Economic Partnership Agreements

The Eastern and Southern African countries (ESA) met in Harare, Zimbabwe from 30 January – 2 February to discuss the process of the ESA-EC EPA negotiations. The meeting highlighted sticking points in need of clarification and further work. Some of the technical points and issues raised in this report have been expanded on in a series of articles published in the SEATINI Bulletin. The general comment is that whilst the ESA countries managed the lengthy series of meetings (non-stop over five days), a lot of work still needs to be done in the EPAs process. It is by no means clear that ESA countries appreciate the risks and opportunities in the EPAs process. With due respect, the observer is left wondering whether the ESA group really knows what it expects and wants from the EPAs process, and whether these talks should really continue given this background of uncertainty and unpreparedness. Although only one aspersion (quite a light one for that matter) was made against civil society attacking the EPAs process, the meeting confirmed many criticisms which the anti-EPA community (including civil society) has been voicing. Delegates expressed issue after issue which calls into question the whole EPAs process.

The ESA Technical Team held its second meeting on 30 January 2006. The meeting was chaired by the Lead Spokesperson on Fisheries, HE Ambassador A Weldegiorgis. Other officials included, ESA Lead Spokespersons on Market Access, Trade in Services and Trade Related Issues. Representatives of the ACP Secretariat were also present. The meeting was organised by the COMESA and the Indian Ocean Commission (IOC) secretariats. In our opinion, the fisheries cluster is by far the most organised and efficient negotiating node. However as will be apparent below there are several technical and general issues which will have to be addressed if ESA countries are to get any benefits at all from concluding a fisheries agreement with the EU. Despite the group’s highly efficient outlook, there is serious need for technical capacity, especially with regards to legal aspects of the whole process. The lack of such capacity can prove to be undoing for the group’s good work. Given the sensitivity of this sector and its significance to millions of citizens in the ESA region it will be foolhardy to rely on external technical assistance with respect to legal advice. This comment is not meant to downplay the work of the ESA experts but to emphasise the fact they need all the help available in this very complicated area. Again in relationship with the whole EPAs process, these shortcomings should cause a pause for thought about the haste with which ESA countries (and their ACP counterparts) are engaging with the EPAs process. Further more time is required to analyse the link between the EPAs negotiations and the WTO process, especially with respect to multilateral reduction commitments. It is not at all clear if it is prudent for ESA states to conclude negotiations on a bilateral level given the possibility of an adverse or better outcome under the multilateral process.

The Lead Spokesperson reported on the progress of the fisheries negotiations. He noted the importance to remember that the fisheries cluster is the only one where the ESA region has the resources which the EU wants. This gives ESA countries an important leverage over the EU. He reported that from the last meeting (Zambia, October 2005), the EU had agreed that the Framework Fisheries Agreement (FFA) would be the basis of the negotiations with ESA on marine fisheries, and also that ESA had informed the EU that ESA would negotiate inland fisheries together with marine fisheries. Such a common approach, he noted, worried the EU in that the later felt that the differences between inland and marine fisheries would create technical difficulties. The EU had responded to the ESA demands in the form of a non-paper (see separate article in this Bulletin). The spokesperson noted that the non-paper is a backward step in the wrong direction as it deals only with ESA obligations and has no commitments from the EU. The non-paper has no response to the ESA FFA, and it provides very general statements which require clarification. This comes against the conclusions from the last meeting on fisheries which were:

ESA stressed the significance of the fisheries sector for the region and made a case for the sustainable exploitation of regional fisheries and created a regional fisheries development framework;
ESA requested specific EU commitments; namely:

The FFA to be the basis for negotiations;
Provisions for resources development;
Protection of preference margins; and
Support for inland fisheries.

The Comesa Secretariat presented an outline of the comments submitted by the EU and further presented an analysis of the non-paper. It noted that if the objective of a sustainable fisheries sector was to be achieved the distribution of resources would have to be redefined. Using figures on the exploitation of one marine species, tuna, the secretariat noted that the value of exports from the region is about 2-3 billion euro, of this only 117 million euro accrues to the ESA region (there was no indication on whether these figures represent annual values or otherwise, but whatever the period in question the proportion is heavily skewered against ESA countries).

