News: An update on the ACP-EU Economic Partnership Agreements

By Suzy H. Nikièma and Damon Vis-Dunbar
8 August 2008

Over the last six years the European Commission and 77 African, Caribbean, Pacific (ACP) countries have been negotiating free trade agreements, which they call Economic Partnership Agreements (EPAs).  The EPAs are intended to end the non-reciprocal trade preferences given to Europe’s former colonies which are now in conflict with certain WTO rules.

Despite striving for an end-of-2007 deadline for the conclusion of the negotiations, only one negotiating group, the bloc of Caribbean countries known as CARIFORUM, were able to reach an agreement with the EU member states. Interim agreements were signed between the EU and the other ACP states. These interim agreements function as transitional agreements; they include some new commitments on trade in goods, and set a loose agenda for negotiation on the other issues which will comprise the comprehensive EPAs.

Seven interim agreements have been signed in total: one with the States of the Community of East Africa (Burundi, Kenya, Rwanda, Tanzania and Uganda); one with the five states of the Common Market for Eastern and Southern Africa (Zimbabwe, Seychelles, Mauritius, Comoros and Madagascar); one with two Pacific countries, Papua New Guinea and Fiji; and one with the five states of the Southern African Development Community (Botswana, Lesotho, Namibia, Swaziland and Mozambique). Meanwhile, individual agreements were signed with Côte d’Ivoire and Ghana, which form part of the State Economic Community of West Africa (ECOWAS), and with Cameroon, which belongs to the Economic and Monetary Community of Central Africa (CEMAC).

The presence of investment within the agreements

Investment liberalization has been one of the more controversial topics within the EPA negotiations. The European Commission has held that establishing a legal framework for investment liberalization within the EPAs would be beneficial to the economic development all parties. However, many of the ACP countries have said that they lack the technical expertise to negotiate on investment effectively.

The EU-CARIFORUM EPA contains commitments on investment only with respect to trade in services and the movement of capital.  In the case of services, the EPA builds on the WTO’s general agreement on trade in service (GATS). The EPA also guarantees the free movement of capital related to foreign investments made in accordance with the laws of the host country.

While the interim agreements limit their commitments to trade in goods, they also outline areas for further negotiation, including in some cases on investment. None of the interim agreements commit the parties to include rules on investment liberalization in the EPAs. However, they do signal a willingness to discuss the topic.

All but two of the interim agreements name investment as a topic for further negotiation. The exceptions are EU-Cameroon and the EU-Papua New Guinea-Fiji deals. In the case of the former, the interim agreement only mentions investment as it relates to the free movement of capital. The former has no mention of investment at all.

With the five other interim agreements, the articles that reference investment vary slightly. But essentially, the agreements affirm a desire to conclude complete EPAs, or “global” EPAs, as a follow up step to the interim deals.

In the case of Ghana, for instance, the interim agreement states that “The Parties will take all necessary measures to endeavour to conclude a global EPA,” including in the areas of investment, intellectual property, and trade in services.

Central and West Africa states maintain united front on investment liberalization

Côte d’Ivoire, Ghana and Cameroon came under criticism for breaking regional integration when they entered into their own interim agreements with the EU. Their reasons for doing so, however, were clear. Unlike their neighbours, these countries do not benefit from the preferential treatment granted to exports under the EU’s Everything But Arms (EBA) program. Fearful of having exports like bananas and cocoa come under the WTO’s General System of Preferences, in which case they would receive the same treatment as competitors in Latin America, they preferred to begin a process of gradual liberalization through the interim agreements.

In addition to commitments on trade in goods, the interim agreements signed by Côte d’Ivoire and Ghana mention investment as topic for future negotiation. This is notable given the fact that Central and West African states have vocally resisted invitations by the European Commission to include provisions on investment liberalization in the EPAs.

However, Côte d’Ivoire and Ghana are clear that they are not making a break with their regional partners: rules that liberalize investment will only be pursued with the full backing of their regional partners.

It appears unlikely that ECOWAS or CEMAC will endorse a commitment to begin negotiating on investment liberalization within the time table currently set for completing the negotiations (end of 2008, according to the European Commission and June 2009 according to ECOWAS). Both blocs say they must first harmonize their investment laws on a regional basis, before they can begin agreeing to investment liberalization commitments with the EU.

To a limited degree, such regional integration has already taken place. ECOWAS has the Protocol on Energy, which contains rules on investment in the energy sector. CEMAC has the Charter of Investment, which is a framework agreement that consists mainly of provisions designed to improve the institutional, fiscal and financial environment for companies. But both regions stress that they have a ways to go, and neither group is currently engaged in formal negotiations to broadly harmonize legislation on foreign investment.