Trade Negotiations Insights (TNI) EPA Update-Longer Version
By Melissa Julian, ECDPM
This is the longer, more detailed version of the TNI EPA Update in the May-June 2006 issue of Trade Negotiations Insights
EU Member States confirm EPA development focus …
EU Foreign Ministers adopted EPA conclusions in April confirming the need to ensure strong coherence with the EU's Development Policy Statement and extending previous Council conclusions on EPAs and Africa to all ACP regions. The EPA conclusions outline the types of EU support which should be provided to assist the ACP to effectively negotiate and implement EPAs which will deliver development objectives. They also explicitly recognise that the ACP’s political choices on what to include in the EPA must be respected.
The Council instructed the EC to ensure that this year’s Cotonou Partnership Agreement (CPA) Article 37(4) EPA review covers not only the process, speed and adequacy of the timetable for negotiations set in each region, but to also cover content issues - both trade and development aspects, including cross-cutting issues affecting the development prospects of all ACP countries and necessary measures to support the timely completion of the negotiations. They also call for regional results to be consolidated and discussed at all-ACP level and for Council to be consulted on the major challenges identified in the review of the negotiations and implementation of EPAs before the finalisation of the negotiations next year. To help to achieve development outcomes, the Council calls for the establishment, in consultation with all parties, of a mechanism to allow effective monitoring of the development and trade challenges from the start of implementation of the EPA.
The Council conclusions give a clear signal to the ACP, and EC negotiators, that the EU Member States intend to ensure that EPAs are measured against development objectives. An important message at this crucial stage in the EPA negotiations to determine the policies, instruments and capacity building support necessary for EPAs and just ahead of the 2006 review of the EPA negotiations to see what’s needed to ensure EPAs achieve their development objectives.
Separately, the Council adopted conclusions on policy coherence and aid effectiveness which also have implications for EPAs.
… But are unable to agree on the European Development Fund
A principal source of EPA support will be provided through the 10th EDF (European Development Fund). In December, EU Heads of Government finally agreed (months after the signing of the revised CPA when they were scheduled to have agreed) to provide 22.682 billion euro for the 10th EDF to cover support from 2007-2013 (a disputable amount (the EU Presidency says it is an 37% increase (or 1 billion euro) over the 9th EDF in absolute terms, but the European Parliament and other observers (including ECDPM) question if the EU’s funding commitments to the ACP have been honoured in real terms). But formal agreement of the EDF’s financial protocol has been blocked in Council due to disagreement on whether the agreed amount includes administrative costs and funding for the EU’s overseas countries and territories (the position of a majority of EU Member States) or if these amounts are to be provided additionally (the position of the EC and some EU Member States and the Parliament).
Even if this amount is agreed, DG Development Director General Manservisi informed MEPs in April that EU Member States would have to provide any additional EPA financing the ACP need. In reply to a parliamentary question, EC Development Commissioner Michel estimated that between 400-700 million euro would be returned to EU Member States under the deal agreed to return uncommitted existing EDF funding to them at the end of 2007. So an argument could be made for EU Member States to use this money for EPAs he implied. Major commitments were made to increase ODA and aid for trade in 2005 and the EU Member States are committed to have a comprehensive EC/EU Member States approach to EPA support. The EC says the focus now should be on implementing these commitments.
Council will continue discussions to try to agree the financial package at their meeting on 15 May. The ACP-EU Ministerial Council in Papua New Guinea on 1-2 June should negotiate a final agreement. Ratification needs to be completed before the 31 December 2007 expiry to use 9th EDF funds. Programming has started, and needs to be completed. Any delay could lead to a gap in financial support at a crucial moment in the preparation of EPAs.
