Far from being a development tool, Demba Moussa Dembele argues that Economic Partnership Agreements (EPAs) seek to take control of the continent’s resources and undermine its drive toward autonomous economic and social development. The result would be the transformation of Africa into a playground of multinational corporations. Trade and Africa’s ‘integration’ into the global economy must not be allowed to take place on terms dictated by Europe, Dembele concludes.

In February 2000, the new framework agreement, signed between the African, Caribbean and Pacific (ACP) countries and the European Union (EU), marked a major departure from previous agreements in that it opened the door to a profound transformation of the relationships between the two groups. Arguing that the new international trade environment requires that both parties comply with the rules of the World Trade Organisation (WTO), the EU has compelled its ACP partners to engage in separate free trade zones, dubbed 'economic partnership agreements' (EPAs), whose fundamental aim is to remove the trade preferences granted to ACP countries and establish reciprocity in trade relations:

Negotiations of the economic partnership agreements shall aim notably at establishing the timetable for the progressive removal of barriers to trade between the Parties, in accordance with the relevant WTO rules. (EU 2000, Article 37-7).

However, the EU insists that the partnership agreements will be negotiated only with countries which feel that their economies are able to sustain competition from European products. All the other non-least developed countries (LDCs) that do not fall within this category would be granted some undefined 'alternative possibilities'. The necessity to bring the ACP/EU relationships into compliance with the WTO framework stems from the belief that it would be almost impossible to get a waiver for an indefinite period for maintaining the trade preferences granted to ACP countries. In fact, the EU claims that under WTO rules, these preferences are both discriminatory – applying only to ACP countries rather than all LDCs – and non-reciprocal – European exports are not granted similar preferences in ACP markets.

Apart from the need to comply with the WTO provisions, the economic partnership agreements are intended to achieve two other objectives. One of them is the necessity to maintain the 'special relationship' established between Europe and the ACP countries. From the EU perspective, the necessity to comply with the rules of the new international trade framework does not mean giving up all the benefits associated with decades of special trade and financial relationships with ACP countries. According to the dominant view, Europe has invested too much in these countries to let others undermine the close relationships that have been nurtured over decades.

The other objective assigned to the EPAs is to make the economic partnership more 'efficient'. The concern with efficiency stems from what Europe perceives as a 'poor' performance of the Lomé Convention. The EU's own studies, corroborated by several other studies, indicate that ACP countries’ share in the EU market has consistently shrunk over the years to the benefit of other developing countries in Asia and Latin America. The reasons for this 'poor' performance are both internal and external to ACP countries. The internal constraints are weak supply conditions, a limited awareness of Lomé preferences, the lack of well-functioning trade channels, and so forth. Among the external constraints are the stringent rules of origin imposed by the EU, which require an added value of between 50% and 60% of ACP exports to Europe, and complicated and cumbersome trade procedures. To these constraints, one may add numerous non-tariff barriers, such as sanitary and phytosanitary measures and transportation costs that are a real handicap for small or medium-sized exporters, particularly those in landlocked countries.

In addition, the Lomé mechanism has not helped export diversification in African countries, but contributed to reinforcing their trade dependence on the European Union, which is estimated at more than 45%. In the light of this, the European Union tends to draw the conclusion that trade preferences granted to ACP countries have been a waste and have had little impact on the development of ACP countries.

But despite their emphasis on trade liberalisation and reciprocity, the EU insists that the EPAs will promote 'integration' and stimulate 'economic development' on the continent. For this to be the case there would need to be a fundamental reorientation of the EPAs, to transform them into a development-enhancing scheme, as spelt out below.

Non-reciprocity in trade liberalisation

Article 53-1 of the Cotonou Agreement stipulates that: 'Economic and trade co-operation shall be based on a true, strengthened and strategic partnership.'