Illegal, unregulated, uncontrolled fishing (IUU). The EU is far more responsible for this damaging issue than the ESA countries. Therefore ESA countries demand more commitment from the EU that this will be curbed.
Capping on number of fishing vessels. The EU generally goes around the issue of capping on the number of fishing vessels by having many EU ships flying foreign flags. This deceptive practice defeats the whole purpose of capping the number of vessels.
Preference margins. Although by virtue of the WTO rules the EU cannot guarantee preference margins ESA countries should seek a commitment from the EU to make all efforts to preserve a certain level of preferences with the Regional Trade Agreement (RTA) context vis-à-vis third parties.
Major objectives of FFA. The EU did not make a single reference to the major objectives of the FFA. The EU does not want a regional supra-national agreement on fisheries. This is unacceptable as it limits ESA efforts at regional integration, especially in view of the fact that fisheries require closer regional co-operation. Further the EU did not respond (despite having made a commitment to do so) to ESA demands on areas of cooperation, support to conservation measures, and investment support and private sector development.
Non-discrimination. There is uncertainty as to if ESA should treat its local fleet in a similar manner the EU fleet.
Employment. There is a need to consider additional measures to increase employment of ACP fishermen on EU vessels.
Rules of origin. ESA has to discuss in detail how specific fisheries related rules of origin should be dealt with.

Mauritius noted:

ESA vessels should be exempted from the non-discrimination principle;
Over the years the ACP states have failed to make use of art.39 (protocol 1 of Annex V, origin of fisheries products) of the Cotonou Agreement. Rules in favour of ESA states must be utilised;
Article 38 of the Cotonou agreement must also be fully understood where it applies to flagging, ownership and capital with relation to vessels.

Zimbabwe queries whether the EU’s position is for ESA to have an FFA amongst itself as opposed to a stand-alone agreement under the EPAs. On non-discrimination, it is important to ascertain if the WTO rules permit developing countries to discriminate against developed countries when they are both in an RTA. Will GATT art.24 suffice?

should fish not be treated as a sensitive product so that preference margins will be retained, otherwise the WTO level reduction formula will apply. Under NAMA it is impossible for fish to be treated as a sensitive product, however one can argue that fish from the ACP (whether or not on an EU or ACP vessel) should be given the same market access;
What will happen if ESA concludes a more favourable fisheries agreement with say, Japan or China? Can we review an ESA-EU Fisheries Agreement because of this?
ESA should take note that the EU has already overfished its own waters, and the EU Parliament has developed new rules to govern the fisheries sector. ESA should carefully peruse these rules to make sure that they also apply to EU vessels in ESA waters;
The EC non-paper says that the EC objective is to “re-enforce EC interests in the region”. Do ESA states know what these interests are? Do ESA states agree with these interests?
Further specific demands were made, such as harmonisation of standards, including SPS measures, zero-duty on inland fish, removal of EU subsidies on EU fish products, and training and establishment of regional fisheries regulatory authorities- but the EC non-paper is silent on all these.

The meeting agreed to ensure that the fisheries framework should include a substantive section on inland fisheries. The Technical Team was tasked with developing this on the basis of the outcome of the first Dedicated Session on Inland Fisheries and Draft Negotiating Positions developed during the 4th RNF.

The meeting dwelt at lengthy on this issue. Delegates agreed that this principle should not apply in view of the different levels of development between ESA and EU fisheries. It was further proposed that an ESA-EU fisheries arrangement should have a review clause to factor in possible better terms with 3rd parties.

