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France, Europe and Development Aid. From the Treaties of Rome to the Present Day

 | 
Gérard Bossuat
, 
Gordon D. Cummings

Enlargements and New Aid Paradigms (1975-1995)

What is Distinctive about European Development Aid: Taking account of New Paradigms (1975-1995) 

Philippe Hugon

Texte intégral

Introduction

1As a young student in 1958 I attended a talk in Rome by the Italian Foreign Minister on European aid following the Treaty of Rome. He began his talk by quoting Confucius: “What have you got against me? I have given you nothing”. I have always found that, in the words of the African proverb, “The hand that gives is superior to the hand that receives”. I shall speak as a university researcher who experienced the 1975-1995 period and analysed what was happening with European aid from the outside.

2The creation of the European Economic Community (EEC) coincided with the period of decolonisation. There were always links between developments in Europe and colonisation. It was the rifts between European powers that encouraged a process of colonial expansion which increased tensions between colonising countries. The process of decolonisation took place at the same time as the Common Market was being formed, in 1957, and some of the countries which had lost their empire were building up the European project.

3Association of the overseas countries and territories enshrined in the Treaty of Rome concerned eighteen entities which were all French-speaking, except for Somalia. The Yaoundé Convention (1963) meant that decolonisation, imperial preferences and post-colonial links could be managed at European level. For the founders, solidarity with the South and more specifically with Africa was at the heart of the European identity. Aid was one of Europe’s fundamental values and, as Willy Brandt said, “development policy is the policy of peace in the 20th century”.

4However, right from the start the Member States of the European Community, which later became the European Union, disagreed on many issues such as the preferential partners, the sharing of the aid “burden”, political neutrality, conditionality and the balance between aid and trade. France was in favour of a post-colonial Eurafrique, while Germany and the Netherlands wanted to extend their preferential relations with the developing world. In forming the Franco-African Community, and retaining sovereign monetary, military and political functions, France maintained preferential relations with African countries, while other European countries developed more normal links with Africa.

5France played a central role in establishing the system of development aid, by prioritising personnel networks and the politics of influence over “market forces”, by supporting aid, and by helping to stabilise commodity prices while other countries focused on trade. The EDF was originally designed along the lines of the FIDES. At first, the French overseas administrators played a leading role in the European Commission and in the Ministry of Cooperation by adopting a political approach rather than an economic approach. When Britain joined the European Community on 22 January 1972, after France’s veto at the time of General de Gaulle, that only reinforced the position in favour of trade.

6The period which we are discussing here starts with the Lomé I Convention in 1975, and ends with the Maastricht Treaty and Lomé IV bis in the mid-1990s. The end of the Thirty Glorious Years in the mid-1970s was marked by major changes in European aid in a context of internal enlargement and diversification of partners. This was due both to the changes in the international context, in Europe and in the ACP countries, and to the changes to development paradigms. Europe gradually abandoned its strong policy in relation to Africa.

7The first part of this chapter explores the evolution of aid in context: from the time of Lomé I to the Maastricht Treaty and the WTO; the second part presents the new paradigms of development and of European aid. The chapter ends by taking stock of what was achieved over this twenty year period.

I. The Changing Context from Lomé I (1975) to Lomé IV bis (1995)

8The evolution of policies in support of development is influenced by the weight of history, political choices, compromises, power relations, historical accidents and external events. The stated principles and goals differ from what is done in practice. The end of the Thirty Glorious Years in the mid-1970s was marked by major changes in European aid in the context of Europe’s internal enlargement, the opening-up to the global economy, and the diversification of partners in the South. The Lomé Convention of 28 February 1975 was signed by nine European countries and 46 ACP countries. The EDF had a budget of 3 billion ecus over five years. The mid-1990s brought the Maastricht Treaty (1993), and Lomé IV bis (1995) was signed by 65 ACP countries.

  • 1 Jean Bossuyt, “European Development Cooperation in the Post-Maastricht Era”, Development Research I (...)

9The context of the various Lomé conventions was one of significant transformation due to the changing global context, in Europe and the ACP countries, and modifications to development paradigms.1

A. Changes in the Global Context

10The global context changed radically in the two decades from the end of the New International Economic Order (1974) and the oil shocks up to the establishment of the WTO (1995).

