Economic Partnership Agreements

Economic Partnership Agreements Where are we and what challenges for development? Isabelle Ramdoo 13 November 2013, The Hague

Structure of presentation • Setting the scene: key milestones • Some facts about the configuration • Where are we now? Brief state of play • Critical challenges ahead in the negotiations • Risks ahead? 6. Which way forward in the negotiations? 7. The major challenge for a win-win outcome 8. What then for development policy? ECDPM

1. Setting the scene: Key milestones • Prior to 2008 (Lome to Cotonou): unilateral, non-reciprocal preferential market access BUT not compatible with WTO • Difficult, uncertain and costly WTO waivers between 2000-07 • Art 36 Cotonou Agreement: parties committed to start EPA negotiation to address WTO compatibility • Since 2008 – Trade outside of Cotonou agreement. EPAs are stand-alone agreements; • However: many unfinished negotiations – to avoid trade disruption, EC Reg. 1528/2007 – provisional application of EPAs for countries that had at least initialed an EPA (although interim) • Deadline to finalise all unfinished business: 1st October 2014 ECDPM

2. Key facts • Stage I 09/2002 – 09/2003: All ACP negotiations • Stage II 10/2003 – 2007: Regional negotiations West Africa: 15 countries (ECOWAS + Mauritania) Central Africa: 8 countries East and Southern Africa: 11 countries (COMESA minus) East African Community: 5 countries (full region) Southern Africa –6 countries + SA joined later (SADC minus) Caribbean region – 15 countries Pacific: Pacific Forum • Since then: • Only 1 full EPA (CARIFORUM) signed in 2008; • 1 African region ESA (4 countries) signed in 2009 – all countries ratified. • The remaining 17 countries (have agreements that are legally challenging • Africa: CA (Cameroun signed in 2009, not ratified) • West Africa: Ivory Coast and Ghana ECDPM

3.a Where are we now? ECDPM

3.b Countries concerned by deadline and regime applied in 2014 ECDPM

3.c Who will be affected and by how much? Source: Bartels L & Goodison P (2011): EU Proposal to end preferences for 18 African and Pacific States : An Assessment – Trade Hot Topics, Commonwealth Secretariat – Figures are from 2009 • Biggest losers: • Fiji (97.4% exports) • Swaziland (96.3%) Both sugar exporters (€339/tonne) Kenya and Namibia also likely to suffer ECDPM

3. State of Play of current negotiations: not quite there yet… • ECOWAS: 2 main issues Market access offer (degree and time frame) Development chapter (PAPED – additional resources) Other contentious issues: MFN Clause; EU Domestic subsidies and support to agriculture; Obligations to negotiate FTAs with countries where EU has CU (Turkey, San Marino, Andorra) 2. EAC: Mainly contentious issues Export taxes; MFN, RoO; Agriculture; non-execution clause (ICC/Kenya) ECDPM

3. SADC: • Export taxes, MFN • South Africa/SACU market access both on agriculture and NAMA; RoOcumulation with SA; • infant/distress industries; 4. Central Africa: • Slow negotiations. • Key remaining issues include MA offer; MFN, Export taxes development 5. Pacific: Recently agreed to freeze negotiations because of fisheries 6. ESA: 1 outstanding issue: customs cooperation agreement but not an issue with deadline ECDPM

4. Critical challenges ahead in negotiations • Deadline1st Oct. 2014 • So far, on contention issues, little flexibility on both sides • Timeline towards deadline: given pace of negotiations, even if negotiations are completed there might be problems with implementation • Risk of failure: Some countries might be left without preferences; likely implications for regional integration (Kenya? Ivory Coast? Cameroun? Swaziland?) ECDPM

5. Risks ahead • If agreements are concluded: Timeline is unrealistic Risk of trade disruption pending ratification: economically challenging and politically unacceptable • If trade talk collapse: some countries may sign for fear of market disruption; big risk for regional (dis)integration; multiple trade regimes applicable to exports to EU with negative impacts on RI Diplomatic and political challenges: EU-Africa Summit – risk of derailing strategic discussions; More broadly: geostrategic implications – partners might turn elsewhere ECDPM

6. Which way forward in negotiations? • 10 years on, all technical possibilities have been explored; but technical solutions still possible • Outcome most likely to be resolved at political level • Becoming evident that EPA has negative impact on the overall Europe-Africa relationship; • Increasingly urgent to promote positive and constructive atmosphere to maintain the broader strategic relations between Europe and Africa • Needs pragmatic and realistic solutions on both sides ECDPM

Important to weigh the political cost of a possible failure within the broader EU-Africa relationship; • Are we prepared for a failure? What “extra-mile” are we ready to go? Or can we afford to go? Whose role? • Preparing “smooth landing” if/when negotiations fail: agree to disagree = politics ECDPM

7.The main challenge: Expectations v/s reality:The disconnect! • The major challenge is to bridge the gap between the expectations of the EPA and the realism: Expectations = EPA meant to be a development tool. From African side, many expected to see trade act as a leverage for broader development. Also financial expectations (additional funds). But has not happened. From European side, it was assumed the link was automatic. Both expectations were not met! Realism = it ended up being JUST an FTA. As such, even if trade is one tool to achieve development, it is not sufficient in itself. Needs more (reforms, markets, investments, accompanying measures for fiscal losses or losers etc). Crafted as it is, it will not deliver! ECDPM

