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 July-August 2006 issue of Trade Negotiations Insights
ACP take their concerns about EPAs’ development dimensions to the political level
The ACP-EU Joint Council and Ministerial Trade Committee (MTC) meetings were held on 2 and 29 June in Brussels. The continuing fundamental divergence of view between the ACP and the EC on how to ensure EPAs deliver on their development objectives, revealed in several technical level meetings with the EC at all-ACP and regional levels, was a focus of discussions between ACP and EU Member States Ministers in both meetings. These Joint Council meetings, held once a year, are the only all-ACP-EU political level forum in which ACP and EU Member States can discus, monitor and provide guidance on the implementation of the EPA negotiating mandates. EU and ACP Member States officials who attended the meetings indicate that exchanges were heated, often polemic, particularly between EC Trade Commissioner Peter Mandelson and ACP MTC Co-President Dame Billie Miller (Barbados’ Minister of Foreign Affairs and Foreign Trade). It is now apparent to Member States that further work is necessary to reach agreement on how to deliver on the development objectives of EPAs.
The ACP Council adopted a decision ahead of the meetings with the EU expressing its disappointment and apprehension with regard to how EC negotiators’ are dealing with the development component of EPAs and at the slow pace and lack of tangible progress in the EPA negotiations on critical issues. They called on the EU Council to urgently review its negotiating directives and structures to ensure the development dimension of EPAs is accorded the appropriate attention in the negotiations and in final agreement.
ACP Ministers also called on the EU to make a binding commitment for additional resources beyond the 10th European Development Fund (EDF) (with a duration to 2013, but when EPA implementation and adjustment costs will extend well beyond that date) to cover EPA related costs and for this commitment to be factored into the legal text of each EPA so that there is a direct and explicit link between the ACP commitments to reforms necessary to implement EPA and adequate donor support for reforms, capacity building, improving competitiveness and implementation of the agreements. Specifically, they called for the establishment of an additional EPA Financing Facility, to which all donors could contribute, in order to provide a more timely and effective mechanism than the EDF to deliver EPA support and which would also prevent aid resources to other crucial development areas such as education and health being diverted to trade support.
Dame Billie Miller elaborated on these decisions at the MTC (and also in a terse exchange with Commissioner Mandelson at the ACP-EU Joint Assembly the week prior to the MTC saying that only eighteen months remain before the projected conclusion of the EPA negotiations and there are major differences between the ACP and EC positions on key issues. On the timing and pace of regional integration processes, the EC is pushing for regional arrangements to be in place to sign EPAs and which could take common commitments she said, but the ACP argue this is not a realistic possibility considering that most regions have their own timetables for regional integration and consider that the negotiations should be worked around these. There was concern expressed about the perceived unwillingness from the European side to understand the economic and political difficulties the ACP face in regional integration in such a short period of time. The ACP argue that a variable geometry approach should be applied on this issue.
Co-Chair Miller also said there were differences in relation to giving tangible expression to the concept of development in an EPA espoused by EC Commissioners, but in the ACP view, not implemented by EC negotiators at a technical level. She reiterated the ACP view that to ensure economic growth and sustainable development, development should infuse all facets of an EPA and implies special and differential treatment for the ACP commensurate with their level of development, greater flexibility in the application of trade rules, enhanced and effective access to EU markets, sustained and effective trade capacity building measures and binding commitments on EU development support aimed at responding expeditiously and fully to legitimate ACP needs to address supply side constraints to negotiate and implement EPAs to make use of market access and to cope with the loss of government revenue associated with EPAs. She said the ACP fear that EPAs could become promises and expectations unfulfilled.
