While the debate in East Africa on the EAC-EU EPA continues, with the UNECA warning of the dangers posed by the agreement to the structural economic transformation of East Africa, the German Chancellor Angela Merkel has described the EPAs as ‘not right’ and possible in need of re-negotiation. A key issue will be laying the basis for EU trade agreements to contribute to the structural economic transformation of African agro-food sectors. This issue needs to be taken up in the post-Cotonou negotiations in order to:
- enshrine an EU commitment to the flexible and responsible implementation of EPA commitments in legally binding agreements;
- address the systematic bias against smallholder producers and small scale exporters which exists in design and implementation EU food safety and SPS control systems;
- extend the current EU regulatory initiative son UTPs to ACP-EU supply chains;
- revise the design of loan and investment support instruments to effectively meet the needs of local agricultural producers and agro-processing companies.
According to press reports ‘Germany is calling for the renegotiation of some of the European Union’s trade agreements with Africa’, with the current agreements being seen as ‘unfair’. Addressing development NGOs at a meeting in Hamburg in June 2017 Chancellor Merkel reportedly argued some of the agreements negotiated between the EU and Africa were ‘not right’ (1), stating ‘We’ll speak again at the EU Africa summit in autumn about how we need to renegotiate them’ (2). The EU-Africa Summit is scheduled for November 2017 (1).
These remarks came in the face of calls by the government of Tanzania for a renegotiation of the EAC-EU EPA which it termed ‘skewed and exploitative’, while ‘Kenya’s Industrialisation and Trade Principal Secretary Dr Chris Kiptoo said Chancellor Merkel’s comments were timely because some of the agreements that the continent has with the EU are not beneficial’ (1).
This needs to be seen in the context of earlier warnings from the UN Economic Commission for Africa to EAC governments ‘against entering into an Economic Partnership Agreement with the European Union arguing that it will neither spur economic growth nor bring wealth to the region’s citizens’(3). The UNECA maintains ‘if the EPA is signed, local industries will struggle to withstand competitive pressures from EU firms, while the region will be stuck in its position as a low value-added commodity exporter’. According to the UNECA report ‘if the EAC-EU EPA is fully implemented, the region risks losing trading opportunities with other partners, industrial output, welfare and GDP’ (3).
The report claims ‘the bilateral deficit will increase given that the EPA does not represent improved market access for EAC countries to Europe over the short-to-midterm, as tariff eliminations are implemented’. It was maintained ‘Intra-EAC imports could decline by $42 million – mainly in manufacturing – while tariff revenues from EU imports would decline by $169 million’ Overall ‘welfare in the EAC will likely reduce as a consequence of EPA. Most losses will be accrued by Kenya – $45 million – while the EU will register a huge welfare gain of $212 million’ (3).
The UNECA analysis further claims ‘the deal with Europe will be calamitous unless EAC countries are able to clearly define what their infant industries are, as well as identify sub-sectors they intend to protect’. Furthermore it was argued provisions related to domestic support policies could undermine existing industrial policy initiatives (3).
In terms of wider African integration efforts it was argued ‘while the EPA purportedly intends to respect regional integration programmes, they are adding to the complexity of the task’. More specifically it is argued the EPAs could compromise efforts to promote a continental FTA (3).
However Rwanda’s Trade Minister referred to the UNECA report as a ‘political tool’ and a ‘step back in long term negotiations to secure a positive deal with the EU’.
However, EC officials continue to push African governments to sign on to EPAs in their current form. In June 2017 the outgoing EU Delegate to Nigeria called for ‘Nigeria to reconsider its reluctance to sign the Economic Partnership Agreement’, arguing Nigeria need not figure the negative impact of the EPA. It was implied the Nigerian government’s policy was falling victim to the vested interests of ‘some Nigerians in positions of authority and businesses’ who are ‘just blocking the process to signing the EPA’ (4).
