EPA negotiation issues between West Africa and the EU

Contents

1. Background and Context of the EPA negotiations between the EU and Wes...
2. Latest developments and implications for the ACP.
2.1 Key facts
2.1.1 The regional dimension is undermined.
2.1.2 The implications of the signature of an IEPA in Côte d’Ivoire and...
2.2 Towards a regional EPA: why such a delay?
2.2.1 The market-access offer: still no agreement despite the concession...
2.2.2 Conclusion of an agreement on the PAPED.
2.2.3 Ongoing discussions on the disputed clauses.
2.2.4 Delays in the implementation of the ECOWAS CET and non-resolution...
2.3 Wider developments affecting ACP-EU trade
2.3.1 Duty-free and quota-free access for all LDC products since October...
2.3.2 The banana dispute between Latin America and the EU: repercussions...
Information Sources.

About this update:

CTA’s Executive brief on the rice sector was published in March 2009 and in CTA’s Agritrade: ACP–EU Trade Issues (2009 Compendium). This update consists of:

1. Background and key issues: briefly summarising the original executive brief, and where necessary, updating developments related to key issues;
2. Latest developments and implications for the ACP: reviewing developments that have taken place since the publication of the original executive brief; examining the implications of recent developments for the ACP countries concerned.

The original executive brief (2009) is available on request from: info@agritrade.cta.int.

1. Background and key issues of the EPA negotiations

Since 2002, the European Union (EU) and the WA region (WA - 16 countries) have been negotiating an Economic Partnership Agreement (EPA), a free-trade agreement intended to replace, from 1 January 2008, the non-reciprocal preferential access enjoyed by the African, Caribbean and Pacific (ACP) countries since the Yaoundé Conventions (1967-1974) and the Lomé Agreements (1975-2000). After having been called into question by the non-ACP developing countries, this preferential scheme was seen as inconsistent with the rules of the World Trade Organisation (WTO). It was therefore decided to replace it with regional EPAs. The negotiations concern an agreement which would allow ACP exports to enjoy duty-free and quota-free access to the European market for all products, except rice, bananas and sugar. In exchange, the ACP countries must also allow duty-free access to their market for their ‘main’ imports. This market opening would inevitable involve a decrease in customs revenues (which represent in WA a very significant share of government revenues) as well as increased competition between imports from the EU and local production. After five years of negotiations, the two regions have not yet reached an agreement, and Côte d’Ivoire and Ghana have signed a bilateral interim EPA with the EU, thereby breaking ranks with the regional bloc.

For the time being, no WA customs union exists. Eight French-speaking countries (Benin, Burkina Faso, Côte d’Ivoire, Guinea, Mali, Niger, Senegal and Togo) have a customs and monetary union, the West African Economic and Monetary Union (UEMOA), and the countries of this area and seven others (Cape Verde, Guinea Bissau, Nigeria, Sierra Leone, Liberia, Ghana and Gambia) have formed a free-trade area which is in the process of becoming a customs union, the Economic Community of West African States (ECOWAS). In addition to these 15 countries, the WA region includes Mauritania which does not belong to either of the aforementioned integrated areas but must join them if it wants to be part of the regional EPA. Finally, although the majority of the countries in the WA region are least developed countries (LDCs - 12 out of 16), the non-LDCs (Côte d’Ivoire, Ghana, Nigeria and Cape Verde) are among the main exporters to the EU (more than 80% of exports). Consequently, it is more in the interest of the latter group of countries to sign an EPA in order to maintain the widest possible access to the European market since LDCs enjoy free access via the Everything but Arms (EBA) initiative. Cape Verde has not been considered as an LDC since 2008, but it benefits from a three-year transitional period during which it can still export under the EBA scheme.

WA is the main ACP region in terms of its importance in EU trade (approximately 40% of ACP-EU trade) and the EU is WA’s main trading partner (30% of the region’s trade in 2007). In this context, a change of trade regime is a strategic issue for the future of WA economies. The agricultural and food sector represents a significant share of trade between the two regions (18% during the 2005-2007 period) and employs the majority of the population (between 60 and 85% of the total population is rural, except in Cape Verde where it represents 30%). Whereas WA runs a large trade deficit in non-agricultural products, it has a surplus in agricultural products, with a positive balance of €1.25 billion for the 2005-2007 period. This has deteriorated sharply since the 1996-1998 period, since agricultural and food imports have increased by 51.6% while exports have grown by only 14%.

