Workshop on PACP EPA Market Access Offers

1. Workshop on PACP EPA Market Access Offers 12-13 August 2010 Shangri-La's Fijian Resort Sigatoka, Fiji

2. Outline • Background • PACP modalities • EC requirements • GATT Article XXIV and its interpretation • Developments in other ACP regions • The June 2010 Workshop • The Way Forward

3. Background ACP States and the EC agreed to negotiate the EPA under the CA (Art. 36.1). Negotiations commenced in September 2002 and the EPAs were supposed to enter into force by 1 January 2008 (Art. 37.1 CA). ACP countries had to move from non-reciprocity to reciprocity: GATT Art. XXIV. PACP demands included lower SAT, improved RoO, policy space, DFQF, NTBs, Development Assistance. EC offer: DFQF + improved RoOi.e.global sourcing for some fisheries products (HS heading 1604/1605). LDCs have EBA which provides DFQF market access on all products except arms and ammunitions but RoO are stringent. Non-LDCs that did not initial EPAs have been relegated to the GSP contrary to Art. 37.6 of the CA which requires the EU to provide alternatives to EPAs extending equivalent access.

4. PACP Modalities • Modalities for Trade in Goods were originally agreed to by PACP Trade Ministers at their meeting in Nadi in May 2006 and subsequently revised in Port Vila in August 2007. • Ministers agreed that the modalities should minimise revenue loss and protect domestic industries. • Key principles that were agreed to by the PACPS include the following: • Optional participation by individual PACPS in the trade in goods component of the EPA • The agreement will only govern bilateral trade (i.e. trade between the individual PACP and the EU) • PACPS are to liberalise less than EU - asymmetry in commitments • Maximum flexibility on SAT • Special and differential treatment for LDCs and SIS

5. Staging categories The base rate will be applied to MFN import duties as of [XX Month Year], with staging categories as follows: • Category A: Duties eliminated on entry into force of the EPA • Category B: Duties eliminated after Year [5] • Category C: Duties eliminated after Year [10] • Category D: Duties eliminated after Year [15] • Category E: Duties eliminated after Year [20] • Category F: Duties eliminated after Year [25] (LDC/SIS only) • Category G: Products not subject to duty reductions

6. SAT • There is no agreement at the WTO on SAT benchmarks • Two types of definitions and measures for SAT are most commonly discussed: • share of the value of trade between parties to the FTA: • this approach is historically preferred by a number of countries (including by EU) • often calculated as the percentage of the value of total two-way trade between parties • common benchmark  liberalise ~ 90% of total two-way trade. • percentage of tariff lines: • increasingly common usage e.g. Australia defines SAT at 95% @ 6 digit level • ACP WTO proposal – less than 80% and long transition periods -25yrs

7. SAT Precedents: • the Thailand-Australia FTA provides a transitional period of 20 years for Thailand • the Australia-U.S. FTA provides a transitional period of 18 years for U.S • the Canada-Chile FTA provides 18 years to Chile • the U.S. – Morocco FTA provides 25 years for Morocco (2006) • the FTA between European Free Trade Area (EFTA) and Egypt, allows Egypt to exclude 25.3% of its value of trade with Switzerland from liberalization (2007) • The Comprehensive Economic Cooperation Agreement between India and Singapore that entered into force on 1 August 2005, allowed India to maintain duties on 24.7% of trade with Singapore at the end of the implementation period • NB: the bulk of trade is liberalised within the first 10 years.

8. SAT • ¾ of FTAs reviewed in the CRTA between October 2008 and October 2009 were implemented within 10 years. • However, there is considerable variation in the exceptional cases, which exceeded 10 years. • About 14.5% of FTAs liberalised trade over 15 years.

9. SAT • Article 34(4) of CPA provides that:“Economic and trade cooperation shall be implemented in full conformity with the provisions of the WTO including special and differential treatment taking account of the Parties’ mutual interests and their respective levels of development”. • Article 35(3) also provides that: Economic and trade cooperation shall take account of the different needs and levels of development of the ACP countries and regions. In this context the Parties reaffirm their attachment to ensuring special and differential treatment for all ACP countries and to maintaining special treatment for ACP LDCs and to taking due account of the vulnerability of small landlocked and island countries. • Article 37(7) provides that: “Negotiations will therefore be as flexible as possible in establishing the duration of a sufficient transitional period the final product coverage taking into account sensitive sectors and the degree of asymmetry in terms of timetable for tariff dismantlement while remaining in conformity with WTO rules then prevailing”. • WTO negotiations on RTAs-para 29

10. EC’s Earlier Position • A slide from a November 2004 presentation by Claude Maerten, Head of Unit DG Trade entitled ‘Economic Partnership Agreements: A new approach to ACP-EU economic and trade cooperation’

11. Offers submitted in 2007 • About 8/9 offers were submitted in 2007 based on the regional offer approach (i.e., a combined offer where all the offers together would result in 80% trade liberalisation which is what the EC argued was required to meet the SAT requirement under Article XXIV of the GATT). • The offers did not meet the EC’s “laughing test” • EC wanted PACPS to liberalise at least 80% of their trade (value and tariff lines) over 15 years, with the bulk of liberalisation taking place within the first 10 years. • Only PNG and Fiji submitted offers that satisfied the EC’s interpretation of SAT requirements.