11Trade liberalisation and multilateralism were reflected in the principle of reciprocity, implying a significant liberalisation of foreign trade while maintaining special, differential treatment recognised by GATT Article XXIV.

12The financial globalisation which resulted in particular from the move to abolish the gold exchange standard, exchange rate flexibility and liberalisation of the capital markets brought the “three Ds”: disintermediation via securitisation, deregulation and departitioning of the financial markets. This led to the growing financialisation of global and European capitalism.

13The world was obviously transformed by the collapse of the Berlin Wall in 1989, the rise of the new industrial countries later known as emerging countries, and the creation of a system leading to multipolarity. The end of the Cold War and of a bipolar world with countries bidding for aid led to a downgrading of the geopolitical role of aid.

B. Changes in the European Context

14The European context also saw fundamental changes. Europe was enlarged from nine members (1973) to ten (1981), twelve (1986) and fifteen (1995). The collapse of the Berlin Wall (1989) caused a shift in Europe’s centre of gravity towards the North and East, and led to funding for Central and Eastern Europe, partly at the expense of southern countries.

  • 2 European Commission, Green Paper on relations between the European Union and the ACP countries on t (...)

15At the Commission, DG Trade grew in importance, putting the emphasis on the role of the market and competition. Apart from the principles mentioned, European development aid policy also brought DG Development into conflict with DG Trade, the Commission and the Parliament, as is evident from the debates on adjustment.2

16At the end of the period, the Maastricht Treaty (1993) established the Common Foreign and Security Policy (CFSP). The Member States retained the right to decide foreign policy and defence policy, but with some modifications: the principle of subsidiarity was introduced with an element of supranationality; the stated objectives of integration into the global economy, sustainable development and poverty reduction became to some extent conflicting goals. Monetary coordination was extended with the creation of the European monetary system in 1979 and the ECU unit of account, the predecessor to the euro.

C. Changes concerning the ACP Countries

17The ACP (African, Caribbean and Pacific) countries became Europe’s partners. The ACP group was formed by the Georgetown agreement involving 46 states in 1975, which became 65 in 1990. The Lomé Conventions were thus extended to include English, Spanish and Portuguese speakers. The number of preferential partners for European aid was greatly increased. The ACP group became disparate and during those twenty years tended to experience economic stagnation, financial deficits and trade marginalisation.

18After benefiting from the commodity boom in 1974 and in 1980, the ACP countries suffered deteriorating terms of trade up to 1995. They had access to international liquidity during the 1970s in anticipation of a lasting increase in commodity prices. They were then caught up in permanent debt by borrowing to pay the interest. The ACP debts, which came to less than $ 50 billion in 1975, had reached $ 95 billion by 1982 and $ 222 billion in 1995. The burden of multilateral debt incapable of being rescheduled was constantly growing.

19In this generally rather unfavourable context, the ACP countries suffered economic stagnation and marginalisation, losing market share compared to other developing countries. The great majority of ACP economies continued to be based on cash crops, specialising in primary products.

20This led to essential economic policy reforms at the instigation of the Bretton Woods institutions; the aim was to manage the transition from administered, protected economies and post-colonial state capitalism to liberalised, open economies which would face the erosion of preferential treatment and confront global competition. The priority concerned debt management and financial balancing which, in the great majority of cases, was achieved at the expense of economic growth, leading to a “downward adjustment”, at least in the medium term.

II. Changes in European Aid, Europe/ACP Relations and Development Paradigms

A. The Foundations of the Original Lomé Model

  • 3 Dieter Frisch, “La politique de développement de l’Union européenne. Un regard sur 50 ans de coopér (...)

21The original institutional model for Lomé was based on political dialogue. Its institutional framework was unique in that it was permanent (Council of Ministers, Committee of Ambassadors, ACP-Europe joint assembly).3

22The principles underlying the original character of European aid concerned:

  • the right to development taking account of asymmetries; the aim was to compensate for international asymmetries and structural handicaps;

  • the ACP’s autonomy over control of expenditure;

  • the non-reciprocity of trade preferences with non-reciprocal liberalisation, access to EDF aid programmes, and the principle of the contractual nature of Lomé;

  • stabilising mechanisms and mechanisms to compensate for instability with the establishment of Stabex for agricultural products and Sysmin for mineral products;

  • the complementarity between aid and trade;

  • the absence of conditionality, with political neutrality;

  • preferential relations between the EU and the ACP states;

23There was in fact a formalistic approach, some marginalisation of the ACP-EU framework in the policy pursued by the EU, a dialogue between unequal partners and asymmetrical relations in terms of knowledge, power and assets.

