Trade Negotiations Insights • Volume 7 • Number 10 • December 2008

EPA negotiations update

by Melissa Julian, ECDPM

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EU Member States and Commissioner Ashton committed to flexibility

Positive feedback has characterized the first meeting between African, Caribbean, and Pacific (ACP) Ambassadors and the recently appointed European Commissioner for Trade, Catherine Ashton, on 4 December 2008. The ACP representatives expressed appreciation for Ashton’s willingness and availability to listen to their views on the Economic Partnership Agreements (EPAs) and welcomed her commitment to flexibility in the negotiations. During the meeting, several Ambassadors requested the Commission react positively to specific contentious issues, such as the removal of commitments in the interim EPAs (IEPAs) that are not required for WTO compatibility.

On a less positive note, the ACP Ambassadors learned that their collective request for a high-level meeting between a representative group for the ACP and several EU Member States will not be held. The meeting, which was intended to be organized in the margins of the next EU Summit scheduled for 11-12 December 2008, has been called off on account of the unavailability of the European Commission President, Jose Manuel Barroso. This decision came despite EU Member States request that the European Commission respond positively to the meeting.

European Union Member States also appealed to Commissioner Ashton to account for the ACP’s political decisions, development priorities, and administrative capacities in the context of EPA negotiations. Members encouraged Ashton to show all possible WTO-compatible flexibility and pragmatism in order to swiftly sign IEPAs that serve the development needs of ACP countries. They have also requested that the EU exercise flexibility with implementing changes from the interim into full EPAs that could prompt other regions to enter into the agreement, thereby strengthening regional integration.

EU Ministers also called for the enhancement of dialogues on regional ACP Aid for Trade (AfT) packages and for the European Commission and EU Member States to present the overall framework for their initiatives in early 2009. Commissioner Ashton reportedly informed EU Development Council Ministers that the European Commission will examine any issues in IEPAs that partners want to re-consider as full EPAs discussions advance. ACP regions should also be provided more time as needed. It remains to be seen whether these commitments will trickle down to technical level negotiations.

Central Africa postpones negotiations to continue technical preparations

Central African EPA negotiations with the European Commission initially scheduled for end October and mid-December 2008, have been postponed to January 2009. The delay is reportedly to allow Central Africa time for further internal coordination.

The Cameroon IEPA signing was also postponed from 27 November 2008 to a yet to be determined date. There is speculation that Cameroon is re-thinking signature following the European Commission’s decision to negotiate a free trade agreement (FTA) with Central American countries that the ACP group believes poses a serious threat to their banana preferences. The ACP has argued that this contradicts the objectives of the EPAs. (1) The EU’s decision to advance the FTA follows a recent WTO ruling that determined the EU tariffs on imported bananas was discriminating Latin American producers. (2)

Côte d’Ivoire signs IEPA; West Africa advances EPA and internal CET negotiations

Representing the first interim agreement between the EU and an African trade partner, an IEPA between the EU and Côte d’Ivoire was signed on 26 November 2008. (3) The agreement is now being notified to the WTO. Ghana is also scheduled to sign an IEPA with the EU in the coming weeks. The objective for both sides remains to conclude a comprehensive, regional EPA with all members of West Africa. The EU-Côte d’Ivoire and Ghana IEPAs appears, however, to be causing some fears of disintegration in West Africa.

West African Ministers continued to work towards an early 2009 goal for tabling a regional list of sensitive products and a market access offer in goods to the EU in the ECOWAS Council of Ministers meeting in Ouagadougou on 27 November 2008. (4) Ministers encouraged negotiators to continue their efforts in order to secure beneficial EPAs and to bring issues that cannot be resolved at a technical level to their attention.

Ministers also focused on agreeing on a common structure for the ECOWAS Common External Tariff (CET), which includes the creation of a fifth tariff band at a 35% rate for certain products from the region. This is in addition to the existing four bands of 0%, 5%, 10% and 20%. Nigeria, with 70% of its workforce engaged in the agricultural sector, proposed the fifth higher band of tariffs to protect infant productive industries with prospects for industrialization. It is intended that, in the case of Nigeria, this will help promote the diversification of economies.

During the meeting, Ministers also requested the ECOWAS and UEMOA Commissions accelerate the process of re-classifying products into tariff band categories and on safeguard measures to complement the CET. In addition, they have asked that member states validate the regional list of sensitive products. Ministers noted that the CET will be an absolute priority for the region and a prerequisite for the finalization of any market access offer to the European Commission.

European and West African negotiators made progress on a number of issues in joint EPA texts during technical and senior official level meetings in late October 2008. (5) Specifically, advancements were made to a near completion of joint EPA texts on trade in goods, sanitary and phytosanitary rules, technical barriers to trade, and trade facilitation. The meetings also focused on finding solutions to the remaining divergences in the joint agreement. The European Commission put forward new proposals with regard to transitional periods and fiscal reform for regional levies and standstill, and MFN treatment on export taxes. No progress was made, however, on deadlock issues such as West Africa’s request for commitments in the EPA texts by the European Commission to remove trade distorting agricultural subsidies and to pledge continued EPA-related assistance beyond the 2020 expiry of the Cotonou Agreement.

