Partnership for Change project has two thematic focus connected to the heart of development policies and the struggle against poverty.
MDGs and EPAs, central themes of the project, were indeed both created as development policies: the first one, with the aim of committing governments in the South and in the North on punctual development objectives to be reached by 2015, the second one, proposing economic agreements of free trade as an access point to development for many ACP countries.
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EPAs or Economic Partnership Agreements
The Cotonou Agreement, signed in 2000, is a trade partnership pact between the African, Caribbean and Pacific Group of States (ACP) and the Europe Community (EC). Its predecessor, the Lomé Convention, originally signed in 1975, provided the framework within which trade relations and development cooperation between the African, Caribbean and Pacific Group of States have been conducted with the European Union. The centerpiece of the trade relations has been non-reciprocal preferential trade access for ACP goods into Europe.
The Cotonou Agreement provided for the temporary continuation of Lomé’s non-reciprocal trade preferences as well as the negotiation of a successor trade framework based on WTO-compatible rules. As part of the Uruguay Round of the World Trade Organization (WTO) and prior to the ending of the Lomé Convention new rules had been negotiated to govern multilateral trade. Those rules are based on reciprocity in trade agreements and prohibit discrimination among developing states save in specified circumstances.
As a consequence, the Cotonou Agreement with its non-reciprocal principle and preferential access for Caribbean (and other ACP) exports to Europe required special permission. After much difficulty a waiver was secured from WTO members. The waiver request faced opposition from an international community opposed to non-reciprocal trade agreements in general.
Costly concession had to be made in order to obtain the waiver in 2001. As with Cotonou the ACP and EU also undertook to negotiate WTO-compatible alternatives. Those alternatives include Economic Partnership Agreements, or EPAs.
According to Article 36, the ACP and EC agreed to conclude new WTO compatible trading arrangements, "removing progressively barriers to trade between them and enhancing cooperation in all areas relevant to trade." Article 37 provides that the "Economic Partnership Agreements shall be negotiated during the preparatory period which shall end by 31 December 2007 at the latest". The Commission was not willing to request another waiver for the period after 2007.
In 2002, the first phase of negotiations started between the Commission and the ACP group on issues of general interest to the all ACP countries of the agreements followed by separate negotiations with six ACP regions that were established for the EPA negotiations (Caribbean, West Africa, Central Africa, Eastern and Southern Africa, SADC minus, Pacific).
By October 2007, it became apparent that only the Caribbean States were ready to initial a full EPA. The Commission confirmed its refusal to request a prolongation of the WTO waiver for those countries that did not agree on EPA or to seek for other transitional solutions, such as extending the GSP+ regime to all ACP countries, but pushed ACP countries to sign WTO compatible interim or "stepping stone" EPAs. On 23 October 2007, the Commission issued a communication proposing to conclude WTO-compatible interim agreements either on regional, sub-regional or national level.
In order to create such WTO-compatible Free Trade Agreements, they must liberalise "substantially all the trade" (on goods) between the countries involved and "in a reasonable length of time". These provisions of GATT Article XXIV are subject to interpretation, which explains the considerable differences between the initialled EPAs. However, it is the official interpretation of the "reasonable length of time" that the liberalisation process should exceed ten years only in exceptional cases. Minimum requirement for covering "substantially all trade" would be not less than 80% of trade between partners. Obviously, these "understandings" are also subject to interpretation.
EPAs: the state of play
By the end of 2007, the 15 CARIFORUM states initialled a "full" EPA, 18 African and two Pacific states initialled interim EPAs, and 42 ACP countries did not initial EPAs at all. These countries are trading with the EU since 1 January 2008 on the basis of the GSP.
