EPA Update
By Melissa Julian, ECDPM
This is the longer, more detailed version of the TNI EPA Update in the May - June 2007 issue of Trade Negotiations Insights
Summary
*EU Market Access Offers on the Negotiating Table, But Much Remains to be Clarified
*ACP Offers Remain Elusive
*EPA Texts Also Being Negotiated
*West Africa (ECOWAS)
*Central Africa (CEMAC)
*Southern Africa Development Community (SADC)
*Eastern and Southern Africa (ESA)
*Caribbean (CARIFORUM)
*Pacific
EU Market Access Offers on the Negotiating Table, But Much Remains to be Clarified
Having re-confirmed in February the objective of agreeing development-oriented EPAs before the expiry of the WTO waiver protecting existing trade ACP-EU arrangements, ACP and EU EPA negotiators met in March and April to work towards agreements on EPA texts, market access schedules and accompanying programmes.
In April, the EC proposed a market access offer consisting of duty-free, quota-free treatment for all ACP imports. This treatment would apply from entry into force of EPAs for all products except for sugar and rice. For these two products, duty-free, quota-free treatment would be phased in over a transition period. The only exception will be South Africa where a number of globally competitive products will continue to pay import duties. However, several EU Member States object to the EC offer which they argue will undermine EU producers. The German EU Presidency indicates that it will continue to work towards reaching a common position on the proposals.
The EC also tabled its services market access offer in some ACP regions' negotiations. No EU Member State has objected to the offer, but negotiated deals must be approved unanimously by the EU Council. This may prove a challenge considering the current difficulties in reaching agreement on intra-EU services trade.
The EC says it will make an ambitious Mode IV (movement of persons) offer to the ACP. There are few details, but it could be linked to the broader EU debate on migration and development where the EC will present proposals to better organise legal migration between the EU and third countries.
The ACP are considering the EC offers in regional EPA negotiations. Most initial reactions welcome the goods offer, but some are concerned about the impact on sugar, bananas and rice producers. The ACP also call for clarity in a number of areas to take advantage of market access provided. One is the precise length of ACP market access liberalisation transition periods, product coverage and exclusions of certain sensitive products that the EU will grant. The EC has said transition periods could run up to 25 years on some specific products and there can be exclusion for sensitive products, but the German EU Presidency says there can be long delays in only “very exceptional cases for very sensitive products”. The EC says it can provide more specific concessions only when ACP offers are put on the table.
The ACP also request clarity on the EPA rules of origin that will be used to determine what proportion of imported materials they are allowed to use in manufacturing goods which are then exported to the EU. The EC circulated a draft legal framework to allow negotiations on this issue to begin. It is based around the “value added” system . Many ACP regions may prefer the Change in Tariff Heading approach be used as the basis for rules of origin.
Finally, the ACP also want more clarity on the development support that will be available to help exporters meet EU health and safety standards and labelling requirements to be able to use market access. The ACP are calling for the provision of additional and legally binding financial commitments through regional funds to be included in EPAs. The EC say increased and sufficient money is available in the 10 th EDF and that EU Member States have made additional Official Development Assistance (ODA) and Aid for Trade commitments which must be allocated in line with national ACP strategies. They maintain that no financial protocol can be included in the EPA as this is already included in the Cotonou Agreement. They say they cannot be more specific on the amount and type of capacity building support until ACP liberalisation commitments are taken which will determine where support will be needed.
ACP regions continue work on the difficult process of establishing their market access offers to the EC. Some regions still have much work to do at a technical level, but even in regions which are technically well prepared, political issues remain between Member States, within governments and between governments and the private sector and civil society and regional integration organisations.
EPA Texts Also Being Negotiated
The EC has also put a draft EPA text on negotiating tables. It includes, inter alia, agriculture and fisheries; trade in goods; trade defence instruments; non-tariff measures; customs and trade facilitation; technical barriers to trade and sanitary and phytosanitary measures; trade in services; trade related issues and institutional provisions. Some ACP regions have also tabled draft EPA texts.
Negotiations on the text have begun and the two sides are hoping to reach agreements in as many areas as possible and are also considering ways to agree WTO compatible texts within the end of year deadline which would allow for phased commitments in services and trade related issues and a flexible set of methods to monitor the implementation of EPAs and the impacts of key policies and measures related to EPAs with regards to development goals.
EC and West African technical level EPA negotiators held two rounds of negotiations, including meetings of the Regional Preparatory Task Force (RPTF), in March and April.
The EC presented its market access offer in goods and papers on rules of origin and aid for trade. West Africa continues to work on its market access offer looking in particular at elaboration of a Common External Tariff for ECOWAS, the overall regional tariff liberalisation schedules in goods and services, sensitive products, rules or origin, fiscal impacts and safeguard measures. The EC noted that it hopes the West African offer can be presented in June with liberalisation scenarios per band and comprising a list of products covered and to exclude in liberalisation so that detailed negotiations can begin.
West Africa presented the revised draft EPA structure, already amended by the EC and most of the text was agreed. It was also agreed that this text, together with the draft EPA text presented by the EC, will guide the work on drafting EPA texts.
