Is there a life after EPAs?

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Is there a life after EPAs?. The future of EU-Africa trade relations. Isabelle Ramdoo ECDPM 24 July 2014. Structure of the presentation. Part 1 : State of play of the relationship between EU and African regions/countries Whos in? Whos out? Whats in? Whats out? What now? - PowerPoint PPT Presentation


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The future of EU-Africa trade relationsIsabelle RamdooECDPM24 July 2014Is there a life after EPAs?Part 1 : State of play of the relationship between EU and African regions/countriesWhos in? Whos out?Whats in? Whats out?What now?

Part II: EU trade relations with third parties: what implications for EU-Africa trade ties?Mega trade deals

Part III: Conclusion: some suggestionsStructure of the presentationPage 2ECDPM PART I BRIEF OVERVIEW OF EU-AFRICA RELATIONSHIP


Whos out?ECDPMPage 5

Whats in?ECDPMPage 6

Whats in?ECDPMPage 7

The current EPAs are about trade in goods. Services, TRIPs and other trade-related issues are not included. Most of them are in a RDV clause but there is no hurry and no specific timeline to conclude on these.

Critical issues domestic support to EU farmers for instance, have not been fully captured. Still left to multilateral negotiations but with slow progress at the WTO, these may not be addressed soon;

Still too many trade arrangements governing trade between EU and Africa: EPAs, EBA, GSP, DCFTA with North Africa. No mention on how to address these inconsistencies, that are a serious barrier to building regional markets and value chains (cumulation does not work well among those regimes)

Most regions (except for WA) have only an FTA, with no financial package attached to it to address fiscal challenges EPAs could bring, and a limited focus on development. Remember EPA was supposed to be about development.

Whats out?ECDPMPage 8 8The way EPAs are designed currently: will maintain the status quo in terms of trade flows (i.e maintain access to EU for unprocessed goods)Implication for BIAT? Some major concerns as they lock region in their current configuration how to you address overlapping memberships or enlargement of existing blocks with EPAs?Preferences: Countries still give more preferences to EU (ie DFQF) than to their sister RECS. Are we now prepared to extend such preferences to ourselves?Enter Mega trade deals: Today EUs FTAs account for less than 40% of its total trade 60% IS STILL NOT COVERED What implications on the African agenda?ECDPMPage 9

Legally: countries that have initialed new EPAs or taking steps to sign and ratify existing interim EPAs will preserve MA; others will be added to GSP; Any UMIC might lose GSP after January 2016. Rendez-vous clauses in EPA texts on services, investment and other trade-related issues. But no deadline and therefore no hurry. Sequencing is crucial here In the mean time, EU is negotiating FTAs (and mega-deals) with its main partners: important to closely watch them carefully and take measures at national/regional/continental level to minimise impactsUse as far as possible the EPAs to get access to more favourable treatment (including on non-tariff measures) that EU will grant to other partners (MFN is applicable to EU as well)On the African side: Regional integration agenda, BIAT, CFTA, AIDA, CAADP more important than ever to deepen regional/continental integration and to build solid regional markets and to mitigate potential negative impacts of EPAsNeed to address lock-in effect of EPAsWhat now?ECDPMPage 10 PART II


WHAT IMPLICATIONS FOR AFRICA-EU TIES?CASE OF MEGA TRADE DEALSECDPMPage 11 WTO negotiations are in a deadlock; Key issues about agriculture and industrial products were not addressed in Bali

Big players feel need to reshape global trading system as globalisation deepens and the world become more interconnected. About 60% of global trade is made of of trade in intermediaries. Multilateral system does not respond to some challenges linked to that

Strategic interest. Geopolitical rise of China soon to be the leader in global trade. A way for EU and US to join forces to maintain access to key markets

In case of EU More than 60% of its trade is not covered by FTA.

