Summary
In reviewing the EU-Cote d’Ivoire EPA the EC has placed considerable emphasis on the 80% expansion of Ivorian banana exports to the EU since the granting of full duty free-quota free access under the interim EPA in place of the former ACP Banana Protocol. This is seen as a major success story. However 2018 could prove to be the high point of Ivorian banana exports. Ecuador’s accession to the EU-Andean Pact FTA from 1st January 2017 has seen a 14.4% expansion of Ecuadorian banana exports to the EU in 2017 (+186,613 tonnes) and a 20% growth in the first 6 months of 2018. This has seen the first decline in Cote d’Ivoire’s share of the EU banana market in a decade. If a ‘no-deal’ Brexit occurs and EU bilaterally negotiated $ banana TRQs are not apportioned between the EU27 and UK markets, this will result in a significant increase in competition for Ivorian banana exports to EU27 markets, given the UK has accounted in recent years for 20% of EU banana imports. This down turn in the fortunes of Ivorian banana exporters will coincide with the start of the phased elimination of import duties on EU products, which is scheduled to start from 1st January 2019 and take place over a 14 year period.
While the Cote d’Ivoire ‘stepping stone’ EPA was concluded and signed in November 2008, it was not ratified by the Ivorian Parliament until August 2016, with it provisionally entering into force on 3rd September 2016. However according to announcements by the government of Cote d’Ivoire liberalization of tariffs on imports from the EU will not start until 1st January 2019.
The EC highlights how ‘exports of Côte d’Ivoire to the EU have seen a steady increase’ and how since 2008 ‘all exports from Côte d’Ivoire enter the EU duty-free and quota-free’ (1). While Cote d’Ivoire maintains a trade surplus with the EU the size of this trade surplus is heavily dependent on the international cocoa price, with in 2017 cocoa beans accounting for 45% of the value of EU imports from Cote d’Ivoire and cocoa products a further 23%.
Cote d’Ivoire is even more highly dependent on agro-food exports than this figure suggests. According to the EC in 2017 natural rubber and bananas accounted for a further 8% and 4% respectively of total EU imports from Cote d’Ivoire. Indeed over the past 4 years, the main agro-food products exported by Cote d’Ivoire accounted for between 82% and 85% of total export earnings on trade with the EU (see table).
Main Ivorian Agro-Food Exports to the EU (€) 2014-2017
| 2014 | 2015 | 2016 | 2017 | |
| Cocoa beans (1801) | 1,242,814,130 | 1,878,182,954 | 2,110,357,584 | 2,107,017,343 |
| Cocoa Paste (1803) | 473,242,166 | 528,219,442 | 544,254,181 | 532,903,848 |
| Cocoa Butter (1804) | 314,226,652 | 392,456,058 | 345,729,214 | 400,441,547 |
| Cocoa Powder (1805) | 30,753,780 | 37,375,814 | 39,139,565 | 46,329,601 |
| Chocolate (1806) | 27,468,708 | 99,325,925 | 112,685,291 | 97,329,815 |
| Bananas (0803) | 169,320,894 | 185,294,112 | 229,135,698 | 234,991,907 |
| Pineapples (080430) | 14,929,193 | 18,990,029 | 16,023,969 | 21,352,717 |
| Guavas, Mangoes (080450) | 23,135,594 | 26,622,004 | 30,100,316 | 27,557,044 |
| Prep & Preser. Tuna (160414) | 111,500,828 | 98,534,980 | 113,885,569 | 125,900,179 |
| Natural Rubber (4001) | 257,187,803 | 270,903,678 | 268,689,128 | 395,787,568 |
| Sub-Total | 2,664,569,748 | 3,535,904,996 | 3,810,000,515 | 3,989,614,569 |
| Total value exports to EU | 3,256,307,140 | 4,254,833,384 | 4,548,341,331 | 4,677,867,938 |
| % share sub-total | 81.8% | 83.1% | 83.8% | 85.3% |
Source: EC, Market Access Data Base
This however needs to be seen in a context where according to the EC for most years the share of products entering under MFN zero tariffs ‘is around 60-65% of total exports’ (1). These products would enter the EU market duty free regardless of whether an EPA was in place, since they face no duty under The EU’s standard MFN trade regime.
