EPA Review Annex Documents - DFID

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educed output for a period of time. Whilst it is difficult to grasp the magnitude of these adjustment costs, it is easier to approximate the compensation that would need to be disbursed by donors to compensate for these. Milner (2006) identifies the type and scale of the assistance needed to smoothen the transition period by separating it into five broad categories. The first category is the ‘fiscal adjustment’ cost which results from the loss in tariff revenue. Donors should focus efforts to enhancing tax collection methods from alternative sources. This can be done through technical assistance and capacity building programmes. The second type of assistance would treat ‘trade facilitation and export development’ in view of ensuring a swift re-allocation of resources towards more productive processes. This would require aid in the form of development of export products and enhancement of knowledge of export market opportunities. The third adjustment cost should focus on ‘production and employment’ where both workers and firms should be compensated in the form of unemployment benefits and training for the former, and production line restructuring for the latter. It then follows that donors should focus on ‘skills development and productivity enhancement’ to allow both firms and workers to reap and channel productivity gains. The last focus area is ‘negotiation and legislation’ where donors aid ACP countries in developing the capacity, through technical assistance, for negotiating trade agreements and for adapting existing legislations to changing demands. Whilst an estimate of these compensatory measures does not give us an idea of the real cost of adjustment, it provides an interesting benchmark of the costs that would fall on ACP countries in adapting to the new circumstances. Milner (2006) uses previous World Bank project budgets and available indicators (such as share of trade tax revenue in total tax revenue, or share of manufacturing in GDP) to make rough calculations on the scale of adjustment compensation needed by each ACP country. Overall, Milner’s results suggest that the fiscal adjustment category is the one that should attract most attention, closely followed by employment adjustment and skills/ productivity enhancement. In terms of geographical concentration of adjustment costs, he suggests that ECOWAS and ESA are to require the highest volumes of aid. Overall, Milner estimates the cost of adjustment assistance for ACP countries to be in the region of €9 billion at 2005 prices. This figure would be in addition to the current funds available to ACP countries (€22.7 billion for the years 2007-2013) 85 which would imply an increase in development funds just below 40%. In Table 2 the most important empirical studies carried out by region are mapped. Comments are made on the overall results and point the reader to the tables in the annex for a more in depth exposition of the methodologies and the results obtained from each empirical investigation. ECOWAS All empirical investigations suggest that trade creation will predominate over trade diversion in the ECOWAS region. Busse and Grossman (2004), by way of a partial equilibrium analysis, estimate that the share of EU imports will increase by 6% whilst the share of non preferential imports should increase by 3.5%. Under a similar partial equilibrium simulation but at higher degrees of disaggregation, Fontagne et al (2008) estimate that the long run impact on trading structures will increase ECOWAS exports to the EU by 4% whilst imports from the EU are set to rise by 15%. In terms of revenue lost due to loss of duties on EU imports, the empirical studies concur that this will potentially be a significant issue. Fontagne et al (2008) estimate that this loss could range between 38% and 27% of total tariff revenues. However, Busse and Grossman (2004) have a higher estimate of 53% of total import duties. This would represent a loss of 8% of government revenue which translates into a decline of 1% in GDP. The countries that are most likely to be negatively impacted are 85 http://ec.europa.eu/europeaid/how/finance/index_en.htm 37
Cape Verde (loss of 4.1% of GDP) and Gambia (loss of 3.5% of GDP). These are significant loses that have to be weighed against the possible gains derived from trade creation. In terms of development aid necessary to offset the negative restructuring costs, Milner (2006) suggests that these should focus primarily on fiscal adjustment where an extra €955 million should be disbursed to compensate for the high loss of revenue. This disbursement should focus on enhancing tax collection methods from alternative sources (i.e. VAT). Overall, Milner’s calculations suggest that the ECOWAS region is the one that should receive the highest compensation given its size and particular vulnerability with an estimated amount just below €2.8 billion. CEMAC The impact of losing Cotonou preferences for the CEMAC region is expected to reduce exports to the EU by 4% according to Fontagne et al (2008). Whilst signing the EPAs should increase exports to the EU by 7% (4% from retaining preferences and 2% for increased preferences as a result of the EPA agreement) and imports from the EU by 17%. ECA (2005) concur that trade creation will dominate over trade diversion, but they show strong fiscal effects particularly for Cameroon, Congo and Gabon. Fontagne et al (2008) estimate the tariff revenue loss to range between 41% and 30% of custom takings. Milner (2006) in turn calculates the compensatory package to deal with this tariff revenue loss and adjustment to new conditions to be of €270 million. He estimates that the region should absorb €880 million in compensatory packages to smoothen the transition period. COMESA Where