TWN Info Service on WTO and Trade Issues (Nov07/22)

15 November 2007

Trade: ACP Ministers clarify their EPA principles and options
Published in SUNS #6365 dated 14 November 2007
Reproduction requires permission of SUNS (
By Martin Khor, Geneva, 11 Nov 2007

The Ministers of the African, Caribbean and Pacific (ACP) group of countries have issued their most comprehensive policy statement on the Economic Partnership Agreements (EPAs) at the end of a meeting they held in Brussels on 8-9 November.

From the "Conclusions of the meeting" that they issued, it is clear that the Ministers recognised that the six ACP regional groupings are at different stages of negotiations with the European Commission on their respective EPAs, and that there are also differences between the regions on the issues that the EPAs would cover and on whether the negotiations will end by the official 31 December deadline.

The Conclusions acknowledged these differences among the ACP regions and countries and provided guidelines or principles on how the different categories of regions/countries should approach their respective negotiations.

It is known that the EPA negotiations between the EC and the Caribbean and Pacific regions are more advanced, while some of the African sub-regions (in particular West Africa, and Eastern and Southern Africa) are not yet in a position to finalise an agreement with the EC and are looking at alternative ways to handle this situation.

Allowing for the differences among their countries, the ACP Ministers came to a common understanding on some critical issues and principles.

They strongly criticised the EC for its negotiating strategy which treated the ACP groupings on a "take it or leave it" basis, and for its unwillingness to consider temporary alternatives (such as GSP-Plus) for continuing trade preferences for regions that are unable to conclude the EPA deal by 31 December, after which the WTO waiver for the existing preferences end.

The EC has implicitly recognised that it is not possible to conclude the EPAs in most of the ACP regions by the deadline should it keep to its original demand -- that the scope of EPAs must include not only goods trade but also services, intellectual property and the Singapore issues of investment, competition policy and government procurement.

Many African countries, including Kenya, Nigeria and South Africa, do not want the Singapore issues in the EPA. The African Trade Ministers in several declarations (Cairo 2005, Nairobi 2006) have asked that the EPAs exclude the Singapore issues, and that African countries should not be asked by the EC to undertake commitments in services or IPRs that are beyond their existing WTO obligations.

In October, the EC Trade Commissioner Peter Mandelson made a new offer of an "EPA-Lite", in which the ACP countries need only to conclude a first phase of the EPAs containing only trade in goods by 31 December, while the "non-trade" issues must be negotiated in a second phase.

This has caused a debate within governments and civil society in African countries whether to accept or reject an EPA-Lite deal. The African Trade Network, the leading grouping of African NGOs and social movements involved in trade issues, has come out against the EPA-Lite, and many African trade unions and farmers' groups have also asked their governments to reject an EPA-Lite deal.

In the view of the African civil society organisations, the EPA-Lite would not solve any problems, since it would oblige the ACP countries to liberalise their imports (with zero tariffs for a majority of goods), thus facilitating a surge of European imports that will displace local production, while there would also be a mandatory second phase of EPA talks on the rest of the issues.

Thus, the comprehensive scope of the EPAs that the EC wants would be preserved; the only difference is that there would be two phases. The EPA-Lite would not be light after all.

Many African groups, backed by some European NGOs, have demanded that the EPA talks not be concluded, and instead that the EC grant GSP-Plus status to the ACP countries. Some African governments are also exploring this option, as the Conclusions made clear.

"GSP-Plus" refers to trade privileges that incorporate the General System of Preferences plus additional preferential benefits. The EU already grants GSP-Plus status to some developing countries.

Some NGOs estimate that GSP-Plus will allow ACP countries to have almost the same level of benefits they enjoy under the present Cotonou Agreement scheme or that they would enjoy under the EPAs, while the ACP countries need not have to open up their markets so drastically to European products as demanded under the reciprocal scheme of the EPAs.

