adminSo far, it has successfully created reciprocal trade relations in the World Trade Organisation trade rules.
More recently, the ACP and the EU have undertaken negotiations for an Economic Partnership Agreement, as part of key elements of the Cotonou Agreement.
This discussion will review the contentious issues surrounding EPAs and present an argument as to why it is in Zimbabwe’s best interest not to embrace them.
Most African countries together with Zimbabwe are refusing to embrace the EPAs proposed by the EU.
The principal reasons provided by African states are that they need more policy space and flexibility with matters relating to EPAs.
There are a number of contentious issues which makes it very difficult for Zimbabwe to benefit from EPAs. These include the implementation of the agreements time frame.
African countries are stating that they will need more than 15 years to implement the full EPA, while the EU is insisting that African countries can only have a maximum 15 years for implementation.
For Zimbabwe, the issue of time frame is even more critical since the country witnessed a decade of economic meltdown which has seen the economy contracting by more than 50 percent.
Over these years, Zimbabwe has lost its international competitiveness and the country’s cost profile made even very difficult to supply local market let alone to create trade in the mighty powers of fully mechanised and highly efficient industries in the EU.
Export taxes
Export taxes have been part of trade policy scene for centuries and have been an essential instrument of the industrial policy for raw materials and volatility of food prices.
In 2009, export taxes and restrictions emerged as ninth top category among state measures discriminating against foreign commercial interests.
The trend continues upward making export taxes and restriction, the fifth top measure in 2012 after bailouts, trade remedies, tariffs and non-tariff barriers emanating from the global economic crisis and its aftermath.
The use of export taxes is even allowed under Article XI of General Agreement on Tariff and Trade. But, surprisingly, the EU in the EPA agreement doesn’t want to see the application of export taxes.
This then shows that conventional wisdom which states that ACP countries including Zimbabwe didn’t substantially benefit from the Lomé Convention and Cotonou Agreement is true.
Although it is debatable that it was actually the EU which benefited through supply of cheap raw materials while we were comfortably thinking that we are getting preferential treatment yet we were and still are supporting their industrial growth, I vehemently stand my ground here.
For Africa and Zimbabwe, we even got more relaxed and see trade agreements as good for our economy when we got stabilisation of export earnings.
Stabex was implemented by EU to protect the export earnings of ACP countries from the effects of the fluctuations to which they are subject as a result of the operation of the market or the vicissitudes of production through compensation of losses in export earnings.
These were mere crocodile tears meant to keep us afloat and continue to supply raw materials for EU industries.
ACP countries are opposed to the provisions that would limit the use of export taxes both as a matter of principle and for the sake of preserving their policy space. Zimbabwe has over the years been calling for value addition, but industry especially never heeded to the call.
Export taxes offer Zimbabwe with a much more convenient way of encouraging value addition. Rather, export taxes are more friendly instruments than draconian approaches of say banning.
For Zimbabwe it is much more urgent to use export taxes for export diversification.
Over the years, more than two thirds of Zimbabwe’s export basket was concentrated in primary products which fetch low export earnings due to volatility of international prices of such products.
With the strong denial by the EU for Zimbabwe to incorporate export taxes in its trade and industrial policies I don’t see Zimbabwe benefiting from the EPAs.
The standstill clause
The clause stipulates that after the entry into force of the EPAs, the parties may not introduce new tariffs, or may not raise existing tariffs and, once eliminated, tariffs may not be re-imposed.
This is another show of insincerity of the EU. Zimbabwe is going through a development cycle. It is still a developing country, not even an emerging market.
Hence, it is clear that it requires flexible trade policy for particular state of the economy. For example, when Zimbabwe initialled and signed interim EPAs it submitted a list of sensitive products (constituting 20 percent of total tariff lines) which were supposed to be excluded from trade liberalisation.
In my humble view that sensitive list has to be updated now, that is, remove products which were sensitive and now no longer sensitive and replace it with new products which need protection.
So, against this background, Zimbabwe and other African States feel that the standstill clause should be removed from the EPA texts in order to allow for maximum use of policy space for development purposes.
Zimbabwe must remain flexible to make trade policy changes if necessary.
The MFN clause
The Most Favoured Nation clause dictates that following the conclusion of an EPA, should any ACP country or grouping conclude a Free Trade Agreement with any developed country or any other major trading economy, including the newly emerging economies such as China, India and Brazil, then any more favourable treatment provided to that developed country or grouping must also be extended to the EU and vice versa.
The MFN can be violated under the Enabling Clause; developing countries can exchange virtually any trade preferences to which they agree.
This provision is intended to promote trade among developing countries themselves. Under the Enabling Clause, preferences need not to lead to full free trade area, partial preferences across a subset of goods are permitted.
Finally, MFN is also violated under Article XXIV of GATT, any two or more of the WTO members can form an FTA or customs union.
The Enabling Clause was established to legitimise the principles under which unilateral preference schemes were granted by developed to developing countries and to allow lower thresholds for liberalisation in agreements between developing countries.
Hence its application should exclude the above newly emerging countries. To me, this is rather nostalgic, absurd and ridiculous.
The EU wants similar treatment given by Zimbabwe say to China. If China makes a huge investment say in the energy sector while the EU is concentrating on giving Zimbabwe sanctions it then expects to enjoy the same preferential treatment with China yet it has done nothing except harm.
The issue of MFN clause is not universally applied in all cases.
The list of contentious issues is long. From this discussion, Zimbabwe does not need to hurry to sign EPAs without these factors raised above addressed.
The argument of the EU of disruption of trade if we don’t sign and ratify full EPAs is mere cheap talk.
We can still export to the EU under the WTO arrangement and the EU cannot unilaterally discriminate us under the MFN clause.
It is rather more beneficial to stick to the WTO framework with the EU rather than the skewed free trade agreement enshrined in EPAs which takes away our policy space.
Gift Mugano is an author and expert in Trade Policies Research and Analysis (ACP-EU, Comesa and Sadc) and PhD candidate (Economics) and a lecturer in Economics, at Nelson Mandela Metropolitan University, Port Elizabeth, South Africa. Email: [email protected], Mobile: +27 780 174 112.
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