Making policies work

GREAT insights Magazine

Trade without Trade-offs

16-10-2014

Lange, B. 2014. Trade without trade-offs. GREAT insights Magazine, Volume 3, Issue 9. October/November 2014.

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Economic Partnership Agreements (EPAs) present an opportunity to strengthen and foster intra- and inter-regional integration, an opportunity which should not be wasted. The long-stigmatised EPAs process has the potential to become a catalyst of improved Africa-Africa and Africa-EU political and business relations.

Towards genuinely fair trade

Free and fair trade can be a powerhouse for job creation and growth if the conditions are right. Resources and know-how brought about by properly regulated and transparent foreign direct investment are crucial aspects for success. Trade and investment policy must create and sustain conditions to add value to the complex cross-border supply chains of the world we live in.

Globalisation has demonstrated its capability of lifting millions out of poverty by creating and upgrading jobs. If properly governed, it can improve standards of living and boost economic and social integration. But if left to the forces of the free market and crony capitalism it has proven time and again to be the cause of social and environmental degradation.

The European Parliament and its Committee on International Trade (INTA) are deeply committed to ensuring that trade is not only free, but fair; balancing values and shared interests. We are convinced that only a rules-based trade regime without distortions, red-tape, arbitrary import and export bans and discrimination of foreign businesses and investors is free. We also believe that trade policy must be used to uphold sustainable development, social inclusion and protection of human rights to be considered as fair. In this spirit, trade and investment policy must be used to contribute to advancing not only economic interests, but also civil, political, social, environmental and solidarity rights.

The European Parliament analyses every EPA and related legislation, putting it to the interests, values and development test. And of course it has the last word in ratifying any agreement. During the long-drawn-out EPAs negotiation process, the European Parliament re-focused the EU’s Generalised System of Preferences (GSP) on the countries most in need. We have extended the phasing out of the Market Access Regulation (MAR) 1528/2007, approved interim EPAs with the Pacific, Eastern and Southern African countries and Cameroon and scrutinised the implementation of the CARIFORUM EPA. Our work is far from being complete: the agreements with the Western and Southern African groupings will soon be on the agenda of the INTA committee and soon after debated by the entire European Parliament.

EPAs – a rocky road to success

The EU’s trade policy in general and EPAs in particular are the outcome of extensive discussions and consultations involving EU institutions, EU member states and stakeholders from within the EU and beyond. In spite of long delays, a breakthrough in key talks launched back in 2002 between the EU and African, Caribbean and Pacific (ACP) groupings of states on the conclusion of WTO-compatible and development-oriented regional EPAs was reached this summer.

Both the conclusion of regional EPAs with the Western African and Southern African groupings and the ratifications of further interim EPAs mark important milestones for EU-Africa trade relations. Even though flawed, the oftentimes bumpy and protracted EPA process can nevertheless be considered a success story for several reasons:

In terms of content we have coupled the principle of substantial trade liberalisation with an improved rules of origin and development component, adding a boost to regional cohesion for our partner countries. Up-front access to the EU’s market and asymmetrical and gradual market opening in partner regions characterise our approach.

We have also succeeded in terms of process. The years African and European negotiators dedicated to trade talks were not wasted. We have proven our political will when making necessary policy choices showing a remarkable degree of flexibility. We reached compromises when we were close to losing hope, and maybe most importantly, we have confirmed our commitment to trade-driven development. And we have remained flexible: the doors for expanding membership and deepening interim EPAs when the time is ripe remain wide open.

And this option will remain important. It is clear that bilateral and plurilateral trade agreements which replace unilateral preferences continue to be essential while uncertainty looms around the implementation of the WTO Trade Facilitation Agreement.

Furthermore, mobilisation of civil society and the interest of the academic community triggered substantial discussions and valuable analysis, helping to raise awareness and clear up concerns among our partners. While monitoring the EPA negotiating process, the European Parliament carefully listens to the voices of the civil society and business community from within and outside the EU and will continue doing so. Let me reiterate that the “non-execution clause” in EPAs is a red line for the European Parliament[A3] . The protection of human rights as well as social and environmental standards is deeply embedded in the EU’s trade relations and the European Parliament will continue to act as Europe´s democratic conscience when protecting these.

