The attitude of the richer countries in the world towards those that still have low living standards is critically important. We all share a common human obligation to assist those who are much worse off than we are. In many parts of the world, the figures for easily preventable diseases, malnutrition, low levels of literacy and education, and poor life chances generally, are appalling. Leaving aside altruism, moreover, we also all have a common interest in making the world a more equal place, so that it is safer and more at ease with itself. In addition, the population of the poorest countries is growing much faster than those that are better off and the world's future sustainability is going to depend on the number of people it is expected to contain being manageable. The EU, as a major trading bloc, thus has a critically important role to play in finding a way ahead which really will help poor countries while still being acceptable to voters in the rich world. How do EU policies measure up to this challenge?
While aid has an important role to play, by far the most urgent requirement for poor countries is for them to be allowed to trade their way into greater prosperity. To do this, they need to be able to develop export industries, starting with relatively simple products, such as textiles and shoes, or employing the relatively basic technology required to produce commodities such as steel, using the advantage they have of comparatively low labour costs to compete. For this to be possible, however, the richer countries of the world have to have no significant barriers to imports for such products, in particular impediments such as onerous import duties or quotas. In this respect, without doubt, the record of the EU is a total disgrace. While the EU's external tariff is low on most goods coming from the already developed world, it is staggeringly much higher on those coming from most poor countries.
Undoubtedly the worst case of EU protectionism and distortion of trade relates to agriculture. The expense to the EU consumer and tax payer is massive - recently estimated by the OECD to be more than $100bn a year - not far short of $300 for every single person living in the current EU Member States. In many important respects, however, the cost to the Third World is even higher. Tariffs and quotas on the foodstuffs which farmers in poorer countries can produce at a fraction of the prices paid to EU farmers are so high that it is impossible for them to sell to EU markets. People living in the EU pay over two and a half times the world price for their sugar; over twice the world price for lamb and butter; double what they should be paying for their beef; and over 80% more for bananas and 50% extra for cereals. Worse still, surplus high cost production from EU farms is then dumped on world markets, driving Third World farmers out of business. Nor do EU tariff policies do anything to encourage poor countries to trade up by industrialising. EU tariffs are about twice as high on processed foods as they are on those which are unprocessed. Thus Kenya, for example, can thus sell us coffee beans but not instant coffee in jars. How can such countries be expected to help themselves by creating more added value against discriminatory barriers like this?
The Common Fisheries Policy has been a well known disaster for Britain and for the fish stocks and ecology of European fishing waters. What is not so well known is the knock on effects on Third World countries of fishing out the sea round the EU. The impact of falling fish catches within EU coastal seas has been to drive EU fishing fleets into Third World waters, particularly off the coast of Africa. The heavily subsidised and industrialised EU fishing fleet then catches far too many fish for sustainability, while at the same time driving local fishermen out of business. The EU catch comes back to European markets duty free, while fish products cannot be sold by Third World fisherman to the EU. What a way to try to help poor countries!
One of the success stories of the Labour government has been to increase significantly the proportion of Britain's GDP devoted to aid projects in the Third World, projected to rise to 0.4% of GDP by 2005/06. Unfortunately, this initiative has not been matched across the EU where aid budgets currently average 0.34% of GDP. Furthermore, there are major problems with the aid sums which are available. Far too much of it goes to ex-colonial client states - such as France's links with North Africa - or to East European countries which are already comparatively well off, rather than to the countries which are poorest and need the aid most, to which British aid is very largely directed. Even more worrying is the almost unbelievable inefficiency with which the EU aid budget is administered. Disbursements are routinely made late. Accounting controls are lax, making it all too easy for fraud to take place. There is no doubt at all that the British aid programme is administered far more efficiently than that part of it - about a quarter - which we have to pass over to the EU before it is disbursed.
One of the more sinister components of the rich world's relationship with poorer countries relates to the arms trade. Here, again, the record of the EU leaves a great deal to be desired. The EU is a large scale exporter of arms of all sorts to the Third World, adding to the waste of scarce resources and making it easier for conflicts to break out and intensify, aggravating the horrifying loss of life which we have witnessed in many poorer countries. Anything up to 4m people may have lost their lives in the Congo alone, for example, as a result of warfare, during the last five or six years. Regrettably, this is an area in which Britain is in no position to take up the high moral ground, but this does not excuse the absence of more serious efforts by the EU to control more effectively the sale of arms to the Third World
The prospects for reform of all these damaging policies is not, unfortunately, likely to be improved by the big expansion of EU membership which is now likely to take place over the coming few years. Although by world standards, the accession countries are much better off than those in the Third World, their requirements will inevitably put further strains on the EU budget. In particular, the high concentration on agriculture in the applicant countries will make it more difficult for the far poorer countries in the world to receive the attention they urgently need. Serious reform of the CAP has already been put off until at least 2013, with current tinkering achieving little real progress, making it very unlikely that this major block on Third World development will be removed.
Perhaps the biggest single reason for lack of optimism about the prospects for significant changes to the EU's policies towards the Third World lies in the poor outlook for the euro-zone economy. The introduction of the Single Currency, with the one size fits all policies which it entails, has made EU economic management far more inflexible and difficult. The Stability and Growth Pact has locked the euro economies into policies which make it impossible for governments to stimulate their economies with the spur they need from a period of deficit financing. The obsession of the unelected and unaccountable European Central Bank to drive down inflation to ever lower levels means constant monetary deflation. The consequences of this mix of policies are the slow growth and high levels of unemployment which are so conspicuous across the euro-zone. Unfortunately, this is exactly the opposite to the prosperous and optimistic environment needed to encourage EU public opinion, and its electorate, to look outwards in a generous spirit to those in poorer countries who so badly need access to EU markets and other forms of assistance. On the contrary, further years of economic under-performance are much more likely to lead to a hardening attitude to other people's problems. The EU is all to likely to become more inward looking and less willing to take a generous view of its obligations to the rest of the world.
The total costs of all this misgovernment are staggeringly high. The cost to EU consumers and tax payers from all EU trade barriers, including tariffs, quotas, export subsidies and anti-dumping measures, adds up to about 7% of the entire EU GDP - about the total output of the whole of the Spanish economy. Each job saved by this protectionism costs around $200,000. The cost to the Third World, however, is even higher, and the impact in many ways more acute. The increased poverty and deprivation resulting from the failure of the developed world to open its markets to poorer countries is colossal. The UN has estimated that incomes in the Third World could be increased by $700bn a year if their economies were provided with open access to the markets of the developed world. Even a 50% reduction in tariffs would increase prosperity in the poorest countries by $150bn - which is three times the total value of all development assistance. The EU, particularly because of the Common Agricultural Policy but also because of its protectionism generally, is one of the worst offenders. We should not allow this to continue. If other EU Member States are resolutely set on avoiding reform, this is another very powerful reason for making sure that Britain stays clear of further efforts to stifle our ability to take independent action. It provides another powerful argument for resisting the current attempts to integrate the British nation state still further into an inward looking United States of Europe. This is not where our traditions lie. We need to be able to implement sensible policies to help the Third World - not to be caught up in a web of self interested politicking which may make the rich richer but which also keeps some of the poorest people on earth in grinding poverty.
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