Communication from the Commission to the European Parliament and the Council - Economic Partnership Agreements
Date: 2007-10-23
Institutions: European Commission
Subjects: ACP countries, economic agreement, international cooperation, international negotiations, liberalisation of trade, market access

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 23.10.2007 
COM(2007) 635 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  

Economic Partnership Agreements 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT AND THE COUNCIL  

Economic Partnership Agreements 

1. 

INTRODUCTION 

1.1. 

Negotiating Objectives 

The  objectives  of  Economic  Partnership  Agreements  (EPAs)  are  to  establish  new 
WTO-compatible trade arrangements before the current trade arrangements expire on 
31  December  2007  and  to  support  ACP  regional  integration  and  foster  the  smooth 
and  gradual  integration  of  the  ACP  states  into  the  world  economy,  particularly  by 
helping  create  larger  ACP  regional  markets,  thereby  contributing  to  sustainable 
development and poverty reduction. 

This  is  reflected  in  the  negotiating  directives  adopted  by  the  Council  when 
authorising  the  Commission  to  open  negotiations,  which  foresee  the  Commission 
negotiating  full  EPAs  with  ACP  regions.  These  EPAs  will  contain  provisions  in 
trade-related  areas,  trade-related  rules  and trade  in  services  and  include  appropriate 
links to development co-operation. 

The Commission believes that such full agreements are essential to meet the ultimate 
objective of ACP-EU economic and trade cooperation which, as expressed in Article 
34(2)  of the Cotonou Agreement, is  to  enable  the  ACP  States  to  play  a  full  part  in 
international trade. The primary objective of the Commission is, therefore, to secure 
full  regional  EPAs  within  the  deadline  set  by  the  expiry  of  the  current  trade 
arrangements.  This  is  achievable  in  some  regions.  For  the  other  regions,  this 
Communication sets out the approach to ensuring progress to full regional EPAs is 
maintained while avoiding, in so far as possible, any interruption to the trade regime 
for goods originating in the ACP countries. 

1.2. 

Negotiating Deadline 

Article  37(1)  of  the  Cotonou  Agreement  stipulates  that  new  ACP-EU  trading 
arrangements set out in EPAs shall enter into force by 1 January 2008. After this date 
both  the  trade  preferences  set  out  in  Annex  V  of  the  Cotonou  Agreement  and  the 
waiver  granted  in  2001  by  the  WTO1  will  no  longer  be  in  force.  This  expiry  of 
current market access arrangements therefore places a firm deadline of end 2007 to 
negotiate the goods market access aspect of EPAs. 

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This  waiver  permits  a  derogation  from  the  Most  Favoured  Nation  (MFN)  clause  of  the  General 
Agreement on Tariffs and Trade (GATT). 

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2. 

SECURING FULL ECONOMIC PARTNERSHIP AGREEMENTS 

2.1. 

Securing Full EPA Content 

At the May 2007 ACP-EU Joint Council of Ministers, all ACP regions and the EU 
reaffirmed  their  intention  to  conclude  full  EPAs  (as  defined  in  Section  1.1)  by  the 
end 2007 deadline. In some regions this is achievable. In others it will take longer to 
reach agreement on full EPAs. In such cases, the Commission will seek, to conclude 
agreements  that  include  WTO-compatible  goods  market  access  arrangements  as  an 
important  step  towards  a  full  EPA.  Any  such  agreement  needs  to  be  concluded  in 
time to establish new trading arrangements and will include all other aspects of EPAs 
where  negotiations  are  already  concluded.  Negotiations  will  then  continue  on  any 
outstanding aspects required to conclude full EPAs. 

This approach is based on the need to have a WTO-compatible goods market access 
arrangement  in  an  international  agreement  in  order  to  establish  a  new  trade  regime 
from 1st January 2008. The issues and conditions affecting that market access regime 
for goods which the Commission proposes that the Community offer to the ACP in 
2008 are set out in Section 3. 

Any agreement will be a stepping stone to a full regional EPA and not an end point 
to  negotiations.  These  agreements  should  contain  rendezvous  clauses  and  binding 
commitments to continue negotiations in outstanding areas. This would then set the 
stage to conclude negotiations on full regional EPAs. 

2.2. 

