Download Economic Partnership Agreements - TWN

Economic Partnership
Agreement
negotiations
A brief guide
TWN Africa Secretariat, May 2004
EPAs … Key terms
For explanations and more terms see: www.epawatch.net
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Free trade agreements/free trade areas
Trade in goods, trade in services
Common agricultural policy/subsidies
Reciprocity / non-reciprocity
WTO compatibility
Preferential trade
Market access
Customs union
Special and differential treatment
General system of preferences (GSP)
Everything but arms/LDCs
Trade related areas/Singapore issues
Open regionalism/regional integration
Regional configurations
Commodity protocols
Adjustment funds
Assymetry
Compensatory trade measures
Non-execution clause
Development dimensions
Rules of origin
Economic Partnership
Agreements are …
free trade areas being negotiated
between
the European Union
and
ECOWAS
SADC
CARIBBEAN
EAST AND SOUTHERN AFRICA GROUP
CENTRAL AFRICA (CEMAC)
PACIFIC
What is a free trade area?
A group of two or more countries or economies that
have eliminated tariff and non-tariff measures
affecting trade amongst themselves.
Countries sign a free trade agreement that allows
their imports and exports to enter each others
markets at duty free rates.
Historically, most free trade areas have been
regional trade arrangements and are part of
regional integration processes.
Eg: East Africa Community, COMESA, SADC or the
European Union.
The aim of these is to strengthen economic
development amongst countries of a similar
region by enhancing trade between each other.
SACU is a customs union, because goods circulate
freely, but in addition, the SACU countries have
a common external tariff.
Usually these trade agreements have been between
countries that have similar levels of
development, so that the signatory countries
have balanced economic benefits.
However, industrialised countries are now pushing
for free trade areas with much poorer countries
(eg. US-Latin America). The problem is how to
ensure that the weaker countries in the trade
agreement that are less competitive, and have
less to export, are still able to derive benefits.
Free trade areas … more
It is an established fact in economics that a free trade
arrangement between economies of unequal strength
WILL BENEFIT THE STRONGER ECONOMIES, WHILE
THE WEAKER ECONOMIES COULD LOSE OUT,
unless specific policy measures are taken to ensure
equitable benefits. In the case of the European Union,
the richer countries (eg. Germany, UK, France) have
contributed large amounts to accelerate economic
development in the the poorer countries (Greece,
Portugal, Ireland) of the Union to address this problem.
Free trade area/Regional trade agreements are now
governed by WTO rules and must cover
SUBSTANTIALLY ALL TRADE. There is little flexibility to
allow for the differences in the economies.
The EU and US have also pushed for FTAs to include
SERVICES LIBERALISATION and POLICY
DEREGULATION measures in areas such as
government procurement, investment, competition.
These proposals have been rejected in the WTO.
EPAs are therefore a way for the EU to get its unpopular
WTO proposals through the back door.
The EPAs are not about ‘partnership’ and they are not about
‘development.’ They are about ‘locking in’ structural
adjustment policy reforms ie. liberalisation and
deregulation for the benefit of their own corporations.
The EPA/FTAs will severely restrict the ability of
governments to adopt policies that allow for the
protection and growth of local economic operators in
sectors such as agriculture, services and manufacturing.
Implications of free
trade areas …
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Unfair competition from European
exports, implications for productive
sector development (agriculture,
industries.)
 Deregulation, privatisation through
investment, services agreements:
public services in particular are
targeted by the EU.
 No ability to take advantage of
European markets because of
stringent non-tariff barriers, rules of
origin, SPS measures etc.
 Implications of EU enlargement …
new member states will also have
access to ACP markets.
 Losses of government revenue from
tariff reductions.
 Development agreement but …
adjustment costs all borne by the
ACP!
Reference texts for EPA
negotiations (I)
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Cotonou Agreement provisions on
EPA negotiations (2000)
– Formal negotiations of the new trading arrangements
[EPAs] shall start in September 2002 and the new
trading arrangements shall enter into force by 1
January 2008 (Article 37.1)
– Negotiation of the Economic Partnership Agreement
will be undertaken by countries which consider
themselves in a position to do so, at the level they
consider appropriate and in accordance with the
procedures agreed by the ACP Group. (Article 37.4)
– In 2004, the Community will assess the situation of
the non-LDCs which decide they are not in a position
to enter into EPAs and will examine all alternative
possibilities, in order to provide these countries with a
new framework for trade which is equivalent to their
existing situation and in conformity to WTO rules.
