This paper should be cited as: Christopher Stevens, Mareike Meyn and Jane Kennan ODI and Sanoussi Bilal, Corinna Braun-Munzinger, Franziska Jerosch, Davina Makhan and Francesco Rampa. 2008. The new EPAs: comparative analysis of their content and the challenges for 2008 (Policy Management Report 14). Maastricht: ECDPM

Currently only available in PDF: The new EPAs: comparative analysis of their content and the challenges for 2008


Table of contents

List of tables
List of boxes
List of acronyms
Executive summary and recommendations
Introduction

Part A. Analysis of the existing agreements so far, both liberalisation schedules and texts
1. Introduction to Part A
2. Extent of ACP liberalisation: country-by-country review
3. Summary of key similarities and differences
4. Provisions on ACP exports

Part B. Implications and options for the way forward
1. Process: why we are where we are now, and how did we get here?
2. Options for the way forward and challenges to be expected
3. Aid for Trade modalities

Notes

Appendix 1. Comparison of European Commission and ODI liberalisation estimates
Appendix 2. Supplementary BLNS tables
Appendix 3. Summary of key provisions in the EPA texts
Appendix 4. Comparative analysis of the EPA texts
Appendix 5. Summary of non-EPA-signatory exports subject to increased tariff from 2008
Appendix 6. EU Generalised System of Preferences


List of tables

Table 1. Overview of EPA signatory states
Table 2. Base tariffs in the liberalisation schedules
Table 3. Summary of Cameroon market access schedule
Table 4. Summary of Cameroon exclusions
Table 5. Broad composition of Cameroon exclusions
Table 6. Summary of Cameroon first-tranche liberalisations (2010–2013)
Table 7. Summary of Côte d’Ivoire market access schedule
Table 8. Summary of Côte d’Ivoire exclusions
Table 9. Broad composition of Côte d’Ivoire exclusions
Table 10. Summary of Côte d’Ivoire first-tranche liberalisations (2008–2012)
Table 11. Summary of Ghana market access schedule
Table 12. Summary of Ghana exclusions
Table 13. Ghana: broad composition of exclusion list
Table 14. Summary of Ghana first-tranche liberalisations (2009–2013)
Table 15. Hypothetical revenue loss in EAC countries
Table 16. Summary of Burundi market access schedule
Table 17. Summary of Kenya market access schedule
Table 18. Summary of Rwanda market access schedule
Table 19. Summary of Tanzania market access schedule
Table 20. Summary of Uganda market access schedule
Table 21. Summary of EAC exclusions
Table 22. Broad composition of EAC exclusions
Table 23. Items with the largest number of different classifications being liberalised by all ESA countries
Table 24. Hypothetical revenue loss in ESA countries
Table 25. Summary of Comoros market access schedule
Table 26. Summary of Comoros exclusions
Table 27. Broad composition of Comoros exclusions
Table 28. Summary of Madagascar market access schedule
Table 29. Summary of Madagascar exclusions
Table 30. Broad composition of Madagascar exclusions
Table 31. Summary of Madagascar first-tranche liberalisations (2013)
Table 32. Summary of Mauritius market access schedule
Table 33. Summary of Mauritius exclusions
Table 34. Broad composition of Mauritius exclusions
Table 35. Summary of Mauritius first-tranche liberalisations (2008)
Table 36. Summary of Seychelles market access schedule
Table 37. Summary of Seychelles exclusions
Table 38. Broad composition of Seychelles exclusions
Table 39. Summary of Seychelles first-tranche liberalisations (2013)
Table 40. Summary of Zimbabwe market access schedule
Table 41. Summary of Zimbabwe exclusions
Table 42. Broad composition of Zimbabwe exclusions
Table 43. Summary of Zimbabwe first-tranche liberalisations (2013)
Table 44. Summary of BLNS market access schedule
Table 46. Broad composition of BLNS exclusions
Table 47. Summary of BLNS first-tranche liberalisations (2008)
Table 48. Summary of Mozambique market access schedule
Table 49. Summary of Mozambique exclusions
Table 50. Broad composition of Mozambique exclusions
Table 51. Summary of Mozambique first-tranche liberalisations (2008)
Table 52. Summary of ESA exclusions
Table 54. Comparison of liberalisation schedules
Table 56. Provisions in the CARIFORUM and/or PACP not found in the African EPAs
Table 57. Areas subject to the ‘rendezvous’ clause
Table 58. The countries exporting goods affected by DFQF
Table 59. Products eligible for greatest static DFQF gains
Table 60. Options for the way forward: EPAs and alternative trade regimes
Table 61. Estimated adjustment costs by region
Table 62. 10th EDF NIPs for 31 African countries: number of focal sectors covering AfT needs
Table 63. Expected revenue loss in EPA countries
Table 64. Funds allocated and spent during each five-year financing cycle (million euros)


List of boxes

Box 1. Key features of Economic Partnership Agreements
Box 2. CPA Article 37.4 Review of the EPA negotiations: a lost opportunity?
Box 3. Key events in EPA negotiations, autumn 2007
Box 4. Negative reactions to EPA process
Box 5. Positive reactions to EPAs
Box 6. Interim texts cast in stone?
Box 7. Scenarios regarding the regional coverage of the agreements
Box 8. EDF programming instruments


List of acronyms

ACP	African, Caribbean and Pacific
AfT	Aid for Trade
AGOA	(United States) Africa Growth Opportunity Act
AoA	(WTO) Agreement on Agriculture
BLNS	Botswana, Lesotho, Namibia and Swaziland
BLS	Botswana, Lesotho and Swaziland
CARIFORUM	Caribbean Forum
CEMAC	Communauté Économique et Monétaire de l'Afrique Centrale
CET	Common external tariff
COMESA	Common Market for Eastern and Southern Africa
Comtrade	United Nations Commodity Trade Statistical Database
CPA	Cotonou Partnership Agreement
CSP	Country Strategy Papers
DFQF	duty-free, quota-free access
DSB	[WTO] Dispute Settlement Body
EAC	East African Community
EAFF	Eastern Africa Farmers Federation
EBA	Everything but Arms
EC	European Community
ECDPM	European Centre for Development Policy Management
ECOWAS	Economic Community of West African States
EDF	European Development Fund
EPA	Economic Partnership Agreement
ESA	Eastern and Southern Africa
EU	European Union
FTA	free-trade agreement
GAERC	General Affairs and External Relations Council
GATT	General Agreement on Tariffs and Trade
GSP	Generalised System of Preferences
HS	Harmonised System
ICTSD	International Centre for Trade and Sustainable Development
LDC	least developed country
MDG	Millennium Development Goals
MEP	Member of European Parliament
MFN	most favoured nation
NAO	National Authorising Officer
NIP	National Indicative Programme
NTB	non-tariff barrier
NTL	national tariff line
ODI	Overseas Development Institute
PACP	Pacific ACP
PARI	Program d'Aide à la Recherche Industrielle
PNG	Papua New Guinea
PROPAC	Plateforme sous-régionale des organisations paysannes d’Afrique centrale
PRSP	Poverty Reduction Strategy Paper
PSD	private sector development
RAO	Regional Authorising Officer
REC	regional economic community
RSP	Regional Strategy Paper
RIP	Regional Indicative Programme
RoO	rules of origin
ROPPA	Réseau des organisations paysannes et des producteurs agricoles de l’Afrique de l’Ouest
RSP	regional strategy papers
RPTF	regional preparatory task force
SACAU	Southern Africa Confederation of Agricultural Unions
SACU	Southern African Customs Union
SADC	Southern Africa Development Community
SDT	special and differential treatment
TDCA	(EU–South Africa) Trade, Development and Co-operation Agreement
TRA	trade-related assistance
TRAINS	(UNCTAD’s) Trade Information and Analysis System
UEMOA	Union Economique et Monétaire Ouest Africaine
UN	United Nations
UNCTAD	United Nations Conference on Trade and Development
WINFA	Windward Islands Farmers Association
WTO	World Trade Organization

Executive summary and recommendations

This report¹ provides a comprehensive analysis of the trade regimes for Africa that on 1 January 2008 replaced the Cotonou Partnership Agreement (CPA), the negotiations that remain to be completed and the challenges facing Africa in implementation, some of which require support from Europe. Part A provides an analysis of the liberalisation that African states have agreed to undertake in relation to imports from the European Union (EU) and vice versa and key features of the main texts of the interim Economic Partnership Agreements (EPAs). Part B reviews the process that culminated in the initialling of interim EPAs by some ACP states but not by others to learn the lessons, reviews the future options for both current signatories and non-signatories and assesses the aid for trade (AfT) modalities.

