Trade Relations between the EU and Developing Countries

Have the Trade Policies of the EU contributed to the External Constraints which hamper the Development in the South?


Bachelor Thesis, 2011
30 Pages, Grade: 7

Excerpt

1
Introduction
The countries located on the African continent continue to be marginalized in the
world economic system. In contrast to regions such as East Asia and Latin America,
which in the last decades have shown their potential to decrease poverty and join the
ranks of the developed world in the future, the prospects for African states, and
especially the states of Sub-Saharan Africa (SSA), remain remarkably bleak. The
various indications of this dire state need not be repeated here, as they are presented
in every textbook addressing the economic situation of the Third World, such as in
Understanding Third World Politics (Smith, B.C., 2009).
As there may be a consensus on the lack of development in Sub-Saharan
Africa, this is far from true when it comes to understanding the causes of this lack of
development. The scientific study that concerns itself not only with analyzing the root
causes of this lack of development, but also with providing recommendations for how
economic development can be achieved is called development economics. Diana Hunt
set as her objective to outline the main perspectives, which all approach development
economics differently. She distinguished between six major perspectives: the
structuralist-, neo-Marxist-, Maoist-, basic needs-, neo-classical paradigms and
dependency analyses (1989). A very important part in the debates between them has
been on the question whether internal, i.e. "domestic mismanagement", or external
influences, i.e. "the structure of the global economy", lay at the basis of the mal-
performance of African states (Clapham, 1996, p. 812). It goes without saying that
developing a better understanding of the real causes that constrain African
development is a crucial element towards economic progress on this continent. In
this thesis, the theoretical perspective of dependency theory will be applied.
Trade policy of the European Union towards the states of the South provides
an example of such external influences. In short, since the gaining of independence of
former colonial countries the developed countries have used trade policy as a means
to restrict the access of their products to their markets (Rittberger, 2006, p. 178).
These restrictions have differed to various degrees, but on the face of it, the purpose
has been to protect sensitive industries in which developing countries possessed a
comparative advantage (DeVault, 1996, p. 35). There has been a growing realization
that liberalization of the markets of developed economies for goods from developing

2
countries is an important pre-requisite for their development. Without such changes,
other "testimonies" of a will to aid developing countries, i.e. development aid, can be
seen as nothing more but cosmetics (Rittberger, 2006, p. 178).
Assessing the degree to which trade policy inhibits economic progress of
developing countries requires a closer look at how trade policy has manifested itself.
After the Second World War a liberal international economic order was established
and maintained up to the present time. When newly independent nations of SSA
entered into trade relations with other countries, these took place within the
framework of this liberal order. The General Agreement on Tariffs and Trade (GATT)
was the institution that regulated these relations. Members of this organization
needed to play according to its rules, of which the most-favoured nation (MFN)
principle was the most important. Basically, it means that a country must be non-
discriminatory with regard to the tariffs it applies towards other countries. For
example, the lowest tariff that is applied on steel must be applied to all trading
partners. Developing countries regarded this principle based on reciprocity as
limiting their development opportunities, and therefore pressured to change the
system by calling for a new international economic order (NIEO) (Sapir et al, 2008,
p.207). As we now know, the developed countries proved unwilling to accommodate
their proposals. However, developing countries succeeded on one front by being able
to introduce an exemption into the rule book of GATT: the Generalized System of
Preferences (GSP).
GSP allowed developing countries to negotiate preferential trade agreements
(PTA's) with developed countries, making it possible that developed countries
granted imports from developing countries preferential tariff treatment. These were
non-reciprocal, meaning that lower tariffs on the side of developed countries did not
need to be met by the same concession on the side of developing countries. The
original intention was to create a generalized system, but it turned out that GSP
schemes were introduced by several industrialized countries, at different times (Sapir
et al, 2008, p.208). The then European Economic Community was proud to
announce its first PTA in 1971 before other industrialized countries followed suit
(Faber et al, 2008, p. 194). The United States of America (U.S.) were the last country
to introduce their GSP in January 1976 (Sapir et al, 2008, p.208). Another pillar of
EU trade relations with developing countries is constituted by the EU's association
agreements. The first such agreement was unilaterally adopted by the EEC in 1957