EC Trade Commissioner Peter Mandelson strongly refuted the allegations that the EC is not translating its political commitment to ensuring that EPAs deliver development objectives in the regional EPA negotiations. In his speech to the MTC, he reiterated the EC’s view that for EPAs to deliver on their development objectives the key is policy reform, which will increase trade, which will deliver growth, which will contribute even more than development assistance can to the ACP’s sustainable development. EPAs he said must include: carefully programmed trade liberalisation which protects fragile industries and builds competitiveness; the removal of non-tariff barriers and support to trade facilitation; the delivery of better services rules; and deeper regional integration to build viable open markets which will attract private investment. He disagreed with ACP assertions that EU goods would flood their markets or that heavy fiscal losses would be incurred with EPA trade liberalisation. Commissioner Mandelson also assured ministers that the EU will not interfere in ACP sovereign choices on geographical configuration, but said that as a party to the negotiations the EC has to avoid unworkable solutions such as ACP Member States being part of two customs unions at once. He said a common regional tariff did not need to be in place overnight and that no one is suggesting this automatically requires alignment on the lowest applied tariff in the region.
Commissioner Mandelson also said it is not possible to contractualise finance into an EPA with no end date, but that if the ACP identifies the commitments they will make in the EPAs, and their financial needs, that funding should be available. He said that EPAs are a central priority in the 0th EDF and that if there is not enough set aside for EPAs, then EU Member States and other donors will be mobilised to review the commitments before EPAs are signed. He expressed concern that the EPAs are being presented as the EU demanding ever more difficult policy choices from a reluctant and unwilling ACP stressing that joint commitments have been made in the Cotonou Agreement.
10th EDF agreedThe other major item of debate at the Joint Council, also with major implications for EPAs, was on the amount of the 10th EDF which provides development finance to the ACP for 2008-2013. EU Member States had agreed the amount for the 10th EDF after difficult political negotiations so it was effectively non-negotiable. The Joint Council agreed 23.9 billion euro for 2008-2013. The multi-annual financial framework does not specify the exact amounts for national and regional envelopes (though it does for the intra-ACP resources which are substantial). Transfers between envelopes (national, regional, intra-ACP & EIB) are also possible to allow flexibility, optimised spending and the opportunity for the ACP to table initiatives. This means increased flexibility, but perhaps less visibility of actual expenditures.
EU Member States claim this is a substantial increase to ACP funding. The ACP, however, see it as running counter not only to the EU promises made during the revision of the Cotonou Agreement (to maintain the current level of funding) but also to the 2005 ODA commitments made by EU Member States. EU Member States argue they can meet ODA commitments through bilateral increases. Another major source of concern for the ACP is the absence of any specific allocation within the 10th EDF for effective EPA implementation.
The EU adopted declarations after the meeting. On EPAs, the Council says that the gradually arising needs from the implementation of EPAs will be taken into account in the programming dialogue with the ACP on the end of term review of the 9th EDF and on the resources of the 10th EDF, covering the time period after the entry into force on 1 January 2008. Moreover, the European Union recalls its commitments to substantially increase Aid for Trade by 2010 in addition to the EDF resources.
On decommitted funds, the EU declaration states that based on a performance review in 2010 and a proposal by the EC, that the Council will consider a decision, by unanimity, on the transfer of any funds de-committed from ACP projects funded out of the 9th and previous EDFs into the reserves of the 10th EDF. Given the important development objectives pursued by EPAs, the Council will, in its consideration, also pay attention to giving further support to structural adjustment costs and other development needs in the implementation of EPAs. Projections indicate this could be 400-500 million euros that would otherwise be returned to EU Member States.
The EPA review
The Joint MTC was meant to launch the EPA review set out in the Cotonou Agreement’s Article 37.4 which states that “ The Parties will regularly review the progress of the preparations and negotiations and, will in 2006 carry out a formal and comprehensive review of the arrangements planned for all countries to ensure that no further time is needed for preparations or negotiations.” But divergence of views between the two sides on the review process and how to interpret “comprehensive review” led Ministers to mandate the ACP-EU Committee of Ambassadors to clarify the modalities and agree terms of reference for the implementation of the review. The ACP had presented to the 2 June Joint Council its position that the review should be all inclusive, consultative and should be conducted at national and regional levels. The results should be consolidated and discussed at all-ACP level before the commencement of the joint ACP-EU review. The review should include, inter alia, the structure, process and substance of the negotiations, the trade and development dimensions, as well as the capacity and preparedness to conclude EPAs and also include an assessment of measures necessary to support the achievement of positive results and to ensure effective implementation of the agreements and of whether further time is needed for preparation or negotiations. Development benchmarks should also be developed to assist the exercise, and in the negotiations as a whole, according to the ACP.