The EC highlights how Cote d’Ivoire’s banana exports have increased ‘by 80% over the last decade (2007-2017), even as overall banana imports in the EU only increased by around 50%’. It further highlights how ‘the production of bananas for exports accounts for about 10% of agricultural GDP in Côte d’Ivoire’, employing around 10 000 workers directly with another 3 300 workers engaged in supporting activities. The EC argues this upward trend is ‘aided by having secured long-term duty free and quota free access to the European market through the interim EPA’ (1).
As with other EPAs trade in services and investment issue are not covered in the existing agreements.
In the course of 2017 and 2018 various technical issues related to Cote d’Ivoire’s tariff phase down commitments were addressed, laying the basis for the commencement of the opening up of the Ivorian market to EU exports from 1st January 2019.
The EC lays emphasis on the support it is providing to Côte d’Ivoire’s EPA Implementation Strategy which was adopted in October 2017. This includes ‘a series of programmes and projects that target value chain development, export competitiveness and industrialization’. These programmes use funding drawn from the regional ‘Competitiveness support programme in West Africa’ from which some €9.9 million has been allocated to Côte d’Ivoire. The aim of this regional programme is to:
- upgrade and support ‘consortiums of companies in target sectors and value chains’;
- strengthen ‘the capacities of the Private Sector Intermediary Organizations that will serve as a lever for modernization, competitiveness and growth for SMEs’;
- improve ‘the overall business regulatory environment’.
The EC is also supporting EPA implementation through: dedicated programmes for ‘customs cooperation on tariff and non-tariff issues’; ‘support on SPS measures to reduce barriers to trade’; fiscal diversification initiatives; and support in the design of trade defence instruments.
The report further highlights how dedicated support programmes in both the banana and sugar sectors had recently been completed.
In the coming period the EC is looking to focus on:
- ‘implementation of the different steps leading to the first tariff cut on the 1st January 2019’;
- finalising the negotiations on the rules of origin protocol;
- completing work on dispute settlement procedures;
- communicating better with stakeholders on the ‘challenges and opportunities of the interim EPA’.
The EC describes the commencement of liberalisation of the Côte d’Ivoire Market from 1st January 2019 as an ‘important step in EU trade’s relationship with Côte d’Ivoire’. The EC is committed to closely monitoring ‘each step of the liberalisation process’’ and to assisting Côte d’Ivoire with ‘the implementation of the EPA through trade related development assistance’.
While the EC rightly points out ‘it is too early to draw conclusions’ on the impact of EPA commitments, it highlights how ‘trade flows have steadily increased and the EU remains the primary trading partner of Côte d’Ivoire’. The EC further maintains ‘the EPA has provided predictability to new investors and led to increased production and market share in the EU for Côte d’Ivoire’s cocoa and bananas production, among others’ (1).
Significantly the EC see’s both the Cote d’Ivoire and Ghanaian EPAs as being ‘substituted by the regional EU-West Africa EPA once the latter enters into force’ (1).
| Comment and Analysis While virtually all of Cote d’Ivoire’s imports enjoy duty free access to the EU market, for Cote d’Ivoire cocoa beans and natural rubber accounted for 53.5% of total goods exports to the EU in 2017, up from 46% in 2013. This trade is in no way dependent on EPA preferences since EU MFN duties are set at zero for these products. This is similarly the case for oil products which account for around 9% of Cote d’Ivoire’s exports to the EU.The main areas where EPAs provide some level of tariff preferences are:· Cocoa Paste (1803), Cocoa Butter (1804), and Cocoa Powder (1805), where MFN tariffs would be between 7.7% and 9.6% and GSP duties would be between 2.8% and 6.1%;· Chocolate (1806),: where MFN duties would be 8% plus supplementary duties linked to the sugar content of up to €419 EUR / tonne· Bananas (0803): where MFN tariffs would be €114/tonnes· Pineapples (080430), where duties would be 5.8% and a minimum import price is in force; and· Tuna (160414), where MFN tariffs would be 20.5%. Additional EPA related tariff preferences were largely granted in the banana sector and for value added processed cocoa products. In other areas the EPA market access arrangements largely replicated pre-existing non-reciprocal duty free access arrangements. It is against this background that the EC has highlighted the growth in Ivorian banana exports to the EU since 2008.This has seen Ivorian banana exports to the EU28 market grow strongly, up some 80% over the past decade. However 