Securing Full EPA Regional Coverage 

The  degree  of  regional  integration  varies  within  the  six  ACP  regions.  In  some 
regions, established Regional Economic Communities form specific sub-regions with 
higher  levels  of  economic  integration  and  ambition  than  their  regional  neighbours. 
The  trade  interests  and  concerns  within  the  regions  also  vary  between  Least 
Developed and other developing countries or reflect the specific needs of particular 
States.  

The  Commission  recognises  this  diversity,  and  that  some  countries  may  not  join  a 
regional  agreement  at  the  outset.  Where  a  grouping  of  countries  within  a  region 
wishes  to  proceed  with  negotiations,  the  Commission  will  be  willing  to  reach 
agreements  with  sub-regions,  including  agreements  on  market  access  as  a  step 
towards  full  EPAs.  To  maintain  the  momentum  of  ongoing  regional  integration 
plans, any such agreement will be a stepping stone to a full EPA open to all countries 
of the region in question.  

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3. 

MARKET ACCESS 

3.1. 

Legal Certainty 

The objective of market access negotiations is to ensure that goods originating in the 
ACP  benefit  from  legally  secure  and  improved  access  to  EU  markets  on  1  January 
2008.  The  only  way  to  ensure  legal  certainty  for  any  goods  market  access 
arrangement  between the Community and an EPA region is for it to be compatible 
with  WTO  rules  covering  Free  Trade  Areas2.  The  Commission  notes  that  this 
requires an agreement leading to the formation of a Free Trade Area3. 

3.2.  Market Access Offer for Goods 

The  Community  made  a  market  access  offer  for  goods  in  the  context  of  EPA 
negotiations  of  duty-free  quota-free  access  (with  transition  periods  for  sugar  and 
rice).  This  offer  was  welcomed  by  Council4  and  is  intended  to  apply  to  goods 
originating  in  those  countries  that  conclude  negotiations  on  an  international 
agreement  with  the  Community  that  includes  new  trade  arrangements  compatible 
with  WTO  rules  as  described  in  Section  3.1.  In  addition,  it  will  allow  asymmetry 
between ACP and EU market access commitments and suitable transition times for 
ACP liberalisation. 

3.3. 

Implementation of EPA Market Access Offer 

The  Commission  will  propose  a  Regulation  based  on  Article  133  of  the  EC  Treaty 
establishing a market access regime for goods from 1 January 2008 applicable to a 
list  of  regions  and  countries  that  have  concluded  negotiations  for  an  agreement  as 
described in Section 3.25. In order to inform EU Customs Authorities and economic 
operators  in  due  time  and,  if  required,  allow  the  Commission  to  adopt  any 
implementing  regulations  for  the  transitional  arrangements  for  sugar  and  rice,  the 
Commission intends to submit a proposal for a Regulation as soon as possible. 

The  Commission  will  submit  full  texts  of  all  agreements  to  the  Council  as  soon  as 
possible for a Decision authorising signature and provisional application. 

The  Commission  will  include  measures  in  the  proposed  Regulation  to  repeal  or 
amend  as  necessary  from  1st  January  2008  all  remaining  regulatory  provision  that 
either  refers  to  or  provides  for  the  management  and  implementation  of  the  trade 
provisions in Annex V of the Cotonou Agreement. 

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Article XXIV of the General Agreement on Tariffs and Trade. 
For the purposes of Article XXIV of GATT this is defined as an interim agreement that "shall include a 
plan and schedule for the formation of a Free Trade Area". The Free Trade Area is understood to exist 
when duties and other restrictive regulations of commerce are eliminated on substantially all the trade 
between parties. 
15th May 2007 Council Conclusions on EPA, Council reference 9560/07. 
In  accordance  with  the  provisions  of  the  EU  EPA  market  access  offer  and  the  Council  Decision  to 
associate  South  Africa  to  the  EPA negotiations,  the  Regulation  will  make  appropriate  provision for  a 
differentiated goods trade regime for South Africa. 

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The  Commission  will  include  measures  in  the  proposed  Regulation  to  enable  the 
temporary withdrawal of market access for certain products in cases of fraud or non-
compliance with the Rules of Origin. 

3.4.  Market Access under the Generalised System of Preferences 

Some ACP countries may not be able to conclude negotiations for an agreement in 
time  to  be  included  on  the  list  of  countries  to  which  the  new  goods  market  access 
regime established by the Regulation described in Section 3.3 applies. In such cases, 
the Community has no option available but to apply the goods trade regime set out in 
the Generalised System of Preferences (GSP) Regulation. This will also be the case 
where countries choose not to sign such an agreement or a full EPA. 

