranean,which requires a co-ordinated restructuring, especially of the southern European economies and acomplex diversification of Mediterranean countries’ productive resources.

To drive the point home, the relation between WTO and EMP could be characterized as a doublebind. On the one hand, most of the southern Mediterranean EMP partners would lose out if globaltrade rules should create a global level playing field, ending the preferential economic relationswith the Union, with great consequences for regional stability. On the other hand, the EMP wouldlose its sense and political dynamic if it should be disconnected from the global framework of WTOtrade rules. Partners would just not accept why they should agree to lose: substantial parts of theirfiscal revenues; be invaded by European goods; deal with ensuing unemployment; and, most of all,sustain the painful, and in this region, extensive institutional and social adaptation costs of freetrade.

Against this background, the ambitiousness of the Barcelona Declaration finds its rationale. Itschapters on political and socio-cultural co-operation would not be necessary if the EU would just

1 The 12 Mediterranean Partners are Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia,Turkey, Palestinian Teritories.

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mitigate, temporarily, the high transition costs imposed on the partner countries. Some technicaland financial assistance would be enough. Not even the institutional form of partnership wouldmake a lot of sense. The conditions imposed by the Bretton Woods Institutions for financial support,and specially designed EU trust funds for the partner countries, administered by the World Bank,would be sufficient. But, with the Barcelona Declaration, the EU has indirectly expressed a reservationabout the regional efficiency of global recipes for market liberalization, as employed by the existinginternational financial institutions. Instead, it has agreed to take over the political responsibility toenhance the framing conditions for a deep reaching institutional, social and policy reform programin the partner countries. It is this aspect which distinguishes the EMP from other regional economicco-operation schemes, such as North American Free Trade Agreement (NAFTA). At the same time,however, the EMP is also different from full-fledged regional integration schemes, such as the EU’sprogram for the Eastern European accession candidates (PHARE). The EMP can be better describedas a hybrid falling somewhere between NAFTA and PHARE. It is something of a new model of politicalco-optation, but with a built-in potential that makes it more like PHARE.

The character of the EMP, as a special political partnership, is often underlined in the EuropeanUnion’s official documents - even outrightly cultivated by highlighting the dense succession of bi-and multilateral political dialogue forums on every possible subject. However, the EMP’s mainfinancial instrument, MEDA, which, in the form of grants, disburses some 73 percent of the totalfinancial envelope dedicated to the Mediterranean partners, [but] is not part of the partnershiparrangements of equal decision-making power. It operates on the basis of two forms of conditionality,both of which were introduced for the first time in 1996 with the MEDA Regulation. Some 83 percentof MEDA funds in the period MEDA-1 (1995-1999) have been subject to these forms of conditionaldisbursement, with the only exception of interest subsidies on loans from the European InvestmentBank for environmental activities (seven percent) and regional programs (ten percent).

The first form of conditionality takes the form of controls set on efficiency in the implementation ofbi-laterally agreed reform programs. Before 1995, financial resources were provided by the EU undera five-year financial protocol with each partner. Grants under MEDA, however, are subject to annualrevisions by the EU, evaluating the pace of disbursal at the receiver side and progress toward agreedupon parameters of policy reforms. This applies to the two main chapters of financial assistancewhich, together and evenly divided between them, accounted for 59 percent of financialcommitments in the period MEDA-1:

● The chapter ‘Creation of an environment favorable to the development of the private sector’relates directly to the preparation of the envisioned Free Trade Zone and follows closely therecommendations of the Bretton Woods Institutions on structural economic policy reforms foraccession to its financing facilities. However, unlike the lending criteria employed by the IMFand World Bank, MEDA does not operate on the basis of pre-configured Structural AdjustmentPrograms (SAPs). Grants under this chapter are disbursed flexibly and for different purposes,and are not made contingent on the existence of SAPs;

● The chapter ‘Socio-economic balance’ relates to the mitigation of short-term negative effects ofeconomic transition. Same as above applies, though, recently, the EU has started to concentrateefforts by creating sectoral adjustment facilities, for example, for health insurance in Tunisia.

The second form of conditionality for MEDA disbursements is of a different nature since it is notnegotiable between the donor and receiver in the EMP framework. It applies to the chapter‘Structural adjustment facilities’ (SAFs) which provides direct budgetary support to EMP partnercountries implementing a SAP under the facilities of the IMF and the World Bank. This chapteraccounted for 20 percent of commitments in the period MEDA-1. Since only Morocco, Algeria, Tunisiaand Jordan are in a SAP program with the IMF or World Bank, this marks a considerable concentrationof EU grant resources in these countries, reaching from 40-50 percent in the Maghreb countries toalmost 70 percent in the case of Jordan. Conditionality in this chapter takes the form of mandatorystructural reform goals which the recipient country has to reach, before subsequent tranches offinancial support are disbursed. In the period MEDA-1, the IMF applied this tool in the case of Moroccowhich was evaluated to have failed to sufficiently reach set structural reform targets in 5 out of 24elements of the conditions. Subsequently, the EU withheld the disbursal of the second tranche of40 Mio Euro for almost one year.

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Given the magnitude of MEDA financial support contingent on IMF/World Bank structuraladjustment programs and parameters, it is reasonable to inquire whether this part of EU grantfinancing advances the specific regional goals set out in the Barcelona Declaration. The EU claimsthat its direct budget support through the MEDA Structural Adjustment Facilities (MEDA-SAFs) isclosely coordinated with the Bretton Woods Institutions (BWI) and a coherent part of its policy tofacilitate the establishment of the Euro-Med Free Trade Zone. While it is somewhat early to evaluatethe reality of this claim, the principles for the coordination with IMF/World Bank, as well as theresults of IMF-led structural reform in the four Mediterranean partner countries, do not bode wellto justify a policy of “pegging” the disbursal of MEDA funds on IMF/World Bank consent, under thepresent terms.

At the level of principles, Annex II of the MEDA Regulation refers explicitly to the lead function ofthe Bretton Woods Institutions, stating that only those EMP partners are eligible for MEDA-SAFs,which already undertake a reform program agreed to by the BWIs, or recognized as analogue bythem. The four EMP countries concerned entered into IMF- and World Bank-led SAPs before MEDAwas even established. This means that the MEDA-SAFs were enacted in a situation of pre-setconditionality. It comes, hence, of no surprise that the BWIs – as observers describe - merely “tooknote” of the objectives of the MEDA program, particularly in relation to the Maghreb countries(Gruet & Plane, 36); a wording indicating that the EU Commission did not resume a position toinfluence the pre-set agreed to conditionality towards the goals of the Free Trade Zone. Independentof timing, it is doubtful that the EU Commission’s limited staff capacity and the very indicativenature of the ‘National Indicative Programs’ in the frame of EMP, could cope with the staff structureand sophistication of the World Banks main national planning document, the ‘Country AssistanceStrategies’, in establishing its own conditionality.

Reading through the text of Annex II of the MEDA Regulation, one cannot even find any effort tospecify which of the EMP partners might qualify for direct budget support under specific regionalcircumstances. The criteria for eligibility is adopted from the IMF criteria, without trying to proceedtowards a regional benchmarking: level of debt and interest rate payments; the situation of balanceof payments and hard currency at disposal; budget situation; GNP per capita; and the level ofunemployment. This prevents the EU from providing direct budget support to partner countrieswhich might not qualify or are not appreciated positively in IMF/World Bank terms, but are intemporary need of flexible and fast new budget resources to mitigate the loss of fiscal revenuesdue to trade liberalization agreed to in the EMP framework. It would be more consistent with thephilosophy of the EMP, to relate the criteria for budget support eligibility – and its amount - directlyto the specific objectives of the MEDA programme, especially the Free Trade Zone which createstemporary needs to compensate for economic transition costs related to the progressive dismantlingof tariffs on imported goods. Instead, MEDA provides direct budget support to objectives set indifferent political frameworks, such as to Jordan for the supply of its currency to the areas of thePalestine National Authority, agreed upon in the multilateral track of the Madrid peace talks.

Moving further through the text, it is evident that the specific contents of a policy geared towardsa regional Free Trade Zone would require SAPs which are less focused on market-liberalizationwithin the short-sighted national perspective, but instead on reforms which facilitate thediversification of EMP partners productive resources from a regional perspective. Part of theeconomic problems of the area is that most of its production competes for the same segments ofthe European market, while intra-regional south-south trade makes up for the insignificant shareof six percent. While the European market does provide for few possibilities of increased exportearnings, most economies of scale rely on reforms to open up trade between southern partners,such as reforms on rules for full cumulation of origin2 and for mechanisms to regionally stabilizecurrency exchange fluctuations.

At the level of the results of IMF-led structural reform in the four Mediterranean partner countries,it can be observed that all of them register less growth than the average of all EMP countries. While

2 Full cumulation of origin allows for the export of a product free of duties independently of where the process ofvalue-adding has taken place. This allows for the diversification of productive resources and cooperation betweendifferent countries in productive processes.

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this might be a temporary situation, it is more significant that none of them, with the exception ofTunisia, has been able to attract a considerably higher share of Foreign Direct Investments (FDI).The low foreign investment points to the fact that it is not primarily national liberalization andprivatization programs which attract foreign productive investment, but the perspective of a biggerregional market, underlining again the importance of the EMP’s regional political framework.

In conclusion, referring back to the initial remarks on the relation between regional and globalframeworks, these notes suggest that the EU cannot claim for responsibly guiding the regionalEMP effort, if it does not embark on a strategy to influence the global parameters set by theinternational financial institutions, especially the Bretton Wood Institutions. Given that the EU andits Member States hold a considerable share of the BWI’s capital and voting power, one must, in thefriendly interpretation, to be conscious of the political inconsistency, or, in the critical inclination,submission of the EU’s regional policy to its global policy goals.

SourcesEuropean Commission, Euro-Mediterranean Partnership: Support for Structural Adjustment, Publication

of the European Commission, Directorate General 1 B (without year)European Commission, Euro-Mediterranean Partnership: Private Sector Development, Publication of the

European Commission, Directorate General 1 B, April 1997European Commission, Annual Report of the MEDA Programme 1998 (and following years), Publication

of the European Commission, Directorate General 1 BEuropean Commission, Reinvigorating the Barcelona Process, COM (2000) 497 final (6.9.2000)

Communication from the Commission to the Council and the European Parliament to prepare thefourth meeting of euro-mediteranean foreign ministers

European Commission, The Euro-Mediterranean Economic Area, Euromed Special Feature, Issue Nr. 2,November 27, 1998 (Directorate General 1 B)

Gruet, Francois & Plane, Patrick, Evaluation des facilités d’adjustement structurel dans le pays au sud de laMediterranée, April 1999 (Study on behalf of the European Commission, Directorate General 1 B

Köhler, Martin, The Mediterranean Policy after the conference of Barcelona, December 1997 (ExternalStudy for the European Parliament, Directorate General for Research, Political Series, POLI-103-EN)

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2.4 The EU’s enlargement and its impact ondevelopment co-operation

Robert ZeinerDirector of Austrian Service for Development Co-operation, and

President of the Austrian EU-Platform of NGDOs

IntroductionIn December 1999, the European Council, meeting at the EU-summit in Helsinki, announced thelaunching of accession negotiations with six countries –the Czech Republic, Cyprus, Estonia, Hungary,Poland, and Slovenia, - to be followed by a further six -Bulgaria, Romania, Malta, Slovakia, Latvia,Lithuania. Consequently, within a decade, the European Union might include as many as 12 newmembers, bringing the total to 27 members.

The process of enlarging the EU raises important challenges for the EU and its institutions, whichare thoroughly being debated and discussed within the Inter-Governmental Conference (IGC). Itwill also have significant consequences for non-EU countries. Logically these consequences shouldbe assessed following the structure of this report: i.e. what impact will the EU’s enlargement haveon the EU’s influence in multilateral organizations? What impact will it have on the EU’s capacity tocontrol the economy and make it socially and ecologically responsible? What will be the impact onthe global ecological responsibility of the EU?

This briefing paper is limited to looking at the impact of enlargement on development policies anddevelopment co-operation. One risk is that enlargement will divert funds from development co-operation towards support to accession countries. On the other hand, accession countries will haveto adopt the ‘acquis communautaire’ in terms of development co-operation and will be obliged toparticipate and contribute to the European development policies.

1. The potential impact of enlargement on third partiesThe enlargement of the EU will be costly. Direct costs are estimated at 75 billion Euros, which,according to Agenda 2000, could be financed by the current community budget. There are concerns,however, that the current external relations budget will be compressed to finance enlargementrelated expenses. What happened in the case of Kosovo seems to be serving as a precedent. It tookstrong lobbying to avoid using the development budget to finance the reconstruction of Kosovo,for instance, the NGO co-financing budget-line.

The risk is that enlargement aid will be diverted to the detriment of the southern countries, whileat the political level priorities may shift even more to countries in Central and Eastern Europe andthe Mediterranean to the detriment of the poorer developing countries.

Another economic risk for developing countries is that economic integration of the accessioncountries will change the priorities of trade relations and foreign investment to the detriment ofdeveloping countries.

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1 Please see in addition Trialog Policy Paper on Enlargement and development co-operation (January 2001).

2. Existing Community rules on development co-operationThe frame of reference is Title XX of the Amsterdam Treaty. During the current screening andnegotiating process that is being conducted in bilateral accession conferences, on the basis of 31chapters covering all areas of the ‘aquis communautaire’, development co-operation issues are dealtwith under the chapter ‘external relations’. The EU-task force focuses on the capacity and thewillingness of the accession countries to apply the rules and agreements of the Cotonou Agreementand especially the preferential trade system for ACP countries.

The body of existing Community rules is not negotiable: the European Council has decided that acountry cannot join the EU if it adopts only some rules and not others. In this situation, the importantquestion that arises is to what extent the administrative and legal systems of the candidate countriesare capable of applying and respecting this body of rules. That is why pre-accession aid and transitionperiods have been provided.

The main body of existing Union rules, in the sphere of development co-operation, is the CotonouAgreement, successor of the Lomé Convention (see briefing note on The EU-ACP Partnership: anambitious co-operation agreement and a transition to a radically new trade regimen). On accession,each country will have to apply its preferential trade system to the ACP States and will participate,with the other Member States, in financing the European Development Fund (EDF), whichcontributes financial aid under the terms of the convention.

This chapter is, however, marginal in the overall accession process. Until now it is not explainedhow candidate countries are informed about the terms of the Cotonou agreement, how they willcontribute to the European Development Fund, how they will participate in the developmentpartnership relations, the EU has with a number of regional groupings - in addition to the ACPcountries, the EU-Mediterranean partnership and the agreements on economic, technical andfinancial co-operation with the countries of Asia and Latin America – to mention a few.

The European Non-Governmental-Development-Organizations (NGDOs) have, therefore, called onEuropean Institutions to initiate a political dialogue in the on-going accession negotiations, inparticular:

● To inform the candidate countries about the Cotonou Agreement (new ACP-EC Agreement)and to involve the candidate countries in its implementation;

● To prepare for the participation of the candidate countries in the EU’s development partnershiprelations with a number of regional groupings (in addition to the ACP countries, the EU-Mediterranean partnership and the agreements on economic, technical and financial co-operation with the countries of Asia and Latin America in particular); and

● To negotiate on the basis of a preceding political dialogue, the contribution to the EuropeanDevelopment Fund (e.g. the Czech Republic and Poland declare in their negotiation positionsthat they are willing and ready to participate in the development assistance programmes, butthe amount of their contributions has to be agreed upon in separate negotiations).

3. Emerging challenges for NGOs working in development co-operation in thecontext of enlargement1

For the accession countries enlargement will imply financial contributions as well as participationin and implementation of the common EU development policy. To achieve this, it is necessary tocreate or strengthen the respective structures at the government level and to root developmentconcerns in the civil societies of the particular countries.

In this context, European NGDOs have already discussed at various conferences and meetings howorganizations engaged in development co-operation can and should take part in this process.The critical challenge in the process will be to achieve the highest possible level of participationfrom civil society. Citizens’ participation will be a decisive element for creating a democratic EU that

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is open to the world. Citizens’ participation should be both a consequence of and a preconditionfor the enlargement process: citizens’ participation can only be guaranteed by a systematic andconscious consultation with civil society. Western European NGDOs have a long tradition, owingtheir existence to the participation and social commitment of civic groupings. In recent years, theyhave gained influence as dialogue partners in discussing development issues, in shaping thedevelopment agenda and as actors in development co-operation. Recent emphases on povertyeradication, decentralisation or strengthening of civil society reflect this influence as much as theparticipation of NGDOs in the process for the renewal of the Lomé convention. Nevertheless, co-operation with developing countries is - even in the present EU-Member States – a rather secondaryissue. In the accession countries’ civil societies the level of public awareness of the need for co-operation with the South is much lower.

Raising public awareness therefore, is a crucial challenge. To participate in this effort, the EU’s NGDOsmake efforts to build and strengthen alliances with NGOs in the accession countries. Links withinterested persons in existing NGOs, with a certain thematic affinity like human rights orenvironmental organizations, are being established. It will be crucial to increase the awareness ofthe relevance and importance of development issues, development co-operation and developmenteducation. There are already some encouraging examples of co-operation, like the one betweenthe Finnish and Swedish NGO umbrellas, with the Baltic States, and especially with Estonia or theco-operation between Slovak, Czech and Austrian NGDOs.

European Institutions could support these initiatives in different ways: by providing the financialsupport to promote systematic exchange between NGOs in the East, West and South ‘Trialogue’; byfacilitating this Trialogue through modifying the general conditions for development educationand awareness raising, enabling and promoting the co-financing of projects in and with accessioncountries. Recently, encouraging steps have been taken in order to modify the legal basis of theGeneral Conditions of the Co-financing budget line to allow the mentioned co-operation withpartners in the accession countries.

In addition, and perhaps more importantly, the creation of national NGDOs, NGDO-platforms or, atleast, the adoption of a development focus within existing platforms in accession countries shouldbe supported: in order to strengthen the capacity of NGDOs in accession countries to lobby theirown governments on development issues and to design and implement awareness raisingcampaigns and global learning issues.

4. Recent concrete actions taken by the NGDO-communityPreparations for the European Union’s enlargement have been inscribed in the Liaison Committee’s(LC) strategic plan for 1997 – 2000 (objective 8). Concrete areas of action proposed in the plan areto identify and contact NGDOs and relevant civil society sectors in accession countries, and to bringtogether NGDOs from accession countries and the EU for dialogue and exchange of information.The LC’s strategic plan for 2000 – 2004 continues and intensifies the relevance of the EU’s enlargementfor the advocacy work of the Liaison Committee. The EU’s enlargement and its impact on North-South-relations is one of three high priority issues on the advocacy agenda of the LC. It is already clearthat the objective for the LC will be to prepare for the enlargement by building up a network of NGOcontacts among the accession countries that can serve as a basis for raising the public’s awareness ofdevelopment co-operation and advocacy work with the new Member States´ governments.

Consequently, a series of activities have been undertaken by several national platforms (NPs). InNovember 1998, the Vienna Conference was the first within the Liaison Committee framework tobring together interested persons from the West, East and South. More than 150 participants from32 countries gathered, initiating a dialogue on how to ensure both increased support in therespective civil societies and a prospering NGDO sector in the countries which join the EU and toestablish close relationships with EU development co-operation and policy.

In June 1999, the Berlin Conference entitled ‘From Dialogue to Trialogue’, focused on ways andmeans of developing genuine co-operation between East-South-West civil society actors. This eventsucceeded not only in continuing the dialogue, but also in deepening certain aspects and enrichingthe debate with new participants and new elements.

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In both conferences it became clear that, although there are some emerging civil society activitiesfor co-operation with the South, the general development of the respective structures is still veryweak. Old co-operation structures existing under the communist governments have nearlycompletely disappeared. New focuses for the creation of organizational expressions of solidaritywith the poor are church organizations and religious communities. A significant potential forsolidarity work with the South can also be seen in the more advanced NGO sectors, such as humanrights, environment, and democracy building, where people are motivated by similar values. It wasone of the objectives of the Finnish platform to draw more on this opportunity. In December 1999,in Tampere, Finland, at the Citizens´ Agenda 2000 NGO-forum, enlargement and EU-developmentco-operation was consequently a specific aspect of discussion. It should be noted that thePortuguese platform, by organizing an international conference on enlargement, offered an excellentframework by which to widen the debate and to deepen the involvement of organizations of theglobal South and the accession countries in the process.

For the members of the Liaison Committee, it has become clear that the Vienna, Berlin, Tampereand Sintra conferences have provided very important opportunities to start and intensify theexchange of information, contacts, dialogue, and a debate focused on certain aspects, but it wasalso obvious that the required systematic work demands a specific organizational and financialframework. Consequently, in its February 1999 meeting, the Liaison Committee accepted theproposal put forward by the Austrian Platform to undertake a follow-up on the enlargement issue.To do this, a project was set up aimed at creating facilities for setting up a network of people andorganizations within the accession countries and between East-South-West NGDOs and theirrespective umbrellas. At the LC-General Assembly in 1999 a special workshop was held on thetopic. The project proposal found widespread support among the LC-General Assembly delegates.

The project intends to:

● Create a framework to systematically intensify the contacts and dialogue with interestedorganizations and individuals in accession-countries;

● Establish, within the project period, from 2000-2002, an operating network of people andorganizations in accession countries for whom a common understanding of global developmentissues is or could be an important topic;

● Support activities aimed at raising the public’s awareness of both accession countries and theEU’s need for co-operation between an enlarged EU and the South;

● Create a common ground on which joint efforts are being made towards:● EU institutions, EU governments as well as governments of the accession countries with

the aim of preventing a ‘play-off ’ between EU development co-operation and the EUenlargement, as a result of political and economic interests as well as budget considerations;

● Public awareness, information and education work in and with the accession countries aboutthe necessity of dealing with global development and policy issues like poverty (and povertyeradication), world trade mechanisms, global environmental threats, just to mention a fewand how they affect people in the accession countries;

● Public awareness in the EU about the necessity for co-operation between the enlarged EUand the South.

● Support the development of a strategy at the level of European Institutions based on an analysisof the effects of the enlargement on the EU’s approach to development; to work at the Europeaninstitutions’ level on the requirements of enlargement concerning development policies andprogrammes (as part of the acquis communautaire);

● Prepare and support modifications of the LC-structure in view of their own future enlargement;● Strengthen the human resources available in accession countries by supporting capacity-

building measures.

The process of enlargement is happening and the dates when the first accession countries willbecome Members are getting relatively close. Development NGOs must use this opportune momenttaking care in their programmes of activities to make sure that development co-operation remainson the agenda both during and after the enlargement process, and to also prepare for theenlargement of the NGDO family.

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2.5 Challenging corporate control over EU trade andinvestment policies

Olivier HoedemanCorporate Europe Observatory (CEO)

IntroductionThe EU’s deficit in democratic decision-making is widely recognized. Who then influences the EU’sdecision-making?

Evidence shows that large corporations have been able to gain a great degree of influence overEuropean Union decision-making, at times with the active encouragement of the Commission itself.This influence is particularly significant over trade and investment policies. The result is that the EUpromotes a model of economic globalization which is carefully carved to serve primarily corporateinterests.

In order to allow for a shift towards more equitable and sustainable international economic relations,the EU should break with the harmful and deeply undemocratic premise, that corporate prioritiesshould be the basis of trade policies and political decision-making in general. This note ends witha number of recommendations for creating space for progressive trade and investment policies byrolling back corporate political and economic power.

1. European unification and the rise of corporate powerTransnational corporations (TNCs), individually and within various lobby groups, have becomesignificant political actors in European Union decision-making. The Commission began to engageindustry in strategic alliances in the 1980s, reversing its rather critical stance towards TNCs of the1970s, and has since actively encouraged the involvement of large corporations and pan-Europeanindustry associations in the Brussels political apparatus. These partnerships add weight to EUinitiatives, and they tend to strengthen the Commission’s position vis-à-vis member stategovernments. The number and intensity of connections with business varies within differentCommission directorates, but the phenomenon is generally on the rise.

The centralization of power in Brussels, the shift of decision-making power from national capitalsto the two highly opaque EU institutions — the EC and the Council of Ministers — and the persistingdemocratic gap, symbolized by the weakness of the EU Parliament, have provided fertile groundfor lobbyists. And in that game, large corporations have an enormous advantage. Today Brusselsteems with lobbyists. Over 10,000 professional lobbyists roam the halls of the Commission, Counciland Parliament buildings, the vast majority of them from PR firms, industry lobby groups andindividual companies. The European Roundtable of Industrialists (ERT) is without doubt the mostinfluential group, bringing together some 45 captains of industry from Europe’s largest TNCs.

More than just another industry pressure group trying to benefit from European integration, theERT was formed with the express intention of reviving the unification process and shaping it to thepreferences of European corporations. Through its privileged access to both governments and the

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European Commission, the Roundtable has performed an agenda-setting role at the EU level,pushing for deregulation, liberalization and other measures to subvert all levels of society to marketforces and the increasing pressures of global economic competition. The ERT’s message is reinforcedby a chorus of other corporate lobby groups in Brussels, led by the European employers’ organisation(UNICE) and the EU Committee of the American Chamber of Commerce (AmCham). Although lessproactive than the ERT, UNICE and AmCham have also succeeded in sculpting the emerging bodyof European law by closely monitoring and advocating for or against EU policies relevant to business.

By contrast, the social movements that often constitute a real countervailing force to corporatepressure groups at the local and national levels remain comparatively weak at the European level.As a result, they have lost numerous battles. Trade unionists and the social and environmentalmovements are now racing to catch up, but they are hindered by their lack of Europeanconstituencies.

2. The EU’s corporate-led global trade agendaToday, the Union is simultaneously reshaping European societies to become ‘internationallycompetitive’ and actively promoting economic globalization through bilateral and global tradederegulation. Despite a generous layer of ‘feel good’ pro-globalization rhetoric, the goals of the EU’sinternational trade and investment policies are propelled by a craving for unfettered market accessfor European-based TNCs. A similar logic rules the policies adopted by other major global powers, andthe predominant political blocs have joined forces within the World Trade Organisation (WTO) todismantle barriers to trade and investment in the less industrialized nations.

Decision-making on international trade and investment policies is arguably one of the areas wherethe EU’s democratic gap is most pronounced. The European Commission has the agenda-settingrole and negotiates for EU Member States in bodies like the WTO. The bulk of the EU’s decisions ontrade and investment are made in the powerful ‘133 Committee’, which consists of trade officialsfrom Member States and Commission representatives. Although the European Parliament isinformed, it lacks decision-making power on external trade policies. And national parliamentsgenerally fail to exert effective control over their respective trade ministers. Thus, although the EU’spolicies are increasingly coming under scrutiny, the habit of shaping international trade policiesaround the offensive interests of large TNCs remains largely unchallenged. In sum, European-basedTNCs’ craving for unfettered market access propels the goals of the EU’s international trade andinvestment policies.

Since 1998, the European Commission has campaigned for a sweeping new round of WTOnegotiations to pursue trade and investment liberalization, the so-called Millennium Round. In itscampaign for a new Round, the Commission has been freshening up its connections with Europeanindustry by actively encouraging the creation of new business structures to build support for theMillennium Round, and to deliver input into the negotiations. In 1997, the first steps towards thisrelatively new and increasingly symbiotic relationship were taken during negotiations on the WTO’sFinancial Services Agreement, when the EC worked in tandem with Financial Leaders’ Group, theindustry coalition. The EC’s close co-operation with business is modelled after the example of theUS government-industry liaisons in the WTO arena.

In the run-up to Seattle, the European Commission coordinated its campaign for investmentnegotiations in the WTO with the Investment Network (IN), an ‘informal network’ of businessrepresentatives initiated by the EC in 1998. The IN, representing Fiat, ICI, Daimler-Benz, Carlsberg,British Petroleum, Rhône-Poulenc and some 50 other corporations, was set up to identify thepriorities of large European corporations for a WTO investment agreement. The Commission alsoencouraged European corporations in the services sector to set up a European Services Forum(ESF), consisting of over 50 corporations and 36 federations, which will “advise European Unionnegotiators on the key barriers and countries on which they should focus on in these negotiations.”

In regard to the WTO’s services agreement (GATS), the EC’s deregulatory approach and strongfocus on offensive industry interests, are as disturbing as the negotiations, which started inFebruary 2000, and encompass a broad range of sectors: from tourism, energy, water and fooddistribution to health, education and social services. As US academic Maria Green-Cowles points

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out, ‘By working closely together, the companies and the Commission present the Member Stateswith a negotiating strategy “pre-approved” by European industry.’ The EC’s co-operation withbusiness is complemented with a highly publicized, but far less specific, parallel process of‘dialogues’ with civil society.

Another major corporate structure, that has the ability to influence EU trade policies, is theTransatlantic Business Dialogue (TABD). The TABD’s annual summit (November 1999 in Berlin) wasattended by over 120 captains of industry, as well as EU Commissioners and numerous other high-level government officials from the EU and US. The EC brought over 50 people to the Berlinconference, while the US Government attended the event with an even larger group. Through theTABD and its elaborate structure of working groups, EU and US based corporations developgovernment policy recommendations, which both governments in turn do their utmost toimplement. In both Washington DC and Brussels, the TABD’s access to the political process isremarkably institutionalized. The primary aim of the TABD is to build an integrated transatlanticmarketplace and to develop and steer EU-US leadership in international trade negotiations, forexample within the World Trade Organisation. Rather than being yet another example of a corporatelobby group successfully influencing and manipulating the political environment on behalf of itsmember companies, the TABD is initiated by (parts of ) the European Commission and the USGovernment which saw such a body as providing momentum for their political agenda andincreasing their power. The TABD is a disturbing but predictable model of political decision-makingin an era where corporate international competitiveness dominates the political agenda.

3. Campaigning for responsible European policies in the global arenaA fundamental condition for any positive change, is for EU governments move away from the flawedassumption that international trade and investment policies should be shaped around the ‘offensiveinterests’ of EU-based corporations. The role of the European Commission needs particular attention,as it continues to be a prime motor behind this model of policy making. In this light, the proposal inthe negotiations that created the EU’s Nice Treaty (the Inter-Governmental Conference IGC), toexpand the EC’s powers in the EU’s external commercial policies, would have been a step in thewrong direction. The Commission, supported by industry, argued for changing the AmsterdamTreaty’s paragraph 133, which gives national governments extensive control over issues likeinternational investment, services and intellectual property rights. Partly as a result of intense NGOcampaigning against giving the EC ‘fast-track’ powers over the EU international trade and investmentpolicies, the expansion of EC powers in the Nice Treaty was limited to a few areas, mainly concerningintellectual property rights.

It is illustrative to look at the example of the Multilateral Agreement on Investment (MAI). Thiscontroversial investment treaty was negotiated in the Organization for Economic Co-operationand Development (OECD) between 1995 and the end of 1998, when public outrage brought aboutits demise. The European Commission remained firmly behind the MAI, even while one Europeangovernment after the other abandoned the sinking negotiations, pushing for its completion beforepublic opposition spiralled out of control. In retrospect, it is a real blessing that the EC’s powers ofinternational investment negotiations are limited, which means that EU governments had vetopowers.

On a more fundamental level, change towards socially and environmentally responsible tradepolicies depends on the strength of social movements that can counter the corporate agenda. Forinstance, over 1000 European NGOs have signed on to a statement against the Commission’soffensive for a new round. But the EC remains unreceptive to critique of the fundamental social andenvironmental flaws of corporate-led globalization, a process that the proposed WTO MillenniumRound would further accelerate and lock in.

Trade and investment liberalization, privatization, deregulation of labour markets and so forth, havemade corporations increasingly footloose and the threat of relocation more potent, which hascontributed to shifting the power balance to favour business and has simultaneously decreasedthe countervailing forces of trade unions and citizens’ movements. In the manic logic of thederegulated global marketplace that holds European decision-makers in a firm grip, maintaininginternational competitiveness has become a matter of political survival.

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Turning the tide would begin with the rejection of policies that increase the economic dominanceof TNCs and the adoption of measures to restrict their power. Regaining democratic control overfinance and capital would constitute a first step in that direction, and would help governments andcommunities to improve social conditions and job opportunities. International speculation taxesand a set of enforceable UN rules on corporate behaviour are just two examples of measures thatwould start to shift the balance. Social movements have an increasing awareness about the roleplayed by corporations in the shaping of the whole spectrum of public policies. By campaigningagainst flawed global and regional free trade and investment agreements, citizen’s groups areattacking the structures of corporate power.

For references, see Corporate Europe Observatory Reports:“WTO Millennium Bug: TNC Control over Global Trade Politics”, July 1999.“Transatlantic Business Dialogue – Putting the Business Horse Before the Government Cart”, October 1999.“Investment Network: How the EC and Business Prepared for WTO Investments Talks in Seattle” Corporate

Europe Observer Issue 6, April 2000.Balanyá Belén, Doherty Ann, Hoedeman Olivier, Ma’anit Adam and Wesselius Erik (2000) Europe Inc.;

Regional & Global Restructuring and the Rise of Corporate Power. Pluto Press, London. The book isavailable through bookshops, but can also be ordered directly from Pluto Press at http://www.plutobooks.com.

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3. THE EXTERNAL IMPACT OF EU INTERNAL POLICIESAND REGULATIONS

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3.1 Agriculture

Rian Fokker and Jan KlugkistNetherlands Organisation for International Development Cooperation, NOVIB

IntroductionIn the space of a few decades, the EU has been able to transform itself from a food-importingregion to a major agricultural exporter. In the year 2000, the EU holds major positions in the worldmarkets of dairy, beef, wine and sugar, among others.

In spite of impressive shares in world trade, in these sectors, the EU is neither the most efficient norcheapest producer in the world. It is, however, one of the wealthiest ones. Billions of dollars have beeninvested in a Common Agricultural Policy (CAP), it was initially aimed at achieving food security, butlater used to dispose of produced surpluses and to support agricultural incomes.

Backed by a 40 billion dollar annual budget to support agriculture, the EU is now a formidable opponentin the playing field of international agricultural trade. Developing countries are particularly affectedby the subsidized exports and by high import barriers with which the EU continues to strengthen itsposition. Farmers in these countries see their local markets flooded by EU products, sold at pricesbelow cost price. While poor urban consumers may welcome the cheap imports, they hamper thelong-term development of the agricultural sector, and as a result the economy as a whole.

Liberalization commitments, as agreed to in the 1994 General Agreement on Tariffs and Trade (GATT),has done little to change the situation. Where most of the developing countries had alreadyliberalized their markets due to Structural Adjustment Programmes, they did not experience anystructural effects from the partial GATT liberalization of OECD countries.

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Over the last few years a large number of non-governmental organizations (NGOs) have pointed tothe incoherence between the EU agricultural policy and EU development objectives. However, whilethe debate over the incoherence drags on, some concrete successes in overcoming this problemhave been achieved.

1. The Common Agricultural PolicyIn the early sixties, the European Economic Community established its Common Agricultural Policy(CAP). The system was meant to increase productivity; thus securing food availability and fairagricultural incomes.

It was decided that a number of essential products should have guaranteed minimum prices, whichwould generally be higher than world market prices. The maintenance of high price levels alsoincluded the protection of the internal market against cheap imports, and the produced surplusescould only be sold by means of export subsidies.

The system proved to be successful. After a short period, the EU transformed itself from net importerto net exporter for most products. But it was not long before the success of the CAP led to problems.Surpluses increased, and led to increasing costs for export and stocking. In the early eighties, theannual CAP budget amounted to 11 billion Euro. In 1997, the costs of agricultural support hadskyrocketed to over 40 billion Euro.

The soaring costs of the CAP and the commitment to comply with liberalization processes led to aseries of reforms, the first of them being the introduction of a quota system for the dairy sector in1984. The cereals and beef sectors were reformed in the early nineties, when the EU was facing theestablishment of a GATT/WTO agreement on agriculture. The 1992 MacSharry reforms graduallylowered price support for beef and cereals; while introducing direct income support in these sectors.Direct income support is defined as ‘not trade distorting’ under current GATT/WTO rules.

The GATT agreement, concluded in 1994, committed the participating industrial countries togradually reduce the domestic support of agriculture by measures defined as trade distorting, by20 percent. Export subsidies are to be reduced by 36 percent, and the volume of subsidized exportsby 21 percent. All import restrictions must be redefined as tariffs, and tariffs are to be reduced by 36percent. These commitments must be met in a 6 years period, from 1995 to 2001. Minimal marketaccess is to increase to 5 percent of internal consumption, over a ten-year period.

In 1999, a last reform was established in order to meet with the new challenges: the future integrationof a number of Central and Eastern European countries in the EU; and new WTO negotiations,demanding further liberalization. The ‘Agenda 2000’ proposals extend the 1992 MacSharry reformthrough further shifts from price support to direct payments. This time the dairy sector is alsoincluded in the reforms, although to a minor degree.

Over the years, as a result, the share of export subsidies in the EU agricultural budget has diminishedconsiderably, from 29.4 percent in 1993 to 12.5 in 1998. Direct income support, on the other hand,has increased from 8.3 percent in 1993 to 51.3 percent in 1998, now presenting by far the mostimportant heading.

In 1998, most of the remaining export subsidies were spent on dairy products and sugar (1.4 and1.2 billion ECU respectively). Beef and arable crops also received a fair share of the refunds budget(0.8 and 0.4 billion ECU respectively).

Overall agricultural support, in the EU, expressed as the Producer Support Estimate, stood at 45percent of the total value output, compared with an average of 37 percent overall in OECD countries.EU agricultural support represented 45 percent of all OECD support.

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Table 1. Structure of EU agricultural expenditure in 1998ECU Million

Export refunds 4 826.3

Conventional market support (1) 12 208.1

Direct income support 19 895.3

Accompanying measures 1 847.0

Other (2) - 28.6

Total 38 748.1

1. Includes expenditure on storage, set-aside, incentives, processing and marketing aid, aid toproducers and income aid.

2. Covers various chapters such as monitoring and prevention and the clearance of accounts.

Source: 28th financial report on the European Agricultural Guidance and Guarantee Fund (EAGGF)Guarantee Section.

