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French Version

Exports to Europe 'unlikely to rise' despite new pact more than the dismantling of trade Barriers needed (Daily Star)

Lebanon's annual shipments to the European Union are equivalent to the amount of goods sold to Iraq.

Lebanese exports to the European Union are unlikely to increase this year, although Lebanon has inked an interim Association Agreement with the 15-member bloc granting Lebanese goods immediate market access.

The Lebanese government had negotiated the interim agreement with the European Union to speed up the process of tariff cuts secured in an Association Agreement signed last year. Without the interim agreement that entered into force last Saturday, Lebanese exports to Europe would have had to wait until parliaments in all 15 EU member states ratified the Association Agreement to benefit from these tariff cuts.

But many local officials said they doubted Lebanese producers would be able to take advantage of the agreement."In 1977, we signed an agreement that reduced tariffs on most of our products," said Antoine Howwayek of the General Confederation of Farmers Unions. "If our imports to Europe were to increase, they would have done so by now." In 1977, Lebanon signed a cooperation agreement with the EU's predecessor, the European Community, which granted nearly 85 percent of Lebanon's industrial products tariff-free access and offered tariff cuts for selected agricultural produce. Once the Association Agreement enters into force, it would annul the cooperation agreement, which the European Community signed with a number of Mediterranean countries."The Association Agreement is our future, but we aren't prepared enough for it," said Roy Badaro, an industrialist who also heads the EuroMed WTO unit at the Beirut Chamber of Commerce.

For Lebanon, the major novelty of the Association Agreement lies in tariff cuts to agro-industrial goods headed to Europe, which weren't covered by the 1977 agreement. The Association Agreement also offers some leniency in application of some European norms."Up to this moment, no infrastructure mechanism has been put in place to help the private sector and food industry access the European markets," said Atef Idriss, head of the Union of Food Industries. Lebanese goods need more than just the dismantling of trade barriers to penetrate the European market of some 300 million consumers, which is set to expand to 500 million with the membership of 10 candidate states.

Lebanese exports to Europe have yet to conform to European norms and standards or even appeal to the taste of a more sophisticated consumer market. EU External Relations Commissioner Chris Patten had referred to these non-trade or non-tariff barriers during his recent visit to Lebanon in January this year.

Patten, who attend ed the signing ceremony of the Association Agreement in Luxembourg in June last year said he would like to see more European investments flowing into Lebanon. "Quite a lot of the things are preventing bigger trade between us... non-trade, non-tariffs, non-quota barriers, issues like regulatory convergence and standards," Patten told reporters at the end of his Beirut visit.

Lebanon's annual exports to the European Union are equal to the amount of goods sold to Iraq and don't usually exceed 20 percent of Lebanon's export bill, which reached $1.45 billion last year."Within the Association Agreement, we were given generous quotas for agricultural produce, but few of these goods appeal to European tastes," said Howwayek. "We can't export to Europe unless we change our agricultural policies."

These policies are as outdated, as Lebanon's agriculture output, which is made up mainly of citrus fruits, potatoes and tomatoes, which are produced in neighboring Arab countries at lower costs."Lebanese potatoes can't compete with Egyptian potatoes inside Lebanon," said Howwayek. "How do we expect them to compete in Europe?"

Most Lebanese industrial and agricultural firms also don't have the financial resources to conform to European standards."We haven't done anything to cut production costs," commented Fadi Abboud the head of the Lebanese Industrialists Association. Government measures such as cutting social security payments, scrapping customs on imported raw materials and exempting exports from the value-added tax have done little to tame these costs.

Several industrialists say banks are still reluctant to lend money or even lower interest rates on loans, although rates on deposits have fallen sharply since last year's "Paris II" donor meeting that drew financial pledges to help the Lebanese government cut borrowing costs.

Some agriculturists say the EU's hefty subsidies to its agricultural sector are also to blame for Lebanon's weak exports. The European Union spends nearly half of its annual budget on the agricultural sector."The European Union has a common agricultural policy and some of it is in the form of non-trade barriers and subsidies that are rendering our exports to Europe practically unattractive," said Idriss.

Beirut 11-03-2003
Dania Saadi
The Daily Star

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