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Europe/Africa: Partnership Reality Check
AfricaFocus Bulletin
Feb 4, 2007 (070204)
(Reposted from sources cited below)
Editor's Note
During the World Social Forum in Nairobi, reported Kenya's Daily
Nation, thousands of demonstrators paralyzed operations of the
European Union office in Nairobi, protesting the Economic
Partnership Agreements (EPAs) now being negotiated as the new
framework for economic ties between Europe and Africa. The
demonstrators said further opening of African markets to European
products would destabilize African economies and marginalize
African farmers.
A week earlier in Addis Ababa, trade ministers of the African Union
discussed the same issue in more measured language. But the reports
they heard from African economists echoed the demonstrators'
arguments, albeit in more technical language. Unless African
negotiators gained substantial modifications in the agreements to
curb European demands for rapid movement toward trade reciprocity,
the ministers were told, the agreements "will be very costly for
Africa irrespective of how the issue is looked at, in terms of
revenue losses, adjustment costs associated with
de-industrialization and its undermining effect on regional
integration." .
This AfricaFocus Bulletin contains excerpts from a speech at the
trade ministers' meeting by Abdoulie Janneh, UN Under-Secretary
General and Executive Secretary of the Economic Commission for
Africa (ECA), and from a briefing paper prepared by the ECA's
African Trade Policy Centre on "The Economic and Welfare Impacts of
the EU-Africa Economic Partnership Agreements." These and other
related documents are all available on the ECA website
(http://www.uneca.org).
For previous AfricaFocus Bulletins on trade issues, visit
http://www.africafocus.org/tradexp.php
Previous Bulletins on EPAs include
http://www.africafocus.org/docs05/act0503.php,
http://www.africafocus.org/docs05/epa0505.php,
and
http://www.africafocus.org/docs06/abug0602.php
Recently published: "Don't Replay Iraq in Horn of Africa,"
commentary by AfricaFocus editor William Minter, in Providence
Journal, Providence, Rhode Island, January 31, 2007. See
http://www.africafocus.org/editor/som0701_projo.php
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Remarks by Mr. Abdoulie Janneh, UN Under-Secretary General and
Executive Secretary of the Economic Commission for Africa
3rd Extraordinary Session of the African Union Conference of
Ministers of Trade
16 January 2007
Addis Ababa, Ethiopia
[Excerpts. For full text visit http://www.uneca.org/eca_resources/Speeches/index.asp]
The year 2007 presents opportunities and challenges for Africa in
trade, especially in the arenas of WTO and EPAs negotiations. I
would like to highlight from the perspective of the ECA how your
active engagement and direction would be instrumental to positive
outcomes. But before turning to the WTO and EPAs issues, let me
make some observations regarding Africa's performance in the global
trade.
Africa remains marginalised despite double-digit trade growth
Over the past 6 years, world merchandise exports experienced an
average growth rate of 10.4%. Over the same period, Africa
performed better, increasing its exports by 16% on average
annually. However, a decomposition of the export performance by
region reveals that the rapid increase in export is particularly
concentrated in oil-exporting Sub-Saharan African countries. These
countries achieved an average export growth of 22.4% over the
period. On the contrary, the average export performance of non-oil
exporting Sub-Saharan countries is very much in line with the World
average (11.2%). Unfortunately, despite this recent slight
recovery, Africa's share of global exports in merchandises remains
historically low. Africa's share in global exports in 2005 was 2.8%
only, roughly equivalent to its 1991 value and less than half its
peak value in 1980 (6.0%).
This picture suggests that the recent appearance of a catch-up by
Africa's exports is not based on the diversification of the export
base but rather on increased oil exports. Hence recent improvement
in the export performance of Africa is still vulnerable to shifts
in international commodity prices, and particularly in changes in
prices of oil.
Let me now turn to the trade negotiations issues, which actually
present opportunities and challenges for Africa in its quest to
addressing the peripheral position it occupies in the global trade.
The Doha Round
The ECA and the UN in general recognizes the Doha Round as an
indispensable platform through which the marginalisation of Africa
in the global trade could be addressed. It is for this reason that
the ECA continues to invest heavily in supporting African countries
in their efforts to scale up their active engagement in the trade
negotiations process in Geneva. The African Trade Policy Centre,
through the generous support of the Canadian and Danish Governments
continues to implement programmes and activities that support
African negotiators in Geneva and Senior Officials from the
Capitals. We are therefore very concerned that the trade talks have
not yet regained the expected dynamism beyond the low-key
consultations.
It is my hope that your meeting apart from giving guidance to the
negotiators and Senior Officials will contribute greatly in the
efforts to redynamise the talks. But even as we hope that the talks
will become more formal and dynamic, as ECA we remain concerned
that the negotiations achievements to date have not fully addressed
Africa's priorities. We therefore hope that your conclusions from
this meeting will contribute to assuring that once the talks gather
momentum they will take a track that will lead to tangible
proposals that will lead to the realisation of African priorities,
namely:
- Genuine market access opportunities for developing countries in
agriculture, non-agriculture and services.
