Economic Partnership Agreements: Issues, stakes and Alternatives

1. Seminar on Climate, Agriculture and Development AlternativesMariano IossaFood and Trade Policy Adviser Economic Partnership Agreements:Issues, stakes and Alternatives

2. 27 EU member states ACP countries divided into 6 regions: Caribbean Pacific West Africa (ECOWAS) Eastern Africa (ESA) Southern African (SADC) Central Africa (COMESA) Background: the parties

3. Signed in 2000 between EU and ACPs Replaces 4 Lome conventions (1974 – 2000) Establishes new relations around 3 axes: Development cooperation Political Dialogue Economic and Trade Cooperation Engages the parties to negotiate EPAs by the end of 2008 Background: Cotonou Agreement

4. From Lomè to Cotonou: a different world • Post-industrial era • Emergence of new economic powers: China, India and Brazil • End of the commodity agreements • Creation of WTO: push towards preferences erosion

5. Preferences have not given the expected results: little increase in ACP trade weak diversification Why?: EU: preferences resulted in little incentive for diversification, investment and improvement of competitiveness ACPs: NTB, RoO, tariff escalation and EU subsidies made preferences an market access illusion From Lomè to Cotonou:need to change

6. 25 EU countries: combined GDP of $13,300bn ACPs include 39 of the world’s 50 Least Developed Countries (LDCs) The Pacific Islands (smallest group) has a combined GDP of $9bn - 1,400 times smaller than the EU’s West Africa region (largest group), is more than 80 times smaller than the EU in terms of GDP Background:Unequal partners

7. EPAs: objectives and principles Objectives: • Poverty eradication and gradual integration of ACPs in global economy • Deepen regional integration • Attract investments • Improve competitiveness and diversify supply Principles • WTO compatibility • Not to leave any ACP worse off as a result of the negotiations

8. EPAs: areas of negotiation • Trade in goods/custom duties • Trade in services (limited) • Rules in investment, competition and IPRs • Calendar of liberalisation • Capacity building and adjustment programmes

9. Free Trade agreements, i.e. Reciprocity Substantially all trade Progressive liberalisation in +- 12 years Financial support for adjustment EPAs: the EC approach

10. Majority of liberalisation will take place on ACP side EU non tariff barriers will endure ACP markets more vulnerable to subsidised European products Increase of unemployment as local businesses will not be able to face the competition of European industries Lack of adequate financing to cover the high adjustment costs Loss of fiscal revenues Lack of preparednessof ACP to conclude negotiations and to implement EPAs Risks:openess = vulnerability

11. Before Eu unilateral preferences Possiblity for ACPs to protect their products Risks: custom duties After • Reciprocal preferences • Very limited possibility for ACPs to protect their products

12. Before National policy-making power Differentiated rules for establishment of foreign companies Risks: investment and competition After • Right of establishment • National Treatment • Capital repatriation

13. Risks:loss of fiscal revenues

14. Adjustment Measures: enough to deliver? EDF – European Development Fund • 2005 – 2015: 2 envelopes instead of 3 • Risk of real reduction of 37% Aid for Trade: • 2 bn Euro till 2010 • Mostly to ACPs but….. • Only 700 mio Euro might be new money • Need estimated at 9.2 bn Euro

15. “We won't sacrifice future generations for a bad economic partnership agreement." Hon. Lotoala Metia, Tuvalu’s Minister of Finance “… the current EPA negotiations … are far from development tools – instead they pose serious threats to the development of African countries and their people”. ACP Secretary-General John Kaputin “After all, if 30 years of non reciprocal free market access into the EU did not improve the economic situation of ACP, how can a reciprocal trading arrangement achieve anything better?” Dr. Aliyu Modibo Umar, Nigeria’s Minister of Commerce "The EPA will change the way we collect revenue.  By eliminating tariff revenue and creating consumer taxes, our governments will pass the tax burden on to our poor, creating social inequity." Grant Percival, President, Samoa’s Association of Manufacturers and Exporters, What do they think about EPAs?

16. Divergences:mid-term review • Completion of negotiations • Development dimension • Cost of adjustment • Fiscal losses • Alternatives

17. Divergences: longer negotiating period • ECOWAS: considering the challenges ahead, the level of divergencies and stakes, considers necessary to postpone the 2007 deadline • EU: 2007 deadline is mandatory and non-negotiable, a bad political sign to WTO members, and postponement unnecessary

18. Divergencies: a new waiver at WTO • Some ACPs: favourable to a new WTO waiver to give time to negotiations and avoid a legal vacuum • EU: against a new waiver, especially because of the cost entailed, which would damage also ACPs; e.g. waiver obtained in Doha costed the Eu a tariff quota of 400 000 tons of tune to Thailand, Philippines and Indonesia.

19. Divergencies: what if? “There will be no more, no less than standard GSP” Commissioner Mandelson, JMTC, March 2007 “Failure to conclude EPAs by 1st Jan 2008 does not absolve the EC of its Cotonou obligations to provide preferential treatment on equivalent terms to imports from ACP non-LDCs”. Legal opinion, Commonwealth Secretariat, March 2007

20. Divergencies: role of Parlamentarians “We will include clauses to ensure for temporary entry into force of EPAs pending ratification by national parliaments. I hope you can reciprocate in doing this”. Commissioner Mandelson, JMTC, March 2007

21. Alternatives: Art 37.6 of Cotonou “In 2004, the [European] Community will assess the situation of the non-LDC which, after consultations with the Community decide that they are not in a position to enter into economic partnership agreements 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 with WTO rules.”

22. Alternatives: GSP, GSP+, EBA-type EBA-expanded Unilateral Non contractual Non reciprocal Coverage: Cotonou + Need to extend to low income countries RoO still a barrier GSP/GSP+ Unilateral Non contractual Non reciprocal Coverage: Cotonou - = Governance criteria WTO compatibility ?

23. Alternatives:GSP and GSP+ Source: Oxfam, 2007. Comparison of Cotonou, GSP and GSP+: excluding bananas and sugar

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