Memorandum submitted by Traidcraft
BILATERAL NEGOTIATIONS:
THE NEW
TRADE BATTLEGROUND?
1. Traidcraft is a fair trade organisation
whose mission is to fight poverty through trade. We trade with
and support small producers around the world whose circumstances
effectively exclude or marginalise them from the mainstream system.
We also seek to influence the wider trading environment through
research, analysis and advocacy.
THE EU'S
TWIN-TRACK
APPROACH
2. Following the collapse of the Fifth World
Trade Organisation (WTO) Ministerial held from 10-14 September
in Cancún, there is concern that key trading blocs, primarily
the United States and European Union (EU) will now pursue their
interests—including those such as the "new issues"—more
aggressively through a series of bilateral deals currently under
negotiation where they possess greater "arm-twisting"
power. The Secretary of State for Trade and Industry, Patricia
Hewitt has warned of this, "A multilateral solution, reached
via the WTO, will always be fairer to developing countries than
a system composed of bilateral deals, in which the poorest countries
can be isolated and pressurised."[66]
3. Despite this and the EU's stated commitment
to multilateralism, this memorandum will highlight how the British
Government, with its partners in the EU, is already using its
collective power to "isolate and pressurise" developing
countries in the bilateral forum through talks with the Africa,
Caribbean and Pacific (ACP) countries. The EU is already playing
the multilateral and bilateral forums against each other in a
"twin-track" approach designed to maximise gains. This
is by no means a new phenomenon, but post-Cancún the question
is whether bilateral pressure will be intensified, or whether
the EU will use this opportunity to reinforce its commitment to
the multilateral system and ease or even rescind its bilateral
demands.
THE "EPA"
NEGOTIATIONS
4. The Cotonou Agreement, signed in 2000
between the EU and 78 African, Caribbean and Pacific (ACP) countries
covers aid, trade and political co-operation. The Agreement marks
a fundamental shift in the EU's approach to the ACP group in a
number of areas, but it is in the area of trade that the EU's
new approach is most significant. Negotiations began in September
2002 to agree new trading arrangements to be called "Economic
Partnership Agreements" (EPAs). Although the nature of these
has yet to be decided (and the option of an alternative remains
open to the ACP), the EU sees EPAs as reciprocal free trade areas
which they will negotiate on a bilateral basis with ACP countries
or regions. This is a significant change from the system of non-reciprocal
preferences that characterised the previous Lomeú Agreements
between the parties.
5. The talks were launched over a year ago,
but thus far the process has been deadlocked. The ACP wants a
number of substantive issues of common interest to be agreed with
the EU by the whole ACP group in the first phase of talks, before
the second phase of regional negotiations begins. The EU is fiercely
resisting this attempt, instead favouring negotiating all substantive
issues with individual regions—where, of course, as a powerful
trading bloc and major donor—its "arm-twisting"
power is greater.
6. Both the EU and ACP have set out their
overall aims and objectives for the talks in their "negotiating
directives". These set out what they want to achieve above
and beyond commitments already made in the main Cotonou Agreement
which does contain some provisions on trade. It is clear from
the EU's mandate that they intend to use these bilateral talks
to lever commitments which are either unlikely to be achievable
through the WTO or to build on concessions extracted there, including:
— Increased market access for EU goods
and services—including into least developed countries.
— Commitments on "new issues"
such as investment and public procurement through the "trade
related issues" or "second pillar of EPAs".
THE DANGERS
OF THE
"TWIN TRACK"
APPROACH
7. The EU's policy of pursuing those issues
that are difficult to obtain multilaterally, or seeking additional
commitments through the EPA negotiations, not only calls into
question the EU's stated commitment to the multilateral system,
but also poses specific dangers for the ACP group:
— Commitments made in one forum (either
the WTO or bilaterals) become a "floor" rather than
a "ceiling" from which further concessions are then
sought. Of course to a certain extent, all bilateral talks are
designed to build on what is agreed in other forums, however this
tactic is of concern to the ACP because of the marked imbalance
in terms of political and economic power between the negotiating
parties—one of whom is the donor and one the recipient.
— The option of getting controversial
issues on the table through the "back door" is retained.
The Singapore issues, which have so far been successfully resisted
at the WTO, are being actively pursued by the EU in a number of
bilaterals—including the EPA talks.
— The twin track approach further stretches
the negotiating capacity of developing countries who have yet
another forum in which to defend their interests. Capacity problems
are compounded by the EU forcing the pace of the talks—particularly
in EPAs—where the EU is pressing for substantive regional
negotiations to begin.
