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					 ACP/00/118/03 Rev.1                       Brussels, 2 October 2003
 ACP-EC/NG/NP/43




                 ACP-EC EPA negotiations

Joint Report on the all-ACP – EC phase of EPA negotiations
                           ACP-EC EPA negotiations

      Joint Report on the all-ACP – EC phase of EPA negotiations

1.      The negotiations on Economic Partnership Agreements (EPAs) were launched
in Brussels on 27 September 2002. At the opening session an agreement was reached
to sequence the negotiations in two phases. The first phase would take place at an all-
ACP-EC level and would address horizontal issues of interest to all parties. The
second phase would be at the level of ACP countries and regions, and would address
specific commitments.

2.       Since the start of the negotiations, eight meetings at ambassadorial level have
taken place. They have allowed the parties to exchange views on issues pertaining
both to the conduct and the substance of the negotiations. In addition, twelve more
restricted, dedicated sessions on specific technical issues identified at ambassadorial
level have been held, which have allowed to deepen the discussions. These dedicated
sessions were grouped around six areas: legal issues, development dimension of
EPAs, agriculture and fisheries agreements, services, market access and trade-related
areas. The detailed discussions on these various issues are summarised in the reports
on the Joint ACP-EC Ambassadorial meetings and on the dedicated sessions, which
are herewith attached.

3.      The discussions have allowed to improve each party’s understanding on the
other side’s positions and to identify areas of convergence and points of divergence.
The outcome of these discussions can be summarised as follows:

A.     Principles and objectives of EPAs

4.     Both sides agreed that the Cotonou Agreement provides the basic principles
and objectives of EPAs.

(a)    Objectives

       They concurred that the overall objectives of EPAs shall be the sustainable
       development of ACP countries, their smooth and gradual integration into the
       global economy and eradication of poverty. They further concurred that the
       specific objectives of EPAs shall be to promote sustained growth; increase the
       production and supply capacity of the ACP countries; foster the structural
       transformation of the ACP economies and their diversification; and support
       regional integration.

(b)    Principles

       Both sides further agreed that the following main principles should underpin
       EPAs:




                                                                                      1
(i)     Instruments for development

EPAs must be instruments for development that contribute to foster “the
smooth and gradual integration of the ACP States into the world economy,
with due regard for their political choices and development priorities, thereby
promoting their sustainable development and contributing to poverty
eradication in the ACP countries”, and not ends in themselves.

In this context, both sides concurred that EPAs should directly contribute to
the development of the ACP countries, by seeking to enlarge their markets and
by improving the predictability and transparency of the regulatory framework
for trade, thereby creating the conditions for increasing investment and
mobilising private sector initiatives and thus enhancing the supply capacity of
the ACP States. To achieve this, EPAs must take account of the specific
economic, social, environmental and structural constraints of the ACP
countries and regions concerned, as well as of their capacity to adapt their
economies to the EPA process. They further need to take account of the
development policy objectives of the ACP countries and regions concerned.
Furthermore, EPAs should be economically and socially sustainable.

(ii)    Regional integration

EPAs must support regional integration initiatives existing within the ACP
and not undermine them. EPAs will therefore need to be based on the
integration objectives of the regions concerned. EPAs should also contribute
to reinforcing regional integration, in particular by contributing to the regional
harmonisation of rules. In this perspective, EPAs’ first emphasis should be to
consolidate ACP markets, before fostering trade integration with the EC.

(iii)   Preservation of the acquis

There is an agreement that EPAs will maintain and improve the current level
of preferential market access into the EC for ACP exports. Concerning the
commodity protocols, both sides agree that, in conformity with Article 36:4 of
the Cotonou Agreement, they would review them in the context of the new
trading arrangements, in particular as regards their compatibility with WTO
rules, with a view to safeguarding the benefits derived therefrom, bearing in
mind the special legal status of the Sugar Protocol. As regards non-LDC ACP
countries, which would not be in a position to enter into EPAs, both sides
concurred that, in accordance with Article 37:6 of the Cotonou Agreement, the
EC will assess their situation and will examine all alternative possibilities, in
order to provide these countries with a new framework for trade which is
equivalent to their existing situation and in conformity with WTO rules.




                                                                                2
(iv)   WTO compatibility

       There has been convergence of views that EPAs must be compatible with
       WTO rules then prevailing and will need to take account of the evolutionary
       nature of relevant WTO rules, in particular in the context of the Doha
       Development Agenda. Both sides agreed to co-operate closely in the context
       of the WTO with a view to defending the arrangements reached, in particular
       with regard to the degree of flexibility then available.

       (v)     Special and differential treatment

       Both sides concur that special and differential treatment should be provided to
       all ACP States, and in particular to LDCs and vulnerable small, landlocked
       and island countries.

B.     Market Access

5.      Both sides agreed that the principles enshrined in the Cotonou Agreement,
notably those of flexibility, asymmetry, and preservation and improvement of the
Cotonou acquis, will guide the market access negotiations. In addition, certain
objectives proposed by the ACP side, namely the acceleration of export-led growth,
preparing ACP’s adaptation to changes in global markets, and promotion of ACP
trade were accepted by the EC. Both sides also concurred that at the end of the EPA
negotiations, no ACP State participating in an EPA should be worse off than it is
currently.

6.     Flexibility would be provided in the EPAs, and asymmetry in favour of the
ACP would be granted both in terms of product coverage and transition periods.
Concerning the application of the principle of asymmetry to rules of origin, both sides
concurred that further examination at expert level was required.

7.      Regarding access to ACP markets, both sides concurred that EPA product
coverage and the length of transitional periods needed to be defined in detail at
regional level, taking account of the specificity of the regions concerned. With regard
to the length of the transition periods, the EC referred to the general WTO parameters
which would be pursued with flexibility and could be adapted in the light of specific
economic, social and environmental needs and constraints of the countries and regions
concerned, as well as of their capacity to adapt their economies to the liberalisation
process. Both sides agree that this issue needs further discussion.

8.     Concerning the product coverage, the EC referred to the WTO criterion of
“90%+” of trade as an expression of its general ambition for long term coverage of
reciprocal trade liberalization. Both sides agree that this issue needs further discussion.




                                                                                        3
9.      Both sides finally concurred that appropriate safeguard measures should be
developed at the regional level in the context of EPAs for both industrial and
agricultural products. Both sides also agreed to the principle of a continuous
evaluation of the adjustment process, which EPAs would require with a view to
adjusting the liberalization programme, should any serious problems occur in the ACP
states.

C.     Agriculture and fisheries agreements

10.     Agriculture and fisheries have been discussed with regard to market access
issues as well as their wider developmental importance.

11.     There has been convergence of views on the crucial importance of agriculture
in pursuing the objectives laid down in the Cotonou Agreement, of contributing to
foster the smooth and gradual integration of the ACP States into the world economy,
with due regard for their political choices and development priorities, thereby
promoting their sustainable development and contributing to poverty eradication in
the ACP countries.

12.    There has also been convergence of views on the need for the ACP countries
and regions to diversify their export structure and to add more value to their exports.
In this perspective, both sides agreed that addressing issues such as the PMDT
(processing, marketing, distribution and transport) would be essential.

13.     They further agree on the need to address the concerns of ACP countries, in
particular those of LDCs, small, island developing States (SIDS), land-locked
countries, net food-importing and heavily indebted non-LDCs, small economies and
single commodity producers as well as non-trade concerns such as rural development
and the preservation of the environment.

14.     Both sides agreed on the need for EPA negotiations to address SPS issues, as
well as the impact of EC export refunds on a case by case basis. With regard to SPS
issues, the EC concurred with the ACP’s recommendation of supporting the
development of national and regional capacities, as appropriate, including testing and
certification institutions, as one of the best immediate ways forward and recognised
the utility of developing a co-ordination and consultation mechanism on SPS issues
within EPAs as requested by the ACP. It is understood that existing or future national
or regional capacities in this area should be used as widely (even beyond national or
regional boundaries) as would be economically feasible.

15.    They also agreed on the need to address the issue of Commodity Protocols as
provided for under Article 36(4) of the Cotonou Agreement.




                                                                                     4
16.     However, there has been divergence of view on the sequencing of trade
liberalisation of agriculture under EPAs vis-à-vis the provision of support for the
development of agricultural sector to the ACP countries and regions. The ACP side
considers that more assistance is needed for the ACP countries and regions before
EPA negotiations could start in this area. The EC has argued that these two processes
were complementary and needed to go hand in hand so as to foster their mutual
supportiveness. Both sides concurred that this issue will need to be considered in the
context of the regional negotiations, in the light of the specific situation of the
countries and regions concerned.

17.     On fisheries, the two sides concurred on the importance of the sector, with the
mutuality of interest and with the potential of negotiating regional fisheries
agreements to be further explored. The two sides had an exchange of views on the
merits of concluding a framework ACP-EU Agreement on fisheries incorporating
fundamental principles such as the principle of responsible fishing, rational and
sustainable management of fisheries resources, and agreed to continue the discussion.


D.     Services

18.     Services have been discussed with regard to market access issues as well as
their wider developmental importance.

19.     There has been convergence of views on the importance of a vibrant service
sector for the development of the economies of ACP countries and regions and on the
need to strengthen this sector in these countries and regions.

20.     Both sides agreed that there was no firm obligation under the Cotonou
Agreement to liberalize trade in services in the context of EPAs. They however
recognized that, in the Cotonou Agreement, the Parties had agreed on the objective of
extending their partnership to encompass liberalisation of services as provided for in
Article 41(4). Both sides agreed that services liberalisation within EPAs should be
progressive, in principle based on the positive list approach and adapted to the level of
development of the ACP countries and regions concerned both in overall terms and in
terms of their services sectors and sub-sectors and to their specific constraints, and
should be underpinned by the principles of special and differential treatment,
asymmetry and positive regional discrimination. Both sides also agreed that, for
services liberalisation to be successful, it was necessary to establish a sound
regulatory framework that is supportive of services activities. Both sides would also
retain the right to regulate, and to introduce new regulations on, the supply of services
within their territories in order to meet national policy objectives. Moreover, the
negotiations would address whether and how a special safeguard mechanism in the
area of trade in services could be established.

21.     With respect to the ACP’s request for improvement in the access of ACP
service suppliers to the EC market under mode 4 (movement of natural persons), the
EC agreed to discuss this issue of mutual interest in the context of the EPA
negotiations.




                                                                                       5
22.    Both the ACP and the EC agreed on the need for support to be provided in the
context of EPAs to the ACP for the development of their services sector. This support
would need to target the specific needs of ACP countries and regions.

23.     Both sides concurred that the sequencing between support for the development
and strengthening of the services sector in the ACP countries and the negotiation of
liberalisation commitments would need to be considered, as appropriate, in the
context of the regional negotiations, taking account of the specific situation of the
countries and regions concerned.

E.     Trade-Related Issues

24.     Both sides concurred on the importance of trade-related issues. They noted
that as progress was being made in lowering tariffs, other “behind the border issues”
had become serious barriers to trade. In order to have smooth trade flows between the
parties to the EPAs, issues such as standards, sanitary, veterinary or phytosanitary
rules or rules for the protection of consumers, needed to be addressed, so as to ensure
that, even where these measures had been introduced for valid reasons, they did not
result in high costs and become practical obstacles to trade. Both sides also agreed
that well functioning infrastructure and institutions, and appropriate regulatory
systems were two necessary ingredients for the success of any trading economy, and
that they were complementary.

25.     Both sides however differed with regard to the scope and coverage of the
issues; and on sequencing of EPA negotiations with both WTO negotiations and the
building of requisite capacity in ACP States to deal with trade related subjects. For
the ACP side, the rules aspects of the trade-related areas should not be the subject of
EPA negotiations before agreement is reached on how to treat these issues at a
multilateral level, particularly in the WTO. Furthermore, the ACP side maintained
that there is a need to build adequate legal and institutional capacities in ACP
countries and regions, before any disciplines in these areas can be negotiated.

26.     For its part, the EC argued that concrete commitments in most of the areas
under consideration have already been defined in the framework of the Cotonou
Agreement. Therefore, the task ahead is rather to fine-tune these commitments in the
light of the specific situation of the countries and regions concerned and to ensure
their proper implementation. Furthermore, capacity building and negotiation of rules
should run in parallel.

27.    Notwithstanding their divergent views, both sides agreed to enhance their
cooperation in all areas relevant to trade and to strengthen the ACP capacity to handle
these areas including where necessary improving and supporting the institutional
frameworks.




                                                                                     6
F.     Development support for EPAs

28.     Both sides concurred that EPAs need to be accompanied by appropriate
development support measures, so as to allow ACP countries and regions to maximise
the benefits deriving from EPAs. EPAs and development support measures must be
complementary and mutually supportive. EPAs therefore need to be mainstreamed
into the development policies of the ACP countries and regions and fully integrated
into the development cooperation policies of the EC.

29.     Capacity building and infrastructure development are important requirements
for EPAs to contribute to the sustainable development of ACP countries. Industrial
development and enhancing regional integration are equally important. Both sides
concur that support in these areas is needed. Both sides further concur on the general
principles and modalities for such support, as set out by the Cotonou Agreement and
its Compendium, and on the need to ensure the implementation of these principles and
modalities, through the identification and the design of concrete programmes and
projects.

30.    However, a divergence of view still persists on whether there is a need for
additional financial resources over and above the EDF to be granted to the ACP. For
the ACP side, additional resources are required to cater for adjustments costs that
would result from the implementation of EPAs and to ensure that resources currently
available under EDF are not diverted from the development priorities of the ACP. For
the EC, resources available for the financing of development co-operation in the next
five years have been agreed in the framework of the Cotonou Agreement, and this
question is not up for renegotiations in the framework of EPA negotiations.

G.     Other issues

(a)    Non-execution clause

31.      The EC has signified its intention to have the non-execution clause contained
in Articles 96 and 97 of the Cotonou Agreement included in EPAs. The ACP position
is that the non-execution clause should not apply to EPAs and should be confined to
political cooperation.

(b)    Dispute settlement procedures

32.    Both sides agreed that this issue should be examined further at a later stage.

Conclusions and Next Steps

33.     The meetings held during the first phase of EPA negotiations have allowed the
parties to converge on a number of issues. However, divergent views remain. Both
parties therefore agree to continue discussions at the all-ACP – EC level.




                                                                                        7
34.       To this end, they propose:

•     to establish an all-ACP-EC Technical Monitoring Committee, in order to maintain
      transparency with regard to the regional negotiating processes. The main purpose
      of this mechanism will be to ensure a free flow of information and to promote
      dialogue between the different ACP regional groupings, on the one hand, and
      between them and the EC, on the other. The Technical Monitoring Committee will
      be composed of representatives of the different regional groupings, the ACP
      Secretariat, the Troïka of the ACP Committee of ambassadors, and the EC.

