The European Union has been negotiating Economic Partnership Agreements with the ACP countries since 27September 2002. EPAs are meant to be “instruments for development” furthering poverty reduction, sustainabledevelopment, regional integration and integration into the world economy. Nevertheless, the negotiations havebeen fraught with disagreements and difficulties and, except in the case of the Caribbean, they did not come to aconclusion at the foreseen end date of 31 December 2007. Instead, a series of interim agreements on theliberalisation of trade in goods were initialled with individual or small groups of ACP countries, creating rifts in theACP regions.Almost 2 years past the 2007 deadline, the EPA negotiations are still far from over. The “interim” arrangementsimposed at the time by the EU did not solve the key issues of contention but, on the contrary, further complicatedthe negotiations. The previous European Parliament has called for - and the EU Council and Commission havepromised - more flexibility in their approach. However, the flexibility shown in some cases has been inadequateand in other spheres has yet to materialise.This discussion paper highlights 4 key issues, in relation to which the undersigned CSOs believe the EUneeds to change its approach:1. The development dimension2. Market access in goods or the issue of tariff elimination3. The non-goods issues4. Contentious Issues: revising the interim agreementsWe hope that this paper will encourage decision makers in the EU member states and the EU institutions tocontinue to question the EU negotiating stance and to make sure that the new trade relations with the ACPcountries respect the principles of partnership, ownership and respect for the ACP needs, constraints and2political choices.

Since the 31 December 2007 deadline lapsed, the EPA negotiations between the EU and the ACP countrieshave been running in ‘extra time’ for almost 2 years. Yet the score has not changed much. Since the end of 2007there is still only one region that has concluded a full regional EPA and only one additional country, Zambia, hasinitialled an interim EPA (IEPA). Forty ACP countries, out of the 76 taking part in the negotiations, have not3concluded any agreement at all .This meagre result should not come as a surprise. The reports of the official review of the negotiations in 2006-2007 highlighted the weak institutional capacities and unpreparedness of the ACP countries and regions in the4face of the complexity of the negotiations and indicated that the 2007 deadline was impossible to attain . TheWest-African region made a fairly good estimate at that time when it said that it needed at least three more years5to conclude .The passing of the deadline has not solved the difficulties and divergences that have existed throughout thenegotiations. In fact, the series of bilateral or sub-regional interim EPAs initialled at the end of 2007 made thingsworse. Since then the negotiations have run on three tracks: 1) the EU continues to insist on “fullEPAs”,2)meanwhile, ACP countries are seeking to revise a number of contentious issues in the hastily concluded IEPAsand 3) ACP countries are at the same time trying to come to regional agreements to repair the cracks in theregions that the IEPA approach has caused and to build the regional integration that – all parties agree – isindispensable for the development of these countries.

For an introduction to EPAs see Traidcraft e.a.,Economic Partnership Agreements, What MEPs need to know.August20092Cotonou Agreement, art.34.1; “…with due regard for their political choices and development priorities”; art. 35.3: “…take account of the different needs and levels of development of the ACP countries and regions”3For an overview see note 1 or EU Commission, DG Trade,Update on Economic Partnership Agreements,23 March2009, http://trade.ec.europa.eu/doclib/docs/2009/march/tradoc_142689.pdf.4For on overview of the review reports see ECDPM.Overview of Article 37(4) Reviews of the EPA Negotiations(ECDPMDiscussion Paper 81). Maastricht, 2007.5CEDAO-UEMOA,Rapport sur la revue des négociations de l’accord de partenariat économique (APE) UE – Afrique del’Ouest au titre de l’article 37.4 de l’accord de Cotonou. Proposition de l’Afrique de l’Ouest,November 2006.

