SPECIAL UPDATE: European Commission puts renewed pressure on EPA negotiations

11 October 2011

The European Commission announced on 30 September that countries that have concluded an Economic Partnership Agreement (EPA) with the EU without having taken the steps to ratify and implement it will be withdrawn from the Market Access Regulation as of 1 January 2014 onward. Should these developing countries not ratify an EPA by this new deadline, they could potentially lose their free access to the EU market.

This proposal is expected to add new momentum to the current state of EPA negotiations. As to date only 18 countries of the 36 in Africa, Caribbean and the Pacific that negotiated EPAs in 2007 have taken what the Commission calls "necessary steps" toward ratification.

Slow EPA progress spurs EU action

The EPAs were meant to provide for trade reciprocity, promote sustainable development, and further regional integration by encouraging African, Caribbean and Pacific countries to enter the negotiations with the EU in regional groupings.

Since the launch of EPA negotiations in 2002 - with 1 January 2008 being set as the deadline for bringing the EC-ACP trade regime into conformity with WTO rules- progress has been slower than expected, with only one full EPA being signed between the EC and the CARIFORUM in 2008. However the implementation process of the CARIFORUM-EC EPA seems to have stalled since then, a problem that has widely been blamed on insufficient institutional capacity.

EU regulation has provided DFQF access since 2008

With the expiration of the trade regime under the ACP-EU Cotonou Agreement in 2008, the EU Market Access Regulation (MAR) 1528/2007 has been providing duty free quota free market (DFQF) access to the 36 ACP countries. The EU Market Access Regulation (MAR) requires these ACP countries to sign, ratify and implement their EPA "within a reasonable period of time."

Despite their development goals, over the years the conclusion of EPAs have been continuously delayed and have since become a source of tension between the EU and ACP countries, leaving the entire process in disarray as a result. ACP countries have traditionally been reluctant to join EPAs for a host of reasons, including increased competitions from EU imports, the inclusion of an MFN clause, interpretation of the "substantially all trade" WTO requirement, and non-execution clauses, amongst others. (see DP 100)

So far the ACP countries that have not concluded an interim EPA have not experienced any trade disruptions, as they have been able to fall back either on the "Everything But Arms" (EBA) regime or the standard EU Generalised System of Preferences (GSP).

" A temporary solution"

The EC's explanation of its new proposal states that the MAR was always meant to be a "temporary solution and not a permanent facility." According to the EU this decision aims to realign the ACP-EU trade relations so that they conform to WTO rules, while simultaneously preserving balance and fairness towards other ACP and non-ACP developing countries.

Implications for affected ACP countries

Of the 36 ACP countries that benefit from the Market Access Regulation, 18 island countries - Madagascar, Mauritius, Seychelles, Papua New Guinea, and 14 Caribbean countries - have taken the necessary steps toward ratification and initialled agreements. These countries will continue to enjoy a duty free quota free market access to the EU, as they have in the past.

However the situation becomes more critical for the other 18 countries that have not signed their agreements or are still not applying it. These countries would need to take the "necessary steps" toward ratification of existing EPAs or conclude new regional agreements with the EU.

Alternatively, countries that still decide to opt out of EPAs will face a variety of different situations, depending on their existing arrangements with the 27-member EU bloc.

Nine LDCs - Burundi, the Comoros, Haiti, Lesotho, Mozambique, Rwanda, Tanzania, Uganda, and Zambia - will continue benefiting from DFQF access to the EU under the EBA scheme.

Seven low income or lower middle income countries - Cameroon, Fiji, Ghana, Ivory Coast, Kenya, Swaziland, Zimbabwe -  could still benefit from the GSP regime, which is also scheduled for reform in 2014.

Finally, the last two countries, Botswana and Namibia - which are currently classified as upper middle income countries as per the World Bank's gross national income per capita ranking - would no longer benefit from any preferences if their upper middle income status is maintained after the new EU GSP comes into force in 2014.

Risks of rushing EPA talks

Rushed decisions to conclude EPA negotiations could seriously undermine regional integration, observers fear, as well as trigger negative development effects. Indeed, all countries within a same region are not likely to share a common position with regards to the conclusion of an EPA with the EU, due to varying levels of economic growth and development.

Effective implementation might also become difficult if some countries endorse an EPA agenda for fear of trade disruption rather than development strategy considerations.

Meanwhile, emerging players such as China, India, and Brazil have changed the stakes of the game by presenting themselves to these countries as alternatives to the EU, and with fewer conditions attached. The growing engagement of these emerging economies in Africa, for instance, is already changing the landscape for development by bringing in investment, development finance, and new trade prospects (See TNI special issue this topic, Vol10-3, May 2011).

More information

The main features of the Proposal are available here.

Related articles can be found on  the ECDPM Talking Point Blog "EPA Negotiations: The honeymoon is over..."; in Trade Negotiations Insights "Riding out the storm: Will the EPAs sink?"; and "Losing old friends: The risk of an EPA backlash" by I. Ramdoo and S.Bilal.

Additional background information can be found at the following website.

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