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Europe/Africa: Partnership for Whom?

AfricaFocus Bulletin
May 20, 2005 (050520)
(Reposted from sources cited below)

Editor's Note

"The likely results of these new Economic Partnership Agreements (EPAs) are not hard to imagine. With their diverse range of products and muscle in the marketplace, European producers can outstrip ACP [African, Caribbean, and Pacific] rivals in their domestic markets. ... [African countries] stand to lose existing industries and the potential to develop new ones as products from Europe flood their markets." - Christian Aid

This AfricaFocus Bulletin contains excerpts from "For Richer or Poorer: Transforming Economic Partnerships between Europe and Africa," a new report released by Christian Aid earlier this month. The full report (available at
http://www.christianaid.org.uk/indepth/505epas) includes case studies of the impact of forced trade liberalization on small farmers and national industries in Senegal, Ghana, Mozambique, and Malawi.

For more information see also the links page of the international STOP EPAs coalition at http://stopepa.org/stopepa/links.php.

Another Bulletin sent out today has excerpts from an analysis of the current status of World Trade Organization (WTO) negotiations, describing how concerns of developing countries have been systematically marginalized.

For previous AfricaFocus Bulletins dealing with trade policy issues, see http://www.africafocus.org/tradexp.php

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

For richer or poorer: Transforming economic partnership agreements between Europe and Africa

April 2005

Christian Aid
http://www.christianaid.org.uk
http://www.christian-aid.ie

[Excerpts. Full report available at http://www.christianaid.org.uk/indepth/505epas]

'Some NGOs have raised concerns about the Economic Partnership Agreements that the EC is negotiating with the poorest countries... Europe should not be, and is not, seeking to "take" anything from these countries. Our aim is a new framework where neighbours work together to benefit from freer trade, while we offer assistance to integrate them into the world trading system. That is our global 21st-century challenge.' Peter Mandelson, EU Trade Commissioner, the Guardian, 1 December 2004

'We are extremely wary of these EPAs because income is going to fall dramatically in a country like Mali. If we sign EPAs and our income drops by 20 or 30 per cent, it seems we are going around in circles. We have a lot of misgivings... it may lead to revolution.' Amadou Ali Niangadou, Malian MP, Joint Parliamentary Assembly, Brussels, 5 February 2005

For the first time in history, Europe is negotiating free-trade agreements with the countries it once colonised. In return for continued access to European markets, 77 countries in Africa, the Caribbean and Pacific region (ACP) are being asked to open up their markets to products from Europe.

The likely results of these new Economic Partnership Agreements (EPAs) are not hard to imagine. With their diverse range of products and muscle in the marketplace, European producers can outstrip ACP rivals in their domestic markets. European producers have enjoyed decades of subsidies, support and protection from their governments and have built strong, lean, competitive industries.

ACP countries - especially those in Africa, whose problem is not only that they can't sell enough but that they don't produce enough - have not. They stand to lose existing industries and the potential to develop new ones as products from Europe flood their markets.

Through EPAs, Europe is threatening not merely to give with one hand and take with the other. In spite of Commissioner Mandelson's fine words, it is just taking. Since colonial times, ACP countries have been locked into feeding the European market with raw commodities, and are often locked out when they try to export processed or value-added products. And 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 European Union, on the other hand, stands to gain much by forcing through EPAs. Above all, once the reforms are enacted, Europe will have duty-free access to 77 new markets for the vast majority of its products. Europe's determination to negotiate this was laid bare at a recent meeting between EU and ACP trade negotiators. The ACP representatives were told by a senior Commission official to 'come back in a better mood', when they proposed protecting 30 per cent of their products from tariff elimination under EPAs.

This report calls for EPAs to be stopped in their current form.

It focuses in particular on what African countries want and need from a new trade relationship with the EU, given that 2005 is the year in which the UK government will be pushing its counterparts in the G8 to take action for a strong and prosperous Africa. As EPAs are the framework through which it will shape this relationship, the UK government should take a much greater interest in these negotiations. EPAs may end up achieving the opposite of what the UK government desires in its new deal for Africa.

How EPAs fail on their own terms

'I intend to ensure that there are no unfair demands for reciprocity in the EU's approach, and no enforced liberalisation until targeted aid programmes have built up local capacities.' Peter Mandelson, EU Trade Commissioner, the Independent, 27 December 2004 'I am more convinced that EPAs stand to knock us back. EPAs stand to harm us... it will only benefit our European partners. The ACP must sit up and look at this issue critically.' Kwame Osei-Prempeh, Ghanaian MP, Joint Parliamentary Assembly, Brussels, 5 February 2005

The all-powerful Trade Directorate, which sits at the heart of the European Commission, argues that EPAs are necessary precisely because the way in which ACP countries currently gain access to Europe's markets contravenes World Trade Organisation (WTO) rules.