If that is really the case and if the EU is sincere in adhering to these principles, then, it should accept that the huge asymmetry that exists between the two economies should prevent the establishment of a free trade zone between African and European countries. In other words, the EU should give up its intention to impose reciprocity in trade relations. It is said that the EPAs seek to go beyond what is allowed under the WTO rules, such as special and differential treatment as well as non-reciprocity which have been integrated into the WTO since the Punta del Este Declaration. Even the Commission for Africa, established by the British Prime Minister, Tony Blair, has challenged the free trade stance of the EPAs, to such an extent that it seems to have alarmed Peter Mandelson, the EU trade commissioner.

Indeed, given the asymmetry between African and European economies and the huge subsidies the latter enjoy, any reciprocity in trade liberalisation, as implied by the economic partnership agreements, would deal a major blow to Africa’s development prospects. It would mean not only more unemployment and poverty on a larger scale, but worst of all, the total collapse of the agricultural sector in sub-Saharan Africa, which in turn would aggravate the food crisis on the continent. It is widely acknowledged that trade liberalisation has already entailed huge losses to African countries. It has been estimated that the combination of deteriorating terms of trade and the trade restrictions introduced by developed countries has led to an average annual loss of $60 billion for Africa, about four times the amount of development 'assistance' to the continent. Admittedly, sub-Saharan Africa has suffered disproportionately from trade losses over the last 25 years. In particular, the costly protectionist European agricultural policies are undermining the objective of 'poverty reduction' in sub-Saharan Africa, one of the other objectives that the EU claims to pursue in Africa.

Findings reported by the United Nations Conference on Trade and Development (UNCTAD 2004) confirm that trade liberalisation has aggravated the economic and social conditions of the least developed countries, most of which (34) are in Africa. These findings are consistent with the analysis made in 1997 by the United Nations Development Programme (UNDP), which made the following observation, based on a number of case studies around the world:

In the real world, distinct from the imaginary world of free-trade proponents, the survival in agricultural product markets depends less on the policy of comparative advantage than on the comparative access to subsidies. To liberalize local food markets in the face of such an unequal competition is not a policy aimed at improving efficiency, but a recipe for the destruction of livelihood on a large scale. (UNDP 1997: 86)

This observation and those by other UN agencies must convince the EU that reciprocity in trade liberalisation with Africa would be a recipe for disaster. Indeed, agricultural policies left to the free play of market forces, combined with the continued subsidising of developed countries’ high-cost production, have led to the collapse of commodity prices in world markets and contributed to a low level of investments in productive capacity in Africa. Therefore, unless European agricultural policies are dismantled or substantially reformed, to take into account the interests of African countries, the latter must insist that agriculture be kept outside of any negotiations with the EU, while they reserve the right to protect key sectors of their domestic economies. Thus, it can be argued that reciprocity in granting trade preferences should not be based on a theoretical timetable proposed or decided on by the EU. Rather, it should be linked to tangible achievements by African economies in being able to sustain competition from European products.

No to TRIPS

If the EU is really committed to promoting 'a true … partnership' and establishing 'a strategic partnership' with Africa, it should help African countries take full advantage of all the WTO provisions that allow them to protect their economies under certain conditions. The EU should not be forcing them to forgo those provisions, or to go beyond what is allowed under the WTO framework. The compliance with some of the WTO key provisions would represent a major threat to African economies. For instance, the continent’s industrial policy would be particularly hurt if African countries were forced to comply with some of the most basic WTO provisions such as the trade-related intellectual property rights (TRIPS). The following paragraph in the Cotonou Agreement clearly indicates the EU's determination to force ACP countries to abide by these provisions:

Without prejudice to the positions of the Parties in multilateral negotiations, the Parties recognise the need to ensure an adequate and effective level of protection of intellectual, industrial and commercial property rights, and other rights covered by TRIPS.
(EU 2000: 40, Article 46-1).

If there are not profound modifications to these provisions, complying with TRIPS would compel African countries to enact laws designed to protect the intellectual property rights of European multinationals for 20 years, even for essential drugs. In effect, these provisions protect intellectual property through patent arrangements that exclude third party use, offering for sale, selling or importing of such products for a minimum of 20 years. This would make it impossible to produce generic copies for at least 20 years. This policy would strengthen developed countries’ technological monopoly and deprive African countries of the opportunity to catch up through adapting technology and producing generic copies of drugs, which was possible before the WTO provisions entered into force in 1995.

