EPA Update
By Melissa Julian, ECDPM
This is the longer, more detailed version of the TNI EPA Update in the October 2007 issue of Trade Negotiations Insights
Summary
*EC Trade Commissioner says progress needed in most ACP regions to conclude EPAs on time
*Central Africa negotiating “hard, but positively”
*Will the end-2007 deadline for completing West Africa’s EPA negotiations be met?
*SADC-EC EPA negotiators make progress, but still no agreement to include trade related issues
*Agreement on East African Community (EAC) EPA evasive
*ESA struggles with configuration and market access issues
*Caribbean market access offer remains the most outstanding challenge
*Pacific expected to ask for EPA negotiations extension
*EC Trade Commissioner says progress needed in most ACP regions to conclude EPAs on time
“We stand in these negotiations on the edge - and whether this is the edge of a cliff or of success the next few weeks will tell.” So said EC Trade Commissioner Peter Mandelson in a presentation on 11 September to the European Parliament’s International Trade Committee which outlined the status of EPA negotiations and publicly “named and shamed” specific countries for holding up EPA progress (see details in regional sections below) saying that if no major progress is made in market access offers by the end of September that “ACP countries will be in serious difficulty”.
In response to increasing calls from governments and NGOs to consider GSP+ as an alternative option to EPAs or at least as a transition arrangement to allow more time for EPA negotiations to be successfully conducted and concluded, Mandelson said that “some believe they have little to lose if an EPA is not concluded and for the more resource-rich countries this may be the case; or that the EU will pull a rabbit out of the hat at the last minute to guarantee continuing existing trade preferences in the absence of an EPA.” He added, “I have no hat and no rabbit to pull out of it. If we have no new trade regime in place by the end of this year in each of the regions - and that means effectively initialling an agreement by around the end of October - the Commission has no legal option but to offer the region concerned GSP preferences. Contrary to the advice given by certain NGOs, no region will be eligible for GSP+ from 1 January 2008 - and very few, if any, from 2009, when the next version of the GSP will enter into force. The 31 countries of the ACP who are not Least-Developed Countries will lose the tariff advantage Cotonou gives them over their competitors in key areas such as textiles, cocoa, tuna, bananas and horticulture.” He went on: “This deadline is not a bluff or some negotiating tactic invented in Brussels. It is an external reality created in the WTO in Geneva. We have given a binding multilateral commitment that was set and agreed seven years ago.”
NGOs argue that indeed the EC is bluffing as a reintroduction of tariffs on ACP countries would be politically inconceivable and argue that African countries do not need to sign EPAs to maintain their current market access levels to the European market and think the GSP+ is an option at least for Africa.
NGOs argue that the EC is using the threat of the loss of trade preferences and other underhanded tactics like naming an shaming, making links to development finance support, as a means to extract concessions in the EPA negotiations, especially in relation to trade related issues, for the EU’s commercial benefit. In the European Parliament debate, Mandelson lashed out at the NGOs saying that if more people concentrated on the facts rather than delivering an army of misinformation to the ACP then trade ministers could get on with their jobs. They are being mislead, wound up, given propaganda to score party political points at the expense of the negotiations. Those responsible for playing this elaborate political game must recognise their gross responsibility for failure if this is what happens, he said.
So it appears that despite indications from various ACP regions that they require transitional trade measures to be put in place in case the EPA deadline cannot be met, the Commissioner has ruled this out. The ACP point out, however, that Article 37(6) of the Cotonou Agreement requires “a new framework for trade [in goods] which is equivalent to their existing situation and in conformity with WTO rules”.
*Central Africa negotiating “hard, but positively”
EC and Central Africa EPA negotiators are meeting in Kinshasa from 19-29 September where technical experts are aiming to progress towards agreements on market access in goods and services and trade-related and development issues for presentation to a joint Chief Negotiators meeting on 29 September which will assess progress and determine the next steps in the negotiations.
The meetings follow technical level discussions held the first week of September in Yaoundé. Central African countries were not yet able to table complete regional market access offers in good and services. For goods, ½ of the CEMAC member States have defined their sensitive products lists and a preliminary services offer/request has been sent to the EC which will be discussed in negotiations at the end of September. Negotiators did, however, exchange views on how to categorise, classify and treat individual product tariff lines in terms of development impact considering indicators relating to poverty, competitiveness, etc.
The two sides also had a fruitful exchange of views on legal texts on goods discussing issues such as non-tariff barriers, trade defence instruments and other customs changes.
There was also an exchange of views on rules of origin, though the EC still awaits CEMAC’s proposals for how to improve on existing Cotonou Agreement rules.
