Agro-Trade Policy News Alert June 2016
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WHY GPEDC NEEDS TO TAKE POLICY COHERENCE FOR DEVELOPMENT SERIOUSLY Given the central importance of agriculture to livelihoods in most African countries, the agro-food sector is vital to efforts to eradicate poverty. The Global Partnership for Effective Development Cooperation (GPEDC) has so far failed to recognise this. With Africa increasingly seen as the next booming market for food demand, opportunities exist to transform African agro-food sectors. Many constraints are faced to bring about the production revolution on African agriculture. Considerable resources are being mobilised internationally to address these constraints, and the implications warrant a full discussion at the GPEDC’s High-Level Meeting that is scheduled to take place in Nairobi at the end of November 2016. It is increasingly apparent that issues of policy coherence for development (PCD) need to be addressed if investments in pro-poor agro-food sector developments are not to be undermined. For example, since 2000 the European Union alone has invested over €200 million in the development of smallholder sugar farming schemes in Swaziland. Across Southern Africa (Swaziland, Mozambique, Zambia and Malawi) EU development assistance, alongside government and private sector investments, has expanded small holder sugar production and opened up new commercial farming opportunities to a multiplicity of smallholder producers. Yet in making these investments the likely market effects of ongoing EU sugar sector reforms (notably production quota abolition) were largely ignored. EU sugar import demand beyond 2017 is projected to be half historical levels, with prices being sustained at only marginally above world market prices and around 1/3 below average prices from 2008 to 2013. This will undermine the financial position of newly established smallholder producers and leave them mired in the debts incurred to get into sugar cane production. Similarly, if EU trade agreement provisions dealing with non-tariff trade policy measures are not implemented responsibly and flexibly, recent investments in poultry and dairy sector development across Africa, totalling hundreds of millions of Euros could be undermined, as EU exports surge. Current trade trends, which are showing a growing African food import dependency, need to be reversed. This requires not only coordinated investments in African agricultural production and associated infrastructure but also a new approach to PCD . Approaches which in the evolving global agro-food sector trade context, places centre stage the problems faced in individual African countries in developing local agricultural production and processing. The adoption of such a ‘problem driven approach’ to PCD is essential if growing African food demand is to be met increasingly by Africa’s own agricultural and agro-food processing industries. Without this boost in production and employment within Africa, even the best GPEDC efforts towards effective development will be in vain.
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EDITORIAL The EC’s arbitrary deadline of 1st October 2016 for the ratification and implementation of concluded EPAs is a source of concern. Non-least developed African EPA signatories risk losing duty free access to the EU market, despite their commitment to ratifying and implementing the concluded agreements. This risk arises either because of: - the need to respect internal parliamentary consultation and ratification procedures; or - the need to respect regionally agreed mechanisms for EPA ratification. The EC’s arbitrary ‘deadline’ is unhelpful in ensuring full national and regional commitment to EPA implementation. What is more, it is positively harmful to African efforts to diversify exports and foster the structural transformation of African agrofood sectors. This structural transformation is vital to ensuring more value is created locally and more employment is generated for a rapidly growing population. Against this background the European Commission needs to state publicly that no sub-Saharan African country will lose duty free access to the EU market from 1st October 2016 where, through no fault of the governments in question, the ratification process has not been completed. This is essential to prevent both short term commercial losses and the undermining of long term efforts to diversify and structurally transform African agro-food sectors.
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AWEPA DELEGATION TO UNECA AND AU FINANCE MINISTER MEETING
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From 2-5 April an AWEPA delegation attended the UNECA Development Week and the AU Finance Ministers meeting in Addis Ababa. The mission was undertaken at the invitation of the UNECA Executive Secretary. At the last minute processes of government formation in Ireland prevented Irish AWEPA branch members from participating in the AWEPA delegation. Nevertheless the Coordinator of the AWEPA SADC programme and co-chair of the UK Africa All Party Parliamentary Group, Lord David Chidgey, held a series of fruitful discussions at senior official and ministerial level, on African trade and development aspirations and concerns arising around EPA implementation. Particular concerns were expressed over the interpretation and application of EPA provisions which proved contentious during the negotiations. These primarily related to EPA commitments on the elimination of non-tariff barriers to EU exports. This causes particular concern in the agro-food sector, since in most EPAs the elimination of the use of non-tariff policy measures is scheduled to take place from the date of entry into force of the agreement. While compromises were reached on these provisions, the final wording is ambiguous. Indeed, taken as a whole, in sensitive areas many of the EPA texts are contradictory. According to WTO trade policy reviews conducted since October 2010, no less than 27 sub-Saharan African governments make use of non-tariff trade policy measures to manage trade in no less than 11 distinct agro-food sectors. The use of these tools is often closely linked to African efforts to promote agricultural development and increase local value added processing. The importance of promoting local agricultural development and increased value added processing was highlighted by speakers from the African Union, the UNECA and a number of African Finance Ministers in their public presentations. Yet it is precisely in this sphere where EPA commitments could carry serious implications for national policy initiatives in the agro-food sector. The extent to which this is the case will depend on how these contentious provisions are interpreted and applied. If EPA implementation is not to undermine sub-Saharan African efforts to develop local agro-food sector supply chains then there is a need for the EC to commit to the flexible and responsible interpretation and application of EPA commitments. Given the projected growth in African food demand (with the population doubling by 2050), no African government should be required to implement trade agreement commitments which could undermine local agro-food sector development efforts. •