The draft joint conclusions presented to the MTC meeting called for the review to assess the structure, process and substance of the negotiations. They also called for the review to assess progress on trade and development issues, the work plan of the negotiations (to assess whether further time is needed) and to identify measures to support timely completion. The regional reviews would be consolidated and discussed at the Joint Ministerial Trade Committee in the first quarter of 2007. A Joint ACP-EU Ministerial level meeting on EPAs would then be convened to consider the recommendations. Once the terms of reference are agreed, technical level officials will start the review process.
What’s Next?
The tensions currently revolving around EPAs arise from their potential to be powerful tools for development, their possible negative impact and uncertainties about their actual content. EPA details will soon emerge which will permit a real assessment. The EU is actively looking at how to address ACP concerns. Much confidence is being put in the review process as a way to provide information for the basis of proposals to address problems arising in EPAs. The review will help move EPAs up national political agendas. It will provide the basis for a coordinated EU, multi-donor, approach to EPA support. Informal technical level meetings amongst some EU Member States and ACP negotiators and Member States are already discussing practical ways to ensure the development focus of EPAs (through the RPTFs, 10th EDF, EPA adjustment facilities and EU Member States’ governments programming) to look at how to most effectively support capacity building for ACP on trade as part of overall national and regional development strategies. The EU is committed to monitoring EPAs for development objectives, increasing aid effectiveness, including donor coordination. The EC is pushing EU Member States to discuss synergies between Aid for Trade and EPA development support processes. EPA support provides an opportunity for the EC and the EU Member States to translate those commitments into concrete actions.
Central Africa
The Joint Central Africa-EC Committee of Negotiators (senior officials) met in Brussels on 12 May. Negotiations focussed on the elaboration of the draft EPA structure and its key concepts. The draft structure includes sections relating to the principles and objectives of the EPA; regional integration objectives and actors; an investment framework; competition policy; public procurement rules; reinforcing and levelling-up capacities; trade in goods; trade in services; trade-related areas; and institutional issues.
There was broad agreement reached on most of the draft structure. Officials requested their experts to continue discussions to agree on texts, focussing in particular in areas where there is continuing divergence of views. On 1-2 June, technical level negotiators from the two sides met to carry on with this work.
There remains work to be done to build consensus in a number of areas. The EC is seeking detailed clarification of Central African proposals to include financing mechanisms in the EPA for regional integration institutions’ capacity building, for reinforcing and levelling-up production capacities and infrastructure in key areas (such as agriculture, fisheries, industrial goods, tourism, natural resources and other areas of cooperation ). On financing of the institutions responsible for implementing EPAs, the EC prefers to integrate this discussion once the overall institutional framework has been agreed.
Central Africa continues to object to EC proposals to include references to essential elements of the Cotonou Agreement (human rights, democracy and the rule of law) and to good governance, a fundamental element of Cotonou.
Both sides presented papers on how to reinforce production and EPA implementation capacities. The documents need to be further elaborated but provide the basis for further discussion on these issues.
The EC also presented actual draft EPA texts to the meeting. Central Africa will examine these after the EPA structure and key concepts are agreed.
Sources indicate that Central Africa is slowing down negotiations until there is agreement on the issue of how to include reinforcement of capacities in the EPA text.
The technical negotiators’ meeting was followed by a joint meeting of negotiating Group 5 on reinforcing and levelling-up capacities. The two sides discussed the draft text from Central Africa on the terms of reference for this group. Central Africa also elaborated its view on what reinforcing capacity entails and on how to identify and implement support to production sectors - improving the business environment, putting in place a system of finance for SMEs, support to increase or create basic infrastructure to reduce costs of production and the battle against poverty and support for budget adjustment and compensation measures linked to the implementation of EPAs. Central Africa wants these issues included in the EPA text.