NEW ISSUES
BY THE
BACK DOOR
8. There has been a great deal of public
resistance around EU attempts to force the inclusion of the so-called
"new" or "Singapore" issues (Investment, Competition
Policy, Trade Facilitation and Transparency in Public Procurement)
onto the WTO agenda. In fact, European insistence on this led
to the breakdown of the Cancún meeting. There has been
less of an outcry about their inclusion and further elaboration
as part of the EU's agenda for EPAs. But in some ways the dangers
within the EPA talks are greater because the EU is pursuing these
areas on the basis of the same liberalisation, non-discrimination
and national treatment agenda which poses threats to development,
but this time from a position of even greater "arm-twisting"
power. It is instructive to note that one of the new issues that
the EU seems prepared to drop from the multilateral stage—investment—is
already very clearly elaborated as part of their negotiating directives
for EPAs. Since ACP countries are clear that they are not ready
to talk about any of these issues at present in the WTO, Traidcraft
and its partners are concerned that it is inappropriate for the
EU to use the bilateral route to force the pace on these issues,
unless requested by the ACP group.
The EU negotiating directives state: "The
mere removal of tariffs will not be sufficient to fully achieve
the objectives of economic and trade co-operation. In particular,
the potential gains from trade liberalisation will not be fully
realised unless other factors causing segmentation of markets
are removed. This is precisely why the Cotonou Agreement has defined
enhanced co-operation in all areas relevant to trade as the second
pillar of EPAs."[67]
INVESTMENT
9. In the area of investment, the EU's stated
objective is that EPAs should: "agree to establish, while
respecting the respective competencies of the Community and its
Member States, a regulatory framework, which shall enhance and
stimulate mutually beneficial sustainable investment between them
[EU and ACP regions]. This framework will be based on principles
of non-discrimination, openness, transparency and stability and
on general principles of protection, which will endorse the best
results agreed in the competent international fora or bilaterally."[68]
The EU is clearly looking for concessions above
and beyond what it is likely to achieve at the WTO where developing
countries have been firm in refusing to negotiate an investment
agreement.
Aside from the fact such an agreement has been
rejected by developing countries in the multilateral forum, including
such a framework as part of a negotiation whose aim is to "promote
sustainable development and contribute to poverty eradication
in ACP countries"[69]
has two fundamental flaws:
i) A framework that ensures transparency
and stability will not of itself lead to increased investment.
The World Bank has concluded: "Countries that had concluded
a Bilateral Investment Treaty (BIT) were no more likely to received
additional Foreign Direct Investment than were countries without
such a pact."[70]
ii) The principles of non-discrimination
and openness remove a fundamental tool that most developed countries
have used during their period of development. Discrimination between
foreign and domestic firms has been a central tool of industrial
policy, including in the UK, allowing countries to support small
producers and build up national industry through placing limits
on foreign ownership, requiring local employment or insisting
on joint ventures. The evidence shows that investment liberalisation
is a product, rather than a cause of development, being sought
once a country reaches a certain level of competitiveness.[71]
PUBLIC PROCUREMENT
10. Those who were pushing for "new
issues" to be included in Cancún were only arguing
for transparency in public procurement, so the EU's suggested
liberalisation of public procurement as part of EPAs is a clear
attempt to force an issue through even more aggressively, using
their power in the bilateral forum. The EU goes even further in
suggesting that such progressive liberalisation should be based
on the principle of "non discrimination": "EPAs
will aim to ensure full transparency in procurement rules and
methods at all government levels. In addition the parties will
seek progressive liberalisation of their procurement markets on
the basis of the principle of non discrimination and taking into
account their development levels."[72]
Despite the reference to levels of development, there is a concern
that if agreed, this could take away the fundamental right of
sovereign countries to determine their own domestic economic priorities.
Governments may be forced to advertise tenders widely throughout
the EU and ACP regions and may no longer be able to support or
prioritise local companies for domestic contracts, with devastating
longer-term consequences. This offers huge possibilities for European
companies and consultants, as well as threatening to squeeze out
domestic firms.
