Southern and Eastern African Trade Information and Negotiations Institute (Harare)
The failed WTO talks and EPAs negotiations
By Elijah Munyuki
28 August 2006
USA and EU trade negotiators have been quoted countless times declaring that if they do not get their way in the multilateral trade negotiations they will go bilateral. The WTO negotiations have been declared dead. No-one knows when efforts to start all over again will be made. Some analysts have pinned the future of the talks to the USA political landscape. The EU has gone quite far in cementing bilateral trade negotiations and has roped in its former colonies into negotiating so-called Economic Partnership Agreements (EPAs). One of the regions which has gone quite far in this process is the so-called Eastern and Southern Africa (ESA) configuration. The ESA negotiators have been given the mandate to start text-based negotiations with the EU. A draft text for an agreement with the EU has already seen several versions, and is now a third draft. The text is long and covers a wide range of trade issues, from agriculture to investment rules and competition policy. This August the ESA group meets to iron out further details in preparation for engagement with the EU. Only recently the same group met to consider positions on services negotiations.
These events come in the wake of the collapse of the WTO talks. There is however no indication that the ESA countries have considered the implications of the failure of the WTO talks on the EPA negotiations. These processes are very closely linked. And the failure by the ESA group and indeed the rest of the ACP group to adjust their positions exposes them to serious harm.
Linkages with the WTO.
Many of the negotiating positions put forward by the EU under the WTO process reflect the interests of EU private capital. The corporations seek expanded markets for both trade in goods and in services. The EU has made it clear in its positions that it seeks deep and wide liberalisation. The EU seeks simplified conditions for its capital to take full advantage of market opportunities. These demands met with no success at the WTO. The same demands were made in the EPA context. More emphasis of these demands will certainly be made in the EPA context. Thus there will be heavier pressure exerted on ACP negotiators and politicians. ACP countries should expect EU strategies to be much more forceful and even more cunning than before. Many impoverished ACP governments depend on EU finances. There will be political arm-twisting, promises of aid, and direct EU private sector campaigns. Already some EU-based multinationals are on a road-show to sell “investment friendly” advice. Recently the electrical multinational, Phillips mounted one such campaign in South Africa, and the target audience was governments and the private sector in the Southern African region. Elsewhere Reuters reports reveal that the USA will review whether to withdraw long time trade benefits for India, Brazil and 11 other advanced developing countries, following the recent collapse of WTO talks, which many members of Congress blame on the reluctance of India, Brazil and others to open their markets to more foreign goods. The 32-year-old programme expires December 31 2006 unless renewed by Congress. Targeted countries include Argentina, Brazil, Croatia, India, Indonesia, Kazakhstan, Philippines, Romania, Russia, South Africa, Thailand, Turkey and Venezuela.
The WTO norms
There are many issues which link the WTO process with the EPAs negotiations. The first obvious issue is the very essence of the EPAs. These are a form of Regional Trade Agreements (RTAs) whose structure should be consistent with the WTO system. The very nature of consistency was an issue under negotiation. The WTO work programme is yet to decide on the many requests put forward by the ACP grouping on the need for flexibility with respect to RTAs. The ACP group is also worried about the possibility of preference erosion, this is apparent in the ESA draft text ; but the WTO is yet to issue definitive guidelines on the question of preferences. In this context it is worth asking if there is any wisdom in continuing with an arrangement whose legal validity may very well be questioned, and potentially reversed under the WTO system. The EPAs process is time consuming. It is also very expensive.
The WTO Work Programme
Plenty of issues on the EPAs agenda are still to be completed under the WTO work programme. Since the ESA configuration has gone ahead to prepare a draft text we shall use parts of the text to illustrate the pitfalls of continuing with the EPA negotiations when several contents of the draft text depend on a successful completion of the WTO issues.
