Investment in EPAs and Investment in EPAs and FTAsFTAs

Eastern and Southern African StatesEastern and Southern African States

QUESTION:QUESTION:

From your understanding of the issues relating to international investment, should investment be included in the EPA Negotiations?

Economic Partnership Economic Partnership AgreementsAgreements

EPAs are regional trade agreements to create a Free Trade Area (FTA) between the EU and different developing countries.

A Free Trade Area is an arrangement between countries in the FTA to eliminate trade barriers between themselves but with each country maintaining its own external tariffs.

Africa – EU EPA Africa – EU EPA ArrangementsArrangements

EAC - The East African Community - (Uganda, Kenya, Tanzania, Rwanda and Burundi).

ESA - Eastern and Southern Africa – (Sudan, Eritrea, Djibouti, Ethiopia, Zambia, Zimbabwe, Madagascar, DRC, Malawi, Mauritius, Comoros, and Seychelles. )

SADC - The Southern African Development Community (Botswana, Mozambique, Swaziland, Lesotho and Namibia. South Africa preferred TDCA with the EU)

CEMAC - La Communaute’ Economique et Mone’taire de l’Afrique Centrale (Cameroon and Gabon. The LDCs Chad, DRC, Central African Republic, Equatorial Guinea, Sao Tome and Principe export under the EBA initiative).

UEMOA - L'Union Economique et Monetaire Ouest Africaine (Cote d’Ivoire and Ghana. Nigeria and Cape Verde – GSP scheme. Other LDCs - EBA)

Past Africa - EU Trade Past Africa - EU Trade ArrangementsArrangements

1958 -1962 1958 -1962 – AAMS - EU preferential trading with Africa in African Association of Malagasy States.

1963 – 1974- 1963 – 1974- Yaounde I and II – non reciprocal and discriminatory trade.

1975 - 2000- 1975 - 2000- Lome I, II, III and IV – equal trading relationship created. Reciprocity established.

2000 – 2020 2000 – 2020 – Cotonou – poverty reduction through increased economic and trade cooperation.

EPAs under Cotonou Agreement. Negotiations started in 20022002

Why EPAs now?Why EPAs now?To enhance Africa’s integration To enhance Africa’s integration

into the world economy. into the world economy. ◦Lome and Cotonou systems of preferences

had increased Africa’s marginalization in world trade. EU sought to create EPAs as an instrument for development, that would allow African countries the liberty to shape agreements that would enable them achieve this goal, to enable them build ability to compete in the world markets.

To address Singapore IssuesTo address Singapore Issues. . ◦ (Investment, Competition, Government

Procurement and Trade Facilitation) and other issues eg Services etc that were not directly dealt with by Lome and Cotonou.

International Investment Rules– International Investment Rules– Brief Brief BackgroundBackground

Prevalent international debate on investment rules. Debate relevant to inform key issues and provide

draft instruments for investment negotiations. Uruguay Round – 1947 -1994 -Inclusion of limited

Agreement on Investment – TRIMS 1990 – Failure of attempted Multilateral

Investment Agreement within OECD framework. July 2004 Singapore issues (investment) that had

been introduced in 1996 Singapore Ministerial Conference dropped from WTO negotiations.

2002 – EPA negotiations commenced and by 2004 EPA negotiations taking off. EC makes Singapore Issues priority in EPAs.

Investment - ContextInvestment - ContextPreceding unsuccessful attempts

to conclude international investment Agreements- clear indication of need to exercise caution and careful analysis before any investment clauses are agreed to in EPA negotiations.

Known interests of developed countries eg EU and developing countries eg EAC, ESA

EU Investment Interests in EU Investment Interests in EPAsEPAs

Market Access for EU investors at least, on terms comparable to other developed country competitors.

To lock in advantageous position in event of conclusion of future agreements with other developed nations.

The EU is divided into 3 main camps:◦ Advocates for liberalization for EU investors to

same degree as Canada/USA investors.◦ Opponents to negotiations to avoid overtaxing for

implementation.◦ Proponents for negotiations for sake of regional

integration.

Investment and the Cotonou Investment and the Cotonou AgreementAgreement

Cotonou concluded in June 2000 inmidst debate Cotonou concluded in June 2000 inmidst debate of whether to negotiate investment rules at the of whether to negotiate investment rules at the WTO.WTO.

EU and other developed countries in favor of EU and other developed countries in favor of international investment rules, developing international investment rules, developing countries against it.countries against it.

Cotonou agreed that negotiations on investment Cotonou agreed that negotiations on investment in EPAs follow the outcome at the multilateral in EPAs follow the outcome at the multilateral level.level.

Investment, a Singapore issue, dropped at the Investment, a Singapore issue, dropped at the multilateral level by General Council Decision of multilateral level by General Council Decision of August 2004. August 2004.

