comparing eac, sadc and ecowas epas: what can esa epa draw from them?

What can ESA EPA draw from them?

Isabelle Ramdoo

24-25 November 2014

Harare, Zimbabwe

ComparingEAC, SADC and ECOWAS EPAs

Part I: State of play

• Recently concluded EPAs: Who’s in? Who’s out?

• Trade regimes with EU: where are we?

Part II. Comparing EPAs:

• SAT: What’s in? what’s out?

• Key provisions on market access

• Rules of origin

Part III: EU’s trade agreements with third parties

• Where are we?

• Recently concluded ones: what’s important

• TTIPand TTP: Game changers?

Structure of presentation

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Part I: State of playWho’s in? Who’s out?

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Who’s out? (27 ACP countries)

b. What regimes apply to African countries?

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Part II: Comparing EPAs

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• ECOWAS and SADC EPA groups concluded a regional EPA in July.Market access preserved, once agreements enter into force; Forthe moment MAR applies for those that were under the regul;TDCA continues for SA; and GSP for Nigeria

• EAC: Regional agreement concluded on 14th Oct. (after deadline).Kenya non-LDC, currently trading under GSP till agreement entersinto force. Others EBA. Estimated loss: $140 million per year; Keysectors impacted fresh produce (40% destined to Europe), mainlyfresh roses and cut flowers (5 – 8.5% duties); coffee (2.6% tariff).But regional unity preserved.

• Cameroun: ratified goods-only EPA. No regional agreement inCentral Africa

• ESA: Mauritius, Seychelles, Madagascar, Zimbabwe areimplementing interim EPAs. No regional agreement.

In a Nutshell: What’s in? What’s out?

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What’s in?

1. On the EU side, save for South Africa, all countries have DFQF on all products: Timeframe, since 1st January 2008 for those that were covered under MAR; for others, once EPAs enter into force

2. On the African side: Trade in goods agreement + devt;

Coverage: at least 75% openness over up to 25 years

South Africa: 105 GI; EU: 251 GI

Subsdies on agric. Exports eliminated (except in ESA)

Development: PAPED Euros 6.5 billion

Flexible but different RoO (on cummulation & asymetry (EAC)

What’s out?

Excluded: Sensitive products, including both agricultural and industrial products that are produced domestically

To be negotiated: Services; Investment; IPR; and other trade related issues (RDV clause)

1. Tariff phase down

1. EAC EPA: to liberalize 82.6% over 25 years, as follows

Exclusion: agricultural products, wines and spirits, chemicals, plastics, wood based paper, textiles and clothing, footwear, ceramic products, glassware, articles of base metal and vehicles.

Key provisions on market access

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2. SADC to liberalize 80% of its trade with the EU.

2 MA lists: SACU region, namely Botswana, Lesotho, Namibia, Swaziland (BLNS) and South Africa; and Mozambique (agreed already in 2007)

SACU Tariff phase down

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EU Tariff phase down for SA

Geographical indication: 105 SA GI and 251 EU GI protected

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3. ECOWAS Tariff Phase down: 75% of its tariff lines, based on CET, over 20 years

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Key other provisions

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1. Value Tolerance

ESA: 15% ex-works price (for EU and ESA)

SADC: Same as ESA

EAC: 15% allowed on weight on Ch 1- 24

15% ex-works price for Ch. 24 – 97

ECOWAS: 10% ex-works price for EU

15% ex-works price for ECOWAS

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Key provisions on RoO

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2. Cummulation

3. EAC has asymmetric RoO for on specific products: Key ones include

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Part III: FTAs with third countries

State of play since ESA signed EPA (2009):

Being implemented

EU – Peru – Columbia: 2013

EU – Central America (Costa Rica, Panama, El Salvador, Guatemala, Honduras, Nicaragua, 2013

EU – South Korea: 2011

Concluded

EU – Singapore: Agreement initialed in Sep. 2013 but investment negotiations concluded in November 2014

EU – Canada : 26 Sep. 2014 concluded. To be signed – 1st FTA with a G8

EU – Eastern Neighbourhood: Moldova, Armenia, Georgia: Initialled in Nov. 2013

EU – Ukraine (concluded in 2011, but signature suspended)

Currently been negotiated:

EU – India: launched in 2007

EU – ASEAN (with 4 countries – concluded with Singapore; ongoing with Thailand, Vietnam and Malaysia)

EU – Mercosur: launched in 2000; suspended in 2004; resumed in 2010

EU – Japan: Negotiations launched in April 2013

EU – US: Negotiations started in July 2013

EU – China Investment Agreement: Launched in November 2013ECDPM

Yet, more than 60% of EU’s trade is currently not covered by FTA.

• WTO negotiations are in a deadlock; Key issues about agriculture and industrial products were not addressed in Bali and will be increasingly difficult to get concensus

• Big players feel need to reshape global trading system as globalization deepens and the world become more interconnected. About 60% of global trade is made of of trade in intermediaries. Multilateral system does not seem respond rapidly enough to changes to fit a 21st century trading system

• Strategic interest. Geopolitical rise of China – soon to be the leader in global trade. A way for EU and US to join forces to maintain access to key markets

Mega-deals: a game changer?

