Market Access Regulation, What implications and which way forward?

What implications and which way forward?

Isabelle Ramdoo, ECDPM

African Union, EPA Negotiations Coordinating Meeting17 – 18 May 2012, Arusha, Tanzania

Market Access Regulation

• EC MAR Reg 1528/2007 was a temporary, unilateral instrument of the EU to ensure that, pending implementation of EPAs, there would be no trade disruption

• It provided DFQF to countries having signed and/or initialed an (I)EPA

• The Reg required countries to initiate the ratification process within a “reasonable period of time”.

IntroductionReminder: What is MAR 1528/2007?

ECDPM Page 2

• 30 September 2011 – EC Proposal for a Reg amending 1528/2007 (remove countries from Annex 1)

• Objective: Deadline to the provisional application of EPA trade preferences for countries that initialed an EPA but had not signed or taken the necessary steps to ratify it, regardless of whether contentious issues have been resolved or regional EPAs completed.

• Result: Countries that had not initialed or taken steps to ratify would loose trade preferences under EPA as from 1st January 2014

• EC seeking delegated powers from the EP and the Council to reinstate countries into Annex 1 of MAR should they take the necessary steps to ratify the EPAs

2011 MAR 1528 Proposal : In a nutshell

Page 3ECDPM

• By 2011, 36 ACP countries had initialed or signed an (I)EPA.

• Of those, 18 countries had met the requirement of ratification (i.e 15 Caribbean countries + Mauritius, Madagascar and Seychelles)

• In 2012, Zimbabwe ratified its IEPA

• Today, a total of 19 countries are not concerned by EC proposal of 30 September 2011

• The remaining 17 countries will therefore lose EPA market access by 2014 if they do not ratify the EPA by then.

Who is concerned by the 2011 Proposal?

ECDPM Page 4

a. Countries concerned and regime applicable by 2014

ECDPM Page 5

The 17 countries fall into different categories:

• 9 are LDCs – on a pure market access basis, they will continue to benefit from DFQF under EBA status

• 7 are lower middle income countries and will therefore fall under the standard GSP Scheme – with higher tariffs for some products and stricter RoO

• 2 are upper middle income countries and will lose all preferences if the GSP reform comes into effect in 2014

ECDPM Page 6

Source: Bartels L & Goodison P (2011): EU Proposal to end preferences for 18 African and Pacific States : An Assessment – Trade Hot Topics, Commonwealth Secretariat – Figures are from 2009

Who will be affected and by how much?

• Biggest losers:• Fiji (97.4% exports)• Swaziland (96.3%)Both sugar exporters

(€339/tonne)

Kenya and Namibia also likely to suffer

Page 7ECDPM

Products with very high tariffs:• Sugar (€339 – 419/tonne) – Swaziland, Fiji, Kenya • Fresh and chilled bovine (12.8% + €3034/tonne) – Namibia

and Botswana)• Fresh bananas (€176/tonne) – Ivory Coast, Cameroun, Ghana

Products with high tariffs• Tuna (20.4%) – Ivory Coast and Ghana• Other fish (hake (fresh, chilled, frozen) + monkfish (11.5% -

15%) – Namibia• Beans – 15.7% - Kenya• Pineapples – 14.9 – 15.7% - Kenya, Swaziland• Citrus – 14.9% - Swaziland• Orange, grapefruits, grapes .. >10% - Kenya, Namibia,

Swaziland

Products to be affected

ECDPM Page 8

• Beyond worsening market access conditions for some and trade disruption for others, there will be practical implications of falling into different regimes:

• For exporters: tariffs will increase; RoO will change

• Cummulation, which was possible among countries which were benefiting from IEPA within the same region will no longer be possible – hence implications for regional markets and value chains

• For regional integration – some countries would give EU better market access than to their regional partners; implications for RI agenda in setting up CUs or for the administration of CUs in place;

• Some countries will face same treatment as developed countries (Eg Botswana and Namibia will export to EU under MFN = Japan or US)

ECDPM Page 9

The timing is no coincidence:

• It is the date at which the new GSP is expected to come into force

• It is also the date at which most countries will start to implement their respective trade liberalisation commitments under the EPA, after the 5 years moratorium

Timing

ECDPM Page 10

• EC is reviewing its GSP Scheme, a preference scheme applicable to all developing countries.

