EPA Negotiations Update

4 September 2008

 

To sign or not to sign, that is the question

ACP and European Commission EPA negotiators return from their summer holidays in the wake of the collapse of WTO negotiations and a continuing global economic crisis. Military and political conflicts are also affecting several ACP countries. With the price of everyday living accelerating beyond control, many ACP governments are finding it difficult to provide the social provisions that electorates expect.  They also fear it will be difficult to increase competitiveness in order to benefit from greater trade liberalisation.  As a result, there appears to be a shift in the political mood with many ACP governments re-evaluating trade negotiations and relationships to avoid economic and political instability.

European Trade Commissioner Peter Mandelson maintains that trade liberalisation can facilitate development in ACP countries and that EPAs (and interim agreements) must be signed without delay to ensure WTO compatibility of ACP-EU trade relations.  But tensions witnessed between the Commissioner and the French Presidency of the EU Council during the WTO negotiations could spill over into the EPAs.

No ACP sub-region has yet endorsed an EPA or an interim agreement.  For some countries, this is simply because legal texts are not yet ready for signature.  For others, the belief that agreements were initialled in haste has led them to request reassessment and possible revision. This is to ensure that there is no loss of policy space, that effective support will be delivered and that ACP countries can benefit from the foreseen EPA development objectives.  As such, countries need to identify specific, quantifiable areas where commercial and development goals collide and ascertain how much flexibility the European Commission might agree to.

Technical problems are preventing signature of the interim agreements on the European side. Only the Caribbean EPA has been translated into all EU languages and received the green light from the EU Council on July 15.  The European Commission informed its member states in mid-July of delays with translation and legal verification and that it could be mid-April 2009 before the process is completed.  The Commission argues the hold-up will have repercussions on WTO notification, legal security and might even encourage some countries not to sign at all.  In a bid to combat this, the Commission proposes that EU member states authorise signature immediately and agree to adopt the legal texts later.  However, sources indicate that several EU governments oppose this. 

Duty-free, quota-free access to EU markets for non-LDC ACP countries is currently based on the EU Regulation agreed last December.1 This states that a country can only be removed from the list of beneficiaries by a Council decision under qualified majority voting, particularly where "the region or state indicates that it intends not to ratify an agreement which has permitted it to be included in Annex I."  It is therefore argued that ACP countries could continue to negotiate improved initialled agreements before signing, since EU member states are unlikely to remove a country that is negotiating in good faith.  However, a non-ACP country could challenge the legality of the EU regulation at the WTO - an unlikely move during EPA negotiations. As soon as an EPA or interim agreement is signed and provisionally applied it will replace the EU Regulation. Provisions in the interim agreement would allow the European Commission to unilaterally withdraw preferences at any time, lessening the ACP's leverage towards an improved or full EPA.

Central Africa presents market access offer

Central African EPA negotiators presented their long-awaited market access offer for goods during a meeting with the EU Commission in Brazzaville from July 9-17. The offer, which is linked to the ongoing process of harmonising a Central African Common External Tariff (CET), would abolish tariffs on 71% of imports over 20 years including a ive year preparatory period. Central Africa considered several criteria for their offer including local production, consumer welfare, LDC members and fiscal revenues. During the meeting, the EU reiterated that 80% of products should be liberalised over 15 years, although agreed that a transitory preparatory period might be possible.

The Commission stressed the importance for Central Africa to establish priorities in its requests on services. Central Africa argued that the requests it submitted in May represent its major needs in this area. Central Africa has only presented a provisional services offer so far: it has not yet integrated lists from Equatorial Guinea or São Tomé and Principe and needs member states to validate it. 

While progress was made on consolidating the EPA text (on market access for goods and on general articles), further negotiation is needed on export duties, the Most Favoured Nation (MFN) clause and some provisions on safeguard and antidumping measures. Dispute settlement and development issues have not yet been discussed either. However, Central Africa stated its understanding of the EPA's development dimension: compensation for revenue losses, strengthening economic capacities and financing adjustment costs linked to EPA implementation. Central Africa also presented a text on strengthening capacity building with the objective of transforming elements of the Joint Orientation Document (JOD) into binding commitments. The Commission reportedly said that these elements are already in the JOD, but that it will examine them nonetheless.

