Select Committee on International Development Written Evidence


Services and ACP-EU Economic Partnership Agreements

  The Cotonou Partnership Agreement (CPA), signed in 2000 and ratified in 2003 by a sufficient number of states, allows for the negotiation of Economic Partnership Agreements (EPAs) between the European Union (EU) and African, Caribbean and Pacific (ACP) countries in the area of services.

  EU-ACP wide phase 1 negotiations started in Sept 2002; Regionally based phase 2 negotiations launched in 2003 by ECOWAS (+ Mauritania), CEMAC (+Sao Tome), and in 2004 by ESA and CARIFORUM (CARICOM +Dominican Republic) and others (in other Africa, Pacific). Negotiations are set to be concluded by December 2008.

  Key provisions on services include

    —  Extend EPAs to encompass the liberalisation of services in accordance with provisions of GATS (CPA, Art 41.4);

    —  Reaffirmation of GATS commitments (41.2), progressive liberalisation (41.3) and EC support for ACP export capacity (labour, business, distribution, finance, tourism, culture and construction) (41.5);

    —  Need for Special and Differential Treatment (SDT) for ACP suppliers (41.2 and 41.3);

    —  Special sectors: Maritime Transport (Art 42) and ICT/Telecommunications (Art 43), and Tourism (Art 24).

  Phase 1 negotiations have so far concluded that services liberalisation in an EPA should be progressive, based on a positive list, adapted to the level of ACP countries and their sectors and specific constraints, and underpinned by principles of S&D, asymmetry and positive regional discrimination. The EC agreed to discuss liberalisation in mode 4 (temporary movement of natural persons) [63]in the context of EPA negotiations. This issue is sensitive for the EU but crucial to the ACP. The EU and the ACP also agreed that support for the development of services sectors should be provided to ACP countries within the context of EPAs, but there is disagreement over the need for additional funds which can be used flexibly and rapidly (ACP) as opposed to no additional (EU) beyond existing EDF commitments. Finally, while the EU argues for a GATS-plus agreement, the ACP group is unlikely to want to go (significantly) beyond commitments in the GATS.

Mode 2. Consumption abroad: when a consumer travels abroad to consume from the service supplier, such as in tourism, education, or heath services.

Mode 3. Commercial presence: when a foreign owned company sells services (eg foreign branches of banks).

Mode 4. Temporary movement of natural persons: when independent service providers or employees of a multinational firm temporarily move to another country.

  Several options remain for Phase 2 negotiations, which include

    —  Do nothing: no pain, no gain.

    —  No services agreement but with focus on SDT.

    —  Reaffirm GATS commitments under Cotonou and emphasise SDT (safeguards, funds, etc); pressure to sign Telecommunications annex.

    —  GATS plus services agreement with new commitments by both ACP and EU, and with SDT.

  There will be advantages and disadvantages associated with each choice. Trade liberalisation with an appropriate regulatory framework is generally associated with gains, but these may not occur in each sector, country or group of countries. In some cases there may be enhanced export opportunities, but in others the domestic services capacity or its export capacity in the region may be at risk through trade liberalisation. It is thus important to examine which options would provide the best outcome.

  On the basis of existing EU trade agreements with developing countries it is clear that the contents of services agreements differ and thus these are in principle negotiable:

    —  Mode 4 provisions are more free in EU-CEECs (or CARICOM) than in EU-MEXICO or TDCA.

    —  Some Mode 3 and investor protection provisions pre-establishment for EU-CEECs and EU-Chile.

    —  Government Procurement included in few.

    —  Depth of commitments varies considerably, but is reciprocal, subject to implementation periods. Limited depth in eg TDCA with South Africa.

  EPAs aim to be WTO consistent. There are provisions in the General Agreement for Trade in Services that would most likely make EPAs WTO compatible while still including the possibility for offering flexibility (or special and differential treatment) to the ACP in terms of coverage and removal of discrimination (GATS article V: 1 & 3). However, since the Council of Trade in Services has not yet ruled on any regional service agreement it is impossible to be more precise.

  The Caribbean (as is the case for many ACP countries) are involved in a number of services negotiations

    —  CSME—the Caribbean Single Market and Economy which include a negative list (ie it has a list of restrictions which member states will remove according to a fixed scheduled until 2005. Some countries are moving faster than others.

    —  FTAA—Free Trade Area of the Americas which includes a draft chapter on services, but proposals by Caribbean are modest—was scheduled to be finalised in 2005.

    —  Bilateral negotiations such as Caricom-Costa Rica/Canada.

    —  GATS 2000 which is part of the Doha single undertaking; this has included modest offers by St Kitts and Suriname, while EC has made request from 11 Caribbean countries—scheduled to be finalised by 2005.