This is true, but when the new round of WTO trade talks was launched in Doha, Qatar, in November 2001, ACP countries negotiated a 'waiver' with the EU to allow their preferential market access to continue. This waiver is due to expire two years after the end of the Doha round, which means that a way of ensuring continued preferential market access for ACP countries must be found. But in the view of Christian Aid, the organisations with which we work and many other groups that represent the interests of poor people in African countries, EPAs are not the solution.

Despite the claims of the EU, EPAs are neither development friendly nor, ironically, legally watertight under the WTO's rules. And Commissioner Mandelson's attempt to sugar the pill of enforced liberalisation by offering 'assurances' that ACP governments will be allowed up to 25 years to open their markets is further undermining the legality of EPAs.

The WTO rule that governs regional trade agreements - Article 24 of the General Agreement on Tariffs and Trade - is aimed at fostering free-trade between countries at a similar level of development. It stipulates that they must liberalise 'substantially all trade' over a limited period of time, usually ten years.' In other words, the EU and its Trade Commissioner cannot deliver on their guarantee of giving ACP countries a long timescale in which to liberalise with any legal certainty.

African countries want to negotiate a new trade and aid agreement with the EU, since Europe is still their most important trading partner. They want an agreement that allows them:

  • to choose if, when and how they open up their markets to the EU
  • the ability to shape the terms of their access to the EU market
  • the legal certainty that this market access won't be open to a challenge at the WTO.

Instead, they are being forced into negotiating EPAs by a European Union that appears determined to offer them no alternative means of holding on to their existing access to Europe's markets.

A perilous strategy

'We fear that our economies will not be able to withstand the pressures associated with liberalisation, as prescribed by the World Trade Organisation. This therefore challenges us all as partners to ensure that the outcome of the ongoing EPA negotiations does not leave ACP countries more vulnerable to the vagaries of globalisation and liberalisation, thus further marginalising their economies.' President Festus Mogae of Botswana, May 2004

For more than 20 years, trade liberalisation in developing countries has proved disastrous for poor people. Christian Aid argues that governments in ACP countries now need to be allowed to take a breather. Not only should the push for further liberalisation of their products cease, but because tariffs are already lower on average than those in rich countries, developing countries should be permitted to raise them where necessary.3 ACP countries must be able to protect their infant industries.

New studies commissioned for this report look at the already disastrous impact of trade liberalisation on poor producers and at the likely effects of a further lowering of tariffs in three African countries.

In Ghana and Senegal, two countries currently involved in EPA negotiations with Europe as part of the Economic Community of West African States (ECOWAS), the enforced lowering of import tariffs on products such as tomato paste and chicken parts and meat has been followed by a deluge of products, sold at cut-throat prices, from Europe. These often undercut locally produced goods, causing factories that add value to local produce to close down. This in turn leads to great hardship in poor, rural communities where people's livelihoods rely on selling surplus food.

In Mozambique liberalisation resulting from EPAs would open up a thriving milling industry to more cheaply produced wheat-flour from Europe, undercutting locally milled flour. This would not only mean jobs losses in the milling industry but would have a knock-on effect among the small but growing number of Mozambican farmers who produce wheat.

These studies show that not only is liberalisation often a harmful policy for poor people, but that locking countries into a pre-determined pattern of liberalisation through EPAs will prevent them developing new industries in the future. This 'capping' of development will not serve to reduce poverty and will leave developing countries dependent on the same narrow range of primary commodities. This is not how now-industrialised countries developed.

Another study looks at the impact that major cuts in EU sugar prices will have on economic development and poverty in Malawi, one of the poorest countries in the world.

Malawi's sugar industry employs tens of thousands of people directly and many more in associated industries. A large share of its income comes from the guaranteed high prices it receives from the sugar it exports to the EU market.

But planned changes to Europe's Common Agricultural Policy (CAP) will see EU sugar prices fall by more than a third, costing the Malawian government and sugar industry at least 4 million euros. And while sugar-beet farmers in Europe will receive direct aid covering 60 per cent of their revenue loss,4 Malawian farmers and workers are unlikely to receive such compensation.5 This sounds like a clear warning of the sort of deal poor countries can expect if EPAs, in their current form, are allowed to go ahead.

It is clear that compensation from the EU for losses in ACP countries as the value of preferences is reduced or they are eroded will not be forthcoming. Christian Aid calls on the EU to make funds available to help cushion the inevitable blow that will fall hardest on the poorest, such as Malawian sugar farmers and workers and their families.

It is clear from these studies that not only is liberalisation already often a harmful policy for poor people, but that using EPAs to lock countries into a pre-determined pattern of liberalisation will deny them opportunities to develop new industries in future. This will scupper their efforts to reduce poverty and transform their economies, and will deny them the opportunity to use protection selectively as they develop, in the same way European countries have been able to do.

