FAO Seminar- Riga, June EPAs and their impacts on ACP agriculture and development Anne Wagner

FAO Seminar- Riga, June Cotonou Agreement A significant change in EU-ACP relations

FAO Seminar- Riga, June From Lomé to Cotonou A radical change in 2000 Lomé Convention – an Aid section, the EDF (15 bn €/5 years) – a commercial section, based on non- reciprocal commercial preferences –4 product specific protocols banana, sugar, meat and rum

FAO Seminar- Riga, June Reasons for change WTO non compatible – discriminatory and non reciprocal –Contrary to MFN clause Advantages given to one partner must be given to all 2 exceptions –concessions to all LDCS or to all DCs –or reciprocal concessions in the framework of a FTA (GATT art. 24 ) – EU obliged to ask for a waiver from WTO

FAO Seminar- Riga, June A mixed outcome for Lomé preferences A mixed outcome –A decrease of the share of imports originating from ACP on the EU market (from 7 in 1976 to 3 % in 2003) –Exports from ACP that remain very concentrated on primary products (ex: Burkina Faso) –Exports from ACP very dependant on EU market –Supply side structural constraints Some individual success stories (Mauritius, lichee from Madagascar, …)

FAO Seminar- Riga, June The Cotonou Agreement Introduction of Economic Partnership Agreements (EPAs) –Reciprocity : ACP markets opened to european products, but asymmetry EU opens at 100 % ACP open at 80 % –Negotiation by regional groupings (6), to encourage regional integration –On a voluntary basis A new Aid system –Same amounts (15 bn €) –New mechanisms, not yet defined –Probably linked to EPAs

FAO Seminar- Riga, June If no EPA Different options depending if LDC or not –Non LDC : return to GSP –LDC : EBA Initiative (Everything but Arms) Consequence: not in interests of LDCs and risk of regional destabilisation Probable consequences on aid mechanisms, not yet fixed

FAO Seminar- Riga, June Calendar Beginning of EPAs : 1st January 2008 … implementation in a 12 year period : preparation period –until end 2003 : Phase 1 at all ACP level – since 2004 : regional negotiations, specific to each EPA

FAO Seminar- Riga, June Consequences for ACP What impacts on agriculture sectors and development of those regions?

FAO Seminar- Riga, June Impacts of regional integration Will a larger market enable economies of scale? –Yes, if removal of non tariff barriers (infrastructure, administrative) –But: Danger of an accelerated integration process, risk that current processes are destabilized Increase of inequalities between costal countries and land-locked countries Risk of trade diversion

FAO Seminar- Riga, June Market opening to european products (1/4) Tariff removal: fiscal losses –Between 5 and 10% of fiscal incomes for West African States –Less public investment –Implementation of a new tax system but problem of perception VAT : effect on consumers

FAO Seminar- Riga, June Market opening to european products (2/4) Increased competition on local products: –Average increase of 15% for imports into W Africa –Stronger impact on certain products, when direct competition on local production –Sensitive products : meat, milk, wheat flour, rice, potatoes, onions, sugar, tomatoes, oils…

FAO Seminar- Riga, June Market opening to european products (3/4) Some European products that are supported by CAP –Cereals Direct tranfers to producer Export subsidies: removed (decrease of internal european price), and used again beginning 2005 (€/$ parity) –Milk High internal price (production quotas) Export subsidies for milk powder –Tomatoes Direct transfers to producer for canning Export subsidies for tomato concentrate –Sugar: Current reform process –Chicken meat: dumping

FAO Seminar- Riga, June Market opening to european products (4/4) Threat for ACP agro-processing sector –Decrease of input price –But import competition for processed products –More fiscal pressure on the formal sector Advantage for consumers –Decrease of final consumer price, BUT if intermediaries DON’T transmit the decrease

FAO Seminar- Riga, June Fast liberalization not advised Fast liberalization not advised: –Incremental Protection of certain products, among them agro-processed ones CET level: –Considered as too low, should be increased and maintained until 2020

FAO Seminar- Riga, June Ex: debate on WAEMU CET –Applied by WAEMU since 01/01/2000 –4 levels : 0%, 5%, 10%, 20% –Insufficient to protect agriculture production –Revision demanded: by farmer’s unions first ; Then by governments –But without success

FAO Seminar- Riga, June Access to european market (1/2) Few new opportunities for LDCs, because EBA Non-LDCs : removal of remaining tariffs (mainly processed products) But : –Compliance to sanitary norms and standards –Structural supply constraints –Competition with other countries on european market –Danger of preference erosion if no EPA Ex: CEMAC

FAO Seminar- Riga, June Access to european market (2/2) Risk of regional desequilibrium: –Favorable to costal countries What consequences on natural ressources? What consequences on development modell?

FAO Seminar- Riga, June Recommendations 1.Capacity building 2.Compensation for fiscal losses 3.Negociatiation of commercial agreements that enable development of agriculture and exports

FAO Seminar- Riga, June Increase political and productive capacity (1/2) Capacity of States, to implement necessary reforms –Customs and administrative rules –New tax system –Transport and communication infrastructures At regional level –Coordination between members –Sectoral policies R&D, training, promote industrial development… –Investment regulation

FAO Seminar- Riga, June Increase political and productive capacity (2/2) Support civil society stakeholders Develop exports –Support competitiveness –Training for economic stakeholders (knowledge of european markets) –Standards and norms =>EU must guarantee sufficient and unconditional aid

FAO Seminar- Riga, June Compensate for fiscal losses By the EU, more important for LDCs Finance improvement of production capacity additional to existing funds

FAO Seminar- Riga, June Trade dimension Market opening to european products –Exclude sensitive products (e.g. meats, vegetables, wheat flour, oils) –Incremental –Room for manœuvre in EPA must not be more restrictive than in WTO (SP/SSM), on the contrary Exports –Loosening of norms (feasible ?) and rules of origin