(Article37. 6)
– Negotiations of the Economic Partnership Agreements
shall aim notably at establishing the timetable for the
progressive removal of barriers between the Parties in
accordance with the relevant WTO rules. (Article 37.7)
EPAs – main features
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The key feature of the EPA/FTA negotiations will
be trade liberalisation and deregulation, in
particular
– Elimination of tariffs on goods (around 90% of
all trade over a ten year period)
– Changes to the regulatory framework:
investment rules and policy, competition,
intellectual property rights etc. (Singapore issues),
services liberalisation
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The ACP Group has said that they will not benefit
from EPA/FTAs unless the negotiations include a
‘development dimension’ ie.:
– Additional aid to support ACP countries economic
diversification and to strengthen their trade
capacities
– compensation for the ‘adjustment costs’ of
liberalisation.
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The European trade negotiators have refused
categorically to include the negotiation of an
additional aid package in the EPAs.
European Commission negotiating
directives for EPAs (2002)
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The Member States of the European Union have approved
the European Commission’s the mandate to negotiate free
trade areas with the EU.
 The Negotiating Directives deal mainly with liberalisation in
the following areas:
 Trade in goods
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Import duties
General provisions
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Rules of origin, administrative cooperation, financial
responsibility
Trade facilitatiion
Trade in services
Current payments and capital movements
Trade related areas
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Export duties
Quantitative restrictions
National treatment and fiscal measures
Tax carve out clause
Variable speed
Food security clause
Safeguards
Anti-dumping
Standstill clause
Transparency (customs tariffs)
Exceptions clause
Classification of goods
Investment
Public procurement;
Competiitiion
Standards, technical regulations and conformity assessments
Data protection
Dispute Settlement, non-execution clause
Comment: Each of the EU’s negotiating demands have significant implications
for ACP economies, and will require major revisions of domestic policy to
facilitate opening up ACP markets to European businesses and exports.
However the negotiating mandate of the trade negotiators does not give them
any room to take on board the demands of the ACP countries to include
development issues within the EPAs.
Official justification for the
EPA negotiations
From the EU
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WTO incompatibility of Lome non-reciprocal regime
EU external trade policy: increase access for EU
corporations through free trade agreements.
Emphasis in the Cotonou Agreement is integration of
ACP countries into the global economy: EPAs are a
stepping stone to global integration and are therefore
instruments for development.
EPAs will encourage investment from EU firms.
System of unilateral preferences did not work; ACP
countries need to become competitive.
From the ACP
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Dependence of ACP exports on EU preferences;
countries are obliged to go along with what the EU even
if this is not their most preferred option because they
fear the consequences of losing their preferences to EU
markets;
ACP countries are liberalising anyway; EPAs are part of
a trend.
There is political pressure from the EU to negotiate
despite the concerns from the ACP countries.
Negotiating is not agreeing: the aim of the governments
is to get a deal which will benefit their countries, and
particularly to ensure that EPAs have a strong
development dimension to compensate for the
adjustment costs.
Sub-regional negotiations
(Phase II)
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The regional secretariats are responsible for coordinating the EPA
negotiations.
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Each sub-region has to prepare a set of common positions and demands
on the key areas, particularly tariff liberalisation. The sub-regions are also
formulating demands to improve their access to EU markets. The trade
negotiators have to negotiate on the basis of the mandates given to them
by the Ministers.
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Sub-regions have also established structures which include technical
groups, officials and ministers. The officials will be in charge of most of the
negotiations with the EU. The EU is represented by officials from the
European Commission Trade Directorate. Negotiations will take place in
the ACP capitals or in Brussels.
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A small number of issues are being negotiated collectively by the ACP
Group, coordinated by the ACP Secretariat and Committee of
Ambassadors.
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EPAs are supposed to enter into force by January 2008 and therefore
have to be signed by 2007. This means the bulk of negotiations must be
completed during 2004/2005/2006. Most of 2004 is now clearly being
dedicated to a preparatory phase.
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Challenges at the sub-regional level:
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Do member states understand the issues and the way their interests will be
affected?
There is a lack of technical capacity within trade ministries and regional
organisations to cover all the areas.
The timelines for negotiations are very tight, given the lack of preparedness for the
negotiations.