Terms of Reference were agreed for regional studies on establishing a regional EPA fund, levelling up industries and fiscal impact (using a general equilibrium model). An exchange of views on programmes to level up industries focussed on sectors of production and the objectives of deepening analysis of the impact of an EPA on sectors of production and services, including fiscal aspects. Work on this should contribute to negotiations on market access, notably in relation to the definition of liberation calendars for sensitive or strategic products and to determine transition periods.
CEMAC and EC technical level negotiators met at the end of March. On market access, the EC informed that its market access offers for goods and services would be tabled soon (they subsequently were). The CEMAC goods market access offer is still being elaborated. CEMAC is conducting a services study which will provide clarity and facilitate dialogue. With regard to transition periods for EU access to CEMAC markets, the EC said that for certain particularly sensitive tariff lines, the transition period could be long.
The EC presented its rules or origin paper.
The EC assured that trade related issues will be treated in the framework of strengthening CEMAC regional integration.
The EC presented a draft EPA text. CEMAC will examine this at national level to prepare for negotiations with the EC on this
A presentation was given on the study on costs of adjustments and identification of sensitive sectors. Due to lack of available statistics, the study focussed on Cameroon and it is hoped it can be broadened to other countries in the region.
There was a first exchange of views on the establishment, management and areas of intervention of a regional EPA fund. The EC said it could be funded using the 10 th EDF and contributions form EU Member States, CEMAC Member States and other donors. CEMAC expressed concern on the modalities for the creation of the fund. The EC proposed to recruit a consultant to explore this issue further.
CEMAC indicated that it is currently preparing a capacity building programme.
The two parties agreed to examine questions on financing support for basic infrastructure in the RPTF.
It was noted that support to CEMAC negotiations is delayed and EuropeAid promised to look into this.
The two sides agreed the joint EPA review and to forward this to the ACP Committee of Ambassador s to be consolidated into the overall general ACP review document to be jointly agreed with the EU at the ACP EU Council in May.
CEMAC Heads of Government meeting in April agreed on the creation of an African Union type Commission, with a President and Commissioners, supported by a secretariat, to replace the current CEMAC structure. Heads also adopted recommendations on improving regional integration implementation.
Southern Africa Development Community (SADC)
The Southern African Development Community (SADC) Council of Ministers meeting in March focussed on implementation of the regional economic integration programme in view of the SADC Free Trade Area set for launch in 2008 and Customs Union by 2010. Ministers discussed progress in member states' negotiation of tariff reduction schedules, rules of origin, a dispute settlement mechanism, special product agreements, elimination of non tariff barriers and harmonisation of customs, trade documentation and clearance procedures. Ministers also discussed progress towards the setting up of a SADC Regional Development Fund to support implementation. The Council also discussed the sticky issue of multiple memberships of Regional Economic Communities by member states.
The South Africa Trade and Development Cooperation Agreement (TDCA) Review was launched in March. Progress has been made in negotiations and this will be presented to the meeting of the Ministerial Troika of the EU with South Africa in May to discuss establishment of a Strategic Partnership between the EU and South Africa . The TDCA-SADC EPA link is still to be discussed in the EPA negotiations.
SADC-EC EPA negotiations met at Senior and Ministerial level in April. SADC Ministers noted the EC's approach to differentiate South Africa from the rest of the group in its market access offer to SADC and reaffirmed their commitment to negotiate the EPA as a SADC EPA group. They, however, agreed that it is important to take into account the specific circumstances of member states while ensuring that the group is treated in a coherent manner. They concurred that the TDCA could be used as the basis for tariff liberalisation by Botswana, Lesotho, Namibia and Swaziland (BLNS) since they already offer de facto TDCA reciprocity by virtue of their being members of the SACU Customs Union. Due regard to their sensitivities as well as the status of Lesotho as an LDC need to be taken into account during the negotiations. Additionally, Angola , Mozambique and Tanzania are individual customs territories which should make separate market access offers to the EC in line with their individual development, financial, trade needs or institutional capacities.(all are LDCs).
Negotiators also had an initial exchange on the EC's market access is goods offer. The SADC market access offer to the EU is still under preparation.
With regards to new generation issues, SADC Ministers reiterated their position in the Framework proposal that SADC EPA member states would engage the EC in a cooperative manner aimed at developing institutional, policy and legislative infrastructure for the region. Such arrangements would not extend to negotiations or entail any substantive obligations which would be subject to dispute settlement. However, with regards to services trade, Member States, with the exception of South Africa , are willing to treat the issue differently especially when considering the crucial developmental role the sector can play in their economies.
On Development Support , it was proposed that a Regional EPA Fund be established to finance EPA related development and adjustment needs.
Eastern and Southern Africa (ESA)
ESA and EC technical level EPA officials met from 23-27 April in Lilongwe . The EC outlined its market access offer. ESA has also tabled a schedule for tariff reductions, but has not yet tabled a formal market access offer. ESA indicated that it aims in May to reach a consensus on the structure of its Common External Tariff, through COMESA, and on sensitive regional lists, offensive positions, rules of origin, safeguards and SPS and TBT issues.
