Summary
The EU-ESA EPA is not a single agreement but a collection of five individual yet similar agreements covering a population of some 45.5 million. For 4 countries these agreement have been in place since 2012 while the 5th is scheduled to enter into force shortly. These agreements fall far short of the ambitious regional EPA, embracing up to 18 countries with a population of 541 million, which the EC initially sought. This has split the larger ESA region into 3 distinct groups in terms of trade relations with the EU, thereby complicating intra-regional trade integration efforts. Since the signing of the EPAs EU agri-food exports to ESA EPA signatories have grown strongly (+48%), despite there being no growth in direct EU exports to Zimbabwe. The growth in the value of EU agri-food imports from ESA4 countries was been slower at only +27%. This growth was attributable to the 164% growth in the value of imports from Madagascar which now dominates the ESA4 agri-food export trade to the EU. EU agricultural reforms and the multiplication of EU trade agreements with non-ACP countries are serving to reduce the value of traditional agri-food sector trade preferences, particularly for Mauritius and Zimbabwe. The Brexit process further complicates the situation, although a ‘no-deal’ Brexit could potentially open up new opportunities on the UK market for Mauritian refined sugar exports. Other important issues faced relate to the impact of the new EU plant health regulations on horticulture and floriculture exports and the impact of the expansion of EU agri-food exports on opportunities for the structural development of local agri-food sectors serving national and regional markets. ESA EPA signatories face differing challenges and opportunities as a result of current trends in EU agri-food exports to ESA EPA signatories and the wider Eastern and Southern African region. How EPA provisions are implemented in practice in the future, in the face of Brexit related commercial pressures, will have an important bearing on the future evolution of EU-ESA trade, as well as the scope for the development of intra-regional trade in the Eastern and Southern African region.
Overview and Structure of the EU-ESA Agreements
The EU’s EPA with Eastern and Southern African (ESA) countries is not so much a regional agreement as five agreements with Madagascar, Mauritius, Seychelles, Zimbabwe and most recently the Comoros, with each government making its individual tariff reduction commitments. The agreements with Madagascar, Mauritius, Seychelles and Zimbabwe (ESA4) have been under provisional application since May 2012, while the agreement with the Comoros was signed in 2017 (1).
‘The EU is the largest trade partner of ESA4 for its exports and the second largest partner for its imports’, with the EU being ‘the largest trade partner for Seychelles and Mauritius for both their exports and imports’. The EU also enjoys first place as a destination for Malagasy exports and second place as a source of imports. ‘As for Zimbabwe, the EU is the fourth and third largest partner for its exports and imports respectively’, since ‘Zimbabwe trades mainly with South Africa’. The EC highlights how ‘all ESA4 countries are implementing the Agreement and have made tariff cuts according to their liberalisation schedule’ (1).
In terms of bringing more ESA countries into the existing framework the EC notes how ‘Comoros has already signed the agreement in July 2017 and is expected to ratify it in 2018’, while ‘Zambia can, at any time, also sign and ratify the agreement that it initialled in 2007’. However ‘other ESA States will first need to submit market access offers before eventually joining the agreement’ (1).
In addition the EC acknowledges there are ‘non-tariff measures that need to be tackled by constructive dialogue between the competent services and by appropriate EU support’ (1).
The EC highlights how trade in agricultural products has been increasing more strongly than trade in non-agricultural products since 2013 (+48.1% compared to +19.7%).
Most exports from ESA EPA countries to the EU are zero rated at the MFN level by the EU and hence would enter duty free regardless of the trade regime applied.
Trends in EU Exports to the ESA4
Since 2013, the first full year of application of the ESA4 EPAs, total EU exports to the ESA4 have increased 19.6%. However total EU export values have fluctuated markedly over this period, with export growth only being sustained in the case of the largest market Mauritius. From 2013 to 2017 exports to Mauritius and Madagascar increased 35.7% and 27.6% respectively, while export values to the Seychelles and Zimbabwe were down 7.2% and 10.3% respectively (1). By 2017 Mauritius accounted for just under 50% of EU exports to the ESA-4 countries, up from 44% in 2012 (1). This may in part be linked to both the front loading and extent of Mauritian tariff reduction commitments entered into under the agreement with the EU (1).
