Stabex celebrates its 15th birthday
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CTA. 1990. Stabex celebrates its 15th birthday. Spore 30. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/45397
STABEX, the system which stabilizes export income among the ACP countries, is now 15 years old. Although it has made a major contribution to development in the ACP countries, it cannot by itself alleviate the results of the current crisis on the...
STABEX, the system which stabilizes export income among the ACP countries, is now 15 years old. Although it has made a major contribution to development in the ACP countries, it cannot by itself alleviate the results of the current crisis on the world agricultural markets. The STABEX system was one of the earliest EEC-ACP cooperative instruments. It was set up in 1975 under the first Lome Convention. At that time the debate on the new international order was at its height, and the inauguration of this system was hailed as a unique and exemplary contribution towards stabilizing the export income of developing countries. Product-based world agreements were rare since consumer countries could not reach unanimity. Those that did exist proved progressively inadequate, limited as they were to stabilizing prices. All this made the STABEX contribution appear even more useful. STABEX has often been mistaken for a form of insurance against bad years. In reality it is meant to give the ACP countries a stable and predictable basis for their development programmes. In effect it limits the down side effect of a drop in income from certain agricultural products exported to the EEC by paying a compensatory financial transfer, thus preserving the real value of the transaction. Loss of export income reflects the very real weakness of the sector concerned, and in order to renew its competitiveness on the international market an injection of funds is necessary. Initially the use of STABEX funds was solely the concern of the beneficiary state. Procedures have been progressively strengthened by succeeding Conventions, and the Fourth Lome Convention has just taken the major step of ensuring that the terms and conditions of each transfer will be the subject of agreement between the beneficiary and the EEC. The main characteristics of the STABEX system STABEX applies only to ACP exports of agricultural, fishery and forest products to the European Community. The number of these products has increased from 29 to 49 between Lome I and Lome IV, and now represents virtually all products of agricultural origin exported by the ACP countries. Throughout the term of the first three Lome Conventions these transfers were more in the nature of grants to the least developed of the ACP States, and only the better-off had to repay them. In all cases terms were very favourable, being interest-free and with a flexible repayment schedule. Lome IV abandoned the principle of the 'reimbursement' of STABEX funds by ACP countries, and now all transfers are made as grants. A certain number of conditions have to be met to be a beneficiary of STABEX; the loss incurred must not be the result of deliberate policy, and the exports of the product concerned must form a significant proportion of the total exports of the country. STABEX is financed by the European Development Fund, and its funding has been increased from 325m ecus under Lome I, to 550m under Lome II, 925 under Lome III, up to 1500m currently under Lome IV. An initial assessment From 1975 to 1988 STABEX made transfers to the value of 229,000m ECU benefitting 51 ACP countries. Nearly half this sum went to the least developed countries. In 1989 C??d'lvoire, Cameroon, Burundi and Rwanda used up more than three-quarters of the STABEX funds for their coffee and cocoa exports. However, the system has its limitations and these are primarily financial. There were problems in the early days (1979-81) and at the end of the eighties (1987-89). During these five fiscal periods the funds proved insufficient to cover all the demands for transfers, principally because of a sharp drop in world prices for certain key products exported by ACP countries. In these cases additional funds from different EDFs, or one-off contributions from EEC Member States took care of between 50 and 65% (according to the year) of the sums required. In the 15 years of its existence STABEX has responded to every demand made during ten fiscal periods. But the difficult years proved that such a system could never be wholly workable when the world agricultural markets are undergoing a severe crisis, causing a dramatic fall in prices. The recent failure of the coffee and cocoa agreements serve as a timely illustration of this. The original purpose of STABEX at its inception in the early '70s was to be one of those international mechanisms whose only aim is to modify the economic relationships between the industrial North and a South which exports basic commodities. It was never intended to ensure the stability of income from the export of staple goods only to complement other methods. STABEX can guarantee income by monitoring market trends but it cannot alter market forces.