PRESENTATION EPAs: The Way Forward for the ACP

1. PRESENTATIONEPAs: The Way Forward for the ACP By Ambassador S. GUNESSEE of Republic of Mauritius

2. What liberalisation has been agreed to? Configuration corundum • At the COMESA Summit held in 2003 in Khartoum, Sudan, it was agreed that the wider Eastern and Southern African region (ESA) should negotiate one single EPA with the European Union, as one region. But this did not happen. • Official negotiations were launched in February 2004 in Mauritius with a new ESA configuration. • ESA region initially comprised 16 COMESA States, 12 of which are LDCs and 4 non-LDCs. Subsequently, the Democratic Republic of Congo joined the EPA negotiations within the CEMAC configuration, but still attended ESA meetings on EPA. • The Summit of the East African Community (comprising Burundi, Kenya, Rwanda, Tanzania, and Uganda) held on 20 August, 2007 in Arusha, decided to explore the possibility for the EAC to conclude an EPA with the EU. • Out of the 15 remaining ESA countries, the following initialled Interim EPAs: • 4 (Burundi, Rwanda, Uganda and Kenya) within the Eastern African Community (EAC). It also includes Tanzania, which had initially decided to negotiate an EPA within the SADC-EPAM configuration; and • 5(Comoros, Madagascar, Seychelles, Mauritius and Zimbabwe) in ESA. • Result: COMESA Members are now spread in five sub-groups for EPA purposes. This has fragmented the region at least for now and is contrary to the stated objectives of EPA facilitating and building on regional integration. • Addressing this corondum of configuration and consolidating and building regional integration remains this challenge.

3. EECMarket access offer under Interim EPAs To ESA • DFQF as from 1st January, 2008 with transitional arrangements for rice and sugar, with improved Rules of Origin and tighter safeguards, particularly for sugar. • EC has agreed to give an additional 75, 000 tonnes of sugar and 8,000 tonnes of canned tuna and 2,000 tuna loins to ESA EPAs, and • An additional 15, 000 tonnes of sugar to EAC.

4. ESA offer • 15-years transitional period with an initial 5-year preparatory/moratorium period for all ESA countries that had initialled. • Comoros:In 2013 liberalisation of 21.5% by value representing 28% tariff lines; and • In 2022liberalisation of 80.3% by value and 98 % by tariff lines. • Madagascar: In 2013 liberalisation of 37 % by value representing 24% tariff lines; • In 2022, liberalisation of 80.3% by value and 89.3% by tariff lines. • Mauritius: In 2013, liberalisation of 24.5 % by value representing 26% tariff lines (divergence with EC); • In 2017, liberalisation of 53.6 % by value and 73 % by tariff lines; and • In 2022, liberalisation of 95.6% by value and 96.6% by tariff line. • Seychelles: In 2013, liberalisation of 62 % by value representing 26.5% tariff lines; • In 2017, liberalisation of 77 % by value and 73.1 % by tariff lines; and • In 2022, liberalisation of 97.5 % by value and 97.7 % by tariff line. • Zimbabwe: In 2013, liberalisation of 45 % by value representing 28% tariff lines; • In 2022 liberalisation of 80 % by value and 87 % by tariff line.

5. EAC offer • Burundi, Rwanda, Tanzania, Uganda and Kenya have made the following offer: • In 2010-Liberalisation of 64% by value representing 38% in tariff lines; i.e. a two-years moratorium and a 15-year transitional periods; and • In 2023-Liberalisation of 80% by value representing 57% of tariff lines.

6. Have Development objectives been met?: • Since trade has to be at the service of development, EPA had to be seen in a wider context of this liberalisation. A development cooperation chapter is, therefore, included in the ESA Interim EPA, whose objectives and principles are as follows: • Relevant principles – • Special and differential treatment for LDCs, taking into account the vulnerability of small landlocked and island countries; • Inclusiveness of application of development cooperation provisions • reduction and eventual eradication of poverty through trade and development partnership consistent with the objective of sustainable development. • Address the developmental needs of the ESA States in order to promote sustained growth, increase production and supply capacity, foster structural transformation and competitiveness of their economies; • Support for regional integration and development strategies and cooperation will be based on the Development Cooperation Strategies and the jointly agreed Development Matrix. The strategy and matrix will be regularly reviewed; • Article 52 makes provision for the EC to put at the disposal of ESA States financial assistance to contribute to implement the programmes and projects to be developed under the areas of cooperation identified in the Interim Agreement and under the Development Matrix. • The Interim Agreement also makes provision for the establishment of the EPA Fund to channel EPA related resources. • Cooperation, in the form of financial and non-financial support, will be measured against jointly agreed development benchmarks; • Financing will be carried out within the framework of the rules and relevant procedures provided for under the Cotonou Agreement, in particular, programming procedures of EDF as well as within the frameworks of relevant instruments financed by the General Budget Support; • Parties are to cooperate for the mobilization of the resources additional to the EU financial framework for the expansion of Aid for Trade commitments of EU Member States and other donors, relating specifically to EPA support requirements and adjustment costs.

