ECONOMIC PARTNERSHIP AGREEMENTS IN AFRICA: A cost-benefit analysis Peter Lunenborg lunenborg@southcentre.org

South Centre: think tank of developing countries To promote South solidarity, South consciousness and mutual knowledge and understanding among the countries of the South. Developing points of view of the South on major policy issues, and to generating ideas and action-oriented proposals Responding to requests for policy advice, and for technical and other support from developing country groupings (G77, NAM, African Group) and member states South Centre: think tank of developing countries

Main policy areas GGDP: climate change, global finance IAKP: IP, technology transfer, traditional knowledge, WIPO TDP: trade (agriculture, NAMA, services) at WTO as well as in bilateral/regional settings

Costs vs benefits of EPAs

Costs of EPA Tariff revenue loss Major source of government revenue for countries in process in development In the US, tariffs were the largest source of federal revenue from 1790s to World War I, until it was surpassed by income taxes

Costs of EPA – Estimates of tariff revenue losses UNECA 2005 study: most comprehensive Between then and now more imports More imports = more tariff revenue loss

Tariff revenue loss for Sub Saharan Africa: USD 3.4 billion Region Tariff revenue loss (UNECA 2005) Import from EU, 2003 Import from EU, 2008-2010 Correction factor (D / C) Revenue loss, based on imports 2008-2010 (B x E) A B C D E F West Africa 980.2 12,317 21,483 1.7 1,804.4 Central Africa 389.8 3,479 4,925 1.4 570.5 EAC 162.6 1,543 2,905 1.9 301.1 SADC EPA 121.0 2,488 6,010 2.4 302.7 ESA EPA 318.2 3,356 3,993 1.2 406.5 Sub Saharan Africa 1,971.8 23,183 39,316 3,385.2

Top 10 losers (tariff revenue) Country Estimated revenue loss based on imports 2008-2010, in USD million Nigeria 857.2 Ghana 374.4 Angola 273.2 Kenya 193.8 Congo 173.5 Cote d'Ivoire 159.2 Cameroon 154 Senegal 149.5 Sudan 117.8 Ethiopia 88.7

Benefit of EPA (1) Avoidance of duties for African exports to the EU compared with the arrangement without an EPA So, if an African country falls back to a less favourable market access regime, how much additional duties would EU importers pay for African exports?

Benefits of EPA is assumed to accrue to African exporters for 100%: overstates benefits EU importers also benefit Costs of EPA will be borne by African governments, and the people affected by cuts in government incomes Hospitals Schools Roads

Benefits of EPA differ per country LDCs: Everything But Arms From market access perspective, no benefit from EPA South Africa: TDCA Incremental benefits (already at 95%) Republic of Congo, Gabon, Nigeria: not listed as beneficiaries under EU’s MAR 1528/2007, already trading under EU GSP For other non-LDCs: EU’s GSP For example fresh or dried pineapples (08043000) = 0.7%

For each country: Calculation of duties payable under EU GSP Top 30 exports Eurostat trade data, EU imports from African countries Three year average 2008-2010 Applicable EU GSP duty MFN rates: European Commission, Taxation and Customs Union Mixed / specific duties: ad valorem equivalent (ITC Market access map) EU GSP regulation . In all non-LDCs, the thirty most important exports to the EU constitute more than 90% of total exports to the EU, with Botswana, Congo, Gabon, Nigeria, Seychelles and Swaziland reaching 98% or more. The only exception is Mauritius (79%), due to the fact that textile tariff lines are extremely specific in the EU’s tariff schedule.

Only 127 products would not be duty free under EU GSP Description Total exports by non-LDCs (excl. RSA) Total duties under EU GSP, EUR mln Raw Cane Sugar 223.31 109.2 Bananas 348.98 74.82 Prepared Or Preserved Tunas And Skipjack 299.91 61.48 Fresh Or Chilled Bovine Meat 54.43 34.96 White Sugar 54.53 32.95 150.11 30.77 Fresh Cut Roses And Buds 282.92 24.05 Cocoa Paste (Excl. Defatted) 331.68 20.23 Fillets Known As "Loins" Of Tunas Or Skipjack 77.55 15.9 Cocoa Butter 356.78 14.98 Other 1,770.54 151.74 Total 3,950.74 571.08

Cost of EPA higher than benefit of EPA  Country GAINS OF SIGNING EPA COSTS OF SIGNING EPA Cost of EPA higher than benefit of EPA Duties under GSP (USD mln) Tariff revenue loss (USD mln) Botswana 37.7 5.4 No Cameroon 56.7 154.0 Yes Congo - 173.5 Cote d'Ivoire 124.5 159.2 Gabon 3.1 88.1 Ghana 51.9 374.4 Kenya 87.1 193.8 Mauritius 193.2 50.3 Namibia 60.6 7.1 Nigeria 8.4 857.2 Seychelles 46.2 30.0 Swaziland 73.6 1.4 Zimbabwe 39.2 15.4 Non LDCs 782.2 2,110.0 LDCs 1,275.2 All Sub Saharan Africa 3,385.2

Costs of EPAs higher than benefits? Yes: No: LDCs Botswana Cameroon Mauritius Congo Namibia Cote d’Ivoire Seychelles Gabon Swaziland Ghana Zimbabwe Kenya Nigeria

GSP reform does not change the story Fall back option less attractive for some countries GSP reform is a way to increase the benefits /gains of signing EPA However does not change the story except if Cote d’Ivoire would be pushed back to MFN

Cost of EPA higher than benefit of EPA  Country GAINS OF SIGNING EPA COSTS OF SIGNING EPA Cost of EPA higher than benefit of EPA Duties under MFN (USD mln) Tariff revenue loss (USD mln) Botswana 37.8 5.4 No Cameroon 61.5 154.0 Yes Congo 1.3 173.5 Cote d'Ivoire 163.4 159.2 Gabon 10.6 88.1 Ghana 69.2 374.4 Kenya 121.8 193.8 Mauritius 212.8 50.3 Namibia 73.1 7.1 Nigeria 19.3 857.2 Seychelles 54.2 30.0 Swaziland 74.6 1.4 Zimbabwe 47.0 15.4 Non LDCs 946.5 2,110.0 LDCs 1,275.2 All Sub Saharan Africa 3,385.2

AU common position paper highlights other risks EPA’s potential impacts on Food security and rural livelihoods EU Ag subsidies Regional trade and integration Industrial development Export taxes Governments’ Support of Local Enterprises and Industries Tighter Intellectual Property Disciplines

AU common position paper Despite the resources and efforts devoted to EPA negotiations by African countries, many of these critical issues have still not yet been addressed. Nevertheless, Africa continues to seek an improved relationship with Europe to address the impediments to development and to strengthen its productive capacities.

Thank you