The EC said it was agreed that the group should evaluate opportunities and risks in production sectors in relation to EPA impact, but that support for this is to be dealt with in the RPTF (and could also be dealt with in the 10th EDF programming process).
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The EC argued that a more effective way to proceed is to analyse and further define criteria to identify sensitive sectors, to exchange on how these sectors should be treated down the line in future market access issues, and to look at the types of corresponding support necessary to provide support for these sectors. Once sensitive sectors and the approach to liberalisation is identified, then the opportunities and risks of the EPA will become clearer. The EC presented a document on how these issues could be tackled in the run up to market access discussions in the autumn.With regard to the fiscal impact of EPAs, the EU said that it was ready to discuss this at the next committee of negotiators. This discussion would be better informed if some of the work set out above had been carried out.
Central Africa called for the terms of reference of Group 5 to be agreed before actual negotiations begin in the group.
The next joint technical group meeting will be held on 22 July in Lambarene, Gabon and will further examine these issues and elaborate further on key concepts. The next joint meeting of the Committee of Negotiators is scheduled to be held in September to prepare for an eventual Joint Ministerial meeting before the end of the year.
West Africa
West African and EC technical level negotiators met from 2-4 May in Brussels. West Africa presented the report of its April EPA Ministerial Monitoring Committee meeting which noted the progress achieved in negotiations on intellectual property rights and services (negotiating groups 3 and 4) (there is already agreement in negotiating groups 1 and 2 on customs unions and technical barriers to trade). But Ministers had also noted that there is still work to be completed in negotiating group 5 on production sectors and on the EPA reference framework. Work in all areas must be completed before the next phase of negotiations on EPA texts can begin. The EC noted its concern with regard to the delay in the negotiating timetable and potential impact this has on the timely conclusion of EPA negotiations. Both sides agreed to continue working with a view to finalising reports. The EC will also continue working on a draft EPA text so that negotiations on this can advance rapidly when they are started.
Discussions on intellectual property rights and services led to the virtual agreement of the joint reports in these areas.
West Africa also put forward a revised version of the draft report of group 5 which looks at the current situation (policies and capacities), constraints and potential in various production sectors, including the agriculture, fisheries and industrial sectors. For each sector, the report outlines the opportunities, challenges and risks in relation to EPA implementation and sets out programmes of priority actions to increase production capacity and to be included in EPAs. EC comments on the draft report focused on how to use its conclusions to define negotiating positions on market access questions and implementation programmes. The EC said West Africa should analyse specific products with a view to formulating a list of sensitive products. The EC stressed that the conclusions in the report are not binding on the two parties, though it is ready to help work on these issues in the RPTF and finds they will be useful in programming the 10th EDF. West Africa insists that the report must be eventually jointly adopted and included in the EPA reference framework together with the other agreed negotiating groups’ reports.
West Africa also presented a draft report on an EPA reference framework which covers the state of regional integration and includes chapters on increasing competitiveness and reinforcement of capacity and on modalities for implementation and mobilisation of resources for EPAs. The EC gave its first comments on the draft report which were generally positive, but said that the chapter on modalities for implementation and resource mobilisation could not be included in the report as this is an issue to be covered by the Cotonou Agreement’s development cooperation finance and in particular in the programming of the 10th EDF. The EC said it could be possible to examine the possibility of including a chapter in the framework report which summarises the work of the RPTF. West Africa insists that EPAs must include development cooperation finance provisions. The EC will give detailed comments on the draft report ahead of the next meeting.
West Africa also presented a draft EPA structure based on the text presented by the EC in March though there can be no real discussion on this until negotiations on the issues above are completed.
The two parties agreed to start preparing in September for a joint report to be the basis for Article 37.4 EPA review to examine state of advancement of negotiations and see what is needed for their timely and effective completion.
EC and West African technical level negotiators then held an informal meeting in Lome from 31 May-2 June to discuss West Africa’s revised draft reports of group 5 on productions sectors and on the EPA reference framework. The meeting followed a series of informal telephone and e-mail exchanges between the two sides on these issues.