Eighteen of African states (including most non-least developed and some least developed countries (LDCs)) have initialled interim EPAs, as have two Pacific non-LDCs (Fiji and Papua New Guinea (PNG)); the Caribbean countries (CARIFORUM) have gone further and have agreed full EPAs. The remaining African, Caribbean and Pacific (ACP) countries apart from South Africa now export to the European market under the EU Generalised System of Preferences (GSP): its favourable Everything But Arms (EBA) sub-regime in the case of LDCs, and the less favourable standard GSP for Nigeria, Republic of the Congo, Gabon and seven Pacific countries.² South Africa continues to export under its own free trade agreement (FTA) with the EU, the Trade, Development and Cooperation Agreement (TDCA).

As World Trade Organization (WTO)-compatible free trade deals, the interim EPAs have removed the risk that the end of the Cotonou waiver would result in some ACP losing their preferential EU market access. Free from the pressure to meet WTO commitments, the parties can now continue negotiations towards more comprehensive EPAs, based on their initial development objectives. The European Commission has the mandate to conclude full EPAs and it intends to do so; none of their ACP partners has so far renounced this objective. But, whilst reaching development-oriented agreements without arbitrary time pressure is an attractive prospect, it is no easy task.


Key features of the interim EPAs

Part A analyses the agreements initialled by African countries and, where relevant, makes a comparison with the CARIFORUM and Pacific agreements. It responds to five specific research questions posed in the terms of reference for the study.

1) National level: what is the impact of the agreed tariff liberalisation schedules, when compared to current applied tariffs? Aspects to be addressed are the coverage (relative impact on products and sector) and speed of tariff liberalisation (front loading/back loading of products/sectors), analysis of the exclusion list (products/sectors) and impact on hypothetical government revenue.

2) Regional level: how should the individual agreements (if applicable) be interpreted in relation to current and future regional integration initiatives? Including comparative analysis of exclusion lists and liberalisation schedules of countries within the same region, identification of (dis)similarities in exclusion baskets and liberalisation schedules.

3) ACP–EU exports: what does the DFQF market access to the EU mean for ACP countries in terms of (additional) market opening to the EU? Special attention should be given to the regime for sugar.

4) What do the agreed interim agreements/stepping stone agreements say about possibilities to opt out and conditions and time schedules to come to a full EPA (incl. conditions in relation to the Singapore issues, etc.).

5) In how far are the agreed texts for African regions and countries i) similar to each other and to the text for the Caribbean region and ii) development friendly? Aspects to be addressed are for example provisions on export taxes, compensation of export revenues, trade-related technical assistance and capacity building., infant industry and safeguards.

It does this through a detailed analysis of the changes that each party (both ACP and the EU) will make to tariffs and quotas on goods trade and a review of the main texts of the agreements which concentrate upon: the provisions required for an FTA in goods such as can be presented to the WTO; necessary institutional infrastructure; provisions on trade defence; some provisions (but not complete ones) on those elements that have been included in the negotiations but on which final agreement has not yet been reached such as services and the so-called Singapore Issues.

As such, it provides a country-by-country and region-by-region snapshot of the interim EPAs, explaining in broad terms what has been agreed and what changes will be made to current policy – and when. As well as providing a starting point for further, more detailed country- and issue-focused work, certain broad themes have emerged from this initial scrutiny. Some important findings on research questions 1, 2, 4 and 5 are summarised in the next three sub-sections, and those from research question 3 are included in the sub-section on Aid for Trade.


Levels of national commitment

The interim EPAs were finalised in a rush to beat the end 2007 deadline – and it shows. All of the African EPAs are different and in only one region does more than one country have the same commitments as the others: this is the East African Community (EAC). At the other extreme is West Africa, where the only two EPA countries have initialled significantly different texts with different liberalisation commitments.

No clear pattern can be identified that the poorer countries have longer to adjust than the richer ones or of the EPAs being tailored to development needs (however defined). Some of the richer countries among the list have to adjust quickly – but so do some of the poorest.

The picture that emerges is entirely consistent with the hypothesis that countries have a deal that reflects their negotiating skills: that countries able to negotiate hard, knowing their interests, have obtained a better deal than those lacking these characteristics. Côte d’Ivoire and Mozambique will face adjustment challenges that are among the largest and will appear soonest. Côte d’Ivoire, for example, will have removed completely tariffs on 60% of its imports from the EU two years before Kenya even begins to start reducing its tariffs as part of the EPA; Ghana will have liberalised completely 71% of its imports by the time Kenya is three years into this process which, after a further six years, will result in just 39% of its imports being duty free.


Implications for regionalism

A common perception, expressed by many countries in the independent Article 37.4 review of the negotiations, is that there is little coherence between the EPA agenda and the regional integration processes in Africa. One particular concern has been that countries in the same economic region might liberalise different baskets of products and so create new barriers to intra-regional trade in order to avoid trade deflection. This concern has been vindicated by the interim EPAs that have been agreed.

In the case of Central and West Africa the principal challenge for regional integration is that most countries have not initialled an EPA, but Cameroon, Côte d’Ivoire and Ghana have done so. The countries in the regions that do not currently belong to an EPA will reduce none of their tariffs towards the EU, maximising the incompatibility between their trade regimes and those of Cameroon, Côte d’Ivoire and Ghana.

Only in the case of EAC have all members joined the EPA and accepted identical liberalisation schedules. If these are implemented fully and in a timely way economic integration will have been reinforced.

Those Eastern and Southern Africa (ESA) countries ³ and the five Southern Africa Development Community sub-group (SADC-minus) states that have initialled, have done so to single agreements, but there is considerable dissimilarity in the country liberalisation schedules and exclusion baskets. Of the goods being excluded by ESA not a single item is in the basket of all five countries and over three-quarters are being excluded by just one. Comparing Mozambique’s schedules with those jointly agreed by Botswana, Lesotho, Namibia and Swaziland (BLNS), just one-fifth of the items are being excluded by both parties.

ESA faces an additional challenge. All of the ESA states have established their liberalisation schedules in relation to the common external tariff (CET) (presumably of the Common Market for Eastern and Southern Africa – COMESA), but it is not only the details of their liberalisation and of their exclusion baskets that are different – so is their classification of goods. The agreed phasing of liberalisation is made in relation to the product groups established by COMESA for its CET. Although the COMESA members agreed that the CET should be set at different levels for these groups, they have not so far agreed a formal definition that allocated each item in the nomenclature to one or other group. The EPAs have required countries to make this specific link – and they have done so differently, which will create problems for implementing any eventual COMESA CET. There are over a thousand items being liberalised by one or more of the ESA countries where there is some degree of discrepancy in the CET classification.


Some key provisions of the interim agreements

The issues highlighted above (which respond to research questions 1 and 2) have been derived from the complex and detailed EPA schedules using the authors’ judgements about the relative importance of different elements of the agreements. This subjective dimension is even greater when attention shifts to answering research questions 4 and 5. This takes attention away from the schedules of tariffs to be liberalised or excluded towards the main texts, the impact of which will become clear only over time in the light of circumstances.

Part A explains how judging features of the main texts that have already attracted attention (such as the ‘MFN clause’) depends on how they are interpreted and enforced as well as on the analyst’s political and economic perspective. The same applies to the fact that the recent food export ban imposed by Tanzania (to fight domestic shortages) will be illegal in any EPA once implemented other than that of the EAC.

It is for this reason that an issue-by-issue summary of the main provisions of the EPAs is provided in Appendix 3. It is the safest guide to what the parties have agreed and allows a comparison to be made of each main provision in the various EPA texts . The TDCA and EU–Mexico FTA are less restrictive than any of the EPAs in several (but not all) respects: they contain no MFN clause, standstill clause, or time restrictions for pre-emptive safeguards, and provide no sanctions in case of a lack of administrative cooperation. And in some respects the CARIFORUM and Pacific EPAs are less restrictive than those in Africa (though in other cases the reverse is true, so it is not possible to say that one EPA is more or less restrictive than another across the board). There are seven provisions found in the CARIFORUM and/or PACP EPAs but not in any of the African ones, and six of these have the effect of making the accords less restrictive.

Despite this need for caution in drawing bold conclusions on the texts, there are some clear patterns on some specific issues. These are summarised below.


Border measures

Specific border measures are provided in the EPAs which may slightly alter some of the features of the liberalisation regimes. CEMAC has provision to halt tariff reduction unilaterally for a maximum period of one year, and the ‘standstill clause’ phrasing in the SADC EPA does not apply to goods excluded from liberalisation. All the African EPAs except ESA allow for the temporary introduction/increase of export duties in ‘exceptional circumstances’ following ‘joint agreement’ with the EC (EAC) or ‘consultations’ (CEMAC, Ghana, Côte d’Ivoire and SADC).

