EU

trade

tools for development?

policy

a reader exploring the issues

Credits
text and design Dave Richards thanks to ACORD International, Caribbean Policy Development Center, Friends of the Earth, Kenya Human Rights Commission, Oxfam France - Agir ici, Oxfam International, Trade Justice Movement, Traidcraft, Windward Islands Farmers Association, War on Want, World Development Movement This publication has been produced with the financial assistance of the European Union. Its contents are the sole responsibility of RISC and can under no circumstances be regarded as reflecting the position of the European Union.

RISC, 2009 Users may copy pages from this pack for educational use, but no part may be reproduced for commercial use without prior permission from RISC.

Different perspectives on EU trade policy, clockwise from top left: The Trade Dictator, YouTube clip from World Development Movement 8www.youtube.com/watch?v=FGsNf8chgnc; Making trade work for development Aid for Trade: a selection of case studies from around the world, European Communities, 2008; On ne signe pas! Non aux APE!, YouTube clip from Senegalese rapper Didier Awadi 8www.youtube.com/ watch?v=HtDlqErTUHg

Contents
Introduction & Background to EPAs 2 Appendix 1: Trade timeline 18 Appendix 2: Six reasons to oppose EPAs in their current form 23 Response from 20 leading ACP and EU civil society organisations to some of the key arguments put forward in support of Economic Partnership Agreements (EPAs) by the EU. November 2004 Appendix 3: Advocacy paper on the CARIFORUM-EU EPA negotiations 30 Evaluation by Windward Islands Farmers Association (WINFA) of the negotiations and the likely implications of the EPA for Caribbean agriculture in general and Windward Islands farmers in particular. November 2006 Appendix 4: KHRC: Constitutional Challenge to the EPAs 33 Kenya Human Rights Commission (KHRC), the Kenya Small Scale Farmers Forum (KESSF) and other petitioners instituted proceedings against the Government of Kenya to prevent it from signing the EPA on the grounds that it would infringe human rights. 2007 Appendix 5: EPAs: What Every Parliamentarian Needs to Know 36 Policy briefing paper from a coalition of African NGOs, highlighting implications of signing an EPA. 2007 Appendix 6: Nigeria and the EU: Trade for Development An Introduction to the EPA 39 Major document from European Commission explaining the background to EPAs and the likely benefits for Nigerias development. 2007 Appendix 7: Six common misconceptions about EPAs 40 Response from European Commission to critique of EPA negotiaions. January 2008 Appendix 8: Dear anti-poverty campaigner 42 Response to criticism of EPAs from EU Trade Commissioner, Peter Mandelson, and EU Development Commissioner, Louis Michel. Posted on EU website. September 2007 Appendix 9: The potential effects of EPAs: what quantitative models say 44 Review by Overseas Development Institute (ODI) of several modelling studies undertaken to assess the likely economic effects of EPAs. 2006 Appendix 10: Partnership or powerplay? 45 Policy paper from Oxfam International on how Europe should bring development into its trade deals with ACP countries. Evaluates the likely development benefits of the initialled EPAs. 2007 Appendix 11: Undercutting Africa: EPAs, forests and the EUs quest for Africas raw materials 47 Report from Friends of the Earth which argues that EU trade policy is primarily aimed at securing raw materials and new markets in a competitive globalised world economy. 2008 Appendix 12: Global Europe: competing in the world 50 Key document from the European Commission which outlines the EUs strategy to secure economic growth and jobs. October 2006 Appendix 13: Block the EPA 52 Declaration of several Haitian organisations which criticises the EU and Haitian government. October 2007 Appendix 14: Global Europe 54 Paper from War on Want which argues that Global Europe: competing in the world is an attack on developing countries and the European social model. April 2008 Appendix 15: The EU-India FTA: initial observations from a development perspective 56 Traidcraft report which analyses the development implications of the Global Europe agenda for India. 2008 Appendix 16: Dialogue of the deaf 60 An assessment by ICCO of Europes developmental approach to trade negotiations. September 2008 Appendix 17: Dear Baroness Ashton 62 Letter to new Trade Commissioner from development ministers of three EU governments. November 2008 Appendix 18: European Parliament resolution 64 Two resolutions on the development impact of EPAs. One, tabled by the conservative grouping was passed. An alternative, proposed by Socialists and Greens was not adopted. 5 February 2009 Appendix 19: FTAs & the financial crisis 67 Gallery 69 Further information 78

Introduction
Since 2002 the European Union (EU) has been negotiating new trade deals called Economic Partnership Agreements (EPAs) with 76 countries in Africa, the Caribbean and the Pacific (ACP). The EPAs are perhaps the most important trade talks faced by these countries which represent 750 million of the worlds poorest people. The EU is not only their largest export market, but also their biggest aid donor. Although the European Trade Commission has promised that EPAs will be tools for development, there has been a concerted campaign against them by some ACP governments and many civil society organisations in ACP and EU countries. This reader tries to make the complex world of trade agreements more comprehensible and asks the question: how far can the opening up of trade meet the needs of the worlds poorest people? The background section summarises the arguments which have been put for and against EPAs using extracts from key documents. The appendices include longer extracts from these documents to give a better idea of the complexities involved as the long process of negotiation has unfolded and the campaign against EPAs has been countered by its proponents.

The players

ECOWAS CEMAC ESA SADC-minus

Southern African Development Community (SADC-minus) 7

Angola*, Botswana, Lesotho*, Mozambique*, Namibia, Swaziland, Tanzania* (excludes South Africa which already has a WTO compatible Free Trade Area agreement with the EU)

Central Africa (CEMAC) 7

Cameroon, Central African Republic*, Chad*, Congo Republic, Equatorial Guinea*, Gabon, Sao Tome and Principe*

West Africa (ECOWAS) 16

Benin*, Burkina Faso*, Cape Verde, The Gambia*, Ghana, Guinea*, Guinea-Bissau*, Cte dIvoire, Liberia*, Mali*, Mauritania*, Niger*, Nigeria, Senegal*, Sierra Leone*, Togo*

Eastern and Southern Africa (ESA) 16

Burundi*, Comoros*, Democratic Republic of Congo*, Djibouti*, Eritrea*, Ethiopia*, Kenya*, Malawi*, Mauritius, Madagascar*, Rwanda*, Seychelles, Sudan*, Uganda*, Zambia*, Zimbabwe

Caribbean (CARIFORUM) 15
Antigua and Barbuda, The Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Haiti*, Jamaica, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Surinam, Trinidad and Tobago

Pacific (PAPC) 14
Cook Islands, Federated States of Micronesia, Fiji, Kiribati*, Republic of the Marshall Islands, Nauru, Niue, Palau, Papua New Guinea, Samoa*, Solomon Islands*, Tonga, Tuvalu*, Vanuatu* * Least Developed Country (LDC) represent the poorest and weakest segment of the international community. Extreme poverty, the structural weaknesses of their economies and the lack of capacities related to growth, often compounded by structural handicaps, hamper efforts of these countries to improve the quality of life of their people. These countries are also characterized by their acute susceptibility to external economic shocks, natural and man-made disasters and communicable diseases. Landlocked Developing Countries and Small Island Developing States The United Nations Office of the High Representative for Least Developed Countries 8www.unohrlls.org

Africa, Caribbean and Pacific (ACP) side

Regional secretariats Negotiate with the European Commission on behalf of the ACP member states. ACP member states Give a set of negotiating directives (negotiating mandate) to their respective regional secretariat.

European Union side

European Commission (EC) The EC is the executive arm of the EU. It is responsible for developing policy, proposing legislation, implementing decisions, and the general day-to-day running of the European Union. The EC is divided up into directorate generals (DGs), a bit like government departments, each of which is headed up by a Commissioner, who are the EU equivalents of Secretaries of State. Each member state appoints a Commissioner and the President of the European Commission decides which DG to assign to each Commissioner. The Directorate-General for Trade negotiates on behalf of the European Union with a set of negotiating directives (a negotiating mandate) agreed by the EU member states. EU member states Give a set of negotiating directives (a negotiating mandate) to the European Commission. European Parliament MEPs may have a yes/no vote on the final trade and development agreement.

ACP-EU
Joint Parliamentary Assembly MEPs and a range of ACP representatives, including MPs and government officials, meet on a regular basis for discussion.

Background to EPAs
Globalization has made the world economy more efficient and has created hundreds of millions of jobs, mainly, but not only, in developing countries. It generates an upward spiral of jobs and prosperity for countries that embrace the process, although the advantages will not reach everybody at the same time. Brief on Globalization International Chamber of Commerce, 2000 Until the lions have their historians, declares an African proverb, tales of hunting will always glorify the hunter. The same is true of tales about international trade. For globalization enthusiasts the rapid expansion of world trade over the past two decades has been an unmitigated blessing, notably for the worlds poor. Reality is more prosaic. Greater trade does offer enormous opportunities for human development. Under the right conditions it has potential for reducing poverty, narrowing inequality and overcoming economic injustice. For many of the worlds poorest countries, and for millions of poor people, these conditions have yet to be created. Human Development Report 2005 United Nations Development Programme For the last 30 years the EU and ACP countries, mainly former colonies, have had a series of five-year agreements that set the framework for their political and economic relationship. Under these agreements the EU has been giving ACP countries preferential access to its markets on the goods they export. But this preferential treatment has been declared incompatible with the rules of the World Trade Organisation (WTO). The EU and ACP were granted a waiver in 2001 which expired at the end of 2007. Economic Partnership Agreements (EPAs) are the new, WTO-compatible trade deals to replace the old arrangements. EPAs are extremely important because they will lay the rules of trade between ACP countries and Europe for decades to come and affect the lives of millions of people. They are also highly controversial, with highly polarised views on whether they will provide the wealth for developing countries to meet their development needs, particularly the Millenium Devlopment Goals (MDGs) which are the current focus for international development policies. One one side are the supporters of the EUs Directorate-General for Trade (DG Trade), closely identified with Peter Mandelson, the Trade Comissioner until October 2008. On the other is a broad movement of organisations ranging from anti-capitalist/globalisation movements from around the world, through to development Non-Governmental Organisation (NGOs) and parliamentarians from both ACP and EU. This mirrors the familiar positions seen in arguments about the pros and cons of trade liberalisation, especially the policies promoted by the World Trade Organisation (WTO) and its supporters. The EU and African Caribbean and Pacific (ACP) countries agreed to negotiate EPAs because the system of trade preferences that was in place before EPAs, the Cotonou trade regime, was failing to help ACP economies diversify and develop their trade. In fact their share of EU and world trade was shrinking. In addition, the Cotonou trade regime did not comply with EU and ACP commitments at the WTO that trade agreements must not discriminate between groups of countries unless they fully open trade between the countries concerned. Under the Cotonou trade regime the EU granted better trade preferences to the ACP than to similar developing countries but without any corresponding ACP opening. The EU and ACP therefore sought a special waiver from WTO rules with other WTO members in 2001 to allow EPA negotiations to continue until the 31st of December 2007 when the Cotonou trade regime would legally expire. The EPAs were intended not only to be compatible with WTO rules but to promote development by covering issues like services, investment and standards and to increase cooperation on trade issues. An Overview of the Interim Agreements DG Trade, January 2009 This belief in the benefits of a more liberalised trading system for developing countries, that countries can trade their way out of poverty, is a key element in all European Commission documents explaining its trade policies (see Appendix 6, p39).

The European Union is a leading actor in world trade. We believe that free and fair trade not only creates jobs and growth in the EU but it also helps the poorest countries in the world to develop. We want to promote prosperity and social justice through fair and open trade which is based on rules that are respected by everyone. Trade policy is central to the EUs relations with the rest of the world. As a global trading power and the worlds largest market, our trade policy is an important instrument for shaping the economic world we live in. It also means the EU has responsibilities, and in particular, we believe the benefits of trade should be extended to all, especially the poorest. We believe that a policy of progressively opening up trade at the multilateral level, supported by the development of stronger international trade rules, is the best way forward. It will enable us to contribute significantly to promoting sustainable development. And it also means we can ensure coherence between international trade and development policies, thus helping developing countries to integrate into the global economy. Trade policy: the EUs relations with the rest of the world DG Trade, 2006 Globalisation brings real economic challenges for the West African sub-region. Global economic change can be a positive force for development in West Africa, providing new markets for exports and new possibilities for trade and investment. But it also brings challenges, not least the pressures of integrating into the global economy. In order to help the states of West Africa harness and benefit from global economic change, the EU and West Africa need to build a new economic partnership which strengthens the region economically and helps equip West African countries for a changing economic world. Our work starts with an effective reduction of poverty. Without greater economic opportunities, few West African countries will have the revenues they need in the long term to deliver basic services or even maintain the economic and social fabric of their societies. Boosting economic opportunities will also be a key factor in achieving the Millennium Development Goals. Building on a long history of excellent co-operation the groundwork for this new EU-West Africa partnership has already been laid. The Cotonou Agreement is unique in linking development assistance and trade relations and ensuring that they reinforce each other. The Economic Partnership Agreements we are currently negotiating to replace the original trade chapters of the Cotonou Agreement will reflect the same balance. The challenge for the Economic Partnership Agreements is to add a third dimension: fostering regional integration and helping to create the conditions for attracting vital investment. That is the vision for each of the Economic Partnership Agreements the EU is negotiating with the six ACP regions. Peter Mandelson in Nigeria and the European Union: Trade for Development DG Trade, 2007

Negotiations
Negotiations began in September 2002 and as the talks advanced, it became apparent that ACP governments faced a dilemma. EPAs secured market access for traditional exports which formed the cornerstone of their economies, but the reciprocal nature of the agreement meant that they also represented a threat. The experience of trade liberalisation under WTO rules provided ample evidence that the benefits of more open markets were not spread evenly there were losers as well as winners. EPAs would also give powerful corporations based in the EU greater access to ACP markets. This could undermine poor countries fledgling industries and local laws protecting workers and the environment. Government revenue would also fall becuase of reduced taxes on goods and services imported from the EU. This would compromise investment in health and education and threaten the achievement of the MDGs. Despite the obscure and highly technical nature of the negotiations, awareness of the implication of EPAs grew. A vigourous international campaign to stop the signing of the EPAs emerged which brought together trades unions, farmers organisations, civil society and business groups in the ACP countries. In September 2004 a group of 20 leading ACP and European civil society organisations published Six reasons to oppose EPAs in their current form, a critique of EPAs as promoted by the EU, and a declaration of intent (see Appendix 2, p23).

If EPAs continue to develop along their current course, they pose a severe threat to the development of ACP countries and the people living in these countries. They contravene the commitment of the EU to promote sustainable development and poverty reduction. That is why we are opposed to EPAs in their current form. Civil society will continue to work with parliamentarians, governments, and the European Commission to contribute to an outcome of these negotiations that will create a fairer trading relationship and bring about genuine benefits and economic opportunities for poor people. To this end, the undersigned organisations ask the EU to take the following steps: Fulfil its commitment under the Cotonou Agreement and urgently begin to pursue alternatives with ACP countries, based on the principle of non-reciprocity instituted in GSP1 and special and differential treatment in the WTO. Drop its offensive interest in areas beyond the WTO to which the ACP countries are opposed, specifically the Singapore Issues of investment, competition policy, and government procurement. Six reasons to oppose EPAs in their current form, 2004 NGOs concerned with trade justice now turned their attention to EU trade policy as well as their long standing opposition to the WTOs promotion of trade liberalisation. Resources were committed to research and raise awareness of the likely impact of EPAs. Development economists produced varied predictions of the costs and benefits of EPAs to ACP countries (see Appendix 9, p44). For instance, when considering the impact on trade, ACP exports to the EU are forecast to be 10% higher with the EPAs than under the GSP/EBA2 option. In percentage terms, the largest increases in exports will occur in the livestock sector, which is forecast to at least double in the EPA scenario. Exports of agricultural products (excluding meat and cotton) and textile products are forecast to increase by 40%. On the import side, a 7% average increase overall is forecast for ACP countries in 2015, against 17.7% in 2022. This low forecast in the short run is explained by the limited liberalization of ACP imports over this time horizon. On average ACP countries are forecast to lose 70% of tariff revenues on EU imports in the long run, under the central scenario (H1). The most affected region is ECOWAS. Yet imports from other regions of the world will continue to provide tariff revenues. Thus when tariff revenue losses are computed on total ACP imports, losses are limited to 26% on average in the long run under H1, and 19% under H2 (when the product lists are optimised). Furthermore, the final impact on the economy depends on the importance of tariffs in government revenue and on potential compensatory effects. Some positive impacts can be expected from EPAs, whenever an enlargement of the fiscal basis upon which other public incomes are based is achieved. However, this long term and less visible effect will mainly depend on the capacity of each ACP country to reorganise its fiscal base, shifting to other forms of taxation. Some improvements in the efficiency of the customs administration could be attained, as a consequence of diminished trade flows to tax and monitor. Considering a 50% increase in the collection rate, we find that tariff revenue losses could be significantly alleviated. An Impact Study of the EU-ACP Economic Partnership Agreements (EPAs) in the Six ACP Regions CEPIICIREM (prepared for DG Trade but not necessarily reflecting its views), January 2008
1 Generalised System of Preferences or standard-GSP is a system of exemption for developing countries from the WTOs Most Favoured Nation principle (MFN) member countries must treat the imports of all other WTO member countries no worse than they treat the imports of their most favoured trading partner. Richer countries give a selection of products preferential access to their markets. The EUs GSP scheme significantly less generoous than the terms of the Cotonou Agreement. Critics argue that GSP has benefited newly industrialising countries, eg India, Thailand, more than least developed countries (LDCs). The GSP+ or Special Incentive Arrangement For Sustainable Development and Good Governance scheme provides preferential access that is substantially higher than GSP for LDCs implementing international standards in human and labour rights, environmental protection, the fight against drugs and good governance. 2 Everything But Arms (EBA) initiative provides LDCs with duty and quota-free access into the EU for all exports, except arms.

At the Third Africa Social Forum held in Lusaka, Zambia in December 2004, the Africa Trade Network launched the Stop EPAs campaign. This was taken up around the continent. Throughout ACP countries and EU the campaign made use of a wide range of techniques to target different audiences in order to mobilise opinion against the negotiations (see Appendix 3, p30; Gallery, p70). Large protest rallies sought to gain media attention and raise public awareness of the obscure negotiations, which were taking place behind closed doors. African governments are negotiating for Economic Partnership Agreements (EPAs) with the European Union (EU). EPAs are free trade agreements based on the principle of reciprocity, meaning that Africa will be required to open its borders to duty and tariff-free goods and services from Europe. These will have disastrous consequences even worse than structural adjustment programs: As a farmer, you will lose your livelihood when faced with increased competition from Europes highly subsidised, cheaper products. As a consumer, you will risk food insecurity because of the collapse of the domestic and regional food markets and your increased reliance on imports. As a citizen, you will lose the benefit of most of your governments social welfare schemes, which will be dropped because of loss of revenue. As a woman, you will carry the burden of adjustment costs: losing your livelihood as an agro-processor, taking on more care-giving as social services are dropped, being forced into the informal sector. As a government, you will lose policy space to protect, respect and fulfill your citizens human rights. As Africa, our regional integration processes will be slowed rather than enhanced. YOU CAN STOP EPAs BEFORE IT IS TOO LATE. STOP . THINK. RESIST EPAs. Sign this petition. Join the petition against EPAs! Stop! Think! Resist!, 2 June 2007 8www.acordinternational.org

Economic Partnership Agreements: A Threat to Food Sovereignty

The European Union (EU) is currently negotiating Economic Partnership Agreements (EPAs) with 77 States inAfrica,the Caribbean and Pacific (ACP). For the past three decades, ACP countries have had preferential access to European markets through the Lom and Cotonou agreements. EPAs will dramatically change this relationship. EPAs will essentially be Free Trade Agreements (FTAs), creating free trade between the EU and ACP countries, with no duties or quotas on substantially all trade between the regions. Thus, in order to continue enjoying duty-free access to Europe's markets, Africa has been told to open its own markets in return. According to the negotiation schedule,EPAs are supposed to take effect on 1 January 2008. EPAs will be reciprocal and legally binding agreements with no end date; they represent a point of no return.1
1.See COTONOU Agreement. WTO GATT Art. XXIV 8(b) defines a Free Trade area as duties and restrictions on commerce eliminated on substantially all trade. This phrase has been interpreted as requiring free trade for no less than 80% of commerce. 2. See FAO, The State of Food and Agriculture 2006

Policy Briefing Paper # 1 June 2007

Food Sovereignty:Hope forAfricanAgriculture Agriculture is the backbone ofAfrica's economy and its populations' livelihoods.It is the primary activity of 60% of the population in Sub-Saharan Africa and accounts for over half of the GDP in some countries.2 Small scale farmers produce most of Africa's agricultural production, particularly staple foods critical for food security. Since the Universal Declaration of Human Rights in 1948, the human right to food has developed as a binding obligation on States. And in the discourse of development, there has long been talk of the need for food security in Africa. It's only in the past decade that farmer movements and civil society have begun to call for Food Sovereignty. Food Sovereignty proposes a set of precise policy measures focusing on food for people, valuing food providers, localising food systems, putting control of resources locally, building knowledge and skills, and working with nature. Food security and the right to food are realised through the food sovereignty framework.

Food Security: When all people, at all times, have physical and economic access to safe and nutritious food which meets their dietary needs and food preferences. Food Sovereignty: The right of peoples, communities and countries to define their own agricultural, labour, fishing, food and land policies, which are appropriate to their unique circumstances (ecologically, socially, economically and culturally).

Campaign materials produced by Stop! Think! Resist! (left) and EcoNews Africa, Seatini and Traidcraft (right)

International NGOs produced more technical briefing papers aimed at trade negotiators, parliamentarians and other policy makers. These questioned many of the assumptions behind EPAs, and argued that there were alternatives to EPAs which would comply with WTO rules, yet not offer such favourable terms for European corporations. The free trade Economic Partnership Agreements (EPAs) proposed by the European Union would have a devastating effect on African, Caribbean and Pacific (ACP) countries if they go ahead as planned. New and unfair rules would require developing countries to cut their tariffs on up to 90% of imports from the EU. Jobs would be lost and livelihoods would be wrecked. European corporations would be empowered and ACP governments impeded. The most unequal trade negotiations in history could produce the most disastrous results for development. Yet there are real alternatives to this outcome. Both the EU and the ACP must now stop negotiating free trade Economic Partnership Agreements. Proposed Economic Partnership Agreements must then be radically reformed so that the European Union makes no liberalisation requirements of ACP countries. ACP countries would continue to enjoy preferential access to the European market while maintaining the right to protect their industries from unfair competition. ACP countries would also be able to decide to unilaterally cut tariffs in a strategic and targeted way if they considered it in their developmental interests to do so. Radically reformed EPAs require changes to the European Commissions negotiating mandate and WTO rules on regional trade agreements. There are also alternatives outside the EPA framework. Here, the European Union is in breach of its treaty obligations to the ACP , an opinion backed by legal advice from a lawyer from Matrix Chambers. Under the Cotonou Partnership Agreement the treaty setting out the relationship between the EU and ACP for the next generation the non least-developed ACP countries have the right to choose an alternative trade deal should they wish. By proclaiming possible alternatives as second best, the European Commission is prejudging what these alternatives might be, thereby violating international and European Community law. One possible alternative outside the EPA framework is the EUs Generalised System of Preferences. This offers ACP countries certain advantages because it makes no liberalisation requirements of them, but under current plans it would effectively exclude some current ACP products from the European market. A second option is the EUs Everything But Arms scheme, currently available only to the very poorest countries in the world. This would need to be extended to all low-income countries with similar development needs. Its rules of origin requirements would need to be improved and it would need to become a contractual rather than a unilateral preference scheme. African, Caribbean and Pacific countries must be able to choose between at least two good alternatives: a radically reformed Economic Partnership Agreement and a pro-development alternative. EU, African, Caribbean and Pacific policy-makers must make the changes necessary to make this a reality. The trade escape: WTO rules and alternatives to free trade Economic Partnership Agreements ActionAid, 2005

Partnership or powerplay?
EPAs are a real problem for poor countries... Less-developed countries have neither the time nor the capacity to negotiate strong agreements with the EU. Eveline Herfkens, the UN Secretary Generals co-ordinator for the campaign to promote the Millennium Development Goals (MDGs) Another recurring theme in the critique of EPAs is how far the negotiations are a genuine partnership of equals (see Appendix 10, p45). The negotiating tactics employed by the Trade Commissioner, Peter Mandelson, and Karl Falkenberg, the EUs chief trade negotiator until January 2009, were seen as arrogant and bullying. Ministers deplore the enormous pressure that has been brought to bear on the ACP States by the European Commission to initial the interim trade arrangements. Council of ACP Trade Ministers, December 2007 This view is echoed in a report evaluating the negotiating process. A representative sample of African Caribbean and Pacific (ACP) negotiators was asked to judge whether or not European negotiators had lived up to the rhetoric surrounding the Economic Partnership Agreement (EPA) talks. Nine out of thirteen felt that EPAs did not support regional integration Eleven felt that they had been put under pressure to negotiate trade-related issues by the European Commission (EC) Eleven felt that EPAs would force ACP countries to liberalise their trade Ten confirmed that aid was being made conditional on the signing of an EPA Eight felt that the EC did not listen to ACP concerns or proposals Only two felt that EPAs would be instruments for development. Other evidence from academic assessments, formal statements and documents obtained from negotiations seems to support their views. Dialogue of the deaf: an assessment of Europes developmental approach to trade negotiations, ICCO, September 2008

Global Europe
The EUs long term agenda for satisfying its own external trade interests is clearly laid out in its Global Europe strategy, adopted as part of the Lisbon Treaty in 2006 (see Appendix 12, p50). More countries than ever before are seizing the opportunities of globalisation. In the second half of the twentieth century, the United States, Europe and Japan drove the global economy. Today they are being joined by increasingly open and expanding economies, in particular China and India, but also Brazil, Russia and others. China is already the third largest exporter and likely to become the second largest national economy a few years from now. Within the same timeframe, India may become the sixth largest. The nature of global trade is changing as a result. We do not yet live in a world without tariffs, but many sectors are moving in that direction. For Europe, knowledge, innovation, intellectual property, services and the efficient use of resources are now the keys to competitiveness. Trade policy and our whole approach to international competitiveness need to adapt. Global Europe: competing in the world European Commission, 2006