2. Decision-makingLegislative power concerning the Common Agricultural Policy lies with the Council. The AgricultureCouncil, meeting once every month, decides on the outlines of the CAP. The presidency, whichchanges every half a year, has therefore great influence on decisions concerning the CAP. TheEuropean Council, consisting of the member states’ political leaders, has also gained influence overthe last years, as the decision-making process on the Agenda 2000 reforms illustrated.

However, as the Commission has the exclusive right of initiative, the Council is allowed to work onthe basis of Commission’s proposals only. The Commission is also responsible for the implementationof decisions taken in the Council. Certain decisions are delegated by the Council to the Commission,such as the height of restitution and the modalities of intervention policy.

Democratic control over the Common Agricultural Policy is minimal. The European Parliament playsa primarily advisory role. Only in the field of food legislation and of sanitary and phyto-sanitarymeasures, concerning issues that directly influence public health, has the parliament any effectivesay.

Transparent decision-making is equally minimal. A large number of procedures are at hand to treatdifferent issues.

Over the last decades, lobbying organizations representing farmers, agricultural co-operatives, foodindustry etc, have been able to find their way in this web of rules and procedures, exertingconsiderable influence on the decision-making process.

So far, advocacy work conducted by development organizations was mainly directed towards theDevelopment Council. In the early nineties, NGOs protested, for example, against the dumping ofEU beef in West Africa, which undermined the livelihoods of hundreds of thousands of cattle farmersin the Sahel region. NGO lobbying led to the reduction of export subsidies to West Africa. When EUdumping practices appeared to shift towards South Africa, affecting cattle farmers in that countryand in neighbouring countries such as Namibia, a second campaign also resulted in export subsidyreductions.

The beef dumping campaigns yielded a lot of public and political support. In 1994, the Commissionadopted an internal guideline, in which they concluded that it was ‘necessary to take immediatemeasures to end the lack of coherence between the Community’s agricultural policy and itsdevelopment policy’. The second reduction in export subsidies (1997) was motivated by referringback to coherence objectives.

In 1997, the Development Council adopted a special resolution on coherence, defining four prioritythemes, among them, agriculture and food security. It also proposed a number of procedural

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arrangements, in order to systematically tackle incoherence in EU policies. So far, this resolution hasnot been implemented.

Continued NGO advocacy work, however, has put coherence back on the agenda. This has led, amongothers, to the adoption of a resolution by the European Parliament, in which the Parliament urgesCommission and Council to take concrete steps.

3. Main issues at stakeVarious European NGOs have pointed out the huge, though multi-faceted, impact of the CAP ondeveloping countries. While a number of these countries have profited from the EU support ofagriculture, either because they have preferential access to the EU market, or because they havebeen able to import cheap food, others have seen complete sectors be out competed by the EU’spower play.

The main issues at stake are:1. The structural and incidental use of export subsidies, which have distorted world and local

markets.2. Compensation schemes for processed products, which have led to the export of cheap

products, have frustrated processing industries and primary producers in developing countries.3. The lack of access to the rich European market, due to import tariffs and other import barriers.4. High internal support levels.

1) Structural and incidental use of export subsidiesExport subsidies are used to sell the EU’s relatively expensive products on external markets. TheEU’s high use of export subsidies has tended to reduce world prices; thus barring other producersfrom the world market. Targeted export refunds have distorted local markets and disrupted localproduction chains. This policy instrument has undermined agricultural development in manydeveloping countries. Recent examples are the effects of long-term export subsidies on dairy forthe dairy sector in Jamaica, and the acute problems caused by an increase in export subsidies onpork for Central and Eastern Europe.

Subsidized dairy exports to JamaicaIn 1998, the EU dairy budget amounted to 2.6 billion Euro, 1.4 billion of which was spent on exportsubsidies. In 1999, the average world market price of whole milk powder was 1,380 Euro/tonneexport; whereas export subsidy amounted to 1,200 Euro/tonne, 87 percent of its actual value. Likewisethe subsidy/value for skimmed milk powder amounted to 78 percent.

In Jamaica, subsidized European milk powder is increasingly replacing locally produced milk as aninput for the local dairy industry. This practice, over the last few years, has resulted in farmers throwingaway thousands of litres of milk from their overflowing coolers. Until the early nineties, Jamaicandairy farmers were largely protected from excessive dairy imports, and the sector’s production wasgrowing fast. When the Jamaican government was forced to liberalize imports as part of the WorldBank led adjustment policies, problems started. Jamaican local production fell from almost 39 millionlitres in 1992 to 27 million litres in 1997. EU exports of concentrated milk (mainly milk powder)increased from 1,566 tonnes to 4,334 tonnes over that period. EU dairy now accounts for a rough60 percent of all dairy imports in Jamaica.

Representatives of the Jamaica Dairy Farmers Federation, a young organization with an ambitiousprogramme to get the Jamaican dairy sector back on track, asked the European Commission duringa visit in 1999 to adjust export subsidies on dairy for Jamaica. So far this request has not been granted.

Dumping of pig meat in Central Europe in 1998The EU maintains a light regime on pig meat, originally meant to compensate farmers for high feedcosts, due to high internal cereal prices. Export subsidies are meant to bridge the gap between thehigher EU cost price and external prices. This regime still existed in 1998, even though the relativedisadvantage of EU farmers had long since vanished. In 1998, the EU market was over saturated,and prices of pig meat were at an all time low. Instead of reducing export subsidies, however, theCommission decided to increase refunds on meat to Central and Eastern Europe to 400 Euro per

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tonne, which was almost half of its value. By the end of 1998, Czech importers had to pay 34 Czechcrowns/kg at the farm gate for domestic meat, compared with only 20 crowns for pig meat importedfrom the EU. After serious protests by the Czech Government, the Commission cut refunds by 50percent in December 1998. This ‘gesture of good will’, as Agricultural Commissioner Fischler called itlater, rapidly led to a 6 crowns/kg price increase in the Czech Republic.

2) Compensatory schemesBesides direct export subsidization, the EU also subsidizes export indirectly. Due to high internalprices, agro-industries pay more for their raw materials than they would have to on the world market.The EU has developed a number of schemes in order to compensate industries for this relativedisadvantage. These schemes are characterized by a lack of transparency and high susceptibility tofraud. Moreover, they provide EU industries with favourable competitive positions on the worldmarket, in marked cases at the expense of local industries and farmers.

Export of tomato concentrate to West AfricaThe EU tomato sector is supported through a Minimum Grower Price Scheme. The EU compensatesthe tomato processing industry that pays this minimum price. In 1997, 372 million Euro was spenton processing support for tomatoes. Average support was 47 Euro/tonne of fresh tomatoes,compared to minimum grower prices of 90 to 150 Euro/tonne. This has allowed EU companies toexport tomato concentrate very cheaply. Most EU exports of tomato concentrates go to North Africa,the Gulf States and West Africa. West Africa has had its own processing industries since the sixties,but many of these factories have closed down since then. 80 percent of the regional demand fortomato concentrates is now imported from the EU. Senegal once had a flourishing tomato sector.In 1991, Senegalese farmers produced 73,000 tonnes of tomatoes, and concentrate was exportedto neighbouring countries. Due to a number of reasons (low prices, decreasing government spendingin the sector, increased prices for inputs after a major devaluation, increased pest pressure) tomatoproduction has fallen dramatically since then. The one processing factory that has survived inSenegal, SOCAS, has replaced the processing of fresh tomatoes by diluting imported tripleconcentrate into the regular double concentrate. EU triple concentrate now plays a major role inthe Senegalese tomato market. As the tomato industry has a perfect alternative input for freshtomatoes, they can keep prices relatively low. Senegalese farmers now receive 40 FCFA/kg of freshtomatoes, compared to the 60 FCFA European farmers get under the Minimum Grower Price Scheme.

3) Access to the EU marketExporting agricultural products to the attractive market of the EU is generally extremely difficult, asthe EU applies high import tariffs for crucial sectors. In spite of preferential treatment under theLomé agreement, imports from ACP countries have been falling steadily over the last few years toa meagre 3.8 percent of all imports. While 87 percent of all Lomé exports to the EU have tariff freeaccess, for agricultural products this is only 55 percent. In the policy papers for WTO and UnitedNations Conference on Trade and Development (UNCTAD) 10, the EU advocates tariff free accessfor essentially all products from the Least Developed Countries (LDCs).

4) Direct income supportThe European Commission has presented the reform of the CAP, replacing price support by directincome support, as a step in the right direction. It remains to be seen if this is actually the case.While developing countries with preferential access to the EU may be confronted with lower prices,thus loosing income, EU products may still be exported at low prices without consequences for EUfarm incomes. The effects of Agenda 2000; therefore, needs close monitoring.

Under the Treaty of the European Union, the Council and the Commission are required to preventsuch cases of incoherence between EU policies. Article 130U in the Maastricht Treaty concludesthat the Community shall take account of the objectives of development co-operation in the policiesthat it implements, which are likely to affect developing countries. This article has laid a solid legalfoundation for the political debate and subsequent action on any EU policy that negatively affectsdeveloping countries and people outside the EU. It has provided NGOs with a basis to improve theimpact of their advocacy work, for example when they campaigned for the reduction of exportsubsidies on beef for West and Southern Africa in the early nineties. Structural measures to improvethe coherence of EU policies, however, have not been taken so far. Even the adoption of the coherenceresolution by the Development Council in 1997 has not changed that status quo.

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Recent developments, however, have raised hopes that eventually steps will be taken to adopt amore structural approach. The European Commission has announced that they will publish aCommunication on Coherence before the Development Council of May 2000. A first draft of thiscommunication contained a number of promising proposals for mechanisms to prevent and reduceincoherence. In February 2000, the European Parliament adopted a resolution, calling for suchstructural measures.

4. Recent work carried out by citizen organizationsIn 1999, Eurostep published a Novib-produced dossier on CAP and coherence, with a large numberof examples illustrating the detrimental effects of the EU agricultural policy on the development ofthe agricultural sector in developing countries and countries in transition. A second Eurostep/Novibpaper, ‘Dumping in Jamaica, dairy farming undermined by subsidized EU exports’, focused on theEU dairy regime. Over the last year, Eurostep and Novib have set up an intensive advocacy campaignon coherence, targeting EU institutions as well as national governments. The campaign aims forconcrete solutions for concrete cases, such as the Jamaica/dairy case, as well as for a structuralapproach towards the coherence of policies.

Also in 1999, Aprodev produced a booklet ‘Brussels’ blind spot, the lack of coherence betweenpoverty eradication and the EU’s other policies’, which, among others, referred to the dumping ofbeef.

Fonds voor Ontwikkelingssamenwerking Belgie (FOS) and the GFCG together edit a newsletter onthe CAP: the ‘CAP and developing Countries Monitor’, which pays attention to NGO activities andcampaigns in the field of the Common Agricultural Policy.

In 1998, the European Research Office (ERO), together with the Global Food Security Group Ireland(GFSG-IRE) produced ‘Food for Thought, an information dossier on the potential impact of CAP, CAPreform and moves towards free trade with the EU on agricultural development in Southern Africa’.The dossier contained, among others, a briefing on the Non-Annex II regime that provides forcompensatory funding for the processing industry in agriculture.

In the same year, the Catholic Institute for International Relations (CIIR) brought out a discussionpaper on the effects of the CAP reform for developing countries: ‘Levelling the field’.

ERO, Terre des Hommes, One World Action and Ibis contributed to the production of ‘Ek het niks,the impact of European Union Policies on Women Canning Workers in South Africa’, a paper on theimpact of this Non-Annex II regime on the South African canning industry. The paper was producedin 1998.

Also Solagral’s work on incoherence should be mentioned here, particularly their document on‘Contradictions in European Policy Towards Developing Countries: Evidence from the farm sectorand proposals for improving the effectiveness of international development cooperation in 1996’.

Sources28th financial report on the European Agricultural Guidance and Guarantee Fund (EAGGF) Guarantee

Section, 2000, European Commission.CAP and Coherence, Coherence in EU policies towards developing countries, 1999, R. Fokker en J. Klugkist,

Eurostep.Dumping in Jamaica, dairy farming undermined by subsidised EU exports, 1999, R. Fokker en J. Klugkist,

Eurostep.Food for thought, Cap reform and agricultural development in Southern Africa, 1998, European Research

Office, with Global Food Security Group-Ireland and Fonds voor Ontwikkelingssamenwerking Belgie.Levelling the field, will CAP reform provide a fair deal for developing countries, 1998, J. Kennan, C. Stevens,

J. Yates, CIIR.EU-landbouwpolitiek van binnen en van buiten, J. de Hoogh, H.J. Silvis, 1998 Wageningen PersContradictions in European Policy towards developing countries, 1996, Y. Jadot, J.P. Rolland.

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Addresses

CIIR IbisUnit 3 Canonbury Yard Nørrebrogade 68B190a New North Road KøbenhavnLondon N1 7BJ DK-2200+44 171 354 0883 + 45 35358788

Aprodev Novib174 Rue Joseph II PO Box 30919B-1000 Brussels 2500 GX Den Haag+32 2 231 0102 + 31 70 342 1621

ERO One World ActionGrasmarkt 105 bus 46 Bradley Close1000 Brussels White Lion Street+ 32 2 502 2092 London NI 9PF

+ 44 171 833 4075

Eurostep Terre des Hommes115 Rue Stévin Ruppenkampstraße 11a1000 Brussels Osnabrück+32 2 231 1659 +49 541 71010

FOS Solagral ParisGrasmarkt 105 bus 46 45 bis Avenue de la Belle Gabrielle1000 Brussels 94736 Nogent sur Marne+ 32 2 552 0300

GFSC-IRE10, Upper Camden StreetDublin 2+ 353 1 478 3490

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3.2 EU fisheries: rights and responsibilities inrelations with the South

Béatrice GorezCoalition for Fair Fisheries Arrangements (CFFA)

1. EU’s Common Fisheries Policy: internal factorsInitially, the EU’s Common Fisheries Policy was established as an entirely domestic policy, designedto promote the development of fishing activities within the European Community, in line with thebroader objectives of self-sufficiency and established for the agricultural sector. In this context, theprincipal objectives established for the Common Fisheries Policy were:

● To ensure the availability of fish to European consumers and the fish processing industry atreasonable prices;

● To stabilize European markets for fish;● To increase the productivity of the European fishing industry;● To improve the living standards of fishing communities in the EU.

While these objectives have been substantially elaborated on, as the Common Fisheries Policy cameto take on its own identity (particularly with regard to conservation and fisheries management),they remain the underlying rationale for EU fisheries policy. To a certain extent, however, theseobjectives are potentially in opposition to one another. For example, assuring consumers suppliesof reasonably priced fish, can prevent improvements in living standards for fishing communities.Similarly, increasing productivity, in the context of a renewable yet finite resource base, can

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undermine long-term market stability, as stocks are more intensively exploited and consequentlydepleted.

Clearly, a careful balance needs to be struck in the policy measures adopted, if these potentiallycompeting objectives are to be reconciled. The EU policy has witnessed some notable policyshortcomings in this regard. Efforts to modernize the EU fleet, over the 1970-1983 period saw anincrease in the fishing capacity by 64 percent. This resulted in increased pressure on domestic fishstocks to the potential detriment of long-term market stability, as stock depletion set in.

The policy difficulties faced were compounded by the entry of Spain into the European Union in1986. It led to a 75 percent increase in the size of the EU fleet and a 45 percent increase in fishconsumption. Since then, the EU has faced increasing difficulties in reconciling these basic policyobjectives. While the EU sought to reduce member states fishing capacity in the 1980s, through thescrapping of vessels, other EU programmes assisted EU member states in modernizing their fishingfleets through vessel construction and upgrading.

These contradictory policies resulted in an overall increase in the EU’s fishing capacity. This servedto compound the process of stock depletion, which was already under way.

In addition, according to the European Commission, some 1,300 vessels and 20,000 jobs directlydepend on third country fisheries agreements. With perhaps between 50,000 and 100,000 indirectjobs being created in ancillary industries.

This has created a situation where an expanding and excessive volume of fishing is being deployedagainst a diminishing resource base. As a consequence, over time, the dependence of the EU onnon-EU supplies of fish has increased. What is more, the EU has to increasingly look outside its ownwaters for fishing opportunities for its excess fishing capacity.

2. Fishing crisis in Europe: some facts and external impactsFish stocks in the EU’s waters are seriously depleted. 55 percent of stocks are over exploited, 42percent are seriously over exploited, and 7 percent have collapsed. The EU’s home water fleet is atleast 40 percent over capacity for the resources available within community waters. Theredeployment of this ‘surplus capacity’ to distant third country waters is seen as an important meansof redistributing its pressure.

The EU’s self-sufficiency in catching fish in its own waters has decreased from 83 percent in 1984, to58 percent in 1994. The supply deficit is estimated to be growing at 15-25 percent per annum. TheEU imports 35-40 percent of its fish supplies, with a further 20-25 percent of the fish consumed inthe EU caught in EU vessels in third country waters. The EU now secures less than one half of its fishsupplies from its own waters.

It is against this background that in its fisheries relations with developing countries the EU is primarilylooking for:

● Supplies of fish to meet European consumer demand;● Supplies of fish to meet the needs of the European fish processing industry;● Fishing opportunities for European fishermen;● Investment opportunities for the redeployment of capital tied up in the fisheries sector.

Given the growing internal crisis within the EU’s fishing industry, the international component ofthe Common Fisheries Policy has increased considerably in importance in recent years. As a result,the reality is that the EU Common Fisheries Policy can no longer be considered a purely domesticpolicy. Its implications and consequences are felt far and wide throughout the developing world.

This growing internal crisis in the EU fisheries sector has seen a dramatic increase in EU budgetaryexpenditures. Since 1985, the EU’s expenditures on the CFP have increased five fold. The growingimportance of the external dimension of the Common Fisheries Policy has seen expenditures onfisheries agreements accounting for between 30 and 35 percent of total fisheries expenditures,

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and the allocation of a further 8 percent of funds in the form of structural aid to the transfer of EUfishing vessels to third country fishing fleets.

The financing of both temporary (joint ventures) and permanent (joint enterprises) transfers ofvessels to developing country fishing fleets now forms an integral part of EU efforts to reducefishing pressure on its own waters. The impact of these vessel transfers on local fishing and theirfisheries, however, is simply not a factor in the redeployment process. This has important implicationsfor the sustainability of fisheries sector development in those developing countries where thesetypes of arrangements are set in place (e.g. Argentina).

Given the need to ensure supplies of fish to the EU (for both processing and direct consumption),fisheries agreements (e.g. South Africa) and vessel transfers are increasingly being linked to thepriority supply of the EU market and the extension of trade preferences (e.g. Argentina). This toocan have important implications for the sustainable development of fisheries sectors in developingcountries.

The increasing importance of the external dimension of the EU Common Fisheries Policy is havingtwo main effects on developing countries. Firstly, it is increasing pressure on fisheries resourcesand undermining sustainability. Secondly, it is strongly influencing the policy framework for fisheriessector development adopted by individual developing countries.

3. EU Fisheries Policies and the South: experiences from ACP CountriesThe vulnerable situation of artisanal fishing communities stands in marked contrast to the situationof individual EU vessels operating in developing country waters under fisheries agreements. Giventhe network of fisheries agreements which the EU has concluded, individual EU fishing vessels canalways seek access to new fishing grounds, should their activities result in the depletion of localfish stocks in individual ACP fishing zones. Artisanal fishermen in developing countries enjoy nosuch luxury. If local stocks are depleted, then their future is ruined.

At least 200 million fishworkers depend both directly and indirectly on fishing for their livelihoods,and 95 percent of them are from the South. The majority of fishworkers - men, women and childrenwho earn their living from fishery related activities - in the South belong to small-scale, traditionalor artisanal fishing communities.

The characteristics and relative importance of these communities may vary across countries, but atleast two aspects are universal:

● Small-scale fishing communities tend to be critically dependent on fishery resources for theirfood and livelihood security, and as such are highly vulnerable to external pressures;

● Small-scale fishing communities are highly dynamic, provide significant direct and indirectemployment, and promote important forward and backward linkages in the local economy.

Although renewable, fishery resources are highly vulnerable to unsustainable patterns of fishing. Itis the dependence of fishing communities on a highly vulnerable resource, rather than absolutelevels of poverty in small-scale fishing communities that makes the role of fisheries so critical in thecampaign against poverty, and the promotion of sustainable forms of development.

In terms of food and livelihood security, catches from the small-scale sector not only provide ahighly decentralized source of essential nutrients for remote communities (in coastal, lake-shoreand in-land areas), but often the only source of such nutrients.

The availability and accessibility of such nutrients is particularly important to vulnerable sectionsof the population (the sick, the young, the old, the poor etc). In such communities, small-scale fisheriesalso sustain an extensive network of fish processors, traders and local skilled artisans, who providethe vast majority of the necessary support services.

An important difference between the small-scale and the larger-scale or commercial sectors is thatfishing has a socio-economic and cultural value, rather than a purely commercial value. In the small-

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scale, sector entire households may be fishery dependent, with a high degree of specialization bygender and generation.

In addition, such fisheries, although informally organized, tend to be well regulated and inherentlysustainable. However, they can easily be destroyed if improperly managed, subjected to unfaircompetition or externally driven increases in fishing activity.

Preserving the resources on which fishing communities depend, in the face of increasing pressureson developing countries’ fisheries resources, needs to be an important policy priority for all thoseconcerned with promoting sustainable development and poverty eradication in developingcountries.

4. Fisheries and international tradeThe deepening crisis in the waters of developed fishing nations and increasing market demandsworldwide are placing increasing pressures on fishery resources in southern waters. Most of theglobal fish catch is now taken from the waters of the South (60 percent), and fish as a commodityhas become highly integrated in the world economy (40 percent of the catch enters internationaltrade). As the value of fisheries resources has increased, ACP fisheries resources have becomeincreasingly vulnerable to externally driven pressures.

Fisheries products are one of the few areas where ACP countries have seen their participation inworld trade increase. Between 1976 and 1986 ACP fish exports to the EU rose from 36 MECU to 309MECU, while by 1996 the value of ACP fish exports exceeded 946 MECU.

Under the Lomé Convention, ACP countries enjoyed duty-free access to the EU market for fisheriesexports. With import duties of between 4 percent and 12 percent on fish from non-ACP developingcountries, this represents an important trade preference.

This has encouraged the rapid expansion of ACP fisheries exports to the EU, with growth ratesfaster than those of any other group of developing countries. However, it is by no means clear whateffect these trade preferences have had on ACP artisanal fishworkers or the poor who depend oncheap fish for the bulk of their protein and other important vitamins and minerals.

In the four years from 1992 to 1996, the ACP’s share of total EU fish imports rose form 16.4 percentto 22.5 percent. This contrasts markedly with the general ACP trade performance, which saw theACP share of imports into the EU decline from 6.7 percent in 1985, to 3.4 percent in 1994.

Thus, from an economic perspective, ACP fisheries resources are no longer just of local or regionalsignificance, but form an important part of the national macro-economic equation in a significantnumber of ACP countries. As we shall see, this poses a particular challenge in countries like Mauritania,where the sale of fishing rights to third country fishing fleets generates a significant proportion oftotal government revenue.

Internationally, the demand for ACP fish products has increased; and price trends, in contrast tomost other ACP commodities, have generally been favourable. The closer integration into the worldeconomy, which these strong demand growth and favourable price trends have fostered, couldpotentially make an important contribution to poverty eradication and sustainable developmentin ACP countries.

However, the sad reality is that evolving patterns of exploitation of ACP fisheries resources aregenerally far from sustainable, and rarely contribute in a net beneficial manner to poverty eradicationobjectives. Indeed, in a number of instances documented in this note, evolving patterns ofexploitation are contributing to a marginalization of the small-scale fisheries sector and increasingthe vulnerability of those who depend on fish for their livelihoods, food security, general healthand well being.

ACP fisheries are being integrated into the world economy through a wide variety, of oftenoverlapping, means. While trade relationships are mainly responsible for this integration, variousother mechanisms are also at play.

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These mechanisms include: fisheries access agreements; private access agreements; various schemesfor the promotion of joint ventures and joint enterprises, direct investment and in some cases outright illegal fishing.

Key issues are:

● Who actually benefits when fisheries sectors, from developing countries, are permitted, throughdifferent and overlapping patterns of integration, into the world economy?

● Given the considerable international emphasis being placed on promoting sustainable formsof economic and social development to progressively eradicate poverty in developing countries,an associated issue is:

● What policies need to be set in place to ensure that the poor, resource dependent andvulnerable communities, increasingly benefit from the exploitation of fisheries resourcesand the integration of the countries’ fisheries sectors into the world economy?

These issues are of particular relevance to the EU, since the EU has made major policy commitmentson the promotion of sustainable forms of economic and social development and support for thecampaign against poverty. The EU has also made a commitment to ensuring greater coherencebetween the objectives of its development co-operation policy and the policies it pursues in otherareas.

5. The debate on coherenceThe promotion of greater coherence has been enshrined in the Treaty of the European Union, andis now a legal obligation. However, in the fisheries sector, issues of coherence have increased inimportance, not simply as a result of the ‘goodwill’ of EU Development Ministers, but as aconsequence of a changing reality, which sees the EU Common Fisheries Policy increasinglyimpinging on the development prospects of developing countries’ fisheries sectors. This has farreaching implications for the hundreds of millions who depend on the fisheries sector for theirlivelihood and food security.

It is vital that the concerns and interests of these people are taken into account within both theprocess of EU policy formulation and policy execution. This implies that the cost-benefit analysis ofthe EU’s Fisheries Agreements should not be restricted to an assessment of the purely Europeanimpact of the policy measures pursued. If EU policy is to be coherent, then any cost-benefit analysisshould take into account the impact of EU policies on those in developing countries that dependon the fisheries sector.

This issue was underlined by the Council of Development Ministers in their June 1997 Resolutionon ‘Fishery and Development’. This

stressed the need for an integrated policy approach to sustainable fishingin third countries, which takes into account, besides the interests of theEC, the interests of the local fishery sector, as well as the principle ofsustainability of the resources.

In looking at the varied concerns and objectives which the EU and developing countries,governments bring to the development of relations in the fisheries sector, a number of importantcontradictions can be identified between the following:

● The rights of small-scale fishing communities throughout the developing world to have priorityaccess to local fisheries resources; and the EU’s demands for access to EU fishing vessels;

● The rights of those in developing countries who depend on fisheries resources for their foodsecurity, essential vitamins and nutrients; and the EU’s desire to ensure supplies of healthy andreasonably priced fish to European consumers;

● The desire of developing countries to increase local value added processing, in the fisheriessector; and the EU’s desire to secure fish for the European based processing industry;

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● The desire of developing countries’ governments to maximize foreign exchange earnings andshort-term budget revenue flows; and the aspirations of local fishing communities to ensuresustainable exploitation of fisheries resources to the benefit of current and future generations;

● The EU development co-operation policy objective, which stress the importance of promotingsustainable forms of development to the benefit of the poor; and the policy practise of EU fisheriesagreements which are encouraging the excessive deployment of fishing in developing countries’waters and making a unique contribution to the process of stock depletion which is reachingdangerous levels.

In resolving these contradictions, difficult choices will have to be made if aspirations of developingcounties’ governments and peoples are to be reconciled with long-term EU policy objectives. Thiswill require a review of both the objectives of the EU Common Fisheries Policy and how currentpolicy instruments are deployed.

This will be essential, if the EU involvement in the exploitation of developing countries’ fisheriesresources, is not to undermine the economic future of fishing communities in developing countries.Thereby running directly counter to the major EU development policy objective of promotingsustainable forms of development and eradicating poverty.

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3.3 The impact of the Monetary Union on developingcountries: the case of the Franc Zone

Anne-Sophie ClaeysCentre d’Etude d’Afrique Noire (CEAN)

Alice SindzingreCentre National de la Recherche Scientifique (CNRS)

IntroductionThe Euro is an internal policy that strengthens the first pillar of the European Union. As an internalEuropean policy, it has been conceived for and is expected to benefit Europe first. The question ofits potential impact on developing countries has always been seen as secondary or as no questionat all. Within the group of developing countries, specific consideration must be given to countriesthat are linked to the Euro through a monetary arrangement with a member state of the EuropeanUnion. This situation concerns the 15 countries of the Franc Zone (including the Comoro Islands),whose currency is anchored to the French Franc, and Cape-Verde anchored to the Portuguese Escudo.

The focus of this briefing note is the impact of the European Economic and Monetary Union ondeveloping countries. Given the impressive literature on the subject, the discussion is circumscribedto African economies, and more specifically to the Franc Zone countries.

1. Europe’s Economic and Monetary Union (EMU)The third and final stage of the EMU has been the launching of the Euro, January 1st, 1999. Thecurrencies of each European country will disappear in 2002. The Euro embodies a fundamentalstep for European integration, above all for the eleven member states of the Euro Zone, andsymbolises European unity and identity. It completes the common market and strengthens theeconomic weight of Europe.1 The main internal aim of the EMU is stability, and the main purposefor Europe vis-à-vis non-European countries is a quest for credibility.

There are different theoretical opinions about the possible impact of the Euro on the participatingeconomies. Economics Nobel Laureate, Amartya Sen, argues that a single currency reduces thegovernments’ room to manoeuvre in situations of rising unemployment and economic recession.Governments also loose the instrument of the exchange rate that is a good adjustment tool. Bycontrast, according to Robert Mundell, theorist of the optimal currency areas and economics NobelLaureate as well, the Euro zone could be an optimum currency area in which member countries getmore advantages than costs from their belonging to it. By sharing the same currency and followingthe same monetary policy, Euro Zone countries benefit from the invariability of exchange rates andlower transaction costs. The results could be stability, credibility, a reduction in transaction costsand economic growth.2

1 Silguy, Yves-Thibault de, European Commissioner for Financial and Monetary Affairs, personal communication, April2000.2 Robert Mundell, ‘Le père intellectuel de l’Euro’, Le Figaro, 14 October 1999.

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The European Central Bank (ECB), which is an independent institution, is responsible for theconception of the monetary policy and surveillance. According to the Maastricht Treaty, the ECBonly cares about monetary stability.3 There is, however, a trade-off between a strong and weak Euro.A strong Euro gives credibility to the single currency; on the other hand a weak Euro enhances thecompetitiveness to European firms and thereby provides support to employment policies. The third,but unlikely, choice in terms of monetary policy for the ECB, is the ‘benign neglect’ policy, as the USdid with the level of the dollar.4 Up to now, the evolution of the Euro has shown persistent weakness,the Euro lost more than 16 percent of its value against the dollar between the beginning of 1999and mid-February 2000.

The Euro also gives the EU international visibility, even if the Euro zone needs to find somearrangements for its international representation, above all at the G7 and the International MonetaryFund (IMF). Europe also argues that the introduction of the Euro will simplify all trade relations witheconomic partners, suppress the exchange uncertainty, give greater stability to export earningsfrom raw commodities, lower supply costs linked to a decrease in production costs in Europe, andoffer attractive conditions for foreign investors. Developing countries could benefit from the accessto a larger market with low exchange rate risks.5

2. General consequences of the EMU on developing countriesThe creation of the Euro has consequences for developing countries in general, and for countriesthat have a monetary agreement with Europe in particular. These consequences are both economicand political.

The economic impacts follow different channels: trade, financial flows, and debt. For the tradechannel, non-EU countries will benefit from the economic performance in the EU through spillovereffects, positive when an increase in its GDP will entail a high import demand, negative whendeveloping countries will be also challenged by the increase in enterprise competitiveness withinEurope created by the EMU.6 For the financial channel, non-EU countries will reduce their transactioncosts by using the Euro as a transaction currency on foreign exchange markets, and foreign directinvestment of EU in developing countries may increase (but also may be more attracted toinvestment within the EU).7 For the debt channel, countries may choose the monetary structure oftheir own external debt and a part of the debt could be denominated in Euro: so the outstandingportion of the debt will naturally follow the fluctuation of the value of the Euro.8 As Cohen says,‘from the stand point of an optimal debt-management strategy, a country’s debt portfolio shouldideally mirror the composition of its trade flows’.9 The shift might be more important forMediterranean and Sub-Saharan countries than for Asia or the Caribbean.

In the case of Sub-Saharan African countries, economic studies show that the Euro does not seemto have a substantial macro-economic impact, unless the Euro takes a major policy shift, like the‘euroization’ of Sub-Saharan Africa. This does not seem likely.10 The political significance of thecreation of the Euro may be equally important for developing countries. EU sees the Euro asadvantageous because it contributes to restoring a balance within the international monetarysystem that can be of benefit to developing countries, by giving them the possibility of being lessdependent on the dollar in the management of their external debt.

Developing countries can benefit from a new competition between the dollar and the Euro. Fordeveloping countries, the possibility of having some part of their reserves holdings in Euro is ameans of diversification and diminution of dependency vis-à-vis the dollar, as it has been shown

3 ‘Amartya Sen: ‘l’Euro va réduire les marges de manœuvre’, Libération, 19 October 1998.4 Guilhaudis, 1998 and, for the ‘benign neglect’, see also Cohen, 2000.5 Silguy, 1998.6 Green and Swagel, 1998.7 Bekx, 1998.8 Verner, 1999.9 Cohen, 2000.10 Cohen, Kristensen and Verner, 1999.

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for Latin America and Caribbean countries.11 According to Benjamin Cohen, three political strategiesare available for developing countries: currency neutrality, currency subordination and currencycoalition.12 From a political economy perspective, developing countries will face more directly therivalry between the Euro and the dollar in the global monetary system, and it may lead them tomake new trade-offs relative to their own national currency strategies.13 For international markets,the status and history of both currencies is obviously very different. This is accentuated by thecurrent exceptional growth in the US, and the different policies of the US and Europe towardslabour markets; Europe’s policies are considered by international markets as ‘structurally rigid’, notpositioning the Euro-area economies on a high-growth path; thus, contributing to the weakness ofthe Euro.14 These political dimensions may be more important and long-lasting than the trade orfinancial linkages.

3. The case of the Franc Zone: the example of WAEMUBackgroundThe Franc Zone is an arrangement between France and 15 African countries, and includes twomonetary unions (plus the Comoro Islands having their own ‘Franc Comorien’), managed by twocentral banks, the Central Bank of West African States (BCEAO) for the West African Economic andMonetary Union (WAEMU consisting of 8 countries), and the Bank of Central African States (BEAC)for the Central African Economic Monetary Community (CAEMC consisting of 6 countries). The CFAFranc is managed by the French Treasury which guarantees full convertibility via an account called‘compte d’opérations’, which has a unique arrangement. The CFA Franc remained pegged to theFrench Franc at the same parity for 46 years, from 1948 until 1994 (1FCFA =0,02 French Francs afterthe French devaluation in 1960).15 This arrangement functioned during the years of prosperity inFrance after WWII, and in the CFA zone, during the period of growth from the years of independence,around 1960, until the second oil shock in 1979, the counter-shock in 1986, and the persistentinternational price wars on raw commodities which ensued. In the legal texts, the CFA countriesseem to be the main responsible actors in their monetary policy: ‘the CFA Franc Zone is more of abudgetary arrangement between Francophone African states and the French Treasury, rather thana monetary arrangement with the Bank of France’.16

In January 1994, the CFA Franc devalued by 50 percent. In the same movement, two treaties creatingthe WAEMU, and the CAEMC were signed, these banks were the successors to the UMOA (UnionMonétaire Ouest-Africaine) and UDEAC (Union Douanière des Etats d’Afrique Centrale) respectively.But the main modification has been that of parity. The general framework between the FrenchTreasury and the African countries of the Franc Zone remained broadly unchanged. The anchor tothe French Treasury has remained.

The two Treaties introduced procedures similar to ones inscribed in the Maastricht Treaty. They establisheda multilateral surveillance of Member States’ national policies, reducing the possibilities to run excessivefiscal deficits, based on a list of surveillance variables (e.g. the wage bill and public spending). Theyalso set convergence criteria relative to public deficit, public debt and price stability, implying theimprovement of national statistics, and establish sanctions for states that do not meet the criteria.17

Impact of the Monetary UnionThe creation of the Euro did not change the general institutional and legal framework of the FrancZone.18 The Maastricht Treaty merely transferred competence over exchange rates from the FrenchTreasury to the EU level (article 109 of the Treaty). The CFA Franc remains pegged, this time to theEuro, and at a rate that is equivalent to the current peg to the French Franc (1FF=100CFA, 1 Euro =6,5596 FF, so 1 Euro = 665,96 FCFA).

11 Verner, 199912 Cohen, 2000.13 Cohen, 2000.14 This is analysed in detail in International Monetary Fund, 2000.15 The history and institutions of the CFA zone are presented in Godeau, 1995.16 Guillaumont and Guillaumont, 1989, quoted by Fouda and Stasavage, 2000.17 Tchienchrom, 2000.18 Silguy 1999, Gnassou 1999.

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However, some EU governments have made different interpretations about the fact that the existingCFA zone could not be maintained under the sole responsibility of France. A compromise oninterpretations has been found. On the 23rd November 1998, the Council of the European Unionagreed on a decision (98/683/CE)19 stipulating that France could maintain these agreements; Franceand the CFA countries continue to be responsible for implementing these agreements; Frenchauthorities have to inform the Commission, the European Central Bank and the Financial andEconomic Committee about any modification of the parity Euro/CFA; modifications about the natureand range of the agreement have to be approved by the Council recommended by the Commissionand after consulting the ECB. T. Padoa Schioppa, a member of the ECB board, mentioned that thisagreement does not affect the object of community policy and does not set a precedent for othercountries.20 Technically speaking, the French Treasury continues to guarantee free convertibility,fixed parity and centralized management through the ‘comptes d’opérations’ of each central bankof the CFA Zone.

