EPAs: good for Africa? William Gumede is Associate Professor, School of Governance, University of the Witwatersrand, Johannesburg. His most recent book is South Africa in BRICS: Salvation or Ruination (Tafelberg) Introduction The European Union (EU) in 2000 agreed in principle with African, Caribbean and Pacific (ACP) countries, its former colonies, to establish new trade agreements with them, which became the Economic Partnership Agreements (EPAs). The EPAs negotiations followed changes in global trade rules, which was sparked by the Uruguay Round of trade negotiations, finalised in 1994, which required regional trade agreements to cut restrictive regulations and duties on ‘substantially all the trade’ among trading partners (GATT 1994). The EPAs were meant to be WTO-compatible. The EPAs are not conventional free trade agreements, but also pledges development cooperation. The EU’s EPAs with former African, Caribbean and Pacific colonies replaces preferential trade arrangements between the ACP states which operated for three decades prior. The EU negotiated with regional blocs within Africa. These African regional blocs were ‘created’ for the purposes of the EPAs by the EU. The African EPAs are only with sub-Saharan African countries and exclude North Africa. In the European Partnership Agreement (EPA), African countries have to open their markets to EU products, in some cases up to 82.6%, and gradually eliminate tariffs over 5 to 25 years. The EU agreed to African countries protecting around 20% of domestic products. In return, African countries will have duty and quota free access for some African products to the EU market (EU Bulletin 2014). EPAs negotiations have hurt EU-Africa relations The EPAs negotiations have damaged EU-Africa relations. The EPAs negotiations have brought tension between the EU and African countries. It has also brought divisions between individual African countries, especially the demand by the EU that every country in the African region constructed by the EU for the EPAs, must sign the agreement, before it is ratified. This has caused divisions between African countries who agreed to sign and others who refused. For example, Tanzania last year refused to sign the EPAs causing tension in the East African Community, with the members, such as Rwanda, who agreed to sign. The EU has punished or threatened to punish African countries who did not sign the EPA deal on the EU’s terms (EU Parliament 2014). For example, Namibia initially refused to sign-up, but was forced to back down as the EU threatened to bar market access to Namibian beef, grapes and fresh fish annually worth €30 million. The European Commission declared through a delegated act that if Kenya did not ratify the EPA by October 2016, it will lose its tariff-free access to EU markets. Rwanda signed the EPAs because it desperately wanted to access EU development funding, which it would not have been able to tap into if it did not sign, causing tensions with the members of the EAC who did not sign (Esiara 2016). In November last year, the Tanzanian parliament unanimously rejected the EPAs, saying it would deindustrialize the country. Tanzania feared that signing the EPAs will undermine its own industrialisation plan with China. In July last year, Uganda President Yoweri Museveni said his country would not sign the EPAs because the EU had not adequately consulted with EAC governments. African countries have little recourse for trade, economic and political disputes with the EU, specifically regarding disputes over EPAs. The EU’s EPAs threaten Africa’s development The United Nations’ Andrew Mold said: “The African countries cannot compete with an economy like Germany’s. As a result, free trade and EU imports endanger existing industries, and future industries do not even materialise because they are exposed to competition from the EU” (EU Bulletin 2014). The EPAs threatens African farmers and infant industries, as EPAs promote EU products and services entering African markets without any quotas or duties. EPAs undermine African attempts to build local manufacturing capacities – as often heavily subsidized European products flood African economies. As a case in point, the EU’s Sustainability Impact Assessment of EPAs warned: “While liberalisation might encourage (consumers to buy products at affordable prices), it might also accelerate the collapse of the modern [sic] West African manufacturing sector” (PWC & EU 2003). African countries are heavily dependent on import taxes for revenue – often around 7-10% of revenue. A study by the Common Market for East and Southern Africa (2002), calculated that countries in the region could lost as much as 25% of trade tax income if EU products enter the region duty-free. Import tariffs for raw materials such as oil are typically low in the EU but they increase dramatically with each stage of processing. The International Trade Union Council (ITUC) stated: “As the market tariffs came down on African raw materials, they went up for manufactures (tariff escalation). Also, non-tariff barriers including unreasonable sanitary and phyto-sanitary measures replaced the tariffs. In addition, European exporters continued to benefit from huge levels of subsidies that enabled them to out-compete their African counterparts” (ITUC 2016). The EPA’s also undermine Africa’s attempts to pool their individual country markets, trading more with each other and to create a continent-wide free trade area from Cape to Cairo. This approach is integral to Africa’s future prosperity. The EU’s decision to create its own African regions to struck EPA deals with undermines Africa’s own regional integration project. The EPAs undermine African regional integration. In implementing EPAs, the EU has divided Africa into its own regions, completely undermining African efforts at integration. According to the EPAs, if an individual country default on any part of the EPA in its ‘region’, the EU has the power to act against all SADC countries. Yet SADC is expected to reach a consensus if there is a trade dispute with the EU. The EPAs undermine Africa’s efforts to diversify trading partners. The EPAs demand that African countries declare the EU as ‘most favoured nation’ whose products should not be subjected to higher levies than those of developing countries. In addition, EPAs demand that African countries extend all the benefits of any future trade agreements that an African country may enter into with other countries. This is seen by African countries as a way to prevent African countries from striking more