A major criticism of EPAS has been that although DG trade claims that EPAs aim to meet the development needs of ACP countries, in reality they reflect the EUs need to secure raw materials and markets in an increasingly competitive world economy (see Appendix 11, p47; Appendix 13, p52; Appendix 14, p54; Appendix 15 p56). The Economic Partnership Agreements (EPAs) proposed by the European Union do not constitute a framework of partnership, but are essentially neo-liberal-inspired free market agreements that prolong imperialist domination and a neo-colonial vision, and which aim to strengthen the position of European multinationals in the context of the rivalry between the most powerful economic trade blocs. In an October 2006 document, the European Community declared its ambition to control the majority of the global market by the year 2010. The EPA requires (with few exceptions) a complete trade liberalization. Our country has already lived with, and is still living with, the disastrous consequences of the liberalization imposed by the International Finance Institutions (IFIs) in the 1980s and with even greater force since the years 1994-95. Haiti has become one of the countries most open to foreign trade, with existing import tariffs set at an average of 2.9% and the vast majority of the imported products coming in with a zero tariff. This situation is largely responsible for the collapse of whole sectors of the peasant economy which currently generates only 25% of annual GDP , and can barely produce 48% of the food consumed in our country. Following this accelerated liberalization, our country has entered a period of rapid economic decline, which has plunged the vast majority of the population (76%) into extreme poverty. We have also witnessed an explosion in unemployment. According to available information, in the sectors producing rice, sugar, chickens and eggs, more than 830,000 jobs have been destroyed by the liberalization of the 1990s. We cannot accept a continuation along the same path. Agreements like the EPA will accelerate the destruction of our economy. Declaration of the Haitian Block the EPA coalition, October 2007 8www.deiberthaiti.blogspot.com With the WTOs multi-laterial Doha Round of trade negotiations stalled since December 2005, many critics see bi-lateral negotiations such as EPAs as a more effective means of achieving similar results. The EU has also been accused of including investment, competition policy and government procurement the Singapore Issues which had been shelved by the WTO. The focus on bilateralism damages the rights particularly of the poor and the weak because in a bilateral negotiation the objectivity of a global system goes out the window and you have in effect a bullying opportunity often for the major trading powers. Peter Sutherland, former WTO Director General and Non-Executive Chairman, BP & Goldman Sachs Over the past two decades, this right of African countries to pursue their own individual and collective developmental agenda have been attacked and subverted by the countries of the north that dominate the world economic system, as part of their never-ending attempts to further open up the economies of African and other developing countries for the benefit of their transnational corporations. The so-called Economic Partnership Agreements being negotiated by African countries (and the Caribbean and Pacific) with the European Union, are, like other bi-lateral and multilateral free trade agreements, simply the latest instruments deployed in the attack on our countries. These agreements are set to be even more restrictive of the policy choices and opportunities available to our governments, and even more severe in their impacts than the World Bank/IMF structural adjustment policies as well as the WTO agreements. It has been three years since members of the Africa Trade Network launched their opposition to the Economic Partnership Agreements. Since then, several hundred civil society organisations, social movements, and mass-membership organisations across Africa, the Caribbean, the Pacific and Europe have been pursuing a campaign to STOP the EPAs as

10

Campaign graphic with Angelique Kidjo from Oxfam France Agir ici (left) photo: Nick Stevens/Oxfam; Seventh World Social Forum, Nairobi (right)

currently being negotiated between the European Union and ACP groupings of countries. While there is wide-spread recognition among governments, inter-governmental institutions, parliamentarians, civil society actors and a diverse range of social constituencies across the ACP , Europe and the rest of the world of the dangers posed by the EPAs to the economies and peoples of the ACP countries, this has not yet led to fundamental changes in the design of the EPAs and the process of negotiations. Expressions of concern among some European Union member-states and institutions about the EU proposals for the agreements have not yet translated into changes in directives for the European Commission. Instead, the EC has simply adopted new rhetoric to continue to impose its parameters, agenda and momentum on African (and other ACP) groups. Furthermore, while the EC negotiators have sought to strike a public profile of reasonableness, they have continued with characteristic arrogance in the negotiations. On their part, Africas EPA negotiating regions still seem unable to give expression to the fundamental logic of their stated developmental concerns in the overall architecture of the EPA and its different themes. Rather, they have tended to get bogged down in disputes with the EC over narrow (even if legitimate) questions of support for adjustment costs, transition costs and supply-side constraints. Furthermore, many countries in the African regions have still not fully carried out their own independent assessments and studies of the overall as well as sectoral implications of the EPAs. They continue to rely on support from the EC, while the latter continues to reject those studies whose outcomes it does not like. In some instances, the secretariats of the regional groupings whose role it is to represent the interests of the regions in the negotiations have been overwhelmed by the EC. Above all, in spite of the fact that they are patently not in a position to do so, many of the African negotiating regions are rushing to engage in the more advanced and complex stages of the negotiations. Declaration of 9th Annual Meeting of the Africa Trade Network, 11-14 December 2006 During 2006, more than 100 developing countries were engaged in over 67 bilateral or regional trade negotiations, and signed over 60 bilateral investment treaties. More than 250 regional and bilateral trade agreements now govern more than 30 per cent of world trade, whilst an average of two bilateral investment treaties have been agreed every week over the last ten years. The rules negotiated in these agreements reflect the bargaining power between the parties. Agreements between developed and developing countries are invariably imbalanced. Signing Away the Future Oxfam International, 2007

11

Deadline
With the deadline for the conclusion set for December 31, the campaign against EPAs intensified in 2007. The World Social Forum, held in Nairobi in January, saw large demonstrations. Tactics to prevent governments from signing included a constitutional challenge by the Kenya Human Rights Commission (KHRC), the Kenya Small Scale Farmers Forum (KESSF) and other petitioners against the Government of Kenya to prevent it from signing the EPA on the grounds that it would infringe human rights (see Appendix 4, p33). Stop EPAs Day, 27 September 2007 drew in 219 organisations from 44 countries, including 14 international organisations from across the globe! Well known musicians such as Benins world music diva, Angelique Kidjo, Haitis Boukman Eksperyans and Senegalese rapper Didier Awadi added their voice to the protests. Do you really wanna kill The economy Do you really wanna kill The industry Do you really wanna kill Our fishermen No man You wanna kill our countrymen Do you remember the days of slavery The type of deals in days of slavery Once again You wanna break our unity Stop now We wont sign it On signe pas Senegalese rapper, Didier Awadi 8www.awadimusic.com In the EU, tried and tested campaign tools photo opportunities outside parliament on Stop EPAs Day, postcards to key policy makers all the tools of modern communication were employed to mobilise opinion YouTube, Facebook, Twitter (see Gallery, p69). I have a six year old son. I pay for his education, healthcare, lodging, food, directly or indirectly. This means that if I sent him to the labour market and make him get a job, Id save a lot of money. On top of that, hed bring some money back home and Id be financially much better off. Now, if I said that, a lot of people would say that Im very cruel and myopic, but this is essentially what people say to developing countries when they put pressure on them to liberalise their trade and to integrate with the world economy. Through this agreement the developing countries are being called to open up most of their agriculture and manufacturing to outside competition, and this is like asking a parent of 5 or 6 year old boys to send their children into the labour market so that these children can get a job, get exposed to competition, and become a more productive person when they grow up. The trouble is that

Korean economist, Ha-Joon Chang, on YouTube posting for Oxfam 8www.youtube.com/watch?v=zukAnEkogn4

12

when you send these young children into the labour market, they might become a shoeshine boy or street hawker, they never become brain surgeon, chartered accountant or nuclear physicist. Ha-Joon Chang, YouTube posting for Oxfam adapted from Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, 2008 In response to the high profile international Stop EPAs campaign, the EU attempted to address the isssues raised by its critics (see Appendix 7, p40; Appendix 8, p42) ACP countries would be the first to say that it is essential that there is strong debate over EPAs. But those who suggest that Economic Partnership Agreements are a danger to African development are not only wrong, they also undermine those in Africa and other ACP countries who are seeking to work constructively towards a new trade and development relationship with Europe. In the final phase of this important process, ACP countries need confidence and support from their partners to put the final pieces of agreements in place. That is precisely what we will be seeking to offer in the weeks ahead. An open letter to anti-poverty campaigners Peter Mandelson, EU Trade Commissioner, and Louis Michel, EU Development Commissioner, 27 September 2007 (Stop EPAs Day) An indication of the strength of opposition to EPAs is the fact that although negotiations for a new trade regime should have been concluded by 31 December 2007, only the Caribbean grouping was in a position to initial a comprehensive EPA (on 16 December). To avoid the disruption of trade and under duress from the EU, 18 African and two Pacific countries initialled interim EPAs. It was clear by late 2007 that EPA negotiations in Africa and the Pacific would not conclude in time. Faced with the legal expiry of the Cotonou trade regime and WTO waiver that covered it, the EU and ACP therefore decided to conclude interim agreements that complied with WTO rules covering trade in goods. This would secure ACP access to EU markets and allow wider EPA negotiations to continue without legal challenge from other WTO members. All the inbuilt flexibility of WTO rules was used in these agreements to allow the ACP to exclude products sensitive to EU imports from tariff reductions and to spread liberalisation of EU imports over long transition periods. Due to the tight deadline, several interim agreements were initialled with individual countries rather than full ACP regions. However, this is a temporary situation and the aim remains to conclude full regional EPAs. Negotiations over these full EPAs are currently ongoing with all African and Pacific regions and cover a wider range of topics, including any issues set out in the interim agreements which partners want to re-examine. Fact sheet on the interim Economic Partnership Agreements European Commission Trade, 2009 Nigeria and Congo-Brazzaville refused to sign any agreement and lost their trade preferences with the EU. This was an almost fatal blow to the Nigerian cocoa processing industry because it imposed a special tariff on processed agricultural products from Nigeria, making it uncompetitive against similar products being exported to the EU from nations that had endorsed the interim EPA. In 2008, negotiations continued to secure full acceptance of interim EPAs and move them towards agreed comprehensive EPAs3, but progress was slower than hoped for by DG Trade because of increased resistance from several African countries. In December 2008, the Kenyan Human Rights Commission and the Kenyan Small Scale Farmers Forum (KESSFF) had the first panel of judges appointed to hear their case against the Kenyan Government. This challenged EPAs on violations of fundamental rights and freedoms as laid down in the Kenyan constitution and international instruments. The Kenyan Government was given until March 2009 to prepare their case.
3 Signed = legally binding Initialled = a commitment to sign, but not legally binding Interim EPA = agreements that do not yet include services or investment Comprehensive EPA = agreements that include trade in goods and services and investment

13

Trade regime from 1 January 2008

EPA configuration EPA 10 LDCs, 26 non-LDCs Antigua & Barbuda, Bahamas, Barbados, Belize, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St Kitts & Nevis, St Lucia, St Vincent & Grenadines, Surinam, Trinidad &Tobago Cameroon EAC: Burundi, Kenya, Rwanda, Tanzania, Uganda ESA: Comoros, Madagascar, Mauritius, Seychelles, Zambia, Zimbabwe Papua New Guinea, Fiji Central African Rep, DR Congo-Kinshasa, Chad, Equatorial Guinea, So Tome Djibouti, Eritrea, Ethiopia, Malawi, Somalia, Sudan East Timor, Kiribati, Samoa, Solomon Islands, Tuvalu, Vanuatu Benin, Burkina Faso, CapeVerde2, Gambia, Guinea, Guinea Bissau, Liberia, Mali, Mauritania, Niger, Senegal, Sierra Leone, Togo Angola Cook Islands, Tonga, Marshall Islands, Niue, Micronesia, Palau, Nauru Gabon, Rep Congo-Brazzaville Everything But Arms 31 LDCs General System of Preferences 10 non-LDCs1

Caribbean

Central Africa Eastern / Southern Africa

Pacific

West Africa

Cte dIvoire, Ghana

Nigeria

SADC

Botswana, Lesotho, Namibia, Mozambique, Swaziland

1 The Pacific countries have minimal goods trade with the EU while Nigeria and Congo (Brazzaville) declined to negotiate interim agreements 2

Cape Verde loses its LDC status in 2008 but will continue to benefit from GSP/EBA for a transitional period

Source: Fact sheet on the interim Economic Partnership Agreements European Commission DG Trade, 2009 8http://ec.europa.eu/trade/issues/bilateral/regions/acp/index_en.htm In May 2008, UK MEP David Martin published an open letter in the European Voice, signed by 55 fellow MEPs, calling on Jos Manuel Barroso, President of the EC, to stand with us on the side of the worlds poor, and reassess and renegotiate EPAs (see Gallery, p73). In October 2008 Peter Mandelson re-joined the British government and was replaced by Baroness Catherine Ashton. In January 2009 Karl Falkenberg became Director-General Environment. For many the change held the possibility of a new approach to the negotiations. An open letter to the new Commissioner from minsters with responsibity for development of Denmark, Ireland and The Netherlands reflected the belief that a more flexible approach to negotiations was needed and possible (see Appendix 17, p62). we have much to do to ensure that EPAs genuinely live up to the goals formulated in the Cotonou Partnership Agreement. We therefore need to ensure that EPAs will actively support regional integration and contribute to a regulatory framework that will stimulate economic development. If we are to succeed in this, we must be prepared to show more flexibility towards the countries and regions concerned in the next rounds of negotiations. In May of this year, the European Council already underlined how important it is to take a flexible approach to the transition from interim agreements to regional Economic Partnership Agreements and called

14

on the Commission to make full use of the flexibility and asymmetry permissible under current WTO law so as to reflect the different development levels and development needs of the ACP countries and regions. Judging by the vast majority of reactions received from the ACP over recent weeks and months, it is clear that as yet no sufficient degree of consensus has been achieved on the disputed negotiating issues as to allow negotiations to be brought to a successful conclusion. We would therefore like to urgently appeal to the Commission to make full use of all the flexibility available to us under current WTO law and to actively display that flexibility in current negotiations Ms Ulla Trns, Minister for Development Cooperation, Denmark; Peter Power TD, Minister of State for Overseas Development, Department of Foreign Affairs, Ireland; Bert Koenders, Minister for Development Cooperation, Kingdom of The Netherlands, November 7 2008 The new Commissioner publicly acknowledged the need for a new approach. Commissioner Ashton and her DG Trade colleagues cannot afford to continue along the same path followed by the previous Commissioner. I trust that we will see a new flexibility that will be translated into a practical willingness to reduce the pressure on the ACP to suppress their reservations, to get on with it, and to sign on the dotted line. The justifiable plaudits that Commissioner Ashton has received for her change in style and tone must now, as she herself has acknowledged, be matched by a change in substance. She is genuinely promising to offer real progress, but many of us cant help fearing that Europe, as the dominant partner, holding all the cards, is unlikely to want to make major concessions. She has inherited a difficult legacy and a great deal hangs on her ability to fulfil the promise that she displayed both at her hearing in the European Parliament and at the meeting with the International Trade Committee. And surely, as a matter of basic need and self-interest, the EU must now look beyond EPAs to build the improved relations with the ACP that will be helpful if Europe wants to broker critical multilateral agreements on, for instance, trade and climate change. Clearly in negotiation with countries such as China, India, and Brazil, Europes alliance with the ACP would be vital. Glenys Kinnock, MEP , Co-President of the ACP-EU Joint Parliamentary Assembly, Trade Negotiations Insight, February 2009 The European Parliament also acknowledged the undermining of trust in its relationship with ACP countries as a result of the negotiations when it passed a resolution to promote the development priorities which should be upheld in EPAs. A more radical resolution tabled by the Socialist and Green coalitions was rejected (see Appendix 18, p64). The European Parliament Urges the Council, the Commission and the governments of the EU Member States and ACP countries to do their utmost to re-establish an atmosphere of confidence and constructive dialogue in so far as it has been damaged in the course of negotiations and to recognise the ACP states as equal partners in the negotiation and implementation process Stresses that there is a need to increase transparency in the negotiations and their outcomes in order to allow for public scrutiny by policy makers, parliamentarians and civil society representatives European Parliament resolution [P6_TA-PROV(2009)0051] passed on 5 February 2009 The global financial crisis which finally broke in 2008 clearly demonstrates the dangers of unregulated liberalisation. It also provides a revealing contrast between the strategies and resources devoted to rescuing the discredited international banking system and developed economies, and the lack of similar commitment and flexibility in dealing with the development needs of the global South. It also highlighted the dangers of FTAs (see Appendix 19, p19). Bharrat Jagdeo, Guyanas President and an outspoken critic of the Caribbean EPA, called for a pause on its implementation until the turbulence of the crisis is resolved.

15

If we have a moratorium on this we will be able to raise some of those funds. The investments we need in our economy now by opening it up are not coming because investors cant find money; investment has dried up in many of our regions. Some of the leaders in these countries [Europe] were the strongest advocates of reciprocity in the EPA and of free trade; and the first sign of trouble [they] move to protect their economies. Now, if these countries cant handle open trade and they have a social safety net for their people and a large per capita GDP , what will reciprocity in the EPA do to us? Bharrat Jagdeo, President of Guyana, meeting of ACP and EU parliamentarians, 25 February 2009 The European Parliamentary elections in June 2009 provided campaigners in the EU with the opportunity to lobby candidates. In the UK, the Trade Justice Movement launched the Be a Trade Hero campaign. This included distributing 20,000 postcards which could be sent to Commissioner Ashton asking her to rethink Europes trade deals, and a pack for trade justice groups to organise the lobbying of candidates who were asked to sign a pledge to support a review of trade policy, both EPAs and the new free trade agreements being negotiated under the Global Europe agenda1. 80 candidates signed of whom 18 were elected and will be asked to fulfil their promises in the new parliament. Over 6,000 cards were eventually presented to the Commissioner. It is essential that the European Union takes a new approach to trade, one that prioritises development, environmental sustainability and human rights in poor countries. As an institution, it is accountable to the governments of its member states, who are in turn accountable to us, the people of europe. With the European parliamentary elections in June 2009, and the appointment of a new European Commission in autumn 2009, we have a unique opportunity to turn European trade policy around. A global campaign is already underway, involving civil society groups in Africa, Asia, and Latin America, as well as across Europe, to stop the deals unfolding under the destructive Global Europe trade strategy, and secure a full-scale rethink. TJM, alongside campaigners around the world, are calling for the European Commission to: Stop unfair EU trade deals with Africa, Asia and Latin America Commit before the end of 2009 to rethink EU trade policy so that it prioritises development, environmental sustainability and human rights in poor countries Open up European trade policy to enable better democratic accountability and scrutiny by parliamentarians and civil society. MEP lobby pack Trade Justice Movement, February 2009

With the WTOs Doha Development Round stalled, the EU is now trying to secure trade deals directly with countries or regions. In 2006, the EU set out its Global Europe trade strategy, identifying 34 countries for free trade agreements (FTA) that will benefit European corporations at the expense of some of the worlds poorest people. The EU is currently negotiating FTAs with: Central America (6 countries) Association of South East Asian States (ASEAN) (7 countries) Community of Andean Nations (4 countries) South Korea India Mediterranean (10 countries) MERCOSUR (5 countries). In total, these countries are home to 922 million people who live on less than US$2 per day. Illustration: TJM

16

The key objective now is to sign and provisionally implement all agreements concluded at the end of 2007. Only once they have been signed can these agreements be notified to the WTO and secure duty-free, quota-free market access currently granted by the EU. The main strategic objective remains the end of successful negotiations and the signing of full EPAs with all ACP regions, based on a shared vision for the future. Only full EPAs can deliver a comprehensive approach to trade and development in ACP regions. Update on Economic Partnership Agreements European Commission DG Trade, 23 March 2009 Although the EU had hoped to conclude all EPA negotiations by June 2009, several African countries have learnt from the Caribbean experience and held out for more favourable terms. Caribbean countries signed up to a full EPA to avoid being penalised. As Professor Norman Girvan has pointed out, although the percentages of total exports affected are small, they involve politically vulnerable sectors such as bananas which employ a large number of people. The EU knew this and played on it ruthlessly. Guyana was the country that would have been worst affected by the threatened imposition of tariffs on their goods and services yet it was the one that most strongly held out against signing a full EPA and did so only after getting an agreement to review the EPA within 5 years. Had the Caribbean stood together, they could have refused to surrender to the EU threats to their exports. African countries are facing similar threats but many of them have refused to sign until their concerns about safeguarding their development needs are met. By not capitulating to the EU, they may end up getting a better deal than the Caribbean. The division of labour among nations is that some specialize in winning and others in losing. Open Veins of Latin America: Five Centuries of the Pillage of a Continent Eduardo Galeano, 1971 As the EPA negotiations draw to a close, the whole protracted process provides insight into the difficulty of trying to create a world economic system which produces a more equitable distribution of the worlds resources, and meets the needs of the poorest of the poor the Bottom Billion. The fractious negotiations, lack of transparency and abuse of power which have characterised the EPA negotiations are a warning that developing a genuine partnership to address the global financial crisis and the growing threat of global climate change will require real committment to change the troubled relationship between rich and poor nations. Much of last year was characterised by a fuel and food crisis that saw the most rapid price escalation in living memory. Just as the historically high oil prices threatened the viability of fuel intensive industries and impacted on the cost of transportation and food production, so did food prices threaten to condemn millions around the world to hunger and poverty This fuel and food crisis was followed by the unparalleled current global financial and economic crisis which has overturned decades of economic orthodoxy underpinned by the neo liberal ideology and characterized by free market fundamentalism. The virtual collapse of the financial markets in the major capitals of the world has led to losses in excess of 50 trillion US dollars, left millions of workers jobless and homeless, and created an atmosphere of uncertainty and anxiety. The crisis has sapped the confidence of the markets, led to recession in the developed world and a bleak outlook for developing countries. The collapse of the ideology of unfettered markets and the election of Barack Obama as the President of the United States have created the opportunity and hope for the reform of colonial and post colonial international relations and institutions such as the United Nations, the IMF, the World Bank and the World Trade Organizations, all with their inherent bias towards the interests of the developed world. The challenge remains to reshape global relations so as to make this century the century of the developing world where five of the six billion inhabitants of the world reside. Bharrat Jagdeo, President of Guyana, Independence Day speech, 26 May 2009

17

World trade timeline

1944 1945 Bretton Woods Conference framework for post-war international trading system proposals to set up International Trade Organisation (ITO), International Bank for Reconstruction and Development (World Bank) & International Monetary Fund (IMF) Treaties to create World Bank and International Monetary Fund (IMF) signed 8www.imf.org; 8www.worldbank.org

from left: logos of IMF, World Bank, WTO

1948

1948

1948

International Trade Organisation (ITO) Charter agreed in Havana: seeks to establish specialised agency of United Nations to administer rules on employment, commodity agreements, restrictive business practices, international investment, and services; in 1950 US Congress refuses to ratify and ITO abandoned Organisation for European Economic Co-operation (OEEC) formed to administer US aid to war-torn Europe under the Marshall Plan initial 18 members aimed to develop intra-European trade by reducing tariffs and other barriers to the expansion of trade and study the feasibility of creating a customs union or free trade area; became OECD in 1961 General Agreement on Tariffs & Trade (GATT) comes into effect: interim organisation to boost trade liberalisation and remove protectionist measures from early 1930s

GATT trade rounds

year 1947 1949 1951 1956 1960-1961 1964-1967 1973-1979 location Geneva, Switzerland Annecy, France Torquay, UK Geneva Geneva, Dillon Round tariff reduction tariff reduction tariff reduction tariff reduction tariff reduction subject countries 23 13 38 26 26 62 102

Geneva, Kennedy Round tariff reduction & anti-dumping measures Geneva, Tokyo Round tariffs, trade barriers, eg subsidies framework agreements

1986-1994

15 issues including tariffs, non-tariff measures, rules, services, intellectual property, dispute Geneva, Uruguay Round settlement, textiles, agriculture, creation of WTO, etc

123

1961

Organisation for Economic Cooperation and Development (OECD) formed to help its member countries to achieve sustainable economic growth and employment and to raise the standard of living in member countries while maintaining financial stability; current membership: Australia, Austria,Belgium,Canada, Czech Republic,Denmark, Finland, France, Germany,Greece,Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, NewZealand, Norway, Poland, Portugal, Slovak Republic, Spain,Sweden, Switzerland, Turkey, United Kingdom, United States (EU has quasi-member status); shares expertise and exchanges with other countries, includingBrazil,China,andRussia 8www.oecd.org

18

Appendix 1

first United Nations Conference on Trade & Development (UNCTAD) to address concerns of developing countries: agree to meet every four years 8www.unctad.org Group of 77 (G-77) established by seventy-seven developing countries at UNCTAD; current membership of 131 countries largest intergovernmental organisation of developing states in the UN; provides the means for the countries of the South to articulate and promote their collective economic interests and enhance their joint negotiating capacity on all major international economic issues within the UN system, and promote South-South cooperation for development 8www.g77.org 1973 Yom Kippur/Ramadan War results in oil price increase by Organisation of Petroleum Exporting Countries (OPEC) who deposit petro-dollars in Western banks which make low interest loans to developing countries with little concern for how they will be used or how they will be repaid mid 1970s falling commodity prices and rising interest rates increase debt service requirements for developing countries 1975 Group of Six (G-6) formed: in response to global recession following 1973 oil crisis leaders of France, Italy, Japan, UK, USA, West Germany agree to meet annually to facilitate cooperation among worlds largest industrial democracies; finance ministers meet to discuss and coordinate actions on economic and commercial issues; 1976: becomes G-7 with addition of Canada; 1977: EU is represented by President of EC; 1997: becomes G-8 with addition of Russia; 2005 five Outreach Countries Brazil, China, India, Mexico and South Africa included in separate meetings to give impetus to WTO Doha Round G8+5