West Africa also tabled texts in relation to trade-related issues and theyrequested capacity building support, but no legal commitments were made. The European Commission reportedly requested that the region legally commit to these issues and to services as well.

SADC Member States seek common positions ahead of negotiations with the EU

Continuing discussions within the region on how to move forward both in the negotiations and with the European Commission on outstanding market access offers have postponed the signing of an IEPA between the Southern African Development Community (SADC) and the EU. Initially scheduled for 31 December 2008, the signing has now been moved to early 2009. Negotiations on a comprehensive EPA were also postponed to January 2009. Southern Africa Customs Union (SACU) Ministers are meeting as TNI goes to press to try to reach a consensus on the EPA in the face of huge tensions within the bloc.

Botswana, Lesotho, Swaziland (BLS), and the European Commission, are pressing to sign the IEPA now so that it can be notified to the WTO and negotiations towards a comprehensive, regional EPA can advance. South Africa (and Angola and Namibia), however, maintain that changes are still needed to ensure policy space is maintained. If BLS signs against the wishes of other members, this will result in two trade regimes operating within SACU. Many argue that regional integration could be thwarted with serious implications for development, integration, trade arrangements, political stability, and, ultimately, integration into the global economy.

SADC and EU negotiators, meeting in November 2008, agreed to exchange improved market access offers by mid-December. During these discussions, Rules of Origin, services and investments, sustainable development, and SADC’s concerns with the IEPA text were also raised. Southern Africa sources indicate that negotiations are far from concluded and that divergence in services, investment, and market access issues persist. With regard to market access issues, no conclusions were reached with the European Commission, which indicated that, with the removal of South Africa from the text, cumulation with them would not be possible.

East and Southern Africa and the European Commission discuss way forward

The end-December 2008 East and Southern Africa (ESA)-EC EPA negotiating meetings have been postponed to January 2009. ESA senior officials and the ESA Council were being held as TNI goes to press. The launch of the COMESA Customs Union will take place during the first half of 2009, according to the COMESA Secretary General. (6)

European and ESA negotiators met in November 2008 to discuss the way forward on comprehensive, regional EPAs. The EU encouraged the region to adopt a regional preference provision for market access offers in the EPA so as to boost regional integration. ESA sources indicate that with regard to the definition of ‘Substantially all Trade,’ both sides have agreed to work on the basis of specific liberalization scenarios that consider liberalization of the ESA market in terms of potential revenue losses, sectoral sensitivities, infant industries, capacity building, and provisional support that will enable the ESA States to undertake reforms where applicable. ESA has called for developing countries to be excluded from the coverage of the European Commission’s proposed MFN clause in the EPA. Here, the European Commission committed to providing a new draft text on the issue, which could serve as a basis for more productive political discussions. Both parties agreed that there is still substantial work to be done, which cannot be resolved before the December 2008 deadline. It was agreed that a roadmap would be established as a guide for continuing negotiations in 2009.

Progress among East African and European Commission experts

EU and East African Community (EAC) technical negotiators meetings in November 2008 (7) agreed to all technical andclerical errors and omissions to the initialled IEPA text. Thiswill accompany the revised EAC market access offer for eventual final signature. EAC also put forward proposals to amend the IEPA text in the negotiations towards a full EPA. Whether the European Commission will honour these requests or maintain their positions taken throughout the IEPA negotiations remains to be seen.

Two issues remain outstanding in relation to the full EPA: EAC’s proposal to allow for imposition of a duty or export tax in emergency cases; and the EAC ’s call to raise the threshold for the definition of a major trading economy in the MFN clause exports in order to promote South–South trade. The European Commission maintains that the current exclusion of ACP and African countries and regions from the MFN clause is sufficient for the regional integration needs. They argue that increasing the percentage would allow European Commission competitors to benefit from better trading conditions than the EU in the region.

While discussions on customs and trade facilitation, and sanitary and phytosantiary measures, were finalized, no agreement was reached on development issues. This includes the EAC’s proposal for a European Commission commitment to provide additional financial support, the establishment of an EPA fund, and the text on EPA adjustment cost cooperation needs. The EAC will submit a draft text on an EAC-European Commission development cooperation strategy by the end of January 2009.

Caribbean focuses on EPA implementation

EPA implementation was the focus of the CARIFORUM Council of Ministers that took place in November just ahead of the agreement’s imminent provisional application. (8) CARIFORUM Secretary General, Edwin Carrington, said during the meeting that leadership was necessary to guide the enormous amount of work to be done. Carrington noted the need for more regional integration and cooperation aimed at enhancing the region’s productivity and competitiveness at the government, private sector, and civil society levels. (9)

Caribbean sources indicate that the CARICOM Secretariat is seeking to become a recognised actor responsible for coordinating regional implementation efforts and provision of EPA development funds. But there are concerns that there is a lack of capacity in the Secretariat. As such, CARIFORUM countries are considering alternatives. The regional coordinating mandate could be granted to a reinforced Caribbean Regional Negotiating Machinery (CRNM), to a new Caribbean Regional Implementation Machinery (CRIM), or to the existing Caribbean Export Development Agency (CEDA). The Council of Ministers will meet no later than January 2009 to consider this issue.