Out of the 30 African countries without EPA, 26 countries are LDCs, and benefit from the Everything But Arms (EBA) scheme, which gives almost duty free and quota free access (DFQF) to the EU market. Only Gabon, Nigeria and Congo are non-LDCs and their exports to the EU are now subject to the normal GSP tariffs or to MFN treatment (Most favoured nation clause), in case that items are not covered by the standard GSP. There will be no effect in terms of increase in tariffs compared to the Cotonou preferences for LDCs (except possible problems with the technical adaptation of customs requirements to EBA treatment). In the case of Nigeria, about 1.2% of exports will be subject to new tariffs, for Congo 3.5% and for Gabon 6%. Most of the tariff rates will be relatively low, but some may hurt exports in specific sectors, i.e. shrimps, prawns and crabs exports for all three countries, cane sugar and tobacco from Congo, plywood from Gabon, and cocoa and goat products as well as cotton and polyester from Nigeria. The fourth African non-LDC not having concluded an EPA is South Africa, which is already implementing WTO-compatible Trade, Development and Cooperation Agreement (TDCA).
In the Pacific region, only Papua New Guinea (PNG) and Fiji, both non-LDCs, initialled an interim EPA. For the remaining Pacific ACP states, the effects are limited due to limited trade relations to the EU, although 7 out of 13 EPA non-signatory states are non-LDCs.
The interim agreements should be signed and subsequently transmitted to the European Parliament for assent by August 2008. EU officials concede there is a strong likelihood they will take place in 2009 as well.
An updated calendar can be reached @ the link: http://www.acp-eu-trade.org/index.php?loc=events/
Slipping deadlines are nothing new in the EPA process, as in any trade negotiation. It reflects the difficulties, technical and administrative, in finalising the interim agreements (so-called ‘legal scrubbing’ in negotiators’ jargon) to be signed, hurdles made all the higher given that many of the agreements were concluded in haste. It probably also reflects some uneasiness by certain African countries regarding the content of these interim agreements. The Caribbean, the only region to have concluded a full-EPA, is due to sign in July. For the rest, negotiations towards a full EPA continue at the technical level. While on the surface regions appear to be making good progress, several factors could prevent a smooth and speedy conclusion of comprehensive EPAs.
To start with, there seems to be a difference between the technical discussions, which have restarted and seem to be going in the right direction, and the political mood, which still seems to be lacking leadership and a sense of direction. As many decisions will be political in nature there is a need to avoid the pre-2008 mistake of leaving many contentious issues to the end of negotiations and to rely solely on the technical experts. African countries need ministers to make effective political decisions on what products to liberalise and by how much, as well as choosing which reforms and accompanying measures are necessary.
Who will benefit from EPAs?
Currently the African, Caribbean and Pacific (ACP) countries are locked in negotiations with the European Union (EU) those Economic Partnership Agreements (EPAs) as part of the implementation of the Cotonou Agreement.
Initially, when the EPA negotiations began in 2001 there was going to be just one agreement. It was to be between the then 15 countries of Europe, and 76 of the ACP countries. Since then the EU has enlarged itself to 27 members still signing as one entity with full powers given to the European Commission (EC) to negotiate for all of them. The ACP countries in the meantime have allowed themselves to be fragmented into three regions (Africa, Caribbean and the Pacific); then, later, into six (Western Africa, Central Africa, Eastern Africa, Southern Africa, the Caribbean and the Pacific); and later still into several -- in the case of Africa, into its almost total fragmentation.
Finally, we now have, in many cases, bilateral agreements between one African country on one side and the European Community on the other – a veritable David and Goliath phenomenon. Yash Tandon, of ACP Ngo South Centre, in an Editorial of their bulletin is tempting to make the comparison with the Berlin Conference of 1884, when European imperial powers sat around a map of Africa and carved it out between them. However, there are two significant differences…
About 25 African least developed countries (LDCs) have not initialed interim EPAs. The widely held view from civil society has been that it is unnecessary for LDCs to enter into EPAs as the Everything But Arms scheme provides them with the necessary preferential trade access to the EU’s markets.
The EPAs have been consistently criticised as being potentially detrimental to development.
In June this year, 61 members of the European Parliament from 16 different countries voted for more flexibility and more time for the EPA talks, a sentiment echoed by many of those involved in the process. The Netherlands and Denmark are recommending renegotiation. However, the European Union (EU) has been pressing ahead. A new Working document from the Committee on Development of the European Parliament point out that while the EU is the most important trading partner for most ACP countries, and virtually for all African ACP states, trade with the ACP countries is rather insignificant for the EU economy. Less than 3% of EU exports are destined to the ACP countries. However, European exporters are expected to gain from reciprocity. In certain products, the abolishment of tariffs may increase EU exports significantly, for instance an increase in meat exports can be expected (although the meat exports from certain ACP countries to the EU will also increase).
