EPA Update
By Melissa Julian and Davina Makhan, ECDPM
This is the longer, more detailed version of the TNI EPA Update in the September-October 2006 issue of Trade Negotiations Insights
EPA Review Process Launched
In July, the ACP-EU Committee of Ambassador s agreed a joint declaration setting out the modalities and terms of reference for the implementation of the Review of the Economic Partnership Agreements (EPAs) negotiations set out in the Cotonou Agreement's Article 37.4. This article 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.” The declaration states that the review will be undertaken jointly in each of the regional EPA negotiations and include the structure, process and substance of the negotiations. It will assess what progress has been achieved on both trade and development issues and the work plan of negotiations, in order to identify any necessary measures to support the timely completion of the negotiations before the January 1st 2008 deadline for entry into force of the new arrangements or if more time is needed to effectively conduct the negotiations. The review will also identify procedures necessary to support the effective implementation of the EPAs.
The results of each review, together with inputs from the all-ACP level, shall be finalised in 2006 and presented in a consolidated document to the ACP-EU Joint Ministerial Trade Committee. The ACP-EU Council of Ministers Meeting scheduled for the first half of 2007 will consider the report of the JMTC which may include recommendations and pave the way for the finalisation of the EPA negotiations at the end of 2007.
While the review has been broadened from its initial proposal to incorporate provisions called for by ACP and EU Member States and civil society, there remains disappointment in some circles that the reviews do not specifically call for assessment of how to deal with supply side constraints and adjustment costs; that reviews are not taking place at a national level; do not call for all stakeholders to be consulted; and include no references to alternatives or development benchmarks. EU officials note, however, that the terms of reference would allow for these and that the review should be read in conjunction with Cotonou 's Article 37.6 which provides for alternative possibilities to EPAs.
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 as negotiations proceed to the final phases which will help determine EPA's development impact. Much confidence is, therefore, being put in the review process as a way to provide information for the basis of proposals to address problems arising in EPAs.
Central Africa
There has been little progress in the negotiations between Central Africa and the European Union in July and August, the main divergences being the issues of the reinforcement of production capacities and of the inclusion of financing mechanisms in the EPAs. The joint technical group met in Libreville , from the 22 to 25 July 2006 and discussed the CEMAC document on the reinforcement of production capacities.
The CEMAC stresses the importance of adopting a broad understanding of the reinforcement of production capacities, to include issues such as improving the business environment, putting in place a system of finance for SMEs, support to increase or create basic infrastructure (e.g. electricity, roads) to reduce costs of production.
To the EC, the CEMAC is adopting a far-reaching methodology which applies to issues of general economic development that are already covered by DG Development and catered for under the European Development Fund. European negotiators are thus calling for an informed exchange on sensitive products in preparation of the negotiations on market access and in combination with an analysis of appropriate accompanying measures for the EPA .
However, for the CEMAC linking the reinforcement of production capacities to market access and liberalisation is restrictive and are therefore calling for more flexibility on the part of the EC. They further point out that discussions should not be limited to products that would be in competition with European products but also include those products that have the potential to be traded. The EC have indicated that they are in full agreement that potential products need to be part of this analysis. CEMAC also wants to have included a chapter on the financing of capacities, distinct from the EDF's basket. In this context and while there hasn't been a great deal of movement in the negotiations, the CEMAC sent a letter to its European counterpart, hoping to ease out divergences through informal exchanges.
CEMAC is now waiting to hear back from the European Commission. The joint meeting of the Committee of Negotiators scheduled for September has in the meantime been postponed. Sources indicate that they will not pass on to phase III of the negotiations on market access as long as the issue of reinforcement of production capacities is not settled.
Ministers in charge of the EDF also met in Yaoundé on the 22 nd of August to discuss of the state of play of EPA negotiations and of the financing of EPAs. They requested that a meeting be held with the Ministers of Trade in order to clarify what is to be financed as well as the scope of the reinforcement of capacities.
West Africa
Since their last joint meeting in June, West Africa and the EC have had a series of informal exchanges on the EPA reference framework and the report of negotiating group 5 on the production sectors. On the latter, the EC reportedly considers that the document should not outline specific actions to be taken since the group will continue its work even after the EPA is signed. For West Africa , however, it is important that the axes of intervention be identified and has pursued work in this direction.
Concerning the EPA reference framework, it has been reported that the parties disagree on the modalities of implementation and accompanying measures, to which the EC does not want to commit additional resources. West Africa wants a specific reference to the principle of commitment, whereby West Africa and the EC would agree on dealing with this particular concern. The negotiating parties however compromised on referring to the activities of the RPTF.
