SHORT BACKGROUND BRIEF ON

ECONOMIC PARTNERSHIP AGREEMENTS

 

 

 

JOINTLY PREPARED BY

THE COMMISSION OF THE AFRICAN UNION, AND

THE ECONOMIC COMMISSION FOR AFRICA

 

SHORT BACKGROUND BRIEF FOR THE AGENDA ITEM ON EPAS

The negotiation of economic partnership agreements between six groups of ACP countries, four of them African, and the European Community has reached a critical stage. This short brief serves to highlight key issues and make suggestions for consideration and action.

 

a.                   State of Negotiations: The current state of negotiations has not adequately addressed all the difficulties and concerns of African countries. These concerns are clearly set out in both the Cairo and Nairobi Declarations on EPAs adopted by the African Union Ministers of Trade in 2005 and 2006 respectively. The concerns include: failure of the negotiations to have a development focus; the imbalance in the negotiations towards a focus on trade liberalisation; and lack of appreciation of the major adjustment challenges that African economies would face in implementing EPAs. In addition, the pace of negotiations has been greatly slowed by the time it takes for the EU to respond to issues that are formally presented to it. As a result, some negotiating groups are falling behind the timeframes for their negotiations. The EU should respond more quickly and should not be as inflexible as it has been, in order to hasten progress in the negotiations. The European Commission should positively respond to the key concerns of ACP negotiating groups, and should have regard to the pronouncements of European Parliamentarians and some member states calling upon the negotiators to fully take into account and positively respond to the concerns of ACP negotiating groups.

 

b.                  Coordination of EPA negotiations among the groups: African negotiators in each of the regions could benefit greatly from regular coordination meetings at the technical level. Given that they are likely to face similar issues from the European Union, coordinated consultations should enable them to formulate and define informed positions on key issues as well as appropriately respond to the EC positions. The negotiating groups should again be requested to invite representatives of other negotiating groups and to closely involve them in their events and negotiations.

 

c.                   Coordination of negotiations by the African Union: The AU coordination of the negotiations should be strengthened. The negotiating groups should involve the Commission of the African Union in their events and negotiations, and should make regular reports on the state of play as well as appropriate recommendations for resolving any issues arising. So far, only one negotiating group, ESA, has regularly and consistently submitted progress reports to the Commission of the African Union. The African Union Commission should participate in the actual negotiating meetings as coordinator and advisor, providing technical input and ensuring that the EPAs are fully in line with the development and integration objectives of the African Union.

 

d.                  Divergence between EU and ACP positions: There are divergences between the EU and Africa negotiating groups on key issues, which still remain unresolved. These include, among others, divergences in the areas of regional integration and risks that EPAs pose, coordination among negotiating groups, development cooperation and finance, and WTO compatibility. The parameters set for the African negotiators in the previous EPA declarations should be adhered to, in order to assist coordination and harmony in positions taken and to draw on the strength of the Common African Positions on key issues as set out in those Declarations. Given the divergence in the negotiations that remain unresolved there is need for more political involvement that can facilitate the process to move forward as acknowledged and recommended in Port Moresby during the ACP Council of Ministers meeting. In this regard, the ACP and AU summits planned for December 2006 and January 2007, respectively, should be requested to address key issues that arise in EPA negotiations.

 

e.                   Preparedness: The level of preparedness depends on availability of informed and objective options leading to positions that clearly reflect each countries vision and strategy. This preparedness is only possible if countries have undertaken country-specific studies. Therefore, detailed and more specific simulation studies should continue to be undertaken for those countries that have not yet done so. Before these studies are finalized and thorough assessments have been done at the national, regional and continental levels, the preparedness to enter EPAs should be considered not to have yet been adequately addressed.

 

f.                   Potential adjustment costs remain an issue: Countries negotiating the EPAs are concerned with the potential adjustment costs and the questions of how to adjust still persist. Clear measures therefore need to be defined that will help these countries address the challenges of adjustment. Experience for North African countries is that the EU helped establish well-funded adjustment programmes for these countries. These support programmes helped leverage enterprises in implementing the Association Agreements. A broad EPA adjustment facility in addition to the EDF is an appropriate instrument for African countries negotiating the EPAs. This accompanying adjustment facility should cover social development; economic reforms; private sector development and institutions development support.

