The Lomé Convention is a trade and aid agreement between the European Community (EC) and 71 African, Caribbean, and Pacific (ACP) countries, first signed in February 1975 in Lomé, Togo.
The first Lomé Convention (Lomé I), which came into force in April 1976, was designed to provide a new framework of cooperation between the then European Community (EC) and developing ACP countries, in particular former British, Dutch, Belgian and French colonies. It had two main aspects. It provided for most ACP agricultural and mineral exports to enter the EC free of duty. Preferential access based on a quota system was agreed for products, such as sugar and beef, in competition with EC agriculture. Secondly, the EC committed ECU 3 billion for aid and investment in the ACP countries.
The convention was renegotiated and renewed three times. Lomé II (January 1981 to February 1985) increased aid and investment expenditure to ECU 5.5 billion. Lomé III came into force in March 1985 (trade provisions) and May 1986 (aid), and expired in 1990; it increased commitments to ECU 8.5 billion. Lomé IV was signed in December 1989. Its trade provisions cover the ten years, 1990 to 1999. Aid and investment commitments for the first five years amounted to ECU 12 billion. In all, some 70 ACP countries are party to Lomé IV, compared with 46 signatories of Lomé I.
Lomé development aid was dispersed primarily through the European Development Fund; investment assistance was mainly channelled through the European Investment Bank. Two other important mechanisms were the Stabex and Sysmin schemes, which provided compensatory finance to ACP states for adverse fluctuations in the world prices of, respectively, key agricultural and mineral exports.
The emergence of the single European market at the end of 1992 affected ACP preferential access to EU markets. The Caribbean's many smallholder banana farmers argued for the continuation of their preferential access to traditional markets, notably Great Britain. They feared that otherwise the EU would be flooded with cheap bananas from the Central American plantations, with devastating effects on several Caribbean economies. Negotiations led in 1993 to the EU agreeing to maintain the Caribbean producers' preferential access until the end of Lomé IV, pending possible negotiation on an extension.
In 1995, the United States government petitioned to the World Trade Organization to investigate whether the Lomé IV convention has violated WTO rules. Then later in 1996, the WTO Dispute Settlement Body ruled in favor of the plaintiffs, effectively ending the cross-subsidies that had benefited ACP countries for many years. But the US remained unsatisfied and insisted that all preferential trade agreements between the EU and ACP should cease. The WTO Dispute Settlement Body established another panel to discuss the issue and concluded that agreements between the EU and ACP were indeed not compatible with WTO regulations. Finally, the EU negotiated with the US through WTO to reach an agreement.
In June 2000, after a quarter of a century of the Lomé Convention being the cornerstone of trade and aid between Europe and the developing world, a new trade and aid agreement was reached between the EU and 71 ACP countries. The treaty, which replaced Lomé IV, became known as the Cotonou Agreement, after Cotonou in Benin , where the convention for the agreement was held. The convention was scheduled to be held in Fiji, but this plan had to be revised due to domestic political difficulties.
The Cotonou Agreement is expected to run for 20 years. The new deal transforms the previous convention into a system of trade and cooperation pacts with individual nations. Some of the poorer ACP states will continue to enjoy virtually free access to European markets and there will be regional free trade agreements between the EU and better-off developing countries. The Cotonou Agreement has been criticised for moving from partnership, to excessive and unhelpful conditionality upon ACP countries. The ACP countries the Lomé Convention initially helped were economically hindered as the Cotonou Agreement was not particularly advantageous to the ACP countries.
The Economic Partnership Agreement (EPA) was signed by the 27 European Union member states and 14 CARIFORUM states (all except Haiti) in October 2008 and it came into effect through provisional application in December 2008. It replaces the trade provisions of the Cotonou Agreement, signed in 2000, in which the European Community unilaterally granted African, Caribbean and Pacific (ACP) countries non-reciprocal market access to Europe on more favourable terms than those enjoyed by goods from other countries. There was special access for some traditional exports like sugar, rum, rice into the European market which was very important to ACP countries.
The Cotonou's non-reciprocal trade preferences required a waiver in the World Trade Organization (WTO) because it was contrary to the basic rule enshrined in Article 1 of the GATT, that all members must be treated no less than any other member (most favoured nation (MFN) principle) unless they belong to a regional trade agreement or economic integration agreement which meets the substantive criteria of Article XXIV of the GATT or Article V of the General Agreement on Trade in Services (GATS) respectively. In exchange for the waiver, the EU and ACP states had agreed to replace the Cotonou preferential trade arrangement with a reciprocal, WTO-compatible agreement by the end of 2007. The CARIFORUM-EC EPA is the first EPA to be completed between Europe and one of the six sub-regions of the ACP.
CARIFORUM members of the EPA: Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname, Trinidad and Tobago.
European Union members of the EPA: Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom.