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EU Trade Negotiations Heading for a Stalemate

Public Agenda, Accra

EU Trade Negotiations Heading for a Stalemate

By Amos Safo

23 November 2007

West Africa is sticking by its demand for an extended World Trade Organisation waiver for trade with Europe, rejecting an EU call for new interim commercial deals by December 31.

The European Union hopes to sign "Economic Partnership Agreements" (EPAs) with six regional groupings of ex-colonies before a WTO waiver on its preferential trade measures for ACP countries expires at the end of the year.

The talks with West Africa, which includes oil-exporting heavyweight Nigeria and many of the world’s poorest countries, are the most difficult of all the EU negotiations, thanks to the pressure civil society groups are exerting on their governments.

"For ECOWAS there is no change - we are asking Europe to ask the WTO for a waiver," said Ablasse Ouedraogo, special adviser to the executive president of the 15-nation Economic Community of West African States (ECOWAS), which is negotiating the EPAs with the EU.

But the European Union says to request any waiver extension it must have evidence of progress, including at least a deal on market access and lists of "sensitive products" on which each ACP grouping could retain tariffs under the new agreements.

The EU Commissioners for trade and development, Peter Mandelson and Louis Michel, piled pressure on ACP countries to speed up negotiations in an opinion piece published last month in Britain’s Guardian newspaper.

They said it was immoral and incompatible with world trade rules to continue the existing preferential trade terms for ACP countries, which were agreed in 2000 and discriminate against other poor countries that do not belong to the ACP bloc.

But with West Africa in particular sticking to its position not to sign the EPAs now it looks set that the European Union may have to settle on other temporary trade agreements come January 2008.

The European Commission recently acknowledged that some ACP regions would not conclude EPAs by the end of the year and called on those groups of countries that were ready to sign interim deals by Dec. 31 to allow their preferential exports to Europe to continue into 2008, while full EPAs are negotiated.

Mr. Stephen Adams, an assistant to the EU Trade Commissioner told a team of African media personnel at the EU headquarters in Brussels last month that the Cotonou agreement which was signed on 23rd June 2000 and revised in Luxembourg in 2005 was based on historical circumstances and the special relationship between the EU and the ACP countries.

He said some of the provisions of the agreement are in contravention of World Trade Organisation (WTO) regulations which insist that trade relations should be reciprocal. The EU therefore fears that other developing countries, particularly in Latin America that are outside the ACP could sue the EU at the WTO if it does not put an end to its preferential treatment for ACP countries.

"This is what we have spent the last seven years doing in order to prevent ourselves from a law suit from the other developing world," Adams told the African journalists. "The notion here is that the EU discriminates in its trade relations by having different trade arrangements with developing countries."

Mr. Adams argues that the EU is not asking ACP countries to liberalize their markets on the same scale as the EU would. "We are just asking them to liberalize just enough to meet WTO regulations."

However, a paper titled, "Assessing the Implications of Economic Partnership Agreements on the West African Sub-Region" and submitted to the Ecowas Commission on behalf of civil society groups contradicts EU’s argument that ACP countries would not have to further liberalise their markets. Authored by Prof Ademola Ariyo, Executive Director- Centre for Public-Private Cooperation (CPPC), it points out that one of the obvious implications of reciprocity in the EPA is that ECOWAS countries will have to open up their economies to imports from Europe.

He argues further that tariff elimination will lead to a decline in import duties and, hence, total government revenue. "In absolute terms, the decline in import duties in the mid-scenario is US$854.16 million in ECOWAS."

Quoting a study by Karingi et al (2005) and Lang (2006), Prof Ademola argues that as a result of the import duties foregone on EU exports into the sub-region, non-oil producing countries like Ghana and La Cote d’Ivoire will be hit by revenue shortfall and the ECOWAS sub-region will have to forego up to $980,216,375 in the medium term.

Already, due to the tariff reductions in the ECOWAS as a result of the Common External Tariff recently adopted, there has been an eight-fold increase in the import of EU poultry products with over 30 percent of the total imports going to Ghana. In 2000, US$11 million worth of poultry products were imported; but just a year later this had more than doubled to US$26 million. "These products are selling at 25-30 percent below the cost of production in Ghana due to the production and export subsidies they enjoy in developed countries", says Prof. Ademola.

This in turn, says the report is likely to affect income level of both the poor and the non-poor. If alternatives were not found to compensate for the loss in government revenue because of the EPA, government expenditure in most of the ECOWAS countries would have to be reduced. In the event that the governments of these countries are unable to raise revenue in other ways, there would have to be a reduction in fiscal expenditure with the likely knock-on effects on social spending.

"It is poor women, men and children in these countries who will be hardest hit by the loss of government revenue. The government’s capacity for spending on education, health, water and sanitation is already woefully inadequate in some of these countries. Any further decrease in its budget will worsen this problem. In addition, this has serious implications for the attainment of the millennium development goals (MDGs)" argues the report.

But the EU says it is guaranteeing increased aid for development assistance although development assistance is not being negotiated as part of EPAs. In addition, the European Commission (EC) has committed to granting 2 billion euros (2.75 billion dollars) in annual aid trade by 2010.

The civil society groups however argue that the EC is only using promises of aid for trade to entice ACP countries into signing the EPAs, despite their concerns that the level of market opening required as part of those agreements would leave indigenous enterprises at risk from outside competition.

In addition, anti-EPA groups say not only do EPAs threaten existing productive sectors; they could severely undermine the ability of ACP governments to support future economic development. They point out that virtually all countries that have developed in the past have used tariff policy to encourage small enterprises to move up the value chain into new manufacturing and processing industries.