EPAs News Update - June 2009

SADC

 

On the 4th June the SADC countries Botswana, Lesotho, and Swaziland signed an interim EPA with the EU. Mozambique signaled its intention to sign this agreement in the next days, but its trade minister was unable to come to Brussels. South Africa and Namibia as well as Angola did not sign. The signing of the agreement had originally already been foreseen for early May, but had to be called off at the last moment. 

The three countries, which did not sign did so mostly because of concerns regarding the Most Favoured Nation clause (MFN) and the Definition of Parties (DoP). The MFN clause would for example require Namibia to extend the same benefits it offers major trade partners like Brazil, India and China to all countries within the EU too. The EU refused to reopen the negotiation on this issue for the interim EPA but promised the MFN clause could be rediscussed within the negotiations for full EPAs. While this was not enough to convince all SADC members to sign it was enough for some of them. Their decision is highly risky: the interim EPA with the current negative wording on MFN will be legally valid once the agreement has been ratified, while it is impossible to predict whether the final EPA will contain a wording, which is more favourable for Africans, but realising this then will be too late. The EC's promise to rediscuss the subject does in no way entail a binding commitment to a more favourable solution for Africans in the final EPA. As they say verba volant, scripta manent, and the piece of paper which remains is not favourable for Africans. In this sense the position of the other three countries, which refused to sign and insisted on negotiations until an outcome, which satisfies all parties is achieved seems much more reasonable.

 

As far as the DoP is concerned the problems arise from the EU's insistence on dealing with the seven SADC countries as one single entity, which would require the Southern African Customs Union (Sacu) to include Angola and Mozambique in the customs area, a move risks to destabilize the union and threaten regional integration in the Southern African Development Community (SADC). In other words this means that Sacu members need to treat Angola and Mozambique like they were Sacu members as well, although they are not. Furthermore the separate signing of the EPA goes against Sacu's rules, which prevent members of the Union from entering separate trade agreements with third countries. South Africa already threatened to set up trade barriers to prevent an inflow of cheap goods from Botswana, Lesotho, Swaziland and Namibia. This again shows the risks EPAs pose to regional integration and would be a severe blow for example for Namibia, for which Sacu is the most important revenue source.

 

Of the three countries not signing the agreement Namibia is left most vulnerable. Angola is benefiting from free access to European markets, thanks to the Everything but Arms program, while South Africa benefits from preferential tariffs under a separate Free Trade Agreement with the EU, which will expire in 2012.

 

ECOWAS

 

The signing of the interim EPA agreement between the EU and the ECOWAS countries, which was originally foreseen for the end of June might need to be postponed. At an ECOWAS meeting in May the trade ministers expressed their concern regarding a series of aspects of the agreement being negotiated.

Among the critical unresolved issues standing on the path of the agreement are the 0.5 percent community levy, which the EU wants, removed whereas, it constitutes the financial livewire of ECOWAS. The EU had also insisted that the Most Favoured Nations (MFN) arrangement proposed by ECOWAS is against the spirit of the EPA.

On the issue of the liberalization of market access for European goods, the ministers reiterated their earlier request that only between 60 and 70 per cent of the regional economy should be affected over a transition period of 25 to 30 years preceded by a five to seven year period of moratorium. This is a decisively lower percentage of goods and longer timeframe than what the EC has hitherto been willing to offer.

Furthermore the ministers called for unequivocal commitment from the European Commission and EU Member States to contribute to the funding of a development program to ameliorate the effects of EPAs on the West African community. Specifically they asked that such contribution to the EPA Development Program (EPADP) should be "adequate and accessible" beyond the commitment already made in the European Development Fund (EDF). They also asked for a financing plan to be presented by the EU before the signing of the EPA.

Considering the amount of outstanding issues a finalization of the agreement by the end of June is no longer seen as realistic by several African diplomats in particular from Nigeria.

 

ESA

Eastern and Southern African (ESA) countries negotiating Economic Partnership Agreements (EPAs) with the European Union have removed technocrats from the negotiations, claiming the urgent need to add a political dimension to the negotiations.

This development clearly indicates that the ESA configuration is likely to sign the interim EPA soon. ESA grouping chairperson and Zambia's minister of trade and commerce Felix Mutati said EPA negotiations have been taken at a political level since time was not on their side. "Trust us we will deliver and we shall continue engaging the EU to sign EPAs soon because if we do not do it, we shall remain behind since trade and investment are critical to poverty reduction", he stated. The Commission from its side is encouraging ESA countries to accelerate negotiations asserting that outstanding contentious issues can be solved within the negotiations for full EPAs.

Other News

 

The joint ACP-EU Council in Brussels on 28-29 May  adopted only one formal decision. It will allow highly indebted poor countries from the ACP group to refinance their debts by means of lower rate loans from the European Investment Bank (EIB). The change allows the EIB to offer least developed countries that are eligible under the HIPC (Highly Indebted Poor Countries)[1] initiative loans at reduced rates. It aligns arrangements on the management of the EIB's own resources (€2 million) with the more favourable conditions of the European development Fund (EDF) so that reduced rate loans can be granted.

 

At the Joint ACP-EU Council ACP countries have also stated clearly their fears of being subject to the full force of competition from Latin American bananas on the European Union, now that the EU is concluding an agreement with Latin American producers, which meets the WTO rules and which will lead to a reduction of tariffs on bananas imported from Latin America to the EU. This will lead to an increase of imports of bananas from Latin America to the EU and a reduction of banana imports from the ACP countries. Therefore ACP governments called for compensation from the EU for losses. The ACP countries called for €500 million to compensate the reduction in their exports. The EU stated that it considers this sum as unrealistic and offered €110 million instead.

 

 

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[1]  The HIPC initiative is an initiative of the International Monetary Fund (IMF) and is meant to assist highly indebted poor countries. Up to date debt reduction packages have been approved for 35 countries, 29 of them in Africa.