Summary
The EU has sought to place Mauritania’s signature of the West African EPA in the context of the ‘new Africa-Europe alliance for sustainable investment and jobs’ initiative. The ultimate aim of this initiative is to secure a comprehensive EU-Africa FTA. The EC wants to see this include a revisiting of disciplines on domestic policy formulation which African governments consciously steered away from under the EPA negotiations. This needs to be seen in the context of the relative failure of the EC in securing FTAs with African countries. After 16 years of negotiations only 15 African governments have signed, ratified and are in the process of implementing EPAs, with this embracing only 24% of the population of sub-Saharan Africa. Against this background the EC appears to be looking to harness the ‘cart’ of its trade and investment ambitions in Africa to the ‘horse’ of the African Continental Free Trade Area. This could potentially complicate efforts to create a pan-African free trade area for agro-food products. In this context, in operationalising AfCFTA commitments, African governments will need to address the challenge of how to ensure the ‘tail’ of EPAs with the EU does not end up wagging the ‘dog’ of pan-African trade integration, simply by virtue of being first on the scene.
On 21st September the EC announced Mauritania had become ‘the 15th West African country to have signed the region-to-region Economic Partnership Agreement (EPA) with the European Union’. Only Nigeria now stands apart from the completion of the process of concluding a comprehensive EU-West Africa region to region economic partnership agreement (1). The EC seeks to place this development within the context of the recently launched ‘new Africa-Europe alliance for sustainable investment and jobs’ (2).
According to the EC the aim of this initiative is to promote ‘a substantial increase of private investment from both Africans and Europeans, boost trade, enhance job creation and contribute to sustainable and inclusive development, promoting standards of modern and sustainable technology, environmental and labour protection, and responsible business conduct’. The initiative is nominally focused on ‘Africa’s economic potential and the mobilisation of the private sector’ in unlocking this potential (2).
For the EU a major focus is on job creation to reduce migration pressures and the promotion of a more coordinated approach to migration issues. The EC is looking to use this initiative to ‘boost responsible private – domestic and foreign – investments in Africa’. This objective is placed in the context of the existing record of the EC is mobilising private investment in Africa. According to the EC ‘the EU is Africa’s biggest investor, with its Member States holding approximately 40% of Foreign Direct Investment stock worth EUR 291 billion in 2016’ (2).
The new initiative will seek to crowd in investments via ‘blending and guarantees in order to leverage resources from capital markets with international, European and national financial institutions, to de-risk investments and to facilitate access to finance’. Priority is to be given to ‘value-adding sectors with a high potential for sustainable job creation’. In association with African partners the EC is looking to ‘steer the joint efforts around those value chains with the highest potential for job creation, seizing the opportunities for manufacturing and processing, unlocking the huge potential of the green and blue economy, supporting transition to low-carbon and climate-resilient economies, exploiting the full potential of the digital transformation of the economy, in particular e-commerce and data economy’ (2).
Significantly the EC is looking to ‘tackling the areas requiring reform in order to improve the business enabling environment’ (2). Overall the aim is to ‘look at the long-term challenges and strategic interests’, with a focus on ‘how to accelerate impact, boost public and private investments, and best share knowledge and know-how’. This it is held would also ‘serve to define strategies to promote and prioritise sectoral policy and regulatory reform in African countries and facilitate related EU public and private investments’.
| The Financial Carrot On Offer Under the Sustainable Investment and Jobs Initiative
The EC claims that already ‘between 2014 and 2017, the EU has leveraged through blending operations approximately EUR 35 billion’ with the EC hoping to see ‘€15 billion of investments through blending and over EUR 16 billion under the Guarantee’ in the framework of the ‘External Investment Plan and the creation of the European Fund for Sustainable Development in 2017’. By 2020 the EC hopes to have leveraged €44 billion in investments in Africa and neighbouring countries. What is more under the next long term multiannual financial framework the EC is looking to ’substantially increasing available funding’ for its investment tools and improve the delivery mechanisms for such assistance. |
It should be noted that implicit in this focus is ab effort by the EC to re-engage on issues related to domestic policy formulation in African countries which African governments consciously placed beyond the scope of the EPA negotiations with the EU.
In terms of its approach, the EC is looking to build sector focused multi-stakeholder dialogues ‘to examine and support strategic developments in critical economic areas’, including the agricultural sector. Specifically in regard to agriculture the EC highlights how ‘in May 2018, the EU and the African Union … set up a Task Force for Rural Africa, comprised of African and European experts, to provide advice and recommendations on priorities and the next steps in our cooperation in the field of agriculture, looking inter alia at how to boost public and private investments in African sustainable agriculture, how to facilitate EU responsible private investments, boosting intra-African trade as well as exports from African countries’. The EC also highlights how ‘Investments in value-adding and labour intensive sectors also requires markets for the products and services’ (2).
