Undermining Development? EU Trade Policy on Natural Resources

20 January 2011

Report Summary

The European Union is making a big push to help its companies and investors access raw materials in developing countries. One element of this is a new strategy promoted in Brussels – the Raw Materials Initiative - to enable European companies to access key minerals on which the EU economy is argued to depend for its future competitiveness. Another element is the negotiation of free trade agreements with groups of developing countries, which require them to remove trade barriers and agree to new rules on investment. EU policy is being largely driven by European businesses to secure greater access to cheap raw materials.

This report shows that EU trade policies are already having severe adverse impacts on developing countries and that these will become worse if the current EU proposals succeed. In particular, developing countries will be further constrained in their ability to promote effective development policies. Furthermore, the already prevalent negative environmental and human rights impacts of European companies are likely to increase. At worst, the EU’s strategy looks like a traditional grab for raw materials, part of a new scramble for Africa and beyond that will lock developing countries into a vicious circle of poverty.

Two EU policies are of special concern in this report:

  • The first is the EU’s attempt to secure developing countries’ agreement to ban or curb the use of export taxes which many developing countries levy on raw materials exports to help develop their local industry, raise revenue or protect the environment.

  • The second is the EU’s attempt to negotiate new rules on investment that will give European companies unprecedented access to developing country raw materials on the same or even better terms as local businesses. While many developing countries need to attract more foreign investment, this EU push will make it more difficult for their governments to regulate investment to promote local development.

This report argues that current EU trade policy on raw materials is a distraction from what should be the major goals: first, to reduce Europe’s own over-consumption of the world’s resources; second, to help create a more equitable global system to manage and utilise the world’s natural resources in a sustainable way.

 

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    The Peru Support Group exists to promote social inclusion, sustainable development and the observance of human rights in Peru. To that end the PSG highlights shortcomings in observance of established norms, whether international or local in nature, in its research, advocacy and publications. In so doing, it underscores the relationships that exist within the political system, how institutions work, and the effectiveness of policies that aim to reduce poverty and inequality within the context of sustainable development.

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