Despite the preferential access to the European market, agricultural exports to the EU have stagnated in recent years, but the structure of exports is still based strongly on raw materials, in particular agricultural raw materials. The region’s exports are highly concentrated on a small number of products which are chiefly unprocessed or partly processed primary products. Cocoa and its derivative products alone account for 60% of agricultural exports to the EU, followed a long way back by fisheries products (11%) and tropical fruits (pineapples and bananas, with a share of 9%). The region’s countries therefore depend on a small range of agricultural products in terms of exports and benefit from preferential margins on the European market on a small number of products, but these margins are declining as result of multilateral liberalisation and the negotiation of free-trade agreements between the EU and other regions in the world. The issues in terms of market access are therefore limited to a very small number of products and concern only a few of the region’s countries, but its biggest exporters (non-LDCs).

Imports of agricultural and food products represent 14% of the region’s total imports from the EU and are increasing strongly. Accordingly, the opening of WA markets represents a serious threat to local production, as European exports are very competitive and de facto subsidised, hence the importance of the definition of sensitive products to be excluded from the agreement. Although imported agricultural and food products are relatively diversified, imports of cereals and cereal-based products, dairy products, meat and fish (as well as their preparations), fruit and vegetables and preparations, which are the main products in competition with WA products, represent 69.4% of the total.

As mentioned above, while the two regions have been negotiating an agreement since 2003 and the deadline fixed for concluding them was 1 June 2008, at the beginning of 2010 the negotiations have still not culminated in a regional agreement. Three points are holding up the conclusion of the negotiations:

• it took until the beginning of 2009 to prepare the WA market-access offer, after a long process, based on determining sensitive products in the framework of trade liberalisation. Each country has produced a market-access offer based on a comparable methodology (involving sensitivity criteria, indicators, marks and weighting). These offers were then consolidated into a regional offer and the consolidated offer was then presented to the EU. However, discussions between the two regions are still ongoing;
• the text of the agreement;
• the EPA development programme (PAPED) in WA is a unique approach among the ACP regions. This programme is a reformulation of the ‘support and upgrading measures’ approach intended to make the EPA a development instrument. Based on a participatory process, the process has encountered several difficulties, but was finally validated by the region in February 2009 and finalised during the same year.

The region had requested an extension of the WTO dispensation enabling it to export under the Cotonou Agreement beyond 2008. On the one hand, this request was rejected by the EC and, on the other hand, the proposed European stepping-stone agreement, limited to the liberalisation of trade in goods, was rejected by the region. Since 2008, LDC exports have consequently been subject to the Everything but Arms (EBA) scheme and those of Nigeria, the only non-LDC not having initialled an EPA before the end of 2007, to the Generalised System of Preferences (GSP), which is less favourable than the Cotonou system. Nigeria has requested application of the GSP+, but the EC has rejected its request on the grounds that Nigeria does not satisfy the necessary conditions, in particular concerning the ratification of certain international agreements. The risks resulting from this change of system led Côte d’Ivoire and Ghana to conclude an interim EPA (IEPA) on a national basis. However, this has undermined the negotiating powers of the regional block.

These two IEPAs include a liberalisation schedule for the various groups of products classified according to their sensitivity and all the provisions of a full EPA, but do not contain any precise commitment from the EC on the development part of the IEPA. Under the IEPAs, the exports of the two countries will have duty-free and quota-free access to the EU market, except for rice and sugar which will be liberalised after a transitional period (10 and 15 years respectively). On the other hand, the two agreements are not harmonised as regards the liberalisation plan (concerning which products are included in each group), which will undoubtedly create problems if the two countries are required to agree on a regional EPA. Under the Côte d’Ivoire-EU interim EPA, the tariff-elimination commitments commence immediately and will be completed in 2022. The products excluded from the tariff-liberalisation commitments represent 19% of the products imported from the EU by the country in 2004-2006 (representing 11% of tariff lines), more than one-third of these being composed of agricultural and food products (i.e. 226 tariff lines). The Ghana-EC interim EPA also provides for liberalisation over 15 years and approximately 20% of the products currently imported from the EU are to be excluded from liberalisation (representing 19% of tariff lines), 28% of them being agricultural products and 62% falling within the highest tariff band. The products excluded by both Ghana and Côte d’Ivoire include: cotton, poultry and other meats, tomatoes, onions, sugar, tobacco and beer. In addition to these products, Ghana has excluded wheat and frozen fish.