1964

WTO trade rounds

1996 1st Ministerial Conference, Singapore disagreements between developed and developing economies emerged during this conference over investment, competition policy, government transparency and government procurement the Singapore Issues

2nd Ministerial Conference, Geneva 3rd Ministerial Conference, ended in failure, with massive demonstrations and riots drawing 1999 Seattle worldwide attention negotiations to liberalise trade in services, eg water, education, General Agreement on health, undertaken in special meetings of Services Council 2000 Trade in Services (GATS) and regular meetings of committees and working parties; now incorporated into Doha Round agree to begin Doha Development Agenda new negotiations 4th Ministerial Conference 2001 on opening markets to agricultural & manufactured goods and in Doha, Qatar services the G20 (a group of developing countries led by India, China and 5th Ministerial Conference, Brazil), called for an end to agricultural subsidies and resisted 2003 Cancun, Mexico demands to include Singapore Issues; the talks broke down without progress talks achieve a framework agreement on the Doha Round developed countries will lower agricultural subsidies; in exchange 2004 Geneva developing countries will lower tariff barriers to manufactured goods Sixth Ministerial 2005 continuation of Doha Round negotiations Conference, Hong Kong collapse of Doha Round negotiations: developing countries refuse new improved offer to open Europes market for agricultural imports and reduced subsidies for US farmers in return for greater 2008 Geneva access to their non-agricultural markets; US rejects developing countries demands for flexible subsidies to protect small farmers from surges in subsidised imports to improve food security 1998 Appendix 1

19

1982

1985

1994 1995 1995

1995

1998

1999

2004 2005 2008

2008

Mexico threatens to default on foreign debt: Structural Adjustment Programmes (SAPs) introduced for Mexico and other countries with severe debt servicing problems; exportled growth, trade liberalisation and privatisation of nationalised industries are major components of SAPs beginning of Debt Crisis Group of Seven (G-7) set up to facilitate cooperation among worlds largest industrial democracies Canada, France, Germany, UK, Italy, Corporate influence in Mindanao, Philippines Japan, USA (European Commission attended since 1981 finance ministers meet to discuss and coordinate actions on economic and commercial issues North American Free Trade Agreement (NAFTA) implemented World Trade Organisation (WTO) established to provide legally binding trade rules 8www.wto.org Multilateral Agreement on Investment (MAI) negotiations launched at the Annual Meeting of the Organisation for Economic Co-operation & Development (OECD) to provide a broad framework for the liberalisation of international investment regimes and protection for foreign investment abandoned in April 1998 following international campaign Trans Atlantic Business Dialogue (TABD) set up to facilitate EU-US trade through meetings between CEOs of major corporations and working groups Protests against the MAI outside WTO in Geneva which submit proposals to US and EU leaders at the annual US-EU Summit 8www.tabd.com Heavily Indebted Poor Countries (HIPC) Initiative to qualify for relief countries have to prepare a Poverty Reduction Strategy Paper (PRSP) which is assessed by lenders who believe that poverty reduction is best achieved through economic growth brought about by privatisation, deregulation and rapid integration into the global economy Group of 20 set up G-7 nations plus Argentina, Australia, Brazil, China, EU, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey following complaints that emerging countries interests not represented at G7 meetings IMF introduces Trade Integration Mechanism to assist member countries to meet balance of payments shortfalls that might result from multilateral trade liberalisation IMF and World Bank implement Multilateral Debt Relief Initiative for 19 countries 100% debt relief for countries which qualify for HIPC initiative to release resources to achieve MDGs Collapse of Doha Round in July when India, China and US failed to agree the level at which developing countries can protect poor farmers by imposing a tariff on agricultural imports in the event of a drop in prices or a surge in imports Global Financial Crisis precipitated by loss of confidence in worlds financial and banking systems creating the most serious financial crisis since the Great Depression; global impact includes bankruptcies of key businesses, declines in consumer wealth estimated in the trillions of US dollars, substantial financial bail-outs by governments, and a significant decline in economic activity

20

Appendix 1

EU trade policy
1957 European Economic Community (EEC) set up between Belgium, France, Italy, Luxembourg, The Netherlands, West Germany: part of the Treaty allows for European Development Funds (EDFs) to provide aid to non-European countries with close relations to member states (1973 accession of Denmark, Ireland, UK; 1981: Greece; 1986: Portugal, Spain; 1995: Austria, Finland, Sweden) Yaound Convention gives trade preferences and aid to 18 African ex-colonies European Management Forum set up: European business leaders meet at Davos, Switzerland, under patronage of European Commission and industrial associations; gradually expands focus from management practices to economic and social issues political leaders invited in 1974; 1976 membership system of 1000 leading companies of the world introduced; 1987 changes name to World Economic Forum 8www.weforum.org Lom Convention: sets principles behind partnership between EU (then EEC) and former colonies in Africa, Caribbean and Pacific (ACP) on aid, trade and political relations; includes trade preferences for imports at guaranteed prices, eg sugar, bananas; aims to eradicate poverty through sustainable development brought about by greater integration into the world economy EUs development cooperation policies increasingly include conditionalities and aim to create a suitable trade, investment and legal climate to enable Togolese read about the Lom Convention, 1975 European companies to penetrate overseas markets Generalised System of Preferences (GSP) unilateral preferential market access to EU for ACP exports; 2001 under Everything But Arms (EBA) provision, all imports to the EU from the Least Developed Countries are duty free and quota free, with the exception of armaments transitional arrangements for bananas, sugar and rice Cotonou Agreement between ACP and EU: replaced Lom Convention new issues include security, arms trade, migration; agreement to negotiate WTO compliant trade agreement by 2007 Lisbon Strategy launched; by 2010 EU Humanitarian aid image produced by EU to symbolise its role, 2004 aims to be the worlds most dynamic, competitive, knowledge-based economy capable of sustainable economic growth with more and better jobs and greater social cohesion while respecting the environment Economic Partnership Agreements (EPAs) negotiations between EU and ACP to replace Lom Convention with free trade agreements which comply with WTO rules Global Europe: Competing in the World European Commission outlines the agenda for external trade to enhance the competitiveness of the EU within the framework of the WTO and achievel the goals of the Lisbon Strategy; covers trade, investments, public procurement, intellectual property rights, market access issues and a strategy for trade with China 8http://ec.europa.eu/trade/issues/sectoral/competitiveness/global_europe_en.htm Appendix 1

1963 1971

1975

1990s

1995

2000

2002 2006

21

Resistance
1980 1984 1980s Emergence of Karnataka State Farmers Association (KRRS) as a movement for social change at all levels including opposition to trade liberalisation Foundation of Landless Workers Movement Movimento dos Trabalhadores Rurais Sem Terra (MST) in Brazil emergence of Global Justice Movement in opposition to neo-liberal, corporate globalisation economic policies promoted by IMF, World Bank, WTO; massive citizen protests and alternative summits: 1988 annual meetings of IMF and World Bank in Berlin, 1994 50th Anniversary of IMF and World Bank in Madrid 8www.globaljusticemovement.org La Via Campesina international peasant movement launched to promote interests of small and medium sized farmers 8www.viacampesina.org Maquila Solidarity Network set up to to support struggle for labour and womens rights in global supply chains 8www.maquilasolidarity.org global encounter convened by Zapatista Army of National Liberation in Chiapas, Mexico; 6000 participants form a collective network of all our particular struggles and resistances... an intercontinental network of resistance against neoliberalism... (and) for humanity Launch of Peoples Global Action in Geneva as a anti-capitalist globalisation network which coordinates decentralised Global Action Days around the world to highlight resistance of popular movements, including Carnival Against Capitalism in cities around the world (1999), WTO Ministerial in Seattle (1999), G8 Summit in Genoa (2000), WTO Ministerial in Qatar (2001) 8www.agp.org World Social Forum set up by alterglobalisation movement as antidote Protesters in Genoa, 2000 to World Economic Forum to share experiences and develop strategies under the slogan Another world is possible; it supports globalisation which puts democracy, economic justice, environmental protection, and human rights ahead of economic concerns; meets annually, initially in Porto Alegre, Brazil, abut recently in Mumbai, India (2004), a polycentric event in 2006 Caracas (Venezuela), Bamako (Mali), Karachi (Pakistan) and Nairobi (Kenya) 8www.forumsocialmundial.org.br European Social Forum meets in Florence under slogan Against war, racism and neo-liberalism; subsequent forums in Paris (2003), London (2004), Athens (2006), Malmo (2008); other regional, national and local social forums have developed around the world Global Call to Action Against Poverty (GCAP) launched to campaign for an end to poverty and inequality including debt cancellation and trade justice; now words largest civil society movement with over 900 affiliated organisations from 70 countries; in UK campaigners responded with MakePOVERTY History 8www.whiteband.org Six Reasons to Oppose EPAs in their Current Form paper published by leading ACP and EU civl society organisations demanding more development-centred alternatives to the EPAs start of an international campaign First EPA signed between 13 Caribbean countries and EU; Bahamas refuses to sign

1993 1994 1996

1998

2001

2002

2004

2004

2008

22

Appendix 1

Six reasons to oppose EPAs in their current form

Response from 20 leading ACP and EU civil society organisations to some of the key arguments put forward in support of Economic Partnership Agreements (EPAs) by the EU. This paper is a response from leading ACP and EU civil society organisations to some of the key arguments put forward in support of Economic Partnership Agreements (EPAs) as currently envisaged by the EU. The undersigned organisations believe that trade can bring genuine benefits to the economies of ACP countries and to some of the poorest communities in those countries. Yet the EPAs as currently envisaged by the EU will not afford these benefits. It is for this reason that the undersigned organisations are participating in or supporting campaigns led by civil society organisations from ACP countries to Stop EPAs. The paper sets out some of the arguments for our position on EPAs and is a contribution to the further discussion that is necessary for development-centred alternatives to the EPAs as currently envisaged. November 2004

Myth 1: EPAs are about development

The Cotonou Agreement states that the objective of Economic Partnership Agreements is to reduce poverty by supporting the sustainable development and the gradual integration of the ACP countries into the world economy. Unfortunately, the current direction of the EPA negotiations looks set to undermine rather than facilitate such objectives. Although the precise nature of EPAs officially still has to be decided (and the option of an alternative remains open, according to the Cotonou agreement), the EU sees EPAs as reciprocal free trade agreements (FTAs) which it will negotiate on a bilateral basis with ACP countries or regions.1 As such, the EU insists that EPAs comply with the rules of the World Trade Organisation (WTO) on FTAs, stipulated in Article 24 of GATT 1994. This article states that FTAs require an elimination of tariff barriers on essentially all trade (interpreted by the EU as 90%2) within a reasonable time (10 years, apart from exceptional cases). An EPA based on this premise would bring about rapid and deep liberalisation3 between the worlds largest single market and the worlds poorest countries.4 For example, the 27 countries that the UNDP marks as having the lowest human development are all ACP countries. While there is general agreement that trade can be a powerful tool for development, a growing body of literature argues that rapid trade liberalisation does not on its own automatically lead to positive development outcomes. Countries should be able to choose the trade-policy option that best suits their development priorities and needs. Trade liberalisation should not be seen as a substitute for a sound development strategy. Moreover, it needs to be timed and sequenced carefully: there are different optimal degrees of openness at different stages of development, and it is generally agreed that, in order for an open trade regime to bring growth and development, countries must first have certain necessary conditions in place such as healthy economic sectors, potentially competitive produc ers, reasonably well-developed market institutions, and effective state capacity.5 Yet ACP countries suffering from serious supply-side constraints generally lack these conditions, which is why they have asked for reciprocity to be applied only after development indicators have been met. As economist and Financial Times journalist Martin Wolf has noted, trade liberalisation, as an aim, regardless of the circumstances, will not generate rapid growth. On this there is no disagreement, and never has been among serious analysts.6 In 2004, the UK government in a White Paper on Trade and Investment asserted that the EU as a whole has made clear that we do not have offensive market access interests, and the UK will seek to hold our EU partners to this.7 Yet the EUs current approach to EPAs as reciprocal FTAs means that ACP countries are being asked to open up to EU goods before they are in a position to compete, which could be devastating to these countries economies and livelihoods. The reciprocity that the EU is demanding could be particularly damaging in the area of agriculture, which is so central to most ACP countries economies and livelihoods. This is especially true in a situation where the EUs overall spending on the Common Agricultural Policy Appendix 2

23

(CAP) will remain at around @40bn per year until 20138 and where the average EU farmer receives 100 times more in agricultural support than the average annual earnings of an African peasant farmer.9 ACP countries could also face major losses to their fledgeling industrial sectors. It is increasingly recognised that when countries apply trade liberalisation before they have consolidated strong economies and institutions, de-industrialisation often ensues.10 This point was recently stressed by the Commission on Africa, established by UK Prime Minister Blair, which stated that [for trade to work as instrument of development] liberalisation should be non-reciprocal, to allow African countries to protect their infant industries.11 And the ECs own mid-term report on Sustainability Impact Assessment warns that EPAs might accelerate the collapse of the modern West African manufacturing sector and could also further discourage the development of processing and manufacturing capacity in the ACP countries in export oriented and other industries.12 The EU argues that existing imbalances can be addressed through asymmetrical liberalisation, which would mean a differential approach to product coverage and to the pace and timing of liberalisation. However, proposals for longer timeframes, combined with lower percentages of liberalisation for ACPs, do not solve the problem.13 Many ACP countries are poorer today than they were two decades ago and could be in worse shape in 10 or 20 years. Yet the EU insists on tying reciprocity to pre-determined timelines and insists that a development component would only come in parallel with opening of markets.

Myth 2: The multilateral trading system is the hallmark of EU external policy

Time and again the EU has asserted its commitment to the multilateral trading system, emphasising the role of the WTO as the principal forum for negotiating the terms of economic relations with trading partners. At the hearings of the European parliament, the EU Commissioner-Designate for Trade Peter Mandelson reiterated this commitment and added we should not do anything that could be seen as calling that commitment into question or divert attention from the WTO.14 However EPAs will do exactly that. First, WTO negotiators in Geneva are already working to an overloaded agenda. Most ACP countries are severely disadvantaged by the small size of their delegations; their inability to participate effectively in meetings; and opaque processes that leave them marginalised and assumed to be part of the consensus if they are not physically present to argue their case. Moreover, many ACP countries have scarce negotiating resources in their capitals and EPA negotiations will only spread this capacity more thinly. In the words of Eveline Herfkens, the UN Secretary Generals co-ordinator for the campaign to promote the Millennium Development Goals (MDGs), speaking at the European parliament: EPAs are a real problem for poor countries.[...] LDCs that include many ACP countries have neither the time nor the capacity to negotiate strong agreements with the EU. ACP countries face huge difficulties in the WTO negotiations.15 Secondly, EPAs threaten to undermine the positions that the ACP countries have defended in the WTO. In the WTO context, ACP countries have in the past traded away vast tracts of their national policy space in exchange for market -access commitments, many of which have still to materialise. Having learned from such painful experience, they formed an ACP/AU/LDC alliance (also known as the G-90) in the WTO negotiations to defend their own development priorities. In Cancun they signalled once and for all that the interests of small and vulnerable countries could no longer be ignored. However, it is much harder for ACP countries to maintain this resolve in the EPA negotiations, given their level of dependence on the EU for markets and development funds.16 The European Commission claims to believe in the complementarity between multilateralism and preferential agreements. However, in reality the EUs agenda for bilateral and regional trade agreements has always been ambitious and EPAs are no exception.17 For example, topics that the ACP countries have strongly resisted in the WTO are now up for re-negotiation in EPAs. Three of the four Singapore Issues (investment, competition, transparency in government procurement) of which the EU has been the strongest proponent were dropped from the Doha work programme as a result of continued opposition by ACP countries, in alliance with other developing countries. Yet all are still prominent on the EPA negotiating table. In effect, ACP countries will have to refight a battle already won in the WTO, but from a weaker bargaining position. Moreover, the EU is pushing for EPAs to go further than was envisaged in the WTO. For example, in the WTO the negotiations were on transparency in government procurement, while in EPAs the EU is asking for liberalisation of public procurement on the basis of non-discrimination.18 And there are further stark inconsistencies between what the EU has offered ACPs in the WTO and what it demands from them in EPAs. In the spring of 2004, the EU offered the ACP/AU/LDC alliance a so-called Round for Free, which proposed to exempt these countries from commitments on tariff reductions for agricultural and industrial products, in exchange for their support for the overall EU position. But as the

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Appendix 2

Dutch minister for Development Co-operation, Mrs van Ardenne- van der Hoeven, remarked recently: [A round for free] may even be perceived as somewhat misleading, since the EU is negotiating free market access for itself in the EPAs with ACP countries.19

Myth 3: ACP governments want EPAs

European decision-makers tend to argue that since ACP countries have agreed to EPAs, the process must be taken forward. This ignores the fact that ACP countries collectively and individually - have expressed clear reservations along the way about negotiating EPAs in the form being proposed by the EU. For example, Botswanan President Mogae recently expressed apprehension20 on behalf of the ACP countries; and back in 2001 a Mauritian non-paper stated that This important political decision was taken by the ACP Group not without reticence for various reasons. It was based more on pragmatism rather than the belief or conviction that the ACP States would benefit from the EPAs. The onus now lies with the EU to convince the ACP States that its preferred option of REPA would be beneficial.21 ACP governments are understandably concerned about the ability of their national economies and development strategies to withstand the potential impacts of reciprocal FTAs. For example, the ACP guidelines state that given the possible adverse effect of reciprocity on domestic production and fiscal stability in ACP states, the latter cannot a priori accept to provide reciprocity in EPAs with the EU; and [ACPs] do not have the capacity to liberalise in parallel and concurrently with the EU; and the implementation of tariff dismantlement should be linked to the attainment of certain development indicators.22 ACP countries have also expressed disagreement on the inclusion of the Singapore Issues in the ECs negotiating mandate, stating that from the ACP side, the rules aspects of the trade-related areas should not be the subject of EPA negotiations before agreement is reached on how to treat these issues at a multilateral level, particularly in the WTO.23 Mauritian Trade Minister Jayakrishna Cuttaree echoed this sentiment when he asserted that ACP states could not agree that subjects that have been rejected at the WTO should be brought to the EPA negotiations, in a back door way of influencing their eventual inclusion into the WTO agenda.24 Such concerns have been expressed despite the fact that the majority of ACP countries are highly dependent on EU aid and are concerned that a rejection of EPAs may result in the loss of a part of the EDF funding. Meanwhile, ACP countries have been calling for greater flexibility of WTO rules with regard to free trade agreements between a group of highly developed economies and least developed and developing economies; as well as for active pursuit of alternatives for those countries not wishing to enter into an EPA, which was clearly mandated by the Cotonou Agreement in Article 37.6. This sentiment has also been voiced in Europe when the UK government stated in 1998 that The Government shares some of these doubts about the FTA option hence our determination to ensure that it should not be the only option and the Government certainly agrees that they [EPAs] are not a universal solution. ... That is why we have worked to ensure that attractive alternatives will be available, both for LDC and non-LDC countries. 25 Not only has the EU failed to offer any serious response to these requests for alternatives, but it continues to push through the negotiations at an unrealistic pace which reinforces the fundamental imbalance in negotiating power between the EU and ACP countries. Negotiations are now taking place in sub-ACP regions, before these country blocs have been able to finish and in many cases even begin their impactassessment studies. In many cases negotiations are under way even before countries have been able to convene their national multi-stakeholder forums, or have clarified their own negotiating positions, or established an effective mechanism for co-ordination between ACP sub-regions. East African MPs recently expressed grave concerns about the process, stating that the pace of the negotiations has caught our countries without adequate considerations of the options open to us, or understanding of their implications, and that we are becoming hostage to the target dates that have been hastily set without the participation of our respective parliaments.26

Myth 4: EPAs are needed for WTO compatibility

EPAs were proposed because the non-reciprocal EUACP trade arrangement under the Lom Agreements was increasingly challenged. First, there was disappointment at the actual development impact of trade preferences; and second, the Lom trade provisions were increasingly being challenged by WTO members. The Lom trade preferences were seen to be discriminatory towards other developing countries, because they were not considered to be generalised preferences.27 Yet neither could the Lom agreement be considered an FTA, because it was non-reciprocal. The Cotonou Agreement (and several of its predecessors) Appendix 2

25

resorted to a WTO waiver to allow for the continuation of the ACPEU trade arrangements. This waiver will end on 31 Decem ber 2007.28 The EU argues that the solution to WTO-incompatibility is to adopt the model of EPAs in the form of a reciprocal FTA. Such an FTA would have to accord with Article 24 of GATT 1994, which would require elimination of barriers to trade on substantially all trade between the parties within a reasonable time (10 years, save for exceptional cases). By pushing for this point, however, the EU turns a blind eye to the fundamental flaws of Article 24 of the GATT. Most crucially, while the WTO explicitly recognises the rights to Special and Differential Treatment for developing countries, Article 24 lacks these SDT provisions.29 This means that ACP countries are faced with trade negotiations of a peculiar nature. Instead of negotiating to obtain concessions, they are in fact negotiating to defend what they already have. Moreover, they are negotiating within the very strict limits imposed by the WTO and the EU.30 But, most significantly, ACP countries are being asked to open up their markets before they are in a position to compete. Despite ACP countries expression of substantial concern about EPAs and their request for alternatives, the EU continues to present EPAs as the best option for future EU ACP trade relations. Does this mean that an EPA in the form of an FTA is the only option open to ACP countries? The answer to this is an unequivocal no. For one Article 24 of the GATT could be changed, allowing for SDT -provisions and flexibility for developing countries. This option has been proposed by ACP countries in a submission to the WTO.31 Alternatively, the enabling clause32 which allows not-fully-reciprocal FTAs could be amended to apply not only to SouthSouth FTAs but also to NorthSouth FTAs. As a further alternative, a new waiver could be sought under the WTO. Another possible route would be to find ways in the EUs current General System of Preferences (GSP) to allow for ACP interests to be taken into account. Each of the alternatives presented above comes with its own political challenges and specific limitations. However, this fact should not prevent the EU from acknowledging, exploring, and pursuing these alternative routes even more so, because in 1998 the European Council committed itself by agreeing that the EU will examine all alternative possibilities, in order to provide [ACP] countries with a new framework for trade which is equivalent to their existing situation and in conformity with WTO rules.33

Myth 5:The financial costs of EPAs can be overcome

The EU has argued that ACP countries can overcome the negative financial impacts from EPAs, yet this claim rings false. As Kofi Annan has said to the ACP Heads of State: A major concern, for example, is the impact that the trade liberalisation to be wrought by EPAs would have on fiscal revenue. Many of your countries are heavily dependent on income from tariffs for government revenue. The prospect of falling government revenue, combined with falling commodity prices and huge external indebtedness, imposes a heavy burden on your countries and threatens to further hinder your ability to achieve the Millennium Development Goals.34 Many ACP countries depend upon import duties for around one third of their national revenue,35 and in some cases the proportion is far higher. For exam ple, in Ivory Coast, Sierra Leone, and Uganda, trade taxes represent 40 per cent, 49 per cent , and 48 per cent of total government revenue respectively.36 Studies have predicted that EPAs would cause major declines in government income through lost tariff revenue. For example, Cape Verde and the Gambia stand to lose 19.8 per cent and 21.9 per cent of their national incomes respectively; and Ghana and Senegal stand to lose 10 per cent and 11 per cent.37 Estimated fiscal revenue losses for Kenya are 12 per cent.38 Such large decreases in fiscal revenue would substantially harm ACP countries budgetary capacities to finance key expenditures in areas such as education, health services, and poverty alleviation. Many developing countries rely heavily on taxation of imports, because it is relatively easier and less costly to administer than other forms of taxation. (Many economic activities in ACP countries take place in the informal economy, which makes them particularly hard to tax.) While reform of tax systems to facilitate alternative tax-revenue sources could have advantages in the long term, it would also be a complex, lengthy, and costly exercise which would divert attention and funds from more immediate development-orientated objectives and increase the burden on poor populations in these countries.39 And this would be just one of a range of adjustment costs. If ACP countries were not to be crushed by EPAs, radical structural reforms of production systems, institutions, and infrastructure, to name but a few areas would be required. Impact assessment studies40 are increasingly showing that for ACP countries to reap any benefits from EPAs, they would first need to address the major supply-side constraints that have long prevented many ACP countries from exploiting their preferences under successive Lom Agreements.

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Appendix 2

Moreover, the expected impact on wages and employment would seriously affect the poor. If existing industries have to compete with imports, the result might be unemployment not automatically offset by growth of employment in export sectors. And if no new opportunities were created for the poor, they could be considerably worse off than before.41 Many ACP governments are holding on to the hope that EPAs will provide the means to address these supply-side problems. Yet the stark reality is that the EU has persistently said that the funding available under the current EDF will not be substantially increased.