However painful for some partner countries, “the choices deadline” of the Market Access Regulation, which phases-out preference discrimination, gave an extra boost for policy-makers to think regionally. Nevertheless, it should be obvious that regionalisation and development cannot be forced upon any country or region. It is therefore encouraging to see a feeling of genuine ownership of the process emerging throughout different regional blocks. We must seek to transform the EPAs process into a catalyst for genuine positive change, facilitating qualitatively new Africa-Africa and Africa-EU political and business relations.

EPAs partners have undertaken WTO-compatible contractual obligations aiming to facilitate regional integration and trade-driven development. But efforts are required: painful structural reforms will be needed and economic operators will have to adapt to their new realities of increased competition.

Although trade is among preconditions for development, it is not sufficient by itself. Therefore, the EU must fulfil its duty to support countries that take responsibility to play the role of engines for long-term integration within their respective regions, willing to accept short-term pains for the sustained growth benefiting their businesses and societies. Effectively targeted aid for trade must be put at the service of trade mainstreaming. The EU must walk the extra mile and continue assisting developing countries to create regional value chains and eventually join the global production lines.

A process rather than a destination

Let’s not forget that however difficult the process of negotiating and ratifying agreements is, it is just the first step of the long process. Implementation is the key. The CARIFORUM EPA is a case in hand.

The challenges and opportunities for the different ACP groupings, including Africa’s regional economic communities, are clear. Many steps forward seem to be self-evident. One piece of the growth puzzle will be to minimise or eradicate barriers to trade amongst African countries. Without a doubt these are an impediment to development. To put it differently: it is obvious that total isolation from world trade and overreliance on raw-material exports are not a formula for sustainable growth and development.

It is up to our ACP partners to tap into their potential and use available instruments to trigger positive socio-economic transformation. In this process, the success of partnerships will very much depend on the credibility and effectiveness of regional bodies, the involvement of parliaments and civil society and the capacity of national authorities to deliver on promises made in the past.

The creation of a strong agricultural and industrial backbone is not possible without a functioning “hard” and “soft” infrastructure and services that glue economies together. As ample successful examples illustrate, fostering linkages within an economy, diversifying trade and investment flows and trading partners are key for capturing “value-added” elements. In times of scarce public finances, technical assistance targeted at trade mainstreaming, public-private partnerships and the role of emerging economies, it is ever more important.

Moving-up the value chains is impossible without legal certainty and sound regulatory environment, enabling transfer of technologies and skills that increase competitiveness and productivity. In this regard, the role of national and regional parliaments in shaping policies and holding governments accountable for the policies they implement and agreements they conclude is essential.

Ambitious targets and visions, like the one of creating an African Continental Free Trade Area by 2017 are important focal points. However, we must remain realistic and start with bringing down barriers between individual countries. Only genuine intra-regional integration and effective inter-regional coordination can make continental ambitions come true. After a critical mass within a regional block is attained and common institutions are strengthened, we may be able to witness further “enlargements” and “mergers” of regional economic communities, such as the envisaged Tripartite COMESA-EAC-SADC initiative.

EPAs ensuring “traditional” market access to the EU market by themselves are not solutions to Africa’s economic challenges. While EPAs were negotiated, a complicated network of interlinked intermediate inputs covered by a “spaghetti bowl” of free trade agreements has emerged. The EU has both concluded and embarked upon a wide range of trade talks, including the comprehensive Transatlantic Trade and Investment Partnership.

Nevertheless, in this context the EPA-process can still become a stepping stone for long-term economic reforms, preparing developing partners to use the potential offered by investment, services and trade-related rules. I am convinced that despite the challenges, Economic Partnership Agreements have the potential to play an important role for countries seeking sustainable economic growth and deepened integration. Furthermore, EPA partners should strive to adhere to environmental and labour standards, ensure sustainable use of resources and promote Corporate Social Responsibility. Although flexibility is important, double standards and discrimination among trade partners in this field have to be avoided. Monitoring in this area is indispensable. EPAs must now be put to the service of sustainable and sustained development.

 Lange

Bernd Lange is a member of the European Parliament within the Progressive Alliance of Socialists and Democrats and Chair of the European Parliament Committee on International Trade (INTA).

 

This article was published in GREAT insights Volume 3, Issue 9 (October/November 2014).

 

Economic Transformation and TradeTrade Policy and Economic Partnership AgreementsEconomic Partnership Agreements (EPAs)

External authors

Bernd Lange