2. Latest developments and implications for the ACP

2.1 Key facts

2.1.1 The regional dimension is undermined

Given the deadlock in the negotiations for a regional EPA, Côte d’Ivoire and Ghana decided at the end of 2007 to initial an interim EPA. At the same time, the regional negotiations continued in 2008, when five negotiation rounds took place. At the end of 2008, the two parties had reached agreement on the provisions of the text on trade in goods, but still had to reach a compromise on export taxes, regional levies, the most favoured nation (MFN) clause and rules of origin, while the WA region as a whole still had to finalise the EPA development programme (PAPED) and its market-access offer.

2.1.2 The implications of the signature of an IEPA in Côte d’Ivoire and Ghana

On 28 November 2008, Côte d’Ivoire signed the EPA initialled one year earlier. The first tariff dismantling started at the beginning of 2008. Although some goods were already zero rated, others were subject to duties of 20%. Five agricultural products representing more than $US1 million in import value are integrated into the initial phase of liberalisation commitments (six other fishery products are also included). According to an ODI/ECDPM study analysing the interim EPAs, ‘several agricultural products seem to be products that might be in competition with local products’, it is however too soon to assess the effects of this tariff dismantling. According to this study Côte d’Ivoire could lose €139 million up to 2022 in customs revenues, with 60% of this loss being incurred in the period up to 2012, hence the importance of determining as quickly as possible the amount of the EPA adjustment aid.

On the other hand, in January 2010, Ghana had still not signed the agreement initialled in December 2007. However, this has not prevented the implementation of the first tranche of liberalisation, which commenced on 1 January 2009. The products on which customs duties are the highest are included in the first phase of liberalisation and four agricultural products are included in this first phase, including turkey pieces, wheat flour and oats. According to the ODI/ECDPM report, Ghana could lose €97 million in customs revenues by 2022, with 29% of this loss being incurred in the period up to 2012.

No new date has been set by the two parties for the conclusion of the negotiations, but the EU hoped to sign the EPA at the beginning of 2010. However, the way in which the future regional EPA and the interim EPAs concluded by Côte d’Ivoire and Ghana will be reconciled is still outstanding. The two interim EPAs have different liberalisation schedules and the texts of the agreements, although they include many similarities, are not the same.

According to the ODI/ECDPM study, the current situation is ‘clearly incompatible with a regional customs union’. Consequently, the only option open is to revise the liberalisation schedule; according to ECDPM, ‘the current schedules of Côte d’Ivoire and Ghana are [therefore] not pertinent’. The interim EPAs concluded by Côte d’Ivoire and Ghana include different clauses in this regard: in both interim EPAs, a clause provides for the liberalisation timetable to be reviewed but only the Côte d’Ivoire-EU EPA stipulates that ‘the liberalisation offer could be reviewed in the light of the ECOWAS CET when the other countries [join] the EPA’. The harmonisation of the liberalisation calendars between the region’s 16 countries is a difficult process and Côte d’Ivoire and Ghana will undoubtedly have to make important concession in relation to their initial offer, unless the European party is more flexible with regard to the regional offer. The market-access offers and liberalisation schedules of the two countries are very different and the lists of exclusions ‘are not identical’ and represent 11% and 19% of the tariff lines, and the EU is currently insisting that the regional offer, which must satisfy 16 countries, should limits its exclusions to 30% of tariff lines (see the box below).

The delays in finalising the regional EPA and the ECOWAS CET make this situation even more complicated, given that Côte d’Ivoire and Ghana began the first tariff-dismantlement phase in 2008 and 2009 respectively. This implies that for some products they will certainly have to restore tariffs before dismantling them again subsequently. This raises the question of how far the status quo clause authorises such a manœuvre.

