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Tuesday, 11 November 2008

Zambia and the EPA

Judith Fessehaie of the Ministry of Commerce Trade and Industry has written an interesting piece on the recent EU - Zambia interim EPA agreement :

Zambia and the EPA, Judith Fessehaie, Trade Negotiation Insights, Commentary

Zambia initialled its market access offer in the context of the Eastern and Southern Africa (ESA) interim Economic Partnership Agreement (IEPA) with the European Commission on September 30 2008. In completing these negotiations, the provisions of the trade in goods chapter and related annexes of the ESA IEPA now apply to Zambia.

Structure of Zambia’s market access offer

The final market access offer initialled by Zambia and the European Commission at the end of September will liberalise 79.62% of Zambia’s imports value from the EU in 15 years. (Ref : 1) In this offer, the exclusion list covers 20.38% of imports from the EU. A precautionary approach was taken, protecting potential or nascent industries and sectors with minimal levels of current imports, but in areas where the EU is increasing its competitiveness. The sensitive list broadly covers: agricultural products, processed food and beverages, plastic and rubber products, clothing and footwear, engineering and wooden products. Zambia’s market access offer backloads liberalisation on products that attract 15% and 25% customs duties. The effects of trade diversion will be partly offset by the launch of the SADC Free Trade Agreement (FTA) in August 2008, which will level the playing field between the EU and Zambia’s major source of imports, South Africa.

Other market access provisions

In order to minimize the impact of reforms resulting from the implementation of the IEPA, Zambia’s market access offer has taken into account several considerations. These include maintaining import prohibitions for environmental purposes, export taxes for industry development (copper concentrates, cotton seeds, scrap metal) and export restrictions on food security grounds. However, while the relevant tariff lines have been annexed to the market access offer, Zambia - and ESA - are renegotiating the provisions on export taxes and quantitative restrictions in the IEPA to ensure these measures can be applied in certain circumstances (in line with GATT flexibilities). Moreover, unforeseen events can be addressed by carefully tailored trade remedies - another area under renegotiation.

Zambia’s expectations on the way forward

The market access pillar is only one of many on which Zambia’s new partnership with the EU will be based. Several issues remain under negotiation including rules of origin and the adjustment of the tariff schedule to COMESA’s common external tariff. The delivery of Aid for Trade under the development component similarly remains unresolved. ESA negotiations on development aim to complement a Development Cooperation Strategy and a costed matrix. ESA and the European Commission agreed on the importance of adopting so-called ‘development benchmarks’ against which to assess the EPA process. The benchmarks should be coherent with national policy objectives and avoid ambiguity in measurement or interpretation. Equally important is how the development component will operate. Zambia is addressing this in the context of national institutional arrangements designed to implement Aid for Trade by setting priorities for intervention, stakeholder consultation, donor coordination and overall strategy formulation. The impact of additional Aid for Trade interventions on Zambia’s capacity to seize new export opportunities will ultimately determine the value of an ESA EPA.

Challenges and opportunities

The complexity and breadth of areas to be negotiated in the coming months present challenges and opportunities for Zambia. Challenges stem from the fact that regional integration in the area of trade in services, for example, has yet to be completed. EPA-level negotiations should not undermine existing regional agendas by skewing priorities for national bodies with limited resources. Also, it is difficult to draft EPA provisions in areas, such as intellectual property rights, where regional policies have not yet been agreed. This problem is less compelling in the context of competition and investment policies since regional regulations are in place and serve as a basis for
engagement with the European Commission (Ref : 2). Yet, only 6 out of the 15 ESA countries have national competition laws and existing regional frameworks are not necessarily a guarantee of national capacity. Zambia’s priorities are to build domestic and regional capacity to regulate sectors, enforce legislation, monitor investors and administer government procurement in a transparent manner.

Zambia has a direct interest in tackling beyond the border measures at the regional level to deepen the common economic area. Sequencing between national, regional and EPA frameworks and setting adequate implementation periods and accompanying measures in an EPA are critical. The level of ambition should not be measured by the depth of WTO+ commitments undertaken by ESA, but by the EPA’s potential to raise the regulatory and enforcement capacity of the region. If this objective is achieved, real economic and social benefits will trickle down to consumers, firms, farmers and the government treasury.

Effective negotiation

The restrictive role played by sanitary and phytosanitary measures (SPS), as well as technical barriers to trade (TBT) and rules of origin on actual market access opportunities is widely acknowledged. For Zambia, EPA negotiations are expected to result in SPS and TBT provisions that respond to the country’s needs. Moreover, relaxing rules of origin would increase the competitiveness of Zambian firms and boost their incentive to integrate into regional and global value chains. For this reason, regional cumulation with African countries is an important aspect of these negotiations. Finally, trade facilitation and developing Information Technology infrastructure will complement the regulatory aspects contained in goods and services provisions, by making it possible to move both across borders in a cost effective and efficient manner. To negotiate successfully, these pressing issues must be kept in mind.

Ref:

  1. Import values as an average for the period 2004-2006.
  2. Member States have finalised the COMESA Common Investment Area and the COMESA Competition Regulations and Rules. Work is ongoing on the draft COMESA Trade in Services Framework. No regional framework is being developed yet on IPRs, as efforts have been focused at the all-Africa level.
MrK's blog provides a good account of EPA issues affecting Zambia, including the reaction to the negative reactions to current deal.

2 comments:

  1. For many Zambians interested in the consequences of free trade (or perhaps freer trade), I suggest reading a very insightful book--Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism. I am putting together an article that I hope can be published on this site. I have already several times expressed deepest concerns on the notion that we cannot hope for a home grown development model unless we embrace free trade and liberalisation. The thought that countries like Zambia will only benefit from reciprocal trade with developed regions is perhaps the most underlying factor at the core of neo-liberal economists but its consequences are dire and the history of most developed countries which where highly protectionistic in nature in the early stages of developed nations stands to tell us much about this model.

    ReplyDelete
  2. Hi Muyatwa,

    I'm reading it too. With the consequences of completely deregulated markets causing major economic catastrophes worldwide, I would hope everyone would let go of the theology of 'free markets'.

    In theory, if there was lots of competition, that would be a good thing.

    However, unregulated markets inevitably lead to concentration of wealth, kartel and monopoly formation, which rings in the end of competition.

    What is needed for development in Zambia and everywhere else, is continuous re-investment of profits and costs in the local and national economy.

    Have larger companies use only local suppliers (even if they have to train them themselves), and pay taxes. Prefer local companies in government contracts. Prefer Zambian corporations before Western corporations.

    If we look at the effect of the privatisation of the mining industry, all we see is that we missed out on the boom caused by historically high copper prices.

    Only through neoliberalism is that possible. I think Zambia missed out on about $10 billion of profits since 2004 and instead of the state coffers overflowing with the kind of cash that could mitigate the coming economic depression, it has no money, and won't be able to borrow from the IMF/World Bank, which themselves are going to be strapped for cash.

    With 'donor aid' drying up (1/3 of the state's budget in 2004), I don't see how the government can get around either massively reducing the size of government, or nationalizing the mines just to make ends meet.

    You can already see that there is hunger in parts of the country, and with fewer people able to afford the price of food, this is frankly only going to get worse.

    What we need, is a redistribution of the land, so at least there will be enough food to go around. We need to start putting a more substantial part of the land under cultivation than the present 20% of arable land. I'm just afraid that the present government is going to look for foreign corporations to do it - like with everything else. Maybe more so under Levy Mwanawasa than Rupiah Banda, but time will tell.

    I don't think there is a party that is full out for works projects, but with the worsening economy, they may be forced to go to that policy.

    ReplyDelete

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