Response to the letter “This is not a poker game” by Messrs Peter Mandelson and Louis Michel in The Guardian of 31 October 2007
Dear Messrs Peter Mandelson and Louis Michel
I refer to your letter “This is not a poker game” that appeared in The Guardian online on Wednesday, 31 October 2007, as well as your Open Letter to anti-poverty campaigners that preceded this one, conveying the same message.
I am an independent trade policy analyst from Namibia, an African, Caribbean and Pacific (ACP) country within the Southern African Development Community (SADC) configuration, currently engaged in Economic Partnership Agreement (EPA) negotiations with the European Union (EU).
I feel obliged to respond to your letter — and the Open Letter — through this media to bring to the attention of the broader readership some of the issues not fully addressed or omitted by you in both cases. So please allow me some comments on behalf of the ACP in general and the SADC-EPA configuration in particular to bring to the fore the realities they are faced with in the EPA negotiations.
I have followed your justifications of EPAs now for quite some time, and with all due respect, it is interwoven with double-talk and a disregard for the Cotonou Agreement provisions. The message is also clear that the EPA process is an exogenously inspired EU model offered to the ACP or alternatively they would face the EU’s “default preference scheme for all developing countries, the Generalised System of Preferences” (GSP) as from the beginning of 2008 — as expressed in your Open Letter. How does this relate to the acquis principle mentioned in Cotonou Art 37.7?
The intension that EPAs “will take a trading relationship based on dependency and turn it into one based on diversification and growth”, is a noble idea. For more than 25 years the EU, under the Lomé and Cotonou trade dispensations, kept the ACP countries in the very same dependency grip to export only primal commodities (especially agriculture) in order to qualify for preferences.
One of the main reasons given by the EU for the failure of the preferential trading arrangements over the years is that the ACP “still exports just a few basic commodities, most of which fetch lower prices than they did 20 years ago.” Add to this the resulting decline in European market prices, especially for primal agricultural commodities because of the EU’s own Common Agricultural Policy reforms, and it’s easy to see why (mandatory) primal commodity exports from the ACP really declined.
In addition, taking into account the economies of scale in the ACP countries, if a country could only export primal commodities in order to qualify for preferences, what incentive is there to diversify the range of export products or the economy? [Could this be the reason why “diversification” is only referred to twice in the 100 Articles of the Cotonou Agreement — Art 21.3 and Art 28 (d) — and not anywhere in the six Annexes?]
What would be a realistic timeframe under the EPA process to transform a 25-year plus basic commodity export system into a diversified value-added export system? Who would be responsible for the funding during this transformation period and the assistance needed to develop new markets for the export products from the newly diversified economy?
Since the 10th EDF funds have already been allocated, were there provisions made for this? To borrow the words of the Commissioners: “this is simply not true.” Aid for trade (2008 to 2010) will be part of the EU-Africa Strategy, which will only be adopted during December 2007, despite the figures quoted. In addition, whether these figures would be sufficient to foot the requested development assistance bill under EPAs also remains an open question.
It is quite a reassurance to know that the EU is not steamrolling the ACP into completing EPA negotiations by year-end. However, this (again) is also a turnaround from your Open Letter where the ACP configurations not in a position to conclude EPA negotiations by year-end are subjected to the sublime threat of being downgraded to the EU’s GSP system as from the beginning of 2008.
Furthermore, you are defending the World Trade Organisation (WTO) waiver deadline as a promise made to non-ACP developing countries in 2000 — the time of the signing of the Cotonou Agreement, i.e. the ACP and the EU are bound by the Cotonou provisions. However, why not also tell the readership that in 2001 the WTO’s Doha Round was launched with the promise to the developing countries that it would be a “Development Round” to specifically address their needs.
The developing ACP countries specifically welcomed this since the Round was to be concluded by early 2005, leaving sufficient time before the expiring of the ACP WTO waiver at the end of 2007 to conclude the EPA negotiations. This was the one and last chance for the developing countries to remedy multilateral discrepancies to eventually pave the way for an acceptable WTO compatible post-Cotonou dispensation with the EU. For example, on 28 April 2004 the ACP made a submission on Regional Trade Agreements to address the development and, special and differential treatment aspects in GATT Art XXIV (vs GATS Art V) and the Enabling Clause.
The Doha Development Round has not been concluded to date, inter alia because of the embroilment between the EU and the United States over cuts in agricultural subsidies. Cotonou Art 39 (1-4) is very clear on close cooperation between the ACP and the EU, inter alia in “furthering their common interests in international economic and trade cooperation in particular in the WTO,” How will the EU justify their role in the unconcluded Doha Development Round in terms of Cotonou Art 39? Or do they need to justify their role given Cotonou Art 37.7 that the EPA negotiations shall take place “in conformity with the WTO rules then prevailing.”? (emphasis added).
Let’s just for a moment revert back to the statement of the non-agreement on WTO compatible arrangements with the ACP and the consequent fall-back to the EU’s “default preference scheme for all developing countries, which is less generous than our current scheme” — let’s take the example of the Namibian beef industry and the consequences of such a step.
