The European Union’s Economic Partnership Agreements: Partnership in whose interest and for what?
Concerns over the impact of current Economic Partnership Agreement (EPA) negotiations between African countries and the European Union are mounting. Henning Melber warns the EU trade bureaucracy not to dismiss these concerns lightly, lest they be conceived as “an integral and active part of a new scramble for Africa, in which the EU competes with the US and China to gain access to and/or secure control over markets and resources primarily for their own interests.”
This commentary summarises some recent concerns that current trends in the EU trade policy towards African countries with special reference to the Economic Partnership Agreements (EPAs) could do more harm than good and undermine future efforts towards regional collaboration. An earlier intervention of a similar nature (published in “Development & Cooperation”/D+C, no. 3/2005; see also for a related argument the commentary in “Pambazuka News” no. 197) had provoked the public disapproval of the former Director-General for Development at the EU Commission. In a reader’s letter to the journal, Dieter Frisch “had a bone to pick” with the author and did “not at all like the way that Melber calls the EU’s development-friendly and contractually negotiated EPA policy ‘anything but helpful’” (D+C, no. 7/2005). It is indeed necessary to discuss the substance and relevance of such arguments and concerns further.
Hence follows another effort to present a critical overview, which simply compiles and articulates in a hopefully concise way the reservations expressed by agencies and stakeholders in the current process, who tend to disagree with the view and approach of the trade department in Brussels. They reflect that despite the former EU official’s expressed trust in the “development-friendly and contractually negotiated EPA policy” others involved in the process draw markedly different conclusions. These deserve to be taken as seriously as the affirmative views - also and in particular by those who consider and advocate (if not even propagate) the current EU initiative as a step in the right direction.
Under the paradigm of the World Trade Organisation (WTO) a newly structured economic reality gains momentum. It organises trade relations in a way which requires questioning. This is the simple purpose of this overview, which continues to challenge the likely effects of the currently designed and pursued EPAs as anything but supportive (or helpful, for that matter) to the interests of the African, Caribbean and Pacific (ACP) member states.
EUs New Role: WTO, EPAs and regional integration
The EPAs negotiated between the ACP states and the EU not only seek to modify the Cotonou Agreement entered into with all ACP countries as a collective entity by means of separate sub-regional negotiations (which would even allow for bilateral agreements with individual countries instead) but also aim towards compatibility between EU–ACP trade relations and the WTO. But while the Cotonou Agreement, which was ratified in April 2003 and replaced the Lomé Convention, allows for negotiating alternatives to the EPAs, the EU Commission continues to pursue the one-track avenue EPAs stand for.
It might be worthwhile to recall the original objectives for EPAs from article 1 of the Cotonou Agreement, namely to honour that cooperation should “be centred on the objective of reducing and eventually eradicating poverty consistent with the objectives of sustainable development and the gradual integration of the ACP countries into the world economy”. But as a team of the German Development Institute (GDI) in a report on the prospects of the EPA negotiations for Tanzania at an early stage of the negotiations pointed out: “Trade liberalisation does not translate automatically into benefits -especially not in least developed countries, let alone for the poor - if this is not actively supported by and embedded in a whole range of other policy matters. How trade liberalisation can be made pro-poor is not outlined in the ‘EPA concept’.”
The EU uses the EPA negotiations to push through agreements on a number of sensitive matters (such as investment, procurement and competition policy) that were rejected by developing countries at the WTO negotiations during 2003. EPAs are about much more than only the suggested reciprocity within a narrowly defined WTO compliance: non-tariff barriers, such as environmental standards or sanitary and other provisions related to an EU consumer protection policy are crucial issues in the negotiations. This is enough reason to provoke fear that such agreements would reduce the policy space for African governments. It does not help to counteract such suspicions as long as even a high-ranking EU official such as Karl Friedrich Falkenberg (European Commission Director/Trade Directory General, Directorate C – Free trade agreements, Agricultural trade questions, ACP, Bilateral trade relations II) recognises in a briefing paper (“Trade Negotiations Insights”, vol. 3, no. 4/2004) “the right of countries, or rather regions, to regulate economic activity in their territory” and accepts the “idea of a preference in favour of local competition”, when he adds at the same time “provided it is not to be a discretionary one”.
The negotiations on future EPAs introduce serious implementation problems and a negative impact on regionalism within the ACP group and its African member states. Regional organizations within Africa are likely to have capacity problems when entering the negotiations. The matter is complicated further by the fact that all these regions present a mix of LDCs and non-LDCs. A likely result is the further fragmentation of the process of regional integration and a further side-lining of LDCs. Even at a high level Conference on European Development Cooperation at The Hague in September 2004, which discussed extensively the EU links to the South, concern surfaced about the EU position on trade liberalisation. As the summary report stated: “Everybody supported the call for a high level of flexibility in the EPA negotiations. Room should be created for asymmetrical trade relations, meaning that developing countries should be allowed to protect their markets against foreign competition on a temporary basis.” But as experience so far suggest, the EU trade commission seems determined to pursue its much stricter and less compromising course further.
