Proposals currently being put forward for the introduction of free trade area arrangements between developed and developing countries would have an impact on developing country producers in their local, national and regional markets, while bringing few if any improvements in the existing access for developing country producers to developed country markets.

     To date, there has been little analysis of the impact this trade policy development would have on existing patterns of production and investment in developing countries. The same is true of the impact on the wider consequences of trade policy development in terms of shared development cooperation policy objectives, such as poverty alleviation and the promotion of sustainable forms of social and economic development, in developing countries.

     The assumption has been that moves towards free trade arrangements between developed and developing countries would bring only benefits to developing countries. However, consideration of some of the recent proposals for the establishment of free trade area arrangements between countries of vastly different levels of development suggests that significant adjustment costs can arise, for the smaller less developed partners, which can have important implications for neighboring regional economies.

     A specific case in point has been the regional impact of the EU-South Africa free trade area agreement. Consideration of this issue suggests that while benefits may be gained in the long term, significant adjustments costs will also arise for the smaller and vulnerable neighboring economies which border South Africa and which collectively form the Southern African Customs Union. This Southern African experience, which increasingly raises issues for the wider SADC region, suggests that a far more detailed analysis of the likely effects of moves towards free trade between developed and developing countries is required, particularly if trade arrangements are to be set in place which maximize the benefits of free trade to developing countries while minimizing the adjustment costs which they MUST carry. This issue is of relevance not only to future trade relations between Caribbean, African and Pacific countries and the European Union but also to the future trade relations between Caribbean, African and Pacific countries and the United States.

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November 1999