by Jo Brew
According to unpublished internal European Union (EU) contract lists, the main beneficiaries of the European Union aid program to Central and Eastern Europe (CEE) are western corporations.
The lion's share of contracts belong to powerful European businesses, and where easterners are employed, they are paid only one-fifth the rate of westerners. Under pressure from western banks, and with financial, legal, political and diplomatic support from the EU Commission, the prize assets of the Soviet bloc are being bought up by western companies in what has been called "the greatest transfer of public wealth ever into private hands."
The new "trade and cooperation" agreements with eastern countries further western transnational corporation (TNC) interests and ignore broader interests of promoting human development and protecting the environment. This bias toward business is maintained through a strategic silence in the Commission that keeps the European public in the dark.
Jobs for Business
The most direct way that the 7.6-billion ECU ($8.7 billion) [European Currency Unit, equal to 1.15 US dollars] European Union aid programs help western businesses is by giving them jobs. Thousands of western experts are paid up to 1000 ECU ($1,150) per day to advise easterners how to run things, while their eastern counterparts receive, at most, 200 ECU ($230) per day. Even the EU auditor Patrick Everard says western consultants are given too much responsibility, are paid too much and that their activities are shrouded in secrecy.
Hundreds of European firms were awarded contracts to work in the East. Since the 1990 initiation of the EU's two subsidy and support programs - PHARE for Central and Eastern Europe, and TACIS for Russia and the former Soviet Union - international management consultants Coopers and Lybrand have been awarded over 50 contracts worth more than 8 million ECU ($9.2 million). They were paid more than 300,000 ECU ($345,000) for "technical assistance for enterprise privatization in Albania," and the same amount again for advising on the privatization of the Belorussian wood processing industry.
Pesticide Dumping
More than 40 different TNCs were paid 100,000 to 1 million ECU ($115,000 to $1.15 million) to supply pesticides to Eastern Europe. The companies included Monsanto Europe, Bayer, Rhone Poulenc Agrochimie, ICI, Hoechst and Shell. Many of the pesticides brought to the East under PHARE contracts were banned in the West. Some of these unusable pesticides now lie in toxic stockpiles, polluting land and threatening drinking water supplies.
The TNCs were paid to supply pesticides as agricultural assistance even though the United Nations Conference on Environment and Development declared in 1992 that agricultural development should use a minimum of pesticides, and despite a 1994 European Parliament resolution that "ecologically sound and organic farming" should be a priority for EU programs in the East.
Nuclear Safety?
The EU assistance program to the East is also providing much-needed employment to western nuclear firms currently suffering a lull in work at home. Under Tacis, the German nuclear giant Siemens has earned over 3.5 million ECU ($4.03 million) in the former Soviet bloc. The World Association of Nuclear Operators has been awarded 21 contracts. The UK's AEA Technology had 6 contracts worth at least 3.7 million ECU ($4.26 million) and Scottish Nuclear received two contracts. While it is difficult to argue against upgrading the existing nuclear power stations in the East for safety, there is a serious case to be made for switching to alternative forms of power.
According to Greenpeace, a unique "opportunity for radical energy reform" is being overlooked by the EU partly because businesses and utilities promoting non-nuclear options do not appear to be vocal enough in financial institutions like the European Commission.
Indirect Aid
Hundreds of firms (including Rank Xerox, Hewlett Packard, Barclays Bank, Deutsche Aerospace and Olivetti) have gained direct financial benefits from EU "aid" to the East. However, the indirect benefit gained by western TNCs from EU programs' promoting privatization and a market economy is probably far greater than the direct financial boosts described above.
Indebted eastern governments are already under pressure from international banks to privatize public property and develop private ownership. EU aid programs are tightening the screw. Each country accepting PHARE and TACIS funding must commit to moving toward a market economy. Aid is often conditional on privatization of key state utility companies, factories and so forth. Privatization in nations lacking capital invariably means selling national businesses to foreigners.
