Beyond Market Access for Economic Development

Gerrit Faber, Jan Orbie

• Publisher: Routledge
• Year: 2009
• ISBN:
  9781134015788
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Negocios en general

The Economic Partnership Agreements between the European Union and the Africa, Caribbean, and Pacific (ACP) countries have drastically restructured Europe's trade architecture towards the third world. This volume examines the consequences of EPAs for development in sub-Saharan Africa (SSA).

Starting from the observation that the establishment of free trade as such will substantially impact upon economic development, the different contributions focus on the potential contribution of non-traditional aspects of EPAs. More specifically, the authors analyze the role of Aid for Trade schemes, regulatory integration issues and broader foreign policy considerations. How can these non-market access aspects stimulate development in Africa, and how have they been addressed in the EPAs? In short, this brings us to the question whether the 'light version EPAs' as they currently stand are a missed chance or a blessing in disguise?

Part I
New dynamics in EU–ACP relations

The genesis of EPAs

1 EPAs between the EU and Africa

Beyond free trade?

Gerrit Faber and Jan Orbie¹

The Economic Partnership Agreements (EPAs) between the European Union (EU) and the countries of Africa, the Caribbean and the Pacific (ACP), have drastically restructured Europe’s trade architecture towards the third world. The establishment of EPAs constitutes a watershed in Europe’s relations with Africa. The scope and impact of these agreements will be even bigger when the ‘interim EPAs’, in force since January 2008, are transformed into ‘full EPAs’ encompassing new trade issues such as the liberalization of services and competition rules.

This chapter introduces the main issues and questions of this book. We explain why the focus of this publication is on the non-trade aspects of the EPAs. First, and for various reasons, the EU policy-makers have always emphasized that EPAs are comprehensive partnerships for development in Africa, rather than narrow free trade agreements. Second, there are solid economic arguments why free trade as such will not substantially impact upon economic development, and the broader institutional context of trade relations should be addressed. Thus, whereas most commentators and academics have focused on the relevance of EPAs in terms of market access between the EU and the ACP,² this volume will look at the trade-related issues in the context of EPAs. More specifically, we will analyse the role of Aid for Trade (AfT) schemes, regulatory trade issues, regional integration schemes and broader foreign policy considerations. The contributions of this book examine the position of countries of sub-Saharan Africa (SSA), although several chapters will consider what lessons we can learn from the EU–CARIFORUM EPA.

The political rationale behind full EPAs

The EU has a long tradition of supporting developing countries by preferential trade arrangements; the tool has been used since the very start of the European Economic Community (EEC) in 1958 (part IV of the EEC Treaty). The latest fruit from this tree is the Cotonou Agreement (2000) between developing countries in Africa, the Caribbean and the Pacific on the one hand and the EU on the other. This agreement paved the way for the substitution of the non-reciprocal trade preferences for reciprocal free trade arrangements in combination with a broad agenda of regulatory policies and supporting measures—EPAs. In 2008 old style preferences expired and from that moment on the wide-ranging EPAs should have become the backbone of Europe’s relationship with Africa if the negotiations worked out as planned. This did not happen. Instead, ‘interim’ or ‘light versions’ of EPAs have been concluded, and a few ACP countries did not even sign up to these agreements. The interim agreements introduced free trade areas in goods among the parties from 2008 onwards, while trade-related issues and services will be negotiated later in order to expand the interim agreements into full EPAs.

European policy-makers themselves have depicted EPAs as innovative and effective tools for development in Africa. Whereas the Union’s new generation of bilateral trade agreements with Latin American and especially Asian countries are explicitly driven by economic interests, the EU emphasizes that development concerns are central to the EPA process (EC 2006b). In addition to the explicitly normative objectives behind EPAs, it should be noted that these new agreements are also remarkably comprehensive, at least in the view of EU policy-makers. Rather than free trade agreements in the traditional sense, EPAs should encompass a whole range of trade-related issues. The establishment of reciprocal trade preferences, in terms of market access, has been the focus of much scholarly analysis and public debate. But this is only one aspect of the new EPAs.

This volume will focus on the non-market access dimension of EPAs. Starting from the observation that the establishment of free trade as such will not substantially impact upon economic development, the different contributions focus on the potential contribution of non-traditional aspects of EPAs. More specifically, the authors analyse the role of Aid for Trade schemes, regulatory integration issues and broader foreign policy considerations. The following questions will be considered: What do we understand by ‘new issues’? What are the contents of the broad trade-related agenda? Why have new trade issues been included in the EPA negotiations? How can they stimulate development in Africa, and how have they been addressed in the EPAs? In short, this brings us to the question whether the ‘light version EPAs’ as they currently stand are a missed chance or a blessing in disguise?