This does not require any specific decision by the Community as all ACP countries 
continue to benefit from market access under the GSP after the Cotonou preferences 
expire.  The  only  exception  is  South  Africa  that  continues  to  benefit  from  the 
provisions  of  the  Trade  and  Development  Cooperation  Agreement  (TDCA)  in  the 
absence of any new trade regime.  

EU  market  access  for  the  poorest  ACP  countries  is  protected  as,  under  the  GSP 
Regulation, the 42 ACP Least Developed Countries6 (LDCs) can continue to benefit 
from duty and quota free access to EU markets through the "Everything but Arms" 
arrangement.  The  remaining  36  non-LDC  countries  would  be  offered  the  standard 
GSP market access arrangement if they do not conclude an agreement. 

The  Commission  recognises  that  some  ACP  countries  may  choose  to  see  market 
access under the GSP as an alternative to an EPA. Nevertheless, the Commission is 
convinced of the important development benefits of a regional EPA and that no ACP 
country  should  lose  the  opportunity  to  accede  to  a  regional  EPA  in  the  future.  The 
situation  where  an  ACP  country  or  region  only  benefits  from  the  GSP  will  be 
considered by the Commission as temporary in nature. Regional EPAs should remain 
open to any ACP country in that region that initially chooses not to be party to the 
relevant agreement.  

At  such  time  as  any  ACP  region  or  country  concludes  negotiations  with  the 
Community on either a full EPA or an agreement fulfilling the conditions described 
in Section 3.2, the Commission will propose to Council that they are added to the list 
of  countries  that  benefit  from  goods  market  access  regime  established  by  the 
Regulation described in Section 3.3. 

3.5. 

Rules of Origin 

The Commission sees new EPA Rules of Origin as an integral part of the EPA goods 
market access arrangements. The Commission recalls the offer to relax and simplify 
the  current  Cotonou  rules  of  origin  within  an  EPA7.  The  Commission  intends  that 
new  EPA  Rules  of  Origin should apply to  trade covered by the EPA goods market 

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Cape Verde is included in this figure but is scheduled to lose its Least Developed Country status. 
The  offer  includes  a  targeted  relaxation  of  Rules  of  Origin  for  agricultural  products,  and  important 
relaxation for textiles and fisheries. This offer has been welcomed by the ACP regions. Negotiations on 
rules of origin are ongoing. 

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access Regulation. The Commission recognizes that the EPA Rules of Origin being 
negotiated with each EPA region will contain some regionally specific elements but 
they  will  mainly  be  based  on  common  rules  and  be  identical  for  most  products  in 
order to facilitate trade between the different ACP regions. The Commission recalls 
that, based on a revision clause to be included in agreements, the new EPA Rules of 
Origin  should  be  reviewed  after  a  period  of  time  to  be  agreed  on  in  a  manner  that 
takes  account  of  the  development  needs  of  the  ACP  region  concerned  but  with  a 
view  to  a  move  to  Rules  of  Origin  consistent  with  the  general  reform  of  the  EU 
preferential Rules Origin.  

New  EPA  Rules  of  Origin  would  apply  once  the  agreement  that  includes  them  is 
signed  based  on  a  decision  obtained  from  Council  to  authorise  signature  and 
provisional  application.  However  this  is  unlikely  to  occur  until  after  the  entry  into 
force of the proposed EPA goods market access Regulation. The Commission is of 
the view that in such cases the substance of the Cotonou Rules of Origin with certain 
unilateral  improvements  in  the  specific  rules  covering  fisheries,  textiles  and 
potentially  agriculture  should  apply  in  the  meantime8.  As  these  improvements  will 
then be carried forward into the new EPA Rules of Origin, economic operators can 
be assured of consistent treatment in these areas.  

4. 

DOHA DEVELOPMENT AGENDA 

Many  ACP  states  are  concerned  about  the  potential  for  preference  erosion  and 
adjustment  needs  for  developing  countries  linked  to  progress  on  the  Doha 
Development Agenda (DDA). The Commission believes that agreement on a WTO-
compatible  market  access  arrangement  in  a  full  EPA  as  described  in  Section  1.2 
would not only help address these concerns but by fully respecting WTO rules would 
demonstrate  support  for  the  multilateral  trading  system  and  facilitate  full  ACP 
participation  at  the  WTO.  The  influence  of  the  EPA  negotiations  on  the  DDA 
negotiating process becomes even stronger given the objective to finalise a deal on 
modalities in the DDA before the end of the year. 

