Making trade negotiations work

The World Trade Organization (WTO) and many developing countries are engaged in regional integration efforts with neighbouring countries and with the major trading powers - the European Union (EU) and the United States (US).

For many African, Caribbean and Pacific (ACP) countries, establishing Economic Partnership Agreements (EPA) with the EU is the major trade negotiation issue. The challenge is to consolidate regional and multilateral initiatives to enhance ACP countries' production and supplies and create a better business environment.

EPAs aim to enhance market access for products in which ACP countries have comparative advantage, namely agriculture and labour-intensive services. They also open up ACP markets to EU exports. ACP countries are keen on using trade agreements to pursue economic development and not for trade expansion in itself.

To achieve economic development, a supportive institutional framework, improved infrastructure and appropriate macroeconomic policies. The EPAs must extend beyond the traditional exchange of market access concessions to be able to reduce poverty. However, progress in both the WTO and EPA negotiations has been slow, particularly on issues of primary interest to ACP countries. Disagreements on agriculture are the main difficulty. Also, progress on the services trade negotiations, especially the temporary movement of skilled and unskilled service providers, is an important challenge.

The benefit EPAs can generate depends on the reforms that ACP countries will have to undertake and on what the EU and its member states will do to help these countries achieve their development objectives. Recent initiatives at the multilateral level, such as aid for trade, are relevant for the regional setting. Concerted efforts are needed to create suitable conditions for firms to take advantage of trade opportunities that may arise from the agreements. For example, in the WTO a July 2004 agreement made implementation of any multilateral trade facilitation agreement conditional on technical and financial assistance being provided to the countries. This approach could also be followed for the EPAs too.

Trade benefits can be enhanced by:

• completely overhauling the Organisation for Economic Cooperation and Development (OECD) countries' agriculture policy by reforming domestic support policies, abolishing all export subsidies and enhancing market access for exports from low income countries. This would have to include assistance to compensate countries that may lose from preference erosion, so that they can satisfy product standards and measures.
• liberalising labour movement and abolishing restrictions in labour intensive goods and services sectors. ACP countries can make gains in this area to offset any losses.
• consolidating unilateral trade preference programmes such as the US African Growth and Opportunity Act (AGOA) and the EU Everything but Arms (EBA) initiative with the multilateral trade framework and simultaneously making it more inclusive with respect to product coverage and the development friendliness of the rules of origin.
• ensuring that the EPAs do not risk reversing the progress achieved by ACP countries in recent years, including regional integration between neighbouring countries. ACP countries' trade liberalisation should be negotiated only after the outcome of the Doha Round is known. A phased liberalisation of goods and services at the regional level and measures to lessen the negative impact of adjustment would assist in reducing overall transactions costs.
• focusing on enhancing the supply response in ACP countries, through aid for trade improve investments and lower transactions and operating costs of industries. Additional commitments for aid for trade should be binding, both within and outside the WTO. This would help improve the policy coherence between trade agreements and ACP governments, bilateral and multilateral aid agencies to pursue development objectives.

Aid for trade is critical to strengthen developing countries' ability to participate effectively in negotiations and identify and defend their national interests. It would also encourage them to expand trade in a liberalised environment. An aid for trade framework that targets country and region-specific problems is needed to improve competitiveness and trading potential, for not just ACP countries but other developing countries too.

Dominique Njinkeu
International Lawyers and Economists against Poverty (ILEAP)
180 Bloor St. West, Suite 904
Toronto
Ontario
Canada M5S 2V6
T +1 (0)416 946 3107
F +1 (0)416 946 0797
Dominique.Njinkeu@ileapinitiative.com
www.ileapiniative.com

See also

Minimum conditions for a package deal - an African perspective, in Developing Countries and the Doha Development Agenda of the WTO, Pitou van Dijck and Gerrit Faber (editors), London and New York: Routledge, Chapter 8, by Dominique Njinkeu and Nicola Loffler, forthcoming 2006

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