Even worse, African countries would be required to enact laws to protect patented products, including those owned by companies in the EU that patent plants and products found in developing countries. In other words, Western multinational corporations operating from the EU can freely patent products found in African countries and get protection from these countries’ governments! This is unacceptable. Thus, development-oriented EPAs should support the call for a comprehensive review of some WTO provisions that are detrimental to developing countries and for an extension of the transition period for these countries. In particular, the EU should support African countries in calling for a profound transformation of TRIPS to limit the threat to Africa’s industrialisation, technological progress and food sovereignty.

Indeed, these provisions have been called into question by developing countries and even by some institutions within the United Nations system. For instance, UNCTAD has made some recommendations to that effect. One recommendation is for a comprehensive reassessment of the links between property rights and development. Another is to extend the transition period to allow more time for developing countries’ industries to adapt. The third recommendation is to allow developing countries to use compulsory licensing to ensure technology transfer and meet public health concerns. These recommendations apply more specifically to African countries, given their extreme economic vulnerability. Therefore, the EU should take into consideration those recommendations and change its view of the EPAs, not as a trade-enhancing tool, but as a development-oriented instrument.

Taking into account the real costs of the EPAs

The EU tends to minimise the costs of the EPAs to African economies even if it says that it has put in place mechanisms aimed at compensating for the transition costs incurred by African countries. However, the real costs of that transition cannot be estimated. First of all, a free trade zone means full reciprocity when it comes to granting trade preferences, which means a complete removal of all quantitative and tariff barriers between African and European countries. In other words, African industries would be exposed to competition from European products. One important implication is that infant African industries would be deprived of the minimum protection they need, which would result in the collapse of many national industries that would not be able to sustain competition with European companies. This would have dire consequences in terms of lost income, higher unemployment and an increase in the level of poverty.

On the other hand, the removal of tariff barriers would entail heavy financial losses for the state as a result of lower revenues from import duties. Since in many African countries’ more than 20% of their budget revenues depend on import duties and more than 50% on primary export revenues, those countries would lose up to 50% of their revenues, because a free trade agreement with the EU would abolish or drastically bring down tariffs on European imports. All this would lead to a further sacrifice of the social sector, because financial compensation from the EU is not likely to match the magnitude of the losses incurred by these states.

In addition, a free trade agreement implies not only a free flow of goods and services, but also a free flow of capital, which means that European multinationals would have a legal basis for freely investing and selling in many African countries. The economic partnership agreement would give fiscal privileges to European investors and protect their investments. The free movement of capital would result in a free and unlimited repatriation of profits. The free flow of capital could aggravate capital flight from Africa and foster short-term capital movements that would be harmful to Africa’s development, as the East Asian case demonstrated a few years ago. All this would exacerbate the financial problems experienced by African countries.

To limit these losses and help African countries overcome some of the most intractable obstacles to development, any development-oriented economic partnership agreement must be linked to unconditional debt cancellation for all African countries, to a rise in official development assistance (ODA) and to the repatriation of stolen wealth. In addition, the EU could provide incentives to stimulate foreign direct investments (FDIs) that are compatible with African countries’ development needs and priorities.

Keep the Singapore issues out of the EPAs

In connection with the above, the Singapore issues must be kept out of the EPAs. These issues include competition policy, government procurement, investment policy and trade facilitation. They had been one of the principal subjects of contention in Cancun, when African and other developing countries rejected discussion of these issues within the WTO framework, leading to the collapse of the meeting. The EU is trying to use the EPAs to force these issues on African countries. This would deal an even greater blow to the continent’s development prospects. Joseph Stiglitz (2004) has stated that acceptance of these issues by developing countries would certainly 'stop the process of development'. Even the British government has asked for the issues to be removed from the negotiations unless the ACP countries feel ready to discuss them.

