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Contributions from
the Column
Focus
Regional integration in Africa
The price is not right yet
ACP countries need reforms
Mercosul dilemmas
ASEAN + 3
ECOWAS’ unfinished agenda
01/2007
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The price is not right yet
Countries in Africa, the Carribean and Pacific should insist on flexible trade rules when dealing with the EU. They have no reason to make any commitments that go beyond what they have already signed up to in the WTO context.
[ By El Hadji A. Diouf ]
The European Union is negotiating Economic Partnership Agreements (EPAs) with African, Caribbean and Pacific (ACP) countries. The agenda is based on an understanding between EU institutions and various regional organisations, but it does not reflect the interests of the people concerned. There is a tremendous gap between the views held by organisations like the Economic Community of West African States (ECOWAS) and by experts at the national level.
Civil-society organisations have been campaigning to “Stop EPA” in Africa for several years. The bone of contention is the current content of EPAs and the modus operandi. Neither serve poor countries. In contrast, the principle of the EPA agenda is not bad. Regional integration could indeed have a positive impact on ACP countries, by boosting trade among one another within an adequate framework.
Flawed preparations
However, the EPA process was distorted from the very beginning. In the first phase, which was called “All ACP”, representatives from every ACP country and the EU were supposed to define mutually acceptable principles and the substantial negotiation topics. The idea was to find a common ground, thus giving the regional negotiations momentum. However, the approach made it impossible to highlight the specifics of each of the six ACP regions. All summed up, the preparations were therefore patchy and full of gaps.
For example, ECOWAS quickly affirmed its wish to move on to the second phase of negotiations, defining its stand along the lines of an impact assessment yet to be funded by the EU. Observers did not fail to note the absurdity of this step: ECOWAS decided to negotiate with the EU and allowed the EU to define ECOWAS policy at the same time. Soon after, the Ministerial Monitoring Committee for ECOWAS decided to indeed move on to the second phase of negotiations at the regional level. This was done even though the participants knew that the impact assessment, which would provide their guidelines for the negotiations, had not even been completed. Civil-society organisations pointed out this problem, arguing that the region was in danger of moving on to a complex negotiation agenda without any clear understanding of its own interests.
Apparently, the regional institutions like ECOWAS can be content with agendas that fly in the face of the interests of their member governments. The “Singapore Issues” illustrate this fact very clearly. Because of strong opposition from Africa and other poor regions, topics such as competition law, investors’ rights and others (collectively called “Singapore Issues”) were dropped from the Doha Round of the World Trade Organisation (WTO). Accordingly, African trade ministers told a high-ranking EU delegation in Dar es Salaam in January 2005 that they did not wish to deal with these issues in EPA talks. Because of EU insistence, investment and competition nonetheless became part of the roadmap for West Africa’s EPA programme. Obviously upset, the Ministerial Monitoring Committee next decided that the Singapore Issues would only be negotiated at “the right time”, that is not until the WTO had reached an agreement.
A serious worry is that African countries are not yet ready for trade liberalisation. Civil-society leaders fear that EPAs will turn out to be “a weapon of mass destruction”, wreaking havoc in Africa. The EPA agenda, they argue, does not help to fight poverty. For instance, the reduction of trade tariffs envisioned would considerably reduce government revenues. Moreover, liberalisation would seriously threaten rural areas, as growing competition among agricultural producers from various ACP countries would distort domestic markets. Entire families are likely to become vulnerable to exploitation and poverty, and countries’ ability to feed themselves will be at risk.
In WTO talks, the rich countries always stress that agriculture is multifunctional. That equally applies to ACP countries in the EPA context. Legitimate issues such as rural development and food security must be taken into account on top of free trade, if the detrimental effects of excessive liberalisation are to be compensated for. In this respect, the debate about which “sensitive” products should be excluded from EPAs matters hugely. The sensitive products are very important for ACP countries, and any agreement should exclude these products from liberalisation.
In general, the ACP countries should not make any trade concessions in EPA talks that go beyond those already made in the WTO context. The WTO gives special scope to Regional Trade Agreements, on the basis of which particular preferences may be granted. This rule makes sense, as it helps to boost regional integration, which in turn speeds up growth. The EPA agenda, however, implies that some regional agreements will bridge the gap between rich and poor regions of the world. Therefore, the rules on flexibility meant to protect weak partners in the WTO must also apply to EPAs.