The creation of the EU did not change significantly the economic implications of the CFA for countriesof the Franc Zone. Risks and benefits remain equivalent to the ones linked to the previousarrangement with the French Franc. The main risks are: overvaluation, that would be increased by astrong Euro, if the economies deviate from the ceilings fixed by the rules of UEMOA or are disturbedby major shocks in terms of trade; the impossibility for countries to use the instrument of the nominalexchange rate in case of a shock; and the rigidity of a fixed exchange rate regime, which does not atleast partially buffer the countries from external shocks.21 The fixed exchange rate and monetaryintegration have been considered by some studies as the causes of heavy economic losses for theCFA countries, and as arguments for dismantling the Zone and issuing national currencies thatwould later integrate at a pace consistent with the evolution of their economies.22 Other criticisms,of the CFA Zone, have recommended a peg to a broader basket of currencies including not only theEuro, but also the dollar and the yen, reflecting in a more relevant way the composition of theexternal trade of the Zone.23

CFA countries have a high degree of openness to trade (72 percent of the of the Gross DomesticProduct (GDP)), and have strong trade relations with the EU, which represents on average 50 percentof their trade, and especially with France. But they mostly export non processed goods whose priceis determined by international commodities markets (oil, tropical beverages, etc.), and the share oftrade from the former colonial countries with Sub-Saharan Africa, e.g. Great Britain, has decreasedsince the period of independence.24 But unlike other developing countries, they receive very littleprivate capital inflows. Their external debt is very high, and about 40 percent of it is denominatedin EU currencies at variable interest rates.25

Previous benefits of the CFA also remain, as they stem from the anchor provided by a global currency.One benefit is better credibility, which is supplied by an external and more credible entity, theFrench Treasury. It acts as an ‘agency of restraint’ binding the hands of African governments, whichin theory limits the temptation of expansionary fiscal and monetary policies thereby reducingdeficits26, while creating a conducive monetary environment to attract direct foreign investments.Another benefit is better economic management of their economies and currency.27 This will bereinforced by the fact that the Maastricht Treaty gives, in abstentia, a greater role and surveillancecapacity over the management of the WAEMU central bank (BCEAO) to the ECB. The BCEAO should

19 Decision of the EU Council of the 23rd of November 1998 concerning questions of exchange relative to CFA Francand Comoro Islands Franc (98/683/CE).20 “The effects of Euro on the ACP countries and in particular the CFA zone”, Public hearing, European Parliament, 27October 1998.21 Hoffmaister, Roldos and Wickham, 1997.22 Monga, 1997.23 Ojo, 1996.24 Coquet et al., 1993.25 Feldman et al., 1998.26 On the role of binding agreements with external agencies as substitutes of credibility and international publicgoods, see Collier, 1991, or Rodrik, 1996.27 Honohan and O’Connell, 1997.

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be less influenced by clientelism and political considerations, than under the sole supervision ofthe French authorities. Decades of structural adjustment and the rules and institutions of WAEMUand reciprocal surveillance are also much more constraining elements. All these aspects are likelyto lead African governments to implement better economic policies, and the recognition of this byinternational markets.

4. Some Issues aheadThe future of the Franc Zone suffers from institutional constraints. The EU and the WAEMU are tworegional organizations that followed an opposite trajectory. The first one integrated througheconomics before it set up a monetary union. The second one was primarily a monetary union andwith the 1994 WAEMU Treaty, it aimed at becoming a regional economic integration area. But overthe years, this agreement has been characterized more by the divergence of the economicperformance of member countries, than by convergence.28 The WAEMU seeks to reinforce regionalco-operation in trade, orthodox fiscal policies (forbidding fiscal deficits above 3 percent) and theirmultilateral surveillance, and harmonization of law relative to business.

Thus, the WAEMU imitated some institutions and organizational features of the EMU, as shown bythe example of the concept of multilateral surveillance of fiscal policies. According to Moussa Touré,there is a parallel between the EU and WAEMU institutions and structures, and the EU is a kind ofmodel for other actors of regional co-operation.29

Nevertheless, there are specific characteristics of the WAEMU that make the transposition of therules of European institutions problematic. The nature of European and African States are toodifferent to go into any further, but above all is the difference in terms of the level of stateinstitutionalization. Furthermore, in certain ways, the WAEMU seems more democratic andmanageable than the EMU. For instance, there is one commissioner per country, whatever itseconomic level and contribution to the WAEMU budget. In any event, one must remember thatboth the WAEMU and the EMU are on-going processes.

In both cases, the WAEMU and the EMU, monetary and/or economic integration preceded politicalco-operation (which in the case of Europe occurred as early as 1970, with the European Political Co-operation), and obviously political integration, which remains the most difficult issue. They bothaim at deepening the political integration, but this is a very sensitive subject. Optimum currencyareas can last only if strengthened by deep political reforms.30

Conclusions● The economic impact of the creation of the Euro on developing countries is marginal, except for

countries that have close relationships to the EU. There are few risks and few opportunities fordeveloping countries in general, and more risks and opportunities for CFA Franc countries inparticular. For the Franc Zone countries, the big event was the devaluation of the CFA Franc in1994. The launching of the Euro does not modify the bilateral dimension of the relationshipbetween Franc Zone countries and France, except if the monetary co-operation is extended tothe European Union, replacing France as an external guarantor and ‘agency of restraint’.31

● The current period is one of transition, and there is some indifference from European countriesabout the consequences of the Euro for African countries, the consequences for the relationswith Transition economies and Latin American countries have raised more analyses.

● As for now, nearly all studies about the launching of the Euro foresee the situation in the case ofa strong Euro. Nevertheless, for the time being, the Euro has been depreciating against the dollar,and more surprisingly, against the yen.32 A weak Euro is good for European exporters who becomemore competitive. For developing countries, the consequences vary, depending on situationsof a weak or strong Euro.

28 Venables 1999.29 Moussa Touré, President of the Commission of the WAEMU, personal communication, 12 March 1999, Ouagadougou.30 Benjamin Cohen, in Alternatives Economiques, January 2000.31 Collier et al., 1997.32 Alternatives Economiques, January 2000.

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● Once again, economic considerations outweigh political ones. The European Monetary Unionand the launching of the Euro embody the choice for deepening economic relations beforepolitical integration.

● The influence of the Euro on developing countries will be progressively significant.33 Imagining‘euroization’ of some regions of the developing world is unlikely, except maybe for Africa. If ithappens, ‘euroization’ could ensue only from the choice of African countries to peg their currencyto the Euro, but not from a European decision to settle a Euro-African currency zone.

ReferencesBekx, Peter (1998), The Implications of the Introduction of the Euro for Non-EU Countries, Euro Papers,

n°26, July, pp. 1-24.Blackhurst, Richard, Alice Enders and Joseph F. François (1995), The Uruguay Round and Market Access:

Opportunities and Challenges for Developing Countries, in Will Martin and L. Alan Winters eds., TheUruguay Round and the Developing Economies, Washington D. C., the World Bank.

Cohen, Benjamin J. (2000), EMU and the Developing Countries, mimeo, Los Angeles, Annual Meeting ofthe International Studies Association, March 17.

Cohen, Daniel, Nicolai Kristensen and Dorte Verner (1999), Will the Euro Create a Bonanza for Africa,Washington D. C., the World Bank, Policy Research Working Paper 2251.

Collier, Paul (1991), Africa’s External Economic Relations, 1960-1990, African Affairs, vol. 90, pp. 339-356.Collier, Paul, Patrick Guillaumont, Sylviane Guillaumont and Jan Willem Gunning (1997), The Future of

Lomé: Europe’s Role in African Growth, World Economy, vol. 20, n°3, pp. 285-305.Coquet, Bruno, Jean-Marc Daniel and Emmanuel Fourmann (1993), L’Europe et l’Afrique: flux et reflux,

Politique Africaine, n°49, March, pp. 6-30.Feldman, Robert A. et al. (1998), Impact of EMU on Selected Non-European Union Countries, Washington

D. C. International Monetary Fund, Occasional Paper 174.Fouda, Seraphin M. and David Stasavage (2000), The CFA Franc Zone After EMU: Status Quo, Reform, or

Dissolution? World Economy, vol. 23, n°2, February, pp. 221-233.Godeau, Rémi (1995), Le Franc CFA: pourquoi la dévaluation a tout changé, Paris, Editions Sepia.Gnassou, A. Laure (1999), Après l’euro: quel statut juridique pour la zone Franc africaine? Afrique

Contemporaine, n°189, January-March, pp. 6-22.Green, John and Phillip L. Swagel (1998), The Euro Area and the World Economy, Finance and Development,

vol. 35, n°4, December, pp. 8-11.Guilhaudis, Jean-François (1998) L’Europe en transition : l’esquisse du nouvel ordre européen, Paris,

Montchrestien.Guillaumont, Patrick and Sylviane Guillaumont (1989), Monnaie européenne et monnaie africaines, Revue

Française d’Economie, vol. 4, n°1, pp. 97-116.Hoffmaister, Alexander W., Jorge E. Roldos and Peter Wickham (1997), Macroeconomic Fluctuations in

Sub-Saharan Africa, Washington D. C., International Monetary Fund, Working Paper WP/97/82.Honohan, Patrick and Stephen A. O’Connell (1997), Contrasting Monetary Regimes in Africa, Washington

D. C., International Monetary Fund, Working Paper WP/97/64.International Monetary Fund (2000), Monetary and Exchange Rate Policies of the Euro Area, Washington

D. C., International Monetary Fund, Staff Country report n°00/46.Jadot, Yannick and Jean-Pierre Rolland (1996), La contradiction des politiques européennes à l’égard des

pays en développement, Paris, Solagral.Monga, Celestin (1997), A Currency Reform Index for Western and Central Africa,World Economy, vol. 20,

n°1, January, pp. 103-125.Ojo, Oladeji O. (1996), The CFA Franc Devaluation and the Future of Monetary Cooperation in Africa, in

Oladeji O. Ojo ed., Africa and Europe: the Changing Economic Relationship, London, Zed Books andAbidjan, the African Development Bank.

Silguy, Yves-Thibault de (1998), L’Euro et le Franc CFA, Speech given in Dakar, 18 June 1998.Silguy, Yves-Thibault de (1999), L’association du Franc CFA et de l’euro: un gain de sécurité, Afrique

Contemporaine, n°189, January-March, pp. 3-5.Stasavage, David (1997), The CFA Franc Zone and Fiscal Discipline, Journal of African Economies, vol. 6, n°1,

pp. 132-167.Tchienchrom, Jean-Vincent (2000), Zone Franc : de la surveillance multilatérale à la convergence, Marchés

Tropicaux et Méditerranéens, n°2827, January 14, pp. 42-45.Venables, Anthony J. (1999), Regional Integration Agreements: A Force for Convergence or Divergence?;

Washington D. C., the World Bank, Policy Research Working Paper 226Verner, Dorte (1999) The Euro and Latin America, Finance and Development, June, vol. 36, n° 2, pp. 43-45.

33 Feldman et al., 1998.

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3.4 Refugees and asylum:Europe’s global responsibility

Peer BanekeGeneral Secretary

European Council on Refugees and Exiles (ECRE)

IntroductionEurope has a tremendous global responsibility and impact. Unfortunately at this moment it is anegative impact.

The world has changed a lot over the past fifty years, but in ways that have increased rather thandiminish the importance of the United Nations Refugee Convention. Despite –or perhaps becauseof– its continuing value, the Convention has been under attack by European States for many years.Of particular concern has been the increasing trend to restrict who comes within the definition ofthe Refugee Convention. Now, although many people are forced to flee from countries where humanrights are flagrantly violated, only a small proportion of those people are recognized as refugeeswhen they come to Europe.

Many of the negative developments have come about because European countries have not co-operated or shared the responsibility for refugees. Instead, each of the countries has been worryingthat they might attract more refugees than neighbouring countries. In order to prevent this anddeter the refugees, they have made their laws and the conditions, in which asylum seekers arereceived, tougher than those of the neighbouring countries, creating a downwards spiral, becauseof course it would then cause the neighbouring countries to make their own legislation even tighter.

1. Need for a common EU approach to refugees protectionIn May 1999, the Amsterdam Treaty came into force, bringing a commitment of the European Unionto develop common, binding refugee policies.

One of the reasons the European Council on Refugees and Exiles (ECRE) has urged a commonapproach to refugee protection is obvious: there is a protection lottery in Europe, based mainly onthe fact that several European states adopt a narrow interpretation of the Refugee Conventionwhich is often not legally correct. Refugees are either protected or are not protected, not accordingto rational rules governing criteria in Europe, but according to where they end up making theirasylum claim. A cursory glance at the criteria governing the recognition of refugee status showsdifferences on important concepts:

1) Persecution by non-State agents, a concept accepted by most States except Germany and Austria,means that refugees from a country such as Afghanistan cannot receive full refugee status inthose countries.

2) Gender-based persecution, some countries such as the United Kingdom accept this as groundsfor recognition as a refugee, while others grant a category B status, like Sweden. Granting ofcomplementary forms of protection is a complex issue. There are wide differences in the

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treatment of people who might benefit from complementary protection. These include notonly the type of status granted and its duration, but also the reasons for the granting of statusand the rights attached to the type of status. A trend common to nearly all EU States is thatcomplementary forms of protection are increasingly preferred to recognition of refugee status.

The key danger here in harmonizing asylum policy is that the Refugee Convention may simply belost. A narrow interpretation of the Convention combined with more and more reliance oncomplementary protection means that the Convention becomes, in practise, redundant by beinglimited to a small group of refugees.

There is a place for Complementary Protection, but it should be kept in its place and not be extendedbeyond its limits. That is the way complementary protection should be harmonized.

As we can see from the forms of complementary protection granted, most states have a very narrowidea of what protection means. An idea that some people do not deserve the same treatmentwhich we believe we deserve ourselves. The rights which the various forms of status attract dependupon the reasons for the asylum-seeker’s flight. Some forms of status do attract the same level ofrights granted to those recognized as refugees under the Refugee Convention. Others have lowerlevels of rights. Tolerated status, i.e. withholding of deportation, generally attracts no rights at all. Ofcourse, all this is also part of a deterrent approach. In our view, the concept of protection involvesthe enjoyment of at least certain basic rights. The Refugee Convention is a point of departure here:it stipulates that any refugee is entitled to rights such as access to employment; freedom ofmovement; freedom of religion; rights to property; access to the courts; elementary education andto identity documents.

2. Other important issues in relation to developments in EuropeThe greatest risk to the Refugee Convention in the EU’s harmonization process is the threat toaccess to its protection. The Convention only applies when a refugee has crossed an internationalborder. The jurisdiction of States Parties applies only when the refugee comes within its authority.This is why there have been attempts to stop refugees leaving their place of persecution or toprevent them from accessing protection in Europe: through visa regimes, carriers’ sanctions andso-called safe third country practises, through regionalization of refugee protection by thedesignation of safe havens and the promotion of the right to remain.

The European Union’s Member States, Canada, the United States, Australia and Japan, arestrengthening the checks on their borders by increasing their military and police surveillance ofland and sea borders; increasing checks at non-public areas in ports providing international links;and creating coast guard cordons to interdict unauthorized arrivals by sea. Spain has announcedthat it is to install an electronic warning system based on Israeli anti-terrorist technology along itssea border in an attempt to make Europe’s southern border impenetrable to immigrants. TheIntegrated Electronic Surveillance System will combine radar, infrared sensors and night visiontechnology to identify boats up to ten kilometres from the coast.

Even if a ‘model asylum system’ was created in Europe, it would not be viable if refugees are simplyto be denied the opportunity to have access to it.

The situation at present can be compared to the prohibition era in the USA. By erecting barriers, theEuropean Member States have helped to create powerful networks of traffickers. It is a worryingfact that those traffickers have often become the last resort of asylum seekers.

Perhaps one of the most pernicious measures to deflect asylum seekers is the application of the‘safe third countries’ concept – the notion that asylum seekers ought to apply for asylum incountries through which they transit before arriving at their preferred country of destination.While the concept may sound reasonable at face value, in practise it has touched off a chain ofdeportations as one country after another refuses to consider the refugee claim on its merits,pushing the asylum seeker back into countries with fewer resources and less well establisheddue-process-of-law traditions.

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Two years ago, the European Union, at the initiative of the Dutch Government, set up the HighLevel Working Group on Asylum and Migration which drafted Action Plans to deal with irregularmigration from Afghanistan, Albania and the neighbouring region, Iraq, Morocco, Somalia and SriLanka. The Plans were supposed to look not only at migration itself, but also at the causes and howto tackle them. ECRE has observed, however, that the Plans have neither focused on these causes,which would have included human rights violations and poverty, nor on the protection of refugees,but instead on measures to prevent entry into Europe.

Furthermore, an idea that has become popular is that asylum determination could be carried out in acountry close to the country of origin, and then refugees could be re-settled into Europe. This couldbe seen as an additional protection tool, rather than a substitute, but we have serious questions aboutit. We need only point to decreasing levels of international aid and decreasing interest in existingresettlement regimes to question whether Northern countries will institute and maintain asylumdetermination regimes in the South, from where most refugees originate and where most remain.

There are more serious questions about what would happen to asylum seekers who would bereceived in a reception centre in one of the countries in the region, for example in Central Africa,and whose claims for asylum would be rejected. Would it become the responsibility of this southerncountry to return them to the country of origin? What would happen to the claimant if such areturn is not possible?

The above developments have a very strong global impact.

It is in Europe where the foundations of global international co-operation in the field of refugeeprotection get weakened. Weakened by narrowing interpretations of who a refugee is. Weakenedby a steady build up of more and more barriers to keep refugees out. Weakened by the de-factoapplication of the Convention to a smaller and smaller proportion of those who justifiably come toseek international protection in Europe.

The impact of such decisions taken by Europe’s politicians is global. Once the foundations of theConvention are undermined, the whole global building of protection will come down.

How can we expect countries like South Africa, Tanzania, Iran or Pakistan to struggle to take theirresponsibility if they see rich European countries constantly trying to escape its relatively lightload?

On 2 October 2000, the United Nations General Secretary, Kofi Annan, addressed the UNHCRExecutive Committee, and said to the now former United Nations High Commissioner for Refugees,Sadako Ogata:

You have become part of ‘a containment strategy’, by which this world’smore fortunate and powerful countries seek to keep the problems ofthe poorer world at arm’s length. How else can one explain the disparitybetween the relatively generous funding for relief efforts in countriesclose to the frontiers of the prosperous world, and the much moreparsimonious effort made for those who suffer in remoter parts of Asiaor Africa? And how else can one explain the contrast between thegenerosity which poor countries are expected to show, when hundredsof thousands of refugees pour across their frontiers, and the precautionstaken to ensure that as few asylum seekers as possible ever reach theshores of rich countries?

During the same meeting of the UNHCR Executive Committee, Sadako Ogata warmly thanked theUnited States, Japan, the Nordic States, the Netherlands and Switzerland for their consistent financialsupport of UNHCR. However, she also specially referred to the European Commission and some ofthe European governments whose contributions to UNCHR had declined or never been very high.

To be clear, there have not only been negative developments in the European Union, but also positivesigns. In October 1999, in Tampere, Finland, a Summit of European Heads of States and Heads of

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Government took place. At this Summit, the European Union’s Member States expressed theircommitment to the right to seek asylum and to develop a harmonized asylum policy which is fullycommitted to the obligations of the Refugee Convention.

Non-governmental organizations have been working with UNHCR to try and ensure that theEuropean Union and its Member States will stick to this new positive direction.

Ultimately, the Refugee Convention has been ratified by Governments. The new High Commissionerfor Refugees, Ruud Lubbers, can therefore have the greatest impact by ensuring that governmentscontinue to provide protection. He will need all the support he can muster to ensure positiveleadership of the European Union and its Member States. This means that he must persuade themto work together and harmonize at a higher level, rather then give way to the lowest standards tobe found in Europe. Otherwise, European harmonization will undermine the global protectionsystem.

Although, within the UN system, it is not the core task of the High Commissioner for Refugees, heshould nevertheless insist that states give more attention to prevention by tackling the humanrights violations which cause refugees to flee. His main task, however, is to insist on the responsibilitiesof governments to meet their protection obligations towards refugees.

In relation to European governments and the EU this means three things:

● Firstly, insisting on their continued commitment to the Refugee Convention as the cornerstoneof the international protection system;

● Secondly, insisting on continued access for asylum seekers to the territory of the European Union;● And, thirdly, insisting that European governments share the responsibility for refugees, in Europe

and in the world.

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3.5 Supervision of export credit agencies

Nicholas HildyardCorner House, and

Franck AmalricSociety for International Development1

IntroductionExport Credit Agencies (ECAs) – publicly backed government agencies which give financial guaranteesto companies operating abroad - are now the single largest source of taxpayer support for privatesector companies seeking out business projects in the South and Eastern Europe.

Created to stimulate exports, ECA support now exceeds by far the total annual investments madeby the World Bank and other multilateral development banks. With rare exceptions, the major ECAslack mandatory environmental and development standards and, in addition, they are often secretiveand generally unaccountable. The result is a range of ECA-backed projects - from dams to arms andpolluting power stations - that are environmentally destructive, socially oppressive and, often,financially unviable. Environmental, human rights and development groups are pressing forfundamental reforms.

1 This article is edited from The Corner House (1999) Briefing 14: Snouts in the Trough. Export Credit Agencies, CorporateWelfare and Policy Incoherence. For all references, see this piece.

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1. Export Credit Agencies: the factsExport Credit Agencies (ECAs) provide companies with insurance against the main commercialand political risks of operating abroad, in particular, of not being paid by their creditors. The systemis simple. Services provided by ECAs include ‘Buyer Credits’, in the form of 100 percent unconditionalguarantees to banks who make loans available for overseas purchases of goods and services;underwriting the losses of commercial banks if the agreed interest rates on loans for overseas projectsprove insufficient to cover their costs ‘plus a reasonable rate of return’; and covering losses resultingfrom specified political risks, ‘such as a foreign government seizing or confiscating an investment,suddenly imposing restrictions on profits leaving the country or the outbreak of civil war.’

To obtain an export credit guarantee, the exporter takes out insurance with an ECA, which undertakesto pay the exporter for the exported goods should the importer default on payment. Generally, theexport credit agency then secures a sovereign counter-guarantee from the importing country. If itdoes have to pay up, the ECA is, therefore, able to pass on any debt to the government of theimporting country. A default just adds to the stock of bilateral debt owed to the ECA’s homegovernment.2

ECAs have been set up to promote national exports and help national industries win businessabroad. Many of the projects backed by ECAs would not go forward without their support, as privatesector banks and insurance firms would not underwrite the high financial risks involved. Forcompanies and the banks that finance them, the advantages are obvious. As Midland Bank executiveStephen Kock puts it:

You see, before we advance monies to a company, we always insist onany funds being covered by the [UK] Government’s Export CreditsGuarantee Department . . . We can’t lose. After 90 days, if the Iraqis haven’tcoughed up, the company gets paid instead by the British Government.Either way, we recover our loan, plus interest of course. It’s beautiful.

In the 1980s, ECAs fell out of favour with industry, largely because they were considered toobureaucratic. But now they are the most commonly used means of featherbedding risky Third Worldbusiness contracts. Between 1988 and 1996, the worldwide value of new export credit loans andguarantees increased four-fold - from $26 billion to $105 billion a year. By 1996, ECAs were supporting$432.2 billion worth of exports (about 10 percent of the world total) in the form of guarantees, insuranceand loans - a 40 percent increase on the figure for 1990. While much of this credit involved short-termtransactions, an estimated $70 billion a year was for medium and long-term cover, with approximatelyhalf of the new commitments going to large infrastructure projects in power generation,telecommunications and transport, predominantly in the South.

The context for the explosive growth in the export credit business during the 1990s is theprivatization of infrastructure development and public services in countries around the world andthe concomitant trade liberalization. Whereas in the past, infrastructure projects were largelyplanned, commissioned and financed by public authorities using public money, often in the formof loans from Multilateral Development Banks and other international bodies; the trend now istowards private sector financing and ownership. In the mid-1990s, the private sector financed about10-15 percent of infrastructure investments in the Third World, with the World Bank predicting thatprivate investors could soon be providing as much as 70 percent of infrastructure investment.Although private sector financing for infrastructure projects in the developing world fell to lessthan $20 billion in 1999, the expectation is that it will soon recover to earlier levels.

The increasing ‘privatization’ of infrastructure development has meant that construction andengineering companies have been forced to take on financial risks which, in government-sponsoredprojects, were previously borne by the State - risks which, in the absence of taxpayer support,potentially threaten shareholder profits and may make raising the necessary finance more difficult.Banks, in particular, have proved extremely reluctant to back large-scale private sector infrastructureprojects without the backing of investment insurance, since most such projects are increasingly

2 For statistics on export credits originated from main EU creditor countries and their shares of the HIPC debt stocks,see briefing note on Debt annex ‘Latest Bilateral Creditor Positions’ by Eurodad.

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financed on a so-called ‘non-recourse’ basis - in the event of a default, the investors have no claimother than on the assets of the project itself.

Project financiers are increasingly insisting on some form of investment insurance before they willinvest in new private sector infrastructure projects. Raising investment insurance through the privatesector, however, is often difficult, particularly where the project is in a country with a low creditrating. As a result, project developers are increasingly looking towards publicly funded bodies, suchas ECAs and Investment Insurance Agencies (IIAs), for support.

2. Inappropriate decision-making processesWith rare exceptions - the US Export-Import (Ex-Im) Bank and the US Overseas Private InvestmentCorporation (OPIC) being cases in point – most ECAs have no binding human rights, environmentaland development standards whatsoever. Moreover, despite being backed by public money, mostECAs operate in almost total secrecy, are not accountable even to national parliaments, and areheavily influenced by industry lobbies.

Lack of transparencyInformation on the projects and companies receiving support from ECAs is extremely limited, withmany ECAs only giving out details of credits with the approval of the companies, which have receivedthem. In the UK, even parliamentarians seeking a full list of projects backed by the UK Export CreditsGuarantee Department (ECGD) have been stonewalled. In Germany, only the budget committee ofparliament is informed semi-annually of the amounts of guarantees issued per country and of‘sensitive’ projects like arms exports and nuclear projects.

Lack of social and environmental standardsThe lack of transparency is combined with a lack of social and environmental standards. EuropeanECAs are neither required to follow the World Bank’s (weak) guidelines for screening and monitoringprojects, nor the guidelines recommended by the Development Assistance Committee of theOrganisation for Economic Co-operation and Development (OECD), nor the guidelines drawn upby the OECD to influence the conduct of multinational companies – all guidelines which the EUMembers helped develop and to which they are formally committed. They have no legal obligationto consider the environmental impacts of their investments or the contribution they will make todevelopment; no obligation to ensure that all their projects comply with a set of mandatory humanrights, environmental and development guidelines; and no obligation to screen out projects withadverse social and environmental impacts. This is despite clear language in the Final Communiquéof the June 1997 Denver Summit Meeting of G7 leaders, committing the UK, French and Germangovernments to: ‘help[ing] promote sustainable practises by taking environmental factors intoaccount when providing financing support for investment in infrastructure and equipment.’

Although the bulk of European ECAs have now introduced rudimentary screening procedures, theyfall far short of those demanded by non-governmental organizations or those practised by majordevelopment agencies and more progressive companies. In late 1999, for example, the UK’s ECGDintroduced an environmental questionnaire to screen projects. A Select Committee of the UKParliament subsequently described the questionnaire as ‘possibly the weakest form ofenvironmental assessment that could have been chosen’. Although the ECGD has now tightenedthe questionnaire, it is still only an information gathering exercise - and does not require the ECGDto turn down projects which fail to meet international standards. In Germany as well, there are noprovisions for the exclusion of especially destructive projects, nor are there any binding criteria onhow projects with possible environmental impacts are processed further. In the case of Italy, theForeign Trade Minister commissioned an independent expert to make analyses of different scenariosof social and environmental guidelines that could be adopted by the Italian ECA SACE by the endof 2000. The report was completed at the end of March 2000. Since then, there has been no evidenceof any public discussion or institutional initiative of the report’s content, not even a follow-up onone of the three proposed scenarios. However, having said this, we cannot be certain that its findingsare not being used to screen Italian ECAs, a case in point is Canada. In Canada, the criteria used bythe Export Development Corporation (EDC) for screening projects for environmental and socialimpacts has not been made public, although the EDC says they screen their projects and that staffhave been trained in environmental screening.

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3. Reforming the ECAsGiven the significance of the ECAs; the lack of transparency in decision-making processes; and thelack of mandatory social and environmental standards, ECAs have become the target of citizencampaigns across EU Member States. In Italy, for example, a vigorous campaign has been foughtagainst Italian ECA support for the Ilisu Dam in Turkey, a campaign that has also seen the involvementof UK, German and Swedish NGOs.

Other recent examples include campaigns against ECA support for:

● The massive Three Gorges Dam on the Yangtze River in China for which an estimated 1.9 millionpeople will have to move;

● The sale of Hawk military ‘training’ jets to the Indonesian airforce - despite well-founded fearsthat they would be used against villagers in East Timor where the Indonesian army was thenengaged in a brutal war against the East Timorese;

● The Maheshwar dam in Madhya Pradesh, India, which has provoked widespread public protestin the area affected;

● The Paiton coal-fired power project in Indonesia - a project involving massive corruption.

Such campaigns have already yielded some successes. In the UK, for example, the ECGD has adopteda set of ‘Business Principles’ which commit the ECGD to ‘promote a responsible approach to businessand …ensure our activities take into account the government’s international policies, includingthose on sustainable development, environment, human rights, good governance and trade.’ Theprinciples also state that the ECGD will ‘look not only at payment risks but also at the underlyingquality of the project, including its environmental, social and human rights impacts.’ Whilst theBusiness Principles represent a major step in the right direction, they are nonetheless deficient in anumber of important respects. Firstly, their legal status is unclear; secondly, no procedures are outlinesto ensure their implementation, which is largely discretionary. As such, they fail to provide theincentives, penalties, binding rules and avenues of redress that would make them a suitableinstrument for governing the ECGD’s business practice.

4. Multilateral InitiativesPressure from environmental and development groups, both North and South, has also led to ECAreform’s being placed firmly on the international policy agenda. The urgent need to reform theOECD’s national ECAs, for example, was fully recognized at the Denver G7 Summit in 1997. The FinalCommuniqué for the Summit stated:

Private sector financial flows from industrial nations have a significantimpact on sustainable development worldwide. Governments shouldhelp promote sustainable practices by taking environmental factors intoaccount when providing financing support for investment ininfrastructure and equipment. We attach importance to the work on thisin the OECD and will review progress at our meeting next year.

Citizen groups pursue three general objectives: ensuring binding standards, both at the projectand programme level; ensuring that ECAs work for the wider public interest and not just that ofindustry; and forgiving the debt build up through ECAs.

Ensuring Binding StandardsDue to the pressure described above, discussions have been taking place within the OECD ExportCredit Working Group on adopting common environmental standards for ECAs. Negotiations haveproceeded at a dilatory pace and have been crab-like in their direction, often moving sidewaysrather than forward. In these negotiations, EU countries have often resisted rather than promotedreform, generally only pushing for change when under pressure from domestic environment anddevelopment groups.

In December 2000, the Working Group agreed to a draft agreement on common standards. Theagreement opposes mandatory standards in favour of a so-called “benchmarking” proposal - a “pick-and-mix” approach, whereby proposed project standards are simply compared with variousinternational standards and then agreed to on a project-by-project basis.

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Not only would such an approach prove bureaucratic, costly and time-consuming for exporters,but it would perpetuate the very institutional failures that have historically bedevilled export creditagencies decsion-making processes. Under the draft agreement, ECAs will not be required to rejectprojects that fail to meet international standards but will instead only be encouraged to imposemitigatory measures as conditions for support.3 This “band aid” approach has already beendiscredited in a number of ECA-backed projects, notably the controversial Ilisu Dam project in Turkey,where conditions were imposed after provisional ECA support was agreed. As a UK parliamentarycommittee notes of the Ilisu project:

There is good reason for the expectation that relevant internationalcriteria should be met before a proposal is agreed and cover sought – itis a sign of political will, institutional capacity, developmental commitmentand good faith. The shotgun wedding approach to export credit that wefind in the case of the Ilisu Dam does not in our view bode well for theimplementation of commitments but is rather the worst form of exportcredit practice . . .We do not believe that fundamental conditions met atthe last minute, and only as a result of export credit agency pressure, canbe treated seriously.

Of further concern is the discretionary nature of the agreements reached within the OECD WorkingGroup. For example:

• There is no requirement to undertake Environmental Impact Assessments (EIA)for projects:instead, “members shall, where appropriate, request an EIA for the most sensitive projectsidentified by their respective screening and scoping procedures;”4

• ECAs are not required to abide by a single set of standards: instead, they “shall use, wheneverpossible on an agreed basis, examples of best practice,” with “national, host governmentstandards, international financial institutions‘ standards” serving as “reference points, orbenchmarks.”5 Based on past experience, this is likely to lead to the lowest common denominatorand least onerous standards being adopted.

The agreement also eschews any negative or positive listing of projects, requiring only that ECAs“screen all applications in order to identify those projects which may have adverse environmentalor social impacts.” Such a requirement confuses information gathering with screening; theagreement gives no guidance as to how ECAs should act on the information gathered. No criteriaare laid down that would direct staff as to which projects to screen out, or indeed which projectsshould be positively encouraged. As such, the agreement provides a flimsy and inadequate basisfor ensuring that future projects contribute positively to sustainable development.

The procedures laid down in the agreement are also completely lacking in any requirement fortransparency or public participation. The choice of standards, for example, does not have to bejustified publicly - and is thus not open to even rudimentary public scrutiny.

Ensuring the Public InterestExport credits are a subsidy: in the words of the UK Minister for Trade, ‘Who is the lender of lastresort? Who actually picks up the tab? It is the Government, the taxpayer…’Although there may bea case for this where export credits are subject to legally-enforceable sustainable developmentgoals, the current system has no clearly defined public purpose and its main beneficiaries are

3 “Members shall evaluate all the information and decide whether to provide official support, and if so, whether thisshall involve pre-conditions, e.g. Mitigation measures, covenants, monitoring requirements.” See: Working Party onExport Credits and Credit Guarantees, “Draft Agreement on Common Approaches on Environment and OfficiallySupported Export Credits Among Members of the Working Party on Export Credits and Credit Guarantees (ECG)”,Confidential Draft, OECD, Paris, 6 December 2000, p.6.4 Ibid, p.6.5 Ibid, p.6.

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generally a small clique of companies in the private sector. Indeed, the very nature of exports creditsencourages businesses to take unwarranted financial risks at the public’s expense, while enjoyingthe full benefits if a project is successful.

Where companies make claims for losses covered by ECAs, the liability passes to the ECA, which, inturn, passes the losses on to the importing country. The claims thus end up being added to thestock of bilateral debt owed to the ECA’s national government, the peoples of the South ultimatelypicking up the bill. In effect, Northern governments are using Third World money to subsidize theirexports, the chief beneficiaries being the shareholders of some of the richest companies in theworld.

Export credit-related debts constitute a major drain on the foreign exchange earnings of developingcountries. Worldwide, export credit-generated debt now accounts for 56 percent of the debts owedby the Third World to official creditors and 24 percent of their total debts, including debts owed toprivate banks. As Eurodad notes:

A few countries, such as Gabon, Algeria and Nigeria owe more than 50per cent of their total debt to export credit agencies. Moreover, becauseexport credit-related loans are usually made at less concessional ratesthan other official loans, ‘they figure disproportionately in a country’s debtservice profile.

For many European creditor countries, the share of the outstanding export credit-generated debtof the total HIPC debt stock is remarkable. For instance, in the case of France, out of the totaloutstanding HIPC debt stock of US$ 11,274 million, US$ 7,779 million are export credits.

Debt cancellationThose who pay the price for project failures are neither the companies which receive the exportcredits and investment insurance guarantees handed out by ECAs, nor the politicians who makepolitical capital out of the ‘rescue packages’ and ‘development assistance programmes’ they areable to announce. Those who pay are the poorer people the world over, bearing the costs of thedebt through cuts in public expenditure, poorer services and higher prices for basic needs. Neitheris that debt burden purely financial: the support of ECAs for dictatorial regimes has also subjectedthe citizens of many countries to internal repression.

Unsurprisingly, campaign groups are calling for the cancellation of export credit debts incurredthrough ‘political’ loans or where ECAs were cavalier in their support of financially dubious projects.

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3.6 Controlling corporate wrongs: the liability ofmultinational corporations

Mandy MacdonaldInternational Restructuring Education Network Europe, IRENE1

IntroductionMultinational or transnational corporations (MNCs or TNCs) have been around for many decades,but the current international economic order of trade liberalization and economic globalization, inwhich workers’ rights and environmental considerations are increasingly seen as barriers to freetrade, gives MNCs extraordinary power without requiring them to be accountable to anyone or

1 This briefing paper is a summary of a report given at the international IRENE seminar on corporate liability andworkers’ rights held at the University of Warwick, Coventry, United Kingdom, 20 and 21 March. 2000. This seminarwas part of a series of development education activities provided by IRENE on corporate social responsibility andworkers’ rights and was made possible with the support of the Fondation des Droits de l’Homme au Travail, Oxfam-Magasins du Monde, the Scurrah Wainwright Charity and the European Commission. The aims of the seminar wereto bring together different groups working to achieve corporate accountability: lawyers, trade unionists, academics/researchers, development NGOs (NGDO’s) and campaigning organizations to review legal initiatives aimed atcontrolling corporations and examine the legal and pseudo-legal issues raised by some key cases and to suggestfuture directions and initiatives for civil society in making corporations more accountable to states, citizens and theplanet. The main organizers of the seminar were Hilke Molenaar and Peter Pennartz from IRENE. An electronic readerfor the seminar as well as copies of the seminar report are available on request at IRENE. This article is an abridgedversion of the seminar report with additional fact boxes and statistics on the European Union by Marikki Stocchetti.For all the references, please see the original report.

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anything, except their shareholders. At one time, in the 1960s and 1970s, there was concern aboutexcessive interference by MNCs in the affairs of developing countries; today they appear to faileven to control bad practices by their overseas affiliates or subsidiaries.

Although many MNCs have more power and wealth than governments, they seem to feel no moralobligation to use their position to contribute to improving the quality of life for people in thecountries where they operate, not even those they touch directly, such as their employees andconsumers. Meanwhile, governments’ abilities to regulate MNCs are shrinking. The division ofaccountability between states and MNCs is often unclear, resulting in an accountability vacuum inwhich neither takes responsibility.

In recent years, few claimants have won legal rulings (e.g. against Thor Chemical Holdings in SouthAfrica) as compared to the number of cases where companies have won. What is worse, there is aneven greater number of violations reported to human rights organizations, trade unions andenvironmental organizations against MNCs.