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upon the coming into force of the Treaty of Rome. The ensuing Yaoundé and Lomé
Conventions, and the latest Cotonou Agreement saw the number of developing
countries party to these association agreements rising substantially. The African,
Caribbean and Pacific Group of States (ACP) that first united surrounding the
negotiation of Lomé I in 1975 now consists of 79 developing countries, covering
nearly all the states located in Sub-Saharan Africa.
Many studies have confirmed that the GSP have shown not to be of a great
economic stimulus for developing countries (DeVault, 1996, p.35). The effectiveness
of the GSP in contributing to export earnings of developing countries has been
undermined by factors such as non-tariff barriers to trade, limits on preferential
treatment and the limited nature of GSP coverage. The GSP scheme of the EU can
hardly be seen as standing out as a contribution to a world trade system that is more
conducive to developing countries. Concerning the EU's association agreements,
observers have been less critical. Especially the first Lomé Convention was hailed by
some as constituting an agreement that gives important concessions to developing
countries (Frey-Wouters, 1980, p.3).
In the broader relationship between dominant economies of the North, and the
economies of the South, how should the external influence that the EU has on
developing countries be viewed? Some economic theories, especially the more radical
ones, have brought forward arguments to explain how the North is underdeveloping
the South. Dependency theory in particular regards the world capitalist system as an
extremely hostile environment that prevents development in the South. Thus, this
thesis will evaluate to what extent the external influences of the EU upon the
developing countries correspond to the theories of dependency theory concerning
underdevelopment.
Since its creation, the EU has incorporated states that are among the most
dominant ones in the world economic system. Up to now, many states have acceded.
Therefore, the EU can be regarded as constituting an important trading bloc. This
shows that the EU has always been an important player giving form to the structure
of the global economy. Consequently, a study of its trade relations with developing
countries is of great value to assess how strong external influences have weighed on
the development opportunities of the South. Furthermore, such an examination may
be able to contribute to an understanding of how external factors come to affect the
global South. Accordingly, the main research question reads as follows: To what

4
extent do trade relations between the EU and developing countries, constituting as
they do an example of external factors influencing the development of developing
countries, validate the assumptions of dependency theory?
The research question, first of all, necessitates an outline of the main tenets of
dependency theory. Thus, the first sub-question will be: How does dependency
theory account for underdevelopment in the South? The second research question
provides for a closer examination of the composition, the details and the evolution of
trade policy between the EU and developing countries. Therefore, the second chapter
will address the sub-question: How has trade policy and development cooperation of
the EU with the developing country manifested itself, and what are the
circumstances under which the trade regimes of the EC towards developing
countries have come into existence? Based on a better understanding of EU trade
policy, the effect of EU trade on developing countries will subsequently be analyzed.
The question that underlies the third chapter is: Have the trade policies of the EU
contributed to the external constraints which hamper the development of developing
countries?

5
Chapter I: The theoretical insights of dependency theory: the ambitious
and radical strand of Frank and Amin
This section will deal with the question: How does dependency theory account for
underdevelopment in the South? To start off, some remarks concerning the
coherence of the theoretical perspective that is called dependency theory should be
made. These remarks are necessary in order to clarify what particular branch of
dependency theory will be scrutinized in the remainder of this thesis. It is widely
accepted that dependency theory shares among its different variations two
assumptions. First, development of the economies in the South is conditioned
because of its dependence on other economies. Second, this dependence is more than
the common interdependence in times of globalization because it is structural and
goes deeper (Brown, 1985, p.62). Apart from that, however, the views of dependency
theorists diverge (Ibid.). Within the academic community there is no consensus on
"whether or not several dependency theories exist or can ever exist" (Browett, 1985,
p.790). Therefore, it is not possible to speak of a dependency paradigm. Rather, a
scholar writing in the late 1980's in the field of economic theories of development
regarded dependency theory as constituting not more than the mere seeds of a new
paradigm (Hunt, 1989). Twenty years later the situation seems to have remained
unchanged.
One reason for the lack of paradigmatic nature can be found in the fact that
dependency theory draws from several other theories. Of the several theoretical
backgrounds that are identified by Wil Hout I would like to focus shortly on the neo-
Marxist background.
1
It seems to me quite striking that André Gunder Frank, who is
seen by many as the most influential figure within dependency theory (Foster-Caster,
1976, p.173), was put by Diana Hunt into the neo-Marxist school of thought (Hunt,
1989). Indeed, Frank's work bears a clear Marxist heritage (Brown, 1985, p. 65),
although this was always rejected by himself (Hout, 1993, p.54). For example, his
theoretical insights rely heavily on those of Baran, a neo-Marxist scholar (Foster-
Caster, 1976, pp. 167-168). Furthermore, Samir Amin, who is another important
figure within dependency theory, does consider himself as a Marxist. The point that I