- The elimination of trade distorting subsidies that continues to
hurt Africa agriculture.
- Concrete agreement on a significant reduction in domestic support
on cotton and a credible development assistance package.
- Precise, effective and operational special and differential
treatment provisions. This continues to be an area of much debate
in the negotiations on modalities in agriculture and NAMA.
- Agreement with regards to dealing effectively with adjustment
costs, including those that are likely to arise from preference
erosion.
- Operationalisation of the Aid-for-Trade with an expanded scope
and in line with Africa's expectations.
To complement your efforts, let me reiterate that as part of the UN
community, and as I have promised in the past we will continue
through our analytical and consensus-building capacities to stress
that trade and trade liberalisation is not an end in itself. But a
means to helping African countries face the development challenges
that they face. In particular, we will continue to strongly but
objectively advocate that given the reality that our countries are
at different development levels, the world needs to uphold a
universal, rules-based, transparent, predictable,
non-discriminatory and equitable multilateral trading system. We
will also continue to emphasise that there is incontestable
justification for support at the international level for
development-oriented adjustments to trade reforms, even for the
countries not expected to make any commitments at the multilateral
level.
Ensuring Gains for Africa from Economic Partnership Agreements
This is going to be an important year for Africa-EU relationship.
According to the Cotonou Agreement between the ACP and the EU
countries, negotiations on Economic Partnership Agreements (EPAs)
are supposed to be concluded by 31 December 2007. In working
towards this deadline and in order to ensure that EPAs benefit
Africa, you mandated the ACP Secretariat and the African Union
Commission during your last meeting in Nairobi to oversee the
undertaking of a Comprehensive Review of the EPAs Negotiations. I
am pleased to report to you that the ACP Secretariat approached the
ECA through the ATPC to undertake the Comprehensive Review for
Africa ACP. The outcome of the ECA work on the review was presented
to the Senior Officials yesterday. We will also be hosting a
meeting with the African Union Commission and the ACP Secretariat,
and UNDP in Nairobi on 12-13 February 2007, where we are inviting
members of the National Development and Trade Policy Forums (NDTPF)
from your countries.
The ECA has also carried out a lot of technical studies on the
implications of the EPAs on African economies. These studies have
been shared with your Senior Officials in the Ministerial meetings
in Cairo and Nairobi in 2005 and 2006 respectively.
The key question that ECA work has been tackling is, given the
challenges of reciprocity, how could Africa benefit from EPAs to
assure development in the 21st Century? The answer to this question
has been that if reciprocity in bilateral agreements is to benefit
Africa, and thus help improve the development prospects of the
continent the first thing that must happen is that asymmetrical
reciprocity must be considered. This asymmetry should not just be
in terms of the value of trade covered but also the implementation
period.
Moreover, for reciprocity in EPAs to work for Africa, a
"gradualist" approach rather "big-bang" would be needed because it
takes time to implement the complementary measures that are
required to ease the inter-sectoral adjustment process and the
reduction or elimination of direct and indirect barriers to trade.
Beyond the WTO and EPAs: The Critical Role of Intra-African Trade
You will agree with me that the prospects for Africa given the
current state of play in the WTO and EPAs negotiations are not as
clear as we would wish. One cannot say confidently that the
expected benefits are secure. And that is why your current meeting
is aimed at ensuring they are secure.
It is for this reason; we continue to urge that regional
integration is an important condition for improving Africa's
prospects. The ECA promotes it as an accepted framework through
which obstacles to intra-African and international trade could be
addressed. And that is why in our repositioning of the ECA, we
treat regional integration as a key pillar for Africa's
development.
We strongly believe that the opportunity that intra-Africa trade
holds for helping Africa trade its way out of poverty is as
promising as the opportunities that Doha promises through better
market access and fair trading ground. It is the same reason that
we continue to argue that the EPAs should also live to their spirit
of deepening regional integration if they are to be deemed as
developmental tools. I have noted previously that at the ECA we
hold the view that there is an important lesson from the lack of
progress in the Doha Round for the African countries to now live
the wise saying that charity does indeed begin at home.
The impediments to trade facilitation and the barriers that make it
difficult for our countries to trade more among each other need to
be addressed now rather than later. The expected gains from Doha
could be multiplied many times over if as African countries we
could implement our trade agreements and invest more in our
infrastructure with the aim to enhance trade amongst us.
Securing trade through Aid-for-Trade
To conclude, the reforms that are anticipated to arise from the
multilateral and bilateral agreements will pose some challenges for
Africa. But this is expected whenever reforms are undertaken as you
may attest from your experiences as key decision makers. Besides,
if Africa is to maximize its potential and ensure it fully benefits
from the international and intra-African trade, it has to raise its
productive capacities and deal with the supply constraints that
hinder its competitiveness. That is why at the ECA, we fully
endorse and welcome the efforts to operationalised the
Aid-for-Trade. We are ready to be fully involved in the
implementation of this initiative.
