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EU ‘Firm’ on EPA Deadline

By Catherine Sasman
Friday, 16th of November 2007

WINDHOEK - Following a meeting with trade ministers from the African, Caribbean and Pacific countries with the European Union (EU) in Brussels Wednesday, the European Commission said existing modalities supporting trade preferences would no longer be in force from January 1, 2008.

“The ACP and the EU are therefore faced with a firm deadline. In spite of the hopes that each of the six regions would be in a position to conclude full EPAs (economic partnership agreements) before this deadline it is now clear that this will not happen,” said the European Commission.

Proposing a “pragmatic way” to deal with the situation, the Commission proposed, for the ACPs that wish to, to build “stepping stone agreements” that would focus in particular on the need to have World Trade Organisaion-compatible goods market access arrangements in place. Negotiations would then need to continue on any outstanding aspects to conclude all EPAs.

As a second proposal, the EU indicated that it would be open to discussion on the issue of initial signatories of any EPA. In the current time-pressured context, said David O’Sullivan, Director General of DG Trade of the Commission, there is an obligation upon the EU to address immediate losses non-least developed countries (LCDs) alone will face at the beginning of next year if there is no appropriate arrangement in place.

“For these non-LCDs such as Namibia, a solution which guarantees and improves current market access must be in place. The EU is therefore prepared to engage with [smaller groupings than those initially envisaged if this desire is so expressed. But this will only be done on the basis that the door remains very much open to all interested parties to join, whether today or a couple of months down the line,” said O’Sullivan.

For legal security, he said, an agreement should cover “substantially all trade”. According to a WTO benchmark, this means that less than 80 percent liberalisation of EU goods, or a period of more than 15 years, will make an EPA vulnerable. “And even that does not go down well with some countries in the WTO, but taking into account the nature of ACP countries, it probably can be defended, but it would not be prudent to go further,” he said.

He went on to say that extensive flexibility exists to take into account sensitive sectors - be it for political or economic reasons - that require longer or permanent tariff protection.

Where no EPA can be signed, he said, all countries would benefit from a non-discriminatory Generalised System of Preferences. “Of course we recognize the difficulties this can create in terms of preference loss for certain ACP non-LDC. But if we have not been able to put in place a WTO-compatible goods agreement, there is no other option which is either legally sound or politically sustainable. This is far from being the EU preferred outcome.”

He added: “There are no alternatives to EPAs that are defensible under WTO rules, or indeed fair to other developing countries outside the ACP.”

This means that a goods-only agreement to satisfy the conditions of the WTO waiver that comes into effect by the end of this year - with the emphasis on reciprocity - to make it compatible with WTO rules - will be signed before year end to have legal trade arrangements in place. Despite this being a noble step, said trade analyst Wallie Roux, it is because the EU’s insistence to include service and other trade related issues on the EPA negotiating agenda was met with too much resistance from ACP countries to have the EPAs signed by the end of the year.

Trade and other related issues are not required for WTO compatibility.

The EU two-stage approach, said Roux, would be to firstly initial a WTO compatible trade in goods-only agreement based on the EU’s duty-free, quota-free market access by 15 November (yesterday). More importantly, he said, is that this stage also contains binding commitments to continue negotiations in outstanding areas. The second stage will be conducted in trade in services and trade related issues. Again, said Roux, the EU is forcing these back on the EPA negotiating agenda, albeit in 2008.

Roux suggested that alternatives should be sought, arguing that the only alternative that the EU offers to the EPAs to date is its GSP, “which in the words of Mr Peter Mandelson, is ‘less generous than our current scheme’ with reference to the EPAs,” he said. “What happened to the Cotonou provision of ‘which is equivalent to their existing situation’, and what happened to the Cotonou provision of ‘will examine all alternative possibilities’?” asked Roux.

He said that Mandelson had already in February 2005, before the United Kingdom’s International Development Committee, interpreted the Cotonou provision of ‘all alternative possibilities’ as being the EU’s GSP, “something that he himself regarded as ‘second best’ at the time. Since then no alternative or alternatives were presented to the ACP.”

Referring to a legal opinion of June 2005 by ActionAid [a UK-based NGO] from Kate Cook who concluded that Mandelson’s “uncompromising position on alternatives to the ACP countries is in breach of the Cotonou Agreement”, Roux said ACP countries are today still “stuck with no realistic alternative” according to the Cotonou Agreement and that ACP developing countries are “still faced with the EU’s GSP system” as from the beginning of 2008.

Using the Namibian beef industry as an example, Roux said the country could not benefit from the GSP system anymore because beef is now excluded from the revised list of beneficiary products.

“Beef is included in the EU’s GSP+ system, but Namibia does not currently qualify for membership to that system. The only other option open for the Namibian beef industry in the absence of an EPA post-2007 would be to export beef to the EU under the WTO’s Most Favoured Nation (MFN) tariffs. As a rough indication from the calculations that I have seen, the MFN import tariffs would about equal the value of a container of beef exported to the EU, thus rendering beef exports from Namibia - and Botswana and Swaziland - totally uneconomical as from the beginning of 2008,” said Roux.