EU Policy, EPAs and SADC
The negotiations by the EU aim at separate accords with each region, and no country may negotiate in more than one bloc. As such, SADC is reduced to seven countries (half of the member states) under the EPA negotiations. It is not far-fetched to see that there is an inbuilt conflict between regionalism as it exists and the negotiations of new multilateral processes. Countries might differ over the advantages between benefits from the continued protection of regional arrangements or the creation of individual preferential access within other trade agreements, but if regionalism is considered as a problem or obstacle towards further global harmonisation under the WTO, it stands little chance of being a viable point of departure for strengthening the South within the global trade arrangements.
The EU-SA free trade agreement, negotiated during the second half of the 1990s, has already had a highly divisive effect on the Southern African region. It entered into a preferential trade relationship with one country and thereby enhanced differences resulting from existing conflicts of interest among the national economies within the region. The fact that this affected directly the “satellite states” in the customs union (Botswana, Lesotho, Namibia and Swaziland) was initially overlooked and understandably so the initial non-consultation of these countries was anything but a confidence building measure. South Africa herself, the monetary zone, the South African Customs Union (SACU) and SADC are already not in harmony at any time and less so given the effects of the free trade agreement on regional economic matters.
Hence the EU intervention adds more friction and the beneficiary effects of the FTA for South Africa cannot be used as a convincing argument in favour of more free trade policy with other – less industrialised – countries. South African interests and benefits are not identical with regional ones. Regional integration would have to include the interests of the junior partners in the neighbourhood. The political economy of such regionalism is a constantly negotiated arrangement, with shifting boundaries and changing coalitions of interests. But it clearly has to aim beyond the immediate gains of the sub-imperialist centre, as which South Africa is not only perceived but as which it is at least economically indeed acting under an aggressive expansion into African markets.
The EPA process does not seem to strengthen an alternative route, re-focussing on regional consolidation as a first step. SADC members had to make a choice to negotiate either within the East and Southern African (ESA) bloc or as a SADC Group. Angola, Botswana, Lesotho, Mozambique, Namibia, Swaziland and Tanzania opted to negotiate with the EC under the SADC configuration. It is revealing that the recommendations by the GDI study referred to above were then based on the assumption that Tanzania would negotiate in the East African bloc along side Kenya and Uganda. Meanwhile, Tanzania ultimately decided to join the SADC configuration.
SADC – EC EPA negotiations were officially launched on 8 July 2004 in Windhoek in the presence of EC Commissioners Danuta Hübner and Poul Nielson. Botswana’s Trade Minister acted as SADC coordinator. South Africa - which as mentioned had entered the FTA with the EU in 1999 as Trade, Development and Cooperation Agreement, since it was not considered as an ACP member country due to its more advanced economic status - participated in an observatory and supportive capacity. A Joint Roadmap was adopted, but criticism of the divisive EC approach (subdividing the countries of the sub-region into different SADC and ESA blocs) and the efforts to eliminate preferential trade clauses, which exist under the Cotonou Agreement for the LDCs, was increasingly articulated since then.
A Working Paper by The Namibian Economic Policy Research Unit (NEPRU) in Windhoek warned in mid-2004 that implementing EPAs as currently designed “violates the originally formulated requirements of the EU according to which ACP countries should have been treated depending on their different development status. This principle was already disregarded when negotiating the EU-South Africa FTA, where the EU locked-in BLNS countries in the same tariff structure as South Africa, without granting them improved market access.” The author sees the risk that EPAs imply a loss for LDCs “when opening their markets without receiving anything substantial in return”. Interesting enough, even South Africa’s Minister of Finance Trevor Manuel - known as a strong key player within the current trade liberalisation schemes - summarised the scepticism among Southern African countries in a lecture at the University of Sussex on 2 December 2004, when he stated: “Greater transparency of intentions would also be helpful – the EU’s request for Africa to divide into groups to negotiate … does little to help Africa coordinate its trade policies - thereby reinforcing the legacy of our colonial economic relationships.”
EPAs and Policy Coherence
Paul Goodison and Colin Stoneman have in an article in the “Review of African Political Economy” (vol. 31, no. 102) maintained “it would be an act of foolish optimism to expect integrity or honesty in the EU’s trade policy towards southern Africa and the wider ACP group”. Instead, as Cosmas Ochieng and Tom Sharman summarise in their report “Trade traps”, published with the London based advocacy group Actionaid International, the EPA initiative during its initial negotiations “has created new regional groupings that are inconsistent with, and undermine, existing African economic and political blocs. Reducing regional integration to trade liberalisation undermines the broader socio-economic and political objectives of existing bodies.”
