5 Interim Economic Partnership Agreement
between the European Community and its Member States and the South
African Development Community States
| (a) (29973) 13314/08 + ADDS 1-13 COM(08) 562
(b) (29979) 13386/08 + ADDS 1-13 COM(08) 565
| Draft Council Decision on the signature and provisional application of the Interim Economic Partnership Agreement between the European Community and its Member States and the SADC EPA States
Draft Council Decision concluding the Interim Economic Partnership Agreement between the European Community and its Member States and the SADC EPA States
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| Legal base | Articles 133, 181 and 300 EC; QMV; co-decision
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| Department | International Development
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| Basis of consideration | Minister's letter of 11 June 2009
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| Previous Committee Report | HC 19-vii (2008-09), chapter 7 (11 February 2009) and HC 16-xxxi (2007-08), chapter 5 (15 October 2008); also see (29043) 14498/07 and (29155) 14968/07: HC 16-xxi (2007-08), chapter 13 (14 May 2008)
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| Discussed in Council | 24 April 2009
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| Committee's assessment | Politically important
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| Committee's decision | Cleared (reported to the House on 11 February 2009); further information requested
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Background
5.1 The Economic Partnership Agreement (EPA) negotiations with
the African, Caribbean and Pacific (ACP) group of countries, which
began in 2002, aimed at redefining the trade regime between the
two groups of countries, thereby replacing the long-standing Lomé
system of preferential access to the European market for the ACP
from 2008. The EPAs are intended to be in conformity with WTO
rules, which require that barriers to trade be dismantled on both
sides, introducing an element of reciprocity into trade relations
between the EU and the ACP states for the first time. This gave
rise to concern that extensive market opening in these countries
to the EU could create strong adjustment pressures, while European
suppliers would be only marginally affected by free market access
for ACP goods and services. The deadline for negotiation was 31
December 2007.
5.2 The Commission's aim was always "full"
EPAs — which include provisions on trade-related areas,
trade-related rules and trade in services and include appropriate
links to development cooperation, as well as trade in goods —
in accordance with what is outlined in the Cotonou Agreement and
the Commission's negotiating mandate. But not all of the six ACP
negotiating regions were likely to conclude a full EPA by the
set deadline; so, for these regions, the Commission decided to
pursue basic "trade in goods agreements", which provide
for duty free/quota free access and simplified Rules of Origin.
5.3 Our earlier Reports set out our consideration
of the process in greater detail, concluding with a letter from
the Parliamentary Under-Secretary of State at the Departments
for International Development and Business, Enterprise and Regulatory
Reform (Mr Gareth Thomas) outlining the general situation as of
the end of April 2008.[22]
The Council Decisions
5.4 These two proposals are for:
— a
Council Decision authorising the signature, on behalf of the Community,
and provisional application of an Agreement between the EC and
its Member States on the one hand, and the SADC EPA states on
the other; and:
— a Council Decision authorising the formal
conclusion, on behalf of the Community, of an Agreement between
the EC and its Member States on the one hand, and the SADC EPA
states on the other
5.5 "SADC EPA states" refers to Namibia,
Botswana, Lesotho, Swaziland and Mozambique, countries within
SADC that have completed interim EPA negotiations. Of these, the
first four are members, along with South Africa, of the Southern
African Customs Union (SACU). In this Agreement, for some purposes
the "SADC EPA states" act collectively and for others
they act individually.
5.6 The Commission and SADC EPA states initialled
the IEPA on 23 November 2007, which enabled their inclusion in
the EPA Market Access Regulation adopted by the Council of Ministers
on 20 December 2007 (which provides for duty-free, quota-free
access for all SADC EPA states' exports to the EU, commencing
1 January 2008).
5.7 The Commission has issued these proposals together
as they both concern the formalities necessary to agree formally
and give effect to the same international agreement, namely the
Agreement establishing an interim Economic Partnership Agreement
between the EC and its Member States and the SADC EPA states (the
IEPA). The two step process is not unusual — the EC Treaty
expressly allows the Community to apply international agreements
provisionally, prior to their formal conclusion, as the formal
conclusion process can be lengthy.