The reports were finalised and submitted to the regional workshop and meeting of West African experts organised in Cotonou from the 31 st of July to the 3 rd of August. Work still needs to be done on the group 5 report, as some experts considered that it did not meet the expectations yet, notably due to a lack of analysis in the sectors of services, agriculture and manufacturing. Sources also argue that the synthesis of the different impact studies available for the region, which the April Ministerial Committee had called for, should have been carried out prior to the work of the group 5 on production sectors.
A meeting was held at the end of August of West African Ministers of Trade, Finance, Foreign Affairs and Regional Integration with the participation of representatives of the EC, the World Bank and the IMF. The agenda included an exchange of information on the EPA negotiations. It also provided an opportunity for the Regional Secretariats to discuss with Ministers the how to take development dimensions into account in negotiations and obtain an EU commitment to accompanying countries to implement the adjustment costs linked to EPAs.
The group 5 and EPA reference framework reports will be considered at the next Experts and Ministerial Monitoring Committee scheduled from the 3 rd of October till the 7 th of October, in Niamey . The meeting will be preceded by a technical meeting on investment and competition on the 28 th and 30 th of September in Niamey . The Ministerial Committee will also consider the progress of the harmonisation of the existing frameworks for investment and competition in the region. Despite divergences on whether investment issues should be incorporated in the discussions with the EC, West African Member States have indeed recognised the need for a common intra-regional framework on this particular issue that could then be used as a tool in the context of the negotiations of the EPA with the EU. ECOWAS Secretariat has also mobilised consultants to work on the definition of sensitive products at the regional level.
The RPTF will also be meeting during the same week. The meeting, which has been scheduled to enable West African countries to assess the progress made in the EPA negotiations, will be determining. There are still divergences on the composition of RPTF, with some countries concerned about the fact that they are not represented in this structure. Furthermore, the question of additional funding still needs to addressed as well as the specific role of the RPTF on this matter. West African countries have indicated that if the previous issues are not settled, they would not move to the next phase of the negotiations.
It is also expected that officials attending the meeting will discuss of the suspension of the Doha talks and assess the linkage between the WTO negotiations and the EPA negotiations and its potential impact.
A regional meeting with the civil society will also take place in Accra , from the 18 th to the 20 th of September, in collaboration with the ECOWAS Secretariat. Civil society actors have indeed requested the establishment of a better informed dialogue with the institutions responsible for the negotiations, to provide appropriate representation of non-state actors in the discussions, regular updating on progress made and ensure their involvement in the implementation of the Cotonou Agreement and the EPA at national, regional and ACP level.
Press reports indicate that Cape Verde may negotiate its own trading arrangement with the EC instead of being party to the West Africa EPA.
Southern Africa Development Community (SADC)
The EC and EU Member States continue to consider SADC's proposed framework for the EPA negotiations presented in March. There has been positive public response from the EC to some of SADC's proposals, such as associating South Africa with the SADC EPA process and thereby reinforcing the SADC regional integration process. EU Member States sources indicate that the proposal raises very complex political and economic c issues which could also set precedents for other EPA negotiations. So public details of the discussions are limited. ( For an outline of the SADC proposal and the EU's initial comments see previous EPA updates in TNI 5-2 and TNI 5-3)
An official EU response to the SADC EPA proposal is expected by the end of the year. Technical EPA negotiations are effectively on hold since the EU response will provide the point of departure for the future negotiations.
SADC continues to elaborate its EPA framework proposal and issues arising from it with a view to formulating detailed EPA negotiating positions. Discussions are focusing on national concerns in relation to tariff liberalisation transition periods, a griculture and fisheries, WTO requirements, trade related issues and development issues, including in relation to EPA financing support.
The Summit of SADC Heads of State and Government met in August made a commitment to a timeline of achieving a Free Trade Area by 2008 and a Customs Union by 2010. Heads also called for the scaling up of the implementation process for SADC integration programmes. They also called for the resolution of the issue of multiple membership in regional economic communities which is delaying progress towards deeper regional integration. The Summit approved and signed the SADC Protocol on Finance and Investment. The Summit welcomed the application of Seychelles to rejoin SADC.
