The Pacific EPA
Memorandum submitted by Dr. Stephen Dearden, Department
of Economics,
Manchester Metropolitan University
Negotiations in regard to the Pacific EPA commenced
in September this year. With the exception of Fiji and Papua New
Guinea the EU is not a significant market for the 14 Pacific ACP
(PACP) exports (€530 m 2003; 9% of the regions total)), nor
is the EU a significant supplier of their imports (€300 m:
4%). The five low income PACP's - Kiribati, Samoa, Solomon Islands,
Tuvalu and Vanuatu -qualify for the non-reciprocal 'everything
that arms' trade agreement.
The principal difficulties in the establishment
of a reciprocal PACP EPA lies in the implications of such an agreement
for their trade arrangements with Australia and New Zealand under
the Pacific Agreement on Closer Economic Relations (PACER). It
provides that in the event that should negotiations with another
developed country be commenced then similar consultations should
begin with Australia and New Zealand "with a view to extending
similar arrangements." Australia and New Zealand are far
more significant trading partners for the PACP's and the implications
of a reciprocal free trade agreement with them would have a far
more profound impact upon their economies. Although Australia
and New Zealand appear sympathetic to the development character
of the EU's intentions in regard to an EPA, nonetheless any assessment
of the impact of tariff reductions must take into account the
likely extension of these concessions under PACER. Such changes
will be significant not only in terms of the possible structural
adjustment that may be required, but also for fiscal adjustment,
as many PACP's are particularly dependent upon customs duties
for government finance.
Similar extensions of any free trade agreement will
be required for the three ACP US compact states - the Federated
States of Micronesia, Palau and the Marshall Islands.
Given the PACPs limited interests in EU trade, and
sensibilities to any PACER revision, the PACPs have proposed a
flexible two-tier EPA structure that will provide something of
benefit to all its members. The proposal is for an 'unbrella'
or 'master' agreement, setting out the broad terms including MFN
for the EU, accompanied by subsidiary agreements covering a broad
range of issues including services, investment, fishing and the
trade in goods. The PACP's could then choose to which subsidiary
agreements they wish to subscribe, with only those committing
to the trade in goods agreement needing to adopt reciprocity.
These latter would be WTO notifiable, with implications for PACER.
This radical solution to the particular problems and diverse interests
of the PACP's has not been rejected by the EU and will form the
basis for further studies and negotiations. However some ambiguity
remains, as might be expected, in the 'Joint Road Map' (September
2004). However for the EU WTO compatibility remains a central
requirement, although the potential of the current Doha round
for introducing greater flexibility in the interpretation of 'special
and differential treatment' is recognised.
A particular problem exists for Fiji in regard to
significant sugar exports to the EU under the Sugar Protocol (92%
of the value of its EU exports). The recent successful WTO challenge
to the EU's dumping of sugar on the world markets and proposals
for reform of the CAP are likely to lead reductions in the guaranteed
price, with a significant implications for long-term future of
Fiji's sugar industry. While sugar export quotas are expected
to continue, their value will almost certainly decline with a
fall in the guaranteed price ansd new suppliers may enter the
EU market under the EBA. One of the unanswered questions of the
regional EPA negotiations is their relationship to discussions
about the Sugar Protocol, which will need to take place at the
ACP level.
It is also unclear as to the prospects for additional
the extent of additional aid that might support the restructuring,
economic and fiscal, that will be necessary under an EPA. The
Commission appears to have indicated that no additional funding
is regarded as necessary beyond that contained within the current
envelope of EDF9. However EDF 10 negotiations will almost certainly
offer the opportunity to revisit this issue.
Finally I would draw attention of the Sustainability
Impact Assessment that has been contracted by the Commission to
inform the 'stakeholders' in the EPA negotiations. Intended to
assess the economic, social and environmental impact of all regional
EPA proposals, this contract has been place with PricewaterhouseCoopers.
In the case of the Pacific PricewaterhouseCoopers are just commencing
their consultation, but had decided to undertake a sector study
of fisheries. Although there are references in the 'Joint Road
Map' to "particular attention also to be paid to the ongoing
EC's SIA exercise with a view to both making optimal use of its
results within EPA negotiations and feeding ideas and outcomes
of the negotiation process into the construction of a Pacific
ACP-specific SIA process", there must be serious concerns
as to the value of this exercise. The fisheries industry is a
sector where considerable work has already been undertake. The
usefulness of this exercise for the broader Pacific EPA negotiations
is not self-evident and the selection of this focus-other than
as an expression of EU commercial interests - is unclear. Indeed
the question of the ownership of the SIA process is not apparent.
Certainly among the PACPs there was little awareness and little
value placed upon the SIA. By contrast the Pacific Forum Secretariat
will be conducting supportive technical assessments over the coming
year. The strength of the Pacific Forum Secretariat is likely
to prove an important factor in the successful outcome of the
EPA negotiations in a region where intra regional trade is minimal
and economic and political interests diverse. This diversity needs
to be recognised by the EC and the appropriateness of its rather
dogmatic emphasise upon the potential for regional integration
questioned.
October 2004
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