AGGRESSIVE MARKET
ACCESS DEMANDS
11. According to the main Cotonou Agreement
the overall objective of EPAs is, "to conclude new WTO compatible
trading arrangements removing progressively barriers to trade
and enhancing co-operation in all areas relevant to trade".[73]
The EU is choosing to interpret "WTO compatible" in
a restrictive way, arguing that ACP regions who choose to negotiate
EPAs may be requested to open up substantially all trade (90%)
over a 12 year period.[74]
However under the multilateral WTO Doha Agenda, agreed in 2001,
developed countries agreed to demand "less than full reciprocity"
from least developed countries (LDCs) in non-agricultural goods.
It is not yet clear how this will be reconciled for those LDCs
that have no viable alternative but to join an EPA[75].
The ACP has argued that there should be special arrangements for
LDCs within the EPA framework and that this should be agreed at
the "all-ACP" phase, but the EU continues to resist
any agreement at this level.
12. For the EU the beauty of the twin track
approach is that in bilateral talks such as the EPA negotiations,
it is in a stronger position to resist the troublesome issue of
its own agricultural policies (which was one of the major sticking
points in Cancún) even being on the agenda—despite
continued calls from ACP countries. In the EPA negotiations, the
EU is attempting to use its powerful position to demand improved
market access for its industrial and agricultural goods—even
from of the poorest ACP countries—without having to mention
the contentious issue of the impacts of the Common Agricultural
Policy (CAP)—in particular on poorer producers and small
enterprises in ACP countries.
ADDITIONAL SERVICES
DEMANDS
13. The main Cotonou Agreement requires
"progressive and reciprocal liberalisation of trade in services
consistent with WTO and in particular Article V of General Agreement
on Trade in Services (GATS)[76].
Such liberalisation is to be asymmetrical in both timing and the
sectors and sub-sectors included. This means that ACP countries
can theoretically decide to open more slowly and exclude certain
sensitive sectors altogether (although even this level of policy
freedom is questionable). However in their negotiating directives
for EPAs, the EU makes its real intentions clear by stating that
as part of EPAs it wants to see services "negotiations begin
in all sectors by 2006 at the latest."[77]
14. There are two clear concerns for ACP
countries:
(i) The inclusion of all sectors undermines
the principle in the GATS negotiations that talks are based on
positive lists and requests and offer phases—and directly
contradicts the principle of asymmetry agreed in the main Cotonou
Agreement. The question remains, whether ACP countries will be
allowed to preclude liberalisation in important public sectors
such as healthcare, education and basic service provision. Will
they be allowed to prioritise local firms to provide local services?
(ii) The timing of 2006 suggests that bilateral
negotiations under the Cotonou framework will only begin after
the GATS negotiations have been concluded in 2005. Thus, commitments
given (often under extreme pressure) during the GATS talks may
in fact form the floor from which further opening will be prised
during the EPA discussions.
15. SUMMARY OF
KEY ISSUES
| Issue | WTO commitments
| Commitments being pursued by the EU via EPAs
|
| Investment | Fierce resistance to an investment
Agreement at the WTO from developing countries and campaigners
| Pressure to establish an investment protection "framework" on the principle of "non-discrimination".
|
| Public Procurement | Resistance to including an agreement on transparency in public procurement in the WTO from developing countries and campaigners
| Pressure to include transparency in public procurement as part of the EPA negotiations, and to move beyond this into progressive liberalisation of procurement markets based on the principle of non-discrimination
|
| Services | Positive list approach during GATS so some sensitive sectors can theoretically be exempted
| Services negotiations to have started in all sectors by 2006 at the latest thus creating pressure for further commitments
|
| Market Access | EU will demand "less than reciprocal" market access from LDCs on non-agricultural products
Limited EU offers regarding agriculture support measures
| If LDCs are part of regional free trade areas, this could mean reciprocal access in some sectors
EU resisting discussion of CAP or its impacts as part of the EPA negotiations
|
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THE ROLE
OF THE
EU
16. As the table highlights, there are at present no
areas where the "WTO-plus" and other commitments the
EU is pressing for as part of EPAs are designed in favour of ACP
interests. Instead they are all specifically in the EU's interest,
proving that the devil is in the detail and calling into question
the EU's commitment to ensuring that EPAs contribute to poverty
alleviation and eventual eradication in ACP countries.
17. This does not have to be the case and it is important
to note that these remain only EU proposals. The ACP group is
in a strong position following the breakdown of the Cancún
Ministerial to press the EU to take their concerns seriously and
flex its political muscle in the EPA as well as the WTO forum.
18. It is now critically important that developing countries
and those supporting them reinforce the importance of the multilateral
system while closely monitoring the content and process of the
EPA talks as this "new battleground" for international
trade unfolds.
