Trade not Aid

Lomé Convention
• Started in 1975
• Signed in Lomé, the capital of Togo
• EU’s comprehensive trade-and-aid agreement with developing
countries in Africa, the Caribbean and the Pacific (ACP)
• ACP states – 71 members.
• 48 in Africa, 15 in the Caribbean and 8 in the Pacific are
Europe’s former colonies.
• Many of the ACP countries are amongst the poorest countries
in the world.

Aid
• Part of the Lomé Convention
• Aid aka Development Assistance
• Distinguishing feature: concentrates more on agricultural and
rural development projects
• Compared to those of the USA and Japan the EU’s aid
programme is considered to be less concerned with strategic
and commercial relationships and more focused on
development

Trade
• Trade is a key factor influencing prospects for sustainable and
equitable growth amongst developing countries
• Increased trade if often seen as a means of combating poverty
through providing jobs and income-earning opportunities
• In order to help stimulate the economies of the of the ACP
states, the Lomé Convention guarantees special access to the
European market place
• 95% of all ACP exports enter the EI market duty free
• This, in theory, should give ACP states competitive advantage
and stimulate ACP exports to the EU
• The ACP countries are still allowed to tax European-made
products entering their countries.
• It is ‘non-reciprocal’

Success?
• Evidence from the past 15-20 years suggests that the Lomé
Convention’s trade preferences have not acted as a great
stimulus to ACP exporters
• Trade preferences alone appear to be an insufficient
mechanism to stimulate sustainable and equitable growth in
developing countries
• It appears that rather than being an ‘engine for growth’ the
Lomé Convention acted as a ‘life support mechanism’ for many
of the ACP states.

Why?
• There is a lack of industrial culture in many of the ACP states.
• The absence of port infrastructure, banking facilities and
entrepreneurial activity means that many of the ACP couldn’t
take advantage of the opportunities offered
• Has Lomé locked ACP counties into unfair trading relationships.
• Whilst the developing counties of the ACP exported low value
primary products, European counties exported high value
manufactured goods.
• The impact of Globalization – in 1975 EU trade tariffs stood at
10% - with various free-trade agreements etc and WHO
intervention the EU trade tariffs have dropped to under 3%

Replacement
• In June 2000 a new trade and aid agreement was reached
between the EU and 71 ACP countries
• The treaty became known as the Cotonou Agreement, after
Cotonou in Benin, where the convention for the agreement was
held
• The Cotonou Agreement is expected to run for 20 years.
• The new deal transforms the previous convention into a system
of trade and cooperation pacts with individual nations
• Some of the poorer ACP states will continue to enjoy virtually
free access to European markets and there will be regional free
trade agreements between the EU and better-off developing
countries