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EU PROPOSES DUTY- AND QUOTA-FREE ACCESS FOR ACP COUNTRIES IN EPA TALKS

Thursday, April 26, 2007 > 15:10:54
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(Source: BRIDGES Weekly Trade News Digest  Vol. 11, Number 13)

The EU has proposed removing tariffs and quotas on all exports except rice and sugar from the African, Caribbean, and Pacific (ACP) group of countries, as part of its economic partnership agreement (EPA) negotiations with the former colonies.

The offer was unveiled by the European Commission on 4 April, in a meeting with ACP representatives in Brussels.

ACP nations have benefited from preferential access to EU markets since 1975. WTO practice requires non-reciprocal trade preference schemes not extended to all developing countries to receive a 'waiver' from the entire Membership. Some other developing nations, mainly from Latin America and Southeast Asia, were unhappy with the advantageous access enjoyed by the ACP. In 2001, they won an agreement under which WTO Members allowed the EU to maintain its preferences for the ACP until the end of 2007, after which they would be replaced by two-way free trade agreements that would not need a waiver (see BRIDGES Weekly, 15 November 2001, http://www.ictsd.org/weekly/01-11-15/story2.htm). Since 2002, the EU has been negotiating with each of the six ACP geographical blocs to establish these EPAs. The reciprocal accords would be protected by WTO regulations so long as they removed tariffs on 'substantially all trade' (a concept that remains undefined).

Under the EU's market access proposal, quotas and tariffs for 'substantially all' ACP products -- including beef, dairy, cereals, fruits, and vegetables -- would be immediately lifted upon the signing of an EPA. Rice and sugar are the notable exceptions. The duty and quota import regime for sugar would be phased out through 2015, with volume-based safeguards for exports from the relatively richer ACP countries. After 2015, unrestricted access would be subject to a standard safeguard "adjusted to take account of the sensitivity of sugar." The terms for rice are not yet wholly determined, but the EU has stated that the transition period would be brief, with a duty-free import quota.

Effectively, the proposal appears to offer all ACP nations, except South Africa, the same market access conditions available to least-developed countries (LDCs) under the EU's Everything But Arms (EBA) policy. There are over 30 non-LDC members of the ACP group, including Papua New Guinea, Botswana, Jamaica, and Nigeria. Brussels said that some "globally competitive products" from South Africa would continue to face tariffs.

The EU claims that its proposal would encourage ACP countries to build strong regional markets, increase competitiveness, and diversify their economies, thus promoting integration into the global economy. Despite existing preferences, ACP nations export a handful of basic commodities, many of which have dropped in price over the past few decades.

Sceptics are concerned that the proposal might actually do more harm than good, if it is only an attempt to step up the pace of the EPA negotiations. ACP countries say that their participation in the talks has been hampered by insufficient resources and negotiating capacity. Some believe that an extended timeframe for the talks -- beyond the agreed end-date of 2007 -- would allow for an improved understanding of regional issues and more focused studies on the potential impacts of the agreements. "The European Commission offer threatens to poison the negotiating climate, especially at a time when both sides are making strides (on) flexibilities," said Junior Lodge, the Caribbean Regional Negotiating Machinery representative to Brussels. "This mustn't be used as a way to bribe ACP countries into signing deals by the end of the year," civil society group Oxfam warned in a statement.

Furthermore, some fear that increased regional competition and integration among ACP countries might benefit the strongest economies among them, but leave the rest in a static or worsened economic position.

One ACP source noted that the EU's market access offer would mean little unless associated with generous rules of origin, along with assistance to help poor country exporters meet EU health and safety standards. Accessible rules of origin would make the greatest difference in ensuring that market access for ACP goods under the EPAs would be better than that available under the existing preference scheme, the source added.

Critics also worry that the offer is a ploy by the EU to gain liberalised access to ACP markets in the future, since the EPAs, as full-fledged free trade agreements would also require ACP countries to lower their own import duties. A surge of imports from the EU could raise unemployment and inhibit industrial development, they say. "Developing countries look set to be asked to open their markets dramatically, which could have seriously negative implications for poor peoples' livelihoods and future economic development," cautioned the head of Oxfam Brussels, Luis Morago.

The EU has refuted these allegations, arguing that the ACP would only have to implement market-opening commitments over a long transition period, up to 25 years. Furthermore, an EU source insisted that Brussels was open to letting ACP countries exempt some products from liberalisation.

Aid has been another sticking point in the EPA negotiations. For instance, the ACP wants legally binding commitments for adjustment assistance from the EU (see BRIDGES Weekly, 14 February 2007, http://www.ictsd.org/weekly/07-02-14/story3.htm). The EU is one of the world's largest aid donors and has promised more than 22 billion euros to ACP nations in general aid between 2008 and 2013, of which 2 billion per year is directed towards aid for trade and the opening up of markets. African countries in particular say that without more support, they will be unable to offset lost tariff revenue or develop their products to comply with EU standards.

The EU says that an extension of the waiver for the existing ACP preferences is "extremely unlikely," given opposition from other WTO Members. Nevertheless, some observers of the EPA negotiations believe that even if the current waiver lapsed before an agreement is reached, other developing countries might be convinced to refrain launching a formal WTO dispute if they were reasonably sure that a long-term deal would be reached within a year or 18 months.

Since Brussels' market access offer is conditional on the signing of an EPA, the proposal will be discussed during the current talks. It would not be implemented unless it becomes part of a final agreement. Both sides continue to reiterate the importance of staying focused on the current objectives: signing an agreement by the end of 2007.

ICTSD reporting; "EC Market Access Offer in Economic Partnership Agreements (EPAs)," European Commission, 4 April 2007; "Last Barriers for ACP Countries to EU Market," IPP MEDIA, 6 April 2007; "EU Pledges to Open Markets to Ex-Colonies," REUTERS, 4 April 2007; "The Full Market Access Offer from the EU," TRADE LAW CENTRE FOR SOUTHERN AFRICA, 11 April 2007; "EU Offers Full Market Access to Former Colonies," AGENCE FRANCE PRESSE, 4 April 2007; "Caribbean to Mull EU Market Access Offer," STABROEK NEWS, 5 April 2007.

 
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