The ACP continue to voice concerns on the development aspects of EPAs
The ACP Technical Follow-up Group on the EPA negotiations met on 8-9 March to take stock of the status of the EPA negotiations. Presentations highlighted several common problems including the EC’s reluctance to make effective commitments to deal with the development dimension of the EPAs. Sources indicate that specific issues raised included the EC’s refusal to include support measures in the text of the EPA and to make commitments to guarantee these are effectively implemented; pressure from the EC to include in the negotiations issues that some ACP regions were not yet ready to address; pressure from the EC for the creation of a Customs Union and to open up markets before regions are ready for this; EC refusal to allow for variable geometry so as to grant LDCs special and differential treatment in order to take account of their special circumstances; and a lack of transparency on the part of the EC.
The Technical Follow-up Group also discussed all-ACP negotiations. Sources indicate that the discussions focused mainly on the rules of origin. In view of the lack of progress on this issue at the all-ACP level and the fact that several ACP regions now need to negotiate these rules in their EPAs, the group agreed that negotiations be undertaken at regional levels.
As regards the non-execution clause, it was noted that this is an issue which is re-emerging in the regional level negotiations. The group recalled the ACP Council decision that the issue be withdrawn from the EPA negotiations.
No concrete proposal was made regarding the settlement of disputes.
As regards trade-related matters, the Committee reportedly felt these could be discussed but that the negotiations should be based on the same approach adopted for the Cotonou Agreement which does not involve any restrictive commitments.
The ACP-EC Committee of Ambassadors met on 21 April and discussed EPAs. Sources indicate that the ACP said there has been little significant progress in the negotiating process and that they are not satisfied with the direction of the negotiations. They noted their concern in particular with the lack of consideration of the development commitment in the negotiations. Specifically, they called for phasing of EPA trade reciprocity implementation and appealed for the establishment of an additional EPA Financing Instrument in accordance to paragraph 2 of EC Declaration XIV of the revised Cotonou Agreement to address the issue of adjustment costs and support to the EPA negotiation and implementation processes (African Trade Ministers and ACP Finance Ministers also took up this proposal at their meetings in April – see below). They welcomed the appeal made by the EU Foreign Affairs Ministers on bringing development to the centre of the EPA negotiations and called on the EU side to translate its political statements into action.
Consideration was also reportedly given to the parameters governing the upcoming EPA review which the ACP maintain should include a review of the timetable of negotiations, regional capacity building projects that would allow for effective integration of development concerns in EPAs and formulation of development benchmarks. The EPA review should be conducted at the regional level with the results filtered into an ACP-EU Ministerial at the end of 2006.
ACP Finance and Economic Affairs Ministers met on 24-28 April to review ACP-EU financial cooperation. The Ministers adopted conclusions on development finance challenges and the impact of the Economic Partnership Agreements (these will be posted at: http://www.acpsec.org/). The Ministers exchanged views with EC representatives on the implementation of ACP-EU development finance cooperation and ways of improving the disbursement of resources.
Discussions will continue at upcoming meetings including on 12 May of the ACP-EC Development Finance Committee, 22-23 May meeting of ACP Chief EPA negotiators; ACP and ACP-EU Joint Ministerial meetings from 28 May-2 June; and the ACP-EU Joint Ministerial Trade Committee MTC on 28 June.
WTO negotiations deadlock – implications for EPAs (See Bridges Weekly for details on the WTO deadlock)
The WTO negotiations are in a very difficult/critical phase and will have a bearing on EPAs in terms of what will be WTO compatible in each region. In particular, the review of the WTO rules on Regional Trading Arrangements (GATT Article 24) and the issues of preference erosion and revenue loss in the context of liberalisation of agricultural and non-agricultural market access need to be addressed (an ACP Non Paper on Preference Erosion has been prepared on this). WTO negotiations on services and trade related issues have also to be considered.
Compromise lines are not emerging between the EU, US and bigger dev countries in particularly in the key focus areas of market access for agricultural products, non-agricultural market access and disciplines of agricultural subsidies. ACP support is crucial to the EU in the WTO negotiations. And without it, EC sources indicate that it would prove a difficult situation for the EU to support the ACP on the issue of preferences.
