On 27 September 2002, the European Union and the ACP countries officially opened negotiations on Economic Partnership Agreements (EPAs). These negotiations, which are to to take place over 5 years, are aimed at redefining the trade regime between the two groups of countries.

2 years on, Tom Sharman looks at how far the EPA negotiations have come, and analyses the development prospects for the ACP countries under the new regime.

The recent WTO meeting in Geneva gained media attention and appeared to revitalise the Doha round. Yet while much comment focused on whether multilateral or bilateral negotiations are best for poor countries, in reality this is a false choice: all economic superpowers undertake both kinds. What they cannot secure at the WTO, due to the clout of countries such as Brazil, India and China, they seek to impose through bilateral negotiations where the poorest countries are weakest.

Trade negotiations between the EU and the African, Caribbean Pacific (ACP) group have now entered a critical phase. Six sub-regional groupings of the ACP have entered into Phase 2 negotiations to agree Economic Partnership Agreements (EPAs) with the EU. The outcome of the negotiations will be a series of new Free Trade Agreements (FTA) replacing the Lomé system of preferential access to the European market for the ACP from 2008.

While the Lomé regime was far from perfect, it did allow ACP countries the space to pursue pro-development policies. Protection for local industries and access to the European market was a successful formula for Mauritius and Botswana who saw their GDP per capita rise from less than US$300 at independence to US$10,000 by 2002.

The replacement of the Lomé regime with free trade areas is a massive risk for the ACP but the EU has nothing to lose. ACP countries are unlikely to gain better access to the European market but will see their local industries put under severe strain by competition from cheap European imports, often subsidised and of poor quality. The European Commission's own impact assessment notes that, ‘EPAs could lead to the collapse of the manufacturing sector in West Africa’.

The EU is also keen to push the new issues that developing countries rejected at the WTO. ACP countries face further constraints on policy-making while European corporations gain new powers. The North American Free Trade Agreement (NAFTA) precedent suggests an investment agreement would lead to corporations undermining environmental and labour standards. The experience with Bilateral Investment Treaties between ACP and European countries shows that investment agreements do not by themselves attract foreign capital; what matters is infrastructure, market size and human capital.

The Cotonou Agreement [1] intended that EPAs contribute to regional integration. But regional integration projects are being undermined. EPA negotiations divided the Southern African Development Community in two. The poorest countries are put in a no-win situation: either they maintain their non-reciprocal access to the European market under the Everything But Arms programme but leave their regional grouping, or stick with their regional partners and open their market to the EU.

The Pacific provides a telling example of how bilateral negotiations contribute to a multilateral patchwork quilt of rules that favour the rich over the poor and circumvent concessions won at the WTO. On 10 September, the Pacific region became the last EPA group to commence Phase 2 negotiations. Under an Australia-New Zealand agreement with the Pacific countries, the launch of FTA negotiations with the EU triggers similar negotiations with them. For this reason, the Pacific group has deferred talks on trade in goods (as these would constitute FTA talks) and brought forward talks on new issues, no doubt to the delight of the EU due to the precedent that this sets.

The EU is refusing to look at alternatives to free trade EPAs, despite a requirement to do so under the Cotonou Agreement. Even under the current restrictive WTO rules there is scope for pro-development trade arrangements. The EU could extend the Everything But Arms deal, currently applied to the Least Developed Countries or expand the Generalised System of Preferences to continue non-reciprocal market access to the ACP.

The EPA negotiations might appear bleak, but there is hope. Campaigning NGOs from across Europe will be converging at the European Social Forum in London on 14-17 October for the launch of the Stop EPA coalition in Europe. They will be calling for EU member states to take action: reciprocity must be withdrawn from the EPA negotiating mandate and new issues rejected. EPAs must be stopped.