12. Draft Goods Offers Submitted in 2009 • 4 PACPS submitted revised offers • LDCs and SIS proposed to liberalise 70% of their trade over 25 years and developing countries proposed to liberalise 75% of their trade (by value and tariff lines) over 20 years • The offers were conditional upon: • satisfactory progress on contentious issues including the definition of SAT, improved RoO on fresh and frozen fish (0304 and 0305), export taxes, infant industry, etc... • recent changes in tariff rates-5 year moratorium? • consultations with the US (FAS); and • The PACPS also reserved the right to amend or withdraw any portion of their offers at any time.

13. Developments in ACP regions • 36/78 ACP States initialed/signed IAs or full EPAs • Central Africa: 1/8 (Cameroon signed) • EAC: 5/5 initialed • ESA: 6/11-initialed and only 4 signed in August 2009. • ECOWAS: 2/15 (Ghana and Cote d’Ivore) • SADC: 5/7 initialed -4 signed IA • PACP:2/14-initialed and signed IA • CARIFORUM: 15/15 signed

14. Developments in ACP regions • Of the 78 ACP countries, only 36 have either initialled or signed the Interim or full EPAs. • All the 15 CARIFORUM members signed the full EPA • However, only 19 out of 47 African countries that are engaged in EPAs initialled the Interim EPA and only 10 out of 19 signed the Interim EPA. The other 9 African countries have not yet signed because they want the contentious issues to be resolved first. • In the Pacific, only Papua New Guinea and Fiji initialled the Interim EPA in 2007 and signed the Agreement in 2009 in order to avoid market disruption, mainly for tuna and sugar.

15. Central Africa:71% of its trade with the EU • West Africa: 69% of its trade with the EU • The East African Community and CARIFORUM were given a transitional period of more than 20 years. The EAC does not have to remove any agreed common tariffs during the first six years. • Cameroon, Zambia and Zimbabwe were also given a transitional period of up to 20 years.

16. ESA • Contentious issues: export taxes, quantitative restrictions, infant industries, definition of SAT and timeframes for tariff liberalization for LDCs, MFN, special agricultural safeguards, rules of origin, and modification of tariffs. • Resolved: standstill, modifications of tariff quantitative restrictions and infant industries. • 6 initialed but only 4 signed because of disagreement over contentious issues

17. ESA • Basket I:EC was prepared to provide some concessions on export taxes, quantitative restrictions, infant industries and standstill provisions • Basket II: issues which needed more technical work to give an indication of what movement could be possible in future e.g. rules of origin and agricultural safeguards. • Basket III: issues for which no agreement or movement is possible and these include MFN, SAT and timeframes. EC requested further detailed presentations from ESA states on a case by case basis to enable them to consult its member states to reconsider its position on these issues

18. EAC No signature until the following issues are resolved: • the Development Chapter • Lock in mechanism • MFN

19. SADC • Botswana, Lesotho, Swaziland, Mozambique signed in June 2009. • Angola, Namibia and South Africa refused. • There are similar divisions on services and trade-related issues

21. The Legal Text and the Offer • Classification will be based on the HS. • Scope: IEPA chapters 1-97, CA=all goods. • Article XXIV Applies to export taxes? • Standstill • Other contentious issues? • 6 digit or 8 digit?

22. June 2010 Outcomes (i) Finalise the technical verification of 2007 HS conversions and verify whether the transposed data (2006-2008) was allocated to appropriate subheadings and whether the data tool has accurate information. This information was to be submitted to the Secretariat by 30 June 2010; (ii) Request the Secretariat to provide further assistance to FSM and Solomon Islands on HS conversions and transpositions; (iii) Note that in September 2009, the EC rejected PACP offers liberalising 70-75% of trade over 20-25 years for developing countries and SIS respectively. Instead, the EC wanted PACPS to liberalise 80% of their trade by value and tariff lines over a period of 15 years with a substantial portion (50%) being liberalised over the first 10 years; (iv) Prepare offers taking into account the developments on SAT in other ACP regions; (v) identify/review the contentious issues that the seven PACPS wanted resolved before agreeing to submit a final offer and that the list of contentious issues be submitted to the Secretariat for technical review no later than 15 July; and (vi) Prepare draft offers based on recent trade data (2006-2008) and the 2007 HS and submit them to the Secretariat for technical review no later than 15 July. Extended to 30 July.

23. Recommendations PACPS are requested to: • Agree on common benchmarks for SAT and transitional periods taking into account the developments in other regions; • Ensure that the contentious issues in the legal text are resolved before the PACPS that are interested in participating in trade in goods finalise their offers; • Urge the PACPS that are participating in the trade in goods market access component to inform the Secretariat whether they want to submit their offers in the context of the Interim Agreement or the full EPA, taking into account the fact that the EU indicated that flexibilities on contentious issues will only be considered in the full EPA and not in the Interim EPA; • Urge those PACPS that are participating in trade in goods to finalise their market access offers and submit their offers to the Secretariat for onward submission to the EU, no later than 03 September 2010.