Written Evidence submitted by Dr Stephen R Hurt (EUT0003)

Executive Summary

• The EU’s trade relations with Africa need to be understood in historical context. The first Lomé Convention of 1975 offered African, Caribbean and Pacific (ACP) states non-reciprocal preferences but the Cotonou Agreement, signed in 2000, enshrined the idea of reciprocal trade deals known as Economic Partnership Agreements (EPAs).
• During the EPA negotiations the EU has pursued comprehensive trade deals that go beyond the requirements necessary to satisfy WTO rules. It is claimed that this focus on ‘behind-the-border’ issues supports development in ACP states.
• However, the EPA negotiations, particularly with African sub-regions, have become contentious with African states and civil society actors questioning their developmental credentials. In the face of such resistance the EU has had to resort to increasingly coercive tactics to try and conclude the negotiations.
• The recent UK government White Paper on Trade expresses a desire to replicate EPAs after Brexit. However, African states are now well-versed in their criticism of EPAs and would be well placed to exert even more agency in any future negotiations with the UK.
• Therefore, the UK government should abandon its desire to replicate EPAs after Brexit. Instead a unilateral trade preference scheme could be devised to ensure that Africa’s development and the UK’s obligations to the UN Sustainable Development Goals are prioritised.

Introduction

1. I am a Senior Lecturer in International Relations in the Department of Social Sciences at Oxford Brookes University. I have conducted research on EU trade and development policy with ACP states since the early 2000s and have published academic articles on both the Cotonou Agreement between the two parties and the subsequent negotiation of EPAs.[1] It is therefore the possibility of replicating the EU’s trade arrangements with the ACP (and African states in particular) that are the focus of this submission.

Where did EPAs come from? A (very) brief history of EU-ACP trade relations

2. It is first maybe useful just to put EPAs into historical perspective. The EU’s trade relations with Africa go right back to the immediate post-colonial period of the 1960s. The first two agreements, known as the Yaoundé Conventions were basically a continuation of colonial trade relations. Things changed in 1975 when the first Lomé Convention was signed. This was influenced by the calls for a New International Economic Order by developing countries and was based on the view that African states should be protected from unilateral trade liberalisation.[2] This offered the ACP countries non-reciprocal trade preferences, whereby they would have preferential access to the European market but would not be required to liberalise their trade with European exporters.

3. However, by the early 1990s there was an increasing adoption of neoliberal thinking in the EU’s trade and development policy. By this point the whole idea of preferential trade access for ACP countries was called into question.[3] Discussions began on a successor to Lomé and eventually the Cotonou Agreement was signed in 2000. One of the key justifications for Cotonou was the requirement of conforming to the rules of the World Trade Organisation (WTO), which require that regional trade agreements liberalise substantially all trade between partners (which has been interpreted as 90%).

4. The EU negotiated EPAs with seven sub-regions within the ACP group of states (five of these are within Africa). The idea of developing reciprocal trade arrangements was one of the three main pillars of the Cotonou Agreement (the others being political dialogue and development aid). They are part of a much wider trend over the last two decades, where we have seen a proliferation of bilateral free trade agreements (FTAs).

The underlying assumptions of EPAs

5. The EU’s plan for EPAs was for them to be comprehensive free trade agreements, which means they are not just about the liberalisation of trade in goods, but also about liberalisation of services, investments, and government procurement, and the strengthening of intellectual property rights, and competition rules. The inclusion of these ‘behind-the-border’ issues meant that the EU’s ambitions for EPAs went beyond those aspects deemed necessary to satisfy WTO rules on FTAs. As a result, the EPA negotiations have allowed the EU to include at the bilateral level many of the issues that developing countries had resisted in the WTO Doha Round negotiations, most notably in Cancún back in 2003.[4] EPA negotiations have also divided up the ACP grouping into sub-regions, which has allowed the EU to determine the key aspects of the negotiating agenda.

6. The EU’s ‘deep integration’ approach, aiming to secure FTAs that go beyond simply the liberalisation of trade in goods, informs the European Commission’s claim that EPAs can be described as comprehensive development partnerships and not just FTAs. It is argued that they will improve the regulatory systems in ACP countries, which will attract foreign investors and that this is the ‘added-value’ of EPAs, together with the focus on regionalisation and associated development finance via the European Development Fund.

7. What marks the EU’s approach as rather unique is the associated belief in the developmental benefits of regional integration. Since the mid-1990s, regional integration has become a cornerstone of the EU’s external relations. It sees itself as a ‘natural supporter of regional initiatives’.[5] The argument has been that for ACP countries, regional economic integration can be a stepping stone towards their successful integration into the global economy. This is because it will promote not only trade with external partners but will also support trade between regional partners to create bigger and more attractive local markets for investment.

The contentious nature of EPAs

8. Right from the outset ACP states made it clear that they wanted the EU to maintain non-reciprocal trade preferences and market access.[6] African states have demonstrated significant resistance in the face of the pressure applied by the European Commission to conclude comprehensive WTO-plus EPAs. They have expressed a series of concerns, which can be summarised as follows.

9. The burden of trade liberalisation will fall most heavily on the ACP states. This is especially the case for the LDCs who already qualify for duty-free and quota-free access via the EU’s ‘Everything but Arms’ initiative.

10. The liberalisation of trade will also have a negative impact on tariff revenues collected by ACP states. In the Southern African Development Community (SADC), for example, Botswana, Lesotho, Namibia and Swaziland are particularly reliant on this revenue.

