Europe s Reflection in the EPA Mirror Dr Christopher

Europe’s Reflection in the EPA Mirror Dr Christopher Stevens Open Europe Seminar 26 March 2007 Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007

What sort of Europe do we want? q The EPA debate is old and jaded – under way since 1996: Ø but cannot be resolved until an EPA exists; Ø hypothetical EPAs can be created which are development friendly; Ø but will they be agreed? q But the Commission has recently raised the stakes. q Already too late to complete EPAs in 2007 that are: Ø detailed; Ø genuinely negotiated with stakeholder buy-in; Ø apply to regions. q What happens in January 2008 - will: Ø the current trade regime be extended temporarily – the usual precedent; Ø a default regime be imposed – what the Commission threatens? Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 2

Europe as Caesar’s wife q Time runs out because: Ø Cotonou says so; Ø the WTO waiver expires, which: • does not require action for at least 2 years; • but EU claims it must be squeaky clean. q But there is also Cotonou Article 37(6): In 2004, the Community will assess the situation of the non-LDC which, after consultations with the Community, decide they are not in a position to enter into economic partnership agreements and will examine all alternative possibilities, in order to provide these countries with a new framework for trade which is equivalent to their existing situation and in conformity with WTO rules. Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 3

Complying with Article 37(6) q When it signed Cotonou the EU made a promise it could not fulfil at that time. q In 2000 there was no off-the-peg trade regime that was: Ø equivalent to Cotonou; Ø clearly WTO conforming. q In 2007 there still isn’t! Ø Either the EU negotiated in bad faith; Ø or it must create such a regime. Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 4

Enter the GSP q The Commission’s threat must assume that the GSP fulfils Article 37(6). q ODI research shows that it doesn’t. q Instead it will cause: Ø tariffs to be raised, not lowered, (in the name of being squeaky clean in the WTO); Ø ACP exporters to pay taxes to Europe; Ø the collapse of some ACP exports. Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 5

The ODI research q Analysed all significant ACP exports to EU in 2005 to see the tariff implications of replacing Cotonou with the GSP. q Identified products with: 1. no change; 2. moderate change (tariff jump under 10%); 3. large change (10%+ tariff jump or new/increased specific duty). q Category 2 exports: Ø some may decline/cease in medium term, but unpredictably; Ø all will pay trade taxes to the EU. q Category 3 exports: Ø easier to spot the casualties. Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 6

All non-LDC ACP are affected Proportion of value of total trade represented by exports each accounting for 1% or more of the total which would experience a change in access Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 7

How badly affected? q EU tax take on Category 2 imports: Ø € 156 million p. a. (equals 2. 6 time Europe. Aid’s 2005 commitments to health projects in all ACP); Ø assumes no fall in exports because of the tax. q Some ACP exports will cease - with sugar, bananas, beef, rice, horticulture, citrus and processed fruits at most risk. q Because some competitors will have more favourable (often non-reciprocal) access. Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 8

The way out q The Commission threatens: Ø Ø to impose taxes not levied for 30 years; without recourse to Member States or Parliament; in violation of Treaty commitments; in the name of WTO respectability! q An alternative exists: Ø the EU can create the regime that did not exist in 2000; Ø based on the GSP+ (currently available to 15 states); Ø extended to cover some key ACP exports. q This would: Ø follow established precedent; Ø buy time for EPA negotiations to conclude. q But will the Commission do it? Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007 9

Europe’s Reflection in the EPA Mirror Dr Christopher Stevens Open Europe Seminar 26 March 2007 Europe's Reflection in the EPA Mirror: Open Europe, 26 March 2007