8. What then for development? • EPA was expected to be mainly a development tool. • So far, this is far from the case – disconnect still too wide, development objectives still too low • This is where we need to focus support if we want EPAs to really work for development • Unfortunately – not the mandate of DG Trade and DG Devco is still too much trapped within existing financing mechanisms (EDF etc) all of which are available ANYWAY (with or without EPAs) • So EPA countries see no additionality and LDCs do not see the necessity to open up their markets ECDPM

But “traditional aid” is not sufficient to bridge the gap – experience has shown that results have been mixed • What role for member states? What can be done? • Main issue in Africa – structural transformation of economies to diversify away from commodity based: Role for private sector? Which private sector? Thinking beyond aid but in terms of productive engagement – bring know-how, help develop local expertise and productive capacity; ECDPM

Annexes: Additional slides for information ECDPM

Deadline 1st October 2014: In a nutshell • EC regulation to amending 1528/2007 (remove countries from Annex 1) • Objective: Deadline to the provisional application of EPA trade preferences for countries that initialed an EPA but had not signed or taken the necessary steps to ratify it, regardless of whether contentious issues have been resolved or regional EPAs completed. • Result: Countries that had not initialed or taken steps to ratify will loose trade preferences under EPA as from 1stOctober 2014 ECDPM

Who is concerned by the deadline? • So far, 36 ACP countries had initialed or signed an (I)EPA. • Of those, 19 countries had met the requirement of ratification (i.e 15 Caribbean countries + Mauritius, Madagascar; Seychelles and Zimbabwe). Not concerned by deadline 1st October 2014. • The remaining 17 countries will lose EPA market access by 2014 if they do not ratify the EPA by then. ECDPM

The 17 countries fall into different categories: • 9 are LDCs – on a pure market access basis, they will continue to benefit from DFQF under EBA status • 7 are lower middle income countries and will therefore fall under the standard GSP Scheme – with higher tariffs for some products and stricter RoO • 2 are upper middle income countries and will lose all preferences if the new GSP comes into effect in 2014 ECDPM

Products to be affected Products with very high tariffs: • Sugar (€339 – 419/tonne) – Swaziland, Fiji, Kenya • Fresh and chilled bovine (12.8% + €3034/tonne) – Namibia and Botswana) • Fresh bananas (€176/tonne) – Ivory Coast, Cameroun, Ghana Products with high tariffs • Tuna (20.4%) – Ivory Coast and Ghana • Other fish (hake (fresh, chilled, frozen) + monkfish (11.5% - 15%) – Namibia • Beans – 15.7% - Kenya • Pineapples – 14.9 – 15.7% - Kenya, Swaziland • Citrus – 14.9% - Swaziland • Orange, grapefruits, grapes .. >10% - Kenya, Namibia, Swaziland ECDPM

Beyond worsening market access conditions for some and trade disruption for others, there will be practical implications of falling into different regimes: • For exporters: tariffs will increase; RoO will change • Cumulation, which was possible among countries which were benefiting from IEPA within the same region will no longer be possible – hence implications for regional markets and value chains • For regional integration – some countries would give EU better market access than to their regional partners; implications for RI agenda in setting up CUs or for the administration of CUs in place; • Some countries will face same treatment as developed countries (Eg Botswana and Namibia will export to EU under MFN = Japan or US) ECDPM

Contentious issues: what flexibility • Degree of liberalisation: In WA and CA, some degree of flexibility is needed: WA is requesting 75%. No precedent at WTO that is is NOT compatible. EU can justify this on the ground that regional agreements include a majority of LDCs. • MFN Clause: a redline for ALL regions. Either EU drops it or it broadens the scope to include RoO and other non-tariff matters as well as services (big EU FTAs are yet to come, so this should be sellable) • Export taxes: A redline for ALL regions: problem is with the language. Countries do not want their measures to be approved by EU but only consultation. Other option is to leave it to WTO • Additional funding: so far none, but could explore innovative financing mechanisms such as blending, leveraging loans using aid money etc. ECDPM

EPAs: what impact for Regional Integration and beyond? Boomerang effect • Although negotiations continue, it is increasingly felt that timing and sequencing of trade agreements with third parties should be based on RI agenda and not the reverse • Priority therefore given to regional agenda by many RECs. For EPA, this is particularly relevant for services and other trade-related issues. • E.g COMESA services negotiations launched in September 2009 as a way of preparing a common stand for EPA services negotiations; EPA competition clause is based on COMESA competition policy etc. ECDPM

But also broader issues: • Disillusion between expectations and results. • Many countries seeking status quo and little appetite beyond market access • Flaws in EU’s own trade policies: EBA given to all LDCs in 2001 + improved RoO in 2011; LDCs have no interest to sign EPAs and some RECs mainly LDCs • On December 2011, at WTO improved market access in services granted to LDCs. Will have an impact on future services negotiations • No political traction on both sides and no political will to find mutually acceptable agreement on contentious issues ECDPM

Not necessarily a consensus on either side on what a good development policy is or whether EPAs are good for RI and development or not. • Irrespective of economic merits, arguments from the EC side had little convincing effects, given differences in interests and perception of what EPA was and would achieve ECDPM

Thank you www.ecdpm.org Isabelle Ramdoo (ir@ecdpm.org)

Economic Partnership Agreements