On 15 February 2011, the European Council took the final step for formal EU approval of the Pacific interim Economic Partnership Agreement (IEPA). This is the culmination of the EU approval process set in train following the conclusion of the IEPAs between the EU and Papua New Guinea and Fiji respectively in November 2007.
Following the entry into force of the Lisbon Treaty on 1 December 2009, the European Parliament (EP) has a greatly enhanced involvement in the agreement of any new European trade policy. The Council, representing the EU member states, can only approve a new policy once the Parliament has given its consent, which it has done for the Pacific IEPA. This means that the exports from Fiji and Papua New Guinea to the EU are no longer dependent on the temporary, autonomous regime that the EU introduced at the end of 2007, when it became clear that none of the EPA negotiations would be completed by the time the Cotonou trade regime expired on 31 December 2007. As an ‘autonomous’ act by the EU, this temporary regime could have been withdrawn from Fiji and Papua New Guinea at any time, subject to a two-thirds majority approval in the EU Council.
The new certainty generated by the approval of the Fijian and PNG IEPAs is helpful, since there are signs of a new assertiveness in EU trade policy, possibly associated in part with the Parliament’s new role. While at present the EP is still exploring the scope of its new powers – most notably through the renewal of the GSP, which is the first substantial case of Parliamentary involvement from start to finish in an important development trade policy process – it is proving responsive to farmers’ concerns. Thus, the Commission's approach to trade negotiations with third countries was criticised in a non-legislative resolution adopted by the EP on 8 March 2011. This resolution argued that, when negotiating international trade agreements, the EC must stop making concessions that can adversely affect European farmers, and warned of the effects of the trade talks with Mercosur and of the recent agreement with Morocco (see Agritrade article, ‘ EU farmers release data on concerns over EU-Mercosur negotiations’, April 2011).
Concern in the EP has been increased by claims from, for example, the Peruvian–German Chamber of Commerce and Industry that Peru’s fruit and vegetable exports to Europe may rise by 50% after the FTA with the EU comes into effect in 2012. Peruvian trade statistics indicate that 11% of its agricultural exports are destined for Germany, making it the country’s second-largest agricultural export market. The Commission has tried to calm these concerns, arguing they are ‘exaggerated’.
Concerns in the EU over agricultural imports from Morocco, Tunisia and some other North African and Middle-East states are also hampering the EU’s provision of concrete trade support to the region following the political changes in some states. A Reuters report has argued that the hopes of EU leaders to deepen trade and economic ties with North Africa following the upheaval in the region ‘are likely to be modest and slow’, partly because of ‘European suspicion of North African workers and farm goods’.
How important is predictability and security in a trade agreement? Most ACP LDCs now rely upon the EU’s ‘Everything But Arms’ (EBA) regime to determine the tariffs that they pay when exporting to Europe. This is part of Europe’s Generalised System of Preferences – an autonomous trade regime that Europe has the right to alter at any time. The EC has stated that it sees the EBA regime as permanent, and there have been no signs of any attempt to substantively erode the preferences granted. The EC has, however, altered the EBA rules of origin, albeit to make them more flexible. This nevertheless demonstrates that there are ways in which the EBA’s benefits could be trimmed without formally being altered. Peru has indicated that one of the reasons it has agreed an FTA with the EU is that the GSP+ regime under which it exports at present, although fairly liberal, is not secure.
It can be argued that the market access of ACP states that have initialled, but not yet finalised, an interim or full EPA is less secure. Their access is based on being listed in an autonomous regulation that the EU introduced in December 2007. Again, there have been no signs so far that the EU is contemplating the threat of removal from the list as a spur to completion of the negotiations, but it remains an option. There are suggestions that the apparent keenness of the Commission and some member states for more rigorous ‘graduation’ in the new GSP (which removes some benefits from countries that are deemed too competitive in certain products) could be designed partly to exert leverage on countries such as India and Brazil in the current ongoing FTA negotiations. Making the GSP a less attractive alternative may increase their willingness to compromise on an FTA. While this is speculative, once an interim EPA has been agreed, as is the case with the Pacific, having it formally ‘approved’ by Europe does increase security.