Many of the existing international instruments, devised to regulate the activities of transnationalcompanies, are unenforceable, because they are not binding, and are therefore largely ineffectualin practice. Corporations seem to have no qualms about flouting them, particularly in Southerncountries where national accountability mechanisms are rare, access to justice for ordinary citizensis difficult, and national governments are prepared to collude with corporations for the sake of theperceived benefits to their own economies. If control over MNCs’ affiliates and subsidiaries in othercountries is difficult, control over their subcontractors and suppliers, which are even further removedfrom a parent company’s sphere of influence, is even more problematic, yet very important. In thissituation, lawyers, trade unions and human rights organizations working on behalf of workers andothers whose rights have been violated often find themselves at an impasse.

This article, based on a seminar report on corporate liability and workers’ rights, explores legal andpseudo-legal initiatives by which corporate responsibility can be improved and makes suggestionsfor new directions for civil society to take in making corporations more accountable to states, citizensand the planet. The article also contains factual information on Foreign Direct Investment (FDI) andthe largest investors on the global scene: the EU-based multinational corporations.

1. Holding governments accountable for MNC behaviourMultilateral corporations, under either domestic or international law, can be held accountable fortheir operations in other countries either directly or through the governments of countries wherethey operate. However, corporations also have an armoury of avoidance strategies and countermoveswhich they can bring into play.

States are obliged to protect the rights of people in their jurisdiction, and this implies that theymust regulate companies operating or headquartered in their jurisdiction. It is, therefore, importantnot to lose sight of the role of states in directing MNCs. Working at the level of governments,governments of both home and host states need to formulate and implement legislation, regulatorymechanisms, monitoring and supervision to ensure that they can control and regulate the activitiesof MNCs. At the same time, international instruments which are directly binding on MNCs arenecessary, together with effective international institutional mechanisms to enforce them.

In the context of the shrinking state and the privatization of public services, states are increasinglytrying to shift responsibilities, e.g. the privatization of the provision of water, which usually resultsin a poorer service that penalizes the poorest citizens. In many countries governments waivetheir own labour and environmental legislation to allow MNCs freer rein, or turn a blind eye toviolations.

Some examplesStates such as Sri Lanka have created free trade zones (FTZs) within which the state allows a separatesystem of law or waivers of national law. At worst, MNCs and governments actively collude: in Burma,for instance, the state oil and gas company, MOGE, was part of a joint venture with UNOCAL whichwas accused of serious human rights violations carried out by the Burmese security forces to clearterritory and obtain forced labour for the construction of a gas pipeline. Meanwhile in Nigeria, even

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under the new civilian government, state security forces are still being used to repress protests bylocal people at the activities of Shell and other oil companies in the Niger river delta. In such cases,collusion produces a legal vacuum. Who can be held accountable? Whom can claimants sue?

Bringing states to account for these responsibilities can, on the one hand, force them to put pressureon companies. So it is important to pressure both MNCs home states, to ensure that they actresponsibly in other countries, and host states where MNCs operate, to formulate and implementappropriate legislation regulating business activity in their jurisdiction, and not to collude with MNCs.On the other hand, MNCs have ways of avoiding being pressured through governments: they canmove their headquarters to a more compliant state, or they can use their vague national identity todeclare themselves free of the law of any country in which they operate.

Fact Box 1Foreign Direct Investment (FDI) has become the main source of financing for development inthe South, outweighing by fourfold the Official Development Assistance (ODA) in recent years.Great expectations have been put on FDI, as it is expected to bring Southern countries into theglobal economy and in the process pave the way for development.

● In 1999, the growth of the global flow of FDI reached $865 billion, an increase of 27 per centover the previous year.

● Similarly, the FDI flows to developing countries reached an all-time high of $208 billion, anincrease of 16 per cent over 1998.

● At the same time, the position of the EU as the world’s most important source of FDI wasreconfirmed as outflows of FDI rose for the sixth year in a row.

● The MNCs based in the European Union invested nearly two-thirds of the global outflows in1999 and accounted for outward flows of $510 billion, an increase of 20 per cent over 1998.

● In 1998, European Union FDI outflows were already respectively three and eight times higherthan the US and Japan.

● In 1998, European Union outflows to developing countries accounted for 45 per cent of thetotal flows to the South.

● The United Kingdom maintained its status as the largest investor in 1999, not only in Europe,but globally. The UK, which alone accounted for 39 per cent of total EU outflows, followed byFrance and Germany and the Netherlands.

Source: World Investment Report 2000, European Union direct investment yearbook 1999.

Given the weight of investments of EU origin, the EU, through concerted action, could make asignificant contribution to the establishment of responsible rules in order to govern the flow ofinvestments from North to South. Will the EU lead the way in this process, thus matching itsleadership role in financial flows?

2. Holding MNCs directly accountableThe alternative of holding MNCs directly accountable, while it may take the pressure off states’responsibilities to provide an adequate regulatory framework for MNC operations, offers greaterpossibilities for winning actual redress for victims of abuses by MNCs. Here, however, MNCs can usetheir ephemeral and shifting legal nature, existing many countries at once, to argue that they exist innone and are therefore free from regulation by any government other than that of the host countrythey happen to be in. When approaches in the host country prove fruitless – which is usually the case–other approaches can be used under either domestic or international law:

● At the level of the MNC’s home state;● At the regional level; and● At the international level.

Home or host state?There are differences of opinion over whether cases should be put forward in the home or the hoststate. Experience indicates that claims are less likely to succeed in host states, for a variety of reasons.Access to justice for victims/claims may be more difficult in their own countries. In South Africa, for

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instance, employees are banned by law from suing employers, this right being replaced with ‘no-fault compensation’, and the relatives of claimants who have died cannot bring a claim at all inSouth Africa, though they can do so in the UK against a UK-headquartered company. In such a casecollusion is more likely, partly because developing countries, which are usually host states, needMNCs in the globalized economy. Many small, weak, national economies are dependent on MNCs,and it is understandable, if regrettable, that they fear alienating them.

Meanwhile, having recourse to MNCs home states raises the question of sovereignty. In the past,home states have exercised diplomatic protection on behalf of corporations against the host state,but this became seen as a colonial practice and an infringement of the host state’s sovereignty.Arguments on the grounds of sovereignty, however, are double-edged. Companies often use (orabuse) sovereignty as a pretext for devolving responsibility to host states, hoping to benefit fromless adequate legal protection of victims and less juridical rigour. In many cases claimants haveinsisted on bringing their cases in the offending MNCs home country.

Yet host governments’ laws should not be ignored out of hand. For instance, hundreds of cases involvingoil spills have been brought successfully against Shell in Nigeria, resulting in compensation for damagesamounting to approximately $0.5 million. With the arrival of the civilian government in Nigeria thereare hopes that the judiciary will be more independent; but even under Gen. Abacha judges wereprepared to rule against oil companies, often because they were themselves from communities affectedby the companies’ operations. However, it was pointed out that these cases resulted from a very specificcontract signed between Shell and the former Nigerian Government granting Nigerians the right tosue Shell only on oil spills, so human rights violations cannot be addressed.

Table 1. The 20 largest European headquartered transnational corporations World rankingby foreign assets in 1998

WORLD TNI2 CORPORATION COUNTRY INDUSTRY

RANK

3. 45. Royal Dutch/Shell Group NL/UK Petroleum expl./ref./distr.

8. 21. BP AMOCO UK Petroleum expl./ref./distr.

9. 59. Daimler-Chrysler Germany Motor vehicles

10. 3. Nestlé SA Switzerland Food/beverages

11. 51. Volkswagen Group Germany Motor vehicles

12. 7. Unilever NL/UK Food/beverages

13. 63. Suez Lyonnaise Des Eaux France Diversified/Utility

15. 8. ABB Switzerland Elect. Equipment

17. 17. Diageo Plc UK Beverages

19. 52. Siemens Germany Electronics

21. 34. Renault SA France Motor vehicles

23. 40. BMW AG Germany Motor vehicles

26. 22. Bayer AG Germany Pharmaceuticals/Chemicals

27. 13. Roche Holding AG Switzerland Pharmaceuticals

28. 23. Hoechst AG Germany Pharmaceuticals/Chemicals

29. 56. Elf Aquitaine SA France Petroleum expl./ref./distr.

30. 50. Viag AG Germany Diversified

31. 26. Rhone-Poulenc SA France Pharmaceuticals/Chemicals

32. 27. Total Fina SA France Petroleum expl./ref./distr.

33. 14. Philips Electronics NL Electronics

Source: The World Investment Report 2000 pp. 72-74.

2 TNI is the abbreviation for ‘transnationality index’ which is calculated as the average of three factors: foreign assetsto total assets, foreign sales to total sales, foreign employment to total employment.

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The response of home statesA number of cases in industrialized countries where MNCs are headquartered – principally the UK,the USA, Canada and Australia – are slowly increasing the possibility for claimants from host countriesto hold MNCs legally accountable in their home countries.

In the UK, the legal standard that is used under English law is the ‘duty of care’, which is an obligationapplying to everyone in the UK, individuals as well as organizations. Richard Meeran has reportedon several cases which have been pursued by his firm, Leigh, Day and Co., to get compensation inthe English courts for people living in the countries where the abuses have occurred, by holdingthe UK parent companies liable at home.3 The central issue in these cases is whether the MNCparent company has a legal duty of care to people affected by the operations of its subsidiariesoverseas. Leigh, Day and Co. argue that it does have a duty because: the parent company,headquartered in England, exercised control, including financial control, of operations from its homebase; practices considered unacceptable in the headquarters country were exported to othercountries (e.g. the Thor case) and the profits are repatriated to the home country.

3. Actions at the regional levelThe European UnionSince the 1970s, the EU has been interested in issues of corporate responsibility and has issued aseries of Directives, mostly on working conditions, with relevance to the behaviour of MNCs. ExistingEU mechanisms for accountability include the European Court of Human Rights, the human rightsprovisions contained in the Amsterdam (1997) and Maastricht (1992) treaties; and the collectivecomplaints provision of the EU Social Charter, which has been used successfully in a handful ofcases concerning, for example, child labour in Portugal.

William van Genugten (Faculty of Law, Tilburg University) has suggested that it could be useful tobring test cases to the European Court in Luxembourg, and has also spoken of the need to fight forhorizontal force in the application of human rights decisions in the EU framework. However,according to van Genugten, MNCs have used EU instruments for their own ends on several occasions,such as the Nord/Nolde case of 1974, in which a German company sued the EU for violating itsrights to property.

Most recently, in January 1999, a parliamentary resolution based on a report by Richard Howitt MEPled to the adoption of the idea of a European Code of Conduct for European Enterprises Operatingin Developing Countries. The European Commission (EC) is now instructed to draw up a modelcode based on existing minimum standards for MNCs. This will not be legally binding, but, byadopting the Howitt report, the European Parliament (EP) has called on the EC to enforce an existingrequirement – that private companies undertaking work for the EU in third countries should respectfundamental rights in accordance with the Treaty of Europe, or lose their funding. The main use ofthe Howitt resolution lies in its creation of a Monitoring Platform, consisting of independent experts,trade unionists and European business representatives, which would investigate complaints andhear evidence from representatives of corporations about their actions in other countries. Thisforum would rely for effectiveness on subjecting companies to the glare of publicity and a semi-judicial setting. The EP Committee on Development and Co-operation will hold public hearings atleast once a year to which cases of abuse may be presented.

3 These included cases against the Kent-based company Thor Chemicals, in which over 28 workers in South Africanfactory suffered severe mercury poisoning; against Cape Plc, brought by over 2,000 South African victims of asbestosisfrom long-term unsafe practices by Cape and its fully owned subsidiaries in South Africa; and against Rio Tinto(formerly RTZ), brought by a worker poisoned by uranium dust in Namibia.

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Extra-EU FDI outflows exluding RE 1998

&'()*(

)'(

+(

,(

)(

North America

Central and South America

EFTA

Other European countries

Africa

Asia and Oceania

EU15 versus EU11 FDI assets Share in Extra EU15 FDI assets

- )- '- ,- .- *- &-

North America

Asia

EFTA

NICs2LA

South America

Oceania & otherterritories

NICs1

Central and EasternEurope

NICs2A

European Union Euro-zone

Facts: Table 2. Extra EU assets (geographic breakdown

Source: European Investment Year book 1999 p. 20

Facts: PIE 3. Extra EU FDI outflows excluding RE (geographic breakdown)

Source: European Investment Year book 1999 p. 35

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OECD Guidelines for Multinational EnterprisesThe OECD is not truly international, and is heavily biased in favour of the global North, its membersbeing the governments of 29 industrialized countries. Nonetheless, it has a series of agreementsand guidelines for member governments concerning corporations. A strength of OECD instrumentsis that they are drawn up by and for governments. They could and should be brought into nationallegislation, but governments rarely do this. Moreover, implementation is notoriously weak.

The OECD Guidelines for Multinational Enterprises, drawn up in 1976 and revised several times,most recently in 1999, are wide-ranging, covering employment, industrial relations, environmentalconsiderations, information disclosure and transparency, competition, taxation, and other aspectsof corporate activity.4 However, they are widely seen as out of touch with current corporate behaviourand crippled by their voluntary nature. In particular, the inertia and ineffectiveness of the NationalContact Points (NCPs) which constitute the Guidelines’ enforcement mechanisms are criticized.

Roger Blanpain, the rapporteur for the 1999 revision of the Guidelines, has outlined the revisionprocess, which was relatively open. Trade unions and to a lesser extent NGOs were consulted by theworking party responsible for the review, and information was available on the Web. Blanpain haslisted areas where new guidelines have been introduced, including:

● Extraterritoriality: making all MNCs headquartered in OECD countries responsible for theiractivities even when operating through subsidiaries outside the OECD area;

● Introduction of positive aspects, such as ‘encouraging human capital formation’, which shouldapply also to subcontractors and suppliers;

● Changes in the 1976 text on industrial relations, including access to decision-makers andcompliance with prevailing labour law;

● Age discrimination;● A new guideline on health and safety; and● New rules on giving notice prior to restructuring a company.

New guidelines have also been introduced on the use of environmental impact assessments, childand forced labour, bribery and corruption, and consumer interests. Suppliers and subcontractorsare encouraged to apply the Guidelines. There are, however, many loopholes and, above all, theproposals for improving implementation are toothless, since they focus strongly on reviving andstrengthening, NCPs which have already proved useless. For instance, the revised guideline onextraterritorial application of the Guidelines, which could cover some of the worst abuses by MNCsin developing countries, is positive. But without an effective enforcement mechanism, this too standsto be as widely ignored by companies as the Guidelines have been hitherto.

Another problem is the limited use of the Guidelines: in the 24 years of their existence the OECDhas examined only about 30 cases presented under the Guidelines, and only two in the 1990s,leading one to question to what extent a voluntary code could ever be effective in practice. RogerBlanpain has argued that although the Guidelines were not legally enforceable, the fact that theyhave been agreed and promulgated by many countries, companies, and labour organizations givesthem moral force. He recommended that NGOs should take up more cases, present them to theOECD, and lobby around them, on the grounds that the public opinion mobilized by such cases canmake MNCs change their practice. Given the present lack of implementation, however, it is notsurprising that there is little confidence in the system.

According to Saman Zarifi, a much more interesting and effective OECD instrument is its Conventionon Corruption (see briefing paper 4.4, The European Union’s role in fighting trans-border corruption),which holds companies criminally liable for bribing public officials in third countries. The existenceof this convention gives the lie to corporations, which have always claimed such a law would beunworkable. However, as so often, implementation to date has been weak.

4 See Duncan McLaren 2000, ‘The OECD’s revised Guidelines for Multinational Enterprises: A step towards corporateaccountability’.

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4. Action at the international levelParallel with national legislation, we need international standards which are directly binding onthe MNCs. States have long resisted these, because imposing such obligations would give companiesstatus in international law, which was considered dangerous. However, the OECD Convention onCorruption, currently the only international instrument which imposes obligations on MNCs, couldbe a useful precedent for setting similar obligations in the fields of human rights and environmentalresponsibility.

These instruments need to be accompanied by international institutions with the power to superviseand enforce the implementation of binding standards. With the failure of the MAI and of the attemptto make companies as well as individuals accountable before the International Criminal Court inRome, there are only international codes of conduct, such as the ILO and OECD mechanisms. Theseare severely hampered by their non-binding nature and very weak supervisory mechanisms.

International human rights law, which can apply to international as well as national companies,offers some opportunities for calling companies to account, but to date has been more widely usedin relation to states. However, the UN Subcommission on the Promotion and Protection of HumanRights, in the context of its work on economics, social and cultural rights, has begun looking at theactivities of MNCs and their impact on human rights and is expected to produce a new code in2001. The subcommission is also interested in other economic areas, such as trade liberalizationand globalization and their impact on human rights.

The United Nations Subcommission for the promotion and protection of human rightsThe United Nations human rights mechanisms have begun to address the fact that many of theproblems they deal with have their roots in corporate conduct, and the United NationsSubcommission for the Promotion and Protection of Human Righs has a working group dealingspecifically with these issues. According to a member of the working group, Francoise Hampson, ofthe three principal areas on which human rights mechanisms can focus – enforcement, monitoringand standard–setting – the Subcomission’s particular strength lies in standard-setting. Much of thestandard-setting as regards civil and political rights, is now considered to have been accomplished,and the Subcommission has been concentrating more on the realization of economic, social andcultural rights.

In 1998, the issue of MNC operations first came to the Subcommission’s attention. TheSubcommission established a three-year sessional working group, which is pulling together adocument aiming to integrate all the measures and norms necessary to ensure that all the activitiesof MNCs are consistent with the promotion and protection of human rights. The group is collectingdata from as many constituencies as possible on how MNCs affect the enjoyment of civil, cultural,economic, political and social rights, development and the maintenance of a healthy environment.It aims to cover both good and bad practices, and seeks input from NGOs, especially on theelaboration of sustainability reporting guidelines. A report on elaborating a possible code of conduct,with relevant human rights standards and a possible implementation mechanism, should be readyby the August 2000 session of the Subcommission and the group’s final meeting in 2001 may resultin a draft code, although the Subcommission would not itself be empowered to make this into aconcrete obligation.

This working group wants the new code to have a binding character, but expects this will be difficultto achieve, since there is already considerable opposition to this in the Subcommission from variouswestern European governments which do not favour imposing obligations on business. It also wantsto require MNCs to prepare regular impact assessments.

The International Labour Organization’s (ILO) ConventionsCurrently there are 180 ILO Conventions in existence of which five address ‘core’ themes:

● Conventions 29 and 105 on the abolition of forced labour;● Conventions 87 and 98 on the rights to freedom of association and collective bargaining;● Conventions 111 and 100 on the prevention of discrimination in employment and equal pay for

work of equal value;

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● Conventions 138 and 182 on the minimum age for employment and child labour; and● Conventions 174 and 176 on industrial accidents, safety and health.

ILO Conventions are international treaties, subject to ratification by ILO Member States, and as suchare held to be ‘hard law’, allowing claimants to proceed against governments, workers and employers;and, like the OECD instruments, they are intended to promote rather than punish. The ILO also hasa specific, less formal instrument related to MNCs, the Tripartite Declaration of Principles concerningmultinational enterprises and social policy (1977), which it describes as a voluntary code.The ILO is the principal international standard-setting body for labour relations, and manyinternational codes are based on ILO Conventions. As a legal instrument for obtaining corporateaccountability, however, it suffers from many of the same limitations as the OECD, principally asregards implementation. There is a MNCs Committee, but it tends to be very slow and inconclusivein practice.

The United Nations Global Compact

On 31 January 1999, in Davos, the United Nations Global Compact was launched at the WorldEconomic Forum by the United Nations secretary-general Kofi A. Annan. He called on worldbusiness leaders to take action, both in their individual corporate practices and by supportingappropriate public policies, to implement nine key principles in the areas of human rights, labourand the environment. The key principles are:

1. Support and respect the protection of international human rights within their sphereof influence;

2. Make sure their own corporations are not complicit in human rights abuses;

3. Freedom of association and the effective recognition of the right to collectivebargaining;

4. The elimination of all forms of forced and compulsory labour;

5. The effective abolition of child labour;

6. The elimination of discrimination in respect of employment and occupation;

7. Support a precautionary approach to environmental challenges;

8. Undertake initiatives to promote greater environmental responsibility; and

9. Encourage the development and diffusion of environmentally friendly technologies.

In practice, however, the Global Compact is in its present state no more than a set of principles.The agreement is non-binding and has no enforcement mechanisms, and implementation todate consists only of the launching of a website.

The World BankThe World Bank (WB) was originally set up to eradicate poverty, so its guidelines do protect certainresource-poor groups, such as indigenous people. These ideals have become somewhat diluted inthe growth of the World Bank as a major development donor and a promoter of neoliberal economicprinciples through structural adjustment programmes. This makes it an unpromising partner inany challenge to corporate power; but in recent years non-governmental development organizations(NGDOs) and people’s organizations have started to take the Bank to task and press it to meet upits founding principles, with some success. Now the International Monetary Fund and the WB arestarting to put poverty reduction into their mandates alongside free trade imperatives. Althoughthis may seem to ignore the inevitable contradictions, it creates room for calling on these institutionsto fulfill their promises.

The World Trade Organization (WTO)The WTO is the only international body with real power to enforce, but from the point of view ofchallenging MNCs, its devotion to free trade makes it on the whole part of the problem rather thanpart of the solution. The less power national governments have, the more necessary internationalregulation is; but unfortunately the WTO, the organization most involved in international regulation,is also the one coming under the strongest criticism.

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The WTO authorizes victims of unfair trade practices to impose sanctions on companies up to acertain maximum amount, and there are several cases where Corporations have had to changetheir behaviour, and ultimately bear costs. However, most WTO cases are between industries orcorporations. In practice, civil society has no meaningful access to the WTO, and the institutiondoes not present itself as a defender of the economic rights of citizens. In fact, protection of somerights by states can result in a violation of WTO rules. Thus, the WTO itself raises a series of humanrights questions.

5. NGO action: legal means, campaigns and advocacyWhile NGOs generally choose to challenge corporate power by non-legal means, such as campaigns,public awareness-raising, and advocacy, some have taken the legal route and others are consideringit as a strategy. In Belgium, Oxfam Magasins du Monde/Clean Clothes Campaign is campaigning forthe rights of employees of Adidas, a sponsor of the Euro 2000 football tournament in June–July2000, and would like to pursue legal actions. In Germany, the Bayerwatch campaign, which, as itsname suggests, monitors the activities of the powerful German pharmaceuticals MNC, Bayer, hastried to bring many cases against the company, but has had limited success and was itself sued byBayer in the late 1980s. After a seven-year legal battle that went right to the German SupremeCourt, Bayerwatch won the case, but at enormous expense.

In the Netherlands, Amnesty International’s Netherlands section is exploring the possibilities andproblems of legal actions with lawyers and other NGOs. In the UK, World Development Movementhas been working with Richard Meeran on the Cape case5, but is still trying to clarify the mosteffective role it can play as a campaigning organization; this may be most usefully defined on thebasis of public interest.

Semi-legal and non-legal means of pressuring companies are also very important, and can lead toeconomic punishment for companies, which is a good deterrent. NGO activities such as working onstandards and codes, raising public awareness, solidarity with claimants, research and evidence-gathering, advocacy with government and companies, can complement legal work.

Public hearings In 1999, as a result of the Howitt report and the resolution which has helped to create the MonitoringPlatform (see above), the European Parliament decided to hold public hearings where victims ofabuses by MNCs could complain publicly before Members of the European Parliament and in thepresence of the MNCs, who would reply. The press and media would also be invited. Hearings in theEP are decided on by presidencies, but are brought forward by the parliamentary committees. Itrequires a lot of lobbying to obtain an EP hearing and so far only the Committee on Developmentand Co-operation has agreed to hold hearings on MNCs. The big advantage of EP hearings is thatthe facts speak for themselves and that the mechanisms confront industries with complainants.

The Permanent People’s Tribunal on Global Corporations and Human WrongsThe Rome-based tribunal works on important test cases such as that involving Union Carbide atBhopal in 1984, which has been described as the world’s works industrial disaster. It also holdsperiodic Tribunal hearings to receive the testimony of those who have suffered from the activitiesof MNCs.

ShareholdingCorporations’ main legal responsibilities are to their shareholders, they often insists on this whencalled to account for putting profits before the welfare of workers and consumers or environmentalconsiderations. Holding a few shares in a company theoretically give the holder a limited say inhow the company operates. Some human rights and environmental organizations and activist havetried to use shareholding in the past as a strategy for promoting the accountability of companies,but the companies can mobilize for greater resources for influencing their shareholders thanindividual small shareholders can.

5 See footnote 3.

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Codes of conduct and Standard-settingThe formulation and promotion of codes of conduct and standards, including the awarding ofsocial or environmental labels such as Rugmark (a social label for carpets produced in India andNepal without the use of child labour), is perhaps the most common NGO activity aimed at makingMNCs more accountable. While the effectiveness of this strategy is debated, one result is that thereis now a large array of codes of conduct dealing with the same broad issues. An interesting exampleof work in this area is the set of Principles for the conduct of company operations within the oil andgas industry elaborated by Bread for the World (BfW). BfW realized that although there is no shortageof codes there is a need for principles that allow such codes to become operational, meaningfuland verifiable. The Principles form a comprehensive list of regulations covering people’s participationin planning oil and gas extraction projects; sustainable development; respect for indigenous peoplesand their traditions; environmental standards, including intergenerational equity, and human andlabour rights; enjoining independent monitoring, auditing and verification of codes of conductand independent and accessible mechanisms for receiving complaints.

Advocacy with governmentsIn Britain, Oxfam and World Development Movement (WDM) are pressuring the UK Government toimprove national law and policy, in order to make it possible to sue corporations or put pressure onthem to abide by the law.

WDM, having been frustrated by attempts to promote voluntary codes of conduct effectively, hasshifted its focus towards promoting enforceable regulations and their use as a complement tovoluntary codes. Here it is focusing on the UK Government and especially a review of company law.The key issue is the need to change the idea that a company’s legal responsibility is primarily to itsshareholders. WDM wants this responsibility extended not only to all UK stakeholders, for instanceemployees, but also to overseas stakeholders.

The question of international regulation of MNCs is more complex. WDM identified from internationalagreements a list of rights which corporations can be expected to respect. However, states areoften unwilling to implement these rights, and WDM is still examining whether corporations canbe made directly responsible for implementing them. Even harder to regulate is the economicimpact of MNC activity in host countries, especially in the context of mergers and other shifts incorporate ownership. To what extent can these aspects be regulated by national or even internationallaw? More indirectly, WDM is challenging the power of MNCs through work on the Bio-safety Protocol,in which it aims to strengthen the power of Southern governments to refuse to import geneticallymodified (GM) crops, giving both consumers and producers some rights against the companieswhich are pushing GM crops.

Advocacy with companiesAside from the work on codes of conduct, some NGOs are carrying out other forms of advocacywith companies. Amnesty International’s (AI) core mandate, for example, does not include theprotection of economic and social rights, but this emphasis is changing, and AI sees that to remainrelevant it must address the human rights impact of globalization and free trade. The BusinessGroup of Amnesty International UK (AIBG) has a number of activities aimed at getting companiesto be more aware of the human rights implications of their operations, including a letter campaignsensitizing companies operating in Indonesia to the East Timor crisis. In situations where humanrights violations are prevalent, companies’ activities can either contribute to these violations or canprotect human rights. AIBG outlines a series of policies which companies can adopt in such situationsin its Human rights guidelines for companies.

Over the last year or so, AIBG has also been working on issues of corporate governance, using theexample of pension funds. Local authorities invest huge sums of money in companies in this areaand are concerned about accountability. Pension funds control as much as a third of the StockExchange. A recent amendment to the Pensions Act requires all pension funds now to declarewhether or not they have an ethical policy. AIBG sees this as an opportunity to get the major financialinstitutions which manage their funds to develop their own ethical policies and criteria.

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Since the 1970s, AI in the Netherlands has been involved in advocacy with companies on humanrights, and is currently working on terms of reference for companies in this respect. However,companies have proven ignorant of even the basic notions of human rights and have only in thelast few years become acquainted with human rights instruments, such as the ILO Conventionsand OECD Guidelines. AIBG is trying to develop terms of reference for companies in the sphere ofhuman rights, and is also asking AI members to ask their pension funds about their activities.

ADIDAS – NOT PLAYING BY THE RULESReported by Carole Crabbe, Oxfam Magasins du Monde (OMM – Belgium)- the Clean Clothes Campaign(CCC) against Adidas,

Based in Germany, Adidas is the mother company to many subcontractors in countries where lowwages and poor working conditions are common. Under pressure from public opinion in 1998, it signeda very low-level voluntary code of conduct, which says nothing about implementation, monitoring, orsanctions.

Adidas was a sponsor of the Euro 2000 football tournament. In the run-up to the tournament, CCCasked the Euro 2000 organizers to include in their contract with sponsors the so-called FIFA code ofconduct, which – although FIFA apparently has not actually signed it — is a much better code thanAdidas’ own code and is based on ILO Conventions, with provisions for implementation and sanctions.This has been done, which means that all footballs and equipment made by Adidas and bearing theE2000 logo must comply with the FIFA code.

Meanwhile, several violations of workers’ rights in Bulgaria, El Salvador, Thailand, and Indonesia haveemerged, including denial of freedom of association, paying less than minimum wages, excessiveworking hours, making workers take pregnancy tests, and prohibition of collective bargaining. In March2000, OMM tried to present the cases to the Euro 2000 as evidence of violation of workers’ rights in thesupply chain, but they accepted no further responsibility. OMM is continuing to draw attention to theviolations, for instance by sending a television team to one of the countries involved, but would alsolike to move on the legal front against either Adidas or Euro 2000.

Which ways forward?The Warwick seminar participants discussed the basis and fora in which these cases could be pursuedat the home-state, regional and international levels. Possibilities raised included proceeding againstthe Bulgarian government for allowing (the) violation of ILO conventions in its jurisdiction, or againstGermany for allowing its citizens to violate those rules; bringing a claim against Adidas in Germany, itshome state; or bringing a case against Adidas in Belgium on the grounds of false advertising (usingthe Euro 2000 logo on its equipment while breaking the FIFA code). However, a two-pronged processwas recommended, in which, if NGOs could get strong enough evidence of the violations, lawyerscould use it to identify the most appropriate legal instruments and begin to apply them.

Predictable problems were also raised. The agreement of the workers concerned would have to beobtained before taking the case forward, and they would be unlikely to favour any action that wouldfurther endanger them. Might Adidas reply that it cannot guarantee the quality of all its subcontractorsand suppliers? Would evidence have to be found that Adidas is in fact using the FIFA code of conductfor publicity purposes? Strong arguments would have to be found for targeting Adidas specifically, sothat other sports goods companies such as Reebok and Nike would not seem to be let off the hook. Islitigation advisable if it means that the company might pull out of a country where it is a key contributorto the local economy? And finally, what if Adidas starts a libel action against the NGOs?

Awareness-raising, education and public campaigningMost if not all NGOs accompany their advocacy and other work with public awareness-raising andcampaigning. It is important to build a critical mass of informed public opinion calling corporationsto account for their activities. AIBG, Banana Link, Bayerwatch, and WDM are among the NGOs whopublish awareness-raising and campaigning materials, including regular newsletters (Banana TradeNews Bulletin, Keycode Bayer, Human Rights and Business Matters) to equip the public to callcompanies to account. Weltumspannend Arbeiten of Austria is a specifically education-orientedproject working with organized workers and development issues and the effects of globalization.

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Codes of conduct

‘Voluntary labels and codes of conduct are no substitute for legislation and bindinginternational agreements. However, they can be helpful in promoting fundamental labour

and human rights all over the world.’India Committee of the Netherlands

Codes of conduct are currently mushrooming, being created by governments, companies, and NGOs;and there seems to be a clear division of opinion between those who considered them at bestineffectual and at worst dangerous, and those who found value in promoting meaningful codesand lobbying for them to be treated by companies as a mechanism of accountability to the public,even though they are not legally binding. This division of opinion coincides to some extent withthe two constituencies: lawyers and NGOs/activists. Lawyers’ principal interest is in getting legalredress for victims of abuses; while that of NGOs is in non-legal means, which are more appealingto the public and can therefore have some public impact even if a legal action fails.

The NGO position, broadly speaking, is that while legal methods are both valuable and necessary,successes are still very small, and attempts by civil society to push MNCs towards more acceptablepractices, such as work on codes of conduct, should be seen not as an alternative but as a supportor complement to legal actions. Some NGOs feel that codes of conduct are valuable in establishinggeneral, agreed principles which could then be developed on the evidence of individual cases,leading subsequently to binding legislation.

The main problem with both internal codes of conduct and international standards and guidelinesis implementation. In the case of internal company codes the public relations component is invariablyhigh; internal codes have even been described as a form of advertising. But there is a serious dangerthat companies will abuse codes if they are not subject to tough, independent, binding supervisorymechanisms. These should consist not of internal accounting mechanisms set in place by thecompany itself, but of independent mechanisms to which victims of abuses by companies cansubmit complaints. Without such mechanisms, codes of conduct remain at the level of a PR exerciseand can be flouted or perversely interpreted by companies at will.

Another danger of internal codes of conduct is revealed when corporations change, for instancethrough breakup or merger. Shell, for instance, accepted a minimum code of conduct which allowedit to claim the moral high ground and bask in a good deal of credit. When Shell in Nigeria later soldoff parts of the corporation to small companies far less accountable than Shell and without codesof conduct, affected workers and communities were left without even the minimal protection offeredby Shell’s minimum code. Similar dangers – and a strategic dilemma for those seeking MNCaccountability – arise when MNCs leave an area, perhaps even as a result of successful actionsagainst them, and smaller and even less accountable companies move in to replace them. Anexample is Petronas, a Malaysian-based oil company which is moving into areas abandoned byNorthern oil companies. Internal, company-based codes cannot address situations of this kind:independent international mechanisms are the only option.

The weak implementation mechanisms of the relevant international codes and standard-settinginstruments have been discussed above. A chief advantage of standard-setting is that it appliesacross the board and in many cases includes reporting mechanisms. But there is still an urgentneed for meaningful implementation, putting the right procedures in place and getting themapplied.

In the end, codes of conduct, particularly internal ones, make corporations look and feel good withoutaddressing the actual or potential victims; whereas legal methods are based around the victim.However, neither lawyers nor NGOs and campaigners can afford to lose sight of the double objective:to get justice for the victims of past abuses and to put systems in place to ensure that such abusesdon’t recur.

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Conclusions and proposalsThe current focus on MNCs is very new. But the issue of corporate accountability is now ‘in the air’,and people in general are starting to assume that corporations should bear responsibility for whatthey do abroad.

The growth of rules and regulations that has accompanied the globalization of institutions meansthat people and companies are more familiar and comfortable with rules and with ideas oftransboundary accountability. In fact, corporations prefer the law because it is clear, everyone knowswhere they stand. MNCs can be regulated, should be regulated, and ultimately want to be regulated.

MNC accountability can be demanded either directly from the corporations involved, or indirectlyfrom the states where they operate and especially from those where they are headquartered. Suchaccountability can be demanded via legal action at the domestic, regional or international levels.

However, there are a number of constraints on winning either redress for past or ongoing abusesby MNCs or greater accountability in the future. These include:

● Collusion between MNCs and states which are not willing to enforce existing laws or whichactively exempt MNCs from their national legal systems, often under pressure from their owneconomic needs;

● Laws, and models of legal system, emanating from the North where the companies have theirheadquarters, give greater power to the already powerful;

● ‘Reverse forum-shopping’; where the accused corporations fight to have a case refused in acountry favourable to the complaints (usually the home country) and have it returned to alocation favourable to itself (usually the host country);

● The‘corporate veil’ or smokescreen, ambiguities in the nationality of MNCs which make it difficultto separate the identities of the parent company and the subsidiaries, created by MNCs to enablethem to escape legal responsibility in a country where they operate;

● WTO rules, which offer little help to claimants and are not really interested in labour issues;● Limiting the access of civil society to approach the WTO and other international institutions;● Internal codes of conduct, which allow corporations to feel good while not imposing any legal

obligations on them, and do nothing to address the claims of victims;● Poor implementation mechanisms in most international regulatory instruments;● Counteroffensives by MNCs, e.g. libel cases against campaigners;● The expense of legal actions, which can sometimes be crippling even in the case of a victory,

particularly where an NGO is defending itself against a corporate counteroffensive.

Lawyers, trade unionists and NGOs have a common goal, to minimize the impunity of MNCs as theirpower increases with globalization. Organizations do not have to take MNCs on alone but can doso through coalitions or collaborations to optimize the use of funding and the specific competenciesof different sectors, organizations and people.

Ultimately, what is needed is binding and enforceable legislation at the international level to regulateMNC’s activities, and effective international institutions to enforce it. The road to this goal is longand fraught with difficulty and conflict, but there are a number of steps on the way which areuseful and practicable. The following proposals indicate some of these.

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Proposals● Pool resources and knowledge to come up with ways of getting evidence from victims or

claimants and ways of applying them where it matters most. Put resources into gatheringevidence;

● Build coalitions, share information among victims/claimants and experts in Northern legalsystems, and systematize them into written materials;

● Develop, with the help of lawyers, economists and accountants, tools for analyzing MNCs’ activitiesand their impact, and for keeping track of changes in corporate practice and structure;

● Research into applicable national and international legal instruments, including competitionlaw, law on mergers, and criminal liability of MNC management;

● NGOs and academics should work harder on getting more test cases going in Europe;● Build up a body of evidence around case law. This could be facilitated by a reporting and advisory

body where evidence could be accumulated, taken with a common set of standards as a measure;● Use the development of a body of norms as contained in codes of conduct as a basis for reporting

and co-operation with the United Nations Subcommission on the Promotion and Protection ofHuman rights ;

● Implementation, implementation, and implementation! Existing international instruments willremain toothless and invisible if they are not used. Write to the local OECD, NCPs, and if they donothing this can be used to demonstrate that NCPs are incompetent and press for reform of thesystem;

● Develop a different type of co-operation between Northern and Southern NGOs, one in whichNorthern NGOs could advise those in the South on how to register a complaint;

● Finally, get everyone talking to each other and sharing information. As an initial step, a web siteon these issues has been set up. GLODIS/Department of International Law, the Centre for Researchon Multinational Corporations (SOMO), and International Restructuring Education NetworkEurope (IRENE) can serve as a clearinghouse for information.