In this context the EC is looking to support regional and continental economic integration, with the EC committing to fully supporting the AfCFTA negotiation process. The EC has committed to increasing funding from the current €7 million provided over the 2014-17 period to €50 million from 2018 to 2020. This support will fund ‘institutional support as well as technical support to the various phases of the negotiations (on issues such as Technical Barriers to Trade, Sanitary and Phytosanitary measures, Intellectual Property Rights including Geographic Indications, investment, competition, e-commerce), including support for data gathering and data analysis’ (2).
In the communication the EC is open about its aspirations to establish an EU-Africa continent to continent FTA on the back of the AFCFTA process. It notes ‘to prepare this, Economic Partnership Agreements, Free Trade Agreements including the Deep and Comprehensive Free Trade Areas on offer to the countries of North Africa, and other trade regimes with the EU should be exploited to the greatest extent, as building blocks to the benefit of the African Continental Free Trade Area’ (2). . In this context the EC highlights how on the 26th October 2018 a Joint EU-ACP Ministerial Committee on Trade will take place in Brussels to ‘discuss the state of play of the seven Economic Partnership Agreements between the EU and countries of Africa, the Caribbean and the Pacific’ (1).
According to the EC communication ‘the ambition is to further increase African exports and to attract investment, including into manufacturing and processing sectors, and to encourage the creation of regional value chains through flexible rules of origin’. With a view to supporting the attainment of this objective the proposed Alliance will ‘further strengthen and better target Aid for Trade measures in support of trade facilitation and approximation of technical and quality product standards and other regulatory measures’ (2).
The EC communication also highlights how ‘economic integration and the development of value chains that are linked to the regional, continental and global set-up also require connectivity, both intra-African as well as strategic linkages between the EU and Africa. Infrastructure investments underpin the ability of African countries to fully capitalise on job and growth creation opportunities’ (2).
The EC maintains that for the proposed ‘new Africa-Europe alliance for sustainable investment and jobs’ to be successful a ‘constant dialogue between European and African partners, increased involvement with the private sector and close consultation with civil society are needed’. However within this jobs and investment initiative it is unclear what role African governments will play, with an impression emerging that African governments will be junior partners in an EU led initiative which engages with pan-African bodies and non-state actors across Africa.
This being noted the EC proposes to make available over the coming 7 year financial framework a distinct package of financial resources, with €32 billion in grants being allocated to sub-Saharan Africa and €7.7 billion in grants being allocated to North Africa. There will in addition be a €10.5 billion European Peace Facility, while Africa is also to be a priority region in the EU’s €60 billion External Action Guarantee facility.
| Comment and Analysis
In launch the ‘new Africa-Europe alliance for sustainable investment and jobs’ needs to be seen in the context of wider EU policy objectives. The EC focus on crowding in investment cannot be separated from the broader aspirations of EU member states to ensure the future EU-ACP cooperation framework more effectively promotes EU trade and investment interests. This needs to be seen in the context of EU concerns over its position in an increasingly competitive global environment (see epamonitoring.net article, ‘Implications of the EC orientation for Post-Cotonou negotiations for ACP agro-food sectors’, 28 January 2017). A key priority in this regard is the promotion of employment and income growth in the EU, through a strengthening of relations with Africa. The ‘new Africa-Europe alliance for sustainable investment and jobs’, with its emphasis on dialogue at all levels cannot be seen in isolation from EU political concerns over its waning global influence, in a context where the agenda’s being promoted by other global players are not always seen as compatible with EU political and economic interests. In this context great care will need to be taken with the design and structure of the EU’s new proposed investment promotion initiative to make sure these are suited to the needs of African entrepreneurs and existing African businesses. If not these new facilities could become little more than an investment subsidy for EU enterprises seeking to consolidate their market position in rapidly growing African markets in the faces of mounting commercial challenges from other major global traders (e.g. China, India and Brazil). In such a situation any benefits in terms of the structural development of African economies would then become coincidental, rather than central to the initiatives. This is a particular source of concern in the agro-food sector where there are fundamental contradictions between African structural development aspirations and the growing international orientation of the EU agro-food sector. This needs to be seen in the context of the EU’s underlying lack of price competitiveness compared to other major agricultural exporters. It is against this background that the EU is seeking to use trade and agricultural policy tools to enhance the competitive position of EU exporters on African markets. It now appears as if across the board EU development cooperation policy is now going to be used as an additional support tool. Given the centrality of the structural development of African agro-food sectors to generating the employment and income earning opportunities required to