Economic Commission for Africa
African Trade Policy Centre
The Economic and Welfare Impacts of the EU-Africa Economic
Partnership Agreements
ATPC Briefing
No. 6
[Excerpts: For the full text of this 4-page briefing, including
methodological notes and charts, as well as other background
documents on trade policy, visit http://www.uneca.org/atpc A larger
version of the study is available at http://www.uneca.org/trid]
Introduction
The Cotonou Partnership Agreement (CPA) between the European Union
(EU) and African, Caribbean and Pacific (ACP) countries is expected
to succeed the expired Lom� Agreement. It envisages the signing of
Economic Partnership Agreements (EPAs) by December 2007 between the
EU and the ACP countries. The EPAs, which will be the new
cooperative framework under the CPA, are expected to adopt an
integrated approach based on partnership and promoting cooperation,
trade and political dialogue between the EU and ACP countries. ...
The key CPA principles are reciprocity, differentiation, deeper
regional integration, and coordination of trade and aid.
Any benefits that EPAs are expected to generate for ACP countries
are unlikely to materialize spontaneously and instantaneously.
Moreover, the implementation of EPAs will impose a number of severe
challenges for ACP countries
,,,
[The ATPC undertook a study of the projected potential impacts of
EPAs on African economies, using the WITS/SMART econometric model.]
The main findings
The main conclusions that can be drawn from the results and the
discussion are that full reciprocity will be very costly for Africa
irrespective of how the issue is looked at, in terms of revenue
losses, adjustment costs associated with de-industrialization and
its undermining effect of regional integration. Of major concern
was this finding that even though the full reciprocity principle
appears to be trade expanding globally (singularly in favour of
EU), it will pose serious implications for deepening of regional
integration in Africa.
The benefits from regional integration efforts in Africa achieved
so far are likely to be stymied by the EPAs since a significant
portion of the trade gained by the EU will be due to trade
diversion not only from the rest of the world but also from within
the EPA groupings themselves that are configured around existing
RECs. Indeed, unless there are clear mitigating measures, the EPAs
could seriously undermine the gains that have been achieved so far
in the integration process of the continent.
A focus on deepening integration with a view to enhancing
intra-African trade would provide positive results. But it is the
scenario for unrestricted market access for Africa, which deals
effectively with barriers associated to sensitive European
products, that portends the largest gain for the continent. Even
with reciprocity, a free trade area that does not exclude sectors
of export interest to Africa and one that deals with non-tariff
barriers promises positive results for African countries.
Based on the magnitudes and direction of impacts under the three
scenarios, the overarching conclusion from the findings is that
sequencing of policy reforms that Africa will need to undertake is
critical to the success of the EPAs.
To begin with, the EPAs should focus on deepening intra-African
trade. This should be given sufficient lead-time to allow the
African countries build the requisite competitiveness (see figure
2). This would have to be accompanied with significant
developmental programmes to complement the larger markets with
increased supply and diversified capacities. Eventually, any tariff
dismantlement by African countries will need to be implemented in
phases hand in hand with unrestricted market access for African
exports into the EU market. Clearly, the 10-12 years period
interpreted from Article XXIV of GATT is only sufficient for the
deepening of the intra-African trade. The EPAs should look beyond
the 12 years as the possible dates for introducing reciprocity.
Before then, unrestricted market access and deeper African
integration will have provided sufficient room for supply
capacities and exports diversity to be built in the continent.
The adjustment costs at the country level and the dangers to the
regional integration processes in the continent emerged also as
potential challenges for the EPAs.
Two consistent stories underpin these concerns. The first
consistent outcome in each of the proposed EPA at the regional
economic community (REC) level is that EU stands to gain
significantly in terms of expanded trade into RECs markets. While
part of this trade expansion will result from trade creation,
which is welfare improving, significant proportions of the trade
gain will also be due to trade diversion from the rest of the
world and from within the REC EPA grouping itself. As a result,
while the reciprocity principle appears to be trade expanding, it
will pose serious implications for deepened regional integration
in Africa.
Indeed, unless there are clear mitigating measures, the EPAs
could seriously undermine the gains that have been achieved so
far in the integration process of the continent. Africa must
therefore hasten regional integration processes to build and
consolidate supply capacity before opening up to EU.
Another consistent result at the country and regional level, are
the potential adjustment costs that the African countries will
have to bear as a result of revenue shortfalls (see Table 1).
Given the prominence of the EU imports into these countries, the
reliance of majority of the African countries on tariff revenues,
the tariff dismantlement result in all cases in significant
revenue shortfalls. It is only in the SACU countries where tariff
losses appear limited and even then the revenues sharing formula
within SACU is likely to ameliorate any shocks from the EPAs in
those countries. The major challenge that these revenue
shortfalls will pose is the adjustment costs associated with tax
policy and administration reforms. The EPAs, if no appropriate
measures are put in place to forestall the macroeconomic
imbalances that are likely to result from the falling revenues,
will have the possibility of undermining developmental objectives
of the African countries.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues,
with a particular focus on U.S. and international policies.
AfricaFocus Bulletin is edited by William Minter.
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