The ACP states are mostly Net Food Importing Countries, small and vulnerable economies, post conflict and post natural disaster countries. They require special and differential treatment. The ACP argue that policy space for these countries must be preserved in the context of the negotiations. Countries should be accorded realistic time frames for implementation, which need to be accompanied with technical assistance without conditionalities. And there needs to be compensation for preference erosion they maintain.
Central Africa
Central African and EC technical level negotiators met from 15-17 March in Bangui and continued with the drafting of the EPA structure and fleshing out areas of the agreement where the parties had reached a consensus. But there were very tough discussions on many areas, including the development dimension, productive capacity building and impact studies.
The first joint meeting on productive capacity building and EPA Impact was also held though discussions focussed only on the groups’ terms of reference. The group is meant to eventually analyse the challenges and opportunities for key productive sectors and put recommendations to the Committee of Negotiators and the RPTF with a view to helping prepare for future discussions on group 5.
Sources from both sides indicate that there is still fundamental divergence of views between the two parties on the political dimensions of EPAs (application of the non execution clause), how principles of the Cotonou Agreement could be integrated in the EPA and the provision of additional resources for capacity building to reinforce productive sectors. Central Africa would like a chapter of the EPA to be dedicated to this latter issue and additional resources provided, whereas the EC maintains that development issues are covered by the CPA and that sufficient funding is currently available and can be re-assessed after negotiations are completed.
The CEMAC Council of Ministers and Heads of States conference met in March in Bata (Equatorial Guinea). Discussions included on an institutional, organisational and functional audit of the CEMAC (conducted by ECDPM along with Performances Management Consulting (PMC) from Senegal). The audit made public in Bata revealed a mitigated diagnosis. If CEMAC has achieved some progresses compared to the former UDEAC, several bottlenecks remain. Amongst those, the lack of commitment to contribute to the Community budget; the lack of “esprit communautaire”; the unbalanced key positions; the lack of coherence of the institutional framework; the limited powers of the Executive Secretariat, which should play a more prominent role; and, generally, a lack of good governance. These shortcomings must be addressed for EPAs to be sustainable.
The next round of negotiations takes place at the Contact Group and Committee of Negotiators’ meetings in Brussels from 8-12 May. Discussions will assess the work of the technical level negotiations to date, try to achieve convergence of views on areas of disagreement and make proposals for the next steps in the negotiations. Recommendations will be formulated to be put to the joint Ministerial EPA negotiation session in July
Central African sources indicate that these upcoming meetings may prove a turning point in the negotiations. If the fundamental divergence of views on the key issues continues, the region may begin to consider alternative trading arrangements with the EU.
West Africa
According to West Africa's EPA road map, the region should also now be negotiating the structure and content of the EPA, but sources indicate that negotiations have stalled due to disagreement on whether these Phase II negotiations can go ahead while Phase I issues are still outstanding.
West African and EC technical experts level negotiators met from 9-11 March. The joint reports on intellectual property rights and services were virtually agreed (see below for outstanding issues). There was also a presentation by West Africa of their draft report on the impact of an EPA on productive sectors. And an exchange of views on the structure of the EPA, based on a draft text prepared by the EC.
The RPTF also met with representatives of the EU Member States, the EIB and the World Bank to share information on the recommendations formulated by negotiators and progress made by RPTF to facilitate these. Participants also reportedly worked on modalities to exchange information (donor matrix) and involve other partners in the work of the RPTF. Sources indicate that the discussion was constructive and initiated an interesting dynamic of coordination in the context of supporting EPA negotiations and implementation. In parallel to this meeting, the programming of the 10th European Development Fund was launched. The EC objective is to support the implementation of the EPA under the 10th EDF. The RPTF will contribute to establish the link between the EPA needs and the 10th EDF programming both at regional and national level.