2018 is likely to mark a turning point in the value of Ivorian banana sector tariff preferences. Not only is the access of $ banana exporters being progressively increased and tariffs slowly lowered (from €110/tonne in 2015 to $75/tonne in 2019), but in 2017 the worlds’ leading banana exporter, Ecuador, became party to an FTA with the EU. This came into effect for Ecuador’s exports on 1st January 2017. This saw Ecuador’s banana exports to the EU increased14.4% in 2017 (from 1,298,614 tonnes to 1,485,227 tonnes), with a further increase of 20% from January to June 2018 (3). This is seeing Cote d’Ivoire’s share of the EU banana market fall for the first time in a decade. It is these EU trade agreements with $ banana suppliers which are likely to have the greatest impact on the market position of Ivorian banana exports on the EU market in the coming years. This market situation could well be compounded from 30th March 2019 if no agreement is reached between the EU and the UK over the apportionment of bilaterally negotiated banana TRQs as part of the Brexit process. While the EU and the UK have agreed a joint position on the apportionment of WTO agreed TRQs between the EU27 and UK markets (although this is being challenged by WTO members), the European Commission has remained strangely quiet on the issue of the apportionment of bilaterally negotiated TRQs between the EU27 and UK markets. This is leading to concerns that no apportionment will take place and the EU27 market will need to absorb in full the existing $ banana TRQs. This needs to be seen in a context where in recent years the UK market accounted for around 20% of EU28 banana imports. From April 2019 Ivorian exporters would then face a sudden and significant increase in competition on EU27 markets, in a context where 78.5% of total Ivorian banana exports to the EU go to EU27 markets. Looking more broadly at the impact of the EU-Cote D’Ivoire EPA, the EC rightly points out that the impact of the EPA cannot really be assessed since it has not yet entered into force. However it should be noted the entry into force of the EU-Cote D’Ivoire EPA will primarily impact on EU agro-food exports to Cote d’Ivoire. Even without an EPA in place the overall value of EU agri-food exports to Cote d’Ivoire increased 15.5% between 2013 and 2017. However this overall growth figure masks some far more significant increases in the value and volume of EU agri-food exports to Cote d’Ivoire. This is most notably the case for: · meat products (+58.3% in value), with a 10 fold increase in the volume of EU poultry meat exports (6 fold increase in value); and a 6 fold increase in exports of fresh and chilled beef (in value but from a low base) and a 44% increase in value of exports of edible bovine offal (the largest category accounting for over half of all EU meat exports to Cote d’Ivoire); · preparation of cereals (+76.9% in value); and · beverages and spirits (+72.7% in value) (2). The EU’s agri-food sector figures however do not cover an additional item which has become increasingly significant in the EU’s trade with West Africa, namely EU fat filled milk powder exports. The product category under which these exports are most commonly reported has seen almost a tripling of both the volume and value of exports to Cote d’Ivoire over this period. There is thus an expansion of EU agri-food exports underway to Cote d’Ivoire even in the absence of the tariff reductions agreed under the bilateral free trade area agreement concluded with the EU. The areas where these increases are most marked (meat and fat filled milk powders) are a particular source of concern since a ‘no-deal’ Brexit could severely disrupt current UK-EU trade in these products, leading to both UK and EU27 exporters seeking out alternative markets, particularly in West Africa. This needs to be seen in a context where the principal change which the EPA will introduce from 1st January 2019 will be the gradual elimination of import duties on 80% of EU exports to Cote d’Ivoire and the entry into force of provisions prohibiting the use of quantitative restrictions by the government of Cote d’Ivoire on imports from the EU. |
Source:
(1) EC, ‘Individual reports and info sheets on implementation of EU Free Trade Agreements’, Commission Staff Working Documents, pp.236-240, SWD(2018) 454 final, 31 October 2018
http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157473.PDF
(2) EC, ‘Agri-food statistical fact sheet European Union – Ivory Coast (2013-2017)
https://ec.europa.eu/agriculture/sites/agriculture/files/trade-analysis/statistics/outside-eu/countries/agrifood-ivory-coast_en.pdf
(3) EC, ‘EU banana market’, European Commission DG Agriculture and Rural Development, Unit G2 Wine, spirits and horticultural products,18 September 2018
https://ec.europa.eu/agriculture/sites/agriculture/files/fruit-and-vegetables/product-reports/bananas/reports/market-2018-09_en.pdf