The European Commission (EC) has generally downplayed the costs involved in the implementation of Economic Partnership Agreements (EPAs), preferring to focus on the supposed benefits (Working document on the development impact of Economic Partnership Agreements). A short paper written by Liz Dodd from Traidcraft summarizes the potential fiscal costs of EPAs resulting from loss of customs revenue and adjustment costs associated with transition to a new trade regime. It does not attempt to assess the value of trade creation or diversion associated with the trade liberalization aspects of EPAs.
Although it is difficult to accurately forecast what these fiscal costs will be, as negotiations in countries and regions continue, research to date suggests some of the costs are likely to be substantial, front loaded and threaten to divert resources from other government programmes. The pape briefly outlines why it would be unwise for ACP countries to rely on either aid from the EU or tax reform to adequately cover these losses.
For governments whose revenue is heavily dependent on import tariffs, for instance, the reduction of tariffs on as much as up to 80-90% or more of imports from the EU (as in some of the agreements initialled so far) will represent a substantial loss of public revenue. Customs revenues in Sub-Saharan Africa are significant, for example amounting to 27% of public revenues in 1995.
ACP Ministers against EPAs
Economic Partnership Agreements came very often under heavy attack from ACP leaders and trade officers. At a NGO side event at UNCTAD XII, for instance, convened by the Africa Trade Network with the objective of presenting its views and engaging with officials, Deputy Minister Rob Davies of South Africa's Trade and Industry Ministry.
Deputy Minister Rob Davies of South Africa's Trade and Industry Ministry said that there is a difference between the stated objectives of the EPA's and the reality of the agreement. The objectives are to promote development, improve market access and regional integration. Yet the reality of the EU's agreement was that it exceeded WTO requirements and was swamped with excessive demands of its vested commercial interests.
ACP countries find themselves backed into a serious corner that undermines development prospects and divides the Africa, Caribbean and Pacific countries. If there is not serious rethinking of the EPAs permanent problems will be created.
Far from promoting regional integration, the reality is that they have created divisions and complicating Africa's own integration no end. For example, the Southern Africa Development Community's (SADC's) fourteen countries have been divided into five negotiating configurations with different liberalization commitments while SADC itself was pursuing its own regional African free trade area. Divisions have also been created by EPAs in the South African Customs Union (SACU) where four out of five members of the Union have initialed the EPAs.
Mr. Abdoulaye Diop, Minister of Economy and Finances, Senegal, said the EPAs were not as good as the previous Cotonou/Lome agreements. It is very important to recognize that the latter were already very weak agreements. When we look at the development dimension, we see it was not taken care of as the commitments are general and vague. However when we look at the mercantile dimension, the agreement is very precise, with clearly cut deadlines (TWN Info service on trade issue)
In June The 87th African, Caribbean and the Pacific (ACP) Council of Ministers Meeting in Addis Ababa, Ethiopia opened with the Group expressing concern about the way most aspects of the Economic Partnership Agreements (EPAs) have progressed.
The President of the Council of the Ministers and Minister In Charge of National Solidarity of Djibouti, Mr Mohamed Ahmed Aweleh, when opening the meeting said the EPAs in their current form risk distorting regional integration.
In hopes of meeting the 2007 deadlines for completing negotiations on the EPAs, the European Commission and the ACP states were pressured by time and ended up signing interim agreements in smaller trading blocs or individually rather than the groups originally intended in order to meet the Dec. 31, 2007 deadline.
This was done in order to avoid disruption for ACP non-LDCs following the expiry of the Cotonou Trade provision and WTO waiver on Dec. 31, 2007.
Mr Aweleh highlighted that a recent African Union Trade and Finance Ministers Meeting in Ethiopia identified certain clauses in some of the completed EPAs that need to be reviewed.