•     to request the Joint ACP-EC Ministerial Trade Committee (JMTC) to ensure
      mutual understanding on horizontal issues of interest to all parties. It shall make
      any recommendations, which it deems appropriate to ensure coherence of the
      negotiations. Where appropriate, the JMTC could mandate technical groups to
      work at expert level on specific issues, which it has identified as requiring deeper
      examination.

•     that ACP-EC Ministers will meet as appropriate to take stock of the discussions.

35.     Concerning the external aspect of transparency, the ACP side and EC will
intensify the involvement of non-state actors, notably business representatives, social
partners and other representatives of civil society in the EPA process, notably on the
regional level but also within the framework of the all-ACP – EC dialogue.

36.       The joint Ministerial level meeting is invited to

      (i)     endorse the areas of convergence reflected in this report;
      (ii)    consider areas of divergences;
      (iii)   discuss the above proposals on the establishment of an all-ACP - EC
              mechanism during the second phase of the negotiations; and
      (iv)    address and provide political guidance on all areas of the negotiations, as
              they deem necessary.

37.    Finally, Ministers are invited to take note that the second phase of EPA
negotiations will be launched in October 2003, with regional negotiations in Central
Africa on 4 October 2003 and in Western Africa on 6 October 2003.



                                  ___________________




                                                                                         8
     ACP/61/121/02                      Brussels, 9 December 2002
     ACP-EC/NG/MN/8




                        JOINT REPORT

ACP – EU NEGOTIATIONS ON ECONOMIC PARTNERSHIP AGREEMENTS



           1st all-ACP – EU Ambassadorial level meeting

              ACP House, Brussels, 30 October 2002




                                                                    9
Co-chairmen:

ACP: Ambassador Sutiawan Gunessee (Mauritius), Chairman of the ACP Committee
of Ambassadors

EC: Karl Falkenberg (EC Commission), Director at DG Trade


1.     Agenda

The attached agenda was adopted.


2.     Structure for the negotiations

The ACP side indicated that there would be two main levels for the negotiations.
These were the ministerial and the ambassadorial levels. At these two levels, the ACP
had designated spokespersons to address specific subjects. The ACP side proposed
the convening of ad hoc groups to deepen discussions on certain complex issues,
should the need arise. In addition to the ministerial and ambassadorial levels, a
technical “co-ordinating group” would be established to prepare the work of the
ambassadorial meetings. The technical group would forward reports, proposals and
open questions to the Ambassadorial level meetings for adoption or further
discussions.

The EC agreed to have three working levels (ministerial, ambassadorial and
technical). DG Trade would normally represent the EC, with the participation of other
DGs whenever appropriate. Commissioner Lamy would be the main EC ministerial
representative, while DG Trade Director Karl Falkenberg would normally represent
the EC at ambassadorial level. As regards meetings of the ad hoc groups, the EC side
said that it was too early to take a decision.

Both sides agreed that there should be a transparent, flexible and efficient structure,
which could be adjusted as the negotiations would progress. The structure would have
two main levels, namely Ministerial and Ambassadorial. At the Ministerial level, the
ACP side would be represented by the ACP Council of Ministers and would have
different spokespersons on specific issues. At the Ambassadorial level, the ACP side
would be represented by the ACP Committee of Ambassadors and would have
different specific-issue Spokespersons. As for the EU side, it would be represented at
the Ministerial level by Commissioner Lamy and at the Ambassadorial level by Mr.
Karl Falkenberg, with the assistance of other Commissioners or DGs whenever
appropriate. Ambassadorial meetings would be prepared at the technical level by a co-
ordinating group, whose modalities still needed to be discussed. The ACP side
indicated it would revert to the EC on this point.




                                                                                    10
2.     Issues to be considered during Phase I

The ACP side reiterated its wish to convene six issue-specific negotiating groups
(market access, agriculture and fisheries agreements, including SPS measures, trade
in services, development co-operation issues including debt, trade-related issues, and
legal issues). It also requested that the EC explain what it meant when it suggested
the establishment of a group which would be working on a “toolbox”.

The Commission indicated that it would be more appropriate to conduct the
discussions within a single setting. It also explained that issues to be discussed could
be usefully grouped into four, broader clusters: one would be a kind of “toolbox” of
the necessary elements for successful regional integration among the ACP, one would
allow to address market access issues in a comprehensive way (i.e. industrial,
agricultural, fish and services), one would cover all rules-related areas, and the last
one would address procedures for the organisation of regional negotiations (e.g. to
ensure that full transparency is maintained between the different regional
negotiations).

The ACP side took note of the presentation by the EC side and requested the EC to
present its views in writing to facilitate its consideration of the EC’s proposed
“toolbox” and clusters of issues. The EC agreed to present its views in writing,
including on the question of the development aspect of EPAs. The EC was of the view
that it would be better for the development dimension to be integrated within the
discussion of all issues, rather than to be discussed in isolation under a specific
heading. The ACP side underlined the need to discuss development-related issues in
a cluster of its own in view of the importance of those issues.

3.     Procedures for moving from Phase I to Phase II

The EC recalled that a first all-ACP-EU phase would be useful for discussing and
clarifying issues before embarking on the regional negotiations. As Commissioner
Lamy had made it very clear at the opening of the negotiations of EPAs, the
completion of the all-ACP-EU phase of discussion could not be considered as a pre-
condition for the launch of regional negotiations. The EC also reiterated that it was up
to the ACP countries to decide within which regional setting they wished to negotiate.

The ACP side stressed that the first phase should take place at an all-ACP-EU level
resulting in an all-ACP-EU Agreement. It recalled the need to stick to the language of
the Cotonou Agreement, noting that the provisions of Article 37.5 made it clear that
it is for the ACP to agree on the procedures to apply throughout the negotiation of
EPAs. In this regard, an all-ACP mechanism needed to be maintained during the
second tier of the negotiations, which could start in September 2003. The all-ACP
mechanism would ensure effective coordination, follow-up and information exchange
and facilitate coherence and transparency as well as the formal and comprehensive
review referred to in Article 37.4. The ACP side explained that it was sensitive to the
view that finalisation of the first phase was not a pre-condition for the start of the
second one, in particular since it would probably not be possible to solve all first
phase issues until much later in the process. However, the conclusion of an all-ACP –
EU Agreement was a fundamental element for the ACP side, because there was a


                                                                                     11
need for a legal anchorage of EPAs within the Cotonou Agreement, as regards
economic and trade cooperation between the ACP and the EU.

The EC took note of that position which it termed legalistic but recalled that economic
realities also needed to be taken into consideration. It was a well known fact that some
ACP sub-regions were already negotiating preferential and reciprocal trade regimes
with other major trading partners, so the EC would find it strange to see itself barred
from doing the same with regions with which it had gradually built a sound and truly
development-oriented partnership.

Both parties agreed that there was a need to be pragmatic. There would be two phases
in the negotiations of EPAs. An all-ACP mechanism would be maintained during the
whole process so as to ensure transparency. For the rest, both sides took note of the
other side’s positions.

4.     Establishment of a Joint ACP-EU Steering Committee on WTO
       Negotiations

As a follow-up to the agreement reached during the first ACP-EU Ministerial
meeting, the ACP side presented its views on the creation of a Joint Steering
Committee which would meet in Brussels for co-ordinating positions on Doha
Development Agenda and Doha Development Agenda / Economic Partnership
Agreement issues. The Steering Committee could comprise European Commission
and Member States representatives, as well as Brussels- and Geneva-based ACP
Ambassadors. The existing Geneva-based EU-ACP consultation mechanism would
however be maintained. In this regard, it would be necessary to provide adequate
funds for the functioning of the Steering Committee. The ACP side announced that it
would provide a written proposal in this respect.

The Commission spoke in favour of improving the efficiency of the existing Geneva-
based DDA co-ordination mechanism, and indicated that it was not fully convinced of
the need to create an additional structure in Brussels. The forthcoming ACP proposal
would however be given due consideration.

5.     Calendar of meetings: ACP-EU Ambassadorial meetings, Joint MTC and
       2nd ACP-EU Ministerial Meeting

Both sides agreed that the Second EU-ACP Ministerial meeting on EPA negotiations
would take place in the first half of 2003. They anticipated that the exact date and
venue (probably in an ACP country) would be decided during the next meeting of the
Joint Ministerial Trade Committee. They took note of the proposal to hold that
meeting in February 2003 in St. Lucia.

Both sides agreed that the second ambassadorial meeting on EPA negotiations would
take place in the first week of December 2002. The ACP side suggested a few points
for the agenda (principles and objectives of EPAs; special and differential treatment;
legal status including ratification and entry into force of EPAs; question of who takes
obligations: individual ACP States or ACP regions even if EPAs could be concluded
with regions, and who would finally notify them to the WTO; who commits the
parties to the EPAs: the Commission or the EU Member States, particularly in areas


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where the Commission has no exclusive competence, clusters of issues). However,
the EC indicated that the co-ordinating group would need to discuss this agenda. The
ACP side agreed that the co-ordinating group would have to meet in advance of the
ambassadorial meeting but indicated it would revert to the EC concerning its
modalities.

6.     Any other business

It was agreed that a Joint Report would be drafted by the Commission and the ACP
Secretariat, for adoption at the next session of the ambassadorial meeting.




                                ________________




                                                                                 13
  Ref. ACP/61/111/02 Rev.1                   Brussels, 28 October 2002
  S.E.D.D.




DRAFT AGENDA OF THE


FIRST ACP-EU AMBASSADORIAL MEETING ON THE NEGOTIATION OF
ECONOMIC PARTNERSHIP AGREEMENTS

                         ACP HOUSE
             WEDNESDAY, 30 OCTOBER 2002, AT 10 A.M.




  1.    Adoption of the Draft Agenda.

  2.    Structure for the negotiations.

  3.    Issues to be considered during Phase I.

  4.    Procedure for moving from Phase I to Phase II.

  5.    Establishment of a Joint ACP-EU Steering Committee on WTO
        negotiations.

  6.    Calendar of meetings: ACP-EU Ambassadorial meetings, Joint MTC
        and 2nd ACP-EU Ministerial meeting.

  7.    Any Other Business.




                                   ***




                                                                         14
ACP-EC/NG/MN/16
ACP/61/005/03                                 Brussels, 12 February 2003
Sustainable Economic Development Department




                                JOINT REPORT


  ACP – EU NEGOTIATIONS ON ECONOMIC
       PARTNERSHIP AGREEMENTS
         2nd all-ACP – EU Ambassadorial level meeting

                  ACP House, Brussels, 9 December 2002




                                                                           15
Co-chairmen:

ACP: Ambassador Sutiawan Gunessee (Mauritius), Chairman of the ACP Committee
of Ambassadors

EC: Karl Falkenberg (EC Commission), Director at DG Trade

1.     Agenda

The attached agenda was adopted.

2.     Approval of the Joint Report for the First ACP-EC Ambassadorial Level
       Meeting

The draft Joint Report was approved with two amendments. The first one related to
the replacement of the words “ambassadorial meetings” by the word “groups” (page
1, section 2, paragraph 1, line 4), and the second one to the replacement of the last
sentence of the subsequent paragraph by “As regards meetings of the ad hoc groups,
the EC side said that it was too early to take a decision.”

It was agreed that a small drafting group be set up to prepare the joint reports. The
ACP side indicated that its members to this drafting group would be communicated to
the EC side later.

3.     Follow-up to the First Ambassadorial Meeting:

       (i)     Modalities of the Co-ordinating Group

       The ACP side indicated that it would soon transmit in writing to the EC side
       the modalities for operationalizing the ACP negotiating structure for Phase I
       of the negotiations. The ACP Secretariat would be responsible for
       coordination of technical preparations within the ACP Group. At the
       Ambassadorial level, the ACP Committee of Ambassadors would ensure
       coordination of the negotiations. Negotiations themselves would take place at
       the Ambassadorial level. In order to engage in deeper interaction and more
       meaningful negotiations, the ACP side considered that more specific sessions
       should be held in a more restricted setting. The EC agreed to have
       “dedicated”meetings, stressing that DG Trade Unit C.1 would be representing
       the Commission and that ACP attendance would be left to the ACP side.

       It was therefore agreed that, where appropriate, “dedicated” meetings would
       be convened, which would be conducted by the designated spokespersons for
       the ACP side and by Trade C.1 for the Commission. It was also agreed that in
       case technical preparations were needed on certain specific issues, ad hoc
       groups could exceptionally be convened.




                                                                                  16
(ii)    Clustering of issues

The ACP side reiterated its view on the establishment of six groups of issues
(Annexed), while the EC elaborated four broader clusters (Annexed). It was
agreed that negotiations would take place in one, single setting and that it was
up to each side to organize itself as necessary so that all the subjects which
should be considered are addressed. Moreover, it was agreed that issues that
had not been identified under those clusters could also be discussed.

(iii)   Outcome of phase 1

The EC side reiterated its view that Phase I was one of clarification and that its
outcome should not be formalized. It also indicated that it might be useful to
have an all-ACP process throughout the entire negotiations for reasons of
transparency, coherence and ACP solidarity. For its part, the ACP side
reiterated its position that there should be an all-ACP – EU Agreement at the
end of Phase I and that cross-cutting issues for all ACP States (e.g. rules of
origin, safeguard clause, dispute settlement mechanisms, etc) should be dealt
with at the all-ACP-EU level. The EC stressed that the regional approach of
the negotiations would ensure flexibility and would allow for tailoring the
EPAs to the economic realities and needs of the different regions.

Both sides took note of each other’s position and agreed to revert to the
question at a later stage, and also as appropriate to refer any divergences to the
Ministerial level.

(iv)    Joint ACP-EC Steering Committee on WTO Negotiations

The ACP side indicated that it had submitted in writing to the EC side its
proposal, which it had slightly modified, on the establishment of a Joint ACP-
EC WTO Steering Committee at ambassadorial level in Brussels. It pointed
out that the idea of such a Joint Committee had originally come from
Commissioner Lamy at the last Joint Ministerial Trade Committee meeting
and was agreed upon at the 1st ACP-EU Ministerial negotiating session. The
ACP side reiterated its position that the Joint Steering Committee should be
located in Brussels since many ACP States were not present in Geneva – some
of them not even being members to the WTO.

The EC stated that coordination on WTO negotiations did not require the
creation of a new bureaucratic institution. Rather, what was necessary was to
improve the existing Geneva-based co-ordination. However, it acknowledged
that, in order to ensure coherence between EPA and DDA negotiations, there
might be a need to convene ad hoc meetings in Brussels, but these should not
be institutionalized.

It was finally agreed to revert to this issue only in case of new developments.
It was also agreed that the JMTC would be advised on this matter.