A meeting of West Africa’s EPA Ministerial Monitoring Committee was held on 10 April to consider the status of negotiations to date and make recommendations for future negotiations with the EC. Ministers were informed that joint papers were virtually agreed at expert level on IPR and services
Ministers also considered a draft report on the EPA reference framework which examines the economic and institutional environment in West Africa and commitments that may be made by the two regions. The report reportedly stresses the necessary links between the EPA objectives, the Doha Development Agenda, the Millennium Development Goals, and NEPAD. The report will be discussed further at a workshop of key players.
Draft reports meant to serve as the basis for examining the effects of the EPA in terms of challenges and opportunities and support necessary for productive sectors in West Africa were also considered. Again, a regional workshop was requested to elaborate these.
Sources indicate that West Africa continues to insist that improvement of competitiveness and upgrading of productive sectors be included in the EPA reference framework report. The EU maintains that this is a long term job which should be done in parallel, not before Phase II negotiations begin and is the responsibility of the RPTF and not an issue to be included in EPAs. This divergence is reportedly the reason for the delay in the preparation of the report which West Africa argues should be finalised prior to the commencement of Phase II negotiations on the structure and content of EPAs.
Sources indicate that West Africa Member States see the potential of EPAs for promotion of regional integration, sustainable development and growth, addressing supply-side constraints, enhancement of economic diversification, etc., but are also concerned about the potential huge decline in government revenue when governments are highly dependent on customs duties for their revenue, the lack of negotiating capacity, lack of progress towards effective regional integration, fear of high adjustment cost at the level of the local private sector and benefits for LDC’s
Ministers, therefore, reportedly maintained calls for the provision of additional and adequate resources to meet EPA implementation-related adjustment costs and that payment of adjustment costs, particularly absorption of losses of revenue incurred as a consequence of intra- and bi-regional tariff dismantling to be considered within the framework of the EPA negotiations. The EC maintains that existing financing instruments and resources are adequate and that modalities should be examined by the RPTF.
West Africa’s EPA draft structure was also considered. Sources indicate that it includes legal aspects, the objectives and scope of the trade partnership and a section on coherence between trade and development cooperation.
Sources indicate that a major debate at the ministerial meeting was on whether to include investment and competition issues in the EPA. The regional secretariats and some Member States argued in favour as a means of attracting investment while other Member States were against saying they lack negotiating capacity and that there is a need first for a harmonised framework for investment and competition in the region on which the negotiations could be based and due to African solidarity after the June 2005 African Trade Ministers decision on the G90 in the WTO. It was agreed that the region would continue to work towards policy harmonisation for the formulation of community regulatory frameworks in preparation for eventual EPA negotiations.
Nigeria presented its impact assessment to the ministers meeting. It finds that the EPA may carry some advantages in assisting the integration of Nigeria into the global economy and paving the way for sustainable development aid reducing the cost of imports for the EU and stimulating structuring of competitive production. However, EPA implementation will likely have adjustment costs which need to be assessed before embarking on trade negotiations. Nigeria is a major economy in the region and its position will have a significant impact on the EPA negotiations. Ministers reportedly called on the countries which were yet to conduct their EPA impact assessment studies to do so within the shortest possible time A summary of the studies will be presented to the next Ministerial meeting.
ECDPM presented its study on Alternative (to) EPAs. Anglophone counties welcomed it, but most francophone countries felt EPAs are the only way forward at this time.
As we go to press (first week of May), technical experts are meeting in Brussels to see if the current deadlock in negotiations can be resolved.
SADC
At the March meeting of SADC-EC Senior Officials, SADC presented its proposed framework for the EPA negotiations between SADC and the EU (see previous issue of TNI for an outline of the SADC proposal)
The EC is currently analysing this. Sources indicate that while the proposal appears WTO compatible, it complicates the agreement by offering separate treatments for members (the TDCA may have to be “retrofitted” by lowering some of its current tariffs to accommodate BLNS (Botswana, Lesotho, Namibia and Swaziland who have a customs union with South Africa) and allow EBA market access (“Everything But Arms”) for least developed countries). There is also concern that the proposed exclusion of commitments on trade related issues (services, investment; government procurement; competition, intellectual property, etc.) will not adequately fulfil the development objectives of EPAs. The EC would have to request amended negotiating mandates (the agreement of which is always a lengthy process) for EPAs and the TDCA from the EU Member States to negotiate such an EPA agreement. Though sources indicate that while EPA negotiations may slow down a bit if new mandates are requested, once agreed, the EPAs will be relatively straightforward to adopt trade provisions of the TDCA to the EPA as SACU = trade bit of TDCA = EPA.