West Africa makes progress on sensitive products

A draft regional list of sensitive products was discussed at a workshop organised by ECOWAS and UEMOA on August 4-5 in Dakar. As participants were unable to finalise the list, a revised draft will be prepared by the two regional organisations and circulated to member states for comments before September 4. This will be followed by another regional workshop in September to give the list the green light and finalise the region's market access offer. Several factors must be taken into account before ECOWAS and UEMOA can make their official-market access offer to the EU: the creation of a list on the basis of the HS10 tariff heading (the first lists were made under the HSH6 heading as requested by the EU); the incorporation of fisheries products; the inclusion of national lists from those countries yet to submit them (Cape Verde and Liberia); an assessment of the failure of the Doha Round; and the need to incorporate the details on safeguard measures, rules of origin, trade defence mechanisms and the Common External Tariff into the overall market access offer.

A regional workshop on the draft EPA text and rules of origin in the EPA took place on July 8-11 in Cotonou. On the basis of the draft EPA text of July 2007, participants considered amendments proposed by West Africa in its negotiations with the European Commission. The meeting considered an EU draft protocol on rules of origin, in a bid to formulate a regional proposal. Both sides already decided in April to use the same rules of origin for the interim agreements as for the planned regional agreement. The region is also advancing in defining its Aid for Trade and development programmes under the EPAs, due to be finalised by December. These should be integrated into the broader ECOWAS regional development programme. National studies are currently being carried out to take stock of existing projects and assess future needs.

Programming for the 10th EDF was addressed by ECOWAS, UEMOA and the European Commission on July 28-31 in Brussels. West African sources indicate that more discussion is required to determine how infrastructure needs will be financed.

ESA-IO address regional integration

EDF programming to support regional integration efforts was put under the spotlight during a high-level meeting in Dar es Salaam on July 17. The meeting, which brought together ministers from the Eastern and Southern Africa and Indian Ocean (ESA-IO) region, further addressed EPAs, food security and climate change. Participants - which included chief executives of regional organisations, EU representatives including Commissioner Louis Michel and representatives of multilateral development organisations - recognised the supply-side challenges the region faces and endorsed the basic elements of the 10th EDF ESA-IO Regional Strategy Paper and Regional Indicative Programme. This still awaits formal approval by both parties. Participants also recognised the important role EPAs could play in the overall regional integration process and underlined the need for coherence and convergence between the African Union and individual African Regional Economic Communities.2

COMESA continued to work towards finalising its CET by the end of 2008, during a meeting on sensitive products and harmonisation of tariff rates on July 14-16 in Lusaka. COMESA countries expect to complete their tariff alignment schedules by the end of October.3

Internal technical and senior official level meetings are being held on August 21-26 to prepare ESA for negotiations with the European Commission. Discussions will cover market access and agriculture, services, trade related issues and development, as well as dispute settlement, institutional and financial provisions.

EAC plans its EPA negotiation position

Members of the East African Community (EAC) worked hard to prepare their EPA negotiation stance during a four day meeting at the end of July. The meeting paved the way for the next round of technical level talks with the European Commission,4  scheduled for September 16-18 in Bujumbura.5 The EAC has also commissioned a study to feed into discussions on the establishment of an East African Monetary Union. Consultations began in August in EAC countries to assess how prepared each of the five member states is for the monetary union, developing suggestions for the institutional framework and structure and designing a model protocol. An interim report presenting results and recommendations is expected to be finalised in December.6 The EAC is also in the process of installing a common regional quality standard. The newly adopted Standards, Measurement and Testing Act came into effect on July 1. The EAC Council has set up a committee to coordinate putting the law into practice in a bid to overcome implementation challenges.7

SADC launches free-trade zone

Twelve out of the fifteen SADC countries launched a free trade area on August 17, during the annual SADC summit in Johannesburg. The aim was to eliminate all import tariffs by 2012 and establish a common currency by 2018. "While 85% of all intra-SADC trade is duty-free in 2008, we must acknowledge that the work is not yet complete," South African President Thabo Mbeki said at the launch.8 "The remaining 15% of trade is still to be liberalised by 2012 and we need to ensure that all members are able jointly to meet that milestone," he added. Angola, the Democratic Republic of Congo and Malawi plan to join at a later date.

