EPAs: Of what significance Multilaterally?

My article published on Tralac Website (original dated January 2008)

January 2008 ushered in useful milestones. Seven EPAs are reportedly in place, of which six are coined interim EPAs and therefore earmarked for further negotiations while the Caribbean-EC EPA has been crowned the full comprehensive EPA. All agreements have met the core objective, which is to conclude WTO compatible trade in goods agreements under Article XXIV and have thereby prevented trade disruption on the part of ACP States. EPAs have also provided the EU private sector with historic market access opportunities into some of the poorest countries in the world. Nonetheless, with additional negotiations anticipated in six EPA regions, the Cotonou Agreement preparatory period is far from over. Additionally, the repercussions of these agreements both regionally and at the WTO are not encouraging. 

The new EPA environment has been birthed amidst controversy and ingenuity. The conclusion of interim EPA or full comprehensive EPA has further compounded confusion as to the legal basis for additional negotiations, when in fact both EPAs meet the Cotonou Agreement core objective of WTO compatibility in trade in goods. GATT Article XXIV technically only differentiates between fully liberalised FTAs and interim tariff dismantling FTAs, while WTO practice finds that almost none of the near 300 regional trade agreements notified under Article XXIV to the WTO RTA Committee, have been notified as interim agreements. In practice however, interim EPAs are expected to rapidly migrate beyond goods into full comprehensive EPAs, by concluding on a range of rules, some of which the WTO has not even considered, such as the Singapore issues. 

This migration plunges ACP States into a minefield of multilaterally unregulated trade territory and one with almost no disciplines for regional trade agreements. The graduation of the interim EPA also moves against the negotiating procedures of the Cotonou Agreement Article 37, which mandates that EPAs would progressively eliminate barriers in accordance with relevant WTO rules. Furthermore, the development objective of negotiations in areas the WTO has not even considered remains questionable given various documented research findings that comprehensive EPAs would not support the development objectives of many poor countries. Nonetheless, taking into account the limited to non-existent negotiating capacity including incoherent regional participation in some EPA regions which dismally constitute only one or two ACP countries, its not clear how or whether the additional negotiations scheduled for 2008 would be consummated on the part of the ACP EPA Parties. 

At the WTO, reciprocal parties to FTAs with developed countries will for the first time include LDCs, in essence contradicting the developmental arguments put forth in the Doha Round by the poorest countries. The same can be said of the Small Economies whose vulnerabilities have been acknowledged by trade and development experts globally and considered in the Doha negotiations. On this basis, the role of the WTO in the area of development could be eventually eroded as the negotiating positions and coalitions among developing and LDCs are thrown into further disarray and possible fragmentation.

The second phase of EPA negotiations could also potentially worsen what is already an uncomfortable situation in trade in goods both in the regional and WTO context. Regionally EPAs may provide EC goods access into the wider ACP markets. At the WTO, EPAs appear to have compromised the potential development benefits of the Doha Round, given concluded provisions reverse some of the Doha negotiating positions of developing countries. These include EPA commitments even by LDCs, to reduce up to 80% of tariffs, to eliminate export taxes and other useful development tools. Further negotiations with the EC, before the conclusion of the Doha round could further detract from development objectives of developing countries and their negotiating leverage at the WTO. 

Additionally, future negotiations on the development dimension of Article XXIV may have been compromised by these agreements. It remains doubtful if the threshold for substantially all trade even for LDCs will be reviewed or whether additional flexibilities for developing countries under GATT Article XXIV will be permissible in the WTO negotiations, beyond that agreed upon in the EPAs. 

Finally, EPAs may essentially determine or provide advance impetus for a possible agenda for the next round of multilateral trade negotiations. This agenda may include the formerly rejected Singapore issues such as investment, competition, public procurement, among other areas now agreed as part of the interim EPA, but not presently regulated by the WTO. If the interim EPAs are fully concluded by most ACP States, this may compromise future multilateral negotiations, when these issues do come under the ambit of the WTO. 

ACP States and the EU Members combined, constitute close to two thirds of the 150 WTO Membership. So far about half the ACP membership has concluded an EPA with the EC, with more ACP countries likely to do so to safeguard their regional integration efforts. Which raises the question; what impact could EPAs have on the multilateral trade and development agenda as a whole?