EPA Review Annex Documents - DFID

implementing different tariff schedules. In addition, the signing of interim agreements by
only some members of some regional grouping has created some tension, as
manifested in the Ethiopian case study. Nevertheless, it would not be reasonable to
associate these tensions uniquely to the EPA process. More likely, the EPA experience
only shows the serious underlying problems in some regional groupings to credibly
implement their regional commitments and advance in their regional integration
processes.
Cost-benefit analysis of counterfactual options
This is perhaps one of the most important elements of the study, since an intensive use
of resources would be justified in the case of the EPAs bringing about large benefits.
The analysis of the case studies gives us a diverse picture. For the case of the D.R.
there are clear benefits of EPAs as compared to GSP. This is due to loss of preferences
in GSP in key products and benefits from trade creation in an economy where trade
diversion and revenue loss has been minimised with the DR-CAFTA.
In the case of Nigeria, GSP+ could have provided additional market access at almost
zero costs of negotiation and negligible adjustment costs. However, it has been rejected
twice. In addition, due to its large tariff barriers, there are potential large benefits from
domestic liberalisation and trade creation under EPA that would probably outweigh the
adjustment costs.
The analysis for Ethiopia is clearly different. While EBA guarantees full coverage of
exports at zero costs of negotiation, more than $1.2 million has been spent of
negotiating EPAs with uncertain outcome. Trade diversion and adjustment costs are
likely to be large if implementing the EPAs. This implies that EBA could be a better
option for Ethiopia in economic terms. However, binding development finance for supply
constraints and adjustment within an EPA agreement and commitments on services
could make EPAs an option with larger benefits.
Perceptions on trade and non-trade related content of the EPAs
It is clear from the case studies that for Ethiopia and Nigeria their main objective during
the negotiations have been binding funding for adjustment and enhancing supply
capacity. While this objective may be justified, it is quite striking the perception that
EPAs and other trade related issues will not bring any significant additional benefits in
specific areas. For example, there is a clear lack of interest on services liberalisation,
mainly due to defensive reasons. Despite the broader scope for EPAs, including binding
funds in the agreements remains as the most important issue to conclude an agreement.
Staff incentives
Without doubting about the commitment of trade negotiators towards defending their
own policy objectives, it is worrying the financial incentive problems that per diems
introduce. The average salary of ministry staff involved in negotiations in Ethiopia and
Nigeria is around $400, while per diem where estimated in around $70 or $200
depending on whether the hotel was included. This creates a large financial incentive for
travelling to negotiations or training courses, which may be reinforced in the case of
EPAs when negotiations are so travel intensive.
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