the COMESA region is concerned, the loss of Cotonou preferences would reduce exports to the EU by 12%, but the completion of the EPAs will increase exports to the EU by 25% and imports from the EU by 21% according to Fontagne et al (2008). The fiscal effects are likely to be lower than those for the ECOWAS and CEMAC regions where reciprocation would reduce tariff revenue takings within the range of 21%-16%. ECA (2005) identify the biggest losses in value terms to come from Kenya, Sudan, Mauritius, Ethiopia, DRC and the Seychelles. Mckay et al (2008) estimate, using a PE model, that the loss of tariff revenue could be as large as 70% in Tanzania and 60% in Uganda. Milner’s (2006) calculations on the amount of development aid needed to reduce the adjustment burdens in the region sum to €2.7 billion. SADC In the SADC region, the CGE results of Keck and Piermartini (2008) point to an increase in exports and imports of 3.6% and 11.4% respectively under a full reciprocal liberalisation scenario where the overall effect on GDP would be an increase in 0.12% for the region. This overall increase masks a small possible decline in GDP for Botswana, Zambia, Mozambique and Tanzania. Where the decline for the latter is also evidenced in McKay et al (2008) and amounts to a loss of 0.5% of GDP. 86 Perez (2005) here sees a very small overall decline in GDP as a result of the EPAs in the SADC region and estimates the fiscal loss to be 0.4% of GDP if 80% of trade is liberalised and 1.4% of GDP if there is full reciprocal liberalisation. 87 Milner’s (2006) results seem to also reflect lower compensatory measures as a result of revenue loses where he estimates the amount to be disbursed at €340 million with an overall requirement of just over €1 billion in development aid to enable SADC countries to adapt to new conditions. 86 However, the change in negotiating groups for Tanzania might alter these results somewhat. 87 Note that some countries are not singularly identified in the SADC grouping used in the Perez (2005) estimations. 38
Page 1 and 2: EPA Review Annex Documents by Insti
Page 3 and 4: Part Three: EPAs as Instruments for
Page 5 and 6: Part One: Literature Review 4
Page 7 and 8: countries demanded more precision a
Page 9 and 10: essential and fundamental of EPA (h
Page 11 and 12: EPA group. However, after phase II
Page 13 and 14: Disagreements also existed on other
Page 15 and 16: ules of origin as a basis for negot
Page 17 and 18: would not meet WTO provisions. Even
Page 19 and 20: is only just about to conclude an i
Page 21 and 22: The EC took almost nine months to a
Page 23 and 24: Caribbean The CARIFORUM EPA was the
Page 25 and 26: services, CARIFORUM countries commi
Page 27 and 28: 2006. Moreover, PACP countries cons
Page 29 and 30: Table 3 Main Problems and Divergenc
Page 31 and 32: 4. Final comments The EPA’s negot
Page 33 and 34: creation) but can also lead to impo
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Page 37: 3. Impact of the EPAs by Region One
Page 41 and 42: SSA ECOWAS CEMAC COMESA EAC Table 2
Page 43 and 44: Perez (2005) CGE, 2001 base year 80
Page 45 and 46: Whilst most studies appear to agree
Page 47 and 48: 7. Annex Literature Countries Metho
Page 49 and 50: Hinkle and Schiff (2004) "Economic
Page 51 and 52: Milner, Morressey and McKay (2008)
Page 53 and 54: Karingi et al (2005) “Assessment
Page 55 and 56: Greenaway and Milner (2003) "a grim
Page 57 and 58: Perez, R (2005) “ Are the Economi
Page 59 and 60: Case Studies Lessons 1. Introductio
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Page 79 and 80: • An estimated $214,000 in travel
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Page 85 and 86: Therefore, while negotiators could
Page 87 and 88: System Improvement & Human Resource
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Ethiopia - List of RNF meetings Amo
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Nigeria Cost of EPA negotiation-rel
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Dominican Republic Distribution of
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1. Overview of existing resources f
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The FTRD that was responsible for b
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The support of the NDTPF and the ex
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dedicated sessions during the year
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Mauritius, Seychelles, and Madagasc
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3. Quantification of costs of count
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Ethiopia took a clear stance from t
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4. Perspectives on EPA negotiations
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5. Qns: Had you had more resources,
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) Basic knowledge on Cotonou Agreem
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Council of ESA Ministers Committee
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System Improvement & Human Resource
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List of RNF meetings 118 ANNEX VII
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EPA Review Study Nigeria December,
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contains the quantification of cost
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which appear to have crowded out ac
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Table 3 Resource Detail of Intra-Af
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Table 5 Capacity Building Programme
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Table 7 Cost of EPA Negotiation-Rel
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ADDRESSING THE LABOUR MARKET EFFECT
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Table 9 Annual Cost of Nigeria Trad
