EPAs and Access to Markets for Agricultural Products Reneth Mano Dept of Agricultural Economics University of Zimbabwe

Outline Background: EPAs and their Global Context African Agricultural Development Challenge Potential Role and Dangers of Free Trade Key Elements of EPAs Affecting Accessibility of EU Agric Markets Negotiation Issues for Increasing Access to EU Markets Towards the Best Possible Outcomes for ACPs from EPAs

Background:Global Context of EPAs EPAs: EU & ACP attempt at developing a GATT/WTO compliant partnership for economic development New Realities in EU/ACP Relationship – Asymmetric GATT/WTO commitments between EU and ACP – Differentiated WTO concessions for ACP with LDC status versus rest of ACP developing countries New Realities in EU Market /World Markets Relationship – EU role back on CAP supports progressively reduce comparative returns to ACP accessing EU markets versus world market – EU WTO bound to eliminate some barriers to EU market entry for goods from ROW not only ACPs Swim or sink: ACP under pressure to adjust to changing global trade realities in World Markets

State of ACP Agriculture & Development Challenge ACP Agriculture too under developed to benefit from EPA free trade initiatives –Technology development & yield gap –Domestic infrastructure dev gap –Market institution dev gap –Historic gap in domestic agric policy orientation ACPs are Developing Countries –Low GDP per capita than EU –Low economic growth rate than EU –High trade disparities between ACP & EU

Does EU-EPA Free Trade Approach Help the Development Cause of ACPs? Two Schools of Thought informing EPA debate (a) ACP agriculture needs free trade based EPAs as shock therapy to develop? – Competition is key to getting economies moving – Concession based market access entrench structural inefficiencies (b) ACP agriculture too underdeveloped to benefit from unconditional free trade rules – premature competition is unfair competition – premature competition lands countries and world on sub optimal growth path – World no longer buying this argument for all LDCs

EPA Myths: Potential Roles & Dangers EPAs will commit EU to develop ACPs – to help ACP enhance competitiveness of their agricultural products? – to allocate more aid for development? – to adjust smoothly out of non competitive sectors? EPA will turn ACPs into Dumping grounds for EU products – No help from EU to develop competing product lines against EU interests – No new aid for development

Under WTO rules issues of access are global issues –Access of ACP goods to ACP, EU, ROW –Access of EU goods to EU, ACP, ROW –Access of ROW goods to ROW, EU,ACP EPA as a FTA with EU guarantee preferential access to markets for : (a) EU goods in ACP countries (b) ACP goods in EU countries Key Issues on Impact of EPAs on Access to Markets

First Rule of Trade A Nation’s Standard of Living Is Determined By What It Consumes, Not What It Produces Through Trade Nations Can Consume Products Which They Do Not Produce

Principal of Comparative Advantage There are economic gains when, under free trade, nations produce and export those commodities they can produce relatively more efficiently and import those that other nations produce more efficiently. Trading comparative advantage products for comparative disadvantage products is called indirect production.

The Comparative Advantage Rule Export What We Do Best And then Import the Rest Comparative Advantage: To Get More Sugar, Should EU or America Produce Sugar or Produce Corn in order to Trade for Sugar?

Comparative Advantage Rules Comparative Advantage Determines Specialization and Trade Every Country (Region) Has a CA in Something (not necessarily food) CA is Determined By Resources But This Can Change Changes in the world climate,new technologies, transportation costs, exchange rates,government political policies,and resource or land development.

Negotiation Issues for Increasing Access to EU Markets Improving ACP access to EU Markets – Reduction in EU CAP supports commodity production support – Removal of agricultural export subsidies – Reduction of Non Tariff Barriers to trade – Replacement of impossible SPS & G&S with market friendly system of G&S and science based SPS requirements – Targeted development support to ACP for commodity with greatest potential comparative advantage

Sources of the Gains From Trade Operational Efficiency Gains (output/input) –Larger Markets –Specialization and Division of Labor Pricing Efficiency Gains –Competitive Discipline –Improved World Resource Allocation Public Gains –Consumer Choice

Barriers to Trade Trade Protectionism = market policies and devices that prevent free trade among nations –Often due to internal domestic policies –Farm commodity price supports and subsidies Tariffs (taxes on imports) Import Restrictions, Quotas, Licenses Industry Subsidies Embargoes, Export Restrictions Export Subsidies, Dumping Overvalued exchange rate policies: strong rand makes wine exports less competitive in EU and imports from EU relatively competitive in RSA

Domestic policies major influence on Exchange Rates Inflation/Confidence In Currency Monetary Policy/Interest Rates Trade Balances

Good Stopping Point