1. The development dimension

The EC argues that only a full EPA will be an effective development instrument. Liberalisation of trade in goods,services, investment and government procurement, together with disciplines on competition and IPR, will giveaccess to quality goods, inputs and services, create export opportunities and attract investment that will improveessential infrastructure and competitiveness and bring economic growth.There is nothing, however, in the conventional economic theory thatguaranteessuch outcomes , especially inpoorer less-developed economies, or in the face of the multiple food, climate, financial and economic crises.However, while the benefits are far from guaranteed, under EPAs ACP tariffs will be eliminated according to astrict schedule, protective measures will be lifted, and policy space to support local producers will be reduced. Atthe same time, EPAs will oblige ACP governments to undertake significant reforms and to design and createnew policies and institutions, which will have significant costs attached. According to some estimates, such8compliance costs would amount to at least €9bn for all ACP countries. In addition to these costs, during the first9stage of liberalisation alone, African countries are expected to lose $359m per year due to tariff elimination.Therefore, ACP countries are concerned that while their weak economies will be unable to face increasedcompetition at home and abroad, EPA obligations will also place a heavy strain on government budgets.The EU has little to offer to address these concerns. On the one hand it continues to insist that ACP countriesmake decisions now that will lock in vast policy reforms for the next 15 to 25 years. On the other hand, it isneither able to prove that these reforms will bring development, nor willing to guarantee that EPA costs will bemet with additional finance. The EU resisted ACP requests for EPAs to contain development cooperationprovisions for four long years (from the start of the negotiations until November 2006) and since then has onlyaccepted non-committal language. Beyond the regular funds foreseen for the ACP countries by the CotonouAgreement via the European Development Fund (EDF), there are no real guarantees for additional finance, noteven under the so-called Aid for Trade promise of 2 billion Euros per year by 2010 by the European member10states and the European Communities .For many ACP countries this is a crucial element. In early July 2009 the Eastern African Community postponedthe signature of the IEPA because “theEC has consistently been non-committal and non-responsive oneconomic and development issues”and “giventhe sensitivity and impact the EPA is likely to have on the EACPartner States economies it will be difficult to effect the ratification of the [IEPA] through the National legislatures11without in-built economic and development safety nets to support the required economic adjustments”. TheWest-African region has worked out an EPA-related development programme (PAPED) which they have costed1213at 9.5 billion Euros over a period of 5 years . A similar Central African plan would cost 12.4 billion Euros .Funding to cover EPA costs must be additional to the EDF, in order for it not to be just a re-packing of existingfunds which would take resources away from other important development programmes. The Commission7

European Research Office,The ACP and the EU negotiating mandates. A comparison and commentary,9 July 2002See M.Cruz,Can Free Trade Guarantee Gains from Trade?UNU WIDER Research Paper No. 2008/97 orB.Gavin,TheEU-ACP Economic Partnership Agreements: What Impact on Development?Dublin, Trinity College, International Instituteof Integration Studies (IIIS), 2007.8C. Milner,An assessment of the overall implementation and adjustment costs for the ACP countries of EPAs with the EU,in R.Grynberg and A. Clarke,The European Development Fund and Economic Partnership Agreements,CommonwealthSecretariat, 20069S.Bilal and C. Stevens, (Eds.),The Interim Economic Partnership Agreements between the EU and African States:Contents, challenges and prospects,(Policy Management Report 17). Maastricht, ECDPM-ODI, 2009.10See note 7. According to the European Commission’sAid for Trade monitoring report 2009(COM 2009/160 final,p.30), EU AfT commitments to the ACP have even fallen from 2,975 million Euros in 2005 to 2,097 million Euros in 2007.The share of AfT for the ACP in the overall EU AfT has fallen from 50% to 36% over the same period.11EAC-EC-EPA Ministerial Preparatory Meeting (Ministers for Trade Session), Report of the meeting(EAC/SR/37/2009),3 July 2009.12This figure is been criticized as insufficient as it would not include all EPA related costs. ICTSD-ECDPM,EPA Update,Trade Negotiations Insights, Vol. 8, No 1, February 2009 and No 2, March 200913Négociation de l’Accord de Partenariat Economique Afrique Centrale-Communauté Européenne, Réunion des Experts,Relevé des conclusions. Libreville, les 5, 6, 9,et 10 février 2009.7

