Thursday, May 23, 2024

Basic principles on which European Union bases its current trade talks

I am sending you this message on behalf of Ambassador Gerard McGovern, Head of the Delegation of the European Union to Botswana and SADC.

Last week you published an editorial piece which reflects the opinion of the Overseas Development Institute (ODI). We feel compelled to react and to recall some of the basic principles on which the European Union bases its current trade talks with countries in sub-Saharan Africa.

In 2000, African, Caribbean and Pacific countries (ACP) and the EU agreed jointly to conclude European Partnership Agreements (EPA). This decision was sealed in the ‘Cotonou Partnership Agreement’, the most far-reaching North-South partnership ever established. It aims to cut poverty and promote sustainable development in the ACP counties and it covers development in its widest sense – political, economic, social and cultural.

So far 36 ACP countries have concluded EPAs, including 10 sub-Saharan African countries, have signed EPAs and talks for comprehensive agreements continue with another 47 countries, grouped together into five regions within Africa. The Eastern and Southern Africa interim EPA has just begun application, the first in Africa.

For over 30 years the EU had unilaterally offered Sub-Saharan Africa much more generous access to its market than it had to the world’s other developing regions while African countries did not have to open their markets to the EU. The outcome of such limited approach is there for all to see: commodity dependence for exports and limited addition of domestic value.

EPAs can help African partner countries develop trade between each other and with the EU. They will also foster economic growth and create jobs.

More importantly, EPAs will require African countries to open up their trade with Europe to a large extent. But if African businesses are to integrate into the global trading system and value chains, they need access to low-priced inputs and to affordable quality services. To export and add value competitively you need to be able to import competitively. They African businesses need a transparent business environment, roads and ports that work and they need a lowering of non-tariff barriers.

All this, an EPA can offer. But these agreements are negotiated between equal partners. They are not imposed by an EU desperate to defend its territory against competitors. On the contrary, the ACP regions and countries decide for themselves if they are ready to take on certain commitments.
The EU is not asking African countries to open their markets fully, as the EU has done to them. EPAs define asymmetric obligations, so that concessions are economically interesting but also sustainable. African businesses will still have full duty free quota free access to the EU, while African regions can keep tariffs on sheltering goods they consider being sensitive and they open up gradually.

And if imports from the EU suddenly surge, EPAs also allow African countries to use a safeguard and restrict imports in case of sudden increases of imports. There is also the possibility of increasing tariffs again to preserve food security or to protect industries which are still in their infancy. These provisions are all included in the texts negotiated and your article should reflect them.

As you rightly mentioned in another article in the same edition, on trade related assistance the EU and its Member help countries to develop trade strategies, build trade-related infrastructure and improve their productive capacity in order to encourage growth and reduce poverty.

Trade related assistance reached Ôé¼ 2.6 billion in 2010 and the EU and its Member States remain the biggest providers making up 60% of global commitments. Sub-Saharan Africa continues to be the main beneficiary of EU Aid for Trade.

We also need to point out that the ODI is out of date with its numbers: of the 18 countries allegedly vulnerable to increased tariffs, nine have ‘least developed country’ status and so are guaranteed duty free quota free access.

EPA agreements are well within reach for the remaining countries, including Botswana. At no point in the EPA negotiation has the EU put into question Botswana’s duty-free quota-free access to its market, even in a highly sensitive sector like beef where such unrestricted access is unknown outside the ACP partner countries as no other free trade agreement with the EU includes it.

The EU remains one of the most open markets to the import of agricultural products especially from developing countries. The EU’s imports from developing countries consistently outstrip imports of five major high-income countries together (US, Japan, Canada, Australia and New Zealand).

The common agricultural policy depicted in the ODI report is outdated. Over the past two decades the EU has moved away from high support prices for production to supporting farmers through direct payments. Already more than 90% of the EU’s Common Agricultural Policies (CAP) support is decoupled from production. There is ample economic evidence that decoupling is an effective tool in terms of efficiency of income transfer and the incentive it offers for provision of environmental public goods. Above all, decoupled support minimises distortions to farmers’ production decisions so that it has little or no impact on markets and on trade.

Against that analytical background, there is no justification for the claim that EU decoupled income support leads to a higher level of EU production. Furthermore overall CAP expenditure accounts for no more than 0.45% of GDP, and farming remains a hard pressed sector in the EU, with incomes around 40% of the average EU income.

This kind of economic analysis may not have gained as much publicity as the ODI’s report, but they do show the EU is on the right policy track and faithful to its preferential suppliers like Botswana.

With best regards,
Jochen P P├Âttgen
Trade, Politics, Press & Information
European Union
Delegation to Botswana & SADC
Phone 00267 361 00 20

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