EU wants to force ACP countries to sign EPAs

Anti EPA Protest
Anti EPA Protest

In the last year, EPA negotiations had largely come to a standstill: only a few negotiation rounds took place and they produced no significant outcome. Frustrated with this lack of progress in the negotiations, the EU has decided to step up the pressure on the ACP countries. On 30th September the European Commission adopted a proposal amending Regulation 1528/2007 governing the market access of 36 ACP countries to the EU. The proposal for amendment provides that, unless the 36 countries listed in the Annex ratify and implement EPAs by January 2014, they will be taken off the list. This means that they will lose the duty/quota free access of their goods to the European market. This now marks officially the beginning of the endgame in the EPA process. To become effective, the proposal needs to be adopted by the Council and by the European Parliament.


How did we get here?


The Cotonou agreement in 2000 made provision for bilateral trade agreements (EPAs) to replace the unilateral duty/quota free access of ACP countries were enjoying by the end of 2007. However, negotiations progressed far more slowly than foreseen and as the 31 December deadline approached, no country was ready to sign an EPA. The delay in the negotiations was partly due to the European Commission's insistence on including trade in services, investments, government procurement and the protection of intellectual property rights, although this would not have been necessary to make EPAs compatible with the rules of the World Trade Organisation as well as the EU's excessive insistence on market opening.


Regulation 1528 was therefore adopted in December 2007 as a temporary solution to allow for more time to conclude the EPA negotiations and the ratification process. Even after 2007, however, negotiations continued at a much slower pace than the European Commission would have liked. Only with the Caribbean countries was an agreement for a full EPA concluded. In the negotiations with various African regional formations, disagreements over various aspects of the EPAs continued. Although some African countries initialed or signed interim EPAs, they generally refrained from implementing them. The main underlying reason is that Africans do not share the EU's vision that EPAs will help their development. They rather see them as an instrument to defend European interests in Africa and as harmful to Africa's long term development perspectives.


The GSP reform


The decision of the European Commission to remove countries that do not sign an EPA from the Annex to regulation 1528/2007 has to be seen in parallel with the proposal for reform of the Generalised System of Preferences (GSP) presented in May this year. GSP is a trade arrangement through which the EU provides developing countries and territories with preferential access to the EU market. This takes the form of reduced tariffs for their goods when entering the EU market. There is no expectation or requirement that this access be reciprocated. It has however to be noted that this represents an increase in tariffs for ACP countries which hitherto have benefited from duty free access to the EU market. The current GSP will terminate at the end of 2013 which means that the new system will be put in place in January 2014, at exactly the same time the Commission intends to remove ACP countries from the annex of the market access regulation.


Like the proposal to change regulation 1528/2007, the Commission proposal for GSP reform has yet to be approved by the Council and the European Parliament and is likely to be amended. According to the reform plans of the European Commission, countries benefiting from GSP should be radically reduced and this would also have negative consequences for some African countries as we will see in the section below. One of the main reasons behind the Commission's decision to reduce the number of beneficiary countries is to make GSP a less attractive option and to force developing countries to sign trade agreements with the EU.


So far, only three African countries have used the EU’s GSP scheme: Congo-Brazzaville, Gabon and Nigeria. All three are oil-rich countries with a Gross Domestic Product which is too high to qualify them for the ‘Everything but Arms’ programme of the European Union for Least Developed Countries (LDCs). These three countries decided not to sign an EPA with the EU and backed out of the negotiation process years ago. As oil is the main commodity these countries export, they could afford not to sign an EPA and to fall back on GSP as oil does not face tariffs when imported to the EU. Now, according to the reform proposal of the Commission, Gabon would no longer qualify for GSP. As Gabon's oil exports will not face import duties in any case, it is unlikely Gabon will be persuaded to sign an EPA. However, at the same time, it limits Gabon's future possibilities to diversify its economy and to develop its own industrial sector, as these goods would face considerable tariffs if exported to the European market and therefore become less competitive.


The consequences of the decision


The regulation of 2007 allows the 36 ACP to continue benefiting from duty free/quota free access to the European market. Of these 36 countries 18 (14 Caribbean countries, Madagascar, Mauritius, Seychelles and Papua New Guinea) are seen as "good guys" by the Commission, meaning they have taken the necessary steps towards the ratification and implementation of the EPA. If they continue implementing the EPAs these countries will not be taken off the Annex of regulation 1528/2007.