Once a government has agreed to sell off its public assets, the EU aid programs bring in advisors to smooth passage of the deal. Phare has paid over 1 million ECU ($1.15 million) to western legal experts and accountants advising Polish authorities negotiating Fiat's purchase of a 14-million-ECU ($16.1 million) stake in the state-owned car company.
Phare also provides money to sell the idea of privatization to the public. According to the Slovenian Mission to the EU, PHARE spent around 400,000 ECU ($460,000) in 1995 to help "familiarize the Slovenian public with the benefits and necessity of privatization."
European taxpayers also fund consultants advising eastern governments on how to rewrite their legislation in order to assure the safety of private capital in the former Soviet bloc. There are land registration schemes, mass privatization laws, new stock exchanges and accountant training programs. All of this is funded by EU taxpayers.
Infrastructure Expansion
EU aid programs are funneling money into an infrastructure of new roads, railines and airports that will help business. Glynn Meridith of Siemens-Plessey Electronics Systems talks about how Siemens lobbyists use the idea of a US threat to extract money from the European Commission.
"The European air traffic industry gets much lower subsidies than the American." Meridith explained. "Since the European market has been thrown wide open to General Motors, Siemens… has been doing a lot of lobbying [of the EU], saying 'Look, please [protect] us from the American threat.' "
One quarter of Phare aid is being spent on infrastructure projects. These include a new motorway from Pilzen (Czech Republic) to Germany and upgrading of the railway linking Berlin to Warsaw and Minsk. For Poland, Phare maintains that "sustaining reforms in the longer term depends critically on improving East/West transport connections." The links are part of the EU transport network program (TEN) which has been extensively criticized by environmentalists and other activists for causing damage to both the economy and the environment. Environmentalists are concerned that the new roads will increase CO2 emissions dramatically instead of stabilizing emissions at 1990 levels as promised by the EU in the Earth Summit climate change convention.
New West-East Relations
At the international level, EU diplomats have been negotiating new bilateral agreements with the weakened eastern nations. Under these agreements the East becomes a colonized dependent of the West and its TNCs.
In eastern countries including Poland, Hungary and Rumania, public sector contracts are to be opened to international tender, thus limiting the capacity of locally elected representatives to pursue public or political objectives with their taxpayers' money. There has been a boom in the so-called "regulation and normalization" industry. Legions of lawyers are helping governments to rewrite their national laws to meet EU norms.
Most of the new regulations are pro-market and pro-TNC. At the time this article was originally published, in May 1997, there had been no public debate about this new relationship between West and East.
High Secrecy
Phare and Tacis obscure their close link with TNCs by scarcely mentioning the names of western companies in their publications. They break down financial reports by sector or country, obscuring the actual recipient of the program funding. Slick documents given out liberally to the public and the Brussels press corps focus heavily on projects that have ended up with local ownership, thus giving a false impression of the development of popular capitalism.
A typical case study, entitled "Rural Telecommunications for the Heart of Poland - A Local Approach to Rural Telephony," reports that Phare funding will help the Polish Ministry of Telecommunications set up a local phone network with "the potential... to attract investment, some of it local; to generate profits locally and to facilitate employment in rural areas across the country." There is no mention of western experts receiving wages five times as high as their Polish counterparts nor any mention of western TNCs providing expensive technical assistance.
The bias toward western business is further hidden behind a sophisticated veil of pretended incompetence. EU analysts present the programs as being confused rather than as colonizing.
It took me more than a year of requests before the Commission would release the lists revealing the western TNC beneficiaries of Phare and Tacis programs. As far as I know, I am the only person outside the Commission to have gained access to this information.
Excerpted from Europe, Inc., published by the Corporate Europe Observatory, an Amsterdam-based non-profit foundation set up to monitor and report on the activities of European corporations and their lobby groups. [Copies of Europe, Inc. are available for $10 including mailing costsm from CEO, c/o A SEED Europe Office, PO Box 92066 1090 AB Amsterdam, The Netherlands. E-mail: ceo@xs4all.nl, http://www.xs4all.nl/~ceo/].
EU Aid or Asset Stripping?