Taking into account that the EU has in the recent past revised its GSP system, a country like Namibia (include Botswana and Swaziland), that depends on its beef exports to the EU to stimulate development for 70% of the population, cannot benefit from the GSP system anymore because beef is now excluded from the revised list of beneficiary products.
Beef is included in your 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.
How does this fit in with the acquis principle referred to in Cotonou Art 37.7 and the reference in Cotonou Art 37.6 that alternative trading arrangements should be “equivalent to their existing situation and in conformity with WTO rules.” While the EU’s GSP — Mr Mandelson’s only alternative to EPAs — conform to WTO rules, it certainly does not give equivalence to the ACP’s existing situation. You yourselves acknowledge this fact through your statement “which is less generous than our current scheme” in your letter and “has less generous tariff rates than our current scheme” in your Open Letter — again a neglect of the Cotonou provisions.
Then you are trying to ease the readership with the assurance that “The EU is not threatening to raise tariffs for these countries, but is doing all it can to avoid this.” — noble words again. Mr Mandelson, let me remind you of your address to the European Parliament’s International Trade Committee on 11 September 2007, where you said that it was “irresponsible” for anti-poverty campaigners to claim that if the ACP does not sign EPAs by end-2007, that punitive tariffs should not be imposed on those ACP countries — speaking of double-talk.
There you claimed this was because you have “no [other] legal option” than that imposed under the WTO rules. Your disclaimer was that “I have no hat and no rabbit to pull out of it.” A little too late to look for a hat containing a rabbit at this stage in 2007 I presume? Let me take you back in history to show your own disregard for the Cotonou provisions.
During February 2005, while being questioned before the United Kingdom’s International Development Committee on the provisions of Cotonou Art 37.6 on alternatives to EPAs, you confirmed that this provision “still stands.” However, even back then your interpretation of Art 37.6 on “alternative possibilities” only pointed to the EU’s GSP — something you yourself regarded as “second best” to the EPA proposals at the time — again showing your disregard for the Cotonou provisions. Since then more than two years have passed and still you could not come up with a better alternative to EPAs than the EU’s GSP.
Here I would like to refer you back to a legal opinion of June 2005 obtained by ActionAid (an UK-based NGO) from Kate Cook, a lawyer at Matrix Chambers. She concluded that your uncompromising position on alternatives to the ACP countries is in breach of the Cotonou Agreement. Despite this, the ACP countries today are still stuck with no realistic alternative according to the Cotonou Agreement and the ACP is faced with the EU’s “default preference scheme for all developing countries, the Generalised System of Preferences” as from the beginning of 2008. Why then the provision in the Cotonou Agreement?
In September 2000 the EU signed the United Nations’ Millennium Declaration for achieving the Millennium Development Goals (MDGs) by 2015. During 2005 the EU adopted a series of measures to accelerate the progress towards attaining the MDGs [COM(2005) 132 final/2, COM(2005) 133 final/2, COM(2005) 134 final]. Then in 2006 the EU adopted their groundbreaking European Consensus on Development (2006/C 46/01). According to the latter “The primary and overarching objective of EU development cooperation is the eradication of poverty in the context of sustainable development, including pursuit of the MDGs.”
The EU’s measures to attain the MDGs and those contained in the European Consensus on Development do not reflect what the EU is pursuing in their EPA negotiations. The question is why the EU would go against their own adopted policies to achieve something else in the EPA negotiations?
Maybe this could be explained within the ambit of what is called an enforced partnership, which is power-based. The EU can dictate to the ACP because of an asymmetrical power relationship. A subdivision of enforced partnership is called a structured partnership and the Cotonou Agreement and the envisaged EPAs are examples of this.
The Cotonou Agreement is a continuation of the historical relationship between the EU and the ACP, albeit more structured by the inclusion of a political dimension. The EPAs will go one step further by including reciprocity in the trade relations between the EU and the ACP, thus augmenting the structure of the partnership. The only dilemma of such a relationship remains that the balance of power still favours the EU and the ACP still finds itself at the receiving end — hence it’s got to take what is offered (or eventually imposed) or suffer the consequences.
The main point of contention in the EPA negotiations from the beginning — from the launch in 2003 and 2004 — was the EU’s insistence (in 2007 one could probably call it an obsession) to include the so-called new generation issues in the negotiating agenda. These include services, investment, government procurement, trade facilitation, intellectual property rights, labour and environmental standards. These issues are not required by the waiver to have WTO compatible trading arrangements in place by 01 January 2008, hence the EU is pursuing a WTO-plus negotiating agenda.
Why being apologetic at this late stage to excuse yourself from the blame of delaying the EPA negotiations? Why wasted so much time with your insistence to include the new generation issues in the agreement before the end of 2007? Now that you see it would be an impossible task to conclude agreements including the new generation issues, suddenly at this late stage you are willing to reach an agreement on trade in goods only to satisfy the conditions of the WTO waiver that will expire at year-end — why the sudden turnaround?