The recently concluded Conference of African Ministers of Trade and Finance identified and enumerated 10 clauses that have to be revised or removed altogether in the present texts.
ACP PRESS STATEMENT 2 - ACP expresses concern on most aspects of EPAs
Services on the spot
At the close of 2007, the EU completed a comprehensive Economic Partnership Agreement (EPA) with the Cariforum countries. The EPA with the Cariforum is comprehensive in the sense that it extends to trade in goods, services and all the new generation issues including government procurement, competition law, and others. With the rest of the regions negotiating these Agreements, Europe secured interim Agreements on trade in goods only. Ngo South Centre realized an analytical note providing an overview of key provisions related to trade in services in the Cariforum EPA text and comments on the possible implications for other ACP countries in Africa and the Pacific, which may soon initiate negotiations for the reciprocal liberalisation of trade in services with Europe.
The importance of the services sector for ACP countries transcends mere economic and commercial significance leaning more towards social and welfare enhancing functions. Socially, services provide key functions essential for human existence such as health, sanitation and water thereby enhancing the quality of human life and allowing for a productive pool of human resource that can then engage in commercially meaningful activities, contributing towards the attainment of national development objectives. Education services provide the skills necessary for building government and private work.
Most ACP countries are agro-based economies. The bulk of activity relates to tilling the land mainly for subsistence, with surplus being sold to local markets. In such cases, trade in services becomes important with transportation and distribution services providing connectability to markets where farmers can sell their produce and get linked to industrial production processes (in which energy services play a critical role).
Services also provide employment especially to women in tourism, which is important as a diversification tool to stand shocks related to the continual fluctuation in agricultural commodity markets.
The intangibility of most services, their non stockability and the highly informal nature of the sector in ACP countries makes it difficult to capture with precision the statistical importance of services. However, figures available show that in the CEMAC region, the sector experiences an annual growth rate of 6.5%. The share in total regional exports amounts to 8% with imports averaging at 45%. In the Central African Republic (CAR), IMF data indicates the contribution of the services sector to GDP is 28.4% in 1996/9 dropping to 0.9% in 2004/5. Tourism contributed receipts averaging US$4.7million per annum between 1988 and 2004. In Cameroon, the services sector contributes about 40% to GDP. In the ECOWAS region, the services sector is also economically significant. In Nigeria, for instance, services represent about 33.3% of GDP with key sectors being finance, insurance and energy. Senegal has at least two-thirds of GDP contributed by services; Cote d’Ivoire has a diversified financial sector whereas Cape Verde is strong in transportation, travel and other commercial services.
Mid-term review of the Economic Partnership Agreements
The networks of farmers’ organizations of five ACP sub-regions have carried out their own mid-term assessment of the state of progress in the negotiation of the EPA with the E.U. This document represents a synthesis of the most important points emerged by the consultations which took place in the five regions and it is a formal contribution to the review process as foreseen in the Cotonou Agreement.
They noted:
- the deep imbalance in human and institutional capacities between the negotiating parties;
- the under estimation of the scope of the preliminary reforms to be designed, negotiated and implemented both at national and at regional levels in order to create the conditions for an effective participation of the ACP regions in an EPA (customs union, common external tariff, competition and investment policies, measures to facilitate exchanges, harmonization of technical norms, suppression of technical obstacles to trade, harmonization of sanitary and phytosanitary norms, etc.); and, finally,
- the divergences in views between the ACP and the European Commission on certain points, notably the “development content” of the EPAs.
The farmers’ organizations held that it would be extremely dangerous to artificially accelerate the formal process of negotiation in order to close them over the coming months at whatever cost and to implement the EPA by the projected deadline of 1 January 2008. The interim EPAs came in force on time but it’s still interesting to read the remarks of the farmers organizations.
