EAC-EPAs Issues of Interest to NSAs

The member states of the East African Community and their European Union (EU)'s counterparts signed an Interim Partnership Agreement late 2007. The second step is to negotiate a comprehensive EPAs; the process which requires engagement of Non-State Actors. The Non-State Actors Support Programme has recently commissioned TRADEXA to undertake a study to establish issues of interest to Non-State Actors. below is a summary of issues emerged from the study; and a comprehensive report can be downloaded under "Reports" section on this website.

Issues of Interest to NSAs in the Framework East-African EPAs

At the beginning the EU pledged to conclude an agreement that would exclusively serve the development interests of the ACP regions, with due regard for their political choices and development priorities. However, as the negotiations went on, they insisted that there was no workable alternative to a free trade agreement. If the EU wanted to implement their pledge, they could opt for negotiating a free trade agreement which only includes the very basics needed for WTO compatibility. If this were the case, the EPA text shouldn’t have included the following:

· Stand still clause. This obliges ACP countries to freeze all their tariffs at current rates even in products that are not due to be opened up for twenty or so years. In the case of the EAC, this technically applies even to the products on the exclusion list.

· Most favoured nation (MFN) clause. This threatens south-south integration. In the FEPA, ACP countries are required to extend to Europe the benefits of any deal that they might strike in future with other larger countries or regions. This suggests that permanent privileged access to ACP markets might be good for Europe but not necessarily in the interest of ACP. This clause limits the leverage of ACP countries to negotiate favourable deals with countries whose exports are growing rapidly like China, India and Brazil

· Taxes and charges clause. This would deny the ACP countries significant autonomy over trade policy. For instance, the FEPA discourages taxes on exports from most ACP countries which are largely raw materials. This deprives ACP economies of jobs and more revenues on exports that would accrue if processing (value addition) were undertaken locally. In short, the clause would weaken the existing industrial base in the ACP countries in favour of European manufacturers and exporters.

· Safeguard measure clause. In the event of import surges (which could paralyze local weak or small producers), the FEPA text has very weak safeguard measures. Developing countries are currently talking at the WTO about Special Safeguard Measures (SSMs) which are not touched at all in the FEPA.

· Rendez–vous clause (areas for future negotiations). This clause shows the areas to be continued in future negotiations and it includes those areas which are not included in the WTO like trade related issues, famously known as the Singapore issues. Now, if this is the case, one would ask: is EPA WTO plus or WTO compatible? The Cotonou Agreement states categorically in Title II, Chapter 2, Article 36 (1) that EPA should be WTO compatible.

· Tariffs. These have been an important mechanism in protecting farmers in ACP countries from import surges as well as a key revenue source. Worse still, the EPA has required ACP states to undertake further cuts in the tariffs. In the case of Cariforum’s concluded EPA, the agreement has not required the EU to make a commitment for elimination of trade–distorting subsidies which cause problems[1] to ACP farmers. That is to say, the EPA allows the use of subsidies and forbids the use of tariffs. Therefore, a favourable EPA during agriculture negotiations should require the EU to eliminate the existing distortions that weaken farmers particularly in EAC and the ACP in general.

· The opening up requirements. LDCs should not have been required to make any tariff cuts as is the case in the Doha Development round; but instead they have been required in the EPAs to open up to more than 80 percent. If opening up was that much necessary, LDCs would be required to open up by less than 80 percent as per WTO entitlement of less than full reciprocity. Though the entitlement of longer period of implementation has been granted to EAC partner States, that is 25 years, the period applies to a few products only.

· Regional Integration. According to the Cotonou Agreement, Article 35 (2), one of the principles of EPA is to build on regional integration initiatives of ACP states, bearing in mind that regional integration is a key instrument for integration of ACP countries into the world economy. Instead of implementing this principle, the EPA has disintegrated the existing regional integration blocs. For example, the EAC initially started negotiating the EPAs in different blocs whereby two members were in ESA and one member in SADC-EPA group. SADC regional bloc also was and is still dismantled–some members are in ESA and others are in SADC-EPA group. Likewise, some members in COMESA are in EAC and some are in ESA. With these examples one would wonder: are these countries going to concentrate on their regional economic issues? Given this framework, how is EPA going to integrate ACP economies into the world economy?

The EPA is More Demanding than the WTO

The EPA text is set to undermine the negotiating positions of the ACP in multilateral forums. It tends to take away what the ACP countries have gained in the WTO. This has been the real case in the recently concluded full EPA between the EU and the Caribbean countries (Cariforum); and it is thus brought as a lesson to EAC States applicable in their ongoing negotiations with the EU towards the full EPA. The following areas form part of the fully signed EU-Cariforum EPA; and they mostly constitute areas for future EAC-EU EPAs negotiations:

· Intellectual Property. It has been agreed at WTO that developing countries implement Trade Related Intellectual Property Rights (TRIPS) by 2005 and LDCs by 2013. However, the EPA requires both LDCs and developing countries to make commitments that go substantially beyond TRIPS. This is the case with Cariforum who have signed a full EPA. This example is dangerous to a region with both developing and least developed countries like the EAC. The EAC, however, is yet to sign the EPA fully; and it is hereby cautioned to be careful in doing so.

· Investment. This is not an agenda in the WTO; but it is included in the EPA. Cariforum have negotiated it in the same text with Trade in Services. The EPA is requiring ACP countries to open up markets and treat foreign (EU) investors in a similar manner like locals. The EAC Partner States are cautioned not to follow the Cariforum footsteps.

· Competition. This area is not included in the WTO agenda while substantive commitment is required in the EPAs to enforce competition policies in ACP countries including in the area of services. This has also been included in the EU-Cariforum EPA.

· Government procurement. A plurilateral agreement[2] exists for this area, but no ACP country is party to that. However, the EPA requires ACP countries to make substantive commitments on transparency and further negotiations on subsequent opening up of government procurement markets. Given the limited size of their national markets and low capacities of their productive and economic sectors including manufacturing and services to supply EU procurement markets, the priority for EAC states would likely be opening the regional procurement markets before making commitments to open to the EU suppliers. For instance, the EAC bloc may in the first place consider opening up its regional procurement market among its five country members. This is because there are potential costs related to procurement provisions in the EAC-EU EPAs; and they include:

(i) commitments on liberalisation of national treatment principle that will limit flexibilities in using preferences for national suppliers as a local empowerment policy instrument; and

(ii) compliance costs related to the EPAs procurement framework or transparency rules.

· Trade in Services. This is also an area for future EAC-EU EPAs negotiations. Under WTO, developing countries are not required to make further market access and national treatment commitments in addition to what they have made. While LDCs are under no obligation in the WTO to make further commitments, both developing and least developed countries are required in the EPAs to make commitments that go beyond the existing WTO’s General Agreement on Trade in Services (GATS) commitments in terms of opening up and regulations.

· Agriculture. This is among the areas for future negotiation in the EAC-EU EPAs. The EU text on agriculture tends to emphasise business over development. For instance, removal of tariffs and NTBs by ACP countries would benefit EU manufacturers and exporters more than it would do to ACP producers. It should also be noted that the EU’s huge domestic support measures distort trade and development interests of ACP countries. EU text promotes biofuel production too, which is likely to impact negatively on food production because both (biofuel and food crops) compete for land and labour. This is strongly justified in the World Bank Report (2008) which claims that biofuel activities alone contributed about 75% of a rise in global food prices.

E-mail this to a friend

Printable version