Sources indicate that regional technical level experts are negotiating long and hard with the EC, holding their line on key issues. Even Mandelson admitted this saying “This region has understood what is at stake and has defined its interests. It is negotiating hard, but negotiating positively. We await the Region's response to what the EU has put on the table.” Some experts, however, regret that not all CEMAC Ministers heed their advice and some tend to make concessions in negotiations with EC Commissioners which are viewed by some observers as de facto undermining efforts for more transparency and governance in the region. There are also indications that there are differences of view between CEMAC Member States on what has been agreed and is possible in EPA negotiations.
*Will the end-2007 deadline for completing West Africa’s EPA negotiations be met?
ECOWAS and UEMOA Commissions recently sent letters requesting an extension of the deadline for completing EPA negotiations to West African Heads of Government and EC Commissioners following a 3 September brainstorming meeting on EPAs attended by senior ECOWAS, UEMOA and Nigerian officials. Officials felt that despite progress and good will to date, the preconditions jointly agreed by the EC and West Africa in February for signing an EPA will not be able to be successfully negotiated before 31 December. To date, no programmes have been elaborated to accompany the EPA to improve competitiveness of the West African economy nor an assessment made of the financial impact of EPA implementation of programmes and identification of sources of finance support. West Africa has not yet reacted to the EC proposal of a draft EPA text so that there is not yet a joint EPA text which can be provided to governments and stakeholders for consideration. And West Africa has yet to complete and table its market access offer to the EU on goods or services. Officials also noted other outstanding issues which need to be resolved before an EPA can be signed, such as rules of origin, multilateral trade negotiations under the Doha Round, definition of EPA monitoring mechanisms, ratification of the 10th EDF, details on additional funding and implementation mechanisms.
ECOWAS-UEMOA officials proposed to their governments three possible options (with pros/cons for each) on the type of transitional trade regime that could be applied to trade between West Africa and the EU during the additional period since the non-reciprocal trade preferences accorded the ACP States by virtue of the WTO waiver end on 31 December 2007 – a WTO compatible minimum EPA and continued negotiations on additional issues beyond 2007; shifting to the generalised system of preferences and the everything but arms initiative; or maintaining the non-reciprocal trade regime under Cotonou through an understanding with the EU or a request to the WTO for an extension of the period of validity of the waiver enabling the EU to grant non-reciprocal trade preferences to the ACP States. The later is reportedly the preferred option
West Africa governments must agree to the proposed extension, decide the best transition option and then negotiate this with the EC. The response by ECOWAS is anticipated at their extraordinary Ministerial EPA Monitoring Committee on 5 October.
The European Commission replied to the Presidents of ECOWAS and UEMOA Commissions and to West African States by underlining the cost that reverting to GSP would bear for West African economies. Exports worth more than 1 billion € per year would face higher duties and be at risk – Ivory Coast and Ghana being the countries most affected. The European Commission also ruled out the possibility of requesting a new-WTO waiver given that such a waiver requires consensus of all WTO members and, as the experience with bananas shows, other developing countries resentful of ACP privileges in EU markets will not hesitate to challenge any extension of preferences. The Commission therefore believed that the only way forward was to conclude an EPA in time.
Commissioner Mandelson in his speech to the European Parliament said that “West Africa has the capacity to conclude an agreement rapidly. So it is all the more disappointing that recent indications suggest it may be moving backwards, not forwards in preparing its own market access proposals for the agreement.”
Talks are currently going on between the European Commission and ECOWAS and UEMOA Commissions in order to find a compromise on how to proceed.
It is to be noted that, as in the CEMAC region, there are concerns in government and NGOs on Secretariat not taking forward issues as agreed by Member States.Partly in an effort to address these concerns, Ablassé Ouedraogo, former Deputy Director of WTO has been recruited as a resource person to help the negotiators. The former head of the technical ECOWAS team, Mr Gilles Hounkpatin, has been nominated as new Director of customs in Benin Republic though this has reportedly nothing to do with criticisms of the secretariats.
West African civil society has commended the ECOWAS and UEMOA secretariats for seeking the extension of the deadline of EPA negotiations. In a statement by NANTS on behalf of the region’s private sector and civil society, NANTS called for critical scrutiny of the EPA adjustment costs and potential inflows to enable the region perform an overall cost and benefits analysis of the agreement before any endorsement.