A general prohibition on import barriers other than customs duties and taxes (apart from measures taken in the context of anti-dumping and countervailing measures/safeguards) is subject to exemptions in all EPA texts (e.g. for infant industry protection or in case of public finance difficulties). The maintenance of national subsidies conforming to WTO provisions is also allowed in all the texts. The CEMAC text refers to the gradual phasing out by the EU of its agricultural export subsidies, which it is already committed in the WTO to do by 2013.

There are strict provisions on customs and trade facilitation with sanctions in case of failure to provide administrative cooperation. If the Joint Council/Committee cannot come to a mutually accepted solution within three months, the complaining party can suspend preference for up to six months (renewable).


Areas for continued negotiation

There are big differences in the ‘rendezvous clauses’ in the interim EPAs which establish the areas in which negotiations must continue. How important these differences are in practice remains to be seen since the clauses are ‘guidelines’ for the areas to be negotiated, and all texts foresee additional topics deemed by the parties to be relevant coming up in the ongoing negotiations towards a full EPA.


Dispute settlement

The dispute avoidance and settlement provisions are more extensive and rigid than in some previous EU FTAs, such as the TDCA with South Africa. The procedures for consultations, seeking advice from a mediator and establishing an arbitration panel are detailed and the time-frames are very strict. The procedures are largely identical except in EAC and ESA, where negotiations continue. The application of temporary trade remedies is envisaged in cases of non-compliance with an arbitration decision.


Development cooperation and finance

All the EPAs except EAC have comprehensive but wholly non-binding provisions for development cooperation, mentioned in each and every chapter as well as in a section on development cooperation (most extensively in the ESA text). The EAC, ESA and CEMAC texts also explicitly foresee continued negotiations on this.


The way forward

Provided that there is goodwill and flexibility on all sides it ought to be possible to avoid the EPA process creating new barriers to African integration. But this requires a recognition that not all the details of the current texts are set in stone. The demands that will arise from the agreement of full EPAs reinforce this need.

Part B considers the implications of the interim EPAs concluded in Africa, and the way they were concluded, on the continuing EPA negotiation process, and identifies options for the way forward. It addresses five questions raised in the terms of reference for the study.

1) What are the lessons learned from the EPA negotiation process?

2) Based on the findings from part 1, what are the different scenarios for the way forward, including: – moving from interim to comprehensive EPAs, moving from country to regional EPAs, and/or moving from interim EPAs to GSP+?

3) What could be the changes and additions to the interim EPAs to make them comprehensive, development friendly and in support of regional integration?

4) What are the opportunities and threats for the ACP for the negotiations on ‘phase 2’? Special attention should be given to the lessons from phase 1, the political dynamics and the interaction between regional integration and EPA negotiation processes.

5) Considering the outcomes of part 1, what are the implications for aid modalities for the coming years (where should ACP and donors pay attention to compared to the current state of affairs)?

A turbulent negotiating process

The EPA process has not been an easy or friendly one; words and deeds have often been at odds, and tension has flared up.

From the outset, EPA negotiations have been extremely challenging, in terms of both process and substance. As a result, and amidst much tension and frustration on either side of the table, there had been only limited substantive progress in most negotiations a few months ahead of the 31 December 2007 deadline. For various reasons, EC and ACP negotiators have in most cases not been able to reach a common understanding and approach on the cornerstones of the new trading arrangement, notably, and quite surprisingly, on the development component and regionalism. The lack of institutional and technical capacity on the ACP side, as well as insufficient political leadership in many regions, has also taken its toll on a smooth progress in the negotiations.

The first challenge is thus to mend bruised feelings, restore some confidence and trust and build a true partnership. To that end, positive rhetoric will not suffice. It will be necessary to allow for the adjustment of interim texts that do not fully reflect the interests of all parties. In revising an interim agreement it may be helpful to draw on texts concluded in other ACP regions, adopting some provisions from these as suitable.


Options for the way forward

All the parties are officially committed to concluding comprehensive EPAs, and negotiations are continuing to that end in all regions. However, given past experience, this goal may not be as easy to achieve as hoped and different outcomes of the negotiation process may be envisaged. These range from concluding full EPAs over adopting the initialled interim agreements as permanent solutions (possibly joined by additional countries), to opting out of EPAs, relying instead on the GSP (EBA, GSP+ or standard GSP, depending on the criteria met by the countries) to access the EU market and liberalising under the intra-regional and multilateral frameworks, if at all. It is not for the authors of this study to identify which is the best option, as this is a task for each country and region. In fact, different countries, even within the same region, may prefer different options. As indicated by the analysis in Part A, the challenge will be for each grouping to adopt an common approach consistent with their regional integration processes, while promoting their development objectives.


The need for ownership

The range of issues to be covered in a full EPA should reflect both ACP national and regional interests. If interests among countries within a region differ, an EPA might include varying degrees of commitment on trade in services and trade-related issues. Further, signing an EPA should be a sovereign decision by each country: if a country chooses not to take part it should not be pressured to join through political pressure or through aid conditionality.


Timing

It will be crucial to allow sufficient time to negotiate a truly development friendly, comprehensive EPA that is owned by all involved stakeholders; while the momentum of the negotiations should not be lost, there is no need to rush to an agreement with ill-conceived provisions. A clear agenda and calendar for the negotiation that is acceptable to both partners should be defined, and should avoid leaving contentious or difficult issues until the end.

Instead of moving from interim agreements directly to full EPAs it would be possible to address different areas of negotiations step-by-step through a built-in agenda consisting of rendezvous clauses with different issue-specific deadlines to finalise negotiations. Implementing commitments in line with this agenda could further be made conditional on the availability of support for capacity building.
Increasing transparency

There is a need to increase transparency in the negotiations and their outcomes in order to allow for public scrutiny by policy makers, parliamentarians, private sector and civil society representatives. This will foster a more participatory approach and contribute to increasing ownership of the agreements reached.


Reducing negotiation asymmetries

The asymmetries in negotiating capacity (between the EU and ACP and among the ACP) that have contributed to the incoherence of the interim agreements need to be taken into account in the further negotiations if the problems identified in Part A are not to be made worse. This needs to be done through adapting the pace of negotiations as well as the style of interaction between the parties and through capacity-building measures under the AfT initiative.

Lack of capacity has also hampered the effective consultation, involvement and participation in the EPA process of ACP civil society, private sector and parliamentarians, a fact which consequently often hindered the ACP negotiating positions. As a result, the EPA process has generally not been effectively embedded in national policy processes in the ACP and in extreme cases it has generated a general public hostility towards the EPAs.


Aid for Trade and EPA related development support

Although the EPAs have only non-binding provisions for development cooperation, the African ACP states will lose significant tariff revenue – in some cases very quickly – and financial support to offset this is needed. The total ‘theoretical revenue’ (as defined in Part A) that will be lost during the first tranches of liberalisation is $359 million per year.

Such inflows are needed just to maintain the status quo: the support needed for domestic producers to adjust to increased competition from imports and new opportunities for exports as a result of duty-free, quota-free access (DFQF) is additional. DFQF will bring some immediate and valuable gains from the redistribution of the revenue that until the end of 2007 the EU accrued as import tax. But it still needs to be built on by enabling an increase in ACP supply to bring longer-term benefits. This will often require significant investment in both physical and human resources, some of which will need to come from the private sector and some from the public sector.

As the centrepiece of the EU’s commitment to EPAs so far, it would be sensible to ensure that there is also adequate aid provision to help remove blockages to increased supply. Europe has committed itself to provide more Aid for Trade (AfT) to developing countries and should ensure that part of this enhances the use of DFQF by removing obstacles to production and export, such as poor infrastructure and other physical or institutional deficiencies.

Indeed, the EU decided that EPA-related needs should be addressed through the ‘EU Aid for Trade Strategy’ in favour of all developing countries, recognising that the availability of aid for trade should not be made conditional on concluding an EPA. However, there is no clarity on what resources will be available for each ACP country and by when as part of the AfT Strategy.

Improving mechanisms and procedures for delivering AfT and trade-related assistance is as important as providing an appropriate level of support. Effectiveness of delivery will determine the capacity to implement EPAs and any further trade reform. Given that the AfT Strategy builds on the EU commitments for improving the quality of aid in line with the Paris Declaration, there is a window of opportunity in 2008 to use aid effectiveness processes to harmonise donors’ practices and align them with partner countries’ own delivery instruments.

The ACP regions and countries should proactively ensure that the EU AfT Strategy is operational and effective by identifying gaps in existing support and improvements needed in AfT delivery instruments. There is urgent need in particular to assess the added value of different mechanisms (regional funds and national-level instruments, etc.).