                                                                               17
4.     Objectives, principles and overall structure of EPAs

The ACP side presented the ten principles that should underlie the future EPAs. These
were the following: EPAs should be oriented towards the achievement of sustainable
development for the ACP States; they should preserve and strengthen ACP unity and
solidarity; preserve and improve the Lomé acquis; be WTO-compatible (however,
flexibility should be injected in the existing WTO rules to facilitate the conclusion of
a development-oriented, WTO-compatible trading arrangements between the ACP
States and the EU); provide for special and differential treatment; be economically
viable, politically acceptable and socially sustainable; be coherent and consistent with
the development objectives and policies of ACP States; build on and not compete
with ACP regional integration processes; be based on the principles of legitimacy,
transparency and inclusiveness; and provide for additional resources to support
adjustment and fiscal costs that would be incurred by ACP States and to address their
supply-side constraints. The ACP side stated that a common understanding could be
reached on these fundamental issues given that in the EC negotiating directives, it is
stated that discussions at the all-ACP level shall aim at finding a common
understanding on the structure and content of EPA. The EC stressed that what was
meant by a common understanding was a meeting of minds, and not the conclusion of
a legally binding agreement.

The EC recalled that the EPAs’ objectives and principles were already defined by
Cotonou and, although one could elaborate a bit on those, the EC saw no possibility to
bring in totally new elements. The EC stressed that the financial framework for
development co-operation had been settled in the Cotonou Agreement, and that its
mandate was only to negotiate the trade arrangements foreseen by that Agreement.
There was absolutely no room for manoeuvre on this issue.

The ACP side insisted that unless additional resources were available to address the
supply-side constraints, including fiscal and economic adjustment costs, of the ACP
States, the latter’s situation would remain the same as under the Lomé Conventions.
The ACP stated that this issue should be brought up for discussion at a higher level.

It was agreed to organise a “dedicated” meeting to address the issue of “flanking
measures and implications of EPAs”.

As regards the EPAs’ structure, the EC reiterated its position on a regional, bottom-up
approach to the process. EPAs needed to provide targeted solutions to the specific
problems of the various ACP regions and could therefore not be modelled according
to a “one-size-fits-all” approach. The ACP side considered that there were some
issues which should be discussed at the all-ACP-EU level and that it would be
pointless for the EC to discuss cross-cutting issues several times with different
regions/countries. During Phase II, issues specific to regions/countries would be
discussed. The ACP side also referred to Article 37(5) of the Cotonou Agreement
which provides that it is for the ACP to decide on the level at which issues should be
dealt with.

With regard to the content of EPAs, the EC indicated that the Cotonou Agreement
provided for a clear description of what the EPAs’ content would be, and that the


                                                                                     18
parties should now start to look at the substance of the issues concerned. If some
issues required a similar treatment in all the EPAs, then similar provisions would
simply be included in the different, regional agreements and the outcome may be
considered at the end of the negotiations.

The ACP side indicated that it would submit in writing its views on the content of
EPAs.

5.     Exchange of views on legal status of EPAs:

       (i)    Definition of parties to the EPAs

       The ACP side stated that this was an issue of great importance since it needed
       to have a clear indication of who, on the EC side, would have the competence
       to take commitments, particularly in areas of shared competence, in light of
       the experience of the conclusion of the EU-South Africa Trade, Development
       and Cooperation Agreement. That issue was also important because the ACP
       and the EU had agreed to negotiate new WTO-compatible trading
       arrangements and the future EPAs would have to be notified to the WTO.
       Since only customs territories can assume obligations in the WTO, it is
       necessary to know in the case of an EPA which would be negotiated with an
       ACP region, who would take obligations for its WTO-compatibility: the ACP
       region or the individual ACP States? This issue could influence ACP
       countries’ choice of geographical or other configuration for the negotiations.
       The EC answered that this was a question that could only be usefully
       discussed once the negotiations were more advanced, and the regional
       grouping engaged in EPA negotiations were known. In the case of the EC, it
       would be the substance of the commitments, which would dictate the parties to
       the EPAs. In addition, the EU was in a process of constitutional reform, and it
       was too early to say what would come out of the ongoing deliberations of the
       European Convention.

       It was agreed that a dedicated meeting would be organised in order to deepen
       discussions on this issue.

       (ii)   Modalities for entry into force

       Both sides agreed that this issue be dealt with in a dedicated session.

6.     Any other business:

       (i)    Date and agenda for the 3rd Ambassadorial meeting

       It was agreed that the 3rd Ambassadorial meeting would take place on the 28
       January 2003. The 4th meeting was tentatively scheduled for mid-February, so
       as to allow for enough time to prepare the 4th JMTC.

       (ii)   Preparation for the 4th Joint ACP-EC Ministerial Trade
              Committee (JMTC)



                                                                                   19
It was agreed that the 4th Joint ACP-EC Ministerial Trade Committee would
take place in February 2003 in St. Lucia and that the dates would be fixed after
consultations with the host country. That meeting would be prepared by the
4th Ambassadorial meeting.




                                                                             20
      ACP/61/125/02 Rev.2                             Brussels, 3 December 2002
      ACP-EC/NG/AG/10




                             DRAFT AGENDA OF THE

       SECOND ACP-EC AMBASSADORIAL MEETING ON THE
     NEGOTIATION OF ECONOMIC PARTNERSHIP AGREEMENTS

                              ACP HOUSE
                MONDAY, 9 DECEMBER 2002, 09.00 – 11.00hrs



1.     Adoption of the draft agenda. [ACP/61/125/02 Rev.2 - ACP-
       EC/NG/AG/10]

2.      Approval of the Joint Report for the First ACP-EC Ambassadorial Level
        Meeting. [ACP/61/121/02 – ACP-EC/NG/MN/8]

3.      Follow-up to the First Ambassadorial Meeting:

        (i)       Modalities of the Co-ordinating Group,
        (ii)      Clustering of issues,
        (iii)     Outcome of phase 1,
        (iv)      Joint ACP-EC Steering Committee on WTO negotiations.

4.      Objectives, principles and overall structure of EPAs.

5.      Exchange of views on legal status of EPAs:

        (i)       Definition of parties to the EPAs
        (ii)      Modalities for entry into force.

6.      Any other business.
        (i)   Date and agenda for the 3rd Ambassadorial meeting
        (ii)  Preparation for the 4th Joint ACP-EC Ministerial Trade
              Committee (MTC)




                                                                                  21
EC/NG/WD/9 EN
Working document
Ambassadorial group
21/11/02

                                   EPA Negotiations


    EC views on the organisation of issues for discussion in the all-ACP phase


As was agreed at the first ambassadorial meeting under EPA negotiations, the EC
would hereby like to present its views on how the various topics for discussions could
be best addressed during the all-ACP phase.

It is to be recalled that all issues of interest for either the ACP or the EC side should
be given the possibility to be examined by the parties during the all-ACP phase. It
further needs to be borne in mind that discussions will be conducted, at the different
levels, within one single setting, with different spokesmen intervening on the ACP
side. The EC therefore believes that clustering of issues in the joint discussions does
not necessarily need to follow the division of labour decided between the ACP, but
should rather be guided by the objective to ensure effectiveness of these discussions.

With this in mind, the EC proposes to structure the discussions around four broad
clusters of issues : market access, rules related issues, the tool-box and procedures. As
regards the development dimension of EPAs, the EC is of the view that it would be
best served by being integrated in the discussion of all EPA relevant themes, rather
than by being discussed in isolation from other issues in a separate framework.

MARKET ACCESS

Under this heading all measures applied at the border to trade in goods and services
would be discussed. This would, in particular, include all tariff and non-tariff barriers
applied to trade between the parties, as well as all linked issues such as rules of origin
and customs administration, customs procedures and trade facilitation and safeguards.
The EC feels it is important to discuss all such barriers to trade in context so as to
ensure that they are addressed in a comprehensive and balanced way.

RULES-RELATED ISSUES

Under this heading all measures would be discussed, which, although not specifically
applied to imports or exports, would nevertheless lead to segmentation of markets
between the parties. In this context, all trade-related areas defined by the Cotonou
Agreement (Articles 43-51), including investment, would be addressed as well as all
similar issues introduced by either side. Given the fact that theses issues are often
inter-related, the EC would favour discussing them within one single framework, so
as to assess complementarity and to ensure coherence.
TOOLBOX

Under this heading, the elements relevant for successful ACP sub-regional economic
integration would be discussed. The objective of these discussions would be to
establish a tool-box for regional integration, which could serve regional organisations
as a guide in their integration efforts and at the same time ensure the pertinence of
EPA negotiations for the integration process. The idea would therefore be to discuss
the various elements that have proved useful in the past to maximise the benefits of
regional integration as well as their drawbacks (e.g. advantages and implications
associated with the establishment of a common external tariff, usefulness of regional
competition policy, investment or intellectual property protection rules, importance of
improving certification and testing capacities on a regional basis, merit of introducing
dispute settlement procedures, etc), with a view to provide possible building blocks
for ACP regional integration and for EPA negotiations. Ultimately, the toolbox
therefore is a specific cluster of issues, or rather an approach to the all-ACP
discussions which will set the framework and provide the tools for the regional
negotiations.


PROCEDURES

Under this heading, issues relating to the regional phase of the negotiations would be
discussed. The objective of the discussions would be the setting up of a mechanism to
ensure that transparency and coherence is maintained with regard to the different
regional negotiating processes. The EC feels it is necessary to make sure that all ACP
regions are aware of all policy options considered during the regional negotiation
process, so as to ensure that these negotiations lead to the best results for each region.




                                                                                        1
                        ACP-EU NEGOTIATIONS OF EPAs


ACP’s position on the subjects to be considered under the six negotiating groups
during the first phase of the negotiations

In order to ensure coherence among the different objectives of the negotiations, the

ACP group has established negotiating groups and agreed on the subjects to be

considered under each of the groups as follows: -




       (a) Market access – Including, inter alia, rules of origin; trade facilitation
           including customs procedures; non-tariff barriers to trade including
           standardization and certification; safeguards; product coverage and
           transitional periods.

       (b) Agriculture and fisheries agreements – including, inter alia, commodities
           and commodity protocols; sanitary and phytosanitary measures;

       (c) Trade in services – including, inter alia, labour, business, distribution,
           financial, tourism, cultural, construction and related engineering
           services, air and sea transport, information and communication
           technologies;

       (d) Trade-related issues – including, inter alia, competition policy,
           intellectual property rights, trade and environment;

       (e) Development Cooperation issues – including, inter alia, supply side
           constraints, transport and telecommunication infrastructure, energy,
           investment promotion and protection schemes, technologies, capacity
           building, debt and financial support and other measures to address
           adjustment costs;

       (f) Legal issues – Including, inter alia, dispute settlement, legal status of
           the Agreement(s), institutional matters, and WTO compatibility.



Certain cross-cutting subjects such as special and differential treatment, sanitary and
phytosanitary measures and safeguards could be dealt with in more than one
negotiating group.

                                          ***



                                                                                       2
ACP-EU/NG/MN/18                      Brussels, 19 February 2003
ACP/00/029/03




                   JOINT REPORT


 ACP – EU NEGOTIATIONS ON ECONOMIC
      PARTNERSHIP AGREEMENTS
    3rd all-ACP – EC Ambassadorial level meeting
       Borschette Centre, Brussels, 12 February 2003




                                                                  3
Co-chairmen:

ACP: Ambassador Isikeli U. Mataitoga (Fiji), Chairman of the ACP Committee of
Ambassadors

EC: Karl Falkenberg (EC Commission), Director at DG Trade

1. Agenda

The attached agenda as amended was adopted (Annex 1).

2. Approval of the Joint Report for the Second ACP-EC Ambassadorial Level
   Meeting

The proposed Joint Report was adopted with the following amendments:

-   On page 2, section (iii), paragraph 2 will read “Both sides took note of each
    other’s position and agreed to revert to the question at a later stage, and also as
    appropriate to refer any divergences to the Ministerial level.”
-   On page 3, add the following sentence at the end of paragraph 1: “The ACP side
    stated that a common understanding could be reached on these fundamental issues
    given that in the EC negotiating directives, it is stated that discussions at the all-
    ACP level shall aim at finding a common understanding on the structure and
    content of EPA. The EC stressed that what was meant by a common
    understanding was a meeting of minds, and not the conclusion of a legally binding
    agreement.”
-   On page 3, the end of the first sentence of paragraph 6 will read: “and the outcome
    may be considered at the end of the negotiations.”


3. Follow-up to the Second Ambassadorial Meeting:

       (i)     Dedicated session on legal issues

               Ambassador Yolette Azor-Charles of Haiti, ACP Spokesperson on
               legal issues, reported on the discussions held on 5 and 7 February.
               While agreeing that the report mostly reflected the discussions, the
               Commission brought certain nuances thereto – inter alia related to the
               reporting of its position on the ACP request for additional resources.

               The ACP side sought assurance from the EU side that additional
               resources would be provided to the ACP countries for the adjustments
               that would be necessary as a result of EPAs. It pointed out that this
               was an issue of critical importance for the ACP.

               It was agreed that a written joint report would be finalised. The final
               joint report of the dedicated session is attached to this report as Annex




                                                                                        4
             2. It was also agreed that the dedicated session should continue its
             work.

      (ii)   Dedicated session on flanking measures and implications of EPAs

             The EC regretted that it had not been possible to convene the dedicated
             session on flanking measures and EPA implications, as had been
             agreed at the 2nd ambassadorial meeting.

             The ACP side proposed that the relevant parties be requested to
             convene a dedicated session on flanking measures and implications of
             EPAs as soon as is practicable.

             It was agreed to convene as soon as possible a dedicated session on
             flanking measures and implications of EPAs.

4. Exchange of views on the issue papers presented by the Commission

      (i)    Market access

             The EC introduced its paper by stressing the need to work on building
             stronger ACP markets before turning to liberalising market access for
             EU exports. Market access issues were to be looked at regionally and
             in a comprehensive manner (border protection, trade facilitation, trade
             defence instruments, rules of origin, etc), in order to be able to tailor
             the EPAs to the ACP regions’ specific constraints and to their
             development needs.

             The ACP side noted that the market access issues raised by the EC
             in its document fall under the purview of three different
             negotiating groups on the ACP side, namely market access,
             agriculture and fisheries agreements, and trade in services and in
             this regard, argued that the issues should be treated in separate
             dedicated sessions in the same manner as they are treated in the
             WTO. The ACP side noted that both sides agreed that it was
             essential to maintain and improve on the Lomé acquis, as agreed
             under the Cotonou Agreement.

             The EC underlined the need to ensure that market access would support
             the ACP development. This required to approach market access issues
             in a single setting. The EC also underlined the impact that the DDA
             market access negotiations would have on the ACP, in particular
             regarding the erosion of their preferential margins. It noted that the
             market access proposals put forward by the US in the WTO were
             potentially very detrimental in this respect.