Accordingly, EPAs that envisage making a contribution to Africa’s development must remove the Singapore issues from the negotiations until general consensus is reached among African and other developing countries. Indeed, the inclusion of the Singapore issues would compel African countries to comply with trade-related investment measures (TRIMS), which would deal another big blow to a regional industrial policy, since it would mean granting 'national treatment' status to European investors and allowing them to invest in any area of their choice. Worst of all, it would mean adapting African economic and social policies to the needs of these investors, since they would be allowed to sue host countries for any losses they might suffer as a result of domestic economic and social polices. These provisions are similar to those embodied in the failed Multilateral Agreement on Investment (MAI), which was strongly opposed by African and other developing countries. For individual African countries, as well as for the continent as a whole, this would spell the end of any chance of industrialisation for the foreseeable future. Indeed, the provisions for support and protection of investments, contained in the current post-Lomé IV Agreement, are far more extensive and stringent than those found in previous Lomé Conventions. An illustration is given by Article 78-3 of the agreement, which indicates:

The Parties also agree to introduce, within the economic partnership agreements, and while respecting the respective competencies of the Community and its Member States, general principles on protection and promotion of investments, which will endorse the best results agreed in the competent international fora or bilaterally. (EU 2000: 61)

According to critics, these 'general principles' do not contain any mechanisms to ensure investors’ responsibility for their labour force or the host country’s national development. Nor do they include mechanisms that ensure a clear relationship between investments, poverty reduction and sustainable development. Worst of all, these provisions have no mechanisms for allowing ACP countries to control the flow of portfolio capital, which is the most speculative part of foreign capital for developing countries. It is precisely the absence of such mechanisms that led to the Asian financial crisis in the late 1990s, with its devastating economic and social consequences.

Without such mechanisms, the free flow of capital that would accompany a free trade agreement with the EU would devastate African economies as a result of speculative short-term investments. A development-oriented partnership agreement must therefore aim at promoting long-term and stable investments in productive sectors, in infrastructure, in telecommunications and human resources development. It must also recognise African countries’ right to restore capital controls and set performance criteria for foreign investors in terms of technology transfer, job creation, etc, to meet the objectives of their economic and social development.

Provide genuine support for economic integration

A development-oriented partnership agreement should encourage real economic integration, at both regional and continental levels. This means that it should avoid imposing different trade arrangements within regional economic communities (RECs). But such a risk is associated with the current EPAs, which are dividing African countries into LDCs and non-LDCs. By offering some undefined 'preferences' to LDCs, the EU knows that selfish and narrow 'national' interests may override regional solidarity and compliance with the Abuja Treaty and Africa’s interests as a whole. Therefore, some countries may be tempted to sign separate agreements with the EU for short-term gains at the expense of the long-term interests of their regions or the continent.

Another risk of split lies in the possibility that European countries may attempt to establish closer relationships with some more 'developed' countries, such as South Africa, Nigeria and others, the so-called 'emerging markets', at the expense of the other countries, while nominally encouraging the process of integration. Indeed, by giving a free ride to market forces, the EU may seek to develop closer economic ties with countries presenting better opportunities for its industries and investors. This would lead to a two-level economic partnership and expose African countries to great risks of implosion, if they were to opt for different trading arrangements as proposed by the EU.

But the adoption of two or more trade regimes in the same regional bloc would violate the provisions of the Abuja Treaty, since the African Economic Community (AEC) is a supranational community. This would be even more incomprehensible for countries which already have a common external tariff for third countries. In addition, if there were several trade regimes, it would be almost impossible to control the flows of goods and services between countries of the region, a fact which was underlined by the EU's own study. Thus, African countries must insist that any economic partnership agreement with Europe must be compatible with the provisions of the Abuja Treaty, since it requires the regional economic communities to:

…make [their policies] compatible with those of continental integration and align their statutory instruments such as their Treaties and Protocols to the provisions of the Abuja Treaty establishing the African Economic Community. (AEC, 1997).

