GREEN PAPER

on relations between the European Union and the ACP countries on the eve of the 21st century

Challenges and options for a new partnership

EUROPEAN COMMISSION, DIRECTORATE-GENERAL VIII/1
Brussels, 20 November 1996

CHAPTER I. GLOBAL CHANGES AFFECTING ACP-EU RELATIONS

A. The international context and its consequences for the ACP countries and Europe
B. The external action of the Union and development cooperation policy
C. The Union's development role

CHAPTER II. THE EXPERIENCE OF ACP-EU COOPERATION

A. Relations between the Union and the ACP countries: their origins and subsequent development
B. Successes and failures of cooperation under the Lomé Convention
C. Implications for future partnership

CHAPTER III. SOCIO-ECONOMIC CHANGE IN ACP STATES: LIMITING FACTORS AND POTENTIAL

A. The vicissitudes of economic policy in a deeply uncertain climate
B. Anticipating risks and exploiting potential
C. Implications for the future partnership

CHAPTER IV. TOWARDS A NEW PARTNERSHIP

A. The place of the ACP-EU partnership in the European Union's external policy
B. Revitalizing the ACP-EU partnership by strengthening its political dimension
C. Opening up the framework of ACP-EU cooperation
D. The geographical cover of cooperation agreements: options
E. The European partners and coordination: options

CHAPTER V. OPTIONS FOR A NEW EU COOPERATION POLICY WITH THE ACP STATES

A. The socio-economic dimension
B. The institutional dimension
C. Trade and investment

CHAPTER VI. OPTIONS FOR A NEW PRACTICE IN THE FIELD OF FINANCIAL AND TECHNICAL COOPERATION

A. A single source of funds or multiple smaller sources?
B. Should aid be granted according to need or according to merit?
C. Types of aid
D. Co-management, EU-only management or autonomous management by recipients themselves?

CHAPTER I. GLOBAL CHANGES AFFECTING ACP-EU RELATIONS

A. The international context and its consequences for the ACP countries and Europe

Unprecedented changes have occurred on the international scene since the beginning of ACP-EU cooperation, the scale of which is illustrated by:

1. Economic globalization and interdependence

The growth of trade, the unification of capital markets and the globalization of production and distribution networks represent both opportunities and new risks for Europe and the ACP states.

The emergence of new motors of development in Asia and Latin America - itself a factor of globalization - modifies both the geography of international growth and the direction of private capital flows. Many countries which in 1960 were included among the world's less developed states, often with large populations, now have greatly reduced poverty and significantly improved human development indicators.

The new economic constraints are forcing all states and societies to adjust by implementing radical reforms. EU countries must make their economies more competitive, reform their social systems, and tackle the problem of declining social cohesion. High unemployment, rising poverty and social exclusion are a major concern and may lead to both countries and individuals to turn in on themselves. Budgetary constraints, linked ultimately to the pressure of an ageing population on social security systems, do not make the task of reform any easier.

The ACP states are only marginal players in global trade (2%) and international investment flows (less than 1%). They must integrate more fully into global trade, diversify their production base and their export outlets. As in other regions, regional synergies and cooperation, both economic and political, would contribute to this process.

Action on a national scale appears increasingly inadequate as the growing interdependence between the social and economic systems of various regions, the appearance of new systemic environmental dangers, migration, terrorism, drugs, and international organized crime, call into question the notion of national sovereignty. Global regulation is progressing very slowly; it seems likely that the parallel trends apparent today - a stronger multilateralism and regionalism - will continue.

2. The ever faster spread of technological innovation

The information society is a spectacular aspect of globalization which could accelerate change, reduce technological gaps and open new roads to development. Conversely, the lack of basic infrastructure in the poorest countries, the concentration of production of new technologies in certain industrialized countries and the possibility of a culturally-motivated rejection of these technologies risk widening the gap between poorer and richer countries and increasing social inequality.

