Economic Partnership Agreements - no plan B?

New Era (Windhoek) | 20 September 2007

Economic Partnership Agreements - No Plan B?

By Catherine Sasman

Insights (September 2007 edition), the European Union Trade Commissioner, Peter Mandelson, said the EU would not engage in an alternative strategy concerning African, Caribbean and Pacific (ACP) trade relations with Europe at the World Trade Organisation (WTO), stressing that there is definitely "no Plan B" for EU trade relations with the ACP. New Era spoke to trade analyst, Wallie Roux, wherein he responds in his personal capacity to Mandelson’s assertions.

What would the consequences be if the Doha Round stalls on the EPA negotiations?

The WTO (World Trade Organisation) Doha Round started in 2001 and was earmarked as a Development Round to accommodate the specific needs of the developing countries. The Round was supposed to be concluded early 2005, leaving sufficient time to engage and conclude the EPA negotiations under ’new’ WTO rules.

However, this never materialised and the EPAs are negotiated according to Cotonou Article 37.7, that reads, " while remaining in conformity with WTO rules then prevailing", in other words, the ’old’ WTO rules.

Should the Doha Round be concluded by year-end, as indicated by the new deadline and in favour of the developing countries, it would be interesting to see whether the EU would allow the new rules to be accommodated in the EPA text.

What market access would ACP countries have to EU markets compared to what they would receive under the Doha Round?

While Mr Mandelson is mentioning that ’EPAs would remove all remaining tariffs and quotas for all products — which is a phase-in period for rice and sugar’, he, however, did not mention the condition attached to it.

This duty-free, quota-free offer from the EU will only apply to those countries that have signed an EPA before or on December 31. In the case of the SADC-EPA, there is the stalemate with the EU regarding the negotiation of services and the new generation issues before the end of this year, which makes the signing of an EPA before year-end unlikely.

What needs to be solved for the EPAs to be concluded by the end of the year?

Mr Mandelson specifically mentions regional integration as a complex and sensitive issue as part of the problems that need to be solved for the EPAs to be concluded by the end of the year.

Cotonou Article 35.2 recognises regional integration as a ’key instrument for the integration of the ACP [African Caribbean and Pacific] countries into the world economy’. It furthermore states that ’economic and trade cooperation shall build on regional integration initiatives of ACP states’.

As a result of the exogenously inspired EPA process, the most profound regional integration initiative in southern Africa, namely SADC, is currently split between three different EPA configurations. The other regional integration initiative, SACU [Southern African Customs Union], was also divided until South Africa was allowed as a full member of the SADC-EPA in February.

Furthermore, what will happen to regional integration if not all of the countries within a configuration would sign the EU’s duty-free, quota-free offer by 31 December? To solve this problem in practical terms before the end of this year borders on near impossibility.

Part of the problem of regional integration in southern Africa in the current EPA context is the TDCA [Trade, Development and Cooperation Agreement] between the EU and South Africa. This agreement stems from an unsuccessful application of South Africa to become a full member of the Lomé IV Convention after 1994. It was only granted a qualified membership. Instead, the EU offered to engage in a FTA [free trade agreement] with South Africa.

This came at a time when the SACU members were engaged in the renegotiations of the SACU 1969 Agreement.

The EU, to my mind, acted with self-interest in the process - probably to gain access to the South African market - thus negating the existence of the BLNS [Botswana, Lesotho, Namibia, Swaziland] as SACU partners. South Africa on the other hand tasted their first fruits of international recognition and took the bait, while negating the process of regional integration in southern Africa.

A couple of years along the road, reality has proven that both the EU and South Africa inappropriate in their over-eagerness to conclude a ’unilateral’ trade agreement without taking into account the regional realities within southern Africa. This only augment what is called disruptive regionalism in southern Africa, where common interests are negotiated on the basis of power.

What is the development chapter of an EPA?

Care should be taken when talking about a development chapter of an EPA.

EPAs are first and foremost a replacement of the trade chapter of the Cotonou Agreement - before the expiry of the WTO waiver at the end of the year. That is why DG [Director General] Trade of the European Commission is leading the EPA negotiations and not DG Development.

Mr Mandelson himself said that the new trading relationship would be based less on dependency but more on economic diversification, which is the goal of the development dimension. This he linked to the ’aid for trade’ strategy, which will focus on breaking supply-side barriers in order to build a capacity to trade.

Hence, development in an EPA context is not what it was construed to be in a historical sense; that is part of the ongoing Cotonou Agreement.

Development in an EPA as to be negotiated in terms of assistance regarding the new envisaged trading arrangements for post-2007 and should not be taken for granted.