So far, the EC has not shown any sympathy for considering alternatives to the EPAs such as the GSP-Plus. Nor has it been willing to seek an extension of the waiver at the WTO. The ACP Ministers at their Brussels meeting took the EC to task on these two issues.

The Ministers also collectively agreed that some principles should apply, whatever choice is made by each region on whether to conclude the EPAs by the deadline (they listed three possible scenarios as to what may happen - a comprehensive EPA deal, an alternative to the EPA such as GSP-Plus, and an EPA-Lite).

The principles include that no ACP country would be worse off after the deadline passes; that ACP countries that cannot enter into an EPA be provided with a WTO-compatible trade framework that is equivalent to their present situation, and that the regional integration process (within the ACP regions) should be supported by the EPA and not be dictated by it.

The Brussels meeting and the Minister's joint declaration will place the ACP countries in a better position in the present complex situation and when each of the regions get back to their negotiations with the EC.

In their "Conclusions", the ACP Ministers said they had an interactive session with WTO Director General Pascal Lamy and discussed the current WTO situation, especially areas of interest to the ACP States. They also explored with Lamy ways and means to help the ACP States deal with the requirements for WTO-compatibility of the EPAs.

The Ministers endorsed the concerns of their senior officials (who had met before the Ministerial) that negotiations should not be conducted in a manner that continues to exert pressure on ACP regions in a take-it-or-leave-it manner.

They expressed dissatisfaction that the exchanges (with EC officials) did not reveal any willingness on the part of the EC to explore such options as GSP plus or enhanced GSP measures - as temporary measures to WTO compatibility.

They stressed that in attempting to obtain individual country agreements, the EC should desist from measures that will undermine regional integration processes.

The Conclusions then dealt with scenarios and conditions for concluding the EPAs.

The Ministers noted from the presentations on the state of play of the EPA negotiations that most regions would not be in a position to conclude the full EPAs by the agreed deadline.

They observed that trade is already being disrupted as importers in Europe are hesitant to place orders for delivery in January 2008, since they are not sure about the import regime that will be in place in the European Union. This was considered to be extremely serious.

The Ministers considered three possible scenarios and related corresponding conditions that would ensure that there is no continued disruption of trade between the ACP countries and the European Union from 1 January 2008, namely:

1. Securing a comprehensive EPA: In light of the time constraints, this might require securing the extension of the current WTO Waiver. The Ministers believed that there is a compelling case for a request for a waiver, bearing in mind that AGOA and CBERA trade regimes continue to operate pending the consideration of the extension of the waiver.

2. GSP (General System of Preferences), GSP plus and EBA (Everything But Arms): These regimes are autonomous and not equivalent to the current Cotonou trade regime.

3. EC proposal for interim agreements with a built-in agenda for a comprehensive EPA at a latter stage: The Ministers emphasized the need to define the content of the interim agreement taking into account the needs of ACP countries and regions. This must include the following: market access for goods and development issues. However, the impact on regional integration must also be taken into account.

The Ministers stressed that whatever the scenario, the fundamental principles listed below should continue to be observed in the negotiations:

* EPAs should be tools for development and therefore contribute to the sustainable development of ACP economies;

* EPAs should build on the acquis and no ACP State should be worse off after 1 January 2008;

* Asymmetry in obligations should be applied because of the different levels of development among the negotiating partners;

* Regional integration - the process should ensure support and positive contribution to the regional integration process in the ACP region but should not dictate the pace of that integration; and

* ACP countries not in a position to enter into an EPA should be provided with a framework for trade which is equivalent to their existing situation, and in conformity with WTO rules.

The Ministers took note of the consideration given to the above-mentioned scenarios by the different ACP regions, following which they:

* observed that to date no ACP region has completed the EPA negotiations and therefore urged that every effort be made to obtain a fair and equitable EPA that would be a real development vehicle for their countries;

* exhorted the regions which, for objective reasons, are not in a position to conclude a comprehensive EPA, to continue to explore all possible ways and means to safeguard the relevant interests;

* invited the negotiating regions to recall their solidarity and take into account all the concerns of their member countries to ensure that no country is adversely affected by the regional decision;

* called on the EC to take all the possible measures, in conjunction with the ACP States, including, if necessary, the submission of a request for a waiver to the WTO, in order to enable the trade regime currently in effect to continue during the period required to conclude the negotiations in the event that, despite the will and efforts of the negotiators, it might not be possible to conclude agreements that are compatible with WTO rules in due time.

