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

Is SPS the silver lining? Economic Partnership Agreements

by Martin Doherty

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Sanitary or phytosanitary protection (SPS) is regarded by many as the number one non-tariff barrier in international trade today. The rise in the prominence of SPS issues has been driven by an increasing level of concern regarding food safety among European and other consumers about the presence of chemicals and various additives in their food. This worry has been exacerbated by various food alarms (e.g. mad cow disease, Avian flu, etc.) and to a certain extent by the resultant action to tighten up and harmonise an EU food safety regime that had developed in a piecemeal fashion over 40 years.

SPS is a fundamental element of the negotiations on Economic Partnership Agreements (EPAs) under the Cotonou Agreement between the ACP regional groupings and the EU, as it directly affects ACP exporters’ ability to avail themselves of any opportunities that may arise. Of particular relevance is the requirement that all trade between the EPA partners is “reciprocal” and that consequently, ACP countries will lose the ability to protect their markets through tariff levels. Unless ACP sectors are able to deliver a level of food safety equivalent to their EU competitors then they will inevitably lose market share and potentially ownership of their domestic markets.

There are considerable issues that surround both the basic concept of EPAs and the nature and coverage of their provisions. Much of this focuses on the perceived negative aspects of these agreements. But, it is possible to also view them as an opportunity to alleviate some of the SPS barriers that have proved so difficult to successfully tackle for many ACP countries over the past decade.

Although the contents of each regional EPA may vary according to the negotiators skills and local circumstance, SPS constitutes a common element: that is, a basic requirement for the ACP signatories to have SPS mechanisms that provide a level of safety equivalent to that within the EU itself. Complementing this obligation, however, is a commitment by the EU to provide assistance (financial and technical) to enable the ACP countries to meet their obligations under the EPA.

It is in this formalised obligation/commitment that an opportunity lies for developing countries both to upgrade their existing SPS arrangements and to tackle some of the less obvious, but nonetheless damaging, SPS-related practices that have emerged from the EU’s (entirely legitimate) interpretation of the WTO/SPS Agreement.

This article looks at some ways the EPA can be used to identify and focus capacity building that not only protects current trading patterns, but also helps to develop new opportunities for entrepreneurs hindered by a lack of SPS-related support mechanisms. It is clear that maintenance of the status quo in relation to SPS and the current trading environment runs the risk that ACP-EU trade may not be able to benefit from the potential that the originators of Cotonou intended. However it is equally clear that with proper examination, the EPAs may represent much more opportunity for development within the ACP regions than many have yet realised. SPS can be viewed as a key element in making EPAs function as they were intended.

Restraints on interpretation of the WTO/SPS Agreement

The EU cannot be challenged on its right to protect its citizens from potentially harmful food. This is irrespective of whether countries that supply the food lack the capacity to meet the standard being established.

Attention must therefore be on the mechanics of the measure being required rather than on the basic principle. The SPS Agreement contains areas of ambiguity that allow the EU to introduce measures that, whilst not at variance with the wording of the Agreement, can have a result that may arguably be viewed as contrary to the underlying intention, i.e. not to interfere unnecessarily with international trade.

Two areas where scope exists for the inclusion of clarification and assistance within EPA discussions relate to:

Ambiguity 1

According to the SPS Agreement, members may adopt temporary, precautionary bans to prevent the introduction of risks when sufficient scientific evidence is absent. The problem here does not lie with this provision, but rather with how to remove the provision once it is triggered. The SPS Agreement is silent on the steps that a member country, which has lost international market access because trading partners have invoked this provision, must take.

Greater clarification is required in the SPS Agreement on how long is ‘temporary’ and on the quantity and type of scientific evidence that is deemed sufficient. The EPAs represent an opportunity for the introduction of greater certainty into what constitutes ‘temporary’ and on the quantity and nature of scientific evidence that is deemed ‘sufficient’. Scope certainly exists for the establishment of some formalised framework where actions on such temporary bans are handled more effectively through cooperation between both parties.

Ambiguity 2

The SPS Agreement sets a regulatory floor but not a ceiling. Members are committed to both the international harmonisation of SPS measures and the mutual recognition of measures employed by other members. With respect to mutual recognition, a member is committed, in principle, to granting equivalence to the SPS measures adopted by an exporting country “if the exporting Member objectively demonstrates to the importing Member that its measure achieve the importing Member’s appropriate level of sanitary or phytosanitary protection” (Article 4.1).

The problem is– provided that the national treatment provision is met– the Agreement is silent on limits for country regulations that are substantially above those of other member states. Therefore, while there is a minimum level of SPS measures that must be met, is there a maximum defining the point that importing member countries cannot legitimately expect potential exporting members to achieve?

It is arguable that in exercising their right to require higher than international norms importing countries also incur an associated obligation to provide a higher than normal level of scientific evidence. The EPAs represent an opportunity to insert provisions that may place some degree of limitation on the rising level of protection often driven by advances in testing technology and/or media publicity alarms rather than by hard evidence of increased risk.

Using SPS to develop current and future trade potential

The terms capacity building and technical assistance are all used freely in the EPA negotiations. However, the EU is reluctant to agree support whose purpose and application may not be transparent. The EU is more likely to favourably consider specific requests. While SPS is an area highly eligible for support for trade reasons, it also represents a vehicle for making an impact on the development aims enshrined in the Cotonou Agreement. In order to bring SPS requests more in line with what the EU is likely to consider supporting, the following actions are recommended:

a) Identifying and costing what ACP countries need to do to comply with the EU SPS legislation. While not all countries require the same degree of aid, this move demands turning away from broad, across the board generalisations that obscure the real requirements. Identification and prioritisation of key areas may result in the input of relatively small but targeted assistance, which could prove highly cost effective in achieving quick SPS compliance.

b) Moving beyond the goal of meeting the current requirements and considering how SPS-related assistance can be used to develop new products and assist targeted sectors to export more processed products and fewer raw materials. The current thinking that focuses on historic trade patterns must inevitably come under pressure when the reciprocity element of EPAs become effective and sectors face the inevitable consequence of changing or losing out to new European competitors.

The EU has a comprehensive framework of assistance designed to promote eligible imports. What is not so well addressed is the need for assistance for the private sector to move up the value chain through the development of processed multi products. This requires not only support in meeting SPS regulations but also the creation of a more enabling business environments where entrepreneurs can find the information and support services necessary to develop their businesses.

c) EPAs have regional integration at their core and a logical extension of this is the development of regional bodies. The uniform requirements of the SPS Agreement when viewed against the multiplicity of national agencies and standard setters and enforcers in APC regions, inevitably demands some regionalisation of SPS functions. Whilst the national entities would still carry out local regulatory functions, such as inspections, these regional entities could introduce more uniform management practices and also form a transparent vehicle for the deposit of EU (and other donor) funding to be used to promote regionally agreed objectives. Regional bodies might also have the capacity to be more proactive than national bodies by supporting the production of regional standards and codes of practice that are internationally benchmarked.

A final word

It is recognised that a range of differing views exist regarding the concept of EPAs. Nevertheless the issue of SPS does not impact these concerns and in fact represents an opportunity for a uniform approach across the ACP- EPA regions. Irrespective of this, however, is the fact that failure to fully utilise what is on offer in relation to SPS assistance will, in the context of the EPAs reciprocal requirements, inevitably result in ACP economies losing market share not only in the EU but their own domestic markets as well.

Notes
1. Martin Doherty is an independent consultant and Head of Research, International Trade Consultancy Cerrex Ltd UK