Previous consideration
5.8 The details of the IEPA are set out in our previous
Report. In his accompanying 10 October 2008 Explanatory Memorandum,
the then Parliamentary Under-Secretary of State at the Department
for International Development (Mr Gareth Thomas) said that the
UK had consistently stated that EPAs should help provide a strong
framework for long term development, economic growth and poverty
reduction, and had centred its policy on the principles set out
in the DFID/DTI Position Paper of 2005.[23]
5.9 This Agreement broadly aligned with these principles,
which included the belief that: ACP countries should be able to
decide the scope of issues covered within their IEPA; they should
have flexibility over their market opening; EPAs should provide
them with duty and quota free market access into the EU with improved
Rules of Origin; they should benefit from effective safeguards
to protect their markets when required; and EU partners should
provide ACP countries with effective development assistance to
benefit from new trade opportunities while ensuring aid is not
made conditional on signing an EPA. The initialling of this 'goods-only'
agreement had thus enabled SADC EPA states to secure market access
into the EU while allowing more time to work with other African
neighbours to negotiate a regional EPA covering other trade issues
such as services.
5.10 The Minister noted a number of positive features
(see our previous report). But he also noted a number of concerns
raised by the SADC signatories and South Africa — SACU's
biggest and most influential member, who had chosen not to initial
the IEPA — which he intended to pursue in the Development
Working Group (ditto). These included some measures not required
for WTO compatibility (e.g. MFN clause and standstill clause),
what he regarded as an over-ambitious timetable regarding commitments
to broaden the scope of the Agreement (on services and investment)
and the potential damage to the aim of regional integration through
South Africa's non-participation. He said that he would monitor
these and lobby the Commission as necessary. Given these concerns
and the fact that discussion on the concluded SADC IEPA had not
been held so far in the Working Groups, he thought it possible
that he might need to come back to the Committee with further
developments and advice. The Committee nonetheless drew all this
to the attention of the House, because of the widespread interest
in the EPA process, and also to the attention of the International
Development Committee, so that they might be aware of the elements
of the EPA and the Minister's concerns; and in the meantime retained
the documents under scrutiny.[24]
The Minister's letter of 29 January 2009
5.11 The Minister provided the following update:
Regional Integration issues — Border administration:
concerns over regional integration as South Africa is not party
to the interim EPA (IEPA), the most pressing relating to the mis-match
in tariffs between the SADC states and SACU (South African Customs
Union). The main challenge to maintaining coherent regional trade
regimes was to harmonise tariffs between South Africa and other
countries in SADC. The Commission had presented South Africa with
a range of options that would enable this and dialogue was ongoing.
Regional Integration issues — Content:
EPA rules on sourcing of materials meant
that inputs from South Africa which fell under the exclusion list
could not be used in goods exported to the EU from SADC. The Commission
had informed him that these items were not indefinitely excluded.
However, his understanding from regional governments was that
there was not yet clarity on dates and how future sourcing of
inputs from South Africa would be managed. He was monitoring the
situation closely and would, if necessary, push for greater flexibility
from the Commission.
Country Government Views: Angola,
South Africa and Namibia were the only governments in the region
to express opposition to the terms of the interim EPA. Botswana,
Lesotho and Swaziland had been generally supportive but had expressed
concerns about the impact of the Interim EPA on regional integration.
Namibia had signalled its intention to sign but had
also raised concerns, some of which echoed those of South Africa.
Recent Commission updates said that progress has been made on
the most contentious issues. On balance, it appeared that Namibia
was likely to sign, but with the expectation that their concerns
would be addressed in the move towards a regional EPA.
Engagement with South Africa was ongoing, but progress
had been slow in the light of "current domestic pressures";
the Minister would do all he could to encourage both the Commission
and key negotiating partners to reach agreement on outstanding
issues.
Future Regional Engagement: The
Trade Commissioner was to visit the Southern African region in
February to help progress discussions on the regional EPA. And
the Commission had outlined plans to hold a seminar in early 2009,
once the Interim EPA had been signed, to promote constructive
discussion with countries in the region on difficult or sensitive
issues that were not fully resolved within the Interim EPA but
were to "be seriously considered in the regional agreement."
