Unequal Partners: How EUACP Economic Partnership Agreements (EPAs) could harm the development prospects of many of the world's poorest countries | African

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The Doha ‘Development’ Round of trade talks has stalled, but the world’s poorest countries remain under pressure to open up their markets with potentially disastrous consequences. These negotiations were meant to ‘make trade fair’, but they were blocked by the USA and EU, unwilling to address the rigged rules and double standards from which they benefit. The EU wants to forge new free trade agreements with 75 of its former colonies in Africa, the Caribbean, and the Pacific (ACP). These imbalanced negotiations of ‘Economic Partnership Agreements’ between the two regions, pit some of the world’s most advanced industrial economies against some of the poorest nations on earth. In addition, the ACP countries are split into six small groups for the negotiations
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    Oxfam Briefing Note Unequal Partners: How EU–ACP Economic Partnership Agreements (EPAs) could harm the development prospects of many of the world’s poorest countries   September 2006 ‘I come from a small fishing village in Ghana. Members of my family fished for their livelihood, but fishing has become impossible since larger European fishing vessels came and fished our seas empty. The same happened with poultry. EU imports of frozen chicken wings destroyed the local market…EPAs are free trade agreements, and as such, they will bring poverty to Africa.’ — Tetteh Hormeku, Third World Network, Accra, Ghana ‘Our experience tells us that FTAs between a large market like the EU and small economies are not easily sustainable and often lead to a deficit for the weaker partner.’ — EU Europa Trade website: the EU describing its recent Free Trade Agreement (FTA) negotiations with Central America 1      Summary The Doha ‘Development’ Round of trade talks has stalled, but the world’s poorest countries remain under pressure to open up their markets with potentially disastrous consequences. These negotiations were meant to ‘make trade fair’, but they were blocked by the USA and EU, unwilling to address the rigged rules and double standards from which they benefit. The EU wants to forge new free trade agreements with 75 of its former colonies in Africa, the Caribbean, and the Pacific (ACP). These imbalanced negotiations of ‘Economic Partnership Agreements’ between the two regions, pit some of the world’s most advanced industrial economies against some of the poorest nations on earth. In addition, the ACP countries are split into six small groups for the negotiations; the smallest group, the Pacific Islands, is negotiating a trade agreement with an economic giant more than 1400 times its size. The EU has an opportunity to develop fairer trading relations with ACP countries, but such extreme disparities in negotiating power could all too easily produce unfair results, and Oxfam fears that the future development of the ACP countries may be  jeopardised by the EU’s tactics. Far more is at stake for the ACP than for Europe. Nearly half (41 per cent) of ACP exports go to Europe, but ACP trade is merely small change for the giant European economy. Firms in the City of London pay more in executive bonuses than Europe spends on buying products from the whole of the ACP. 2  Yet there is every sign that Europe is playing hardball in these negotiations, putting commercial self-interest before development needs. In addition, there is a wider concern that EPAs could undermine multilateralism. Under the proposed EPAs: ã farmers and producers in many of the world’s poorest countries will be forced into direct and unfair competition with efficient and highly subsidised EU producers; ã regional integration amongst ACP countries will be severely undermined; ã ACP governments will lose substantial revenue along with many of the policy tools they need to support economic and social development. In September 2006, the EU and ACP will start their mid-term review of the EPA negotiations, a formal exercise scheduled when the EPA process was launched in 2002. 3  The review provides a real opportunity for ACP governments — and the EU — to fully consider the development implications of the current EPA proposals and trends, and to re-focus efforts on putting together a pro-development trade agreement in conformity with the Cotonou Agreement. As this note will show, the proposed EPAs are a serious threat to the future development prospects of ACP countries, and the forthcoming review must be used to force a radical rethink. Next round: world’s poorest vs. world’s richest  The EPA negotiations are being conducted between the 25 EU countries, which have a combined GDP of $13,300bn, and six groups of African, Caribbean, and Pacific countries. Among these ACP countries are 39 of the world’s 50 Least Developed Countries (LDCs). The smallest group, the Pacific Islands, has a combined GDP of only $9bn — 1,400 times smaller than the EU’s. Even the largest group, the West Africa region, is more than 80 times smaller than the EU in terms of GDP. Given these vast inequalities, it is not hard to see where the power lies. Unequal Partners , Oxfam International Briefing Note, September 2006 2    Table 1: Unequal partners in trade EPA GDP 2005 (billion US$) Per cent of EU GDP i  Ratio to EU GDP EU 13,300 SADC 66 0.50 200 ESA ii  75 0.56 178 West Africa 162 1.22 82 Central Africa 40 0.30 330 Caribbean 72 0.54 185 Pacific iii  9 0.07 1,414 Total EPA 425 3.20 31 Source: World Bank (2005)  http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP.pdf  Notes: i  Data given to two decimal places. ii  Eastern and Southern Africa.  