Global Trends by Martin Khor
Monday 22 November 2010
African Trade Ministers recently criticised attempts by Europe to get them to sign Economic Partnership Agreements that would damage their economies, and are proposing more beneficial alternatives
The economies of
Under these economic
partnership agreements (EPAs), Europe wants
Moreover, African farmers will lose their markets to artificially cheap European food imports that are heavily subsidised, if agricultural tariffs are reduced or eliminated.
These concerns, and
more, were expressed by African Ministers of Trade at their meeting
in Rwandan capital of
The Ministers adopted a Declaration on the EPAs which made clear their opposition to the EU's model of EPAs.
Also, in a show of
regional unity, the African Union Commission and the continent's five
regional economic commissions covering Eastern, Central, Western and
They also proposed
various ways for Africa to get out of its predicament, instead of signing
the kind of EPAs that
Some African Presidents
are expected to voice the region's concerns at a Europe-Africa summit
The growing African
resistance to the EPAs is the latest stage in a long saga which started
when Europe decided to end the long-standing post-colonial arrangement
in which it gave trade preferences for products coming from African,
However under the
Three years after the deadline, few African countries have signed the EPAs because of their damaging effects. The EC has threatened to remove the preferences from countries that have not signed.
These countries face
a dilemma. They face the pressure to sign, to maintain their preferences
and not lose some of their exports to
Firstly, the African countries fear that their local industries and farms will be damaged because the EPAs require them to reduce their tariffs to zero for 80% of their imports from the EU. Many local products may not survive or will lose market share to the cheapened imports.
They are also against several other trade conditions, including prohibiting or restricting the use of export taxes. Most African countries tax the exports of some of their raw materials so that local industries can use them for processing or manufacturing.
A ban on export taxes will prevent African countries from taking measures to add value to their primary commodities and to climb the value chain and industrialise.
The loss of import duties and export taxes will also reduce the governments' revenue since these trade taxes are a large part of their income.
Secondly, the African
countries are asked to open their services, ranging from telecoms and
retail trade to banking, to European firms. In the EPAs with the
Thirdly, the EPAs require liberalisation and deregulation of financial flows, investment and government procurement. This will make it difficult for the countries to regulate capital flows, when such regulation or capital controls are now recognised as important policy tools because of the present volatility of financial flows.
The opening of government procurement business to foreign firms (to be treated equally as locals) will affect the ability of the governments to give preference to locals, or to boost the domestic economy, because of the leakage to imports and foreign services.
Fourthly, the African
Ministers are worried that the EPAs would adversely affect
diverted to European products and services.
Fifthly, the EPAs would also make it more difficult for Africa to cope with the economic slowdown, since their trade balance with Europe is likely to deteriorate; and their ability to regulate capital flows, to boost domestic or regional demand and to earn revenue through trade taxes, will be affected.
What then can be done to avoid these damaging effects? First, 34 of the 47 African countries involved in the EPAs are least developed countries, and they do not have to sign the EPAs since their preferences will continue under an existing “Everything But Arms” scheme.
And second, the 13 non-LDCs can request that the EU provide them also with the Everything But Arms scheme, without their having to give preferences to the EU in return. There is a good case, as the 13 African countries are also poor and vulnerable, similar to the LDCs.
There is a precedence.
In any case, a good
solution should be found because it would be hypocritical for European
countries to pledge to help