Myth 6: EPAs will foster regional integration

Given the small size of most ACP economies and their tendency towards dependency on a few primary commodities, regional integration among groupings of developing countries can offer these countries mutually beneficial development gains. Such trade arrangements can promote the pooling of resources, expanded markets, increased intra-regional trade and investment, and greater diversification and value addition. In turn they can reduce dependency on a small number of Northern markets and diminish vulnerability to a downturn in those markets. Moreover, in the longer term such regional projects could place countries in a stronger position to trade in higher value-added products on a more level playing field with major trading partners like the EU. ACP governments recognise these potential benefits, and currently a substantial majority of ACP countries are involved in varying forms of regional economic integration initiatives. However, regional integration is still at an early stage in most regions, and opening to EU imports before regional markets have been consolidated could undermine rather than support the process. There are a number of reasons why advancing intra-regional integration within ACP blocs is a slow and complex process which needs to be allowed to go at its own internally-driven pace. For example, in most ACP sub-regions, adjacent states are largely confined to the production of the same limited basket of primary commodities for export outside the region. Market infrastructure and institutional frameworks tend to have an outward orientation, and the intra-regional enabling environments for trade tend to be weak. These realities add up to a lack of immediate complementarity of neighbouring states for intraregional trade. Without first addressing these structural weaknesses in a way that leads to increased economies of scale and regional economic integration within developing-country negotiating blocs, there is little possibility of equitable economic exchange with an economic giant like the EU. Further complications are presented by the fact that many ACP countries belong to more than one trade agreement, and yet through the EPA process they are being forced to choose one bloc through which to negotiate with the EU. For example, in East and Southern Africa many countries have overlapping membership in the Common Market for East and Southern Africa (COMESA) and the Southern African Development Community (SADC), in addition to smaller blocs like the East African Community (EAC) and Southern African Customs Union (SACU). For the purposes of EPAs, countries have had to choose whether to negotiate as SADC or COMESA, which means that some countries are placed in a difficult dilemma, and on-going processes towards intra-regional co-operation are being undermined. In negotiations with the EU, COMESA has now been reduced to East and Southern Africa bloc (ESA), a grouping formed only for the purpose of negotiating an EPA, with no supporting institutions or legal framework. Meanwhile, Tanzania has chosen to negotiate as part of SADC, whereas its partners in East Africa will negotiate as part of ESA. This is placing strains on the EAC, which recently signed a Customs Union. The clustering of LDCs and non-LDCs within negotiating blocs is likely to produce even more difficulties. LDCs already have the Everything But Arms (EBA) arrangement, which allows them to benefit from market access into the EU without reciprocating. In ECOWAS, for example, 14 out of the 16 member countries are LDCs. Yet if these countries choose to opt out of an EPA, but continue with the ECOWAS regional integration process, they will still feel the effects of EU imports coming into their markets via their nonLDC regional neighbours. This presents countries with a grave dilemma and may actually increase regional tensions rather than promoting regional integration, given the wide disparities between the costs and benefits of EPAs for different countries in the same group. Precisely because of the perceived need first to advance their own indigenous regional integration proc esses, ACP countries have argued that if these processes are not to be stifled or undermined they should have precedence over EPAs and that ACP states must be allowed to first consolidate their own regional integration processes.42

Conclusion and recommendations

If EPAs continue to develop along their current course, they pose a severe threat to the development of ACP countries and the people living in these countries. They contravene the commitment of the EU to promote Appendix 2

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sustainable development and poverty reduction. That is why we are opposed to EPAs in their current form. Civil society will continue to work with parliamentarians, governments, and the European Commission to contribute to an outcome of these negotiations that will create a fairer trading relationship and bring about genuine benefits and economic opportunities for poor people. To this end, the undersigned organisations ask the EU to take the following steps: Fulfil its commitment under the Cotonou Agreement and urgently begin to pursue alternatives with ACP countries, based on the principle of non-reciprocity instituted in GSPs and special and differential treatment in the WTO. Drop its offensive interest in areas beyond the WTO to which the ACP countries are opposed, specifically the Singapore Issues of investment, competition policy, and government procurement. Signed by Africa Trade Network, Acord (Mali), ActionAid International (UK), Agir Ici (France), Both Ends (Netherlands), Cafod (UK), Centre for International Development CECIDE (Guinea), Christian Aid (UK), Econews Africa (Kenya), 11.11.11 Coalition of the Flemish North-South Movement (Belgium), Enda Tiers Monde (Senegal), Eurostep (Belgium), Mwengo (Zimbabwe), Oxfam International, Southern & Eastern African Trade Information and Negotiations Institute, SEATINI (Zimbabwe), Traidcraft (UK), Third World Network (TWN) Africa (Ghana), Zambian Trade Network (Zambia) November 2004 8www.tjm.org.uk
This marks a fundamental shift in the EUs approach to the ACP group. The previous Lom Agreements were characterised by a system of non-reciprocal preferences. This shift in EU policy has been motivated by the perceived need for EUACP trade to be compliant with current interpretations of WTO rules; and the inability of ACP countries to translate market access into development gains. 2 Recommendation authorising the Commission to negotiate Economic Partnership Agreements with the ACP countries and regions, 9798/02 ACP 84 WTO 59 + ADD 1. 3 Together, around 92 per cent of products originating in ACP States enter the EU without duty and with quota. Source: B. Ongugloand T. Ito. ( 2003), How to make EPAs WTO compatible? Reforming the rules on regional trade agreements,ECDPM Discussion Paper 40, Maastricht: ECDPM. 99.7 per cent of African exports enter the EU duty -free. Source: EUAfrica, Caribbean, Pacific ACP trade relations, Key facts and figures, Brussels 02 October 2003. All LDC ACP countries have quota-free and dutyfree access to the EU under the Everything-But-Arms initiative. At this moment ACP countries do not provide preferential access for EU imports. 4 The ACP group, for instance, contains 38 of the worlds 49 LDCs, while all EU countries are ranked by UNDP as high humandevelopment countries. 5 For instance, UNDP (2001), The global governance of trade as if development really mattered; Dani Rodrik (1999) Making Openness Work: The New Global Economy and the Developing Countries, Washington DC: Overseas Development Council; Ajit Singh (2003) Elements for a New Paradigm on Special and Differential Treatment Special and Differential Treatment, The Multilateral Trading System and Economic Development in the 21st Century, Cambrdige: Cambrdige University Press. 6 Martin Wolf (2004) Why Globalisation Works, Yale University Press: London. 7 DTI (2004) Trade and Investment White Paper Making Globalisation a Force for Good, London: DTI, p.91. 8 In comparison, the ninth EDF contains Euro 13.4 billion for the ACP for the period 2000-2005. In addition, outstanding funds from previous EDFs can be used (approximately @10 billion). Additional funds for trade-related assistance are also available, for instance @50 million for trade.com. Source: www.europa.eu.int/scadplus /leg/en/lvb/r12102.htm, last visited on 4 November 2004 . 9 Trade-distorting agricultural subsidies are being negotiated within the framework of the WTO and are not negotiated in EPAs. The outlook for these negotiations in the WTO are not promising, even though a first step on export subsidies was made in the July Framework Agreement. This means that ACP countries could continue to face highly subsidised agricultural exports when EPAs come into effect. The average European farmer receives the equivalent of US$16,028 annually in agricultural support. Source: Producer support estimates per European farmer 1998-2000 from OECD (2001) Agricultural Policies in OECD Countries, Monitoring and Evaluation, Paris: OECD. Meanwhile, the average income of an African farmer is US$163 per annum, according to The Commission for Africa (2004), Commission for Africa: An Overview of the Evidence London: The Commission for Africa. 10 For instance: UNCTAD (2004), Least Developed Country Report . 11 African Commission, closed session, Thematic issues opportunity and growth, 7 October 2004, Addis Ababa, Ethiopia. 12 Sustainability Impact Assessments (SIA) of Trade Negotiations of the EU-ACP Economic Partnership Agreements, Mid Term Report Working Draft, 1 October 2003, http://www.sia-gcc.org/acp/download/summarized_mid- term_report_final_doc_light.pdf. 13 In recent meetings between civil society and the UK government (autumn 2004) timeframes of up to 20 years and a liberalisation commitment from ACPs of 75-80 per cent have been mentioned. 14 European Parliament hearings, Answers to questionnaire for Commissioner designate Mr Peter Mandelson, Part B Specific questions, source: www.europarl.eu.int/hearings. 15 Ann De Ron IPS (Sept 8 2004), Small Countries Problems Get Bigger, Brussels. 16 D. Primack and S. Bilal in Trade Negotiations Insight, vol 3, no 1, January 2004, The journey from Cotonou to Cancun, and
1

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beyond: the changing dynamics of WTO and EPA negotiations. 17 The Cotonou Agreement proposes that EPAs cover a whole range of areas, including competition policy (Art. 45), intellectual property rights (Art. 46), standardisation and certification (Art. 47), sanitary and phytosanitary measures (SPS, Art. 48), trade and environmental considerations (Art. 49), trade and labour standards (Art. 50), consumer protection (Art. 51), food security (Art. 54) and investment (Art.75). In terms of coverage, the recent agreements with Chile and Mexico best reflect the EUs template for EPAs. Source: S. Szepesi (2004) Coercion or Engagement? Economics and Institutions in ACPEU Trade Negotiations (ECDPM Discussion Paper 56), p.7, Maastricht: ECDPM. 18 EC Directives for the negotiation of Economic Partnership Agreements with ACP countries and regions. 19 Agnes van Ardenne-van der Hoeven, Minister for Development Co-operation of the Netherlands, (10 July 2004) The Doha Development Agenda in the WTO: a Political and Economic Necessity or an Exercise in Political Correctness? Speech at a Conference on the Role of the WTO System in the World Economy. The Cornell Law School and the Cordell Hull Institute. 20 At the ACP-EU Council of Ministers meeting in Gabarone, May 2004. Source: TNI July 2004, EPA Negotiations Update: State of Play of Negotiations; www.epawatch.net/documents /doc113_2.doc+Botswana+president+EPA&hl=en. 21 From Mauritius Non-Paper 1, author: Ambassador Gunessee of Mauritius (12 October 2001), Negotiation of Economic Partnership Agreement under the ACP-EU Partnership Agreement: An all-ACP-EU EPA Option, Non Paper 08 12 01 Amb Gunessee Rev 2, www.epawatch.net/general/text.php?itemID=15&menuID=25. 22 ACP Guidelines for the Negotiation of Economic Partnership Agreements ACP/61/056/02/FINAL, 5 July 2002, Brussels. www. acpsec.org/ExternalSheet.aspx?&ArticleFileName=http://www.acp.int/6105602EngNegGuidelinesFINAL.pdf&sessLang=1 23 Joint report on the all ACP-EC phase of EPA negotiations, Brussels, 2 October 2003. 24 Minister Cuttaree, quoted in Press Release, The ACPCouncil of Ministers at the ACP-EU Joint Parliamentary Assembly, Addis Ababa, 17 February 2004. 25 The response also said: there should be a reasonable alternative available to Lom partners, without reduction in their market access to the EU. And Thanks to the agreement the Government obtained in the Council, all LDCs should enjoy duty -free access for essentially all products by 2005, and that non-LDC ACPs unable to join FTAs should be offered a new trade framework equivalent to their existing situation under the Lom Convention. UK Governments response to the International Development Committees report on the renegotiation of the Lome Convention www.publications.parliament.uk/pa/cm199798/cmselect/ cmintdev/1068/106804.htm, accessed on 8 October 2004. 26 Quoted from Resolution of Members of East African Parliamentary Liaison Committee in workshop on EPAs organised by FES and SEATINI, Mombasa, 1-2 April 2004. 27 One of the main arguments for the WTO incompatibility of the Lom convention was that it granted preferences to an arbitrary group of developing countries: the ACP group, for instance, excludes several LDCs. The WTO members acknowledge three groupings of countries: LDCs, developing countries, and developed countries. Non-reciprocal preferences fall under the enabling clause which allows developed countries to extend preferences under the GSP to developing countries. Six reasons to oppose EPAs in their current form 9 28 B Onguglo and T. Ito (2003) How to make EPAs WTO compatible? Reforming the rules on regional trade agreements (ECDPM Discussion Paper 40), Maastricht: ECDPM. 29 If one developed country is involved (in this case the EU), the FTA falls under the scope of Article XXIV of GATT 1994. In case of a trade agreement between developing countries, they can choose whether to apply the enabling clause or Article 24 . In the former case, this would mean for instance that the clauses in trade coverage (essentially all trade) and transitional periods (exceed reasonable time only in exceptional cases) do not apply. 30 B Onguglo and T. Ito (2003) How to make EPAs WTO compatible? Reforming the rules on regional trade agreements (ECDPM Discussion Paper 40). Maastricht: ECDPM. 31 Submission on Regional Trade Agreements to the WTO negotiating group on rules: Developmental Aspects of regional trade agreements and special and differential treatment in WTO rules: GATT 1994 Article XXIV and the Enabling Clause, Paper by the ACP Group of States, TN/RL/W/155, 28 April 2004. 32 The enabling clause allows WTO members to favour developing countries. The main measures covered by the enabling clause are GSP , regional and global trading agreements between developing countries, and special treatment for LDCs. 33 Article 37.6 of Cotonou Agreement. 34 Message by HEM Kofi Annan, Secretary-General of the United Nations, delivered by K.Y. Amoako, Executive Secretary, Economic Commission for Africa, to the 4th Summit of ACPHeads of State and Government, 23 June 2004, Maputo, Mozambique www. acpsec.org/InternalSheet.aspx?ArticleFileName=2004/msgsgonu_en.html&sessLang=1 35 The IMF says that import duties represent 34 per cent of national revenue for African LDCs. Source: Bridges Weekly Trade News Digest, 30 April 2003. 36 World Bank World Development Indicators 2003: figures for 2000. 37 M Busse et al. (July 2004) The impact of the ACP/EU Economic Partnership agreements; an empirical analysis of the trade and budget effects, Hamburg Institute of International Economics prepared for the Friedrich-Ebert-Stiftung (p.27). 38 S. Szepesi (2004) Coercion or Engagement? Economics and Institutions in ACPEU Trade Negotiations (ECDPM Discussion Paper 56), Maastricht: ECDPM, p.13. 39 Ibid. 40 See, for example, Kenya Institute for Public Policy Research and Analysis (August 2004), Agenda for Development of Negotiating Position Under Economic Partnership Agreements; Kenyas Agricultural Trade with the EU (Draft Report), Nairobi Kenya; Trade & Development Studies (TRADES) Centre (July 2004), Study of the Impact and Sustainability of EPAs for the Economy of Uganda, Harare, Zimbabwe; Caribbean Policy Development Centre (April 2004) REPAS or RIP OFF: An Initial Advocacy Position of the Caribbean Reference Group on the EPA Negotiations, Bridgetown Barbados. 41 S. Szepesi (2004) op. cit., p.7. 42 ACP Guidelines for the Negotiation of Economic Partnership Agreements ACP/61/056/02/FINAL, 5 July 2002, Brussels

Appendix 2

29

on the CARIFORUM-EU EPA Negotiations

Advocacy paper

Evaluation by Windward Islands Farmers Association (WINFA) of the negotiations and the likely implications of the EPA for Caribbean agriculture in general and Windward Islands farmers in particular.

Background
The six ACP regions are currently engaged in negotiations for completion of Economic Partnership Agreements (EPAs) with the European Union (EU) by December 31, 2007. The resulting EPAs are meant to replace the existing Cotonou Agreement that governs trade between the ACP as a Group and the EU. However, the Cotonou Agreement makes provision for a mid-term review of the EPA negotiations with a view to determining: whether the negotiations will be completed on time; whether the emerging agreements would likely address the development concerns of the various ACP regions; and what further work needs to be done to ensure the successful completion of these agreements. Preparatory to the mid-term review, the Windward Islands Farmers Association (WINFA), with assistance from the International Fund for Agricultural Development (IFAD), has undertaken an assessment of the EPA negotiations between CARIFORUM and the EU up to July 2006. While the assessment has looked at the negotiations as a whole it has been primarily concerned with the likely implications of the EPA for regional agriculture in general and for Farmers of the Windward Islands in particular. In the remainder of this advocacy paper WINFA has set out the main findings and conclusions of the study and identifies the necessary actions to be taken by various parties in order to ensure that the EPA delivers an output that is consistent with the development interests of the Regions farming community.

Findings, conclusions and required actions

First finding and conclusion EPA negotiations have proceeded according to schedule. However, treatment of several issues of interest to CARIFORUM has been less than satisfactory. Both CARIFORUM and the EU broadly share a similar vision of the EPA. Both sides believe that an EPA has to be more than a classic FTA built purely on market access commitments and obligations. In particular, both sides agree that an EPA should contain a significant development dimension with respect to the CARIFORUM side. However, when it comes to the specifics of the negotiations it appears that there is considerable divergence in some key positions of the two sides. In particular they do not agree over the following issues: how the development dimension should be crafted so that it infuses all aspects of the EPA; financial resources for CARIFORUMs implementation of commitments under an EPA; approach to tariff elimination; variability in the economic structure and progress of CARIFORUM states; treatment of investment taking into account bi-lateral investment treaties; and commitments in the areas of sustainable development and good governance. Required actions There needs to be more convergence in the views of CARIFORUM and the EU. Such convergence is important particularly in the understanding of the development dimension; financial resources for implementation of the EPA and approach to tariff elimination in Agriculture. Specifically, CARIFORUM must balance the EUs demands for tariff elimination in Agriculture with the EUs own timetable and commitments both in the WTO and the EPA to eliminate all subsidies in Agriculture. Second finding and conclusion CARIFORUMs agriculture trade deficit is a major problem for most of its members, except Guyana and Belize that have been consistent agriculture trade surplus generators. In particular, all of the Windward Islands consistently experience agriculture trade deficits even if there are commodities other than bananas to which production can be diversified, as supply-side constraints effectively constitute barriers to diversification. Required actions CARIFORUM needs to secure a commitment from the EU in the context of the EPA to provide technical and financial assistance for developing an adequate supply of specific commodities both for domestic

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Appendix 3

consumption and regional and international trade. WINFA has identified a preliminary list of such products and will be made available to CARIFORUM for the EPA negotiations in due course. Third finding and conclusion The EUs stance on a single starting line (SSL) as the basis for liberalization of trade in CARIFORUM is not in the best interest of the Windward Islands. If adopted, the SSL could result in the smallest economies undertaking to cut their tariffs to the same extent as significantly larger economies. Consequently, this would place considerable pressure on the domestic agriculture sectors in the region especially if EU members do not eliminate agriculture subsidies upon implementation of the EPA. In addition, the already weak fiscal systems may well collapse as governments lose most of their revenue from imports. Related to the EUs position on SSL is its view on the principle of non-discrimination any member of CARIFORUM that has made concessions to a developed country must make similar concessions to the EU. This provision would allow the EU to access concessions made by the Dominican Republic in the CAFTA-DR-US FTA and could have even more profound adverse implications for the smaller CARIFORUM members. Required actions CARIFORUM must insist that the SSL approach to tariff elimination proposed by the EU is not feasible and needs to urge the EU to agree to countries eliminating tariffs on the basis of their capacities so to do. In addition, CARIFORUM must signal its concerns that by demanding the Dominican Republic provides the EU same concessions as it has provided the United States the possibility is being created for further demands on the weakest members of CARIFORUM undertaking to liberalize their tariffs at an even faster pace than envisaged under SSL. Fourth finding and conclusion With regards to the specific treatment of Agriculture in the talks so far, more needs to be done by the CARIFORUM side to ensure a more focused and specific outcome with respect to agriculture in general and the products of export interest by Farmers of WINFA in particular. In particular, where bananas are concerned it would be in WINFA Farmers best interest if a managed quota was maintained on the EU side, thereby providing a justification for the EU to continue to impose a reasonably high tariff on bananas subjected to MFN market access. Quota free or unlimited quantity market access for bananas means very little to WINFA farmers in a context in which they all face permanent supply-side constraints. However, the major banana exporters from Africa Cameroon and Ivory Coast, are pursuing quota free access given that they possess capacity to effectively expand market presence, significantly. Required actions CARIFORUM needs to articulate its specific agriculture concerns to the EU ensuring that both its traditional and new agriculture export interests are taken into account. With respect to bananas CARIFORUM needs to make clear to the EU that it has no interest in securing unlimited or quota free access and that in its view it is in the best interest of all the ACP regions to accept quota restrictions. Should the EU concede to this in the EPA then it would signal intense competition to the Latin American suppliers and would likely result in an entire new round of banana trade litigation in the WTO. Therefore, in addition to stating its position in these negotiations WINFA will seek to engage farmers from organizations in these countries, as well as other influential groups in pursuing its objective. Farmers of WINFA also believe more might be achieved out of the EPA than is presently scheduled by making the following specific submissions to negotiators through the CARIFORUM Council of Ministers of Trade. First, for products affected by long-standing preferences the EU should commit not to engage negotiations multilaterally and to move to designate them as sensitive. Additionally, such products should be excluded from the scope of negotiations in other FTAs that the EU may engage in over the next decade. Secondly, Farmers of WINFA will notify a list of products as important to either their export production interest or rural livelihoods and security to the CARIFORUM Council of Ministers of Trade. As such, the Ministers of Trade should be requested to instruct its regional negotiators to ensure that in addition to market access which the EU will provide in an EPA that the EU commits to building supply-side capacity for development of these products in the Region. Commitment should also be sought from the EU in the context of technical and financial assistance to ensure that market access can be converted to market presence in the EU for these products. Moreover, the EU should agree as part of the development dimension to implement measures that would help farmers better integrate into the entire supply chain for these products. Such integration should result in an enhanced understanding of norms and values, business practices and other issues peculiar to EU member states that may impede market presence. Appendix 3

31

Fifth finding and conclusions The EU has proven so far to be too inflexible in the following areas: concept of a development dimension that will generate real value to CARIFORUM; financial assistance for implementing commitments and obligations under and EPA; and the approach to tariff elimination. Required actions Given the importance of the above finding for the overall success of the EPA negotiations WINFA proposes an aggressive lobby and advocacy campaign of EU capitals and the Commission on these specific issues. Sixth finding and conclusions In surveying the literature on alternatives to the EPA, WINFA has not found evidence of credible alternatives that would effectively provide CARIFORUM the same degree of security as the EPA. Indeed options like GSP would result in less favorable treatment than that under Cotonou. Required actions WINFA therefore proposes the major initiative that CARIFORUM should embark upon is to ensure that it maximizes on the flexibility in implementation, opting for long phase-out periods for sensitive products while diversifying the domestic and export production base of the region. Seventh finding and conclusions The EU has committed to building regional integration as a major pillar of the EPA, the so called market building pillar. However, agriculture trade within the region is significantly hampered by the absence of transportation for the movement of bulk agriculture produce. Required actions As part of its commitment to help build the integration process, WINFA proposes that the EU should provide technical and financial assistance to the Region for establishment of a shipping line. This is seen as a major priority for success of the Regions own integration and market building and ultimately, the success of the EPA between CARIFORUM and the EU. Eighth finding and conclusions Global warming is a major problem confronting the world at this time. It poses major challenges for small island states like those of the Windward Islands. However, there has so far been no discussion on the environmental implications of the EPA for the Caribbean region. Required actions Within the context of the EPA, the EU should commit to environmentally friendly means of production of goods for trade with CARIFORUM, and assist CARIFORUM in developing and implementing appropriate standards to ensure its own environmental sustainability. In that connection the EPA should include specific provisions on the environment including a permanent committee on the subject as part of its joint implementation mechanism. Ninth finding and conclusions Regarding the RPTF it seems that the relevant preparatory work has been done in identification of the various areas for support. However, the pace of implementation of projects and initiatives within the identified areas is rather slow. Approval of project ideas and disbursement of funds have been particularly problematic in that regard. Required actions There is a need therefore for the EU to ensure that all necessary actions are taken to facilitate an early harvest in the delivery in key areas. WINFA also proposes that this matter be made known to EU member states and EU NGOs to ensure that the EC gives these issues the attention they deserve. Tenth finding and conclusions WINFA believes that the importance of the development dimension cannot be understated. In that connection the CARIFORUM side is expected to table a detailed approach that could be adopted to the development dimension when talks resume after the summer. Required actions WINFA proposes that it should examine the submissions in that proposal in order to ensure that it reasonably captures most of its concerns as outlined in this advocacy paper. Windward Islands Farmers Association (WINFA), 9 November 2006 8www.winfa.org

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Appendix 3

Constitutional Challenge to the EPAs

Kenya Human Rights Commission

Kenya Human Rights Commission (KHRC), the Kenya Small Scale Farmers Forum (KESSF) and other Petitioners instituted proceedings against the Government of Kenya to prevent it from signing the EPA on the grounds that it would infringe human rights. The Kenya Human Rights Commission (KHRC) and the Kenya Small Scale Farmers Forum (KESSF) along with other Petitioners are instituting proceedings under Section 84(1) of the Constitution of Kenya and various international instruments against the Government of Kenya on violations of the fundamental rights and freedoms of the individual and contraventions of the provisions of the Constitution of Kenya and the international instruments. Kenya along with other African Caribbean and Pacific (ACP) Group of States are currently negotiating with the European Union (EU) new trading arrangements and agreements known as Economic Partnership Agreements (EPAs). The basis and principles underlying these negotiations are contained in the Cotonou Partnership Agreement (CPA) which was signed in Cotonou in June 2000. There were four conventions prior to the signing of the Cotonou Protocol. These were Lom I (1976-1980), Lom II (1981-1984), Lom III (1985-1990) and Lom IV (1991-2000). Under the trade provisions of the Lom Agreements the ACP states were given market access into EU for exports of raw materials and agricultural products. Kenyas negotiations with the EU are being conducted through the Eastern and Southern Africa (ESA), a geographical configuration which comprises 16 countries: Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda Seychelles, Sudan, Uganda, Zambia and Zimbabwe. Key components of the principles and the essential and fundamental elements of the CPA include the following: Respect for and promotion of all human rights. This is based on the conviction that democratisation, development and the protection of fundamental freedoms and human rights, democracy and good governance are interrelated and mutually reinforcing. Reducing and eventually eradicating poverty. Sustained growth and increasing employment. Participation. Partnership is not an exclusive domain of central governments. Participation must be open to different kinds of other actors including civil society organisations, the private sector and other nonstate actors. Equality of men and women. Deeper regional integration. Reciprocity. The EPAs will be the new cooperative framework under the CPA and are expected to adopt an integrated approach based on partnership and promoting cooperation, trade and political dialogue between the EU and ACP countries. EPAs will essentially be free trade area arrangements to replace the non-reciprocal trading preferences currently advanced to the ACP countries under the Lom Agreements with reciprocal arrangements in compliance to the WTO rules of non-discriminatory trading arrangements. Studies have shown the following; EPAs will bring about revenue loss of 6 to 9 billion Kenya shillings. EPAs may lead to a net welfare loss for Kenya equivalent to 0.1% of GDP or Kshs. 25 per capita when all the goods are included in the liberalization process. There will be a potential reduction in national output ranging between 0.6 and 1 percentage points and a potential loss of over 3000 jobs. Appendix 4

33

 There will be a reduction of taxable trading activities leading ultimately to revenue losses. Kenya will loose about fifteen percent of the intra-EAC trade and comparable percentage in the COMESA region as Kenyan exports would be crowded out of the markets by an increase of EU exports. Kenyan industries and manufactured goods for exports will lose their competitive edge in the region. Kenya will be forced to expand its tax base and to introduce new taxes or seek budgetary support. EPAs will pose significant challenges to Kenyas major food commodities such as wheat, rice, sugar, dairy, and maize, meat and meat products. Reciprocity will be very costly to Africa. Any benefits that EPAs are expected to generate for ACP countries are unlikely to materialize spontaneously or instantaneously. The implementation will impose on the ACP countries severe challenges including management of losses of fiscal revenue, competition under the principle reciprocity and difficulties in the area of market access for agricultural and non-agricultural products. EPAs will undermine the gains achieved so far in the integration process of the continent. Governments in the COMESA region will lose about a quarter or twenty-five percent of trade taxes and about six percent of total revenue. EPAs for COMESA countries will lead to de-industrialization and attendant loss of jobs and barriers to entry into new markets of local products as a result of price and quality competition from EU-based industries to local manufacturers. Economies of scale and access to new technologies would give an edge to EU-based industries. The elimination or dismantlement of import tariffs on EU-sourced imports will affect Kenya adversely and the country will find it difficult to come up with ways to replace the revenue lost. Revenue shortfalls will have economic, social and political dimensions. The country may resort to increased reliance on income tax. EU stands to gain significantly in terms of expanded trade into markets in the ACP countries including Kenya. ACP countries will have to cope with and bear adjustment costs as a result of revenue shortfalls. Without appropriate measures to forestall the macroeconomic imbalances that are likely to result from falling revenues EPAs will undermine developmental objectives of the African countries. The ACP countries will have to cope with non-tariff barriers that may dilute or frustrate market access of certain goods and services to the EU. The petition is being mounted largely on two fronts. First is the violation of Sections 70(a), 71(1), 73(1), 74(1) and 75(1) of the Constitution which covers the range of rights that include right to life, protection from slavery and servitude, right to human dignity and protection against deprivation of property. 4 4 Components of the right to life include the right to employment, the right to a decent standard of living, the right health and the right to development because without them the right to life will be jeopardized or is meaningless. Secondly is the right to participate which can be gathered from a purposive interpretation of Section 79(1) of the Constitution. These grounds become clearer when read together with the Universal Declaration of Human Rights, the International Covenant on Economic, Social and Cultural Rights, the International Covenant on Civil and Political Rights (ICCPR) and the African Charter on Human and Peoples Rights and other international instruments. Article 25 of ICCPR guarantees not only the right but also the opportunity to take part in the conduct of public affairs. This imposes obligation on states like Kenya to take positive steps to ensure that their citizens have an opportunity to exercise their right to political participation. The African Charter is even more specific and explicit. The right to participation includes but is not limited to the right to vote in an election. The Human Rights Committee has explained that citizens may participate directly by exerting influence through public debate and dialogue. The CPA makes it a fundamental element for citizens to be involved to promote participatory democracy and parliaments to be consulted and enact enabling legislation. All this is done to give the process and the governments legitimacy and legality and to ensure that the Executive is open transparent and accountable to its people. The Petitioners are saying the government is negotiating in secrecy. No documents are availed to the public.