The ESA group held its second session on development on 31 January 2006, in Harare, Zimbabwe. It was chaired by the Lead Spokesperson on Trade Related Issues, HE Ambassador Ali Youssif Ahmed. Despite the ESA claim that development is at the heart of the EPA, it was worrying that only two countries had submitted their documents outlining development constraints and suggested developmental interventions. Though there was a diplomatic rebuke, it was clear that the COMESA secretariat and those who had made their submissions were not happy with the poor response from the rest of the ESA group. Serious institutional problems were also raised regarding the very status of the ESA grouping. This aspect was not resolved and kept on being raised despite attempts to quash it as a non-issue. It is now quite clear that certain countries have serious reservations about participating under the ESA banner. This issue will not go away, and may even derail the negotiations. The commitment of certain countries to the ESA banner is doubtful, for example the DRC was silent on this issue, only to be uncovered by the EU delegation the next day; the meeting was informed that the DRC was no longer engaging the EU under ESA, but had decided to go it alone! It may be too late, but this issue should be resolved. The ESA capitals should deal with this issue once and for all.

Zimbabwe’s deputy Minister of International trade and industry, Mr. Phineas Chihota stressed that the whole reason why ESA countries are negotiating an EPA with the EU is because of the development aspects. He was worried that the EC had proposed a reduction in the number of negotiating clusters, this would see development being dropped from the clusters. He warned that such a move would derail the whole negotiating process and strongly urged ESA countries to resist this attempt by the EU to redefine the negotiating agenda.

Amb. Ali Ahmed gave an update on the ESA negotiations with the EU on development, noting that the ESA position is that development should be at the heart of the EPA negotiations. He regretted that the EC appeared to be less concerned about the development aspects of the EPA, but was more concerned with trade issue, noting further that the EC’s DG for Trade has even said that he is not competent to deal with development issues even if there is a serious link between trade and development. He also explained that ESA countries should assess their options given that the EU was increasingly linking development funding to other donor activities, e.g., the World Bank and IMF.

The ACP Secretariat representative noted that the issues of development had been raised by all ACP regions. He advised ESA countries to consult the EC paper on the issue and to make an input in the programming for the 10th EDF. The meeting agreed to circulate this paper as well as the one written by APRODEV and ICTSD on Benchmarks for Development.

The representative for ECA informed the meeting that ECA had conducted impact assessment studies for Seychelles, Rwanda and Mali. The ECA findings from these studies were that development is an illusive issue. EU investments are focused on commodities which are strategic to the EU, e.g., minerals, and not on agriculture which is the mainstay of the people in the ESA region.

The development matrix document (a list of national development constraints and suggested intervention points by the concerned country, the region and the EU) was supposed to be based on the submissions by all ESA countries. However, by the time COMESA compiled its analysis of the matrix only two ESA countries had made their submissions. Hence COMESA made its presentation on the basis of incomplete information. As a result of the presentation by COMESA a working group was formed to review the template on the matrix. A new template was adopted and member states were given until the end of February 2006 to submit their matrices.

The meeting highlighted the complexities involved in attempting to access EDF resources. The delegates called for the EC to simplify its EDF procedures in time for the disbursement of the 10th EDF.

It is important that we raise this issue of the regional configuration as it frequently came up from the various delegates.

Some countries raised serious questions about the institutional arrangement which so-called ESA countries chose for engaging with the EU. They strongly felt that ESA is not an institution, and that other ESA countries should note that there are others who belong to other regional groups such as SADC. In particular Zambia was not happy with the juxtapositioning of ESA with COMESA. The two are not the same despite COMESA acting as the secretariat for ESA. Other delegations raised the same issue, noting that ESA has no institutional arrangement. Delegates argued that the ESA grouping was not a recognised regional entity, and this will create accountability problems in future. The COMESA secretary general defended the ESA grouping arguing that it is just a facilitative forum, countries negotiate as group under ESA but will sign the EPA individually. He argued that ESA is good for regional integration as it also incorporates the work of other regional bodies such as the IOC, ECA and IGAD. Despite the fact that the COMESA minutes of this item of the meeting say that the ESA countries agreed to maintain the status quo it is clear that this issue was not resolved and will certainly be raised again. (Indeed the very next day it was again raised, and not once, but several times). And it came back onto the agenda via an attempt to change the ESA negotiating structure.

