Agata Hinc, AfricaNews reporter in Warsaw, Poland

The so-called Economic Partnership Agreements are raising some controversies and criticism form the African and Caribbean states as negotiations reach their final stage. Both local political classes and civil society organizations are calling for fairer set of rules to govern trade between Europe and her former colonies. Agata Hinc analyses the risks of failure of such an agreement.

What are EPAs?

The Economic Partnership Agreements (EPAs) are a new trade agreements being negotiated between the European Union (EU) and the Africa, Caribbean and Pacific Group of States (ACP), according to Article 37 of Cotonou Agreement (2000).

The EU and the ACP had to start negotiating a new trade regime, because under the World Trade Organization (WTO) rules, the EU cannot provide preferential trade access to some developing states while excluding others.

Simultaneously, the WTO granted a special exemption that allows ACP exporters preferential access to EU markets until December 2007. Consequently, the new trade agreements have to be introduced by 1st of January 2008.
Problems with negotiations

Negotiations

The first negligence of the EU and the ACP was that while the concept of EPAs has been on the agenda for several years, the talks aimed at achieving them have only taken place in earnest for the past two years. European negotiators were working very hard to make up the time lost. Unfortunately, as the EPAs deadline is approaching faster and faster, there are still few problematic issues to be solved. Peter Mandelson, EU Trade Commissioner, is moving from one place to another trying to convince it’s African partners that EPAs are the best way to organize a trade regime between the European Union and the African, Caribbean and Pacific states under the WTO rules.

The Economic Partnership Agreements will ensure continued tariff-free export from Africa to Europe and will introduce, after several (sometimes even dozen) years, tariff-free export from Europe to Africa. Many Africans say that they will get to little in return and that cut-price goods from Europe will flood their markets and killing domestic production.

Periods of transition

African diplomats say that there are serious differences between their governments and the EU on some of the key questions relating to trade in goods. The Africans have proposed that the transition period, under which they would have to reduce and in many cases eliminate the tariffs they levy on imports from Europe, should be up to 25 years. The EU Member States and the European Commission have talked about 25 years - but only for very sensitive products and in very exceptional circumstances. Most of the products will be probably liberalized within 10 years.

As Peter Mandelson and Louis Michel, EU Development Commissioner, wrote in their open letter to anti-poverty campaigners (27 September 2007) “African, Caribbean and Pacific countries will be able to protect and exclude sensitive products and take advantage of long transition periods to nurture growing industry. During this time the EU will provide very substantial technical and financial support to help with implementation of the new arrangements.”
During this periods of transition, lasting 10 up to 25 years, the new trading relationship should be based less on dependency but more on economic diversification.

To make this real the 10th European Development Fund (EDF) will provide €22 billion to the ACP countries between 2008 and 2013, which means 35% enlargement of EDF. African, Caribbean and Pacific countries will also be major beneficiaries of the decision to increase Europe's spending on “Aid for trade” to €2billion a year, with a priority given to measures that help implement the Economic Partnership Agreements. According to Mr. Mandelson’s and Mr. Michel’s letter, the money will be available to help countries prepare new structural reforms and trade policies, adjust to the changes they bring and enhance infrastructure and competitiveness to seize trade opportunities. “Aid for trade” (2008 to 2010) will be part of the EU-Africa strategy, which will be adopted during December.

The cons of EPAs

The Global Day of Action (27 September 2007) and The Call for Action Statement were protests against EPAs, initiated by a collection of networks and organizations campaigning for EPAs. More than 200 organizations, among them international ones - working in countries all around the world, took part in this protest. The organizations, who have answered the Call for Action, have joined together in a Global Joint Statement, which highlights the shared concerns over EPAs. In the Statement protesters called the EU “not to impose trade liberalizations and other ‘trade-related’ terms upon the ACP countries,” to “refrain from putting pressure on them to sign EPAs this year and to offer non-reciprocal alternatives, like an improved GSP+” and “to ensure that exports to the EU from ACP countries will not be interrupted”.

The most often proposed by protesters argument against EPAs was underlined by Oxfam International representatives. They state that EPAs, as free trade agreements, will oblige developing countries to liberalize almost all their goods in a "reasonable period of time" (usually believed to be about 10 years) and that it’s not a good basis for a development agreement between trading blocs of such unequal weight. Alexander Woollcombe (from Oxfam) adds: "Nonetheless, a goods-only agreement could still be harmful. The devil is in the detail. Now is the time to focus on development, not a WTO deadline."

The last days of negotiations?