Introduction


The purpose and scope of the report

The start of 2008 marked the quiet death of over 30 years of Lomé/Cotonou preferences, and yet most ACP countries did not lose their privileged access to European markets. This report, prepared by the Overseas Development Institute (ODI) and the European Centre for Development Policy Management (ECDPM), provides a comprehensive analysis of the regimes that have replaced it for Africa, the negotiations that remain to be completed and the challenges facing Africa in implementing it, some of which require support from Europe.

The report is divided into two main parts. Part A provides an analysis of the liberalisation that African states have agreed to undertake in relation to imports from the EU and vice versa and key features of the main texts of the interim EPAs. Part B reviews the process that culminated in the initialling of interim EPAs by some ACP states but not by others to learn the lessons, reviews the future options for both current signatories and non-signatories and assesses the AfT modalities. This last section of Part B is particularly relevant, since it is clear from the analysis in both Parts that securing a favourable development impact from EPAs will require substantial financial and technical assistance both to help countries adjust and to boost supply in order to take advantage of new opportunities.

This introductory review provides a brief scene-setting guide to the events leading up to December 2007 and ushering in 2008 and highlights some of the key findings and recommendations that have a general applicability; many others are to be found in the relevant country- and issue-specific sections of the report.


The road to EPAs

When the EU and the ACP group of countries started negotiating a new WTO-compatible trade regime in 2002 it was with the intention of concluding EPAs by the end of 2007. After a first ACP-wide phase to address issues of interest to all ACP countries negotiations were taken to the regional level. The EU and six ACP regional configurations thereby engaged in discussions on the scope and substance of the future trade and development agreements, which they have formally been conducting for the last three to four years.

From the outset EPA negotiations were extremely challenging, in terms of both process and substance. As a result, and amidst much tension and frustration on either side of the table, there had been only limited substantive progress in most negotiations a few months ahead of the 31 December 2007 deadline. For various reasons, EC and ACP negotiators had in most cases been unable to reach a common understanding and approach on issues surrounding the key principles of EPAs.⁴

By October–November 2007 none of the African regions was in a position to conclude a full EPA and nor was the Pacific. The EU insisted on abiding by the letter of the WTO rules and on not seeking any further derogation. In the absence of any decision to the contrary the only alternative trade regime available for those ACP countries not signing an EPA would have been EBA for LDCs and for others the standard GSP.⁵ Since the latter offers less favourable conditions the ACP asked for an alternative to EPAs that would safeguard market access from 2008 onwards. Proposals ranged from an extension of Cotonou preferences (through the formal request of a prolongation of the WTO waiver) to the granting of GSP+ preferences to all ACP countries.

Whilst the EC refused such approaches, stressing that failure to reach an agreement by the end of the year would not produce an alternative strategy, ⁶ it did agree to limit the scope of what needed to be agreed by end-2007 to ‘interim agreements’ that provided a legal basis for continuing (and improving) ACP preferences into 2008. Such interim agreements would need to cover all the areas required for an FTA compatible with GATT Article XXIV.

Although the European Commission denies having exerted any pressure, ⁷ there are plenty of ACP accounts to the contrary (see Part B, Box 4). The December 2007 ACP Council of Ministers ‘deplore[d] the enormous pressure that has been brought to bear on the ACP States by the European Commission to initial the interim trade arrangements, contrary to the spirit of the ACP–EU partnership,’⁸ in a process characterised by the ACP Secretary General Sir John Kaputin as ‘fraught with panic, confusion and disagreements.’ ⁹ Many ACP Heads of States and Ministers have publicly expressed their disquiet over these EPA negotiations.¹⁰ Even Commissioner Mandelson came to acknowledge that ‘the last months of 2007 were difficult’ and that ‘some good relationships […] have been strained.’¹¹

The extreme rush of negotiating these extremely detailed and complex documents goes a long way to explain the many inconsistencies and gaps uncovered by this study and reported in Part A. It also explains the regional incoherence in most of the African EPAs. As the deadline approached, Part B explains, the European Commission switched away from a purely regional approach and started conducting parallel bilateral negotiations with single countries and sub-regions as a fall back position.

Free from the pressure to meet WTO commitments, the parties can now continue negotiations towards more comprehensive EPAs, based on their initial development objectives (and negotiations can continue with states that have not initialled the interim agreements). The European Commission has the mandate to conclude full EPAs and it intends to do so; none of their ACP partners has so far renounced this objective.

Reaching development-oriented agreements without arbitrary time pressure is an attractive prospect, but it is no easy task. The pressures of 2007 have coloured the continuing negotiations both in substance (some existing texts are incompatible with regional accords) and in style (there are bruised feelings and a lack of confidence). Without active steps to remove these actual and psychological barriers the promised land of EPAs may remain an unattainable goal.


Part A. Analysis of the existing agreements so far, both liberalisation schedules and texts


1. Introduction to Part A


1.1 The scope of the analysis

Part A of this report analyses the agreements initialled by African countries in December 2007. Where relevant, a comparison is made with the agreements initialled by the CARIFORUM states and by those in the Pacific, but the principal focus of the analysis is Africa. Since the African agreements are only ‘interim ones’, the analysis is restricted primarily to:

• a detailed analysis of the changes that each party will make to tariffs on goods trade;
• a review of the main texts of the agreements which concentrate upon:
• the provisions required for an FTA in goods such as can be presented to the WTO;
• necessary institutional infrastructure;
• provisions on trade defence;
• some provisions (but not complete ones) on those elements that have been included in the negotiations but on which final agreement has not yet been reached (such as services and the so called Singapore Issues).

Because the African texts have reached full agreement only in the area of trade in goods and related matters, negotiations on other areas will continue during 2008. These are one of the areas of focus in Part B of the report, which also includes an analysis of the lessons to be learned from the EPA negotiation process as well as the best way to move forward.

Identifying the lessons to be learned involves building upon the factual evidence provided in Part A. Since almost every African EPA agreement is different from the others many hundreds of pages of text and tens of thousands of tariff lines have had to be analysed in the course of this research. A major task for the report is to strike a balance between, on the one hand, providing accurate country- and product-specific information (which by definition is easily digestible only for readers focusing narrowly on, for example, Ghana or on the ‘implications for cereals’) whilst at the same time providing a broad picture of the overall patterns of what has been agreed. The second task necessarily involves the exercise of some qualitative judgements by the authors.

The format of this report aims to deal with these two tasks and make clear the extent to which any ‘broad patterns’ identified are based upon the authors’ judgements. It does this in the following way. Section A2 goes through key features of the liberalisation commitments that have been accepted by ACP signatories, country by country and region by region. Even this section, which is the most detailed, focuses on a pre-selected set of common indicators judged by the authors to provide an initial overview of key features of what has been agreed. It is to be considered as the first step in analysing the full implications of each EPA for each signatory country, and will need to be followed up by in-depth, country-specific (and probably issue-specific) studies.

Section A3 provides a summary of what the authors consider to be the key similarities and differences between the EPAs. The first part points to some apparent patterns in the liberalisation schedules that different African countries have accepted. It draws upon the country-by-country analysis in Section A2 and makes explicit the judgements and assumptions that underpin the identification of these ‘patterns’. This is followed by a summary of key provisions in the various EPA texts which tries to show the range of obligations that have been adopted (and to make some comparisons with other EU–developing country FTAs). In both cases an important focus is the broad implications for different African regions. This necessarily involves the exercise of judgement by the authors over which of the many features of each agreement are the most ‘relevant’ for each region.
The focus is particularly on the follow-up action that now needs to be taken in the context of the EPA. Such action is required to ensure both that EPA signatories are able to take advantage of any new opportunities (for example by removing supply constraints or providing institutional support) and that they are equipped to deal with any challenges that result (including those that arise for further regional integration and from obvious features of any EPA such as the need to find alternative sources of government revenue to replace declining trade taxes).

Section A4 considers the implications of EPAs for African exports. The net impact of the EPAs on ACP trade in goods will be the product of the effects flowing from the reduction of African tariffs on imports from the EU and the removal of tariffs by the EU on exports from Africa.


1.2 Which countries have signed EPAs

The list that has been distributed by the European Commission on which countries within which regional groupings have signed is presented in Table 1. In addition to this information, the table indicates the EU tariff regime that now applies to imports from non-signatories, the proportion of members of each regional grouping that have signed, and the number of liberalisation schedules that they have submitted.

In two regions all members have signed. These are CARIFORUM and EAC. The latter is perhaps the more noteworthy, since all but one signatory are LDCs and, hence, have no immediate need to join an EPA to avoid tariffs being increased on their exports to the EU. It is also an ‘EPA negotiating region’ that emerged only in the final months of the five-year process.

