AFRICA COULD LOSE BIG IN ECONOMIC PARTNERSHIP AGREEMENTS WITH EU

By Aileen Kwa Reprint | | Print |

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GENEVA, Mar 16 2009 (IPS) - Given the way the Economic Partnership Agreement (EPA) negotiations have been based on the requirement for reciprocal market opening with the European Union (EU), they are likely to bring more losses than gains for Africa and make the path to development even more difficult than it already is. For this reason, the South Centre recommends an alternative approach.

While the price African countries would have to pay to maintain preferential access into the EU is very high, the value of this access will essentially vanish in 5-10 years. This is because the EU is already negotiating Free Trade Agreements (FTAs) with Central America, Andean countries, ASEAN, India, and other entities. For preferences that will last but a few years, African countries are being asked to sign away control over their trade policy.

In any case, the Least Developed Countries (LDCs), which make up 34 out of the 47 African countries negotiating the EPAs, can avail themselves of the Everything But Arms (EBA) preferential scheme of the EU. For non-LDCs, options more supportive of development should be fully explored, including the search for regional and other markets (rather than looking mainly to the EU for export markets), the Generalised System of Preferences (GSP+), as well as renegotiating Article 24 of the World Trade Organisation (WTO) on regional and free trade agreements.

Consequently, for countries that want to sign an EPA, we propose the use of development benchmarks pegged to their trade liberalisation schedules. This will ensure that only when countries attain a certain level of development will they have to undertake far-reaching reform of their trade regimes vis-a-vis a very strong economic partner, the EU.

The liberalisation schedules we propose become operative 10 years after the entry into force of an EPA. If at that time, countries have attained 20 percent of the economic size of the EU (measured by per capita Gross National Income and per capita value of manufactured exports), and if their exports show a certain level of diversification, they would eliminate tariffs on 20 percent of their tariff lines. If after 15 years, the EPA has facilitated their development and they attain 50 percent the economic size of the EU (in per capita terms), and if the countries fulfil other criteria demonstrating that their economies are diversified, and if they attain a certain level of trade integration with other African countries, then the countries will eliminate tariffs on 50 percent of their tariff lines in trade with the EU. After 20 years, if they have attained 70 percent the size of the EU, and fulfilled the diversification and regional integration criteria, they would eliminate tariffs on 70 percent of their tariff lines over five years.

Currently South Africa has attained 27.2 percent of the economic size of the EU, Mauritius 23 percent, Nigeria 6.3 percent, and Cote d’Ivoire 5 percent.

We propose that this conditioned liberalisation schedule be accompanied by a ‘bare bones’ goods-only EPA. Whilst the EU is pushing hard for countries to liberalise not only goods but also services, intellectual property, investment, competition, and government procurement, these categories are more appropriately addressed when African economies have grown and can negotiate from a position of strength rather than weakness.

In addition to the benchmarking mentioned above, the ‘bare bones’ EPA should have the following elements:

-Removal of the most favoured nation treatment (MFN) clause. This clause makes it mandatory that African countries offer to the EU what they offer to another major economy after the entry into force of the EPA. This works against regional integration and the promotion of south-south trade.

-Removal of the standstill clause. All of the interim EPA agreements have a standstill clause barring the application of new customs duties or the raising of existing ones, even for sensitive products, after the entry into force of the Agreement.

-Removal of the provision to freeze export taxes and duties. The EU wants access to Africa’s raw materials in order to maintain its competitiveness. Yet putting in place these export taxes and duties is important to encourage diversification and value addition for African economies.

In addition, EPAs should include far better safeguards than the interim versions now contain: for instance, a more ‘proactive’ infant industry clause.

The current infant industry clause is ‘reactive’, limited to situations in which an injury has happened or seems imminent. A more proactive clause will allow a government to put in place additional duties on those goods imported into its area which compete with its own infant industries. An infant industry can be defined as an industry which has been established for not more than 15 years. This clause should not expire since countries will always have infant industries.

In conclusion, South Centre urges African countries to exercise the greatest caution when approaching these negotiations. It is of vital importance for developing and least developed countries that they not foreclose the options for industrialisation for future generations. (END/COPYRIGHT IPS)

(*) Aileen Kwa is coordinator of the Trade and Development Programme at the South Centre, Geneva.