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3.7 The impact of the EU’s demand forgoods and services

Franck AmalricSociety for International Development (SID)

Considered as a whole, the economy of the European Union is the largest in the world. The 373 millionEuropean citizens produce 36 percent of the world’s Gross National Product (GNP), and its importsmake-up 18 percent of the global demand for goods and services (only second to the United States’21 percent). The EU’s demand for goods produced in other countries is therefore very significant forexporting countries. The impact is complex and takes place through at least three channels.

On the positive side, high EU demand for foreign goods provides economic opportunities for foreignproducers, and in this way can support the development efforts of countries in the South and East.The flip side of the coin is that, the more the EU economy consumes, the more environmental space ittakes up, and since consumption within the EU is already beyond ecologically sustainable levels, anyfurther increase in its consumption either further deepens the environmental crisis world wide orreduces further the environmental space available for other countries. Moreover, shopping in the EUmay support production and commercialization practices that do not respect people’s rights, orenvironmental standards, or stand in contrast to the development needs of the producing countries.

The economic significance of importsThe great American economist, J.K. Galbraith, once remarked that ‘production is now more necessaryfor the employment it provides than for the goods and services it supplies’. It is not forcing the trait

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too much to state that in industrialised countries consumption is needed for production ratherthan the other way around. The traditional relation between consumption and production is thusreversed as a consequence of the recurrent need to generate new employment opportunities in acontext of continuous productivity gains, and for reasons linked to the reproduction of capital.

A similar argument is made today in the context of North-South relationships: high-sustainedNorthern consumption would be necessary for the development of countries in the South and intransition by providing a market for the goods they produce: “It is not politically correct these daysto say it. But everyone needs the United States, EU and Japanese economies to grow and to beimporting as well as exporting. A slow down not only boosts protectionism sentiments, where weneed it least, and weakens the position of those who seek more Gross Domestic Product (GDP), butalso has an immediate impact on developing countries’ exports.”1

Most EU imports, however, do not serve to finance development efforts. In 1999, the EuropeanUnion imported goods for a total value of 779 Billion Euros, which represents a world import shareof 18.7 percent, second only to the United States that had a world import share of 23.6 percent.Twenty percent of the EU’s share of imports was held by the United States alone; another ninepercent by Japan; 10 percent by Norway and Switzerland alone, and another 10 percent by thecountries of central Eastern Europe (excluding Confederation of Independent States (CIS) countries);and six percent by OPEC countries. Thus, only 45 percent of EU imports actually represent marketaccess for developing countries, 10 percent of which are captured by the Asian Tiger economies.2

Access to the EU single market is regulated by different policies and organizations:

● The various trade agreements managed by the World Trade Organization;● Other multilateral agreements such as the EU-ACP partnership and the Euro-Med partnership;● Bilateral agreements like the EU-South Africa free trade agreement;● Ad-hoc initiatives, like the EU’s“Everything but Arms” proposal towards the world’s 48 poorest countries.

In addition, access to EU markets is influenced by internal regulations that impact trade. Some ofthese regulations are themselves included in a number of agreements within the WTO, in particularover sanitary and phytosanitary measures and over technical barriers to trade. Others are not.A well-known example of the latter is an EU directive on chocolate. In July 1999, the Internal MarketCouncil of EU Ministers approved a stance that allows certain vegetable fats to be added to chocolate,up to five percent of the finished product. This internal decision will reduce the demand for cocoa,and could affect significantly producing countries and growers.3

Calls for greater access to Northern markets, and EU markets in particular, remains a central concernof the South. Access to these markets remains particularly difficult for goods in which Southernproducers may hold a comparative advantage: textile and agricultural goods. Thus, “High-incomecountries’ agricultural tariffs and other distortions, such as subsidies, have been estimated to causeannual welfare losses of US$19.8 billion for developing countries – equivalent to about 40 percentof the official development assistance given to developing countries in 1998.”4

A recent and important initiative to provide better market access to developing countries is theEU’s ‘Everything but Arms’ new policy.5 In late February 2001, the EU council of Ministers approved

1 Moore, Mike, Speech to the Ministerial roundtable on trade and poverty in LDCs, London, March 19, 2001. MikeMoore is Director General of the World Trade Organization. Speech available at www.wto.org/english/news_e/spmm_e/spmm55_e.htm.2 All figures from Eurostat (2001) External and intra-European Union Trade, Luxembourg: Office for Official Publicationsof the European Communities.3 See John Madeley (ed.) with Clive Robinson (1999) “Brussel’s blind spot. The lack of coherence between povertyeradication and the European Union’s other policies”, Aprodev. Available on www.oneworld.org/aprodev/blind991.4 Anderson, Kym, Bernard Hoekman, and Anna Strutt (1999) “Agriculture and the WTO: Next Steps.” Paper presentedat the Second Annual Conference on Global Economic Analysis, Avernaes Conference Centre, 20-22 June, Helnaes,Denmark. Cited in World Bank (2000), “World Development Report 2000/2001. Attacking Poverty”, New York: OxfordUniversity Press. p.180. Moore cites a Tinbergen Institute study which estimates that developing countries wouldgain US$ 155 billion a year from further trade liberalization.5 See the European Commission’s web-site: europa.eu.int/comm/trade/miti/devel/eba.htm

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the Commission’s proposal to eliminate quotas and duties on all products except arms from theworld’s 48 poorest countries. The decision came into effect on March 5 2001 with the elimination ofquotas and duty on all products (except arms), with three exceptions: bananas, sugar and rice. Theelimination of tariffs and quotas on these three very sensitive products will be phased out over afew years to allow appropriate adjustments within the EU and its traditional commercial partnersfor these products.

Buying global environmental spacesThe human economy is integrally part of the biosphere, and consequently the extent to which thehuman economy can grow is limited by the limits of the Earth’s natural environment.

In the heyday of development, after World War II, there was a lot of optimism in the capacity of thehuman economy to grow – and indeed world output has multiplied over the last fifty years. Butrecently, it has become more evident that this growth could not be sustained much more, and thatthe human economy was increasingly taking a toll on nature’s economy, thereby underminingprospects to sustain the human economy in the future. One consequence was to debunk the myththat, one day, people the world over could enjoy the high-consumption lifestyle of the averageEuropean citizen: “Extrapolating current industrial consumption and production patterns to theentire world would require about ten times the existing resources, which illustrates the scope forpossible distribution tensions and ecological problems at a global level if current tendencies arenot curbed.”6

From this perspective, high levels of aggregated EU consumption may pose a problem to the extentthat it takes-up more than its fair share of the “environmental space” available for the human economyworld-wide. The environmental space is defined as “the total amount of energy, non-renewableresources, land, water, wood and other resources which can be used globally or regionally withoutenvironmental damage, and without impinging on the rights of future generations” (Carley andSpapens 1998: 9). Environmental space is a multidimensional criterion that does not attempt toaggregate all forms of natural assets into one single measure.

Two questions follow: How do we measure the environmental space that an individual or a groupof individuals use? What is the “fair” share to which an individual or a group of individuals is entitled?Measuring the environmental space used in the act of consumption takes into account not onlythe immediate space taken up, but also all the space used in the course of the production, processing,and commercialization of the product, which is called the “ecological backpack” of the product.If we assume that “we” share the world as equals, calculating “fair” shares should also be quitestraightforward. For each type of resource, the fair share is simply the global environmental spaceavailable divided by the world population. These individual shares can then be aggregated to assessthe “fair” share for groupings like nations.

Let us emphasize that a fair share of environmental space is not an endowment. It is not a startingpoint, but an end point, an objective to reach, a target that helps policy-makers and citizens tovisualize the magnitude of the changes to be made, and assess the relevance of different measuresin order to achieve them. For this reason, the principle of living within one’s fair share ofenvironmental space automatically raises limits to trade and appropriation, at least because onewould not be allowed to trade and therefore accumulate shares in environmental spaces.

In 1992, Friends of the Earth Europe launched the Sustainable Europe Campaign. The purpose ofthe campaign was to assess what sustainable development means in practical terms. It adoptedand refined the concept of environmental space, with scientific support from the Wuppertal Institutefor Climate, Environment and Energy. The outcome of this work is presented in Carley and Spapens(1998). The table below presents some of the results.

6 Commission of the European Community (1993) White Paper on Growth, Competitiveness and Employment, Brussels:Com (93) 700. Cited by Carley, Michael and Philippe Spapens (1998), p. 29.

170

EU consumption of environmental space with interim reductions for the year 2010 and fullysustainable consumption levels for 20507

Resource Present use per Optimum reductions for final target Interim target 2010

capita per year year 2050

Energy 7.3 tonnes 1.7 tonnes -77% -26%

CO2 emissions

Non-renewable

raw materials

Cement 536 kg 80 kg -85% -21%

Pig iron 273 kg 36 kg -87% -22%

Aluminium 12 kg 1.2 kg -90% -23%

Chlorine 23 kg 0 kg -100% -25%

Land use EU-12

Protected area 0.003 ha 0.061 ha + 2000 %

Built-up land 0.053 ha 0.051 ha -3.2% -3.2%

Net import of land 0.037 ha 0.0185 ha -50% -50%

Wood 0.66 m3 0.56m3 -15%

Buying ethicallyAnother impact of buying, on non-EU countries, is through its implicit support to processes and theorganization of production and marketing channels. The economic demand generated by the factof buying goods and services participates in supporting and encouraging practices that are attimes ethically questionable. Civil activism has for a long time attempted to make consumers moreaware of these linkages and use their purchasing power as a political tool.

The array of issues responsible purchasing touches upon is potentially huge, getting ever largerand more complex with the increase in trade relationships. Just to mention a few of them:

● Illicit appropriation of natural resources: there are today many conflicts around the world overthe appropriation of natural resources which oppose commercial interests targeted at globalmarkets and local communities defending their livelihoods. The oil and mining industries, butalso the tourist, paper, fishing and agro-business industries are particularly involved. A numberof international campaigns – for instance against Shell’s policies in Nigeria -- have raised publicawareness on some of these issues.

● Illicit externalization of costs in the process of production: the problem is similar to the previouspoint. Mining activities, for instance, may lead to the pollution of rivers.

● Illicit forms of production: when for instance minimum environmental or social standards arenot respected.

Efforts to involve consumers in social activism have pursued two complementary paths, whichcorrespond respectively to the resistance and to the constructive agendas: campaigns to denouncethe malpractice of specific economic actors, usually a transnational company; promotion of “fairtrade” and other types of “ethical” products.

Campaigns by consumer groups in the North, in alliance with affected citizen groups in the South,have played and continue to play a significant role in making consumption more responsible. (Zadekand Amalric 1998; Morehouse 1998). Significant campaigns have targeted sweatshop labour by theGAP and Nike or environmental destruction and violations of human rights by Shell in Nigeria.More recently, a number of home improvement retailers in the United States, including Home Depot

7 Source: Carley, Michael and Philippe Spapens (1998), p. 106.

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and Menards, respectively numbering one and three on the market, in response to an internationalcampaign waged by the Rainforest Action Network, have announced they would stop selling woodfrom endangered old growth forests within a few years (RAN 2000). Oversight and monitoring bycitizen groups, in particular consumer groups in the North, thus complement efforts towardsdemocratic governance in the South to respect people’s rights, protect ecological sustainability,and promote sustainable human development (See Briefing papers 3.6 on MNCs and 4.2. on Forests).

Beyond supporting campaigns against a particular company, there is evidence that consumers arebecoming more and more aware of the political dimension of purchasing goods and services, andthat they are ready to put their money where their morals are. A study conducted in the UnitedKingdom revealed, that one out of six shoppers say they frequently but or boycott products becauseof the manufacturer’s reputation (Cowe and Williams, 2000). The demand for ethical products isactually on the increase – for products like ethical investment, fair trade, or organic food – eventhough it still represents a very small share of the market (about one percent in the United Kingdomaccording to Cowe and Williams). Fair-trade ground coffee, one of the best-known fair trade products,has captured around five percent of the UK market, with sales growing at around nine percentannually in an otherwise static market.

The future of these movements and trends will depend, in part, on national and EU level policies onlabelling, i.e. how much available information is there about the products, manufacturers and retailersand is it free or required or both to shoppers. Labelling may include any information aboutproduction and the supply chain – from the producer, to wholesalers, to distributors. In the UnitedKingdom’s market, labelled products include sustainable timber, fair trade chocolate, tea and coffee,and recycled plastic or paper (Boyle and Simms 2001). Recent legislation at the EU level includesthe 1998 decision to impose labelling of genetically modified food.

Labelling will certainly become an important area of controversy in the coming years. Governmentsand citizens will have to mediate between shoppers’ increasing demand for information, pressuresfrom corporations and other economic interests, and international commitments to trade.

ConclusionsHigh demand for products in the European Union has (at least) three impacts on the rest of theworld:

● It provides a market for goods produced in other countries and in this manner supports theeconomy of these countries.

● It takes-up limited environmental space beyond the EU’s fair share.● It supports production practices that may go against respect for human and social rights, as

well as ecologically sustainable practices.

The first and third points are mutually compatible. The third point is actually a qualification of theview that greater market access can support development efforts: this may be true if and only if theright institutional mechanisms are in place in order to translate global economic opportunitiesinto genuinely developmental social and economic processes.

The second point, by contrast, does stand in conflict with the logic of the first point. What it says isthat a development strategy that is dependent on increasing consumption in the Northern countriescannot be sustainable because the North is also consuming beyond the thresholds of sustainability.It calls therefore for a different organizsation of the global economy towards one that would provideeconomic opportunities to developing countries independent of increasing market opportunitiesin the North.

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Contacts

On the link between consumption in the North and development through market access:UNCTAD www.unctad.orgThe South Centre www.southcentre.orgEuropean Commission External Trade europa.eu.int/comm/trade

On consumption and environmental spaces:WWF www.panda.orgRedefining Progress www.rprogress.orgFriends of the Earth Europe www.foeeurope.org

On ethical consumption and fair trade:New Economics Foundation www.neweconomics.orgConsumers International www.consumersinternational.org

ReferencesBoyle, David and Andrew Simms (2001) The Naked Consumer. Why Shoppers Deserve Honest Product

Labelling. London: New Economics Foundation. (Available on www.neweconomics.org)Carley, Michael and Philippe Spapens (1998) Sharing the World. Sustainable Living and Global Equity in

the 21st Century. London: Earthscan.Cosgrove, W. J. and F.R. Rijsberman (1999) World Water Vision: Report. Version of 17 December 1999. Paris:

World Water Vision Unit at UNESCO.Cowe, Roger and Simon Williams (2000) Who Are The Ethical Consumers? London: The Cooperative Bank.

(Available onIPS (1997) Terra Viva, Monday, June 23.Morehouse, Ward (1998) ‘Consumption, Civil Action and Corporate Power: Lessons from the past, strategies

for the future’, Development 41 (1), pp. 48-53.Rainforest Action Network (2000), “Menards announces plan to end sales of endangered old growth wood

products”, RAN, January 28.Zadek, Simon with Franck Amalric (1998) ‘Consumer works!’, Development 41 (1), pp. 7-14.

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Interlude 3:How fair is the tropical timber business in the EU?

Emmanuel HeuseWorld Wide Fund for Nature, WWF Belgium

The European market, historically one of the leading consumers of tropical timber, has been exceededover the past two decades by Japan, South Korea, China and Taïwan. Together, these four Asiancountries import more than three times the amount of tropical timber products annualy importedby the countries of the European Union. In 1998, these four countries imported 10 million cubicmeters (roundwood equivalent). Meanwhile, imports by the major European countries were lower:France (1.9 million m3 RE imported in 1998), Italy (1.6 million m3), Spain (1.2 million m3), and Germany(1.1 million m3).

A report published last year by the WWF-Belgium and the World Resources Institute in Washington1

underlines that despite the increasing importance of capital originating from south-east Asia fornew logging and timber processing operations in ACP countries, European companies still have adominant, albeit declining, influence in the sector in regions such as the Congo Basin in CentralAfrica. According to this report, European firms were traditionally selective in the species and qualityof timber they harvested and exported, logging vast areas of forests at low intensity’. Yet, in order torespond to the increasing demand for African timber on the Asian markets (Asia temporarily becamethe most important destination for African logs in mid-1997), European suppliers and new Asianinvestors have begun to harvest more species and thus larger volumes per hectare. From a generalpoint of view, logging activities by foreign entreprises operating in low-income timber producingcountries hardly ever reconcile the discrepancy between long-term forest management objectivesand the need of foreign investors’ short-term profitability, a need driven by the market and theinvestors’ shareholders. Investors are largely interested in capturing timber income from a forest,then moving on to new primary forest areas once existing areas are exploited (as long as the costsof infrastructure to open up primary forests can be met). Up to a few years ago, no investments hadtaken place for silvicultural treatments or any other measures to assure a new harvesting cycle.

The report also states that:

European logging companies claim their selective method of exploitationdoes not destroy the forest, and that they can not be held responsiblefor the side-effects of logging, such as movement into logged areas bysmall farmers and hunters…

However, very few European-owned operations have developed forestmanagement plans or inventories, clearly indicating little intention toplan resource use and management for the long-term.

1 Nigel Sizer and Dominiek Plouvier, Increased investment and trade by transnational logging companies in Africa,the Caribbean and the Pacific : Implications for the sustainable management and conservation of tropical forests,Brussels, 2000.

174

The area currently being brought under management remains very small in comparison to themore than 60 million hectares which have been opened up for logging in Africa, largely by Europeans,much of which has already been deforested by over logging and invasion by hunters and farmers.

Only very recently have the first European logging firms operating in Central Africa shown significantinterest in improving their level of investment in responsible management. In Gabon for instance,four companies (Compagnie Equatoriale des Bois of the Groupe Thanry, Leroy, Rougier-Gabon, andSociété des Bois de Lastourville) have started to elaborate contracts with the government basedon long-term management planning. In the Central African Republic, two companies (Sociétéd’Exploitation Forestière de la Sangha-Mbaéré and Industrie Forestière de Batalimo), with thefinancial help of the Caisse Française de Développement and technical assistance from CIRAD-Forêt, France, have recently elaborated forest management plans and have started their fieldimplementation. In Congo-Brazzaville, the Compagnie Industrielle des Bois of the German GroupHinrich Feldmeyer Gmbh & Co, has also engaged in the development of a comprehensivemanagement plan.

Reforming the role of the governments in producing countries, as forest owners and stewards, is animportant key to any solution. Of course, governments should be advised and helped by the donors andinternational community. Yet, whether such help can offset the overall effects of globalization remainsto be seen. While the economies of the tropical timber countries have been liberalized, facilitating theinflow of capital and the expansion of primary industry, there has been a great lag in the establishmentof the various control, monitoring, and regulatory mechanisms that are, to some extent, taken forgranted in developed countries. During this lag, investors are able to operate with little or no publicscrutiny, and in some cases, bring about substantial economic losses to the countries concerned.

Through the new Cotonou Convention and the renewed Tropical Forest Budget Line, the EU has acrucial role to play in this regard. It should help the governments of producing countries to committhemselves to establishing the regulatory and planning framework needed to ensure that foreigninvestments in logging operations contribute to national economic growth; while employing theirbest practises to minimize negative social and environmental impacts. Governments that makeand stick to commitments to behave responsibly should receive preferential attention from the EU.Preferential assistance should be given to those countries which have the courage to enact moratoriaon new investments before they have established a national system of protected areas; haveaddressed indigenous and tribal land claims; and have created sufficient technical capacity tomonitor the logging activities. These countries will experience a significant short-term cost bymaking such decisions, which may in some cases be very difficult where there is substantial pressureto do otherwise. Funds should be made available by reallocating them from countries where thereis not a clearly demonstrated political will at the highest levels to promote transparency, reducecorruption, combat poverty, and so on. It is vital that donors improve their coordination so thatcommon conditionalities are upheld across programmes and agencies.

On the other hand, European transnational investors, who make clear commitments to responsibleforest management and third-party certification, should also be granted special assistance from theEU and European development banks, for the elaboration and implementation of specific elementsof forest management plans related to ecological and social factors. These should include identificationand effective management of protection series; low impact logging training; natural regenerationstudies; and the elaboration of mechanisms to market non-timber products and services.

However important the role to be played by the EU institutions through adequate trade policy-making and proper implementation of aid programs in the framework of the Cotonou conventionand other aid mechanisms, the most important driving force in Europe for an effective protectionof tropical forests might remain in the hands of the European consumers. Growing environmentalawareness and concern about tropical forest loss has developed steadily accross Europe for thelast couple of years. One outgrowth of this strenghtened awareness has been the establishment ofmeans to independently certify the origin and quality of management behind the production oftimber from all sources, such as the Forest Stewardship Council system. While certification processesdo not yet represent a major proportion of global tropical timber consumption for the time being,they do point to developing trends in consumption. Certification may eventually become aprerequisite for suppliers willing to sell tropical timber products on the European markets.

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PART 2

GLOBAL ISSUES

176

177

4. SOME GLOBAL ISSUES AND THE EU’S POTENTIALROLE IN ADDRESSING THEM

178

179

4.1 The impact of the EU on the global environment:the case of global warming

Raimund BleischwitzWuppertal Institute1

1. Facts about global warming and the EU´s impactSince the First World Climate Conference took place in 1979, climatologists have been seriouslystressing the potential threat of global warming. Since 1900, the average annual global airtemperature has increased by 0.3-0.6° C and 1998 was, globally, the warmest year on record since1861. These trends are attributed to the increasing emissions of greenhouse gases (GHG) due tohuman activities, most notably CO

2. Under the assumption that these emissions will continue in

the near future, climatologists expect a rise of the average earth´s near-surface temperature byapproximately 1.4 – 5.8°C by the end of the 21th century. If one compares this with the globaltemperature rise of roughly 5°C after the last glacial period, 15,000 to 50,000 years ago, one realizeshow dramatic an impact this increase might have.

1 Raimund Bleischwitz joined the SID Responsible EU initiative while working with Max Planck Project Group ‘Law onCommon Goods’. As of June 2000, he continued to work on the issues at Wuppertal Institute. The views expressed inthe article are only those of the author and do not necessarily represent the opinion of the Max Planck ProjectGroup or the Wuppertal Institute.

�

Global environment Issue:

global warming

UN agreements

Trade agreements

IMF policies

World Bank policies

National development pol.

EU development policy

Enlargement

CAP

Common pol. on fisheries

ECAs support to TNCs

TNC corporate strategies

Buying

Consuming

Channels of impact

180

The rise sea level to up to 0.88 m by 2100 is probably the most widely discussed impact, but others,such as the melting of glaciers and sea ice; changes in rainfall and wind patterns; and changes inthe incidence of climatic extremes, would also have potentially disastrous effects for the earth´secosystems and for humanity. Food and water supply will be heavily affected by climate change.Many developing countries in particular are extremely vulnerable to any of these changes. It is verylikely that an increase in conflicts will arise along with such changes.

The Intergovernmental Panel on Climate Change (IPCC), which was set up in order to give advice tointernational policy makers in 1988, has developed computer-based climate models. The latestreport of January 2001 (IPCC 2001) states that there is increasing confidence in the ability of modelsto project the future climate, based upon a better understanding of water vapour, sea-ice-dynamicsand aerosols. Models have been tested and calibrated, inter alia, by comparing simulation results tomeasured changes. A special report on emission scenarios (SRES) projects further temperatureincreases above 1990 levels of about 1.4 to 5.8°C by the year 2100. However, in order for the eco-system to naturally adapt, temperature increases should be limited to 1.5°C by 2100 or to 0.1°C perdecade, and a rise in sea levels that does not exceed 2cm per decade, industrialized countries wouldneed to reduce greenhouse gas emissions by at least 35 percent between 1990 and 2010.

Fossil-fuel combustion is the leading activity causing global warming. Other activities are agriculture,forestry, land use, and certain industrial processes. Almost every human activity contributes in oneway or another to the greenhouse effect. Unfortunately, current technologies cannot scrubber forCO

2. For this reason, other options of technological change such as energy efficiency must move

from being marginally important to the centre of economic strategies.

Table 1. Greenhouse Gases

Gas Concentration Contribution to Main anthropogenic sourcesincrease (percent) Global Warmingsince about 1750 (percent)

CO2

30 percent 64 percent Fuel combustion, deforestationand land-use change, cementproduction

CH4

145 percent 20 percent Energy production and use (incl. Bio-mass), animals, rice paddies, sewage,organic waste in landfills

CFCs, HFCs, not applicable 10 percent Refrigeration, air conditioning, foamPFCs blowing, solvent use, aluminium

industryN

2O 15 percent 6 percent Use of fertilizers, land clearing, adipic

and nitric acid production, bio-massburning, combustion of fossil fuels

Source: IPCC 1996.

In 1990, in the European Union, greenhouse gas emissions made up 25 percent of total emissionsin industrialized countries (excluding CO

2 sinks). Carbon dioxide contributes to 80-90 percent of

GHG emissions in Western Europe and the US, and about 70 percent in other industrialized countries.If one takes into account the historic emissions since early industrialization took place, the globalshare of Europe would be obviously higher.

However, if one considers current emissions, the EU´s impact is declining compared to that of otherindustrialized countries and the developing world. Between 1990 and 1996, the EU’s CO

2 emissions

decreased by 1 percent. Though some people are optimistic and assume a permanent trend towardslower emissions caused by the introduction of the information age, CO

2 emissions are projected to

increase under the so-called baseline scenario by 8 percent above 1990 levels by 2010, with thetransport sector facing rapid increases (+39 percent) while industrial sector emissions decline by15 percent. This divergence between the projected increase of 8 percent and the necessary decreaseof 35 percent by 2010 strongly demand that additional policies and measures on each level of theeconomy and society will have to be taken.

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2. Policies to combat global warming internationally and at the EU levelIn 1979, on the occasion of the First the World Climate Conference, the International climate policycommenced. After some ups and downs in the eighties, governments responded to the concernsat the 1992 UN Conference on Environment and Development by adopting the FrameworkConvention on Climate Change (UNFCCC). More than 170 countries have now ratified the convention,including the European Community and all 15 Member States. Article 2 defines, as the objective ofthe convention, the stabilization of greenhouse gas concentrations in the atmosphere at a levelthat would prevent dangerous anthropogenic interference with the climate system, to be achievedwithin a timeframe sufficient to allow ecosystems to adapt naturally, to ensure that food productionis not threatened and to enable economic development in a sustainable manner. This is quite anambitious objective! The industrialized countries (as listed in Annex I of the Convention) committedthemselves to aim to return their emissions of greenhouse gases to 1990 levels by the year 2000.

In 1997, at the Third Conference of the Parties (COP 3), the Kyoto Protocol was adopted stating thatindustrialized countries should reduce their emissions of six greenhouse gases, as expressed in CO

2

equivalents, by an overall 5 percent of1990 levels by 2008–2012. The Kyoto Protocol, however, stillhas to come into force. The EU signed it relatively early, the US too, but the ratification process is stillunderway. To become binding international law, the Protocol has to be ratified by 55 parties to theUNFCCC and the Annex I parties ratifying it have to account for 55 percent of the 1990 CO

2 emissions

(of Annex I countries). This mechanism gives strong parties a blocking position, but the US or EUalone cannot block its entry into force.

There are three ‘flexibility mechanisms’ introduced in the Kyoto Protocol which are aimed at reducingthe overall costs of GHG reduction by allowing the use of the comparative advantages of differentcountries. In particular, the Russian Federation is prepared to sell licenses resulting from its economicbreakdown since 1990 and the related decrease in CO

2emissions.

The flexibility mechanisms are:

● Emissions trading among industrialized (Annex I) countries;● Joint implementation among industrialized countries; and● Co-operation between industrialized and developing countries in a ‘clean development

mechanism’.

In November 2000, the latest Conference of the Parties (COP 6) took place in The Hague (TheNetherlands). It closed without any decision concerning the critical issues of the negotiations. TheEuropean Union, supported by many NGO´s, underlined their principle of ‘environmental integrity’,meaning that the reduction of emissions should primarily be done by domestic measures and bystrictly limiting (or even excluding) the inclusion of any carbon sinks, such as forests or other landor ocean absorption of greenhouse gases. An opposite position has been vigorously representedby the so-called ‘umbrella group’, namely the USA, Japan, Australia and Russia. After the Conference,some observer stated that the result of having no deal is preferable to any bad deal; while otherscriticized the President of COP 6, the Dutch Environment Minister, Jan Pronk, of mismanaging theconference. Regardless, follow-up meetings have taken place in Ottawa and Oslo, indicating that ageneral view of continuing negotiations is supported by the parties. The main points to be solvedduring the next conferences (one is scheduled for late Spring or Summer 2001 in Bonn, Germany)are:

● The regulation of carbon sinks;● The regulation of the flexibility mechanisms (see above);● The involvement of Developing Countries; and● Issues of compliance.

Regarding the internal policies of the EU, climate policy started in 1988 with a communicationfrom the Commission to the Council. Under the UNFCCC and the Kyoto Protocol, the EU and each ofits Member States were committed to a reduction of 8 percent below the 1990 level in the period2008–2012. Central and eastern European countries are committed to reductions of 5–8 percent.Each party is required to make demonstrable progress by 2005. Internally, the EU agreed upon a

182

system of ‘burden sharing’ (or target sharing) in June 1998, taking into account the different economicstatus of the Member States and the ‘polluter pays’ principle.

Table 2. EU 1990 emissions and the Kyoto Protocol targets, including the EU ‘burdensharing’ agreement (selected Member States, all in CO

2 equivalents)

Emissions 1990 Target 2008–2012

Country Target (percent) (Tg CO2 eq.) (Tg CO

2 eq.)

Denmark -21.0 72 57France 0 546 546Germany -21.0 1 208 955Italy -6.5 543 507Netherlands -6.0 217 204Spain 15.0 302 348United Kingdom -12.5 790 691EU total -8.0 4 264 3 922

Source: EEA 1999.

The Domestic EU policies cover a wide range of measures. The programmes, such as ALTENER, SAVEand JOULE-THERMIE, feature response options. An energy efficiency label for electrical appliancesis in use. In July 1998, for transport, the European Commission reached an agreement with the carindustry to reduce the CO

2 emissions from new passenger cars by 25 percent between 1995 and

2008, with the target of improving fuel efficiency further. An energy efficiency label for cars hasbeen proposed by the Commission. Furthermore, the Commission has proposed the introductionof a mandatory EU-wide energy and CO

2 tax. Although reaching an agreement upon this proposal

is extremely sensitive at the EU level, various Member States have implemented comparable taxschemes unilaterally: Austria, Denmark, Finland, Germany, the Netherlands, and Sweden. Morerecently, the Commission has presented a ‘Green paper on GHG emissions trading within the EU’.

Many observers regard the EU as the potential leader in international climate policy. This is partlybecause the US seems so reluctant to implement the Kyoto Protocol that even its entry into forcewithout the US is now receiving serious consideration. In 1999, two European institutes, ECOLOGICand the Wuppertal Institute, launched an ‘EU leadership initiative’. However, different weaknessessuggest that both the EU’s role in international negotiations and the EU’s domestic policies need tobe strengthened considerably if the EU were willing to act as a leader.

3. Main issues at stake and some future optionsAn obvious issue at stake is the ratification of the Kyoto Protocol. The Commission has proposed aninternal strategy for a synchronized ratification but has done little to accelerate it. The main reasonis the claim that it must know to what it will be subscribing and therefore tries to keep up pressureon the US and the reluctant ‘umbrella group’. Against this prisoner dilemma situation, astraightforward strategy would be an accelerated and well-communicated ratification. It wouldexpose the laggard to the public and, moreover, it would give a clear signal to pioneer industriesthat the EU is willing to take the lead. In this case, the EU ratification process might have a positiveeffect on Japan, the Russian Federation, and others to ratify too. Taken together, these countrieswould meet the minimum threshold of 55 percent of the total CO

2 emissions of Annex I parties –

even if the US still hesitated because of their Senate-driven resistance or because of the newadministration under President Bush. The point, therefore, is that early EU ratification would speedup the ratification process worldwide, and not that its entry into force without the US would bedesirable (indeed it is not).

In the medium-term, taking the lead in climate policies would require a much better negotiatingposition. Today, most observers agree that the US sets the agenda and never negotiates near itsbottom line; whereas the EU appears reactive, heterogeneous, and negotiates consistently belowits bottom line. However, coherence and toughness require institutional mechanisms on a commonEU foreign policy, which are still in a premature stage. It is relatively unlikely that a specific policy

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such as global warming, on which the Member States do not agree, will act as a vehicle for aresponsible EU in a global society. Any stronger EU position might start with accelerated ratificationand some minor progress in international negotiations, but with a strong momentum on domesticpolicy. In this context, it might be worthwhile to systematically downsize the scope of negotiationsby first concentrating on those issues that are based upon reliable scientific data; thereby increasingthe likelihood of agreements. Eligible candidates for any light (though binding) agreement wouldbe measures to promote energy efficiency and renewable energies. This approach could besupplemented by improved international legal institutions, such as a Court of Justice or a Council.

Towards this strategy, a responsible EU in a global world should actively demonstrate the win-winpotentials of climate policy. The Commission showed that a 15 percent reduction in CO

2 emissions

would be technically feasible and the cost burden would not be insupportable. Selected exampleseven demonstrate the feasibility of “FACTOR FOUR” eco-efficiency or of “ZERO EMISSIONS”. These potentialsprovide excellent opportunities for well-designed policies, thereby modernizing the EU economyas a whole. Some instruments to be taken at the EU level are at hand: an EU-wide energy and CO

2

tax as proposed by the Commission would be an appropriate way of smoothly changing theframework conditions for business and private households. Some objections by certain industriesabout their competitiveness might be lowered by adopting a scheme of emissions trading withinthe EU. It would allow industry the kind of flexibility needed, while minimizing the possible negativeeffects. Such an approach would enhance learning effects within industry even if the relationbetween taxation and emissions trading appeared to be an exemption for some industries. Bylooking at other industries, the flexibility mechanism will communicate best-practise solutions and,hence, stimulate further improvements.

Taking such a flexible approach might lead to variations in the pace at which some Member Statescontribute to the reduction in emissions, a concept which is foreseen in the Treaty of Amsterdamand which would also allow certain Member States to apply stricter standards. By and large such anapproach could serve EU interests in the international arena. Internally, it would enhance institutionalcompetition, helping to select over time those institutions best equipped for our climate andeconomy. Information-based instruments might be worth considering as a second pillar. Theyacknowledge that market co-ordination cannot work by prices alone, but that information andlearning effects are indispensable factors of production. In-depth exchanges of information andcommunications are tools stimulating business and society during their turnaround towards climate-friendly patterns. A directive that would commit businesses to publish reports on their climate andenvironment-related activities, similar to the EU’s voluntary eco-audit directive, might pave theway for civil society action. Civil society will raise its awareness of business and, vice versa, businesseswill orient themselves towards their stakeholders. Market-based rating agencies will evaluate theeconomic-ecological performance of industries, which will support financial markets to invest incleaner production.

A third pillar of activities should be devoted to the involvement of developing countries. Althougha credible and offensive domestic policy is perhaps the most promising way to convince others tolower the carbon intensity of their economy, the clean development mechanism offers additionalmeans to facilitate technology transfer to developing countries. It should be noted that under ourpolicy scenario, Trans-National Corporations (TNCs) would have to report on their investments indeveloping countries too.

Ultimately, a responsible European Union is critically dependent upon society and business. Who, ifnot the people and business, is acting to combat or enforce protection measures against globalwarming? The role of governments should be one that enables and sets framework conditions,rather than regulating people and business. In this sense, a “FACTOR FOUR” and the information ageare very close to each other.

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SourcesBarrett, S., ‘Political Economy of the Kyoto Protocol’, Oxford Review of Economic Policy, Vol. 14, No. 4, Winter

1998, pp. 20 – 39.European Environment Agency EEA: Greenhouse Gases and Climate Change – Environment in EU at the

Turn of the Century. Copenhagen 1999.European Commission: Green Paper on Greenhouse Gas Emissions Trading within the European Union.

Brussels 2000.Intergovernmental Panel on Climate Change IPCC: Second Assessment Report: Climate Change. Geneva

1995.Intergovernmental Panel on Climate Change IPCC: Working Group I Third Assessment Report. Summary

for Policy Makers. Shanghai Draft 2001.Hyvärinen, J. (1999) The EU in the International Climate Negotiations – Lost and Defeated? Institute for

European Environmental Policy, London:Oberthür, S. & Ott, H. (1999) Breaking the Impasse. Forging an EU Leadership Initiative on Climate Change:

Heinrich Boell Foundation, Berlin.Oberthür, S. & Ott, H. (1999) The Kyoto-Protocol. International Climate Policy for the 21th Century. Springer

Publishers, Berlin et al.Sandler, T., (1997) Global Challenges. An Approach to Environmental, Political, and Economic Problems.

Cambridge Univ. Press, Cambridge.

Related Internet AddressesCenter for Science and Evironment New Delhi; www.oneworld.org/cseClimate Action Network; www.climnet.orgEuropean Environment Agency; www.eea.eu.intGlobal Commons Institute; www.gci.org.ukIntergovernmental Panel on Climate Change; www.ipcc.chUN Framework Convention on Climate Change; www.unfccc.deWorld Business Council for Sustainable Development; http://www.wbcsd.chWorld Resources Institute; www.wri.orgWuppertal Institute; www.wupperinst.org

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4.2 Forests

Nicole Gerard, Jutta Kill and Saskia OzingaFERN

IntroductionThe world has now lost some 50 percent of its forests and every year more trees are cut down tokeep pace with the rising demand for timber, pulp and paper. Between 1980 and 1995 alone, atleast 200 million hectares of forests vanished - an area larger than Mexico1- and tropical forestscontinue to disappear at an alarming rate of 20 hectares or 40 soccer fields per minute. When forestsdisappear, we lose one of the world’s most important reservoirs of biological diversity. We jeopardizethe key role forests play in maintaining the natural ecosystems, e.g. through maintaining andenhancing soils, reducing the extremes of the climate, controlling rainfall and hydrological systems.And last, but not least, we put at risk countless local livelihoods depending on intact forests.2

1 Janet Abramovitz: Taking a Stand. Cultivating a new relationship with the world’s forest. Worldwatch Paper No.40,1998.2 Dudley, N., J.-P. Jeanrenaud & F. Sullivan: Bad Harvest? The Timber Trade and the Degradation of the World’s Forests.1995. Earthscan.3 Amsterdam Treaty: Article 175, ex-article 130s, paragraph 2.

