Anthony Peter Gonzales
The Economic Partnership Agreement (EPA) between the Cariforum
countries (CAR) and the EU is a Free Trade Agreement (FTA)
and the choice of a comprehensive FTA with the EU by Cariforum
is essentially dictated by the options in the multilateral
legal framework to which this region subscribes in the WTO
and the specific collective interests of the region.
At the multilateral level, North/South and North/North FTA
agreements must be concluded within the confines of Article
XXIV for goods (unlike many similar South/South agreements
which can be done within the Enabling Clause where the conditions
are less stringent) and Article 5 under the GATS for services.
The scope for North/South trade agreements in the WTO remains
limited to either a non-reciprocal GSP under the Enabling
Clause or a reciprocal FTA either partially under Article
XXIV or under Article XXIV and Art 5 of the GATS. The Cotonou
non-reciprocal arrangement was an exception to these two
options as it departed from the non-discrimination principle
and required a waiver which ended on the 31st January 2007.
At the signing of the Cotonou agreement, both parties agreed
to reduce trade barriers and explore in the future a WTO-compatible
trade agreement which by implication meant either of the
two options described above in the manner in which they
were evolving in the WTO at the time of negotiation. As
the non-reciprocal trade part of Cotonou was more preferential
than the GSP, the ACP argued for no less favourable trade
treatment after 2007 and got a best endeavour clause in
the Cotonou Agreement which committed the EU to try and
find some way, if possible, to get an equivalent framework
which could either be a new type of EU GSP that secures
all the existing Cotonou preferences or an FTA.
Cotonou also made provision for a mid-term review for the
ACP non-LDCs to decide if they wanted to opt for the best
available GSP at the time or continue with exploring an
FTA. Since Cotonou was signed the EU introduced a WTO compatible
GSP for all ACP and non-ACP LDCs (EverythingBut-Arms)
(EBA) that offers a status that is even more preferential
than Cotonou. It also further differentiated its GSP to
allow for more preferential treatment than the standard
GSP for small vulnerable countries (GSP-SVEs), drug-producing
countries and those with governance problems (Super GSP).
WTO rules require that a developed country can offer a group
of developing countries a special GSP once the criteria
are universally applied to all developing countries. Differentiating
the GSP to give all ACP non-LDCs the same status as Cotonou
became problematic as some of the key ACP preferences would
have to go to other non-ACP non-LDCs some of whom are large
and fiercely competitive and this would certainly nullify
At the time of the mid-term review the region at the highest
technical and political levels examined the GSP alternatives
and concluded they were all unsuitable. Both GSP-SVEs and
Super-GSP did not cover important CAR traditional preferences
in sugar, bananas, rice, etc as well as significant margins
in many important non-traditional areas. The loss to the
region in choosing this option would have been unbearable
in these of income and employment. The best technical advice
from those who favoured an alternative to the FTA could
only come up with the GSP option with some among them throwing
in for good measure a partial reciprocal services agreement
even though it was not clear how the latter would be WTO
compatible and could be negotiated separately.
It should be clear to all that in terms of unilateral non-reciprocal
preferences the EU hands are tied in the WTO. On a daily
basis many of our friendly neighbours in Latin
America and cousins in Asia have been and continue
to challenge legally the entitlement of the region to the
special Cotonou preferences. Even though these preferences
cover a small part of world exports, they claim they lose
huge markets in Europe as well as investments at home as
a result of the granting of these preferences to the ACP.
Cotonou preferences under a waiver are therefore no longer
sustainablea fact again supported by the difficulties
encountered in obtaining the renewal of the CBI waiver in
the WTO. Furthermore, this opposition is not only in the
WTO. Many well-known pro-development academics and NGOs
(as OXFAM) in developed countries have been campaigning
against these special preferences for the ACP non-LDCs pointing
to the plight of the most needy non-ACP LDCs in the world.
The EU is being urged by them to establish either a universal
GSP for all developing countries or to differentiate the
GSP based on acceptable criteriaoptions which would
not cover the special development needs of the small countries
of the region whose trade options do not lie in these multilateral
solutions as they are not yet global traders.
In choosing therefore to explore the FTA option, the challenge
before the region was how to negotiate a development-friendly
asymmetrical reciprocal agreement whose net welfare benefit
(benefits minus costs) would be greater than that under
the best available GSP. As part of this strategy, the region
along with its ACP counterparts focused on obtaining more
flexibility within the multilateral framework by placing
systemic changes to North/South Regional Trade Agreements
(RTAs) on the Doha Agenda and deploying efforts to change
Article XXIV, essentially to include longer transition periods
and greater exclusions as well as provide legal certainty
to an area where the borders are still nebulous and what
is reasonable has to be determined in court.
All these ACP negotiating efforts have come to naught, and
it is evident as already seen in the impasse and in the
absence of real substantive negotiations in this area, that
Doha will end without any flexible changes in Art XXIV.
The only possibility that therefore remained by going this
FTA route was to try and pull the maximum flexibility out
of the existing loose Article XXIV and hope for the best.
Consequently, the recently-negotiated FTA has to be basically
judged in terms of the trade-off with the GSP and the flexibility
negotiated under Article XXIV and GATS V. Maximum gain from
any FTA talks with the EU would have logically to go beyond
goods and include at least services and development assistance
since a limited goods agreement would not offset the costs
In a next instalment I will argue how Cariforum largely
obtained its objectives indicating the gains and losses
that resulted from the negotiating process.
Gonzales is an international trade expert.