Research Papers 11

EXECUTIVE SUMMARY (excerpt)

The relationship between African, Caribbean and Pacific (ACP) countries and the European Union (EU) is undergoing an overhaul. ACP countries are engaged in trade liberalization negotiations, based on reciprocity, to agree Economic Partnership Agreements (EPAs) with the EU. The introduction of reciprocity into a previously preferential arrangement between these groups of countries poses critical challenges for the development prospects of ACP countries. Owing to weak production and export capacities, the ACP countries are not at the stage where they can compete on equal footing with the EU in trade in goods and services. By signing a reciprocal trade Agreement with the EU, the ACP countries will be singling out the EU for more favourable treatment than is available to other WTO members, but they will not benefit from market openings in the EU in ways remotely comparable to the benefits to be enjoyed by the EU.

The EU is faced with great pressure from other WTO members to correct what they view as illegal and discriminatory preferential treatment to the ACP countries under the Enabling clause. In signing EPAs, the EU will have solved the questions of WTO incompatibility of certain aspects of the Lomé Conventions, which are the legal basis for the preferences it currently grants to the ACP group of states. However, aside from resolving this legal technicality, EPAs will not represent any significant development prospects for ACP countries, either in the short or long term.

This paper examines the dynamics of services trade in Regional Trade Agreements (RTAs) within the context of the EU-ACP EPA negotiations currently under way, assessing what is at stake for the Eastern and Southern African (ESA) group of countries involved in this negotiation. The paper makes the argument that while the EPAs have as a stated aim to ensure the development of ACP countries, the potential outcome will not be development oriented. The paper analyses multilateral rules and negotiations on trade in services as contained in the World Trade Organisations’s (WTO) General Agreement on Trade in Services (GATS), and its interface with the ESA-EPA negotiations. It analyses the RTA perspective, assessing the state of play in EU-ACP EPA negotiations and exploring the development impact on ESA countries. Affirming the notion that the process will serve to enhance EU development rather than that of ESA countries, the paper makes the case that the real priorities for ESA countries lie in the development of overall and sector specific national policies on services, the development of capacity for the supply of services mainly at the domestic level, so as to meet universal access to basic services obligations, and the development of effective regulatory capacity in services so as to ensure a balance between commercial interests and other national development oriented plans.

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