Case: Policy coherence in general

12-01-2012 Preference erosion in ACP countries questioned by MEPs

In order to promote and facilitate socioeconomic development in developing countries through sustainable economic growth, the European Union grants tariff preferences to trading partners in African, Caribbean and Pacific (ACP) countries. The Generalised System of Preference (GSP) allows such preferential treatment of developing countries as an exemption of WTO rules that aim for equal treatment of imports from all WTO member countries.

However, in their external trade policy the EU focuses more and more on the negotiation of bilateral Free Trade Agreement (FTAs) with developed and emerging economies. These FTAs are meant to reduce import tariffs and as a result cause the GSP tariff treatment for ACP countries to become less preferential. This preference erosion is an increasing threat for the ACP countries development and infant economies.

MEP Louis Michel (ALDE) asked the European Commission several question on the coherence between the two different policies: on the one hand the EU development policy that aims to protect developing countries socioeconomic development by granting them preferential treatments and on the other hand the EU trade policy that seeks to lower import tariffs for developed trading partners which at the same time reduces the preferences for ACP countries. MEP Michel wants to Commission to make clear how it will guarantee policy coherence in the areas of development and trade, if the FTA impact assessments take into account the potential impact of FTAs on ACP countries, and what measures should be taken so that the FTAs wont undermine the EUs development policy objectives for ACP countries.

An example of the preference erosion can be found in a question to the Commission by MEP Peter Stastný (EPP). He points out that the EU currently maintains a zero tariff treatment for imported palm oil for food production for ACP countries. In Papua New Guinea and the Solomon islands this treatment has encouraged the sustainable production and export of palm oil, for which there is a high demand in Europe. Due to their geographical remoteness however, the sustainable long-term development and economic growth of these countries still largely depend on the preferential system for ACP countries. Without it, they wont be able to export their palm oil to the EU and to compete with producers from Malaysia and Indonesia. At this moment the EU is also negotiating a FTA with Malaysia and probably will start negotiations with Indonesia soon. The import tariffs on Malaysian and Indonesian palm oil will probably be reduced through those FTAs, resulting in preference erosion for Papua New Guinea and the Solomon Islands that will seriously affect the socioeconomic development of those countries.
MEP Stastný asked the Commission if they took into account the impact of preference erosion in their impact assessment preceding the launch of FTA negotiation with Malaysia and if they will do so in the impact assessment for Indonesia. Also MEP Stastný asked whether the Commission considers to not eliminate tariffs for palm oil in the FTAs.

Fair Politics warmly welcomes the questions from MEPs Michel and the attention he draws to Policy Coherence for Development (PCD). As the EU has committed itself to PCD, through the European Consensus on Development and the Lisbon Treaty article 21 and 208. Also Fair Politics would like to thank MEP Stastný for posing his question. The importance of preventing preference erosion and the need to put development before the EUs commercial interests becomes clear from his case.
For posing these questions and with that contributing to PCD, Fair Politics grants both MEP Louis Michel and MEP Peter Stastný one point in our monitoring system towards the Fair Politician of the Year Award.

Monitor fair: ALDE, EPP


Parliamentary questions
17 November 2011 E-010541/2011

Question for written answer
to the Commission
Rule 117
Louis Michel (ALDE)

Subject: Coherence of EU trade and development policy

Under the Generalised System of Preferences (GSP) the European Union grants favourable tariff treatment to trading partners in the African, Caribbean and Pacific (ACP) region. These favourable tariffs are applied in order to promote and facilitate socioeconomic development via sustained economic growth in some of the worlds most underprivileged countries.
The EUs external trade policy is increasingly focused on the negotiation of bilateral free trade agreements (FTAs) with developed and emerging markets, which aim to reduce import tariffs on goods. One consequence of this for ACP countries is that their GSP tariff treatment undergoes preference erosion, threatening the future development of their vulnerable economies.
Policy coherence is particularly important in the areas of development and trade.
1. How does the Commission guarantee policy coherence in the areas of development and trade?
2. Do the Commissions impact assessments, carried out prior to launching FTA negotiations, take into account the potential consequences of such agreements for ACP countries and the impact that preference erosion in key industrial sectors may have on those countries?
3. In the Pacific region, does the Commission believe that the renewed partnership called for by President Barroso in his speech at the Pacific Islands Forum plenary held on 7 September 2011 will be undermined by the preference erosion which may be suffered by Pacific Island economies as a result of the EUs FTA negotiations with some ASEAN countries?
4. What policy measures should be taken to ensure that efforts to safeguard the EUs commercial interests by negotiating FTAs with third countries do not undermine its development policy objectives for ACP countries? Will DG Trade consider this when drafting the new Communication on Trade and Development expected by the end of 2011?


Parliamentary questions
9 December 2011 E-011682/2011

Question for written answer
to the Commission
Rule 117
Peter Stastný (PPE)

Subject: Preference erosion in ACP countries

The EU currently maintains zero tariff treatment on imported palm oil for food production under the Generalized System of Preferences (GSP) for countries in the African, Caribbean and Pacific (ACP) region. This encourages the sustainable harvesting and export of palm oil from Papua New Guinea (PNG) and the Solomon Islands (SI) to Europe to help meet demand for high-quality, fully traceable food products.
The production of sustainable and traceable palm oil from PNG and SI is highly efficient, with local producers achieving remarkably high yields. However, due to their geographic remoteness, GSP tariff preferences are essential for them to be able to export to the EU and compete with palm oil producers from Malaysia and Indonesia, which are less distant. The EU system of ACP preferences is vital for the sustainable long-term development and economic growth of these Pacific island countries.
The EU is currently negotiating a Free Trade Agreement (FTA) with Malaysia. The launch of FTA negotiations with Indonesia is expected soon. Both will probably seek to reduce import tariffs on Malaysian and Indonesian palm oil entering the EU for food production. The resulting preference erosion would seriously affect the socioeconomic development of vulnerable Pacific Island economies.
1. Did the impact assessment preceding the launch of FTA negotiations with Malaysia take into account the impact of preference erosion on Pacific island nations? Will the assessment for Indonesia take account of these concerns?
2. Under the foreseen FTAs, has the Commission considered excluding palm oil from the list of products for which tariffs will be eliminated, given that Malaysian and Indonesian exports will remain competitive irrespective of tariff elimination?