argues that it cannot meet these financial demands, tends to questions their necessity and seems intent thatACP countries should accept “full EPAs” without them.ACP countries on the other hand have tried to link liberalisation commitments to EU aid delivery andbenchmarking, arguing that each step of the liberalisation and reform schedule can only be undertaken whencertain results or benchmarks are reached and the promised aid is delivered. The EU has resisted suchconditional liberalisation, claiming that this would not be WTO-compatible or would not provide sufficientcertainty to businesses – however, this leaves the risks entirely with ACP governments and – worse still – the14populations of these countries which are among the poorest in the world .This discussion is also an important reminder that the overall objectives of the EPAs have never been specifiedin concrete, operational terms. What is “sustainable development”? What does “integration into the worldeconomy” mean? What measure of “poverty reduction” is pursued? What results should EPAs bring in the nextfive, ten, fifteen years? When the development objectives are not specified, it is impossible to determine whatsequencing needs to be followed and, therefore, when will one be able to say that the EPAs are on the righttrack?The EU has been so focused on achieving its negotiating objectives – i.e. to secure liberalisation of goods andthe wide range of trade-related issues already outlined – that it hardly appears to have considered thesequestions. On the contrary, the EU has also tried to ensure that the EPAs conform as closely as possible to theEU’s standard approach to trade as defined in 2006 in its strategy document “Global Europe, competing in theworld”. This is evident in the EPA negotiations in two ways. First, Global Europe is based on EU concerns aboutits market share in the world, its access to energy resources and raw materials, and the increasing competitionwith emerging countries such as Brazil, Russia, India and China (the BRICs). Even if the EU denies that it hasany offensive interests in the EPA negotiations, the EPAs do give the EU preferential access to ACP marketsover its competitors, and the EU is trying to use EPAs to ban ACP export restrictions on raw materials and toobtain access to land, mining and drilling. Second, the EU Commission and member states appear concernedthat the EPAs will set precedents that other trade partners could claim as well: if ACP countries do not agree tonegotiations on services, other trade partners may also exclude services negotiations from the free tradeagreements (FTAs) they are negotiating with the EU; if the ACP countries reject TRIPS+ rules, others may too; ifthe coverage of the tariff elimination is too low, other countries may follow the example. In other words, the fullerthe EPAs, the easier it will be for the EU to obtain the objectives of Global Europe in its other FTA negotiations;even if this means that the ACP countries do not get the flexibilities that they need.

2. Eliminating import tariffs: coverage, time frame and alternatives

Coverage and timeframe

The only WTO-compatible ways to give trade preferences to a country or group of countries without having toask for an exemption or “waiver” are to either (a) offer such preferences in a non discriminatory way to alldeveloping countries or all least developed countries (LDCs) or (b) negotiate a free trade agreement (FTA)based on art.24 of the GATT agreement. Art.24 stipulates that trade barriers must be removed on “substantiallyall trade” and “within a reasonable period of time” which can only be exceeded in exceptional circumstances. Incontrast to most WTO provisions, art.24 does not foresee "Special and Differential Treatment" for developingcountries. But, as “substantially all” and “exceptional circumstances” are not defined, there is considerableleeway in the coverage of an FTA and the transition period that is used to reach that coverage.However, in the EPA negotiations the EU has unilaterally fixed the coverage at a minimum of 80% tariffelimination and the transition period to obtain this at a maximum of 15 years, for all ACP regions and countrieswithout taking into account their “differentneeds and levels of development”as required by the CotonouAgreement (art.35.3).All those countries that initialled IEPAs, under enormous pressure, at the end of 2007 have indeed complied withthe EU’s demanded levels of coverage and timeframes; some have even offered more. However, in the ongoingnegotiations many ACP countries, especially the LDCs, have argued that the EU is expecting too much andhave questioned this demand, pointing out that it is not a WTO requirement but merely an EU interpretation of15the WTO rules .West Africa has taken a long time to carefully formulate a tariff elimination offer in the EPA negotiations. It hasdeveloped a methodology to identify sensitive products and to arrive at national and regional lists of sensitiveproducts. It has organised many consultations with stakeholders and has incorporated into its negotiationprocess the West African Network of Peasant and Agriculture Producer Organizations (ROPPA), which1415

represents some 345 million small-holder farmers. The region has also carefully prepared the introduction of aCommon External Tariff (CET), expanding and adapting the CET of the West African Economic and MonetaryUnion (Waemu-Uemoa) to the whole of ECOWAS. Based on these preparations and considering that 13 out ofthe 16 West African countries are LDCs, the region has offered a tariff reduction of 60% over a timeframe of 2516years .At the same time, the region has consulted WTO experts, to assess the WTO compatibility of this offer, who17have concluded that it is as valid as the standard set by the EU . The EU, however, insists that WTOcompatibility is not the only issue and that a more “ambitious” liberalisation commitment is better for West-Africa’s development. But is this for the EU to judge?