�

National level Issue:

forests

UN agreements

Trade agreements

IMF policies

World Bank policies

National development pol.

EU development policy

Enlargement

CAP

Common pol. on fisheries

ECAs support to TNCs

TNC corporate strategies

Buying

Consuming

Channels of impact

Global economy Issue:

forests

Local spaces Issue:

forests

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The management of forests and forest areas remains squarely a prerogative of national states. Thisis also the case for EU member states.3 However, the EU and its member states have a major influenceon how forests are being managed worldwide: by being a major consumer and importer of timberand timber products; by being one of the main actors within the World Trade Organization (WTO),where rules over the trade of forest products are being designed; and because one third of allbilateral forest projects worldwide are funded by the EU and its member states.

Each of these influences can be harnessed to ensure that the EU and its member states act responsiblywith regard to one of the main ecological challenges of our times, the preservation of forests. Andthis policy should start at home, by ensuring a responsible management of forests in the EU.

A coherent policy on forestry is not just a political challenge. It is also an administrative one. Theprocess of decision-making in the EU on issues about forests is extremely complex. Decision-makingthat affects forests is fragmented across administrative bodies according to subject matter,geographical area, and the amount and type of funding involved. Furthermore, the capacity to dealwith the matter is low: administrators are insufficient in number and overburdened with tasks.

DG Agriculture has the most significant influence on the forests within EU borders. Through itsdealings with forest-based industries, DG Enterprise also exerts influence on forests within EUMember States. In so far as possible, DG Environment is responsible for elaborating legislation witha directly protective purpose that affects European forests (e.g. forest fires and atmospheric pollution)and in their capacity as habitats. DG External Relations is responsible for trade policy and tradenegotiations, for example, within the WTO. DG External Relations is also responsible for the EC’spolicy towards Asia and Latin America as well as financial assistance for forest projects in thesecountries.4 DG Development deals most directly with the African, Caribbean, and Pacific countriesthat are party to the Lomé Convention and its successor the Cotonou Agreement.

The European Parliament has a role in elaborating legislation that varies according to legislativeprocedure, ranging from co-decision where environmental measures are concerned, to mereconsultation where agricultural matters are regulated. Besides this role, the European Parliamenthas been consistently active in attempting to ensure that EU forest policy is environmentally andsocially responsible, e.g. by publishing reports and adopting resolutions. Often it falls to Parliamentto defend priorities that other EU institutions are not willing or not able to speak out for, such as theTropical Forest Budget Line5(TFBL), as well as to protect its own legislative prerogatives6.

1. The state of EU ForestsWith regard to forests within the EU, the most significant issues that can be singled out includeatmospheric pollution, bio-diversity crisis, a developing battle between conflicting certificationschemes, and, as elsewhere in the world, climate change and political machinations concerningcarbon sinks.

Atmospheric pollutionThirty percent of Europe is covered by trees, yet only between 0.24-1.8 percent (depending on thesource) is considered virgin, or old-growth. Furthermore, in the 1970s a striking decline in the healthof Europe’s forests - loss of foliage, discoloration- was noticed, caused by atmospheric pollution.

4 Note that the responsibilities of the different DGs, those responsible for development co-operation, are currentlybeing restructured. A Commission proposal outlining the new division of tasks among the respective DGs is expectedfor April 19/2000.5 In autumn 1999, in the habitual tug-of-war over the TFBL, the Council proposed to decrease the annual budgetfrom 45 million to 9 million euro. After Parliament’s intervention in December 1999, the amount was fixed at 30million euro. It is of grave concern that the TFBL, widely acknowledged to be the most effective of the EU forest-related budget lines, is seemingly destined to be phased out.6 And occasionally DG Environment’s prerogatives, as with joined cases C-164/97 and C-165/97 European Parliamentv Council, 25 February 1999 before the European Court of Justice concerning the adoption of the protection of theCommunity’s forests against atmospheric pollution and fires directives. The Parliament argued that as these issueswere environmental rather than agricultural the co-decision or co-operation procedure should have been used toadopt the directives rather than the consultation procedure. Parliament won the case.

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High concentrations of sulphur dioxide and nitrogen oxides affect trees directly as well as throughsoil and groundwater acidification. In 1990, the critical loads for acidification were exceeded in over33 million hectares of sensitive ecosystems in the European Union, according to the Commission’sown data. Not surprisingly, across Europe, only 36 percent of conifers and 34 percent of broadleaftree species do not show signs of defoliation. Overall, 63,8 percent of all trees assessed throughoutEurope show signs of defoliation, with 23,1 percent classified as moderately or severely damaged7.In late 1999, the European Commission once again confirmed the poor health of Europe’s forests,which has deteriorated since 1997. More than 60 percent of all beech and roughly half of all oaktrees are damaged, and problems of soil acidification and deterioration in crown conditions continueunmitigated.8

Bio-diversity crisisThe FAO definitions of forests make no distinction between forests and plantations or tree-crops.Therefore, the removal of an old natural forest and its replacement with a larger area of mono-culture, even-aged plantation, statistically counts as an increase in forest area, while in fact a highconservation value forest has been replaced by a tree crop. This is particularly relevant for Europewhere a significant part of its landbase is forested, but with hardly any old-growth forests left (seeabove). Afforestation and reforestation schemes are important. Equally important, however, froman ecological, social and aesthetic perspective, is how such schemes are carried out. In the past,partly due to high subsidies for afforestation linked with the EU’s Common Agricultural Policy, inmany Member States plantations of fast-growing exotic species were planted, e.g. the eucalyptusplantations in Spain and Portugal and exotic conifers in the UK and Western Europe. This has haddisastrous environmental effects. In most Member States this policy is changing and more attentionis now being given to ecological and social criteria in forest policy review. Others, however, lag farbehind.

In 1998, the European Community adopted a Communication on a European Bio-diversity Strategy(Com (90/42), as required by the ratification of the Convention on Biological Diversity. In a smallsection on forests, it is acknowledged that:

Forests contain the greatest proportion of biological diversity in termsof species, genetic material and ecological processes, and have an intrinsicvalue for the conservation and sustainable use of bio-diversity.

Nonetheless, in terms of action, it seemed to pass the baton to the then-upcoming EU ForestryStrategy. The Forestry Strategy, when adopted, was disappointing to environmental NGOs not onlyin terms of its secretive elaboration, but also in its overarching emphasis on the commercial aspectsof forests rather than on multiple forest use and conservation of biological diversity.

In sum, although the EU is well-placed in terms of wealth to protect its own bio-diversity, the EU andits member states are dragging their feet on the issue. Action must be prioritised and a variety of toolsexist that could be used to reverse the EU’s forest and bio-diversity crisis. To start, on the internationallevel, much more could be obtained from the Convention on Biological Diversity than is currently thecase; and within Europe, the same can be said of the Habitats Directive.

Climate change and carbon ‘sinks’Under the Kyoto Protocol to the Framework Convention on Climate Change, the European Unionhas committed itself to an overall reduction of 8 percent of greenhouse gas emissions, as comparedto 1990 levels by the year 2012. Demonstrable progress is required by 2005. Unfortunately, theKyoto Protocol has yet to enter into force, and therefore, these projected reductions are not binding.In fact, recent studies have shown, on the contrary, that emissions have been rising since the mid-1990s.

The principle rules and guidelines of the Protocol’s formal flexible mechanisms (Clean DevelopmentMechanism (CDM), emissions trading and Joint Implementation schemes) for achieving these

7 Forest Condition in Europe. 1999 Executive Report. UNECE / European Commission. Geneva & Brussels, 1999.8 Forest Condition in Europe. 1999 Executive Report. UNECE / European Commission. Geneva & Brussels, 1999.

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reductions have not yet been agreed. This has not prevented the World Bank, on 18 January 2000,from unveiling its Prototype Carbon Fund in anticipation of an eventual agreement.9 And althoughthe EU is reluctant concerning this practice, four European countries have not been deterred fromparticipating in it.

Roughly summarized, the purpose of such mechanisms is to allow industrialized countries, ratherthan to reduce their own emissions, to buy emissions from other countries and to participate inprojects in developing countries or countries in transition that are designed to contribute to carbonabsorption or other emissions projects, thereby gaining carbon credits. With regard to forests, thegreat fear is that even without scientific knowledge - concerning carbon released from the soilonce forests have been cut and the soil exposed to UV rays, for example - old-growth forests will becleared and replaced with rapid-growth plantations or other plants.10 As one of the most forward-looking Kyoto Protocol parties, the EU must take the lead in the promotion and use of solar andother renewable energy sources.11

The European Communication on Greenhouse Gas emissions12 is a feeble step in the right direction.At present the EU position is to reject carbon sinks under the CDM, but not all member statesfavour this position. The EU must provide the example and push for genuine reductions in carbonemissions, rather than be content with carbon-accounting sleight-of-hand that will not, ultimately,fool nature.

2. EU’s influence outside its territory: consumptionEU’s ecological footprint on forestsAs a consumer, the EU’s impact on forests is felt globally: it is one of the biggest consumers oftimber, and specifically pulp and paper products. In 1998, the EU’s consumption of paper productsamounted to 196kg/person/y or a total of 73,3 Mio tonnes, compared to 334 kg/person/y in the USor 3,8/person/y in India. Mirroring the world-wide North-South divide in resource consumption,the top consumer countries within the EU are the northern Member States, while consumptionlevels are significantly lower in the southern Member States (as presented in Table 1).

Table 1. Apparent per capita paper consumption in the EU (1996-97)

1. Finland 331.9 8 Germany 192.12 Belgium 300.7 9 France 175.9

(EU Institutions!) 10 Italy 158.73 Sweden 274.3 11 Luxembourg 158.34 Denmark 220.6 12 Spain 140.55 Netherlands 217.9 13 Ireland 110.26 U.K. 208.3 14 Portugal 92.27 Austria 201.6 15 Greece 87.8

Source: Martin v. Mirbach: World-wide Paper Consumption and Discussion Points. 1999.

It is undeniable that consumption patterns of the EU and its Member States - the largest consumerbloc with 275 Mio potential consumers who use less forest products per capita than people in theUnited States but more than the Japanese13 - will leave a heavy ecological footprint on the globe;the question is how deep, how indelible a footprint will this be.

Clearly, the major burden lies with the EU as one of the top consumers of timber products. In spiteof recycling initiatives, a vast amount of pulp and paper products still go to waste within the EU.The aggressive marketing of short-life, disposable products, the growing importance of packagingin the consumer marketplace and the proliferation of junk mail and advertising all contribute to

9 See http://www.prototypecarbonfund.org10 See http://www.wrm.org.uy for more on possible effects.11 Coal, oil and nuclear projects must be excluded from such mechanisms.12 Launched on 8 March 2000, http://europa.eu.int/comm/environment/docum/index.htm.13 State of the World 2000. Worldwatch Institute, Washington. Earthscan, London.

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the ever-increasing demand for paper. Despite overwhelming evidence of the link between wasteand forest destruction – a recent survey in Germany found that around 98 percent of secondarypackaging was unnecessary14 - the EU has shown little initiative to adopt measures to reduce theamount of waste or promote a sustainable use of wood and paper products. Consequently, overalllevels of consumption continue to be excessive and damaging in themselves: current levels ofconsumption of paper products are set to rise by 2,8 percent per year from 1998 to 2015.15 Thegains made through recycling and switching to credibly certified products are more than offset bythose increases in consumption.

Competing certification schemesOne of the means of affecting consumer behaviour are certification schemes. These schemes allowconsumers to distinguish between products originating from well managed versus poorly managedforests, thereby providing an incentive to forest owners and forestry industry to improve theirstandards of forest management. The most well known label of sustainably managed forests isprovided by the Forest Stewardship Council (FSC). The FSC is supported by most environmentalNGOs including World Wide Fund for Nature, Greenpeace and Friends of the Earth. Roughly half ofthe forests certified by the FSC scheme until the end of 1999 were located in Europe.

At present in Europe, certain elements of the private sector are trying to encourage responsiblepatterns of consumption in timber and timber products. Various Do-It-Yourself chain stores in severalEuropean countries, including the UK based B&Q and the Dutch Gamma, are working towards sellingonly FSC-certified timber products.

These efforts may however be undermined by the creation of a second forest certification schemeunder the initiative of European forest owners and EU based forestry industry, the Pan-EuropeanForest Certification (PEFC) scheme. This competing scheme is spreading rapidly in Europe - andgiving considerable cause for concern.

On 30 June 1999, the PEFC was launched, it was developed to compete with the Forest StewardshipCouncil (FSC). NGOs have been highly critical of the PEFC process: it was mostly elaborated byforest owners and forestry industry in order to certify status-quo forestry practises in Europe; thesocial and ecological criteria are weak, NGOs were invited to participate only after all the maincharacteristics of the scheme were in place; the PEFC was developed without a clear performancestandard and without a chain of custody or control mechanisms; and finally, 9 of the 11 seats on theboard represent timber business interests. Consequently, most decision-making power remainswith the forest owners.

European environmental NGOs, therefore, do not support the scheme as it continues to lack elementsessential to its credibility. Consequently, at present, the FSC is still the only certification schemerecognized by NGOs as independent, having chain of custody controls and being participative andprotective of the rights of indigenous peoples.

The European Commission has for many years had the intention to play a role in the harmonizationof different forest certification schemes at the EU level or even to create a framework for Europeancertification schemes. Although it is understandable that the European Commission wants to playa role in harmonization, NGOs are concerned that action taken by the European Commission onthis issue would lead to a lowest common denominator approach and would not lead to a systemwith criteria that are stringent enough to create an incentive for truly improving sustainable forestmanagement in Europe’s forests.

3. EU’s influence outside its territory: trade rulesThe EU, together with the US, is the most influential negotiator in the trade arena. Disagreementbetween the EU and the US was widely seen as one of the most important reasons for the WTO’sfailure to start a new round of trade negotiations at the December 1999 meeting in Seattle. One of

14 T. Rice: Out of the Woods. Friends of the Earth. 1995.15 European Pulp & Paper. CEPI Newsletter April 2000.

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the agenda items to be discussed at Seattle, strongly promoted by the US, was a proposal toaccelerate further tariff liberalization (ATL) in the forest product sector.16 The EU, supported by Japan,resisted this attempt; no ATL agreement was signed. Nonetheless, many items that could have anegative impact on forests and forest peoples remain on the EU’s agenda for future tradenegotiations. These include liberalization of tariffs and non-tariff measures as well as investment.

Tariffs on forest products are already less than 1.5 percent on average.17 Further tariff reductionwould clearly have a negative albeit relatively small impact on the world’s forests when comparedto predictions about an overall increase of trade in forest products. More worrisome is that many inthe forestry industry in and outside Europe insist that tariff reduction be accompanied by theelimination of non-tariff measures (NTMs). NTMs could include requirements to use a certain amountof recycled paper, certification and labelling schemes, reforestation subsidies, log export bans etc.All of these NTMs could be challenged within the current WTO regime. Elimination of those NTMs(some have valid protective effects on the world’s forests), currently in place to protect forests andforest peoples, would obviously have a significant negative impact. Furthermore, a study carriedout for Asia Pacific Economic Cooperation (APEC)18 has shown that many of these non-tariff measuresdo not act as a significant barrier to trade.

Probably even more crucial for the fate of the world’s forests are the ongoing negotiations in theagricultural sector, as part of the WTO’s Agreement on Agriculture. The EU’s current system of highimport tariffs and subsidies for agricultural products discriminates against developing countriesand should be challenged. However, lowering import tariffs on products like soybean, palm oil andbeef (with current tariffs around 100 percent) is expected to put further pressure on forests andforest peoples in countries that export these agricultural goods by increasing forest land sacrificedto grow these ‘cash-crops’. It is, therefore, essential that environmental and social impacts be seriouslyand thoroughly assessed, and binding commitments be made to mitigate negative impacts, beforeany future trade agreements are signed.

4. EU’s influence outside its territory: EC aid to tropical forest projectsGlobally, the Europan Union and its member states fund one-third of all bilateral tropical forest projects.The EU’s power to influence forest policy outside its borders is enormous; however, the qualitativeeffect of this power can be questioned. At present, the overall assessment of the quality of EuropeanCommunity financial assistance looks disappointingly mediocre. An ECO evaluation of EuropeanCommunity aid to tropical forests concluded that 53 percent of the projects had poor results.19

Where forest-related aid is concerned, projects are spread across a variety of budget lines, including:

● The European Development Fund (EDF) for support to ACP countries, which provided 10 percentof total assistance to tropical forest projects in 1996;

● The Asian and Latin American budget line (ALA), supporting sustainable development,environment and natural resources projects, covering 27 percent of disbursed funds in 1996;

● The Tropical Forest Budget Line (TFBL), the most forest-specific, which accounted for 52 percentof forest-related assistance in 1996.20

Notably, in a context of implacably increasing deforestation, EC aid to tropical forest projects issteadily decreasing.21 Various studies, both independent and ordered by the Commission, made

16 Under this proposal most import tariffs for forest products would be eliminated by 2002.17 Fern’s literature review of the environmental and social impact of further trade liberalization in the forest product,sector. Study for WWF International, April 2000.18Draft Study of Non-Tariff Measures in the Forest Products Sector in the APEC Economies. Forest Research Consultancy.19 ECO study: Evaluation of the forestry component of EC programmes in Developing Countries, ECO 1998.20 Where Central and Eastern European countries are concerned, the Phare and Tacis budget lines are highly relevant.These will not be further discussed here: see Fern’s Phare Briefing Sheet for further information.21In 1994, the aid amounted to 130 million ECU; while in 1996, this had decreased to 80 million, Fern report: The EUand tropical forests on a new track 1999.

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clear that much improvement in EC aid is required.22 Although the inter-related problems are well-known, they remain unresolved.

Some of the key findings of these studies were:

● EC projects lack a coherent strategy; the accomplishments of one EC-funded project can beundone by the effects of a misguided EC initiative in another area. For example, road building –resulting in the opening up of forests for further exploitation - has been funded even into forestareas foreseen for the protection of natural resources by another EC aid project administeredunder a different budget line.23

● General information on EC projects is lacking. For instance, less than 100 evaluations of ALA projectswere available in 1997, although some 2000 projects had been financed at that point. As a result,lessons delivered during project implementation remain unapplied to future projects.

● Funding is allocated and projects are elaborated and implemented in a manner that is neithersufficiently transparent nor participative.

● Staff to implement EC projects is severely insufficient, personnel changes frequently, andspecifically environment and forest expertise is lacking. As a result, ever fewer human resourcesare left handling larger and larger disbursements of money, despite the fact that smaller projectswith a more bottom-up approach have been shown to be more effective.

● Lengthy, unwieldy administrative procedures, where the focus tends to be on administrativeform over project substance. Here delays and gaps in the funding are the norm rather than theexception, in turn disrupting the work of those on the ground implementing the projects, whoare left hanging or indebted.

In short, while the potential for EC aid to leave a positive treck mark is remarkable, the results so farhave been meagre. The Commission must urgently re-emphasize a participative, bottom-upapproach with increased consideration for small, more manageable projects. Also, before the EUcan be considered to use its power ‘responsibly’, at minimum obligatory procedures such asEnvironmental and Social Impact Assessments must be fulfilled and impacts of projects must beregularly monitored. Obviously, to do this, it is of utmost importance that the absurd lack of ECpersonnel be rectified to be somewhat on par with the substantial amount of taxpayer’s moneyleft in their care. Attempts to simplify and harmonize decision-making procedures are ongoing buthave so far not been successful.

EU resolution on indigenous peoples and developmentMost of the world’s indigenous peoples live in tropical forest areas; conversely, most tropical forestsare inhabited by indigenous peoples. Debates on forests, therefore, should have at their very corethe position of indigenous and forest peoples directly or indirectly dependent on these forests. InDecember 1998, the EU Development Council adopted a resolution on indigenous peoples anddevelopment aid that clearly states that development co-operation should contribute to enhancingthe rights and capacity of indigenous peoples to their self development. The Resolution also notesthat indigenous peoples have the right to object to projects. It is, therefore, disappointing that therecent discussion paper on EC development aid does not even mention this Council Resolution.

22 ERM; Evaluation of the environmental performance of EC Programmes in developing countries (1997); ECO,Evaluation of the forestry component of EC programmes in developing countries (1998); Rainforest Foundation, Outof Commission (1998); Evaluation of EU development aid to ALA states (1999) and Evaluation of EC development aidto ACP countries (1998).23 Rainforest Foundation protest against an EC funded project to upgrade a road in Cameroon which would contributeto logging in that area which includes the partly EC funded Dja reserve. See Rainforest Foundation website:www.rainforestfoundationuk.org.

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ConclusionThe political courage must be found to send the message clearly to consumers that only by drasticallyreducing current levels of consumption, can we hope to achieve anything approaching ‘sustainability’.And only by curbing our own excessive consumption, can we hope to encourage shifts towardssustainable forest use and some measure of conservation in the developing world.

Unfortunately, reducing consumption is a message that is unpopular with industry and politicallyunpopular as well. As elsewhere in the world, few European politicians and administrators have thecourage to contradict industry even where they would have the support of their electorates to doso. And very unfortunately, those who make a stand are often punished for it: binding measures -although democratically passed - that aim to impose responsible patterns of consumption, continueto run aground on trade rules in the international arena (see NTMs, above) as well as on internalmarket rules within the EU. For instance, a law discussed by the Dutch Parliament, put to the EU andthe WTO, which requires all timber imports to be marked with a red or green label according towhether the timber comes from sustainably managed forests is set to be blocked on the basis offree trade arguments. It seems the tools available to encourage responsible choices are ever beingrestricted, while the industries’ push to constantly increase levels of consumption is ever moreinsistent.

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4.3 The EU and the HIPC Initiative:still a long way to go

Rob Mills and Anna CollinsEuropean Network on Debt and Development EURODAD

Introduction - the HIPC InitiativeThe current international mechanism for dealing with the debt crisis is the Heavily Indebted PoorCountries (HIPC) Initiative. First established in 1996, it was the first comprehensive debt initiativethat brought multilateral and bilateral creditors together. However, the slow progress of the Initiative- by mid-1999 only a couple of HIPCs had actually received debt relief - and the limited debt reliefactually received, led creditors to agree to an ‘enhanced’ HIPC Initiative in September 1999.

This article will examine what the ‘enhanced’ HIPC Initiative is all about, providing some criticismsof its weaknesses and offering solutions. We will then focus on the EU’s position on the debt issue,concluding with recommendations for how the EU could do more.

The enhanced HIPC Initiative promises greater debt relief, as measured by various ratios1 and aspart of which bilateral Paris Club creditors committed to cancel 100 percent of the officialdevelopment aid (ODA) debt, and 90 percent of commercial (export credit) debt. The actual processby which debt relief will be achieved is extremely lengthy: a country first undergoes an assessmentof how much of its debt cannot be repaid. A preliminary HIPC document is issued and some timelater (which could be months or years) a country will reach its ‘Decision Point’ when an agreementis reached as to the amount of debt that will be cancelled. Up to three years later, after meetingcertain conditions, a country might reach its ‘Completion Point’. This is the point at which a certainamount of its debt will actually be cancelled.

Political pressure on creditors has recently grown, largely through the influence of the internationalJubilee 2000 movement, there has been a rather undignified scramble amongst G7 creditors not tobe the ‘one left behind’. Sparked largely by Canadian and UK moves to go beyond the G7 consensusreached at Cologne in June 1999, there has been a flurry of moves over the past eighteen months.All the G7 creditors now claim to be cancelling 100 percent of their bilateral debts. However, if youdelve into the details, there is in fact a good deal of variation between the leading creditors. Japanand France, in particular, the biggest bilateral creditors, have not yet offered true 100 percentcancellation, as they have refused to cancel any debts incurred after a so-called ‘cut-off date’.2 Onlythe UK, Canada and the US have so far pledged to cancel post cut-off date debt.

1 There are two main ratios that are used to assess whether HIPCs can qualify for the enhanced HIPC Initiative. Thefirst, the ‘export indicator’, states that countries are eligible for debt cancellation to the point where debt stock as apercentage of exports is 150 percent or less. The second, the ‘fiscal indicator’, is for debt stock as a percentage ofgovernment revenues of 250 percent or less; the fiscal indicator is accompanied by two onerous macro-economicconditions. (See footnote 10).2 The ‘cut-off date’ varies by country, and is the date at which a debtor first went to the Paris Club for a rescheduling.For many countries, post cut-off date debt represents a large proportion of their bilateral debt burden.

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It is also important to note that most of these bilateral deals are contingent on a country reachingthe Completion Point of the HIPC Initiative process. For many countries, this will either be manyyears down the road, or will never happen.

The non-Paris Club creditors, plus Russia, also need far more attention. When the leading G7 creditorsgo ahead with their debt cancellation plans as HIPCs reach their Decision/ Completion Points, byfar the largest volumes of debt will belong to these other creditors. So far, efforts to get them to‘burden-share’ by agreeing to the same terms as the Paris Club have borne little fruit. Whilst theseare often the creditors to whom debtors are most likely to be in arrears, the debt owed to them (anestimated $35 billion) still represents a significant debt burden.

1. Important Issues going forwardIt is clear that bilateral creditors, in particular, have made big strides in cutting their debt burdens.But, given that much of this debt was already heavily in arrears, there are still many very importantproblems that must be addressed.

We note five of these problems here:1. Insufficient flexibility - the need for a Crisis Response Mechanism;2. No development approach to assessing debt sustainability;3. Long delays in delivering HIPC Initiative assistance;4. Debt relief must be additional to existing aid;5. The importance of trade – or the lack of it.

Problem 1: Insufficient flexibility - the need for a Crisis Response MechanismThe recent flooding disaster in Mozambique demonstrates that, despite the nice words, the‘enhanced’ HIPC Initiative is:

1. Too bureaucratic and inflexible to be able to respond to fast-moving humanitarian disasterslike the one in Mozambique; and

2. insufficiently poverty-oriented.

In the aftermath of the recent devastating floods, Mozambique needs maximal resource flows forimmediate humanitarian and reconstruction efforts, let alone for long-term poverty reduction. Wepropose a ‘Crisis Response Mechanism’ in the HIPC Initiative.

This mechanism would automatically ‘Stop the Clock’ on all public external debt servicing, for amoratorium period of two years, in the event of a humanitarian disaster. By ‘Stop the Clock’ wemean that debt payments and interest accruals would be completely frozen for the duration of themoratorium. During this time, all a country’s resources could then be dedicated to emergencyresponse and to the additional costs of reconstruction, not to paying off creditors. We suggest atwo-year moratorium, as this will ensure that the rural economy can go through at least one fullcrop cycle after the disaster has struck. It is only after this point that it will be feasible to analyse thefull impact of the crisis throughout the economy, not just on tangible indicators such as infrastructuredamage.

Such a mechanism would add a much-needed degree of flexibility to the current system. TheMozambique disaster, as with the hurricane that hit Honduras and Nicaragua in 1998, shows thathuman disasters do not wait for teams of World Bank economists to arrive with their laptops andeconomic models.

A ‘Stop the Clock’ moratorium means that interest arrears would not be accrued, or any otherpenalties imposed by creditors. This was not the case for the agreed upon moratorium period forHonduras and Nicaragua in December 1998, where interest was being charged on the missed loanrepayments and then capitalized, so that the countries owed more after the moratorium periodthan they did before. Moreover, the multilaterals were even less generous there, by not participatingin the moratorium, and the IMF added to future debt-servicing problems by lending at non-concessional interest rates. In the case of Mozambique, the multilaterals have taken steps to stopdebt servicing for one year, which is a welcome initial step. However, this is not a true ‘Stop the

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Clock’ mechanism - it is instead a front-loading of debt servicing, which will have to be ‘caught up’in the years that follow.

Such a rapid moratorium mechanism must not be rendered ineffective by conditions. One of theelements of the new poverty focus amongst creditors is that HIPCs must produce country-ownedand participatory poverty reduction strategies (PRSPs), as a condition of receiving assistance underthe HIPC Initiative. While, in principle, the idea of a country coming up with its own approach topoverty reduction is welcome, in practice no country hit by catastrophe will be capable of dedicatingthe time and resources necessary for a high-quality PRSP. For this reason, the Crisis ResponseMechanism must not be linked to PRSPs – a moratorium mechanism for freezing debt servicepayments must be capable of rapid implementation.

However, one of the worries of creditors and NGOs is that debt relief resources will not be spent onpoverty reduction efforts. Sadly, past experience has shown that, in humanitarian crisis situations,the disbursement of funds - whether from debt relief or donor grants - does need careful monitoringto avoid corruption. For example, at a Consultative Group meeting in February, following the agreedupon Stockholm accords for Central America in the aftermath of Hurricane Mitch, civil society groupsand donors raised serious questions about the administration of the aid. In El Salvador, for example,there is no way to verify the government’s claim that it has only received 38.7 million US dollars inreconstruction funds. Also, NGOs in Honduras have serious doubts about the government’s handlingof the 1.6 billion US dollars received so far.3 It is clear that civil society groups, such as grass-rootschurch groups, need to be actively involved in the planning and monitoring of disaster relief efforts.4

An important question is ‘what defines a humanitarian disaster?’ There can be little doubt of thescale of the disaster for Mozambique - with over half a million people forced to flee their homes;the threat of epidemics caused by water-borne diseases; a death-toll of over 200 which looks set torise as the waters subside and more bodies are found; and up to one third of agricultural landunder water.

Should these be seen as the ‘parameters of disaster’ in the future? Certainly not! One hopes that eveneconomists would not attempt to set pre-defined misery targets in this way. Instead, one must notforget the dignity of the people living in the poorest countries – and when they themselves acknowledgethat they are desperately in need of outside assistance, then this should suffice.

Problem 2: a human development approach to debt sustainability for all HIPCs 5

We think that there needs to be a new approach to assessing debt sustainability that is explicitlybased on human development concerns. As a first step, a thorough analysis will need to be madebefore the end of the proposed two-year moratorium period to assess if the country’s economyhas reached equilibrium, for example, if transport links have been re-established or agriculturalactivity has been able to re-start. If it is clear that a country is still in a crisis situation, then themoratorium will need to be extended.

The debt burden itself must then be re-analysed, including any new loans that were extended aspart of the crisis response. The enhanced HIPC Initiative slightly adjusted downwards the debtsustainability indicators6, such that the first eight countries assessed for the Initiative will see their

3 Information from ‘TerraViva Europe’, (an IPS publication), 25th February 2000, p. 3.4 Indeed, in many non-crisis countries where poverty reduction priorities are clear and the need for new resourcesurgent, such an approach stressing the need for civil society to monitor the spending of debt relief resources offersa solution to the current tension between the urgency of debt relief, and the time required for producing a high-quality and comprehensive PRSP. Early cases such as Uganda have already demonstrated that the PRSP demandsare delaying the delivery of urgently needed debt relief resources.5 For more details on the methodology of this approach, please contact the Eurodad Secretariat.6 The new indicators are: NPV Debt stock as percent of total annual value of exports = 150 percent or more NPV Debtstock as percent of total annual government revenue = 250 percent or more. Any country that has debt stocks at alevel that exceed these indicators will in theory be considered eligible for debt reduction under the enhanced HIPCInitiative.

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debt servicing bills reduced on average by around 25 percent in the initial years after reachingCompletion Point.7 This is clearly a start, but given entrenched poverty in HIPCs, the decline in ODAflows8, precipitous falls in commodity prices and unfair terms of trade, it is clearly not enough.

Some countries, notably the United States and United Kingdom, have already announced that theywill unilaterally cancel any remaining debts when Mozambique reaches the Completion Point ofthe HIPC Initiative. This is welcome. But significant amounts of HIPCs’ debt burden remain with themultilaterals and other bilaterals. For example, Mozambique owed 8.3 billion US dollars at the endof 1998 - 2.1 billion to multilaterals and 4.3 billion to bilaterals (the majority is owed to Paris Clubcreditors, with Italy claiming 504 million, France 472 million, Germany 201 million, Japan 57 million.Russia and Brazil are the largest non-Paris club creditors).9

NGOs argue that the current method of assessing debt sustainability is inadequate, and that thereneeds to be a completely new approach, not just for crisis-stricken countries like Mozambique, butfor all HIPCs. Creditors may now recognize the human development impact of debt, but they refuseto approach the issue of debt sustainability itself from the same perspective. For example, we haverepeatedly argued that the current indicators are arbitrary, with no empirical basis. For example, inthe enhanced HIPC Initiative, the ‘fiscal indicator’10, was moved only to 250 percent from 280 percent,and the ‘qualifying conditions’11 scarcely changed – and so the bottom line remains that qualifyingfor debt relief via the fiscal indicator still demands an impossible mixture of high indebtedness andmacro-economic soundness.12 The HIPC Initiative still approaches the debt problem from a narrowand ‘top-down’ macro-economic perspective, that does not take into account the resources thatHIPCs require to tackle poverty. There is no attempt to account for human development. We remainconvinced that the main concern of the creditors is not to ensure a viable macro-economic basisfor poverty reduction efforts, but rather to contain costs.

We argue for two important changes:1. A new indicator that measures actual spending of government budgets on debt servicing.2. A human development approach to assess debt sustainability.

The most important factor in assessing debt sustainability is the total amount of the governmentbudget that is spent every year on debt servicing. There needs to be a new indicator that measuresthis directly. Indicators based on total debt stocks are irrelevant, as cancelling debt stocks that arealready in arrears is merely an accounting exercise, and does not reflect the debt servicing burdensof the HIPCs.

More importantly, this new indicator needs to be linked to a ‘bottom-up’ approach to debtsustainability, where the starting point is to prioritize human development needs.13 Spending onpoverty reduction targets is a priori, a higher priority than servicing debts. The first step is to calculatewhat a country’s annual revenues are likely to be, by analysing GDP and what percentage of thepopulation live below the poverty line to estimate potential tax revenues, and adding in grant aidand export revenues where appropriate. The next step is to say that the first thing to come out ofthis government revenue is essential spending on poverty reduction and post crisis reconstruction.

7 From the World Bank / IMF ‘Modifications to the HIPC Initiative’ paper, July 23 1999. The 25 percent figure is theprojected average reduction in nominal debt servicing bills between Completion Point and 2005. Note that theWorld Bank and IMF predict that most countries will face steadily rising debt service bills after 2005.8 See ‘Problem 4: Debt relief must be additional to existing aid’ in this article which shows that, amongst the problemsof the decline in ODA flows generally, many creditors are using their aid budgets to pay for their debt reliefcommitments.9 Source: Jubilee 2000 Coalition Briefing ‘Mozambique and International Debt’, February 28th 2000.10 NPV Debt stock as a percentage of government revenues.11 To qualify via the fiscal indicator, a country must pass two additional tests: exports / GDP greater than 30 percentand government revenue / GDP greater than 15 percent.12 See Eurodad’s submission to the HIPC Initiative Review Phase One, March 1999:www.oneworld.org/eurodad/hipc-rev.htm13 This method was first proposed by Christian Aid and CAFOD, and also by Jubilee 2000 UK.

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This includes clean water, primary health care, education, essential civil infrastructure – and thecosts of organising a genuinely participatory poverty reduction strategy. What is left is non-essentialspending, including military budgets, non-essential civil infrastructure - and debt servicing. Theassumption is that up to 30 percent of this remaining money may go on debt servicing, in itselfquite a generous assumption. Any external debt burden that can only be serviced by going abovethis 30 percent is then judged to be unsustainable - and should be cancelled.

Using this method, we are working on an assessment, for all the HIPC countries, of what maximumdebt servicing should be as a percentage of government revenues. This ‘bottom-up’ approach todebt sustainability, driven by what a country can actually ‘afford’ to spend on debt servicing contrastsradically with the current ‘top-down’ macro-economic approach.

This approach, when applied to Mozambique’s situation, even before the floods, shows that thepoverty reduction challenges in Mozambique were so big, and the government’s revenues so small,that the country could not ‘afford’ any external debt servicing whatsoever. Given the human andeconomic catastrophe in Mozambique, there is now no prospect of the country being able to serviceany debt. On this basis, we support the call for a total cancellation of Mozambique’s external debt.Similar calculations show that at least seven other HIPCs14 have no ability to service any debt burdenwhatsoever. For all other debtors, this human development approach indicates that debt-servicingbills must be deeply cut.

Problem 3: Long delays in delivering HIPC Initiative assistanceNGOs, unlike creditors, have always argued that debt relief proceeds must be used for povertyreduction. In the past, one of the major complaints about the old structural adjustment programmeswas that they never ensured this. So why not tie debt relief to Poverty Reduction Strategy Papers(PRSPs), given that they are poverty focused? The main reason is this: PRSP will be far more than justa conduit to channel debt relief resources to fighting poverty. This is, as it should be, PRSPs must becomprehensive and participatory poverty reduction strategies. But these take time – time thatHIPCs do not have. The idea of an interim PRSP (IPRSP) is welcome – but it is not clear how significantlythis will differ from a PRSP, apart from the participatory element. The IPRSP concept is in itself acompromise, resulting from the tension between the time taken for a high-quality participatoryprocess and the need to avoid additional delays in the HIPC process by throwing in extra PRSPconditions.

Yet it can already be seen that this compromise is not working. The 22 countries that reached DecisionPoint by the end of 2000 are fewer than the 25 originally planned, in large part because of the IPRSPrequirement. Clare Short, UK International Development minister, identified the PRSP as a majorproblem, commenting:

What is happening in Washington is that there’s a delay in looking forthe perfect poverty reduction strategy, which means that the timetablefor debt relief won’t be kept. If you ask for perfection, you’ll be waiting fordecades.

The pressure to qualify for HIPC will pressure other countries to cut corners on the participatoryparts of their PRSPs.