Southern African sources also indicate that incorporating SACU into the TDCA could be done almost immediately, but achieving a single EU deal with other SADC countries could be complex and would take more time.
Work is also continuing in the region. The SADC EPA Technical Team meetings were held in April on market access, rues of origin, trade facilitation and the TDCA.
A joint Senior Officials level meeting will be held on 18 May to agree on the approach ahead of a Ministerial level meeting scheduled for mid-May.
In related news, a meeting of the Ministers of COMESA, EAC and SADC responsible for Economic Partnership Agreements (EPA) negotiations, met on 16th March and adopted joint communiqué on EPAs to harmonise their negotiating positions for the EPAs, external trade matters and implementation of common programmes
File Name: EPAs-ESA-SADC-EAC-Communique 0306 (make link)ESA
EC and ESA technical level negotiators (RPTF) met on 13 March to discuss market access issues. Sources indicate that draft joint reports on sanitary and phytosanitary and technical barriers to trade were agreed for further consideration. These draft texts set out the objectives, principles and areas of cooperation necessary in these areas.
ESA reportedly presented a draft paper on rules of origin which calls for simplified rules, improving the current cumulation provisions with other countries and simplified administration procedures. ESA also reiterated its preference for a change in tariff sub-heading criterion and the maintenance of the wholly obtained criterion for some products. The EC is currently reforming its rules of origin regime and will put forward proposals in the coming weeks.
Sources indicate that ESA called on the EU to provide duty and quota free market access and an adequate transition period for the establishment of a free trade area and outlined its approach to asymmetrical liberalisation in the ESA markets. There was also discussion on safeguard measures based on papers produced by both sides. The EC will formulate its position ahead of further negotiations on these issues.
The EC presented discussion texts on services (sent prior to the meeting) and informed of its work on an investment text.
Discussions continued on ESA’s proposed Fisheries Framework Agreement. Sources indicate that divergence of views continues with regard to the approach on this issue with the EC maintaining that a separate fisheries agreement is not possible and that fisheries should be dealt with as part of the EPA.
With regard to development issues, the 10 EDF programming seminar for the ESA region was held in March and was preceded by internal ESA coordination meetings involving National and Regional Authorising Officers and development experts who then met with EC negotiators. Sources indicate that ESA highlighted the need for a substantial increase in resources to cover the preparations, adjustment and implementation of EPAs. The EC, however, maintains that additional funding to the EDF and other financial instruments available to ESA countries, such as the Africa Infrastructure Fund, the Water Facility, Energy Fund and others must come from EU Member States and other donors.
An ESA Task Force of trade-legal experts met on 27-30 March and discussed the incorporation of key issues identified in negotiations into the draft EPA text including product coverage and implementation time-frames for tariff reductions, safeguard provisions and support for EPAs. The draft text prepared by the task force has been under consideration since by ESA Member States and should be presented to the May meetings of RNF and Council of ministers meeting for their consideration. It will serve as the basis for subsequent negotiations with EU.
ESA is also formulating development matrices (for the EDF and for required additional resources) which aim to illustrate the cost of constraints and adjustment requirements that would arise from commitments to implement EPAs and to provide figures as to the amount of financial resources required for this. The region is also continuing discussions on how to deal with the broader development approach to be taken in the EPA negotiations (whether to seek to have these included in the EPA or deal with them in parallel to that framework). These issues will be discussed at the May Council meetings and will provide the basis to negotiate EPA support with the EC.
As we go to press (first week of May), meetings are about to take place of the RNF and joint senior officials and ministerial level negotiations to further consider all these issues.