EU exports to ESA-4 2012-2017 (€ millions)
| 2013 | 2014 | 2015 | 2016 | 2017 | % change | Share ESA4 2013 | Share ESA4 2017 | |
| Madagascar | 537 | 532 | 563 | 556 | 685 | +27.6% | 27.4% | 29.2% |
| Mauritius | 862 | 875 | 899 | 949 | 1,170 | +35.7% | 44.0% | 49.9% |
| Seychelles | 321 | 237 | 302 | 279 | 298 | -7.2% | 16.4% | 12.6% |
| Zimbabwe | 241 | 221 | 220 | 174 | 192 | -10.3% | 12.3% | 8.2% |
| ESA-4 | 1,961 | 1,865 | 1,981 | 1,958 | 2,345 | +19.6% | ||
| Comoros | 42.4 | 39.2 | 44.8 | 61.5 | 52.7 | +24.3% |
Between 2013 and 2016 the % share of EU agri-food exports in total EU exports to ESA4 countries increased from 10.6% to 14.1%, on the back of a steady increase in value of EU agri-food exports over this period and a relative stagnation in overall EU exports to the ESA4.
However between 2016 and 2017 the value of total EU exports to ESA4 countries increased strongly (+19.8%). This was linked to a recovery in total EU export values to all ESA countries between 2016 and 2017, with Mauritius (+23.3%) and Madagascar (+23.2%) leading the way. This meant while the growth in EU agri-food exports to ESA4 countries continued (+11.6%), the % share of agri-food products in total EU exports fell back to 13.1%
EU Agri-Food exports to ESA-4 and the Comoros 2013-2017 (€ millions)
| 2013 | 2014 | 2015 | 2016 | 2017 | % change | Share ESA4 2013 | Share ESA4 2017 | |
| Mauritius | 115 | 130 | 154 | 158 | 176 | +53% | 55.3% | 57.1% |
| Madagascar | 50 | 51 | 47 | 57 | 72 | +44% | 24.0% | 23.7% |
| Seychelles | 28 | 31 | 37 | 41 | 45 | +61% | 13.5% | 14.6% |
| Zimbabwe | 15 | 27 | 21 | 20 | 15 | 0% | 7.2% | 4.9% |
| ESA-4 | 208 | 239 | 259 | 276 | 308 | +48% | ||
| % EU exports | 10.6% | 12.8% | 13.1% | 14.1% | 13.1% | |||
| Comoros | 13 | 13 | 14 | 20 | 20 | +54% | ||
| % EU exports | 31% | 33% | 31% | 32% | 38% |
Mauritius is accounting for an increasing share of EU agri-food exports to the ESA4. This may in part be linked to the role Mauritius plays as a processing platform for the production of value added food products for onward trade across the Eastern and Southern African region, with in this context the EU being an important source of low cost raw materials (e.g. cheap milk powders and grain).
Beyond the ESA4 the EU has a growing export trade with the Comoros (+24.3%), with agri-food products playing and increasingly important role in this export trade. Over the 2013-17 period EU agri-food exports to the Comoros grew 53.8%, with the share of agri-food products in total EU exports to the Comoros increasing from 31% in 2013 to 38% in 2017. However as the EC points out this has not been impacted by the EPA agreement which has yet to enter into force.
Trends in EU Imports from ESA4 Countries and the Comoros
EU imports from ESA4 countries increased 14% between 2013 and 2017, with variable trends in import values from the Seychelles and Zimbabwe, a sustained decline in the value of imports from Mauritius from 2013 to 2016 (followed by a small recovery in 2017) and sustained strong growth in the value of Malagasy exports to the EU, which increased 60% between 2013 and 2017 (1). Developments in Malagasy exports to the EU reflected the emergence of a fragile political stability following democratic elections after 5 years of instability under military rule.