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Though the current negotiating stru
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• The simultaneous application of
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understand the changing environment
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7. Summary of Findings and Main Les
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opportunity cost could be quite sub
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• There is adequate technical adv
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5. Appendices Appendix Table 1 Rang
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EPA Review Study Dominican Republic
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c. Technical Level At a regional le
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2) From the ministers of trade of C
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The fact that the DR had previously
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- State Secretariat of Foreign Rela
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Table 1 Distribution of the Main Tr
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Figure 2 CARIFORUM Dimensions Diffe
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with the EU, in order to present a
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Table 4 Average Monthly Salaries EP
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In additional there were eight meet
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Per Diem Rate (US$) 500 A- Total of
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5. Perspectives of EPA negotiations
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usiness and political levels repres
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expectation of increases in exports
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8. Annexes Interviews Name Institut
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MAY o 05-06: WTO TWG on NAMA, Barba
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o 05-06: Joint Meeting of the Prime
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o 10-13: 12 th Meeting of CARIFORUM
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Trinidad & Tobago, 11-15 mayo 2007
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Reviewing services negotiations in
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Table 2 MMain differeences in serrv
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3. Services coverage in the CARIFOR
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In this exercise, it is important t
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196 ANNEX Provisions of the agreeme
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Tariff and Non-tariff barriers in E
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products could be extended until ye
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extended to the original partner. F
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than the rate applied on the proces
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RoO and the EPAs 1. Introduction Ru
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Table 1 Similarity of EAC countries
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that value added in ACP countries o
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The EU has yet to deliver a simple
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arrangements, are constrained by pr
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and non-oil exporting countries wit
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Common Market for Eastern and South
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to be seen. The Ethiopia case study
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fact that countries either export o
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development assistance in the EPA.
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References Bilal, S. and Stevens, C
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SPS Issues in EPA Negotiations 1. B
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The SPS committee provides an oppor
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of equivalence. Clearly, the Econom
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In the case of Ghana, where there i
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which relevant entities within thei
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Specific provisions While the final
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‘.....In addition, the Parties sh
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imparted to EPA signatories. In pra
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of the EC Party when these products
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So what have the EPA negotiations a
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Region/Country Year Total 2002 2003
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EAC CARIFORUM PACP Region/Country Y
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EAC CARIFORUM PACP Region/Country N
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EAS SADC EAC Country/Region Mycotox
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Country/Region West Africa CEMAC Co
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Development Finance and EPAs 1. Int
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evenues, one of the main sources of
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References Braun-Munzinger, C. ( 20
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EPA Review Annex Documents - DFID

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