Free Trade Agreements

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By Joel Konopo To bring the Cotonou Agreement that grants southern African countries preferential access to the European Union (EU) market in line with World Trade Organisation (WTO) provision, SADC countries will enter into negotiations of Free Trade Agreements (FTA) with the EU through the Economic Partnership Agreements (EPAs). These negotiations will be in force by 2008 and shall liberalise about 90 percent EU-Africa Caribbean Pacific (ACP) trade within 10 – 12 years. Dubbed EU-SADC EPAs, these agreements will bring together two regions, each with its own history of regional integration with unprecedented impact on the development of some of the world’s poorest countries. Head of the EU Delegation in Botswana, Paul Marlin, recognises the importance of the negotiations: “The EPAs will be a means for Europe to help the SADC region to improve competitiveness, diversify its exports and build regional markets.” If carried out in their current form, Marlin believes that EPAs will bolster the development potential of many of the world’s poorest countries by linking ACP producers with EU producers. The agreements will go beyond the current trade arrangement for SADC goods entering the European Union. The EU is SADC’s largest trading partner (with development assistance of over 3 billion euros for 2002 -2007), a long standing supporter of SADC with a close political dialogue. While trade relationships between Europe and Southern African countries is historical, it became more pronounced in 2000 when the EU and all Sub-Saharan African countries agreed to overhaul their trade arrangements. They agreed to have broader EPAs that will place development firmly at the centre of trade arrangements between Europe and the SADC region. Seven SADC Member States – Angola, Botswana, Lesotho, Mozam-bique, Namibia, Swaziland and Tanzania – form part of the agreement. What are EPAs? The EPAs is a free trade agreement, which aims to establish free trade zones between ACP and EU implying overt north-south regionalism and strongly unequal reciprocity and competition between the two entities at the level of development. The negotiations which began in Brussels in September 2002 with the EU and 77 ACP countries, will be conducted concomitantly with other trade negotiations: at a regional level (within the region (intra-regional)), between the region and the EU and at multilateral level (WTO), with notable necessity of maintaining coherence between national development and commitment at different levels. Pamabazuka News journalist Demba Moussa Dembele explains that negotiations of the EPAs shall aim notably at establishing the timetable for the progressive removal of barriers to trade between the parties, in accordance with WTO rules. Why the EPAs? For the ACP regions as well as for the EU, the declared objective of the EPAs is development. In a recent report published by a Senegal-based International Non-governmental Organisation ENDA, authored by Bibian Mbaye, the EU’s main objective is to finance development through supporting the existing process of regional integration. On the other hand, Marlin believes that the current negotiation is the best option for linking trade and development. EPAs help improve share of imports from ACP into EU that has declined drastically since the beginning of trade relations between the two blocks from 6.7 percent in 1976 to 3.1 percent in 2000. (See table). In comparative terms, imports from the EU to ACP against other developing countries recorded a slow growth in all products since 1976. While on the other hand, trade between Asia and the EU have sky-rocketed. Marlin pointed out that lack of ACP export diversification led to unattractive trade relations between the EU and ACP as opposed to Asian economies. ACP countries export petroleum products, diamonds, cocoa, coffee, fish, beef and wood products and have managed to export about 60 percent of its products to the EU and this trade has been relatively low. Since colonial times, ACP countries have been feeding European countries with raw commodities. Currently, ACP countries export 65 percent raw materials, 16 percent semi finished goods and 19 percent finished products. Due to the culmination of the EPAs, expectation is that Europe’s 25 members will help ACP countries to improve and diversify what they produce and export. Hence the EPAs have become very crucial. EPAs were introduced upon realisation that unilateral preferences were not enough, as they did not encourage diversification. Preference erosion increases as multilateral liberalisation progresses. There was also the realisation that a new comprehensive approach was required to avoid focusing on market access alone. The EPAs come along with renewed vigour and a different approach with an objective to sustainably develop ACP states. Of the 78 ACP countries, 40 are least developed countries (LDCs), mainly islands and landlocked that have always been vulnerable to unfair trade. EPAs will have significant implications for the socio-economic and political fabric