Trade Negotiations Insights • Volume 8 • Number 4 • April 2009

EPAs and natural resources

The European sustainability agenda

by Peter Thompson

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EPAs are a special type of trade agreement, unlike other Free Trade Agreements (FTAs) that the European Union has negotiated throughout recent years. Despite all the suspicions and accusations floated on this subject, the Commission did not set itself any offensive interest in EPA negotiations.

It is a fact that there is a worldwide ‘gold rush’ where major economies, in particular emerging ones, have been aggressively working towards securing access to raw materials with reportedly little regard for economic and social sustainability or environment protection. Africa is one of their key targets. It is also true that, as part of its Global Europe strategy, the Commission has been pushing a specific agenda on raw material trade liberalisation eg, through commitments on free trade in raw materials into trade agreements. However, EPAs are not classical FTAs and there is no such thing on the EPA negotiation table. Securing access to natural resources is not on the agenda (1) as EPAs are focussed on the needs of the ACP side. Sustainable development is at the top of the negotiation agenda eg, through chapters on forestry, fishery and the environment as well as social provisions (including labour standards). EPAs are indeed trade agreements but their central objective is development, more precisely how best to ensure that trade brings about sustainable development.

The Commission considers that the EPA with the Caribbean region sets an encouraging precedent. Sustainable development is the key principle governing the agreement with specific chapters covering environmental and social provisions. Like in other EPAs, the Caribbean States are free to take measures to protect the environment or natural resources and the agreement prevents lowering social or environmental standards in order to achieve investment or trade benefits.

There are also commitments not to use trade or investment related legislation in order to limit environmental protection.

Forestry is a key sector for sustainable development in many ACP countries. Contrary to assertions that this sector would illustrate the alleged Commission’s careless negotiations tactics and aggressive agenda, (2) the European Union (EU) is at the forefront of the battle against illegal logging, in particular through the Forest Law Enforcement, Governance and Trade (FLEGT) initiative. Interestingly enough, Ghana, one of the interim EPA signatories, has also been the first country to conclude the negotiations of a FLEGT Voluntary Partnership Agreement (VPA) with the EU in September 2008. (3) The European Union’s commitment to fight illegal logging is mirrored in the EPA negotiations with the region which enjoys one of the most important forest areas, namely Central Africa. As part of the comprehensive regional EPA which is under negotiations, the Commission has tabled a chapter on forest resources management designed to strengthen governance and promote legal and sustainable trade of forest-based products both at the EU and regional levels. In addition, Central Africa’s Regional Strategy under the 10th EDF, currently under finalisation, identifies the sustainable management of natural resources as a development cooperation priority.

More generally, it has been argued that ACP countries should control their markets for raw materials and agricultural export products through export restrictions (primarily export taxes) and should not facilitate foreign direct investment (FDI). (4) In most cases, export taxes do not aim at protecting specific economic sectors, in particular in the ACP countries. Their main purpose is essentially fiscal. These government revenues can be secured through different, more economically efficient, types of taxes. In addition, in the EPA negotiations, the Commission has tackled the export taxes issue with as much flexibility as possible in order to address the ACP countries’ special development needs. The Commission proposes that EPAs allow for exceptions to introduce or keep export taxes in certain cases such as state budgetary reasons or protection of the environment. The Commission has shown it is open to necessary derogations, provided they are well defined in terms of purpose and duration and are non-discriminatory to other ACP trading partners.

It is striking that the EPAs provisions on investment liberalisation have been heavily criticised whereas ACP countries badly need FDI: sub-Saharan Africa is the region with the lowest level of investment in the world. As reminded by the Barbados Ambassador in Brussels in a speech on 13 February 2008, ‘(we) aggressively seek FDI to support our economic development. EPA rules on investment give predictability and transparency on market access in the manufacturing, mining, agriculture and forestry, and service sector in both the EU and (ACP countries)’. Attracting FDI is even more necessary in the current economic and financial crisis. Investment liberalisation does not mean, however, that ACP countries will lose their policy space to regulate, in particular for environmental, sustainability or public health purposes.

Overall, the EU has been negotiating in an open and flexible way to meet ACP needs. Sustainable development standards, which are conducive to a balanced economic growth in full respect of environmental and social requirements, are embedded in EPAs. The Commission believes EPAs are the way to go to ensure a fair and sustainable growth to ACP countries.

Author
Peter Thompson is the Director in Directorate General Trade at the European Commission, responsible for Trade and Development policy and bilateral trade relations with the African, Caribbean and Pacific (ACP) countries.

Notes
1. Ronnie Hall, “Undercutting Africa,” Trade Negotiations Insights, Vol. 8, No. 1, February 2009.
2. See footnote 1
3. Under VPAs, legally-produced timber exported to the EU can be identified using licenses issued by Partner countries. This will be underpinned by timber legality assurance systems developed under the auspices of each VPA. Definitions of legally-produced timber incorporate laws that address the three pillars of sustainability, i.e. those aimed at social, environmental and economic objectives, and are agreed through a national multi-stakeholder process in the Partner country.
4. See footnote 1