TWN Info Service on WTO and Trade Issues (Jan07/05)

24 January 2007

African Ministers want to explore "all alternatives" in EPA talks

African Trade Ministers at their recent meeting in Addis Ababa have decried the lack of progress in all aspects of negotiations in the Economic Partnership Agreements (EPAs) between African countries and the European Commission.

In a Ministerial Declaration on the EPA negotiations, they urged for stock taking of the EPA talks and to explore all alternatives including whether to extend the period of negotiations (beyond the deadline of the end of 2007).

Below is an article on the Ministerial Declaration on EPAs.

It was published in the SUNS.

With best wishes
Martin Khor


African Ministers want to explore "all alternatives" in EPA talks

By Martin Khor (TWN), 19 Jan 2007

African Trade Ministers at their recent meeting in Addis Ababa have decried the lack of progress in all aspects of negotiations in the Economic Partnership Agreements between Africa and the European Commission, and crtiticised the delay by the EC to respond to issues raised by African negotiators.

In a Ministerial Declaration on the EPA negotiations, they urged "all parties to take stock of the negotiations and explore all alternatives to ensure there is no disruption of mutual trade, including whether to extend the period of negotiations."

According to some participants who were at the meeting, this phrase reflected the suggestions by several Ministers and senior officials that the EPA negotiations (now taking place between the European Union and the African, Caribbean and Pacific states) should be extended beyond the end of this year, which is the present deadline for completion of the talks.

Some Ministers and officials also wanted that alternatives to the present EPAs be considered.

However, as there was no consensus on these two points, the final language in the Declaration reflected the view that "all alternatives" be explored, including the extension of the period of negotiations.

The African Union Conference of Trade Ministers in its third extraordinary session was held in Addis Ababa on 15-16 January. It discussed the state of the current WTO negotiations as well as the EPA negotiations.

The final version of the Addis Ababa Ministerial Declaration on the EPA negotiations has just been made available by the AU Commission.

The Ministers reaffirmed the positions they had taken in previous Declarations on EPAs in Mauritius, Cairo (2005) and Nairobi (2006). The latter two Declarations had rejected the inclusion of the "Singapore issues" (investment, competition and government procurement) in the EPAs.

The previous Declarations had also called on the EU not to include TRIPS-plus provisions in the intellectual property chapter, asked that there be non-reciprocity in the outcome of market access negotiations, and that Article 24 of GATT (dealing with regional trade arrangements) be amended to allow special and differential treatment and asymmetrical obligations in free trade agreements between developed and developing countries.

The Addis Ababa Declaration stated that reports on EPA negotiations at the regional level in general indicate lack of sufficient progress in all aspects of the negotiations and in particular the delay by the European Commission to respond to certain issues submitted by the African negotiators related to the development dimension, market access and regional integration as well as the EC's demand for the inclusion of new generation issues.

The Ministers expressed concern that "at this advanced stage of the negotiations, Africa's priorities have not been positively and adequately addressed by the European Commission."

They also expressed the need to ensure that EPAs take into account African countries' concerns such as the cost of adjustment and building of the supply capacities, market access, including flexibilities related to product coverage, transitional period as well as financing of trade-related infrastructure.

They reiterated that the African regions will be allowed to pursue their regional integration processes at a pace that is commensurate with their political, economical and social capacities, and noted that the level of preparedness to conclude EPAs is inadequate in Africa due to among other reasons the lack of completion of country-specific impact assessment studies.

The Ministers called upon the EC to show flexibility and to positively and adequately respond to key African concerns. They called on the EC and its Member States to genuinely provide additional resources in accordance with the commitment, paying attention to the development and financing needs of Africa in building competitiveness and addressing supply-side and infrastructure constraints.

The Declaration also reiterated the call for a "broad EPA adjustment facility, in addition to the EDF, as an appropriate instrument that should cover social development, economic reforms, private sector development, and institutional development."

Explaining this call, the Ministers said they were fully aware of the potential huge adjustment costs that EPAs would entail during implementation. "As questions of how to adjust still persist, clear measures need to be defined that will help our countries address the challenges of adjustment."

The Ministers also said that "having regard to the preliminary results of the Comprehensive Review, we urge all the parties to take stock of the negotiations and explore all alternatives to ensure that there is no disruption of mutual trade, including whether to extend the period of negotiations."

The Ministers also directed their negotiators in each of the regions to ensure that they coordinate the EPA negotiations at technical level. They directed that the AU coordination of the negotiations should be strengthened. The negotiating groups should involve the AU Commission in their events and negotiations.

They also directed that their negotiators ensure that the review of the EPAs fully addresses all outstanding issues and that the four negotiating groups of Africa coordinate their activities and produce a consolidated report with the assistance of the AU Commission of the African Union in collaboration with the Economic Commission for Africa (ECA).

Finally, the Ministers recognized that Article XXIV of the GATT 1994, as currently interpreted by the EU, is unsuitable for pro-development Economic Partnership Agreements. They recalled the proposal by the ACP Group at the WTO and urged WTO members to take this proposal fully into account.

Before the adoption of the Declaration on EPAs, there was a presentation of a background paper as well as a debate at the senior officials' level and at the Ministerial level.

The "Background Brief" on the EPAs - jointly prepared by the AU Commission and the Economic Commission for Africa - critically highlighted some key issues and offered some bold proposals.

The two leading regional institutions of Africa implicitly called for the EPA negotiations to be extended beyond end-2007, so that there can be coherence between the negotiations at the WTO and the EPAs. Their paper said that since the Doha talks at the WTO had stalled, the EPA negotiations should not be concluded and its conclusion should wait until the Doha Round was finished.