             The ACP side indicated that it had expressed a position on the DDA
             approach for tariff liberalisation on agricultural products, which was
             supportive of the EC proposal to replicate the Uruguay Round formula.


                                                                                    5
        After a considerable exchange of views, it was agreed to convene a
        dedicated session on market access, without excluding the possibility
        of moving, where appropriate, to more specific, sectoral discussions.

(ii)    Rules-related issues

        The EC briefly introduced its position on the need to harness trade
        liberalisation with a set of rules. Non-tariff barriers had become much
        more important in today’s trading relations. In particular, EPAs needed
        to address all areas relevant for trade if they were to allow the ACP to
        fully realise the gains from trade liberalisation. For the time being,
        problems related to divergent marketing rules or product regulations
        (e.g. technical standards, SPS requirements), to the uncompetitive
        behaviour of firms or to inadequate protection of intellectual property
        rights often acted as barriers to trade, resulting in high production costs
        and inefficiencies in the ACP countries.

        The ACP side indicated that it first needed to reinforce its human
        resource, regulatory and administrative capacities before it could be
        expected to negotiate on the so-called “rules-related” issues. Until
        multilateral trade rules are crafted on competition policy, investment,
        trade and labour standards, data protection, etc, the ACP would not be
        amenable to negotiating any rules on those issues in the context of
        EPAs. What the ACP hoped to conclude with the EU was cooperation
        arrangements in all those areas. The ACP side also stressed that since
        the ACP States had taken up international obligations independently, it
        could prove extremely difficult to implement or comply with those
        obligations on a regional basis.

        The convening of a dedicated session on these issues was agreed.

(iii)   Toolbox

        The EC explained the rationale behind its paper on toolbox.
        Commissioner Lamy had set the tone: EPAs should be instruments for
        development that would focus first on building larger ACP markets and
        only then on opening those to EU products and services. The idea of
        the toolbox was therefore to help ACP integration by identifying
        examples of successful regional policies in various areas relevant for
        trade. Inter alia, looking at the experience gained in other regions
        would allow the ACP regions to identify and use the tools that would
        be the most appropriate for achieving their own integration objectives.
        Discussions on the toolbox were to be development-oriented and to
        focus on regions.

        The ACP side insisted on the need to take into account the significant
        progress which had been made by the regional integration processes in
        the ACP regions in most of the policy areas outlined in the EC
        proposed “toolbox” and, to clarify the appropriate tools for regional


                                                                                 6
               integration and broaden the perspective by going beyond purely trade-
               related tools. In its view, it was necessary to accord sufficient
               treatment to the development dimension and additionality of resources
               for the suggested policy measures, be it in the areas of trade in goods,
               trade in services, trade facilitation, rules and enforcement mechanisms,
               and regional integration in a wider context. However, it was open to
               discuss the EC proposal for the creation of regional preparatory task
               forces, with a view to removing any ambiguities as to how these new
               institutional arrangements would fit into and/or contribute to the EPA
               negotiating process.

               It was agreed that the dedicated session on flanking measures and
               implications of EPAs would further examine these issues.

       (iv)    Procedures

               The ACP side agreed on the need for an all ACP-EU mechanism
               during phase 2 whose role would be both to maintain transparency and
               coherence with regard to negotiations during the second phase and to
               oversee the reviews and assessments referred to in Article 37 of the
               Cotonou Agreement. The ACP however raised concerns on the EC
               paper, relating mostly to the composition, the legal basis for the
               proposed structure in view of Cotonou Art. 15-17, and to the
               representation of the regions. The ACP expressed the view that
               regions should be represented by their Member States, because it is
               they who would take the commitments in the end.

               The EC stressed that this would be a negotiation-related structure,
               which would be independent from the regular Cotonou institutions.
               Irrespective of their ability to take commitments, participation of
               regional organisations was crucial since they had the expertise and
               would participate in the negotiations.

               As regards the external aspect of transparency, the ACP side expressed
               the view that this was an issue that should be left to each side to
               manage.

               It was agreed that the dedicated session on legal issues would address
               these issues.

5. Exchange of views on specific issues raised by the ACP Group on agriculture and
   fisheries agreements

The ACP side emphasized the significance of agriculture to the economies of ACP
States. In some ACP States, agriculture contributes up to 50% of national GDP and
up to 75% of export earnings. Furthermore, both the ACP and the EU have agreed
under Article 36(4) of the Cotonou Agreement to review the Commodity Protocols in
the context of EPAs with a view to safeguarding the benefits derived therefrom,
bearing in mind the special legal status of the Sugar Protocol. In addition, agricultural
products have been treated differently from industrial products in the context of ACP-


                                                                                       7
EU trade relations, in WTO, and in EU relations with other countries (Chile) and
regions (MERCOSUR).

In the case of fisheries where there is mutuality of interests, the ACP side wanted to
address specific issues contained in the new EU proposal on an integrated framework
for Fisheries Partnership Agreements with third countries following the reform of the
EU Common Fisheries Policy. In view of the importance of agriculture and fisheries,
the ACP side expressed the view that since some of the issues related to these sectors
are not market access related, it was critical for these issues to be addressed in a
separate dedicated session.

The ACP side also underscored the use of sanitary and phytosanitary measures, in
particular in agriculture, as barriers to trade. The issue was not only to meet standards
and norms but also for ACP States to build capacity.

The EC agreed with these remarks, especially on the importance of agriculture, while
underlining the need for the adoption of a holistic approach.

6. Any Other Business

       (i)     Date and agenda for the 4th Ambassadorial Meeting

               It was agreed to hold the next Ambassadorial Meeting on the afternoon
               of 24 February at the ACP House.

       (ii)    Preparation for the 4th ACP-EC JMTC

               The ACP side proposed a number of issues for the agenda of the 4th
               meeting of the ACP-EC JMTC. While agreeing in general to the
               proposals, the EC said that it would further examine them and would
               revert to the ACP side.




                                                                                       8
ACP-EC/NG/AG/17
ACP/61/006/03
                                                   Brussels, 12 February 2003




AGENDA OF THE


THIRD ACP-EC AMBASSADORIAL MEETING ON THE NEGOTIATION OF
ECONOMIC PARTNERSHIP AGREEMENTS

            Borschette Centre, Rue Froissard 36
         WEDNESDAY, 12 FEBRUARY 2003, AT 10 A.M.




  8.    Adoption of the Agenda.

  9.    Approval of the Joint Report on the Second ACP-EC Ambassadorial
        Meeting.

  10.   Follow-up to the Second Ambassadorial Meeting:

           (i)     Dedicated session on legal issues,
           (ii)    Dedicated session on flanking measures and implications
                   of EPAs.

  11.   Exchange of view on the issue papers presented by the Commission:

           (i)     Market access,
           (ii)    Rules-related issues,
           (iii)   Toolbox,
           (iv)    Procedures.

   5.    Exchange of views on specific issues raised by the ACP Group on
         agriculture and fisheries agreements.

  6. Any Other Business.

           (i)     Date and agenda for the 4th Ambassadorial meeting,
           (ii)    Preparation for the 4th Joint ACP-EC Ministerial Trade
                   Committee (JMTC).



                                                                            9
ACP/00/047/03                                 Brussels, 7 April 2003
ACP-EU/NG/MN/20




                    JOINT REPORT


 ACP – EU NEGOTIATIONS ON ECONOMIC
      PARTNERSHIP AGREEMENTS
      4th all-ACP – EC Ambassadorial level meeting

           ACP House, Brussels, 24 February 2003




                                                                 10
Co-chairmen:


EC: Mr. Karl Falkenberg (European Commission), Director at DG Trade

ACP: Ambassador Isikeli U. Mataitoga (Fiji), Chairman of the ACP Committee of
Ambassadors

1. Agenda

The attached agenda was adopted (Annex 1).

2. Approval of the Joint Report for the Third ACP-EC Ambassadorial Level
   Meeting

The draft Joint Report for the third ACP-EC Ambassadorial meeting held on 12
February 2003 was approved without any amendment. It was, however, noted that the
final joint report of the dedicated session on legal issues to be attached thereto as
Annex 2, had yet to be finalized.

3. Follow-up to the Third Ambassadorial Meeting:

  (i) Dedicated session on legal issues

       Mr. Ingo Feustel of DG Trade reported on the discussions which the dedicated
       session on legal issues had on 17 February 2003, on the EC proposals on the
       establishment of a co-ordination committee at the all-ACP level, that would
       maintain transparency and coherence with regard to the regional negotiating
       processes.

       Reacting to that report, Ambassador Tauililli Uili Meredith of Samoa,
       deputising the ACP Spokesperson on legal issues, gave more precision on the
       ACP position, particularly as regards the substantive aspect of coherence of
       the negotiations. For the ACP, it was premature to consider that issue since it
       was related to other questions on which discussions had to be pursued, namely
       the all-ACP framework agreement, the definition of parties to the EPAs, and
       the conclusion of the all-ACP-EU phase.

       The ACP side also expressed the following caveats to the EC proposal on the
       co-ordination mechanism:

       a) While Article 37(4) of the Cotonou Agreement makes a case for
          transparency and the sharing of information through a process of regular
          review by the Parties, Article 37(5) affords the ACP Group the latitude
          and scope to agree within itself, i.e. among its membership, on the
          modalities for achieving coherence throughout the entire process of
          negotiations which started last September, and which would include a
          review in 2006, as envisaged in Article 37(4).



                                                                                   11
   b) No mention is made in the EC proposal of the parties to the Cotonou
      Agreement, which in the case of the ACP, are the ACP States which
      signed and ratified the Agreement. In so far as the Cotonou Agreement is
      an inter-governmental agreement, the question arises as to what role is
      envisaged for those ACP States – in the absence of any delegation of
      competence to the regional groupings – in relation to the substantive
      aspect of coherence.

    In response, the EC acknowledged that Articles 37(4) and 37(5) dealt with
    distinct issues. While the former applied to both the ACP side and the EC the
    latter related to the ACP side’s internal organisation.

    Replying to a question from the ACP side as to whether the EC also intended
    to consult with ACP non-State actors, the EC said that it was consulting with
    both the EU and ACP civil society and referred to the sustainability impact
    assessments (SIAs) which it was currently undertaking. The EC added that it
    was up to the ACP to associate their non-State actors in the negotiation
    process, and called upon the ACP side to associate itself, and in particular its
    civil society, to the SIA process.

    It was agreed that further discussion was needed on those issues. It was also
    agreed that a written joint report would be finalised. The final report of the
    dedicated session is attached to this report as Annex 2.

(ii) Dedicated session on the development dimension of EPAs

   Ambassador Dr. Zedekia Josef Ngavirue of Namibia, interim ACP
   Spokesperson on development co-operation issues, reported on the discussions
   held on 21st February. While not disputing the coverage and accuracy of the
   report, the Commission brought certain additions thereto – inter alia related to
   what it saw as key areas of convergence and those it saw needed further
   elaboration on its part.

   It was agreed that a written joint report would be finalised and that further
   discussion was needed on these issues. The final report of the dedicated
   session is attached to this report as Annex 3.

   It was also agreed that there should be sufficient time between dedicated
   sessions and ambassadorial meetings, so as to allow appropriate reporting on
   the dedicated sessions.




                                                                                 12
4. Preparation of the 4th Joint ACP-EC Ministerial Trade Committee (JMTC)
   meeting

  (i) Draft Agenda

      It was agreed that Commissioner Lamy would chair the 4th JMTC meeting in
      St. Lucia, and that Minister Maigari Bello Bouba of Cameroon, the Chairman
      of ACP MTC, would co-chair.

      The meeting agreed that the first two agenda items of the JMTC were
      procedural and that these be left to the Ministers to decide.

      The EC proposed that for the substantive agenda points 3 and 4 it would be
      opportune for the JMTC to come up with joint views and possible conclusions.
      The EC indicated that it would transmit a proposal for Joint Conclusions to the
      ACP side before the St. Lucia meeting later in the week. The ACP side
      indicated that its position on these substantive agenda items should be agreed
      upon during the ACP MTC meeting scheduled for 27th and 28th February in St.
      Lucia.

      The ACP side indicated that it wishes to introduce discussions on agenda item
      3 of the JMTC. In this respect, it was agreed that Minister Maigari Bello
      Bouba, Chairman of the ACP MTC, would introduce the discussion on this
      agenda item and, in particular, on the status of the EPA negotiations.
      Commissioner Lamy will respond on the four indents; and the ACP will then
      respond on the other three items accordingly.

      On agenda item 4 the EC indicated that, inter alia, recent developments in
      Geneva, the recent Ministerial meeting in Tokyo, and the Harbinson document
      should allow Ministers to consider the overall implications of WTO
      negotiations and on the EPA negotiations. Market access issues were, thus,
      expected to assume a high profile in St. Lucia in particular since preferential
      market access and notably ACP’s preferential access to the EU markets, were
      a target in the WTO negotiations. The EC suggested that the Ministers should
      talk about what should be done about these developments and how to go about
      carrying forward their recommendations.

      Under the same agenda point it was agreed that the Ministers would consider
      the procedures and roadmap to the 5th WTO Ministerial Conference in
      Cancun. This would include views on how the ACP and EU can co-operate
      and contribute to defining the roadmap and agenda for Cancun.




                                                                                  13
      The ACP side expressed its wish to hear from Commissioner Lamy on
      progress on the implementation of the Doha Development Agenda and
      specifically on TRIPS and access to medicines, and negotiations on the special
      and differential treatment provisions. The EC agreed that Commissioner Lamy
      would address these issues.

      On agenda item 5 of the JMTC meeting, it was agreed that the discussions
      would take place on the understanding that the JMTC will not be making
      decisions on these issues but exchanging views. Under this item, the ACP side
      indicated that it would also like to report on its consultations with Brazil on
      sugar.

      On the date and venue of the next JMTC and of the 2nd ACP-EU Ministerial
      meeting on negotiations of EPAs, it was agreed that the Ministers at St. Lucia
      would consider the emerging views and take appropriate decisions on both
      issues.

  (ii) Draft joint report to the JMTC

      It was agreed that there would be no joint report to the JMTC and that each
      side would offer its own views on the status of the negotiations.

5. Any Other Business

It was agreed to leave the date and agenda for the 5th joint Ambassadorial meeting
open, with the view to allowing more meetings of dedicated sessions to take place.




                                                                                  14
                                                                     ANNEX 1


       ACP/00/027/03 Rev.1                   Brussels, 20 February 2003




                         DRAFT AGENDA FOR THE


FOURTH ACP-EC AMBASSADORIAL MEETING ON THE NEGOTIATION OF
            ECONOMIC PARTNERSHIP AGREEMENTS

                          ACP House
            MONDAY, 24 FEBRUARY 2003, AT 15:00 HRS



 12.      Adoption of the Agenda.

 13.      Approval of the Joint Report on the Third ACP-EC Ambassadorial
          Meeting.

 14.      Follow-up to the Third Ambassadorial Meeting:

             (i)    Dedicated session on legal issues;
             (ii)   Dedicated session on the development dimension of EPAs.