Why mega-deals?ECDPMPage 12 Who are EUs main trading partners?ECDPMPage 13Source: European Commission, 2014

EU does not have a trade agreement yet in place with countries representing >60% of its trade EU Mega Trade Deal: The rationaleECDPMPage 14

ECDPMPage 15

But mega-trade deals are becoming strategic for all bog players. Three major ones: Trans-pacific partnership (TTP) 12 countries incl. US, Japan, Canada, Australia, Singapore, Mexico, Chile, New Zealand, Brunei, Peru, Vietnam and Malaysia. Transatlantic Trade and Investment Partnership (TTIP) between EU and US Regional Comprehensive Economic Cooperation (RCEP), 16 countries of which 10 ASEAN countries (Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, Vietnam); Australia, China, India, Japan, S. Korea, New Zealand. Trade is not only about tariff, it is aboutRegulation, standards, norms Licensing practicesDomestic taxesInvestment

Trade is not only about trade, it is aboutHuman rights;Environment;Labour rights

Need to look at the future trade relationship between Europe and Africa in a broader context the inter-connectedness between Europe and big players will have spill-over effects on EU-Africa trade relationsTherefore: new approach to trade diplomacyECDPMPage 16 Tariffs (more important for US-Pacific TTP than EU-US TTIP) and potentially subsidies in agriculture

Trade in services, investment (possibly including state-investors dispute), intellectual property

Trade-related issues such as government procurement, competition policy, e-commerce, environment, state-owned enterprises (for TTP)

Regulatory and non-tariff measures such as norms, standards, testing requirements, procedures, technical regulation, food safety Key elements of the TTIP and the TTPECDPMPage 17 Regulatory barriers will be the heart of the EU-US negotiations

It is estimated that av. Tariff protection on imports in EU and US range between 2.2 3.3% respectively, while ad valorem tariff equivalent protection form NTMs range between 19% - 73%.

It is also estimated that up to 50% of those barriers could potentially be eliminated (most optimistic scenario)

If standards are harmonised, this will imply that non-parties to the agreement will be requested to meet those standard to remain competitive on the market

Third countries (incl. African countries) will therefore face higher compliance and trade costs if they want to maintain access to these markets (despite their existing trade regimes with EU EPA or not!!)

In the case of the TTIP between EU and USECDPMPage 18 Mega trade deals will NOT be mainly about tariffs.

They will basically set new standards and norms and will involve far-reaching agreements on services and investment with major implications for product quality;

Impact will depend on the level of dependency on countries trade on EU or US market. Today, 40% of Africas trade is destined to EU or US.

Higher trade concentration, higher risk of preference erosion or impact of standards-taking

Where does that leave us in Africa?ECDPMPage 19

Our RoO are quite flexible good for us but means that they open the backdoor for cheap inputs (if standards are lowered) that will impact on the cost of production in Europe

If change in regulations are anticipated and properly managed to what we want, flexible RoO could lead to thisECDPMPage 20


According to some estimates, overall impact of EU-US TTIP is expected to be lower than the US-Pacific TTP on African countries because trade structures vary significantly. What we trade with EU and what US trades with EU is quite different. In Asia, different, there is competition from developing countries with our exports to US.

However complementaries are high because Africa is a major supplier of inputs and raw materials to EU and US.

In the short term, sourcing of these products might increase. Positive for exports, foreign exchange earning, jobs etc.

But in the medium to long term it may have a perverse effect: may have a lock-in effect and therefore marginalise African countries from participation in global value chains, affecting industralisation prospects. Hence the need to be active on our own agenda.ECDPMPage 21 1. Critical to follow the current mega-deal negotiations, as they will set the tone for the evolving global trading system

2. African countries should on their side, take unilateral initiatives to calibrate domestic reforms to be prepared to meet standards. Otherwise the risk is marginalisation since you will de facto become rules takers.

3. In parallel, since the Africa group is a strong one at the WTO, ensure that they are at the forefront in negotiations there to ensure big players do not multilateralise their FTAs through WTO. There is a real role to play there to ensure advanced countries and few large developing countries do not have the monopoly of setting standards and rules, to impose them on countries that did not have their say in the negotiations

Conclusion: some suggestionsECDPMPage 22 4. In regional/continental trade agenda: Ensure regulatory reforms reflect clearly regional realities and priorities and they have sufficient safeguards to mitigate undesirable impacts of such agreements. Regional trade agreement, BIAT and CFTA discussions could consider strengthening cooperation in NTMs, though possible harmonisation or mutual recognitions, based on regional highest common denominators

5. EPAs have RDV clauses and US might ask for FTA in the future (beyond goods): but ensure proper sequencing this time by completing regional/continental agenda first before opening up on issues where countries and regions are unprepared and have not measured fully the consequences. The risk is that as EU and US conclude advanced FTAs, this will become the standard for their future trade deals and might be difficult to resist, if unprepared.

