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The West Africa-EU Economic Partnership Agreement is absurd

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SOL | 15 May 2016

The West Africa-EU Economic Partnership Agreement is absurd

by Jacques Berthelot

Genesis of the EPAs

After the independence of sub-Saharan Africa’s (SSA) countries, of which of the 16 West African (WA) States – the 15 of the Economic Community of West African States (ECOWAS), and Mauritania – all former colonies (except Liberia), the EU has maintained the non-reciprocal trade preferences allowing them to export duty free to the EU 97% of their agricultural products and 100% of their industrial products while being able to tax their imports from the EU, in the context of broader cooperation agreements, called Lomé Conventions from 1975 to 2000. But the 9 Latin American (LA) exporters of bananas to the EU – 3 Andean countries (Colombia, Ecuador, Peru) and 6 Central America countries (Costa Rica, El Salvador, Honduras, Guatemala, Nicaragua and Panama) – have sued the EU at the GATT first in 1993 and then at the WTO from its creation in 1995, when the EU was sentenced three times. The reason: these developing countries (DCs) had to pay import duties (ID) to the EU which was importing duty free the bananas of ACP countries (Africa, Caribbean and Pacific), which was contrary to the WTO principle of non-discrimination. According to this principle, if developed countries may grant non-reciprocal trade preferences to DCs, they cannot discriminate them on a geographical basis but only on a development level basis. Hence the implementation of the EU bilateral "Generalised System of Preferences" (GSP) since 1971 for DCs – in which they benefit from lower ID of about 30% compared to the normal ID of the so-called "most favoured nation" (MFN) applied to developed countries – and duty free-quota free (DFQF) applied to the "least developed countries" (LDCs) since the EU Decision "Everything But Arms " (EBA) of 2001.

The EU obtained a WTO waiver to extend the non-reciprocal preferences to ACP countries from 1995 to 2001, which led it to turn the Lomé Convention into the Cotonou Agreement on 23 June 2000, whose economic components provided for the establishment of 7 regional Economic Partnership Agreements (EPAs), of which 5 in sub-Saharan Africa (SSA). They are Free Trade Agreements (FTAs) in which the ACP countries could no longer tax 80% of their imports from the EU which itself would open its market to 100% of its imports from countries that signed an EPA, which was already almost realized. As EPAs could not be implemented immediately, the EU obtained a second waiver provided that they would take effect in January 2008.

A first remark is that the EU has done nothing to get from the WTO the right to maintain non-reciprocal preferences with the ACP countries due to the differences in development levels between them, of which WA, and those of LA. Indeed in 1995 the average per capita GDP of $1,294 of the 9 LA countries exporting bananas was 2.3 times the average of Ivory Coast and Ghana ($560), the two only exporters of WA bananas to the EU. And the gap has grown to 4.3 times in 2014 ($6,321 against $1,454). Furthermore the banana war was buried at the WTO in December 2009 when the EU agreed to lower the ID payable by these countries, and the ID was further lowered after the signing of FTAs at the end of 2012 with the 2 Andean countries on the one hand (an FTA that Ecuador joined in 2014) and the 6 Central American countries on the other hand. All these LA countries agreed in return that the EU could continue importing duty free the ACP bananas. It would therefore be possible to obtain a WTO waiver allowing the EU to give again non-reciprocal preferences to ACPs. All the more as they are facing four specific challenges: a population explosion, a growing food deficit (excluding cocoa which is not a staple food), a dramatic climate change and an heavy dependence on exports of oil and other minerals whose prices have collapsed recently.

But the EU does not wish to renew the non-reciprocal trade agreements as it has been pursuing since the 1980s a strategy of market access to third countries, particularly DCs, while ensuring at the same time its supply of raw materials at world prices, including through "structural adjustment policies" imposed on indebted DCs by the World Bank and IMF where developed countries hold a majority stake, hence of votes. This strategy was reinforced in the document "Global Europe" of 6 October 2006 of the Trade Commissioner Peter Mandelson and confirmed in the document "Trade for All" of June 2015 of the Commissioner Cecilia Malmström. For Peter Mandelson, "If our economic strength is built on trade, then our prosperity is directly linked to the openness of the markets we try to sell to… Alongside our commitment to the WTO we have, through bilateral negotiations, sought to remove trade barriers behind borders… Building on the WTO, our aim will be to go beyond what can be achieved at the global level by seeking deeper reductions in tariffs; by tackling non-tariff barriers to trade; and by covering issues which are not yet ready for multilateral discussion, such as rules for competition or investment"1. Cecilia Malmström confirms: "In view of the EU’s dependence on imported resources, access to energy and raw materials is critical for the EU’s competitiveness. Trade agreements can improve access by setting rules on non- discrimination and transit: by tackling local content requirements; by encouraging energy efficiency and trade in renewables; and by ensuring state owned enterprises compete with other companies on a level playing field according to market principles".

It is in that context that the European Commission justifies the EPAs by a reductio ad absurdum argument: since the preferential trade agreements of the Lomé Convention did not prevent the ACPs from getting poorer, then administering the sovereign remedy of exposing them to a full-fledged free trade with their main partner will necessarily trigger a salutary reaction which will increase drastically their competitiveness: "Past ACP-EC trade cooperation, which has primarily been built on non-reciprocal trade preferences, has not delivered the results expected. Although it has granted duty free access for nearly all products, it has not prevented the increasing marginalisation of the ACP in world trade… Therefore, a more comprehensive approach is needed… Economic Partnership Agreements are an instrument to achieve these objectives…by removing progressively all barriers to trade between the EU and the ACP EPA groupings and enhancing co-operation in all areas relevant to trade"3. This is a way of thinking as absurd as that consisting for a poultry producer to open the henhouse gate to allow the fox to test the poultry resistance capacity. In this case the 16 WA "chickens" had in 2014 an average per capita GDP 17.7 times lower than that of the EU "fox": €1,547 against €27,335.

We must say that the major European corporations, particularly French, have been maneuvering to persuade the WA Heads of State they had everything to gain from the EPA. Among them you find Robert Fabre, President of Compagnie Fruitière, which produces the bulk of bananas and pineapples of Ivory Coast, Ghana and Cameroon and exports them on his vessels, as well as cherry tomatoes in Senegal. Then you have the Mimran Group, owner of the Great Mills of Abidjan and Dakar, who suceeded in eliminating at the beginning of the liberalization process, in year T+5 (2020), the already very low import duty of 5% ad valorem of the ECOWAS Common External Tariff (CET) on cereals (except rice). You find also the Bolloré group, which manages most of the Gulf of Guinea port facilities and is involved in the export of 65% of Ivory Coast’s cocoa.

Full paper here

 source: SOL