In EAC all parties appear to have agreed to the same liberalisation schedule and so the EPA should not in principle cause any problems for achieving a CET. In fact, EAC is the only region for which this is the case. The end point for CARIFORUM (apart from Dominican Republic) is understood from those involved in the negotiations to be very similar but not identical, although there are many variations in how countries arrive, evident in complex variations in the schedules for the implementation.

At the other end of the spectrum is West Africa. Only two countries have signed interim EPAs, and they are significantly different from each other. This means that over four-fifths of the Economic Community of West African States (ECOWAS) have not joined the interim EPA, and that there is no established accord that, if all joined, would provide a region-wide agreement. In principle it would be possible for all the non-signatories to accede to the text agreed by Ghana, or that agreed by Côte d’Ivoire – but even if this were to happen there would still be at least one country in the region with different tariff obligations towards the EU from all the rest. The interim agreement with Côte d’Ivoire specifically raises the possibility of re-negotiating the liberalisation schedule as part of a wider ECOWAS EPA. Although the agreement with Ghana does not do so, Commission officials have confirmed orally that it is current policy to allow a re-negotiation of both accords in the context of a broader ECOWAS EPA. For the present, though, all that can be analysed are the texts and schedules of these two bilateral accords.

The Communauté Economique et Monétaire de l'Afrique Centrale (CEMAC) is notionally in the same position as CARIFORUM and EAC, in that there is just one text and liberalisation schedule. But this is because Cameroon is the only country in the group to have initialled an interim EPA. As with ECOWAS, over four-fifths of members have not so far joined.

The other ‘regions’ – ESA, the Pacific ACP countries (PACP) and SADC-minus – are in a midway position. Each of the signatories within the group has agreed an identical text, but their liberalisation schedules differ, with implications for future regional integration.

The word regions is in inverted commas above because both ESA and SADC-minus are now different groupings from those that were engaged in negotiations with the EU until the middle of last year (and, of course, from those that have agreed FTAs or customs unions under COMESA and under SADC). Apart from the unresolved position of South Africa (see below) the differences are relatively small for SADC-minus: Tanzania has joined EAC and Angola has not signed an interim EPA. That leaves BLNS and Mozambique as signatories, with the position of South Africa still under a question mark.

In the case of ESA, though, the changes are substantial. The ‘ESA region’, as determined by the signatory states, now consists just of four islands plus Zimbabwe (the current ability of which to implement any trade agreement must be a matter for conjecture). Unless other countries join, it is hard to see how this grouping can be considered a ‘real’ region. The implications for COMESA are clearly very important (and are taken up below in Sections A2.5 and B2.3)

The position of the Southern African Customs Union (SACU) is an anomaly. Under the 2004 SACU Agreement, no member can agree a new trade regime with a foreign country without the consent of all. Since South Africa has not initialled an interim EPA, this consent has clearly not been given. What happens now is uncertain. South Africa would appear to have the right, if it so chose, to support autonomously a change in the SACU CET towards the EU that brought it into line with the obligations that BLNS have accepted. In other words, there would appear to be a prima facie case that South Africa would not need actually to sign an EPA in order for the situation to be regularised; it would merely need to accept autonomously the required changes to the SACU tariff. But, unless the ‘common’ SACU external tariff were to have separate BLNS and SACU schedules (at least during the EPA implementation period) the EU would also need to accept some changes to the provisions of its TDCA. This is because some goods will be liberalised later under the EPA than is scheduled under the TDCA. Unless and until both of these things happen it would appear that the commitments to which BLNS have agreed are not enforceable in law within SACU.

Column 4 of Table 1 indicates the tariff regime currently being applied by the EU on imports from non-signatories. It confirms that the Commission has indeed applied standard GSP or most-favoured-nation (MFN) tariffs on imports from non-LDC non-signatories. However, the actual impact of this is modest, since most non-LDC countries exporting sensitive products to the EU have signed. Apart from a number of Pacific islands, none of which is believed to export sensitive products to the EU, only Congo, Gabon and Nigeria have had standard GSP/MFN tariffs applied to them (see Section A4).

1.3 Methodology

The main texts and liberalisation schedules of all the initialled EPAs have been analysed.¹² Analysis and comparison of the texts has been fairly straightforward, albeit time consuming, but the analysis of the liberalisation schedules has involved some challenges. ¹³ Those with a possible bearing on the results can be summarised under the headings of reconciliation, comparability and coverage; it is also important to define what are potential ‘EPA effects’.

Problems of reconciliation

There have been problems reconciling the products listed in the schedules (for liberalisation or exclusion) with data on imports and tariffs. In some cases this has arisen because the EPA schedules have been compiled using a different version of the Harmonised System (HS) from that used to record the most recent available data on imports and tariffs. In the case of BLNS, for example, the schedules are recorded using the 2007 version of the HS nomenclature. Naturally, the most recent data on imports and tariffs use an earlier version (2002). Consequently, 7% of the items imported by Botswana from the EU (accounting for 15.6% of import value in 2004–6) are not listed in its EPA schedule (either for liberalisation or exclusion). ¹⁴ Similar problems applied to the other three signatories. A similar problem of changing HS codes has arisen when identifying the overlap between the liberalisation commitments of BLNS with those to which South Africa has already agreed (and this is discussed in the Section A2.6 on SADC).

Problems of comparability

All trade data sources contain errors: there is no single ‘magic source’ that is always superior. Since alternative sources rarely provide identical information it is normal for analysts using different sources to produce different results. Consequently, it is important to explain the choice of data sources in case the findings in this report differ from those in other documents.¹⁵

In one case (ESA) the EPA schedules provide data on imports, and so these have been used. In all other cases, we have had to obtain data on imports from a third party in order to calculate the share liberalised in each tranche (and excluded) and the theoretical revenue impact. The team’s key selection criteria for the preferred data to be used for ACP imports when analysing their liberalisation commitments were:

• data availability for several years (normally the three years 2004–6) to allow the impact assessment to be made in reference to recent average import levels rather than those for a single year;
• a uniform approach for all countries within a single regional EPA (to maximise the intra-regional comparability of the analysis);
• a single source for the data (to maximise consistency of treatment of the raw data supplied by countries).

These criteria have resulted in the use of data from the United Nation’s Commodity Trade Statistics (Comtrade) database, using figures meeting the first criterion that have been supplied by the ACP importing country whenever they exist – save for two exceptions noted below. In other cases, where Comtrade does not offer 2004–6 data supplied by the ACP importer, ‘mirror data’ from Comtrade (on the EU’s reported exports to the country concerned) have been used instead.

The two exceptions are:

1. where the preferred data exist for some states in a regional group but not for others;

2. where they suffer from problems already known to the team.

It is important to use the same data source for all members of a regional group in order to ensure comparability in the analysis. To achieve this in the case of exception (1), mirror data have been used for all the countries in the group. They have also been used in the case of exception (2).

Data on ACP tariffs have been taken either from the EPA documents or, where these are not given or are insufficient for our purposes, from UNCTAD’s Trade Analysis and Information System (TRAINS). The import and tariff data sources used for each country (and the reasons for this) are given either in Table 2 or in the relevant tables in Section A2. In all cases, again to achieve comparability, the proportion of imports covered by each tranche of liberalisation (and by the items excluded from liberalisation) has been established in relation to a country’s total imports falling into HS chapters 1–97. In other words we have disregarded imports in the two miscellaneous, unclassified chapters (98 and 99), neither of which appear in the import data or the tariff schedules, on the grounds that it is not possible (by definition) to analyse the impact of liberalisation. Moreover, neither is mentioned in any of the EPAs except for nine items with incomplete descriptions in the BLNS schedules.

Given the likelihood that the use of different sources will produce different conclusions, we have compared our results on the share of each country’s trade that will be liberalised by the end of the implementation period with those circulated by the European Commission (see Appendix 1). In all except three cases the results are sufficiently close as to be compatible with the use of different data sources (or inclusion/exclusion of HS Chapters 98–99). The exceptions are the EAC EPA (for some of its members) and Mozambique, plus BLNS (for technical reasons described in Section A2.6).¹⁶

Problems of coverage

Both of these exceptions are discussed in the relevant country sections below and may arise from problems of coverage. The issue is most easily illustrated in the case of EAC. The basic problem is that the EAC schedule lists goods in only 4,277 different HS6 codes, whereas the full HS nomenclature contains some 5,200. The proportion of trade that is ‘missing’ is substantial. In the case of Kenya, for example, the goods not listed in the EPA schedule accounted for 38% of the value of imports from the EU in 2004–6, and the proportion is even higher for Tanzania and Uganda. Since only items specifically listed as such are to be liberalised, the result of ignoring them is that a very high proportion of trade is ‘excluded’. But there is no way of knowing whether this is the correct interpretation, whether there are schedules missing from the documents analysed (and not referred to in the main text) or there exists some other explanation. Requests to the Commission for further information have not brought forth a response. In the absence of guidance, the relevant tables identify separately the proportion of trade that is formally ‘excluded’ (because the items are flagged as such in the schedules) and the proportion that is simply not mentioned as being liberalised.