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am trying to make is that it becomes difficult for dependency theory to carve out its
own paradigm if some of its scholars show more affinity with other paradigms.
Yet, it is possible to classify dependency theory. In this thesis I will follow the
classification of Chris Brown. He regards dependency theory as composed of
"dependencia", "centre-periphery analysis" and "world-system analysis" (Brown,
1985). This thesis will mainly rely on the theoretical perspective of those scholars
whose work is connected with "centre-periphery analysis". Whereas dependendistas
2
have limited themselves to studying the dependent nature of Latin America, scholars
writing on centre-periphery relations include in their studies the whole periphery,
which is all developing countries (Brown, 1985, p.65). It might be necessary to recall
that this thesis is trying to investigate the causes for underdevelopment of the ACP
group of states. Furthermore, this branch of dependency theory is a more "ambitious
and radical version of `dependencia'" (Brown, 1985, p.64), as will become clear later
on.
Wil Hout identifies André Gunder Frank, Samir Amin, Giovanni Arrighi and
Johan Galtung as the most important writers analyzing centre-periphery relations.
The works of Frank and Amin show sufficient similarities, which has led to a
tendency to regard these theories, together with Wallerstein's world-system analysis,
as constituting the dependency perspective (Browett, 1985, p.790). Thus, when I will
be using the term dependency theory or perspective in the remainder of this thesis,
this perspective should be regarded as being constituted particularly by the works of
Frank and Amin.
The thesis will proceed by outlining the main tenets of this branch of
dependency theory, referring to Frank and Amin where the ideas can be directly
traced back to them. Frank's first contribution to the study of dependency had wide
repercussions, and he may be seen as the figure who increased the influence of
dependency by giving it a higher profile (Foster-Caster, 1976, p. 175). This had
certainly to do with the fact that Frank's conception of dependency was, as
mentioned, more ambitious and radical (Brown, 1985, p.64). To a substantial part the
significance of his first contribution stems from his difference between
undevelopment and underdevelopment. In his article "the development of
1
The other theoretical backgrounds that are described are traditional economies theories of
development, liberal theories, the E.C.L.A. approach and modernization theories. (Hout, 1993, pp.19-
38)
2
Dependendistas are writers within the field of dependencia.

7
underdevelopment" from 1966 he argues that while the now advanced economies of
the centre can be regarded as undeveloped prior to industrialization, the state of
development in the periphery can be characterized as underdeveloped (Frank, 1964,
pp.150-151).
Besides, it should be noted that the centre is composed of the dominant
economies of the world system, while the periphery is more or less composed of the
developing countries (Hout, 1993, p.78). This is not very specific, and must be seen as
a major deficiency of dependency theorists (Disney, 1977, p.126). On the overall, a
major criticism of dependency theory is that its propositions are "at a very high level
of generality" (Foster-Carter, 1976, p.172).
As the title already states, Frank attributes an active role to the dominant
economies in the underdevelopment of the South. This argumentation stands in stark
contrast with another influential theory of that time, which is modernization theory.
Modernization theory maintains that underdevelopment was due to the dualist
nature in developing countries, meaning that for development to take place the still
existing pre-capital, sometimes called feudal, production structures needed to be
modernized (Hout, 1993, pp.34-38). In contrast, Frank argued that colonization had
a profound and lasting effect on the colonies and the whole of its population. Thus, he
regards backward areas of the country, and the underdevelopment in general, as the
"historical product of past and continuing economic and other relations between the
satellite underdeveloped and the now developed metropolitan countries" (Frank,
1994, p.150).
The stress on "continuing economic and other relations" makes clear that
dependency has some common ground with "neo-colonialism", as they both insist
that political independence of the developing countries has resulted in only limited
room for political manoeuvring (Smith, 1979, p. 247). Frank and Amin tell us that we
must perceive the development possibilities of the South as structurally limited by the
place they occupy within the world capitalist system. It is the structure of the
international system that is the "key variable to be studied in order to understand the
form that development has taken".
Consequently, and this is the main critique of Tony Smith, they totally discard
the individual nations of the South as a unit of analysis (1979, p.252). This is because
they argue that the nations of the South will, as long as they are part of the global
capitalist system, be forced to perform the functions according to their status as a