There is reportedly no major divergence of views with regard to the situation and potential of production sectors in the group 5 report. The EC considered it to be a good basis for the work of group 5. There is, however, further work necessary with regard to the definition of sensitive products. There is agreement to define them using tariff line criteria to determine which would negatively impact on development and trade if trade is liberalised with the EU, and also to include as sensitive products those not now traded, but which have the potential to be. Its up to each side to define its own lists of sensitive products (these cannot be jointly agreed).
Further discussion is also needed to determine how to insert the conclusions of impact studies into the eventual production capacity report and how to insert the final report into the overall EPA framework report. The EU argues that the report cannot be included in the joint EPA framework report because the EC was not involved in nor have they seen the impact studies which form the basis of the group 5 report. West Africa will redraft the text for re-submission to the EC.
There is broad consensus on some chapters of the draft EPA reference framework report, including on increasing regional integration and the socio-economic environment. But divergence of view remains on how to include the development finance dimension in the reference framework report. West Africa wants to include a chapter on modalities for implementation and mobilisation of resources for EPAs and that the role of the RPTF should be included here as the body responsible to make recommendations and find financing for this. West Africa continues to insist on the need for sufficient resources to help with adjustment costs linked to EPA implementation and finance for increasing competitiveness.
The EC position reportedly calls for negotiators’ recommendations to distinguish between those that refer to questions relating to market access and investment attraction (which can be negotiated and included in an EPA) and those which relate to financial support for increasing competitiveness of production sectors (which cannot be included in an EPA, though reference could be made to the need for support from the RPTF in the EPA reference Framework report). Those parts of the group 5 report which could eventually be included in an EPA should be inserted in the relevant chapters of the report of the EPA reference framework. The EC said many of the recommendations in the report will also be achieved through better economic governance in the region which is the aim of EPAs. Finally, they said recommendations on the modalities of the implementation seems premature in this stage of negotiations and cannot be included in report.
With regard to the chapter in the EPA reference framework on opportunities to increase competitiveness, this cannot be finalised until work of group 5 is done. The EC noted that it regrets that so far it does not include the essential condition of reforming institutions and governance to make a favourable environment and implementation of this which is the principle problem.
The two sides agreed that the West African side would redraft to define objectives and modalities in these areas ahead of a regional workshops to be held with West African Member States experts on 31 July – 2 August to discuss the draft report of group 5 on production sectors and the EPA reference framework (a meeting of the West African side of group 5 will be held on 10-12 July prior to the workshop. A joint informal West Africa-EC meeting could be held in the 3rd week of July. The EC then will also present a draft EPA text, but West Africa will not examine it until the other areas are worked out. A joint senior officials meeting could be held in early September if things have advanced far enough. A Joint Ministerial Follow Up Committee could then be held at the end of September in Niamey to assess progress in negotiations. West Africa has requested that both Commissioners Mandelson and Michel attend this meeting. If this meeting is successful, negotiations on detailed EPA texts can then begin.
Southern Africa Development Community (SADC)
The EC and EU Member States are still considering the SADC framework for the EPA negotiations, presented by SADC in March. The proposal calls for the negotiation of an EPA including South Africa and offering contractualised EBA (everything but arms, i.e. duty free / quota free non-reciprocal) market access to Mozambique, Angola and Tanzania and the exclusion of trade related issues from the negotiations. EU Member States sources indicate that the proposal raises very complex political and economic issues which could also set precedents for other EPA negotiations. Particular concerns relate to increased market access vis-à-vis South Africa; the exclusion of rules discussions when these are seen as the key development aspect of EPAs; the WTO compatibility of EBA contractualisation; and the impact on regional integration and on LDCs in particular. The EU aims to reply to SADC within the coming months . Technical EPA negotiations are effectively on hold since the EU reply will provide the point of departure for future negotiations (though there was one informal senior officials level discussion with the EC on the proposals on 18 May).