of ACP states. WTO rules require the SADC region to liberalise substantially all trade. While rules might be changed, in the current WTO talks it is clear that the element of reciprocity will also be required in the future. Analysts believe that economically, there is strong evidence that opening the SADC region to the EU products will increase efficiency. A recent EU brochure entitled, “Trade for Development EU-SADC Economic Partnership Agreement,” published in 2005 estimates that because of the satiable trade relationship between the EU and SADC, about 98 percent of current SADC exports can enter the EU duty free and that several SADC countries benefit from the “Everything but Arms” scheme, which offers duty and quota free access to the EU. EPAs provide potential advantages over preferential schemes as they enable EPA members to negotiate continued and improved access to EU markets. They are also attached to development assistance to enhance regional integration to address supply-side constraint to production and to help cope with costs of adjustment caused by trade reforms. Political economist and commentator on International Relations, Christi van Der Westhuizen, is of the view that members of the Customs Union would be ideal to negotiate EPAs with the EU as they share a common external tariff (CET) and have thus harmonised their external trade relations. Among the topics that will come up are the rules that define products as genuinely SADC (rules of origin) and technical issues such as product standard and food safety requirements. As Marlin puts it succinctly: “The EPAs will enable the SADC region to maintain and improve market access, a commitment clearly set out in the Cotonou Agreement.” According to Marlin, one important change that the EPA will bring about is that SADC markets will also have to open up gradually to the EU goods, removing some duties and quotas. This new arrangement is essential, especially for economic reasons. As the deadline for the 2006 SADC Ministerial consultative conference in Windhoek, Namibia becomes more pressing, the attention of trade ministers is potentially diverted and the negotiating capacity of EU-SADC is increasingly stretched. At this meeting, the criticality of EPAs would be more emphasised because the conference will be dedicated to marketing the Regional Indicative Strategic Development Plan (RISDP) and the Strategic Indicative Plan of the Organ on Politics, Defence and Security (SIPO) and mobilise resources for implementation. These negotiations are extricably linked with the EPAs. The Conference provides a platform for SADC and its International Cooperating Partners to engage in policy dialogue, mobilise consensus and review cooperation arrangements in the context of a new partnership for the implementation of the RISDP and the SIPO. Given the strategic importance of a New SADC-ICP Partnership for the implementation of the RISDP and SIPO, the 2006 SADC Consultative Conference requires a high-level dialogue between SADC and ICPs. The main objective of the conference is to build confidence and mobilise consensus on SADC-ICPs relations and facilitate discussions on mechanisms for the involvement and the respective roles of all key stakeholders in the implementation of the RISDP and SIPO. Progress So Far Regarding the negotiation process, although not yet at an advanced stage, the year 2006 is very crucial for the talks. Thematic discussions of senior level and technical work took place in December 2004 and twice in 2005. Preparations have accelerated. A joint EU-SADC took place in September 2005. The Windhoek ministerial conference provided guidance for the negotiations in April 27, 2006. By the end of 2006, negotiations should have covered all issues relevant for the EPA and an outline EPA should agree on. SADC trade ministers met in July 2005 to commission a working group to look at harmonising trade relations between southern African countries and the EU. The group looked at the following: Coordination of the Trade and Development Cooperation Agreement (TDCA) between South Africa and the EU and the SADC EPA negotiation, and how the region could advance towards establishing a single trade regime with the EU while maintaining the impetus for regional integration among SADC member states. “This also entailed reviewing the role of South Africa in EPA negotiation,” SADC Director, Trade, Industry, Finance and Development, Nokokure Murangi was quoted as saying in a media briefing. The SADC group may brace itself for impressive achievements such as adoption of a roadmap with objectives, principles, structure and sequencing of negotiations. The region has also discussed regional integration as well as market access issues such as sanitary and phytosanitary standards and technical barriers to trade, dialogue on trade related areas and rules, and the like with the South Africa TDCA. *Joel Konopo joined Mmegi and Monitor newspapers as a business reporter in January 2005. He holds a BA (Political Science) from the University of Botswana (UB) and has interest in reporting economics and international trade issues.