The texts of the two interim EPAs are fairly similar as regards trade in goods (see annex). Some clauses which have been concluded in the framework of the interim EPAs are the subject of disagreement in the framework of the negotiations for a regional EPA. The two interim EPAs stipulate that ‘this agreement will be superseded by a global EPA concluded at regional level with the EC party at its date of entry into force. In this case, the parties will endeavour or ensure that the EPA at regional level preserves most of the benefits obtained by (the country concerned) under this agreement’. Concerning the provisions of the text of the agreement, in principle the region’s 16 countries have the same interests, however, given the threshold of 70% of tariff lines demanded by the EC, the regional market-access offer might not be able to take into consideration the interests of the region’s 16 countries in terms of protecting the sectors which are seen as priority sectors.

Main provisions concerning trade in goods (customs duties, trade-defence instruments, non-tariff barriers)

Sources: ECDPM, ODI: The new EPAs: comparative analysis of their content and the challenges for 2008, 31 March 2008.
http://www.acp-eu-trade.org/library/files/ECDPM-ODI_EN_310308_ECDPM-ODI_...

EC, Fact sheet on the interim EPAs - West Africa: Côte d’Ivoire and Ghana, 27 January 2009.
http://www.acp-eu-trade.org/library/files/EC_EN_270109_EC_West-Africa.pdf

2.2 Towards a regional EPA: why such a delay?

At the beginning of 2009, the EU and the WA region agreed to conclude the EPA by 30 June 2009. In March 2009, WA presented its first tariff-liberalisation offer. The EC considered that it did not comply with article XXIV of the GATT and asked the region to revise its offer. Despite several negotiation meetings in the period up to mid-June, it proved impossible to reach a compromise on this point and the other outstanding issues; the EC accordingly announced that the EPA would be concluded in October 2009. This EPA was intended to cover ‘initially, only trade in goods and development cooperation linked to the EPA’. The intention was that the other aspects would be negotiated during 2010, with a view to concluding a full EPA. However, no major progress has been made and it was decided at the meeting of 21-25 September 2009 in Brussels, that the deadline of October 2009 for a partial regional EPA could no longer be met. In November 2009, the two parties reached an agreement on the articles of the agreement relative to development but negotiations on the market-access offer and other disputed points are still deadlocked.

2.2.1 The market-access offer: still no agreement despite the concessions made by WA

Although the WA regions has completed the process of preparing a joint market-access offer for the region’s 16 countries, it is now the degree of market opening and the liberalisation schedule on which the two parties are in profound disagreement, despite the fact that WA has revised its proposal several times.

In the negotiations at senior and technical level in Dakar from 16 to 20 February 2009, WA tabled a preliminary market-access proposal for the liberalisation of 60% of imports from the EU over 25 years (2010-2034). The EU expressed its doubts about the proposal’s compatibility with article XXIV of the GATT governing free-trade agreements, in terms of coverage and the transitional period, and asked the region to revise its offer.

An improved offer was tabled at the Dakar meeting of 16 to 23 July 2009, proposing to open regional trade for 63.12% of imports from the EU, again over a 25-year period. The EC however maintained that ‘the improvement made is still marginal and this offer is unlikely to contribute to the economic development of the region’s countries’. The two parties then held in-depth discussions on the region’s market-access offer. In particular they carried out an economic analysis, product by product, rather than focusing on the thresholds, at the technical level negotiations of 21-24 September 2009.

At the negotiation meeting of 23-24 October 2009, in Abidjan, the WA negotiators presented a new revised market-access offer. This offer was the fruit of in-depth internal consultations within the region. ‘A large number of products […] have been reclassified’. These products include certain animal products (4 products), plant-origin products (83 products), vegetable- and animal- fat-based products (7 products) and drinks and prepared food products (18 products). This offer, which proposed a tariff dismantling of 67% of goods over 25 years, was examined by both parties at a meeting from 10 to 13 November 2009. The EC asked WA to revise its offer once again in order to increase the liberalisation to 70% of tariff lines and to accelerate the liberalisation of certain products. The WA negotiators apparently undertook ‘to consider’ this request. However, at the joint meeting of 4-5 February 2010 on the market-access offer for goods, ‘the WA party indicated that it was not yet in a position to submit a new access offer with a 70% liberalisation rate’, thereby not respecting the mandate given to the WA party. This delay can be explained by the fact that the region has not yet completed its work on the offer.

At the same time the EC has been urged in some quarters to adopt a more flexible approach in the negotiations. Enda Tiers Monde has published an examination of the legal arguments in favour of the position adopted by WA which wants limited reciprocity in the EPA. The organisation maintains that, at the current time, there is a legal vacuum in the WTO rules regarding the treatment of what it calls ‘mixed regional trade agreements’, that is to say inter-regional free-trade agreements involving, on the one hand, developed economies and, on the other hand, less-developed and developing economic groupings. According to its analysis the WTO rules are not at all explicit as regards the level of tariff liberalisation that less developed and developing countries must implement, nor as regards the length of the transitional period that has to be respected. It adds that given ‘the implicit recognition of a possible asymmetry by the EC’ and by taking a weighted average of 80% of all trade as the appropriate level of product coverage, if the EU liberalises 100% of imports, WA should liberalise only 60% of its imports from the EU to be in compliance with the WTO rules. In the same way, as regards the length of the transition period, according to Enda’s report, in the light of current practices in agreements between developed countries and developing countries, there should be no objection, given these ‘exceptional circumstances’ to a transition period of 25 years being granted in the framework of a WA-EU interim EPA (as is the case in the framework of the Cariforum-EC and EAC-EC agreements).

A recent study carried out by GRET at the request of the French Development Agency (AFD) reinforces the position of the region and Enda. It has analysed 41 free-trade agreements in force and reveals that some agreements have liberalisation levels of below 80% and have not been contested at the WTO. This shows the region’s market-access offer in a new light. In particular, in the EU-Mexico free-trade agreement, 54.1% and 98.1% of imports in value of Mexico from the EU and EU imports from Mexico respectively are liberalised, which represents 66% of trade between the two regions. According to the report published by GRET, given the number of LDCs in the region, it is unlikely that an agreement liberalising 67% of imports from the EU would be challenged at the WTO. The French Foreign Affairs Commission’s report submitted to the French National Assembly last December also calls on the EC to review its position, in particular as regards the liberalisation rate and schedule. According to the report, ‘the European Commission’s position is based on its own interpretation of the GATT rules and does not correspond to the practices of free-trade agreements’ and it recommends the EC ‘to introduce a system of asymmetrical trade preferences’.

If the EC maintains its position, and the region fails to reach an agreement on the 70% of imports and tariff lines needing to be liberalised, other instruments could be used to maintain a certain level of protection for sectors deemed to be sensitive and incapable of coping with an increase in imports from the EU. WA could, instead of including certain sensitive products in the exclusion list, use tariff quotas for these products, which would enable them to benefit from some protection and regulation since imports will be subject to quotas, but also to extend the coverage of the agreement. Moreover, if the region is induced to liberalise sectors seen as sensitive or priority sectors, it is important that the safeguard instruments included in the agreement are sufficiently simple to trigger in the event of surges in imports.

The WA region is due to submit its new proposals ahead of the next negotiations scheduled for mid-March 2010.

2.2.2 Conclusion of an agreement on the PAPED

While the market-access offer still needs to be adjusted, ‘the text of the articles relative to development in the EPA’ was finalised and accepted by both parties during 2009. The amount of the PAPED still needs to be validated by the European side but very good progress has been made in the discussions. It was validated by the region at a regional workshop on 2-4 February 2009 in Accra devoted to the community-development programme and the PAPED. This validation of the PAPED document was however ‘subject to the integration of the observations and recommendations’ of the workshop participants.

The PAPED programme has five strategic headings:

• diversification and growth of production capacities;
• developing intra-regional trade and facilitating access to international markets;
• improving and strengthening trade-related infrastructures;
• implementing indispensable adjustments and integrating other trade-related needs;
• EPA implementation and monitoring-assessment.

In accordance with the NEPAD initiative to strengthen production capacities and with the sensitive products determined, the PAPED puts the emphasis on three main value chains: food supply; cotton and textiles/clothing; and tourism. Moreover, the fields covered by the PAPED concern:

• reinforcing opportunities (sanitary and phytosanitary measures, standards, trade facilitation, competitive production, EU-WA value chain);
• reducing negative effects (tax reforms and compensation, social issues and macroeconomic stability);
• implementation (capacity building, increasing intra-ECOWAS trade flows and trade with the EU, the expected investment spill-over effects of the programme, improved competitiveness, relative impact on the government’s finances).

During the meeting, the amount for the implementation of the PAPED of €9.5 billion was called into question as being inadequate. The answer given was that this figure did not represent ‘the total costs of all the necessary adjustment measures, which moreover are being discussed with the EU’. Finally, the region effectively asked for €9.5 billion over five years, but this amount will have to be increased to compensate for lost taxes.

Significant progress was achieved at the meetings in April, July and September 2009, but it was only in November in Abidjan that the two parties reached an agreement on the articles relative to development which will be included in the EPA. During those meetings, the PAPED financing and implementation procedures and the support that the EU has to provide above the compensation for lost taxes were discussed.

Another question discussed was the WA proposal to ‘link the implementation of its commitments in the framework of liberalisation and the progress achieved in improving the region’s competiveness and production capacities, on the one hand, and, on the other hand, the financing of the programme costs by the EC’. At the meeting of 21-25 September 2009 this proposal was rejected by the EC. Finally, following the agreement concluded in November, the EC has undertaken ‘through the Joint EPA Council, to seek synergies between the rate of the implementation of WA’s liberalisation commitments and progress achieved in the implementation of the PAPED, in particular in relation to the mobilisation of financial resources and the improvement of the region’s competitiveness and production capacities.’

Another subject of discussion between the two parties was whether or not to include a clause committing the EC to providing additional financing following the signature of the agreement. The EU was against this proposal as it did not want to undertake to provide support not drawn from existing resources. At the September meeting, WA proposed a new wording whereby ‘the EC and its member states undertake to provide the financing necessary for the implementation of the development components of the EPA’. This wording was finally accepted by the EC which has undertaken to find additional sources of financing at the level of other donors. Moreover, the EC has undertaken to ‘create new financing mechanisms if the Cotonou Agreement should expire’.

2.2.3 Ongoing discussions on the disputed clauses

Making rules of origin more flexible

Negotiations on rules of origin are ongoing. The WA party side, like the other ACP regions, greater flexibility in the way these rules are applied to exports on the EU market. In the framework of the region’s two interim EPAs, provisional rues of origin are applied (EPA general rules of origin – Council Regulation 1528/2007) and will be replaced by those negotiated at regional level.

According to the report of the May 2009 meeting of experts, given ‘the impossibility of obtaining a totally reworded text on the rules of origin’, the two parties agreed in May 2008 to ‘negotiate a provisional agreement on rules of origin which would be an improved version of Cotonou’ and to insert a review clause in the EPA. In this framework, the EC has proposed provisional rules for the agricultural sector, fisheries and textiles. However, WA considers the EC proposal to be insufficient and has therefore prepared an alternative proposal. The main points of divergence between the two parties would appear to concern:

• the scope of coverage of the products concerned which is seen as insufficient;
• the question of asymmetry;
• the level of simplification;
• regional accumulation;
• rules of tolerance;
• administrative cooperation.

In March 2009, discussions were held on specific rules for agricultural products and, at the meeting of experts of 20-21 July 2009 in Dakar on rules of origin, an agreement was reached on ten chapters and headings for the products of chapters 2 to 23 of the harmonised system. Agreement still needs to be reached on the remaining chapters concerning products containing sugar and fish and shellfish of chapters 3 and 16. As regards fisheries products, the group has rejected a new offer put forward by the EC, which had requested WA to withdraw all its demands relating to the fishery sector in this regard. On the other hand, the parties have reached an agreement on only some chapters as regards industrial products.

According to a study published in the Revue d’économie du développement on the rules of origin in the future WA/CA-EU EPAs, ‘the development objectives of the EPAs could be satisfied with a maximum rate of imported content of 90-95% for LDCs and 60-70% for non-LDCs’.

The inclusion of the MFN clause

The inclusion of the most favoured nation (MFN) clause, which guarantees that neither of the two parties to the agreement will grant more favourable treatment to a third party than that granted to the other party, is subject to discussion between the two regions.

