Multiple problems in EPAs highlighted at workshop

Original Publication Date: 
26 October, 2006

The absence of development content and the severe effects of rapid trade liberalization were among key problems highlighted by policymakers and NGO participants at a workshop held here on the Economic Partnership Agreements between the European Union and the African, Caribbean and Pacific Group.

Many speakers and participants stressed the need for a comprehensive review and impact assessments of the EPA negotiations. They said the deadline for concluding the negotiations (which is end-2007) should be extended. Also, the WTO waiver enabling preferential treatment for ACP countries to the EU market should be extended, especially since the Doha negotiations have been suspended.

The meeting on the Development Challenge of the EPAs, held on 12-13 October, was hosted by the South Centre and co-organised by 11 NGOs from ACP and European countries.

The meeting opened with speeches by the Trade Ministers of Barbados, Fiji and Senegal, as well as presentation of the speech of the Nigerian Minister, who was unable to attend.

The Ministers made critical comments on the lack of the development dimension in the negotiations so far, on the adjustment costs arising from economic and social dislocation and loss of tariff revenue arising from liberalization, and on the inadequate process including lack of impact assessment studies and procedural difficulties in drawing from the EDF funding mechanism. (See SUNS #6122 dated 18 October 2006).

Expressing the view that it would be difficult for the EPA talks to conclude by the deadline of the end of 2007, the Ministers also called for a basic rethinking of the approach of the EPAs, and for the search for alternatives to the EPAs.

During a question-and-answer session, several participants voiced their views and concerns, and the Ministers responded.

The Mauritius Ambassador in Brussels said the ACP countries should not negotiate under duress simply because the WTO waiver (enabling the preferential access of ACP countries to the EU market) will expire next year. They should also not be subject to duress due to the configuration (of countries in the regional groupings that negotiate with the EC).

He added that the East African countries were disappointed when the EC found the draft text on development aspects (prepared by the Africans) unacceptable. When the Africans indicated that in this case they would suspend the negotiations, then the EU showed good sense.

He said that tying resources to conditionality made no sense, that development should be at the top of the agenda and that the negotiating structure itself is deficient. He also opposed having a suspension clause in the EPA (in Article 96 which deals with governance and rule of law) as this brings politics into trade, and this goes against having predictability of trade, as a country could be subject to suspension of trade. Moreover, there would be "collective punishment" on all countries if one country were said to be in violation.

On the possible extension of the deadline, the Mauritius Ambassador said the formal review should examine if more time is needed for the negotiations.
The period from 2000 to 2007 was meant to prepare the ACP countries to operate in a liberalized environment, but in fact no such preparation was made.

Referring to the principle of compatibility with WTO rules, he said: "We thought that new rules in Article 24 of GATT (dealing with regional trade
agreements) would be established in the Doha Round, but now that the Doha talks are suspended, this change in rules did not materialize. Also, if the EPA is WTO-plus, we don't know what is plus."

Given this situation, he asked, why should we commit ourselves? There is justification for the deadline (of concluding the EPA talks) to be extended to 2010.

The Ambassador of Barbados in Brussels agreed that there would be a legal problem of how the EU can enforce a suspension based on Article 96 on all members. He also supported the call to extend the deadline beyond next year to 2009 or 2010 or without fixing a new deadline.

In response, Barbados' Trade Minister Dame Billie Miller said "we have to be careful not to be terrorized by waivers" and that no one will pull the plug.
At the WTO, every deadline has been missed (so it is not unusual to ask for an extension of the deadline).

Senegal's Trade Minister Mamadou Diop said that it was important for the ACP countries to unite and keep cohesion. "In West Africa, we did not do impact studies, so we cannot sign an agreement. No government that is responsible can do that. We can continue to discuss but cannot sign. We cannot be forced to sign an agreement that is against people's interests."

A representative of a Third World non-governmental organization (NGO) said that the African Ministers in their Nairobi Declaration on EPAs earlier this year had stated that they did not want to make WTO-plus obligations in the EPAs, with respect to services, intellectual property and the Singapore issues (investment, competition and government procurement).

On market access, the African Ministers said that Article 24 of the GATT had to be amended to enable special and differential treatment and non-reciprocal relations between developed and developing countries in an FTA, and that the EPA's market access aspects will not be concluded until the Article 24 amendment is made.

He called on the ACP countries to request the EC to apply for an extension of the waiver in the WTO. There should also be greater efforts to amend Article 24 appropriately. And the EC should be called upon not to pressure the ACP countries into "enforced liberalization".

An official from the African Union Commission also highlighted the AU Ministers' Nairobi Declaration. In its paragraph 2, the African Ministers had expressed deep disappointment with the EC for not addressing development concerns. He supported the call to extend the WTO waiver and said the ACP should ask the EU to get the waiver extended. The few members of the WTO that may oppose such an extension could be persuaded not to oppose.

The AU official added that "having no agreement is better than having an agreement that damages development. We should not be pressurized into signing an agreement that harms us."

A staff of a member of the European Parliament said that the workshop had shown that the ACP countries had many constructive positions, which he could now transmit to the EC because the EC was repeatedly bemoaning the lack of constructive positions from the ACP. He agreed that it is a "total nightmare" to try to get funds from the EDF mechanism.

