Saturday, November 8, 2008

Zambia and the EPA

by Judith Fessehaie, Trade Negotiations Insights • Volume 7 • Number 9 • November 2008

Zambia initialled its market access offer in the context of the Eastern and Southern Africa (ESA) interim Economic Partnership Agreement (IEPA) with the European Commission on September 30 2008. In completing these negotiations, the provisions of the trade in goods chapter and related annexes of the ESA IEPA now apply to Zambia.

Structure of Zambia’s market access offer The final market access offer initialled by Zambia and the European Commission at the end of September will liberalise 79.62% of Zambia’s imports value from the EU in 15 years.2 In this offer, the exclusion list covers 20.38% of imports from the EU. A precautionary approach was taken, protecting potential or nascent industries and sectors with minimal levels of current imports, but in areas where the EU is increasing its competitiveness. The sensitive list broadly covers: agricultural products, processed food and beverages, plastic and rubber products, clothing and footwear, engineering and wooden products. Zambia’s market access offer backloads liberalisation on products that attract 15% and 25% customs duties. The effects of trade diversion will be partly offset by the launch of the SADC Free Trade Agreement (FTA) in August 2008, which will level the playing field between the EU and Zambia’s major source of imports, South Africa.

Other market access provisions In order to minimize the impact of reforms resulting from the implementation of the IEPA, Zambia’s market access offer has taken into account several considerations. These include maintaining import prohibitions for environmental purposes, export taxes for industry development (copper concentrates, cotton seeds, scrap metal) and export restrictions on food security grounds. However, while the relevant tariff lines have been annexed to the market access offer, Zambia - and ESA - are renegotiating the provisions on export taxes and quantitative restrictions in the IEPA to ensure these measures can be applied in certain circumstances (in line with GATT fl exibilities). Moreover, unforeseen events can be addressed by carefully tailored trade remedies - another area under renegotiation.

Zambia’s expectations on the way forward The market access pillar is only one of many on which Zambia’s new partnership with the EU will be based. Several issues remain under negotiation including rules of origin and the adjustment of the tariff schedule to COMESA’s common external tariff. The delivery of Aid for Trade under the development component similarly remains unresolved. ESA negotiations on development aim to complement a Development Cooperation Strategy and a costed matrix. ESA and the European Commission agreed on the importance of adopting so-called ‘development benchmarks’ against which to assess the EPA process. The benchmarks should be coherent with national policy objectives and avoid ambiguity in measurement or interpretation. Equally important is how the development component will operate. Zambia is addressing this in the context of national institutional arrangements designed to implement Aid for Trade by setting priorities for intervention, stakeholder consultation, donor coordination and overall strategy formulation. The impact of additional Aid for Trade interventions on Zambia’s capacity to seize new export opportunities will ultimately determine the value of an ESA EPA.

Challenges and opportunities The complexity and breadth of areas to be negotiated in the coming months present challenges and opportunities for Zambia. Challenges stem from the fact that regional integration in the area of trade in services, for example, has yet to be completed. EPA-level negotiations should not undermine existing regional agendas by skewing priorities for national bodies with limited resources. Also, it is difficult to draft EPA provisions in areas, such as intellectual property rights, where regional policies have not yet been agreed. This problem is less compelling in the context of competition and investment policies since regional regulations are in place and serve as a basis for engagement with the European Commission.3 Yet, only 6 out of the 15 ESA countries have national competition laws and existing regional frameworks are not necessarily a guarantee of national capacity. Zambia’s priorities are to build domestic and regional capacity to regulate sectors, enforce legislation, monitor investors and administer government procurement in a transparent manner. Zambia has a direct interest in tackling beyond the border measures at the regional level to deepen the common economic area. Sequencing between national, regional and EPA frameworks and setting adequate implementation periods and accompanying measures in an EPA are critical. The level of ambition should not be measured by the depth of WTO+ commitments undertaken by ESA, but by the EPA’s potential to raise the regulatory and enforcement capacity of the region. If this objective is achieved, real economic and social benefits will trickle down to consumers, firms, farmers and the government treasury.

Effective negotiation The restrictive role played by sanitary and phytosanitary measures (SPS), as well as technical barriers to trade (TBT) and rules of origin on actual market access opportunities is widely acknowledged. For Zambia, EPA negotiations are expected to result in SPS and TBT provisions that respond to the country’s needs. Moreover, relaxing rules of origin would increase the competitiveness of Zambian firms and boost their incentive to integrate into regional and global value chains. For this reason, regional cumulation with African countries is an important aspect of these negotiations. Finally, trade facilitation and developing Information Technology infrastructure will complement the regulatory aspects contained in goods and services provisions, by making it possible to move both across borders in a cost effective and efficient manner. To negotiate successfully, these pressing issues must be kept in mind.

1 Judith Fessehaie is Trade Policy Analyst (Commonwealth Secretariat) in the Ministry of Commerce, Trade and Industry, Zambia.
2 Import values as an average for the period 2004-2006.
3 Member States have finalised the COMESA Common Investment Area and the COMESA Competition Regulations and Rules. Work is ongoing on the draft COMESA Trade in Services Framework. No regional framework is being developed yet on IPRs, as efforts have been focused at the all-Africa level.