The European Commission notified the WTO of the CARIFORUM-EU EPA on 22 October 2008. (10)

Pacific stress need for genuine EU flexibility to conclude EPAs

The Pacific ACP grouping (PACP) once again stressed that the EPA must reflect the unique circumstances of the region in order for negotiations to move forward. (11) This sentiment was reiterated by the Papua New Guinea Deputy Prime Minister during a bi-annual meeting of the ACP-EU Joint Parliamentary Assembly held in Papua New Guinea in November 2008. (12) As argued by PACPs negotiators, despite exhaustive efforts on their part over the past several years, there has been no agreement with the European Commission on a trade in services regime that would enable the PACPs to be genuine service providers in the EU market in line with their capacities and levels of development. The PACPs are hopeful trade in services will form an important part of the EPA in the years to come. In order to retain the option for inclusion of services in an EPA, the PACPs have proposed inserting a rendezvous clause for services negotiations that would see the two sides return to detailed trade in services negotiations in a few years. Because of the constraints faced by the region, they are proposing that the comprehensive PACP-European Commission EPA focus on trade in goods, fisheries, development cooperation, and dispute settlement at this stage.

The Deputy Prime Minister further stated that while his country and Fiji both initialled interim EPAs in late 2007 to protect market access for exports of tuna and sugar to Europe, the countries are unhappy with the terms of the agreements. Pacific Trade Ministers informed the European Commission that rules on export taxes, infant industry and the most favoured nation clause contained in the interim EPAs should be changed.

Glyn Ford, the European Parliament Member responsible for reporting on the Fiji and Papua New Guinea IEPAs, said if the European Commission cannot accept the Pacific’s basis for further negotiation, he would recommend the European Parliament vote “no” to the interim agreement. In a written reply, the European Commission recognised the uniqueness of the Pacific region and reiterated that the EU’s aim is to agree a comprehensive EPA. The Commission believes that services play an important role in the development of Pacific countries and that discussion should continue on these important issues in the framework of the EPA. (13)

Other key development issues raised by Mr. Ford included allowing export taxes, protecting infant industries, safeguarding traditional knowledge, increasing the transparency of government procurement, and extending length of stay for working visas. For the Pacfic—and other negotiating regions—it is encouraging that these development-oriented issues are being discussed at the highest-levels in Europe. Any solutions that are reached will set a precedent on which to base future negotiations on development matters in other ACP regions.

Directly questioning the European Development Commissioner Louis Michel on his position, Mr Ford asked: “Does the Commissioner agree…that allowing for the size and remoteness of the region’s Members…that the Commission’s approach must include accessible, viable alternatives that guarantee market access for those countries not wishing to commit to the final EPA?” The Commissioner replied with a simple “Yes.”

According to regional sources it is unlikely negotiations will conclude in 2008.

For a longer version of this update see: www.acp-eu-trade.org/newsletter/tni.phpin

Notes
1. ACP Banana Group Press Release www.acp.int/en/coa/bananaconcern.suriname08.html
2. Report on WTO banana ruling www.javno.com/en/economy/clanak.php?id=208045
3. European Commission press release on EU-Côte d’Ivoire IEPA on 26 November www.trade.ec.europa.eu/doclib/docs/2008/november/tradoc_141437.pdf Background Note www.trade.ec.europa.eu/doclib/docs/2008/november/tradoc_141434.pdf and
Guardian Press Report www.guardian.co.uk/business/feedarticle/8085968
5. European Commission Press release on EU-West Africa EPA negotiations 20-24 October 2008
www.acp-eu-trade.org/library/library_detail.php?doc_language=en&library_detail_id=4746
7. EPA Flash News, European Commission, 17 November 2008 www.acp-eu-trade.org/library/library_detail.php?doc_language=en&library_detail_id=4761
8. Press release from CARIFORUM Council of Ministers, 26 November 2008
www.caricom.org/jsp/pressreleases/pres360_08.jsp
9. CARIFORUM SG to CARIFORUM Council of Ministers on EPAs. 26.11.08 www.caricom.org/jsp/pressreleases/pres361_08.jsp
11. Papua New Guinea Prime Minister to the ACP EU Joint Parliamentary Assembly 25 November 2008
www.europarl.europa.eu/intcoop/acp/60_16/pdf/temu_speech.pdf
12. ACP-EU Joint Parliamentary Assembly (Papua New Guinea 24-28 November 2008) Website
www.europarl.europa.eu/intcoop/acp/60_16/default_en.htm
13. Written reply from the EC to question from Mr. Ford on EPAs
www.europarl.europa.eu/intcoop/acp/60_16/pdf/rqo_com_en.pdf