ACP REGIONS SPLINTER, AS EU TURNS UP PRESSURE FOR EPAs
A bloc of Eastern and Southern African countries appears to be splintering in economic partnership agreement (EPA) talks with the EU, with some members of the group set to sign a separate deal with Brussels.
The East African Community (EAC) is preparing to initial a deal on goods trade, development cooperation, and fisheries with Brussels, possibly as soon as this week, according to a 14 November statement from the European Commission. The EAC is a customs union comprising Kenya, Uganda, Tanzania, Burundi and Rwanda.
This appears to mark the first open split in one of the six geographical blocs of the African, Caribbean, and Pacific (ACP) group of countries, each of which have been negotiating with Brussels. The EAC is a subset of the 16-member Eastern and Southern African bloc.
Pressure to reach a deal by a crucial year-end deadline has been particularly heavy on the 31 relatively richer ACP countries. Without an agreement, they stand to lose preferential access to the EU market from the beginning of 2008. The EU has warned that their exporters risk finding themselves slapped with tariffs identical to those that apply to all developing countries under the less-generous Generalised System of Preferences, potentially putting them in direct competition with companies in places such as Brazil and India.
The rest of the 79-member ACP group, as least-developed countries (LDCs), will remain eligible for duty- and quota-free access for almost all products under the EU's 'Everything But Arms' initiative.
The deadline is the result of a waiver under which WTO Members allowed the EU to maintain its unilateral preference scheme for ACP states until the end of 2007, even after it had been ruled to violate multilateral trade rules by discriminating among developing countries. The five-year exemption was supposed to give the EU and the ACP countries time to negotiate reciprocal EPAs, which would be compatible with WTO rules.
Brussels has said that the waiver cannot be extended - not least because this would require the consent of all WTO Members, including those who had complained about the preference scheme in the past.
The EU initially wanted the EPAs to cover goods and services trade, as well as investment and government procurement, but with the talks lagging, it has proposed signing 'interim' agreements covering goods alone by year's end, with other issues to be addressed later. It argues that this is the minimum necessary for WTO compatibility.
Development campaigners and some ACP governments fear that reciprocal agreements would flood the bloc's tiny economies with EU imports, leading to lost jobs and customs revenue.
Other ACP blocs show signs of splitting
In the Eastern and Southern African (ESA) group, Kenya, Mauritius, the Seychelles, and Zimbabwe are the only non-LDCs. Tanzania, a member of the EAC customs union, had until recently been negotiating the EPAs along with the Southern African Development Community (SADC) - an example of the overlapping alliances that have further complicated the process. According to a 12 November communiqué from the broader ESA group, it is in theory still aiming to sign an interim deal by the end of the year, covering goods, development cooperation, and fisheries.
In other ACP regions as well, there has been talk of subgroups or individual countries striking agreements with Brussels. Not surprisingly, these have been predominantly the non-LDCs that fear losing market access, such as Cote d'Ivoire.
Sources say that the Seychelles has asked the EU for the near-unfettered access they currently enjoy to be replaced by an enhanced preference scheme (so-called "GSP+") that Brussels maintains for a handful of countries that meet various international standards for human and labour rights, environmental protection, and good governance. Reports suggest that Mauritius, the Seychelles, Madagascar and the Comoros are also working to develop a sub-regional EPA offer of their own.
EU Trade Commissioner Peter Mandelson on 20 November told the European Parliament's trade committee that the Commission would be open to signing 'interim' agreements with willing countries or groups within ACP blocs. Though broadly optimistic, he acknowledged that deals would not be possible with at least some ACP states. "In the days ahead, we can secure interim deals that lead us towards full EPAs and regional integration covering the majority of the ACP," he said.
