TWN Info Service on Finance and Development (Oct07/01)

2 October 2007

WORLD BANK ASKS FOR MORE TIME ON EPAS

Senior World Bank staff have asked the European Union to consider extending the end-of-year deadline that it has set for a series of free trade agreements with Africa.

Peter Mandelson, the European commissioner for trade, has repeatedly warned that African, Caribbean and Pacific (ACP) countries will have steep tariffs imposed on their exports to the EU if they do not sign Economic Partnership Agreements (EPAs) by December 31.

Although economists at the 185-country World Bank say that they favour moves to boost trade between Europe and Africa, they have suggested that more time is needed to thrash out the kind of comprehensive market liberalisation accord favoured by the European Commission.

Below is a report by IPS on the World Bank recommendations. It was published in the SUNS #6334, Monday, 1 October 2007.

With best wishes
Martin Khor
TWN

World Bank Asks For More Time on EPAs

By David Cronin (IPS)

Senior World Bank staff have asked the European Union to consider extending the end-of-year deadline that it has set for a series of free trade agreements with Africa.

Peter Mandelson, the European commissioner for trade, has repeatedly warned that African, Caribbean and Pacific (ACP) countries will have steep tariffs imposed on their exports to the EU if they do not sign Economic Partnership Agreements (EPAs) by December 31.

Although economists at the 185-country World Bank say that they favour moves to boost trade between Europe and Africa, they have suggested that more time is needed to thrash out the kind of comprehensive market liberalisation accord favoured by the European Commission.

This point has been raised during recent discussions between the Bank and EU trade officials.

A well-placed member of staff in the Bank’s Washington headquarters said that while the concept of EPAs has been on the agenda of the EU’s relations with Africa for several years, the talks aimed at achieving them have only taken place in earnest for the past two years.

“That is a fairly short period to develop a degree of comfort,” the source, speaking on condition of anonymity, told IPS.

The source said that there is a lack of clarity about some of the key issues in the negotiations, including the level of assistance that will be granted to ACP countries so that they can build up their capacity to avail of new trading opportunities.

In May, the EU’s governments and the Commission committed themselves to granting 2 billion euros (US$2.75 billion) in annual ‘aid for trade’ by 2010.

“It’s not clear to the Africans and to be honest, it’s not entirely clear to us how much of the aid for trade will be additional (to funds previously earmarked for development assistance),” the source said.

Some Bank economists also take the view that the EU should not pressure the Africans into hastily accepting clauses on investment and competition issues in the EPAs.

Such issues were removed from the Doha round of world trade talks following intense lobbying from developing countries, concerned that an agreement covering them would limit their capacity to protect domestic firms against multinational corporations.

African diplomats and anti-poverty campaigners have accused the EU of using the EPA talks to push these issues back on the international trade agenda.

The Bank argues that it is not opposed to the principle of having agreements relating to investment but argues that the Commission should pay heed to concerns raised in Africa.

“It might be better to defer these issues until the Africans are ready,” the source added.

With the December 31 deadline looming, one idea mooted by African diplomats is that it might be possible to conclude a slimmed-down trade agreement by that date.

Such a deal - described as a ‘framework agreement’ in diplomatic circles - would only relate to trade in goods, leaving more contentious issues such as services liberalisation until a later date.

EU officials regard the end-of-year deadline as sacrosanct, as a waiver of World Trade Organisation rules granted to the trade preferences offered by the EU to imports from the ACP countries will expire at the beginning of 2008.

An accord limited to trade in goods should be sufficient to comply with the WTO’s requirements.

Nonetheless, African diplomats say that there are serious differences between their governments and the EU on some of the key questions relating to trade in goods.

The Africans have proposed that the transition period under which they would have to reduce and in many cases eliminate the tariffs they levy on imports from Europe should be up to 25 years.

Yet some EU officials view that period as too long.

“It will still be difficult to come up with a framework agreement considering the time remaining,” explained one diplomat.

Anti-poverty activists have highlighted the damage that a flood of tariff-free imports from Europe could have on African agriculture during an international day of action against the EPAs, called for September 27.

Bassiaka Dao, president of the Farmers Federation in Burkina Faso, said that unfettered free trade could compromise his country’s ability to feed its own population.

“EPAs are a risk for our food sovereignty,” he said. “A free trade agreement with the EU will not only have an impact on our commercial relations but will also limit the national policy space in the field of support policies for our agriculture. That is why we say no to EPAs in their current form.”

The dairy sector in Burkina Faso, traditionally a pastoralist country, has already suffered because of increased imports of heavily subsidised milk powder from Europe. Yogurt using imported milk powder has been found to be 10-15% cheaper than that using local produce.

Chicken farmers in Ghana, meanwhile, have warned that they face ruin if the country accepts an EPA. The quantity of European chicken sent to the country exceeded 40,000 tonnes in 2004 and will almost certainly rise in the coming years.

“The EU’s use of pressure on ACP countries is not acceptable,” said Tetteh Hormeku from the Third World Network in Accra, Ghana.

“Nor does it make sense. Imposed EPAs will definitely not reflect the EU’s interests and trade approaches. They fail to fulfill the development goals [that] the EPAs were supposed to meet.”