The 6th meeting of the Regional Negotiating Forum (RNF) (Harare, Zimbabwe, February 1-2, 2006) was attended by members from Burundi, Comoros, Congo DR, Djibouti, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Uganda, Zambia and Zimbabwe. ESA Ambassadors and Lead Spokespersons from Brussels were also in attendance. The latter’s role was called into question in a debate about the review of the ESA negotiating structure. This meeting was important because at least one detailed effort was made to link the EPAs process with the WTO negotiations (see 3.1. below). The trouble is that this effort was not expanded on in the subsequent debates. In particular there was no concerted effort at reconciling the gains and losses from the EPAs and the WTO process for the purposes of arriving at a clear position on the opportunities and threats posed by the ESA-EU negotiations. The election of Zimbabwe to the chair of the RNF also created an important point for reflection on the ESA negotiating structure. Discussions on the progress of ESA national for the EPA negotiations also pose other questions for worry in that a significant number of ESA states reported minimum progress on EPA preparations on account of financial difficulties. The failure to discuss the Draft EPAs Agreement with the EU clearly highlights a huge problem for ESA countries. The document is a legal draft which requires legal skills to make meaningful contributions. As was apparent very few of the ESA delegations had the benefit of legal advice from the capital on the very document which is meant to be the agreement on the new trade relations with the EU. Some of us have made some analysis of the document and we feel that it is terribly skewered against the interests of the ESA countries, despite it being billed as a COMESA draft.

The outgoing RNF chairperson, Mr. D. Nalo (Kenya’s Permanent Secretary, Trade and Industry) made very pertinent remarks that sought to link the EPA process with the multilateral process under the WTO, especially in light of the WTO Hong Kong Summit (December 2005). He made very crucial remarks

although the structure of the WTO negotiations is viewed as democratic the process is very costly to poor countries. Most countries cannot afford large delegations to cope with broad and high level negotiations. Many meetings are held and it is very difficult for small delegations from poor countries to cover all of the meetings, as such the poor countries are reduced to hopping from one meeting to another with no or little time at all to reflect on the issues in great detail;

First; the most celebrated success in Agriculture is the convergence of mind on an end date (2013) to the export farm subsidies by the developed world. 2013 coincides with the effective date of the EU’s Common Agricultural Policy (CAP) reform, yet ESA countries have not fully understood the implications of the CAP reform on their agriculture sectors.
Second; under NAMA the success was seen in the granting of duty free and quota free market access to the LDC exports to the developed world. This is nothing new (AGOA,EBA etc apply). The sad news is that the list of the LDCs is expanded to include some countries whose income per capita is higher than some more developed countries in Africa e.g., Kenya and Zimbabwe.
Third; the consensus to remove cotton subsidies by the USA to enable the four cotton growing countries from western Africa to have greater market access to the USA leaves out other cotton growers in Africa.;
Fourth; there was very little progress in trade in services; and
Finally; the only new item, being the introduction of aid for trade leaves ESA countries with the problem of turning the commitments by e.g., EU and Japan to tangible results in order to overcome the trade barriers which ESA countries face at present.

The Kenyan delegate noted that the EPAs process must provide ESA with a chance to reclaim what ESA is likely to lose through the WTO arrangement.

            Chair- Zimbabwe
            Vice Chair- Sudan
            Rapporteur- Madagascar

However other delegates privately voiced their disquiet about electing Zimbabwe as chair, given that there are serious political differences between Zimbabwe and the EU (a point further confirmed by the EU’s resident representative in informal remarks the following day). The disquiet is also important in the context of the Cotonou Agreement which mixes political issues with trade issues. Some delegates hoped that in the interests of trade the EU will not invoke its unilateral travelling restrictions on Zimbabwe personnel whose office is intrinsic to the RNF chair. It is important to note that the EU also has political issues with the vice-chair, Sudan. It remains to be seen to what extent these extra-trade differences will affect the trade negotiations.

The ESA countries presented their NDTPF reports, being progress (or lack of) on the preparations for the EPA negotiations. Progress was reported, but half the ESA countries cited minimum progress due to lack of funding. Such lack of funding influences the level of preparedness of individual ESA countries, and if half the ESA group is experiencing such a problem there is a cause for concern. Although the meeting resolved to direct the affected countries to appropriate channels for funding it does not appear as if ignorance of the sources of funding is the issue, rather the list of countries with this problem seems to correspond to the list of countries with a problem or other with the EU. And the EU is a source of funding for NDTPF activities.

