Predicting the development impact of EPAs is hard because no-one knows how far the European Commission will use its leverage to force ACP states to accept terms they do not like. Yet the task is critical because 2006 is the year in which both sides are set to consider ‘alternatives’ to EPAs: alternatives to what?
In evidence to a European Parliament hearing on 31 January I argued that the EU’s own precedents from its existing trade accords show what might be in an EPA. And I identified a ‘minimum EPA’ – the least constraining provisions taken from the agreements that the EU has stated are ‘WTO compatible’. If there is informed consent between the EU and an ACP state or region to go beyond these provisions all well and good; but the minimum EPA provides a benchmark for reluctant ACP indicating how much arm twisting the Commission is doing.
The minimum EPA also flags the features most likely to cause problems (since they are problematic even on a ‘minimum’ accord). Through an analysis of the trade and tariff data of 55 ACP states and of eight EU free trade agreements signed since 1999, I concluded that there need not be substantial ACP liberalisation unless the Commission arm twists. Few ACP states would need to remove substantial tariffs on imports from the EU if the CEC applies its interpretation of WTO requirements in the most flexible way, and neither need they accept onerous provisions for services or ‘Singapore Issues’.
More worrying are the implications of EPAs for regional integration and government revenue. EPAs risk creating new obstacles to regional integration in the ACP because countries will apply ‘reciprocity’ differently from their neighbours. And they will certainly reduce government revenue from tariffs – which is a problem if it happens before alternative revenue sources (which typically take a long time) are put into place.
I recommended to the Parliament that, to ensure EPAs are ‘development friendly’, the EU should commit itself to:a minimalist generic text based on the least constraining provisions taken from Europe’s existing trade agreements reported to the WTO as ‘Article XXIV compliant’, which will form the text of all EPAs except in cases where the ACP wish to go further; allow the implementation of some ACP tariff cuts to be made contingent upon the effective discharge of EU adjustment and revenue diversification support; allow a decision on precisely which very sensitive ACP tariffs are removed to be deferred until after the EPAs have entered into force in cases where there is a risk that intra-regional integration will be disrupted by an over-hasty decision.