The paper said that the negotiations have not adequately addressed all the difficulties and concerns of African countries. The concerns include: failure of the negotiations to have a development focus; the imbalance in the negotiations towards a focus on trade liberalisation; and lack of appreciation of the major adjustment challenges that African economies would face in implementing EPAs.

In addition, negotiations have been greatly slowed by the time it takes for the EU to respond to issues and some negotiating groups are falling behind the timeframes.

The paper called on the EU to respond more quickly and should not be as inflexible as it has been. The EC should positively respond to the key concerns of ACP negotiating groups.

The AU Commission and ECA stressed the need for coherence between the Doha Round and EPA negotiations. Its paper said that "the EPA negotiations are intertwined with the Doha Round of multilateral negotiations. The suspension of the Doha Round is therefore likely to have serious implications on the progress and content of the EPA negotiations and on the final agreed EPA texts.

"The need to ensure coherence in any commitments by the African countries in the EPAs with the progress made in the Doha Round must be emphasised. It would be premature to finalise and conclude EPAs before the conclusion of the WTO negotiations under the Doha Work Programme."

[In effect, the AU Commission and ECA are proposing that the scheduled conclusion of the EPA negotiations (which is the end of 2007) be postponed until the end of the Doha Round.]

The paper also stressed that "it is important to ensure that the EPAs do not contain obligations on the ACP regions that would be far in excess of WTO obligations. Issues that have been rejected in the WTO by Africa should not now be introduced in the EPAs."

The paper also addressed alternatives to the EPAs. It said that "alternatives to EPAs in the context of Article 24 of GATT and the Enabling Clause should continue to be fully explored while taking account of the Cotonou Partnership Agreement. This will help to give the negotiating groups fallback positions and broad latitude in negotiations."

The paper also highlighted issues relating to Article 24 of GATT 1994. Unless it is appropriately modified, Article 24 will limit the flexibility of the African countries to benefit from EPAs, it warned.

"It was clearly understood that Article 24 in its current un-amended form and as currently interpreted was unsuitable for pro-development EPAs and needed to be amended," said the paper. "The amendment would aim to make it development-friendly through introduction of appropriate flexibility for North-South regional trade arrangements such as the EPAs."

"Without appropriate flexibility it would not be possible to use the most appropriate methodology for computing substantially all trade, for instance. In this regard, the ACP proposal at the WTO should be fully taken into account by the negotiating groups in continuing with their negotiations and should be fully reflected in the outcome of the WTO negotiations. In its un-amended form, Article 24 of GATT should not provide the rules with which EPAs should be compatible."

On the review of the EPA negotiations, the paper said that there is ample evidence that there are still issues that require serious attention in the EPA negotiations. These issues require interventions at both the political and technical level.

It added: "A comprehensive review in accordance with the Joint ACP-EU Declaration on the review must be urgently undertaken and finalised. Both the ACP and EU sides need to take this seriously.

"Active participation in an all-inclusive review will help draw appropriate recommendations with regards to outstanding issues, flexibilities, and what needs to be done. The review report will assist in helping the negotiators in terms of the way forward for the negotiations."

There is also need for coordination among the negotiating groups as they undertake the exercise. The African Union Commission should produce a consolidated report together with the ECA, relating to the four negotiating groups of Africa.

The paper highlighted the divergences between EU and ACP positions, including in the areas of regional integration and risks that EPAs pose, coordination among negotiating groups, development cooperation and finance, and WTO compatibility.

It called on African negotiators to adhere to the previous EPA declarations so that there can be harmony in positions taken in line with common African Positions on key issues as set out in those Declarations. More political involvement is also needed.

The brief also said that African countries can be prepared only if they have undertaken country-specific studies. Before these studies are finalized and thorough assessments have been done at the national, regional and continental levels, the issue of preparedness to enter EPAs would not have been addressed.

The paper highlights the major problem of adjustment costs. It said: "Countries negotiating the EPAs are concerned with the potential adjustment costs and the questions of how to adjust still persist. Clear measures therefore need to be defined that will help these countries address the challenges of adjustment.

"A broad EPA adjustment facility in addition to the EDF is an appropriate instrument... This accompanying adjustment facility should cover social development; economic reforms; private sector development and institutions development support."

The paper also calls for finalizing the process of formulating simple and flexible rules of origin at the all-ACP level. The rules should be simple, flexible, and easy to implement. There should be a move away from product specific rules of origin which are difficult to administer to more general rules of application, value addition or level of materials used. With respect to textiles and clothing, single transformation would be ideal.

The brief also warns that health and technical standards can limit the ability of African countries to benefit from trade with the EU. The negotiations must take into account the harmonisation of these standards as part of the EPAs and the EC should oversee private sector standards to ensure that the standards do not act as disguised restrictions to trade.

The paper stresses that regional integration is an African priority and Africa is currently taking measures to enhance regional integration. The EC should respect these measures, and work within them. The EPAs should be supportive of this process and should not be seen to undermine it, including, among others, in the areas of trade liberalization and commitments on elimination or reduction of trade barriers to EU imports, EPA configuration and membership in the Regional Economic Commissions (RECs), development cooperation, and financing of the programmes of the RECs.

"Reinforcement of regional integration is a pre-requisite for the African countries being able to benefit from the EPAs. In this regard, regional integration should always be given primacy over EPAs, which should support and strengthen it."

The paper also called for regular coordination meetings among the four African regional negotiating groups. The AU's coordination of the negotiations should be strengthened and its Commission should take part in negotiating meetings to ensure that the EPAs are in line with AU objectives. So far, only one negotiating group, Eastern and Southern Africa, has regularly submitted progress reports to the AU Commission