Alternatives

While discussions about coverage and timeframe of tariff liberalisation are ongoing, in the meantime it remainspossible to consider non-reciprocal alternatives. The WTO condemned the EU banana import regime, but neverthe ACP preferences as a whole, nor did it mandate that they should end by 31 December 2007. It was the EUthat decided to end the waiver-based preferential system and to negotiate a GATT art.24-based reciprocal freetrade regime with the ACP countries instead. Since then the EU has found that the EPAs have not solved thedispute with non-ACP banana exporting countries and that it will have to come to a separate banana18arrangement in the WTO (within the framework of the Doha Round or outside it) .Meanwhile, rich countries have continued to use non-reciprocal waiver-based preferential regimes. In the pastyear the WTO has granted waivers for the US preferences for the Caribbean, for Africa (AGOA) and for the19Andean countries; and for thenewEU preferences forMoldova. Hence waiver-based preferences remainpossible.Since the start of the EPA negotiations several crises for which the policies of the rich countries are largelyresponsible are increasing poverty, hunger and misery in Africa and the Pacific: climate change, the food crisis,and the financial and economic crisis. In view of this multiple-crisis situation; the fact that most African andPacific counties are LDCs or small island states; and the ongoing banana and tropical fruits negotiations withinthe WTO, a WTO waiver for new EU duty-free quota-free preferential regimes for Sub-Saharan Africa and thePacific is not at all impossible. It would allow these regions to concentrate on tackling the crises and to continuetheir regional integration efforts on their own pace.Alternatively, the EU could adapt its generalised system of preferences (GSP) for developing countries toaccommodate the interests of ACP countries that are not LDCs and therefore have no duty- and quota-freemarket access to the EU under the “Everything but Arms” (EBA) scheme. To ensure that no ACP country is leftworse off if they choose not to pursue a free trade agreement, Europe could enhance its “GSP Plus” scheme tomake it equivalent to the Cotonou arrangements. Or it could simply merge the EBA and GSP Plus schemes togive both LDCs and ‘economically vulnerable’ countries duty-free, quota-free access to its markets. Manyproducts could be incorporated into Europe’s preferential schemes without a problem. However, such a movewould entail severe preference erosion for a few products. To ensure that vulnerable producers are not leftworse off, mitigating steps would need to be taken to support export diversification and/or to provide a long-termguarantee that the EU would purchase a minimum quantity of these products at a fair price. To providebusinesses certainty, Europe could remove the discretionary aspects of its schemes and bind them in the WTO20so that they become permanent arrangements .

3. The non-goods issues

The WTO concerns with the Lomé/Cotonou preferences have only been in relation to trade in goods. While theWTO did not even order the EU to negotiate a reciprocal goods agreement, it certainly never required that theEPAs contain liberalisation or disciplines on non-goods issues; nor does the Cotonou Agreement, which focuseson capacity building and economic cooperation in these areas.West Africa-European Community,EPA Negotiations, Technical meeting , Joint report.Dakar 16-19 February 2009.Joint report.17Diouf, El Hadji A.Article XXIV of GATT and the EPA: Legal Arguments to support West Africa’s Market Access Offer.Dakar, ENDA Third World, 200918A.Giovanni,How would a WTO agreement on bananas affect exporting and importing countries?ICTSD Issues paperNo.21, June 2009.19WTO Council for Trade in Goods, 24 March 2009 (US), 14 April 2008 (EU).20Oxfam International – TWN Africa,A matter of political will. How the European Union can maintain market access forAfrican, Caribbean and Pacific countries in the absence of Economic Partnership Agreements,April 2007.16

The ACP countries have been reluctant to negotiate services, intellectual property rights and Singapore Issuesbecause of their potential disadvantages, their complexity, the uncertainty about their implications and the lack ofcapacity to identify offensive and defensive interests in these areas. For the same reasons developing countriesworked for the removal of the Singapore Issues from the Doha Round of negotiations at the WTO. Many ACPcountries prefer to deal with these issues on an autonomous basis first, at national or regional level. This is alsothe spirit of the Cotonou Agreement which explicitly states that services liberalisationcanbe negotiated whenACP countries “haveacquired some experience in applying Most Favoured Nation (MFN) treatment underGATS”(art.41.4).The pressure to negotiate liberalisation and disciplines in non-goods issues therefore come from the EU EPAnegotiating mandate only and this pressure has been the subject of much criticism. The EU Council thereforehas stated that it would prefer to see non-goods issues included in the EPAs but also that it “fullyrespects theright of all ACP States and regions to determine the best policies for their development”(Conclusions of 15 May2007, §7 or of 19-20 November §6). On 23 March 2009 EU Trade Commissioner Catherine Ashton said in theEuropean Parliament:“the Singapore Issues are only included if wanted and welcomed”.Some ACP governments have indeed embraced the idea of “full EPAs” - the Caribbean governments, forinstance, did so from the beginning - but most have been reluctant and are still reviewing their options on severalissues, especially on investment, government procurement and IPR. SADC for instance communicated to theEU Commission on 7 March 2006 that it did not wish to take commitments on the non-goods issues in the EPAs.West Africa has made proposals to postpone negotiations on services for another three years, to limit the text onintellectual property rights to the TRIPS provisions and to limit the texts on the other non-goods issues to21cooperation provisions .The Pacific island states were initially quite interested in services, but seeing that the EU had little to offer inMode IV (export of services via the temporary movement of service providers), the Pacific region decided to stopfurther discussion on services. Because of its weak services industry, Mode IV is the only way that the Pacificcan possibly develop any meaningful services export to the EU. In April 2008 the region also made it clear that itwas prepared to conclude an EPA that would include goods, competition policy, environment and social aspects(provided that these issues are not subjected to the EPA dispute settlement provisions); but that it did not wish tonegotiate services, or binding rules on intellectual property, government procurement and data protection. Thiswas repeated in June 2009 when the region proposed to put these issues in a rendezvous clause to revisit them22at a later stage .Despite ACP reluctance and rejection the EU has continued to insist on the inclusion of the non-goods issues,causing new rifts in the regions by trying to move with the willing like Botswana, Lesotho, Swaziland andMozambique in SADC or talking to individual Pacific island states. Only recently has the EU begun to accept thepossibility of a “less than full EPA” equipped with a rendezvous clause to discuss issues at a later stage. Butinstead of postponing such discussion by three years as West Africa has asked, the EU has insisted onconcluding a regional goods EPA in October 2009 and starting with the non-goods issues immediately23afterwards in January 2010 . Despite the fine rhetoric, the pressure has never stopped. If the CotonouAgreement underlines the need to respect the policy choices of the ACP countries, why then is it so difficult toindeed accept their choices? It is difficult to understand this EU push for services, IPR and Singapore Issuesunless one indeed sees EPAs as an important part of the EU’s Global Europe strategy.

