Promoting Regional Integration and Sustainable Development:

Lessons from EPAs Dr. San Bilal

Head of Programme, Economic Governance, ECDPM

EU PTAs as a Foreign Policy Tool

•  Core element of foreign policy

•  Means to secure prosperity, jobs and growth in Europe

•  Proliferation of FTAs in recent years

•  Operational FTAs account for approx 30% of EU trade

•  And major trading partners (China, US, Japan, Russia, Australia-NZ) representing approx 50% of trade, not covered by FTAs

Trade in EU Foreign Policy

Page 2 ECDPM

Source: WTO World Trade Report 2011

Increasing number of PTAs

ECDPM Page 3

Source: WTO World Trade Report 2011

Membership in PTAs in force, 2010

ECDPM Page 4

EU FTAs: in force and planned

ECDPM Page 5

EU’s share of world trade on the decline – expected to be cut by half by 2050

2010  2030

Source: Buiter W and Rahbari (2011): Trade Transformed: The Emerging New Corridors of Trade Power, Citi GPS: Global Perspectives & Solutions

Key challenges: Changing geopolitics

ECDPM Page 6

•  Priorities – FTA negotiations (with emerging) – India, ASEAN, Mercosur, Andean, Canada, … US?

Focus on economic interests

•  For developing countries:

differentiation and asymmetry

  GSP reform as a means to focus on most needed

  ongoing EPA negotiations

Focus on development (?)

Re-focusing of Trade Policy

ECDPM Page 7

EPA Key Objectives:

•  Foster Development

•  Building on regional markets

•  Stimulating investment

•  Locking-in of trade reforms

•  Integration into world economy

•  Compatible with WTO rules

EPAs and Regional integration

ECDPM Page 8

•  EU belief in Regional integration principles

•  EU support to RI (EDF RIP, AfT, etc.)

•  Challenges:

•  Coherence of regional partners (diverging interests)

•  Capacity: low absorptive capacity, few bankable projects

•  Recently, Commissioner Pielbags announced drastic cuts in regional envelopes for 11th EDF due to low utilisation. This might undermine some regional projects (infrastructure)

Regional Integration (RI): What role for EU trade policy?

ECDPM Page 9

•  09/2002 – 09/2003: All ACP negotiations

•  10/2003 – 2007: Regional negotiations  ECOWAS+: West Africa  CEMAC+: Central Africa  ESA: East and Southern Africa  SADC: Southern Africa  CARIFORUM: Caribbean  Pacific Forum: Pacific

•  End 2007: some (interim) agreements concluded (35 countries out of 79)

•  1 January 2008: end of Cotonou preferences; end of WTO waiver; MAR 1528 on EPAs (DFQF)

•  Since 2008: Continuation EPA negotiations

•  September 2011: Proposal for deadline to 2014 for MAR 1528

EPA negotiation process

ECDPM Page 10

•  Little coherence between the interim EPAs concluded and the regional integration processes in Africa:   Countries having initialled interim EPAs   Liberalisation commitments

  Regional integration agenda: problem for CUs

•  4 trade regimes with EU (in one region):   IEPAs   EBA for LDCs   GSP for non-LDCs   FTAs (e.g. RSA, Egypt, …)

Impact on regionalism

ECDPM Page 11

Source: www.regionswatch.blogspot.com, 2010

Regional Integration in Africa

•  Low level of intra Africa trade

•  On average: 13.1% in 2010 compared to more that 60% in Europe or 35% in NAFTA

Page 12 ECDPM

Source: www.regionswatch.blogspot.com, 2010

Key challenges:

Overlapping membership

Overlapping mandates

Competing and conflicting agendas

Level of implementation of commitments vary

Page 13 ECDPM

Stimulate focus on regional integration dynamics

Boomerang effect

•  Although negotiations continue, it is increasingly felt that timing and sequencing of trade agreements with third parties should be based on RI agenda and not the reverse

•  Priority therefore given to regional agenda by many RECs. For EPA, this is particularly relevant for services and other trade-related issues.

•  E.g COMESA services negotiations launched in September 2009 as a way of preparing a common stand for EPA services negotiations; EPA competition clause is based on COMESA competition policy etc.

Increased complexity of RI (spaghetti bowl)

EPAs: what impact for Regional Integration and beyond?

ECDPM Page 14

Page 15 ECDPM

But also broader issues:

•  Disillusion between expectations and results

•  Lack of interest: Many countries seeking status quo and little appetite beyond market access

•  Lack of incentives:

Flaws in EU’s own trade policies: EBA given to all LDCs in 2001 + improved RoO in 2011; LDCs have no interest to sign EPAs and some RECs mainly LDCs

On December 2011, at WTO improved market access in services granted to LDCs. Will have an impact on future services negotiations

•  Lack of political traction on both sides and no political will to find mutually acceptable agreement on contentious issues

ECDPM Page 16

•  Lack of consensus on shared vision:

Not necessarily a consensus on either side on what a good development policy is or whether EPAs are good for RI and development or not.

Irrespective of economic merits, arguments from the EC side had little convincing effects, given differences in interests and perception of what EPA was and would achieve

•  Shifting attention towards emerging players: China, India, Brazil, etc. increasingly perceived as a complement or even alternative to EU (economic interests + win-win rhetoric)

•  Political risks: MAR regulation. Deadline is 2014. Might call political tensions. It might antagonise the entire relationship between EU and Africa ECDPM Page 17

•  Negotiating at regional level is complex

•  Importance of political will, interest, experience and capacity of regional grouping

•  Need for regional leadership (and national champion) and cohesive regional agenda

•  Timing and sequencing of FTA with RI process(es)

•  Adjust ambitions to realities: focused agenda

•  FTA not just about trade: political dimension key

" importance of economic diplomacy

•  Credibility Gap between rhetoric and effective partnership

•  Importance of recognizing mistakes and willingness to adjust: not the case in EPAs so far…

Lessons from EPAs…

ECDPM Page 18

Thank you

San Bilal (sb@ecdpm.org) and Isabelle Ramdoo (ir@ecdpm.org)

www.ecdpm.org www.slideshare.net/ecdpm

Page 19