TWN Info Service on WTO and Trade Issues (Nov10/07)
Africa resisting the threat of EPAs
Geneva, 23 Nov (Martin Khor*) -- The economies of Africa, the world's poorest region, are under severe threat from free trade agreements that they are under pressure to sign with the European Union, the world's richest region.
Under these Economic Partnership Agreements (EPAs),
But the African countries are understandably worried that their small industries and service operators will not be able to survive free competition from giant European companies, banks and commercial firms.
Moreover, African farmers will lose their markets to artificially cheap European food imports that are heavily subsidised, if agricultural tariffs are reduced or eliminated.
These concerns, and more, were expressed by African
Ministers of Trade at their meeting in the Rwandan capital of
The Ministers adopted a Declaration on the EPAs which made clear their opposition to the European Union's (EU) model of EPAs.
Also, in a show of regional unity, the African
Union Commission and the continent's five regional economic commissions
covering Eastern, Central, Western and
They also proposed various ways for Africa to
get out of its predicament, instead of signing the kind of EPAs that
Some African Presidents are expected to voice
the region's concerns at a Europe-Africa summit in
The growing African resistance to the EPAs is
the latest stage in a long saga which started when Europe decided to
end the long-standing post-colonial arrangement in which it gave trade
preferences for products coming from the African,
The ACP countries did not have to give preferences for European products in return.
However, under the
Three years after the deadline, few African countries have signed the EPAs because of their damaging effects.
The EC has threatened to remove the preferences from countries that have not signed.
These countries face a dilemma. They face the
pressure to sign, to maintain their preferences and not lose some of
their exports to
Firstly, the African countries fear that their local industries and farms will be damaged because the EPAs require them to reduce their tariffs to zero for 80% of their imports from the EU. Many local products may not survive or will lose market share to the cheapened imports.
They are also against several other trade conditions, including prohibiting or restricting the use of export taxes.
Most African countries tax the exports of some of their raw materials so that local industries can use them for processing or manufacturing.
A ban on export taxes will prevent African countries from taking measures to add value to their primary commodities and to climb the value chain and industrialise.
The loss of import duties and export taxes will also reduce the governments' revenue, since these trade taxes are a large part of their income.
Secondly, the African countries are asked to open up their services, ranging from telecommunications and retail trade to banking, to European firms.
In the EPAs with the
Thirdly, the EPAs require liberalisation and deregulation of financial flows, investment and government procurement. This will make it difficult for the countries to regulate capital flows, when such regulation or capital controls are now recognised as important policy tools because of the present volatility of financial flows.
The opening of the government procurement business to foreign firms (to be treated equally as locals) will affect the ability of the governments to give preference to locals, or to boost the domestic economy, because of the leakage to imports and foreign services.
Fourthly, the African Ministers are worried that
the EPAs would adversely affect
Fifthly, the EPAs would also make it more difficult
for Africa to cope with the economic slowdown, since its trade balance
What then can be done to avoid these damaging effects? First, 34 of the 47 African countries involved in the EPAs are least developed countries (LDCs), and they do not have to sign the EPAs, since their preferences will continue under an existing "Everything But Arms" scheme.
And second, the 13 non-LDCs can request that the EU also provide them with the Everything But Arms scheme, without their having to give preferences to the EU in return. There is a good case, as the 13 African countries are also poor and vulnerable, similar to the LDCs.
There is a precedent. The United States provides a non-reciprocal preference scheme for Africa (known as the African Growth and Opportunity Act), and the EU itself is also providing non-reciprocal preferences to Moldova and the Western Balkan countries, which are better off than the Africans.
In any case, a good solution should be found because
it would be hypocritical for European countries to pledge to help
(* Martin Khor is the Executive Director of the South Centre.) +