ABSTRACT
Trade is important to all economies. Increasing trade volumes and increased openness to trade has been an integral part of the globalization phenomenon over the past few decades, and most countries have a stated commitment to trade liberalization, if only in the terms of their commitments in the World Trade Organization (WTO). There may be disagreement about how much emphasis governments should place on liberalizing trade policies, and all countries have concerns about the impact of increased imports (at least for certain products). Nevertheless, exports, and export promotion policies, make a significant contribution to economic growth. Export growth is easier and more likely if other countries provide greater access to their markets, i.e. countries have to liberalize imports to facilitate global growth in exports. Trade relations are an integral part of international relations between countries. This volume is about one set of trade relations, between the European Union (EU) and the African, Caribbean and Pacific (ACP) countries. Specifically, the focus is on how the relationship is changing and what trade policy analysis can contribute to improving the design and features of the future trade relations. The EU has had preferential trade agreements with the ACP since the 1970s but these were not consistent with WTO rules, so, since 2002, the parties have been negotiating WTO-compatible Economic Partnership Agreements (EPAs). These negotiations have been protracted and the final details have yet to be agreed. As the negotiations are continuing, concern in the analysis is with the effects of future reforms. Essentially this volume is concerned with prospective trade policy analysis, i.e. assessing the effects of what is going to happen rather than evaluating the impact of what has happened. When changes to trade policy are proposed, within a country or for relations between countries, how can analysis be helpful? The direct relevance is for policy-makers as agreements have to be negotiated, so those with more analysis underpinning their position will have more influence. To paraphrase Piermartini and Teh (2005), those with better analysis (and hence the best numbers) will rule in the negotiations. The inherent difficulty in ana lysing proposed policy reforms is that one does not know what the actual effects are. Indeed, one may not even know with any certainty what the precise reforms will be (and the information provided by analysis informs the negotiations that determine the detail of final agreements). In practice, the analyst engages in
effects. There are various ways to conduct such an exercise, and the contributions to this volume cover a number of such approaches. The aim is to provide a flavour of the methods for prospective trade policy analysis so as to inform discussions and negotiations for the EU-ACP. There is no claim or intention to be comprehensive in the types of methods covered. For example, the ‘impact assessment’ approach is not covered (see George and Kirkpatrick, 2004, 2006; Lee and Kirkpatrick, 2006) nor are the details of trade models addressed (see, for example, Hertel, 1997). Furthermore, we do not consider potential effects on the EU (in large part because the European Commission has analytical capacity to address this). Rather, the aim is to provide analysis that relates to policy and negotiating concerns of ACP countries. In June 2000 the EU signed the Cotonou Agreement with 77 ACP countries to replace the Lomé conventions (at that time Lomé IV). The agreement established that from 2002 the EU would negotiate with regional ACP groups a set of EPAs originally intended to be effective in January 2008. The Cotonou framework of cooperation had three components (trade, development aid and a political dimension). The trade component is a preferential trade arrangement between the EU and the ACP states, giving WTO-compatible preferential access to respective markets. Reciprocity in EPAs will be a clear shift from the previous non-reciprocal arrangements under Lomé. The contributions here are largely limited to the trade component (other issues are mentioned in Chapter 10). At the time of the Cotonou Agreement ACP countries were aware that EPAs offer limited benefits, although the situation differed between least developed countries (LDCs) and non-LDCs. The LDCs are entitled to essentially tariff-free access to the EU without committing to reciprocity. The non-LDCs, however, could lose their Lomé-type preferences and would be granted only Generalised Scheme of Preferences (GSP, although possibly enhanced) access if EPAs were not in place. This loss of preferences could undermine export competitiveness and damage major sectors dependent on exports to the EU, such as beef in Namibia and horticulture in Kenya (Stevens, 2007). Thus, non LDCs had a strong incentive to sign EPAs to maintain preferential access for their exports to the EU. EPAs represent an important case to study the dynamics of trade negotiations within ACP countries and regions and between the EU and ACP. These issues are elaborated in Chapter 2. The volume is innovative in providing broad coverage and assessment of EPAs across the full range of ACP countries, including estimates of trade and economic effects (comparing partial and general equilibrium methods), content and implementation of the agreements and discussion of specific issues (such as adjustment effects and food security). A specific feature of the volume is the intention to use EPAs to illustrate the application of methods for assessing the impact of trade policy reforms, i.e. a guiding theme is how to develop and apply impact assessment techniques to inform trade policy negotiations. Economic analysts do not know the details of agreements when trying to estimate possible
parties to any (trade) policy negotiations, such as in the WTO, so there are broad lessons with general implications. EPAs provide a useful case to study because, in contrast to WTO negotiations for example, the broad parameters have been established relatively early in the process and future negotiations relate to details. Assessment is rendered somewhat easier if the core features of reforms are established so analysts can identify probable reform scenarios. A major concern of negotiators is to identify which products should be treated as sensitive (and hence excluded); by identifying products and sectors where effects are likely to be large, analysis can inform this part of negotiations. This brief introduction comprises three parts. Section 1.1 provides an overview of EU-ACP relations, especially trade preferences, and evidence on ACP experience with trade liberalization. Section 1.2 introduces the changes embodied in EPAs and how these relate to prospective trade policy analysis. Section 1.3 outlines the contribution of each chapter. There is no conclusion to this chapter; Chapter 10 provides an overall conclusion to the volume, combining the insights of each chapter and relating them to other concerns in EPAs.