In a section on ACP market access offer for goods, the Ministers adopted the following positions:

1. Substantially all trade: Recalling that the WTO has no set definition of substantially all trade, to request the EC to take the approach provided in GATS Article V which recognizes the need for differentiated treatment of market opening between developed and developing countries as well as Article 37.7 and 37.8 of the Cotonou Agreement.

2. Transition period: To retain the 25 years transitional period as a minimum and option be given to ACP States to determine their liberalization pace.

3. Exclusion list: To take action in order to establish coherence and consistency between the list of special products being developed in the context of WTO negotiations and the sensitive products being proposed by ACP regions in their market access offers under EPAs.

4. Rules of origin: While welcoming the improvements proposed by the European Commission, to request that rules be further improved, especially in the fisheries sector, and taking into account other areas such as the automatic derogation and cumulation.

5. Trade defence measures: To develop effective trade defence instruments that would protect against possible surges of imports from the EU, and to protect infant industries.

6. Export subsidies: Taking into account the insistence of the European Commission to apply the zero for zero approach to export subsidies, allow regions to impose countervailing duties or include affected products in the exclusion list.

7. MFN Clause: To reject any attempt by the EC to include the MFN Clause in EPAs.

In a section on EC market access offer, the Ministers welcomed the EC offer of duty- free, quota-free market access for goods imported from ACP regions (with transitional periods for sugar and rice). However, they noted that the offer excludes South Africa.

On Sugar, the Ministers supported the position of the ACP countries signatories to the Sugar Protocol regarding the EC's proposal for its future Sugar Regime as reflected in the conclusions of the ACP Special Ministerial Consultations on Sugar held in September 2007 [ACP/63/068/07] and agreed that the chairperson should communicate these forthwith to the EU institutions.

The Ministers also took note of the report of the Chairman of the ACP Sugar Ministerial Consultative Group, which met at ACP House on 7 November 2007, and supported the decision to express disagreement with the decision of the EU to unilaterally denounce the Sugar Protocol.

They further agreed to give their support to all the actions that these countries may undertake in response to the EU's unilateral, untimely and unjustified denunciation of the Sugar Protocol, more particularly to safeguard the benefits derived therefrom and to ensure compliance with the relevant provisions of the Cotonou Agreement and of the Sugar Protocol.

Concerning sugar exported under the EBA regime, the Ministers asked the EC for duty-free, quota-free access as of January 2008 without a safeguard clause, except for the prevention of fraud.

On Bananas, the Ministers noted that the WTO's Dispute Settlement Body will issue a ruling in the coming months which could determine the future of the ACP banana producers.

In this regard, they urged the EC to consult and closely involve the ACP countries in any future negotiations which might possibly modify the current EU banana import regime.

They recommended that a request be made to the EC for additional support to the banana sector in ACP countries that will be affected by the current and possible future change in the banana regime.

In a section on Development Cooperation, the Ministers recalled that the ACP and EU have agreed to incorporate development cooperation provisions in the EPAs. In this regard they agreed:

* To request that the Commission relaunch the programming exercise of the Regional Indicative Programmes (RIPs) of the 10th EDF and make an explicit commitment on delinking the disbursement of development support funds from the requirement to sign EPAs.

* To invite ACP regions to define their EPA-related needs in order to make the case for increased EPA development support.

* To urge the ACP States and the EU Member States to urgently ratify the revised Cotonou Agreement to ensure that funds under the 10th EDF are accessible in a timely manner.

