Rethinking Africa-EU trade relations: not “business as usual”

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Over the past decade, there’s been a scramble by the European Union (EU) and the African, Caribbean, and Pacific Group of States (ACP) to mend the regulatory framework governing their trade relations. Earlier this year the EU was forced to extend the deadline for conclusion of trade agreements to October 2014, after several ACP states either failed or refused to ratify Economic Partnership Agreements with the EU. Some context is necessary.

History of Africa-EU trade frameworks

The institutionalization of trade relations between Sub-Saharan Africa and the EU dates back to successive Yaoundé Conventions between 1963 and 1975.

In 1975 the African, Caribbean, and Pacific Group of States (ACP) was founded by the Georgetown Agreement. The ACP is composed of 79 African, Caribbean and Pacific states. There are 48 countries from Sub-Saharan Africa, 16 from the Caribbean and 15 from the Pacific. The main objectives of the ACP include, among other things, coordination and implementation of trade agreements. The ACP has a permanent Secretariat that is responsible for the administrative management and for assisting the Group’s decision-making and advisory organs. The permanent Secretariat is based in Brussels.

Since 1975, trade negotiations between ACP states and other states entities have taken place at two levels: at a multilateral ACP level, and at a bilateral state level.

Between 1976 and 1999, successive Lomé Conventions constituted the multilateral framework regulating trade relations between the European Communities and the ACP Group. The Lomé Conventions served multiple purpose including, trade, development, aid and investment. The framework provided for establishment of Economic Partnership Agreements (EPAs). Under the EPAs, ACP states benefited from preferential trade treatment. Preferential treatment was generally not reciprocal.

In 1992 the European Communities unified into the European Union. Political pressure from member states and other developed states necessitated a renegotiation of the Lomé trade framework. Moreover, in 1995 United States government petitioned the World Trade Organization (WTO) to investigate the compatibility of the Lomé IV Convention with WTO rules. The WTO Dispute Settlement Body finally concluded that the convention was incompatible with WTO rules. It thus became even more pressing for the parties to renegotiate the framework.

The renegotiation commenced in the late 1990s and culminated in the ACP-EU Partnership Agreement signed in Cotonou, Benin in June 2000 (Cotonou Agreement).

The Cotonou Agreement is a binding framework for economic cooperation, trade cooperation and development. The revised Cotonou Agreement (March 2010) has a far reaching political dimension in that it provides for promotion of international criminal justice through the International Criminal Court.

Negotiation of partnership agreements

The Cotonou Agreement does not prescribe a single trade model; instead, the understanding between the parties was that the states would enter into EPAs. The negotiations for EPAs commenced at ACP level in 2002, and regional negotiations by six ACP groups commenced in 2003. The agreements were expected to be concluded in 2007, which coincided with the WTO waiver on preferential trade agreements.

The negotiations have stalled and are threatened by impending collapse. To salvage the negotiations, the parties opted for “interim” Economic Partnership Agreements. While 19 African states initiated such “interim” EPAs, only 10 have actually been signed. Other states have refused to ratify agreements, requesting for “more room to breathe”. The EU has in turn threatened to revoke preferential access.

Stumbling blocks

The two sides have cited contentious political issues and issues of principle. An official list of contentious issues was agreed upon by the Ministers of Trade and Finance of the African Union at their meeting in Addis Ababa in April 2008. The list includes, among other things: transition periods for tariff liberalization, export taxes, national treatment principle in goods, free circulation of goods and regional preference, free circulation of goods, regional preference, safeguards and infant industry provisions, safeguards infant industry provisions, most-favoured nation, non-execution clause, and rules of origin.

The issue of liberalization and market access has special significance for African states. African states are struggling with a delicate balance between liberalising their economies and protecting budding domestic infant industries.

Bargaining clout: emerging powers

A more subtle but thorny stumbling block is the change in balance of power. Growing African regionalism and the emergence of BRICS as a powerful bloc of developing states has created trade and investment alternatives, thus increasing the bargaining power of African states.

The BRICS have emerged as major investors and trade partners for African states. According to the Economic Commission for Africa, “Trade with the BRICS has grown faster than with any other region in the world, doubling since 2007 to $340 billion in 2012, and projected to reach $500 billion by 2015”.

On the investment front, “The largest increase in FDI to Africa in recent years has come from the BRICS (until 2002 their FDI inflows were dwarfed by those from western sources). FDI flows to Africa from India, China and Brazil have risen from 18 per cent of the total in 1995–1999 to 21 per cent in 2000–2008.”

Furthermore, rapid African development has increased capacity for intra-African trade. Intra-African trade is increasing rapidly at 32% a year. Reuters reports that “Between 2003 and 2011, intra-African investment into new FDI projects in Africa grew at a 23 percent annual compound rate, according to Ernst & Young. Since 2007, that rate has increased to 32.5 percent, more than double the growth in investment from non-African emerging markets and almost four times faster than FDI from developed markets.”

This Day recently reported on the important shifts in the African trade environment. The report notes that: “Kenya’s ICT companies are investing in Rwanda and are now looking to enter Nigeria, while United Bank for Africa and other Nigerian banks are rapidly expanding into other African countries. In 2009 alone, South Africa invested $1.6 billion (FDI outflows) into other African countries. In telecoms, MTN, a South African company, now operates in 21 countries across Africa, and Glo, a Nigerian mobile operator, is operating in the Republic of Benin, Ghana and Côte d’Ivoire.”

It is therefore unwise – to say the least — for the EU to adopt “a business as usual” approach in its trade negotiations with Africa (or the ACP Group). The geopolitical landscape has changed dramatically and it is transforming daily. A fresh, nuanced approach is necessary if the parties are sincere about the negotiation. This is not to suggest that EU states must simply yield to all demands, but serious consideration must be given to more balanced trade relations.

The Joint Africa-EU Strategy (JAES) creates opportunity for such a nuanced approach. The official press release characterises the strategy as “an overarching long-term framework for Africa-EU relations, will be implemented through successive short-term Action Plans and enhanced political dialogue at all levels, resulting in concrete and measurable outcomes in all areas of the partnership.”

The JAES is innovative. It highlights a shift towards inter-dependence rather than dependence and equality between EU and Africa. The principles on which the JAES is rooted hinge on commonality of interests. The Africa-EU partnership envisaged by the JAES will be guided by the “fundamental principles of the unity of Africa, the interdependence between Africa and Europe, ownership and joint responsibility, and respect for human rights, democratic principles and the rule of law, as well as the right to development. In the light of this new partnership, both sides also commit themselves to enhance the coherence and effectiveness of existing agreements, policies and instruments.”

Both Africans and Europeans must work tirelessly to shape and bring the strategy into fruition.

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