 

g.                  Rules of origin: Rules of origin are an important element for a pro-development outcome of the EPAs. As such, restrictive rules of origin cannot help EPAs realize their intended development results. It is important therefore to finalise the process of formulating simple and flexible rules of origin at the all-ACP level in order to guide the negotiating groups, taking into account Africa's integration goals. The rules of origin should be, simple, flexible, easy to implement and comply with and should also include all Africa and ACP cummulation. There should be a move away from product specific rules of origin which are difficult to administer to more general rules of application, value addition or level of materials used. With respect to textiles and clothing, single transformation would be ideal.

 

h.                  Health and technical standards: Health and technical standards have the potential to limit the ability of African countries to benefit from trade with the EU. In this regard, the harmonisation of technical and health standards as part of the EPAs and application of internationally agreed rules must be taken into account in the negotiations. The European Community should oversee the formulation and enforcement of private sector standards, in accordance with its WTO obligations under the SPS and TBT Agreements, to ensure that the standards do not act as disguised restrictions to trade nor act as non-tariff barriers to imports from ACP countries.

 

i.                    Regional integration: Regional integration is an African priority in accordance with the legal instruments and programmes for the establishment of the regional economic communities and progressively the African Economic Community, and in accordance with the Constitutive Act of the African Union. Africa is currently taking significant measures to enhance regional integration and address the question of rationalisation of RECs. The EC should fully recognize and respect these measures, and work within them. The EPAs should be supportive of this process and should not be seen to undermine it, including, among others, in the areas of trade liberalization and commitments on elimination or reduction of trade barriers to EU imports, EPA configuration and membership in the RECs, development cooperation, and financing of the programmes of the RECs. Reinforcement of regional integration is a pre-requisite for the African countries being able to benefit from the EPAs. In this regard, regional integration should always be given primacy over EPAs, which should support and strengthen it.

 

j.                    Article 24 of GATT 1994: Article 24 of GATT, unless appropriately modified will limit the flexibility of the African countries to benefit from EPAs. It was clearly understood that Article 24 in its current un-amended form and as currently interpreted was unsuitable for pro-development EPAs and needed to be amended. The amendment would aim to make it development-friendly through introduction of appropriate flexibility for North-South regional trade arrangements such as the EPAs. Without appropriate flexibility it would not be possible to use the most appropriate methodology for computing substantially all trade, for instance. In this regard, the ACP proposal at the WTO should be fully taken into account by the negotiating groups in continuing with their negotiations and should be fully reflected in the outcome of the WTO negotiations. In its un-amended form, Article 24 of GATT should not provide the rules with which EPAs should be compatible.

 

k.                  Coherence between the Doha Round and EPA negotiations: The EPA negotiations are intertwined with the Doha Round of multilateral negotiations. The suspension of the Doha Round is therefore likely to have serious implications on the progress and content of the EPA negotiations and on the final agreed EPA texts. The need to ensure coherence in any commitments by the African countries in the EPAs with the progress made in the Doha Round must be emphasised. It would be premature to finalise and conclude EPAs before the conclusion of the WTO negotiations under the Doha Work Programme. Also, it is important to ensure that the EPAs do not contain obligations on the ACP regions that would be far in excess of WTO obligations. Issues that have been rejected in the WTO by Africa should not now be introduced in the EPAs.

 

l.                    Alternative to EPAs: Alternative to EPAs in the context of Article 24 of GATT and the Enabling Clause should continue to be fully explored while taking account of the Cotonou Partnership Agreement. This will help to give the negotiating groups fallback positions and broad latitude in negotiations.

 

m.                Review of EPA negotiations: There is ample evidence that there are still issues that require serious attention in the EPA negotiations. These issues require interventions at both the political and technical level. A comprehensive review in accordance with the Joint ACP-EU Declaration on the review must be urgently undertaken and finalised. Both the ACP and EU sides need to take this seriously. Active participation in an all-inclusive review will help draw appropriate recommendations with regards to outstanding issues, flexibilities, and what needs to be done. The review report will assist in helping the negotiators in terms of the way forward for the negotiations. There is also need for coordination among the negotiating groups as they undertake the exercise. The African Union Commission should produce a consolidated report together with the ECA, relating to the four negotiating groups of Africa, as requested by the ACP Secretariat, and within the modalities agreed by the ACP Ministerial Trade Committee meeting in June 2006.

 

Senior officials are requested to recommend that the Trade Ministers adopt a strong declaration on EPAs, taking into account some of the suggestions for action in this brief.