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This publication can be downloaded for free at http://www.gmfus.org/publications/index.cfm. Jones, Emily and Marti F.,
Darlan (2009). Updating Economic Partnership Agreements to Today’s Global Challenges. Washington DC/Brussels:
The German Marshall Fund of the United States, Economic Policy Paper Series 09.
About GMF
The German Marshall Fund of the United States (GMF) is a non-partisan American public policy and grant-making
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Updating Economic Partnership Agreements to
Today’s Global Challenges
November 2009
Carim, from the South African government and Examining the EPAs from the context of West
negotiating team, agrees that the EPAs could Africa, Ouedraogo argues that the European
provide leverage to enhance regional economic Union has unfortunately engaged in ‘power
integration, strengthen customs unions, and deepen politics’. Pressure to extract an agreement from
cooperation in new areas, including trade-related ACP countries has led to a situation characterized
3
For a recent reference, see, for instance, Vollrath, Thomas L. & 4
Authors’ calculations from www.trademap.org
Hallahan, Charles B., 2009. “Economic costs and payoffs of bilat-
See, for instance, UNCTAD 2008, World Investment Report,
5
eral/regional trade agreements” 2009 Annual Meeting, July 26-28,
p.38. Available at: http://www.unctad.org/en/docs/wir2008p1_
2009, Milwaukee, Wisconsin 49375, Agricultural and Applied
en.pdf
Economics Association.
14
Over the long run, open global trade would have a significant 5. Coordinate U.S. and European policies
impact on developing country income. One estimate predicts
possible gains of around $200 billion per year. See Cline, Wil- European and U.S. processes that integrate trade
liam (2004). Trade Policy and Global Poverty. Washington, DC:
Center for Global Development. policy with development goals in sub-Saharan
15
Weak infrastructure and intra-regional trade barriers par- Africa should be part of a new transatlantic
ticularly impact agricultural trade, as do low technology, poor leadership. Coordination between the United
skills, high internal taxes, and continued dependence on a small
number of commodities, high transport costs, the spread of
HIV/AIDs and pricing and marketing policies that penalize
small farmers. See Moss, Todd and Alicia Bannon (2009). “Africa 17
See Rosalind Thomas (2008). “Trade Corridors in Africa—
and the Battle over Agricultural Protectionism.” Washington, Connecting Markets: Development Corridors and SDIs—an
DC: Center for Global Development. African Private Sector-Led Growth Strategy.” Presentation to
16
There are 26 official corridors as identified by the New Eco- the Paul Nitze School of Advanced International Studies, Johns
nomic Partnership for African Development (NEPAD), and they Hopkins University, Washington, DC, October 2008.
criss-cross the continent.
a. the moderate appetite if not reluctance to The European Union has acknowledged the
open up domestic markets to EU competition existence of such contentious issues within the
by concluding such a free trade agreement, interim agreements and adopted a more flexible
approach on some of the issues, already suggesting
b. concerns about the scope of a final EPA (see some revised provisions. Some African countries
below), Several African
(e.g., Namibia) or regions (e.g., East African
negotiators and
Community [EAC]) would like to see the interim
c. concerns about an appropriate development politicians have
EPAs amended. But the European Union is willing
dimension, notably in terms of EU voiced concerns
to consider revisions in the context of negotiations
commitments to support accompanying over a number
toward final and comprehensive EPAs only.3 While
measures to an EPA, a dimension missing or of provisions
being too weak in the current framework for the European Commission’s apparent flexibility has
encouraged some countries to sign their interim appearing within
some ACP stakeholders,
EPA and move forward in the negotiations, it has the interim
d. c oncerns about some inadequate provisions in antagonized some others who are reluctant to sign agreements
the interim EPAs (see below), an interim agreement which they deem flawed, that they view
since certain improvements have already been as ‘contentious’
e. difficulties in reaching common regional identified and some revised provisions agreed and which they
positions endorsed by all countries of a in principle with the European Union. These demand be
regional grouping, and tensions, which threaten the cohesion of regional reviewed. These
integration processes, are best illustrated by the
f. n
umerous domestic capacity constraints, issues include,
current situation in Southern Africa, where some
including negotiating trade in services or among others:
members of the Southern Africa Customs Union
some trade-related issues (e.g., investment, the definition of
(SACU) have recently signed their interim EPA
competition, government procurement, and substantially all
and are actively engaged in negotiations toward a
intellectual property). trade, transitional
comprehensive EPA (i.e., Botswana, Lesotho, and
Should negotiations face delays, the interim Swaziland), whereas the other members continue periods, export
agreements might be applied over a longer period to voice serious concerns about this process (i.e., taxes, free
than initially foreseen or even become permanent. Namibia and South Africa).4 circulation of
goods, national
Contentious issues in the interim agreements The debate over contentious issues has crystallized
treatment,
tensions for two reasons. First, it reflects a
Several African negotiators and politicians have bilateral
divergence of views over some specific content
voiced concerns over a number of provisions safeguards,
appearing within the interim agreements that they infant industry
3
For an extensive discussion on these contentious issues, see D.