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Appendix 4

Its negotiating positions are not revealed. The Petitioners are seeking the following declarations and orders; a A declaration that the conduct of ongoing negotiations on EPAs, the EPAs as presently conceived and the actions of the First Respondent in regard to the said negotiations contravene Sections 70(a), 70(b), 70(c), 71(1), 73(1), 74(1, 75(1), 79(1) and 82(2) of the Constitution of Kenya in relation to the Petitioners. b A declaration that the nature of the negotiations as reflected in the Draft Text will contravene the Petitioners rights and freedoms including the right to life, the right to work, the right to earn a living or livelihood which encompasses or includes the rights to basic services such as the provision of water, security, education, roads and infrastructure. c A declaration that the Petitioners have a right to participate in the on-going EPA negotiations. d An order directing the Respondents to take into account the Petitioners fundamental rights and freedoms and the human rights impact of EPAs. e An order directing the Respondents to establish a mechanism for involving stakeholders including the Petitioners in the on-going EPA negotiations. f An order directing the First Respondent to make available to the Petitioners and other stakeholders all the relevant information on the on-going negotiations on EPAs. g An order directing the Respondents to involve and consult parliament and obtain its authority and mandate in negotiating and signing EPAs. h An injunctive or conservatory order staying the signing of EPAs by the First Respondent pending and until the hearing and determination of this petition. Kenya Human Rights Commission, 2007 8www.khrc.or.ke

Appendix 4

35

Policy Briefing Paper # 2 What Every Parliamentarian Needs to Know

Policy briefing paper from a coalition of African NGOs, highlighting implications of signing an EPA. The European Union (EU) is currently negotiating Economic Partnership Agreements (EPAs) with 77 States in Africa, the Caribbean and Pacific (ACP). For the past three decades, ACP countries have had non-reciprocal preferential access to European markets through the Lom and Cotonou agreements. EPAs will dramatically change this relationship. EPAs will establish reciprocal, two way trade preferences and will be essentially Free Trade Agreements (FTAs), creating free trade between the EU and ACP countries, with no duties or quotas on substantially all trade between the regions. Thus, in order to continue enjoying duty-free access to Europes markets, Africa has been told to open its own markets in return. According to the negotiation schedule, EPAs are supposed to take effect on 1 January 2008. EPAs will be reciprocal, legally binding agreements with no end date; they represent a point of no return.

EPAs

Liberalisation Beyond Structural Adjustment Programs (SAPs)

In the early 1980s, many African countries underwent comprehensive policy reforms through Structural Adjustment Programmes (SAPs), funded and initiated by the World Bank and the International Monetary Fund (IMF). In severe debt, African countries took on the belt-tightening measures required by SAPs, under the theory that cutting back on social programs and undergoing trade liberalisation would lead to economic growth. In Africa, a significant component of SAPs was the reduction of trade controls. These experiments in trade liberalization did not lead to overall increased economic performance. Instead, as the UN Special Rapporteur on Economic, Social and Cultural Realization, Danila Turk, pointed out, SAPs brought high social costs and affected the realization of many human rights, including the rights to food, work, health and adequate housing. EPAs, like SAPs, represent yet another step in trade liberalization a step which Parliamentarians must carefully consider before agreeing to take. As the representatives of the people, Parliamentarians have an oversight, legislative, and representative role. EPAs must be ratified by individual countries before they come into force. Thus Parliamentarians must ensure that trade agreements are based on a people centred perspective, rather than on a narrow economic centred perspective. Parliamentarians must ensure that thorough assessments of the likely impacts of EPAs are carried out and that these findings are taken into consideration. Ultimately, they must shoulder a great responsibility to ensure that their country only enters into a trade agreement that will truly benefit their constituencies. African Parliamentarians need to pay close attention to both the negotiating process and the basic tenets of the EPA texts.

Problems with the EPA Negotiation Process

Lack of Participation & Transparency The Cotonou Agreement was ground-breaking in requiring extensive participation of various stakeholders in the EPA negotiations. However, this has not effectively happened. Most Africans, Parliamentarians included, are not aware of the EPA negotiations. In many countries, the Ministries of Trade have taken the negotiations forward, leaving out Parliamentarians and even other Ministries such as Agriculture and Fisheries. Where there has been a lack of information sharing, Parliamentarians have been denied the ability to meet their responsibility and right to oversee trade negotiations. Push for Marginalizing Parliaments Role Lack of participation and transparency has led to Parliamentarians being sidelined in the EPA negotiations. Yet, they have an important role. Parliamentarians have not only a duty to oversee the negotiating process, but also are often responsible for ratifying trade agreements. The EUs answer to this dilemma is to further minimize the role of Parliamentarians. EU Trade Commissioner, Peter Mandelson, has suggested to African negotiators that they should implement EPAs before Parliaments go through the steps of ratification. In

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Appendix 5

other words, the EU wants to marginalize the only step in which elected representatives can play a direct role in the EPA negotiations. We will include clauses to ensure for temporary entry into force of EPAs pending ratification by national parliaments. I hope you can reciprocate in doing this. Commissioner Mandelson, Joint Ministerial Trade Committee, March 2007

Main Substantive Issues that EPAs Pose

Losing Government Revenue In countries where EU import tariff revenues represent a major source of government revenues,the EPAs would mean major losses of total government revenues, unless alternative non-trade based forms of revenue collection are established and effectively implemented. This is a particular area of concern in least developed countries (LDCs), where the IMF has found that an average of only 30 cents in every dollar lost in tariff revenues is replaced by alternative forms of non-trade based taxes. The United Nations Economic Commission for Africa (UNECA) estimates that Sub-Saharan African governments will lose 1.516 billion per year in tariff revenues through the full implementation of the kind of EPAs envisaged by the EU. The Commonwealth Secretary has estimated the costs of financing fiscal adjustment programmes in Sub-Saharan Africa at some 239 million per year over 10 years. The loss in tariff revenues can have a major negative impact on governments financial capacity, thus further reducing their ability to meet legal obligations in providing basic social services to citizens. Threatening Agricultural Policy Space The EUs agricultural reforms are making European food and agricultural exports more price competitive by shifting public financial support to European agriculture from price support to direct aid to farmers. This allows prices of EU agricultural commodities to fall (in some sectors, between 50 and 75%) without affecting farmers incomes. This simply changes the basis of EU trade distortions. Dismantling tariff protection for food and agricultural products in this context risks pushing African farmers further into poverty and locking countries into exporting raw materials for value-added processing in Europe. While carefully protecting its own farmers, the EU is requesting African governments to give up their most effective tools for regulating their agricultural markets. Pre-Empting National and Regional Policies The EU has pushed African governments to negotiate in trade in services and trade-related areas. The inclusion of such provisions would have serious implications for national economic and social development, as they include water, health, education and general government procurement. It is not just the text of these provisions which is of concern, but also how the EU will use them to create new opportunities for EU exporters of goods and services. If Parliamentarians are to have any role in determining national policies in service provision and trade related areas, these areas must not be included in a binding trade agreement with the EU. The EPA will change the way we collect revenue. By eliminating tariff revenue and creating consumer taxes. Our governments will pass the tax burden on to our poor, creating social inequity. Grant Percival, President, Samoa Association of Manufacturers and Exporters, February 2007 whether it be liberalisation of services or of competition and government procurement, robust regulatory frameworks are needed before any liberalisation takes place. ACP-EU Joint Parliamentary Assembly, Resolution on the review of negotiations on EPAs, November 2006

Recommendations
In many countries, Parliamentarians have been left out of the EPA negotiations, yet they have the ultimate responsibility to their constituents. In order to ensure that any trade deal is the best possible for their constituencies, Parliamentarians must demand transparency and accountability in the process. As a Parliamentarian, you can: Request the Minister of Trade to come for a Question and Answer session about EPAs. Ask for detailed updates on the negotiations and the current position of the executive in the negotiations on key policy Appendix 5

37

issues. Make written statements, asking specific questions to the relevant Ministries about EPAs and demand detailed answers. As a Chairperson of a committee on gender, agriculture, labour, or other related areas, contact the Ministry of Trade for information sessions on the projected impact of EPAs. Verify that independent impact analyses have been carried out in your country. Ensure that the ratification process is being planned and will not be by-passed. Develop alliances with Parliamentarians of other African countries and in the EU. Make your position known to your Parliamentary representative in the EU-ACP Joint Parliamentarian Assembly so they can better be able to defend a common position. Demand that the ratification process allows ample time for Parliamentarians to be prepared and make an informed decision. Request that the EU put forward viable prodevelopment alternatives to EPAS. We [elected officials] have a responsibility to all Burundians. We must position ourselves to defend the interest of the population that mandated us.

Richard Nimbesha, Burundian Senator, Burundi National Assembly Workshop on EPAs, April 2007 ACORD International, 2007 8www.stopthinkresist.org

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Appendix 5

Trade for Development: An Introduction to the EPA 2007

Major document from European Commission explaining the background to EPAs and the likely benefits for Nigerias development.

Nigeria and the EU

A possible solution
With the expiration of the waiver in mind, the Cotonou Agreement provided for the Negotiation of Economic Partnership Agreements (EPAs) between the EU and ACP states. These would be negotiated with existing regional trade areas, and aim to govern trade relations from the end of the Cotonou Agreement onwards. It is important to note that the Cotonou Agreement was signed by all ACP states, including Nigeria, and the EPAs were specifically provided for in the agreement. Nevertheless, no country will be forced to accept the EPA if they feel it is not in their best interests. There are provisions in the Cotonou Agreement to investigate alternatives, but to date, no ACP country has requested this. This is partly because the EPAs are intended to be far more than trade agreements. Earlier trade regimes have focused almost exclusively on trade aspects, customs duties and quotas, but this has proven to be not enough to boost economic growth. Why? Over 98% of exports from West Africa already enter the EU without the payment of customs duties. Despite this market access, the region is still unable to maintain its market share, or diversify its exports. The EPA approach is to concentrate first and foremost on building unified regional markets.

How would it work?

The EPA promotes the creation of larger markets through its focus on regional integration. The West African sub-region will have a single market instead of many fragmented markets. This larger market allows for economies of scale, specialisation, and a more efficient allocation of resources. This can lead to increased competitiveness that will make the markets more attractive to investment. This is particularly true where a market is governed by a stable, transparent and predictable policy framework. The European Union itself is a historic example peace, security and stability are fundamental for trade creation. The region has set itself ambitious targets for opening up its markets: free movement of goods and establishment of a single common external tariff for the whole of the West African region. The EPA will support these existing integration processes, and is not an alternative, nor an obstacle. When the process of integration has advanced, a gradual and partial opening-up of West African markets to European products will take place (at least 12 years or more). A well sequenced opening will boost economic development, enhance consumer welfare by increasing purchasing power, make firms more competitive and meet the legal obligations in the WTO. In return the EU has undertaken to give full market access to all ACP states on all products as soon as the EPA is signed with a phase-in period for rice and sugar.

Nigeria and the EU

The EU believes that Nigeria could benefit greatly from an EPA. It provides the time and space to learn and grow before having to deal with the full weight of global competition. The EPAs regional market provides an opportunity for countries like Nigeria to develop and strengthen their commercial operations before accessing the global market. It will help firms develop their business, address supply side constraints (such as expensive inputs), and provide excellent opportunities for diversification and specialisation. The EPAs stable and transparent rules will also encourage much needed investment. The EU stands ready to support the negotiation and implementation of the EPA in the West African region. The EU is already providing development assistance under its existing regional programme, much of which is focused on regional economic integration. Our new programme, commencing in 2008, has doubled available funding to 477m over five years. In addition there is a 120m incentive tranche available, specifically to support the EPA. In concrete terms, the EU will support the upgrading of competitiveness of the West African economies, and will help to compensate for the short term loss of tariff revenue associated with trade liberalisation, before the longer term benefits are felt. Technical assistance will also be provided to implement the rules contained in the EPA. The EU supports the creation of an EPA Regional Fund for West Africa, managed by the region itself, which will channel and oversee EPA support. DG Trade, 2007 8www.ec.europa.eu/trade/issues/index_en.htm Appendix 6

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Six common misconceptions about EPAs

Response from European Commission to critique of EPA negotiaions.

Misconception #1: ACP countries have been forced into interim EPAs by European Commission pressure
This is not true. The pressure came from the expectations of other WTO members, including non-ACP developing countries, that the EU and the ACP would respect their commitment to make their trade relations WTO-compatible by 1 January 2007. The countries that signed interim EPAs recognised they need to do this to be part of the multilateral trading system and made clear their strong commitment to the objectives of the agreements and their conviction to build on them to agree full regional Economic Partnership Agreements in 2008. Misconception #2: Countries that have signed interim EPAs will see their markets flooded with cheap European imports This is not true. The suggestion that the EU was motivated by commercial self interest in the EPAs is wrong: EU companies want integrated supply chains that build up processing in ACP countries, not barriers that prevent it. EU companies export very little to the ACP and EU investors show too little interest in building up companies in these markets, not too much! Under the terms of the interim EPAs, the ACP countries are free to exclude a wide range of sensitive goods and sectors from any liberalisation. Perhaps you have heard that Ghanas chicken farmers would be overwhelmed by EU imports if they signed an EPA? Well, the EU and Ghana agreed early in their negotiations to exclude all chicken products from liberalisation, so under an EPA there will be no change at all in the tariffs Ghana uses to protect its poultry sector.

Misconception #3: By signing interim EPAs with individual countries the EU has undermined attempts at regional integration
This is not true. The ACP and EU commitment to regional integration and building regional markets among ACP countries has not changed. The EU and the Caribbean signed a full regional EPA in December 2007 but elsewhere the overriding priority had to be to secure market access for the remaining 22 ACP countries that are not Least Developed Countries they otherwise faced the risk of increased tariffs on 1 January 2008 because they do not benefit from the EUs Everything But Arms initiative. The interim agreements not only avoided this risk but are specifically drafted to lay the basis for negotiations towards full regional EPAs to continue.

Misconception #4: Cuts in import duties as ACP countries liberalise will undermine government revenue
ACP countries have excluded many products from any liberalisation at all and will liberalise other tariffs over ten to fifteen years, lowering the tariffs on imports that the ACP economies need first. This will prevent dramatic changes in revenue. This said, the EU is ready to assist with fiscal reform and adjustment to help cushion any net fiscal losses observed as a result of EPAs and has the means to do so. Economically, moving away from high tariffs is an important part of economic reform and the right thing to do. Replacing customs tariffs by other sources of fiscal revenue makes sense because taxes on imports suppress economic activity and are better replaced by sales, excise or other revenue taxes. These other forms of taxes are a more sustainable way to finance much needed basic social services such as health and education. In the early stages of liberalisation customs revenues can even increase as trade is stimulated when tariffs begin to come down.

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Appendix 7

Misconception #5: The EU has suggested that future development funds are conditional on the signing of an EPA
This is not true. The EU never tied development finance to the signing of EPAs. For example, on 9th December 2007 in Lisbon, the Commission signed strategy papers allocating 8 billion of the 10th European Development Fund (EDF) to 31 African countries for 2008 2013 using development criteria independent of the countrys position on EPA (half of them have not agreed any form of EPA). The regional financing element of the EDF does support ACP regional integration but its programming guidelines do not specify that this must involve an EPA. It states only that where there is an EPA, funds must support the smooth implementation of any related commitments.

Misconception #6: The EU is still insisting on negotiating on issues such as investment and services in full EPAs, even where ACP countries do not want to do so
This is not true. The EU has never said that it would insist on these issues being covered by EPAs. But it has said that it believes that there are good development reasons why they should be. Services like telecommunications, banking and construction are the backbone of a growing economy and most ACP countries desperately need to attract foreign investment in these sectors and others. Every ACP investment report published says that breaking the dependence on basic commodity exports requires a transparent secure, rules-based investment climate. EPAs can help establish this and many ACP countries agree: as an example, both the full Caribbean EPA and the interim EPA with Pacific countries already include services chapters. DG Trade, 11 January 2008 8www.ec.europa.eu/trade/issues/index_en.htm

Appendix 7

41

Dear anti-poverty campaigner

An open letter to anti-poverty campaigners: response to criticism of EPAs from EU Trade Commissioner, Peter Mandelson, and EU Development Commissioner, Louis Michel. Dear Campaigner Thanks for taking the question of trade and poverty seriously enough to participate in the EPA campaign. We want to take the opportunity to address some of your questions and concerns about the Economic Partnership Agreements that Europe is currently negotiating with the African, Caribbean and Pacific regions. No question in Europes development and trade policy is more pressing than how we can use trade to help African, Caribbean and Pacific countries build stronger economies that can contribute to poverty reduction and break their dependence on trade preferences and basic commodity trade. The key is to give greater confidence and more opportunities to local businesses, attract new investment and build strong regional markets. These will in turn strengthen their capacity to compete in global markets. The Economic Partnership Agreements that the EU is currently negotiating with the ACP regions are designed to help do all these things. They will take a trading relationship based on dependency and turn it into one based on economic diversification and growing economies. By assisting with the creation of regional markets and accompanying the sometimes difficult adjustments these entail, the EU is standing by the side of its ACP partners in their drive to adapt to the challenges of globalisation. These negotiations are certainly not about EU companies and investment muscling into these markets. In fact, if we exclude South Africa, we trade less with all of Sub-Saharan Africa than we do with South Korea alone. The problem is that EU businesses and investors have too little interest in these markets, not that they have too much. The EU is not steamrolling ACP regions into completing negotiations this year; on the contrary, we are doing everything in our power to be as flexible as we can. And our ACP partners are also working hard to meet the end of year deadline. We promised non-ACP developing countries seven years ago that we would put in place a new system compatible with WTO rules by the end of this year. They expect us to honour our promises and from 1 January 2008, when the legal waiver they have extended expires, they can and they will challenge us. Unless we agree new WTO-compatible arrangements, we will have to fall back on our default preference scheme for all developing countries, the Generalised System of Preferences. This has less generous tariff rates than our current scheme. And unlike an EPA, it will not help ACP countries build regional markets, improve product standards or promote investment. Some have suggested that the EU could extend its GSP+ scheme to ACP countries to avoid the endof-year deadline. But GSP+ gives extra trade preferences to countries that ratify and implement core international agreements on labour and sustainable development. No ACP country that could use these preferences has done this. GSP+ is the cornerstone of our attempts to use trade benefits to encourage strong labour and environmental standards. Bending the rules to admit ACP countries would break our commitment to countries that have gone through the rigorous application and vetting procedure. GSP+ would not even safeguard the preferences that ACP countries currently benefit from under the Cotonou agreement and would be clearly less beneficial than an EPA which will grant duty-free and quota-free access to all ACP countries. And the net result would be that GSP+ would be challenged in the WTO and we would lose that part of our trade policy too. We often hear people say that EPAs wont be fair. That they will open ACP markets to EU trade at the expense of local businesses, and local growth. This is simply not true. EPAs wont mean free trade between the EU and African Caribbean countries from January 1st next year, or any time soon. From the EU side there will be a full removal of tariffs and quotas, with only a temporary exception for sugar and rice. Well also make sure there are no export subsidies on any goods where ACP countries remove tariffs, so they will not be competing against subsidised EU produce. But African, Caribbean and Pacific countries will be able to protect and exclude sensitive products and take advantage of long transition periods to nurture growing industry. During this time the EU will provide very substantial technical and financial support to help with implementation of the new arrangements. We have also agreed to rewrite our rules of origin to further improve the market access opportunities for ACP exporters. We have not only agreed to negotiate new rules with the ACP , but that the outcome will be at least as generous as those offered by any other major trading bloc or country.

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Appendix 8

The whole process will be backed up by a considerable package of development assistance. The 10th European Development Fund will provide !22 billion to ACP countries between 2008 and 2013, a 35% increase over the 9th EDF. African, Caribbean and Pacific countries will also be major beneficiaries of the decision to increase Europes spending on aid for trade to !2billion a year, with a priority given to measures that help implement Economic Partnership Agreements. The money will be available to help countries prepare new structural reforms and trade policies, adjust to the changes they bring and enhance infrastructure and competitiveness to seize trade opportunities. Certainly, the EPA negotiations force us to face up to difficult issues. We are rebuilding an economic relationship that has been in place for many years. But that relationship, based on preferences and commodity trade has largely failed to deliver development. No one believes the status quo is working. Africas dependence on trade preferences and a few basic commodities has seen it fall far behind the poverty reduction and economic growth of Asia and Latin America. Calling for an end to EPA negotiations when there is no credible alternative is playing poker with the livelihoods of those we are trying to help. Some people dont even like the very idea that ACP countries might sit down opposite Europe and negotiate a trade agreement. But ACP countries deserve better than attempts to caricature them as weak and helpless. ACP countries themselves have repeatedly said that they are committed to the goals that EPAs are designed to achieve. They know their interests and they have negotiated hard. ACP countries would be the first to say that it is essential that there is strong debate over EPAs. But those who suggest that Economic Partnership Agreements are a danger to African development are not only wrong, they also undermine those in Africa and other ACP countries who are seeking to work constructively towards a new trade and development relationship with Europe. In the final phase of this important process, ACP countries need confidence and support from their partners to put the final pieces of agreements in place. That is precisely what we will be seeking to offer in the weeks ahead. Kind Regards Peter Mandelson, Louis Michel Brussels, 27 September 2007 8www.ec.europa.eu/trade/issues/index_en.htm

Appendix 8

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44
welfare effects negative (EPA with no regional integration) positive (removal of intraSSA barriers or EUSSA Free Trade Area) negative negative small negative for Tanzania; negligible for Uganda loser: Tanzania gainers: Kenya, Mauritius, Sudan & Ethiopia gainers: South Africa, Zimbabwe & Mauritius; losers: Zambia, Tanzania, Mozambique & Swaziland positive positive positive gainers: Nigeria & Ghana; losers: Cape Verde & Gambia gainers: Cameroon, Gabon & DRC major gainers & losers

Economic effects of EPAs on ACP regions

what quantitative models say

Overseas Development Institute (ODI) 2006 8www.odi.org.uk negative large negative large positive (EPA with regional integration) small positive (EPA with no regional integration) small negative small negative (for simultaneous MFN tariff cuts <20%) small positive (for simultaneous MFN tariff cuts <20%) small positive small negative

Review by Overseas Development Institute (ODI) of several modelling studies undertaken to assess the likely economic effects of EPAs.

Appendix 9

region & source

trade creation (TC) / fiscal effects (loss of trade diversion (TD) tariff revenues)

Sub-Saharan Africa as a whole (SSA)

West Africa

TC>TD

Central Africa

TC>TD

East Africa

TC<TD for Tanzania and =TD for large negative Uganda

COMESA

TC>TD

Southern Africa TC>TD

Caribbean

TC<TD (for simultaneous MFN tariff cuts <50%) TC>TD (for simultaneous MFN tariff cuts >50%)

The potential effects of EPAs

gainers: Papua New Guinea and Fiji Trade creation is welfare improving: it represents the increase in welfare enjoyed by consumers (through lower prices and thus higher number of consumers accessing the good) following the elimination of tariffs on goods imported by the most efficient producer; trade diversion is welfare reducing: it occurs when cheap imports from the rest of the world are replaced by imports from less efficient partners, which become cheaper only due to the preferential treatment they enjoy.

