TIPS Economic Partnership Agreement Workshop

Day 2: 05 March 2008

Minutes

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Session 1: The EPA Negotiations - Some Comments and Implications

Background

Brief discussion was held detailing some of the steps that led to the current EPA round.

  • 1975 ACP Convention
  • 1995 GATT challenge (“Banana Trade Wars”)
  • 2000 Cotonou signed
  • 2007 EU waiver expires

Main Findings from the Negotiations Process

ACP

  • Process not entirely inclusive, the private sector and civil society severely under-represented
  • Lack of funds and transparency in the engagement and management of the negotiations process
  • Substantial divergences in economical, political and cultural issues complicated the negotiations process, LDC's had less at stake
  • Lack of efficiency in the preparations for the negotiations

EU

  • New issues brought into EPA were not clarified
  • Sectoral impacts were not detailed
  • Issues surrounding development finance, although its necessity is unquestioned, countries felt it was difficult to access

Issues SADC EU EPA Review

  • Lack ofresources to back negotiations
  • Issues surrounding development finance and trade articulation which cannot be guaranteed by the EC
  • Lack of assessments carried out by some countries
  • Sensitive list of products with BLNS and its relation to SAin terms of SACU and the TDCA
  • Revenue impact on customers and countries - post negotiations
  • Incoherent configurations in relation to the EPA negotiations and configurations forregional integration

Session 2: EPAs and Regional Integration in Southern and Eastern Africa - What Future for SADC and COMESA

Introduction

The presentation started off by a description of the six stages of economic integration – from a preferential trade agreement to a political union.

Motivation for regional integration (RI)

There are two principal reasons economies would want to integrate – economic and political. Economic reasons include static and dynamic gains. The static effects of RI include trade creation where domestic products are replaced by regionally competitive products. In this case overall consumer welfare is enhanced whilst producers are likely to be adversely affected.

Trade diversion is another aspect of the static effect of RI. In this case products which were formerly imported from the rest of the world are replaced by regional products. This is because products from the rest of the world include customs duty, thus making them relatively expensive than regional products. An example of Kenyan products in the Eastern African Community (EAC) was presented, whereby Tanzania and Uganda were dominated by Kenyan products, which were not of comparable quality compared to the rest of the world. In the Southern African Customs Union (SACU), South African products have dominated products in the smaller member countries. In both instances the other countries have failed to reapthe benefits from trade creation.

The dynamic effects of RI include economies of scale due to an enlarged market; enhanced efficiency due to increased competition in the domestic market. Other dynamic effects’ benefits are the learning effects through technology transfer and the opportunity to attract FDI by anenlarged market.

On the other hand countries integrate politically so that they can negotiate as a unit and be taken seriously. The CARIFORUM is a good example of a bloc that negotiated with the EU as a unit and hence they have ‘gained’ overall and their reputation as a trade bloc has improved.

RI in southern and eastern Africa

SACU, being the oldest customs union in the world (since 1910) is one of the world’s properly functioning customs union – at least on a pre-EPA basis. The EPAs have put SACU at the risk of collapsing since the smaller countries have initialed that they want to go ahead with the agreement. The dominant country in SACU is South Africa, which constitute 93% of SACU’s GDP (2003).

The problem of overlapping membership i.e. being a member of more than one customs union was noted and was found to be problematic for those countries that ‘enjoy’ double-membership. Swaziland is a member of SACU and COMESA. In COMESA it has a derogation, which allows it to export to COMESA duty free without reciprocating. Such derogation expires in 2008. Whilst SACU seems to be more beneficial to Swaziland, overall, in terms of revenue, COMESA is an important market for soft drink concentrates, which make about 25% of the country’s total exports. Swaziland also exports sugar to COMESA. This presents a dilemma for Swaziland as losing that market would adversely affect the Swaziland economy.

Some of the problems with overlapping membership are:

  • Administrative and regulatory burden
  • Confuses business hence repulse FDI
  • May be expensive for countries in terms of subscriptions

It was also noted that the EPAs have shaped RI in the region in that SADC, for instance, has been partitioned by the EPAs, when, in fact, SADC has been progressing towards a customs union. With the EPAs SADC has been broken into half with some countries forced to join the Eastern and Southern Africa (ESA) EPA bloc. It must be noted that South Africa is the only country in SADC that will not enjoy ‘benefits’ from the EPAs. Other countries, even though they have not initialed such as Angola, will still enjoy the same benefits since it is classified as an LDC hence will trade with the EU under the Everything But Arms (EBA) facility.

Conclusion

What is coming up from the EPAs negotiations and initialization by most SADC countries is that it has shaped RI in eastern and southern Africa. Going forward, there seem to be a number of challenges, not only in SADC, COMESA but also in SACU.

Session 3: Regional Integration in Southern and Eastern Africa - Scenario Building Group Work

The delegates were split into groups of three who would present on their findings regarding the given scenarios of Southern Africa's regional integration. The scenarios were:

(i) If the current state of regional arrangements in Southern and Eastern Africa prevails, what would happen to SACU, SADC and COMESA?

(ii) A country can be part of only one customs union, and the question posed was if the SADC CU and the COMESA CU are implemented, which countries will join SADC and which countries will join COMESA?

(iii) What would be the encouraging and restricting factors ofa single regional integration body covering all the existing customs unions being implemented?

The 1st scenario was discussed in length. Particularly, the role South Africa is playing in the SACU EPA negotiations. Going forward, would South Africa give its consent (in accordance to Article 31) to BLNS for the SACU EPA to follow through? Also what would be the implications for South Africa joining the SACU EPA bearing in mind that the country already has the TDCA in place?The other matters that were discussed relating to all customs unions:

  • Timeframe of negotiations - clarity of schedules
  • Inconsistencies with CETs
  • The EU has called for a comprehensive EPA which would include new generation issues

In the 2nd scenario, the groups had different views on which customs union each country would affiliate itself to. And the pros and cons of moving in either direction (SADC or COMESA) for each were discussed.

With the current complexities of the Southern and Eastern Africa's regional integration arrangements, many delegates interpreted the 3rd scenario as a rather unlikely situation to occur. Bearing in mind the legal and political implications (among a few) of such an arrangement.

Session 4: Aid For Trade Presentation by Dr. R. Qualmann

Dr. Qualmann began her presentation by explaining how the Aid for Trade initiative started. She sighted one of the reasons for the conception of the Aid For Trade was due to the WTOs unsuccessful DOHA Round negotiations. The different categories that Aid For Trade will be providing assistance include:

  • Trade Policy & Regulation
  • Trade Development (to gear up intermediate production & economic infrastructure)
  • Trade-related Infrastructure
  • Building Productive Capacity
  • Trade-related Adjustments - Funding/ Compensation
  • Other trade-related needs

The issue of the absorption of funds by recipient countries was raised since many countries struggle in this matter due to the lack of capacity.

The OECD database contains information on the activities that the donours of the Aid For Trade are involved in their aim for sustainable development in Africa.

For more information on the Aid For Trade, useful websites are:

Session 5: How to Box Smart

The session commenced with the key speaker revisiting the purpose of the workshop, and continued to emphasize on the tangible benefits of the CARIFORUM. The CARIFORUM negotiation machinery discussion led to the comparison of its formulation relative to having an interim agreement. An outstanding factor is that with the CARIFORUM negotiations, an engagement process took place; all countries were aware of what is unfolding and participated fully. Other issues that were brought up were:

  • would the CARIFORUM model be suitable or could be applied in the southern and eastern African context
  • the preferential treatment provision to LDCs
  • Multilateral agreements (MFNs and Clauses)