EPAs and WTO rules on free-trade areas

The case for incorporating ‘special and differential treatment' into WTO rules on regional trade agreements between developing and developed economies, and proposals as to how this could be achieved, are examined in an ECDPM report of July 2003 entitled ‘How to make EPAs WTO compatible'. The paper reviews the provisions of the Cotonou Agreement dealing with the negotiation of EPAs, looks at the issue of S&D treatment in WTO provisions on regional trade agreements, reviews the extent of flexibility under Article XXIV and draws some conclusions on the specific changes needed. It notes that ‘there exists an important legal lacuna in terms of the availability of special and differential treatment for developing countries in the WTO rules regarding North-South agreements' and that the ‘reciprocity as would be required under prevailing WTO rules on regional trade agreements is likely to pose greater adjustment costs on the part of ACP states that decide to become party to an EPA'. The paper makes the point that ‘if future EPAs are to be legally valid and economically viable, it is imperative that special and differential treatment be made available to developing countries that enter into reciprocal trade agreements with developed country trading partners, and that such treatment be firmly incorporated in relevant WTO rules'. It notes that current Article XXIV provisions ‘do not contain explicit or adequate special and differential treatment for developing countries', and suggests that ACP and EU member states will need to collaborate closely if the necessary flexibility is to be introduced into WTO rules. Comment: The development of WTO rules on regional free-trade area agreements under Article XXIV are likely to have an important bearing on agricultural development in ACP countries, since it will determine the extent and pace of agricultural trade liberalisation under future EPAs with the EU. Given the increased price competitiveness of EU agricultural and simple value-added food-product exports arising from the continued high levels of public assistance despite the process of CAP reform, maintaining the right to charge import duties and implement safeguard measures for such food products is likely to be an important dimension of any EPAs eventually concluded between ACP countries and the EU. This will be crucially determined by future WTO rules on free-trade areas.