Pacific

TC>TD

how Europe should bring development into its trade deals with ACP countries
Policy paper from Oxfam International on how Europe should bring development into its trade deals with ACP countries. Evaluates the likely development benefits of the initialled EPAs. Six years ago trade talks began between the European Union (EU) and 76 African, Caribbean, and Pacific (ACP) countries. By the negotiating deadline of December 2007, fewer than half the ACP countries had initialled any form of deal with Europe. The deals promised to deliver development, but they fail to meet the development test (see the Scorecard below). As trade ministers from across the ACP stated in December 2007, the European Unions mercantilist interests have taken precedence over the ACPs developmental and regional integration interests. To date, deals have only been initialled: they are not legally binding agreements. This means change is possible: new, fairer deals can and should be created. The original aim of these talks was a good one: concluding Economic Partnership Agreements (EPAs) that would promote poverty reduction, sustainable development and the gradual integration of ACP countries into the world economy, and which would bolster regional economic integration. Criticism has come from many quarters in late 2007 and early 2008 including the African Union, the ACP Council of Ministers, ACP heads of state, UN and World Bank officials, elected representatives, coalitions of ACP farmers and businesses, and recognised trade experts. This should have been an important signal to Europe that what it put on the table not only fell short of this aim but in some areas undermined it. These deals may be wellintentioned, but they are far from well-designed. In the final weeks of 2007, the European Commission (EC) used the expiry of a World Trade Organization (WTO) waiver to coerce ACP countries into accepting free trade agreements (FTAs). Despite tremendous pressure, more than half refused to initial any such deal, because it contained little in the way of meaningful development benefits. Many of those countries that concluded deals did so because they faced immediate costs: hundreds of thousands of jobs in their major export sectors, including horticulture, bananas, and tuna, were put at risk. Europe threatened to raise tariffs on imports from countries such as Cte dIvoire, Kenya, Papua New Guinea, and St. Lucia, which are poor but not poor enough to have continued access to Europes markets through the EUs Everything But Arms preference scheme. Now that legal texts are available, it is possible to evaluate the EPAs based on content rather than conjecture. Through analysis of the goods, services, investment, and intellectual property chapters of texts concluded last year, this paper draws attention to aspects of EPAs that put future economic development at risk. It subjects them to the kind of development test that should have guided negotiations from the beginning, and puts forward positive policy prescriptions. Each section uses case studies from the history of the integration of ACP countries into the global economy to draw lessons from both the past and the present. Putting trade at the service of development, as Europe and ACP countries promised to do, is not a simplistic choice between markets being open or closed. It is about ensuring that ACP countries have the institutions, policy instruments, and resources to be able to take advantage of market access and to strategically manage their integration into the global economy in a way that adds value locally and which shares the benefits fairly. However, the current deals strip ACP countries of some of the very tools they need to develop, kicking away the development ladder that countries across the globe, including many in Europe, have used to build their own economies. They require ACP farmers and businesses to compete under similar rules as European producers without seriously tackling the manifold competitiveness constraints they face. They tie the hands of ACP governments, forbidding them from using a variety of the trade and investment measures that are needed to make openness work to create decent jobs and livelihoods. And they give new rights to European investors at the cost of local businesses and public interest. Regional integration is threatened by the sheer number of initialled agreements and their mismatch with ongoing integration efforts. In return, Europe gives little. It has further opened its markets, but barriers remain. And while the deals impose high costs, it has made clear that hardly any additional finance will be available to meet them. In a fair deal that truly reflects partnership, Europe would fully open its markets to all exports without asking ACP countries to reciprocate, thus ensuring ACP countries have the policy freedom to govern their markets in the public interest and pursue regional integration on their own terms and at a pace congruent with regional processes. Europe would further assist ACP countries to tackle pervasive constraints to competiAppendix 10

Partnership or powerplay?

45

tiveness; upgrade institutions; and improve regulatory capacity, particularly in the services sector, to ensure everyone has access to vital services. Europe would ensure that its companies investing in ACP countries bring high-quality investment, generating decent jobs and upgrading skills, and transferring technologies. A fair deal makes sense for all parties. ACP countries would gain a fairer share of the wealth generated from their interaction with the global economy. Europe would gain too by supporting ACP countries through fair deals rather than free trade deals, its trade gains with these countries could ultimately be four times higher. It is time to take a fresh look at the initialled EPAs before potentially damaging agreements are made permanent. It is time for Europe to stop playing power politics and to work in partnership with ACP countries. The millions of people across ACP countries living in poverty cannot afford for politicians to get this wrong. Oxfam International calls for: Thorough and comprehensive independent evaluations and impact assessments of what has been initialled, before any deal is signed and committed into law; Vigorous engagement by parliaments across Europe and the ACP and full scrutiny of the deals; The EU to offer ACP countries long-term options for trade in goods that would include: (i) Adapting its unilateral preference schemes so they further open European markets and are made permanent, ensuring no ACP country is left worse off if it does not conclude a free trade agreement; (ii) Renegotiation of any aspect of the initialled EPAs and commitment to reduce the deals to the minimum needed for WTO compliance; ACP countries to take stock within their regional blocs and make a strategic decision on which route they want to pursue, fully consulting all affected parties, including workers, producers, and businesses; The EU to agree complete flexibility in approaching negotiations on services, investment, technology transfer, and other trade-related areas, with ACP countries taking the lead in setting the pace and content of negotiations; The EU to provide additional, binding, predictable, and swiftly disbursed support to tackle infrastructure and competitiveness constraints in ACP countries. Evaluation The deals create significant barriers to integration between existing Integrate their economies regional partner countries and in several instances fragment existing with their regional neighbours regional blocs. The deals fail to support economic diversification away from low-value Develop new industries and agricultural production by restricting the choices of ACP governments to create jobs support the development of new industries. The deal fail to help tackle food insecurity. Though allowing some Overcome insecure access to protection, weak safeguards in the deals unnecessarily expose smallfood and support vulnerable scale farmers to sudden surges of competition from imports, undermining farmers staple food markets. Although Europe provides substantial funds for infrastructure through the European Development Fund, this is insufficient. Moreover, the new Upgrade their infrastructure deals impose high additional costs. ACP countries are left worse off. The deals only make it slightly easier for the ACP to export to Europe. In return, they require ACP countries to dramatically open their markets Have full access to Europes to imports from Europe. In addition, Europe is set to open up to other markets developing countries, which will make any gains temporary. Foreign investment only brings benefits if well managed. The deal tie the Attract high quality hands of ACP governments, and make it harder to manage investment in investment the public interest. The deals severely constrain effective regulation and threaten universal Provide affordable and access to vital services. accessible services The initialled EPAs fail to support innovation as stricter intellectual Stimulate innovation and property rules undermine access to knowledge; toothless commitments increase access to technology on technology transfer will not work. Partnership or powerplay Oxfam, 2007 8www.oxfam.org/campaigns Do EPAs support ACP to

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Appendix 10

EPAs, forests and the EUs quest for Africas raw materials
Report from Friends of the Earth which argues that EU trade policy is primarily aimed at securing raw materials and new markets in a competitive globalised world economy.

Undercutting Africa

Executive summary
Economic Partnership Agreements (EPAs), the European Unions much vaunted trade and development agreements with African, Caribbean and Pacific (ACP) countries, are in complete disarray. Despite the passing of a key negotiating deadline at the end of 2007, and relentless pressure from European Commission (EC) negotiators, many ACP countries, including Nigeria, Congo and Gabon in Africa, have refused to sign any form of EPA (even though some have lost their tariff preferences as a result). The overall consequences for their economies are simply too threatening.1 However, a number of ACP countries, including 18 African states, were eventually persuaded to initial interim or stepping stone agreements, which focus on trade in goods only; and one region, the Caribbean, initialled a full EPA, including commitments to liberalise services and investment, with explicit reference to agriculture, forestry and mining. Even in the Caribbean however, there has been much heated debate about the content of the EPA, and several deadlines for finally signing it have been missed. Guyana has said that it is not in a position to sign and Haiti has expressed strong reservations. However, one potentially significant consequence of the passing of the 2007 deadline is that for many ACP countries, most especially in Africa (where a higher proportion of countries are also Least Development Countries (LDCs) with little to lose from the failure of the negotiations) there may now be less pressure to conclude EPAs. Now is an ideal moment to reconsider the likely long-term impacts of EPAs. One of the most worrying aspects of EPAs is that all ACP countries are being put under extreme pressure to open their markets: the European Union (EU) expects ACP countries to liberalise 80% or more of their tariff lines. This means that ACP countries signing up to an EPA will lose a key development tool used by industrialised economies themselves and can expect to experience severe economic difficulties if European imports flood their markets. Compare this with the World Trade Organization (WTO), in which most African countries are completely exempt from removing their import tariffs, precisely because their economies are weak and vulnerable. One of the ECs own Sustainability Impact Assessments even predicts that EPAs could accelerate the collapse of the manufacturing sector in West Africa. The inclusion of investment liberalisation in the Caribbean EPA also provides a clear and worrying indication of an additional commitment the EU will seek from other ACP countries if EPA negotiations continue. Liberalising investment in sectors such as forests and agriculture both of which are mentioned explicitly in the Caribbean EPAs investment clauses could have a dramatic impact on deforestation rates, subsistence farming and food security. Countries agreeing to liberalise investment could have to hand over more rights to foreign corporations to exploit forests, fisheries, agriculture and other natural resources such as oil and gas, and this could in turn lead to even more forests and small farms being cleared to make way for logging, mining and export-oriented agriculture. The EU is also determined to remove export restrictions that countries use to limit or prohibit exports of unprocessed raw materials, such as logs. It views these export restrictions as an unfair impediment to its manufacturing industries, implying that Europe should have an equal right to exploit other nations natural resources. Yet this flies in the face of the United Nations International Covenant on Economic, Social and Cultural Rights, which states that All peoples may, for their own ends, freely dispose of their natural wealth and resources without prejudice to any obligations arising out of international economic cooperation, based upon the principle of mutual benefit, and international law. In no case may a people be deprived of its own means of subsistence (UN, 1976). Similarly, the second principle of the Rio Declaration on Environment and Development, says that states have the sovereign right to exploit their own resources pursuant to their own environmental and developmental policies (UNCED, 1992). Indeed, the role that forests and biodiversity play in sustaining the lives and livelihoods of some of the worlds poorest and most marginalised communities seems to have been almost entirely overlooked in the EPAs negotiations. Some 60 million Indigenous people across the world are wholly dependent upon Appendix 11

47

forests for all their physical, cultural and spiritual requirements and 1.6 billion people depend upon forests to some extent for their livelihoods. The loss of this forest biodiversity would be especially devastating for those living in Africa, since over two-thirds of Africas people rely directly or indirectly on forests for their livelihood, including food security. So why is the EU pursuing such a harsh liberalisation agenda? The answer can be found in its Global Europe policy documents. These reveal that competition from increasingly strong emerging economies is behind the drive to prioritise trade concerns at all costs. These include India and most particularly China, which is increasingly present in Africa and also in pursuit of raw materials for its manufacturing industries. In other words, EPAs have been hijacked to deliver Europes trade policies, instead of development. Environmental concerns are also a lower priority. Yet the EU is not blind to the potential negative social and environmental consequences of its EPA negotiations. The ECs own mid-term Sustainability Impact Assessment (SIA) clearly acknowledged the likelihood of such impacts, as have previous very similar EC SIAs, which focused on the potential impact that agreements resulting from WTO trade liberalisation negotiations could have on forests and the forest products sector.

EUs 2006 Renewed EU Sustainable Development Strategy

Sustainable development means that the needs of the present generation should be met without compromising the ability of future generations to meet their own needs. It is an overarching objective of the European Union set out in the Treaty, governing all the Unions policies and activities. It is about safeguarding the earths capacity to support life in all its diversity and is based on the principles of democracy, gender equality, solidarity, the rule of law and respect for fundamental rights, including freedom and equal opportunities for all. It aims at the continuous improvement of the quality of life and well-being on Earth for present and future generations. (EU, 2006:2) The EPAs mid-term SIA comments that trade liberalization and the economic pressure that it encourages threaten biodiversity in a number of ways including through increasing illegal trade in endangered species, facilitating the introduction of alien invasive species, permitting the continued destruction and fragmentation of habitats, and because of increasing industrial and agricultural activities. It specifically identifies West Africa as a vulnerable region in this respect, commenting that additional pressure on primary forests in countries like Ghana and Ivory Coast seems difficult. Previous WTO-related SIAs on the agriculture, forests and fisheries sectors also identified adverse environmental trends that might be exacerbated by trade liberalisation. The forests SIA pointed out that there are likely to be significant and irreversible impacts on forests and biodiversity in biodiversity hotspot countries such as Brazil, Indonesia, countries in the Congo Basin and Papua New Guinea. In addition, countries that currently protect their forest industries using trade measures can expect those industries to shrink and possibly collapse. It is surprising then that the final summary report from the ECs SIA on Economic Partnership Agreements makes no mention of potential impacts on forests at all; and only mentions biodiversity once (in terms of the impacts that tourism might have on biodiversity in the Caribbean). It seems that some very serious potential environmental and social concerns are being overlooked, whether by accident or design, in the rush to finalise EPAs. The EU also seems to be making the most of the fact that the EPAs process has allowed it to negotiate with smaller and more vulnerable economies in isolated blocks, and sometimes on a one-to-one basis. This has pitched some of the worlds poorest countries into competition with each other, throwing regional integration processes into reverse and allowing the EU to extract much harsher trade concessions. The EU market, however, is already quite open to ACP countries exports. This means that the EU will not have to make many alterations itself, although there will be changes in the rice and sugar regimes. Still, Europe is unlikely to experience any major economic setbacks as a result of the EPAs process. Furthermore, it seems that the final content of each EPA is primarily dependent on the negotiating skills of the country or countries in question, rather than their economic and developmental needs. An analysis by the UKs Overseas Development Institute points out that Some of the richer countries among the list have to adjust quickly but so do some of the poorest. The picture that emerges is entirely consistent with the hypothesis that countries have a deal that reflects their negotiating skills: that countries able to negotiate hard, knowing their interests, have obtained a better deal than those lacking these characteristics. An analysis of the different treatment meted out to West and Central African countries in relation to export

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Appendix 11

restrictions demonstrates the variations arising in the different EPAs, and shows the potential implications that a wider application of EPAs might have for Africas forests, biodiversity and forest-reliant communities. Take Cameroon, for example. Whilst a chapter on illegal logging is included in the interim EPA, seemingly at the behest of the EU, it seems that Cameroon could also have to remove a range of log export restrictions intended to ensure value-added processing and prevent the export of certain species. This can hardly be seen as a discouragement to illegal logging. Ghana on the other hand, seems to have managed to escape a complete ban on its log export restrictions, probably through adept negotiation. It seems to be one of the only countries to have managed this however. Neighbouring Cte dIvoire, the only other country in the West African region to have initialled an interim EPA, has fared quite differently, and would appear to have quantitative log export restrictions that will have to go, under the terms of its EPA. Similar restrictions appear in other interim EPAs and the possibility of an almost pan-African prohibition on the use of log export restrictions to protect biodiversity and promote on-the-spot and downstream processing remains a distinct possibility in the long term. Overall it can be argued that the entire thrust of EPAs is in direct conflict with both the EUs commitment to sustainable development and the Millennium Development Goals, which demand the eradication of poverty and hunger and the maintenance of environmental sustainability. In this respect, the timing of the EPAs negotiations could not be worse. The UNs Secretary-General Ban Ki-Moon recently observed that Africa remains off track in its quest to achieve the Millennium Development Goals and other development targets (UN, 2008). The EUs neo-colonialist approach to the EPA negotiations is completely unacceptable, given that they concern potential agreements with some of the worlds poorest and most vulnerable economies. In the long term, EPAs and similar approaches threaten to diminish Africas forests and biodiversity. The overall consequence is that the lives and livelihoods of Africas forest-dependent communities are threatened and the risks posed by climate change, which can be mitigated by the presence of forests, especially in the tropics, are increased (FOEI, 2008). EPAs, like other trade liberalisation agreements, effectively commodify natural resources, relegating them to the status of merchandise, rather than that of a public good that needs to be protected. Fundamentally, trade liberalisation is about opening an increasing number of economic sectors to competition by limiting state intervention. Trade liberalisation agreements such as EPAs lock countries into a virtually irreversible economic model based on the export of raw materials. The EPA negotiations should be stopped, and those agreements that have already been initialled should be repealed. Instead, the EU and its member states should focus on developing a real, equitable partnership with the ACP , ensuring financial and practical support to ACP countries so that they can develop genuinely fair and sustainable societies. ACP countries should be able to maintain their sovereignty and policy space, including in relation to the appropriate use of their own natural resources. They should be able to use investment regulations, tariff barriers and export restrictions to promote equitable, local and sustainable economic development and protect their natural resources. The EU certainly has no automatic right of access to other countries raw materials; rather, it should implement a full and immediate review of its trade strategy, placing sustainable development for the poor and their environment at the top of its agenda, and take urgent steps to delink its own economy from excessive resource use and fossil fuel dependence. There should be no need to usurp Africas natural resources. Finally, there is a pressing need to improve transparency and accountability in relation to intergovernmental negotiations such as these, to ensure the development of agreements that fully reflect the needs of people living in ACP and other developing countries. Undercutting Africa Friends of the Earth, 2008 8www.foe.co.uk

Appendix 11

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a contribution to the EUs growth and jobs strategy

Global Europe: competing in the world

Key document from the European Commission which outlines the EUs strategy to secure economic growth and jobs.

Opening markets abroad

Progressive trade opening is an important source of productivity gains, growth and job creation. It is an essential factor in reducing poverty and promoting development, with the potential in the longer term to help address many of the underlying factors which drive the global challenges we face, from security to migration to climate change. Our core argument is that rejection of protectionism at home must be accompanied by activism in creating open markets and fair conditions for trade abroad. This improves the global business environment and helps spur economic reform in other countries. It reinforces the competitive position of EU industry in a globalised economy and is necessary to sustain domestic political support for our own openness. There are two core elements in pursuing this agenda: stronger engagement with major emerging economies and regions; and a sharper focus on barriers to trade behind the border. Major emerging economies, especially China, India and Brazil, are rightly reaping the benefits of their growing role in world trade. Together they now represent 15% of global trade flows. This growth, based on progressive liberalisation, has been essential to their historic achievement in lifting millions out of poverty. The EU is already very open to exports from these emerging and other developing countries and is ready to go further. But most emerging countries combine high growth with unnecessarily high barriers to EU exports. As their role and the benefits they draw from the global trading system grow, so too do their responsibilities to play a full part in maintaining a global regime that favours openness. This openness is no longer simply about tariffs. Securing real market access in the 21st century will mean focusing on new issues and developing the tools of trade policy to achieve the types of opening that make a real difference: i) Non-tariff barriers: Reducing tariffs remains important to opening markets to Europes industrial and agricultural exports. But as tariffs fall, non-tariff barriers, such as unnecessarily trade-restricting regulations and procedures become the main obstacles. These are often less visible, more complex and can be more sensitive because they touch directly on domestic regulation. Regulating trade is necessary, but it must be done in a transparent and non discriminatory manner, with the least restriction on trade consistent with achieving other legitimate policy objectives. Addressing non-tariff barriers is complicated, resource-intensive and is not fully covered in the WTO system. Instruments such as mutual recognition agreements, international standardisation and regulatory dialogues, as well as technical assistance to third countries, will play an increasingly important role in promoting trade and preventing distorting rules and standards. This will require new ways of working within the Commission and with others, including Member States and industry in order to identify and tackle barriers. ii) Access to resources: More than ever, Europe needs to import to export. Tackling restrictions on access to resources such as energy, metals and scrap, primary raw materials including certain agricultural materials, hides and skins must be a high priority. Measures taken by some of our biggest trading partners to restrict access to their supplies of these inputs are causing some EU industries major problems. Unless justified for security or environmental reasons, restrictions on access to resources should be removed. Energy will be particularly important. As global demand increases and Europe becomes more dependent on external energy sources, the EU needs to go further in developing a coherent policy for competitive, secure and sustainable energy. Internally, this means completing a competitive, EU-wide energy market and promoting a sustainable, efficient and diverse energy mix. Externally, we should seek to improve transparency, governance and trade in the energy sector in third countries through non-discriminatory conditions of transit and third party access to export pipeline infrastructure; and by helping to improve production and export capacities and develop energy transportation infrastructure. Diversity of source,

50

Appendix 12

supply and transit is essential to our internal and external policies. The pursuit of economic growth through trade can have environmental implications, particularly for biodiversity and our climate. Our external competitiveness policies will need to encourage energy efficiency, the use of renewable energies including bio fuels, low emission technology and the rational use of energy in Europe and globally, both to reduce the growth in global energy demand and strengthen security of supply. The links between trade policy and climate change in particular will require further examination. iii) New areas of growth: We will require a sharper focus on market opening and stronger rules in new trade areas of economic importance to us, notably intellectual property (IPR), services, investment, public procurement and competition. The value of new market access for EU businesses is seriously reduced without sufficient IPR protection provided by the countries concerned. IPR violations deprive right-holders of the revenue from their investment and ultimately put at risk the viability of the most innovative and creative companies. The biggest challenge at present is the enforcement of existing commitments, particularly in emerging economies. The Commission has devoted considerable resource to fighting counterfeiting and improving IPR enforcement in key third countries such as China. We have stepped up co-operation with partners like the US and with Japan on IPR and we have worked to protect EU geographical indications. But there is much more to do. Services are the cornerstone of the EU economy. They represent 77% of GDP and employment, an area of European comparative advantage with the greatest potential for growth in EU exports. Gradually liberalising global trade in services is an important factor in future economic growth including in the developing world. The EU will need to negotiate to liberalise trade in services with key trading partners, especially where market access is poor or our partners have made few WTO commitments. Improving investment conditions in third countries for services and other sectors can make an important contribution to growth, both in the EU and in the receiving countries. As supply chains are globalised, the ability to invest freely in third markets becomes more important. Geography and proximity still matter. Establishing a physical presence in a foreign country helps EU companies realise business opportunities, makes the flow of trade more predictable, and consolidates the image and reputation of the firm and of the country of origin. Public procurement is an area of significant untapped potential for EU exporters. EU companies are world leaders in areas such as transport equipment, public works and utilities. But they face discriminatory practices in almost all our trading partners, which effectively close off exporting opportunities. This is probably the biggest trade sector remaining sheltered from multilateral disciplines. The absence of competition and state aid rules in third countries limits market access as it raises new barriers to substitute for tariffs or traditional non-tariff barriers. The EU has a strategic interest in developing international rules and cooperation on competition policies to ensure European firms do not suffer in third countries from unreasonable subsidisation of local companies or anti-competitive practices. There is much to be done in this area. In most countries there is little transparency over the granting of aids. In all these areas, transparent, effective and respected rules are essential. The proper enforcement of such rules at home is the foundation of our competitiveness. But we also need to work with others to ensure their rules and standards are of similar quality. DG Trade, October 2006 8www.ec.europa.eu/trade/issues/index_en.htm

Appendix 12

51

Block the EPA

Declaration of several Haitian organisations which not only criticises the EU, but also calls for better governance in Haiti.

4. Our demands and our recommendations to the European Union (EU)

4.1 The EU should abandon its goal of reciprocal trade liberalization with respect to the weaker economies of the South; 4.2 In compliance with at least the principles and objectives of the Cotonou Agreement, the EU must necessarily focus on development cooperation, rather than on the trade aspect of the EU-ACP Partnership Agreement; 4.3 As a matter of urgency, it is necessary to examine the possibilities of alternative trade regimes. These must take into account the imperatives of the development of ACP countries and their priority needs; 4.4 The EU should change its strategy of negotiating by working with the ACP countries to get more WTO-flexibility and push for a comprehensive reform of this institution so that it is more geared to enhance the development of international trade instead of being under the thumb of multinationals and powerful governments. 4.5 The EU should respect and help build (rather than undermining) m existing regional integration mechanisms, which for the most part remain in a virtual condition. The strengthening of these integration efforts is the first step towards an upgrade of regional economies so that they can cope with the unfair competition that currently dominates the global capitalist market; 4.6 As the EU is the leading economic power in the world (29% of global GDP) it should devote additional resources to strengthen the productive capacities of our countries, to strengthen competitiveness and to diversify our economies. These resources should be made available more easily and more quickly; 4.7 The EU should release more financial resources and technology for sustainable development and the eradication of poverty by increasing development aid, by the immediate and unconditional abolition of debts claimed from the ACP countries, and by exploring innovative sources of development funds (including a tax on financial transactions in progress - several variations of the model of the Tobin Tax are quite applicable, as shown by numerous studies); 4.8 The EU should reform the Common Agricultural Policy in such a way that it contributes to a more sustainable family farming in Europe, and does not interfere with agricultural and trade interests of third countries; 4.9 The EU should establish transparent and participatory mechanisms to more thoroughly assess the impact of existing and future trade policies (including measuring the impact of trade policy reforms carried out under the Structural Adjustment Policies, and putting compensation and reparation measures in place); 4.10 In the current negotiations, the EU should refrain from putting any pressure on the ACP states beyond the scope of the Cotonou Agreement, with regard to issues such as those relating to the liberalization of investment, competition policies, government procurement, trade facilitation, data protection and services; 4.11 The EU should refrain from the use of blackmail by de-linking access to funds from the 10th EDF and the pace of EPA negotiations; 4.12 The EU needs to improve the negotiating process by clearly defining mechanisms for wide, real and effective consultation, especially with community-based organizations, social movements, and civil society in general. The EU countries should be more accountable to their national and supranational parliaments, including the ACP-EU Joint Parliamentary Assembly.