Total EU Imports from ESA-4 and Comoros 2013-2017 (€ millions)
| 2013 | 2014 | 2015 | 2016 | 2017 | % change | Share ESA4 2013 | Share ESA4 2017 | |
| Madagascar | 738 | 840 | 904 | 986 | 1,178 | +60% | 29.5% | 41.4% |
| Mauritius | 1,086 | 960 | 895 | 866 | 925 | -15% | 43.4% | 32.6% |
| Seychelles | 293 | 270 | 249 | 282 | 291 | -7% | 11.7% | 10.2% |
| Zimbabwe | 388 | 510 | 402 | 334 | 454 | +40% | 15.5% | 15.9% |
| ESA-4 | 2,505 | 2,580 | 2,450 | 2,469 | 2,848 | +14% | ||
| Comoros | 13.4 | 10.8 | 11.1 | 15.5 | 19.7 | +47% |
By 2017 Malagasy agri-food products accounted for over half of ESA4 exports to the EU with agri-food product exports from Madagascar to the EU increasing 164% from 2013 to 2017. Over the same period Mauritian agri-food exports to the EU declined in value by 34%, while Zimbabwean export values largely stagnated by on a variable trend.
EU Agri-Food Imports from ESA-4 2013-2017 (€ millions)
| 2013 | 2014 | 2015 | 2016 | 2017 | % change | Share ESA4 2013 | Share ESA4 2017 | |
| Madagascar | 180 | 196 | 224 | 348 | 475 | +163.9% | 24.9% | 51.7% |
| Mauritius | 323 | 260 | 218 | 220 | 213 | -34.1% | 44.7% | 23.2% |
| Seychelles | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Zimbabwe | 220 | 286 | 283 | 215 | 231 | +5% | 30.4% | 25.1% |
| ESA-4 | 723 | 742 | 725 | 783 | 919 | +27.1 | ||
| Comoros | 13.4 | 10 | 11.1 | 15.0 | 19.7 | 20.7% |
For the Comoros agri-food exports completely dominate their export trade with the EU, with over the 2013-17 period the value of Comorian agri-food exports to the EU growing 20.7%. According to the EC analysis the product categories essential oils and tropical fruit and nuts each accounted for around half of the value of Comorian exports to the EU.
Institutional Developments and Accompanying Measures
At the institutional level the EC notes how up to the end of October 2017 there had been 6 meetings of the EPA Committee in the EU-ESA context, with at the last meeting the main issues being addressed including:
- ‘Continuous support to EPA implementation under both the 10th and the 11th European Development Fund (EDF);
- Agreement on modernisation of rules of origin;
- Agreement to hold a dedicated meeting in 2018 to discuss the scope and objectives of the envisioned deepening of the agreement (covering additional topics) which the ESA4 have asked for. The deepening may evolve around the issues mentioned in the rendezvous clause of the interim agreement’ (1).
The EC highlights the importance of development assistance support to EPA implementation, with €10 million being allocated to each of the ESA4 countries under the SADC EDF regional indicative programme (1). The EC notes how in the Seychelles the programme will focus on ‘trade policy capacity building, private sector development in manufacturing and agriculture & fisheries, with a focus on niche sectors that could generate exports, and business to business trade promotion’. While in Madagascar and Zimbabwe EPA related development assistance is focussed on ‘SMEs development and trade facilitation in selected value-chains’ (1).
The EC concludes ‘in 2017, all the four ESA countries implemented their commitments, culminating in significant tariff cuts’, with ESA4 exports having further growth potential through ‘the implementation of domestic reforms and accompanying measures’ (1).
| Comment and Analysis
The first point to note is that the ESA configuration initially included between 16-18 Eastern and Southern Africa countries, with a total population of over 541 million. However currently only 5 on the initial ESA configuration countries are involved in implementing an EPA with the EU. Together this embraces a population of 45,485,117 or 8.4% of the total of the initial ESA configuration population. In addition of course a separate EPA has been negotiated but not yet ratified with a further 5 countries which were part of the initial ESA configuration, namely the 5 members of the East African Community Customs Union (to which South Sudan has also indicated a willingness to accede). This embraces a further 36% of the ESA configuration population. The most populous countries in the initial ESA EPA configuration however remain detached from the ESA EPA process. This carries implications for the commercial importance of the ESA EPA for EU exporters.