Europe is striving to be ultra-competitive in high-technology sectors. ACP countries must create the right conditions for technology transfers and adapt new technologies to their own needs. These two aims are complementary, as the notion of what constitutes "advanced technology" is constantly evolving. The most advanced technologies can now be used to solve problems in developing countries without a prior transition period.

Technology plays a crucial role in the quest for sustainable development. However, the cost of protecting the environment may, in the short term, be in conflict with the aim of increasing the competitiveness of ACP countries. It is imperative to reach international agreement on clean technology and how to share the costs of environmental protection between industrialized and developing countries.

3. Uneven demographic trends

The world population is growing at an unprecedented rate: from 2 billion people in 1930, it reached 4 billion in 1975 and is close to 6 billion today. According to recent projections, the figure will be near 8 billion in the year 2020. Should the entire world population attain the standard of living and levels of consumption of industrialized countries today (including certain newly industrialized countries), pressure on the environment would become intolerable. Moreover, population growth is accompanied by an increase in urbanization, especially in poorer countries.

The imbalance between the populations of the North and South will be reflected in the balance of power in the multilateral system, especially if accompanied by economic performance, as exemplified by Asia's new prominence.

While the global rate of population growth is expected to fall, sub-Saharan Africa is a notable exception. This region still has very strong population growth (2.9% annually), which is not easily compatible with the aims of sustainable development. Rising urbanization is putting acute pressure on infrastructure and social services, especially education. Getting to grips with urban development and managing the local environment will increasingly be a prerequisite of political stability in Africa.

Massive inter-African migration is a factor promoting economic integration. However these movements are often uncontrolled and may also become an important cause of political risk and instability.

North-South migrationary pressures, especially between Africa and Europe, are likely to rise considerably; this prospect underlines the relevance of development.

4. The end of the Cold War and the emergence of a multipolar world.

Economics plays an ever greater role in external relations, while the end of East-West rivalry has rendered ideology-based support obsolete and given middle-sized nations more influence and a degree of autonomy in foreign affairs. The direct responsibility of states for their internal and external security has been reestablished in both North and South.

The new geopolitical reality is taking shape as the coexistence of regional entities. Asia, in particular, has become an economic player of the first order and is expected to reinforce its political presence on the international scene in the years to come.

While the European Union is engaged in an important phase of stepping up the process of integration, it is also transforming its identity. On the one hand, the events that led to its founding are receding into the past; on the other, it is preparing to deal with the fundamental questions posed by its eastward expansion, which will make the Union more diverse and will call for special efforts to ensure the acceptance of its values of peace, solidarity and cooperation.

In this new context, both for internal reasons and in order to respond to external demands, the European Union will affirm its political standing by adopting a more effective, more global common foreign policy. North-South relations will be one of the first strands of this policy: Europe can thus affirm its identity in adding a new dimension to the special relationship between the Union and ACP countries. The end of the Cold War will give a new strategic and security dimension to development cooperation. At the same time, Europe will be shouldering new tasks which will increase its economic responsibilities in fields other than development. Development policy and multilateral trade policy should be consistent and seen as two facets of the Union's external identity.

B. The external action of the Union and development cooperation policy

1. Development cooperation: a cornerstone of coherent external policy

The Union's external policy has three main components:

• the common commercial policy, based on uniform principles, especially with regard to the conclusion of tariff and trade agreements and measures to protect trade: the Union has adopted a broadly liberal overall policy centred on compliance with multilateral obligations, the building of a better-managed multilateral system, and on the active pursuit of wider access to external markets;
• systematic cooperation and joint actions in foreign policy, centred on the aims of peace and security, consolidation of democracy and the rule of law, and human rights and fundamental freedoms;
• development cooperation: support for sustainable economic and social development of the developing countries, especially the most disadvantaged among them, their smooth and gradual integration into the world economy and the campaign against poverty. According to the terms of the Treaty, Community policy in this area should contribute to the general objective of developing and consolidating democracy and the rule of law, and that of respecting human rights and fundamental freedoms;

A number of other Union policies are closely linked to external affairs, especially environment, agriculture and fisheries, science and research, the information society and the harmonization of standards for the internal market.