5. Our demands and our recommendations to the Haitian authorities

5.1 The Haitian government should carry out a process of setting up a national strategy for rehabilitation and development in the context of a broad and meaningful participation of all sectors of national life.

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This should take place as soon as possible. Only on the basis of this strategy we will be able to define a path of regional integration in the Caribbean and the coherent elements of a framework relating to our trade with the rest of the world; 5.2 The government should give serious consideration to the potential of our economy in relation to the needs of countries in the region. To take advantage of these opportunities, the intelligent mobilization of all concerned producers will be required; 5.3 The Haitian government should refuse to sign the EPA and ask for a moratorium of at least three years in order to develop a transparent, inclusive, and truly participatory consultative process; 5.4 The Haitian government should seek to take into account our particular situation (a country plagued by a long systemic crisis) and invoke the concept of special and differential treatment, both in terms of our relations with countries in the Caribbean as well as in the framework of their relations with other regions; 5.5 The government should intensify its relations with blocs of countries proposing an alternative vision of integration like the ALBA framework - based on respect for our culture and our history and which is built on the basis of cooperative advantage; 5.6 The Haitian government should definitively assess the past 20 years of domination by neo-liberal policies, and implement different policies based on a vision of eradicating poverty, and fighting the polarization between the rich and the excluded. It must show a real will to rehabilitate the small peasant economy and build a regime of accumulation prioritizing the needs of the domestic market and coherent articulation of the productive sectors; 5.7 The Haitian government should take advantage of the Common External Tariff (CET)applied by CARICOM to selectively protect production chains with strong potential (tubers, coffee, cocoa, fishing, arts and crafts, cottage industries, cultural production, grains, livestock, dairy production and the processing of fruits, tltravail, construction materials, eco and cultural tourism, etc.); 5.8 The exclusion lists should be discussed with all sectors of the country, and take into account our potential in the medium term. The deadline for signing before the end of the year will not permit serious work on the list of products excluded from the liberalization, and we believe that we must break this doctrine of progressive liberalization as the expiration date of 20 years does not, we believe, offer adequate insurance coverage.; 5.9 The issue of the defense of national production and food sovereignty must be an essential component in the process of negotiation of any partnership agreement; 5.10 The government should refuse to liberalize government procurement which constitutes a lever to protect and recapitalize small and medium-sized domestic companies; 5.11 The government should protect social services by preserving any commodification process to ensure accessibility and universality of these public goods and services; 5.12 The Haitian government should support the reservations expressed by several leaders of CARICOM countries who reject the inclusion of standards of good governance in the context of the EPAs because this implies a reduction in state interventions in social issues, the environment, poverty alleviation, the creation of stable employment, and so on; 5.13 The Haitian government should fight to retain the levers to subsidize agricultural production and fragile niches of transformative industries. Members of Block the EPA coalition: PAPDA, MODEP , CHANDEL, RAJES, SOFA, RNDDH, Tt Kole Ti Peyizan Ayisyen, October 2007 8www.deiberthaiti.blogspot.com

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the EUs double attack on developing countries and the European social model
Paper from War on Want which argues that Global Europe: competing in the world is an attack on developing countries and the European social model. The European Commissions October 2006 communication Global Europe: Competing in the World launched a double attack on working people in developing countries and on the social model of the European Union itself. War on Want has registered its deepest concern at this new EU trade strategy, which explicitly favours the interests of capital over the development needs of the global South. With its open emphasis on meeting EU business interests rather than broader international development objectives, the strategy threatens to condemn many of the worlds poorer communities to deeper poverty. It also threatens to undermine the most progressive aspects of the European social model, to the long-term disadvantage of workers and other citizens of the EU. War on Want believes that a radically different approach is needed to ensure that EU trade relations do not have a negative impact on the prospects of developing countries or on the European social model. The following short analysis provides an introduction to the Global Europe strategy and a critique of the policy it represents.

Global Europe

Provenance
Global Europe: Competing in the World is a reaffirmation of the EUs neoliberal Lisbon Strategy as it applies to the EUs external economic relations. The document has its origins in the process initiated by the European Commission in September 2005 with its issues paper on Trade and Competitiveness, which was then discussed with business representatives at the Commissions fifth market access symposium in Brussels on 19 September 2005. The Commission published the final communication on 4 October 2006, along with a more detailed staff working paper and other supporting documents, and the EUs Council of Ministers received it officially at its General Affairs Council of 13 November 2006. The document therefore now represents the official trade strategy of all 27 EU member states.

Content
Global Europe defines the EUs interests in terms of an aggressive market access agenda on behalf of European business. This pro-corporate approach has been reaffirmed in the Commissions new market access strategy, Global Europe: A Stronger Partnership to Deliver Market Access for European Exporters, published in early 2007. Much is made of the need for an activist or hardnosed approach to obtaining new market opportunities for European exporters, especially by means of a new generation of bilateral or regional trade agreements. With WTO negotiations in permanent crisis as a result of EU and US intransigence, the EU has now launched individual negotiations with ASEAN, India, Korea, China, Central America and the Andean Nations. In addition, the EU continues to pile pressure on African, Caribbean and Pacific countries to finalise Economic Partnership Agreements (EPAs) with the EU, despite the acknowledged damage such agreements will cause to their economies. The Global Europe strategy identifies three key areas in which the EU will press to secure new market access opportunities for its corporations in external markets: non-tariff barriers: Global Europe renews the EUs commitment to reducing tariffs in third countries, despite the acknowledged problems this can cause in many developing economies (including mass bankruptcies, redundancies and revenue losses). However, the EU also now seeks to increase its focus on a wide range of behind-the-border regulations which it terms barriers to trade. To this end, the EU proposes that its new generation of free trade agreements (FTAs) should provide for European companies to have prior consultation rights over new regulations which host countries might wish to introduce, and that industry should have access to monitoring and enforcement mechanisms as efficient as the WTO dispute settlement (which operates only on a state-state basis). access to resources: In response to lobbying by European business groups, the EU identifies unimpeded access to natural resources as a high priority and commits itself to tackling the major problems faced by EU industries in this regard. Many third countries employ export controls in order to safeguard natural resources for their own developmental and environmental purposes, and there has been strong resistance to what are widely perceived as the neocolonial intentions of powerful states in this regard.

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Yet the EU lists a wide range of sectors, and energy in particular, in which controls must be removed so that the access of EU business to such resources is guaranteed. new areas of growth: The EU lists intellectual property, services, investment, public procurement and competition as areas of economic importance to us which will require more aggressive action in future. While companies have succeeded in winning far-reaching intellectual property rights under the WTOs TRIPS agreement, largely to the detriment of developing countries, the EU complains that enforcement of these rights remains a challenge. Similarly, the EU bemoans the fact that services account for three quarters of its GDP and employment but only one quarter of world trade yet third countries have expressed far-reaching concerns at the negative social and developmental impacts of liberalising their services markets for the benefit of EU business interests. The Singapore issues of investment, public procurement and competition attained notoriety at the WTO, given the profound threats posed by liberalisation in these areas. Yet the EU still seeks to win the ability to invest freely in third markets on behalf of its industries by means of an ambitious new model EU investment agreement, as well as opening public procurement markets to the major transport, construction and utilities companies of the EU. In addition, the EUs Global Europe strategy looks to a programme of internal as well as external liberalisation. The most significant threat posed by this programme is to be found in the stated intention of harmonising European standards so that they no longer create friction with trading partners whose standards are lower. Peter Mandelson made clear in his Churchill Lecture given in Berlin on 18 September 2006 that this means above all a process of convergence with the US regulatory system beloved by business for its meagre social and environmental content. Global Europe confirms that this agenda is driven wholly by corporate interests: The greater the consistency in rules and practices with our main partners, the better for EU business. Nowhere does it mention the damage which such an agenda will cause to the peoples, the environment or the social model of the EU.

Analysis
The EUs twin focus on FTAs and internal liberalisation stems from its failure to achieve its corporate agenda through multilateral channels. The EUs attempt to introduce a multilateral investment agreement failed first at the OECD and then at the WTOs Cancn Ministerial in 2003. The attempt to start WTO negotiations on public procurement and competition policy also failed at Cancn, while the European services lobby has repeatedly expressed frustration with the Commissions unsuccessful efforts to open up foreign services markets on its behalf. The EUs proposed ban on export taxes which restrict corporate access to the natural resources of developing countries has failed even to get onto the negotiating agenda at the WTO. This failure is partly due to the fact that developing countries are no longer willing to submit to the ambitions of the European business community as represented to them by the European Commission. The formation of developing country blocs at the WTO has succeeded in frustrating the worst excesses of the industrialised countries agenda, even if it has failed to deliver anything close to a development round. The EU clearly hopes that it can win much greater gains for its business community through the bilateral route of FTAs. Yet there has also been a home front of resistance to the EUs liberalisation agenda. Action from NGOs, farmers groups, trade unions and a wide range of progressive political forces has frustrated the EUs most extreme efforts to liberalise the EU economy, whether through the WTO, the Bolkestein services directive, the port liberalisation programme or the EU constitution itself. This resistance has in turn frustrated the EUs ability to gain more market access for its companies overseas. Put simply, the EU has not been able to offer its trading partners the open markets which the Commission would love to create internally, and therefore has not been able to extract from those trading partners the new business opportunities demanded by EU companies externally.

Conclusion
The Global Europe strategy represents a determined assault on the economies of the developing world in the interest of European capital, and a parallel attack on the social model of the EU. The dual threat posed by this explicitly corporate agenda demands a comprehensive political response from parliamentarians and civil society in the EU and throughout the world. War on Want will be working with its partners to develop such a response over the coming months. War on Want, April 2008 8www.waronwant.org Appendix 14

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initial observations from a development perspective

Traidcraft report which analyses the development implications of the Global Europe agenda for India.

The EU-India FTA

Introduction The context of negotiations

In June 2007, the European Commission (EC), on behalf of the EU member states, and the Government of India embarked on negotiations towards a comprehensive and far-reaching free trade agreement (FTA)1. This is one of a series of FTAs that India is involved in, although most of the others are with developing country partners2. In comparison to Indias other FTAs, the proposed EU-India trade deal has more significant implications because of the magnitude of the imbalance between the two parties and the extent of its proposed coverage. A growing body of literature shows that developing countries entering into trade agreements with richer country partners which lock down far-reaching liberalisation and de-regulation commitments have faced serious risks to their vulnerable sectors - such as small farmers, SMEs and workers - as well as reduced flexibility to implement national policies3. In the multilateral context, India has taken a leading role amongst developing countries to mitigate these risks, insisting that any new World Trade Organisation (WTO) deal must be driven by development objectives. The WTO mini-ministerial meeting in July 2008 ended without conclusion, in part because of the stance taken by India on behalf of many developing countries that they should retain tools and flexibilities to defend farmers, vulnerable industries and future economic development needs. Yet as this report will show, many of the concerns about the development impacts of the WTO proposals rejected by India are equally, if not more, warranted in the FTA context. Indeed, the Indian government itself has recently expressed concerns about a number of the EUs proposals for the FTA.

Europes global strategy

The EUs decision to negotiate an FTA with India dovetailed with the launching in 2006 of its new trade strategy, Global Europe: Competing in the World. The Global Europe strategy has arisen in a context of Europes decreasing share of world markets, the rise of new global competitors such as China, and a failure to secure sufficient levels of increased market access into developing countries through the WTO. The strategy is aimed at keep[ing] the EU at the forefront of international competitiveness through seeking to make progress in the WTO, but also through pursuing increased and preferential levels of access to new and growing markets through the FTA route. The EU is particularly targeting countries or regions with large but still relatively protected markets, including India, ASEAN, South Korea, Central America and the Andean countries, where the gains to EU companies are likely to be greatest. A further factor is that several of [the EUs] main trading partners and priority targets have been negotiating FTAs with [the EUs] competitors4, which makes it particularly important for the EU to secure preferential agreements with these countries in order not to be left behind. In the EUs current raft of FTAs it aims to go far beyond not just existing WTO commitments but also proposals being discussed in the ongoing Doha Round. Objectives set out in the Global Europe strategy as well as in the ECs mandates for individual FTAs include: faster and deeper tariff liberalisation the removal of restrictions on exports in order to facilitate EU industries access to raw materials new rules on investment as well as competition policy, both of which were rejected by India and other developing countries in the WTO increased commitments to further open up services new rules on government procurement, also rejected by developing countries in the WTO, but which the EU sees as an area of significant untapped potential for EU exporters in advanced and emerging economies5 stricter enforcement of intellectual property rules

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 extended rights for third-party stakeholders, including companies, to be consulted in advance of partner countries introduction of new regulations6 In addition, the EU has started to insist that FTA partners commit to extending to the EU any terms that they grant in the future to other major trading partners. The inclusion of a most-favoured nation (MFN) clause in the EUs FTAs and Economic Partnership Agreements (EPAs) has been widely criticised by the African, Caribbean and Pacific (ACP) countries involved and other developing countries for being an infringement upon national sovereignty and an obstacle to building preferential South- South trading arrangements. The EUs FTA negotiations with ACP countries (EPAs) demonstrates its willingness to negotiate aggressively for its interests, even with very poor countries. Throughout the EPA negotiations, the EC consistently stressed the primacy of development objectives and the EUs lack of offensive interests in ACP markets7. Yet even in this context, the EU has pushed extremely hard to secure the same kinds of extensive WTO plus commitments outlined in its Global Europe strategy8. In its dealing with India the EU will expect even more extensive coverage, as it sees the two parties as equal players in this negotiation9 and expects the agreement to be comprehensive and ambitious in coverage, aiming at the highest possible degree of trade liberalisation including far-reaching liberalisation of services and investment in line with the Global Europe strategy10. Unlike the EUs stated lack of offensive interests in ACP markets, the EU and its companies have clear ambitions to extend their reach into Indias rapidly expanding market. The EU appears particularly concerned to gain access to Indias government procurement market, to improve access for its foreign investors in manufacturing sectors as well as in key services including banking and retail. European companies also have interests in exports to India across a range of sectors from automobiles to dairy products.

Indias stance
The Indian government and industry representatives have approached the FTA with Europe with initial enthusiasm. The report of the High Level Trade Group (HLTG) - in which the Indian government and selected industry representatives played an active role - set out far-reaching parameters for the FTA very similar in scope to those outlined in the EUs own global strategy. In the context of the FTA, India is keen to secure better access for Indian service providers in EU markets, to improve its market access in key product sectors, notably textile and clothing exports (in a context of increased competition from China, Bangladesh and Vietnam) and to remove some of the non-tariff barriers to its exports of agricultural products to the EU. The Indian government also sees opportunities for attracting inward foreign direct investment (FDI) in a number of strategic sectors, as well as having interests in outward FDI to Europe. However, as the negotiations have progressed, India has identified a number of sensitivities which the EU does not appear ready to accommodate.

Fault-lines emerging
Key fault-lines are beginning to emerge in the negotiations. The Indian government has sought lower levels of liberalisation than initially proposed by the High Level Trade Group, in order to retain sufficient scope to protect its sensitive sectors, in particular in agriculture. The Indian government also has stated it wants to exclude government procurement from the negotiations. However, the EU sees inclusion of government procurement as a non-negotiable and has also so far objected to asymmetry in tariff liberalisation commitments. Whilst the EU is treating India as an equal partner in the negotiations, a number of realities about India need to be borne in mind when assessing the scope for an FTA to deliver development outcomes.

Indias impressive growth

In European media India is increasingly characterised by its impressive levels of growth, its high-technology services sectors and the bullish attitude of its major conglomerates in European markets. There is ongoing debate about the role of trade liberalisation to date in driving Indias growth11. Whatever the driving factors, India is certainly recognised for its economic growth levels that have accelerated during the past few decades, from annual GDP growth of around 3% in the 1960s and 1970s to 5% in the 1980s to the current levels of more than 8%12. Its economy is well known globally for its expanding output in high-technology services sectors, in particular IT and other business services as well as banking and Appendix 15

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communication services. In addition, major investments from Indian corporations in high-profile European companies and brands notably Tatas purchases of Corus steel, Tetley tea and most audaciously Jaguar and Land Rover have contributed to a popular perception of India as an emerging global superpower. However, such a characterisation masks a more complex picture. Indias GDP is only 6% of the size of the EUs13 for the EU, trade with India makes up only about 2% of its total trade; for India, trade with the EU makes up about 20% of its overall trade14.

and its persistent poverty and inequality

Whilst certain groups in India are amassing huge wealth and the middle classes have certainly been expanding, poverty levels remain extreme and inequality appears to be growing. Using the PPP conversion measure Indias GDP per capita stands at about US$3,800, similar to the levels of Nicaragua, Angola and Vietnam15. Using new poverty estimates from the Asian Development Bank (ADB), GDP per capita is even lower at about US$2,10016. India has the largest numbers of poor people of any country in the world. According to new ADB measures, the actual numbers of poor people living on less than US$1 per day (at PPP measure) are as many as 792 million or 73% of the population; those living on less than US$2 per day as over one billion people or 94% of the population17. This is more than the entire population of the ACP countries combined. While poverty levels appear to have reduced overall, the rate of poverty reduction appears to have slowed and inequality to have risen, according to a number of recent studies18. A 2008 report from UNICEF finds that unless India achieves major improvements in health, nutrition, water and sanitation, education, gender equality and child protection, global efforts to reach the millennium development goals (MDGs) will fail. Much of Indias growth has been services-driven (services grew by an average of 7.5% per annum during the 1990s, as compared to 5.8% for industry and 3.1% for agriculture). Unfortunately this services sector growth has not led the way in job creation. The modern services sector (excluding informal services such as small-scale retail) accounts for only a small proportion of overall employment and household incomes. In 2003 the International Monetary Fund (IMF) joined a host of voices to talk about the the relatively jobless nature of growth in the Indian services sector19. Today Indias high-technology services sector still employs less than 1% of the workforce20. Meanwhile, more than half the population works in agriculture, yet agricultural incomes are stagnating and farmers work in a context of underinvestment combined with an erosion of institutions and service provision. Few new jobs are being created in manufacturing sectors. Indeed, according to one study there has been no rise in employment in manufacturing from pre-1990s reforms to the post-liberalisation period21. And overall employment levels have been getting worse. National Sample Surveys on Employment and Unemployment revealed a sharp decrease in the rate of employment generation across both rural and urban areas during the 1990s. For permanent or secure jobs the rate of increase was close to zero. In both rural and urban areas the absolute number of unemployed increased substantially, and the rate of unemployment went up as well22. In sum, whether or not trade liberalisation has been the key catalyst for Indias growth, it does not appear to have catalysed sufficient levels of poverty reduction, nor provided sufficient jobs in sectors of relevance for poor people and it has coincided with growing levels of inequality. The question is whether the EU-India FTA can help to reverse this trend. Initial assessments based on economic modelling do not bode well for India. For example, one study by Carnegie anticipates the overall impact on India would be slightly negative, with overall real income and private household consumption showing small declines. The study anticipates only very modest gains in employment generation and conclude that while the potential gains are modest the risks are not insignificant23.

About this report

The following chapters explore these risks in greater depth and ask whether the EU-India FTA will exacerbate or alleviate the immense poverty and inequality highlighted above. In particular the report

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focuses on the impacts upon small and medium enterprises (SMEs) and small farmers. According to official figures India has 13 million SMEs employing around 41 million people and accounting for 6% of GDP24. Meanwhile, over half of Indias population still live on the land, of whom 80% are small farmers owning less than two hectares of land. Given the high unemployment and level of inequality in India, these sectors are likely to be critical both for employment generation and for a more equitable distribution of economic growth. As a development NGO working to fight poverty through trade, Traidcraft is concerned to ensure that these groups are strengthened and not undermined as they have an important role to play in catalysing sustainable and equitable economic development. The EU-India FTA Traidcraft 2008 8www.traidcraft.org.uk

1 FTAs are bilateral or regional trade agreements requiring extensive liberalisation of goods and services between trading partners. FTAs typically go beyond multilateral commitments, by binding partners to more far-reaching liberalisation and by introducing new rules on investment and other trade-related areas. 2 During the past 10 years India has concluded FTAs with Sri Lanka, Singapore, Thailand, MERCOSUR, Chile, Nepal and BIMSTEC. India recently concluded an FTA with ASEAN, is part of an ongoing process leading towards an FTA with South Asian countries (SAFTA) and it is also negotiating with Japan, Korea, Malaysia, the South Africa Customs Union, Brazil, South Africa and the Gulf Cooperation Council.

For specific country cases see, for example, A. Nadal (2000), The Environmental and Social Impacts of Economic Liberalisation under NAFTA; African Trade Policy Centre, UN Economic Commission for Africa (March 2005) Karingi et al. Economic and Welfare Impacts of the EU-Africa Economic Partnership Agreements. For more generic concerns see UNCTAD (2007); Joseph Stiglitz, cited in La Jornada, 19 May 2006; Oxfam 2006, Signing Away the Future; H.J. Chang
3 4 5 6

European Commission (October 2006) Global Europe: Competing in the World European Commission (2006) op cit

European Commission (2007) Recommendation from the Commission to the Council Authorising the Commission to negotiate a free trade agreement with India on behalf of the European Community and its Member States (henceforth referred to as EC mandate for EU-India FTA), paragraph 37
7 See, for example, speeches by Trade Commissioner Peter Mandelson, available at http://ec.europa.eu/commission_barroso/ mandelson/sp_dev_en.htm

See Griffiths, M. et al (2007) Partnership Under Pressure; and Oxfam International (2008) Partnership or Powerplay for examples of coverage of interim EPAs
8 9

European Commission (2008) EU-India FTA Negotiations: EC Key Messages, January-February 2008 EC mandate for EU-India FTA (2007) op cit

10 11

Harvard economists Rodrik and Subramanian (2004) have presented evidence to challenge prevailing orthodoxy from the World Bank and others that trade liberalisation has been the key catalyst of Indias growth. See Rodrik and Subramanian (2004) From Hindu Growth to Productivity Surge: The Mystery of the Indian Growth Transition, IMF Working Paper
12 13

Based on data from Central Statistical Organisation of India

Based on figures from CEPII CIREM (2007) Economic Impact of a Potential Free Trade Agreement between the European Union and India
14 15

http://www.eubusiness.com/Trade/India%20EU%20trade/

Polaski, S. et al (2008) Indias Trade Policy Challenges, Carnegie Endowment for International Peace p.,3 based on IMF World Economic Outlook Database 2007 Based on Asian Development Bank (2007) Purchasing Power Parity Preliminary Report Calculations by Polaski et al (2008) op cit, based on ADB measures (2007)

16 17 18

ADB Key Indicators 2007; ADB (October 2007), The Millennium Development Goals: Progress in Asia and the Pacific 2007; National Commission for Enterprises in the Unorganised Sector (NCEUS) (2007), Report on the Conditions of Work and Promotion of Livelihoods in the Unorganised Sector, UN Millennium Project (2005), Investing in Development: A Practical Plan to Achieve the MDGs
19 20 21

Gordon J. and Gupta P . (2003) Understanding Indias Services Revolution, IMF Working Paper Polaski et al, op cit

Ghosh J. Sengupta A. and Roychoudhury A. (2008) The Impact of Macroeconomic Change on Employment in the Retail Sector in India: Policy implications for growth, sectoral change and employment, Economic Research Foundation, New Delhi, for the International Labour Organisation (ILO)
22 23 24

Cited by Ghosh J. Sengupta A. and Roychoudhury A. (2008) op cit Polaski et al, op cit All figures for 2007, Government of India, MSME website

Appendix 15

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Dialogue of the deaf

An assessment of Europes developmental approach to trade negotiations
An assessment by ICCO of Europes developmental approach to trade negotiations. In trade negotiations, the European Union presents itself as an ally of developing countries sensitive to their concerns and looking out for shared interests as a partner in talks. Nowhere has this rhetoric been loftier than in EPA negotiations. The aim of this research is to test how far Europes negotiators are living up to these professed objectives. On behalf of ICCO, a representative sample of African Caribbean and Pacific (ACP) negotiators was asked to judge whether or not European negotiators had lived up to the rhetoric surrounding the Economic Partnership Agreement (EPA) talks. Nine out of thirteen felt that EPAs did not support regional integration Eleven felt that they had been put under pressure to negotiate trade-related issues by the European Commission (EC) Eleven felt that EPAs would force ACP countries to liberalise their trade Ten confirmed that aid was being made conditional on the signing of an EPA Eight felt that the EC did not listen to ACP concerns or proposals Only two felt that EPAs would be instruments for development. Other evidence from academic assessments, formal statements and documents obtained from negotiations seems to support their views. Unless important lessons are learned from EPA talks so far, the likelihood for a good outcome to these negotiations that is one driven by ACP concerns and development coherence looks remote. Prospects look even gloomier for countries negotiating trade deals with Europe under its Global Europe mandate the EUs broader strategy to develop Europes global competitiveness and open up new opportunities for its exporters and investors. In these talks flexibility from the EC is more limited (for example with respect to implementation periods), commercial interests are greater for the EU and development rhetoric is sparse. This despite the fact that the majority of poor people live in those countries and regions and that their economies still have significant structural problems. This research finds that, in the interest of development and poverty alleviation, besides a substantive shift in the its approach to more faithfully pursue the developmentfriendly objectives of EU policy, the EC must also learn the lessons of the past failures of conditionality and desist from imposing its views of sound development policies via its trade deals. Greater transparency and more active engagement from those who can hold Europes negotiators accountable European member states, parliamentarians and civil society is clearly needed so that the mistakes of EPA talks are not continued or repeated in Global Europe negotiations. In many respects it is too early to tell what the impacts of EPAs will be negotiations are ongoing and much will depend on implementation, including aid delivery. It is also outside the scope of this study to make a full assessment of likely impacts. Nevertheless, areas of concern have been highlighted by negotiators that suggest the EC is not on the right track: EPAs risk undermining rather than supporting regional integration A UNECA study shows that if ACP regions are allowed to integrate their markets before opening to the EU welfare gains can reach US$270 million. Without this flexibility, ACP states stand to lose out from trade diversion effects by US$559 million. In the Eastern and Southern Africa (ESA) region, member countries stand to lose out on US$212 million worth of trade with each other, while the EU will increase its exports to the region by US$1.1 billion1. There are questions as to whether the EC will deliver sufficient assistance in an effective way A key lesson of negative impacts of 1980s and 1990s liberalisation in developing countries is the need to carefully sequence trade liberalisation with building production capacity and competitiveness and to put in place appropriate accompanying measures. The lack of an adequate aid provisions or monitoring mechanism