competitive deals with new emerging economies such as India, Brazil and China. What can the EU do? The EU has been much more generous in its preferential trade agreements with Western Balkan countries. The EU for example had asked the WTO to continuing its preferential trade agreements with Western Balkan countries, which the EU argued that “terminating the trade preferences would have a negative impact on the overall economic performance of the Western Balkans, with consequent negative repercussions on their domestic reform and transition processes. Moreover, given the current worldwide economic slowdown, the Western Balkans’ economic recovery could be seriously jeopardized” (WTO 2012). African countries should be given similar treatment by the EU. Even with an EPA, African countries continue to face stringent rules-of-origin, tough sanitary and phyto-sanitary standards (SPS), and tariff-escalation on important (to Africa) value chains, whereby taxes increase the more processed or value-add products. African exporters also face highly subsidised EU producers. The EU must reverse these policies which undermine African development. The EU has insisted that its controversial agricultural subsidies should be discussed at the level of the WTO, and not the EPAs (Irumba 2014). The EU needs to explore how best to support Africa produce value-add products and open-up EU markets to such value-added African products. If, for example, an African country wants to export a tree to an EU country, the trade barriers are relatively low. However, if it turns the wood into a form that can be used to make furniture – which will create more jobs and increase economic growth for the African country, tariff barriers of up to 40 per cent come into force in the EU. The EPAs contains rendezvous clauses, which are not part of the WTO trade provisions, but which demands protection for EU investments, no restriction to competition by heavily subsidized EU products, insistence that African governments give include EU companies as part of preferential procurement regimes, no minimum labour and environment rights, no African tax regimes which prevents tax avoidance schemes and higher than WTO levels of protection for EU intellectual property (EU Parliament 2014). The EU should allow African countries to strike competitive deals with other industrial and developing countries, such as China, Brazil and India, without having to give the EU the same level of deals. The WTO, under its Enabling Clause (1979) allows for developing countries to offer preferential deals with peers, without having to extent the same treatment to developed countries. Africans require the ‘policy space’ to make their own independent policies and decisions. The restrictiveness of the EPAs means that African countries will have difficulty coming up with their own national and evidence based development policies, appropriate to their own specific circumstances – because it may clash with provisions in the EPAs. The EU has comprehensive laws allowing employees representation and to be consulted in the workplace. For example, the European Works Council Directive, which mandates large EU firms to have works councils, elected by employees who management should consult regularly on major issues affecting a company. EU companies must follow the same standards on employee involvement as prescribed by the EU when they invest in Africa. The EU must give African countries fair mechanisms to resolve disputes between the EU and African countries. References COMESA (2002) “Discussion Paper on Trade Policy Compatibility and Impact Assessment of Economic Partnership Agreements and Preliminary Adjustment Scenarios”, COMESA Secretariat, Lusaka, Zambia. Kabona Esiara (2016) Rwanda eyes more exports, investment ties from EPA deal. The East African, July 16 (http://www.theeastafrican.co.ke/news/Rwanda-eyes-more-exports--investment-ties-from-EPA-deal/2558-3297404-m49uts/index.html) European Commission (2017) Overview of Economic Partnership Agreements. April (http://trade.ec.europa.eu/doclib/docs/2009/september/tradoc_144912.pdf) European Commission (2006). “Regional Negotiations of Economic Partnership Agreements,” Brussels. (http://ec.europa.eu/trade/issues/bilateral/regions/acp/regneg_en.htm). European Commission (2005) ‘Economic Partnership Agreements — Putting a Rigorous Priority on Development’, memo, 20 January 2005. Brussels: European Commission. (www.europa-eu-un.org/articles/en/article_4245_en.htm). European Commission (1996) “Green Paper on Relations between the European Union and the ACP countries on the Eve of the 21st Century,” Brussels European Commission (1997) “Communication to the Council and the European Parliament: guidelines for the negotiation of new cooperation agreements with the African, Caribbean and Pacific (ACP) countries,” COM(97) 537 final, 29 October 1997, Brussels European Parliament (2014) African, Caribbean and Pacific (ACP) countries’ position on Economic Partnership Agreements (EPAs). Study Commissioned by the European Parliament Committee on Development. Research conducted by Aileen Kwa, Peter Lunenborg and Wase Musonge, the South Centre, Geneva. (http://www.europarl.europa.eu/RegData/etudes/etudes/join/2014/433843/EXPO-DEVE_ET(2014)433843_EN.pdf) European Union Bulletin (2014) EU-Africa Free Trade Deals ‘Destroy’ Development Policy. EU Bulletin, November 11, Brussels (http://www.eubulletin.com/3628-eu-africa-free-trade-deals-destroy-development-policy.html) Tiago Faia (2012) Exporting Paradise? EU Development Policy towards Africa since the End of the Cold War. Cambridge Scholars Publishing, Newcastle upon Tyne. General Agreement on Tariffs and Trade (1994). The Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, Geneva: GATT. Nathan Irumba (n.a) Africa’s acute problems with the EPAs. (https://www.southcentre.int/question/africas-acute-problems-with-the-epas/) PwC & EU (2003) Sustainability Impact Assessment (SIA) of Trade Negotiations of the EU–ACP Economic Partnership Agreement, Mid-Term Report Working Draft, 1 October. (http://trade.ec.europa.eu/doclib/docs/2005/february/tradoc_112363.pdf.) WTO (2012) EU-Application of Autonomous Preferential Treatment to the Republic of Moldova, Report of the European Union under the Decision of 7 May 2008. WTO, WT/L/861, 10 July WTO (1979) Decision of 28 November 1979 (L/4903). WTO, Geneva (https://www.wto.org/english/docs_e/legal_e/enabling1979_e.htm)
The EU should allow African countries to strike competitive deals with other industrial and developing countries, such as China, Brazil and India