Using ESA texts as the basis of negotiations, EC and ESA EPA officials were able to come up with joint, though still highly bracketed ( in areas like transition periods, implementation of market access, substantially all trade coverage, sensitive products, variable geometry, etc.) , texts on trade in goods. An understanding was reached on how to amend EPA development articles which cover development objectives, horizontal cross-sectors and sector specific language.
Officials also discussed general objectives for accompanying measures and what goes to the regional development matrix. They also had further discussions on how to include the regional development matrix in the EPA text, though this was not finally agreed. ESA continues to work on the development matrix which lists concrete development programmes with indicative time frames and costs which ESA members want to undertake. The matrix could act as a basis for demanding for additional resources from the EC and other development partners. ESA calls for the matrix to be annexed to the EPA with an article in the EPA text which gives the matrix legal standing. The EC remains reluctant to do this arguing that it would be difficult to annex a matrix that needs to be reviewed regularly. Besides, EC maintains that these are typically issues to be worked out in the Cotonou Agreement Framework and the RPTF. ESA is also still working on the content of development benchmarks that could link the liberalisation of ESA market to the EU to the achievement of development benchmarks. ESA also continues to request that a financial protocol be included in the EPA text, notwithstanding the fact that the parties had formally agreed in 2006 that this would not be possible.
There was also further discussion on rules or origin, based on an EC presentation of its legal framework document and discussion on how this fits within the all-ACP-EC negotiations on this issue.
ESA presented draft protocols on trade defence instruments based on the principle of asymmetry and on SPS requests for capacity building for the EC's consideration. The EC called for an appropriate balance between safeguards and substantially all trade to be found.
Ministers of Finance from COMESA met in April and urged the expeditious establishment of the necessary mechanisms for accessing Aid for Trade resources. The Ministers decided to establish a Unit at the COMESA Secretariat to undertake technical analysis and prepare a coherent AfT –compatible programme to access available resources.
Caribbean (CARIFORUM)
Caribbean and EC technical level negotiators met in March. The focus of the encounter was the exchange of services offers and initial discussion on these. Detailed development provisions for the EPA text were also further developed at the meeting.
Caribbean Trade Ministers met in April to discuss the implications of the EC EPA market access offer for the region and progress towards establishing the region's market access offer to the EU. Caribbean concerns relate in particular to the proposal's impact on the region's sugar and banana sectors on which they would like special consideration given in the EU EPA market access and development support offers. Caribbean Trade Ministers agreed to continue discussions on the EC proposal with a view to putting forward their formal position on it in May.
Despite quite thorough technical and political preparations, and being the furthest of the ACP in progress in the EPA negotiations, diverging views between Caribbean countries with very diverse needs continues to be the main obstacle to agreeing a regional market access offer to put to the EU. Difference relate to reciprocal trade and its impact on fiscal revenue, the amount of trade sectors' to be covered and excluded in EPAs, development support and the potential long term gains of an agreement on trade related issues.
Caribbean Trade Ministers called for a suspension of tariff liberalisation discussions with the EU until after a special joint meeting of Trade and Finance Ministers scheduled to be held on 9 June.
The EC is strongly urging the Caribbean to put forward its EPA market access offers to be able to conclude EPA negotiations as early as this summer. In early May, the EC Trade Commissioner said that owing to the proactiveness of the CRNM, CARIFORUM was way ahead of the other groups in the EPA negotiations and stood to gain considerably more benefits than other ACP regions and be first at the gate when it comes to development assistance because they are negotiating and putting in place the agreements.
Pacific
Pacific and EC technical EPA negotiators met in Brussels from 27 April to 4 May. Pacific sources report that EC officials attending the meeting engaged in a useful dialogue which reflected an increasing willingness to think creatively and arrive at mutually acceptable solutions that address the unique needs and circumstances of the Pacific region in EPA negotiating areas, including market access, fisheries and rules of origin. Negotiating positions were clarified and the two parties entered into serious negotiations and started to identify options in key areas, starting work from the basis of Pacific texts in some cases.
EC sources, however, regretted that no agreement could be reached on establishing a RPTF which could discuss matching development resources (including the 76 million euro 10th EDF Pacific Regional Indicative Programme (RIP) and its incentive tranche of another 19 million euro) to EPA needs identified. The Pacific reiterated its position that the costs of EPA adjustment for the 15 PACPS (including Timor Leste, included in the group for the first time) will be far more than 95 million Euro, which, if funded under the RIP, would mean the cancellation of other very important regional projects currently being implemented. The EC side had persistently called for the establishment of a RPTF. The PACP side explained that there was already a regional mechanism to deal with programming of existing RIP resources and so long as all the RPTF was going to do was programme EDF resources it was not needed. The PACP negotiators stressed that additional funding was needed outside of the RIP and that, should there be a good possibility of such resources becoming available, an RPTF could play a useful role. Negotiations on the Pacific's EPA development text and other development-related issues will need considerably more discussion in the coming months.
Pacific negotiators will report back to their Trade Ministers meeting in May and who will give further instructions to negotiators for the next round of negotiations with the EC scheduled to be held at the end of May.