A Matter of Political Will: How the European Union can maintain market access for African, Caribbean and Pacific countries in the absence of Economic Partnership Agreements | African | World Trade Organization

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The European Commission has threatened 76 of the world’s poorest countries with lower access to the EU market – if they fail to sign new trade deals known as Economic Partnership Agreements (EPAs) by the end of 2007, when their current market access preferences expire. But the threats are not justified: in the event that African, Caribbean, and Pacific (ACP) nations are not ready to sign by the end of the year, the European Union could still continue to provide them with a high level of market access, using the GSP-plus scheme, without breaching World Trade Organization rules. This level of market access would also be compatible with their developmental needs.
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     A Matter of Political Will How the European Union can maintain market access for African, Caribbean and Pacific countries in the absence of Economic Partnership Agreements   The European Commission has threatened 76 of the world’s poorest countries with lower access to the EU market - if they fail to sign new trade deals known as Economic Partnerhip Agreements (EPAs) by the end of 2007, when their current market access preferences expire. But the threats are not justified: in the event that African, Caribbean, and Pacific (ACP) nations are not ready to sign by the end of the year, the European Union could still continue to provide them with a high level of market access, using the GSP-plus scheme, without breaching World Trade Organisation rules. This level of market access would also be compatible with their developmental needs. ‘No EPA and no WTO equals a very serious vacuum’ - Peter Mandelson, European Trade Commissioner ‘We should be under no illusion. This is a very real deadline.’ - David O’Sullivan, Director General of DG Trade, European Commission ‘We will not rush to conclude negotiations due to the deadline and risk ending up with a bad EPA. That would be disastrous’ - Hans Joachim Keil, Pacific Lead Negotiator 'This is tantamount to blackmail. The EU has committed to ensuring that alternatives to EPAs are discussed, and that no country will be compelled to sign. However, now they are using the looming deadline to force countries into agreements that could be economically devastating.' -  Bibiane Mbaye, ENDA (Environmental Development Action in the Third World)      GSP+ 1  would take the pressure off The 76 African, Caribbean, and Pacific (ACP) countries currently negotiating Economic Partnership Agreements (EPAs) 2  with the European Union (EU) are under tremendous pressure. The current system of Cotonou Preferences, which provides ACP exporters with preferential access to the EU market, expires at the end of 2007. The Cotonou Agreement legally requires the EU to leave no ACP country worse off after the expiry of Cotonou Preferences, in ways that are compatible with World Trade Organisation rules. 3  But the European Commission (EC) does not appear to be taking the necessary steps to realise these legal assurances. The EC maintains that there is only one means to fulfil its obligation: a free trade agreement or EPA. If the six negotiating regions do not sign EPAs by the end of December 2007, the EC has declared that it will not continue Cotonou Preferences. Instead, from 1 January 2008 least-developed countries will have to rely on the Everything But Arms (EBA) scheme which provides duty-free, quota-free access. All others would have to rely on the standard Generalised System of Preferences (GSP), which the EU provides to all developing countries. This is not a viable option. The standard GSP provides far lower preferences than Cotonou and could be devastating for export sectors in ACP countries. 4  But the EC’s current EPAs proposals pose a serious threat to ACP economies. The stakes are very high. The EU is the largest trading partner for most ACP countries. As an advanced industrialised economy, it is also one of the most powerful competitors in the world. While it is possible to design an economic relationship that benefits ACP countries, the EC’s current proposals threaten to do the opposite. As the deadline draws close, exporters are becoming alarmed at the prospects of facing high tariffs into the EU market. The EU appears to be ‘watching the clock’, hoping that as pressure mounts, ACP countries will have no option but to accept their proposals. The EC has refused to accept many constructive offers placed on the table by ACP countries, and has failed to, or delayed in, responding to other requests. The pressure to conclude EPAs in December, which is likely to be on the EU’s terms, would mean the abandonment by the ACP of their development proposals. An EPA signed under such circumstances would be an injustice to the millions of people whose futures depend on these negotiations. ACP and EU leaders have a legal and moral obligation to negotiate an agreement that supports development. The choice that the EC is offering between an EPA and the standard GSP is a false one. The EC can at the very minimum offer a GSP+ system of preferences. This would provide all ACP countries with a high level of market access for their exports beyond the expiry of Cotonou Preferences, and that ACP countries could well meet the eligibility criteria for GSP+. This would be compatible with World Trade Organisation rules. With sufficient political will the EU could allow all ACP countries to join GSP+ in 2007. The EC and member states should immediately open up such avenues to ACP countries, so that negotiators can rest assured that current trade would not be disrupted after the end of 2007.  A Matter of Political Will: How the European Union can maintain market access for African, Caribbean and Pacific countries in the absence of Economic Partnership Agreements,  Briefing Note,  April 2007  2     African, Caribbean, and Pacific countries request a change of approach, more time, and a transition regime ‘ In West Africa, we did not do impact studies, so we cannot sign an agreement. No government that is responsible can do that. We can continue to discuss but cannot sign. We cannot be forced to sign an agreement that is against people’s interests.’ Mamadou Diop, Senegal’s Trade Minister, October 2006 The EPA negotiating process leaves much to be desired. According to the African Countries’ Continental Review of EPA Negotiations, these negotiations are taking place ‘behind closed doors’ and with an ‘alarming lack of transparency’.   Above all, fundamental differences between the negotiating parties persist, essentially due to the ‘EU’s intransigence or non acceptance of the development dimension as the core and heart of the negotiations’. In a strongly worded communiqué, African Trade Ministers asked the ‘European Commission in the spirit of partnership to show flexibility and to positively and adequately respond to key concerns of Africa’. 5  Negotiating challenges are compounded by severe capacity constraints. According to the report, ‘there is a clear lack of capacities to prepare and conduct the negotiations, at all levels’, as well as a clear lack of capacity ‘to implement the agreed EPAs’. The lack of objective information on which to develop negotiating positions is of particular concern to negotiators: ‘All the regions have expressed important concerns with regard to the lack of impact analysis in individual sectors or sub-sectors (e.g. agriculture, tourism)’. 6 In many ACP regions, detailed discussions on content have only just begun, and substantive differences remain between the two parties. Given these constraints, the eight remaining months of 2007 are clearly insufficient to address the many justified concerns of ACP negotiators. Even in order to conclude only the ‘trade in goods’ sections of an agreement (an ‘EPA-light’), numerous complex issues have to be agreed upon by all parties: the EU–Chile Association Agreement is more than 1400 pages long and the majority of the text concerns trade in goods. 7  The danger of rushing to conclude negotiations to meet the December 2007 deadline is recognised by negotiators in all ACP regions. In a letter to EC Commissioner Mandelson on 21 December 2006, Hans Joachim Keil, the Pacific’s lead negotiator and Samoan Associate Minister of Commerce, Industry and Labour described the prospect of concluding the EPA negotiations by the end of 2007 as ‘somewhat bleak’ and stressed that the Pacific would not ‘rush to conclude negotiations due to the deadline and risk ending up with a bad EPA. That would be disastrous.’ 8 ACP countries have requested that the EU guarantees that a ‘transitory’ regime will be put in place that ensures ACP countries will be left ‘no worse off’ if an EPA is not signed in 2007. West African negotiators have formally asked for a three-year extension of the negotiating deadline. 9  The EC continues to argue that signing an EPA is the only way to ensure that ACP exports are not disrupted after 2007.  A Matter of Political Will: How the European Union can maintain market access for  African, Caribbean and Pacific countries in the absence of Economic Partnership  Agreements , Briefing Note, April 2007  3    Economic Partnership Agreements: very high stakes ‘In our view, there is a definite contradiction between the narrow focus on trade liberalisation and the EU’s argument that EPAs are instruments for development rather than to force open regional markets. One of our concerns is that EPAs must not become instruments of oppression.’ Billie Miller, Chair of the ACP Ministerial Trade Committee and Minister of Foreign Affairs and Foreign Trade of Barbados, June 2006 10 Under World Trade Organisation rules, ACP countries entering free trade deals with the EU would need to liberalise ‘substantially all’ of their trade with the EU in a ‘reasonable’ time period. Within the EPA negotiations, the EC has interpreted this rule to mean that ACP countries must liberalise 80 per cent of their trade with the EU within a period of 10 years, with a possible extension of up to 20 to 25 years for some sensitive products. 11  ACP countries are justifiably concerned that such a degree of market opening could have a significant negative impact on rural livelihoods, current and future industries, and government revenue. ACP countries have also expressed concerns that other issues than trade in goods are being pushed in the negotiations, even when they have often repeated that they were not ready to negotiate them if only because of limited capacity. Many fear that new rules on these issues, including services liberalisation, investment, competition, government procurement and intellectual property rights, may favour European investors and suppliers at the expense of ACP counterparts, while taking away ability of governments in the ACP to promote domestic investors and enterprises. The same concerns have motivated a diverse range of stakeholders, including civil society organisations, the private sector and peasant organisations to mount a campaign against EPAs. The results of impact assessments are sobering. Studies for Kenya’s Ministry of Trade, the International Monetary Fund, and the European Commission indicate that Kenya could lose up to 65 per cent of industry, 12 per cent of government revenue, and millions of rural livelihoods (see Box 1). To avoid any negative impact from an EPA, Kenya would need to exclude more than half its trade from liberalisation with the EU. 12  For the Pacific, signing an EPA with the EU would trigger negotiations with Australia and New Zealand who will demand at least as favourable treatment. The prospect of a free trade agreement with the Pacific’s two industrialised neighbours led the (then) chief negotiator Senator Kaliopate Tavola of Fiji to assert: ‘we will face de-industrialisation and loss of jobs’. 13    A Matter of Political Will: How the European Union can maintain market access for African, Caribbean and Pacific countries in the absence of Economic Partnership Agreements,  Briefing Note,  April 2007  4
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