IEPAs, but as the IEPAs are supposed to be replaced by regional (perhaps “full”) EPAs, the EU has agreed to25consider revising contentious provisions only in these final EPAs .On that basis all regions have been re-examining several issues with the EU and have indeed found newwording for certain provisions. An important step forward in that respect was achieved in the negotiations26between the EU and the SADC region in Swakopmund in March 2009 . The compromises found there havebeen taken over in other regions. The question is how these revised provisions will be carried over into a finalagreement and what will happen to the interim EPAs in the mean time.Placing the revision of disputed provisions of the IEPA in the context of the negotiations for regional EPAsobviously gives the EU leverage to bargain for the inclusion of more non-goods issues in the final agreement.Once the ACP countries havesignedtheir IEPAs, the EU’s bargaining power increases even more. In themeantime the ACP countries are left with unchanged IEPAs that contain inadequate safeguards or that bancertain policies (for example, export taxes) or introduce certain obligations (such as the standstill clause, whichfreezes tariffs at current levels).Namibia is one country that has been insisting that certain compromises reached should indeed be included inthe IEPA, or added as an annex, before it is signed. The EU has instead proposed to add a legally non-bindingdeclaration to the signed IEPAs. For the SADC IEPA the key sentence of this declaration reads: “TheParties will27instruct their negotiators to consider these new texts as the basis for the full EPA text to be negotiated ”.Byitself such an added declaration does not carry much weight vis-à-vis the hard provisions of the agreement itself.To say “Toconsideras abasisfor a text to benegotiated”is a very vague and weak formulation indeed thatleaves the EU all the room for manoeuvre to extract more concessions. If the negotiations for a final EPA fail andthe IEPA is all that remains, the ACP countries will remain stuck with highly contentious and problematicclauses. It should not be a surprise that ACP countries conclude that they can not sign the IEPAs on this basis.

Conclusion: The way forward lies within the Cotonou Agreement not beyond

From the start of the EPA negotiations, the EU has been trying to go beyond the WTO and Cotonourequirements to obtain agreements that fit its broader trade policy objectives at the expense of its developmentobjectives. The agreements concluded so far risk hindering, instead of fostering regional integration andsustainable development in ACP countries.A strong turnaround in the negotiations is therefore urgently needed, rather than merely introducing hesitantflexibilities on a few issues. The EU must at a minimum respond favourably and unconditionally to ACP requestsfor re-negotiation of contentious issues, and refrain from pushing countries that have initialled EPAs to sign andratify these agreements in haste and without amendments.But, beyond this, the EU should refrain from further overloading and complicating the negotiations by demandingthat ACP countries include issues and rules in the agreements that are not required for WTO compatibility, suchas the MFN clause and rules on export restrictions, as well as services, intellectual property rights and the so-called 'Singapore issues'.The EU should also respond positively to proposals for flexible market access arrangements and to requests forreliable and additional aid for regional economic development programmes.In the case that ACP countries express that they are not ready to conclude an EPA, because they believe theagreement will not facilitate their development, the EU must fully support any request for alternative solutionsthat ensure that these countries are not left worse off than under the provisions of the Cotonou Agreement thatwere in place before the end of 2007.