ESA countries are dependant on agriculture. Their agriculture will not survive competition with the EU producers in a free trade area arrangement. The WTO process had set 2013 as an end date for the elimination of all forms of agricultural export subsidies. Tentative indications had also been produced with respect to trade distorting domestic support measures. No real agreement was eventually produced on both forms of support measures. Presumably happy with the WTO indicators ESA countries have put no real pressure on the EU to eliminate all forms of trade distorting subsidies. In particular article 93 of the third draft text makes no mention of time-bound elimination of export and domestic subsidies. Relying on the WTO process for an automatic feed-in on the subsidies issue is a strategic blunder. As it stands the draft text has no effective obligation for the EU to eliminate trade-distorting subsidies. This leaves ESA producers badly exposed should a final deal be sealed with this loophole intact.
Safeguard measures, Anti-dumping and Countervailing measures
ESA producers face potential demise. This is very possible if they remain exposed to the flooding of products by EU exporters in an FTA context. The ESA text (Title VII : Trade Remedies) has attempted to deal with this by making provision for safeguard measures. The same is true for antidumping and countervailing measures. However both protective measures are referenced to the WTO agreements on the issues. The WTO safeguards regime is useless to developing countries. It is thoroughly pointless and irrelevant to the specific needs of the poorer and weaker economies. To a lesser extent the antidumping and countervailing measures regime under the WTO has the same problems. Current proposals have been focussed on making these measures flexible for the purposes of the particular situation of weaker economies. The WTO regime has not even finalised work on the issues. If the EPA goes ahead in the absence of the necessary reforms to the safeguard and the antidumping rules ESA producers will be wiped out. They cannot rely on the WTO provisions as they stand at the moment.
Non-tariff barriers ; Sanitary and Phytosanitary Measures, Technical Barriers to Trade
The common complaint by ACP exporters has been the stiff non-tariff barriers (NTBs) which the EU imposes on ACP products. These NTBs range from the sensible to the ridiculous. Although the WTO has agreements on such issues as sanitary and phytosanitary measures (SPS) and technical barriers to trade (TBTs) these remain ineffective because much of the work meant to develop common standards applicable to all WTO members. Harmonised standards will reduce the discriminatory application of standards. However the ESA text makes particular reference to the WTO process (Part III ; Trade Related Issues). There has been no real movement on this issue under the WTO process. It is not even clear what will happen to the work that had been done before the WTO talks collapsed. These are crucial issues that determine the ACP region’s productive systems. In the absence of WTO rules on NTBs the ACP region will continue to operate under the impossible EU regime. And the ESA countries do not help themselves by basing this crucial aspect on the stalled multilateral process.
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
The ESA draft covers intellectual property rights (Title VI). It also makes reference to the WTO agreement on the subject. However the TRIPS issue is a burning and contentious one. Developing countries have made numerous complaints about the TRIPS regime. They have further submitted several proposals for amending the regime, and have included issues such development in the whole WTO TRIPS regime. There is no conclusion in sight on the WTO front. Yet the ESA draft text proceeds as if the matter is settled at the WTO.
Recent ESA discussions on services negotiations under EPAs reveal staggering confusion amongst the ESA countries. Negotiators have been mandated to negotiate services, this happened very late in the process. It is not even clear what ESA countries seek to achieve in this process. At present the draft text has a title but no content on services. The ESA engagement with the EU on services is in remarkable contradiction with the ESA attitude on WTO services negotiations. ESA countries made very limited commitments under the WTO process. They agreed to open up only very few services sectors. In an FTA with the EU they will be required to open up substantially all sectors. This certainly means more sectors than the ESA countries have opened up under the WTO process. The WTO process is however meant to clarify these issues. It is not apparent what ESA countries think they will achieve in the middle of all these doubts.
ACP countries cannot continue with the EPAs agenda as if the failed WTO talks are irrelevant to the EPAs context. Those countries under ESA, which have gone ahead to prepare negotiating texts should pause and reflect on the implications of the collapse of the multilateral negotiations. So much remains doubtful, and it is foolhardy to proceed in the midst of this doubt. An option would be to take advantage of the proposed review of the Cotonou Agreement upon which the EPAs negotiations are based. This would see a specific section of the review fully analysing the linkages between EPAs and the current state of affairs at the WTO. ACP countries should not wait for the EU to do this for them. Rather discussions should start in the various capitals and move to regional positions. In the meantime there is no real sense in ACP countries moving towards conclusive deals with the EU.
* Elijah Munyuki is a Programme Associate for SEATINI.