• Reform is quite a comprehensive one. In a nutshell, the EC is proposing to focus its trade preferences on “countries who need most”, i.e poorer countries (product coverage will not increase though)

• upper middle income countries (WB classification), will no longer benefit from the Scheme. The number of beneficiaries cut by half: from 176 to around 85 (at time of proposal)

• Countries mostly affected are Latin American countries, China, Malaysia, Indonesia. But also Namibia, Gabon and Botswana. Consequence: More FTAs? More erosion of Preferences, including for EPAs

• The new GSP is expected to come into force on 1st January 2014 (with a 2 year moratorium for UMICs).

A word about the GSP Reform

ECDPM Page 11

Legal experts (c.f Bartels) have pointed out 2 main legal flaws in the EC Proposal:

•(i) The relevance of the Proposal itself: MAR 1528/2007 permits withdrawal only if there is a failure to ratify “within a reasonable period of time” such that there is “undue delay in entry into force”. The 2011 Proposal will withdraw preferences on the basis of “failure to take steps to ratify” the agreements.

•(ii) Violation of Art 25 of the VCLT – EC can only withdraw provisional application if it has notified countries that it does not intend to become a party to the agreement (and not as it is proposing to do in its 2011 Proposal)

Legal constraints of EU’s ability to withdraw preferences

ECDPM Page 12

• For the moment, this is still a Proposal by the Commission

• It is subject to the approval by the European Parliament and the Council

• EP: The INTA Committee Rapporteur has recently submitted its Report, with one amendment (timing). However, he may not have the majority support of other EPs.

• Council has yet to give its conclusions. Although many member states (who make up the council) have indicated their support to the EPA process and shown concerns about the deadline, unlikely that the Proposal will not go through.

• Final MAR expected before the summer.

What next in the EC procedures for MAR?

ECDPM Page 13

As matters stand, Proposal offers only two alternatives:

• (i) Countries who want to benefit from EPA market access, have to sign and start the ratification of their existing EPA or conclude a new regional EPA. (Bearing in mind that there is little chance EC will come up with any flexibility on contentious issues)

(ii) Otherwise, either they will fall under one of the schemes of the new GSP (i.e. Everything but Arms, Standard GSP or GSP Plus) or they will have no preferences (as might be the case for Botswana and Namibia).

Where does that leave us?

ECDPM Page 14

Beyond the deadline – some broader strategic consideration:•(i) 2014 is not 2007, although some countries might still be under “pressure” to conclude by fear of trade disruption

•(ii) In the mean time: •apocalypse announced after 2007 has not happened after all;•Africa is in a super cycle, is lot more confident in its economic prospects and is more attractive than ever;•Other players have joined, although much driven by demand for resources, but not only:, FDI is flowing in, but without FTAs); •Europe: the crisis has weakened EU (countries, institutions and block as a whole); and at the same time, its economic & political leverage; •“Emerging” players are changing geo-politics and the global balance of power.

Final remarks: Broader strategic considerations

ECDPM Page 15

Mainly 3 rules of thumbs to be kept in mind in terms of the deciding the way forward and future options:

1.First, there should at least be a consensus on both sides in terms of what the EPA is expected to achieve. Is it purely a trade tool (i.e a FTA)? Or, as stated in the objectives of some IEPAs, is it a tool for development? Does it genuinely reflect realities and needs of countries? asymmetry in economic power?

2.The EPA has to be “win-win”. Will the expected gains in terms of MA and broader development compensate for the pain?

ECDPM Page 16

3. Finally, the EPA would have to reinforce rather that limit the policy space of countries and regions:

- How does this link to national development objectives and priorities (current and future)?;

- What coherence with objectives (and sequencing) of regional integration; and

- What room of manoeuvre for future engagements and negotiations with third countries?

Watch out for other regions EU FTA nego – Asian countries (interesting – nego done the “Asian way”); Canada – (another game; other rules); coming up soon – trans-Atlantic with US…

ECDPM Page 17

Thank you

Contact: [email protected]

www.ecdpm.orgwww.slideshare.net/ecdpm

Page 18