*SADC-EC EPA negotiators make progress, but still no agreement to include trade related issues
South Africa’s chief trade negotiator, Xavier Carim, says SADC and EC EPA positions are “pretty close” and he is confident an EPA can be agreed by the end of year deadline, albeit with no binding commitments on new-generation trade related issues. His assessment follows the latest round of SADC and EC technical and senior level officials held in Brussels from 11-14 September (and an earlier round held on 29-31 August). The two sides exchanged lists of requests and offers on market access in goods and negotiated the schedule for tariff liberalisation. There was reportedly a push to increase access to the EU for SADC agricultural goods and some processed products. SADC was prepared to offer increased market access to EU fish products and certain industrial and agri-processed products. Convergence of views is needed on both offensive and defensive interests before an agreement can be reached.
Market access offers from Mozambique, Angola and Tanzania are still under preparation and so were not put forward to the meeting.
There was a positive debate on rules of origin and SADC will react to EC proposal
There was also debate on EU EPA accompanying measures and financial commitments to cover adjustment and implementation costs, but sources provided no details to report.
SADC continued to refuse to debate trade-related issues, including Environment and Social Aspects, in the EPA. The EC continues to insist on binding obligations in these areas as a precursor to any binding development cooperation. But Carim says there was a “gradual realisation in the EU that forcing TRI issues is not the right way to go.”
The EC Trade Commissioner, Peter Mandelson, had notched up the pressure prior to the meeting by publicly criticising South Africa’s “negative role” in the SADC negotiations which was preventing others less well off in the region from moving forward.
There are also reportedly tensions between SADC countries following indications from South Africa’ Finance Minister, Trevor Manuel, that the 2010 target for creating a SADC customs union was unlikely to be achieved. Deputy Trade and Industry Minister, Rob Davies, also said South Africa preferred the option of encouraging regional integration by building on SACU. South Africa also indicated that it plans to propose easing SACU import tariffs to lower the costs of inputs and enhance and aid its industrial development through industrial financing and tax incentives and tariff liberalisation. Other SACU members are nervous about this idea as they are heavily reliant on the shared income from the common revenue customs pool.
*Agreement on East African Community (EAC) EPA evasive
A meeting of EAC senior officials on 11 September was to make a final decision on what platform would be used to sign an EPA with the EU. The meeting reviewed the framework and approach for the EAC EPA. Reports indicate that there was disagreement on the interpretation of the summit decision, with one camp led by Kenya proposing that EAC can still negotiate under ESA, while another camp led by Tanzania proposed that EAC can quickly negotiate negotiate its own EPA building on the milestones of the ESA EPA and SADC EPA. The Council of Ministers is expected to meet on September 24th to resolve this issue.
It follows on from the 20 August EAC Heads of State agreement on the need for the EAC to negotiate an EPA. At the time, however, Heads' collective pronouncement in this regard was delayed due to the
sensitivities arising from its members negotiations within the ESA and SADC EPA blocs. They agreed that it would be impolitic to announce that the Summit had endorsed the proposal for the EAC to negotiate an EPA without allowing Kenya and Tanzania time to inform ESA and SADC EPA groups of the decision.
*ESA struggles with configuration and market access issues
As we go to print, ESA EPA technical experts are meeting on 17-18 September in Kigali to discuss development, market access and agriculture issues ahead of technical and senior level officials meeting with the EC from 19-22 September to discuss these issues and also fisheries and trade related issues. Sources indicate that Seychelles has applied for the GSP+ scheme as an interim measure to avoid trade disruption should there be no EPA in place before 1st January 2008. Seychelles is the only non-LDC to be eligible for GSP+. The country remains fully commited to completing the ESA EPA negotiations before the end of the year, but that does not depend only on Seychelles. The ESA meetings are being held just after the EAC senior officials meeting meant to make a final decision on what platform would be used to sign a new EPA with the EU. The results of this meeting have not been reported as we go to print, but discussions will focus on the issue of the region's sensitive list and the approach to meeting the requirement of substantially all trade.
Ahead of the ESA meetings, EC Trade Commissioner Mandelson on 11 September publicly stated that he was “seriously concerned about progress” in ESA EPA negotiations due to long-standing issues of region grouping and configuration specifically calling on Kenya and Tanzania to resolve issues so as not to hold up the region as a whole. The Permanent Secretary of Kenya’s Ministry of Trade, David Nalo, however took issue with the EC saying “It is wrong for the EU to lambaste us lump some because they have for instance delayed feedback on the development text forwarded to them for comment. They should stop posing gimmicks of negotiation to paint us negatively.”