Some are concerned that EPAs might limit the benefits of a SADC free trade area. However, a joint statement issued during the first ever EU-South Africa summit in Bordeaux on July 25 tried to calm these fears.9 According to the statement, an EU-SADC EPA should promote development and regional integration in Africa, specifically in the Southern African Development Community and the Southern Africa Customs Union (SACU).10         

Meanwhile, the European Commission presented a draft text of the EPA services and investment chapters to SADC technical and senior officials in Gaborone from June 30 to July 4. SADC continues to prepare for negotiations in this area and is working towards prioritising and selecting one service sector to undergo liberalisation per SADC country. During the meeting, officials agreed to include a review clause and provisions on safeguards for balance of payments difficulties.  SADC also requested inclusion of an emergency safeguard mechanism and voiced concerns in relation to MFN and standstill clauses.

Officials also reached agreement on most of the outstanding issues related to the SACU market access offer, although sources claim some problems remain in agriculture, where the European Commission is not offering as much as the region would like. Talks on market access moved both sides closer to a deal on fisheries. More discussion is needed on some clothing lines that fall under non-agricultural market access. The Commission requested that South Africa gives concessions to basic and processed EU agricultural products that are currently excluded from liberalisation under the Trade Development and Cooperation Agreement and that also benefit SACU member states.

Some progress in resolving the list of concerns presented by Angola, Namibia and South Africa on the interim EPA was made although sources claim further analysis and national consultations are needed to agree to a common approach. SACU must agree to a common position in order to be able to implement an interim agreement:  either, Botswana, Lesotho, Namibia and Swaziland (BLNS) must find a way to implement an interim EPA without South Africa or South Africa must become a party to the EPA and all five countries sign and ratify a single agreement together.  SADC sources say that signature should take place on completion of the full EPA to allow time to deal with these concerns and avoid two separate ratification processes. However, the Commission believes an interim EPA could be signed by October (although not by all SADC member states). It also claims that most SADC countries are calling for a comprehensive EPA, with ambitious commitments on services and investment.11

SADC sources report that the negotiating climate between the SADC EPA members and the European Commission has improved and that the Commission now appears to have a better understanding of the concerns of Angola, Namibia and South Africa.

Caribbean EPA signature remains in doubt

The signing of the Caribbean-EU EPA may be postponed once again, after delays in Guyana's EPA consultations. The date, which was set for September 2 in Barbados, assumed that Guyana's national process would have been completed in July. However, this has now been postponed until September 5-6. Grenada is also undertaking a review of the EPA, as is St Lucia, which according to press reports has indicated that it will postpone its signature.12 Barbados, on the other hand, has signalled it is ready to sign the EPA.13 For its part, the EU Council authorised the signing and provisional application of the EPA on July 15.14  

Several Caribbean leaders expressed their readiness to sign the EPA during a Heads of Government meeting in Antigua and Barbuda on July 1-4. However, others noted that national consultations would be held in Guyana before any decision to sign is made.  Guyana's President, Bharrat Jagdeo, explained that his country is not yet prepared to sign the EPA because of concerns with the MFN clause and the potential negative impact of the EPA on regional integration.15 But Regional Negotiating Machinery Director, Henry Gill, is confident that all Caribbean countries will sign the EPA in September.16 He warned that if any of the CARICOM leaders refused to sign the EPA in September, it would cause problems for trade with Europe.17

During the meeting there was also much debate on implications for LDC CARICOM countries and on the lack of a real regional integration movement. Some observers warn of a possible collapse of CARICOM if regional leaders fail to put in place integrated mechanisms to enforce decisions.18 The CARICOM Development Fund - designed to provide financial and technical assistance to disadvantaged countries, regions and sectors - was also launched at this time.

Pacific considering way forward on EPAs

The contents of letters exchanged between the lead spokesman of PACP trade ministers, Hans Joachim Keil, and the European Trade Commissioner in mid-July were discussed in the margins of the Pacific Forum Trade Ministers Meeting in Rarotonga on July 22.