In all these fields, the Union pursues aims which respond to specific concerns.

Development cooperation makes a large contribution to the coherence of the Union's external actions in that its aims ultimately complement the Union's political and economic objectives:

• the aim of development is to achieve sustainable economic progress and social equilibrium - aims that underlay the setting-up of the European Union.
• development should help solve global problems (environment, population, epidemic diseases, trafficking) by making it possible for developing countries to help manage these problems;
• development cooperation, specifically the role Europe plays in poorer countries, enhances Europe's image around the world. Europe cannot be accused of commercialism at a time when market shares in emerging economies are hotly contested. In practice, European producers will benefit in the medium or long term from increased prosperity in partner countries with fast-growing populations. Another factor to take into account is that ACP-EU relations embrace four continents, thanks to which European economies are well-placed vis-à-vis emerging regional blocks in sub-Saharan Africa, Latin America, Asia and the Pacific;
• the political aspects of development (democracy, human rights, fundamental liberties, rule of law), its social benefits (better living conditions, preventing the disintegration of the social fabric), and its environmental concerns (conflicts and food deficits due to water shortages and soil degradation) meet some of the security concerns of the EU (risk of armed conflict, spread of nuclear weapons, terrorism, migration). Moreover, regional and global economic integration, which the Union supports, contributes significantly to stabilization.

Development cooperation is an important part of the Union's external policy. Nevertheless, it must retain enough autonomy to meet the Union's own long-term needs, which require continuity. Cooperation may contribute to the aims of foreign policy but must not be ruled by them. The explicit ties between various strands of external policy are governed by the principle of consistency.

2. Development aid: loss of legitimacy and the demand for efficiency

During the 1980s various factors contributed to a general feeling of disillusionment with the actual results of development aid: the budgetary constraints of donor countries; rising unemployment and the worsening of social problems in industrialized countries, with the consequent tendency to turn inwards; the perception that, in comparison to trade and investment, aid had played a marginal role in the economic success of certain Asian and Latin American countries; finally, the evidence that despite certain remarkable results, such as improved health, education and access to drinking water, many countries in sub-Saharan Africa, recipients of substantial aid and cooperation resources, had fallen behind and remained on the margins of global economic and technological development.

This negative reaction to cooperation has been further exacerbated by rising violence, the spread of fratricidal wars, the bankruptcy of many African states in recent years, the perception that corruption was endemic and aid was being siphoned off by powerful elites. Repeated crises have increased substantially the number of humanitarian operations, which divert resources from development budgets; these interventions have also led to a certain confusion between emergency aid and more long-term aid, and between humanitarian and socio-economic needs.

Faced with the downward pressure on development aid budgets, but also aware of the extent of extreme poverty and the threat it represents in terms of instability and potential conflicts, today's partners in cooperation have no alternative but to reexamine the criteria governing the allocation and management of aid in order to achieve a better and more efficient use of available funds.

Apart from the need to improve results, development thinking itself has moved on. Global economic changes (liberalization, technological progress, emerging economies) and the lessons from the success stories of Asia, Latin America, or Africa, have radically modified the philosophy of development. This is especially true of perceptions about the role of the state and relations between public and private actors.

Another factor contributing to the overhaul of cooperation is the end of the Cold War: the new political openness has allowed the emergence of a wide consensus on the principles of democracy and the market economy. International political dialogue has become deeper and richer by incorporating the experiences of new participants. Since 1990, the great international conferences on the environment, human rights, population, social development, the role of women, and food security have demonstrated that very dissimilar countries can agree on common values and principles concerning essential issues for development.

