It is a recurrent discourse that rich countries should help poor ones to develop, but how can they do it in practice?
The initiative that perhaps most of all helps the economies of the poorest countries to evolve is the one promoted by the European Union called “Everything But Arms”.
What is that? And why is it so fundamental for the economies of 48 countries around the world?
Let’s first make a premise, necessary to understand the importance of the program.
HOW DUTIES AND QUOTAS WORK
Each state over time has placed tariffs on products and services from outside countries. The main objective is to make products from abroad more expensive and thus protect or favor local companies.
Duties are complex to understand because often each country draws up long lists in which list the duties to be paid for every category of goods and services.
Over time, some countries have agreed to make agreements, so they have mutually removed or reduced duties from each other. They can only apply to some goods/services (for example, a county can remove the duties on the imported cars, in exchange, the other removes the ones on agricultural products), or they can agree for broad free trade agreements (for example with the creation of The European Union there are no more duties on products/services circulating in all internal countries).
Usually, these types of agreements provide for reciprocity, of the series “you take away duties from me, I take them away from you”.
THE EVERYTHING BUT ARMS PROGRAM
The European Union with the “Everything But Arms” program, launched in 2001, has decided to remove all duties and all import quotas for goods from the Least Developed Countries.
In practice, companies from these countries can export to the European Union without incurring customs duties (duty-free) and without having limits on quantities (quota-free). As the name of the program suggests, the only limitation concerns the armaments that are excluded from the program.
The importance of the measure is given by the fact that the Least Developed Countries were able to maintain duties on products and services from the European Union. Therefore, it was a unilateral action by the European Union.
The aim is to encourage the development of local economies.
WHY IS SO IMPORTANT
The program is very important because it has allowed and favored the export to the European Union of many products from poor countries.
Many of these exported products are agricultural products (rice, sugar, coffee, chocolate, etc. ), this is normal as most poor countries have an agricultural economy.
However, also manufactured goods are exported. An important example is the textile industry in Bangladesh. Bangladesh is one of the largest producers of clothes in the world, thanks also to the European Union that allows the import without custom duties. On the other side, Bangladesh has become a strategic partner for the EU. In fact, Europe is home of many well-known fast fashion firms, such as Zara of Spain and H&M of Sweden, that rely on cheap manufacturing costs in Bangladesh to keep the price of their products to rock-bottom levels.
THE OTHER SIDE OF THE COIN
Despite the goodness of the initiative, the “Everything But Arms” program has been highly criticized within the European Union.
The main reason is that many European companies have been severely damaged by competition from countries with very low labor costs.
The most famous example is the rice one. Rice from Cambodia and Myanmar (two countries included in the program) invaded the European Union and European farmers producing rice entered into a crisis. The main reasons are that the climate of South East Asia is much more conducive to growing rice and also the workforce in Cambodia/Myanmar is extremely cheap.
The European Union reintroduced tariffs on rice from Cambodia and Myanmar for three years.
The exemption of Bangladeshi textiles from duties has also sparked controversy. Many textile multinationals have suppliers in Bangladesh which have very low production costs. Due to that many jobs in Europe have been canceled and also after the collapse of a factory in 2013, which caused more than 1,000 deaths, there has been questioned about working conditions in Bangladesh.
WHICH COUNTRIES ARE INCLUDED INCLUDED IN THE PROGRAM?
The list of countries included is drawn up by the United Nations.
These are the countries currently classified as Least Developed Countries:
- Angola (in-depth article)
- Bangladesh (in-depth article)
- Benin (in-depth article)
- Burkina Faso
- Central African Republic
- Congo (DRC)
- Djibouti (in-depth article)
- Equatorial Guinea
- Ethiopia (in-depth article)
- Lao PDR (in-depth article)
- Sao Tome & Principe
- Sierra Leone
- Solomon Islands
- South Sudan
When the economy of a country improves and is no longer classified as Least Developed Country, it is excluded from the program, so duties and quotas are restored as normally happens.
The European Union tends to get there gradually. For example, in 2007 Cape Verde left the list of poor countries. However, the European Union has maintained zero duties and zero quotas until the end of 2011. Since 2012, it has in any case been granted preferential status for trade with the Union.
More info about the Everything But Arms on the website of the European Union
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