Work has continued in ESA countries on their market access offers and to revise lists of sensitive products that they want to see excluded from tariff liberalisation under the EPA. National requests are being submitted to COMESA which will then come up with a regional list for discussion with the EC. In early September, press reports indicated that the sensitive products list had been reduced to 1,700 products, from the initial list of 2,900. The EU says this is still too long and wants further revision.
ESA countries agreed to work to reduce their sensitive lists to a maximum of 10% for non-Least Developed Countries (LDCs) and 15% for LDCs, so that the consolidated regional list would add up to no more than 30%.
A priority for ESA is to ensure EPA transition measures are put in place in October to ensure continued preferential trading with the EU and to avoid any disruption before the EPAs come into force. The COMESA Bureau Chairperson, Kenyan Trade and Industry minister, Mukhisa Kituyi, has written to the EC requesting a firm commitment on this. He expressed confidence that a commitment would be granted soon.
Work has also continued in the region on development benchmarks, the development cooperation strategy and adjustment costs. ESA member states have resolved to forge ahead with preparation of benchmarks on development that will form the basis of negotiations with the EU once consensus is reached.
*Caribbean market access offer remains the most outstanding challenge
As we go to press on 17 September, a series of meetings culminated with a trade ministers meeting are taking place in the Caribbean to discuss, and perhaps complete, a market access offer to the EC in the EPA negotiations. This is the major issue left to be ironed out in the negotiation process. The meetings have been preceded by a series of Caribbean Regional Negotiating Machinery (CRNM) consultative missions to CARIFORUM countries to exchange views with Ministers and Senior Officials on the CRNM-drafted draft CARIFORUM EPA market access offer to the EC. EC Trade Commissioner Mandelson upped the pressure by publicly stating on 11 September that “if we receive that offer within the next two weeks or so, I believe we will be able to complete negotiations rapidly and the EPA will enter into force on the 1st of January 2008. If we do not, these ACP countries will be in serious difficulty.”
Head of the CRNM, Dr Richard Bernal, also admits "We are behind (in the negotiations) on the critical core issue of market access and the objective of this series of meetings is that by the time we complete the ministerial meeting we will have a Cariforum market access offer," noted Dr Bernal. "That is the major issue right now, most of the other issues are well advanced."
More progress was made in reaching agreements on key issues in the latest round of Caribbean-EC technical negotiations on Market Access held form 11-14 September in Brussels. These were preceded by a meeting with Caribbean stakeholders. The negotiations focussed on non-tariff liberalisation issues and led to the near completion of CARIFORUM-EC EPA legal texts in trade defence measures, customs and trade facilitation and administrative cooperation. They also bridged some of the differences in agriculture (considerable differences remain with respect to the ambit of goods to the supported by EU development cooperation and a Special Safeguard Mechanism).
In his presentation on negotiations’ progress to the ACP-EU Joint Parliamentary Assembly’s Trade Committee on 13 September, CRNM EPA Negotiations Technical Coordinator, Junior Lodge, reported that the EC has dropped its demands that CARIFORUM tariff concessions are based on the principle of non-discrimination which would have resulted in the region’s market access commitments being automatically conditioned by concessions granted by the Dominican Republic (a non-CSME member) to United States under CAFTA.
However, the EC maintains its demand for Most Favoured Nation (MFN) treatment, i.e. that any future concession in both goods and services granted by CARIFORUM to a country enjoying more than a 1 percent share of world merchandise exports, such as China, Turkey, India and Brazil, should be automatically conferred to the EU. Acceptance of such an EC proposal would pose severe challenges to CARIFORUM and could, for example, prevent the Caribbean from liberalising its rum trade with India and Brazil, without applying the same measures to Europe, also a rum supplier.
Lodge further reported that there was agreement that the CARIFORUM liberalisation schedule can be recalibrated in case the region’s food security is threatened or impaired. Negotiations though are still ongoing on the Caribbean proposal to insert a Special Safeguard Mechanism that could be automatically triggered once pre-determined price or volumes levels are attained. Technical negotiators also agreed that on items liberalised by CARIFORUM, the EU will not apply export subsidies unless these are needed by the Caribbean for sensitive and non-competing food imports.
Agreement was also reached to establish an EPA Monitoring Mechanism comprised of Parliamentarians, non-state actors and Senior Officials to track EPA development objectives. The principle of CARIFORUM commitments predicated on the delivery of EU development support is well enshrined in the agreement and trade rules and liberalisation schedules can be altered if the principal EPA aims of sustainable development and poverty eradication are not being observed.