 15.      Preparation of the 4th Joint ACP-EC Ministerial Trade Committee
          meeting

             (i)    Draft agenda;
             (ii)   Report to the JMTC.

 16.      Any Other Business
ACP-EC/NG/MN/30                           Brussels, 4 July 2003
ACP/00/089/03




                  JOINT REPORT


  ACP – EU NEGOTIATIONS ON ECONOMIC
       PARTNERSHIP AGREEMENTS
     5th all-ACP – EC Ambassadorial level meeting
            ACP House, Brussels, 6 May 2003




                                                                  1
Co-chairmen:

ACP: Ambassador Isikeli U. Mataitoga (Fiji), Chairman of the ACP Committee of
Ambassadors



EC: Mr. Karl Falkenberg (European Commission), Director at DG Trade


1. Agenda

The attached agenda was adopted (Annex 1).

2. Approval of the Joint Report on the Fourth ACP-EC Ambassadorial Meeting

The draft Joint Report on the fourth ACP-EC Ambassadorial meeting held on 24
February 2003 was approved without any amendment.

3. Follow-up to the previous Ambassadorial Meetings:

  (i) Dedicated session on legal issues

    The meeting agreed that the reports of the dedicated sessions on legal issues held on
    5 & 7 February and 17 February respectively be annexed to the joint report on the
    Third ACP-EC Ambassadorial meeting.

  (ii) Dedicated session on the development dimension of EPAs

    The meeting agreed that the longer version of the report, as opposed to the shorter
    one, on the first dedicated session on the development dimension of EPAs be
    annexed to the joint report on the Fourth ACP-EC Ambassadorial meeting. It further
    noted that it had been agreed to present a report on the second session at a later
    stage, once the discussion of the issues under consideration has been concluded.

  (iii) Dedicated session on market access: report

    Ambassador Edwin Laurent of the Eastern Caribbean States presented an oral report
    on the first dedicated session on market access, which he had chaired in the absence
    of the ACP Spokesman for market access.

    The EC indicated that it supported a quick finalisation of a written report based on
    Ambassador Laurent’s presentation, which would be considered at the next
    ambassadorial meeting. The EC also clarified the following points:

    a) On WTO compatibility the ACP side would have to demonstrate to the EC that
    current WTO rules did not allow enough flexibility for EPAs to respond to ACP
    development needs and constraints. However, the EC is willing to consider any
    substantiated arguments on this matter.



                                                                                       2
    b) On asymmetry, the EC indicated that there seemed to have been a
    misunderstanding concerning rules of origin. In EC’s view each EPA would contain
    a single set of rules of origin for both parties. It would be difficult to differentiate
    between products originating in the ACP countries and those originating in the EU.
    However, some degree of differentiation in rules of origin could perhaps be
    envisaged between EPAs, in case it was recognised as essential for development
    purposes.

    c) On trade preferences, the EC recognised that some erosion would be inevitable
    as a result of the DDA. It therefore stressed the need for working together in the
    WTO to avoid the process being too abrupt for the ACP.

4. Exchange of views on modalities for addressing Agriculture and Fisheries
   Agreements, and Trade in Services

The EC indicated that it wished to build on the work of the first dedicated session on
market access to clarify the objectives it wished to pursue in the EPA negotiations.
Market access was a cross-cutting approach, which would allow to discuss issues such
as agriculture, fisheries, industrial products and services, first from the ACP regional
integration angle, and in a second step from the reciprocity angle. For this second phase,
which would have to achieve the objective of WTO compatibility, the EC was doing its
homework – assessing how access to its own markets could be further improved for
ACP goods and services. A market access umbrella for addressing the three issues was
therefore important, since one of the main ideas underpinning the EPA process was to
strengthen regional trade integration among the ACP countries. Such an approach would
also allow to limit the number of dedicated sessions, since experience had shown that it
was always very difficult to organise meetings.

The ACP side recalled that at the First ACP-EC Ambassadorial meeting held in October
2002, both sides had agreed that there should be a transparent, flexible and efficient
structure which could be adjusted as the negotiations would progress. It had also been
agreed, at a subsequent meeting, that all the subjects brought up for discussion by either
side should be discussed and that each side would organize itself as necessary. The ACP
side expressed its concerns that agriculture, fisheries and services which were of critical
importance for the development of the ACP countries could, in the view of the EC, only
be addressed from a market access perspective. The contribution of agriculture, fisheries
and services was so fundamental to ACP societies that their potential liberalisation had
implications that went well beyond trade considerations. Therefore, the ACP had
constantly expressed the need to avoid putting a “market access straitjacket” on these
issues. In the services sector, before ACP could move to negotiations on market access
commitments, the need for “developing the ACP services sector” would have to be
addressed. In other words, it would make no sense to approach a sector from the
commercial angle when it did not exist in practice. Referring to the fact that in
multilateral trade negotiations, the EC was willing to discuss agriculture and services as
separate issues, the ACP side wondered why in the case of the EPA negotiations, the EC
adopted a different position. It therefore requested that separate dedicated sessions be
convened to discuss agriculture, fisheries and trade in services.

After a number of possibilities were discussed, a compromise solution was found to the
effect that the next dedicated sessions on the development dimension of EPAs would


                                                                                          3
consider the development dimension of agriculture and fisheries, and trade in services
while the next dedicated sessions on market access would address the market access
dimension of agriculture and fisheries, and trade in services.

5. Consideration of the Joint Report to the ACP-EU Ministerial Council on the
   state of play of EPA negotiations

It was agreed that the draft Joint Report would have to be amended to take account of
the discussion under item 4. It was also agreed that the ACP-EU Council of Ministers
would only take note of it, although it could not be excluded that some ACP Ministers
would deliver a statement on the issue.

6.   Any Other Business

It was agreed that the two co-Secretariats would consult on the date and agenda of the
next Joint ACP-EC Ambassadorial meeting.




                                                                                         4
                                                                   ANNEX 1



      ACP/00/066/03 Rev.1                          Brussels, 5 May 2003
      ACP-EC/NG/AG/26




                         DRAFT AGENDA FOR THE


FIFTH ACP-EC AMBASSADORIAL MEETING ON THE NEGOTIATION OF
            ECONOMIC PARTNERSHIP AGREEMENTS

                               ACP House
                    Tuesday, 6 May 2003, at 15:00 hrs



17.      Adoption of the Agenda.

18.      Approval of the Joint Report on the Fourth ACP-EC Ambassadorial
         Meeting.

19.      Follow-up to previous Ambassadorial Meetings:

            (i)     Dedicated session on legal issues;
            (ii)    Dedicated session on the development dimension of EPAs;
            (iii)   Dedicated session on market access: report.

4.       Exchange of views on modalities for addressing Agriculture and
         Fisheries Agreements, and Trade in Services.

5.       Consideration of the Joint Report to the ACP-EU Ministerial Council
         on the state of play of EPA negotiations.

6.          Any Other Business




                                                                              5
ACP-EC/NG/MN/37                            Brussels, 24 September 2003
ACP/00/0105/03
S.E.D.D.




                          JOINT REPORT


           ACP – EU NEGOTIATIONS ON ECONOMIC
                PARTNERSHIP AGREEMENTS
             6th all-ACP – EC Ambassadorial level meeting
                    ACP House, Brussels, 4 July 2003




                                                                         6
Co-chairmen:


EC: Mr. Karl Falkenberg (European Commission), Director at DG Trade

ACP: Ambassador Sasara George (Botswana), Acting Chairman of the ACP Committee
of Ambassadors

Introduction

In its introductory statement the EC introduced the idea of holding an all-ACP – EC
Ministerial Meeting during the second half of September or in early October. Such a
meeting would enable the respective ministers to take stock of the results of the first
phase of the negotiations.

The ACP side took note of this information, and both sides agreed that a report would be
submitted to Ministers on the work done at the ambassadorial level.

1. Agenda

The attached agenda was adopted (Annex 1).

2. Approval of the Joint Report on the Fifth ACP-EC Ambassadorial Meeting

The draft Joint Report on the fifth ACP-EC Ambassadorial meeting held on 6 May 2003
was approved with an amendment to the last sentence of sub-paragraph (a) of the second
paragraph of section 3(iii), which would read as follows: “However, the EC is willing to
consider any substantiated arguments on this matter”.

3. Follow-up to the previous Ambassadorial Meetings:

  (i) Dedicated session on legal issues

    The meeting took note of the oral report on the dedicated session held on 13 June
    2003, which was presented by the ACP co-chair. The dedicated session had had
    further discussions on the principles and objectives of EPAs, the conclusion of the
    all-ACP – EC phase, the overall structure and content of EPAs, the definition of the
    parties and the modalities for entry into force of EPAs.

    Concerning the principles and objectives of EPAs, the dedicated session had
    confirmed that EPAs would maintain and improving market access into the EC for
    ACP exports. Both sides had also agreed that EPA negotiations would take account
    of the evolving nature of WTO rules, and that the ACP and the EC will need to
    continue to cooperate closely during the WTO negotiations.. On the other hand,
    there was still a need for discussion on how to conclude the all-ACP – EC phase.
    Regarding an indicative structure and content of EPAs, to be agreed at the all ACP-
    EU level, a divergence of views still exists.




                                                                                      7
 It was agreed that the final version of the written report would be circulated in the
 coming days, and that it would be used as a basis for the report to be presented by
 the Ambassadors to the next Ministerial Meeting.

(ii) Dedicated sessions on the development dimension of EPAs

    a) Overall discussions

   The EC co-chair of the dedicated sessions held on 11 April, 4 June and 27 June
   made an oral report on the main outcome of the meetings. In these meetings,
   discussions were held on the subjects of capacity building and infrastructure, and
   of industrial development and regional integration.

   1. Capacity building and infrastructure

   The discussion on capacity building and infrastructure had provided an
   opportunity for both sides to agree on some general principles on how to ensure
   that EPAs will act as an instrument for development. First, EPAs in themselves
   will contribute to the development of ACP countries, by enlarging the ACP
   markets and by establishing an open, transparent and reliable framework for
   trade, which will mobilise private initiatives and attract investment. EPA
   negotiations will therefore need to take account of the development priorities of
   the ACP countries and regions concerned, of their specific economic, social and
   environmental constraints and of the capacity of their economies to adapt to the
   process of liberalization. Second, in order for the ACP countries to maximise the
   benefits they will derive from EPAs, the agreements will need to be accompanied
   by appropriate development support measures. EPAs will therefore need to be
   mainstreamed into the development policies of the ACP countries and regions
   concerned, and fully integrated into the development support strategies of the
   EC.

   On capacity building and infrastructure, both sides concurred on the importance
   of capacity building and infrastructure for the EPA process, and noted the EC
   commitment to support the ACP in this respect. There was a convergence of
   views on the general principles and modalities for such support – as defined by
   the Cotonou Agreement and the Compendium – and on the need to ensure the
   actual implementation of these through the identification and design of
   appropriate programmes and projects.

    2. Industrial development and regional integration

   On industrial development, both sides agreed on the urgent need to promote the
   industrial development of ACP countries and regions and underlined the
   complementary role of EPAs and development co-operation in this regard. Both
   sides also agreed on the main areas where support would be needed.

    As regards regional integration, both sides agreed that EPAs would need to
    support existing ACP initiatives and not undermine them. EPAs would therefore
    need to be based on the integration objectives of the regions concerned. Where
    appropriate, EPAs will also be used to reinforce regional integration, by


                                                                                    8
contributing to the regional harmonisation of rules. In this perspective, there was
a broad consensus that the following issues could be dealt with during the EPA
negotiations: trade in goods, trade in services, trade-related issues, and
implementation mechanisms. Finally, both sides also agreed that it would be
important to reinforce the regional dimension of EC support measures to the
ACP.

The ACP co-chair of the dedicated session concurred with the EC presentations
and both sides agreed that the written version of the reports would be circulated
shortly, and that they would be used as a basis for the report to be presented by
the Ambassadors to the next Ministerial Meeting.

b) Discussion on services

The EC co-chair of the dedicated session held on 25 June presented an oral report
of the discussions. Both sides agreed on the need to strengthen the service sector
in ACP countries and regions. Both sides further agreed that support should be
provided for this end. However, there was a divergence of views on the
sequencing between such support and EPA negotiations. While the ACP side had
insisted that support needed to be provided to develop ACP services before any
liberalisation could be negotiated, the EC had held the view that these two
processes were complementary and mutually supportive, and therefore needed to
go hand in hand. There has also been divergence of views on the question of
whether financial resources, additional to the EDF ones, should be made
available for the development of the services sector in the ACP countries.

In response, the ACP side recalled that the development of the services sector in
the ACP countries had been discussed at its request because of the importance of
services for the development of ACP countries and the opportunities they offer
for the diversification of the ACP economies. It reaffirmed that ACP countries
were facing major constraints in developing their services sector and were able to
supply only a limited number of services. EPAs should therefore support the
development of the services sector in ACP countries and clearly specify the
means of providing that support. It also re-emphasised that, unless ACP services
became competitive, it would be very difficult for ACP countries to liberalise
trade in services in the context of EPAs.

Both sides agreed that the written version of the report would be finalized and
circulated shortly, and that it would be used as a basis for the report to be
presented by the Ambassadors to the next Ministerial Meeting. They also agreed
that the discussion on services should continue at the next meeting.

c) Discussion on agriculture

The EC co-chair presented an oral report on the discussions held on 27 June
2003. Both parties had agreed on the crucial importance of agriculture in
pursuing the objectives of the Cotonou Agreement. There had also been an
agreement on the need for the ACP to diversify their export structure and to
move up the value chain. In this perspective, both sides had agreed that
addressing issues such as the PMDT (production, marketing, distribution and


                                                                                 9
    transport) would be essential. Both sides had also agreed on the need for EPAs to
    address SPS issues as well as the question of EC export refunds.

    A divergence of view however existed on the sequencing between development
    support and EPA negotiations. While the ACP side had stressed that the
    development of ACP agriculture would have to take place before trade
    liberalisation could be discussed, the EC had underlined that support measures
    such as PMDT could only have a real impact if a dynamic private sector existed.
    This would only be the case if an enabling environment existed, which EPAs
    would help to establish. Two processes – development of the agricultural sector
    and EPA negotiations – should therefore go hand in hand and be mutually
    supportive.

    The ACP co-chair of the dedicated session agreed with the EC report. He re-
    emphasised the vital importance of agriculture and fisheries for most ACP
    countries. He indicated that whereas short term measures were needed to help the
    ACP face problems such as the current commodity crises, for example in the area
    of cotton and coffee, in accordance with Article 68 of the Cotonou Agreement in
    the longer run, it would be essential was to help the ACP countries to add more
    value to their products leading to a real transformation of their economies.