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within the EPAs means that ACP countries ability to coordinate trade reforms with putting in place the right conditions and policies is severely limited. A real and meaningful partnership approach is lacking Arguably the most serious failing of EPAs, has been the ECs inability to shift its negotiating practice to a partnership approach. Its own interests and convictions of what is best for ACP development prospects have overridden to listen and response to the ACPs own views and proposals. In order to improve prospects for developmentfriendly EPAs, the EU needs to tackle some fundamental shortcomings in its approach: Increased flexibility needs to be shown, particularly with respect to market access commitments, but also to consider cooperation-only provisions in trade- related areas; The transparency of the negotiating process needs to be improved, to remove any question of inappropriate tactics, but also so that external assessments of the development value of EC proposals can inform progress; ACP proposals should more regularly form the basis of negotiations, and their priorities should be driving the agenda. While it is evident from our reports findings that the EC has failed to live up to its rhetoric relating to trade negotiations with the ACP countries, it needs to be mentioned that negotiators interviewed for this study also emphasized that there is also much that needs to be done on the part of developing country partners to increase the prospect of better results from talks. Being well-prepared is critical. Working out regional positions and knowing EC interests and processes as well as your own were cited by negotiators as keys to success. It is vital that lessons learned from the process to date be taken on board in the on-going EPA negotiations. In addition, they urgently need to be taken on board by the developing countries currently engaging FTA negotiations under the EUs Global Europe Strategy. In these negotiations stronger commercial interests and the perception of negotiating among equals could further erode any prospect of adopting a partnership approach to achieve shared development objectives. In the draft negotiating mandates for these deals, there is even less willingness to show flexibility on the part of the EC, and the strategy clearly states that the EC is pursuing significant commercial and strategic interests in these FTAs, with little mention of development objectives.
1 Karingi et al (2005), Economic and Welfare impacts of the EUAfrica Economic Partnership Agreements, UNECA, ATPC Work in Progress No 10

Dialogue of the Deaf ICCO, September 2008 8www.icco.nl

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Dear Baroness Ashton

Letter to new Trade Commissioner from development ministers of three EU governments. Rt Hon Baroness Ashton Commissioner for Trade at the European Commission Brussels The Hague, November 7 2008 Dear Baroness Ashton, We would like to take this opportunity to congratulate you on your appointment and we look forward to welcoming you personally at next weeks Development General Affairs and External Relations Council. As you will be aware, negotiations between the EU and ACP countries on the Economic Partnership Agreements are at a critical stage. We welcome the comments you made at the recent European Parliament hearing, and particularly your commitment to giving a different character to ongoing regional negotiations. By concluding interim agreements focussing on the trade in goods at the end of 2007, we were able to avoid trade disruption for most of the ACP countries concerned. However, as we are sure you will agree, we have much to do to ensure that EPAs genuinely live up to the goals formulated in the Cotonou Partnership Agreement. We therefore need to ensure that EPAs will actively support regional integration and contribute to a regulatory framework that will stimulate economic development. If we are to succeed in this, we must be prepared to show more flexibility towards the countries and regions concerned in the next rounds of negotiations. In May of this year, the European Council already underlined how important it is to take a flexible approach to the transition from interim agreements to regional Economic Partnership Agreements and called on the Commission to make full use of the flexibility and asymmetry permissible under current WTO law so as to reflect the different development levels and development needs of the ACP countries and regions. Judging by the vast majority of reactions received from the ACP over recent weeks and months, it is clear that as yet no sufficient degree of consensus has been achieved on the disputed negotiating issues as to allow negotiations to be brought to a successful conclusion. We would therefore like to urgently appeal to the Commission to make full use of all the flexibility available to us under current WTO law and to actively display that flexibility in current negotiations. At the same time, we must also deal pragmatically with the reality created by the interim agreements. Due to the fact that not all the countries within each regional group have initialled interim EPA there are two different systems the interim agreements and GSP/EBA - being applied. In some cases, it would appear that those different rules of origin and changes in the practice of cumulation have resulted in disruptions in trade. While we remain keen for the interim agreements to be signed as soon as possible, we call on the Commission to continue work with the ACP countries concerned to find an early, pragmatic solution to this issue as a coherent set of rules of origin will only be settled in the forthcoming EPA. We share a common understanding that the EPAs should be instruments for development. That means we must take a coordinated approach that is specifically tailored to the needs of the ACP countries and regions and differs significantly from other trade agreements negotiated by the EU. With EPAs, the overriding goal is development by a carefully sequenced integration of the ACP countries into the global market that takes account of their respective levels of development. Our aim with the EPAs is to foster development through increased regional integration. If the goal of comprehensive regional agreements is to be achieved, the critical factor in the coming negotiations will be the extent to which especially the poorest ACP countries, the LDCs, are able and willing to negotiate and sign such agreements. We should make their decision easier by showing the necessary flexibility while moving towards regional agreements through, for example, setting reasonable transition periods in new regional liberalization schedules and/ or providing for review clauses in the text. Equally, in regions where ACP parties agree to include these elements in the EPAs, agreements on the trade in services and other trade-related issues must be designed in such a way that they primarily support development friendly regional integration whilst at the same time not placing excessive strain on the ACP countries implementation capacities. With these topics, it is not a question of improving EU market access but of establishing more predictable regional trading rules that will stimulate sustainable economic activity.

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To demonstrate our commitment to building trust and confidence with our ACP partners, we believe that the EU should build on the dialogue that has already begun over the past year by responding positively to the specific ACP proposal for an EPA meeting at joint ministerial level. An informal ministerial meeting in the near future would underpin the new approach that you have eloquently referred to in the European Parliament and could bring a new political impetus to the ongoing negotiations. We are sure that, with a renewed political emphasis and stronger efforts at the technical level to address the issues highlighted above, the negotiations can be brought to a conclusion that is conducive to development. Again, we look forward to meeting you in person at the development GAERC next week when there will be an opportunity to discuss EPAs further. We would be very interested to hear your views on the topics outlined above and look forward to a fruitful exchange of views. Yours sincerely, Ms Ulla Trns, Minister for Development Cooperation, Denmark Peter Power TD, Minister of State for Overseas Development, Department of Foreign Affairs Ireland Bert Koenders, Minister for Development Cooperation, Kingdom of The Netherlands

Appendix 17

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European Parliament resolution

Two resolutions on the development impact of Economic Partnership Agreements (EPAs). One was tabled by the conservative grouping and passed (left). The alternative (right) was proposed by socialists and greens but was not adopted. The European Parliament 1 Urges the Council, the Commission and the governments of the EU Member States and ACP countries to do their utmost to re-establish an atmosphere of confidence and constructive dialogue in so far as it has been damaged in the course of negotiations and to recognise the ACP states as equal partners in the negotiation and implementation process; 2 Urges the Member States to respect their commitments to increase Official Development Assistance (ODA), even in this time of global financial crisis, which will enable an increase in Aid for Trade, and to establish accompanying measures in the form of regional Aid for Trade packages for the implementation of the EPAs contributing to the positive impact of the EPAs on development; stresses the fact that signing an EPA is not imposed as a precondition to receive Aid for Trade Funds; 3 Insists that EPAs are an instrument to development which should reflect both the national and regional interest and the needs of the ACP countries in order to reduce poverty, achieve the MDGs and respect fundamental human rights such as the right to food or the right to access basic public services; 4 Reminds the Council and the Commission that neither the conclusion nor the renunciation of an EPA should lead to a situation where an ACP country may find itself in a less favourable position than it was under the trade provisions of the Cotonou Agreement; 5 Urges the Commission and the ACP countries to make best use of the funding available for Aid for Trade in order to support the reform process in areas essential for economic development; to improve infrastructure where it is necessary, as the opportunities offered by the EPAs can only be fully taken advantage of if strong accompanying measures are introduced for the ACP countries; to compensate the net loss of customs revenue and encourage tax reform so that public investments in social sectors are not reduced; to invest in the production chain in order to diversify export production; to produce more higher added-value export goods; and to invest in training and support for small producers and exporters to meet EU sanitary The European Parliament 1 Urges the Council, the Commission and the governments of the EU Member States and ACP countries to do their utmost to re-establish an atmosphere of confidence and constructive dialogue and mutual respect insofar as it has been damaged in the course of negotiations and to recognise the ACP states as equal partners in the negotiation and implementation process; 2 Urges the Member States to respect their commitments to increase Official Development Aid (ODA), which will enable an increase in Aid for Trade, and to establish accompanying measures in the form of regional Aid for Trade packages for the implementation of the EPAs; 3 Reiterates that full EPAs have to include binding provisions for development cooperation in order to reach their ultimate goal which is economic growth, regional integration, economic diversification and reduction of poverty in ACP countries; 4 Insists that EPAs are an instrument to development which should reflect both the national and regional interest and the needs of the ACP countries in order to reduce poverty, achieve the MDGs and respect human rights; 5 Reminds the Council and the Commission that Europe has to assess and examine other WTO compatible alternatives and has the obligation to ensure that neither the conclusion nor the renunciation of an EPA should lead to a situation where an ACP country may find itself in a less favourable position than it was under the trade provisions of the Cotonou Agreement; 6 Urges the Commission and the ACP countries to make best use of the funding available for Aid for Trade in order to support the reform process in areas essential for economic development; to compensate the net loss of customs ; to invest in the production chain ; to produce more higher addedvalue export goods; and to invest in training and support for small producersand exporters as the opportunities offered by the EPAs can only be fully taken advantage of if strong accompanying measures are introduced for the ACP countries; 7 Reminds of the repeated requests by the European Parliament for the integration of the EDFin the EU budget; condemns the use of

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Appendix 18

and phytosanitary criteria; 6 Stresses that EPAs concluded with individual ACP countries, or with a group of countries not including all countries within one region, run the risk of undermining regional integration; calls upon the Commission to recalibrate its approach taking account of this risk, and ensure that concluding EPAs does not endanger regional integration; 7 Stresses that the increases in ODA promised by the Member States should, as a priority, be used to redouble efforts to attain the Millennium Development Goals in those ACP countries which are hardest hit by the consequences of the global financial and food crisis, which has threatened, and continues to threaten, the success achieved in attaining these goals; 8 Also underlines that all agreements must respect the asymmetry in favour of the ACP countries regarding both the range of products targeted and the transition periods, and that the EPAs must provide firm guarantees of protection for those sectors which the ACP countries identify as sensitive; 9 Stresses that support measures linked to the EPAs have to take into account the importance of regional integration and economic relations with other developing countries to the development of the ACP countries; 10 Urges the Commission to give ACP negotiators sufficient time to evaluate the agreement and to make suggestions before adopting the relevant agreement, taking into consideration the WTO time schedules; 11 Stresses that EPAs agreements should incorporate a revision clause for a revision 5 years after their signature, to which national parliaments, the European Parliament and civil society must be formally associated; stresses also that this period will enable a detailed evaluation of the impact of EPAs on the economies and regional integration of the ACP countries and appropriate reorientations to be carried out; 12 Considers that any trade agreement between ACP and EU, affecting the livelihood of the population, should be the result of an open and public debate with full participation of ACP national parliaments; 13 Urges the ACP governments to implement necessary reforms in order to realise good governance, in particular in the field of public administration, such as in public financial management, collection of customs duties, the tax revenue system, the fight against corruption and mismanagement;

the EDF asa source of financing for the EPAs Regional Funds when additional financing had been expected; Opposes any kind of conditionality linked to the EPAs in the matter of granting European aid; Calls for an early determination and provision of an equitable share of the Aid for Trade resources andthe guarantee that these funds represent additional resources and notrepackaging of EDF funding and that they are conform toACP priorities; 8 Stresses that support measures linked to the EPAs have to take into account the importance of regional integration and economic relations with other developing countries to the development of the ACP countries; 9 Stresses that EPAs concluded with individual ACP countries, or with a group of countries not including all countries within one region, run the risk of undermining regional integration; calls upon the Commission to recalibrate its approach taking account of this risk, and ensure that concluding EPAs does not endanger regional integration; 10 Stresses that the increases in ODA promised by the Member States should, as a priority, be used to redouble efforts to attain the MDG in those ACP countries; 11 Also underlines that all agreements must respect the asymmetry in favour of the ACP countries regarding both the range of products targeted and the transition periods, and that the EPAs must provide firm guarantees of protection for those sectors which the ACP countries identify as sensitive; 12 Stresses that EC should not impose negotiations on the Singapore issues such as procurement, investment and on servicesas long as ACP counties are not willing to do so; 13 Urges the reopening of negotiations on full and interim EPAs oncontentious issues; Urges the Commission to give ACP negotiators sufficient time to evaluate the agreement and to make suggestions before adopting the relevant agreement;Stresses the importanceof reflectingthe concerns of ACP parliaments, local authorities and civil society in the framework of the negotiations, which should neither be concluded under pressurenor in haste; 14 Underscores the need for stronger monitoring and evaluation provisions; Stresses that the final EPA agreements should include a revision clause and a global assessment impact, which should be carried out within 3 to 5 years after the signature of the agreement; Requests that the European and ACP Parliaments should be involved in any revision of the agreement; Appendix 18

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14 Underscores the need for stronger monitoring and evaluation provisions in the EPAs which will determine the impact of the EPA on country and regional development and poverty reduction objectives, not merely EPA compliance levels; 15 Stresses that there is a need to increase transparency in the negotiations and their outcomes in order to allow for public scrutiny by policy makers, parliamentarians and civil society representatives; 16 Considers that the EDF Regional Strategy Papers and Regional Indicative Programmes should contain important, systematic and wellconsidered support for EPA implementation, taking into account the necessary reform process that would make the EPA a success; 17 Urges the Commission in partnership with the ACP countries to include development benchmarks in the EPA and interim EPAs to measure the socioeconomic impact of the EPAs on key sectors, to be determined according to the priorities and for intervals decided by each region; 18 Stresses that it is crucial that forests, biodiversity and indigenous people or forestdependent people are not put at risk; in this regard, stresses that ACP countries should be allowed to implement rules that limit the export of timber and other unprocessed raw materials and be allowed to use these laws in order to protect forests, wildlife and domestic industries; 19 Instructs its President to forward this resolution to the Council, the Commission, the governments of the Member States and of the ACP countries, the ACP-EU Council and the ACP-EU Joint Parliamentary Assembly. European Parliament resolution on the development impact of EPAs [P6_TA-PROV(2009)0051], 5 February 2009 8www.europarl.europa.eu

15 Urges the ACP governments to implement necessary reforms in order to realise good governance, in particular in the field of public administration, 16 Highlights the need for close parliamentary scrutinyduring the negotiation and the implementation of EPAs by a Parliamentary Committee which should operate as part of the ACP-EU Joint Parliamentary Assembly, to avoid a costly and complicated proliferation of meetings, taking advantage of the JPAs system of regional meetings, and to exploit the experience of the JPA and promote synergy between all the EPA regions; Stresses the desirability of this Committees operating in a flexible manner, able to accommodate the expertise on both trade and development issues of the Members of the European Parliament involved in the examination of the EPA in committees; 17 Stresses thelegitimate role of national parliamentsin thenegotiations, ratification andimplementation oftheEPAs and the crucial participation ofnon-stateactors in the monitoring and evaluation ofthe agreements; Calls on the European Commission and ACP countries to guarantee their involvement in the ongoing negotiation procedures; this requires a clear agenda for further negotiations, to be agreed by ACP counties and the EU and based on a participatory approach; 18 Calls for the European Parliament, while guarding a measure of flexibility, to take into account the opinions of the ACP parliaments on the outcome of the EPAs negotiations before giving its assent ; 19 Calls for the necessary integration of the outermost regions (such as the Caribbean) into their regional environment to be taken into account and the instruments of this integration to be provided: free movement of goods and persons (tourist visas to be readily available), tax and customs facilities and support for the establishment of interregional airlines; calls for every effort to be made so that the EPAs will, for the ACP as well as for the outermost regions, form part of a winwin system; 20 Stresses that ACP countries should be allowed to implement rules that limit the export of timber and other unprocessed raw materials and be allowed to use these laws in order to protect forests, wildlife and domestic industries; 21 Instructs its President to forward this resolution to the Council, the Commission, the governments of the Member States and of the ACP countries, the ACP-EU Council and the ACP-EU Joint Parliamentary Assembly.

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Appendix 18

FTAs & the financial crisis

While the financial crisis and its consequences are spreading around the world and even the most erstwhile free market governments are discussing how to re-regulate the financial sector, free trade agreements continue extreme deregulation of the financial industry. The terms of these agreements prohibit countries from reforming their financial sector so as to remedy the financial, economic, environmental, food and social crises now growing, and from ensuring that finance is directed towards the transformation to sustainable societies. Deregulation and liberalisation of financial services is part of the many bilateral and regional free trade agreements (FTAs) that are currently being negotiated or have been implemented over the last years. For instance, the EU-Caribbean Economic Partnership agreement (EPA) exemplifies the model that the EU seeks to impose during all current FTA and EPA negotiations. Some FTAs include a review clause which is a commitment to (further) deregulate and liberalise (financial) services through new negotiations at a certain point in time, without public or parliamentary scrutiny.

Expansion of financial conglomerates

Under the rules of the services agreement (General Agreement on Trade in Services or GATS) in the World Trade Organization (WTO), developing countries can choose whether or not to liberalise or deregulate financial services. But a GATS rule determines that an FTA that covers services must include substantial liberalisation and deregulation commitments although developing countries can liberalise somewhat less than developed countries. EU and US negotiators in close coordination with their financial service industries - have been very keen to secure new deregulated access for their once profitable financial industry (Citigroup profits in 2004 were US$ 17bn). Some existing FTAs have almost 10 pages of commitments and rules on financial services. These rules require that developing countries must admit the presence of all kinds of foreign banks, insurance companies and other financial operators and their services regardless of whether regulation and supervision, or consumer protection, is established or not.

Deregulation of foreign banks

While requiring that countries admit more foreign banks and other financials services, the FTAs simultaneously impose the same restrictions on how governments may regulate financial services and their providers as seen in GATS, unless exemptions were made at the time of negotiation: allowing 100% foreign ownership of financial operators and the financial sector; no restrictions on the size and number of financial operators, nor on the volume of their financial transactions; foreign financial operators have to be treated at least as favourable as domestic financial operators. As a result, many measures that are necessary to prevent a financial crisis violate these rules. One such preventive measure is to limit the size of a bank and the volume of its financial transactions, so that it cannot become too big to fail and thus does not need to be bailed out with taxpayer money. FTA rules also disregard that foreign financial operators behave differently. Foreign banks tend to target the more profitable, rich clients and provide less credit to farmers and small producers, especially in times of a financial crisis. This undermines food production and economic development. FTAs do not allow host governments to pre-screen foreign financial service investors for instance to exclude foreign banks that mainly finance socially and environmentally destructive projects or companies, and to only admit those banks that serve their societies.

FTAs deregulate more than GATS

FTAs contain more rules that deregulate financial services than GATS. For instance, countries are required to permit any new foreign financial service within their territory in those financial sectors they liberalised under NAFTA or an FTA with the EU (Chile, Mexico, Caribbean countries). This means that very risky financial products such as speculative derivative trading can be introduced a practise which contributed significantly to the financial crisis. Although agreements often contain some exceptions for prudential regulation, it is left to trade tribunals to decide what policies are protected. FTAs therefore can make it very difficult for countries to ban speculation in food prices through banning trade in food derivatives that contribute to the food crisis. Moreover, the EU seeks to impose through its FTAs, the implementation of many non-binding international norms for financial regulators in developing countries. Yet, these norms completely failed to prevent the financial crisis, and most developing countries have had no say in their Appendix 19

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design.

FTAs stop capital controls

During a financial crisis, or in order to prevent it, it is important that countries are able to control capital inflows and outflows, which mainly move through banks. Yet, the FTA model employed by both the EU and the US requires countries to remove restrictions on capital movement and facilitate cross-border capital flows. In the EU-Caribbean EPA, no restrictions on capital transfers between residents of the signatory countries are permitted, not even on large capital account transfers related to investments. Only in exceptional circumstances are countries allowed to stop destabilising capital transfers. Also, any prudential measures taken to stop capital or trade flows that are financially destabilising are restricted by many conditions, which undermines many domestic policies to protect economies and societies.

The dangerous mix of FTAs and BITs

What is often forgotten is that foreign financial investors that enter a country under an FTA, can use already existing bilateral investment agreements (BITs) to sue host governments that introduce new social or environmental regulations. For instance, Argentina has been sued by more then 30 companies for its measures taken during its financial crisis (2000-2001). Foreign investors have already used a BIT to sue South Africa for its policies to reverse the legacy of apartheid and increase black ownership in the mining sector, which could also happen in the financial sector.

FTAs forgotten during financial reforms

None of the current official discussions about reforms of the financial sector take into account how FTAs and the WTOs GATS further liberalise and deregulate the financial sector. Nor do these reform discussions focus on establishing rules to shift finance to productive rather than speculative ends or to halt investment in companies and projects that are socially and environmentally disruptive. In order to stop the financial sectors contribution to the worlds food, climate/environmental and social crises, the extreme deregulation and market opening by FTAs and GATS must be reversed.

What we demand
All negotiations in financial services in GATS and FTAs have to be stopped. Countries should be permitted to reverse their existing GATS and FTA liberalisation commitments of financial services (a roll back). Countries are permitted to take all necessary measures to prevent financial, social and environmental crises without retaliation threats based on GATS and FTA rules. Financial services and capital liberalisation are to be taken out of the WTO and all FTAs. Financial services need to be regulated to urgently support the shaping of sustainable societies including by serving the poorest communities first. Free Trade Agreements Contribute To Financial And Other Crises Our World Is Not For Sale, February 2009 8www.ourworldisnotforsale.org/en

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Appendix 19

Gallery

Gallery

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Source: Caribbean Policy Development Center 8www.cpdcngo.org

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Gallery

Source: Windward Islands Farmers Association 8www.winfa.org

Gallery

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Source: World Development Movement 8www.wdm.org

Europes new grip on Africa

Source: Trade Justice Movement 8www.tjm.org

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Gallery

Source: advert taken out by Trade Justice Movement in European Voice magazine

Gallery

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End poverty stop unfair European trade agreements; source: Dutch campaign by Oxfam Novib, ICCO, SOMO, Both ENDS, Fairfood for Germany

Dont lock Africa into poverty

Trade Justice Action Thursday 19 April 2007

Meet at 11am outside the German embassy, Belgrave Square, London SW1
Source: Trade Justice Movement 8www.tjm.org

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Source: World Development Movement 8www.wdm.org

Gallery

Source: Trade Justice Movement 8www.tjm.org

Gallery

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Source: Acord International 8www.acordinternational.org

To impose is not to negotiate source: Oxfam France Agir ici 8www.oxfamfrance.org

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Gallery

Covers of reports and briefing papers on EPAs and FTAs produced by NGOs from ACP and EU.

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Further information
Information on the EPAs campaign in the UK Traidcraft: 8www.traidcraft.org.uk Information on the Global Europe campaign in the UK Friends of the Earth: 8www.foe.co.uk/community/campaigns/corporates_trade_index.html World Development Movement: 8www.wdm.org.uk/trade Trade Justice Movement: 8www.tjm.org.uk War on Want: 8www.waronwant.org/campaigns Information on the Global Europe campaign in the EU Global Europe Watch: 8www.globaleuropewatch.org Seattle to Brussels network: 8www.s2bnetwork.org Information on the Global Europe strategy European Commission Communication: Global Europe: competing in the world 8http://ec.europa.eu/trade/issues/sectoral/competitiveness/global_europe_en.htm Information about worldwide opposition to unfair trade deals 8www.bilaterals.org 8www.fightingftas.org 8www.ourworldisnotforsale.org/en

The world has never been a better place to live in than it is today. Poverty has never been this low, and living standards so high. And the era of globalization has created the setting for an even faster growth of opportunities and wealth creation. Globalization and World Capitalism Johan Norberg, 9 September 2003 8www.johannorberg.net

The world economy is the most efficient expression of organised crime. The international bodies that control currency, trade and credit, practice international terrorism against poor countries, and against the poor of all countries, with a cold-blooded professionalism that would make the best of the bomb throwers blush. Upside Down: a primer for the looking-glass world Eduardo Galeano, 1998

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Further information

www.africa-eu.org
Partnership for Change is a project to raise awareness and political involvement in the question of the Economic Partnership Agreements between the European Union (EU) and African, Caribbean and Pacific (ACP) countries. Its main objective is to contribute to greater consistency between the trade, development and international aid policies of the EU and its commitment to fulfilling the Millenium Development Goals and the promotion of human rights and sustainable development. Our mission is to encourage participatory debate and the exchange of ideas and information about the EPAs, in both EU and ACP countries, with a view to promoting the revision and reformulation of these Agreements. With that in mind, we plan to produce and disseminate publications to raise awareness of the issues for the general public, development-related NGOs, universities, social movements, educational centres and especially people responsible for decision making in the institutions of the EU.

www.

risc

.org.uk

Since 2002 the European Union (EU) has been negotiating new trade deals called Economic Partnership Agreements (EPAs) with 76 countries in Africa, the Caribbean and the Pacific (ACP). The EPAs are perhaps the most important trade talks faced by these countries which represent 750 million of the worlds poorest people. The EU is not only their largest export market, but also their biggest aid donor. Although the European Trade Commission has promised that EPAs will be tools for development, there has been a concerted campaign against them by some ACP governments and many civil society organisations in ACP and EU countries. This reader tries to make the complex world of trade agreements more comprehensible and asks the question: how far can the opening up of trade meet the needs of the worlds poorest people?

www.
www.africa-eu.org

risc

.org.uk