News and Analysis • Volume 10 • Number 6 • September 2006
EPA Negotiations Complicated by Doha Collapse
Negotiations on a new trade relationship between the European Union and countries belonging to the African, Caribbean and Pacific (ACP) Group of States face new uncertainties due to the Doha Round delay.
Briefing the joint ACP-EU Parliamentary Assembly on 13 September on the current state of play of the negotiations for Economic Partnership Agreements (EPAs), the Chair of the ACP Subcommittee on Trade and Commodity Protocols Joseph Ma’ahanua told the audience that the high likelihood of the EPA negotiations concluding before the Doha Round does made it “extremely difficult to conclude WTOcompatible EPAs when WTO compatibility remains a moving target.”
WTO-compatibility is inscribed in the EPA negotiating mandate, which aims to replace the EU’s long-standing unilateral preferences for ACP exports with six regionallybased free trade areas. Least-developed ACP countries need not participate in EPAs, and will keep their duty-free access.
Current WTO rules – adopted when North-South trade agreements were virtually inexistent – require parties to regional free trade areas to eliminate duties and other restrictive regulations to commerce on ‘substantially all the trade’ between them. In April 2004, ACP countries submitted a paper to the Negotiating Group on Rules calling for special and differential treatment provisions to be added to Article XXIV of the GATT with regard to ‘asymmetrical’ free trade areas formed by developed and developing countries. Key points of the proposal were (i) more flexibility for developing countries in meeting the ‘substantially all the trade’ requirement in respect of trade and product coverage; (ii) interpreting the term ‘other restrictive regulations of commerce’ in a manner that allows the developing country parties to apply “contingency protection measures including safeguards and other non-tariff measures”; and (iii) extending the maximum transition period for developing countries to at least 18 years after the agreement’s entry into force.
The proposal aimed to ensure that ‘less than full reciprocity’ in commitments under the EPAs could not be challenged in the WTO. However, the rules negotiations at the WTO are now suspended together with other Doha Round issues, which leaves EPA negotiators without guidance as to whether EPAs “will end up being WTO-plus or WTO-minus and in either case whether this would mean a renegotiation or revision of EPAs when the Doha Round is concluded.” The EPA scheme is scheduled to enter into force on 1 January 2008.
ESA Obtains Trade Financing
Different EPA areas have repeatedly stressed the need for specific and additional financing for the EPA process to cover adjustment and other costs.
Eastern and Southern African (ESA) countries said on 28 September that a breakthrough was made in their EPA negotiations when the EU made a commitment to mobilise up to five billion euros in order to enhance trade within the region. The bulk of the money will be destined to infrastructure projects identified by ESA members, and at least some of it is likely to be counted by the EU as Aid for Trade spending. The negotiations are now expexted to focus on other areas. Both sides said they hoped to conclude the talks on schedule.
The ESA consists of four developing nations – Kenya, Mauritius, the Seychelles and Zimbabwe – and 12 least-developed countries (LDC’s) – Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Madagascar, Malawi, Rwanda, Sudan, Uganda and Zambia.
Criticisms and Counterclaims
On the eve of the EU-ESA meeting, the international development NGO Oxfam released a report, which called on the EU to “use the formal review of the EPAs process over the next few months to redirect negotiations onto a different path.” It charged that the EPAs as currently pursued would: force farmers and producers in many of the world’s poorest countries into direct and unfair competition with efficient and highly subsidised EU producers; undermine regional integration amongst ACP countries, and; cause substantial revenue losses to ACP governments due to tariff reductions on EU goods, as well as a loss of policy tools needed to support economic and social development. Oxfam also said the European Commission should drop its ambitions of having reciprocal market access with ACP countries, and stop insisting on the inclusion of competition policy, investment, and government procurement in the final agreement. WTO membership has already rejected these issues from the Doha Round negotiations, and most ACP negotiators have stressed that they are not ready to undertake new commitments in these areas.
In response, the EU Trade Directorate posted a press release on its website refuting much of the criticism. The document described EPAs as “broad agreements, helping build regional markets and diversify economies in the ACP regions and ultimately opening trade between the EU and these markets in a way that reflects regional sensitivities while integrating ACP economies into the global economy in a sustainable way.” DG Trade maintained that ACP tariff reduction was a joint decision, motivated in part by the experience of emerging Asian economies, where ‘progressive and targeted reduction’ of customs duties had benefited consumers and companies (via cheaper machinery, raw materials and parts for assembly) and made local products more competitive. DG Trade stressed that it had never proposed either a total elimination, or symmetry of commitments. It also denied proposing that the lowest applied rates of ACP states become the basis for a single new external tariff.
In addition, the document asserted that the transition period for ACP countries would be a ‘decade or more’ and would “maintain exceptions that reflect particular needs – exceptions that Peter Mandelson has said he will defend in the WTO if necessary.”