1.1 From Lome to Cotonou

Trade cooperation between the EU and the ACP since the year 1975 has been regulated by four successive Lome conventions that were subject to review after every five years.  The major milestone in this cooperation was the granting of unilateral trade preferences to ACP countries, which has enabled products from ACP countries to be relatively competitive in the EU market.  Trade relations between these two blocs have been governed by the conventions for 25 years as follows:

·         Lome 1 (1975-1980)

·         Lome 11 (1980-1985)

·         Lome 111 (1985-1990)

·         Lome IV (1990-1995)

The Lome agreements were based on two main pillars of cooperation namely: Economic and Trade Cooperation and, aid (predictable aid flows).  The overarching objective of these agreements was to foster development of the colonies and overseas territories.  Specifically, the cooperation between the two blocs was meant to:

·         Promote trade between the two parties

·         Improve market access of ACP products to the EU market (duty-free access)

·         Enhance market access but with strict rules of origin

·         Stabilize exports under the stabex scheme mechanism

·         Provide specific protocols for certain products for instance sugar, beef, bananas etc

The preferential trade regime granted by the EU to ACP countries was mainly through trade preferences, trade protocols and financial and technical aid.

1.2 Underlying features of the Lome Agreement

The critical feature of the Lome agreements was that they recognized the inequality that marked the two parties to the agreements. In fact, under Article 7 of the agreement ACP states were not required to offer market access to the EEC. However, the push for reciprocity it is widely agreed, contradicts the preferential treatment granted by the EU to ACP countries, as the inequalities are hitherto significant if not greater than before thus the opposition to EPAs.  In contemporary international economic relations justice requires equality between those who are unequal in economic strength. Equity itself demands non-reciprocity.

1.3 Why the need for a new trade deal?

Previously, exports from the ACP countries entered the European Union market through the Lome Conventions – a series of agreements dating back to 1975. In 1994, following a trade dispute between the US and EU over banana exports from the Caribbean, the WTO ruled that the Lome Convention gave ACP countries an unfair trade advantage over other WTO members and therefore violated WTO rules. There are various legal and developmental arguments around that particular WTO ruling, particularly given that the WTO rules make provision for special and differential treatment for developing countries. In the event, ACP countries were faced with two options. Under the first option, ACP countries could choose to abandon the Lome Convention arrangements and export under the EU’s General System of Preferences (GSP).

This option would mean less generous treatment for ACP exports, and therefore a potential loss of export earnings for these countries as their products would become less competitive. Given that the EU is one of the top destinations for ACP exports, losing market share would have fairly serious economic consequences on key export sectors. However, access to EU markets through the General System of Preferences is on a non-reciprocal basis, and therefore the GSP would continue to allow local ACP markets some protection from subsidized EU exports.

1.4 Introducing Economic Partnership Agreements

Option 2 involved setting up a free trade area (FTA), with the European Union, dubbed “Economic Partnership Agreements” (EPAs). Under this option, ACP exports would enjoy the same preferences as before, but unlike the Lome Conventions, ACP countries would have to reciprocate meaning that they would have to allow virtually unrestricted access to their markets for almost all EU products within a ten year transition period. The danger in the EPA proposal lies principally in the fact that local producers, manufacturers, and service providers would have to face competition from a flood of European imports and companies. The European Commission, which negotiates on behalf of all the EU member states, has been mandated to negotiate with the ACP States. The EU argues that EPAs are the only possible option, if the ACP wishes to both maintain the existing market access arrangements and comply with the WTO rules. It is also argued by the EU that the EPAs are the best option for integrating ACP countries into the global economy.

2.0 THE COTONOU AGREEMENT – THE ORIGINS OF THE ECONOMIC PARTNERSHIP AGREEMENTS

 

The Cotonou Agreement was signed in June 2000 in Cotonou ( Benin) thus the name. This agreement builds on 25 years of ACP/EU Cooperation under the above four successive Lome Conventions.  The agreement spans for twenty years and has provisions for its review every five years.  The primary objective of the ACP/EU agreement is to reduce and eventually eradicate poverty while contributing to sustainable development and to the gradual integration of ACP countries into the world economy.

The Cotonou Agreement is governed by four main principles:

• Equality of partners and ownership of development strategies implying that, ACP countries need to determine and own development strategies and initiatives for their economies.

   

• Participation:  The agreement envisages widespread participation in the implementation of the Agreement beyond the Central government.  It envisages the participation of other actors for instance the civil society organizations, the private sector, the Local Government/Authorities, and the members of parliament through Joint Parliamentary Associations.

   

• Dialogue and mutual obligations: Under this principle, partners assume mutual obligations for instance, respect for human rights, the protection of fundamental freedoms, and accountable governance among others which are to be monitored through dialogue.

   

§  Differentiation and rationalization:  This principle mainly follows from the principle of Special and Differential treatment adopted by the WTO in recognition of the different levels of development among member states and therefore the need to have different needs and priorities.  Cooperation arrangement under this agreement is to vary depending on the special treatment being extended to Least Developed Countries (LDCs) and landlocked and island countries.

The Cotonou Agreement is largely a re-assessment of the Lome Conventions that were also incompatible with the WTO rules.

2.1 Why engage in EPA negotiations

It is important to understand what EPAs would mean to ACP before signing up to the EPAs. Some of the potential impacts of the EPAs are as follows:-

·         Significant declines in government revenue as a result of the elimination of import taxes on EU goods. This will result in less budget funding for social and human development and would probably also result in higher tax burdens for citizens (e.g. sales taxes) in order for governments to make up for lost revenue. The EU has already stated that it is not prepared to discuss new debt cancellation initiatives, as a way of compensating for these revenue losses.

·         Closures of local manufacturing ventures, especially SMEs as a result of competition from cheap subsidized imports. We are likely to see increased job losses, unemployment, poverty and loss of livelihoods. Industrialization strategies to diversify and expand economic production would also be undermined because of the difficulties for new entrants to the market to compete.

·         Delivery of basic social services in the hands of non-national private sector operators as a result of selling off of essential public services to European transnational corporations under privatization agreements: the provision of health, education, and other basic social services will only be available to those who can pay for them. Low income groups will have less access to fewer basic social services.

·         Declines in inter-regional trade as a result of “trade diversion”: countries of the region will lose their markets in neighbouring countries. Instead of regional cooperation, there will be increased competition between countries of the region to attract investment from the EU.

·         Dumping of cheap EU agricultural surpluses such as the dairy products etc