    —  CARIFORUM-EC EPA negotiations until end of 2008.

  The combination of these "negotiating theatres" requires a focused and consistent approach, where sequence is important. While there may be barriers to services exports to the EU, it may be that the reduction in such barriers can be negotiated under GATS (through own or other countries' interests and requests). On the other hand, some services could be better treated as an EPA issue. There also appear to be direct links between the FTAA and EPA: according to CPA Annex V, Art V, offers to FTAA would need to extend to the EC.

  One issue emphasised in the CPA is the need to apply SDT to ACP suppliers. It is important to examine how this can best be operationalised eg bv mode, sector, or country?

    —  Financial support for services export capacity building (eg services export promotion in ITES, or compensation for brain drain?).

    —  Facilitate recognition of professional credentials using one-stop shops (EUROPASS and ACPPASS).

    —  Information centres in and for ACP service exporters.

    —  Increase technology transfer to ACP using "home country measures" (eg PROINVEST, EIB INFAC).

    —  Full credit for ACP autonomous liberalisation.

    —  Fewer or no new services commitments by ACP (affirming GATS commitments).

    —  EU commitments in areas of ACP export interest.

    —  Mode 4 for less-skilled workers; determination of quotas: ACP business travel card (see Box 1).

    —  Safeguard and remove mode 1 (and 3) commitments in various sectors.

    —  Inclusion of (parts of) EU government procurement.

    —  Operationalise Emergency Safeguard Measures.

    —  Flexible implementation time period (eg recognition of credentials, inventories of trade rules required for progressive liberalisation).

  In order to obtain at least modest gains from a services agreement, the ACP regions would need to table specific SDT options: requests for the lifting of certain barriers in the EU, for resources in specific areas, etc. Now is the time to begin thinking about which specific options are likely to be most effective, considering that this process may be lengthy one. It is potentially costly to wait and be unprepared until other have been finalised, as different requests (for the lifting of barriers, or other SDT options) can be made under Cotonou while the end of other negotiations are not in sight. It would also take time and effort to formulate and assess the costs and benefits of national and regional offers and requests on full or partial liberalisation in certain sectors or modes.


The EU restricts the temporary movement of various categories of natural persons in GATS mode 4. In particular, medium to lower skilled workers from the ACP will find it difficult to enter the EU to supply services. Some higher skilled workers will be subject to quotas. Some new thinking is required so that the EU admits temporary movement of natural persons in all categories as long as some basic conditions are fulfilled. It has so far not been advanced, but a proposal to set up an ACP business travel card may help to facilitate and operationalise market access in mode 4. As a similar example, the APEC business travel card has been successfully introduced. Under an ACP business travel card there could be

—  Visa free or visa-at-border entry for business development purposes,

—  A multiple-entry visa,

—  Common service standards for processing (minimum time) of temporary entry visa,

—  An expanded range of eligibility for professions under "business visitor",

—  An expanded range of eligibility for support staff, in particular applying to less-skilled workers.

There could be a pilot scheme running for a number of years (covering certain ACP countries, regions or sectors). Cardholders would be required to present their passports, but not required to submit separate applications for business visitor visas. Participating economies would commit to implementing the scheme and would be free to maintain existing visa requirements for business visitors. They would also have the responsibility of avoiding abuse of the ACP business travel cards by registering bona fide ACP employers (and avoiding overstaying temporary entry). All economies would retain the right to refuse an individual without providing reasons, or to refuse entry to ACP Business Travel Card-holders at the border. The concept could be introduced at the ACP level, but the precise implementation could be left to regional negotiations, as ACP regions are interested in different services sectors.


  ACP Secretariat (2004) Guidelines for the Negotiations of EPAs

  ESA States (2004) Negotiating Mandate for the ESA-EU Economic Partnership Agreement with the European Union, final version, Grand Bay, Mauritius, 6 February 2004.

  Julian, Melissa (2004) "EPA Negotiations Update: State of Play of the Negotiations", Trade Negotiations Insights Vol 3 No 4.Velde, Dirk Willem te, Ian Gillson and Sheila Page (2004), Special and Differential Treatment in Post-Cotonou Services Negotiations, final report for the Dutch Ministry of Foreign Affairs.

  WTO (2004) Developmental Aspects of Regional Trade Agreements and Special and Differential Treatment in WTO Rules: GATT 1994 Article XXIV and the Enabling Clause, Communication by the Mission of Botswana on Behalf of the ACP Group of States, TN/RL/W/155, 26 April.

63   Mode 1. Cross-border supply: when a service crosses a national border. An example is the purchase of insurance or software by a consumer from a producer abroad. Back

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