1. COMMISSION FREE TRADE ARRANGEMENT STUDIES ARE NOT POSITIVE ON FTAs WITH THE ACP
The Eurostep secretariat has obtained copies of the long awaited studies on EU Regional Economic Partnership (REPA) with the ACP sub-regions, commissioned by the European Commission. The Partnerships consists of the coming together of the ACP Regional Trade Areas with the EU, where by at least 80 per cent of all trade between the two partners and within each grouping is liberalised. Within ten years of a REPA, at least 90 per cent of all trade should be liberalised according to WTO rules.
The five studies obtained examine the economic impact of EU REPAs with the following sub-regions of the ACP: the EAC (East African Co-operation) - Tanzania, Uganda and Kenya; CARICOM - (the Caribbean Community) and the Dominican Republic; the Pacific ACP countries; CEMAC - the Economic and Custom Union of Central Africa; and SADC - Southern African Development Community. The study on a REPA with West Africa is yet to be completed.
The study on the economic impact of a REPA with CEMAC carried out by Planistat Belgique, concludes that the impact of the REPA on exports from the CEMAC LDCs - Equatorial Guinea, Chad and the Central African Republic - to the EU is zero. The impact for Congo was found to be negligible, while for Gabon the impact was noticeable but slight. Cameroon is the only country expected to enjoy significant gains in its exports to the EU. Imports from the EU to CEMAC were estimated to increase by 5% as a result of a REPA. As, with the exception of Equatorial Guinea all CEMAC countries are dependent on custom tariffs for revenue, all CEMAC countries are advised to make changes to their fiscal systems to replace lost customs revenue. The study concludes that the overall impact of the REPA for Gabon, Cameroon and Equatorial Guinea could be slightly positive. For the other lower income CEMAC countries, lost customs revenues will be a problem. Due to the constraints that these countries face in designing effective fiscal reforms, it is highly feasible that alternative taxes, consequent to a REPA, may bring about more economic distortions than the tariffs they set out to replace. Yet, the study concludes that for all CEMAC countries the process of moving towards a REPA could be beneficial due to the impetus for trade policy reforms and innovations. However, two fundamental problems impede the CEMAC region's general development and benefits. These are the limits to common regional economic interests within CEMAC (the REPA in itself will not assist regional integration); and the lack of technical capacity to design and implement effective reforms.
The study on economic partnerships with the EAC carried out by CREDIT - School of Economics at the University of Nottingham basically concludes that prospects of the EAC achieving an internal customs union by 2005 are good. It is thus feasible, the study claims, that the EU could agree to a REPA with the EAC. On economic static costs and benefits, the study concludes that the REPA could be expected to increase EU exports to the EAC region as well as cause trade diversion by displacing more efficient suppliers from the rest of the world to the EAC. The potential increase in imports from the EU and the associated loss of potential tariff for all three EAC countries is likely to be substantial, especially for Kenya. Significant adverse effects on domestic producers in Tanzania and Uganda are unlikely, however adverse effects on Kenyan producers are very probable. The likely dynamic effects of a REPA for the EAC are more positive. A REPA is likely to encourage an increase in investment in sectors engaged in tradable goods for exports. EAC integration should also lead to an improvement in institutions such as customs.
For the Pacific region, the REPA study carried out by the Netherlands Economic Institute, points out that there is little experience of free trade in the Pacific, apart from that within the Melanesian Spearhead Group (MSG). The main problems are a lack of product complimentarity and the large differences in size, diversification and competitiveness among them. However even a REPA with the MSG is problematic, as the MSG does not have a secretariat to handle complex trade negotiations. For the five LDC ACP Pacific countries that are exempt from REPAs, there exists a potential threat of competitive penetration of European goods coming into the REPA. The study concludes that a REPA between ACP Pacific countries and the EU will not solve the problem of current preference erosion. It states the priority for Pacific ACP countries as, not to hurry into free trade arrangements with the EU.