    On SPS, the ACP side indicated that the problems would require solutions
    combining both capacity building support and the establishment of a conducive
    trade policy framework. In its view, it would be appropriate to deal with SPS
    problems at the all-ACP – EC level, since one would need to address the issue on
    the basis of international standards applicable to all. It also announced that it
    would soon submit a written list of SPS issues to be addressed in the
    negotiations.

    Answering a question on the implication of the CAP reform recently decided by
    EC Ministers, the EC presented the broad lines of the reform and referred to the
    Commission press release.

    Both sides finally agreed that the written version of the report would be
    circulated shortly, taking into account all comments made, and that it would be
    used as a basis for the report to be presented by the Ambassadors to the next
    Ministerial Meeting. Both sides also agreed that the discussion on the market
    access dimension of agriculture would take place during the next ambassadorial
    level meeting.

(iii) Dedicated session on trade-related issues

The ACP co-chair of the dedicated session held on 1 July 2003 presented an oral
report of the discussions. He reported that the two sides concurred on the importance
of addressing trade related issues so as to ensure that these “behind the border issues”
do not become real obstacles to trade.

He highlighted that the basic divergence of view which had come out in the
discussion had to do with the scope and coverage of the issues; and sequencing of
EPA negotiations with both WTO negotiations and the building of requisite capacity


                                                                                     10
in ACP States to deal with trade related subjects. The ACP side was of the opinion
that the rules aspects of the trade-related areas could not be the subject of EPA
negotiations before adequate capacities of the ACP countries and regions had been
built up in these areas and agreement reached on how to treat these issues at a
multilateral level, particularly in the WTO. The ACP side was therefore looking for
co-operation arrangements to assist the ACP States put in place in the necessary legal
and institutional frameworks including the minimum infrastructure for dealing with
these issues, before negotiations would take place in the context of EPAs.

The EC had recalled that concrete commitments in most of the areas under
consideration had already been defined in the framework of the Cotonou Agreement.
The task ahead therefore was rather to fine-tune these commitments in the light of the
specific situation of the countries and regions concerned and to ensure their
implementation. Development support would play a major role in this regard.

Concerning the sequencing with WTO negotiations, the EC, while agreeing that EPA
provisions must be compatible with provisions of the WTO, as they evolve, had
recalled that EPAs would go beyond WTO by addressing concrete bottlenecks to
trade. It had therefore held the view that there was no need to wait for the end of the
DDA negotiations for identifying such bottlenecks and the best way to deal with
them.

The EC co-chair of the dedicated session agreed with the ACP oral report,
underlining that after reflection, the positions of both sides seemed to be closer than
they appeared in the conclusions of the dedicated session. It therefore held the view
that a further discussion on this issue would be useful.

Both sides finally agreed that the written version of the report would be finalised and
circulated shortly, taking into account all the comments made, and that it would be
used as a basis for the report to be presented by the Ambassadors to the next
Ministerial Meeting.

(iii) Dedicated session on market access

The EC co-chair of the dedicated session held on 3 July 2003 presented an oral report
of the discussions.

The dedicated session had had further discussion on issues that had already been
addressed at its first meeting, namely product coverage and transitional period for
liberalisation of trade in goods, safeguard measures and rules of origin.

On product coverage and the length of the transitional period, both sides had agreed
that these needed to be defined in detail at regional level, taking account of the
specificities of the regions concerned. They had further agreed that negotiations on
both issues should take account of the specific economic, social and environmental
constraints of the countries and regions concerned, as well as of their capacity to
adapt their economies to the liberalisation process. Both sides had further agreed that
safeguard measures are a necessary component of EPAs, which should be negotiated
at regional level. On rules of origin, it had been noted that the divergence of views on



                                                                                     11
     the need to provide for asymmetry still persisted and that further discussions on this
     issue are still needed.

     The ACP co-chair of the dedicated session agreed in general with the EC’s report.
     He indicated that he could agree with the EC’s view on product coverage, on the
     understanding that the “90%+” criteria put forward by the EC was only an expression
     of its ambition, which could be revised during the negotiations in the light of regional
     specificity. The ACP side insisted that the transition period should be sufficiently
     long to allow for the implementation of national/regional policies in support of
     adjustment and regional integration process. It was necessary to review progress to
     ensure that the transitional period would not end before the ACP economies involved
     had achieved a certain level of development and competitiveness. The ACP side
     further insisted on its proposal for rules of origin to provide for the possibility of an
     asymmetric approach between the ACP and EC products, and on the need to extend
     cumulation possibilities to other countries, which benefit from preferential trade
     arrangements with the EU. In order for the parties to fully grasp the complexities of
     these issues, it suggested that experts from both sides could meet to make sure that
     negotiators had a common understanding of the technical details that would form the
     basis for the future negotiations. Finally, the ACP side expressed the need for the EC
     to formally pronounce itself that EPAs would bring more than Cotonou in terms of
     market access.

     The EC co-chair of the dedicated session agreed with this request, confirming that
     EPAs would maintain existing preferences and also improve on them. It also stressed
     that cumulation was already a reality under the Cotonou Agreement, and that the
     ACP request for asymmetrical rules of origin would have to be examined on a case
     by case basis. Using the textile sector as an example, the EC indicated that looser
     rules of origin could result in a sharp increase in the use of non-ACP inputs, which
     would in turn have a negative impact on ACP efforts to vertically integrate their
     industries. There was therefore a need to address this issue with some caution.

     Both sides finally agreed that the written version of the report would be finalised and
     circulated shortly, taking into account all the comments made, and that it would be
     used as a basis for the report to be presented by the Ambassadors to the next
     Ministerial Meeting.

4.    Any Other Business

It was agreed that the next Joint ACP-EC Ambassadorial meeting would take place
soon, possibly on 11 July 2003.




                                                                                           12
                                                                       ANNEX 1


ACP-EC/NG/AG/32
ACP/00/091/03




                           DRAFT AGENDA FOR THE


  SIXTH ACP-EC AMBASSADORIAL MEETING ON THE NEGOTIATION OF
              ECONOMIC PARTNERSHIP AGREEMENTS



                       ACP House 10h00 Friday 4 July 2003




  1. Adoption of the Agenda

  2. Approval of the Joint Report of the Fifth Ambassadorial Meeting

  3. Follow-up to Previous Ambassadorial Meetings

     (i)     Dedicated Session on Legal Issues

     (ii)    Dedicated Sessions on the Development Dimension of EPAs

             - Overall
             - Services
             - Agriculture and Fisheries

     (iii)   Dedicated Session on Trade-Related Issues

     (iv)    Dedicated Session on Market Access

  4. Any Other Business




                                                                            13
ACP-EC/NG/MN/41                    Brussels, 24 September 2003
ACP/00/116/03




                  JOINT REPORT


  ACP – EU NEGOTIATIONS ON ECONOMIC
       PARTNERSHIP AGREEMENTS
     7th all-ACP – EC Ambassadorial level meeting
            ACP House, Brussels, 11 July 2003




                                                                 14
Co-chairmen:

ACP: Ambassador Isikeli U. Mataitoga (Fiji), Chairman of the ACP Committee of
Ambassadors



EC: Mr. Karl Falkenberg (European Commission), Director at DG Trade

1. Agenda

The attached agenda was adopted (Annex 1).

2. Approval of the Joint Report on the 6th ACP-EC Ambassadorial Meeting

It was agreed that the draft Joint Report on the 6th ACP-EC Ambassadorial meeting held
on 4 July 2003 would be finalised as soon as possible.

3. Follow-Up to the Previous Ambassadorial Meeting:

  (i) Agriculture and Fisheries

  The ACP side made a comprehensive oral presentation of the market access
  dimension of agriculture, fisheries and SPS issues, which is attached as Annex 2.

  The EC agreed with many of the points raised by the ACP side, and shared the ACP
  view that agriculture and fisheries were central for achieving the Cotonou objectives
  of fostering the smooth and gradual integration of the ACP States into the world
  economy, thereby promoting their sustainable development and contributing to
  poverty eradication in the ACP countries.

  The EC could agree with most of the principles which the ACP side had put forward
  and, in particular, confirmed that EPAs would improve EC market access for ACP
  agricultural exports. The EC however stressed that many of the points made by the
  ACP side would best be addressed in the context of regional negotiations since the
  issues required a case by case examination of the situation of specific ACP countries
  and regions. These areas included the need to take account of the position of Net
  Food Importing Developing Countries when tackling the issue of EC export refunds,
  the issue of safeguard clauses, rules of origin and the position of Small and
  Vulnerable Developing Island Economies in terms of special and differential
  treatment. The EC indicated that the previous discussion of the development
  dimension of EPAs in the area of agriculture had come to the conclusion that
  addressing PMDT would be important.

  On SPS matters, the EC agreed that SPS measures could have the potential to hamper
  the development of ACP trade and therefore needed to be addressed in EPA
  negotiations, but said that there would be no easy answers. The introduction of a
  standstill for ACP countries would not be possible since the EC had to retain the
  necessary latitude to introduce new measures where necessary and would do so in
  accordance with the WTO SPS Agreement so that these measures were as least trade-


                                                                                    15
distorting as possible and based on internationally-agreed standards. The objective of
mutual recognition could only be for the long term, since it was based on the
existence of equivalent capacity in the partner countries. In this regard, the EC
concurred with the ACP’s recommendation of supporting the development of
national and regional capacities as appropriate, including testing and certification
institutions, as one of the best immediate ways forward and recognised the utility of
developing a co-ordination and consultation mechanism on SPS issues within EPAs
as requested by the ACP. It is understood that existing or future national or regional
capacities in this area should be used as widely (even beyond national or regional
boundaries) as would be economically feasible.

Concerning fisheries, the EC concurred with the ACP’s emphasis on the importance
of the sector, with the mutuality of interest and with the potential of negotiating
regional fisheries agreements, which it suggested be explored further. The two sides
had an exchange of views on the merits of concluding a framework ACP-EU
Agreement on fisheries incorporating fundamental principles such as the principle of
responsible fishing, rational and sustainable management of fisheries resources, and
agreed to continue this discussion.

(ii) Services

The ACP side started by reiterating the importance it attaches to services because of
the contribution they can make to ACP development and the opportunities they offer
for the diversification of ACP economies. It pointed out that while international trade
in services was increasing, the aggregate share of ACP services exports in world trade
had declined over the years. It stressed that it was because ACP States faced major
capacity and supply-side constraints, that the ACP side wanted support to be provided
to ACP countries in the context of EPAs for the development of their services sector.
The need for this support had to be seen in the context of Article 34 of the Cotonou
Agreement, which provides that one of the objectives of ACP-EU economic and trade
co-operation is to enhance the production, supply and trading capacity of the ACP
countries. Since ACP-EU economic and trade cooperation had not allowed ACP
States to overcome their dependence on a few commodities, the prices of which were
declining, the ACP needed assistance so that they could diversify their economies
into the services sector.

The ACP side underlined that it did not share the view that EPAs would, through
liberalisation of trade in services, lead to the development of the capacities of ACP
countries in services. Benefits from liberalization of trade in services were not
automatic as had been shown by the East Asian experience, particularly in the area of
financial services. Indeed, for liberalisation to be successful a number of
preconditions first had to be fulfilled, such as the formulation of appropriate national
policies and the establishment of a sound institutional and regulatory framework.

Moreover, the ACP side indicated that a country could not rely exclusively on foreign
firms for the development of its services, particularly key services such as water,
health and education. Since experience had shown that foreign firms had an inherent
tendency to ‘run and cut’ if the economic, social and political environment become
unfavourable, it was necessary for ACP States to have also domestic firms providing


                                                                                      16
services and for domestic capacities in the services sector of ACP countries to be
strengthened. Further, the private sector would only invest where it would make
profits. This reality was even acknowledged by developed countries, including the
EU, which provide subsidies to some of their domestic services sectors.


On the other hand, services liberalisation under the GATS had shown that possible
gains for developing countries, including ACP countries, from this liberalisation had
often been nullified by limited access in modes and sectors of export interest to them.
While ACP countries had made substantial commitments under the GATS, they had
not received any meaningful commitments particularly as regards the movement of
natural persons.


It was against that background that the ACP position in the area of services had to be
seen.

In the area of services, the specific objectives had to be pursued within the three
interlinked objectives of the Cotonou Agreement, namely the sustainable
development of ACP States, poverty eradication, and the smooth and gradual
integration of ACP countries into the world economy. The specific objectives for the
services sector under EPAs should be the following:

(a) to strengthen the capacity, efficiency and competitiveness of ACP countries in
    the supply of services, particularly those of export interest to them;

(b) to improve access to the EU of services originating in ACP countries,
    particularly in mode 4 relating to the movement of natural persons; and

(c) to develop effective measures for increasing ACP participation in world trade in
    services through, inter alia, access to technology, and access to distribution
    channels and information.

The ACP side stressed that while there was no obligation under the Cotonou
Agreement for ACP States to liberalise trade in services in the context of EPAs, it
considered that in case services were to be liberalized, this should be on the basis of
Article 41(4) of the Cotonou Agreement. It added that in view of the provisions of
that Article, it was important to determine how much experience the ACP countries
concerned require in applying the MFN treatment under GATS before EPAs can
encompass the liberalization of services. It would be up to the ACP regions or
countries concerned to determine whether and when they would be in a position to
start negotiations on liberalisation of trade in services, taking into account the on-
going negotiations in the WTO on trade in services. The negotiations could start
either during or after Phase II, depending on their level of preparedness and the
national assessments of the services sector in ACP countries that would have been
carried out.

The ACP side also considered that any liberalisation of trade in services that could be
undertaken in the context of EPAs should be governed by the principles of special
and differential treatment, asymmetry, and positive discrimination within ACP


                                                                                     17
regions vis-à-vis the EC. Also, the ACP should retain the right to regulate, and to
introduce new regulations on, the supply of services within their territories in order to
meet national policy objectives; to adopt restrictions to safeguard their balance of
payments in the event of serious balance-of-payments and external difficulties or
threat thereof; and to take measures for the reasons specified in Articles XIV and XIV
bis of the GATS and for any other reasons that may be agreed upon.

The ACP also considered that any liberalisation of trade in services that could be
undertaken in the context of EPAs should be based on the following modalities:

(i) It should be progressive and commensurate with the development situation of
    ACP States, the level of development of their services sector and their capacity to
    adjust to the liberalisation process.

(ii) A “positive list” approach should be adopted.

(iii) A special safeguard mechanism should be introduced for the ACP States to be
      able to protect their nascent services industries and respond to the negative
      environmental, societal or economic difficulties that could arise from the
      liberalisation of trade in services.

(iv) There should be measures to deal with monopoly and anti-competitive practices,
     including restrictive business practices.