In sum, the Minister described the SADC region as
complex and containing countries with quite divergent interests;
while a number of concerns had yet to be resolved, structures
were in place to work towards their resolution.
5.12 Though we felt that it was plain that there
had been little, if any, concrete progress regarding any of the
Minister's major concerns, there were at least indications that
the Commission was beginning to address them, and it would not
be possible for them to do so were the IEPA to remain unsigned.
We therefore cleared the documents, and again drew this to the
attention of the International Development Committee, and asked
the Minister to write before the summer recess with a further
update.[25]
5.13 The Council Decisions were subsequently endorsed,
with a list of desiderata concerning subsequent discussions with
the SADC countries, by the European Parliament in its resolution
of 25 March 2009, [26]
and adopted by the Council on 24 April 2009.
The Minister's letter of 11 June 2009
5.14 The Minister sets out the current position as
follows:
STATE OF PLAY OF THE INTERIM EPA
"The visit by Trade Commissioner Ashton to the
SADC region in February was positively received. Following the
visit, a meeting was held on 9-12 March between senior officials
in the region and the Commission, at which agreement was reached
on issues including export taxes, infant industry safeguards,
quantitative restrictions, free circulation of goods and tariff
alignment to preserve the South African Customs Union (SACU).
"The Interim EPA was signed on 4 June
by Botswana, Lesotho and Swaziland. Mozambique is expected to
sign shortly, and Namibia is expected to sign towards the end
of 2009.
"Following these discussions, the Commission
produced two Joint Declarations and an accompanying legal text.
The declarations accompany the legal text of the Interim EPA and
are intended to give assurances to the SADC signatories
that specific modifications will be made to the Agreement. The
first declaration sets out the position on tariff alignment, such
as that the tariffs under the SADC EPA align with those of the
South African Customs Union. Ensuring that tariff regimes are
harmonised across the region is critical to regional trade.
The second declaration sets out the commitment to regional integration
and the region's commitment to concluding the full EPA negotiations.
"The new legal texts, to be included in the
full EPA, will cover the areas referred to above, where agreement
has been reached. This means that the agreed changes detailed
in these legal texts do not change the terms of the Interim
EPA text, but only become effective once the full
EPA is signed.
NAMIBIA'S POSITION
"Namibia has requested that the legal text detailing
changes to be included in the text of the full regional EPA be
included as an addendum to the Interim EPA. The Commission has
stated that it cannot give such assurances as the interim EPA
would have to be re-submitted to the European Council; Namibia
has cited this as the main reason for not signing.
"While it appears that Namibia will not sign
in the short term, the EU is an important market for its agricultural
exports (especially beef and grapes). Failure to sign the EPA
could ultimately lead to the Commission revoking Namibia's Market
Access Regulation, which provides countries that have signed an
EPA provisional duty-free, quota-free access to the EU. Discussions
are ongoing.
"We will continue to support the SADC region
in its ambition to sign the full regional EPA and encourage the
Commission to be as development focused and transparent as possible
in its negotiations with SADC states."
Conclusion
5.15 We are grateful to the Minister for this
further information, which is reassuring as far as it goes. But
we find it odd that he makes no mention at all of South Africa.
We should accordingly be grateful for a further update in the
autumn, to include an indication of where South Africa —
a key factor — then is in the equation.
5.16 In the meantime, we are again reporting this
further information to the House because of the widespread interest
in these issues.
22 (29043) 14498/07 and (29155) 14968/07: HC 16-xxi
(2007-08), chapter 13 (14 May 2008): see headnote. Back
23
Which is reproduced at the Annex to chapter 1 of our First Report:
see HC16-i (2007-08), chapter 1 (7 November 2007). Back
24
HC 16-xxxi (2007-08), chapter 5 (15 October 2008); see headnote. Back
25
HC 19-vii (2008-09), chapter 7 (11 February 2009); see headnote. Back
26
See http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2009-0179+0+DOC+XML+V0//EN
for the full text of the European Parliament resolution. Back
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