| EPAs: Wrong development model – 3 | Send to a friend |
| Friday, 02 April 2010 08:14 |
 Following is the third and final of the Trade for Development informal note prepared by the South Centre whose board is chaired by retired President Benjamin MkapaThese firms employ more than 100,000 people. Furthermore, in East Africa, statistics show the regional market for manufacturing is much more important for local producers than any other market. Kenya exports 67% of its manufactured exports (chocolates, soap, plastic etc) to the COMESA market. Only 9% goes to the EU. More EU imports will mean the displacement of domestic and regional producers and lead to de-industrialisation. A study by Ademola Oyejide on the EPA and Nigeria shows that domestic production will decrease. Liberalizing 66.7% of tariff lines (ECOWAS’ last offer) results in losses of up to $68.3 million over 25 years or $2.73 million a year. Unemployment caused by the EPA is projected to amount to 13.674 people, or about 550 workers a year. The sectors in Nigeria likely to be affected include certain fabric sectors, metal, beverages, mining sectors and metal products. Oyejide et al note that the fabricated metal products sector alone is slated to lose up $17.5 million and to disengage 3,500 workers. Losses in agriculture: Many African countries are already facing agricultural import surges from Europe – from poultry, to dairy, cereals as well as processed agricultural products. All these sectors, should they be liberalised, will be badly affected by EU’s highly subsidised exports. Whilst many countries are listing agricultural product lines in their sensitive list, since the lists have to be harmonized at the sub – regional levels (for one common offer to the EU, and there are differing sensitivities within sub – regions), some sensitive agricultural have in fact be liberalised. It should be noted that key agricultural staple products make up the bulk of African countries’ imports. These are products to countries themselves can produce and if they do so, poverty and unemployment will be alleviated. In contrast to the promise that lower tariffs will support Africa development, EUs MFN tariffs in sensitive agricultural sectors are high. E.g. 32 points higher than ECOWAS’ tariffs in cereals; 50 points higher than ECOWAS’ tariffs for milk and dairy products 16 for meat; 31 for sugar and 8 points higher for tobacco. In addition, the playing field in agriculture remains highly uneven, with EU farmers receiving about Euros 55 billion per year (or $76 billion) in order to keep them afloat. EU has refused to address the issue of subsidies in the EPA negotiations, saying that it is already being negotiated in the WTO’s Doha round. However, the current Doha negotiations have allowed EU supports to be retained! Real regional integration foregone: The European commission declares that EPAs are about supporting regional integration. This assumes that regional integration within Africa will take place when regional integration between Africa and the EU takes place. This argument is illogical. Allowing Europe market access to Africa will negate the opportunities that African producers have to sell on their domestic and regional markets. The EPA leads to a hubs and spokes trade relation between Africa and Europe. The main production center is Europe (the hub), whilst resources for production (usually primary commodities) will be sourced from the spokes (Africa), resulting in the stunting of production capacities in Africa. African countries will also be exporting with the EU market in mind, and less so to each other. The argument goes that all African countries signing the EPA will be ‘integrated’ by way of a common trade framework with the EU. However, in real economy terms, it will be more disintegrated. Other costs: There are other major costs that have not been mentioned. For example, the long – term costs of development prospects foregone in the industrial, agriculture and services sector. Furthermore, it should also be borne in mind that when a large number of African countries sign an EPA, the US and other countries will also be asking Africa for similar market access terms. It is unlikely that the US for instance will continue to provide AGOA (which is a unilateral prudential scheme for some products like garments from Africa) but will also ask for an EPA – type agreement. Requiring Africa to liberalise. 2.Alternatives to the EPA African countries are in a bind. Non – LDCs will face tariffs on their key exports to the EU market if they do not sign the EPA. Yet doing so will foreclose their development options. There are alternatives to the current situation. 