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EU, ACP determined to meet end-of-year deadline for EPAs

Bridges Trade Weekly, ICTSD

EU, ACP Determined To Meet End-Of-Year Deadline For EPAs

6 June 2007

Leaders from African, Caribbean and Pacific (ACP) states have vowed once again to work to finalise a set of free trade agreements with the EU before a critical end-of-year deadline, although many issues in the negotiations remain unresolved.

Meeting in Brussels from 22-24 May, the ACP ministers expressed their commitment to moving forward with the economic partnership agreement (EPA) negotiations, provided the EU heed their calls to include a number of specific concessions in the deals on issues such as adjustment aid and rules of origin.

Mohlabi K. Tsekoa, Lesotho’s foreign minister and the current ACP chairman, rejected suggestions that the tight timeline risks yielding deals detrimental to the developing countries’ interest. "We have no doubt we will be enhancing the development of our people," he said.

Critics have suggested that the EU is asking ACP countries to sign up for market-opening measures and intellectual property protections that are inappropriately strong. Even members of the European Parliament have urged caution about the potential effects of the talks on the EU’s developing-country partners — an overwhelming majority of them recently appealed to the European Commission not to make excessive demands of the ACP during the EPA talks. They called for allowing the ACP countries safeguard mechanisms that would allow them to protect local industry from surges of EU imports, especially farm products.

Trade deadline looms

The EPAs are intended to replace longstanding preferential trade deals under which the EU accords duty-free access to most ACP exports. These unilateral preferences have been deemed incompatible with WTO rules, but WTO Members in 2000 agreed to a waiver allowing the EU to maintain them through the end of 2007. Given the waiver’s impending expiration, the two sides are now under pressure to establish new bilateral trade agreements before the 31 December deadline. WTO rules for such reciprocal FTAs are less demanding than those governing unilateral-preference schemes: no waivers are necessary, and FTAs are protected as long as they remove tariffs on ’substantially all trade’ — a concept that remains undefined. The prospect of a new waiver for the existing preferences is believed to be unlikely, as some Members have expressed opposition to the idea.

Actual progress toward finalising EPAs has varied: EU negotiations with Central African, West African, East African, and the Pacific countries have been rather slow, while talks with Caribbean and southern African countries have seen greater progress.

New, two-way agreements lower barriers to trade

While the details of the EPAs have not been finalised, they would most certainly require that ACP states make significant cuts to their trade barriers. However, the developing nations would be allowed extended transitional periods to phase in tariff cuts on EU products; Brussels has suggested that these periods could last up to 25 years for duties on some sensitive products if local producers would be threatened by faster liberalisation.

For its part, Brussels has offered to eliminate quotas and tariffs on ’substantially all’ ACP products, including beef, dairy, cereals, and fruits and vegetables, which are currently subject to EU import duties. All tariff cuts would take effect immediately upon the signing of an agreement, with the exception of duties on rice and sugar, both of which would be phased out over extended periods (see BRIDGES Weekly, 18 April 2007).

Although many least-developed country (LDC) members of the ACP group already receive duty free access to the EU under the latter’s Everything But Arms (EBA) policy, more than 30 of the 79 ACP countries are not LDCs, including Papua New Guinea, Ghana, Botswana, Jamaica, the Bahamas, and Nigeria.

According to a trade analyst at the ACP Secretariat in Brussels, the developing nations, though committed to meeting the end-of-year deadline, remain firmly resolved that the pacts must come with a number of concessions. Specific demands include the provision of more flexible rules of origin, extended transitional periods, assistance with adjustment and implementation costs, and the extension of existing commodity protocols on rice and sugar. Brussels has been lukewarm to ACP demands for explicit aid promises to be included in the text of the trade pacts (see BRIDGES Weekly, 29 November 2006).

Short timeline raises concerns

It is unclear what will happen if talks on a particular EPA fail to conclude before the 31 December deadline. In theory, following the waiver’s expiration, the countries’ trade regimes would operate under the EU’s Generalised System of Preferences (GSP). Alternately, the EU could continue to provide ACP countries their existing preferential access, although this would become vulnerable to dispute in the absence of a new waiver Some observers believe that developing countries not receiving the ACP’s level of preferential access might be convinced to refrain launching a formal WTO dispute if they were reasonably sure that a long-term EPA deal would be reached within a year or 18 months.

Concerns have been raised from several quarters that the tight timetable places an unfair burden on ACP countries, whose negotiating teams are much smaller than those of the EU. Indeed, the developing nations previously asked for more time - up to three additional years - to negotiate the pacts (see BRIDGES Weekly, 14 February 2007).

Despite the ACP leaders’ recently announced commitment to work toward the end-of-year target, some ACP civil society groups remain concerned that Brussels is using the upcoming deadline to extract extra concessions from its developing-country partners.

More harm than good?

Others oppose the agreements on pure economic grounds, claiming that the free trade deals would result in net losses for the ACP group of countries.

In principle, the EPAs are intended to spur economic growth by enhancing regional integration, building stronger South-South trade networks, and facilitating access for ACP products to EU markets.

Yet, civil society groups in both EU and ACP countries maintain that regional integration among the developing nations might result in economic gains for the strongest ACP economies, but would bring few, if any, benefits to the weaker members of the group.

Furthermore, ACP industry groups fear that removing tariffs on cheap European imports would undercut local producers and lead to unemployment and lost government revenue. Indeed, the Kenya Association of Manufacturers has warned that Eastern and Southern African states stand to lose up to USD 241 million annually if an EPA is enacted.

One civil society leader, Ibrahim Akalbila, Coordinator of the Ghana Livelihood Coalition, has said that his organisation plans to pressure individual ACP governments not to ratify the agreements.

The EU’s goals for intellectual property provisions in the EPAs are also drawing criticism. In a letter to the Financial Times published on 24 May, a group of academics and trade experts claimed that Brussels was seeking intellectual property standards so strict that they would ultimately hinder economic progress in the developing countries. They argued that the EU proposals risked limiting the availability of educational materials in ACP countries and restricting the right of ACP farmers to save and reuse seed, thus threatening food security. "All available evidence indicates that increased levels of greater intellectual property protection will generate more costs than benefits to for [sic] ACP countries," the writers said. Moreover, they argued that the EU’s demands were unnecessary, since WTO rules were "unequivocally clear" that there is no requirement to negotiate intellectual property.

The EU’s chief negotiator, Heidemarie Wieczorek-Zeul of Germany. emphasised Brussels’ commitment to respecting the position of the EU’s developing-country partners. "It is our common concern to ensure these agreements promote development," she said.

ICTSD reporting; "EU lawmakers appeal for softer line with ACP countries," CARIBBEAN NEWS, 24 May 2007; "ACP members confident of agreement by deadline," TONGA NOW, 29 May 2007; "EPAs could be signed by December," GHANA NEWS AGENCY, 29 May 2007; "L’UE et les ACP s’engagent à conclure un accord en 2007," REUTERS, 25 May 2007; "New EU market access offer unacceptable — region’s sugar group," Starbroek News, 30 May 2007; "EU and ACP states vow to clinch free trade deals by end-year," DEUTSCHE PRESSE-AGENTUR, 25 May 2007; "MEPs call for less onerous conditions imposed on ACP countries," EUROPEAN PARLIAMENT NEWS RELEASE, 23 May 2007; "ACP officials talk tough with the EU," BBC NEWS, 24 May 2007; "EU in danger of breaking its promise to the poor," FINANCIAL TIMES, 24 May 2007.