The EPA negotiations The long-standing Lomé preference system between APC countries and EU was reformed in 2000 with the signature of the Cotonou Treaty. Cotonou rolled over the existing unilateral trade preferences up to the end of 2007 when they should be replaced by a WTO-compatible trade arrangement. The Cotonou trade arrangements are currently not compatible with the WTO rules on preferential trade arrangements (Lang 2006). Indeed, they fit neither the criteria of Article XXIV which call for reciprocity and liberalization of substantially all the trade, nor that of the Enabling Clause which entails that preferences are extended to all developing countries or all LDCs. ACP countries and EU had to seek a waiver from other WTO members for the Cotonou Agreement, and this was granted in Doha in November 2001. The waiver expires at the end of 2007. It is expected that the negotiations on the regime to succeed the Cotonou arrangements will have been concluded by this date.
ACP countries and EU have opted to negotiate Economic Partnership Agreements (EPAs), which will be FTAs between ACP Regional Economic Communities (RECs) and EU. In Africa, EPAs are being negotiated with the Economic and Monetary Community of Central Africa (CEMAC), the Economic Community of West African States (ECOWAS), Common Market of Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC).
The negotiations on EPAs were launched in 2002. They revolve around market access, fisheries, sanitary and phytosanitary (SPS) measures, agriculture, services, investment and competition. Negotiations have evolved differently across the regions. Each region has so far established a roadmap with the EU outlining the way forward for the negotiations. Generally, there has been growing concern in Africa that EPAs, while representing significant potential for growth and development, also carry challenging adjustment costs. Evidence shows that EPAs could also translate into tariff revenue losses, de-industrialization and reductions in intra-African trade (UNECA 2004; 2005). African countries have called for enhanced support to capacity building and financing. EU argues that such tools already exist and that the discussions concerning their improvement are independent of EPA negotiations.
The focus of the negotiations for Africa has therefore shifted to the development dimension of EPAs.
The negotiation process is further complicated by the overlapping memberships of African countries in various RECs (UNECA 2006b). African countries and EU appear to be in agreement that EPAs should be an opportunity to enhance regional integration in Africa. Impact studies on EPAs (UNECA 2004) show that the sequencing of liberalization is key to the development of the continent. This would probably translate into a back-loaded tariff reduction on imports from EU, while liberalization within RECs would be a priority. EU has also shown signs of readiness to allocate additional resources to improvement of interregional trade infrastructure, which would benefit African regional integration.
Article 37.4 of the Cotonou Agreement in 2001 stated that the Parties would conduct a formal and comprehensive review of the process, structure and substance of the negotiations, in 2006.16 This review is under way at the time of writing.
Preliminary results seem to indicate that, in several regions, the process of negotiations is evolving more slowly than expected, partly due to disagreements with EU on the development dimension of the EPAs but also because of the difficulties some countries and regions face in forming internal consensus and informed positions on technical and sectoral issues. The formal review will identify the necessary means to allow timely completion of the negotiations by 1 January 2008. Should the negotiations fail to reach conclusion by end of 2007, the question of a WTO waiver will have to be reconsidered.
One of the questions that recently gained importance in talks regarding EPAs is the potential alternative to the FTAs currently envisaged. The Cotonou Agreement called for all alternatives to be explored. So far, the main alternatives appear to be enhanced preferential schemes such as the Generalized System of Preferences (GSP)
and the Everything but Arms (EBA) initiative (Bilal and Rampa 2006). Further analytical work on this issue is crucial.
The standstill in WTO negotiations also complicates the EPA process. In the absence of evolution on rules for preferential trade arrangements, major uncertainties remain on the degree of flexibility African countries have on the length of transition periods and on the coverage of liberalization (Lang 2006). In this context, there is a risk that negotiators will feel constrained and opt for conservative EPA provisions, retaining few sensitive products and short transition periods.17 This could translate into more acute adjustment costs for African countries in terms of both de-industrialization and regional integration. UNECA research shows that the impact of EPA on African economies could be positive only under a scenario of substantial asymmetry in the degree of liberalization. In particular, the African Party would have to be able to retain a significant share (up to 40 per cent) of trade out of the coverage of liberalization, while EU would have to be willing to open its markets entirely to African exports (Perez and Karingi, forthcoming).
The breakdown in WTO negotiations also affects other issues in the EPA negotiations.
For example, African countries are concerned that gains in access to the EU market for agricultural products may not translate into increased exports as long as international prices remain distorted by subsidies to farmers in the North. Likewise, there may be a potential risk that opening service markets to EU producers may only result in situations of unhealthy monopolies or oligopolies in the service markets of African countries. As a consequence, African countries may feel bound to extend liberalization of their service markets to other WTO members, without obtaining the benefits of reciprocal concessions from these third parties.
EPA negotiations are the major task ahead of African trade policymakers, especially since the freeze of the Doha Round. These pose great challenges but also real opportunities in terms of development for the continent. In view of the short time remaining for completion of the negotiations, it is important that all the parties involved step up their political commitment to successful EPAs. The ongoing comprehensive review process should be seized as an important opportunity to propose solutions to resolve pending issues within Africa and between African groupings and the EU.
Generally, there are some positive developments in the negotiations so far, even if these may still be too limited to make Doha a true development agenda. With the suspension of the talks, there is a risk that these advances may be lost or delayed for a long time. In this respect, some have started to call, albeit reluctantly, for an agreement a-minima, which would probably mean few commitments in agriculture and NAMA in terms of market access and subsidies reduction, but some progress on trade facilitation and some advances on Services and Aid for Trade.
To learn more about this author, visit United Nations Economic Commission for Africa's Website.
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