Sub-regional negotiations
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Since Phase II of the negotiations were launched, progress has
been very slow. Negotiating mandates and timetables (road
maps) have been prepared by the regional institutions to outline
their broad negotiating positions and demands. Degrees of
detail on positions vary in the documents. The pace of the
negotiations has also moved forward differently in each region.
East and Southern Africa
This group is coordinated by the COMESA Secretariat. The
Negotiating Mandate and Joint Road Map were finalised in Feb.
04. National and sub-regional structures have been established,
as well as key negotiating areas.
ECOWAS
Joint Road Map for EPA negotiations was agreed by the Joint
Technical committee, but is awaiting the approval of the ECOWAS
Ministers (July 20040 before negotiations can start.
SADC
The SADC Group (does not include all SADC countries) launched
negotiations in July 2004.
CARICOM
The Caribbean Group launched negotiations in April 2004.
Negotiating mandate and Joint Workplan (April 04)
have been prepared
Pacific
Negotiations to be launched in September 2004.
All-ACP negotiations
Rules of origin discussions underway, non-execution clause
EPAs
what are the options?
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ACP countries may either be part of an EPA (negotiated as
a region or individually) or be part of the EU’s General
System of Preferences (less favorable market access
terms).
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LDCs can access EU markets through the EU’s Everything
But Arms initiative, without being part of an EPA.
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Both the GSP and the EBA are non-reciprocal, but they
decided unilaterally by the EU (ie. Not negotiated)
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The other options would be for the EU and the ACP Group
to put together a non-reciprocal trade arrangement which
accommodates WTO rules. They could also propose
changes to WTO rules that would allow for continued nonreciprocal trade. This is not an option that the EU is
prepared to consider.
Contradictions: EPAs
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Cotonou Agreement is supposed to be about developing ACP
countries, but all the costs of EPAs will be borne by the ACP
countries rather than the EU.
EPAs claim to support and regional integration but ACP
producers will probably lose regional markets as a result of
additional competition from the EU. EPAs are hijacking regional
integration to fit the needs of industrialised countries (market
access) rather than the needs of the regions’ economies.
Cotonou Agreement provides for countries not to sign on EPAs,
but no countries are examining the possibility of opting out of an
EPA despite the negative implications.
While the EU states that EPAs will be flexible will take account
of the development level of the ACP countries, the timelines for
negotiations and for implementing EPAs are very short (12
years).
WTO compatibility, rather than development indicators are the
benchmark for EPAs. At the same time, the ACP countries have
repeatedly stated that WTO rules are biased against developed
countries. WTO compatibility in the current context means
automatically that the EU is in the better position.
LDC countries are negotiating EPAs, even though they are the
group with nothing gain (access to EU markets are guaranteed
by the EBA initiative) and more to lose (through liberalisation).
The EU’s negotiating mandate does not provide for additional
funding to compensate for the very large losses in public
revenue.
The ACP countries are very heavily reliant on the EU for funding
for capacity building and technical support in the negotiations,
even though there are major disagreements between the two
parties on the approach, content and outcome of the
negotiations.
ACP countries’ collective positions on WTO issues (eg. on
investment, competition, procurement) are in danger of being
contradicted by their positions in the EPA negotiations.
Generally there is a problem of backtracking on their own
positions.
Development issues
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Strengthening regional integration?
– The EU’s emphasis on regional
integration is biased towards ‘open
regionalism’ rather than ‘developmental
regionalism.’
– Regional integration efforts, which are
based on the Lagos Plan of Action have
now been hijacked by the EPAs, since
the processes of regional integration
(timelines, content etc) are based on the
EPA negotiations rather than what is
genuinely required for the countries.
Institutional concerns
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Lack of coordination with all ACP
level and other regions. ACP
negotiating guidelines ignored.
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Lack of capacity in the Secretariat
(technical); susceptible to
manipulation from the EU
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Negotiating Structures: weak
national representation, key roles
given to the Secretariat.
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Lack of clarity and direction from
Member States in shaping
negotiations
Practical/tactical
concerns
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Timelines too short given lack of
preparedness (2005/2006)
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Lack of impact studies to
information national positions
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Misunderstanding the role of aid.
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What is in it for LDCs?
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Lack of national consultations with
stakeholders.
Conclusions
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Challenges for civil society
– Bigger challenges are at the
political level: weaknesses of
governments vis-à-vis donors
and the EU.
– Formulation of demands and
positions from civil society …
what do we want?
– Transparency, accountability in
the process of negotiations