* To invite ACP regions to adapt their regional financial procedures and delivery mechanisms to take account of the new implementation and management procedures.

* To put in place a mechanism to facilitate faster disbursement of resources of Aid for Trade through simplified procedures.

* To craft provisions to link the dismantlement of tariffs to the making available of development support to allow absorption of the fiscal impact of EPAs and upgrading of the economies.

In a sub-section on EPA Support, the Ministers noted that funding proposed under the 10th EDF and Aid for Trade will not be adequate to cater for EPA-related needs as identified by the regions. They therefore agreed that:

* Firm commitments be sought from the EC on the amounts of the contribution to be made to the regional EPA funds and to envisage additional resources outside the EDF.

* Amounts arising from up-scaled ODA commitments be considered for channelling support of EPAs.

* Funding for capacity building should be demand and needs-based as well as user-driven.

* The five areas identified in the multilateral arena regarding the scope of Aid for Trade (trade policy and regulations, trade development, trade-related infrastructure, building productive capacity, trade-related adjustment, and other trade-related needs) should be taken into account by the Commission in assessing the level of its commitments.

In a section on Legal and Institutional Issues, the Ministers adopted the following positions:

* Definition of Parties: Although EPAs will mostly be signed by individual member states on the ACP side, the unity and solidarity of the ACP Group should be maintained.

* Dispute Settlement Mechanism with respect to safeguards: The plan by the EC to apply WTO Dispute Settlement mechanism on safeguards should be rejected as in some regions the majority of countries are not WTO members. In this regard, it was recommended that a model dispute settlement mechanism be designed that could be utilized in all ACP regions.

Furthermore, the Ministers rejected the application of collective sanctions in the Dispute Settlement process.

* Non-Execution Clause: The Ministers totally rejected the inclusion of this clause in EPAs.

* Monitoring the implementation of EPAs: The Ministers recommended that the ACP Council of Ministers establish a mechanism to monitor the implementation of EPAs.

In a section on Trade-Related Issues, the Ministers noted that the discussions and negotiations in this area will continue in 2008 in most ACP regions, and recommended as follows:

* Regions should focus on priorities that will assist in the improvement of their export trade performance, such as capacity building to meet health and technical standards.

* Emphasis should be placed on development cooperation, which builds upon regional initiatives and promotes regional integration.

* Commitments on this cluster of issues should be linked to specific EC commitments to support capacity building measures in ACP regions.

On Agriculture, the Ministers noted that negotiations in this area will be continued in 2008 in most of the ACP regions. They underscored the need to focus discussions on, inter alia, Processing, Marketing, Distribution and Transportation (PMDT), Net-Food Importing Developing Countries (NFIDCs), food security, Special Products, and Special Safeguard Mechanism.

On Services, the Ministers expressed concern that the EC is demanding substantial sectoral coverage beyond what is provided for in the WTO Article V of GATS and recommended that the ACP regions apply the flexibilities available to developing ACP countries to the maximum level.

In a final section on the WTO Doha Negotiations, the Ministers noted the information provided by the WTO Director-General on the progress made in the areas of major importance to the ACP countries, such as flexibilities for small, vulnerable economies; the erosion of preferences; the disciplines relating to food aid and export credit; duty- and quota-free access for LDC exports.

Information was also provided on the issues for which efforts are still required, including the cotton dossier, the reduction of domestic support for agriculture, special products, the special safeguard mechanism, commodities, tariff escalation, flexibilities for developing countries in the negotiations on market access for non-agricultural products (NAMA).

The Ministers welcomed the results obtained and stressed the need to do everything possible to ensure that the list submitted by the ACP Group regarding the preference erosion is rationalized to render it more credible.

The Ministers adopted an annexed communique in order to highlight the need to push ahead with the ongoing negotiations at the WTO and to ensure that these negotiations produce an outcome that takes due account of the interests and concerns of the developing countries, especially the ACP States (see SUNS #6364 dated 13 November 2007 for the article on the ACP Ministers' communique on WTO).