11. The EU’s focus on ‘deep integration’ has meant the re-introduction of the so-called ‘Singapore Issues’. They refer to the inclusion of investment, competition policy, government procurement and trade facilitation measures. Their introduction (except trade facilitation) would mean that European firms would have to be treated in the same way as any domestic provider. This would pose significant limits to the range of development strategies available given that regulatory policy, previously the preserve of national politics, would become part of the EPA. African states have argued that this would constrain their ability to diversify their exports and seek to support the development of an industrial sector.

12. Over the period of liberalisation (up to 25 years in some cases) African countries will be expected to remove trade barriers on at least 75% of their imports from the EU.[7] This will include some, although not all, manufactured goods. There is therefore a fear that liberalisation will result in deindustrialisation.

13. Trade liberalisation will also open up African countries to the powerful European agricultural industry. Local producers will be unable to compete with such competition and it is feared that Africa’s food security will be undermined due to an over-reliance on imports.

14. European negotiators also want to include a so-called ‘Most-Favoured Nation’ clause in the EPAs. Many African negotiators feared that this would severely undermine the autonomy of their policymaking in the future as it would require them to offer the EU matching trade preferences to those that might be agreed to in any future bilateral FTAs with other major trading partners.

15. In addition to contesting the consequences of EPAs for development, African states have been critical of how the European Commission has promoted their interpretation of regional integration, which is based very closely on its own ‘EU model’. The rhetorical claims made by the European Commission of the developmental benefits of the regional focus of EPA negotiations have been challenged by African states. It is argued that regional EPAs will make regionally produced goods less competitive because they will have to compete with Europe in the regional market.

16. These criticisms by ACP states were supported by an extensive NGO campaign both in Europe and Africa. It has been argued that this campaign shifted the discursive nature of the EPA negotiations by making them ‘a politically contentious issue’.[8] This has enabled African states to exert significant agency within the EPA negotiations.

17. In the face of such resistance, the EU set a deadline of 1 October 2014, beyond which point they would remove the preferential access to the European market enjoyed by the non-LDCs in each of the ACP sub-regions. They then allowed a further two years for ratification of the agreements. The EU has also had to postpone the inclusion of competition and investment by adding rendez-vous clauses to the EPAs that commits the signatories to return to these contentious issues in the future.

18. This rather coercive approach to the negotiations did result in some African states ratifying EPAs, but they remain less comprehensive than the agreement made with the Caribbean and there continues to be resistance. Both the Tanzanian and Nigerian governments have indicated that they are concerned that signing an EPA will undermine their ability to adopt government policies to support industrialization. In Nigeria, the Manufacturers Association of Nigeria has been particularly effective in lobbying against the EPA, arguing that it will harm the domestic industrial sector.

Should the UK replicate EPAs?

19. The recent Trade White Paper published by the government suggests that as the UK leaves the EU it should ‘seek to replicate existing EPAs (in line with other EU-third country FTAs)’.[9] However, as has been described above, the EU’s negotiation of EPAs with ACP countries has encountered significant resistance from both many ACP governments, and civil society actors across Europe and Africa. There is a potential conflict of principles in the White Paper between the expressed concern for developing countries and the suggestion that the ‘UK will look to secure greater access to overseas markets for UK goods exports as well as push for greater liberalisation of global services, investment and procurement markets’.[10]

20. It is therefore highly likely that the UK will meet significant resistance if it seeks to simply replicate EPAs. African states have been able to demonstrate agency in the EPA negotiations and there would be greater scope for this in any future negotiations with the UK. They have made it clear that rather than deep and comprehensive trade liberalisation, what they want is a gradual process of engagement with global markets, which if it is to be developmental, needs to be facilitated by state support.

Alternatives to EPAs that the UK should consider?

21. One of the lessons to draw from the EPA negotiations is that the neoliberal development model, which underpins the EU’s design of EPAs, is no longer the only alternative. As the UNDP’s Human Development Report of 2013 noted, an alternative more pragmatic development strategy has been successfully adopted by key states in the Global South.[11] It identified three key drivers of development. First, a developmental state that has been vitally important in regulating markets, supporting industrial development, and directing the terms of their engagement with the global economy. Second, the state has also played an important role in investing in health, education and other public services. Third, engagement with global markets has been gradual.

22. An independent UK trade policy to Africa will have to consider that alternative development strategies are now being entertained by many African governments. The UK government should consider the developmental impacts of any future trade agreement with its African partners. This should be done in a way that does not simply replicate the neoliberal assumptions, which have been central to EU policy in recent years.

23. As Traidcraft have suggested, an alternative option available to the UK would be to create a bespoke Generalised System of Preferences scheme that goes above and beyond the EU’s current ‘Everything but Arms’ agreement with LDCs.[12] This would enable imports from economically vulnerable countries to enter the UK on a duty-free, quota-free basis and could be made compatible with WTO rules via the Enabling Clause. As a unilateral offer this would have the added benefit of not requiring the difficult and time-consuming trade negotiations that the EU has experienced with EPAs.

24. In sum, the UK should abandon its desire to seek to replicate EPA-style agreements with ACP states. They are hugely contentious and by doing so the government would be failing to honour its international commitments on development. For example, the UN Sustainable Development Goals include a commitment to ‘respect each country’s policy space and leadership to establish and implement policies for poverty eradication and sustainable development’.[13]

December 2017

1