So there is something rather Kafkaesque about the current situation, although creditors now admitthat the debt leads to poverty, you cannot get debt relief until you have an IPRSP already in place, aparticipatory process, and have achieved results in reducing poverty. These all require time andresources. So there is again the situation, as with the old Enhanced Structural Adjustment Fund(ESAF)15, where the opportunity to rapidly channel debt-relief resources to where they are mostneeded, is held hostage to a separate, complex and long policy process.

14 Burundi, Chad, Ethiopia, DR Congo, Rwanda, Sierra Leone and Tanzania.15 Previously, reaching the completion point and actually receiving debt reduction under the HIPC Initiative wasconditional upon meeting macro-economic conditions as laid out in ESAF programmes.

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The solution is obvious, de-link for the moment the HIPC Initiative process from the PRSP process.As we have argued on many occasions before, all that is required for effective debt relief is amechanism to ensure that debt relief resources are channelled to tackling poverty. Uganda’s PovertyAction Fund is an example of such a mechanism. The mechanism would allow debt relief to:

1. Start to quickly channel resources to the vital social sectors, on which the full PRSP would thenbuild;

2. Not be delayed by participatory elements of a PRSP;3. Provide resources vital for widespread participation in PRSP.

The result would be a better PRSP, and faster poverty reduction. We have argued that, further downthe line, when the PRSP is being implemented, HIPC Initiative assistance and the PRSP could thenbe drawn more closely together.

But there is a more pressing issue. There are of course some countries where governments areinsufficiently committed to poverty reduction, or where governance and corruption issues meanthat resources freed up from debt relief will not substantially benefit poor people. But what NGOsdo not accept is that the only solution in such cases is to simply shrug shoulders, mutter ‘well, whatcan we do’, and simply carry on collecting debt servicing. NGOs see this as a convenient excuse toavoid action.

A more ambitious response is required. In the few cases where debt cancellation will not be beneficial,debt servicing must not simply be re-absorbed into creditors’ budgets. It must be set aside, as grantmoney, and earmarked for that country – it must be seen as ‘belonging’ to that country, in accordancewith the principle of debt relief for human development and poverty reduction. The UK has recentlyproposed to do something along these lines, pledging to “hold in trust” debt repayments fromcountries that have not yet made it through to the final stages of the HIPC Initiative. Canada similarlyproposed a ‘moratorium’ on debt repayments at the Annual Meetings in 2000. Whilst it is not yetclear what the details and status of these proposals are, these are steps in the right direction.

Creditors have several possible options. One might be to use the earmarked resources to fundspecific poverty-reducing activities in a country, for example via local and international NGOs.Another might be to retain the resources, to be used as a ‘carrot’ to encourage countries to put inplace mechanisms that allow debt relief resources to be used for poverty reduction. A third mightbe to use the funds for the development of international public goods, for example in research tofind a viable vaccine for malaria or AIDS. All of these options present problems. Direct funding oflocal NGOs, for example, can be highly disruptive to central government planning processes. Usinga country’s earmarked resources for general research is also problematic. But any of these is surelybetter than the non-solution of using country governance issues as an excuse to collect debtservicing indefinitely.

Moreover, it’s not just about time. The PRSP process will in its own right require resources, for tworeasons:

1. A successful participatory process is key to an effective PRSP, but that process needs civil societyinvolvement. And facilitating civil society involvement requires resources - e.g. in order forrepresentatives of the poor to be able to attend meetings.

2. Work to understand the sources of poverty (e.g. household level poverty surveys).

The obvious question is where are these resources going to come from? In countries that do nothave free resources of their own, debt relief could be a vital source of funds. Without this, there is abig risk, for example, that the ‘participatory process’ will only happen in the Minister of Finance’soffice in the capital.

Problem 4: Debt relief must be additional to existing aidOne of the hidden scandals of the debt debate is that certain governments have been raiding theirdevelopment aid (ODA) budgets to finance their debt relief obligation, despite the fact that debtrelief was always intended to be additional to development aid, not to replace it.

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If a country uses its aid budget to cancel loans that were performing (i.e. repayment being maderegularly), then this means that creditors are giving with one hand, only to take away with theother. The fact that ODA is ‘spent’ on debt relief means that countries do not have to pay their debt,but then do not benefit from aid - cancelling out any advantage from the debt relief.

If a country uses its aid budget to cancel loans that were not performing (i.e. loans in arrears), thenthis is doubly outrageous. In effect, what this does is use the ODA budget to pay back a creditor forloans that they would not otherwise have received back. For debtors, this represents a net loss -valuable aid is used up to ‘cancel’ loans that were not being serviced anyway.

Table 1. below shows just how much some countries spent, of their ODA budgets, on debt relief in1998. The worst offenders, with between 12 and 78 percent of their ODA budgets spent on debtrelief in 1998, are all EU Member States.

Table1. Spending of ODA budgets on debt relief

Country Percent of ODA budgetspent on debt relief, 1998

Portugal 78 percentItaly 57 “Austria 36 “Belgium 22 “France 21 “UK 18 “Spain 15 “Denmark 15 “Netherlands 12 “Canada 7 “Germany 6 “Japan 3 “Australia 2 “Switzerland 1 “Norway 1 “Sweden 1 “USA 1 “Finland 0 “Ireland 0 “Luxembourg 0 “New Zealand 0 “

Average 14 percent

EU average 24 “

Given that ODA flows, in general, are declining, it is a real scandal that creditors are using what aidbudgets they do have to reimburse themselves for money that they may never have received backanyway.

Problem 5: The importance of trade – or the lack of itCancelling the debt of the HIPCs is in some sense a historical reckoning – dealing with bad debtsfrom past crises. But equally important is the need to avoid future crises. One aspect of this is toavoid the types of inappropriate and irresponsible lending that helped build up debts in the 1980s.At the June 1999 G7 summit, for example, politicians again promised further movement to grant-based financing in their development assistance packages, although this had already been promisedin OECD declarations in the early 1990s.

An even more important aspect here, is the fundamental fact that an HIPC with a consistent tradedeficit will by definition build up further debt. Put quite simply, unless a country has a greater valueof exports than imports, then a balance-of payments deficit will increase inexorably, as the cost ofimports exceeds receipts from exports.

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For this reason, discussions of debt cancellation cannot be separated from trade issues. But in thecontext of the HIPC Initiative, the creditors have simply ignored this sensitive issue. This can becontrasted with the London Debt Agreement of 1953, where Germany’s creditors, learning fromtheir mistakes after the First World War, agreed not only to generous debt cancellation that farexceeded what has been offered so far to the HIPCs (as measured by the post-cancellation annualdebt servicing burden, as a percentage of exports), but also recognized that changes in tradingpolicy were necessary for both creditors and debtors.

The Agreement recognized the economic reality that sustainable and long-term debt relief onlymakes sense in the context of a consistent trade surplus for the debtor. Corresponding deficits forcreditors (i.e. industrialized countries) are the logical consequence of this reality. However, a recentreport by Philip Hersel16shows that from a group of 66 debtor nations, 45 have a habitual tradedeficit with the group of 19 creditor nations, and that there is therefore no realistic prospect ofthem ever being able to free themselves of their burden of debt in an orderly way. As far as theremaining 21 countries are concerned, their balance of trade surplus is not always large enough tocover the debt service owed to the creditor nations, even before taking into account the debtservice owed to the private sector or to multilateral creditors such as the World Bank.

It is clear then that creditors, in co-operation with the debtors, need to take steps to remove theserious incoherencies that exist in debt and trade policies, drawing on the London Agreement forinspiration. For that to happen, the creditors would have to make significant concessions in theirtrade policies. This would also include an opening up of agricultural and textile markets to HIPCexports, sectors that have been highly protected up until now.

2. Focusing on the EU’s position on the debt issueTaken as a whole, the European Union and its Member States are the major creditors of poorcountries. Thus, the EU has the potential to have a great impact on the debt issue, especially if theMember States were to take a common position, for example within the IMF and the World Bank.

Most poor country debts to the European Institutions (henceforth referred to as the EU), is owed byAfrican, Caribbean and Pasific (ACP) countries. The EU has proposed to support debt relief for poorcountries with the sum of over 1 billion euros, most of which comes from the European DevelopmentFund (EDF), and breaks down as follows:

1. 360 million euros towards cancelling debt owed to the EU by ACP countries. It is expectedthat this figure will increase.

2. 734 million euros towards the HIPC Trust Fund. Of this figure, 680 million comes from theEuropean Development Fund (EDF) and is earmarked for ACP countries, and the remaining 54million comes from Asian and Latin American budget lines and will be earmarked for thesecountries.

In addition, the EU will provide extra budgetary support to countries undergoing structural reformsas part of the HIPC Initiative.

Eurodad has always argued that ‘undisbursed’ EDF money is not entirely free to be used for debtrelief, because, although funds might not have been spent, some have in fact been allocated to aspecific country or project. Thus, some funds taken for this initiative may have already been allocatedfor development co-operation. To a certain extent, this amounts to a trade off between co-operationin other areas and debt relief. However, ACP countries have accepted this proposal in the new ACP-EU Agreement, and so it is a ‘fait accompli’. The EDF Committee was expected to give a final decisionon this in mid June 2000, with the Commission then able to start delivering the money by the endof July 2000.

16 Available at www.erlassjahr2000.de

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Conclusion - What more could the EU do?A recently adopted European Parliament resolution on poor countries’ debts, calls on the EU and itsMember States to take the initiative and promote a more ambitious strategy in the internationalfinancial institutions, to tackle poor countries’ debts. The Parliamentary President is instructed toforward the resolution to the European Commission and Council, the governments of the MemberStates and the ACP countries, the IMF and the World Bank.

We support this call for action in delivering faster, broader and deeper debt reduction. But there isstill more to be done. As we have argued here, speeding up the process implies the need for de-linking debt-relief from the PRSP process. The EU should support this call, as Clare Short, the UKInternational Development Minister has done by pointing out that delays in waiting for the perfectPRSP could amount to decades. Also, in line with our arguments for a more development-orientedapproach to assessing debt sustainability, the EU and its Member States should go beyond thedebt cancellation offered under the HIPC Initiative, and offer complete cancellation of debts tomany poor countries. Some Member States have already offered this, but others are still way behind,or have yet to deliver.

A further area where the EU and its Member States could have a great impact in helping poorcountries escape the cycle of indebtedness, is to look to their trade practises with these countries.As we have argued here, discussions of debt cancellation cannot be separated from trade issues. Aconsistent trade surplus is required for poor countries if they are to run a positive balance-of-payments, which means that the EU has to accept corresponding trade deficits - and open up suchmarkets as agriculture and textiles to poor countries. In short, a lot of work is needed from the EU inmaking its trade, aid and debt relief policies more coherent.

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4.4 The European Union’s role in fightingtrans-border corruption

Dieter FrischFounding member of Transparency International (TI),

Former Director General for Development at the European Commission

Introductory remarksCorruption, defined as the misuse of public power for private benefit, has taken an alarmingdimension, spreading geographically and growing in intensity. But at the same time, the oldconspiracies of silence, complicity and taboo, which characterized corruption, have given way togreater transparency.

Until the middle of the 90s, the EU did not seem sufficiently aware of the role it was able to play incountering international corruption, leaving this matter instead to the member states or to largerinternational fora, in particular to the Organization for Economic Cooperation and Development(OECD). The only exceptions were initiatives against fraud to the detriment of the Community budget.

In order to focus on the SID initiative to discuss the EU’s powers in a global society, this paper willnot concentrate on intra-EU-territory or intra-EU-institutions’ fight against corruption, but on itsrole to counter corruption in international (extra-EU) relations, in particular with developing andtransition countries.

�

National level Issue:

corruption

UN agreements

Trade agreements

IMF policies

World Bank policies

National development pol.

EU development policy

Enlargement

CAP

Common pol. on fisheries

ECAs support to TNCs

TNC corporate strategies

Buying

Consuming

Channels of impact

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1. Corruption: Some facts and effects on recipient countriesBy its very nature, corruption takes place in secrecy; that is why no reliable global figures are available.International organizations and academics have, nevertheless, tried to make rough estimates, forexample by assuming that a certain percentage (say 5 percent) of all direct foreign investment indeveloping countries and of their imports may consist of bribes. We hesitate to quote the hazardousfigure, which would result from such an across-the board application of 5 percent: some 80 to 90billion US$ per year.

Other studies attempt to assess the cost of corruption in very specific circumstances. One couldshow that, for instance, following the ‘Mani Pulite’ process in Italy, prices for infrastructure projectsin Milan (airport, subway) fell by 20 to 40 percent.

International bribe paying seems to be greatest in the public works and construction sectors,followed by the arms industry.

What inquiries and polls clearly show are the huge differences which exist in the degree of corruptionbetween different countries and different sectors.1

Since 1995, Transparency International (TI) has published, on an annual basis, a ‘Corruption PerceptionIndex’, which ranks some 100 countries according to their perceived degree of passive corruption(‘bribe taking’). Some EU Member States (Denmark, Finland, Sweden, The Netherlands, Luxemburg,The United Kingdom, Germany, Ireland, Austria) are among the first group of the 20 cleanest countries,others (Portugal, France, Spain, Belgium, Greece, Italy) among the following 20, in the order in whichthey are listed here.

Most developing and transition countries are perceived to be more corrupt than the richer countries.But this is not a rule: Singapore is ranked among the least corrupt (in seventh place), much higherthan most EU member states; Chile appears before France; Botswana before Belgium; and Hungarybefore Greece and Italy.

In 1999, TI published its first ‘Bribe Payers Index’, which ranks the 19 leading export countriesaccording to their perceived degree of active corruption (‘bribe giving’). According to the index,the cleanest EU Member State is Sweden (rank1), followed by Austria (4), The Netherlands (6), TheUnited Kingdom (7), Belgium (8), Germany (9), Spain (12), France (13),Italy (16).

Table 1. 1999 Transparency International Bribe Payers Index (BPI)

Ranking 19 Leading Exporters and Ratification of OECD Convention on combating Briberyof Foreign Public Officials in International Business Transactions

RANK COUNTRY SCORE OECD RANK COUNTRY SCORE OECD

1. Sweden 8.3 Ratified 11. Singapore 5.7 No

2. Australia 8.1 Ratified 12. Spain 5.3 Signed

2. Canada 8.1 Ratified 13. France 5.2 Signed

4. Austria 7.8 Ratified 14. Japan 5.1 Ratified

5. Switzerland 7.7 Signed 15. Malaysia 3.1 No

6. Netherlands 7.4 Signed 16. Italy 3.7 Signed

7. The UK 7.2 Ratified 17. Taiwan 3.5 No

8. Belgium 6.8 Ratified 18. South Korea 3.4 Ratified

9. Germany 6.2 Ratified 19. China 3.1 No

9. The US 6.2 Ratified 20.

Source: Transparency International, Bribe-Payers Survey, Information concerning OECD Conventionas of end 1999.

1 This shows the limitations of any across-the-board exercise.

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Trans-border corruption has not only distorting effects on fair competition in international markets;it is also a major obstacle to development2:

1. It increases the price of goods and services (the ten percent to 20 percent are paid from theresources of the country);

2. If financed by loans, it increases consequently the debt;3. It tends to lower the quality of projects (through complicity between government and

contractor);4. It distorts the choice of technology (capital intensive schemes are more ‘lucrative’ in terms of

corruption);5. It perverts the very choice of priorities/projects (prestige projects, economically absurd

schemes instead of basic development needs: education, health, food, shelter). Diverting scarceresources, in the context of poor countries, away from the basic needs, which constitutes aviolation of economic and social human rights;

6. It undermines the development spirit (running for ‘quick money’);7. It has a deterrent effect on private investors (corruption comes first among the negative

determinants affecting foreign investment decisions in Africa);8. It leads to a reduction of foreign aid flows (donors attaching more and more importance to

transparent and accountable resource management).

2. The potential power of the EU and its Member StatesTrans-border corruption and corruption in developing and transition countries can be tackled froma broad variety of angles. Regarding practically all facets, there are possibilities to act at the Europeanlevel, either by the EU as such, or through intergovernmental co-operation (‘3rd pillar’ of theAmsterdam Treaty), or by a co-ordinated approach of EU-member states in international fora. It isonly by acting together that the EU countries can have a real impact in the fight against trans-border corruption.

The main problem was to make the EU Institutions aware of their potential and possibilities ofaction. This is why, in November 1995, Transparency International addressed a First memorandumto the EU Institutions: ‘The fight against international corruption: What the European Union can do’.In this memorandum TI argued that the EU has the legal means and the political capacity to act inall relevant areas. In particular, it was highlighted that corruption distorts competition in internaland external markets, that it is a major obstacle to development and that it undermines morally thevery roots of society. Through this initiative TI has undoubtedly contributed to significant initiatives,which have been taken since. In May 1997, the European Commission came forward with its firstcomprehensive policy paper ‘A Union Policy Against Corruption’ and in October 1998 the EuropeanParliament adopted the Bontempi Report on combating corruption. Technical progress has alsobeen made in several areas.

In November 1999, TI considered it timely, with a new Parliament and a new Commission in place,to take stock in the form of a Second memorandum ‘Fighting corruption: What Remains to be doneat the EU Level’, which goes as systematically as possible through the relevant areas and suggeststhe next steps to be taken.3

2.1 Measures to be taken at the EU level to counter international corruption4

If the EU wants to be a credible partner for developing and transition countries in helping them tosupport good governance and the fight against corruption, it must first and foremost clean up itsown house and abolish or change the rules which tolerate or even encourage bribing abroad, inparticular by:

2 D. Frisch ‘The Effects of Corruption on Development’ The Courrier N° 158, July-August 1996.3 The memorandum can be obtained from TI-Brussels. It is also posted on TI’s Website: www.transparency.org, under‘publications’ and ‘working papers’.4 See also briefing notes on supervision in the European Investment Bank and export credit agencies.

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1. Making the bribery of foreign officials a criminal offence. Until recently, bribing beyond nationalborders was not a crime under the law of the country of origin, except in the USA due to theForeign Corrupt Practices Act of 1977. However, the OECD Convention of 19975 and the EUConvention, also of 1997, but covering only EU territory, have changed this situation. TheConventions still need to be ratified by several EU Member States and transposed into nationallaw.

2. Reinforcing trans-border judicial co-operation.3. Facilitating access to secret bank accounts.4. Abolishing forever the scandalous practice of the tax deductibility of bribes paid to foreign

officials.5. Setting transparent public procurement rules as a model for international practice.6. Blacklisting firms which have engaged in corrupt practices, following the World Bank model.7. Reviewing the role of the statutory auditor in revealing corrupt practices.8. Ending the practice of Export Credit Agencies to include the value of bribes - in general

presented as ‘commissions’, but because of their dimension, easily identifiable as bribes in thetotal contract value covered by the guarantee.

2.2. Measures to be taken in foreign aid programmesThe EU and its member states, through a coordinated policy within the EU framework, haveconsiderable potential under their foreign aid programmes to influence the sound managementof resources and the fight against corruption in developing and transition countries.6 It is, however,evident that the EU’s credibility in offering such assistance depends to a large degree on theeffectiveness of measures in the areas referred to under 2.1. above.

The EU and, in a co-ordinated fashion, its Member States could in particular:

1. Introduce the concept of ‘good governance’, defined as the ‘transparent and accountablemanagement of all internal and external resources of a country for its economic and socialdevelopment’, in all co-operation agreements with third countries, following the model of therecently concluded post-Lomé negotiations, and give this concept the same importance as tothe protection of human rights, the promotion of democratic principles and the rule of law.

2. Evaluate the determination of a government to improve accountability and to fight fraud andcorruption as a good indicator of ‘good governance’.

3. Give high priority to positive actions supporting the efforts of governments in this direction,and consider sanctions only as a measure of last resort, once all possibilities of dialogue,consultation, advice for remedial measures etc. have been exhausted.

4. Evaluate the policy performance of a country as an important criterion for aid allocation (needsremaining the main one). TI suggests assessing performance mainly on the basis of the ‘goodgovernance’ principle.

5. Review procurement and contract rules with a view to preventing corruption or to sanctioningcorrupt practices (in particular through ‘blacklisting’ of firms).

6. Systematize the support of anti-corruption programmes and help countries to build individualsupport measures into coherent ‘national integrity systems’. Support measures may cover interalia:

7. Raising the awareness of the damaging effects of corruption (seminars, civic education....)8. Political and economic framework conditions which indirectly contribute to countering

corruption (support for democracy and popular participation, free press, civil societystructures...)

9. Specific anti-corruption projects (technical assistance for drafting anti-corruption legislation,setting up transparent public procurement procedures, financial control and audit services....)

In several of these areas substantive progress has already been made. For the future, it will benecessary to systematize and reinforce anti-corruption policies.

5 ‘Convention on combating the bribery of foreign public officials in international business transactions’, adopted inDec. 1997, entered into force on 15 Feb. 1999.6 See also briefing notes on the EU’s Development aid and enlargement.

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3. The process of decision-making at the EU levelGiven the broad variety of subjects and facets, decision-making follows different procedures indifferent areas, from intergovernmental to ‘Community’ procedures with intermediary forms ofdecision-making.

Some examples:

1. The criminalization of trans-border corruption needs a unanimous decision, the adoption of aconvention, ratification by each member state (national parliaments) and transposition intonational criminal law.

2. The introduction of rules preventing export credit insurance agencies from guaranteeing bribesas part of the contract value could be achieved either by a Community decision under tradepolicy or by a common position defined within the EU framework and tabled at the OECD.

3. The implementation of anti-corruption support measures in foreign aid programmes comesto a large degree under the management competence of the European Commission, whereassanctions would normally involve the member states.

One must identify for each specific area the decision-making procedures in order to determinewhere pressure should be exerted. It is important to note that the European Commission can takeinitiatives in all relevant areas, although in certain matters (‘3rd pillar’) the Commission has noexclusive right of initiative. The role of the European Parliament is politically very important; legallyit varies according to the type of action.

ConclusionsClearly, the EU could, and arguably should play an important role in fighting trans-border corruption.This is a typical case where a concerted action at the transnational level is called for, because agovernment acting in an isolated manner would create discriminations for its own enterprises.Concerted action should of course take place in the largest geographical framework possible; thiswould lead to the OECD, WTO and UN. However, within these broader organizations some actorsmust take the lead.

The US is one of them, less for developmental reasons than to obtain a ‘level playing field’ for theirfirms, which feel discriminated against by their stricter legislation. The EU, but only if member statesact in common, could be the other driving force and would hopefully give greater weight todevelopment aspects. The EU has the legal means and political capacity to take action. We expect itto use its potential to the full.

Transparency InternationalTo our knowledge Transparency International is the only global NGO devoted exclusively tocountering corruption and increasing government accountability. TI works in a decentralized mannerthrough some 70 national chapters on all continents. TI-Brussels, the national chapter in Belgium, ismandated to monitor EU activities.

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4.5 Strategies for a ResponsibleEuropean Union for gender equity,

social and economic rights

Wendy HarcourtSociety for International Development (SID), and

Brita NeuholdNetwork Women in Development Europe (WIDE)1

The Network Women in Development Europe, from its earliest beginnings, in the late 1980s, hasbeen a lobby and advocacy network for women’s economic and social rights, and has struggled tobe a responsible and accountable network to their counterpart women’s movements in the South.WIDE has operated essentially on three political levels:

1. The national platforms, which lobbied and worked with national governments;2. The co-ordinating team in Brussels, which interacted closely with the European Commission

and other European networks at a regional level; and3. The steering group and working groups, that represented a European position at the International

level, particularly at the series of United Nations meetings held during the 1990s.

In all three areas, WIDE faced several challenges in their identity as a European network workingfrom a gender perspective in international development relations. First they identified themselvesnot as ‘WID’ (women in development) or even ‘GAD’ (gender and development) technical experts,but as politically engaged women that work at a critical distance from traditional development co-operation projects. In aiming to work in partnership with southern women’s groups, WIDE operatedwith a women’s empowerment approach which demanded a far more reciprocal sharing ofknowledge and ideas, than traditional development projects based on the concept of a transfer oftechnical knowledge, training and expertise.

In the early 1990s, WIDE was constantly challenged by southern women’s groups to provideinformation, not only about behind the scenes policy and decision-making regarding the South, atthe national and European levels, but also to address the changes within Europe to its own women,including black and migrant women, and the political responses of women to the global shifts inneo-liberal economic and social policy.

1 Wendy Harcourt was a member of WIDE and Editor of WIDE Bulletin from 1988-1996, Brita Neuhold currentlyrepresents the Austrian WIDE Platform. Please note that Brita Neuhold’s original lobbying card focuses on the areasof critical concerns of the Beijing Platform for action: A) Eradication of Female Poverty; D) Combating Violence againstWomen; E) Support for Women in Armed Conflicts; F) Economic Empowerment of Women; H) Development ofInstitutions on the Advancement of Women (which also affects women’s access to power and decision-making) I)Women’s Human Rights; K) Women and Ecological Sustainability. For all references, see this piece (WIDE 2000www.eurosur.org/wide/porteng.htm).

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This challenge was closely linked to the challenge of how WIDE interacted with European women’sgroups. Once WIDE wanted to understand better the economic and social policy changes withinEurope, in order to enter into a more balanced dialogue with southern women, they often crossedpaths with local women’s groups who felt that WIDE was not able to speak on behalf of the Europeanwomen’s position. Opening up the dialogue on the links between European women and southernwomen became an important part of WIDE’s work. WIDE took a self-empowering and solidarityapproach by looking at Europe with ‘southern’ eyes – a task that was not always easy given thedifferent histories and cultures of the women involved in WIDE.

A further challenge was that as WIDE moved away from the narrow definition of development co-operation as technical assistance, it became clear that in order to understand the real impact ofEurope on the South, and indeed on women’s lives within Europe, it was necessary to grasp bothinternal and external European Union policies on trade, finance, agricultural, economic and socialpolicy. This meant a level of expertise and knowledge on complex treaties and agreements ontrade and economic policy that women in WIDE did not always feel they had. WIDE thereforeundertook research, knowledge sharing and training within the network on gender analysis ofenvironment, economics, trade, agriculture policy at both the micro and macro levels. This processtried to link ‘hard’ development issues with what are often seen as ‘soft’ women’s development concernsof education, reproductive rights, health, cultural change etc.

During this process, WIDE also found themselves arguing for the inclusion of a gender perspectivein areas where many NGOs, governments and others in policy decision-making arenas were genderblind; and in other contexts bringing in a southern perspective to European groups that did notautomatically see the impact of their actions on the South in general and in particular women.

The process led to the need for WIDE to make alliances with a broad range of groups – beginningwith autonomous southern women’s groups to feminist academics, to NGOs and peasant groups,to migrant groups, to lobby groups working on trade, environment and economic issues.

Engaging in such a political process sometimes created tensions between WIDE and funders -principally the development co-operation desks of the EU and national development co-operationagencies. WIDE also found itself part of the critical debate about the political appropriateness ofdevelopment institutionally, as well as in terms of whether development reaches poor women inthe South.

In fact, WIDE found in the international context that they were speaking not so much aboutdevelopment co-operation but how globalization, inequality and gender bias within Europe itselfand European institutions affect southern women’s lives. In preparation for Beijing, for example, amajor task undertaken by WIDE was to put together studies on the impact of economic globalizationon European women’s lives. WIDE then had the basis from which to strategize with southern women’sgroups (who WIDE quite rightly understood would speak on their own behalf ) for changes at theinternational level that would impact on southern and European women, albeit differently. Anothertask was to review how Europe operated as a global actor. WIDE analysed the impact that Europeanbusiness (trade, agricultural policy etc.) has on the lives of women from the South. And, linked tothis project was an analysis of the coherency of European policy towards the South across differentsectors. For example, how women’s reproductive rights can be guaranteed when opening up marketsand privatizing the health system diminishes resources that ensure good education and healthfacilities, the availability of drugs to the poor etc. During the big United Nations European regionaland international meetings, WIDE worked with others in the European coalitions to push for a criticalmacro analysis of issues that would take a holistic approach to development from a genderedsocial economic rights perspective, underlining that globalization’s impact on all women’s economicand social rights (whether living in Europe, in the South or East) is a concern for a responsibleEurope. ‘Think global and act EU’.

Within this process there were not only external but also internal challenges. Within the WIDEnetwork the different national platforms had different focuses (on human rights, on migration, onenvironment, on violence against women) and different approaches, based on cultural as well asgeo-political interests. For example, the Mediterranean country platforms were different from the

211

Nordics who were different again from the British and Dutch. There was tension between Brusselsas the central place that determined EU policy and the political interests of other countries, especiallythose not in the EU, such as the Swiss. And the special relations between different countries couldcause friction, for example the Spanish with Latin America, the French and Belgians with theFrancophone countries, the British with their former colonies. Finally, there was the uncomfortablequestion of how to involve former Eastern European countries, whose history and knowledge ofcivil society and women’s movements even within the German platform emerged as very different.This issue was also linked to the question of how to involve the black European women’s movementand migrant groups in WIDE and finding ways to express solidarity when it did not seem appropriateto work together. The question of who WIDE represented could be particularly problematic in theUnited Nations international meetings. WIDE, in terms of membership, was split between an EUgroup (that tended to group around the key country that held the Presidency) and other non-EUcountries, migrant groups etc., but often for expediencies sake would work within the EU group.

WIDE’s lobby and advocacy work during the 1990s is an illustration of the response of a new kind ofcivil society in the face of globalization that leads to quite different strategic approaches from theold development co-operation. In order to take up responsibilities towards women in the South,WIDE had to expand its analytical knowledge to try to understand the impact of economicglobalization, trade and finance within and outside of Europe and the link between the two spheres.The political arena shifted from just development co-operation to trying to co-ordinate and pushfor coherence across diverse sectors among EU Member States. It involved working in broad alliances,across regions with women in Europe, the South and former Eastern Europe: with peasantmovements, greens, trade unions, European and national parliamentarians, academics as well aswith bureaucrats in the national governments and European Commission.

Over the years, it has also meant trying to find a vision that could unite women working in Europewith women outside of Europe, that could help to identify and combat gender blindness in EUpolicy-making on a broad array of topics – from environment, trade, finance, rights, agriculture,reproductive health, sexuality, domestic violence to migration. It has meant stepping outside of thetraditional development co-operation arena and trying to create quite new political ways of workingin solidarity. WIDE continues to be part of the global EU project. Its history over the last ten yearsprovides an interesting example of how political actors in the EU can play a significant role insolidarity with political groups in other nations.

The table presented below is an example of one of WIDE’s lobbying papers undertaken by BritaNeuhold in 2000. It was created as a tool for the Beijing +5 Review. It outlines strategic policies thatshould be followed at the national, bilateral, international and multilateral levels within theframework of the EU, World Trade Organisation, United Nations, International Financial Institutionsand the Organisation for Economic Co-operation and Development.

The analysis looks at how the different institutions should support the Beijing Platform of Action inthe area of economic and social human rights in three lines of action: the eradication of femalepoverty, economic empowerment for women and women and ecological sustainability. Thedocument was intended for women around the world to use as a lobby tool to hold these keyinstitutions accountable and was a major contribution to the process leading up to the Beijing+5Review at the United Nations General Assembly Special Session (UNGASS) in June 2000 in NewYork.

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d c

oun

tera

ctp

ossi

ble

neg

ativ

e ef

fect

s of

pol

icie

s an

d p

rog

ram

mes

on

po

or s

trat

a of

soc

ieti

es in

Sou

ther

n C

ount

ries

, in

par

ticu

lar o

n ru

ral a

nd

ind

igen

ous

wom

en a

nd

acti

vely

ass

ist t

hos

e w

omen

in th

eir s

tru

gg

le fo

rec

on

om

ic s

urv

ival

an

dsu

stai

nab

le d

evel

op

men

t

·Pri

ori

tise

refo

rms

of

Stru

ctur

al A

dju

stm

ent

Prog

ram

mes

, tak

ing

into

con

sid

erat

ion

the

nee

ds

of

po

or w

om

en in

dis

adva

nta

ged

reg

ion

s

·Str

eng

then

the

gen

der

-sp

ecifi

c or

ien

tati

on o

f th

ed

evel

op

men

t co

-op

erat

ion

effo

rts

of O

ECD

/DA

Cm

emb

ers,

giv

ing

pri

ori

ty to

enh

anci

ng

the

eco

no

mic

,so

cial

an

d c

ult

ura

lem

po

wer

men

t of w

om

en

·Im

ple

men

t th

e “D

AC

-G

uid

elin

es fo

r Gen

der

Equ

alit

y an

d W

om

en’s

Emp

ow

erm

ent i

nD

evel

op

men

t Co

-op

erat

ion”

(199

8)

·Exp

and

rese

arch

on

gen

der

-sp

ecifi

c st

atis

tica

l met

ho

ds,

on

“gen

der

an

d p

ove

rty”

,“g

end

er a

nd

deb

t”,“g

end

eran

d li

ber

alis

atio

n” e

tc.

213

·Pro

mo

te fi

eld

s of

act

ivit

yw

hic

h a

re o

f sp

ecia

lim

po

rtan

ce fo

r po

or a

nd

ind

igen

ou

s w

om

en in

Sou

ther

n c

ou

ntri

es, i

np

arti

cula

r rel

atin

g to

acc

ess

to c

lean

an

d h

ealt

hy

wat

er,

food

pro

duc

tion

an

dn

utri

tion

,rep

rod

ucti

veri

ght

s,ed

ucat

ion

an

dtr

aini

ng,t

rans

por

t,en

ergy

,et

c.

·Su

pp

ort

the

esta

blis

hm

ent

and

mai

nte

nan

ce o

f pu

blic

serv

ices

in th

e ab

ove

men

tio

ned

fiel

ds

·Su

pp

ort

the

incl

usi

on

an

den

forc

emen

t of t

he

eco

no

mic

rig

hts

of w

om

enin

nat

ion

al a

nd

inte

rnat

ion

alle

gal

sys

tem

s

·Pri

ori

tise

the

adva

nce

men

to

f “st

rate

gic

” cap

acit

ies

of

wo

men

i.e.

the

abili

ty to

act

as in

dep

end

ent a

nd

key

agen

ts o

f eco

no

mic

dev

elo

pm

ent,

sup

po

rt th

eir

acce

ss to

eco

no

mic

dec

isio

n-m

akin

g

·Su

pp

ort

wo

men

, in

par

ticu

lar p

oo

r wo

men

inth

e So

uth

, reg

ard

ing

thei

rac

cess

to s

ervi

ces,

trai

nin

g,in

fras

tru

ctu

re, m

arke

tin

gp

oss

ibili

ties

, info

rmat

ion

,(a

dap

ted

) tec

hn

olo

gie

s,b

asic

eco

no

mic

s (s

imp

leb

oo

k-ke

epin

g e

tc.)

and

eco

no

mic

lite

racy

·En

sure

ad

equ

ate

fun

din

g o

fsu

ch p

olic

ies3

·Su

pp

ort

ad

equ

ate

gen

der

-co

mp

eten

t sta

ffin

g w

ith

inre

spec

tive

org

ans

of t

he

Euro

pea

n U

nio

n a

nd

inp

artn

er c

ou

ntr

ies

·Est

ablis

h a

nd

str

eng

then

gen

der

foca

l poi

nts

, su

pp

ort

gen

der

-sp

ecifi

c re

sear

chan

d p

lan

nin

g m

eth

od

s

·Rea

lise

the

inte

gra

tio

n o

f ag

end

er-o

rien

ted

per

spec

tive

into

all

ph

ases

of t

he

pro

ject

/pro

gra

mm

ecy

cle

wit

hin

the

fram

ewo

rko

f th

e d

evel

op

men

t co

-o

per

atio

n o

f th

e Eu

rop

ean

Un

ion

(See

als

o s

ecti

on

H)

·Em

ph

asis

e a

dis

tin

cto

rien

tati

on

tow

ard

s th

eec

onom

ic e

mpo

wer

men

tan

d p

arti

cip

atio

n o

f wo

men

in p

artn

er a

nd

co

-op

erat

ion

cou

ntr

ies

wit

hin

dev

elo

pm

ent a

ctiv

itie

s

·En

forc

e th

e g

ener

al a

nd

un

iver

sal i

nte

gra

tio

n o

f acl

ear a

nd

co

mp

reh

ensi

veg

end

er p

ersp

ecti

ve in

to a

llp

arts

of t

he

new

ag

reem

ent

of t

he

Euro

pea

n U

nio

n w

ith

the

AC

P co

unt

ries

(“Lo

mé

V”)

, in

clu

din

g th

e ch

apte

r on

trad

e

· Rev

iew

, Rep

air a

nd

Ref

orm

exis

tin

g U

rug

uay

Ro

un

dag

reem

ents

fro

m a

gen

der

,h

um

an ri

ght

s an

dsu

stai

nab

le d

evel

op

men

tp

ersp

ecti

ve b

efo

re e

nte

rin

gin

to n

ego

tiat

ion

s o

n n

ewis

sues

(Han

ds

Off

any

new

“Mill

enn

ium

Ro

un

ds”

!)

·Per

form

pos

itiv

e m

easu

res

in th

e in

tere

st o

f po

or

wo

men

in a

ll fie

lds

reg

ula

ted

by

the

WTO

,p

arti

cula

rly

rela

tin

g to

man

ufa

ctu

rin

g, to

trad

e in

goo

ds

and

ser

vice

s, to

agri

cult

ure

, an

d tr

ade

rela

ted

pro

per

ty ri

ght

s an

dto

trad

e re

late

d in

vest

men

tm

easu

res6

Cri

tica

lEn

actm

ent

Step

s to

be

take

nA

reas

of

in t

he

PfA

Co

nce

rn

Co

un

try

Euro

pea

nW

orl

d T

rad

eU

nit

edIn

tern

atio

nal

OEC

D/D

AC

Leve

lU

nio

nO

rgan

isat

ion

Nat

ion

sFi

nan

cial

In

stit

uti

on

s1

·Im

ple

men

t th

e H

IPC

-In

itia

tive

an

d o

ther

pro

gra

mm

es to

relie

ve th

ed

ebt b

urd

en o

f po

or

Sou

ther

n c

ou

ntri

es, p

ayin

gat

tent

ion

to th

ed

evel

op

men

t nee

ds

of p

oo

rw

om

en, w

ho

hav

ep

arti

cula

rly

suff

ered

fro

mth

e“d

ebt c

risi

s” b

yd

evel

op

ing

sp

ecia

lm

easu

res,

e.g

. “co

unt

er-v

alu

efu

nds”

214

·Str

eng

then

wo

men

’sac

tivi

ties

in s

mal

l-sca

le a

nd

mic

ro-in

dus

trie

s , su

pp

ort

wo

men

as

eco

no

mic

entr

epre

neu

rs a

nd

pro

mo

tew

om

en’s

econ

omic

netw

orks

·Fac

ilita

te th

e ac

cess

of

wo

men

to s

avin

gp

rog

ram

mes

an

d c

red

itin

stit

uti

on

s

·Pro

mo

te th

e co

mp

atib

ility

of p

rofe

ssio

nal

an

d fa

mili

alta

sks

of m

en a

nd

wo

men

,es

tab

lish

a m

ore

just

div

isio

n o

f lab

ou

r bet

wee

nth

e se

xes

·Str

eng

then

the

eco

no

mic

cap

acit

ies

of p

arti

cula

rly

“vul

ner

able

” wom

en, e

.g.

rura

l an

d in

dig

eno

us

wo

men

, mig

ran

t wo

men

,ve

ry y

ou

ng

an

d e

lder

lyw

om

en, d

isab

led

wo

men

,w

om

en a

s h

ead

s o

fh

ou

seh

old

s, et

c. P

rom

ote

rese

arch

on

wo

men

an

dec

on

om

ic d

evel

op

men

t

·Pro

mo

te a

nd

su

pp

ort

wo

men

an

d g

end

er-

ori

ente

d N

GO

s in

co

unt

ries

of t

he

Sou

th w

hic

h a

red

edic

ated

to th

ead

van

cem

ent o

f th

eec

on

om

ic e

mp

ow

erm

ent o

fw

om

en

·Int

egra

te a

co

mp

reh

ensi

veg

end

er p

ersp

ecti

ve in

to a

llec

onom

ic a

nd

trad

e p

olic

ies,

agre

emen

ts a

nd

inst

itut

ion

so

f th

e Eu

rop

ean

Un

ion

, in

par

ticu

lar w

ith

in th

efr

amew

ork

the

arti

cle

133-

com

mit

tee

(Tre

aty

of

Am

ster

dam

) 4

·Ela

bo

rate

an

d a

pp

lyin

dic

ator

s o

n “G

end

er a

nd

Trad

e”5

Cri

tica

lEn

actm

ent

Step

s to

be

take

nA

reas

of

in t

he

PfA

Co

nce

rn

Co

un

try

Euro

pea

nW

orl

d T

rad

eU

nit

edIn

tern

atio

nal

OEC

D/D

AC

Leve

lU

nio

nO

rgan

isat

ion

Nat

ion

sFi

nan

cial

In

stit

uti

on

s1

215

·Int

egra

te a

co

nsi

sten

t an

dco

mp

reh

ensi

ve g

end

erp

ersp

ecti

ve in

to p

roje

cts

and

pro

gra

mm

es o

fsu

stai

nab

le d

evel

op

men

tan

d e

nvir

on

men

t pro

tect

ion

·Su

pp

ort

NG

Os

acti

ve in

this

field

·Pro

mo

te re

sear

ch,

info

rmat

ion

an

d a

war

enes

sra

isin

g a

ctiv

itie

s o

n th

ese

issu

es

·Exp

ress

sol

idar

ity

for t

he

resp

ecti

ve c

on

cern

s o

fw

om

en in

So

uth

ern

cou

ntr

ies,

sup

po

rt th

ese

con

cern

s at

inte

rnat

ion

alco

nfe

ren

ces

and

mee

tin

gs,

mak

e su

re th

at th

ey a

rere

flect

ed in

inte

rnat

ion

alco

nven

tion

s an

dag

reem

ents

·Tak

e in

to c

onsi

der

atio

n th

en

eed

s an

d c

apac

itie

s o

fw

om

en –

in p

arti

cula

r of

rura

l an

d in

dig

eno

us

wo

men

– in

the

fram

ewo

rko

f all

pla

nn

ing

act

ivit

ies,

neg

oti

atio

ns

and

dec

isio

n o

fth

e W

TO. S

pec

ial e

mp

has

issh

ou

ld b

e g

iven

to is

sues

rela

ted

to fu

ture

neg

oti

atio

ns

and

dec

isio

no

n w

om

en’s

Trad

e-R

elat

edIn

telle

ctu

al P

rop

erty

Rig

hts

Cri

tica

lEn

actm

ent

Step

s to

be

take

nA

reas

of

in t

he

PfA

Co

nce

rn

Co

un

try

Euro

pea

nW

orl

d T

rad

eU

nit

edIn

tern

atio

nal

OEC

D/D

AC

Leve

lU

nio

nO

rgan

isat

ion

Nat

ion

sFi

nan

cial

In

stit

uti

on

s1

Sup

po

rtW

om

en’s

Co

ntr

ibu

tio

nto

Eco

log

ical

Sust

ain

abili

ty

Stra

teg

icO

bje

ctiv

e

·Ack

now

led

ge

the

safe

gu

ard

ing

of e

colo

gic

alsu

stai

nab

ility

as

on

e o

f th

ep

rin

cip

al ta

rget

s o

f th

eEu

rop

ean

Un

ion

, wit

h a

dis

tin

ct e

mp

has

is o

n th

est

ren

gth

enin

g o

f wo

men

’sca

pac

itie

s in

this

co

ntex

t

·Em

ph

atic

ally

pro

mo

tew

omen

as

key

acto

rs w

ith

inth

e fr

amew

ork

of

envi

ron

men

tal a

nd

sust

ain

able

dev

elo

pm

ent

po

licie

s, in

par

ticu

lar i

nco

un

trie

s o

f th

e So

uth

·In

crea

se g

end

er-o

rien

ted

eco

log

ical

an

d s

usta

inab

led

evel

opm

ent p

roje

cts

and

pro

gra

mm

es w

ith

in th

ed

evel

op

men

t co

-op

erat

ion

of t

he

Euro

pea

n U

nio

n

·Su

pp

ort

NG

Os

and

wom

enex

per

ts a

ctiv

e in

thes

e fie

lds

·In

crea

se th

e sc

op

e an

d th

evo

lum

e o

f gen

der

-orie

nte

den

viro

nm

enta

l pro

ject

s an

dp

rog

ram

mes

wit

hin

the

sco

pe

of U

nit

ed N

atio

ns

dev

elo

pm

ent a

ssis

tan

ce, i

np

arti

cula

r wit

hin

UN

DP

and

UN

IFEM

·Ext

end

rese

arch

,in

form

atio

n a

nd

aw

aren

ess

rais

ing

act

ivit

ies

on

thes

eis

sues

, act

ivel

y in

volv

ing

wo

men

fro

m ru

ral r

egio

ns

and

fro

m in

dig

eno

us

soci

etie

s

·Su

pp

ort

the

con

cern

s o

fw

om

en fr

om

rura

l reg

ion

san

d fr

om

ind

igen

ou

sso

ciet

ies

at in

tern

atio

nal

conf

eren

ces a

nd m

eeti

ngs,

mak

e su

re th

at th

ey a

rere

flect

ed in

inte

rnat

ion

alco

nven

tion

s an

dag

reem

ents

·Mak

e th

e at

tain

men

t an

dp

rese

rvat

ion

of e

colo

gic

alsu

stai

nab

ility

a b

asic

aim

of

the

IFIs

·Pri

ori

tise

su

pp

ort

for

wom

en a

nd

NG

Os

– in

par

ticu

lar f

rom

rura

l reg

ion

san

d in

dig

eno

us

soci

etie

s –

wh

o a

re in

volv

ed in

pro

ject

san

d p

rog

ram

mes

to p

rote

ctth

e en

viro

nm

ent a

nd

tose

cure

eco

log

ical

sust

ain

abili

ty

·Pro

mo

te th

e “s

trat

egic

”n

eed

s, in

tere

sts

and

cap

acit

ies

of w

om

en in

this

cont

ext,

i.e. a

bili

ties

top

arti

cip

ate

in d

ecis

ion

-m

akin

g et

c.

·Hig

hlig

ht t

he

role

of w

om

enas

cru

cial

ag

ents

an

d a

sef

ficie

nt m

anag

ers

of

sust

ain

able

dev

elo

pm

ent

·Su

pp

ort

an

d fu

nd

rese

arch

,aw

aren

ess-

rais

ing

an

din

form

atio

n o

n th

ese

issu

es

·Cre

ate

un

der

stan

din

g fo

rth

e im

po

rtan

ce o

f th

ere

lati

onsh

ip b

etw

een

“eco

log

ical

su

stai

nab

ility

”an

d“g

end

er e

qu

alit

y”

Co

mp

iled

by

Brit

a N

euh

old

/ W

IDE

Au

stri

a

216

1 They include the International Monetary Fund (IMF), the World Bank Group (International Bank for Reconstructionand Development – IBRD - , International Development Association – IDA -, International Finance Corporation – IFC)as well as Multilateral Regional Development Banks as the African Development Bank (ADB), the Asian DevelopmentBank (AsDB) and the Inter-American Development Bank (IaDB)2 The most important international instruments in this context are: The Convention for the Suppression of the Trafficin Persons and of the Exploitation of the Prostitution of Others (UN, 1949), the International Covenant on Economic,Social and Cultural Rights (UN, 1966), the Convention Concerning Equal Remuneration for Men and Women Workersfor Work of Equal Value (ILO, 1951), the Convention Concerning Discrimination in Respect of Employment andOccupation (ILO, 1959), the Convention against Discrimination in Education (UNESCO, 1960), the Convention on theElimination of All Forms of Discrimination Against Women (CEDAW; UN, 1979); the Declaration on the Elimination ofViolence against Women (UN, 1993) and the Optional Protocol to CEDAW3 The present appalling trend to continually reduce funding of gender-oriented activities despite of all officialdeclarations and regulations must be reversed by all means!4 In this committee policies towards and within the WTO are prepared at EU level.5 See: Brew, Jo; Neuhold, Brita: Gender and Trade Indicator. Vienna 1998, WIDE6 For further information see: Hands off Trade in Women’s Human Rights! Position Paper on WTO Negotiations. Brussels1999. WIDE

217

Conclusion: the quest for a responsible EU

Until recently integration has been led, first and foremost, by intra-European concerns: the buildingand strengthening of peace, economic progress, the defence of political freedoms. Relations withthe rest of the world, while given some attention for instance within the Lomé convention, were byand large marginal for reasons which included the weakness of Member States, the cold war geo-political context, and the need to put all energies into the internal process.

The conditions are now ripe to put the EU’s relations with the rest of the world at the head of theintegration agenda, as the new Commission has proposed. The end of the cold war has freed EUMember States from their dependence upon the United States in foreign affairs, and opened upthe possibility for the EU to develop a more independent and original role in global affairs. Theenlargement of the Community in the early 1990s (entry of Austria, Finland and Sweden), thedeepening of its economic integration, and the creation of the Union itself, has transformed the Unioninto a great economic and financial power that needs to position itself on the international scene.

The creation of a common foreign and security policy (CFSP) in the framework of the AmsterdamTreaty (1997) is an important institutional development in this regard. The Treaty states that the EUshould assert an external identity (art. 2) and ensure coherence, effectiveness and unity in its foreignpolicy (art. 13). Other important steps forward have been the launching of Euro-Mediterranean co-operation in Barcelona (1995), the renegotiation of the partnership agreement with ACP countries(2000) and, of course, the launching of the process of enlargement to East European countries.However these steps, while important, fall short of responding to the particular need for co-ordination across various channels of external impact inherent to the process of globalization.

The question about the role the EU should play in globalization thus remains. This question hastwo dimensions: vision and process. The vision comprises the values and ultimate objectives thatthe EU and its Member States wish to foster globally, such as respect for human rights and the ruleof law, as well as a conception of how the world should be organized in order to attain these objectives.The process refers to the path of change from the present situation to realizing that vision.

We presented a number of elements of the vision in the opening chapter, elements such as thecommitment to multilateralism, the promotion of democracy, the rule of law, and respect for humanrights. These elements are not sufficient in themselves to define the external identity of the EU, butraise further questions that will have to be answered in the course of time.

But it is not necessary to define all the elements of the vision to initiate the process of change. Thehistory of European integration is marked by Monnet’s intuition that elaborating a vision andadvancing the integration process could proceed in an iterative and dialectical manner. Initialobjectives, such as building peace, would lead to initial steps towards integration through thecreation of joint institutions, which in turn would nurture new shared values and visions that wouldbe the basis for further steps in the process.

Taking inspiration from this history, what intermediate objectives could be set on the road towardsa responsible EU, and what concrete steps could be made to reach them?

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Intermediate Objectives: producing transparency; fostering deliberativedemocracyProducing transparencyThe first intermediate objective must be to produce transparency on the external impact of EU-based actions. It is not possible for Northern countries to act responsibly in the global society unlessthey render visible the multiple impacts of their actions outside of their borders.

Transparency usually refers to clarity and public supervision of the decision-making process. But italso requires two additional elements that are not about disclosing existing information but aboutproducing information and analysis: analyzing the relationship between the action brought aboutby the decision-making process, and its consequences; producing information about what changesin society are imputable to the action taken, i.e. about the real consequences of the action.

Appropriate mechanisms exist at the national level to produce transparency in this dual sense:national statistics and analysis of the relationship between policy and social changes fulfil that role.But these mechanisms do not exist for actions that affect people in foreign countries. There is vastanecdotal evidence of the impact, as shown in this report, but the information does not exist in aconsolidated form that could bear on decision-making. In the words of Kaul et al. (1999: 467):

Today most countries – from politicians and government officials tobusiness, civil society and the general public -- have little awareness ofthe cross-border externalities, positive or negative, that they produce.Not only that, there is often considerable uncertainty and unawarenessof the many ways in which the country depends on, and is affected by,outside events. So one of the most important ingredients of internationalcooperation is lacking: a clear idea of why, from a national perspective,cooperation makes sense. National externality profiles could encouragea debate on this topic—and could thus be an important first step towardsclosing the current jurisdictional gap and bringing global concerns intonational policy and vice versa.

The June 1997 EU Development Council’s Resolution on the Coherence of the EC’s DevelopmentCo-operation with its Other Policies emphasized the need to produce transparency in EU policiesthat have an external impact. Referring to the objectives of the Community Development Co-operation, as laid down in article 177 of the Consolidated Version of the Treaty of the EuropeanUnion, and to article 178 stating that the Community “shall take account of the objectives of itsdevelopment policy in the policies that it implements that are likely to affect developing countries”,the Council considered the introduction of “coherence impact assessments”, and invited “theCommission to present regularly, preferably on an annual basis, a report to the Council on questionsrelated to coherence in connection with development co-operation, including proceduralarrangements”.1

Fostering deliberative democracyA second intermediate objective must be to create the conditions for deliberative democracy onthe various aspects of the problematic of a globally responsible EU. The problems of incoherenceand lack of coordination that mar the EU’s overall interaction with the rest of the world reflect a lackof deliberative democracy over the issues involved which could confront the difficult trade-offs.Unless the level of democratic deliberation is heightened, decisions will continue to be madeaccording to the strongest vested interests, and that game will continue to generate irresponsibility,as argued in the opening chapter.

1 The November 2000 Statement by the Council and the Commission on the European Community’s DevelopmentPolicy made a similar point. Article 39 on Coherence reads: “There must be greater coherence between the variousCommunity policies focused on sustainable development. Efforts must be made to ensure that Communitydevelopment policy objectives are taken into account in the formulation and implementation of other policiesaffecting the developing countries. The way to achieve this is to make a systematic and thorough analysis of anyindirect effects of measures in especially sensitive areas and to take development problems into account in theCommission decision-making process” (emphasis added).

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An important step in this direction may be to bring back some issues from the global to the EUlevel. This idea runs counter to current wisdom. Proposals to increase co-ordination among EUcountries on external issues are often portrayed as undermining the sovereignty of Member States,and for this reason are resisted. More power to the EU level would imply less power at the nationallevel.

But this view does not take into account the existence of powerful global organizations and thepossibility for the EU and its Member States to regain power from them. Some key global issues arediscussed within and addressed by global organizations like the World Bank, the IMF, and the OECD.Issues such as codes of conduct for TNCs, a protocol on corruption, reform of export-credit agencies,and the policies of the World Bank and the IMF could be brought back and debated at the EU level,in this manner increasing the actual capacity to act of European citizens and Member States.

Fostering deliberative democracy on the issues of a globally responsible EU is also a way of makingmore efficient the internal functioning of the EU. Some of the problems that underpin irresponsiblepractices will have to be addressed some day, in a not too distant future. Raising questions aboutthese issues, today, through the lens of how they impact on the rest of the world, is to initiatechange sooner rather than later. And in the long run, the EU will gain a lot from its capacity of doingthat.

What steps to move forward?

The limits of working within the Treaties

Article 178 (ex Article 130v)The Community shall take account of the objectives referred to in Article 177 in the policiesthat it implements which are likely to affect developing countries.

Article 178 of the Treaty has provided the starting point for most proposals to establish a globallymore responsible European Union. This is, however, a very limiting starting point as illustrated bythe diagram on the following page2.

It is limiting because the objectives of development co-operation, as stated in article 177, leave outthe global context. The objectives are to foster the sustainable and social development of thedeveloping countries, the smooth and gradual integration of the developing countries into theworld economy, and the campaign against poverty in developing countries; and to contribute tothe general objective of developing and consolidating democracy and the rule of law, and to thatof respecting human rights and fundamental freedoms. But in what global context is this to happen?And what is the role of the Community in shaping that context?

The second limitation of Article 178 is that it focuses on the Community and the Community policies.It leaves out, therefore, all actions and policies that are not of Community competence, in particular:monitoring of the International Financial Institutions, starting with the World Bank and the IMF;follow-up of United Nations agreements (in most cases); monitoring of transnational companiesand export-credit agencies.

Because of these basic limitations, the proposals that build on this legal basis lack the kind ofambition necessary for the European Union to face its global responsibilities. Furthermore, becausethey are geared primarily to administrative reforms within the Commission – for instance the creationof a special Coherence Office within the Directorate General for Development3 -- they cannot appealto the larger public and stir democratic debates. They remain prisoners of the technocratic nature

2 For instance, in the June 1997 Resolution on Coherence, the Development Council acknowledged that “the provisionsof the Treaties are adequate for addressing questions concerning coherence of policies in relation to EU developmentco-operation.”3 Eurostep (2000) “Coherence and consistency of EU policies: proposed mechanisms for implementation”, Brussels:Eurostep.

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The arrows in bold are the policies and “channels of external impact” that fall under the scope ofArticle 178 of the Treaty.

The Limits of Article 178

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of the Commission while one of the fundamental reasons for the irresponsibility of the EU towardsthe rest of the world is precisely the lack of democratic discussions around policies that have asignificant impact globally.

Creating a new pillar of EU integrationEU citizens are in the large majority proud of and attached to their model of democracy and thewelfare state. Politicians from the EU defend it – which is legitimate -- and on its basis even try tosuggest that for that reason the EU (and its Member States) acts more responsibly globally thanother global actors. That inference is a pure amalgam of conceptually different issues. The reality isthat, currently, neither the EU Member States nor the EU itself has any model to propose in order toaddress two main concerns over globalization – respect for nature and respect for other nations. Inparticular, there exists no institutional structure that would monitor the impact of EU decisions onothers. And as a consequence, as this report shows, the channels of external impact become attimes vectors for shifting our internal problems onto others.

In the context of highly unequal power relationships across nations, this problem has no easysolution. It is unrealistic, and hypocritical, to state that each government has the responsibility toensure that other countries do not dump on it the costs of their problems. Rather, the conceptualnovelty of the political problem should be acknowledged. The main question of modern politicalphilosophy was how to manage the relationship between individuals and the collectivity, or, to putit differently, between society and the state. By contrast the issue raised here is how that relationshiprelates to realities outside of the national community: the natural environment, other peoples andcountries. We move therefore from a dual relation (state-society) to a triangular one (state-society-the outside). It is for this reason that traditional answers, for instance enhanced democracy, will notnecessarily work. A highly democratic nation may also be a highly selfish one, using its power todump on others the costs of its internal policies. Because of the profoundly novel nature of theproblem, new solutions must be invented.

One possible way forward is the creation of a new pillar in the process of EU integration explicitlyaimed at mediating the EU’s interaction with the rest of the world in a globally responsible way. Thecreation of this new pillar may require changes in the Treaty, the creation of a new institution, andoriginal political processes. To illustrate this idea, we conclude with some examples of how thiscould be done, examples that are not to be taken for worked out proposals.

1. A first and symbolic step could be to introduce the objective “To ensure that all EU-basedactors behave responsibly towards the East and South” as one of the stated objectives of theEuropean Union in Article 2 of the Treaty, replacing the current statement that the EU should“assert its identity on the international scene”.

2. Creation of an “Independent Authority for a Globally Responsible EU”. The Authority would beindependent of the Council, and act as an apolitical body whose legitimacy is based on scientificrigour, impartiality, transparency, and uncompromising commitment to disclosing informationand exposing the consequences of EU policies for the rest of the world. Its main mandatewould be to make a systematic assessment and analysis of the impact of EU-based actors onthe rest of the world, with particular emphasis on the East and South. It would produce thematicreports focusing on particular legislation or actions (at any level within the EU), and publishannually a thorough report that could be presented to all the National Parliaments in specialsessions, to the European Parliament, to the Council, and to the Commission.

3. Creation of a European Coalition for a Globally Responsible EU among civil society organizationsworking on various aspects of the problematic and sharing a concern for global justice, EU-based interested research institutes, and partner organizations in the South and East. Thecoalition would fulfill several functions: to start producing the analysis and reports the Authoritywould eventually be mandated to do; to launch and sustain a campaign to promote the conceptof a globally responsible EU among its citizens; to explore in more details the changes neededin the Treaty and the structure and mandate of the Authority.

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4. Which countries might support the initiative and the creation of another pillar to the EUintegration? Well, the ones who might have more at stake are the ones that experience or willexperience directly the discontinuities between being in and being out of the Union. Who hasthe greatest interest in the IMF’s policies: Finland, because of Russia; Greece, because of Turkey?Who has the greatest interest in the way worldwide agriculture is organized? Poland, becauseof the Ukraine; Italy and Spain because of Morocco, Algeria and Tunisia? Could we imagine analliance of the countries on the borders of the EU, which, because they face directly the world“on the other side”, and in spite of their different expectations of the EU, could come togetherto ensure the EU faces its global responsibilities? Finland, Poland, Hungary, Slovakia, Greece,Italy, Spain, and Portugal: what a strange alliance this would be indeed!

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Postscript: The Future of SID’s European Programme

As mentioned in the Introduction, this report is one outcome of SID’s “Initiative Towards a GloballyResponsible EU”, which aims to stir debates on the role of the EU in the process of globalization.

What’s next?

First of all, SID is committed to catalyze a process of strategic partnership building among civilsociety organizations and networks in Europe and to stimulate public debate in Europe towards aglobally responsible EU. These debates would involve all key actors, from NGO leaders toparliamentarians, from farmers movements to private sector, from policy-makers to youth groupsand academia, so as to create an honest and meaningful process of challenging Europe’s practicestowards the rest of the world.

Second, the process of writing and putting together this report opens the way to preparing a secondenlarged version using more systematically the framework presented in the opening chapter. Seeingthis initial product, more individuals and organizations may be interested in joining the initiativeand contributing to a second report of higher quality. SID is committed to helping this happen.

In these ways, SID aims to contribute to the creation of the European Coalition for a GloballyResponsible EU mentioned in the conclusion, and to the launching of a broad campaign for a GloballyResponsible EU.

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Responsible EU Publication Contributors

The Campaign to Reform the World Bank, Rome, works since 1996on the development and environmental impact of projectsfinanced by the World Bank Group. In the frame of internationalcoordination of NGOs with similar objectives, the Campaignengages in the support of locally effected populations and inadvocacy to make the Italian representatives in the Boards of theWorld Bank, the IMF and other multilateral development banksaccountable to the Italian Parliament and the interested public.

http://www.unimondo.org.cbm

The CEE Bankwatch Network is an international non-governmental organisation (NGO) with member organisationscurrently from 11 countries of CEE and CIS region. The basic aim of the network is to monitor activities of InternationalFinancial Institutions (IFIs) in the region, and to propose constructive alternatives to their policies and projects inthe region.

The CEE Bankwatch Network was formally set up in 1995 and has become one of the strongest networks ofenvironmental NGOs in Central and Eastern Europe. Members of the Bankwatch Network are Bulgaria, Byelorussia,Czech Republic, Estonia, Georgia, Hungary, Lithuania, Macedonia, Poland, Slovak Republic and Ukraine. The Networkis focusing mainly on energy, transport and EU enlargement, while working to promote public participation andaccess to information about activities of IFIs in the CEE region. Members of the CEE Bankwatch Network attend theannual meetings of the IFIs and are engaged in an ongoing critical dialogue with their staffs and Executive Directorsat national, regional and international levels.

http://www.bankwatch.org

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Fondé en 1958, le Centre d’étude d’Afrique noire (CEAN) est l’un des principauxcentres de recherche internationaux pour l’analyse du politique en Afrique. CetteUnité Mixte de Recherche (UMR 5115) du Centre National de la RechercheScientifique (CNRS) et de l’Institut d’Etudes Politiques (IEP) de Bordeaux estégalement affiliée à la Fondation Nationale des Sciences Politiques.

http://www.cean.u-bordeaux.fr;www.cnrs.fi

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����The Coalition for Fair Fisheries Agreements (CFFA) is a platform for European environmental and development NGOsbased in Brussels, which studies the impact of fisheries relations - in particular fisheries agreements - between theEuropean Union and ACP countries (Africa, the Caribbean and the Pacific) on development and the environment.

Formed in 1992 following the ‘Battle for Fish’ Conference, CFFA calls for a change in fisheries relations and EU-ACPfisheries agreements so that they become more in line with European policy objectives for development co-operation,with particular regard to:

● the sustainable use of the fisheries resource for the benefit of coastal communities

● the food security of communities that are dependent on fishing

● the conservation of marine stocks for future generations

CFFA’s aim is to:● provide information to partner organisations (artisanal fishworkers’ organisations in the North and the South,

NGOs, etc.)

● facilitate their access to key institutions so that they can participate in debates, influence public opinion,and be consulted in the drawing up of policies which affect them

Since December 1994, CFFA has shared the offices of ICSF (the International Collective in Support of Fishworkers).The Secretariat is managed by a co-ordinator. It receives human resource and financial support for its activities fromseveral European and ACP NGOs.

http:// www.icsf.net

Corporate Europe Observatory (CEO), is a European-based research and campaign group targeting thethreats to democracy, equity, social justice and theenvironment posed by the economic and political powerof corporations and their lobby groups.

The Corporate Europe Observatory (CEO) team consistsof five members, based in The Netherlands and Spain:Belén Balanyá, Ann Doherty, Olivier Hoedeman, AdamMa’anit and Erik Wesselius.

http://www.xs4all.nl/~ceo

CORNERHOUSE

The CornerHouse is a research and solidarity group which aims to support thegrowth of a democratic, equitable and non-discriminatory civil society in whichcommunities have control over the resources and decisions which affect theirlives and means of livelihood, as well as the power to define themselves ratherthan be defined only by others.

http://www.cornerhouse.icaap.org

The European Centre for Development Policy Management (ECDPM)is an independent foundation that aims to improve internationalcooperation between Europe and countries in Africa, the Caribbean, andthe Pacific. It does this through capacity building for policy management,the promotion of policy dialogue between ACP countries and Europe,and through the provision of information and facilities for knowledgeexchange.

http://www.oneworld.org/ecdpm/

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The European Council on Refugees and Exiles is an umbrella organisation for co-operation between European NGOs concerned with refugees. It campaigns onbehalf of its pan-European membership for humane, fair and comprehensiveasylum policies. ECRE is still growing, with close to 70 member agencies in 25European countries including all national refugee councils, other refugee-assistingorganisations in the legal and social field, national branches of internationalnetworks, human rights and church organisations. The ECRE Secretariat is basedin London and Brussels and plays a key role in analysing the policies of the EUinstitutions in relation to asylum.

http://www.ecre.org

Eurodad is a network of the major development NGOs in sixteen European Countries, which co-ordinate their workon issues such as debt, structural adjustment/poverty reduction strategies, financial markets and World Bank, IMF,European Union and Commission policies in the interest of the promotion of sustainable Human Development.

http://wwww.oneworld.org/eurodad/

Eurostep was established in 1990 to co-ordinate activities of its members at theEuropean level. Its two principal aims are:

first to influence official development co-operation policies of multilateralinstitutions, and in particular those of the European Union; and secondly to improvethe quality and effectiveness of initiatives taken by NGOs in support of peoplecentred development.”

http://www.eurostep.org

FERN

Fern keeps track of the EU’s involvement in forests and co-ordinates NGO activities at the Europeanlevel. Fern advocates changes in EU activities to achieve the sustainable management of forests,respect for the rights of forest peoples and greater transparency in EC aid to tropical forest countries.Fern’s main campaigning areas are: aid, trade, forest certification, climate change andintergovernmental processes.

Fern is not an acronym - the name was chose for its symbolic value, as ferns are one of the fewplant families found in all forest types.

http://www.fern.org

In 1989 the Generalitat de Catalunya (the autonomous government of Catalonia) created the Catalan Institute of theMediterranean (CIM) to stimulate the study of the Mediterranean reality and promote dialogue with other peopleson its shores. Since then, the CIM has been consolidated as an accredited institution in the field of thought, researchand cooperation.

At the same time, the CIM acts as a “think tank” at the service of Euro-Mediterranean politics, an observatory ofmigrations and a centre of study and divulgation of Mediterranean cultures. Among its most notable initiatives isthe promotion of relations between Catalonia and the other countries in the area.

http://www.gencat.es/icm

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IRENE - the International Restructuring Education NetworkEurope

IRENE has been stimulating and facilitating the exchange ofinformation on labour issues since 1981 and has contacts,resources and a European Programme of work on currentinternational labour issues.

IRENE offers* contacts and information on Trade Unions, Trade Union and workers’ organisations and NGOs through-out Europe

and in Latin America, Asia and Africa.* a European Programme of seminars and workshops on current issues including corporate social responsibility

(a.o.t. codes of conducts, corporate liability) women workers in the informal sector, investment strategies ofTNCs and workers’ rights.

* an opportunity to devise strategies for development education and action at European level on internationallabour issues with Trade Unions, workers’ organisations and NGOs.

* a survey ‘Expanding Horizons’ of international labour issues in mainstream Trade Union education in the EUmember states.

* a Newsletter which circulates to all registered contacts to keep groups in touch.* regular reports and information from IRENE seminars and workshops.

E-mail: IRENE@ANTENNA.NL

Mellemfolkeligt Samvirke (MS)

Mellemfolkeligt Samvirke (MS) - Danish Association for International Co-operation - is a private organisation with 4500 individual and 100institutional members. MS works in both the North – Denmark, Europe andother developed countries – and the South – the developing countries. MS’activities are based on co-operation across national and aim to createsolidarity and a more equitable distribution of the riches of the earth. Lobbyand information work is an important element of all MS activities.

MS works in a variety of fields, ranging from exchange programmes for mainly young people, conflict resolution inthe Balkans, work with ethnic minorities and their situation in Denmark, development education about third worldissues targeted mainly at Danish school children, and development work in Africa, Asia and Central America.

One of MS’ major activities is the MS in the South (MSiS) Partnership and Development programme, implementedby MS and local organisations. MS is not a traditional donor, but one of the actors in a partnership. To MS thepartnership concept is a relationship in which two or more partners join resources to achieve mutual goals. MS runscountry offices in Uganda, Tanzania, Kenya, Zimbabwe, Zambia, Mozambique, Lesotho, Nepal and a regionalprogramme in Central America covering Nicaragua, El Salvador, Honduras and Guatemala.

Poverty eradication is the fundamental aim for all development efforts of MS in the South. The four main principlesof the MS support to the partners are: Development by people, Gender orientation, Environment and Sustainabledevelopment.

http://www.ms.dk

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WIDENETWORK WOMEN IN DEVELOPMENT EUROPE

WIDE (Network Women in Development Europe) is a European network of gender specialists, women active in Non-Governmental Development Organisations (NGDOs), and human rights activists. It was formed in 1985 in responseto the Forward-Looking Strategies developed at the Third UN World Conference on Women in Nairobi.

The Vision of WIDE is to strive for a world based on gender equality and justice which ensures equal treatment andpolitical participation of women and men.

The Mission of WIDE is to articulate the relevance of the principles of gender equality and justice to the developmentprocess through research, documentation, information dissemination, economic empowerment, capacity buildingand advocacy, networking, and the organisation of conferences.

WIDE’s Aim is to monitor the implementation of the Beijing Platform for Action (PFA) in the fields of developmentco-operation and international economic and human rights policies. The PFA outlines strategic policies which mustbe followed at the national and bilateral level, but also at the international and multilateral level, within the frameworkof the European Union, the World Trade Organisation (WTO), the United Nations (UN), the International FinancialInstitutions (IFIs) and the Organisation for Economic Cooperation and Development (OECD). In particular, WIDEfocuses on the achievement of economic and social rights of women. This focus is reflected in the following areas ofconcern of the Beijing Platform for Action:

* Eradication of Female Poverty* Economic Empowerment of Women* Combating Violence against Women* Support for Women in Armed Conflicts* Development of Institutions on the Advancement of Women.

http://www.eurosur.org/wide

TRANSPARENCY INTERNATIONALThe global coalition to curb corruption

The Transparency International (TI) was founded in 1993. It is the only global non-governmental and non-profitorganization devoted exclusively to countering corruption and increasing government accountability. Its missionstatements sets out three key strategic principles:

● TI works at both the international and national levels. Activities at the national and local level are carried out byTI National Chapters (presently some 80);

● TI seeks to create coalitions with individuals and organizations from all sectors of society –government, privatebusiness and civil society – to increase its impact;

● TI believes that best way to achieve a sustainable reduction in corruption is to promote systemic reforms, ratherthan investigating individual cases of corruption. Hence its focus on strengthening “integrity systems”, definedas a set of policies, institutions and programs which can contain corruption or promote transparency.

http://www.transparency.org

WWF is the world’s largest and most experienced independentconservation organization with over 4.7 million supporters and a globalnetwork active in 96 countries. WWF Belgium, WWF Cameroon ProgramOffice and WWF Central Africa Regional Program Office are involved ina collaborative initiative to encourage sustainable forest managementin Cameroon, Gabon and Congo-Brazzaville. In the first two countries,National Working Groups have been established to develop certificationstandards. This initiative is also providing support to committed privatelogging companies to design sustainable forest management planswhich take into account the impact of logging on biodiversity and thelocal population.

http://www.wwf.org

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HORIZONT3000 –Österreichische Organisation fürEntwicklungszusammenarbeit

ist ein privater, unabhängiger Verein und gilt als die größte Organisation Österreichs im Bereich derEntwicklungszusammenarbeit (EZA). Entstanden ist HORIZONT3000 mit 1.1.2001 durch die Neustrukturierung derehemaligen Vereine Österreichischer Entwicklungsdienst (ÖED), Institut für Internationale Zusammenarbeit (IIZ)und Kofinanzierungsstelle für Entwicklungszusammenarbeit (KFS). Die Finanzierung erfolgt zum Großteil durchBeiträge der Trägerorganisationen, Förderungen des Österreichischen Staates und Mittel der EU.

http://www.horizont3000.at

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SID in brief

Created in 1957, the Society for International Development (SID) is a unique global network ofindividuals and institutions concerned with development which is participatory, pluralistic andsustainable. SID has over 3,000 individual members in 125 countries, 55 institutional membersand 65 local chapters. It works with more than 100 associations, networks and institutionsinvolving academia, parliamentarians, students, political leaders and development experts, bothat local and international levels. This makes SID one of the very few organizations that has aholistic, multidisciplinary and multi-sectorial approach to development and social change.SID’s purpose is to:

● To support development innovation at all levels - local, national, global - in order to contributeto the search for solutions to the problems of poverty, injustice gender inequity and lack ofsustainability;

● To encourage, support and facilitate the creation of a sense of community amongstindividuals and organizations committed to social justice at the local, national, regional andinternational levels;

● To promote the sharing of knowledge, dialogue, understanding and co-operation for socialand economic development that furthers the well-being of all peoples.

In pursuing this purpose, SID sees its role as:

● A bridge between diverse constituencies in the search for social justice: (including grassrootsmovements, academia, policy-makers, progressive business sector, multilateral institutions),as well as between the local and the global;

● A global catalyst for civil society: SID aims to mobilize and strengthen civil society groups byactively building partnerships among them and with other sectors;

● A knowledge broker: SID supports the generation of knowledge on innovative developmentinitiatives, concepts and practices, and stimulates exchanges and dissemination at all levelsand across sectors.

For further information, please consult SID’s web site http://www.sidint.org or contactthe SID Secretariat (via Panisperna, 207, 00184 Rome, Italy;

Tel. +39-064872172; Fax. +39-064872170; email: info@sidint.org).

What kind of EU do we – European citizens – wish to build in relation to the rest of the world?

At the same time as the process of internal integration goes ahead, the citizens of the European Union arenow called upon to define how they wish to live with the rest of the world, and how they want toparticipate in the shaping of globalization. Of course the EU and its member states have always hadprivileged relations with many countries in the South and East. But for a number of reasons, the EU mustnow make a bolder step and confront its own responsibility towards the rest of the world, and since 75percent of the world population lives in the South and East, in relation to these parts of the world inparticular.

This report presents a framework to debate this question. The framework reflects the many different waysEU-based actors impact on the lives of women and men living in other countries – through multilateralorganizations, bilateral relations, and internal policies and practices — and offers a basic structure toassess these impacts.

The picture drawn by the report is alarming: the EU and its Member States act in a particularlyirresponsible manner. The point cannot be overstressed at a time when people, in the EU itself and in therest of the world, would be inclined to turn to the EU to play a leading role in governing the process ofglobalization. Not only is the EU unable to harness its own potential power, it is also unable to provide aguiding vision for the power it actually has. Good intentions it appears to have, for instance at theoccasion of UN processes, but as soon as concrete action and effective power is at stake, powerlessness,irresolution, narrow national interests, and division come to the fore.