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EPAs and their impacts on ACP agriculture and development

EPAs and their impacts on ACP agriculture and development. Anne Wagner wagner@gret.org. Cotonou Agreement. A significant change in EU-ACP relations. From Lomé to Cotonou. A radical change in 2000 Lomé Convention an Aid section, the EDF (15 bn €/5 years)

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EPAs and their impacts on ACP agriculture and development

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  1. EPAs and their impacts on ACP agriculture and development Anne Wagner wagner@gret.org FAO Seminar- Riga, 05-06 June 2006

  2. Cotonou Agreement A significant change in EU-ACP relations FAO Seminar- Riga, 05-06 June 2006

  3. From Lomé to Cotonou • A radical change in 2000 • Lomé Convention • an Aid section, the EDF (15 bn €/5 years) • a commercial section, based on non-reciprocal commercial preferences • 4 product specific protocols • banana, sugar, meat and rum FAO Seminar- Riga, 05-06 June 2006

  4. Reasons for change • WTO non compatible • discriminatory and non reciprocal • Contrary to MFN clause • Advantages given to one partner must be given to all • 2 exceptions • concessions to all LDCS or to all DCs • or reciprocal concessions in the framework of a FTA (GATT art. 24 ) • EU obliged to ask for a waiver from WTO FAO Seminar- Riga, 05-06 June 2006

  5. A mixed outcome for Lomé preferences • A mixed outcome • A decrease of the share of imports originating from ACP on the EU market (from 7 in 1976 to 3 % in 2003) • Exports from ACP that remain very concentrated on primary products (ex: Burkina Faso) • Exports from ACP very dependant on EU market • Supply side structural constraints • Some individual success stories (Mauritius, lichee from Madagascar, …) FAO Seminar- Riga, 05-06 June 2006

  6. The Cotonou Agreement • Introduction of Economic Partnership Agreements (EPAs) • Reciprocity : ACP markets opened to european products, but asymmetry • EU opens at 100 % • ACP open at 80 % • Negotiation by regional groupings (6), to encourage regional integration • On a voluntary basis • A new Aid system • Same amounts (15 bn €) • New mechanisms, not yet defined • Probably linked to EPAs FAO Seminar- Riga, 05-06 June 2006

  7. If no EPA • Different options depending if LDC or not • Non LDC : return to GSP • LDC : EBA Initiative (Everything but Arms) • Consequence: not in interests of LDCs and risk of regional destabilisation • Probable consequences on aid mechanisms, not yet fixed FAO Seminar- Riga, 05-06 June 2006

  8. Calendar • Beginning of EPAs : 1st January 2008 • … implementation in a 12 year period • 2000-08 : preparation period • until end 2003 : Phase 1 at all ACP level • since 2004 : regional negotiations, specific to each EPA FAO Seminar- Riga, 05-06 June 2006

  9. Consequences for ACP What impacts on agriculture sectors and development of those regions? FAO Seminar- Riga, 05-06 June 2006

  10. Impacts of regional integration • Will a larger market enable economies of scale? • Yes, if removal of non tariff barriers (infrastructure, administrative) • But: • Danger of an accelerated integration process, risk that current processes are destabilized • Increase of inequalities between costal countries and land-locked countries • Risk of trade diversion FAO Seminar- Riga, 05-06 June 2006

  11. Market opening to european products (1/4) • Tariff removal: fiscal losses • Between 5 and 10% of fiscal incomes for West African States • Less public investment • Implementation of a new tax system • but problem of perception • VAT : effect on consumers FAO Seminar- Riga, 05-06 June 2006

  12. Market opening to european products (2/4) • Increased competition on local products: • Average increase of 15% for imports into W Africa • Stronger impact on certain products, when direct competition on local production • Sensitive products : meat, milk, wheat flour, rice, potatoes, onions, sugar, tomatoes, oils… FAO Seminar- Riga, 05-06 June 2006

  13. Market opening to european products (3/4) • Some European products that are supported by CAP • Cereals • Direct tranfers to producer • Export subsidies: removed (decrease of internal european price), and used again beginning 2005 (€/$ parity) • Milk • High internal price (production quotas) • Export subsidies for milk powder • Tomatoes • Direct transfers to producer for canning • Export subsidies for tomato concentrate • Sugar: • Current reform process • Chicken meat: • dumping FAO Seminar- Riga, 05-06 June 2006

  14. Market opening to european products (4/4) • Threat for ACP agro-processing sector • Decrease of input price • But import competition for processed products • More fiscal pressure on the formal sector • Advantage for consumers • Decrease of final consumer price, BUT if intermediaries DON’T transmit the decrease FAO Seminar- Riga, 05-06 June 2006

  15. Fast liberalization not advised • Fast liberalization not advised: • Incremental • Protection of certain products, among them agro-processed ones • CET level: • Considered as too low, should be increased and maintained until 2020 FAO Seminar- Riga, 05-06 June 2006

  16. Ex: debate on WAEMU CET • Applied by WAEMU since 01/01/2000 • 4 levels : 0%, 5%, 10%, 20% • Insufficient to protect agriculture production • Revision demanded: • by farmer’s unions first ; • Then by governments • But without success FAO Seminar- Riga, 05-06 June 2006

  17. Access to european market (1/2) • Few new opportunities for LDCs, because EBA • Non-LDCs : removal of remaining tariffs (mainly processed products) • But : • Compliance to sanitary norms and standards • Structural supply constraints • Competition with other countries on european market • Danger of preference erosion if no EPA • Ex: CEMAC FAO Seminar- Riga, 05-06 June 2006

  18. Access to european market (2/2) • Risk of regional desequilibrium: • Favorable to costal countries • What consequences on natural ressources? • What consequences on development modell? FAO Seminar- Riga, 05-06 June 2006

  19. Recommendations • Capacity building • Compensation for fiscal losses • Negociatiation of commercial agreements that enable development of agriculture and exports FAO Seminar- Riga, 05-06 June 2006

  20. Increase political and productive capacity (1/2) • Capacity of States, to implement necessary reforms • Customs and administrative rules • New tax system • Transport and communication infrastructures • At regional level • Coordination between members • Sectoral policies • R&D, training, promote industrial development… • Investment regulation FAO Seminar- Riga, 05-06 June 2006

  21. Increase political and productive capacity (2/2) • Support civil society stakeholders • Develop exports • Support competitiveness • Training for economic stakeholders (knowledge of european markets) • Standards and norms =>EU must guarantee sufficient and unconditional aid FAO Seminar- Riga, 05-06 June 2006

  22. Compensate for fiscal losses • By the EU, more important for LDCs • Finance improvement of production capacity • additional to existing funds FAO Seminar- Riga, 05-06 June 2006

  23. Trade dimension • Market opening to european products • Exclude sensitive products (e.g. meats, vegetables, wheat flour, oils) • Incremental • Room for manœuvre in EPA must not be more restrictive than in WTO (SP/SSM), on the contrary • Exports • Loosening of norms (feasible ?) and rules of origin FAO Seminar- Riga, 05-06 June 2006

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