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2021 | OriginalPaper | Buchkapitel

12. The Content of Economic Partnership Agreements

verfasst von : Helmut Asche

Erschienen in: Regional Integration, Trade and Industry in Africa

Verlag: Springer International Publishing

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Abstract

This chapter contains the second part of exemplary EPA critique related to the content of the treaties. All relevant economic aspects and clauses of the trade-in-goods agreements are critically examined, including the market access offer, quantitative restrictions, trade remedies, export duties and subsidies, national treatment and procurement, and rules of origin. The agreed and proposed clauses are submitted to scrutiny of whether the remaining policy space still allows sensible infant industry protection in Africa. The analysis concludes that some policy space is left for targeted developmental efforts by African governments but is made very difficult in the practical management of the new trade rules. The chapter contains two case studies on global poultry and cashew trade. The overall result of the EPA examination with regard to partnership, development orientation and sustainability is a mixed picture at best.

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Vorheriges Kapitel The EU-Africa Trade Agreements

Nächstes Kapitel Final Assessment of the EU-Africa Trade Deals—Ways Out?

See Wikipedia entry ‘Chicken Tax’ (accessed 30.11.2018).

The then author of the import regulation at Cameroon’s Ministry of Agriculture adds a seemingly paradoxical aspect to the saga: the combination of the 100% FCFA devaluation in 1994 with the halving of public service salaries deprived numerous households of the purchasing power for imported poultry and accentuated the need for affordable domestic production (Communication at a GIZ-Humboldt University agricultural trade forum, Berlin, 4 May 2018).

Poultry meat imports from the EU (fresh, chilled and frozen) to the whole EAC EPA group have remained insignificant over the period of 2015–2019 (see: EC Agri-Food Trade Statistical Factsheet, extracted 17–03–2020).

For an analysis of the supposed development friendliness of deep integration issues in the CARIFORUM EPA, see (GTZ 2009).

Here, we follow the best analysis to date on WTO compatibility of industrial policy by Colette van de Ven. It focuses on Ghana, Kenya and Namibia, which are all three non-LDCs and thus already subjected to stricter rules in WTO (Van der Ven 2017).

The last-mentioned analysis was produced as a background paper for the WDR 2009 on economic geography.

The exception is Berthelot (2018: 81–110), who lists a number of critical aspects of GTAP-based modelling, not all reproduced here. Taken together, they point to an important lack of realism in the available CGE attempts.

However, no study considers the mitigating impact (and its limits) when the available safeguards and other trade remedies are actually used.

Our main critique of the safeguard measures and infant industry clauses in the EPAs corresponds to this problem. Where protection is allowed only for existing industries suffering from import shocks (which can be estimated provided there are known elasticities), a trade agreement obviously misses out on the configuration of new industries.

For the purpose of EPA analysis, the terms ‘exclusion’ and ‘sensitive’ refer to the range of same products. In the African CFTA design, the exclusion and the sensitive product lists refer to two different categories of goods. As seen in Part I, only the former are excluded permanently from intra-African trade liberalization.

The extreme cases are Seychelles (3%) and Zimbabwe (20%) in the ESA5 EPA; see LSE Consulting (2020: 47) based on EC information.

The ‘SADC EPA’ is particularly careful in also excluding milk powder blends from full liberalization, as add-ons are often used to circumvent protection against pure milk powder imports, but the actual tariff rates are not prohibitive either.

In this respect, the author corrects his earlier assessment in Asche (2008, 2015). The final exclusion lists do not display much that would qualify as highly protected.

In the ‘SADC’ EPA and the ECOWAS EPA, products exempted from liberalization are not contained in a separate annex, but are denoted by an ‘X’ or a ‘D’, respectively, in the annexes of tariff duties on products originating in the EU (Official Journal of the European Union 2016: 1234) (ECOWAS—EU EPA 2017).

HS code 630900, taxed with moderate 45% on the EAC EPA exclusion list, given the fact that used clothes have nearly no value apart from transportation and distribution costs.

For an early estimate of exclusion lists’ mitigating impact, see Milner et al. (2008).

In some use of trade language, sensitive goods are even considered to be goods that are liberalized with delay, while goods on the exclusion list are by definition not liberalized at all.

Taking the ECOWAS CET as example, single REC member states have the right to manage up to 3% of tariff lines individually. This arrangement seeks to cater for very different initial conditions among member countries—compare Burkina Faso and Nigeria—and should be conceived as a transitory dispensation at early stages of an economic community. Yet, such exceptional permission would not have a place anymore in the ECOWAS EPA and not even within the exclusion basket, although the special protection needs of various member states are accommodated here. However, flexible, upward and downward management of tariffs in the 3% bracket would be excluded upon entry into force of the EPA, as it stood before the general stalemate (Personal communication of Francisco Mari, June 2018).

EPRC suggests, for example, removal from the exclusion list and zero tariffs for hard wheat or sugar, as long as there is no companion modernization programme rendering higher yields likely, contrary to well-performing milk and rice, which should remain protected for still some time and then exposed to the free market (Shinyekwa and Katunze 2016). Apart from the fact that the types of products, e.g. in West Africa, are different, the study does not take the indirect effect of EU or US agricultural subsidies into consideration. These subsidies make African farmers appear less competitive; however, European or American farmers would not be the most efficient suppliers on all fronts without these subsidies. We discuss the issue at the end of this volume.

