EPAs: Frequently Asked Questions
What are EPAs?
Economic Partnership Agreements (EPA) are ‘development-focused’ asymmetric free trade agreements negotiated between the African, Caribbean and African (ACP) countries/regions and the European Union (EU), where the EU, as one regional block, provides full duty free and quota free market access to EPA countries and/or regions and where ACP countries/ regions commit to open at least 75% of their markets to the EU.
Who is concerned so far?
As of 16th October 2014, EPAs have been concluded by the EU (28 countries) with 49 ACP countries, covering over 900 million people on 4 continents.
Why negotiate EPAs?
EPAs are trade instruments that replace the unilateral trade regime that governed the trade relationship between EU and ACP countries for over 30 years, under successive Lomé Conventions and since 2000 (and until the end of 2007 only), under the Cotonou Partnership Agreement (CPA). This unilateral trade regime was not compatible with the World Trade Organization (WTO) because it granted more favourable treatment only to ACP countries but not to other developing countries. It thus required a waiver, which was granted by WTO members to the EU until 31st December 2007, under the condition that the discriminatory trade Cotonou regime in favour of the ACP only would be replaced by WTO-compatible trade regimes. This meant in practice either free trade agreements (i.e. EPAs), a non-discriminatory and arbitrary preferential trade regimes to developing countries (i.e. the general system of preferences - GSP), or non-preferential treatment (i.e. trading under the most-favoured nation clause –MFN- of the WTO).
From Lomé Preferences to EPAs: What were the key milestones?
Who negotiated EPAs and under what regional configuration?
EPA negotiations, initiated in 2002, have been conducted at the regional level, in the context of 6, and then 7, EPA groups, namely in: (i) the Caribbean Forum (CARIFORUM) region (15 countries); (ii) the Pacific Islands Forum region (14 countries); (iii) the 15 Economic Community of West African States (ECOWAS) countries plus Mauritania; (iv) the Central African region (8 countries); (v) the Southern African region (a sub-group of the Southern African Development Community - SADC), currently comprising Botswana, Lesotho, Namibia, Swaziland, Mozambique and South Africa; (vi) the Eastern and Southern African (ESA) region (a sub-group of the Common Market for Eastern and Southern Africa - COMESA), included 11 countries (four countries left in 2007 to join the East African Community – EAC - EPA group); and since 2007, the 7th EPA group, comprising of the 5 members of the Eastern African Community (EAC).
Why conclude EPAs before 1st October 2014?
Entry into force of an agreement is a lengthy process: it requires signature, ratification and implementation and may sometimes take years. Therefore, to prevent trade disruption pending the entry into force of EPAs, on 1st January 2008, a Market Access Regulation (MAR 1528/2007) was adopted by the EU, to provisionally apply EPA preferences from the EU to countries that had concluded a deal in 2007, but were yet to sign, ratify and implement their agreements. It was later decided in May 2013 that the MAR would expire on 1st October 2014.
As a consequence, any country or region that would not have taken the necessary steps to ratify the EPA concluded in 2007, or would not have concluded a new (regional) EPA before 1st October 2014, would therefore automatically fall, after that date, under the GSP, a preferential but less favourable trade regime that the EU gives unilaterally to all developing countries. Least-developed countries (LDCs) can trade under the Everything But Arms (EBA) Initiative under the EU GSP, which provide duty free quota free access to the EU market for all exports, except arms, from LDCs. However, according to the new EU GSP that entered into force on 1st January 2014, any upper middle-income countries would no longer have trade preferences on the EU market.
Does the deadline imply that EPA negotiations are over?
No, the “deadline” of 1st October 2014 does not mean the end of EPA negotiations. The deadline only refers to the coverage of countries under MAR 1528/2007 after that date, as discussed above. EPA negotiations can still continue as necessary (i.e. for countries that have not yet concluded an EPA but would still wish to do so, and for EPA countries/regions that have rendez-vous clause to pursue negotiations on a broader scope in terms of content, such as trade in services, investment and other trade-related issues).
Who will be covered by EPAs and what trade regimes will apply to my country/region after October 2014?
What do EPAs cover?
With the exception of the CARIFORUM EPA, which is a comprehensive Agreement covering investment, services and a number of trade-related regulatory issues (from public procurement to competition and intellectual property rights, among others), all remaining EPAs cover only trade in goods and development cooperation. The rest are contained in a rendez-vous clause to continue negotiations on a number of issues, but there is no specific timeline for the finalisation of the negotiations.
The EU provides immediate duty free and quota free market access to all products to EPA signatories (with the exception of South Africa, which has a less open regime with a longer time frame for liberalisation).
On the ACP side, markets are not fully liberalised. The degree of liberalisation varies between 75% for ECOWAS countries and 98% in the case of Seychelles over up to 25 years, reflecting countries’ and regions’ level of development and capacity to open up their goods market.
Regions excluded mainly products deemed sensitive for their domestic economies. These include agricultural products and some industrial products that are being produced at home.
For an overview of the ECOWAS EPA and SADC EPA concluded this summer, see www.ecdpm.org/dp165.
What were the key issues that were the more difficult to agree upon?
A number of issues were considered to be ‘contentious’, given their critical importance for industrial, development, food security and foreign policy purposes. These include: (a) the degree and timeframe for liberalisation; (b) export taxes; (c) MFN clause; (d) non-execution clause; (e) infant industry clause; (f) agricultural export subsidies and domestic support in the EU; and (g) development finance.
EPAs were meant to be development tools: what's in the EPAs for development?
EPAs have been initially branded as first and foremost “development tools’, not traditional free trade agreements pursued with vested mercantilist interests. However, the development impact of EPAs will not be automatic and it may be difficult to measure what economic development can be directly attributed to the EPAs or not. Advocates of EPAs stressed the potential positive impacts of EPAs, in terms of free trade but also on possible positive spillover effects, notably on economic reforms, competition and on the increasing interest of private operators to invest in the local economy to reap the benefits of access to the EU market. Critics of EPAs emphasise the potential negative effects EPAs can entail, in terms of policy space for pursuing development policies, lack of capacity (institutions, infrastructure, productive capacity, etc.), adjustments costs (loss of fiscal revenues, productive adjustments, etc.), and lack of financial support.
On the financial side, ECOWAS is the only region that obtained a financial commitment from the EU of €6.5 billion with their EPA, through the EPA Development Programme (better known under its French acronym PAPED). For the others, there is no similar financial support but the regional programming of the 11th European Development Fund (EDF) provides an important opportunity to address some of the EPA related financing, including in financing infrastructure. In addition, given the current financial constraints and the difficulty for Europe to commit additional funding (beyond the EDF and existing Aid for Trade commitments and mechanisms, such as regional funds), the use of innovative financing mechanisms could be explored (such as blending grants and loans, and various forms of public private partnerships and cooperation).
This is a summary of the ECDPM EPA Dossier: Frequently Asked Questions http://ecdpm.org/dossiers/dossier-economic-partnership-agreements/
Futher information on EPAs:
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This article was published in GREAT insights Volume 3, Issue 9 (October/November 2014).