Meanwhile EU representatives are talking up the prospects of the Gambia signing on to the West Africa-EU EPA following the change of government, with it being noted the new government has ‘shown interest in joining the EPA’, which the only question being when the government would sign on to the EPA. Gambian officials however for their part have noted that while ‘the process has begun …the actual ratification of the deal is nowhere in sight’. Some parliamentarians while in opposition had previously come out firmly against the EPA (5).
|Comment and Analysis
In responding to Chancellor Merkel’s remarks on the concluded EPAs Kenya’s Principal Secretary Kiptoo made specific reference to the forthcoming renegotiation of the Cotonou Agreement. It was the Cotonou Agreement which provided the framework for the negotiation of the EU’s economic partnership agreements. It was always intended these trade arrangements would remain an integral part of the comprehensive ACP-EU cooperation framework alongside arrangements for development financing and political dialogue.
The forthcoming Post-Cotonou negotiations could provide an opportunity for reviewing how the existing EPAs can be made more development friendly to address the concerns of the Tanzanian and other African governments over the long term structural economic development impacts of some of the contentious provisions of the EPAs. This could involve addressing four related areas.
Firstly enshrining in the new agreement legally binding commitments to the flexible and responsible implementation of EPA commitments, so that growing African demand for food products provides the market base for the structural transformation of African agro-food sectors. Currently expanding and evolving African food demand is sucking in imports from the EU on a massive scale, often in ways which undermine efforts to develop local agriculture and integrated agro-food sector supply chains (e.g. in the poultry and dairy sector).
There is a need to ensure EPA provisions on the use of non-tariff trade policy tools are not utilized in ways which systematically remove existing protections aimed at sustaining and fostering local agricultural production and locally integrated agro-food processing activities. This will require the interpretation and application of EPA provisions in these areas to be subordinated to structural economic development requirements of African agro-food sectors, through a formal recognition of what Joseph Stiglitz has described as the ‘right to development’.
Secondly, it will require the EU to put far more resources into the design and application of effective SPS and food safety controls systems which take into account the conditions and constraints of smallholder producers and small scale exporters. This should not involve any weakening of EU SPS and food safety control regimes; rather it should ensure that the existing bias against small scale producers and exporters under SPS and food safety control regimes is removed.
Thirdly it will require an extension of the EU’s current work on strengthening the functioning of agricultural supply chains and the elimination of unfair trading practices (UTPs) to ACP-EU supply chains, so current abuses do not continue to undermine farm level investment by reducing the returns to agricultural producers to levels which make further investment in export orientated production non-viable (see companion article ‘Proposed EC Regulatory Initiative on UTPs Needs to be Extended to ACP-EU Supply Chains’, 8 September 2017).
Fourthly it will require the redesign of investment facilities to create loan financing instruments suited to the needs of local producers and local agro-processors, so that strong local partners can be created who can effectively engage with EU agro-food sector enterprises in ensuring the structural transformation of ACP agro-food sectors, so that more value is being added and more jobs created in local agro-food sector supply chains on a financially sustainable basis.
If these four issues are substantively addressed in the post Cotonou negotiations then the basis could be strengthened for the EU’s new trade agreements to effectively support the structural transformation of ACP agro-food sectors.
This however will require African governments to take up the issue of the inclusion of EPA related issues in the post-Cotonou negotiations in their discussions with the German government in the run up to November Africa-EU summit. Some initiative in this regard from EU member states governments will be essential since the European Commission itself has little interest in addressing these issues as part of the Post-Cotonou negotiations, despite its obvious relevance to core EU migration concerns.
(1) The East African, ‘Africa’s Trade Agreements with the EU ‘Skewed’, 25, June 2017
(2) Reuters, ‘Merkel calls for some EU-Africa trade contracts to be renegotiated’, 19 June 2017
(3) East Africa, ‘UN body warns region against signing trade deal with EU’, 24 April 2017
(4) Nigeria Today, ‘Reconsider stand on EPA EU envoy tells Nigeria’, 26 June 2017
(5) The Point, ‘Gambia to sign free trade deal with EU’, 17 August 2017
|Key words: Chancellor Merkel EPAs, UNECA Tanzania, Kenya, Rwanda, Gambia,
Nigeria, post Cotonou, ‘right to development’, West Africa EPA, EAC EPA
Tags: Post Cotonou, West Africa EPA, East Africa EPA