Note that funds for the tenth EDF [European Development Fund] for the period 2008 to 2013 have already been allocated - to be approved by 27 EU countries instead of 15 that had to approve the ninth EDF budget, in other words, more delays could be expected.

’Aid for trade’ (2008 to 2010) will be part of the EU-Africa strategy, which will only be adopted during December. Thus, development assistance under EPAs would be an applied assistance, which marks a shift away from the traditional development assistance known up till now.

Whether there would be sufficient funding to foot the requested development assistance bill under EPAs remains an open question.

A number of ACP countries have expressed their reservations regarding their ability to commit to the EPA negotiations by the end of the year. How are the parties — the EU and the ACP — addressing these concerns?

Mr Mandelson only refers in general to ’a wide range of technical capacities’ in the ACP countries and the EU’s technical and financial assistance to the ACP negotiators to address ACP concerns. This is correct and the EU should be commended for the latter.

However, and this applies specifically to the SADC-EPA, what he omitted to mention is that in some cases the issue is not technical capacity, but a disagreement with the EU to negotiate certain issues as part of the EPAs, while these are not compulsory to meet the requirements of WTO compatibility, with specific reference to services and the new generation issues. The EU’s insistence that these be negotiated as part of the EPAs could prove to be the reason for the non-conclusion of the agreement by the end of the year.

What will happen if the EPAs are not concluded by the end of the year? Is there really no Plan B?

The fact that the EU has no Plan B that offers the same benefits or can improve on the Cotonou market access provisions, is contrary to building on the acquis principle from the Community’s side as spelt out in Cotonou Article 37.7 where no ACP country shall be worse off after 2007 than before.

The EU has an obligation through Cotonou Article 37.6 to provide ACP countries not in a position to enter into an EPA with an alternative trading arrangement. The only alternative that Mr Mandelson could come up with was the GSP [generalised system of preferences], while he acknowledges that it ’would be a big step backwards in terms of preferential access and lost opportunities for regional integration for almost all ACP countries’, thus neglecting the acquis principle like before.

Some countries like Namibia would in certain cases not benefit at all from the GSP system, because, for instance, beef was removed from the list of GSP beneficial products. Namibia could benefit from the EU’s GSP+ system, where beef is included, but the country does not qualify for membership to this system.

Here I would like to refer you back to a legal opinion of June 2005 obtained by ActionAid - a UK-based NGO - from Kate Cook, a lawyer at Matrix Chambers. She concluded that Mr Mandelson’s 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 Plan B’ and ’in theory we could fall back on the GSP system’. Why then the provision in the Cotonou Agreement?

This immediately raises the question regarding the EU’s 2006 adopted European Consensus on Development (2006/C 46/01). According to this ’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 [Millennium Development Goals]’. In September 2000 the EU signed the UN’s Millennium Declaration for achieving the MDGs by 2015.

During 2005 the EU adopted a series of measures to accelerate the progress towards attaining the MDGs.

These measures and those contained in the European Consensus on Development do not reflect what the EU is pursuing in their EPA negotiations especially with regards to the SADC-EPA configuration. The question is why?

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, and in this case to the SADC-EPA, because of an asymmetrical power relationship. A subdivision of enforced partnership is called a structural 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 SADC-EPA still finds itself at the receiving end — hence it’s got to take what is offered, or eventually imposed, or suffer the consequences.

Once the EPAs are concluded, what should the ACP do to make the EPA implementation a reality?

Once the EPA negotiations have been concluded, there are certain steps to make it legally binding. In principle, after the final text has been negotiated, it must be authenticated, or signed, by the involved parties. All the involved parties must then ratify this final text before it could enter into force and only upon entry into force (implementation) it becomes legally binding on the involved parties.

Provisions that the SADC-EPA should seriously consider to include in the final text are technical and financial assistance during the process of implementation, accession of new members after implementation, an amendment clause for the agreement, annexes to protocols to be added or finalised after implementation, dispute resolution, entry into force and provisional entry into force — to prevent undue delays in practical trade terms — as well as a denunciation clause.

In your opinion, will there be any relevance for the existence of the ACP as a group once the EPAs have been concluded?

The Cotonou Agreement was signed in June 2000 for a period of 20 years.

The EPAs are supposed to replace the trade chapter of the Cotonou Agreement in view of the expiring of the WTO waiver at the end of 2007.

Since the EPAs would eventually be legally binding agreements between the EU and six different regional configurations.

I doubt whether the ACP-group would have any legal status regarding EPAs. However, as far as the rest of the Cotonou Agreement is concerned, remember it was signed between the EU and the ACP.

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