The president of the East African Farmers' Federation said that he was concerned that the ACP countries were getting into an agreement that they had no capacity to implement. "Therefore, we should not rush the negotiations. We should ensure that what we agree is what we can implement."

South Centre Executive Director Yash Tandon, who chaired the session, made a brief conclusion of the discussions. He said that the methodology of the negotiations was being driven by pressure of the EC and "we should not be pressurized."

There may have to be an extension of the negotiations beyond 2008. Given this, there has also to be an extension of the WTO waiver, which should be adjusted to be compatible with the conclusion of the Doha Round.

Also, the issues should be brought back to basics. The ACP countries had been "re-configured or dis-configured" into six groups. In the Phase 1 talks, the negotiations were between the EU and the ACP as a group. Those talks had not finished yet and there had been some proposals to go back to the ACP level of negotiations.

There should also be a "formal and comprehensive" review, said Tandon.
Moreover, the horse had to be put before the cart, and thus there must be impact assessments before negotiations, to ensure that trade serves development needs.

Finally, there were concerns expressed by some participants on Article 96, where countries could be suspended in the context of the issues of governance and rule of law, which were not appropriate to have in a trade document.

In another session, several NGO representatives as well as a senior UN official gave their views.

Mamadou Cissokho, president of the East African Farmers' Federation, said that the EU was already dumping agricultural products such as chicken into African countries and this was already causing damage.

The consequences of the EPAs would be to cause farmers in Africa to stop producing, as EU products will swamp the markets. "We will also have food dependency. Young people will have to leave agriculture and go to the cities, but the cities are not creating jobs."

Shantal Munro-Knight of the Caribbean Policy Development Centre focused on the investment issue. Despite the EC's rhetoric about how including investment rules in the EPAs would bring about development, in reality, there was nothing with regards to development in the EC proposal on investment rules.

She said that the Caribbean countries had agreed to negotiate investment, but they are aware that the issue must be treated in a way that meets development needs.

Stephen Karingi, senior economist at the UN Economic Commission for Africa (ECA), said that a key principle in the EPA is that regional integration should be strengthened. The dilemma is how this principle can be balanced with other EPA principles to have the desired outcomes.

Studies done by the ECA show that the EPAs would cause intra-regional trade (i. e. trade within the African regions) to shrink by as much as 18%. The situation is likely to be worsened by the kind of specialization that will occur.

Karingi said the sequencing of the EPAs' implementation will be critical. It should start with the reinforcement of regional integration, which is a prerequisite if African countries are to benefit from EPAs. Africa must hasten regional integration processes to build and consolidate supply-capacity before opening up to the EU.

He added that regional integration requires time and resources, and there must also be flexibility to enable this to happen.

Marc Maes from the Belgian NGO 11.11.11 said that the EC does not seem willing to put additional resources to help meet the adjustment costs of EPAs. The EC only wants a pure FTA agreement which also contains non-trade issues, having stressed that the government procurement market is 15-20% of GDP.

Regarding services, the EU would not make meaningful offers on labour services. It also won't offer alternatives to EPAs. Many studies have shown that across-the-board liberalization will hurt developing countries. How then can the EC claim that the EPAs are about development, asked Maes.

On the review process, Maes said that "we had hopes [that] it will look at development benchmarks, but these hopes are dwindling. It's not going anywhere."

Tetteh Hormeku of the African Trade Network, who chaired the session, summed up some central points. On investment, he said that foreign direct investment benefits developing countries when the conditions are there, such as technology infusion.

These conditions require the ability of governments to regulate FDI but what the EC is proposing makes this impossible. It will take away the ability of governments to regulate FDI so that FDI can contribute to development.

On agriculture, there is a great imbalance between the EU's agricultural support and the very small support given in Africa. Thus, zero or low tariffs would destroy a lot of agricultural production in ACP countries.

On regional integration, there are many reasons why this is a goal in Africa, but the EPAs are likely to result in trade diversion, and the EPAs could end up destroying the prospects for regional integration. Thus, regional integration should be achieved before liberalization with the EU.

During the discussion period, the Mauritius Ambassador said that the EPAs may end up with a situation of "reverse preference", with ACP countries giving preferences to the EU and the EU not giving preference to the ACP.
"If, by their own actions, the EU is eroding their preferences to us, they are affecting the balance of rights and obligations and they should compensate us, and this has to be addressed."

On regional integration, although the Cotonou agreement states that the EPAs will build on regional integration, in reality, the questions are when do we build on regional integration and what does it mean?

On agriculture, it is important to ask what is the impact on ACP countries of the CAP reform, which changes the nature of subsidies from price support to direct income support. For cereals, the price has been cut by half but the EU farmers now get direct income support, so they can maintain their farms.

The food companies will get the cereals at half the previous price, and this enables them to dump on ACP markets and displace the farmers there. This problem has to be addressed, one possibility being to allow a countervailing duty equal to the direct support given to EU farmers.

Maes reiterated his view that for the EC, the EPAs are seen as pure free trade agreements, and not an agreement to help poor countries. This position causes it to push away the various proposals made from a development view.