These processes have already led to important changes in the concepts of aid and its role in development, which have been partly incorporated in the ACP-EU cooperation policy. These changes fall within four main categories:

• an enhanced political dimension (resolution of 28 November 1991 and revised Article 5 of Lomé IV: human rights, democratic principles, rule of law and good governance);
• stronger ties between relief, rehabilitation and development aid;
• the formulation of new approaches concerning the role of aid and a redefinition of the parties' respective roles: emphasis is placed on the policy environment, local capacity building, the role of civil society, and on new ways of including other agents of development, especially in the private sector;
• a change in priorities, by reducing intervention in productive sectors and integrating relatively new themes:

1. new ways of supporting social development (budget aid and securing social expenses), taking into account more systematically the impact of cooperation on poorer groups and greater emphasis on the role of women, demographic issues, education and training;
2. actions in favour of environmental protection, the management of natural resources, and sustainable development: they involve environmental impact studies in all projects as well as financing for specific environmental programmes and projects;
3. the creation of an instrument for structural adjustment support at macroeconomic and sectoral levels;
4. institutional reforms, development of administrative capacity, building civil society, development of a more participatory approach, and decentralized cooperation;
5. a new conception of the economic role of the state, policies to foster private sector development, and support for trade development.

These changes are expected to increase the effectiveness of development policies. However, it is too early to assess their real impact.

C. The Union's development role

As a force for stability, a model of cooperation and regional integration, a leading trading power and the largest single source of official development assistance, the Union has a major role to play in the development of less fortunate regions.

The Union can contribute in five main ways:

- Through its active participation in the multilateral system, in the fields of security, trade and investment, economic and monetary cooperation, the Union's actions have an appreciable impact in the developing countries. The Union's long-standing concern to see the less developed countries integrated into international trade is now a key consideration in its dealings with the ACP countries.

• In view of the general principle that Community action should be consistent and sustained, the Union is duty-bound to ensure that the developing countries are able to benefit from the process of European integration. Access to the single market, soon to be completed by the move to a single currency, and the prospect of enlargement, which brings with it a risk of deflection of trade and investment as well as new trading opportunities, are key aspects of any European policy towards other regions.
• The Union stands out among multilateral institutions involved in development issues (the World Bank, IMF, regional development banks, etc.) because it alone is a political entity. The Union has the political clout needed to back an equitable and sustainable development model consonant with its own fundamental principles and the socio-cultural values underpinning its vision of society. The importance it attaches to human rights, social values, education and training and the preservation of the environment combine with its firsthand experience of underpinning the liberalization of trade with carefully designed structural policies, and its efforts in the field of regional cooperation and integration to make it a unique force in the development field.
• The Union must make full use of its capacity to mobilize enough aid resources to achieve critical mass and engage in aid policies pursuing long-term objectives. Compared with other donors - now that US aid budgets have been slashed - the Union is a major source of official development assistance: with the volume of international aid in sharp decline since the early 1990s, the share of the total accounted for by the Union (Community and Member States) is increasing all the time (53% in 1995).
• Lastly, by continuing its internal coordination efforts in application of the principle of complementarity between the Community's development policy and the Member States' bilateral policies, the Union can give a fillip to coordination efforts by the international donor community in various forums (the UN, OECD, G7 initiatives to strengthen coordination between the multilateral institutions, the Special Programme for Africa, consultative groups, round tables, etc.). Greater coordination in respect both of global initiatives and individual recipient countries is now crucial to improving the effectiveness and efficiency of aid policies.

The renewed momentum recently given to the European project must, at least in part, be ascribed to Europeans' efforts to deal with the major changes in world affairs described in this opening chapter. Still far from over, this acceleration serves two objectives: to enhance Europeans' capacity for action within a political union and to show democratic solidarity with the countries of central and eastern Europe. To endorse these two objectives, which are central to the present Intergovernmental Conference (IGC), is to recognize, in a way, the need in future for a European development policy: Europe cannot claim to be a player on the world stage without a responsible strategy towards the different regions of the South, and in particular those most at risk of poverty and marginalization. It cannot pride itself on its solidarity with Eastern Europe's fledgling democracies without confirming a partnership with countries feeling their way towards a just society founded on fundamental human rights.

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