B. The Main Changes to the Model

24During these twenty years, there were some profound changes concerning Lomé, such as:

  • the shift from the right to development to normalisation of the rules;

  • diversification of the EU’s partners (neighbourhood policies, Mediterranean, agreements with Asia and Latin America) and differentiation of aid processes between North Africa (Barcelona 1995) and the ACP countries;

  • erosion of the trade preferences and multilateralism, with growing emphasis on the benefits of openness and liberalisation and the debate on regionalism and its compatibility with the WTO (Article XXIV, WTO compatible);

  • the growing role of new players from the private sector or civil society;

  • support for regionalisation in liaison with the free trade areas recognised by the WTO.

  • 4 Craig Burnside, David Dollar, “Aid, Policy and Growth”, Working paper, Washington DC, World Bank, 1 (...)

25These changes were manifested in the changing priorities of the aid programmes. Lomé I (EDF budget of 3 billion ecus, 1975-1979) and Lomé II (EDF budget of 4.5 billion ecus, 1980-1985) focused on infrastructure. Lomé III (EDF budget of 7.4 billion ecus, 1985-1990) highlighted rural development, food security, and macro and sectoral adjustment. Lomé IV (EDF budget of 10.8 billion ecus, 1990-1995) put the emphasis on support for the private sector and the market; conditions were introduced concerning democracy, the rule of law, and human rights; also the criterion of aid selectivity, switching from needs to merit, on the assumption that aid effectiveness depends on good governance (Burnside and Dollar, 1997).4

C. Changes in Development Paradigms

26The obvious question is whether there was a major change in development paradigms or whether there was continuity with only minor modifications to the aid and development paradigm. The changes were gradual. However, the most important change was the acceptance of the principle of adjustment. Conversely, the EU defended a specific, original position on the social dimension of adjustment, and put forward the aims of regional integration and food security. It enjoyed comparative advantage in relation to other bilateral or multilateral lenders in both regionalism and the coordination of national policies or common agricultural policies.

27The dominant view for a long time favoured state capitalism with aid granted to governments, conceived in terms of development projects, support for the creation of regional markets, backing for regional organisations and a recognition that an asymmetrical North/South world needed to be evened out through the use of stabilising mechanisms and trade preferences. There was little sign of issues concerning the environment, peace and security. Monetary relations were either considered too sensitive (in the case of the Franc Zone) or were deemed to be distinguishable from trade relations. This European consensus gradually gave way to the hegemony of the Bretton Woods institutions and a multilateral consensus.

28The acceptance of adjustment by Lomé IV (1990) resulted from the priority accorded to debt management and financial balancing. It led to adjustment in line with the global market, conditionality, targeted macroeconomic budgetary aid paid out quickly (Stabex and Sysmin funds, structural adjustment loans, and counterpart funds partly replacing project aid).

29In fact, apart from personal positions and strong resistance from DG Development, the Bretton Woods institutions and rapprochement with the “Washington Consensus” predominated; eligibility for aid was subject to being on track in the negotiations with the institutions. An aid oligopoly was set up, with a leader (Coussy, 2011).

  • 5  P. Hugon, “French and European Coherence in international Cooperation for Development”, in J. Fors (...)
  • 6 Gemdev (ed. Jean-Jacques Gabas), L’Union européenne et les pays ACP, Un espace de coopération à con (...)