Mandelson said that interim deals were within reach with many countries in the Pacific region and much of the SADC, which includes South Africa and its neighbours. With the Caribbean bloc, he said "We have 99 percent of a full EPA text agreed but, crucially, are still missing the key element of market access." He complained that the Caribbean countries "continue to propose the lowest trade coverage," saying that it was up to them "to decide if they wish to move ahead now or not." As for Eastern and Southern Africa, he expressed the belief that "we are very close to interim deals with the East African Community, the Indian Ocean Countries and some from the wider ESA grouping."
"Our greatest challenges remain in West and Central Africa," he said, pointing to the absence of market access offers from those regions. Some of these countries are asking for an extension to the existing preferences while they continue negotiations on the EPAs, which would technically require a new waiver from WTO Members. Brussels has categorically rejected this option.
Some ACP countries, Mandelson said, "are only now starting to face the need for change. They have been misled by the claims of some that politically easier alternatives - extensions to Cotonou [preferences], seeking another waiver, the availability of GSP+ - are achievable. That the EU was holding something back, and if they only held out long enough against change, some way to preserve the status quo would be found. I believe this impression is now coming to an end." In contrast, other countries "have made the domestic arguments and taken the difficult decisions to put themselves in a position to reach agreement."
Necessity of goods deal questioned
Dominique Njinkeu, executive director of International Lawyers and Economists Against Poverty, said that the EU's insistence on interim EPAs that include detailed tariff reduction commitments went beyond the strict demands of multilateral rules for the WTO-compatibility of free trade agreements.
"GATT Article XXIV 5(c) indicates that an 'interim agreement' must include a 'plan and schedule for the formation of a [free trade area] within a reasonable length of time'," he said. "A simple framework deal with a promise to conclude an agreement, say by the end of 2008, would thus suffice in the immediate-term to maintain ACP preferential access to the EU in a WTO-compatible manner." Furthermore, it "would alleviate the pressure on ACP countries to finalise full goods market access schedules before the end of 2007. Forcing them to undertake the most challenging part of the negotiations in a massive rush would have severe implications both domestically and regionally, and could ultimately shake ACP confidence in the international trading system itself."
WTO compliance or a 'market grab'?
Furthermore, the economic benefits of the EPAs that Brussels wants have been called into question by new research from the International Food Policy Research Institute and the Sciences Po institute in Paris.
Since ACP countries generally have high tariff levels vis-à-vis the rest of the world, liberalising barriers to imports from the EU alone would artificially give European products a competitive edge in ACP markets compared to goods produced elsewhere, concluded Patrick Messerlin and Claire Delpeuch of Science Po's Groupe d'Economie Mondiale (GEM). Not only would the expensive products sold by relatively inefficient EU companies be shielded from outside competition by high ACP tariffs, even globally competitive EU exporters would be in a position to charge prices substantially higher than world market rates. The ACP could effectively end up subsidising inefficient EU firms, and ACP consumers could find themselves denied many of the potential gains from lower prices that might normally arise from liberalisation.
Furthermore, IFPRI determined that the EPAs would see ACP imports swing heavily towards the EU and away from other countries such as the US and China. For instance, they project that the EU's share of meat imports in most ACP countries would rise by 180 percent, while other regions, such as South America, would see beef exports to the ACP decrease by around 30 percent. US beef exports to Nigeria would stand to drop by some 30 percent. This would be ironic, since it was complaints from other countries about the EU's preference scheme that led to the push for the EPAs in the first place.
Susan Sechler, a senior fellow with the German Marshall Fund, said that the IFPRI data indicates that the EU's push to negotiate EPA's by the end of the year amounted to a "market grab from other developing and developed country competitors," as opposed to a more balanced and mutually beneficial agreement with the ACP countries.
Messerlin and Delpeuch said that ACP countries might try to win WTO Members' support for another preference waiver by offering them deeper tariff cuts at the multilateral level, noting that EPAs would actually diminish their access to ACP markets relative to the EU's. They also suggested that any 'interim' EPAs signed within the next few weeks could focus largely on the wide range of products that are simply not manufactured in most ACP countries.