From this perspective, any economic partnership agreement must contribute to strengthening the region’s economic integration and accelerating the process toward building the African Economic Community. Therefore, if the EU is committed to promoting and strengthening regional integration, it should clearly demonstrate its willingness to invest in African countries’ productive sectors, in infrastructures, in human resource development, in promoting cross-border investments in order to improve supply conditions and strengthen the continent’s production base. To demonstrate this commitment, the EU should allow African countries to complete their integration process before engaging them in any discussions about any kind of economic partnership agreement. It was indicated that the SADC, which is the most advanced example of integration in sub-Saharan Africa, would complete its integration only by 2010 or 2012. Therefore, a genuine commitment to African integration should allow this process to run its full course.

Conclusion

Most observers argue that if the proposed economic partnership agreements between the EU and African countries remained in their original form and if they were implemented they would represent a fatal blow not only to Africa’s economic integration but also to its development prospects for the foreseeable future. These agreements risk dealing a fatal blow to the production model of integration adopted by the Abuja Treaty (1991), which was a major departure from the previous models followed by African countries. Several critics have argued that integration in sub-Saharan Africa cannot be conceived of as a trade-enhancing instrument, but as a development tool, that is, as a comprehensive approach to the continent’s complex economic and social problems. From that perspective, its first and foremost priority should be to develop a strong production base in order to meet the continent’s basic needs in food production, in industrial products, in technology, in employment, in human resource development, etc. This conception is embodied in the Abuja Treaty, which laid the foundations for the AEC. Since the signing of this treaty, all African economic communities have adopted the production model.

It is clear from this analysis that a free trade agreement with an African regional grouping – which would not be compatible with the treaty – would only serve the EU's interests at the expense of the continent’s drive toward building the AEC. Development-oriented EPAs must be compatible with the priorities defined by the integration process in Africa. For instance, any free trade agreement with the EU must be compatible with African countries’ own trade liberalisation scheme, while keeping sensitive areas vital to their economies out of the negotiations.

But Europe has little interest in strengthening Africa’s productive capacity. On the contrary, its fundamental aim is to perpetuate the current trading relations with African countries, whereby Africa remains a market for its products and a source of cheap commodities and labour. One could argue that the proposed EPAs are a response to the US-sponsored Africa Growth and Opportunity Act (AGOA). The EPAs and AGOA would in all likelihood transform Africa into an arena of confrontation between Western multinationals, which have been taking over assets in strategic sectors in Africa as a result of the liberalisation and privatisation imposed on African countries by the IMF and the World Bank. In reality, neither the EPAs nor AGOA would bring 'development' to Africa. Quite the contrary, both seek to take control of the continent’s resources and undermine its drive toward autonomous economic and social development. AGOA violates Africa’s sovereignty and overlooks Africa’s priorities. In short, AGOA aims to 'integrate' Africa into the world economy on 'America’s terms' (South Centre, 1999). So will the proposed economic partnership agreements. But Africa’s 'integration' into the world economy must be on its own terms, and not on America’s or Europe’s.

* Demba Moussa Dembele is Director of the African Forum on Alternatives
Dakar (Senegal)

* Please send comments to

REFERENCES

African Economic Community (AEC) (1997) 'The main conclusions and decisions of the first summit of the African Economic Community', AEC Newsletter 1 (4)

European Union (EU) (2000), The Cotonou Agreement between the African, Caribbean and Pacific States and the European Community and its Member States. Brussels: European Union

South Centre (1999) Lopsided Rules of North-South Engagement: The African Growth and Opportunity Act. Geneva: South Centre

Stiglitz, Joseph E. (2004) An Agenda for the Development Round of Trade Negotiations in the Aftermath of Cancun. London: Commonwealth Secretariat

United Nations Conference on Trade and Development (UNCTAD) (2004) The Least Developed Countries Report 2004. New York and Geneva: United Nations

United Nations Development Programme (UNDP) (1997) The Human Development Report. New York: Oxford University Press