7. Outstanding Development issues • Finalisation of development cooperation strategy. • Finalisation of detailed costed development matrix. • Development benchmarks to be jointly developed and adopted. • Joint mobilisation of additional resources: Proposal to hold a Pledging Conference to coincide with the signing of RIP with COMESA. ESA provided with € 600 million under RIP for period 2008-2013, including the so-called incentive tranche of € 135 million. • Establishment of EPA Fund. • Development of monitoring instruments and agreed indicators.

8. ACHIEVEMENTS • Met the deadline in order to avoid trade disruption. • In terms of relaxation of Rules of Origin (RoO), whereby under automatic derogation, ESA would now benefit from an annual quota of 8000 tonnes of canned tuna and 2000 tonnes of tuna loins to be shared among ESA countries that have initialled the Interim Agreement; • For textile and clothing sector, ESA would benefit from one stage transformation which is equivalent to the “Third country fabric” derogation under AGOA; and • All reference to single yarn has been replaced by yarn only. This removes an additional stage of processing. Moreover, references to “others” in Chapters 53 to 62 have been removed. Thus, further relaxing the rules. • Unlike AGOA, where the third country fabric issue is based on a derogation, applicable mainly to the eligible LDCs African sub-Saharan countries, in the Interim EPA, the third country fabric provision is part of the rules and not a derogation and, therefore, there is no risk from it being removed. • By initialling an Interim EPA, we globally succeded in securing € 135 million under the 10th EDF, which was kept as incentive tranche for its RIP. • CMMS could have signed a seperate Interim EPA, but this could killed the ESA conbfiguration. We maintained the region’s integrity andfavoured a regional approach. We expect to consolidate it when negotiating a development-full friendly and inclusive EPA.

9. Challenges and Shortcomings • What is in place now is a unilateral advanced provisional application of EC Regulation (No. 1528) of 20 December, 2007 on Market Access. • Difficulties in taking advantage of the EC market access offer opportunities. • Implementation of the Interim EPA-This would require the signing and ratification by all those which have initialled the Interim EPA-Could be lengthy process and contains element of uncertainty. • Conclusion of a full EPA by end of 2009-Doudtful since many issues still need to be addressed as per Article 53 of the rendez-vous clause. • Inclusion of a safeguard clause on outermost region. • Revision of contentious provisions onMFN clause, National Treatment, Export taxes, DSM provisions. • How to address regional integration when the EAC has initialled a seperate Interim EPA?-Fragmentation of the region • Joint mobilisation of additional resources-Uncertainty about provisions of adequate resources on a sustainable and predictable basis. • Implementation of Interim EPAs would mean significant loss of revenue accruing from liberalisation. No guarantee of additional resources to address the still divergent issue. • EPA adjustment costs. Need to build the supply-side capacity and trade-related infrastructure. Resources again and still a problem.

10. Degree of safeguard of commodity protocols • SADC were the first sub-region to initial the Interim EPA, including agreement to mutually terminate the SP, and agreed on reference price, etc. This undermined the position of the ACP SP countries, including ESA. • The review that had to be undertaken as stipulated under Article 36(4) of Cotonou had not been carried out. • In the Interim EPA, the present quota of SP Members will be maintained. • Additional quota of 75, 000 tonnes of sugar offered to the ESA countries which had initialled the Interim EPA. Can supply any types of sugar and not restricted to raw sugar for refining. Hence, possibility to add value and thus partly mitigate the decrease in the ACP guaranteed price for sugar. • Currently the SP countries and EC are working together on ways and means to ensure that there is a smooth transition to the new sugar regime. • Double safeguard trigger ceiling of 3.5 million tons. Risk of non-LDC ACP States being penalised. LDCs access guaranteed under EBA. • Moving more towards a commercial approach.

11. Are RoO appropriate and development friendly? • Some improvement single transformation, particularly beneficial to the textile/clothing sector, but certain drawbacks: • Cumulation-The main drawback on Rules of Origin is in terms of cumulation. Unlike the Cotonou Agreement, where cumulation among all ACP States was possible, under the Interim EPA, this would be possible only in case of the existence of a bi-regional agreements and identical RoO. This is Cotonou minus. • Both sides have agreed to pursue the negotiations on this issue, including alignment of Rules of Origin. At present the main problem is on implementation. • Value-tolerance-To reinstate what was in Cotonou.

12. New global economic opportunities • There is an organic link between EPA and WTO-DDA Round. Both are meant to be development tools. • This offers an opportunity for countries to integrate the world economy. • EPA-look-in-effect to assist in undertaking reforming of national economies thereby improving ESA countries global competitiveness and hence allowing integration into the world economy. This process may be helped by a regional approach benefiting from economies of scale and reduction in transaction cost. • This could be addressed through additional resources that would be made available partly under Aid for Trade being envisaged at global level. It will help to address EPA-related adjustment costs.

13. How should signatories position themselves in the global economy? • Uncertain so far because it is not yet known who are going to be Parties to the EPAs. (full) • Those who have initialled/concluded EPA (Interim or full) could speak as one voice to promote the interest of the region. Individually this is difficult, but collectively, it can make a difference, but still ACP minus. • In 2008, COMESA would launch the Customs Union and in 2010, the Common market. • The EPAs could thus lead to greater harmonisation of policies. • A Common External Tariff (CET), common trade and industrial policy, could help in slating common position in the global context. • What is needed now is to put our own house ESA/COMESA in order.

14. END OF PRESENTATION Thank You.