Economic Partnership Agreements: Development Challenges for Southern Africa

Paul Kalenga

Trade Law Centre for Southern Africa

2

INTRODUCTION

ACP/EU towards WTO-compatible EPAs

Unprecedented reciprocal market access

North-South PTAs – a fertile area for analysis

TDCA between EU & South Africa still in its infancy

Development impacts remain ambiguous

Limitations and potential to deliver on development promose

Impact lies in their proper design, sequencing and effective

implementation

Development challenges facing Southern Africa

- Promotion of regional trade integration agenda

- Improve market access: agricultural & non-agricultural

- Deal with adjustment costs

- Address supply-side constraints

- Ensure WTO compatibility/ Doha Development Agenda

3

Cotonou Agreement

EPAs are comprehensive FTAs Replacing current non-reciprocal trade preferences with reciprocal

WTO compatible arrangements by 2008 WTO waiver lapses on 31 December 2007 Options to EPAs: EBA GSP for the LDCs, Standard GSP for the non-

LDCs All ACP-EU phase of EPA negotiations: agreed to negotiate regional

EPAs Principles: flexibility, asymmetry and preservation and improvement

of the Cotonou aquis Two-pronged approach: inter-regional integratiobn (EU/ACP regions);

intra-regional integration (trade liberalisation within ACP regional groupings)

Progressive removal of trade towards FTA in accordance with WTO rules (reciprocity, ‘substantial all trade’

Article XXIV of the GATT, 1994 > TDCA

4

Regional Trading Arrangements (RTAs) & EPAs

Eastern and Southern Africa (ESA) EPA configuration

SADC configuration

TDCA and the BLNS countries

East African Community

COMESA

Multiple and overlapping membership

EBA for LDCs

Significant challlenges to the potential content and

implementation of the EPAs

Undermine or enhance regional integration

5

WHY THE EPA APPROACH?

Trade Preferences have a limited impact amidst supply-side

constraints

Despite non-reciprocal trade preferences that the ACP countries

have enjoyed in the EU market over the years they have not been

able to take full advantage of such market access

Steady decline in the ACP share of total EU imports from 6.7% in

1976 to only 3% in 2002

ACP share in world exports have also declined from 3.4% in 1976 to

1.9% in 2000. Furthermore, ACP share in developing countries

exports has fallen from 13.3% in 1976 to a mere 3.7% in 2000

Trade preferences have not led to the diversification of ACP

economies and have failed to halt their increasingly marginalization

in world trade.

EPAs are intended to redress this by looking closer at the supply

side of the ACP economies

6

WHY THE EPA APPROACH?

Preference margins are being eroded

WTO waiver is not likely to be extended after 2007

Importance of South-South integration: dynamic effects such as

economies of scale, the importance of locking-in of intra-regional

trade liberalization

7

KEY CHALLENGES FOR SOUTHERN AFRICA

Dealing with adjustment costs: loss of government revenue and competition from EU products amidst weak economic structure and lack of competitiveness

Enhancing Market Access: Higher MFN tariffs in the EU, especially in labour-intensive sectors such as agriculture, textiles and clothing and food processing

Dealing with SPS measures and technical regulations

CAP Reform issues

Rules of Origin

Promoting Regional Trade Agenda

8

TDCA Lessons

Fears and concerns on the potential adverse impact of the

TDCA in South Africa – still contained and manageable

The importance of appropriate design & implementation

South Africa was guided by clear strategic economic priorities

and balanced pragmatism

A good national governance process but also commitment

towards global economic integration

What about other SADC countries?

Different governance contexts, diverse economic interests,

diverse external levels of protection

Weaker trade policy & negotiation capacities

Reactive and wait-and-see attitude at national levels

9

CONCLUSIONS

EPAs an attempt to use regional integration to assist ACP countries to deal with many of the trade-related and supply-side problems that constrain their access to global markets

Is this a suitable instrument? – far from clear Process appears irreversible The need to focus on effective negotiations towards a desired

outcome There are costs and benefits, the need for proper design and

effective implementation Locking in regional integration initiatives and enhancing trade policy

convergence Challenge to the EU: recognizing adjustment costs, phase-in

reciprocity without causing hardships, sequencing and transitional development assistance

Policy reforms in the EU – especially in agriculture, rules of origin, standards and technical regulations

10