An African delegation is touring Europe to urge national parliamentarians and ministers to send a political message to the European Commission to change direction in the EPAs negotiations. The delegation will highlight the need to say “stop” to EPAs. “As a small farmer in West African I am delighted that we have now taken a stand against the bully tactics of the European Commission,” claims Sanogo Gariko from the West Africa Farmers Association (ROPPA). “There is an urgent need to re-think the entire EPAs process,” says Hon J K Mugambe, MP from Uganda. There are many voices of objection against new trade regime in Africa and around the world, and only a few in favor (mainly from the UE side).

But even the European Union started to lose hope. According to David O'Sullivan, Head of DG Trade in the EU, the Union has decided to drop the Economic Partnership Agreements. Addressing the International Trade Commission of the European Parliament on 10th of October this year, O'Sullivan confessed that the EU will fail to conclude EPAs.

Ratification process

EU Trade Commissioner, being extremely determined, declared: “We will prepare for the rapid implementation of the various legislative and procedural steps needed to put EPAs into place in time to avoid a WTO challenge.” But experts’ efforts to prepare all the papers are not enough. Once the EPAs negotiations are concluded, there are certain steps to make it legally binding. In principle, after the final text is negotiated, it must be authenticated, or signed, by the involved parties. All the involved parties must then ratify this final text before it could enter into force and only upon entry into force (implementation) it becomes legally binding on the involved parties.

The examples above, presenting attitude of a considerable part of the society to the new trade agreements and a complexity of the ratification process, can lead to a conclusion that the process to put EPAs into force will be extremely complicated, if not impossible.

What instead of EPAs?

Signing no new agreement between the EU and the ACP will lead to important trade disruptions on Africa’s side. As Peter Mandelson and Louis Michel wrote in their open letter “If they [EPAs] are not signed by the end of the year, we will no longer be able to offer our current preferential access and will have to move to an alternative, which will give less market access in Europe for many ACP countries.

” This means that affected African firms will face European import tariffs of at least 8 percent. As there is strong likelihood that the Economic Partnership Agreements will not be signed at the set date of 31st December 2007, because of the delay recorded in the ratification process, several alternatives have been suggested by governments, civil society and the European Union. The most popular three are: GSP+, GSP and “EPA-light”.

GSP+

The Generalized System of Preferences Plus (GSP+) is a special arrangement offering additional trade preferences to countries committed to sustainable development and good governance, including basic human rights and labor standards. To join GSP+ countries have to ratify and implement 27 international conventions and undergo a rigorous vetting and application process. GSP+ eligibility is reviewed every 3 years. The next revision will be finalized in 2008 and will establish the list of countries that will benefit from GSP+ from 2009.

No ACP region will be eligible for GSP+ from 1st of January 2008 and very few, if any, from 2009. “The 31 countries of the ACP who are not Least Developed Countries (LDCs) will lose the tariff advantage Cotonou gives them over their competitors in key areas such as textiles, cocoa, tuna, bananas and horticulture,” UE Trade and Development Commissionaires underlines.

GSP

Contrary to the advice given by Non-Governmental Organizations (NGOs), inter alia in the Global Joint Statement, the European Commission has no legal option but to offer to the ACP regions the Generalized System of Preferences (GSP). The GSP would give LDCs duty and quota free access to the EU market but the non-LDCs would get substantially less generous preferences. According to Kenyan analyst, Gichinga Ndirangu: “Under the Cotonou agreement, horticulture, fruit, vegetables and fish enjoys zero-rated tariffs.

Under the GSP, these products can face tariff increases of between two and 24 percent.” And according to Mr. Mandelson and Mr. Michel moving back from EPAs to GSP would hit the ACP key exports and would “not help ACP countries build regional markets, improve product standards or promote investment.”

“EPA-light”

An “EPA-light” means proposal, which is reduced to what in substance would be acceptable for ACP countries and the EU, and would be compatible with WTO requirements. In reality this would be a stop-gap solution, whilst the ACP and the EU will continue negotiating the comprehensive pro-development EPAs. The most problematic sectors would be excluded temporarily with transition phases from 5, 10 to 20 years or even longer or, when necessary – totally excluded. The “EPA-light” would, for example, contain good-only trade regime.

The most probable ending

The EPAs opponents want the GSP+ instead of EPAs for all the ACP countries, but it’s technically impossible. The UE, acting under the WTO rules, can offer only GSP or “EPA-light” instead of the EPAs, but it will raise the tariffs for African exporters. The most probable now is that the Economic Partnership Agreements won’t be implemented at the beginning of next year (in all of the 4 African regions, which are the most problematic or even all the 6 ACP regions).

The negotiations of the EPAs will least, at least, one year longer, in the meantime the Generalized System of Preferences will take effect in the trade relations between Africa and the EU. This is rather pessimistic scenario, although the compromise in this case is extremely difficult.

There’s someone, who didn’t lose the hope, although simultaneously became rather realistic than optimistic – it’s Peter Mandelson. One of his statements will be a god ending of this analysis: “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.”