Frustrated at the some of the claims of development campaigners, Commissioners Peter Mandelson and Louis Michel have written an open letter setting out their case. They argue, as I have repeatedly done, that:
No one believes the status quo is working. Africa’s dependence on trade preferences and a few basic commodities has seen it fall far behind the poverty reduction and economic growth of Asia and Latin America.
The protection offered by trade preferences have given the Africa, Caribbean and Pacific (ACP) countries since 1975 has not enabled those countries to gain a greater share of EU trade. In fact, their share of EU trade dropped from 8% in 1975 to only 3% in 2000. Encouraged by misinformation from development campaigners, the ACP economies have failed to offer what they plan in reciprocation, which is what is required for a new preferential trade agreement to be WTO compliant. Because the existing trade relationship between the EU and ACP economies is in breach of WTO rules, if the negotiations are not completed by the end of the year, the ACP countries will end up with less access to EU markets.
The real point is that the most beneficial thing for the ACP economies is for themselves to open to trade. Between 1970 and 1989, open developing countries had an annual growth rate of 4.5 percent, compared with 0.7 per cent in closed developing countries. It is principally imports, rather than exports, that drive economic prosperity. Less expensive, more readily available imports mean less expensive drugs and better health; less expensive machinery and more productive workplaces; and less expensive food and properly-fed families. The sole purpose of exports is to pay for imports, and the cheaper the imports, the better. Or, to put it another way, people are better off when supermarket prices go down, and worse off when they go up.