Defining the ‘EPA effect’

An additional methodological ‘issue’ that needs to be flagged to avoid misunderstanding concerns the definition of the effects arising from the EPA rather than from other causes. In seven of the eleven tariff schedules covering Africa, liberalisation commitments are expressed not in relation to the current applied tariffs but in relation to the agreed CET of the customs union to which the countries belong (see Table 2).

Since the countries concerned have committed themselves to establish a CET, any changes from the status quo needed to reach the agreed levels is defined in this report not as an ‘EPA effect’ but as a ‘customs union effect’. In the case of Cameroon, for example, changing the current tariff on a product of, say, 20% to a previously agreed CEMAC CET of 10% is a consequence of the country’s decision to join the CEMAC customs union. It is only any further cuts in the tariff to 0% that is an ‘EPA effect’: an additional element of liberalisation that is not required to be a member of CEMAC but is required to be a member of the EPA.

At the same time it is important to consider the combined customs union and EPA effects to understand the challenges facing countries. We have adopted a pragmatic approach according to the country/region in question. Both Ghana and Côte d’Ivoire appear to us from the documents supplied to have set their liberalisation in relation to the current applied tariffs, so the issue of a CET does not arise. In Cameroon the reductions appear to be set in relation to a CET – but the base (CET) tariff shown is the same as the country’s maximum MFN tariff for all except 276 of the 5,224 lines in the schedule. The differences are sufficiently small for the two to be assumed at this level of analysis to be identical. In the case of EAC, sufficient progress has been made towards a customs union for it to be appropriate to take the ‘customs union’ effect as given. This is not the case with ESA, some of the signatories of which have not signed up to the COMESA customs union. Moreover, it is clear that the agreements reached so far on the COMESA customs union are being interpreted differently by members. In all cases except Comoros (for which there are no data in TRAINS) we have shown the changes from recent MFN tariffs as well as from the CET. The ‘SADC EPA’ is not a regional agreement in any serious sense of the term and so the point of comparison is with current applied tariff rates.

In each of the following country sections the analysis follows the following sequence (the implications of which are spelled out in more detail in the earlier sections; only variations are flagged in the later sections). First there is an overall review of the broad pattern of liberalisation. This is followed by an analysis of the exclusion basket (i.e. the goods that will not be liberalised as part of the EPA). Third, the report focuses attention on the goods that will be liberalised in the first tranche of liberalisation, since the impact of this will be felt first (and in some cases immediately). Finally, a figure is given for the hypothetical tariff revenue loss resulting from the full liberalisation and from the first tranche of liberalisation.

2. Extent of ACP liberalisation: country-by-country review

This section deals with four specific questions in relation to the national-level liberalisation commitments entered into by ACP states. These are:

• the product coverage of liberalisation and its relative impact on sectors;
• the speed of tariff liberalisation (and the front/back loading of products/sectors);
• the relative importance and broad composition of the exclusion lists;
• the impact on hypothetical government revenue.

Because only two West African and one Central African states have signed interim EPAs, they are treated here as separate countries. The other states are dealt with in their regional group but important differences between the commitments of the various signatories to a particular agreement are flagged.

2.1 Cameroon

The timetable

Cameroon is one of those countries that have established its liberalisation schedules by reference to a CET – which is assumed to be that of CEMAC. The broad pattern of its liberalisation is shown in Table 3. Liberalisation will not commence until 2010, giving Cameroon two years to make any necessary amendments to its current tariff schedule to bring it into conformity with the CEMAC CET.

Liberalisation is moderately back loaded in the following senses. First, the basket of products to be liberalised in the final tranche accounted for a higher proportion of Cameron’s imports from the EU in 2005–6 than did the goods in either of the two preceding tranches. Second, both the simple average tariff and the trade-weighted average of the products to be liberalised are higher in the later than the earlier tranches.

At the same time, Cameroon will experience some very early effects. Even the first tranche includes liberalisation of some high-tariff items. Moreover, products accounting for almost half of Cameroon’s imports from the EU in 2005–6 will be fully liberalised within 10 years.

Exclusions

Cameroon’s exclusion basket accounted for 21% of imports from the EU in 2005–6. Of the 1,217 sub-heads that have been excluded (see Table 4) less than one-third are agricultural products. Although almost two-thirds are items which currently face the highest CET tariff (of 30%), the country is also excluding a small number of goods that face very low tariffs at present.

There are too many excluded items for it to be feasible to provide a detailed analysis of the goods concerned, and the same applies to most of the EPAs. In each case we provide a broad indication of the distribution of excluded goods according to major product groups (HS chapter), presented in declining order of the relative number of excluded items in each (Table 5). Hence, for example, the three chapters with the largest number of items excluded by Cameroon are textiles and clothing. This ‘league table’, though, provides only a very broad indicator of the relative sensitivity of different sectors because the number of items varies substantially between chapters. Textiles and clothing, for example, have many more HS sub-heads than does Chapter 26 (ores, slag and ash). The figure for the share of total exclusions, therefore, is a function of both the relative sensitivity of the product group and the number of items that need to be listed in order to exclude it.



The first tranche

At the other end of the scale are the goods that Cameroon will be liberalising in its first tranche. These are summarised in Table 6. The table lists all items with a CET of 30% plus all those with lower positive tariffs that were imported from the EU in 2005–6 to a value of $1 million or more. It is improbable that tariffs of 10% or lower could prove to be such a strong barrier that imports have been kept well below their ‘natural level’. Hence, if goods were not imported in the recent past (and many of them were not imported at all or at very low levels) it is reasonable to suppose either that a demand for them does not exist in Cameroon or that the EU is not a competitive supplier. The same reasoning applies (albeit with less force) to tariffs of between 10 and 20%.






Given this, Table 6 probably gives a reasonably realistic picture of the positive-tariff items in which EU imports may increase as the first tranche of liberalisation is implemented. Only nine of the 41 products in the table are agricultural (in the sense that they are covered by the WTO Agreement on Agriculture – AoA). And none was imported in significant values (or at all) in 2005–6. All have a CET at the highest level (of 30%). Because this is relatively high (and the pre-existing Cameroonian applied tariff could be even higher) it is not impossible that imports have been kept at artificially low levels. On the other hand, the products concerned do not appear to be ones in which either the EU is a major exporter or there is likely to be competitive production in Cameroon. This picture is reinforced by the non-agricultural items in the list. A number of these appear to be production inputs rather than direct competitors with Cameroonian production.

Hypothetical revenue loss

We calculate for each country the ‘hypothetical revenue loss’. This is obtained by applying the base applied tariff (where known) to the value of imports in the reference year in order to produce the ‘hypothetical revenue’ currently being collected. In other words, if imports are €100 and the tariff is 15%, the hypothetical revenue is €15. This assumes that collection is 100% efficient and that there are no rebates, which is unrealistic. It also assumes that all tariffs are known, which is not always the case. These two ‘errors’ will work in opposite directions. One will produce a figure for current hypothetical revenue (and hence the figure for EPA-induced revenue loss) that is the maximum possible figure and is almost certainly overstated, but by an unknown amount. The other will overlook some revenue that is currently being collected (assuming that the ‘missing tariffs’ are positive).

By the end of the liberalisation period, tariffs will by definition be zero and so no further revenue will be collected. But during the implementation period the ‘loss of revenue’ will be smaller than implied by the figures cited in this report both because they are based upon the unrealistic assumptions of perfect collection but also because revenue on some items could actually increase. If the initial reductions in tariffs lead to a surge in imports, the total revenue for government could be higher even though the tariff is lower. But, by definition, any such increase will be temporary and will disappear once tariffs have reached zero (and probably before then as they fall to very low levels).

In order to provide a helpful guide to the incidence of tariff loss, we provide two figures for each country. The first is the total revenue loss (in the values relevant to the reference year) that will occur by the time that liberalisation schedule is fully complete. The other is the equivalent figure for the revenue loss by the end of the first tranche of liberalisation.

