IB Geography: Resources - Trade Not Aid

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IB Geography: Resources - Trade Not Aid

  1. 1. Trade not Aid
  2. 2. 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.
  3. 3. 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
  4. 4. 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’
  5. 5. 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.
  6. 6. 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%
  7. 7. 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

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