Regional development under threat

'The trade opening or "market access" part of these agreements are not at their forefront: it comes at the end after regional integration has kick-started growth.' Peter Mandelson, EU Trade Commissioner, speech to the Civil Society Dialogue Group, 20 January 2004

EPAs are threatening existing but fragile regional groupings of African countries. They are already undermining the protection of important industries as groups of countries scramble to align their tariffs in readiness for negotiations with the EU.

African countries have long considered regional integration an important development strategy. It is both a means to overcome the limitations of small markets and an opportunity to pool resources for infrastructure and major production projects. But rather than let African regions decide on the appropriate design and pace of integration, the EU is forcing the issue. Commissioner Mandelson said recently that regional integration was one of the 'most attractive aspects of EPAs' and that the 'EU model has much to offer in that respect'. This externally driven agenda holds several dangers.

The creation of regional markets and the promotion of new regional production to serve them is a key element of African efforts to become more internationally competitive. But regional integration in Africa will certainly not have 'kick-started' growth by the time the EU expects African countries to start opening up their markets to EU imports.

Clearly, regional markets, which first have to overcome very complex political, economic and administrative problems, should be firmly in place and have given rise to new patterns of production before African countries consider opening up to competition from the EU. This is not possible within the European Commission's current timetable. As a result, there is a grave danger that EPAs will force governments to abandon trade policies that will be essential to make the most of new regional opportunities. This will make a nonsense of regional integration.

Government trade negotiators and regional secretariats are already overstretched. An acceleration of the process of economic union, putting further strain on the delicate negotiations over single regional markets, is likely to result in poorly designed regional integration schemes.

If African countries fail to open up their markets to their neighbours before opening up to EU imports, this will cut off any opportunity to develop industries in goods that can be traded regionally. The EU's model of regional integration in Africa could result in trade and its benefits being diverted to the EU, rather than encouraging increased trade and growth within African regions.

EPAs may well divide as much as unite neighbours in Africa. For instance, least developed countries have little incentive to sign 'free trade' EPAs, because they will continue to benefit from special access to Europe's markets under the Everything But Arms initiative even after the ACP waiver has expired. Each of the four regional groups in Africa with which the EU is negotiating comprise least developed and developing countries. The onus will be on the countries within each group to deal with their differences, which could lead to further disagreements.

Rewriting EPAs

'If EPAs carry through, African countries will have to kiss goodbye to their industrialisation efforts.' Tetteh Hormeku, Africa Trade Network

Christian Aid is part of an international campaign to stop EPAs in their current form. We believe that since Europe's former colonies did not ask to open up their markets to EU imports and since hundreds of campaigning and non-governmental organisations in Africa have said that EPAs in their current form should be stopped, the EU must now listen and act. This report calls on Peter Mandelson to remove the reciprocal market-opening element from the EU's negotiating mandate and leave ACP countries to decide for themselves whether to liberalise.

The resulting one-sided or 'non-reciprocal' trade arrangement could be made WTO-legal if European member states were prepared to instruct the Commission to argue for changes to WTO law. The rules governing regional and preferential trade agreements between developed and developing countries need rewriting. Europe has already promised to support measures to make 'special and differential treatment' for developing countries more effective in the ongoing Doha round of talks. Such changes could be sealed at the WTO ministerial meeting in Hong Kong in December 2005.

On the other hand, if Commissioner Mandelson arrives in Hong Kong with EPAs in his briefcase, the EC could again be heading for a confrontation with developing countries of the kind that led to the collapse of talks in Cancun, Mexico, in 2003.

Christian Aid is calling on the EU to give ACP countries four guarantees:

  1. Continued and improved access to EU markets with legal certainty.
  2. The right to decide whether, how and when to liberalise their own markets.
  3. Finance to help them enhance regional integration, and develop their ability to trade and cope with the costs of adjustment caused by trade reforms.
  4. Compensation for the loss of revenue caused by preference erosion.

The UK government must use its pivotal role on the international stage during 2005 to influence the outcome of the EPAs debate.

Britain's declared position favours trade that works for poor people and, in its white paper of 2004, the Department of Trade and Industry states that poor countries should not be required to 'pay the price' for access to the markets of rich countries. Christian Aid challenges the UK government to support this rhetoric with action. It should clearly state that EPAs are not currently compatible with its vision for trade with developing countries. Also, as the UK chairs the G8 and holds the presidency of the EU simultaneously, it should galvanise like-minded European countries to stop EPAs in their current form.


AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

AfricaFocus Bulletin can be reached at africafocus@igc.org. Please write to this address to subscribe or unsubscribe to the bulletin, or to suggest material for inclusion. For more information about reposted material, please contact directly the original source mentioned. For a full archive and other resources, see http://www.africafocus.org