The Lead Spokesperson for Trade Related Issues Cluster presented the report based on the session held in Khartoum, Sudan (12-13 November 2005). The report highlighted on work concerning:

Although there are attempts at safeguarding ESA interests in this work it is clear that ESA countries have gone a step further in recognising the controversial Singapore Issues as being fit for inclusion in the ESA-EU EPA negotiations. The sharp contrast between the ESA countries’ position on these issues at the WTO and their acceptance of them under the EU-ESA regime was not discussed. Minus trade facilitation it remains difficult to see what ESA states hope to gain by negotiating these WTO-plus issues under the EPAs banner.

Further work on this cluster has been recommended at a meeting to be held in Uganda.

See the above report (item 2). However serious questionswere raised which centred on the faithfulness or otherwise of the official report, the result was a revision (in the official report) to cover the issues raised by delegates. The meeting also debated the ESA configuration, and noting the differences (which will not go away) decided to maintain the status quo (i.e. ESA remains ESA, but who is ESA?).

COMESA informed the meeting that the First Approximation or draft EPA agreement had been circulated, discussions on it were meant to be done at this meeting and forwarded to the ministers for their decision. Whilst some comments were received from ESA states most of them had not and could not (in the meeting) make a contribution. It was argued that the document was too technical and legally complex. A technical committee was created to brief the meeting and came up with a revised list of the issues to be included in the document. The document will have to be discussed when members are ready. It was apparent that delegates were grappling with irrelevant technical issues at the expense of substantive issues which require technical expertise to appreciate. (see next Bulletin as we critique the draft agreement). By issuing a critique of the draft EPA agreement we by no means validate the EPAs process. Highlighting the document’s problems is one way of showing our reservations against the process.

The COMESA Secretariat informed the meeting that it is the decision of Council that the RNF should consider the negotiating structure with a view to improving the negotiating effectiveness. Shorn of the diplomatically cryptic tone, this message simply means that there should be a shift from the Brussels based ESA ambassadors as the negotiators. COMESA explained that a Chief Trade Negotiator was to be appointed instead of the ambassadors. It was not really clear in the morass of diplomatic-speak what exactly had prompted a shift in the middle of the negotiations, but COMESA argued that the current structure has shortcomings including poor communication between the capitals and the ambassadors in Brussels, and the fact that the diplomats are political appointees whose tenure has no security for purposes of continuity.

Most delegations did not fully explain a position on the issue and were diplomatically vague. The clearest positions were articulated by Kenya and Zimbabwe who explained they were happy with the current position and thought it very imprudent to change horses in mid-stream. One of the negative points with the proposed new structure was the performance of COMESA itself (where the Chief Trade Negotiator would have been housed). Some delegations were clearly not impressed by the performance of COMESA itself. Whilst communication problems (such as poor linkages between lead spokesperson in Brussels and their supposed ministerial contacts in the capitals) it was clear that this was not the fault of the diplomats. In the end the idea was short down. Rather more support for the current structure was promised in order to ensure its effectiveness.

What may have escaped the debate was the point that the issue is really another side of the debate on the ESA configuration itself. ESA countries decided to engage the EU as a group without an institutional set up, such as a secretariat (COMESA is not ESA and vice-versa). It is only natural that the contact point with the EC in Brussels is the ESA diplomatic presence there, which is individual country ambassadors. The whole debate goes back to the institutional problem, and appointing a trade negotiator does not deal with the problem. A backdoor solution would have seen COMESA becoming the ESA secretariat by virtue of the appointment of a chief negotiator to be housed under COMESA. The fact that the ESA group is still grappling with institutional issues in the middle of the EPA negotiations speaks volumes about the extent of the group’s preparedness for the EPA.