See namely Berthelot (2018: 66–68). We come back to the issue when the role of subsidies is discussed below.

The said critique further refers to the prescription for the REC to apply a set of non-preferential RoO, however not defined for the African RECs. We leave this aspect aside.

Or not, if the bargaining power of the SACU+ group will not suffice to defend the South African case.

In fact, the SADC EPA regulation for temporary export taxes in Article 26 is still more complicated, with exemptions that make the tax near-ungovernable.

Unless the global market remains distorted by third-party interventions, this is what the BWI ignored in the Mozambique cashew case.

The present solution is as unsatisfactory as the AoA clause which allowed in 1992 to continue with existing agrarian export subsidies, while contracting parties relinquished new subsidies.

In large parts, these structural impediments were already identified by the World Bank, yet not addressed.

See the exemplary cases of cotton or cocoa elsewhere in this volume.

All the information is based on Sarabia Palacio (2017).

The proceeds of the export tax have four spending categories: (a) production and distribution of grafted seedlings; (b) research and development; (c) integrated crop and pest management; and (d) a guarantee fund, through which processing companies can gain access to bank loans.

The milk processing value chain in Nigeria represents an interesting case of voluntary LCR with international investors such as ARLA to write local sourcing into the licence to operate. ARLA agreed to use a limited quota of local milk supply in addition to the bulk of milk powder imported from Europa for the production of dairy products. In this case, LCRs do not actually restrict imports, but keep borders open for provision of the national market. It could hardly be otherwise, given the difficulties in mounting an entirely domestic dairy chain in many African countries (see case study above).

The proposed West African regional EPA contains a doubly stronger requirement for European MFN treatment compared to third parties, stipulating that the latter should individually have ‘both a share of world trade in excess of 1.5 per cent and an industrialization rate, measured as the ratio of manufacturing value added to gross domestic product (GDP), in excess of 10 per cent in the year preceding the entry into force of the preferential agreement’. In other words, the EU wants to be treated equally with newly industrializing countries.

As a motive for reluctance to conclude EPAs, it has always been remarked that African least developed countries had little to lose because the special EBA arrangement remained de facto irrevocable for them. While this was true after the 2011 GSP reform of RoO, even EBA countries will not benefit from the advantages of regional cumulation.

Now South Africa is still at a disadvantage because special cumulative benefit of products sourced in the RSA and exported by another ACP EPA country to Europe is only granted if the final product would also benefit from direct DFQF export from South Africa to EU—another complex rule designed to counter trade deflection.

Like regional cumulation, the proper working of RoO requires a legal framework and administrative cooperation at the regional group level. Where contracting RECs such as SADC or EAC have themselves rules which are different from those in the EPAs, RoO management becomes overly complex, and related capacity building needs for EPA implementation are acute. The present level of analysis does not deal with the consequences for EPA-related AfT since aid must first and foremost deliver more strategic technical assistance. See the last chapter of this part.

Given the difficulties mounting a full dairy chain in Africa. If European milk powder is used for the chocolate, duty exemption is assured, but this has another flipside (see case study).

This refers to the 85% of global freight transported by sea and to perishable goods delivered by air. Even when sea transport is below proportion for CO₂ emission compared to road transport (which carries most goods in intra-regional trade), reducing its share in global environmental damage remains paramount; see OECD and ITF (2015) at: www.internationaltransportforum.org/pub/TranspOutlook.html.

For a detailed assessment of the RoO working in the African textiles and apparel sector, in particular in SADC, see also Grumiller et al. (2018: 60–72).

Authors of the African Economic Outlook 2014, otherwise in favour of the new globally fragmented value chains, interestingly refer to cases where regionally integrated chains are considered more efficient than the dispersed mode (AfDB, OECD et al. 2014).

Such pressure materialized in Southern Africa when Taiwanese firms feared the phase-out of the AGOA Third Country Fabric (TCF) derogation—in practice, of fabric imported from Asia—and brought stages of production closer to each other.

For instance, in the SADC EPA, special capacity building and training is foreseen for the purpose of mastering cumulation rules. Someone must have requested it.

As all EPAs contain an interdiction of internal taxes and duties used differentially among products originating in the region or imported, positive discrimination of African regional produced by VAT or excise tax rebate is now theoretically barred. However, VAT is a non-harmonized national tax in EU. So, reopening room to move towards positive discrimination of African regional goods should be acceptable in a revamped EU-Africa trade arrangement.

This is obviously conditional on the highly desirable modifications of the whole market access offer (and thus CET), e.g. with regard to statutory changes in the exclusion lists, treated above.

Titel: The Content of Economic Partnership Agreements
verfasst von: Helmut Asche
Verlag: Springer International Publishing
Buch: Regional Integration, Trade and Industry in Africa
Print ISBN: 978-3-030-75365-8

Electronic ISBN: 978-3-030-75366-5

Copyright-Jahr: 2021
DOI: https://doi.org/10.1007/978-3-030-75366-5_12

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