The EU is also still considering a Communication from the Commission on a future EU-South Africa Strategic Partnership. The South African government has also welcomed the proposal, but says it fails to clearly distinguish what the new elements of the Strategic Partnership would be that are not already part of the framework captured in the existing TDCA. They also say a Strategic Partnership must support the EU Strategy for Africa and South Africa 's commitments to regional integration. And the Communication fails to address the difficult issue of the role of South Africa and alignment of the TDCA within the SADC-EU EPA negotiations and is also silent about the co-operation and commitment of both South Africa and the EU to the successful conclusion of the Doha Development Round in the WTO. The communication will be discussed at the South Africa-EU Cooperation Council meeting on 14 November.
East and Southern Africa (ESA)
ESA and EC EPA negotiators met at Ambassador ial/Senior Officials level in July to continue negotiations on development, fisheries, agriculture, market access and trade related issues.
Both sides agreed that there should be a development chapter in the EPA to link it to the Cotonou Agreement in addition to integrating development components throughout the EPA. ESA reiterated its call for the EC, EU Member States and other donors to provide substantial additional resources to address supply side constraints, support policy reforms and increase competitiveness of ESA productive sectors.
The parties also agreed to include a fisheries chapter in the EPA as well as dealing with market access aspects of it under trade cooperation.
Market access discussions focussed on simplifying asymmetrical rules of origin, tariff liberalisation, safeguards clauses implementation and SPS/TBT. ESA is requesting duty-free quota-free access to the EC market. ESA is also calling for a broader interpretation than the EC of WTO-compatible “substantially all trade”. On tariffs, discussions focused on transition periods, product coverage and erosion of preferences. ESA is proposing a transitional period of 25 years and 45% exclusion.
Market access and development issues in relation to agriculture were also discussed including how to deal with the effect of the EU's CAP reform and agriculture subsidies. ESA informed the EC that it intends to develop a regional agricultural policy and market with a view to negotiating regional preferences.
Discussions were launched on trade-related issues (trade facilitation, competition policy, investment promotion and intellectual property rights) and how these can deliver the development component of EPAs and where EU support may be needed to improve implementation of rules. The EC requested negotiations on public procurement, but ESA indicated that it first needs to establish rules on government procurement and build regional regulatory capacity in this field.
On services, ESA was in listening mode. The EC made a presentation on how it sees key issues in relation to services, in particular in relation to the asymmetrical implementation of commitments in line with GATS agreement.
A calendar of meetings to years' end was agreed. On 25-27 September, the ESA Technical Team will meet to consider EC comments on draft EPA texts and on 27-29 September, EPA text based negotiations will be held with ESA-EC senior officials
The ESA region developed and approved a draft EPA text. The text has since been submitted to EC to facilitate text based negotiations.
At the ESA Regional Negotiating Forum (RNF) meeting in August, the focus was on agreeing the draft EPA texts to present to the EC in September and negotiating positions in relation to development, market access, trade related issues, services, agriculture and fisheries. On development, ESA agreed to call for trade liberalisation to be contingent on meeting development benchmarks.
The RNF also discussed progress in 10 th EDF programming and financing of economic reform in the context of liberalisation and how to include this in EPAs.
The next RNF will be held in Ethiopia back to back with a meeting of ESA negotiators in November.
Caribbean
Caribbean Heads of Government met on 3 July and reaffirmed the region's commitment to the conclusion of an EPA with the EU which is supportive of the development objectives of CARIFORUM countries. They called on the EU to give practical effect to its undertaking that the EPA will support CARIFORUM market strengthening before market opening. Heads called on the EU to provide without further delay the required development support to facilitate the mutually agreed strengthening of the capacity of CARIFORUM countries to fully implement the EPA. Jamaica 's Prime Minister, Portia Simpson-Miller, in her capacity as Chairman of the Prime Ministerial Sub-Committee on External Negotiations, made clear at the meeting the region's concern that a previously common perspective on development was no longer reflected in the positions being taken by European officials in the third and detailed phase of the negotiations. The Prime Minister expressed regret that “what we understood to be a shared perspective is not being reflected in the positions now being taken by the European Commission in Phase III of the negotiations.” She noted with concern that the EC's positions imply that significant market opening commitments should be undertaken by CARIFORUM, while the EC has made no commitment to providing additional resources in the EPA for market building. She underscored that “our European negotiating counterparts have so far resisted CARIFORUM's proposals for the incorporation of binding development-related measures. This resistance is very disturbing. Even the commitments made by the EU, during Phase II of the negotiations, to assist CARIFORUM in specific areas have not yet materialised.”
