FarmPolicy

August 17, 2019

EU “Economic Partnership Agreements” Could Impact Some U.S. Ag Sectors

Categories: Doha / Trade /EU /Farm Bill

At first glance, a somewhat complicated debate over trade policy issues between the European Union and some its former colonies, might appear to be unrelated, or non-germane to American agriculture interests.

However, as details of proposed EU “Economic Partnership Agreements” are analyzed, some have noted that this debate over EU trade policy could possibly enhance the EU export market, while simultaneously stifling U.S. agricultural exports in some sectors.

Background

In a Policy Brief issued last month by The German Marshall Fund, Claire Delpeuch explained that, “For the past five years, the European Union (EU) and the African, Caribbean, and Pacific (ACP) countries have been engaged in reform negotiations of the ‘Cotonou Agreements,’ a set of trade agreements that have continued the almost 40 years of preferential market access offered by the EU to the exports of its former colonies.

“This reform was initiated to bring these preferential trade arrangements into compliance with World Trade Organization (WTO) rules. Indeed, the WTO allows for preferences only when they are part of reciprocal free trade agreements or when they benefit developing countries (DCs) on a non-discriminatory basis. And, as Cotonou preferences are not reciprocal (EU exports do face tariffs when entering ACP markets) and are extended to only some DCs (and not many DCs in Asia and South America), they are not compliant with WTO legislation. Until now, this situation was maintained through the granting of a waiver at the WTO. However, this waiver is due to expire on December 31, 2007.

“As a result, the EU is trying to convince its ACP partners to conclude new
WTO-compliant free trade agreements through the signature of the ‘Economic Partnership Agreements’ (EPAs). Such agreements would liberalize bilateral trade between the EU and six ACP regional groupings, among which free trade would also be established.

“The logic behind the European Commission’s (EC) promotion of the EPAs also relies on the belief that the virtues of regional trade integration would benefit the ACPs: specialization, economies of scale, diminution of trading costs, and increased investment.”

The Policy Brief indicated that, “According to the EC’s official line, EPAs would thus retain the core objectives of previous EU-ACP trade arrangements: to reduce poverty and enhance development in ACP countries. EU officials represent the resulting additional trade liberalization with ACP countries as simply a means to achieve development goals, together with the deepening of regional integration, the enhancement of market access for ACP products in the EU market, and increased cooperation on services and trade-related issues. However, this reintroduction of reciprocity into EU-ACP trade relations is a major political shift, one that could have important economic consequences.”

Current Developments

More recently, Alan Beattie, reported last week in the Financial Times that, “Peter Mandelson on Tuesday said the European Union and developing countries were closer to agreeing high-profile trade pacts, amid renewed criticism that the Commission was bouncing poor country governments into making deals.

“The EU’s trade commissioner told European parliamentarians that after a week of intensive talks with ­African, Caribbean and Pacific (ACP) nations, mainly former European ­colonies, ‘it is clear … that there is a change in attitude on the ACP side’.

“Mr Mandelson has been criticised by academics and development campaigners for pressing the ACP countries to sign preferential trade deals with the EU by the end of the year to replace an expiring agreement that breaches World Trade Organisation rules. The EU says the only other option is a much less generous regime.”

Mr. Beattie went on to explain that, “Researchers at the university Sciences-Politique in Paris, the Washington-based International Food Policy Research Institute and the transatlantic think-tank the German Marshall Fund [GMF] argue that the deals will cause EU exports of goods such as beef, garments, tobacco and beverages to displace those from other countries.”

The FT article added that, “Susan Sechler, senior fellow at the GMF, said: ‘The EU rush to renegotiate EPAs [economic partnership agreements] by the end of the year is a huge market grab.’”

Later, Mr. Beattie indicated that, “Trade academics have argued for options other than forcing ACP countries on to less generous arrangements, including rolling existing agreements forward until a permanent replacement is agreed. Patrick Messerlin and Claire Delpeuch at Sciences-Politique said ACP governments could ensure a level playing field by offering modest market opening to all countries rather than privileging the EU.”

Jochen Luypaert, writing on Wednesday at the EUObserver.com noted that, “[EU trade commissioner Peter Mandelson] also welcomed the progress made in the trade negotiations with the ACP countries – the 78 African, Caribbean and Pacific countries – ‘after an intense week of negotiations’”.

The article explained that, “The EU – which currently offers these countries duty-free and quota-free access to its markets – needs to reach new agreements with these countries under World Trade Organisation (WTO) rules because the current system has been ruled as discriminating against developing countries from Latin-America and Asia.

“The union is willing to continue the free access to its markets on condition that ACP countries open up their markets.”

With respect to the “discriminating” impacts the current scheme has on Latin-America, public radio’s Marketplace program noted in a report from Wednesday that, “The European Union is facing a year-end deadline on some key trade deals. Agreements with nearly 80 of its former colonies are being negotiated. As it does, so, the E.U. is playing poor countries off one another.”

More specifically, the program indicated that, “The European Union charges a duty of $257 for a ton of bananas from Latin America. Meanwhile, bananas from 76 former colonies in Africa, the Caribbean and the Pacific can enter the E.U. duty-free.

“But those preferential trade rules expire December 31, and the E.U. is insisting its former colonies sign new, less favorable agreements before that deadline, or face sharply higher duties.”

“Latin America’s big banana producers are eager for a level playing field in Europe. And the E.U. is using that threat to pressure its former colonies into signing a new agreement,” the program noted.

Stephanie Burgos of Oxfam America, who also appeared on the Marketplace segment, stated that, “This is pitting one poor country against another, which we think is entirely unfair.”