In addition this leaves the initial EPA region split into three distinct groups in terms of their trade relations with the EU. This relates to both the extent and pace of their liberalisation of imports from EU suppliers and the scope left for the deployment of non-tariff trade policy measures. This is likely to pose challenges for regional trade integration across the Eastern and Southern African region. It is noteworthy that 4 of the 5 ESA EPA countries are island nations whose external borders are easier to control, while Zimbabwe is land locked with most of its international trade taking place through South Africa, with which it is in a free trade area and which has its own separate and distinct trade agreement with the EU. The second major point to note is that internal EU policy changes and the continued development of the EU’s external trade policy has reduced the value of traditional agri-food sector tariff preferences for two ESA countries (see part 2 of the ESA EPA brief for country specific details). What is more increasingly strict EU SPS requirement (notably for citrus black spot and under the EU’s New Plant Heath Regulation) and the mode of application of these requirement is making it commercially difficult for small scale horticultural exporters to exploit available tariff preference and establish themselves on the EU market. This trend in EU agri-food imports from ESA EPA countries needs to be seen in a context where EU agri-food sector enterprises are increasingly focussed on securing new export markets for their products, with this being reflected in the higher rates of growth in EU agri-food exports compared to overall EU exports. African markets are seen as particularly important in this regard given the high rates of population growth and rising incomes. This however is likely to pose serious problems for the structural development of national agri-food sector production for national and regional markets in Africa in countries with a strong agricultural base (e.g. Zimbabwe). It could however present opportunities for other countries with a narrower agricultural production base, which are in a position to situate themselves as value added food product manufacturing platforms serving regional markets (e.g. Mauritius). Current trends in EU-ESA EPA agri-food sector trade thus present both challenges and opportunities for different ESA EPA configuration members. What is clear is that the challenges faced are only likely to be compounded by the UK’s departure from the EU under a ‘no deal’ outcome to the current Brexit negotiations. This being noted ESA EPA members have differing levels of exposure to the UK market in their trade with the EU. In terms of overall exports to the EU28 market 3 of the 5 ESA EPA countries have an above average dependence on direct exports to the UK market in their overall exports to the EU28, while 2 countries have virtually no direct exports to the UK market. However for individual products the export dependence on the UK market is greater than the overall trade figures indicate. In addition, the trends in dependence on the UK market vary, with Zimbabwe’s trade dependence on the UK market increasing since the Brexit referendum, while dependence on the UK market has declined in the case of Mauritius and Seychelles. However this relates only to direct exports to the UK market and does not factor in triangular trade into the UK market via initial points of landing in other EU27 countries. ESA EPA configuration members will thus be impacted with different levels of severity by the Brexit process, with more detailed country and product specific analysis being required to obtain an accurate picture of the impact of Brexit on the future value of the existing ESA EPAs with the EU (see part 2 of the ESA EPA brief for country specific details). Dependence on the UK Market in Overall Export Trade with the EU28 (€ and % share
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Sources:
(1) EC, ‘Individual reports and info sheets on implementation of EU Free Trade Agreements’, Commission Staff Working Documents, pp 241-245, SWD(2018) 454 final, 31 October 2018
http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157473.PDF
(2) EC, Market Access Data Base,
http://madb.europa.eu/madb/statistical_form.htm
(3) COMESA Secretariat ‘Overview of the ESA-EC EPA’, 9 December 2009
http://trade.ec.europa.eu/doclib/docs/2010/january/tradoc_145680.%20Overview%20of%20the%20ESA-EC%20EPA,%20COMESA%20Secretariat.pdf