African Trade Ministers adopt EPA declaration
African Union Trade Ministers met on 12-14 April and adopted an EPA Declaration as well as on the Doha Work Programme detailing Africa's position on these issues. A paragraph in the EPA declaration covers on development aspects/adjustment costs and takes up the ACP call for an EPA Financing Facility. This request is expected to be taken further in the ACP and ACP-EU Council of Ministers meetings from 28 May-2 June.
Caribbean
CARIFORUM and EU Principal Negotiators met in Barbados from 27-28 March. A number of issues were discussed related to approaches to trade liberalisation, identifying areas of convergence and issues requiring further discussion.
The Caribbean Regional Negotiating Machinery published the joint statement adopted after the meeting which shows that both sides acknowledged the importance of sequencing of market strengthening relative to market opening and the pace of market opening in relation to the internal and external realities facing CARIFORUM countries. Caribbean sources indicate, however, that there remains disagreement with the EC on how to achieve this. The EC is still reportedly calling for applied tariffs of CARIFORUM members to be translated into a single starting line for tariff liberalisation (formulated to take development concerns into account) as the basis for the EPA. Sources indicate that the Caribbean prefers to start from bound rather than applied rates and maintains that a single starting line is not possible due to the three integration processes being pursued at varied pace and depth in the region and which will not be completed by the 2008 start date for the EPA. The matter of CARIFORUM tariffs is further compounded by the plethora of tariffs that exist among the Caribbean Single Market Economy’s 12 countries. To implement the EC’s proposed approach ahead of the natural completion of these processes would hurt the region’s economies and regional integration efforts, sources say. There will be further talks on this.
The joint statement further says that there was a reaffirmation by the two sides that the development dimension must permeate the structure and provisions of the EPA, but further discussion is needed to make a determination on precisely how it is to be dealt with in the agreement. Caribbean sources indicate that there is still a disconnect between the development support and trade dimensions of the EPA. CARIFORUM maintains the need for trade liberalisation commitments to be contingent on the delivery of EU development funding commitments, for additional and easier accessible resources to be provided and for this to be part of the EPA. The EC maintains that it is not mandated to negotiate contingent liberalisation in the EPA and that development resources must be dealt with within existing Cotonou envelopes.
CARIFORUM also reportedly called for an agriculture chapter aimed at the transformation of the agriculture sector via increasing the competitiveness of production and agricultural safeguards to be included in the EPA. Sources indicate that EC appears open to further discussing both issues.
Discussions also continued on services and investment and trade related issues (TRI). TRI remains a serious bundle of issues in light of the EC demands for the inclusion of binding commitments on sustainable development and good governance. CARIFORUM has argued that the Cotonou provisions should suffice and in any event, the region is unwilling to assume additional commitments in fields where it has no institutional capacity. Both sides have nevertheless agreed to continue discussions on the full slate of TRI issues.A special meeting of the Joint RPTF with international donors was also held. The joint declaration states that progress had been made towards the development and implementation of studies identified by CARIFORUM in the Second Phase of EPA negotiations, but that the issue of the availability of resources and necessary technical guidelines to advance these studies continues to affect their advancement. Caribbean sources indicate that the insufficient progress in the RPTF is a major area of disappointment and that projects need to be urgently funded. The EC shares this sense of urgency and officials note that part of the delay is also on the Caribbean side.
According to CARIFORUM sources, the negotiations are on track as far as the negotiation schedule is concerned. However, after the last Principal Negotiators, the two sides are further apart in the treatment of substantive issues. But Caribbean sources say that these broader fundamental issues relating to regional integration and development support need to be resolved before anything can be formally agreed. The issue may need to be taken to a political level and there are indications that Caribbean Heads of Government may raise the issue with the EU in the margins of the May EU-LAC summit.
