Growing resistance to EPAs

Current EPA negotiations must be stopped, says Liz Dodd. These trade negotiations contain little for ACP countries and could actually increase poverty in some of the poorest countries in the world. Dodd explains that the EU is making grossly unfair demands over EPAs and is forcing controversial 'new' issues through the back door. EPAs are further undermining regional integration.

The Africa, Caribbean and Pacific (ACP) states speak out

At a meeting in London organised by Traidcraft in June, Kenyan Trade Minister Dr Kituyi issued a strong challenge on economic partnership agreements (EPAs). He called on the European Union (EU) to revisit their negotiating mandate in order to ‘whittle out’ mercantilist interests such as the demand for reciprocal trade.

Dr Kituyi made his bold challenge in the presence of the UK’s trade minister, Ian Pearson MP, just days ahead of the UK taking up the presidency of the EU. Addressing an audience of parliamentarians, ambassadors and journalists, Dr Kituyi said if the EPA negotiations require greater concessions than those at the WTO, then ‘to make poverty history, we will also have to make EPAs history’.

On trade liberalisation more broadly, Dr Kituyi commented that, ‘lowering your tariff guard to your neighbours is like inoculation, but if you open up to the EU that’s a full dose of the virus.’ He described the devastating effects of liberalisation on African economies and referred to the ‘lost generation’ of the 1990s who have been denied an education. Dr Kituyi’s challenge came hard on the heels of a strong statement on the negotiations issued by the Africa Union trade ministers at their Cairo conference. In particular the statement reiterated the position that the so-called ‘Singapore issues’ should remain outside the EPA negotiations.

Just days later the ACP Council of Ministers expressed ‘grave concern’ that the negotiations had not proceeded in a satisfactory manner and had failed to start addressing most issues of interest and concern to the ACP. The statement also highlighted the disconnect between what EU Trade Commissioner Peter Mandelson was saying in public and what his negotiators were actually doing in the negotiating sessions. The ministers reinforced Dr Kituyi’s request that the EU rethink their negotiating directives to take on board ACP concerns.

A catalogue of disappointments

This flurry of statements is clear evidence that ACP governments are getting increasingly tired of the EU saying one thing and then doing another on EPAs. The EU talk about EPAs as instruments for development, but then refuse to listen to what ACP governments want. The EU are unhappy that ACP countries’ own development plans and priorities do not include giving the EU preferential access for their markets in return for nothing. The frustration of ACP governments is understandable. At every turn in the talks, the ACP’s legitimate concerns and positions appear to be put on the back burner.

This process began way back at the start of discussions when ACP countries did not want to negotiate EPAs, but the EU insisted that they were necessary to comply with WTO rules. Effectively the ACP were being given no choice. For some ACP countries the only alternative to an EPA on offer would see their market access to Europe slashed.

So the ACP agreed – reluctantly - with the proviso that WTO rules might be changed to be more flexible and that alternatives would be provided for those countries that felt they were not in a position to sign up to a free-trade EPA.

So far, the ACP has received no support from the EU on either of these key issues. Similarly at the end of the first phase of the talks, the ACP side wanted a binding agreement on issues that were critically important to them – such as additional resources to compensate for the adjustment costs involved in EPAs. The EU refused to agree.

Most recently the UK government came out with a position paper on the EPA negotiations, raising some concerns and questions. They were promptly disciplined by the European Commission (EC), who in a letter sent to all the EC delegations in ACP countries called the UK position ‘a major and unwelcome shift … Some recommendations move well away from agreed EU positions.’ The letter went on to say that ‘Peter Mandelson is taking up our concerns and will press for a revised UK line.’

Given the weight of this evidence the ACP are justified in questioning the negotiating faith of the EU.

EPAs: pro development or a hidden menace?

The EU want to sell EPAs as good for development. And they seem determined to drag ACP countries through the process. But the ACP are not playing ball in quite the way the EU would like.

And there are good reasons for the ACP’s fears:

The EU is making grossly unfair demands

Despite the fact that the poorest countries (least developed countries, or LDCs) do not have to open their economies as part of the WTO talks, they are being asked to do so as part of EPAs. At the moment 39 of the 77 ACP countries are classified as least developed. Under EPAs, it will be very difficult for them to prevent cheap, subsidised EU goods flooding their markets and putting local farmers and small-scale manufacturers out of business.