view as ‘contentious’ and which they demand be Lui and S. Bilal (2009).“Contentious Issues in the Interim EPAs: provisions, non-
reviewed. These issues include, among others: the Potential flexibility in the negotiations.” ECDPM Discussion execution clause,
Paper 89, Maastricht: European Centre for Development Policy
definition of substantially all trade, transitional Management. Retrieved at: www.ecdpm.org/dp89 the most favored
periods, export taxes, free circulation of goods, 4
See P. Draper and N. Khumalo (2009). “On the Future of the nation (MFN)
national treatment, bilateral safeguards, infant Southern African Customs Union.” Trade Negotiations Insights
Vol.8, No.6, July-August 2009, ECDPM/ICTSD. Retrieved at:
clause, and
www.acp-eu-trade.org/tni rules of origin.
13
See Council Conclusions of May 27, 2008. Retrieved at: http://
register.consilium.europa.eu/pdf/en/08/st09/st09629.en08. 14
See notably D. Rodrik (2007). One Economics, Many Recipes:
pdf And of November 11, 2008. Retreived at: http://register. Globalization, Institutions, and Economic Growth. Princeton
consilium.europa.eu/pdf/en/08/st15/st15298.en08.pdf University Press.
Why EPAs in the first place? Against this background, the ACP countries
‘Something has to change.’ We heard this and the EC consented in the 2000 Cotonou
opinion expressed time and again in the 1990s Partnership Agreement to replace the unilateral
with regard to the EC-ACP trade regime. trade preferences with EPAs by 2008, through a
process of regional negotiations. In the WTO Doha
To begin with, the unilateral trade preferences conference in 2001, the EU and the ACP countries
the European Community (EC) awarded to the were able to secure a transitional waiver for the
ACP countries for decades under the Yaoundé unilateral trade preferences until January 1, 2008.
and Lomé agreements had come under attack in
the World Trade Organization (WTO). Several What sort of EPAs?
developing countries in Latin America and Asia The broadly shared view was that EPAs should
no longer accepted the special treatment extended become development instruments that would
to ACP countries, arguing that the EU-ACP support the gradual integration of the ACP
regime ran counter to the non-discrimination countries into the world economy. However, it
principle of the multilateral trade framework. soon became clear in the course of negotiations
The banana regime, which was a particular bone that different choices were in play about how best
to give shape to that development dimension.
1
Bert Koenders is the Dutch minister for development coopera- The current Dutch government, in office
tion.
since early 2007, has always taken the position
2
The CARIFORUM EPA was signed in October 2008 by all
CARICOM countries and the Dominican Republic. Haiti, which
that the development dimension should
did initial the interim EPA in December 2007, has not signed yet. take precedence in the EPAs, which, at the
Cotonou tariff regime under which Europe has transition periods for rice, sugar, and bananas, the
imported goods from the ACP states for the past last of which expires in 2009). But for the non-
three decades (the regime lapsed on December 31, LDCs the next-most-favorable regime is either the
2007). Countries that had not, by this time, been standard Generalized System of Preferences (GSP)
granted an EPA-based tariff regime found that their or, in the case of products which it does not cover,
exports have since been taxed on the basis of the the Most Favored Nation (MFN) regime. Tariffs
next-most-favorable tariff regime for which they are under these regimes can be high.
eligible. For least developed countries (LDCs) this
next-most-favorable regime is the non-contractual The basis for allocating countries to one of
Everything But Arms (EBA) scheme under which the three categories is the extent to which it is
the European Union has autonomously decided vulnerable to this threat (and why). Category 1
to import virtually all goods duty free (subject to comprises ‘vulnerable’ countries that stood to lose
in a very tangible way if the pre-existing regime
Percent
1
30
obviously making the trade commercially unviable.5
1
David Laborde Debucquet is a research fellow and co-leader
of the “Globalization and Markets” research project inside the
Markets, Trade, and Institutions Division at International Food
Policy Research Institute (IFPRI).
2
Simulation models refer to analytical tools that compare one
state of the “world” to another state of the world, e.g. a world
without EPA and a world with EPA.
3
EPAs allow ACP countries to exclude some products from the
liberalization scheme and to implement tariff reductions over an
extended period of time.