30Thus, we can talk about changes in the paradigm between 1975 and 1995 leading to the end of the “three Ps” (partnership, political parity, participation), making way for the “three Cs” of Maastricht (coherence, coordination, complementarity).5 The aim of stabilisation and the creation of competitive advantages gave way to the aim of integrating the ACP countries into the world economy (Article 130 u of the Maastricht Treaty). European aid progressively tried to manage the transition from post-colonial administered economies to market economies open to international competition. The emphasis was on institutional questions, democracy, good governance and human rights, and the possibility of democratic conditionality. The use of the English language gradually became the norm, with the terms governance, civil society, appropriation, adjustment, and conditionality.6

III. What was achieved in these twenty years of European Aid?

31What criteria and indicators can be used to gauge the effectiveness of European aid? Should it be judged in the light of the results compared to the objectives? Should we take account of the changing context and the size of the constraints?

32The stated goals were to stimulate economic growth, combat poverty, reduce the vulnerability of economies in an unstable environment, secure financial flows and foster regional integration. What happened in practice, that is, the undeclared goals, often involved expanding areas of influence, forming strategic alliances, gaining access to resources or finding markets.

  • 7 C. Burnside, D. Dollar, “Aid Policy”, op. cit.

33There has been a vast amount of research on the effectiveness of European aid, starting with the Green Paper (1997) which preceded the Cotonou agreement. The research and empirical surveys produce widely differing results. Some emphasise the counter-productive nature of aid and the key issue of the lack of governance;7 others, in contrast, stress the European liberal trend that favoured trade rather than aid, the low level of flows preventing a big push, and the escape from the poverty traps that a Marshall Plan would have made possible; conversely, yet others stress the role of political stability, security, conflict prevention or financial reforms, the effects of which took a long time to be felt.

A. A Mixed Economic Record for the ACP Countries

34Without establishing whether these results are attributable partly to European aid, it is evident that – leaving aside the variations between countries – the ACP states were marginalised over this twenty year period. In 1975 they represented 69% of European aid, compared to 36% in 1997. The proportion of EU imports from non-Community countries coming from the ACP declined from 6.7% in 1976 to 2.8% in 1994. In 1995, Africa accounted for 6% of EU imports and 8% of total exports. The least advanced countries in Africa saw their share of FDI decline from 6% in 1985 to 4% in 1995. In 1975, Africa represented 3% of world trade, but that was down to just 1.5% in 1995. There was also relative economic stagnation and a different economic trajectory in ACP countries
compared to other developing countries and advanced countries. Africa’s average per capita income declined from 14% of developed country incomes in 1975 to 7% in 1995, and by the end of the period the income ratio was down to 2%. The asymmetries with Europe therefore increased.

35ACP exports remained heavily dependent on European markets. The impact of the Lomé preferences on ACP exports of tropical products was small, or even negligible. However, we must not underestimate the role of cash crops – sugar (Mauritius), beef (Botswana) and horticultural products (Kenya) – in the development of more upmarket goods and export diversification. But overall, these countries had an unfavourable position in world value chains and engaged in “impoverishing specialisation” (Bhagwati, 1996).

36In the absence of a flying goose among European investors, the ACP countries continued to base their economies on cash crops and become less competitive. Europe, unlike East Asia, was unable to act as the centre, with growth spreading by contagion to the African periphery as a result of FDI, technology transfers, and the opening-up of trade in high-value-added, processed products. There was very little in the way of competitive advantage achieved by combining territorial advantages based on factor endowments, transfers of elements of competitiveness by subsidiaries of firms, and advantages created by pro-active policies as part of a strategic vision.

B. What are the Explanatory Factors?

37On the European side, there was the erosion and narrowness of the preferential margins, the restrictive role of the rules of origin, the burden of non-tariff barriers (environmental, social, phytosanitary) and the redirection of trade and financial flows to the markets of the East and the emerging countries – need I point out that the annual funding which the EDF allocated to agriculture represented 1/100 of the CAP (€ 55 billion), whereas the CAP had perverse effects on the sustainable agriculture of the ACP countries? There was often a lack of coordination and coherence between Community policies or sectoral policies and development aid policy. The European lobbies played a role particularly in the sphere of food (such as the standards for chocolate without cocoa butter). In general, European aid played a minor role as a catalyst for development and structural reforms permitting the transition from cash crop economies to innovative economies.

38On the ACP side, a number of explanatory factors can be put forward, such as the size of cash crop economies, corruption, the failure to build competitive advantage in a context of deteriorating terms of trade, the accumulation of debts, and downward adjustment, but also delay in implementing institutional reforms and financial consolidation.