SADC Member States also continue to elaborate the framework proposal and issues arising from it with a view to developing detailed EPA negotiating positions. Discussions in the region focus also on the political, legal, economic and regional integration implications of a differentiated tariff liberalisation which includes its powerful South African neighbour and the exclusion of trade rules. There are also implications in relation to EC development support through the 10th EDF intended to promote regional integration. Indeed SADC sources indicate that they are only just now beginning to examine EPA development issues in detail, constrained to date by serious capacity constraints especially in the regional secretariat which to date have been focussed on the trade negotiations with the US and are only now really beginning to focus on EPA negotiations. The region hopes to have some concrete proposals on the table in August.
The next Ministerial Meeting should be expected as soon as there is a response from the Commission and all the necessary consultations have been done on the basis of the work currently ongoing.
The EC adopted communications entitled Towards an EU-South Africa Strategic Partnership and Orientation to the Commission for the revision of the Agreement on Trade, Development and Cooperation between the European Community and its Member States and the Republic of South Africa.
East and Southern Africa (ESA)
ESA Ministers met on 15 May in Kigali (preceded by a Regional Negotiating Forum (RNF) meeting). Ministers noted the progress on a draft EPA text, which is still to be improved with inputs from National Development and Trade Policy Forums (NDTPFs) as well dedicated sessions on specific issues. They noted that the EPA related workload is becoming heavier and the national capacity is increasingly becoming overstretched negatively affecting the ability of these Member States to prepare their EPA positions and called for EU support to be provided to address this. The chapters of the draft text, which will serve as the basis for ESA’s EPA negotiations with the EC, include:
-General provisions
-Trade cooperation in goods trade
-Trade related issues
-Trade in services
-Fisheries
-Trade and economic development cooperation,(agriculture, infrastructure, industry, social and human development)
-Development finance cooperation
-Institutional and final provisions
-AnnexesThe development components of the EPA are a priority for ESA. They are calling for a more effective use of existing resources and additional resources to be provided to cover EPA adjustment related costs. ESA is developing a regional development matrix and linking this to the 10th EDF programming process. Ministers reiterated the need to continue to press for additional resources to be provided to address the needs that would arise from the implementation of the EPA. On 19-20 June, an ESA dedicated session on development was held in Kampala to continue these discussions and work towards the finalisation of ESA’s development positions, the development matrix and see strategies in relation to the 10th EDF programming.
Progress of negotiations on fisheries has been slow due to divergences on both the content and status of the Fisheries Framework agreement which has been presented to the EC by ESA. Council exchanged views on options to be explored such as integrating the fisheries cluster into an EPA or maintaining it as a standalone arrangement. Ministers agreed that a dedicated session on fisheries should be held to further consider the draft Fisheries Development Framework
Progress has been achieved on negotiations on SPS and TBT, with working joint texts on these areas developed. The ESA region had submitted papers to the EC on rules of origin, tariffs and safeguards and was awaiting comments from the EC. ESA continues to define its positions on definition of “substantially all trade”, tariff phase down periods, rules of origin, SPS, TBT issues, sensitive products and safeguards. Sources report that the EC has indicated that they have commercial interests in ESA markets and will submit a paper on this.
On agriculture, the ESA region had presented a paper to the EC and is awaiting their response. One major concern for the region is the erosion of preferences, especially with regard to agricultural products. Ministers decided that a joint dedicated session on agriculture and market access should be held to further clarify outstanding issues.
The ESA mandate stresses the need to ensure increased co-operation in trade related areas and enhanced capacity building and technical assistance. The region has held one dedicated session on these issues last year and the outcome and some of the main elements had been discussed by the RNF. ESA held the second session in Kampala 21-23 June 2006 to further elaborate and develop its positions on the cluster.
COMESA is undertaking a major exercise to come up with a regional framework which could be used as the basis for services negotiations with the EU. A dedicated session is planned for July/August 2006. The EU reportedly has offensive positions in the area of trade in services and has already presented a non-paper on services.
The main focus for ESA to the end of this year is to prepare for and engage in text-based negotiations with the EU at both ambassadorial and ministerial levels. This process is likely to be completed towards year’s end and can be then negotiated with the EC.
