Background EPA

Economic Partnership Agreements (EPAs) are currently in various states of negotiation, but there have been full or step-stone agreements now between the EU and Cameroon, Cote d’Ivoire, Ghana and the Caribbean.

These trade agreements are designed to replace the Cotonou Agreement of 2000's trade provisions after their expiration in December of 2007, to continue without interruption the important trade relationship that exists between the EU and ACP and to facilitate their transition to full integration in the global economy. They serve to create a Free Trade Area (FTA) between the EU and the countries in each negotiating group that is compatible with WTO rules, specifically Article XXIV of the GATT. However, they are more than just trade agreements; they serve as tools for development, support of good governance, peace, regional integration and poverty reduction.

The EPAs are based on 4 key principles or pillars which are: Partnership, Regional Integration, Development, and a link to the WTO. Partnership implies that the proper functioning of the agreements requires active work on both sides to implement reforms and work towards the objectives that have been agreed. The negotiating sides are equal and the overall development policy of ACP countries is under their control. Regional Integration is another key issue of the EPAs, regional integration brings stability and economic prosperity to members as it gives them a greater voice than they would likely have in a bi-lateral negotiation as well as provides for intra-regional economic links to give all members a stake in common economic growth. Regional integration is a key step in integrating an economy into the larger global economy. Development is and always has been a key component of trade agreements between the EU and ACP. Some ACP countries are highly reliant on one or two products or industries and this makes them more vulnerable to rapid price changes on the world market. Poverty continues to be an important concern for many ACP countries and so, along with provisions for direct aid, the development component of EPAs encompasses provisions for good governance, labor standards, economic diversification, and environmental protection. The link with the WTO is the fourth pillar of the EPAs. WTO trade rules have been the impetus behind the reform of trade relations with the EU and ACP. The EPAs have been designed to conform to WTO rules on reciprocity and non-discrimination and are seen as a bridge agreement until the full conclusion of the Doha Development Agenda (DDA).

Trade between the EU and the ACP has long been governed by the four Lome Conventions which provided non-reciprocal, preferential access for ACP goods to the EU market. In 2007 trade with the ACP countries totalled €80 billion, with the EU importing goods to the value of €40.2 billion and exporting goods worth €39.7 billion. The trade is not huge from the European perspective, but the ACP countries do constitute one of the main suppliers of raw material and commodity products to the EU. The ACP countries are by and large highly dependent on the EU market for the export of their goods and thus the key to designing and implementing EPAs will be to do so with minimal negative impact to ACP agricultural and industrial production. This is not an easy task, but in order to ensure against rapid economic shocks or widespread disruption to production EPAs should be designed to implement these reforms steadily but gradually. The ACP countries are some of the most important suppliers of raw materials to the world economy and stable and predictable trade and economic activity are important for everyone concerned.

For most of the ACP countries - and for virtually all African ACP countries - the EU is the main trading partner. The main ACP export products traded are: petroleum (42% of total exports), followed by cocoa beans (5%) and diamonds (5%); as regards EU exports, machinery (22%), followed by oil (11%), vehicles (7%), ship/boats (7%), medicines (3%). With increasing prices of and competition for commodities and raw materials throughout the world, the ACP trading relationship has become more important for the EU.

Why are they needed?

The Cotonou Agreement took effect in 2000 to govern relations between the EU and ACP. The trade provisions of Cotonou, which followed from the IV Lome Convention, have been deemed contrary to WTO rules and have been granted a waiver until the end of 2007. The WTO requires that all trading partners are treated equally and without discrimination, with exceptions for the formation of a FTA. Countries within an FTA can have lower tariffs to each other, but the caveat is that this must be applied throughout the FTA and must be reciprocal. Therefore, new agreements must be found to continue our trade and development policies with the ACP in a WTO compatible manner.