Finally, concerning the movement of natural persons (mode 4) which is a key mode
of supply for ACP countries, the ACP side observed that the trade conditions for that
mode were far more restrictive than for any other mode of supply in the EU. It
therefore proposed that the EU should remove the barriers to entry into the EU of
service providers from ACP countries; that the EU should be more transparent as
regards the measures/legislative framework affecting the movement of natural
persons; that there should be less-time consuming visa procedures for ACP service
suppliers entering the EU; and that mutual recognition agreements should be
negotiated.

The EC thanked the ACP side for its detailed statement and requested to receive it in
writing so that it could examine the ACP proposals in detail. While the EC
recognized that there was no firm obligation under the Cotonou Agreement to
liberalize trade in services, it underlined that, in the Cotonou Agreement, the Parties
had agreed on the objective of extending their partnership to encompass liberalisation
of services as provided for in Article 41.4. The EC therefore felt that the ACP side
was too defensive on the issue of services liberalisation. Market access improvements
in the area of services had a significant potential for enhancing ACP development.
This was particularly true for mode 3, since ACP liberalisation of commercial
presence for EC suppliers would result in increased flows of FDI and facilitate
technology transfers into the ACP host countries. This would, in turn, lead to the
creation of new – and the development of existing – services capacities in the ACP
countries. Such measures could therefore play a useful role in order to develop sound
banking or telecom industries. Referring to the East Asian experience, the EC also
stated that the example of China had demonstrated how progressive and carefully


                                                                                      18
monitored liberalisation of key services sectors such as financial services could help
to stimulate the whole economy. In fact, without the liberalisation measures taken by
China in the context of its WTO accession the development of the Chinese banking
and telecom sectors would have been delayed by decades. The EC underlined that
EPA negotiations therefore represented a not-to-be-missed opportunity for the ACP
countries, which now had an occasion to use gradual services liberalisation as a
means to foster the development of their own services capacities.

The EC also indicated that the ACP objectives were a reflection of the rather
defensive ACP stance towards liberalisation of trade in services. For the EC, it was
clear that the strengthening of ACP capacities would indeed be fostered by
progressive liberalisation of trade in services. Moreover, the EC recalled that during
the discussion on the development dimension of EPAs in the area of trade in services,
it had said that the liberalisation process would be reinforced by the provision of
adequate development support measures in the framework of the Cotonou
Agreement. Liberalisation and development support would therefore be mutually
supportive. The EC also indicated that it considered that the ACP should not focus
only on mode 4. From a development perspective, liberalisation of services under
mode 4 was not the optimal position. This was, inter alia, due to the fact that ACP
countries would only benefit from remittances sent home by their services suppliers,
with a substantial share of the gains staying in the country where the services were
being provided. Mode 1 liberalisation was more advantageous in this respect, and the
EC also recalled what it had previously said concerning mode 3. The EC added that
one should not confuse mode 4 liberalisation with access to the partner country’s
labour market. Access to the EC labour market for ACP individuals would neither
result from WTO mode 4 negotiations, nor from EPA liberalisation. The EC however
stressed that it was willing to discuss the issue of mode 4 liberalisation within EPA
negotiations as it was an issue of mutual interest.

On the principles which should govern EPA services negotiations, the EC indicated
that, as provided by its negotiating mandate, EPA liberalisation of services would be
progressive and take account of the level of development of the ACP countries
concerned. Asymmetry would be ensured and the length of the transition periods
would be applied in a flexible way, to take account of the level of development of the
ACP countries concerned in overall terms as well as in terms of their services sectors
and sub-sectors and of their specific constraints. Furthermore, maintaining intra-
regional preferences vis-à-vis other preferential trading partners was a principle that
the EC itself was following. Therefore, the EC could subscribe to three of the
principles put forward by the ACP for the negotiations on trade in services, namely
special and differential treatment, asymmetry, and positive regional discrimination.

On the question of a special safeguard mechanism for trade in services aimed at
protecting ACP countries from problems generated by the liberalisation of trade in
services, the EC declared that it was willing to examine ACP proposals with an open
mind. It however stressed the technical difficulties, which were also being discussed
in the WTO, that the notion of safeguard entailed when applied to the area of trade in
services. Also, the EC underlined the usefulness of transition periods to address the
situation of nascent services industries. Finally, the EC could agree with the ACP
that, for services liberalisation to be successful, it was of fundamental importance to
have in place a sound regulatory framework for services activities in ACP countries.


                                                                                    19
Both sides thus agreed that services liberalisation within EPAs should be progressive,
in principle based on the positive list approach and adapted to the level of
development of the ACP countries and regions concerned both in overall terms and in
terms of their services sectors and sub-sectors and to their specific constraints, and
should be underpinned by the principles of special and differential treatment,
asymmetry and positive regional discrimination. Both sides also agreed that, for
services liberalisation to be successful, it was necessary to establish a sound
regulatory framework that is supportive of services activities. Both sides would also
retain the right to regulate, and to introduce new regulations on, the supply of
services within their territories in order to meet national policy objectives. Moreover,
the negotiations would address whether and how a special safeguard mechanism in
the area of trade in services could be established.



(iii) Trade-Related Areas

The EC introduced this item since it was on its request that it had been put on the
agenda. The EC had some reservation on the ACP position that nothing could be
done in EPAs concerning trade-related areas before WTO negotiations had allowed to
reach a multilateral agreement in those areas. The EC had difficulty understanding
this position since trade-related areas were essential for fostering ACP sustainable
development. If WTO were to fail to deliver any meaningful results in trade-related
areas such as investment and competition, it would therefore be all the more
important for EPAs to succeed in this respect. Taking investment as an example, the
EC stressed that the ACP longstanding requests to benefit from more FDI and
technology transfers would plead in favour of addressing the issue in EPAs as a
priority. The same logic applied to other areas, which had been included in Cotonou –
sometimes with very specific and far-reaching commitments, as in the case of
competition – because they had pro-development effects. This also meant that EPAs
should pursue the ambition to go beyond whatever could possibly be achieved in the
WTO. The WTO membership was so heterogeneous and its common denominator so
low that there was a risk that DDA negotiations would lead to minimalist results. The
EC therefore felt that there was a need to further discuss these issues.

The ACP side indicated that it had hoped to be able to discuss these issues at a further
dedicated session on trade-related areas. This would have enabled the presentation to
the EC side of a comprehensive list of issues that merited discussion and conclusion
during phase 1. While it agreed with the EC on the importance of addressing trade-
related areas to ensure that these do not become obstacles to trade and was aware of
the commitments taken under the Cotonou Agreement, the ACP side nevertheless felt
that there was a need for an all-ACP – EC agreement on how these Cotonou
commitments were to be interpreted. Also, it was of the view that co-operation
arrangements on the implementation of the Cotonou commitments should be
concluded at the all-ACP – EC level, to define the scope and coverage of trade-
related issues as well as the modalities for addressing them in the course of the
regional negotiations. The ACP side underlined that there was a need for a common
understanding at all-ACP – EC level, to give guidance to the regional negotiations of
phase 2. The ACP quoted the EC paper on tool-box introduced for discussion at the


                                                                                     20
     all-ACP-EC level, which makes proposals for issues that would contribute towards
     effective regional integration. Furthermore, the ACP side indicated that before trade-
     related areas could be the subject of EPA negotiations, an early focus on capacity
     building support was critical for the ACP countries as provided for by Cotonou
     Article 44.2. On the sequencing between EPA and WTO negotiations, the ACP side
     indicated that the WTO compatibility requirement compelled the parties to wait for
     the results of DDA negotiations before addressing the issues within EPAs. It would
     indeed be unwise to negotiate and undertake commitments only to come back and
     reverse them later after realizing that they were not WTO compatible. Furthermore,
     the ACP side was concerned at the slow march towards Cancun especially on issues
     of interest to them. In any case, the ACP side did not have any mandate to go beyond
     WTO rules in these areas.

     The EC responded that ACP regions differed significantly in the way they tackled
     trade-related areas. This meant, for example in the case of competition policy, that an
     all-ACP – EC approach would not be appropriate. It would indeed be more advisable
     to address this issue at a regional level, so as to accommodate the specific needs and
     constraints of the different regions. The EC also indicated that the fact that, legally
     speaking, the Cotonou Agreement did not provide for an obligation to negotiate new
     rules in the context of EPAs was not a reason for doing nothing. Since addressing
     issues such as investment had a pro-development potential, and since both parties
     agreed that trade-related measures in areas such as labour or environment should not
     be used for protectionist purposes, the EC stressed that it would be unwise miss the
     opportunity offered by EPA negotiations to address these issues.

     In its answer, the ACP side stressed that although the details would need to be
     addressed in the regional negotiations, there was still a need for an all-ACP – EC
     clarification of what trade-related areas encompassed. Taking the area of competition
     as an example it also suggested that, before the start of regional negotiations on the
     issue, both parties could agree to identify the level of support that would be needed
     for development ACP capacities in this respect.

     After the EC insisted on the need to tackle these issues following a bottom-up
     approach, both parties agreed to convene another dedicated session on trade-related
     areas preferably before the end of July.

4.    Exchange of views on transition from phase 1 to phase 2 of the negotiations

The ACP side outlined its preliminary thinking on this matter. First, it could agree to
convene the second ACP-EC Ministerial meeting on the negotiation of EPAs, some time
in late September or early October. Second, one needed to prepare a joint report
providing the overall results of the Ambassadorial level negotiations. The report should
cover and highlight the main issues discussed, areas of agreement, areas of divergences
and outstanding issues. Ministers should be invited to endorse the areas of agreement,
negotiate areas of divergences, provide guidance on outstanding or foreseen issues, give
instructions on the process for proceeding to phase 2 of the negotiations, and endorse the
follow-up mechanism, at the all-ACP – EC level, of the second phase of the EPA
negotiations.




                                                                                         21
On that basis, a Ministerial “outcome document” would be prepared containing the
agreed elements, the agreement on list of outstanding issues and modalities for
addressing these issues, and the agreed follow-up mechanism for phase 2 negotiations.
The ACP side considered that once adopted and signed by the two sides, the Ministerial
“outcomes document” could constitute the result or outcome of phase 1 negotiations, as
at the time of their meeting. It therefore proposed to convene the 8th ACP-EC
Ambassadorial Meeting on EPA negotiations immediately after the Cancun WTO
Ministerial Conference, to consider, inter alia, the Draft Ambassadorial Report to
Ministers and the follow-up mechanism, at all ACP-EC level, of the second phase of the
EPA negotiations.

The ACP side also asked the EC how the periodic reviews and the comprehensive
review foreseen in Article 37.4 of the Cotonou Agreements would be conducted.

The EC indicated that there was an agreement on the idea to convene an EPA
Ministerial meeting in the autumn, before the start of regional negotiations, which would
receive an ambassadorial report building on the progress achieved so far. There was also
an agreement on the need to prepare such a Ministerial meeting at an ambassadorial
level, though the EC was of the opinion that the next ambassadorial meeting should be
convened much earlier than proposed by the ACP, possibly still in July.

On the notion that there could be an “outcome document” to be adopted by Ministers
before the start of the regional negotiations, the EC recalled the position expressed by
Pascal Lamy at the opening ceremony of the EPA negotiations. While a “meeting of
minds” would be a good thing, the EC did not consider that any kind of formal decision
would be needed at an all-ACP – EC before the start of regional negotiations. The EC
would start negotiations with those regions, which indicated their willingness to move
the process forward. Finally, in order for the ambassadors to have as much time as
possible to consider a draft joint report to Ministers, the EC would transmit a first draft
of that text to the ACP side as soon as possible.

Both parties finally agreed that the 8th ambassadorial meeting would meet as soon as
possible to consider the draft joint report to Ministers. They also agreed that the question
of the periodic and comprehensive reviews would be addressed whenever appropriate.




                                                                                         22
                                                                         ANNEX 1



    ACP/00/101/03                                        Brussels, 7 July 2003
    ACP-EC/NG/AG/40




                          DRAFT AGENDA FOR THE


SEVENTH ACP-EC AMBASSADORIAL MEETING ON THE NEGOTIATION OF
             ECONOMIC PARTNERSHIP AGREEMENTS



                                   ACP House
                           15:00, Friday, 11 July 2003




 1. Adoption of the agenda.

 2. Approval of the Joint Report of the Sixth Ambassadorial Meeting.

 3. Follow-up to the previous Ambassadorial meeting

    (i)     Agriculture and Fisheries.

    (ii)    Services.

    (iii)   Trade Related Issues

 4. Exchange of views on transition from phase 1 to phase 2 of the negotiations

 5. Any other business.


                               ________________




                                                                                  23
                                                                            ANNEX 2

ACP NEGOTIATING POSITION ON EPA NEGOTIATIONS ON AGRICULTURE


Introduction.

1.      The Negotiations of Economic Partnership Agreement (EPAs) between the ACP
and EU have to be undertaken in the overall context of the Cotonou Agreement (CA),
particularly its development objectives and the principles underlying ACP-EU relations.
But since the signing of the CA in June 2000, many developments have taken place and
there are other on-going or unfolding events that may influence the principles that will
govern eventual EPAs and their contents.

2.      In this regard, it is to be recalled that Article 34 of the Cotonou Agreement
stipulates that
“economic and trade cooperation shall aim at fostering the smooth and gradual
integration of the ACP States into the world economy, with due regard for their political
choices and development priorities, thereby promoting their sustainable development
and contributing to poverty eradication in the ACP countries.”


3.      Moreover, economic and trade cooperation shall aim at enhancing the
production, supply and trading capacity of the ACP countries as well as their capacity to
attract investment. It shall further aim at creating a new trading dynamic between the
ACP and the EU, at strengthening the ACP countries’ trade and investment policies and
at improving the ACP countries’ capacity to handle all issues related to trade, in
particular, issues like trade facilitation, and sanitary and phytosanitary measures which
are increasingly becoming barriers to trade.

4.      The ACP Group is of the view that Agriculture and Fisheries are the two sectors
“par excellence” that may significantly contribute towards the achievement of the above
objectives. As such, agriculture and fisheries will play a central role in the negotiations
of EPAs during both the first and second phases. Indeed, such is their importance that
they may ultimately determine the success or otherwise of the EPA negotiations.


Role and Importance of Agriculture for the ACP


5.     The agricultural sector is at the heart of the economies of the ACP countries. It
accounts for a large share of their gross domestic product (GDP) ranging from 20 to 60
percent in most of them; employs a large proportion of the labour force from 40 percent
to as much as 90 percent in most cases; represents a major source of foreign exchange
(from 25% to as much as 95% in about two thirds of the countries); supplies the bulk of
basic food and provides subsistence and other income to the majority of the ACP’s
populations. And yet many ACP States continue to suffer from food shortages/crisis and
even famine. This is unacceptable.



