A briefing note was prepared for the African Trade Forum meeting in November 2011 focusing on the potential impacts of EPAs on intra–African trade set out in a joint UN Economic Commission for Africa/AU/African Development Bank report. The key messages emerging from the report were:
- ‘while EPAs will present some opportunities, they also pose challenges to RECs’ [regional economic communities’] ability to raise intra- and inter-REC trade’;
- ‘with proper policy sequencing and harmonisation, EPAs and regional integration could be compatible’;
- EPAs could potentially ‘present an opportunity for greater trade in services, as well as the development of regional frameworks in trade-related areas such as investment and competition’;
- ‘however, EPAs may present obstacles if the initial conditions of African countries are ignored and a big-bang approach is adopted.’
The analysis argues that ‘the EPAs’ focus relies too heavily on trade liberalisation’, neglecting the use of trade policy tools to promote supply-side developments. It further argues that EPAs could result in ‘displacing intra- and inter-RECs trade already taking place’, particularly if the provisions of various EPAs on sensitive products and liberalisation schedules are not harmonised within regional groupings. Further problems could also arise from rules of origin provisions ‘which are generous to the EU, and much better than the current RECs rules of origin’.
Yet EPAs could also provide a stimulus for ‘a speedy resolution of the issue of overlapping memberships’ of RECs, which constitute ‘a persistent barrier to intraregional trade’. EPAs could also serve to enhance the credibility of African regional integration processes, particularly if they were ‘supported with sufficient financial resources for diversification and supply-side strengthening’.
Against this background, the UNECA report recommends that:
- ‘comprehensive EPAs should focus on rationalizing and harmonizing the sensitive lists among the sub-regions’;
- the EPAs should involve rules of origin that ‘not only allow cumulation across the EPA groupings, but also bring coherence to the rules of origin in the different RECs’;
- EPAs should allow for the ‘full implementation of existing trade-related protocols in the various RECs’ before proceeding with ‘a phased implementation of EPAs commitments’;
- in their approach to trade negotiations, African governments should ensure ‘more coordination among the RECs, the EPA negotiators and the African Group in the WTO’.
The potential regional problems and challenges posed by the EPAs are especially marked for agricultural goods, because of the high potential for intra-regional trade in these goods. The issue of harmonising sensitive goods and liberalisation schedules, as highlighted by the UNECA/AU/AfDB report, is a long-standing concern.
All states that have initialled or signed EPAs have excluded some items from any liberalisation and ‘backloaded’ others (i.e. delayed liberalisation on them) – and in most cases, sensitive agricultural goods figure prominently in both categories. Yet, apart from in the EAC, none of these lists are identical; in fact, they mostly differ greatly among members. This means that neighbours are excluding or backloading different sensitive agricultural goods, which could result in imports from the EU into states in which tariffs have fallen being ‘deflected’ into neighbouring countries with higher tariffs. This may, in turn, cause problems for genuine intra-regional trade if not dealt with as recommended by the UNECA report.
Differing rules of origin among the different RECs and EPAs are also likely to be particularly problematic for agricultural trade. The rules under the EPAs and some RECs tend to protect agricultural processing rather than the production of raw materials. This makes it difficult for countries with a seasonal shortage of raw material inputs to export under preferential terms to their partners (but allows the latter to import from the world market to keep their mills and canneries rolling). Having different rules in each grouping compounds the problem.