1. FAO Seminar- Riga, 05-06 June 2006 1 EPAs and their impacts on ACP agriculture and development Anne Wagner wagner@gret.org

2. FAO Seminar- Riga, 05-06 June 2006 2 Cotonou Agreement A significant change in EU-ACP relations

3. FAO Seminar- Riga, 05-06 June 2006 3 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

4. FAO Seminar- Riga, 05-06 June 2006 4 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

5. FAO Seminar- Riga, 05-06 June 2006 5 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, …)

6. FAO Seminar- Riga, 05-06 June 2006 6 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

7. FAO Seminar- Riga, 05-06 June 2006 7 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

8. FAO Seminar- Riga, 05-06 June 2006 8 Calendar Beginning of EPAs : 1st January 2008 … implementation in a 12 year period 2000-08 : preparation period –until end 2003 : Phase 1 at all ACP level – since 2004 : regional negotiations, specific to each EPA

9. FAO Seminar- Riga, 05-06 June 2006 9 Consequences for ACP What impacts on agriculture sectors and development of those regions?

10. FAO Seminar- Riga, 05-06 June 2006 10 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

11. FAO Seminar- Riga, 05-06 June 2006 11 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

12. FAO Seminar- Riga, 05-06 June 2006 12 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…

13. FAO Seminar- Riga, 05-06 June 2006 13 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

14. FAO Seminar- Riga, 05-06 June 2006 14 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

15. FAO Seminar- Riga, 05-06 June 2006 15 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

16. FAO Seminar- Riga, 05-06 June 2006 16 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

17. FAO Seminar- Riga, 05-06 June 2006 17 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

18. FAO Seminar- Riga, 05-06 June 2006 18 Access to european market (2/2) Risk of regional desequilibrium: –Favorable to costal countries What consequences on natural ressources? What consequences on development modell?

19. FAO Seminar- Riga, 05-06 June 2006 19 Recommendations 1.Capacity building 2.Compensation for fiscal losses 3.Negociatiation of commercial agreements that enable development of agriculture and exports

20. FAO Seminar- Riga, 05-06 June 2006 20 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

21. FAO Seminar- Riga, 05-06 June 2006 21 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

22. FAO Seminar- Riga, 05-06 June 2006 22 Compensate for fiscal losses By the EU, more important for LDCs Finance improvement of production capacity additional to existing funds

23. FAO Seminar- Riga, 05-06 June 2006 23 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