An aspect that you never mentioned in your letter — and in your Open Letter — is that despite agreeing to a goods only agreement before end-2007, you are linking development assistance to the assumption of binding commitments for the new generation issues to ensure that these would be negotiated post-2007. This gave rise to your latest two-stage approach to the EPA negotiations.
Stage one would be to initial a WTO compatible, trade in goods only agreement based on the EU’s duty free quota free market access offer by 15 November 2007. Even more importantly is that this stage will also contain bidding commitments to continue negotiations in outstanding areas. Stage two, and note, will be conducted in trade in services and new generation issues. Again the ACP is on the receiving end.
As a point of interest, the words partner/partnership appear 52 times in the 100 Articles of the Cotonou Agreement and nine times in the six Annexes, spelling out the statistical significance of the spirit of the Agreement. How then could the EU impose additional commitments when a goods only agreement could be in place post-2007 that satisfies the conditions of the to-be-expired WTO waiver? What happened to “partner” and “partnership” in the spirit of the Agreement? Why is the EU neglecting the Cotonou provisions?
The legal foundation and guideline for a post-Cotonou trade dispensation between the ACP and the EU remain the Cotonou Agreement, despite the different mandates and agendas. Thus, despite what is being negotiated, the provisions of the Cotonou Agreement should still be adhered to — or otherwise, what is the use of signing an international agreement?
Another noble gesture is that you will make sure that “there are no European export subsidies on any goods where ACP countries remove tariffs”, so the ACP “will be able to protect and exclude sensitive products and take advantage of long transition periods to nurture growing industry and protect fragile agricultural sectors if that is what they want”, i.e. the ACP would not have to compete against subsidized EU produce. What about products (especially sensitive products) where the ACP does not remove tariffs or lower tariffs sufficiently? Such products would still have to compete with EU subsidized substitute produce! — the argument doesn’t make sense.
And again, if the argument is that “The problem is that EU businesses and investors have too little interest in these regions, not that they have too much.”, why then the enforcement of the new generation issues in the EPA negotiations? Another example of double talk?
Let me get back to the SADC-EPA configuration: The EPA negotiations between the EU and the SADC configuration were launched in July 2004. At that time the configuration consisted of four members of the Southern African Customs Union (SACU) and Mozambique, Angola and Tanzania — South Africa, as a SACU member, was only an observer (without any definite role attached to its observer status). Furthermore, the SADC configuration contained only half of the original SADC regional bloc members. These two realities posed enormous challenges for the configuration in terms of regional integration and the consequent international legal obligations.
Realizing that the original SADC regional integration ambitions would be shipwrecked under this fragmented dispensation, the SADC-EPA Trade Ministers on 12 February 2006 adopted a range of Strategic Framework proposals in an effort to salvage part of the Southern African regional integration agenda. These proposals were submitted to the EU on 07 March 2006 for consideration in terms of Cotonou Art 37.6 and the African Union’s Declaration on EPAs.
Two of the main objectives of the Strategic Framework proposals were to include South Africa as a full member of the SADC-EPA configuration — thereby resolving the SACU legal obligations — and to exclude the new generation issues from the EPA negotiations since not being a requirement for WTO compliance.
After a delay of 11 months the EU on 14 February 2007 eventually released their long-awaited response to the SADC-EPA Strategic Framework proposals submitted in March 2006. The EU’s response approved South Africa’s inclusion as a member of the SADC-EPA configuration — albeit with a differentiated approach to market access — and the new generation issues had to stay on the negotiating agenda!
As a point of interest, in a communication from the Commission to the Council on 28 November 2006 [SEC(2006) 1427] it is stated with regards to the new generation issues that “It should be made clear to SADC that if, in the end, the region would choose not to make an effort in addressing those [new generation] issues, then the EC would find it difficult to improve SADC access to its market.” Just another (official) pointer of neglecting the Cotonou provisions!
Given the above, why then should the ACP configurations trust you and your negotiators in the EPA negotiations, when you are neglecting provisions in an Agreement that was signed between the EU and the ACP? Next question: are you trying to achieve a final confidentiality break between Africa and the EU on the eve of the EU-Africa Summit in December 2007? — would Africa ever trust you again after your feat with the EPA negotiations?
I do not doubt the EU’s intentions to assist the ACP — and Africa in particular — through your EPA process (building stronger regional markets, attract investments, diversify economies, etc.). However, I strongly question your application — or rather imposition — of an exogenously developed EU model contrary to the realities in Africa (in this case), against the sublime threat of being worse off post-2007 if these countries do not succumb and sign EPAs according to the EU’s agenda.
Messrs Mandelson and Michel, you are right that this should not be a poker game. Maybe it’s time for reflection so you could realize who is actually playing poker with the livelihoods you are trying to help.
Since you’ve mentioned that ”there should be debate over EPAs”, this is my humble contribution — hope you would appreciate ...
Wallie Roux
Tel: +264 61 22 7648
Mobile: +264 81 288 2626
E-mail: wallie@mweb.com.na