In the EPA negotiations, the Commission has stated that the priority is to secure the position of the countries that have major trade with the EU and have been working towards a WTO compatible agreement. From the European perspective, EPAs will require significant reform in market access for European goods and services liberalization which did not exist under the Lome Conventions. It is this reciprocity that is necessary under WTO obligations. This reciprocity means that EPA signatories are not only continuing their access to the EU market, but also opening their markets to the EU and opening their markets to each other (within the same negotiating group). This is a marked departure from the situation under the Lome Conventions and will create increased competition within regions but also may foster greater regional economic integration. In addition to reciprocity, EPAs must also be non-discriminatory and thus open to all WTO members that are interested in negotiating one. The EPAs will involve the removal of all trade preferences that have been established between the EU and ACP since 1975.

Out of the 77 states of the ACP, 39 are classified as LDCs (Least Developed Countries) by the UN, and are spread throughout each of the 6 EPA negotiating groups. LDCs enjoy protection of the Everything But Arms (EBA) agreement, which will ensure continued access to the European market after the expiration of the WTO waiver. EBA is an amendment to the Generalized System of Preferences (GSP) rules which grant duty-free access to all products from the LDCs without qualitative restrictions, with the exception of arms and munitions. Because the duty free quota free access of these countries' products will continue under EBA there is the possibility of lower political will in these countries to conclude EPAs. The EBA differs from the EPA in that it is non-reciprocal and therefore does not grant the EU market access and that it applies to all LDCs.

GATT agreement- Article XXIV
Commission website for EPAs
ACP States
Speech by Peter Mandelsson in European Parliament on EPAs

BACKGROUND
Europe has long had a special relationship with its former colonies in Africa, the Caribbean and the Pacific, the 77 nations which make up the ACP countries. Indeed, mention of this connection was made in the founding Treaty of Rome (1957) that established weiter>>>

COTONOU AGREEMENT
The Cotonou Agreement was adopted to replace the IV Lome Convention and continue trade and development links between the EU and ACP. Cotonou has built upon the aid and development agreements of the Lome Conventions and added a deeper political aspect weiter>>>

WTO COMPATIBILITY - DDA
One of the most important aspects of EPA negotiations is that the new agreements must be compatible with the agreements that have been made in the WTO. Under WTO rules, trade agreements must be reciprocal and non-discriminatory. The ACP States and Europe, weiter>>>

REGIONAL NEGOTIATIONS
For many of the ACP countries, the EU market is by far the most important market for export receipts and thus negotiating EPAs are of high importance. In order to facilitate the adoption of EPAs, the ACP countries have weiter>>>

SADC
Negotiations with the SADC were launched in December 2004 and a joint road map was adopted to frame the negotiations. The initial priorities of the SADC EPA negotiations were Sanitary and Phytosanitary Standards, Standards and Technical barriers to weiter>>>

ESA  - EAC
ESA (Eastern And Southern Africa) EAC (East African Community) Negotiations for the adoption of the EPA for East Africa were launched in February 2004 in Mauritius. Sustainable development weiter>>>

Western Africa/ECOWAS
(Ivory Coast and Ghana) In the first phase of the negotiations from 2004 to October 2006 the focus was on regional economic integration. Five thematic groups were established to look at regional markets (free-trade area, weiter>>>

Central Africa
(Cameroon) Central Africa) were the first to begin (along with that for West Africa) in 2003. The focus is on regional economic integration. There are four thematic technical groups that have characterized the negotiations: weiter>>>

CARIFORUM
Negotiations began in April 2004 between the 15 Countries of the CARIFORUM that are ACP states (14 of which are part of the Caribbean Community (CARICOM) and the Dominican Republic). The second phase began in November 2004 to focus on regional integration weiter>>>

Pacific forum
Negotiations for the Pacific Forum EPA were launched in 2004. The main topics include development assistance, architecture of the agreement, fisheries, investment and services/tourism. The Pacific region is characterized in particular for its close weiter>>>