In the case of Cameroon the total theoretical loss (in 2005–6 values) over the full implementation period is $99 million. Of this $20 million will be ‘lost’ during the first tranche of liberalisation. Although the majority of the loss occurs later in the implementation period the early ‘revenue shock’ is greater than the early ‘adjustment shock’. Although the tariffs on the early tranche liberalisation are relatively low, they generate (as might be expected) disproportionately high theoretical revenue. Cameroon will lose 21% of its theoretical tariff revenue on imports from the EU during the first six years of implementation (and this will be additional, of course, to any loss that occurs by virtue of Cameroon adopting the CEMAC CET).

Summary

In conclusion, therefore, the initial impression of the Cameroon liberalisation schedule is that:

• the ‘EPA effect’ will start in two years (and will be additional to any ‘CEMAC effect’) and will be completed over the next 16 years;
• the effects of liberalisation on producers and consumers will be moderately end loaded because:

- the later tranches include a higher proportion of Cameroon’s recent imports than do the earlier ones;

- the tariffs of goods liberalised in the earlier tranches tend to be lower than those in the later tranches;

- the items that will be liberalised in the first tranche either face a CET of zero or are goods that appear either not to be imported or not to compete with Cameroonian production;

• by contrast, the revenue impact of the EPA will be moderately front loaded, with 21% of the hypothetical loss occurring during the next six years;
• one consequence of the front-loading of the tariff cuts, as explained in Section B2.3, is that if a regional agreement is concluded Cameroon could already have cut tariffs below the CEMAC CET level applied by other countries in the region.

2.2 Côte d’Ivoire

The timetable

Côte d'Ivoire will begin to liberalise products immediately in 2008 (two years before Cameroon) and will complete the process by 2022 (one year before Cameroon) – see Table 7. The goods to be liberalised during the first tranche (over five years to 2012) represented almost 60% of Côte d'Ivoire’s imports from the EU in 2004–6. Liberalisation is therefore heavily front loaded, with less than 10% of imports scheduled for tariff cuts from 2018 onwards.

Although some of the goods that are to be liberalised in the first tranche currently face zero tariffs, there are some with tariffs as high as 20%. Indeed, it is the second tranche of liberalisation and not the third that has the highest simple and trade-weighted average tariffs.

Exclusions

The basket of goods to be excluded from any liberalisation accounted for 20% of the country’s imports from the EU in 2004–6. Of the 643 items, just over one-third are agricultural and almost two-thirds face the highest current tariff of 20% (see Table 8). A further 28% currently face a tariff of 10% or more, with the rest facing positive duties of less than 10%. Textiles account for the largest proportion of exclusions (Table 9), but vehicles (presumably for revenue purposes) are also important as are a number of agricultural goods. It is worth noting, though, that the second-‘highest’ agricultural chapter (9) is one in which the EU would not appear to have an obvious supply capacity (since it excludes for example instant coffee, to be found in Chapter 21).







The first tranche

Five of the goods being liberalised in the first tranche and which have been imported to a value of $1 million or more in the recent past are agricultural (see Table 10). The table only includes those items that have been imported in sufficient values to give a reasonable probability that they are items that the EU can supply and that Côte d'Ivoire demands. Several of the agricultural products would appear to be items that might compete with domestic producers. In addition to the items covered by the AoA, Côte d'Ivoire will be liberalising six fish items which could well be directly or indirectly competitive with domestic food supplies. Many of the non-agricultural products, though, appear to be intermediate inputs into production.





Hypothetical revenue loss

By the end of the implementation period Côte d'Ivoire could face theoretical revenue losses of $139 million. These will be heavily front loaded. The theoretical losses in the first tranche are $83 million, or just under 60% of the total.

Summary

In conclusion, therefore, the initial impression of the Côte d'Ivoire liberalisation schedule is that:

• the ‘ EPA effect’ will start immediately because tariff reductions will be from the current applied tariff and start in 2008;
• the liberalisation will occur more rapidly than was the case for Cameroon, both because the implementation period is shorter and because liberalisation is heavily front loaded; by 2107 Côte d'Ivoire will have liberalised over 70% of its recent imports from the EU, including many of those with relatively high tariffs;
• both the revenue impact and the effect on agricultural producers could be felt very early in the implementation period.

2.3 Ghana

The timetable

Ghana will start liberalising in 2009 and will complete the process by 2022 (Table 11). The liberalisation schedule is front loaded. The products to be liberalised in the first tranche (which will be completed within six years from now) accounted for over one-quarter of the country’s imports from the EU in 2004–6 and also include the highest tariffs on any item that will be liberalised under the EPA. Over 70% of imports will be liberalised within ten years (or two years faster than, say, South Africa is liberalising under the TDCA).

Exclusions
Some 20% of the value of Ghana’s imports are excluded from any liberalisation at all. Of the 1,085 items that will be excluded 28% are agricultural items (Table 12). 62% of the excluded items are in the highest tariff band but six goods that are excluded are currently duty free – which appears bizarre. The most frequently excluded items appear to relate to light engineering, and may be intended to protect domestic manufacturers (Table 13).

The first tranche

The single very high tariff item that Ghana will liberalise is petroleum and the current high tariff must be assumed to be for revenue generation rather than protectionist purposes (Table 14). Four of the items that will be liberalised in the first tranche (and meet the selection criteria for the table) are agricultural products. The first three are all items likely to be exported by the EU and which are likely to affect farmers. Other items, though, seem unlikely to pose obvious adjustment challenges.



Hypothetical revenue loss

Whilst the initial tranche of liberalisation does not appear likely to cause major adjustment problems for Ghanaian producers, the same cannot be said of the revenue impact of the EPA. Over the full implementation period, Ghana will lose theoretical revenue of $97 million, but 29% of this will disappear during the first tranche, i.e. within six years from now.

Summary

The conclusion, therefore, of the initial impression of Ghana’s liberalisation schedule is that:

• the EPA effect will start very quickly because tariff reductions will be from the current applied level and will begin in one year;
• the items liberalised in the first tranche do not at first sight appear to pose adjustment problems for domestic producers;
• but the revenue impact of the EPA liberalisation is likely to be severe since significant new revenue must be found within ten years.

2.4 EAC

The regional implications and timetable

EAC is the only African region in which all signatories have identical schedules. These are all based on reductions from the EAC CET and none requires a country to start removing any positive tariffs until 2015. Any liberalisation before that date, therefore, needs to be judged as a ‘customs union effect’ rather than an ‘EPA effect’.

Liberalisation will occur in three tranches. The first is in 2010 and involves only products with a CET of zero percent. The second will be between 2015 and 2023 and the third between 2020 and 2033. In other words, countries have 24 years from the date of attainment of the CET rates (and 26 years from 2008) to complete the EPA liberalisation process. This makes the EAC EPA the one with the longest transition period.

Hypothetical revenue loss

Following the format of the hypothetical revenue analysis undertaken for West and Central Africa, Table 15 shows the potential implications of the EPA. Since none of the countries will liberalise any positive duty tariff during the first tranche the table indicates the proportion of hypo­thetical revenue that will be lost by the end of the second tranche. In other words, the impact indicated in the table will not be fully felt until 2023, giving countries a relatively long time to adjust. But by that time all countries will have had to put in place alternative revenue sources since they will have lost the greater part of their tariffs on imports from the EU. Because the figures in Table 15 are with respect to changes from the CET they are wholly an ‘EPA effect’ and are additional to any ‘customs union effect’.

Specific country effects

Although the liberalisation schedules are the same, their impact is determined by the level and distribution of imports from the EU in the recent past. Obviously, countries that import from the EU large quantities of items that will be liberalised earlier in the EPA process will face a more rapid adjustment shock than those that do not.

A flavour of the potential non-revenue adjustment effects (for domestic producers and consumers) in each of the countries is provided in Tables 16–20, which provide for each of the EAC countries information on the number and value of the goods to be liberalised in each of the tranches (and to be excluded from liberalisation) as well as the agreed EAC CET for these goods. In all cases countries have to start removing positive tariffs on a significant proportion of imports during the second phase. The trade-weighted average CET for the goods covered by the second tranche varies from a low of 10.3% (for Uganda) to a high of 17.4% (for Burundi).






















Exclusions

The proportion of imports (in 2004–6) that are being excluded from liberalisation for the region as a whole is 19.7%, but this varies between countries (because they import different things) from a low for Uganda (of 17.3%) to a high for Burundi (of 23%). Very few of these are agricultural products (Table 21) and all are goods with a CET of 10% or more. Clothing figures prominently in the exclusion basket (Table 22), followed by other light manufactures.






Summary

In conclusion, therefore, the initial impression of the EAC liberalisation schedule is that:

• the approach and provisions of the EPA support EAC regional integration;
• the ‘EPA effect’ will not start until 2015 and will be completed over 26 years from now, giving the region a good period of time within which to adjust;
• the effects of EPA-induced liberalisation on producers and consumers will be end loaded because the cuts will be from the CET, with most of the highest-tariff items reserved for the final tranche;
• but the revenue impact will be faced in the middle of the implementation period – and will be severe.