EU however continues to pursue investment in EU however continues to pursue investment in EPAsEPAs

EPA Negotiating Directives to EPA Negotiating Directives to the EC the EC - June 2002 -- June 2002 -

◦ In accordance with the objective of reducing and eventually eradicating poverty parties agree to establish a regulatory framework to enhance and stimulate mutually beneficial sustainable investment between them.

◦ Framework to be based on principles of non on principles of non discrimination, openness, transparency, discrimination, openness, transparency, stability, and general principles of protection, stability, and general principles of protection, which will endorse the which will endorse the best results agreed best results agreed in the competent international fora or in the competent international fora or bilaterally.bilaterally.

Africa’s Position on Africa’s Position on Investment and EPAs - Investment and EPAs -

BackgroundBackgroundCairo Declaration of June 2005- African

Union trade ministers agreed that Singapore Issues should be kept out of EPA negotiations.

April 2006 Nairobi Declaration of EPAs, African Union trade ministers re-affirmed position BUT added that African regional added that African regional economic communities may adopt regional economic communities may adopt regional frameworks and instruments on the frameworks and instruments on the Singapore issues within the context of the Singapore issues within the context of the regional integration processes.regional integration processes.◦ regional instruments eg SADC Finance and

Investment Protocol, or COMESA Agreement on a Common Investment Area.

Eventual Approach to Eventual Approach to Investment in EPAsInvestment in EPAs

ACP approach in Papa New Guinea in June 2006 - countries unwilling to negotiate countries unwilling to negotiate Investment in EPAs should not be pressed Investment in EPAs should not be pressed to do so.to do so.

Position finally adopted by EU General Affairs and External Relations Council- May 2007:

Council recognized the various levels of development and integration within the different EPA regions, recalled the ACP right to regulate investment and thus supported a phased and flexible approach in trade related areas. That That the EU is not to pursue any particular the EU is not to pursue any particular market access interestsmarket access interests. .

Current Approach to Investment Current Approach to Investment in EPAsin EPAs

CARIFORUM CARIFORUM endorsed a chapter on investment.

SADCSADC agreed to negotiate a chapter on investment drawing on the SADC Finance and Investment Protocol.

ESAESA – has an extensive chapter on development in which investment provisions and private sector development are areas of cooperation.

EACEAC has expressed interest in dealing with Investment.

Africa’s Key Investment Africa’s Key Investment Interests in EPAs Interests in EPAs

◦ Effect social economic development objectives.

◦ Eradicate poverty.

◦ Promote rural modernization by channeling investment to decided priority sectors and industries.

◦ Emphasis to be on prioritizing development cooperation in investment as opposed to investment rules.

Investment in SADC - EU Investment in SADC - EU EPAEPA

To meet to discuss the chapter on Investment in detail in April 2010.

Draft chapter existing with about 16 Articles

Draft generally covering transparency, optimal use of resources, commercial presence, market access, promotion and facilitation of FDI, promotion of local and regional investments, public private partnerships, SDT, Investment finance facilitation, capacity building, areas of cooperation, etc

Investment in EAC – EU Investment in EAC – EU EPAEPA

Framework Agreement to be signed end of March 2010.

Framework stepping stone to full EPA.Investment Policy and Private Sector

Development to be dealt with in full EPA.

EAC is currently developing a text on Investment that will be included in the Economic and Development Cooperation chapter.

What is clear is EAC wants capacity building in this area and no binding commitments.

Some Lessons from the Some Lessons from the CARIFORUM – EU EPACARIFORUM – EU EPA

EPA provisions go beyond current EU levels of liberalization in BITs and now beyond US and Canada BITs and beyond domestic laws.

Restrictions on Performance Requirement.

Requiring commitments in EU areas of interest eg natural resources.

Automatic extension of best available treatment given to major economies in the future.

QUESTIONQUESTION

As an African, what would be your key

investment concerns in the negotiation of

EPAs?

Development Cooperation Development Cooperation Proposals on Investment in Proposals on Investment in

EPAsEPAsMarch 2007 in Bonn, ACP Ministers proposed

the following approach to investment:

◦ Adoption of Regional Investment Codes.◦ Reduction of transaction costs eg company

registration costs.◦ Building strong infrastructure.◦ Supporting Macro economic stability eg through

debt relief.◦ Promoting full market access to EU markets

including removal of NTBs.◦ Strengthening ACP institutions like the Centre

for Development of Enterprises.◦ Expanding the mandate of the European

Investment Bank to extend credit facilities to SMEs.

Checklist of ConcernsChecklist of Concerns

Refer to handout

ConclusionConclusionInvestment is a very important issue.

Investment chapters have not been concluded in the EPA Negotiations.

Emphasis should be on development cooperation in investment and not investment rules.

Special attention should be made to the substance and language of the EPA.

Transparency of the negotiation process is key.