Rules of Origin and the ACP Fisheries Trade with the EU

1. Rules of Origin and the ACP Fisheries Trade with the EU Liam Campling Department of Development Studies School of Oriental and African Studies University of London lc10@soas.ac.uk ACP Consultative Process on a Trade and Sustainable Development Approach to Negotiation of Fisheries under the EPA 22 – 24 January 2007, ACP House, Brussels Organised by the Commonwealth Secretariat with the support of DFID

2. What Are Rules of Origin For? Two purposes of preferential rules of origin • To ensure that preferences provide developmental benefits to recipient country • A tool of commercial policy on behalf of the preference giver EU rules of origin are a ‘ticket of entry’ for ACP fish products … and serve as a major barrier to market access and associated industry development

3. What Are Cotonou Rules of Origin for Fish? (i) • Wholly obtained fish based on ‘qualifying vessels’ • Qualifying vessels = • Registered & flagged in EU, ACP and/or OCT (EU territories) • Crew 50% nationals EU, ACP and/or OCT • 50% ownership by nationals or a company based in EU, ACP and/or OCT • Chartering (renting) permitted if EU fleet decline access

4. What Are Cotonou Rules of Origin for Fish? (ii) • Automatic derogations (exemptions for set quantities) for canned tuna and tuna loins • Full cumulation available among EU, ACP and/or OCT (i.e. their imports ‘qualify’ as part of production) • Diagonal cumulation with neighbouring (non-ACP) developing countries available to ACP … … but not always commercially useful (i.e. required inputs unavailable) or relevant (i.e. PACP) • Value tolerance 15% (per consignment) … but very rarely used in practice

5. Cotonou Wholly obtained based on ‘qualifying vessels’ Crew 50% nationals EU, ACP and/or OCT Charting permitted if EU DWF offered access Automatic and ‘specific’ derogations Bilateral cumulation with EU, ACP and/or OCT Diagonal cumulation with ‘neighbouring’ DCs Value tolerance 15% (ex-works) GSP Wholly obtained based on ‘qualifying vessels’ Crew 75% nationals EU and/or recipient No chartering No derogations bar ‘specific’ for LDCs Bilateral cumulation with EU Diagonal cumulation for SAARC, Andean, ASEAN Value tolerance 10% (ex-works) Cotonou and GSP RoO for Fish: differences

6. Fisheries Rules of Origin as Commercial Policy • EU distant water fleet (DWF) can charge premium on fish meeting rules of origin (RoO)  acts as a subsidy to DWF • Preferential access to ACP EEZs for EU DWF under Cotonou • EU processors able to source fish based on best market price  insulates them from ACP competition (i.e. flexibility of supply) • ‘Rules of origin are not a neutral instrument’ (EC official) In sum, EU fisheries RoO provide commercial benefit to the EU. Understanding this point is central to the success of proposed ACP reforms.

7. ACP EPA Negotiations and RoO Reform ‘On the Community side trade liberalisation shall build on the acquis and shall aim at improving current market access for the ACP countries through inter alia, a review of the rules of origin.’ Cotonou Agreement, Article 37, para 7

8. EU Fisheries RoO Reform: Three Methods A. Relaxing Cotonou RoOfor ‘originating fish’ • Taxud: 1) Delete crew condition; 2) Simplify ownership criteria; 3) Wholly originating orsubstantial transformation (i.e. 40% value addition) • ACP: Group of Experts recommendations (2005): 1) Catch secured in EEZ = originating; 2) End chartering commitment; 3) Delete crew condition

9. EU Fisheries RoO Reform: Three Methods B. Value Added Method (DG Taxud proposal) • 40% value to be added in recipient country (based on net production costs) • Price of ‘originating fish’ = value addition • Problematic for tuna processing because of the high cost of fish (especially loins) • Opposition from ACP and EUROTHON • Possible % reduction for fish products? • Possible combination with other methods such as change in tariff heading?

10. EU Fisheries RoO Reform: Three Methods C: Change in Tariff Heading Method • Product qualifies if there is a change in Harmonised System (HS) code at the 4-to-8-digit sub-heading • Change at 4-digit heading would suffice for fish • Canned/loined tuna would easily qualify (change in HS Chapter) • DG Taxud opposed to fillets/steaks/etc as ‘substantial transformation’

11. Change in Tariff Heading for Tuna

12. Summary of Key Points • Fisheries rules of origin a tool of EU commercial policy, but … … reform of fisheries rules of origin the primary mechanism to improve fish market access for almost all ACP exporters • ACP Group of Experts recommendation on EEZ as originating fish is a long-running contention, but … … EU historically opposed to this approach • Change in Tariff Heading method in interests of almost all ACP exporters of fish products, but … … likely to encounter resistance from EC and EU business interests (but such is the nature of trade negotiations)

13. Summary of Key Points • Likely EC position in EPAs = Value Added (VA) method: 1) Based upon two-year internal policy development (2003 Green Paper, 2004 Consultation outcomes, 2005 ‘Orientations for Future’, official outcome 2007?) 2) VA method in multiple non-EU preferential RoO 3) Would apply to all EU preferential schemes, thus ACP negotiators need to recognise wider political-economic context 4) ACP could consider a full-back position on fisheries (and other key sectors): e.g. an evidence-based estimation of a commercially appropriate VA percentage