The Institute of Development Studies in Sussex who carried out the study for a REPA with the CARICOM and the Dominican Republic (DR) conclude that, given the likelihood of major liberalisation in the Western hemisphere and the relatively small share of CARICOM/DR imports sourced from the EU, a REPA is likely to have very little trade creation and economic and revenue adjustment effects. If however, hemispheric liberalisation falters, then the cost to CARICOM, and to a lesser extent the DR and Haiti, of the removal Lomé trade preference would be severe. Given the CARICOM structure, tariff cuts of the REPA are not likely to be passed on as lower prices for consumers in the region. Problems of adjustment however could be reduced if sensitive products are excluded from the REPA. The study argues that even though the wider liberalisation plans could have a bigger impact on the CARICOM than a REPA with the EU, the EU could still play a role in setting the general agenda for the wider process, as any agreement between CARICOM/DR and the USA would have to be acceptable to the EU when it comes to WTO approval. The EU would thus have influence in any broader negotiations. The study also points out that unless origin rules are forced to the point of disrupting legitimate trade, a consequence of CARICOM agreeing to both a REPA with the EU and a Free Trade Agreement with the Americas would actually be a free trade area between the EU and the USA.
Imani Development International's study on an EU REPA with the SADC region concludes that a all the LDCs of SADC- Angola Lesotho, Malawi, Mozambique, Tanzania and Zambia would be better off without a REPA. This is mainly due to customs revenue losses, enhanced competition in domestic markets and competition for SADC producers in regional export markets. However non-LDCs could be expected to benefit from a REPA if it is achieved. But the study argues that a number of reasons make it difficult to move towards a REPA in the SADC region. The main one being the lack of integration between SADC countries. It is unlikely according to the study, that a SADC FTA will be established before 2008. Recent increased political instability in the region may also mean that certain countries would not be in a position to participate in an FTA. Furthermore as there are no plans to establish a customs unions in SADC, it would be unrealistic to expect SADC countries to enter negotiations with the EU for a REPA before their own FTA. A further complication would be linking South Africa's own FTA with the EU with a wider REPA. In addition, Botswana, Lesotho, Namibia and Swazilands' links to the South Africa's impending trade agreement with the EU disqualifies them from being a part of a separate agreement with the EU.
The REPA impact studies were made available to all participants of the ACP-EU negotiations this week. As on average each regional study spans over 100 pages, the Eurostep secretariat, for the large part, may only be able to make copies of the executive summaries and conclusions available on request.
2. ACP-EU NEGOTIATIONS FOR NEW AGREEMENT
The Central Group for the ACP-EU Negotiations on a future ACP-EU agreement met this week under the joint chairmanship of Philip Lowe - Director General of DG VIII at the European Commission and H.E. Tau'ili'ili Uili Meredith - Ambassador of the Western Samoa to Belgium and the head of the Committee of ACP Ambassadors. The Group discussed the areas of both parties' negotiating mandates that either converge or diverge. On 'ownership' of strategies by the ACP , differentiation of treatment of ACPs and the different actors of the partnership both parties were in broad agreement. On political dialogue however, the EU want to amend article 5 of the current Convention relating to human rights, while the ACP want the article to be maintained as it is. Concerning conflict prevention and the consolidation of peace, the ACP insist that the EU consider an early warning system and mechanism to promote dialogue. On migration, the ACP insist on respect for the dignity of ACP immigrants. The EU hope to find a way to discourage illicit immigration by including in the new agreement a re-admission clause for illegal immigrants. In the event of a failure to respect essential elements of the future agreement, the ACP is calling for exclusion of any unilateral decision by the EU. On accession, to the EU is calling for new accession criteria beyond present geographic expressions. The two parties also reached an agreement on the involvement of civil society in dialogue.
According to a representative of an EU Member State, the Central Group meeting mainly served as a stocktaking exercise of the different positions. The 'real' negotiations will only begin with the next joint ministerial meeting on February 8-10 in Dakar, Senegal.