For many, the outcome of the wider trade offensive, as represented in a combination of NEPAD, the EPAs and the US-American Africa Growth and Opportunity Act (AGOA) is not encouraging. Referring to the likely effects for African economies, Margaret Lee warns in an article to the “News from the Nordic Africa Institute” (no. 3, 2004): “Anticipated costs include revenue losses, possibly resulting in the worsening of the regional debt situation; de-industrialization; increased unemployment; increased poverty; fragmentation of export and tariff regimes; loss of export competitiveness; undermining of local agriculture and industrial production arising from US and EU dumping; more trade diversion than trade creation; and undermining existing regional economic integration strategies.” And an IDS briefing paper by Christopher Stevens and Jane Kennan in mid-2005 comments upon the argument that EPAs will foster regional integration: “that there will be a significant effect – but a negative one”.
The report tabled by Actionaid International diagnoses that: “EPAs threaten African fiscal stability and public spending. They introduce investment agreements … that would undermine African policy choices. EPAs threaten African regional integration and lack an independent dispute settlement mechanism.”
Ochieng/Sharman therefore appeal that “European Union member states must revise the European Commission’s EPA negotiating mandate to withdraw the demand for reciprocal trade liberalisation” and stop “negotiations on investment, competition policy and public procurement”. They furthermore urge the European Parliament to “launch an investigation into the European Commission’s approach to the EPA negotiations and to exercise effective oversight over the Commission’s negotiating mandate, tactics and processes” while beginning “to immediately examine all possible alternatives to EPAs”.
Conclusion
It might be considered as “anything but helpful” to question “the EU’s development-friendly and contractually negotiated EPA policy”, as Dieter Frisch had put it in his letter. But it reflects the view of a variety of stakeholders in and observers to the current process, who would not agree with the label “development friendly” without further convincing evidence and results pointing in that direction. Instead, they wonder like Paul Goodison (in the “Review of African Political Economy”, vol. 32, no. 103) if the EU trade commission under Peter Mandelson offers a “new start or old spin” - and tend for the moment to conclude the latter.
The leaked documents from the Brussels headquarters of the EU trade department (and disclosed among others by an article in “The Guardian” on 19th May 2005), which showed that Peter Mandelson had initiated a public relations campaign in response to the British government’s critical position on the current format of the EPAs with the aim to counteract the “major and unwelcome shift” in the UK approach, did anything but eliminate such reservations.
As a recent assessment by the British advocacy group Christian Aid summarised: “for more than 20 years, ACP countries have been forced to liberalise their markets to such an extent that many now have economies that are more open than Europe’s. They are already integrated - often harmfully - into the world market. So any new trade agreement between ACP countries and Europe must both help them to improve and diversify what they produce and export, and allow them to protect themselves from imports. In the meantime, EPAs in their current form will do neither.”
The EU trade bureaucracy and its representatives would be well advised not to dismiss such concerns lightly. After all, they would not like to be conceived as an integral and active part of a new scramble for Africa, in which the EU competes with the US and China to gain access to and/or secure control over markets and resources primarily for their own interests, while the partnership talk serves as the necessary cosmetics and lip service. The EU-ACP process unfolding with the EPA negotiations is in its current format unable to meet the criteria for coherence with other fundamental principles of development paradigms and policies of the EU and its member countries, such as support to regional integration as a priority. In times of an intensified rivalry between the haves among the countries in this world to consolidate their particular interests within the regions of the have-nots, EU policy risks a loss of the positive image established and consolidated during various rounds of Lomé treaties earlier on.
To illustrate the case, one only needs to take note of the speech the Tanzanian President Benjamin Mkapa delivered on 31st August 2005 at the headquarters of the African Union, in which he explicitly took EU policies to task and warned of the devastating consequences of further globalisation. As he added: “I urge African leaders to think afresh about the place of our continent in a rapidly globalising world”. Governments and officials of EU member countries sharing responsibility for “the economics of failure” (Christian Aid) as it currently unfolds under the label of EPAs pursued by the trade directorate in Brussels ought to do the same.
* Dr. Henning Melber is Research Director at The Nordic Africa Institute in Uppsala/Sweden. This text is a short version of an input paper presented to the Second Expert Workshop “From Individual Action to a Common Strategy? EU policy on sub-Saharan Africa”, organised by the Development and Peace Foundation, 20/21 September 2005 in Bonn.
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