Economic Partnership Agreements and putting development first
EPAs mark a historic turning point in the history of trade agreements. But, writes Charles Abugre, any new trade agreement must help ACP countries to improve and diversify what they produce and export. This will require a radical rewrite of EPAs as they currently stand.
EPAs are historic trade agreements. They will have an unprecedented impact on the development of some of the world’s poorest countries. They mark a radical shift in the relationship between these countries and their most important partner for aid and trade – the European Union. Previously characterised by preferential market access and aid for building trade capacity, this 'partnership' will oblige ACP (African, Caribbean and Pacific) countries to sign up to free trade agreements with the EU in order to maintain the market access on which producers and traders have come to depend and in order to benefit from the development assistance package that is tied to 'economic partnership agreements'. Christian Aid recognises the danger of this approach. If carried out in their current form, EPAs will undermine the development potential of many of the world’s poorest countries by exposing poor producers and traders to unequal competition and by tying the hands of governments to use trade policy selectively to support their agricultural and industrial development.
As the deadlines for the 6th ministerial conference of the World Trade Organisation in Hong Kong become more pressing, the attention of civil society is potentially diverted and the negotiating capacity of ACP countries is increasingly stretched. It is therefore important that the criticality of EPAs is not forgotten, not least because the two sets of negotiations are inextricably linked.
The discussions underway in the Rules Negotiating Group on regional trade agreements (RTAs) will establish the framework for EPAs. The call of the African Union to shift the timetable of EPA negotiations to let these basic rules be in place before substantive negotiations start is a logical one (African Union 2005). Currently ACP countries are trying to hit a moving target, or worse are trying to shoe-horn EPAs to fit flawed rules that were not designed for RTAs between developed and developing countries. WTO talks will also establish the baseline for EPAs. It is impossible to know what is the value of offers on market access until these talks are completed. It is also impossible to know what the impact will be of a new WTO deal on preference erosion – a critical issue for ACP countries, and one that the EU has committed to address under the Cotonou Agreement and as part of the Doha agenda.
Under EPAs, some of the world's poorest countries are being asked to open up their markets to products from Europe. The likely results are not hard to imagine. With their diverse range of products and muscle in the marketplace, European producers can outstrip ACP rivals in their domestic markets. European producers have enjoyed decades of subsidies, support and protection from their governments and have built strong, competitive industries. ACP countries – whose problem is not only that they cannot sell enough, but that they cannot produce enough – have not. They stand not only to lose existing markets, but also the potential to develop new ones.
According to the rhetoric, EPAs are designed for poverty reduction and to ensure the ACP's integration into the world market. After decades of structural adjustment, the majority of ACP countries are already integrated into international trade – it is the nature of this integration that is the problem. Since colonial times, ACP countries have been locked into feeding the European market with raw commodities and are often locked out when they try to export processed or value-added products.
Any new trade agreement between ACP countries and Europe must help them to improve and diversify what they produce and export. EPAs that focus on locking in an inexorable reduction in tariffs, and their eventual elimination, will not achieve this. No country has developed without the flexibility to raise as well as lower tariffs selectively to protect and encourage development of new industries.
In a recent report, Christian Aid exposed the already disastrous impact of enforced trade liberalisation on poor producers and looked ahead to the likely effects of further lowering tariffs in three African countries (Christian Aid 2005).
In Ghana and Senegal, the enforced lowering of import tariffs on products such as tomato paste and chicken parts has been followed by a deluge of products sold at cut-throat prices from Europe. These often undercut local goods, causing factories that add value to local produce to close down. This leads to great hardship in poor, rural communities where people's livelihoods rely on selling surplus food.
In Mozambique, liberalisation resulting from EPAs would open up a thriving milling industry to more cheaply produced wheat-flour from Europe. This would not only mean job losses in the milling industry, but would have a knock-on effect among the small but growing number of Mozambican farmers who produce wheat.
The studies show that not only is liberalisation often a harmful policy for poor people, but it will 'cap' development and leave countries dependent on the same narrow range of primary commodities.
EPAs are also threatening existing but fragile regional groupings among ACP countries. African countries in particular have long considered regional integration an important development strategy. It is both a means to overcome the limitations of small markets and an opportunity to pool resources for infrastructure and major production projects. But regional integration will not be advanced enough to kick-start growth by the time the EU expects African countries to start opening up markets to EU imports. This will mean that advantages accrue to the EU as the common and dominant partner in these trade arrangements. Opportunities to develop industries in goods that can be traded regionally will be lost.
EPAs are poorly designed to promote regional integration, regardless of timing. Least developed countries (LDCs) and non-LDCs have different incentives to sign up to EPAs, since LDCs benefit from the Everything But Arms initiative beyond 2007. The integrity of two long-standing African regional groupings – COMESA and SADC – is under threat because member governments of both groupings now have to choose under which they will negotiate a new trade deal with the EU.
Putting development first will require a radical rewriting of EPAs. EPAs provide potential advantages over preferential schemes as they enable the ACP to negotiate continued and improved access to EU markets that is legally secure. They are also attached to development assistance to enhance regional integration, to address supply-side constraints to production and to help cope with the costs of adjustment caused by trade reforms. Neither of these features of EPAs should be used to leverage commitments to liberalise. Instead, the EC must work with the ACP to ensure that development does indeed come first, and that ACP country governments are able to use trade policy flexibly to enable this to happen.
Progress towards this goal can be made in Hong Kong, if countries support measures to make effective special and differential treatment an integral part of WTO rules governing regional trade agreements.
* Charles Abugre is currently the head of policy and advocacy at Christian Aid. He has been a development activist in Ghana and many parts of Africa and Asia
* Please send comments to [email protected]
References
African Union (2005) 'Ministerial declaration on EPA negotiations', June
Christian Aid (2005) For Richer or Poorer: transforming economic partnership agreements between Europe and Africa. London: Christian Aid