2.5 ESA

The regional implications and timetable

All of the ESA states have established their liberalisation schedules in relation to the CET (presumably of COMESA), but the details of their liberalisation and of their exclusion baskets are different. Hence they are treated as separate actors in this section and in all cases (except Comoros for which data are lacking) the tables show each country’s autonomous, pre-CET tariff for the latest available year (2006). This allows readers to make an assessment of the relative scale of the ‘customs union’ and the ‘EPA effects’.

In all cases, the phasing of liberalisation is made in relation to the product groups established by COMESA for its CET: raw and capital (for which the agreed CET is to be zero); intermediate (with an agreed CET of 10% when the customs union is fully implemented); and final (with a CET of 25%). This has important implications for the impact of the EPA on COMESA. Although the COMESA members agreed that the CET should be set at different levels for these groups, they never agreed a formal definition that allocated each item in the nomenclature to one or other group. The EPAs have made this specific link – but it is far from clear that ‘raw and capital’ or ‘intermediate’ or ‘final’ are defined in the same way in each country’s schedules. Take the cases of chromium and thallium waste and scrap which are treated differently by all five countries:

• Comoros indicates that they are CET Class A (raw), and has them with raw/capital goods in the first liberalisation tranche;
• Madagascar indicates that they are Class 3 (final) but it includes them in tranche 2 (intermediate goods);
• Mauritius indicates that they are Class 3 (final), but has included them in tranche 1 (raw/capital goods);
• Seychelles doesn’t use the same codes, but appears to indicate that analogous ones are CET Class B (intermediate) and has them in tranche 2;
• and Zimbabwe indicates that thallium waste is Class B (intermediate) and includes it in tranche 2, but that chromium waste is Class C (final) and includes it in tranche 3.

A selective check has been made of the countries’ schedules to determine whether or not this is an isolated, one-off case of incompatible definitions; it is not. There are, in fact, over a thousand items being liberalised by one or more of the ESA countries where there is some degree of discrepancy in the CET classification. Table 23 gives the incompatible definitions that have been used in the EPA schedules for a selection of goods to illustrate the point.¹⁷ This may make eventual agreement on a common, customs union wide set of tariffs more difficult.

In all cases liberalisation occurs in three tranches which relate broadly speaking to the COMESA CET categories although, Seychelles and Zimbabwe apart, countries put a few items from other CET classes into their liberalisation tranches. Putting these minor variations aside, raw materials and capital goods are liberalised first in a single year (although the actual year varies). The other two groups are liberalised in two overlapping tranches with the one on intermediate goods normally (but not always) being completed before the one on final goods. Tariffs are not reduced by equal annual instalments during these two tranches (as is the case in some other EPAs) but in four or five specified years. There will be tariff cuts in 2013, 2014, 2016, 2017, 2020 and 2022. EPA-induced liberalisation will take place, therefore, over ten years, but since it will not begin until 2013 the effective period is 15 years from now. During the first five years (2008–2012), though, countries must accommodate their current tariffs to the COMESA CET level.

Hypothetical revenue loss


Because there are broad similarities in the liberalisation timetable and schedules, differences in the hypothetical revenue loss will be influenced heavily by the pre-existing level and balance of imports from the EU. Table 24 provides for all of the ESA states the same information on potential overall and first-tranche revenue loss. Potentially, all the countries will experience substantial revenue losses in the first tranche – but in the case of Mauritius and Seychelles this impression is probably misleading since sales tax will replace tariffs as a revenue source.

Comoros

The TRAINS database does not list MFN tariffs for Comoros so it is unclear how far current tariffs will have to be reduced in order to reach the agreed CET. All of the items in the first tranche of liberalisation (2013) have CETs of zero (Table 25). It has until 2014, therefore, which is the first year for the other two tranches, to begin ‘EPA induced’ liberalisation.





The exclusion basket accounted for 19.3% of Comoros imports from the EU in 2004–6. Two-thirds of the excluded items are agricultural (Table 26). But the absence of any information on either MFN or CET tariffs for the other items means that the information provided for other countries on the exclusion list table has not been possible for Comoros. Not all of the agricultural goods excluded are items that the EU can necessarily supply (Table 27). Chapter 9, for example, which is listed third in Table 27, does not include instant coffee – and the EU is obviously not a producer of unprocessed coffee and tea.









All of the items being liberalised in the first tranche face a CET of zero. But the absence of MFN tariff data has also made it impossible to identify what changes Comoros will need to make to current tariffs in order to achieve this CET rate.

Madagascar

Although Madagascar has in each of the liberalisation tranches some items for which its recent MFN duties have been zero, they also all contain other items that have faced tariffs of up to 20% (Table 28). There is a modest progression over the implementation period from the trade-weighted average tariff of 10.4% for the goods to be liberalised in 2013 to one of 13.3% for goods in the two tranches ending in 2022, but this is insufficient to indicate any discernable back loading. On the contrary, the items that will be liberalised in 2013 accounted for 37% of the country’s imports from the EU in 2004–6, implying a sharp front loading given the similarity of trade-weighted tariffs.





Some 19.3% of imports are excluded altogether from liberalisation, and just over two-thirds of these are agricultural (Table 29). The majority of items (87%) face the highest CET (of 20%). Bizarrely, though, as with Ghana some items that are duty free are also being excluded from liberalisation. The agricultural exclusions are, in the main, goods for which the EU is a plausible supplier of items that would compete directly or indirectly with local farmers (Table 30).






None of the items being liberalised in 2013 are agricultural products (Table 31) and two of the three of those that currently face a tariff of 20% are not necessarily competitive for domestic production. One item, though, may cause problems: this is ‘worn clothing’.





Mauritius

Mauritius’s first tranche of liberalisation is to be completed in 2008 (rather than 2013 as specified in all the other ESA EPAs). Not all of these goods had been liberalised in 2006, the latest year for which tariff data are available (Table 32). Since the country has announced its intention to be ‘a duty-free island’ (and to use sales taxes instead of tariffs to collect revenue from consumption), this will presumably not pose any ‘additional’ EPA-induced problems for it. This group of products accounted for one-quarter of imports from the EU in 2004–6. Since only 4.4% of imports are being excluded altogether, the great bulk of imports (71% in total) will be liberalised between 2013 and 2022.

Of the 185 items that have been excluded from liberalisation, accounting for only 4.4% of the value of Mauritius imports from the EU, one half are agricultural goods and 58% currently face the highest tariffs, which are ad valorem rates of 30% or specific duties (Table 33). Again, there is a group of products that currently face zero tariffs that are being excluded from liberalisation. The main excluded items are processed foods and light manufactures, for all of which cheaper EU imports might compete with domestic production (Table 34).










A large number of the goods that will be liberalised this year faced 30% tariffs in 2006 (Table 35). But many of these were imported either in very low quantitative values or not all. This applies particularly to the 23 agricultural items. The rest appear to be industrial inputs and the objective of tariffs well may have been revenue generation.





Seychelles

Seychelles, like Comoros and Madagascar and unlike Mauritius, has its first EPA commitments in 2013. But in some cases it will need to reduce very high tariffs (in 2006) to meet the CET target. Table 36 shows that this customs union effect far outweighs the EPA one. The trade-weighted average tariff for goods that will be liberalised by 2013, to reach the CET of zero percent, was 104.1% in 2006. Whilst some items had zero applied tariffs, others had rates of up to 200%. Further cuts from current levels are required for the subsequent tranches (which bring tariffs below the level needed for the CET), but the trade-weighted average of these tariffs is much lower than those included in the first tranche.





Only 2.5% of the value of Seychelles imports from the EU in 2004–6 are excluded from any liberalisation. But their 2006 trade-weighted average tariff was high at 79.3%. Some 37% of them are agricultural products (Table 37) and most face a tariff of 10% or more. There are a number of duty free items in the list as well. Apart from fish, the exclusions appear primarily to be related to revenue generation rather than domestic protection (Table 38).








Because so many of Seychelles’s initial tranche of liberalised products currently face high tariffs they are listed in full in Table 39 (as a consequence of which the table is long). Tariffs of 100% or 200% are sufficiently large plausibly to form an insuperable barrier to imports, so that the fact that trade has been low is not necessarily an indication of a lack of demand or supply capacity. Many are fish products and the high tariffs are linked to support for the domestic canning industry. But Seychelles is able, to an even greater extent than Madagascar and Mauritius, to substitute domestic sales taxes for tariffs since such a large proportion of the goods consumed are imported.