The organization networks put forward four priorities:
a. Give priority to regional integration : the development of regional markets offers more promising perspectives for the fight against poverty and for economic development than does the hypothetical growth of international markets;
b. Define a trade regime based on asymmetry and equity : this is the only way to reduce the gap between the EU and the ACP and to infuse real content into the principle of special and differential treatment, recognized both in the context of the WTO and in the Cotonou Agreement. This asymmetry must absolutely lead to excluding sensitive agricultural products, that is those products imported from the EU which compete with local products in the ACP regions;
c. Improve participation by FOs and other actors in the preparation and negotiation of the EPAs : this participation, beyond the principles of democracy included in the Cotonou Agreement, constitutes a guarantee of the relevance of the choices made in the negotiations and a precondition to their effective implementation.
d. Take the time and avail the means necessary for thorough preparation : it is necessary to implement the regional policies, to carry out deeper assessments of the impacts of different trade regimes, to strengthen the capacity of each region (decision-makers and civil society actors) to define and defend a negotiating position in conformity with the challenges and the interests of each ACP region;
10. To this end, alternatives to the EPAs mush be studied in order to design a trade environment which is resolutely oriented towards the objectives of sustainable development. New impact studies, including environmental and social impacts, need to be conducted in each region, effectively involving the farmers’ organizations.
Updates: position and comments from EU Governments
French Report Condemns EPAs as Anti-Development.
The approach taken by the European Union (EU) in trade talks with Africa has been strongly criticised in an official report commissioned by France, the new holder of the EU’s rotating presidency.
Christiane Taubira, the member of the French national assembly who authored the report at the request of her country’s government, has recommended that the mandate given to the European Commission to negotiate economic partnership agreements (EPAs) with African, Caribbean and Pacific (ACP) countries should be amended. Although trade officials have been leading the talks on behalf of the 27-strong EU, she advocates that the basis for the negotiations should be rethought so that there is a greater emphasis on social and economic development.
Presented to Nicolas Sarkozy, the French president, in mid-June but not yet published, Taubira’s 191-page report contains strong criticisms of efforts made by the Commission to persuade African countries to scrap most of the taxes they levy on imports from Europe. Noting that many ACP countries depend on customs duties for almost 40 percent of their revenues, she argues that the EPAs could render many of the national institutions in Africa ‘‘powerless’’. And while the Commission has presented the EPAs as an opportunity for Africa to increase its exports to Europe, Taubira complains that the high food safety standards applying in the EU ‘‘constitute more effective obstacles than tariffs’’ for farmers and companies wishing to do business with the union.
Her report also suggests that the EPAs could fundamentally alter the political relationship between European countries and their former colonies. Under the Cotonou agreement signed between the EU and ACP states in 2000, the former undertakes to help lift the latter out of poverty. Taubira says, however, that the EU should now state if it has decided to ‘‘abandon development as if it was a dangerous mirage and invite the ACP countries to throw themselves into the big bazaar of free trade’’.
Taubira’s report was commissioned by France in April in preparation for its six-month stint chairing meetings of the EU’s governments, which began on July 1. It follows concerns raised in private by French diplomats to the European Commission over recent months. Although the Commission has been arguing that at least 80 percent of tariffs imposed by ACP countries on European goods should be scrapped, the French officials have recommended that the extent of trade liberalisation sought should be narrower in scope. Other recommendations made by Taubira include that the EU recognises the right of poor countries to feed themselves by allowing them to exclude agricultural goods from trade liberalisation.
She urges, too, that development aid offered by the EU should not be made conditional on the signature of EPAs. The ‘‘new issues’’ of investment, competition policy and public procurement should be removed from the agenda. Many ACP countries had opposed the inclusion of those issues, yet the EU was adamant that they should be covered.
Toubira report
Uk, on the other side side, decided to push strongly at the end of 2007 to define a full EPAs agreement on time. The Trade Minister Gareth Tomah stated at that that time that “The UK has consistently argued that EPAs should bring new benefits to African, Caribbean and Pacific (ACP) countries by contributing to regional development, economic growth and poverty reduction. We have continued to provide financial and technical support to the ACP to help them negotiate their side of EPAs”.
And also he wrote that “We want the ACP’s exports to enjoy access to the EU market without facing any duty or quota, and less complicated export rules ( Rules of Origin) from 1st January 2008 when Cotonou arrangements end. We therefore welcome the Commission’s good market access offer which provides duty and quota-free access but wishes to see further improvements in the Rules of Origin”.
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