39The asymmetrical relations between Europe and the ACP countries often led to mimicry. The European model was often taken as a model by the countries receiving aid (Organisation of African Unity, regional organisations), both in its institutions and in its sequences, progressing from free trade areas to union and integration. Yet the path to European integration was specific to a historical context, and involved trial and error, with progress and setbacks.

C. The Debate on the Evaluation of Aid

40This twenty year period was marked by numerous debates. The main ones concerned the aid disease, aid fatigue, tied aid, the “patrimonialism” and clientelism of aid, questions of aid coherence and coordination, complementarity and subsidiarity, and the respective roles of bilateral and multilateral aid as opposed to European bilateral/multilateral aid.

  • 8 Jean-David Naudet, Trouver des problèmes aux solutions : 20 ans d’aide au Sahel, Paris, OECD, 1999.
  • 9 Patrick Guillaumont, Lisa Chauvet, “Aid and Growth revisited: Policy, economic vulnerability and po (...)

41At first, aid was viewed as the whole package of transfers of technical skills and financial resources which could reduce the development gap while ensuring continued influence over the regions. It was a question of a two-pronged approach involving financial aid and support for governments. The three tasks which Musgrave (1989) delegated to the state at national level (producing public goods, stabilising flows and redistributing incomes) were transferred to the international level by the functions of aid. Gradually, as we have seen, the question of debt and financial balancing predominated over aid arrangements. The institutional questions concerned both the disbursement of the funds and control over their use; these questions seemed central in view of the malfunctions and the “evaporating funds”. Some people have emphasised the cumbersome nature of the procedures and the priority accorded to available instruments over the problems encountered (Naudet 1999).8 Others have decried the patrimonialism and clientelism of aid. Aid intended to secure flows in the long term, with control and establishment of a contractual basis, often focused on promoting short-term interests. Patrick Guillaumont (1999)9 drew attention to the way in which the instability and vulnerability of poor countries impaired the effectiveness of aid. Other priorities emerged in terms of humanitarian aid and emergency assistance, security and peace, and the supply of global or regional public goods.

Conclusion

42What happened after Lomé ?

43Continuation of the trends apparent over twenty years led to the Cotonou agreements, as a result of the Green Paper. The stated principles concerned free trade, the political dimension, plurality of players, support for the private sector, priority for competitiveness, the role of the institutional environment and support for regional integration.

44The question of long-term development gradually gave way to other paradigms and priorities, such as emergency humanitarian aid, adaptation to globalisation, peace and security, support for fragile States (conflict prevention, management of post-conflict situations) and sustainable development with an emphasis on the environment.

  • 10 Philippe Hugon, Olivier Stintzy, “Les accords de partenariat économique entre l’Union européenne et (...)

45In the wake of Cotonou, the Economic Partnership Agreements created numerous opportunities concerning regional integration, and the need for fiscal transition, but they led many LDCs to prefer the short-term advantages of “everything but arms” (EBA), and in practice, a degree of regional disintegration. They have largely been a failure, mainly because of the ultraliberal positions of DG Trade and the lack of regard for the changes of context which cast doubt on the Washington Consensus.10

46Today, the situation is very different with the geopolitical reclassification of the ACP countries, and the revival of growth in Africa. True, the EU and its Member States continue to account for almost half of ACP trade. They are still the ACP states’ main financiers and represent more than 50% of official development aid, but today the countries of the South account for over 40% of trade with the ACP countries. The new partners, notably the emerging countries, have to some extent taken the place of Europe in terms of commercially and financially driven flows of aid and geostrategic interests. Africa is perhaps becoming one of the new frontiers of the world economy in view of its resources and its markets.

47Africa is coveted by “the advanced first world” and increasingly by the second, emerging world for its natural resources and minerals, its emerging markets and the alliances which represent 54 States in international negotiations and organisations. It has diversified its partners, achieved a return to growth overall, and is undergoing geopolitical reclassification.

48What can past experience teach us for future action?

49We need to look beyond the fears emanating from the South in terms of pressure of migration, the influence of religion, and failure to respect environmental, social or phytosanitary standards. Instead, we need to manage the interdependencies at the level of energy and regional public goods.