curb migration pressures, resolving this contradiction through carefully targeted instruments and modalities for the implementation of the new investment and jobs initiative will be a critical challenge moving forward. In the agro-food sector the EC’s approach under the investment and jobs initiative largely ignores the tensions which exist between EU objectives and the objectives and processes through which an African Continental Free Trade Area (AfCFTA) will be constructed. This is most clearly the case in the EC’s assertion that EPAs and other EU focussed trade arrangements could be used as ‘building blocks’ to the benefit of the AfCFTA process. This neglects the fundamental concerns which many African governments have expressed over the implications of the EPA process for their own national structural economic development objectives, particularly as this relates to the agro-food sector. In west Africa the government of Nigeria, a country which accounts for 52% of the population of the west African region and 72% of its GDP, continues to stand apart from the EU’s West Africa-EU economic partnership agreement initiative. This contributes to a situation where: · only 15 governments have signed, ratified and are in the process of implementing · 15 other governments remain engaged with an EPA process representing 20% of · 4 sub-Saharan African governments are ambiguously engaged with an EPA process, · 13 sub-Saharan African governments are no longer engaged with an EPA process, It is against this background that the EU is increasingly seeking out cooperation with the African Union Secretariat and affiliated bodies in promoting the AfCFTA, an FTA which the EC sees’ as laying the basis for EU-Africa continent to continent FTA. Indeed the distinct impression emerges of the EC increasingly seeking to harness the ‘cart’ of its trade and investment ambitions in Africa to the ‘horse’ of the African Continental Free Trade Area. This is potentially a problematical development given: a) the aggressive targeting of African markets by EU agro-food sector companies whose profitability is increasingly dependent on finding 3rd country markets for both basic agricultural products and value added food products, produced from EU agricultural raw materials; b) policy commitments made by a range of African governments under their trade agreements with the EU (EPAs), most notably in regard to tariff standstill commitments, the prohibition of the use of quantitative restrictions on imports from the EU and commitments to ‘national treatment’ for EU exporters, which the EC would like to see generalised across the whole of the African continent. This needs to be seen in a context where currently a range of African governments make extensive use of tariffs and non-tariff trade policy tools to manage trade in order to protect and promote national agro-food sector development in the interests of wider locally defined public policy objectives. Public policy objectives which in many instances bear a striking resemblance to the wider objectives which the uses to justify trade distorting forms of agricultural support and trade barriers to imports from competitive global agricultural exporters (e.g. in the poultry and sugar sectors). Given African governments lack the financial capacity to extend the types of support the EU uses, trade policy tools are one of the only remaining tools available to promote wider public policy objectives in the agro-food sector. Moving forward trade liberalization in the agro-food sector across Africa in the context of the AfCFTA process is likely to be a ‘sensitive’ exercise which will need to be carefully managed if it is to be politically sustainable. There are essentially four main areas in the agro-food sector which African governments will have to address over time as part of the AfCFTA process: · the extent and time table for tariff reduction and elimination commitments · the future use of non-tariff trade policy measures (which is a particularly important · rules of origin to be applied to agro-food product which can be traded with the · the standards to be applied to agro-food products which can be freely traded under Each of these four areas can be impacted by the current trends in EU agro-food exports to Africa and the commitments made in the context of trade agreements concluded by African governments with the EU. Each of these four areas can be further complicated by the EU harnessing its own broader trade and investment ambitions to the AfCFTA process. This harnessing of EU trade and investment interest and ambitions to the AFCFTA process is likely to prove highly unhelpful given the politically sensitive nature of intra-African trade liberalisation in the agro-food sector. This is particularly the case given African aspirations for the structural transformation of domestic agro-food sectors and the increasing export focus of the EU agro-food sector both in terms of trade and investment opportunities. In this context there is a real danger that in terms of trade policy development the ‘tail’ of EPAs with the EU could end up wagging the ‘dog’ of pan-African regional trade integration, simply by virtue of the EPAs having been first on the scene in setting legally binding policy commitments. This is a policy challenge with African governments will need to get to grips with if the challenge of operationalizing AfCFTA commitments in ways which support the structural development of African agro-food sector value chains is to be addressed. |
Sources
(1) EC, ‘Mauritania signs the regional Economic Partnership Agreement between West Africa and the EU’, 21st September 2018
http://trade.ec.europa.eu/doclib/press/index.cfm?id=1911
(2) EC, ‘Communication on a new Africa – Europe Alliance for Sustainable Investment and Jobs: Taking our partnership for investment and jobs to the next level’, 12 September 2018
https://www.africa-eu-partnership.org/sites/default/files/documents/en_communication_on_a_new_alliance.pdf