At the end of July, CARIFORUM and EC negotiators met in Technical Negotiating Groups (TNGs) and made some progress in moving the detailed negotiations further forward. Discussions on customs and trade facilitation focussed on ensuring effective implementation of policies and EC support to strengthen administrative capacities to do this, including a discussion on the blockage of current Caribbean proposals for this in the RPTF. Positions diverge on EC calls for provisions on free circulation of goods in the Caribbean region. There is also divergence on EC proposals to include WTO commitments in EPAs. Discussions will continue at the September TNG.
With regard to market access, there were detailed discussions on tariff rates (EC wants applied rates used at the basis for liberalisation, the Caribbean wants bound rates), the phasing of trade liberalisation for specific products and countries (the Caribbean wants some countries to be excluded from liberalisation commitments to lessen the impact on fiscal revenues. The EC calls for a common regional schedule and claims country exclusion is not WTO compatible and would act as a disincentive to trade and investment), and on sensitive products to be excluded from liberalisation. The EC has yet to offer CARIFORUM full duty- and quota-free access, but apparently indicated that a transitional period in excess of ten years may be possible. There was also discussion on the EC's proposed single starting line for tariff liberalisation. The EC reiterated that this is a tool for market building and regional integration, not for market opening. The EC will present a paper on this ahead of the next TNG in September.
CARIFORUM tabled a working paper on agricultural market access which calls for EC support for a mechanism to formulate a regional strategy to upgrade structures to promote diversification and higher value added production to improve competitiveness and attract foreign investment. CARIFORUM also presented a working paper on Fisheries which the EC will also consider. The two sides agreed to return to these issues at the next meeting of the TNG in September.
CARIFORUM presented it own texts on SPS which included changes in relation, inter alia, to the provision of technical assistance, an early warning mechanism and the links to the WTO SPS Agreement. A joint legal text reflective of both areas and agreement and divergences is to be developed at the September meeting.
CARIFORUM provided proposed elements for the text on technical barriers to trade (TBTs) which seek to ensure collaboration to assist CARIFORUM private sector operators to meet standards required by EU operators in addition to regulatory requirements.
CARIFORUM presented its position paper which, inter alia, calls for an EC commitment to not apply safeguards, anti-dumping nor anti-subsidy measures in EC – CARIFORUM trade. The EC proposes these issues be dealt with at regional level, whereas the Caribbean says only national measures are possible. The September TNG will address the scope of the agreement in a manner.
The EC presented a non-paper outlining areas for the eventual chapter on Services in the EPA which included, inter alia, chapters on commercial presence, cross-border services, temporary presence of business natural persons and regulatory frameworks for specific sectors. CARIFORUM requested clarification on a number of areas in particular in relation to market access and national treatment. CARIFORUM outlined some of its areas of interests such as domestic regulation, subsidies and increasing information to enable services providers in the region to increase their trade with the EU.
The TNG on legal and institutional issues discussed the overall EPA institutional structure including defining the parties to the final EPA Agreement and the legal relationship between EPAs and the Cotonou Partnership Agreement to ensure synergy between the two agreements including a link between Cotonou and EPA commitments for development support and dispute settlement. The EC reportedly noted that there was work ongoing in the EU as to how best to articulate its support of EPA implementation.
Negotiators in the trade-related issue TNG discussed how to deal with development in the EPA text. They also discussed on the nature of commitments on competition policy where CARIFORUM is seeking to increase co-operation in addressing anti-competitive practices. CARIFORUM is also seeking EC support in developing intellectual property as a tool for firms in the region to improve their competitiveness. CARIFORUM continues to resist EC attempts to include language on good governance in taxation issues.
Pacific
A Joint Technical Working Group (JTWG) meeting of Pacific ACP (PACP) and EC EPA negotiators held in Brussels at the end of July had first discussions on a draft EPA text presented by the Pacific as a non-paper. The text covers inter alia, objectives and principles, the scope and development, the institutional framework, trade facilitation and promotion, agricultural development, trade in services tourism development investment protection and promotion, financial mechanisms and consultation and dispute resolution. Pacific representatives reiterated their call for additional financial resources to be provided for the adjustments that would be required from undertaking an EPA with the EU to enable them to benefit from EPAs and for trade rules to be development oriented. 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.