Specifically, this question arises for the trade in services. In this field, what the advanced nations – and the EU in particular – are demanding, is more agressive at the bilateral level than at the multilateral one. According to WTO rules, least developed countries (LDCs) are under no obligation to make any offers or concessions, and most ACP countries are LDCs. The EPA agenda, however, does not make the same exceptions. The WTO rules allow LDCs to open service sectors in stages, depending on how they perceive their economic interests. Of course, some service sectors have already been subjected to liberalisation at the behest of the International Monetary Fund and the World Bank, when these institutions imposed structural adjustments. This is true of water and electricity provision as well as telecommunications. Other vital sectors, particularly health and education, should continue to be protected and managed by governments, however, as providing such services is a social duty of government in general.
New form of protectionism
Apart from tariffs, there are several other obstacles to trade between Europe and ACP countries, particularly in terms of market access. Typically, European law is very strict concerning matters of safety and sanitation. European standards often go beyond what is demanded by the Codex Alimentarius of the FAO or similar multilateral rules. In many cases, it isn’t even proven that EU law makes scientific sense. Nonetheless, goods that do not conform may not be sold in the EU, and poor countries have an especially hard time trying to dispute such regulations in the judicial sphere. Settling for an EPA based on EU law could therefore limit what was achieved in terms of multilateral trade liberalisation, exposing ACP countries to rules which, in effect, add up to a new form of protectionism.
The ACP countries also have a legitimate interest in protecting their fledgling industries until their exports rise to a significant level. In this respect, EPAs should abandon the principle of tariff escalation, which stipulates that customs charges should be demanded according to a country’s level of development. If ACP countries are not allowed to process their commodities and export value-added goods, they will not be able to develop.
Ultimately, signing EPAs only makes sense for ACP countries if such agreements exceed the benefits they already enjoy according to the WTO’s Most-Favoured Nation (MFN) rule, which stresses that no member country may treat other member countries any worse than it treats any other member country. As mentioned above, the MFN provides for some regionally defined discrimination, however, and the standards for developing nations were drawn up under the General European System of Trade Preferences, which benefit all ACP countries. This system is ideal for ACP countries because it guarantees the benefits of preferential trade without forcing them to expose their economy to untenable competition beyond their control. Least developed ACP countries, moreover, may find it hard to derive additional benefits from an EPA at all, because they already enjoy tariff- and quota-free access to the EU thanks to the “Everything but Arms” Initiative.
Some experts actually call into question the very concept of EPAs. After all, 30 years of unreciprocated EU preferences under the Lomé Agreements did not allow the ACP countries to improve their domestic production or to benefit from preference-based trade. Some even ask whether the ACP countries would not be better served by future integration in a multilateral trade system with rules that apply to all countries instead of “special and differential treatment”.
Nonetheless, special and differential treatment is needed. The law must correct economic inequality. Long-term schemes can achieve that as well as exemptions from certain principles of international trade. In any case, such a differential system should help developing countries to prepare for integration in the global trade system in the long run. Of course, the specific details of such frameworks must depend on any given country’s level of economic development. Therefore, ACP countries are right to insist that EPAs must provide flexibility. The current economic situation of most ACP countries is no base for entering into comprehensive free-trade schemes that go beyond what has already been agreed.
Furthermore, ACP countries do not have any commercial or political reason to enter into trade regimes with Europe at the regional level under conditions less favourable than those currently in effect under the World Trade Organisation. Nothing should stop ACP countries from protecting themselves with substantial leeway in order to prepare their economies for free trade – particularly, if the ultimate goal is to integrate those economies into the global system. In that sense, demanding flexibility in the EPA context is not tantamount to asking for ever-lasting aid payments. Rather, the ACP countries need to open their markets at a pace that suits them. That, after all, is what the advanced countries did at certain moments of their development.
El Hadji A. Diouf
coordinates the Africa Trade Programme at the International Centre for Trade and Sustainable Development (ICTSD), an international non-governmental organisation based in Geneva. He is writing here in a personal capacity and not expressing official ICTSD views.
ediouf@ictsd.ch
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