WA is against its inclusion on the basis of the wording proposed by the EU, which has introduced the concept of ‘major trading partner’, which does not exist in the other trade agreements concluded by the EU, according to the ODI/ECDPM report. In most agreements, this clause applies to developed countries; the EU wants, with this formula, to include emerging countries such as China or India, a major trading partner being defined as a ‘country whose share of world exports exceeds 1% or 1.5%’. This clause could consequently create a problem if the region decided to initiate negotiations with Chine for example. This is a probability given the rapid development of trade between China and WA, although it involves above all Chinese exports to WA (in 2006, Chinese exports represented 12% of the region’s imports). According to ECDPM, ‘West Africa has accepted the inclusion of the MFN clause in the EPA, but only if it is applied to Europe in accordance with the WTO rules. Thus, the WA region rejects the EC proposal intended to introduce the ‘major trading partner’ concept.

At the September 2009 meeting, the EC presented a new proposal which has not yet been finally examined by WA.

The inclusion of a review clause

The WA side would like the EPA to include a binding clause requiring both parties to review the agreement after five years, ‘with the possibility to amend the text if necessary’. This issue was discussed at the July negotiations, but no agreement was reached, ‘the EC would prefer a non-binding political declaration’. At the September 2009 negotiations, this issue was discussed, but according to a report by Enda Tiers Monde’s, ‘no decision was taken’.

Given the risks inherent in the agreement as regards trade opening and lost customs revenues, such a clause could prove very useful. For example, a review after five years of the safeguard clauses, the trigger mechanism and the implementation of the agreement would enable their effectiveness to be measured and adapted if necessary.

The use of trade-policy measures

Whereas in other ACP regions the use of trade policy instruments such as export taxes, import licences or bans, was at the heart of the negotiation, this issue has been given little attention in the discussions between WA and the EU. Yet, some countries in the region use such instruments, whether for the purposes of generating government revenues, food security or protecting new industries. Clauses prohibiting the use of these instruments could consequently create a problem for some countries in the region. Guinea for example, which is a major exporter of mining resources, uses export taxes which represent 20% of government revenues.

The interim WA agreements stipulate that no new tax taxes can be introduced or tax increases implemented (except temporarily) for purposes of protecting the environment, new industries or for reasons of monetary stability, and after consultation with the EC. In other EPAs (such as the full Caribbean-EU agreement), these taxes must be abolished within three years after the implementation of the agreement. Given the use of these instruments by certain countries in the region, it is important to ensure that the clause which will be integrated in this regard in the full regional EPA will not go against the application of these measures, if the countries in question want to continue to use them. In the WA region many of the products subject to export taxes are mining products, but some agricultural product are also subject to such taxes in order to protect new industries or for reasons of food security.

Concerning quantitative trade restrictions (in particular import bans and import/export licences), the Ghana-EU agreement prohibits all quantitative trade restrictions other than duties or taxes (as in most other EPAs), whereas this is not specified in the Côte d’Ivoire-EU agreement. This clause will have significant consequences for Nigeria which has put in place numerous import bans in the agricultural sector (dead or live birds, pork, beef, eggs, cassava, some refined vegetable oils and fats, butter, cocoa powder and biscuits, pasta, packed fruit juices, water) and some export bans for reasons of food security (maize). Moreover, food-security regulations require a licence for the export of unprocessed food products.

Concerns about European agricultural subsidies

As regards EU subsidies to European farmers, and in particular export refunds, discussions are making slow progress. At the September 2009 negotiations, WA reiterated its request to the EU to terminate refunds and internal support measures. It also called on the EU to include an article in the text of the EPA leading to their elimination, specifying that ‘if this elimination should not prove possible, it proposes that the two parties should consider solutions to all trade distortion effects, including losses in the competiveness of WA exports to the EU market and local products on markets’.

The EC reiterated that this issue could not be dealt with at bilateral level and had to be addressed in the context of the WTO negotiations. In this framework, export refunds would be eliminated in full by 2013 and internal support measures distorting world trade would be reduced.

2.2.4 Delays in the implementation of the ECOWAS CET and non-resolution of the question of community levies

The application of a common external tariff (CET) across the 16 countries of the WA region (including Mauritania) is a prerequisite for the implementation of the EPA; however at the beginning of 2010, no CET has yet been fully defined and cannot therefore be applied.