As reported, the PACP had requested to focus on finalising outstanding EPA issues including trade in goods, dispute settlement, fisheries and development. They also wanted suspend negotiations on trade in services and insert a rendezvous clause in the EPA that would commit both parties to revisit services in the future.19 EU sources indicate that Mandelson continues to stress the importance of the inclusion of services and investment in a comprehensive Pacific EPA. However, the EU is aware that some PACP countries may not be able to make commitments in these areas. Mandelson, therefore, offered continuing negotiations with all PACP countries on jointly agreed issues, allowing those that desired to make commitments on services and trade related issues. 

Given that not all PACP ministers were present at the meeting (some, including Papua New Guinea's minister, were participating in the WTO negotiations) no official decisions were taken. However, sources indicate that Hans Joachim Keil is set to launch a regional consultation to try to formulate a position ahead of the scheduled EPA technical talks in Brussels in mid-September.

Just before the Pacific Forum meeting, leaders "reiterated the region's commitment to the conclusion of a comprehensive EPA with the European Union by the end of 2008 and agreed that the EPA should reflect the differing circumstances and economic interests of all the PACPS and deliver significant benefits to all of them," as stated in a press released, issued during an August 19 meeting.20

For more EPA news please visit: www.acp-eu-trade.org/epa

 

1 To read the full text:

www.delnam.ec.europa.eu/pdf/trade/Market_access_Regulation.pdf

2 See: Joint Communiqué of the High Level Meeting on "Accelerating Regional Integration in Eastern and Southern Africa and Indian Ocean" www.comesa.int/publications

3 See: the e-COMESA newsletter, issue 163, July 18 2008  www.comesa.int 

4 The East African Community begins EPA talks, Eddie Mukaaya, The New Times, August 18 2008, www.newtimes.co.rw 

5 To read the dates of EPA negotiations rounds see: Bilateral Trade Relations, African, Caribbean and Pacific, July 22 2008 http://ec.europa.eu/trade/issues/bilateral/regions/acp/epa_calendar_en.htm

6 See: Consultations on EAC Monetary Union to begin, Edmund Kagire, The New Times, July 11 2008, www.tralac.org 

7 See: EAC quality mark will be implemented, says PS, Allan Odhiambo, Business Daily (Nairobi) July 4 2008, www.tralac.org   

8 Southern Africa countries launch free trade zone, AFP, August 17 2008.

9 See: EU-South Africa Summit on 25 July in Bordeaux, www.ue2008.fr/PFUE/lang/en

10 First EU-South Africa Summit, Bordeaux, July 25 2008, PRES/08/222, July 27 2008, http://ec.europa.eu 

11 EU and Southern African countries ready to sign interim EPA by October 2008, EPA Flash News, DG Trade, European Commission, July 9 2008 www.acp-eu-trade.org

12 See: St Lucia not signing EPA just yet, caribbean360.com, August 20 2008, www.caribbean360.com

13 See: Sinckler: Barbados proceeding with the signing of the EPA,  The Barbados Advocate, August 20 2008, www.barbadosadvocate.com

14 Council Decision on the signature and provisional application of the Economic Partnership Agreement between the CARIFORUM States, of the one part, and the European Community and its Member States, of the other part, Council of the European Union, July 7 2008, http://register.consilium.europa.eu

15  Remarks by his Excellency Bharrat Jagdeo. President of Guyana, at the opening ceremony of the twenty-ninth meeting of the conference of heads of government of the Caribbean Community, July 1-4 2008, Dickenson Bay, Antigua and Barbuda, www.caricom.org 

16  Negotiator expects EPA consensus, August 5 2008, www.caribbean360.com

17  Caribbean Set to Sign EU Trade Agreement on 2 September, August 5 2008, www.istockanalyst.com

18  See: What good is Caricom? Regional unity losing steam, Jamaica Observer, July 4 2008, www.bilaterals.org  and  Darkening clouds over regionalism, David Jessop, The View from Europe, July 18 2008, www.caribbean-council.org

19 See: Le point sur les APE, Eclairage sur les négociations, Volume 7, Number 6, July-August 2008 www.ictsd.net/news/eclairage

20  PACP leaders committed to an EPA that will benefit members, press release, Pacific Islands Forum Secretariat, August 20 2008 www.forumsec.org.fj

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