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Main trading partners of large economies

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Fig 1: EU’s Main trading partners, 2010 Fig 2: US’s Main trading partners, 2012

Fig 3: China’s Main trading partners, 2010

If successful, mega trade deals are expected to have significant impacts on:

• Trade flows, investment direction and intensity;

• The structure of regional and global value chains;

• The regulatory dimension of trade (i.e redefining the rules of the game)

• Current FTAs the EU have

This new generation type of agreement are expected to be about:

• WTO ‘plus’ issues – i.e go deeper than what is provided for in current WTO agreements

• WTO ‘extra’ issues – i.e to cover issues that are not part of WTO such as data protection, trade facilitation in supply chain management, export restrictions, consumer protection etc

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More importantly, they will :

1. not only be about tariffs, but about:

a. Regulation, standards, norms

b. Licensing practices

c. Domestic taxes

d. Investment

2. And not only about trade, but about

a. Human rights;

b. Environment;

c. Labour rights

Need to look at the future trade relationship between Europe and Africa in that broader context – the inter-connectedness between Europe and big players will have spill-over effects on EPAs (cf RDV clauses – mandate, depth, coverage etc)

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In a nutshell, we are talking about:

1.Trans-pacific partnership (TTP) – 12 countries incl. US, Japan, Canada, Australia,

Singapore, Mexico, Chile, New Zealand, Brunei, Peru, Vietnam and Malaysia.

2. Transatlantic Trade and Investment Partnership (TTIP) between EU and US

1. Regional Comprehensive Economic Cooperation (RCEP), 16 countries of which 10

ASEAN countries (Brunei, Myanmar, Cambodia, Indonesia, Laos, Malaysia, Philippines,

Singapore, Thailand, Vietnam); Australia, China, India, Japan, S. Korea, New Zealand.

• Tariffs (more important for US-Pacific TTP than EU-US TTIP) and potentially subsidies in agriculture

• Trade in services, investment (possibly including state-investors dispute), intellectual property

• Trade-related issues such as government procurement, competition policy, e-commerce, environment, state-owned enterprises (for TTP)

• Regulatory and non-tariff measures such as norms, standards, testing requirements, procedures, technical regulation, food safety

Key elements of the TTIP and the TTP

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• Regulatory compatibility and convergence about rules will be the heart of the EU-US negotiations

• It is estimated that av. tariff protection on imports in EU and US range between 2.2 – 3.3% respectively, while ad valorem tariff equivalent protection form NTMs range between 19% - 73%.

• It is also estimated that up to 50% of those barriers could potentially be eliminated (most optimistic scenario)

• If standards are harmonized, this means that non-parties to the agreement may be requested to meet those standard to remain competitive on the market.

• Third countries (incl. African countries) may face higher compliance and trade costs if they want to maintain access to these markets (despite their existing trade regimes with EU – EPA or not!!) unless they are extented the mutual recognition agreements (under MFN??)

In the case of the TTIP between EU and US

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Where does that leave us in ESA?

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Impacts:

1. On the multilateral system:

• Might distract attention from WTO on key issues.

• As a reaction, other large developing economies might be tempted to do same (RCEP, FTAAP) leading to competitive liberalization.

• Will erode margins of preferences specially for LDCs under Hong Kong Commitments

• These issues might find their way back into the WTO at some point

2. Preference erosion:

• TTIP (EU-US): Not much impact on EPAs or AGOA. Trade structures are not same. Issues more about regulatory convergence and non-tariff issues

• TTP – (US – Pacific): Challenging for AGOA. Many Asian countries key competitors;

• RCEP: China, India have DFQF for LDCs. Preference erosion as non-Asian LDCs will get more access to Asian markets; For the rest, will be (even more) difficult to compete in Asia

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3. Rules taking

As already mentioned, might have implications on the regulatory frameworks through regulatory convergences (through mutual recognition agreements) in particular on services and investment

Important for ESA, because those have not been negotiated yet. Therefore key to ensure that ESA is regularly updated on what MRAs are negotiated to ensure the best deal

1. Forging strategic responses, through

a. Unilateral initiatives to calibrate domestic reforms to be prepared to meet standards. Otherwise the risk is marginalization since you will de facto become rules takers.

b. Regional/ continental trade negotiations should keep pace with these evolutions and by expediting regional agenda

c. In EPA Committee, these need to be regularly discussed. Use MFN clause here to the maximum extent in particular to seek the extension of MRAs on norms and standards; With US, ESA could seek a TIFA type of framework

2. Forging strategic alliances:

At the WTO, through the Africa and other groups. Big players might attempt to multilateralise some of these provisions (not only on rules but also WTO plus and extra ones). Key therefore to play a leading role to ensure developing countries’ interests are preserved, while being ensuring the trading system fits the evolving global landscape.

Conclusion: some suggestions

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comparing eac, sadc and ecowas epas: what can esa epa draw from them?

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