I found this while going through some files on my computer. I cannot remember having seen much of it in the media, so it might be quite interesting in the wake of the Interim EPA signed by Namibia late last year:

THE EU’S EPA AGENDA: ASSISTANCE OR INSISTENCE?

Wallie Roux
(wallie@mweb.com.na)

Paper1 presented at the Hanns Seidel Foundation
Windhoek
15 August 2007

Where did it all start?

The origins of the current market access dilemma for the ACP countries could be found in the recent history, dating back only a few years to the signing of the Cotonou Agreement between the EU and the ACP in 2000.

The Cotonou Agreement marked the dawning of the post-Lomé dispensation that would transfer EU-ACP trade from a preferential to a WTO compatible regime. The latter is precisely where the developing countries had (and still have) problems regarding the non-accommodation of their specific needs.

Luckily in 2001, with the launch of the WTO’s Doha Round, the developing countries were promised a ‘Development Round’ to accommodate their needs. The non-LDC ACP countries especially welcomed this since the Round was to be concluded by early 2005, leaving sufficient time before the expiring of the ACP WTO waiver. This was the one and last chance to rectify multilateral discrepancies to eventually pave the way for their post-Cotonou negotiations with the EU.

As an example, on 28 April 2004 the ACP countries made a submission on Regional Trade Agreements2 to address the development and, special and differential treatment aspects in GATT Art XXIV (vs GATS Art V) and the Enabling Clause. (Should these provisions have been accommodated in the WTO rules, the ACP countries would not have been so reluctant to sign EPAs.)

Cotonou Art 39 clearly states that the EU and the ACP agreed to closely cooperate in the WTO3 to:

further their common interests4;
improve EU market access for ACP products5; and
utilize flexibility in WTO rules to acknowledge the different levels of development in the ACP states and the difficulties they face to meet their obligations6.

Given the missed 2005 deadline, the stalemate in mid-2006 and the unsuccessful attempts to conclude the Doha Round to date, did the EU honour their part of Cotonou Art 39? Or do they need to honour their part of the Cotonou Agreement in the EPA negotiations in terms of Art 37.7 “… in conformity with the WTO rules then prevailing.” (emphasis added)? Where does this leave the non-LDC ACP countries in terms of the EPA negotiations seeing that their requests were not accommodated in the WTO rules?

Economic diversification

In October last year Mr Peter Mandelson7 said that “… after more than thirty years of bilateral trade with Europe, the ACP still exports a few basic commodities. Most of these basic commodities fetch lower prices than they did twenty years ago. The benefits of preferential access are eroding fast …”.

However, what he did not mention was that in order to qualify for these preferences only primary products (or commodities) could be exported – value-added products attract higher duties. He also omitted the influence of the CAP reforms on EU market prices, especially the resultant decline in real market prices of primary products or commodities.

Could this be the reason why the word ‘diversification’ only appears twice8 in the 100 Articles of the Cotonou Agreement and not once in the six Annexes?

End of 2007 deadline

There are exactly six months left till the notorious 31 December 2007 deadline when the WTO waiver for ACP preferential market access to the EU will expire. This waiver only covers trade in goods and not the comprehensive and all-inclusive post-Cotonou dispensation that is currently on the negotiating agenda.

If the focus from the beginning was only on a post-2007 dispensation in trade in goods, maybe the deadline wasn’t so improbable. However, compared to the timelines of other EU bilateral agreements, would it by any means be feasible to have comprehensive EPAs signed by year-end while realistically fulfilling the set objectives and reaching the set goals to the benefit of the ACP countries? In reality this scenario is too much in too little time.

But the ACP will be the losers again. The March 2007 issue of INSAT9 reported that according to the European Commission, GSP tariffs would automatically be imposed from 01 January 2008 on imports from ACP states that have not signed EPAs (and that the customs’ computers are already programmed to this effect)

SADC-EPA

Earlier this year South Africa became the eighth member of the SADC-EPA configuration, which now includes all the SACU members10, plus Mozambique, Angola and Tanzania (the so-called MAT countries). However, despite uniting the SACU countries, this in itself brings other negotiating challenges.

The EU’s recent DFQF offer for instance discriminates against South Africa’s market access in comparison to that of the rest of the SADC-EPA. Does the same rational mean that in reciprocal trade the SADC-EPA may also discriminate against EU countries in access to their own markets? Such new negotiating challenges make the attainment of the end-2007 deadline even more improbable.

What would thus be a likely scenario for the SADC-EPA regarding market access after 2007? South Africa would still have its TDCA with the EU. Lesotho and the MAT countries are all LDCs and could opt for the EU’s EBA preferences. However, Botswana, Namibia and Swaziland would have no legal agreement in this regard with the EU. How does this scenario then fit in with the acquis principle of Cotonou Art 37.7?

The next best option, the GSP, would for instance not benefit the beef exporting industries of these countries, because beef is not included under the GSP. Thus exports would have to take place under MFN tariffs, where the value of an export consignment would roughly equals the duties to be paid.

Given the likely post-2007 market access scenario, these countries would be forced into a system of dramatic conversion of their beef export industries - adherence to reigning market demands, building new marketing and distribution channels for the still to be found new customers, just to name a few. Taking into account the economics of scale in production capacities, these countries would be deprived of a much needed transition period to adapt to their post-Cotonou dispensation, which would in most likelihood enforce the rule of the jungle where only the fittest would survive.

The Southern African situation is unique in many ways. The EPA blueprint has already split the original 14-member SADC bloc. A further split into SACU would be disastrous for regional integration in Southern Africa.

Since the EPA negotiations are in the proverbial graveyard shift, it is time to face the realities of the situation and refrain from conditionalities that further complicate the situation. The Agreement that was signed on 23 June 2000 in Cotonou is an ACP-EU Partnership Agreement.

Did you know that the word partner/partnership appears 52 times in the 100 Articles of the Cotonou Agreement and nine times in the six Annexes? Statistically this is more than a representative example. Why then ignore this statistical fact in the EPA negotiations?

Acronyms

• ACP African, Caribbean and Pacific
• Art Article
• CAP Common Agricultural Policy
• DFQF Duty Free Quota Free
• EBA Everything But Arms
• EPA Economic Partnership Agreement
• EU European Union
• GATS General Agreement on Trade in Services
• GATT General Agreement on Tariffs and Trade
• GSP Generalized System of Preferences
• INSAT Inside Southern African Trade
• LDC Least Developed Country
• MAT Mozambique, Angola and Tanzania
• MFN Most Favoured Nation
• SADC Southern African Development Community
• SACU Southern African Customs Union
• TDCA Trade, Development and Cooperation Agreement
• WTO World Trade Organisation

References

• ACP-EU Partnership Agreement signed in Cotonou on 23 June 2000, Brussels: Courier, September 2000.
• Mandelson, Peter (2006), Address to the European Socialist Party Conference on Economic Partnership Agreements,
• ec.europa.eu/commission_barroso/Mandelson/speeches_articles/sppm123_en.htm
• Roux, Wallie (2006), SADC EPA Configuration: The truth, the whole truth and nothing but the truth (?),
• Stevens, Christopher (2007), After Cotonou: The EU’s GSP and Southern African Exports, Gaborone: Inside Southern African Trade, March 2007, Issue 8, Published by the Southern Africa Global Competitiveness Hub.
• WTO (2004), ‘Submission on Regional Trade Agreements’, TN/RL/W/155, 28 April, Geneva: World Trade Organisation.