There was also a meeting of negotiators with Caribbean civil society in the margins of the March meetings to exchange views on the negotiations. The Caribbean Policy Development Centre (CPDC) organised a rally to coincide with the negotiations. Shantal Munroe-Knight of CPDC, says civil society is concerned that the process has not been transparent and that even though the Regional Negotiating Machinery and the EU officials agreed to meet them, the CPDC is still dissatisfied with the level of engagement. They are concerned that in the negotiations the EU’s stance will be unsympathetic to the realities of the region and the ripple impact of liberalisation policies on vulnerable sectors and groups. We want an institutionalised mechanism for the input of civil society concerns and positions. In a press conference after the meeting, EC principal negotiator Karl Falkenberg noted the stance of the protest seemed to be based on a "caricature" of the EPA, an outside perception of what the EPA was, not the substance of what was being discussed in the negotiators' meeting. However, both Falkenberg and Richard Bernal, Principal CARIFORUM negotiator, acknowledged that more avenues were needed to get the information out.
A Special Meeting of the Council for Trade and Economic Development (COTED) on External Trade Negotiations was held from April 27 to 29 and included discussions on EPAs. The CRNM reports that Caribbean Trade Ministers expressed their deep concern at the failure to date of the EU to give meaningful expression to the development dimension in ongoing CARIFORUM-EU negotiations for an Economic Partnership Agreement (EPA).
Of particular concern is the approach taken by the EU regarding tariff liberalisation in goods, the regional integration dimension, the scope and ambit of commitments in certain areas, funding the costs of EPA implementation and adjustment and, allied to this, the place of EU development support in on-going talks. On this latter point, Caribbean Trade Ministers recently expressed their deep concern at the failure to date of the EU to give meaningful expression to the development support in EPA talks. EC officials note that while it is one thing for the negotiations to have a development dimension (and the EC believe they have), the development dimensions of the agreement itself and its implementation are essential to this process.
CRNM also reports that as part of a series of in-country research and consultation missions the Caribbean Regional Negotiating Machinery (RNM) has scheduled in the first half of 2006 to assist CARIFORUM Member States in the preparation of EPA draft goods and services offers and requests, a team of RNM officials has continued with visits to a number of Member States through April, with additional visits scheduled for this month. Based on the findings of these in-country missions, the RNM will make recommendations to Member States regarding potential goods and services requests and offers to the European Union, within the EPA framework (See CRNM Update 03/05/2006).
The EU External Relations Council adopted conclusions on the EU-Caribbean Partnership
which will be formally presented to the Caribbean at the EU-Latin America-Caribbean Summit in May. They set out the scope and content of cooperation and the broad objectives of the new EU approach to its partnership with the region: shaping a political partnership based on shared values; addressing economic and environmental opportunities and vulnerabilities; and promoting social cohesion and combating poverty. Caribbean sources indicate that while the communication is not the place for the determination of the outcome of the ongoing EPA negotiations, they would have wished it to contain a commitment to front-loading assistance to enhance Caribbean states' productive capacities and competitiveness, thus preparing them for the implementation of EPA as of 1/01/2008. In particular, the region urges that the vague references to the Caribbean's Special Development Fund and to the Regional Development Fund, be translated into meaningful EU contributions to those Funds, as a means of not only supporting the Single Market and Economy, but also permitting better possibilities for deriving benefits from the entry into force of the EPA. The CARIFORUM also anticipates that the wide-ranging strategy will be accompanied by adequate financial support, commensurate with the stated ambitious commitment of the EU to increase the quantity, quality and effectiveness of its development assistance.
The third round of Technical Negotiating Groups (TNGs) is scheduled to be held in Brussels from 16-19 May. Discussions will focus on the approach to trade liberalisation in goods and services and how to fit in development co-operation in that and on investment, trade related issues and legal and institutional issues. The expectation is that in this round, discussions would seek to cement consensus on as many areas as possible, in order to produce draft texts which would be the basis for negotiations between the two sides in the latter half of 2006.
