European Community

In finance, moneyness is a measure of the degree to which a derivative security is likely to have positive monetary value at its expiration. Derivative security is a contract that specifies the rights and obligations between the issuer of the security and the holder to receive or deliver future cash flows (or exchange of other securities or assets) based on some future event (www. wikipedia. com).

A country is said to exhibit the economic characteristic of moneyness if upon expiration of trade agreements with another nation, economic security will still be sustained despite changes in the economic and trading environment and situation in the future. Fluctuations in the amount of supply and the extent of demand between among trading countries can not suffice as a reasonable excuse to maim the economic security and opportunities to the trading partner country. International finance experts favor moneyness of a country as compared to the wealth that the particular country acquires.

The claim that moneyness is more important than money will be clearly understood and argued in the case of  the Lome Convention between the African, Caribbean and Pacific Group of States (ACP) and the European Council (EC). Records tell us that the economic partnership between the ACP and the EC did not meet the expected outcome the trade practice, strengthened by the signed Lome Convention, between the member countries of these particular international organization will bring.

The economic effects of the trading system between these organizations proved to have different results as ACP's share of the EC's import market declined while the volume of EC imports overall has grown. In 1975, when the first Lome Convention between the EC and the ACP states was signed, ACP exports accounted for 3. 4% of total EC imports. However, they failed to keep pace with the growth in EC trade, declining to 3. 2% of E. C. imports by 1985 and to only 1. 5% of E. C. imports by 1992 (Eurostat statistics of 1976-1992).

Average EC import growth between 1985 and 1991 amounted to more than 12% per annum, while ACP exports to the European Community expanded less than 7% per annum over the same period. The Lome Convention, therefore, was not able to provide the necessary economic infrastructure that will support the ACP states for its member countries to maintain their promised international market share. In order to facilitate change in the negative economic implications of the Lome Convention to the members of the ACP, the fourth Lome Convention (Lome IV) was signed for operation in the year 1991.

This new convention between the ACP and the EC made possible the product diversification of the ACP members as export goods to be promoted in the EC market. Such trade agreement enabled the continuous trade practice which was approved between the said international organizations in 1975 as a successor to the older post-colonial arrangements that had existed between various EC member states and their former colonies.

The main objective of the Lome IV in general is to "provide a firm and solid foundation for trade cooperation between the ACP states and the Community," based on the principle of free access to the EC market for products originating in the ACP states, with special provisions for agricultural products and a safeguard clause (4 Article 25, Lome IV Convention). This reaffirmked the commitment made by the signatories during the previous Lome Convention by promoting and supporting economic development among the members of ACP through duty-free access to the market of the EC member countries (Cosgrove, 1994).

When reviewing ACP export performance to the EC market, it is clear that terms of trade would have been much worse without the Lome regime. In 1975, when Lome I was signed, the ACP states were the European Community's most important trading partners among the developing countries, and the agreement was heralded as a partnership of equals which has declined for the next 20 years that followed. The imbalance of the current trade relationship has significant implications for EC-ACP cooperation.

The deterioration in the ACP terms of trade over the period under review indicates that the ACP countries have become relatively poorer, while the European Community has become steadily richer. Nevertheless, the existing preferences offered by the Lome Convention can contribute to ACP trade development, but only if the ACP economies concerned have sufficient capacity to take advantage of the opportunities offered (Cosgrove, 1994).