The EU is forcing controversial ‘new issues’ through the back door

Following resistance from developing countries and campaigning by NGOs around the world, three of the highly controversial ‘new issues’ (investment, competition and transparency in public procurement) are now off the WTO agenda. But they are being pushed through the ‘back door’ of EPAs. In some areas the EU is pushing for EPAs to go much further on these issues than was ever demanded at the WTO.

EPAs are undermining regional integration

EPAs should contribute to the process of regional integration between ACP countries. But in negotiations so far the opposite is happening. EPAs put the poorest countries in an impossible dilemma: should they continue with their ‘non-reciprocal’ duty-free, quota-free access into the European market, but leave their regional grouping or should they open up to the EU and stick with their regional partners? The problem is that whilst the poorest have nothing to gain from EPAs, their slightly less poor neighbours (non-LDCs) have a great deal to lose.

Take East Africa. The East African Community includes Kenya, Uganda and Tanzania. The countries are committed to working together and are in the process of establishing a customs union and a joint currency. They have already set up an East African Parliament. But with EPAs comes a big problem. Uganda and Tanzania are LDCs, Kenya is not. As LDCs, Uganda and Tanzania already have duty-free and quota-free access into the EU market under the Everything But Arms agreement. Uganda and Tanzania have nothing to gain from an EPA. But if they refuse to negotiate, while Kenya goes ahead, how will they stop EU goods entering their markets via Kenya and the customs union? If EPAs are supposed to support and strengthen regional integration – why has it put East Africa in this impossible situation?

Impact fears

There are serious concerns about the impact that EPAs will have on poor and vulnerable groups in ACP countries:

- Company closures and job losses. As European goods begin to enter ACP countries without facing any tariffs, local businesses will be unable to cope with the competition and will be forced out of business. This is likely to be particularly damaging in the agricultural sector where ACP countries are most dependent and where the EU gives the most support to its own producers.

- Glass ceiling. ACP countries are not just concerned about losing out to European competition in the goods they already produce. Because European manufactured goods will be entering African countries without paying any trade taxes, they may be cheaper. For small businesses struggling to add more value to their products by moving into new industries such as manufacturing or food processing this will be a real blow, potentially consigning countries to remain simply exporters of raw materials and basic goods. This would be deeply damaging to national development plans in ACP countries.

- Loss of vital government revenue. Many ACP countries rely heavily on the money they get from levying customs taxes for their normal expenditure. Opening up to the EU will reduce that revenue base and will mean less money for social expenditure. For example, there are estimates that between 25% and 30% of all Namibian government revenue was derived from this type of trade tax between 1990 and 1996.
What would this mean for a country like Kenya?

- The loss of tax revenue will make it harder for the government to implement new plans to help micro enterprises.

- Unfair competition from European goods still heavily supported by the EU under the Common Agricultural Policy could devastate Kenya’s dairy and cereals sectors – both are made up of thousands of small farmers.

- Kenya’s ability to diversify and develop an advantage in value-added areas could also be undermined. The sector most at risk here is the textiles and garments industry.

- The Kenyan government has plans to keep a portion of government contracts for micro-enterprises. EPAs could mean they are no longer allowed to do this.

A call to action

EPA negotiations so far contain little for ACP countries, and could actually increase poverty in some of the poorest countries in the world. European groups are stepping up the pressure on EPAs in direct response to a call from our ACP civil society partners.

Traidcraft along with partners from across the UK and Europe are calling for the European Union member states to wake up to the threat of EPAs and immediately:
- Stop the current negotiations
- Remove the demand for the opening up of reciprocal trade and for new issues from their negotiating mandate
- Work with the ACP to reform WTO rules
- Work urgently to investigate alternatives that leave ACP countries better – not worse – off, as was promised in the Cotonou Agreement

For more information visit: or www.stopepa.org

* Liz Dodd works for Traidcraft in the UK.

* Please send comments to [email protected]