The Sixth CARIFORUM-EU Meeting of EPA Principal Negotiators is set for Santo Domingo, Dominican Republic in September 2006 to advance preparations on a draft EPA text for Ministers to consider at their meeting on 4-5 December.Pacific
With key divergences appearing at the 21-22 March Joint Technical Working Group meeting of Senior Pacific and EC Negotiators – namely over the issue of adjustment – there has been little movement in the Pacific-EPA negotiations since the last TNI EPA Update. During those late-March talks, discussions were held on, inter alia, the EPA architecture, modalities for goods and services, rules of origin, Mode 4 (mobility of labour), investment, fisheries and the EPA review mandated by the Cotonou Agreement. The adjustment discussions were held under the broader umbrella of the development dimension.
On EPA architecture, the Pacific reiterated its position, which reportedly consists of an overall framework agreement which all Pacific ACP countries would sign and a series of subsidiary agreements which would cover trade in goods, services (including tourism) fisheries and investment. On these latter subsidiary agreements, PACP country participation would be optional (depending on prevailing national interests). At the time of writing, sources suggest that Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu have indicated an interest for possible commitments in goods, while almost all PACP countries have indicated similarly for services, fisheries and investment.
The EC reportedly remains sceptical of the WTO compatibility and regional market integration, investment and economic (and therefore development) benefits of the Pacific proposal. They prefer rather an all-inclusive EPA or that the Pacific opts for EBA/GSP market access to the EU. One observer noted the EC’s repeated calls for ‘simplicity’ in approaching a Pacific-EPA. Another source close to the EC noted a degree of frustration over the current pace of the negotiations.
The key issue over which the sides reportedly diverged was that of adjustment assistance, not only to ensure compliance of new obligations, but also to ensure benefits flowing from them. Underscoring the indefinite nature of the proposed EPA as compared to the financial commitments in the Cotonou Agreement that expire in 2020, the Pacific has proposed that the Pacific-EPA contain binding commitments to provide additional resources so as to ensure the EPA acted as a true ‘tool for development’. These resources, they argued, had to be in additional to existing (or forthcoming) aid commitments (under the EU’s European Development Fund), otherwise EPA adjustment would be paid for at the expense of lower aid for schools and hospitals.
The EC response to these proposals was reportedly unfavourable. They maintain that the Cotonou Agreement provides the ‘development pillar’ and that EPAs compromise the trade and economic cooperation chapter of Cotonou Agreement. In related meetings later in the week however, the EC made it clear that EPA adjustment would largely be paid for via National Indicative Programmes (NIPs) and the Regional Indicative Programme (RIP), which in addition to some EPA preparatory work, largely funds schools, roads and hospitals.
As a result of this divergence, the meeting of the Regional Preparatory Task Force was delayed until the sides could bridge their views.
While few of the Pacific countries engage in large volumes of trade with the EU, the primary concern of the region relates to their larger trading partners, Australia and New Zealand. In particular for some, is the MFN obligation (equal treatment) in the Pacific Agreement for Closer Economic Relations (PACER). In that negotiating an EPA with the EU would trigger the MFN clause for goods in PACER, many of the Pacific countries are looking closely at the net benefits that an EPA might confer.
In the meantime, technical EPA preparatory work continues. National consultations are underway on market access interests for goods, and forthcoming on investment, fisheries and the broader development dimension.
Sources indicate that another joint meeting of senior negotiators is likely on the sidelines of the June ACP Council of Ministers meeting in Papua New Guinea. Subsequently, Pacific trade officials and ministers will meet in Fiji in mid-June to follow up on these and other matters. A further Pacific-EU Joint Ministerial Meeting may also be held at the end of June, pending the ability of the two sides to gain some momentum on the key areas of divergence. Sources have also indicated that the Pacific’s draft EPA legal text could be shared at the joint meetings.
Pacific ACP Trade Officials Meeting will meet from 13-14 June and Ministers from 15-16 June in Nadi, Fiji to prepare for a joint Pacific-EU Joint Ministerial Meeting later in the second half of the year. The draft EPA legal text will be further reviewed at the joint meetings.
Copyright @ ECDPM, 2006