Lodge also reported that the EC continues to demand that an EPA includes binding provisions on good governance in taxation, judicial and financial issues, despite CARIFORUM’s mandate not to negotiate these issues. The EC demands, he said, are with respect to waiving the use of “trade-distorting” fiscal incentives as a tool for attracting foreign investment into the Caribbean. Furthermore, the EC would like CARIFORUM countries to “cooperate” by sharing information on EU nationals who invest in Caribbean-based financial instruments. The import of such EU demands would be the immediate decimation of the fledging offshore financial services industry in CARIFORUM states. CARIFORUM remains unconvinced that provisions on good governance on taxation properly reside in the realm of a trade agreement. Furthermore, the legitimacy of the EC’s argument would be strengthened if EU offshore financial services were first banned, said Lodge.
The Caribbean is also not satisfied with the EC proposals on services. The EC is insisting that a CARIFORUM firm be very narrowly defined and excludes branches for most activities to enjoy benefits of EPA. This is not in CARIFORUM’s interest since the region needs to attract third country investors that may wish to take advantage of the EC market. Lodge said that regrettably, the EC’s posture on tourism smacks of disinterest while seeking to insert inert language on cultural cooperation replete with best endeavour language. CARIFORUM remains firm that an EPA must provide for development support to assist in the creation of new services exports.
The EC presented its counter proposal on rules of origin with negotiations currently ongoing.
If a market access offer is agreed in the September by Caribbean Ministers, that would then allow for technical level negotiations with the EC on September 25-28 and October 9-12 in Barbados. The plan remains that the EPA will be initialled on October 31 after being reviewed on the previous day by CARIFORUM Trade Ministers and then signed on December 17.
*Pacific expected to ask for EPA negotiations extension
As we go to press, Pacific ACP (PACP) and EC technical EPA negotiators are meeting in Brussels from 18-28 September to discuss fisheries, trade in goods/market access (where the Pacific is expected to table its offer to the EC), trade in services (the EC is expected to table its offer) and Mode 4 (discussions will focus on a Memorandum of Understanding on Temporary Movement of Natural Persons), Rules of Origin (the EU is expected to table an offer on ‘Cotonou plus’ rules on fisheries ), institutional arrangements and EPA development and adjustment.
The meetings are being held ahead of a 1-2 October Regional Preparatory Task Force meeting where the Pacific will present the results of its Adjustment Needs Analysis which lists the policy measures and support necessary to cushion the potential social impact of an EPA. The Pacific maintains that no EPA commitments be made in particular areas until assistance is forthcoming to address relevant needs in areas identified.
A 3-5 October Pacific Trade Officials and Ministers meetings in Brussels will then consider an analysis of the EC legal EPA text in relation to the PACP EPA legal text and possible EPA alternatives or transition arrangements and decide the way forward in the EPA negotiations.
There is a possibility of a PACP-EU Ministerial Meeting on 5 October.
Regional trade officials and legal experts at a technical working group (TWG) meeting held in Nadi, Fiji from 23-25 August expressed their disappointment and deep concern at the draft legal text proposed by the EC for an EPA covering trade in goods, trade in services, fisheries, investment and development cooperation which was submitted to the Pacific in early August.
The TWG observed that the EC text contained explicit provisions setting out the EC’s demands, but that, except for optional participation in the Goods Agreement, the text did not reflect in any meaningful way concerns of the PACP States that have been repeatedly explained to the EC over the last two years in areas such as rules of origin, investment provisions, temporary movement of persons, sugar, the need for additional development or adjustment resource commitments and fisheries.
They also said the text introduced new and onerous obligations such as an unprecedented Most Favoured Nations (MFN) provision which would require the PACPS to grant to the EU whatever benefits they might gain, for example, from Australia and New Zealand under free trade arrangements negotiated in the context of the Pacific Agreement on Closer Economic Relations (PACER). With only 4 months left to the deadline, the EU draft is also not complete with more proposals on obligations expected to be tabled in areas such as intellectual property rights and government procurement.
The August TWG meeting also discussed EPA alternatives and transition measures considering that it is likely that more time will be needed to achieve a satisfactory outcome to the EPA negotiations especially considering that signing the EPA will trigger negotiations between the Pacific and Australia and New Zealand on the Pacific Agreement on Closer Economic Relations (PACER). Experts felt that the most promising EPA alternative that would offer PACPS “a new framework for trade [in goods] which is equivalent to their existing situation and in conformity with WTO rules” required under Article 37(6) of the Cotonou Agreement is the EU’s enhanced Generalised System of Preferences scheme (GSP+), but that it was important for a satisfactory, long-term solution on market access to be negotiated with the EC within an EPA. This recommendation will be put to Trade Ministers in October for their consideration.