The objective of the EPA negotiations between 2002 and 2008 has been to establish reciprocal and comprehensive trade agreements with six ACP regions. Anno 2008, this target has not been reached and the Union’s trade relations with its former colonies look more complicated than ever. Only one ACP region has initialled a full EPA, namely the Caribbean countries of the CARIFORUM (including the Dominican Republic, Guyana, Haiti and Surinam). Interim EPAs have been negotiated with a number of other ACP countries (e.g. Cameroon, Ghana, Côte d’Ivoire, Zimbabwe, Botswana, Fiji, Papua New Guinea) and sub-regions (e.g. the East African Community). They declared to continue negotiations on full EPAs, although progress beyond 2008 has been difficult. Other countries have reverted to preferential market access under the Generalized System of Preferences (GSP) (e.g. Congo Brazzaville, Nigeria, Gabon) and its ‘Everything But Arms’ (EBA) variant for the least-developed countries (LDCs) (e.g. Sudan, Angola, DR Congo, Liberia, Senegal). South Africa continues to export under its existing free trade agreement with the EU. This complex situation has rendered the regional integration between LDCs and non-LDCs of Africa even more difficult than before (see Chapter 6).

Although this hotchpotch situation has never been rationally designed by EU or ACP policy-makers, it can be seen as the outcome of political decisions made in the second half of the 1990s. Despite their divergences, the various post-Lomé trade regimes have two characteristics in common. First, they are compatible with the rules of the World Trade Organization (WTO). The interim and full EPAs are in line with the provisions in Article XXIV of the General Agreement on Tariffs and Trade (GATT) on the establishment of free trade areas and customs unions (CUs) (see Chapter 3). The GSP and EBA alternatives correspond with the Enabling Clause of the GATT, which foresees preferential market access based on objective and transparent criteria. Second, the new trade arrangements have increased the differentiation of the ACP. The unity of the ACP as an international actor has been eroded because of differences between the ACP regions, on the one hand, and between least-developed and other countries, on the other. Both the quest for compatibility with the rules and the aim for differentiation have been central in the Union’s post-Lomé strategy since 1996 (see Orbie 2007).

In contrast, the pursuit of the new trade issues into the EPAs have been less straightforward. The Commission’s Green Paper (1996) on the reform of the Lomé regime shows a clear preference for reciprocal trade relations with a differentiated ACP group, but remains vague on the incorporation of trade-related issues into the post-Lomé trading system. When regulatory disciplines in areas such as competition policies, investment codes and intellectual property rights are mentioned, this is mainly in the context of the EU as an international donor. EU development cooperation could support the performance of ACP states in these trade-related areas, but the negotiation on these disciplines is largely left to the level of the WTO (EC 1996: x–xiii, 30, 52, 64). In their reactions to the Green Paper, only a few European member states make mention of the new trade issues.³ The trade articles of the EU–ACP Cotonou Agreement are also fuzzy on the comprehensiveness of the EPAs. Article 36(1) talks about ‘WTO compatible trading arrangements, removing progressively barriers to trade […] and enhancing cooperation in all areas relevant to trade’ (italics added). At this point, there is no suggestion of far-reaching negotiations on trade-related rules on services, investment, competition, etc.

This has gradually changed since the beginning of the millennium. The Commission has increasingly emphasized that it does not simply pursue free trade, but that ambitious agreements including behind-the-border regulations are envisaged. In particular, it points to rules in the areas of investment, competition, government procurement and trade facilitation (the ‘Singapore issues’), as well as in services, intellectual property rights and geographical indications. For example, the then Trade Commissioner, Pascal Lamy, contrasted the ‘old-fashioned formula of the twentieth century’ with the ‘WTO-plus’ agreement with Chile which he considered ‘a precedent for the future’ and a ‘model for trade relations in the twenty-first century’ (Agence Europe 18–19 November 2002).⁴ These issues soon became a central part of the Union’s demands towards the ACP. In 2006 the Commission stated that

Excluding all commitments on trade-related rules (e.g. Services, Investment, Government procurement, Trade facilitation, IPR and Competition) would be very difficult to reconcile with Cotonou. Moreover rules are the essence of the development dimension of EPAs. On these areas it is clear that the EC does not look for access for its companies. Its objective is to promote regional harmonisation as well as regional preference so that operators would be faced with predictable, transparent and enforceable rules. A step-by-step approach with Review clauses in order to define an acceptable package of EPA rules would be an acceptable compromise.