RECOMMENDATIONS
The role of the UK Government
19. Following the EU Member States' agreement on the
European Commission (EC)'s negotiating directives for EPAs, the
British and other European Governments have taken a back seat
and the negotiations are stalling. The collapse of Cancún
(which some blame on mishandling by the EC) points to the danger
of allowing Commission officials a free rein to negotiate without
high-level scrutiny, input and direction from the Member States
and parliaments. Similarly the Sustainability Impact Assessment
that the Commission has instigated on the EPA talks (at a cost
of 1 million) is stalled and the process had a number of fundamental
flaws that need the urgent attention of member states[78].
It is vital in the post-Cancún climate that member-state
and parliamentary scrutiny of this process is increased significantly.
20. Traidcraft calls on the UK Government to markedly
increase its engagement in the EPA negotiation process and in
particular to insist that the European Commission:
— Ensures that "WTO-plus" commitments
are only sought at the request of the ACP or are proved to be
supportive of the EPAs' aim to promote sustainable development
and poverty alleviation in ACP countries.
— Works in consultation with the ACP to institute
an independent and participatory impact assessment of EPAs and
refrains from forcing the pace of negotiations until all parties
have had sufficient time to understand the findings of this.
— Commits to a formal agreement with the whole ACP
group covering their issues of concern before regional negotiations
begin.
— States its commitment to exploring alternatives
to EPAs for those countries that, in 2004, do not wish to pursue
this option, as provided for in the Cotonou Agreement.
— Shows commitment to a developmental outcome by
stating a willingness to explore the re-opening of aspects of
the main Cotonou Agreement if the ACP requests it.
The role of the International Development Select Committee
21. Traidcraft urges the members of the International
Development Select Committee to:
— Note that the EU, as well as the United States,
is using bilateral negotiations to aggressively pursue its interests.
— Step up scrutiny of the EPA negotiation process
and strengthen links with parliamentarians across the ACP region.
— Work closely with colleagues on the Trade and
Industry Select Committee (for example through a joint working
group) to ensure coherent scrutiny of the development impacts
of UK and European trade policy.
October 2003
66
"Learning the Lessons of Cancún", Secretary of
State for Trade and Industry, Patricia Hewitt writing in The
Guardian 23/09/03. Back
67
"Recommendations authorising the Comission to negotiate Economic
Partnership Agreements with the ACP countries and regions".
Agreed by the EU General Affairs Council 17/06/02. Back
68
"Recommendations authorising the Commission to negotiate
Economic Partnership Agreements with the ACP countries and regions".
Agreed by the EU General Affairs Council 17/06/02. Back
69
The Cotonou Agreement. Back
70
"Global Economic Prospects and the Developing Countries 2003:
Investing to Unlock Global Opportunities". World Bank, 2003. Back
71
For further information on this point see "Unwanted, unproductive
and unbalanced: Six arguments against an investment agreement
at the WTO". Oxfam, Action Aid, Christian Aid, CAFOD, World
Development Movement and Save the Children, 2003. Back
72
"Recommendations authorising the Commission to negotiate
Economic Partnership Agreements with the ACP countries and regions".
Agreed by the EU General Affairs Council 17/06/02. Back
73
"Recommendations authorising the Commission to negotiate
Economic Partnership Agreements with the ACP countries and regions".
Agreed by the EU General Affairs Council 17/06/02. Back
74
The EU is choosing to use the current interpretation of WTO rules
for Regional Trade Agreements, despite the fact that these were
designed for agreements between parties of broadly comparable
levels of development and are being re-evaluated as part of the
Doha Round. Back
75
LDCs who are part of a regional trading bloc that decides to negotiate
an EPA may be faced with a stark choice-either open up to European
competition-despite the fact that they have nothing to gain from
such an arrangement-or leave their neighbours in the bloc. Back
76
The Cotonou Agreement. Back
77
"Recommendations authorising the Commission to negotiate
Economic Partnership Agreements with the ACP countries and regions".
Agreed by the EU General Affairs Council 17/06/02. Back
78
European civil society groups have raised concerns that the European
Commission's current Sustainability Impact Assessment of EU-ACP
trade is, at present, neither participatory nor sufficiently independent.
It places the onus for coping with the impact on the ACP countries
and is insufficiently linked to the negotiation process. The European
Commission's response to civil society concerns has been inadequate.
For more information on this see www.epawatch.net. Back
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