On 17-19 July, COMESA will organise a high level consultative meeting on Financing of economic reform in the context of liberalisation and a separate meeting of the NAOs/RAOs and Ministers of Trade to discuss EPAs and 10th EDF programming, to consider the intervention areas to be included in the proposed RSP and discuss concrete way forward to ensure national and regional levels coherence,
especially in the context of the national and regional level programming.ESA and the EC are scheduled will hold an EPA negotiating session in Brussels 24-27 July 2006
The next meeting of the ESA RNF will be held in Khartoum from 19-24 August 2006)
A tentative schedule of meetings until the end of the year includes the following:
18-20 September - ESA Technical team meeting to consider EC comments on draft EPA text Mombassa and 22-30 September Text based negotiations ESA-EC senior official [on the draft EPA text]
15 October Workshop for private sector and civil society Malawi
1-2 November 9th RNF Djibouti
3-4 November ESA Ministers prep for text based negotiations Djibouti
4-5 November Text based ministerial negotiations ESA -EC Ministers Council Djibouti
Caribbean
Caribbean and EC technical negotiators met on 19 May in Brussels. Negotiations focused on market access (goods and agriculture), services and investment, trade-related issues, and legal and institutional issues. The objective was to achieve a consensus in as many areas as possible, in order to produce draft texts for negotiation in the latter half of this year. The EC maintains that negotiations are proceeding well. Caribbean sources, however, indicate that there was continued and increased divergence in positions on key issues due to differences in an understanding of development and proposed development solutions. The areas of divergence include: in relation to sequencing of market strengthening relative to market opening and the pace of market opening and the need for variable geometry; the extent to which Europe will assist the adjustment of the regions economies; and how the development dimensions should permeate the structure and provisions of the EPA. Caribbean sources also indicate that in other areas (not discussed in the latest round of meetings) there also remains divergence of views. For example in the proportion of trade and the economic space that an EPA would cover; the length of the phase in period for the region’s more developed and less developed countries; to the direct loss of revenue and the removal of customs duties and the consequent impact this will have on government’s social programmes; and on binding commitments on sustainable development and good governance.
Caribbean officials, starting at the highest levels (Heads of Government) are now saying publicly in various EU-ACP fora that EPA negotiations in the region have reached a critical juncture and that with just six negotiating months to go there is a possibility that the next and final phase of negotiations may stall. Dame Billie Miller, Barbados’ Minister of Foreign Affairs and Foreign Trade, has said that alternative WTO compatible arrangements which will facilitate the continuation of trade and development cooperation may have to be arrived at to be in place in time for when the WTO waiver on the Cotonou Agreement expires on December 31 2007. Dame Miller is also the Co-Chair of the ACP-EU Ministerial Trade Committee and the comments she made there reported on above also apply directly to the Caribbean EPA negotiations. As indeed do the comments made by Commissioner Mandelson in reply in that fora.
Caribbean Foreign Ministers say there is an absolute need for the EC to prioritise the commitment of resources for EPA related projects and are making the development dimension of EPAs a deal breaker in the overall negotiations.
According to the figures politically involved in the negotiations, “European Heads of Government, Cabinet Ministers and Commissioners must now be told that …the EC (must) address supply side constraints and trade capacity measures before the region undertakes any further trade liberalisation”.
And they have taken this message to the political level (see earlier comments in relation to the ACP-EU Joint Council and Joint Ministerial Trade Committee) at the EU-Caribbean Summit in Vienna in May. In the Joint Declaration signed at the end of the Summit both Parties confirmed: “their desire that the Economic Partnership Agreements negotiations between the EU and the countries of the Caribbean, with the development dimension being an integral part of those Agreements, proceed at a good pace and they also agreed to follow closely the future EDF, aimed at providing adequate funding to adjust to the reforms introduced.”
EU sources indicate that they do not think that there is increased divergence in the regional negotiations despite the increased political statements. They argue that the EC is in fact supporting institutional capacity building now and plans to increase this in future via the 10th EDF which should focus on regional integration and EPA implementation. This, plus the expected benefits that will arise from EPAs’ trade rules and the asymmetrical liberalisation proposed should be sufficient to support to ACP needs and to avoid unsustainable tariff revenue losses at least up until 2013.