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CARE NEEDED TO ENSURE EPAs DO NOT UNDERMINE AFRICAN INTEGRATION Following on from a breakfast meeting with the UNECA Executive Secretary, Dr. Carlos Lopes, the AWEPA delegation received a presentation from UNECA technical officials elaborating on the concerns highlighted by UNECA analysis of the impact of EPAs on African economic development. The major points emerging form the UNECA analysis included: • the overall conclusion that EPAs will provide ‘little support to Africa’s diversification and transformation efforts’, indeed, ‘EPAs will reduce intra-African trade’;
Contentious Provisions of EPAs of Concern in the Agro-Food Sector
• the recognition of the importance of the agriculture sector to Africa, with approximately 75% of the population depending on the agriculture sector for their livelihoods;
The interpretation and application of EPA provisions in the following areas represents a cause of concern across a number of Sub-Saharan Africa regions:
• the recognition of the agro-food sector as a particularly sensitive sector under the Continental FTA, with this requiring special treatment, including a continued tolerance of the use of non-tariff measures by AU member states (preferably in the context of their transparent and accountable application in support of specific agrofood sector structural development programmes);
• tariff standstill commitments: which will prevent African governments using the ‘water’ in their ‘bound’ WTO tariffs on imports from the EU should this prove necessary in the face of heightened global agricultural market price instability:
• the recognition that EPA implementation will increase competition for Africa producers, particularly in the sphere of value added food products;
• commitments on the ‘Prohibition of Quantitative Restrictions’: which could seriously constrain the ability of African governments to use import prohibitions, TRQs and import licencing arrangements in support of local agro-food sector development programmes;
• the importance of ensuring an appropriate sequencing of the implementation of a continental free trade area (CFTA) and the implementation of EPA commitments, if the negative effects of EPA implementation on African economic development are to be reduced (with the CFTA needing to be in place before EPA commitments are fully implemented);
• the application of provisions on ‘National Treatment on Internal Taxation and Regulation’, which could constrain the use of local procurement regulations in support of local agro-food sector development;
• the conclusion that moves towards a continental customs union would require a renegotiation of EPA provisions, to reconcile differing tariff elimination commitments made under the various EPAs; • a highly qualified recognition that while ‘EPAs will undoubtedly enhance bilateral Africa-EU trade…trade gains will essentially be concentrated in non-LDCs and few agricultural sectors’.
• the application of infant industry protection safeguard measures: through limiting the scope of application and the duration of infant industry protection measures;
In addition, the UNECA analysts expressed the view that parliamentarians from EU countries should support calls by African parliamentarians for flexibility in the implementation of EPAs. It was argued ’there is scope for the parliaments in both Africa and EU to take a more active role in the EPA process.’
• the application of both general and agriculture sector specific safeguard provisions: which could seriously constrain the scope and duration of safeguard measures.
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The conclusion drawn by the AWEPA delegation from these consultations was that there is a need for a political commitment from the EU Council of Ministers to the flexible interpretation and application of EPA provisions in sensitive areas, particular where this could undermine African efforts to develop and structurally transform their agro-food sectors.
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Parliamentary questions tabled and Government responses Upon his return from the consultations in Ethiopia Lord Chidgey tabled the following questions to the UK government and received the following responses. •
Question: Lord Chidgey
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To ask Her Majesty’s Government what assessment they have made of the impact on the normal functioning of parliamentary ratification processes in developing countries of the EU bringing forward the deadlines for ratification of EU Economic Partnership Agreements. (HL7731)
EC DEADLINE UNDERMINES PARLIAMENTARY PARTICIPATION IN RATIFICATION PROCESS
Answer: Lord Price:
One of the most important points to emerge from confidential Ministerial level consultations undertaken during the AWEPA delegations visit to Addis Ababa, was the undermining of parliamentary involvement in the process of ratifying trade agreements, arising from the EC’s 1st October 2016 deadline.
The EU has not brought forward the deadlines for ratification of Economic Partnership Agreements between the EU and African, Caribbean and Pacific (ACP) partners. EU Regulation 1528/2007 of 20 December 2007 states that ratification of the agreements should take place “within a reasonable period of time.” I expect the parliamentary ratification processes in developing countries to function as normal in relation to these agreements.