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Editorial: Time for alternatives to EPAs

There is no doubt that the Economic Partnership Agreements negotiations between the ACP countries and the EU are still far from addressing the development concerns of developing countries. It is clear that there are still many bridges to cross before a meaningful agreement could be reached that is favourable to developing nations and their people.

The 6th Regional Negotiating Forum meeting of the Eastern and Southern African (ESA) countries together with other technical meetings was held in Harare from the 31st January to 3rd February 2006. From the report in this Bulletin it is apparent that the envisaged EPAs agreement will not in any way help stimulate the productive capacities of ESA states for them to be able to engage in meaningful trade with their more advanced EU countries counterparts. There is a serious deficiency in ESA production and competitiveness that will enable them to be able to supply the EU market with processed goods. Because of thisy it is going to be difficult to realize the full benefits of EPAs hence the need to put development in the forefront as the countries negotiate with the EU.

There are a number of factors that are mitigating against the whole negotiations process. First it is the state of preparedness of ESA countries to negotiate. The ESA EPAs draft agreement with the EU was released and it is reported here that very few countries had made an analysis of the agreement with the view to ensure that it captures the needs of their countries. From our own analysis it is clear that the draft agreement is skewed against ESA countries because of a number of issues which will be articulated in later SEATINI Bulletins.

Linked to that, it also emerged that the development matrix document (a list of national development constraints and suggested intervention points by the concerned country, the region and the EU) was supposed to be based on the submissions by all ESA countries. Unfortunately, by the time COMESA compiled its analysis of the matrix only two ESA countries had made their submissions, hence COMESA made its presentation on the basis of incomplete information.

Secondly, the ESA countries have drawn a wish list of areas in which they envisage funding from the EU to get their projects off the ground. We have heard from previous meetings that “the resources to boost production capacity of the ESA countries were available from the EU but needed to put modalities in place first on how to negotiate for those financial resources”. Such statements have been said over and over again without any tangible outputs on the ground. Sometime in July 2005 I reported after attending an EPAs development meeting in Zambia that countries needing financial support especially under the so-called adjustment facility would have to surrender their sovereign rights and open up everything to the EU’s exploitation. The EU will not release its funds for nothing. ESA countries have to pay. For the ESA countries to get budgetary support under the Adjustment facility, they have to:

Follow a macro-economic reform or adjustment programme and/or have an o-going macro-economic support programme with the EC involving indirect or direct budget support
Implement a programme of trade tax adjustments in order to join or align itself with a Customs Union or Free Trade Area promoted by COMESA or East African Community
Have prepared, negotiated and signed a country Strategy paper (CSP) with the EC and have an on-going indicative programme for the CSP
Be a COMESA or EAC member state and an ACP country signatory to the Cotonou Agreement

These conditions are the same conditions that have been imposed on developing countries and precipitated their demise from the path of development to the path perpetual dependants on aid especially under the Structural Adjustment programmes.

Thirdly, the EC has demonstrated some sensational “wizadry” in handling the negotiations. They have been dazzling aid in front of ESA countries to fast track the negotiations. At the same time they have put in place some complicated modalities for access to funds which at the end of the day ensure that ESA countries have no choice but to accept conditions that go along with EU funds.

Whilst ESA countries have put in place some meaningful negotiating frameworks particularly on the fisheries sector (see next issue of the SEATINI Bulletin) the EC has dampened this by responding with a non-paper which in essence does not reflect the official position of the EU.

Elijah Munyuki in the report in this Bulletin rightly states that the value of tuna exports from the region is about 2-3 billion euro, of this only 117 million euro accrues to the ESA region and the fisheries agreement should ensure that such exploitation does not happen. The EU has over fished their waters and this scenario must not be repeated in the region.

It is now time to put in place alternatives to EPAs. There are concerns from a number of countries regarding the configuration of the region and it is slowly becoming clear that ESA countries have been disintegrated. There are unconfirmed reports that Zambia intends to move from the ESA to SADC region on EPA negotiations.

Whatever the case there are many risks and threats associated with the EPAs negotiations and our growing voice of the STOP EPAs campaign should be strengthened.

ESA-EC discuss EPAs negotiations

Mauritius noted: