In all the arguments over the EU and Britain’s continued membership, most centre around the self interest element of membership. And of course, it is right in many ways that it does so, each has a responsibility to his own – his family, his neighbour, his fellow countryman. But although the arguments about the interest of the British people receive much coverage, the wider effects of the European Union have received little attention. There is a moral dimension to the way that the developed world, and especially the EU, makes policy in respect to its links with the developing world.
In the 1970’s, and agreement was reached with a number of African countries which created a fairly laudable system of preferential sectoral access agreements, tariff free import quotas for the signatory nations and access to aid via the European development fund. The Lomé Convention began with a number of countries which had previously been colonies of the European powers, which had previously based trade on links to the old world. It increased to encompass 71 African and Caribbean countries by the time of its last renegotiation in 1989 (Lomé IV). The ulterior motive though was clear – this gave EEC nations guaranteed access to raw materials and agricultural products, which helped to maintain price stability. Bu the moral aspect of it should not be underestimated. The sense of responsibility to former colonial possessions was still fresh in the mind of the former world powers, Britain foremost among them.
However, the development of the Single Market and the WTO made the further renewal of Lomé impossible – the rules had changed. Most Favoured Nation and the common rules of the Single market made it mostly unlawful to discriminate between producers based on status. This was a fact brought home by the USA, which petitioned the WTO for a decision on the legality of Lomé in an attempt to bring the agreement to an end.
The answer to this decision has been for the EU and its ACP (Africa, Caribbean and Pacific) partners to reach a new agreement, the Cotonou Agreement. This has brought a new era of Economic Partnership Agreements (EPAs), which unlike the old agreements under Lomé are ‘Reciprocal’ trade agreements where the African nations also provide duty free access to their domestic markets for EU producers. Most of the EPAs have delays of liberalisation for protected sectors of their markets, some lasting up to 15 years, but with the first agreements starting in 2008, the end of these restrictions is now in sight. Also, for those sectors without derogations, direct competition with European producers has been hard to swallow.
The added dimension here is that where the WTO allowed allowed non reciprocal trade agreement rules for developing nations, this expired in 2007. So when a developing nation enters reduced tariff agreement with the EU, it must thereby offer the same terms to its other trading partners, potentially seeing its domestic market destroyed by flooding of cheap imports. Then the other issue is that much of these nations income derive from Duties on imported goods. As these are reduced, state income drops and so the ability to be able to develop infrastructure that would raise competitiveness falters. The exemptions to this are made by the Generalised System of Preferences. This is a form of exemption from Most Favoured Nation status which allows some tariffs applied against developed nations to remain applicable in the least developed nations. This system has been criticised for being restrictive, and not applying to sectors where the least developed nations would benefit most (e.g., simple manufactured goods, leather, glass etc.). The USA for example, has exempted many sectors from the GSP it has entered into to protect its own economy from cheaper competition.
The result of all this is that many EPA’s remain uncompleted. They would simply not be in the interests of many of the ACP nations, the risks are too high. Many of those which are completed have had mixed results.
So the situation remains that tariffs into the EU remain stubbornly high for many of the developing World’s farmers and producers of simple manufactured goods. The EU also has the added dead weight of the Common Agricultural Policy, which subsidises EU farmers and therefore creates a further hurdle to competition. Although recent reforms of the CAP have reduced overproduction and dumping in the third world, this along with tariff barriers, makes it very hard for ACP nations farmers especially to compete in European markets.
The final piece of the jigsaw is the Non Tariff Barriers. This is especially a problem for farmers in the ACP nations. Quite properly, the developed nations set high standards for their own goods in terms of the Phytosanitary conditions for food and food related products. This then creates hurdle to climb for developing nations, both in the ability to conform to standards (which can be expensive) and in the ability to prove compliance. There is still a suspicion though, that some developed nations use local rules and inspection regimes to reject goods from their domestic markets.
So how does this inform our discussion on whether to leave the European Union?
In some respects it doesn’t. Either with or without Brexit these situations will continue to exist. We will enter into a trade deal (possibly EEA, possibly something different), but the EU will be unlikely to allow Britain to be used as conduit for developing nations to challenge its home markets in ways it currently does not allow.
This will probably restrict how much we can change our own relationship with the developing world. Because we have to compete with the EU, we will not be able to unilaterally remove farming subsidies. Any trade deals with ACP nations will be probably subject then to many the same problems that the current EU built ones face.
This is because the ‘Developed World’ makes the rules, especially at the WTO – the USA’s challenge to the Lomé Convention has partly set the current chain of events in motion. Britain I would hope, will at least give voice to the concern of many of the developing nations as an independent participant and help to improve the future for the developing world.
The context in which I discuss this today is Non EU Immigration. The above issues paint a simple picture of a world divided into Rich and Poor. That’s not an entirely accurate picture, the shades of grey are numerous. But put yourself in the position of a poor African farmer, your opportunities are limited because your nation cannot help you export to the EU by opening up its own markets, (as MFN would remove state income and potentially decimate other sectors). The CAP makes your product seem less competitive in EU markets anyway, and because other sectors are not developing well your country is not getting richer, your ability to realise more profit from your domestic market is not improving.
What are you going to do to better your children’s lives? The answer is simple – you leave and head north to the developed world. And this is where the EU comes in because it’s attempts at stopping this migration have not, and will not work. The real answer is not to build fences, but to help create thriving economies in the developing world thereby encouraging people to thrive where they are. But protectionism at home both in the EU and especially in the USA, slows that process. The WTO rules, purported to increase developing world wealth, have been too often counter productive. (It would also be helpful for the West not to enter into disastrous foreign policy adventures which add to displacement, but that’s another topic altogether)
In the same way, EU nationals have moved to Britain because it is doing well economically (compared to their countries of origin) and has developed markets which require labour. Had we started by actually helping to develop those countries economically first before allowing freedom of movement, then it is arguable that we would have seen less migration overall. But finance ministers in the UK and Western Europe mostly looked to the GDP figures and the next election. Every migrant worker was another working wage, another item produced, more cash flow on one side of the balance sheet.
We cannot turn back the clock, and this is why immigration (and controlling our borders) should not really be the central focus of the debate on our EU membership. We can hope to mitigate it now, but we cannot undo the errors of the past by putting up fences. That does not mean that current EU immigration is sustainable or that we shouldn’t be more discerning in choosing who we allow to settle permanently. But we have set ourselves on an economic path that requires constant workforce growth to pay for the rising liabilities promised to citizens who have never truly been able to pay into the system what they will receive from it. Government has chosen this route, an ever increasing workforce, to keep the money tree growing.
If we had not been in the EU, then the only difference would probably have been the places the new workforce had come from. Rwanda would have replaced Romania on the posters of protest, Pakistan in place of Poland.
The changes must start at home. Outside of the EU I would hope that a return of domestic democracy will see the real issues begin to be debated and faced with some intellectual rigour and honesty.