One African Minister of Finance, with extensive involvement in the EPA negotiation process, highlighted how the arbitrary 1st October 2016 EC deadline for ratification of concluded EPAs would short circuit Parliamentary ratification processes. The contradiction between EU support for the establishment of fully functioning democratic Parliamentary systems of government and EC policy measures which undermine Parliamentary engagement in important policy making processes was highlighted.
Question: Lord Chidgey To ask Her Majesty’s Government whether they plan to discuss with the European Commission the effect of the deadlines placed on the ratification of trade agreements with developing countries where such deadlines could undermine the normal functioning of parliamentary engagement of these ratification processes. (HL7732)
It was argued many African governments were being confronted with the stark choice of circumventing or curtailing Parliamentary ratification processes or losing temporarily tariff preferences which could carry serious commercial implications for exporters serving EU markets.
Answer: Lord Price:
This was seen as disrespectful of democratic institutional arrangements and as denigrating the role of Parliaments in national economic policy making processes. Indeed, the position adopted by European Commission Trade Directorate officials with regard to the 1st October ‘deadline’ for ratification was seen as inconsistent with broader EU policies which seek to strengthen democratic institutional processes in Africa.
EU Regulation 1528/2007 of 20 December 2007 states that ratification of the European Partnership Agreements (EPAs) between the EU and African, Caribbean and Pacific partners should take place “within a reasonable period of time.” UK officials are in regular contact with the European Commission about the EPAs and we do not expect Regulation 1528/2007 to undermine the normal functioning of parliamentary engagement in the ratification processes for these agreemements.
This immediately gave rise to the tabling of parliamentary questions to EU member states’ governments.
Tabled on: 18 April 2016. Date and time of answers: 03 May 2016 at 12.20.
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UK AFRICA ALL PARTY PARLIAMENTARY GROUP (UK-APPG) TO LAUNCH EPA INQUIRY Following on from concerns expressed by a visiting delegation of Ghanaian MPs and the Executive Secretary of the UNECA, the APPG has decided to look in more detail into the effects the concluded EPAs could have on African economic development, with particular attention being paid to the agro-food sector.
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WHAT THE EC 1 OCTOBER 2016 RATIFICATION DEADLINE COULD MEAN FOR GHANA
Against this background, with a view to enhancing Parliamentary engagement in the EPA process, it has been proposed the African APPG should convene an inquiry to look into issues faced in EPA implementation. It is proposed that this should involve a number of hearings with experts and stakeholders, in addition to follow up meetings. A particular focus will be on the EPAs with West Africa and Southern Africa, given the importance of these two regions to EU agro-food sector exports and the huge projected growth in in food demand in these regions up to 2050.
In April 2016 a delegation of Ghana’s leading exporting companies met with the government of Ghana to express concerns over the possible loss of duty free access to the EU market from 1st October 2016, as a result of the ‘deadline’ for the completion of EPA ratification established by the European Commission. This delegation included the world’s leading international cocoa processor and manufacturer of industrial chocolate, Barry Callebaut, and a host of horticultural and fisheries exporters. The private sector delegation expressed concern about the danger of an imposition of EU GSP duties from the 1st October 2016, ranging from a low of 2.3% (pineapples) through duties of between 2.8% and 6.1% (value added cocoa products) to 19.4% and 20.5% (bananas and preserved tuna products). These increased duties would affect over ¼ of Ghana’s exports to the EU, with the new duties falling particularly heavily on value added agro-food sector products.
The Southern African experience is particularly relevant. The EU already has in place a fully implemented free trade area agreement with South Africa, which in its structure is similar to the recently concluded EPAs. The effects of EPA implementation on trade flows thus can already be seen in the EU’s trade with South Africa. Since 2009, when ‘back loaded’ tariff elimination commitments began to be fully implemented the value of EU agro-food sector exports to South Africa have increased 88%. In contrast over the same period the value of EU imports of agro-food products from South Africa grew only 32%. The trade trends under the EU-South Africa trade agreement are particularly relevant since South Africa acts as the gateway to the wider Southern African region for the vast majority of EU exports.
While the Ghanaian government is resolved to move ahead with EPA ratification and implementation, regionally agreed ratification procedures, mean the government of Ghana cannot move ahead in this regard until all West African governments involved in the EPA have signed. Currently Nigerian Mauritania and Gambia still need to sign the West African-EU EPA. The danger of GSP duties being applied is already weakening the commercial position of Ghanaian exporters in negotiations with EU importers. It is also putting in danger the gains made in moving up the supply chain (in 2012 processed value added cocoa products accounted for 21.9% of Ghana’s total cocoa sector exports but by 2015 this had risen to 32.7%).
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The opinions and conclusions expressed in this newsletter are those of the parties mentioned, and do not necessarily reflect the views of AWEPA International.
Text by: Dr. Paul Goodison, GDC-Partners Expert on EU-Africa trade Design by: AWEPA Communications