1.GPS + FOR NON – LDCs The EU offers a GSP + scheme for non – LDCs. To be eligible, countries have to be ‘vulnerable’ defined in terms of economic diversification and size. Countries also need to sign 27 convections. The GSP + scheme will meet most (but not all) African countries’ need for preferential market access to the EU market. It works particularly well for east Africa and West Africa. Kenya’s horticultural products will enter duty free into the EU market, as will Ghana’s cocoa. In fact, with GSP + 99.6% of Ghana’s exports and 100% of Cote d’Ivoire’s exports will enter the EU duty free. Most African countries have also signed the majority of the 27 conventions. They should request for an implementation time, when they apply for GSP + and African countries can work with the European parliament to call for a review of the GSP + to make EU acceptance of African countries into the GSP + easier. 2.RENEGOTIATE ARTICLE XXIV IN THE WTO The WTO’s article XXIV relating to regional trade agreements and a free trade agreement (FTAs) calls for the liberalization of ‘substantially all the trade’ in FTAs. However, article XXIV is currently being renegotiated in the Doha round, paragraph 29 of the Doha declaration notes that ‘The negotiations shall take into account the development aspects of regional trade agreement’. (WTO Doha ministerial declaration, WT/MI (0) DEC/1, 14 November 2001) African countries should ensure that as developing countries negotiate FTAs with developed countries, they are not required to liberalize’ substantially all trade’ (which the EU interprets as 80% tariff liberalization), but liberalization can be asymmetrical i.e. developing countries can liberalize in accordance to their development needs. 3.MOLDOVA TREATMENT In January 2008, Moldova unilaterally received’ autonomous trade preferences’ from the European Union (Council regulation (EC) No 55/2008). This is near to similar market access as under the everything but arms (EBA) preference scheme the EU provides to LDCs. The explanation of the commission was that Moldova is the poorest country on the European continent and to offer Moldova an improved access to the EU market would support the development of its economy through increased export performance. Furthermore it was clear that entering into negotiations on a free trade agreement with Moldova is not an option as Moldova does not possess the competitive strength to take on reciprocal obligations of such an arrangement with the EU’. This preferential treatment provided by the EU was approved by WTO members without problems in March 2008. Many of the non – LDCs in Africa have even lower levels of development (measured by per capital GDP) than Moldova e.g. Kenya, Ghana, Cote d’Ivoire, Nigeria, Cameroon and are therefore deserving of even better than the ‘Moldova treatment’. 4.A EUROPEAN AGOA (AFRICAN GROWTH OPPORTUNITY ACT) OR FINANCIAL CRISIS PACKAGE FOR AFRICA. Countries in Africa should request the EU to provide an AGOA to them i.e. duty free access to the EU market for key tariff lines on which they are currently exporting to the EU. Calculations by the South centre show that such a package for Africa (the non – LDCs since the LDCs already enjoy the EBA) amounts to only about 100 tariffs lines. The total amount of African exports to EU on these lines is $6 billion a year. The import revenue foregone by the EU, assuming that the average duty on the $6 billion is 10% is only $600 million a year. This package can also be a financial contribution to Africa since the continent has and is still suffering the effects of the financial crisis even though they had not contributed to the crisis. 5.ARTICLE 37 (6) OF COTONOU: MARKET ACCESS OPPORTUNITIES SHOULD BE EQUALITY FAVOURABLE TO COTTON Article 37(6) foresees that WTO-compatible market access opportunities should be equally favorable to those in Cotonou. The various alternatives proposals cited above therefore have a perfectly sound legal base and ECOWAS countries should make full use of this Cotonou provision. 6A GOODS ONLY EPA PEGGED TO DEVELOPMENT BENCHMARKS If African countries that have not yet signed an EPA decide to go ahead with signing, they should ensure that it is a strictly goods – only EPA, with no built in clauses about negotiations on services in the years to come. This is not needed for compliance with the WTO. Importantly, liberalization in goods should be done in keeping with development benchmarks i.e. only when the sub – regions have attained a certainness level of development (e.g. measured by per capita GDP; per capita manufactured exports etc) should the sub region liberalise X percentage of their tariff lines. Since the EPA proposes a model of development that is fundamentally flawed and anti – developmental, pegging liberalization is paced appropriately and is not fixed to an arbitrary and artificial time line such as 15 or 25 years. Add this page to your favorite Social Bookmarking websites           |