8
periphery. From this it follows that Frank and Amin maintain that the countries of
the South are not able to influence their own affairs. The pressures need to be seen as
strong enough to make autonomous decision-making stimulating their own
development impossible. Accordingly, Amin and Frank regard it as pointless to
analyze specific cases. This position has brought them into a position of unease with
regard to the explanation of the good performance of the Newly Industrializing
Countries. The dependency theorists needed to defend themselves against the
argument that policies did matter (Browett, 1985, pp.789-790). However, their stance
remained the same. Amin kept on insisting that it is misleading to analyze specific
cases, since these typologies would "mask the underlying unity of the phenomenon of
underdevelopment" (Smith, 1980, p.7). To understand that point, it is necessary to
examine more closely the nature of the global capitalist system, as perceived by Amin
and Frank.
As with Frank's aforementioned title, "accumulation on a world scale" (1974),
which is the title of one of Amin's monographs, is already very indicative of the thrust
of his analysis. It indicates that the roots of underdevelopment are to be found by an
analysis on the world level. Amin and Frank come together in the assumption that the
necessities of capital accumulation in the centre prevent development in the
periphery. According to Frank, we find the answers to the underdevelopment of the
South in the nature of capitalism itself. He states that the logical tail to successful
development of capitalism in the centre is the distortion of capitalist development in
the periphery. In other words, capitalism makes the economies adjust to the needs of
capitalist development in the centre (Frank, 1994, p. 153). Thus, a subservient role is
established for the periphery. In addition, Amin claims that the pressures of the
international capitalist system entail that the economies of the South become
extraverted and that their production structures get distorted in order to serve an
external market (Amin, 1994, p.162). This is what Frank describes as "satellite
status", and he asserts as a kind of rule of thumb that development in the South is
limited by this status (Frank, 1994, p. 154).
Moreover, he claims that their satellite status is a result of their historical
participation in the world capitalist system, which transformed their economic
structure into a capitalist export economy. Actually, it is this argumentation on which
he builds his difference between underdevelopment and undevelopment. According
to Frank, the now-advanced countries could once be described as undeveloped
Excerpt out of 30 pages

Details

Title
Trade Relations between the EU and Developing Countries
Subtitle
Have the Trade Policies of the EU contributed to the External Constraints which hamper the Development in the South?
College
University of Groningen  (Faculteit Letteren)
Course
Faculty of Arts
Grade
7
Author
Year
2011
Pages
30
Catalog Number
V373214
ISBN (eBook)
9783668530904
ISBN (Book)
9783668530911
File size
519 KB
Language
English
Notes
The author of this text is not a native English speaker. Please excuse any grammatical errors and other inconsistencies.
Tags
EU Trade policy, Cotonou Agreement, Trade Agreement, Trade negotiations, Lomé Convention, ACP, ACP states, EU, European Commission, North-South trade, Developing Countries, Trade Development, Development Aid, Dependency Theory, North-South Relations, World trade system, GSP, Generalized System of Preferences, WTO, Trade preferences
Quote paper
Benjamin Lueber (Author), 2011, Trade Relations between the EU and Developing Countries, Munich, GRIN Verlag, https://www.grin.com/document/373214

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