(EC 2006b: 5)

These issues also feature prominently in the ‘Global Europe’ trade strategy towards India, South Korea and the ASEAN (e.g. EC 2006a: 8). The conclusion that the EU has been ‘the most persistent and vigorous advocate of a broad trade agenda’ (Young 2007: 789) also applies to its bilateral trade policies, including those with the ACP.

How can we explain this? Why has the EU so strongly supported the creation of trade-related disciplines? For one thing, these could serve Europe’s offensive economic interests abroad. While the importance of tariffs and quotas has decreased, European exporters are increasingly confronted with complex behind-the-border measures in foreign markets. This may be all the more true for the ACP markets. The economic relevance of traditional trade from the EU to the ACP countries may be limited (see Chapter 3) but the potential of ACP markets could be more attractive for European investors and service providers. Transposing EU regulations in trade-related areas to the ACP countries would benefit European business. In addition, such comprehensive EPAs would be a precedent for future bilateral negotiations with Asian and Latin American trading partners and for the negotiations within the Doha Development Round. Indeed, the provisions on services and investment in the CARIFORUM agreement have been presented as a blueprint for future bilateral trade agreements (see Chapter 7). There is a complex interrelationship between the Union’s position on EPAs and its agenda in other trade fora. The inclusion of new trade issues into bilateral agreements partly forms a response to the limited progress within the WTO and the abandonment of investment, competition and government procurement issues of the multilateral trade agenda; but it is also used as a leverage to strengthen the EU’s negotiation position on these issues in the Doha Round and in bilateral negotiations.

Nevertheless, the European industrial lobbies and governments have not enthusiastically supported the inclusion of the ‘deep trade agenda’ and the Singapore issues in the WTO (Young 2007: 806)—and this is even more true for the EPAs. This observation leads us to explanations that focus on the institutional dynamics of the European trade negotiations with the ACP. For example, the European Commission (EC), which has long taken the lead in the EPA negotiations (see Chapter 2), has a clear bureaucratic interest in promoting a broad trade agenda. Negotiations in trade-related services, investment, competition and intellectual property rights allow the Commission to be involved in areas which are strictly speaking beyond its competences—both inside the EU and internationally (Dür and Zimmermann 2007: 780). In addition, the negotiation dynamics around the drafting of a trade negotiation mandate by the EU member states may stimulate the adoption of wide-ranging objectives. This corresponds with what Kerremans (2000) calls the ‘restaurant bill problem’. When multiple principals are fearing that, at the end of the day, the costs associated with a trade agreement will be equally shared among each other, they will be tempted to broaden the scope of their demands. In order to avoid losing more than the others, they will order a more extensive menu than they would normally do. The inclusion of new issues in the EU’s negotiation mandate also makes it possible to compensate for painful but necessary concessions in sensitive agricultural and vulnerable industrial products. They could even serve as side-payments for the EU’s negotiation partners, e.g. provisions on labour mobility in the services negotiations (see Chapter 8) and AfT commitments (see Chapter 11).

Finally, there is an ideological component to the Union’s ambitious trade agenda. Given the absence of clear European economic interests in the EPA negotiations, the ideological factor may be all the more important (see Chapter 3). The move to reciprocity and WTO compatibility is obviously inspired by the post-Cold War international economic consensus (or orthodoxy) on the merits of free trade for development. The growing emphasis on regulatory issues at the national level and on AfT schemes reflects the new ‘post-Washington Consensus’ in international development thinking since the beginning of the new millennium. But there is also a distinctively ‘European’ ideological factor. The Commission’s discourse in the context of EPAs suggests that the EU attempts to export its model of deep integration at a regional level to the developing world. The EU’s recipe whereby economic liberalization and regulatory standards have gone hand in hand, complemented with mechanisms for economic redistribution and the provision of political, social and economic rights, may well be exported to the world scene. Confronted with the so-called failure of the Lomé regime which provided non-reciprocal market access, European policy-makers believe that ACP countries would benefit from regulatory integration along the lines of the EU model.

This thinking links up with a new strand in the literature on development economics, which has emphasized that market access barriers are not the main problem of developing countries. Although there is a large variation among these countries, most countries suffer from a pervasive institutional weakness that makes it extremely difficult to create a stable political and economic environment that is conducive to social and economic development. In addition, many economies in this group struggle with geographical handicaps in terms of climate and geographical position. EPAs have to address these formidable challenges by impacting upon governance capacities at ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of illustrations
• Notes on the contributors
• Preface
• List of abbreviations
• PART I New dynamics in EU–ACP relations: the genesis of EPAs
• PART II Spurring regional integration?
• PART III The new trade agenda and deep integration
• PART IV Aid and trade: squaring the circle
• PART V European foreign policy through EPAs
• PART VI Taking stock