5. 

DEVELOPMENT CO-OPERATION 

EPAs are key tools in EU development and trade policy that will use trade to help 
ACP countries  and regions build stronger economies that can contribute to poverty 
reduction.  The  Commission,  as well as EU Member States, are committed to assist 
the  ACP  with  the  creation  of  regional  markets  and  to  support  accompanying 
measures  to  the  adjustments  these  entail.  The  Commission  remains  engaged  in 
helping  our  partners  to  prepare  new  structural  reforms  and  trade  policies,  adjust  to 
the  changes  they  bring  and  enhance  regional  integration  to  seize  the  new  trade 
opportunities  brought  by  the  EPAs.  The  Commission  is  therefore  determined  to 
ensure optimal interaction between EPAs and development cooperation. 

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The only exception would be in the case of South Africa, where the TDCA Protocol would continue to 
apply until a relevant regional EPA Rules of Origin Protocol were agreed. 

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First,  it  has  been  agreed  with  all  regions  that  development  cooperation  provisions 
should be included in the EPAs. This remains the objective, in order to establish an 
appropriate  link  with  the  Cotonou  rules  and  procedures,  and  to  identify  more 
precisely potential areas of cooperation. 

Second,  the  programming  of  the  10th  European  Development  Fund  (EDF)  offers  a 
unique  opportunity  to  synchronise  trade  policy  decisions  taken  in  the  EPAs  and 
programming  of  EDF  resources.  The  Commission  is  satisfied  that  a  substantial 
number of country strategy papers will include trade related assistance, infrastructure 
and regional integration linked to EPAs as areas for cooperation. It is determined to 
now finalise the regional indicative programmes and confirms its objective that the 
available  funds  will  be  aimed  primarily  at  supporting  EPA-related  needs.  In  this 
respect,  priority  will  be  given  to  finalise  the  identification  of  key  accompanying 
measures  and  programmes,  using,  to  the  maximum  extent  possible,  the  outcome  of 
the work of the Regional Preparatory Task Forces. Of particular significance will be 
the  establishment,  where  the  ACP  have  so  decided,  of  regionally  owned  financial 
mechanisms  to  which  Community  funding  –  as  well  as  Member  States  and  other 
donors  –  would  contribute,  with  a  view  to  enhancing  ownership,  effectiveness  and 
coordination. 

Third, the EU as a whole is engaged in increasing and making more effective its Aid 
for Trade. The recently adopted EU Aid for Trade strategy is a milestone in setting 
out  key  objectives  and  principles  for  the  delivery  of  EU  Aid  for  Trade,  and  gives 
specific attention to ACP. It notably seeks to increase support to the wider Aid for 
Trade  agenda  in  a  manner  which  is  proportionate  to  overall  increases  in  Official 
Development  Assistance.  The  Commission  will  continue  to  work  intensively  with 
Member  States  to  ensure  that  a  range  of  50%  of  the  increase  in  EU  trade-related 
assistance will be allocated to ACP countries when the target of € 2 billion per year 
(€  1  billion  from  the  Community,  €1  billion  from  Member  States)  is  reached  by 
2010. Of particular concern will be that each ACP region receives a fair share, based 
on needs prioritised by the region, of this overall amount. 

Full  EPAs  will  allow  EDF  funding  to  be  directed  towards  the  range  of  adjustment 
needs  arising  from  commitments  taken  by  ACP  countries  and  will  help  establish 
priorities  for  additional  funding  from  Member  States.  For  those  regions  agreeing 
WTO-compatible  market  access  agreements  as  a  step  towards  full  EPAs,  the 
Commission recognises that development finance will also be needed at this stage to 
help  the  ACP  regions  undertake  adjustments  linked  to  the  liberalisation  they  have 
committed  to.  This  could  include  measures  such  as  the  upgrade  of  productive 
capacities  and  the  business  environment  and  contributing  to  absorb  the  net  fiscal 
impact resulting from tariff liberalisation in full complementarity with fiscal reforms. 
The Commission therefore believes that reassurance regarding development support 
can be provided, both via the Cotonou instruments and through contributions of the 
Member States. 

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