ECDPMPage 23 Thank you for your attention

Visit our website: www.ecdpm.orgContact: ir@ecdpm.orgFollow me on twitter: @ir_ramdoo

The powerpoint can be downloaded

Page 24 ECOWAS: 16 member states

1. Benin5. Ghana9. Liberia13. Nigeria

2. Burkina Faso6. Guinea10. Mali14. Senegal

3. Cape Verde7. Guinea Bissau11. Mauritania15. Sierra Leone

4. Gambia8. Ivory Coast12. Niger16. Togo

SADC EPA Group (6 countries)

1. Botswana2. Lesotho3. Namibia4. Swaziland

5. Mozambique6. South Africa

ESA EPA Group (4 countries)

1. Madagascar2. Mauritius3. Seychelles4. Zimbabwe

Central Africa (1 country)

1. Cameroun

EAC ??? (5 countries)

1. Burundi2. Kenya3. Rwanda4. Tanzania5. Uganda

Central Africa (7 countries)

1. Central African Rep.2. Chad3. Congo4. DR Congo

5. Equatorial Guinea6. GabonSao Tome & Ppe

ESA Group (minus EPA group 7 countries)

1. Comoros3. Ethiopia5. Sudan7. Zambia

2. Djibouti4. Eritrea6. Malawi

SADC Group (1 country)

1. Angola

North Africa (under different regime 5 countries)

1. Algeria2. Egypt3. Libya4. Tunisia

5. Western Sahara


Market access:

Full DFQFBLNS: 86%Mozambique: 81%SA:75% TLMADA: 81% TLMRU: 96% TLSEY: 98% TLZIM: 80% TL82%

Time FrameImmediate20 years, but with a 5 yr moratorium10 years, starting 201380% over 15 years, the rest in 25 years

CommentsExcept for SA, where DFQF is not fully appliedAngola did not join.South Africa: GI Agreement 105 SA GI and 251 EU GI protected)Improved MA for agricultural products; Quotas obtained on:wine (110 million liters) duty free), sugar (150,000 tons duty free) and ethanol (80,000 tons duty free)Negotiations on full EPA ongoing with the full ESA group 5 outstanding issues remain

Export TaxesExport taxes maintained on eight products for 12 yrs with some exception for exports to EU

New taxes may be introduced

Existing export taxes are maintained; possibility to introduce new taxes for infant industries and revenue needsExisting ET maintained; possibility to introduce new ET subject to consultation with EPA committeeBUT CONTENTIOUS IN FULL EPAContentious

SubsidiesElimination of export subsidies on agricultural goods destined to SACU

Transparency in policies and DS measure;EU to refrain from using export subsidiesContentious

SafeguardsA special safeguard agreement for newly liberalized agricultural prodts;Temporary safeguard mechanism for sensitive prods from smaller SACU countriesN/AExisting EPA has bilateral safeguard;

Negotiations for full EPA are seeking special agricultural safeguards.


MFN ClauseNo automatic extension of the MFN to EU WA to grant MFN to EU except for African and ACP states and for countries whose share of trade < 1.5% and degree of ind., measured as VA in manuf & GDP is < 10% in the yr before the intro of EPAClause is contentious in FULL EPA NEGOTIATIONS

But EPA signatories have a clauseContentious

Development packageNot definedNot defined6.5 billion during 2015-20 under the PAPEDNot definedNot defined

Non-execution clauseIncludedIncludedNo included but ref. to Cotonou IncludedContentious

Rules of originAsymmetry in Value tolerance (15% OA; 10% EU)Inclusion of Ceuta and MelilaAutomatic tuna derogation of 6,000TAutomatic tuna degoration 10,000T (of which 8,000T for canned and 2,000T for loinsStill being negotiated