And, an item posted on Tuesday at AllAfrica.com noted that, “Caroline Lucas, a British Green member of the European Parliament (MEP), argued that Mandelson is putting pressure on vulnerable countries to open their markets to European goods. The Guardian newspaper in London, she remarked, had reprimanded him this week for ‘bully-boy tactics’”.

Meanwhile, an item published at Bridges on Wednesday provided additional detail on the EU EPA issue and specifically highlighted the potential negative impact an agreement could have on some U.S. agricultural exports.

“Furthermore, the economic benefits of the EPAs that Brussels wants have been called into question by new research from the International Food Policy Research Institute [IFPRI] and the Sciences Po institute in Paris,” the Bridges article said.

“Since ACP countries generally have high tariff levels vis-à-vis the rest of the world, liberalising barriers to imports from the EU alone would artificially give European products a competitive edge in ACP markets compared to goods produced elsewhere, concluded Patrick Messerlin and Claire Delpeuch of Science Po’s Groupe d’Economie Mondiale (GEM). Not only would the expensive products sold by relatively inefficient EU companies be shielded from outside competition by high ACP tariffs, even globally competitive EU exporters would be in a position to charge prices substantially higher than world market rates. The ACP could effectively end up subsidising inefficient EU firms, and ACP consumers could find themselves denied many of the potential gains from lower prices that might normally arise from liberalisation.

The article added that, “Furthermore, IFPRI determined that the EPAs would see ACP imports swing heavily towards the EU and away from other countries such as the US and China. For instance, they project that the EU’s share of meat imports in most ACP countries would rise by 180 percent, while other regions, such as South America, would see beef exports to the ACP decrease by around 30 percent. US beef exports to Nigeria would stand to drop by some 30 percent. This would be ironic, since it was complaints from other countries about the EU’s preference scheme that led to the push for the EPAs in the first place.”

In addition, this EU trade issue could also have tangential impacts on the Doha Round of WTO trade talks.

As The Wall Street Journal’s “Washington Wire” section noted on Friday, “Trade advocates fear push by European Union for trade deals with developing nations, many in Africa, could steepen challenge for Doha Round. Susan Sechler of German Marshall Fund warns those deals will remove a ‘reason to get the Africans back to the table’ for broader negotiations.”

Doha

With respect to recent developments in the Doha talks, Reuters news reported on Wednesday that, “The long-running Doha round of trade talks will not see any major developments for the rest of this year as negotiators take time to produce a better deal, the head of the World Trade Organisation (WTO) said on Wednesday.”

The article indicated that, “Expectations in the late summer that the resumption of negotiations on the basis of compromise texts on agriculture and industry would lead to a breakthrough by the end of the year have since faded.

“But trade diplomats and officials say this is because the WTO’s 151 members are at last getting to grips with the issues.

“The revised negotiating texts, incorporating the outcome of the intense talks on highly technical matters since September, will form the foundation of an eventual comprehensive deal.”

Reuters writer Koh Gui Qing reported on Thursday that, “The European Union’s trade chief said on Thursday he was impatient with the lack of progress towards free trade deals in the global Doha round and between the EU and Southeast Asia.”

The article added that, “‘I do think a certain fatigue is setting in, and that’s why I think it would be very dangerous if we delay the negotiation processes. We have to complete this round next year — I think it is very important to get this deal done while President Bush is in the White House,’ [Peter] Mandelson said.

“He said otherwise negotiations would not be revived until 2010. ‘What we have on the table will by then have turned mush. It is going to be much more difficult.’”

And the Associated Press reported yesterday that, “British Prime Minister Gordon Brown said Saturday he was optimistic a new trade deal could be reached in the next few weeks to salvage the troubled Doha round of world trade talks.”

The AP article stated that, “The U.S. and European Union have been increasingly vocal in recent weeks in their criticism of Brazil, India, South Africa and others for refusing to compromise.

“Washington and Brussels say six years of negotiations could collapse without a breakthrough in the coming months.”

U.S. Notification of Domestic Payment Levels

In other WTO news, an item posted at the Organization’s webpage on Wednesday, stated that, “Recent US notifications on domestic support, covering spending in 2002-2005, dominated the half-day meeting of the ‘regular’ Agriculture Committee on 21 November 2007.”

(For more background on the U.S. notification of subsidy levels to the WTO, see this FarmPolicy.com update from October 8th).

The WTO update noted that, “Around one hour of the three-hour meeting was spent on the US replying to about 50 written questions from Australia, Canada, the EU, Japan and New Zealand on the 107-page US notification for 2002-2005 (document G/AG/N/USA/60) circulated on 9 October. Two themes were common to the questions:

“* how the US justifies categorizing its direct payments as ‘decoupled income supports’ in the Green Box, the unofficial name for supports that do not distort trade (or distort minimally) as defined by Article 6 and Annex 2 of the Agriculture Agreement. Questioners referred to a WTO dispute on cotton where the direct payments were found not to fully meet the criteria for decoupled income supports (dispute DS267). There are no limits on Green Box spending.

“* how the US justifies describing its ‘counter-cyclical payments’ (supports that rise when prices fall and vice versa) as ‘non-product specific’, particularly after the ruling in the same dispute, which concluded that the challenged domestic support measures granted some support specifically to upland cotton.

“A number of other questions sought clarification on details of the US programmes. The US provided the explanations and defended the classification of some of its support programmes in the notifications. It argued that direct payments do meet the criteria of the Green Box. And it said the counter-cyclical payments are not specific to products because they are based on historical acreages and yields, and do not require specific crops to be grown.”

Keith Good

Comments are closed.