Of the other 18 "bad guys" Burundi, Ghana, Kenya, Namibia, Rwanda, Tanzania, Uganda and Zambia, have concluded negotiations but have not signed their respective Agreements. Botswana, Cameroon, Ivory Coast, Lesotho, Mozambique, Swaziland, Zimbabwe as well as Fiji and Haiti have signed but have not taken the necessary steps towards ratification or implementation of their respective Agreements. They now face the choice of either ratifying and implementing an EPA or being removed from the market access regulation.


The impact of being removed from the market access regulation would be different for the various countries. Burundi, Comoros, Haiti, Lesotho, Mozambique, Rwanda, Tanzania, Uganda and Zambia are LDCs. These countries can benefit from the European Union's ‘Everything But Arms’ (EBA) scheme, which foresees duty free/quota free access to the European market for LDCs. These countries have therefore little to worry about.


On the other hand, Cameroon, Fiji, Ghana, Ivory Coast, Kenya, Swaziland and Zimbabwe are low income or lower middle income countries and cannot benefit from EBA. They would fall back on the GSP scheme, meaning that their main exports will be taxed when entering the European market. These countries would therefore face serious consequences if they do not sign an EPA.


Botswana and Namibia are in an even trickier situation. They are upper middle income countries and, according to the European Commission's current proposal for reform of the GSP, would no longer even qualify for GSP. They would therefore revert to the higher, normal level of tariffs on their exports to the EU. According to estimates for Namibia, this means an average of 19.5% duties on its exports (almost 60 million Euro as the EU is Namibia's main export market outside Southern Africa and accounts for about 30 per cent of Namibia's exports).


Reactions to the decision of the European Commission


Given that it is one of the countries that is hit hardest by the Commission's decision, it comes as no surprise that Namibia reacted strongly to it. “This is not the way to go,” Trade and Industry Minister Hage Geingob complained.  “This is not a partnership. By setting an arbitrary deadline the EU is trying to put pressure on us to sign the economic partnership agreement.” “There must first be progress in action regarding the outstanding issues before a deadline can be set,” he added. Namibia's Deputy Minister of Finance, Calle Schlettwein stated that Namibia will not sign a ‘bad’ Economic Partnership Agreement that limits its ability to solve domestic developmental agenda problems. "The bad part of the EPA is that, as long as we export raw materials to the EU markets, they impose no tariffs, but the more value we add, the higher the tariffs. If we sign the EPA in its current form, we will be deprived of the opportunity to develop our own industries and to export finished goods to other large markets," he said. Namibia also lamented that during his visit to the country in September, Commissioner for Trade Karel de Gucht did not mention his intention to set the January 2014 deadline.


The Ghanaian government has signaled that it is likely to sign its interim EPA soon and not to wait for the other countries of the West African region (ECOWAS) to find a regional agreement on EPAs. The Trade and Industries Minster, Hannah Tetteh, told the media that the country would have preferred to join other member-countries within ECOWAS to sign the EPA as a body; however, negotiations on the trade agreement with the European Union have stalled - pushing the government to consider its options. “For the past three years, we haven’t really gone far with the ECOWAS EPA" she declared. She also underlined that Ghana's decision was directly related to the Commission's decision to set a deadline.

Meanwhile, civil society organisations including the Third World Network (TWN) have urged the government to forgo the EPA in order to secure regional integration in the West-Africa sub-region. The Head of Economic Unit of TWN, Gyekye Tanoh, recently argued that the EPA is a threat to re-positioning the national economy and to regional integration in the Economic Community of West African States bloc.


The negotiations between South Africa and the EU made progress on agricultural goods. South Africa is not directly affected by market regulation 1528/2007 as its trade relations with the EU are regulated by a bilateral Trade, Development and Cooperation Agreement (TDCA). However, South Africa is negotiating an EPA with the EU as part of the SADC group comprising also Namibia, Botswana, Lesotho, Swaziland Mozambique and Angola. Moreover, Zimbabwe seems likely to bow to the pressure of the EU and ratify the EPA it signed in 2009 by the end of the year, according to recent statements.




Thomas Lazzeri


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