Technical level preparations continue with the region focused on national level market access preparations (via a series of CRNM Country Missions) and Technical Working Group Meetings on EPA trade related issues and on EPA Services and Investment.
The CRNM, in partnership with Friedrich Ebert Stiftung (FES), also hosted a workshop in June in Kingston that brought together approximately forty participants from civil society organizations and community groups in Jamaica providing an opportunity for the RNM to receive the perspective of civil society on, among other things, recommendations on the development agenda of an EPA.
Next meetings:
25-28 July - CARIFORUM-EU Technical Negotiating Sessions and maybe RPTF too in Jamaica
Pacific
Pacific ACP Trade (PACP) Ministers met in Nadi Fiji from 19 to 20 June to discuss a range of EPA-related issues as well as recommendations on a way forward proposed by Pacific ACP Trade Officials who had met prior to the Ministerial meeting. Ministers considered a series of papers from the Pacific Islands Forum Secretariat on various issues. The papers on trade in goods and services outlined draft modalities for negotiating, preparation of PACPs demands and offers, rules of origin, PACP proposals on trade in services and a proposed tourism partnership agreement.
Ministers also considered papers on a possible Fisheries Partnership Agreement (FPA) with the EC, on investment and financial instruments and on development related issues. With regard to the latter, Ministers maintained their call for additional financial resources to be provided for the adjustments that will be required from undertaking an EPA with the EU to enable them to benefit from EPAs. A study has been commissioned on the adjustment costs to PACPS of concluding an EPA and that study should be considered by PACP Ministers in the next few months. Ministers also called for trade rules to be development oriented (for example to provide asymmetrical tariff liberalisation, longer transition periods, special product coverage, etc.). They called for all this to be included as binding commitments within the EPA. They also called for effective mechanisms for delivering assistance and specifically for a separate and additional EPA financing instrument.
Ministers also considered the draft EPA legal text which includes chapters on trade facilitation, agricultural development, investment promotion and protection, and trade related issues. The PACPS call for the EPA architecture to be flexible in order to accommodate the interests of all PACPS, not all of which would probably be able to participate in all aspects of an EPA, at least in the beginning.
Sources indicate that the EC would be open to consider the specific situation of the Pacific where a number of countries, due to their size and remoteness, do not trade with the EU and hence have no interest in a goods agreement. While a possible goods agreement could, therefore, only involve a selection of countries, all other issues, including services, fisheries, investment, etc. would be in a joint EPA text where sufficient flexibilities would be provided to accommodate for the particularities of individual countries. The EC also maintains its position that it can not include development finance in the EPA itself since ACP and EU agreed this aspect within the Cotonou Agreement. Any additional funding, if needed, would have to come from Member States or other donors. Discussing this would be the role of the Regional Preparatory Task Force agreed in the EPA roadmap with the Pacific (but still to be established). The EC has also indicated that it is difficult to see the logic of focussing on funding for unspecified adjustment needs in view of the desire to have long transition periods before any market opening takes place and the minimal trade flows between the partners. It is of the opinion that the development dimension of EPA goes beyond the sole issue of funding and covers in particular gradual opening of markets, enhanced competitiveness, better integration into regional and world markets and good governance.
Ministers also considered a paper on alternatives to an EPAs. The PACP States are still considering the possible establishment of a Regional Preparatory Task Force (RPTF) and how it might effectively address the development concerns of the PACPS in the EPA.
All the papers, when finalised after national consultations, will serve as the basis for PACPS’ negotiating positions for discussions with the EU.
The EC adopted a Communication on EU relations with the Pacific Islands - a strategy for a strengthened partnership. This follows similar communications already adopted for Africa and the Caribbean.
On 19 July, Pacific and EC negotiators will meet as a joint technical working group to discuss draft EPA frameworks and other technical issues. The Pacific aims to agree its detailed texts by September in order to start formal negotiations with the EC in the autumn.
Copyright @ ECDPM, 2006