50Complex and complicated relations with the former colonies must give way to joint evaluation and allow us to move on from the post-colonial debate to a post-post-colonial debate. Vertical aid relations must give way to horizontal cooperation, the management of global public goods, common responses to the challenges and management of the interdependencies concerning energy, migration, the environment, security and technology.

51Today the crisis in Europe and the European states is centre stage. To a significant extent, it is the Angolan oil group Sonangol that is helping to fund Portugal’s debt. The EU is facing an identity crisis and is having difficulty in defining and implementing a strategic vision in its relations with the South, whereas that vision was at the heart of the European project.

52In the light of this assessment, the lesson for today is that aid can accompany internal initiatives, it can sometimes act as a catalyst, but it cannot take the place of the internal development process and it presupposes endogenous efforts.

  • 11 Ph. Hugon, Géopolitique de l’Afrique, Paris, Sedes, 2012.

53The geographical and sectoral priorities must meet a number of criteria: the fragility and vulnerability of countries and their population, regional proximity and common strategic interests, and the response to challenges linked to geographical proximity. By its very nature, the EU has a specific role to play in supporting regional integration, and the coordination of aid provided by the Member States. It needs to reinvent a new, inspiring vocabulary and be in step with new regional and global challenges and threats.11

54In the face of the Washington consensus rivalled by the Beijing consensus, could we see the re-emergence of a Brussels consensus indicating a return to an original European development aid model?

Notes

1 Jean Bossuyt, “European Development Cooperation in the Post-Maastricht Era”, Development Research Insights, 11 September 1993, pp. 1-3; Paul Collier, Jan Willem Gunning, Trade Policy and Integration Implications for the relations between Europe and Africa, Blackwell Publishers, Oxford, 1995.

2 European Commission, 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, Brussels, 1997.

3 Dieter Frisch, “La politique de développement de l’Union européenne. Un regard sur 50 ans de coopération internationale”, ECDPM, March 2008; C. Stevens, “EEC and the Third World: A Survey renegotiating Lomé,” Hodder and Stoughton, London, 1984.

4 Craig Burnside, David Dollar, “Aid, Policy and Growth”, Working paper, Washington DC, World Bank, 1997.

5  P. Hugon, “French and European Coherence in international Cooperation for Development”, in J. Forster, O. Stokke, Policy Coherence in Development Cooperation, EADI, Franck Cass, 1999.

6 Gemdev (ed. Jean-Jacques Gabas), L’Union européenne et les pays ACP, Un espace de coopération à construire, Paris, Karthala, 1999; Gemdev, La convention de Lomé en questions. Les relations entre les pays d’Afrique, des Caraïbes et du pacifique (ACP) et l’Union européenne après l’an 2000, Paris, Karthala, 1998.

7 C. Burnside, D. Dollar, “Aid Policy”, op. cit.

8 Jean-David Naudet, Trouver des problèmes aux solutions : 20 ans d’aide au Sahel, Paris, OECD, 1999.

9 Patrick Guillaumont, Lisa Chauvet, “Aid and Growth revisited: Policy, economic vulnerability and political Instability”, Conference, ABCDE, World Bank, Oslo, 2002.

10 Philippe Hugon, Olivier Stintzy, “Les accords de partenariat économique entre l’Union européenne et l’Afrique de l’Ouest et centrale : des impacts multidimensionnels”, Lettre d’information Rising Africa, No 12007; EPCDM, Les accords de partenariat économique, WP 2010.

11 Ph. Hugon, Géopolitique de l’Afrique, Paris, Sedes, 2012.

Auteur

Philippe Hugon is emeritus professor of economics at Paris Ouest-Nanterre and research director at IRIS (Institut de Relations Internationales et Stratégiques), responsible for Africa. He works more particularly on African economics and geopolitics, and on comparative African and Asian studies. The author of around a hundred articles in specialist journals and many books on development and international political economy, he is the editor of Revue Tiers Monde and responsible for the chapter on sub-Saharan Africa in L’Année stratégique. Latest publications: 3rd edition of Géopolitique de l’Afrique, Paris, SEDES (2012) and 7th edition of L’économie de l’Afrique, Paris, La Découverte, 2012.

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