Adopted on 12 January 2006, the ECOWAS CET was due to be applied on 1 January 2008 after a two year transitional period. Designed as an extension of the UEMOA CET adopted in 2000, it was intended to include four tariff bands of 0, 5, 10 and 20%, as well as a statistical tax of 1% and a community levy of 0.5%. Moreover, the countries have the possibility of applying two taxes, the degressive protection tax (TDP), which is intended to compensate for significant falls in tariff protection linked to the implementation of the CET and the import activity tax (TCI), which is in fact a safeguard measure.

Nigeria judged the CET to be insufficiently protective and called for the introduction of a fifth 50% band, to protect sensitive products and new industries. Finally, the 36th summit of heads of state and government decided on 22 June 2009 to adopt a fifth band, taxing imports at 35%. Although the creation of this fifth band can be seen as an improvement, some observers consider that it is inadequate, given the food-security challenges facing the region. The Réseau des organisations paysannes et de producteurs d’Afrique de l’Ouest (Roppa) has also called for the possibility of 50% protection, ‘a CET on the agricultural products of the ECOWAS lower [than this rate] would not allow the region to achieve the strategic development objectives, in particular those of the ECOWAS common agricultural policy’.

Despite this progress in defining the CET, the latter cannot be applied, as the products falling within the scope of this fifth band need to be reclassified, which requires a consensus among the 16 countries. One problems that remains to be resolved concerns the methodology to be adopted for the reclassification of these products; in all likelihood this methodology has not yet been defined and the final communiqué of the June 2009 meeting urged ‘the Commission to accelerate discussions on the regional methodology to determine the products to be transferred to the fifth band as well as the reclassification’. According to ECDPM, the finalisation of the customs union was to be one of the two main objectives of the ECOWAS summit to be held on 16 February 2010.

Moreover, the question of maintaining the ECOWAS regional levies has still not been resolved. WA wants to be able to maintain community taxes on imports within the ECOWAS which are used to finance regional integration. According to the Enda report on the September 2009 negotiations, the EC has recognised the importance of these levies […] but claims however that it is not certain whether it would be legal not to eliminate them during the tariff-disarmament process.’ These levies are in fact additional customs duties levied on all imports up to 0.5% and 1%, and represent 50% of the revenues of ECOWAS and UEMOA. The region is now proposing to exclude these levies from the definition of customs duties. No decision has yet been taken on this subject, but the Enda report maintains that the ‘region will not change its position’.

2.3 Wider developments affecting ACP-EU trade

2.3.1 Duty-free and quota-free access for all LDC products since October 2009

Since October 2009, the region’s 12 LDCs (and Cape Verde) have been entitled to duty-free and quota-free access for the three products which still benefit from a transitional period, namely rice, bananas and sugar. However, this improved access will not in principle have any major implications, given that WA LDC exports of these products are minor, although a number of them are rice producers.

2.3.2 The banana dispute between Latin America and the EU: repercussions for Côte d’Ivoire

Following the agreement concluded on 15 December 2009 between the EU and Latin American countries on bananas, the preferential access to the European market which Côte d’Ivoire has maintained thanks to the signing of the IEPA does not have the same significance. The agreement will reduce customs duties from €176/tonne to €114/tonne by 2017, but with an immediate reduction to €148/tonne on the signing of the agreement, probably early in 2010. In exchange, Latin American banana exporters will abandon their complaints against the EU filed with the WTO and will not attempt to obtain additional tariff reductions on bananas in the framework of the Doha cycle.

As Côte d’Ivoire’s banana exports represent 5.11% of total exports to the European market (average over the 2006-2008 period), this agreement could cause serious problems for Côte d’Ivoire’s exports. Bananas from Côte d’Ivoire currently represent 4.4% of the EU’s imports, but this proportion has continued to decline since 2001. According to the ICTSD, the agreement is likely to reduce ACP banana exports by 14%, while Latin American exports are expected to increase by around 17%. The conclusion of future free-trade agreements with Central American countries is likely to intensify even further this process leading to the erosion of preferences. In order to help ACP banana-exporting countries adapt to this reduction in the MFN right, the EC has undertaken to pay €200 million of aid, in addition to aid already committed.

One solution for Côte d’Ivoire’s banana producers would be to switch their production to fair trade or organic certified products in order to distinguish their products from Latin American bananas. Although many Caribbean producers have already made this switch, WA producers do not seem to have made sufficient use of this possibility.