5
S. Karekezi, J. Kimani, O. Onguru, and W. Kithyoma (2009).
“Large Scale Hydropower, Renewable Energy and Adaptation to
Climate Change: Climate Change and Energy Security in East 7
S. Karekezi, J. Kimani, O. Onguru (2006). “Contribution of
and Horn of Africa.” Nairobi, Kenya: Energy, Environment and Renewables to a Sustainable Power Sector in Kenya.” Nairobi,
Development Network for Africa (AFREPREN/FWD). Kenya: Energy, Environment and Development Network for
Africa (AFREPREN/FWD).
6
S. Karekezi and W. Kithyoma,W. (eds) (2005). “Sustainable
Energy in Africa: Cogeneration and Geothermal in the East and 8
K. Deepchand (2002). “Bagasse-Based Cogeneration in Mauri-
Horn of Africa—Status and Prospects.” Nairobi, Kenya: Energy, tius: A model for Eastern and Southern Africa.” Nairobi, Kenya:
Environment and Development Network for Africa (AFRE- Energy, Environment and Development Network for Africa
PREN/FWD). (AFREPREN/FWD);.
9
S. Karekezi, J. Kimani, O. Onguru, J. Atiang, J. and Mbithi
(2007). “Sustainable and Community Participation in Biomass- 10
E. Marandu and D. Kayo (eds). (2004). The Regulation of the
Based Cogeneration in Kenya.” Nairobi, Kenya: Energy, Environ- Power Sector in Africa: Attracting Investment and Protecting the
ment and Development Network for Africa (AFREPREN/FWD). Poor. London, U.K.: Zed Books Ltd.
11
E. Marandu and D. Kayo (eds). (2004). The Regulation of the • The aforementioned influx of over-engineering
Power Sector in Africa: Attracting Investment and Protecting the and unnecessarily sophisticated renewable
Poor. London, U.K.: Zed Books Ltd; Stichele, M.V. (2005).
energy technologies that places European-
12
“Dangers in Liberalization of Services and Investment in
EPAs.” SOMO Briefing, May 31, 2005. Accessed on August 21,
2009 at: http://syspro2.enda.sn/seminaire/docs/Services%20 G. Gualberti, et al. (2009). “Electricity Privatizations in Sahel:
13
• The opening of the renewable energy sector Third, it is imperative that liberalization is
in sub-Saharan African countries would likely not implemented in a “blanket” fashion. It is
lead to foreign investors “cherry-picking” the vital that sectors in which sub-Saharan Africa
most lucrative investments—with the highest is relatively competitive be liberalized first
The European returns and lowest risks.14 This could be at while less competitive infant industries are
the expense of investing where returns are liberalized later.15 This would require the speed
Union and African
relatively lower but where energy services are of liberalization to be adjusted to reflect different
negotiators must
most required, for example, in poor rural areas. levels of competitiveness in different renewable
truly treat EPAs energy technologies.
as vehicles for Which way for epa negotiations?
sustainable Fourth, liberalization of the renewable energy
The liberalization of the power sector without a
development industry should involve local private sector in a
clear role for local private investment contributed
in sub-Sahara significant way. There are three possible approaches
to a complete reversal of privatization in some
Africa. This that could be used to achieve this goal:
sub-Saharan African countries. Emerging from
implies that the these experiences is a series of lessons and Local manufacture of key components: EPAs
EU’s commercial recommendations for how EPA negotiations on could include a provision that all renewable
interests in the energy services, and the renewable energy industry energy systems installed by EU companies
agreements in particular, could lead to win-win options for all in sub-Saharan Africa must have at least
should be key stakeholders. 40 percent of the value of the installation
secondary to comprising of locally/regionally produced
First and foremost, the European Union and
the development components. For example, for a solar
African negotiators must truly treat EPAs as
needs of the sub- photovoltaic system, the photovoltaic panel,
vehicles for sustainable development in sub-
Sahara African control equipment, and the end-use equipment
Saharan Africa. This implies that the EU’s
region. maybe imported from the European Union
commercial interests in the agreements should
but the batteries, cables, and balance of system
be secondary to the development needs of the
can be locally produced or imported from
sub-Saharan African region and the need to grow neighboring sub-Saharan African countries.
promising embryonic infant renewable energy
industries. Encouragement of joint ventures: EPAs should
not encourage the establishment of wholly
Second, liberalization must lead to a significant foreign-owned stand-alone renewable energy
amount of new capital investment or expansion investments. Rather, joint ventures between
of existing investment in sub-Saharan Africa. European investors and existing locally-owned
Merely opening up the market for the entry of
finished renewable energy products is unlikely
to lead to long-term economic benefits in the 15
L.E. Hinkle and R.S. Newfarmer (2006). “Risks and Rewards of
Regional Trading Arrangements in Africa: Economic Partner-
ship Agreements between the European Union and sub-Saharan
Africa.” In: Bourguignon, F. and B. Pleskovic (eds). (2006).
14
E. Marandu and D. Kayo (eds). (2004). The Regulation of the Annual World Bank Conference on Development Economics 2006:
Power Sector in Africa: Attracting Investment and Protecting the Growth and Integration. Washington, DC: The International
Poor. London, U.K.: Zed Books Ltd. Bank for Reconstruction and Development/The World Bank.
In light of this, the EPAs can make significant Ceding national policy space
contributions to the innovation deficit by explicitly
incorporating norms that obligate EC member Like other regional FTAs, the EC-CARIFORUM
states to recognize the right of ACP countries to EPA has incorporated IPR provisions that largely
freely exercise the special and differential rules mirror the substantive obligations of the TRIPS
Agreement. And despite the fact that Article 46 of Further, unlike
that apply to them in the context of IPRs. Further,
the Cotonou Agreement explicitly acknowledged many existing
the EPAs could be treated as binding obligations,
the development dimension of IPR protection, EC FTAs, the EPAs
rather than mere exhortations, the stated objectives
of the TRIPS Agreement. A practical expression negotiators have in some cases attempted to include could provide
of such a commitment could be that the EC agrees obligations that extend even beyond those required technical
to evaluate any ACP domestic policy designed by the TRIPS Agreement. These so-called “TRIPS- assistance to aid
to promote access to EC technologies in light plus” provisions generally require ACP regions to ACP countries in
of the relevance of such a policy on measurable strengthen particular IPRs beyond the minimum the design and
development goals, particularly in areas such as standards established by the TRIPS Agreement.15 In implementation
education, R&D, infrastructure, and public health. addition, a provision may qualify as “TRIPS-plus” of IP policies that
Further, unlike many existing FTAs, the EPAs if it expands the scope of subject matter coverage
operationalize
could provide technical assistance to aid ACP beyond those disciplines recognized by the TRIPS
TRIPS Aarticles
countries in the design and implementation of IP Agreement. For example, in the area of copyright,
Article 143 of the EC-CARIFORUM EPA imposes
7 and 8, in
policies that operationalize TRIPS Articles 7 and 8, particular by
in particular by recognizing appropriately crafted on the CARIFORUM the obligation to comply with
the standards set forth in the World Intellectual recognizing
limitations and exceptions to IPRs. Numerous
Property Organization (WIPO) “Internet appropriately
other recommendations exist for structuring EPAs
more meaningfully to enhance the capacity of Treaties”—the WIPO Copyright Treaty (WCT) crafted limitations
ACP countries to absorb technical knowledge and and the WIPO Performances and Phonograms and exceptions
improve the domestic technological environment.14 Treaty (WPPT). to IPRs.
The point simply is that the EPAs should not
While such obligations may be facially neutral,
replicate the failed innovation and diffusion
there are hidden costs associated with even
strategies of contemporary FTAs.
ostensibly beneficial provisions. The fact is that any
increased breadth of subject matter covered by the
Technology and IP provisions in the EPAs
IPR provisions of EPAs reduces the discretionary
The pivotal question, then, is how to make IPRs policy space that could be used to promote
relevant to the development agenda reflected in the initiatives directed solely at domestic innovators
Cotonou Agreement and stated in the objectives of in ACP groupings. The more policy space is taken
the specific EPAs. At a minimum, the obligations over by EPA-based obligations regarding IPRs,
pertaining to IPRs should not impede prospects the less ACP countries can act unilaterally for the
benefit of local firms.
14
See, e.g. Okediji, Ruth L. TRIPS, Access to Public Health and
Public Education: Opportunities for ACP Countries in the EPA
Negotiations, Available at http://www.acp-eu-trade.org/library/
files/Okediji_EN_171108_TradeFacility_TRIPS.pdf 15
See, e.g., EC-CARIFORUM EPA, arts. 143, 147, 151-163.
16
See, e.g. EC-CARIFORUM EPA, arts. 135-138, 142.
1
Xavier Cirera is a research fellow at the Institute of Develop-
ment Studies, University of Sussex.
2
World Bank (2009). “Swimming Against the Tide: How Devel-
oping Countries Are Coping with the Global Crisis.” Back-
ground Paper prepared by World Bank Staff for the G20 Finance 3
The exception is the 15 Caribbean Forum of African, Carib-
Ministers and Central Bank Governors Meeting, Horsham, bean, and Pacific States (CARIFORUM) countries that have
United Kingdom on March 13–14, 2009. already signed a full EPA agreement.
1.0
0.8
0.6
Extensive
0.4
0.2
Source: Author’s own elaboration from COMEXT. Nigeria and South Africa excluded.