The EC maintained its position that it was a fallacy to see EPAs basically as cost factor instead of seeing it as a necessary investment in coping with globalisation and as a wealth creating factor in its own right. If EPA helped improving the investment climate in the Pacific, market access conditions for exporters and transportation services this would help directly economic growth, employment and public revenue. Development funding issues could not be included in the EPA itself since ACP and EU agreed this aspect within the Cotonou Agreement. The EC called on the Pacific to establish the Regional Preparatory Task Force as quickly as possible. This was important to ensure a close link between development cooperation under the EDF or other facilities and trade - particularly in view of the already ongoing programming of the new allocations under the 10 th EDF. Any additional funding, if needed, would have to come from EU Member States or other donors, an issue currently being explored in Brussels . However, it had to be noted that the regional envelope for the Pacific had been increased by 120 % over the last EDF. There was no reason to believe that it could not cover the needs in the foreseeable future. Any adjustment costs would be small in all likelihood in view of very limited trade flows between the partners and the transition periods as envisaged by the Pacific. It was legally impossible to provide now binding commitments for the time beyond the 2020 expiry of the Cotonou Agreement but the EC had recently demonstrated its long term commitment by tabling its Pacific strategy.
There was also an initial exchange of views on more favourable Pacific market access for goods to the EU. The EC agreed on the importance of this issue which was up for negotiations which would also comprise a review of the rules of origin. As concerned the temporary movement of labour the EC indicated that the ambitious requests by the Pacific in this area were logical since several of the small states because of their size were unable to develop a productive sector and would need remittances. However, this matter needed further internal consideration on the EC side. This will also be the case with PACP requests for free movement of workers between the Pacific and the EU.
With regard to the Pacific's request for a separate Fisheries Partnership Agreement, the EC maintains that it does still not see the need to have this as a stand alone agreement. It pointed out that it was more important to concentrate on the various issues that both partners wanted to include and only then see under which format this could be done. Many of the aspects as foreseen by the Pacific could be included within various sections of an EPA and/or within a specific chapter of the EPA. The PACP side continued to press its preference for a multilateral approach. There was agreement to have further discussions on this amongst the experts.
At this stage, it is to seek the approval in November from PACP Trade Ministers for the EPA text to be accepted as a formal negotiating text. It is possible that there will be a videoconference meeting between the PACP and EC at the end of September, at which the PACP side hopes to receive constructive feedback from the EC to the various possibilities raised in non-papers. Depending on how matters progress, there may also be a further JTWG meeting in mid-October, in conjunction with the annual Pacific Islands Forum Leaders meeting.
On 23 August, the PACP Technical Working Group on Fisheries met to consider various issues relating to fisheries in the context of the EPA. It, inter alia, reaffirmed the decision of PACP Trade Ministers for the PACPS to negotiate a Multilateral Fisheries Partnership Agreement with the EU based on a multilateral arrangement which retains the right of individual PACPS to negotiate fishing access bilaterally. Further work is being undertaken to refine detailed aspects of the region's position on fisheries prior to a meeting of PACP Fisheries and Trade Ministers planned for mid-November.
The PACP TWG on Legal, Institutional and Capacity-Building Issues also met in August to review and update the draft EPA negotiating text. The TWG identified the need for more work to be done of SPS and TBT issues of concern to the region for inclusion in the text. These and other issues will need to be worked on in the coming weeks.
The PACP Negotiating Group also met in August to consider the results of the above TWG meetings. They discussed, in particular, preliminary findings of a regional study commissioned on the costs of EPA adjustment. The completed study will be circulated to PACPS in mid-September for their consideration. The meeting once more expressed the region's concern about resources for EPA adjustment and, in that same regard, stressed the importance of creating an EPA adjustment facility to address the needs of the small and medium enterprises sector.
Pacific Island Countries negotiation of an Economic Partnership Agreement (EPA) with the European Union (EU) will be assisted with the launch of a website containing information on the Pacific Regional Economic Integration Programme (PACREIP).
The website is – www.pacreip.org .
A report on a new regional institutional framework was commissioned by the Pacific Plan Action Committee (PPAC). The aim in doing so was to present the report to Pacific Islands Forum Leaders at their October 2006 meeting, after PPAC had considered it in August 2006 in Nadi , Fiji Islands . In this report, the project team proposes significant changes to existing regional institutional arrangements. Through these changes, it envisages the creation of a framework that will facilitate further development, implementation and monitoring of the Pacific Plan. Forum Leaders agreed that “given the central role of regional organisations, a regional institutions framework that is appropriate to the development of the Pacific Plan will be established”.
Council Conclusions on an EU-Strategy for the Pacific, General Affairs, 17 July 2006