Iii  Data unavailable for Cook Islands, Nauru, Niue and Tuvalu The current round of EPA negotiations has been sparked by the expiry of previous trade agreements between the EU and ACP countries. Since 1975, political and economic relations between the two blocs have been governed by a series of five-year ‘Lomé Conventions’. 4  Recognising the vast economic differences between the EU and ACP, the agreements provided trade preferences and aid to ACP countries, without requiring them to reciprocate. ACP exporters were given substantial access to EU markets, while ACP countries retained the right to protect their producers from highly competitive (and often highly subsidised) EU exporters. The Lomé Convention and Cotonou Agreement were not unqualified successes. Despite having many pro-development elements, they have also contributed in some ways to some of the development problems faced by ACP countries today. The last Lomé Convention came to an end in 2000, and was replaced by the Cotonou Partnership Agreement, which had the principal objectives of reducing poverty and promoting the sustainable development of ACP countries and their gradual integration into the world economy. 5  Under the Cotonou Agreement, the EU and ACP agreed to maintain the Lomé preferential system until the end of 2007, and then to replace it with a new Economic Partnership Agreement that would be WTO-compatible. 6  Under the World Trade Organisation rules, both parties must liberalise, with the ACP being required to give duty-free access to ‘substantially all’ EU exports within a ‘reasonable time’. 7  So, to maintain the preferences they already have in the EU market, from January 2008 ACP countries must open their own markets to direct competition from highly competitive EU goods and services. In addition, the EU is pushing for the inclusion of competition policy, investment, and government procurement. The proposed EPAs imply nothing less than a fundamental restructuring of the political and economic relations between the EU and ACP countries. Unequal Partners , Oxfam International Briefing Note, September 2006 3    A true ‘partnership’? Surely ‘partnership’ implies that both parties gain from an agreement? With EPAs, the gains for the EU are clear; but it is hard to see where the gains will be for ACP countries. Market access for ACP exporters Although the EU has promised to increase market access for all ACP exporters, there is little sign that this will happen. The EU established an ‘Everything but Arms’ (EBA) programme for the Least Developed Countries, including 39 LDCs in the ACP blocs in 2001. Under this initiative, eligible countries have duty-free market access for the vast majority of their exports into the EU. For the remaining developing countries in ACP, however, it is unlikely that market access will be expanded beyond the preferences they already had under the Lomé Conventions, or remove the barriers that undermined the effectiveness of previous preferential agreements. 8  Even with an EPA, it is likely that ACP exporters will continue to face stringent rules-of-srcin, which limit the number of exports that can receive preferential treatment; 9  ever-increasing sanitary and phyto-sanitary standards (SPS), which make it very hard for their exporters to break into European markets; 10  and tariff escalation on key value chains, which levies higher taxes on processed goods (e.g. instant coffee) than on raw materials (such as coffee beans), and so deters ACP countries from processing their own products. Slow progress on EU agricultural reform means that even if they manage to export to the EU, ACP exporters will still have to compete with highly subsidised EU producers. 11  In sum then, the 39 least developed ACP countries will not gain appreciably from market access under an EPA, since they have already been promised this access under the EBA scheme, while the other 36 developing countries are negotiating just to preserve the market access they already have under the Cotonou Agreement. Market access for EU exporters In terms of ACP market opening, the exact meaning of ‘substantially all’ trade is strongly debated. Under the EU–South Africa free trade agreement, the EU agreed to liberalise 95 per cent of its trade with South Africa over a 10 year period, while in return South Africa was required to liberalise ‘only’ 86 per cent of its imports from the EU over a 12-year transition period. 12  In the context of EPAs, the EC has stated that the ‘reasonable length of time’ for transition it envisages will be 10 years, but may be longer in exceptional cases. 13  In terms of the liberalisation coverage in ACP countries, the EC has been more guarded. It is generally understood, however, that if the EU liberalises 100 per cent of its trade, the ACP countries will have to liberalise 80 per cent of their markets, thus allowing only 20 per cent protection of products from competition with European goods and services. While such a split would meet the EC’s criterion for WTO compatibility of an average of 90 per cent of trade liberalised, 14  it would effectively squeeze ACP governments into choosing between maintaining tariffs on valuable revenue-raising imports such as cars and electronics; protecting staple foods such as maize; exempting a few existing industries from competition; or securing the ability to support future industrial development. Most ACP governments are heavily dependent on import taxes to raise government revenue. The World Bank estimates that in sub-Saharan Africa tariff revenues average between 7–10 per cent of government revenue. 15  The governments of Gambia and Cape Verde, for example, count on tariffs for up to 20 per cent of their revenues. 16  With EU Unequal Partners , Oxfam International Briefing Note, September 2006 4
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