                                                                                        24
6.      Thus, significant progress in promoting economic growth, reducing poverty,
rural development preventing migration to urban areas and enhancing food security
cannot be achieved in most of the ACP countries without developing more fully the
potential productive capacity of the agricultural sector in view of supply-side constraints
and enhancing its contribution to overall economic and social development.


7.      ACP countries will increasingly continue to rely on agricultural trade for their
socio-economic development and the much needed foreign exchange earnings on a
predictable basis to finance their sustainable development and food procurement
capacity. A contractual agreement incorporating effective market access preferences
guaranteed over a long period is therefore crucial for the sustained growth and
development of ACP States in order to achieve the three objectives of the Cotonou
Agreement.

8.      Agriculture and fisheries continue to play a central role in the economies of most
ACP States particularly in meeting the basic needs of their population including food
security, rural development, protection of the environment and the livelihood of farmers.
They are vital for the sustainable development of the ACP States and contribute in their
fight against poverty and their effort to integrate into the world economy. Agriculture
has to be at the heart of our concern and discussions.
9.     Agriculture and fisheries constitute important export sectors for a large number
of ACP States. The earnings derived from these exports generate vital resources to
finance their development and in some cases for the importation of processed goods and
foodstuffs to meet their basic needs.
10.     The full potential of the export of ACP agricultural products has not been
realised because of a number of factors, including the existence of many obstacles in the
form of tariff and non-tariff barriers, as well as human, institutional and supply-side
constraints. It is hoped that under the EPAs, those obstacles will be removed and thus
put the ACP States on the path to sustained economic growth and sustainable
development for the mutual benefit of both the ACP and the EU.
11.     These two sectors, also fit into the development paradigm of the Cotonou
Agreement’s objectives and principles within which Economic Partnership Agreements
will be negotiated.
12.     Preferential access for ACP agricultural products represents a relatively
insignificant percentage of both the world trade and the EU overall imports; but it
continues to be of critical importance for sustained growth and sustainable development
of a large number of ACP States. In particular, preferential access for ACP agricultural
products in the EU market constitutes an important component in ACP-EU relation and
it should be an integral part of future EPAs.

SPECIFIC PROPOSALS ON AGRICULTURE.

13.    The ACP submit the following proposals, which are meant to guide and underpin
the EPA negotiations between the EU and the ACP States and regions, as appropriate:

       (A)     OBJECTIVES


                                                                                        25
14.     The specific objectives in the agricultural sector should be considered within the
three interlinked objectives of the Cotonou Agreement namely sustainable development,
including rural development and the protection of the environment, the reduction and
eventual eradication of poverty and the smooth and gradual integration of the ACP
States into the world economy.

15.   Moreover, agriculture represents significant potential for the development of
ACP States trade within the region, with the EU, and at the global level. Therefore,
EPAs should also promote the sustainable development of the agricultural sector of the
ACP States.

16.     In recognition of the need to achieve the above strategic objectives, the ACP
proposed that the following principles should inform the first phase negotiations, and
should also underpin the negotiations during the second phase at national, regional level
or in any other configuration to be decided by the ACP:.

(B)    PRINCIPLES

(i)    Preservation and Enhancement of Lomé Acquis

  The preservation and enhancement of the Lomé “acquis” in respect of preferences
and the benefits derived therefrom should be an over-riding principle in the EPA
negotiation. Indeed, no ACP State should be worse off in terms of preferential access
and trade benefits in future EPAs. This is fundamental in the agricultural sector.
       (ii)    Principle of Sustainability

   This principle is crucial for the ACP States to develop sustainable agriculture
necessary for food security, rural development, environment protection and the fight
against poverty.
   The ACP States consider EPAs as tools for their sustainable agricultural development
and as such they should promote the development of local agriculture and not compete
with it in any reciprocal trading arrangement. In this respect, the regional dimension of
agricultural trade will also have to be fully taken into account.
   The ACP are of the view that the subsidies accorded by developed countries,
including the European Union, can contribute to the destabilisation of the agricultural
sectors of ACP countries, thereby threatening the food security of millions of people. It
would be desirable that these subsidies be stopped inasmuch as they undermine fair
competition, damage the productive sectors of ACP importing States and jeopardise the
regional integration process which is at the heart of the Cotonou Agreement and with
which the EU fully agrees.
   The ACP recognize the special situation of ACP Net Food Importing Developing
Countries (NFIDCs) In this regard, in accordance with Article 54 of the Cotonou
Agreement, they may on a case-by-case basis conclude bi-lateral agreements with the
EU to take advantage of export refunds as this has a direct impact on their food
procurement and food security. Moreover, it is felt that consideration should be given
in the WTO under Special and Differential Treatment to address the specific situation of
NFIDCs through the adoption of concrete, effective and operational measures.


                                                                                       26
       (iii)   Special and Differential Treatment

   Special and differential treatment (SDT) to the ACP States shall be an over-arching
principle in future EPAs. Under Article 35(3) of Cotonou the “Parties reaffirm their
attachment to ensuring special and differential treatment for all ACP countries and to
maintaining special treatment for ACP LDCs and to taking due account of the
vulnerability of small, landlocked and island countries.” Therefore, the SDT should be
provided on a secure and predictable basis in order to encourage investment, economic
growth and trade.

   In addition, EPAs should take full account of the trade, development and finance
needs of ACP States as well as their specificities as Least Developed Countries (LDCs),
land-locked, small and vulnerable developing island States bearing in mind the principle
of asymmetry while considering obligation of the Parties in making future EPAs
compatible with WTO rules then prevailing.

   Since many ACP States are highly dependent on stable and predictable export
earnings derived from a limited number of products to meet their basic food needs, the
EU shall ensure that in the administration of TRQs for agricultural products which are
important to the ACP, their in-quota preferential access be preserved.
  The trade preferences which underpin ACP-EU Cooperation should stand on their
own to reflect the ACP trade, development and investment requirements.
   Furthermore, under this principle, it is proposed that the ACP States have the right to
declare those products vital for their food security, livelihood and rural development as
“special or strategic products”. Such products should be exempt from any obligation in
future EPAs.
       (iv)    Principle of Equitable Treatment for ACP States

   As indicated above Article 36(4) of the Cotonou Agreement provides for the review
of the Commodity Protocols, in particular, as regards their WTO compatibility with a
view to safeguarding the benefits derived therefrom. This can best be achieved at the
WTO level in the Doha Round and the issue of benefits in the context of the reform of
the Common Agricultural Policy (CAP).

   In the reform of the Common Agricultural Policy relating to agricultural products
covered by Protocols and EBA, the ACP States concerned should be accorded treatment
no less favourable than the treatment granted to EU farmers in order to maintain and
safeguard the benefits they currently derive from their exports in terms of the level of
income/earnings guaranteed to the farmers.


    The ACP States would, for the purpose of legal security, seek the support of the EU
at the WTO for the grandfathering of the Sugar Protocol as a long standing Preferential
Scheme. This would be in line with the proposal of Chairman Harbinson in paragraph 57
of his December 2002 Overview Paper, paragraph 16 on preferences and paragraph 6 of
Attachment I on Tariff Rate Quotas (TRQs) of the Harbinson II Paper. Such a step
would address the issue of WTO-Compatibility and help maintain the current level of
earnings in favour of ACP.



                                                                                       27
       (v)     Principle of Sequencing

    Any obligation by the ACP States under eventual EPAs should be based on the
principle of sequencing whereby their obligations under existing and future regional
frameworks (e.g. COMESA, SADC, UEMOA and African Union in Africa, CARICOM
in the Pacific etc) should take precedence over EPA obligation for trade liberalisation.

    This principle is in conformity with Article 35(2) of the Cotonou Agreement which
stipulates that economic and trade cooperation “shall build on regional integration
initiatives of ACP States.”
       (vi)    Principle of Trade Creation

   A logical extension of the principles of equity and sequencing and with a view to
maximising the benefits of EPAs and minimising its costs, including loss of welfare,
would be to observe the principle of trade creation and not trade diversion in future
EPAs. This principle has to be fully taken into account while considering trade
liberalisation by interested ACP States under EPAs.

       (vii)   Special Safeguard Clause (SSG).

Under EPA, there should be a Special Safeguard Clause for Agriculture possibly in an
adapted form of the SSG Clause of the WTO Agreement on Agriculture to protect ACP
domestic agricultural markets from sudden and cheap imports which might threaten and
cause injury to domestic agriculture and agro-industrial processed food products. The
provisions on SSG should provide for special and differential treatment for ACP
countries/regions.

       (C )    OTHER ELEMENTS

(i)   Processing, Marketing, Distribution and Transportation (PMDT)


   It is proposed that a special programme be set up to promote development activities
in the field of processing, marketing, distribution and transportation (PMDT) of
commodities.

   It is also suggested that consideration be given for the conclusion of a number of
commodity agreements under the EPAs for the importation into the EU of part of ACP
production of commodities to ensure a fair remuneration to the ACP producers.
   This approach will help to develop complementarity between the EU temperate
agriculture and the ACP States tropical agriculture so as to enable ACP states to export
to the EU their agricultural and agro-industrial products under preferential terms and
conditions.
   The ACP propose that a mechanism be established to provide an insurance to absorb
price volatility. It is to be noted that, there is provision in Article 68(5) of the Cotonou
Agreement for a market based insurance scheme to protect ACP States against the risk
of fluctuations in export earnings.


                                                                                         28
   Such an arrangement will ensure stable, predictable and adequate export earnings to
finance in a sustained manner the development of the ACP states and thus contribute to
fight poverty and raise the living standard of their populations.


(ii)    Rules of Origin

   Unlike industrial products, agricultural products, are at present subject to distinct and
more stringent rules of origin to be fulfilled by the ACP States in order to benefit from
preferential access into the EU markets.

   The ACP propose that these rules, in particular, the issue of the definition of the
concept of “their vessels”, and the width of territorial waters and origin of catches
effected in the 200-mile EEZ of ACP States be re-negotiated taking into account the UN
Law of the Sea as well as other relevant International Conventions and International
Law.

   The concept of “wholly obtained” products to be eligible for preferential treatment
needs to be relaxed to promote vertical and regional intra-ACP cooperation and
integration.

   Since the Lomé/Cotonou Agreement provides for cumulation of rules of origin at the
All-ACP level, it is recommended that the issue of rules of origin be negotiated at the
All-ACP level for incorporation in the proposed All ACP-EU Agreement. This
approach will contribute to the enhancement of ACP solidarity and cohesion as well as
intra-ACP cooperation.

   The ACP propose that, with a view to promoting PMDT and horizontal and vertical
integration at regional level, the concepts of “wholly-obtained” products and
“substantial transformation” be reviewed. In view of their cross-cutting nature, it is
recommended that these issues be dealt with at the All-ACP level, without prejudice to
the right of individual ACP States or regions to decide on the best manner to deal with
them at their respective level.

   In addition, in view of the huge gap between the highly industrialised EU Member
States and the poor and underdeveloped ACP States, it is recommended that
asymmetrical rules of origin for products traded between the ACP and the EU be
developed so as to reflect the level of industrial development of the EU, on the one side,
and of the ACP States, on the other. This issue has been discussed deeply and will be the
subject of separate discussions at expert/technical level.

   The principle of cumulation of rules of origin as at present under the Cotonou
Agreement should be maintained not only as part of the “acquis” but also in an attempt
to foster intra-ACP cooperation and regional integration. There should be specific
reference for cumulation of origin for agricultural products.

(iii)   Export Subsidies

    The ACP Group “reiterates the need to improve the market access for all
agricultural products originating in ACP States, by inter alia, addressing export


                                                                                         29
         subsidies and domestic support in accordance with the Doha WTO Ministerial
         Declaration, while preserving existing preferential arrangements.” (paragraph 88 of
         Nadi Declaration)
             Export subsidies should not destabilise the agricultural production sectors of the
         ACP countries concerned by introducing unfair competition and jeopardizing their food
         security and specific efforts at economic integration.
              Since this issue is linked to the on-going Doha Work Programme, it is
         recommended that in the light of its outcome, ACP States may during the second phase
         of the Negotiations negotiate specific commitments as appropriate.

         SPECIFIC PROPOSALS IN AGRICULTURE IN THE EPA NEGOTIATIONS.

         Specifically the ACP Group is submitting the following proposals to the EU in the
         context of the EPA negotiations in agriculture:

(i)                 Secured and guaranteed access to the EU market for exports from all ACP
         countries, free of customs duties and other prohibitive taxes and without any quantitative
         restrictions or measures having equivalent effect, taking, however, into account existing
         Commodity Protocols.
(ii)              Duty- and quota-free market access for essentially all products for all ACP
         LDCs – re. Article 37(9) of Cotonou.

(iii)              The concerns of ACP countries, in particular those LDCs, small island
         developing States (SIDS), land-locked countries, net food-importing and heavily
         indebted non-LDCs, small economies and single commodity producers as well as non-
         trade concerns such as rural development and the preservation of the environment.
(iv)               Improved market access by, inter alia, addressing export subsidies and
         domestic support affecting agricultural products originating from ACP States, while
         preserving existing preferential arrangements.
(v)      Increase in the existing quotas under the Commodity Protocols in order to accommodate
         new entrants to these protocols.
         (vi)    Under Article 36 (4) of Cotonou, the ACP and the EU:
         “reaffirm the importance of the commodity protocols, attached to Annex V of this
         (Cotonou) Agreement. They agree on the need to review them in the context of the new
         trading arrangements, in particular as regards their compatibility with WTO rules, with
         a view to safeguarding the benefits derived therefrom, bearing in mind the special legal
         status of the Sugar Protocol”.
(vii)    Ensuring the WTO compatibility of the Commodity Protocols by grand-fathering
         traditional preferential arrangements. In this regard, to take advantage of the proposals
         being made by Harbinson in his revised text on modalities in the WTO negotiations on
         agriculture, particularly, on the treatment of preferences.
(viii)   As regards the safeguard of benefits derived from Protocols to guarantee to the ACP
         States concerned the same treatment provided to the EU farmers in the context of the
         CAP reform in terms of level of earnings on a secure and predictable basis.
                                       *****************************



                                                                                                30
ACP NEGOTIATING POSITION ON EPA NEGOTIATIONS ON SPS

Background

1.      SPS now constitute an important impediment to trade. Indeed, with the scaling
down and even phasing out of tariffs on products, particularly agriculture products and
fisheries, SPS are increasingly hampering the free flow of goods. They have in a way
contributed towards the inability of many ACP States to exploit fully the preferential
market opportunities provided by the EU under the ACP-EU Agreements.

2.      A major challenge faced by ACP countries is to raise the SPS/TBT standards to
at least internationally recognized levels. ACP countries face an additional challenge
when the EU, on risk assessment grounds, adopt higher standards than those currently
recognised by international standard-setting bodies. Most ACP States lack the capacity
and regulatory mechanism both to participate in the setting of international standards
and in meeting those standards.

3.    The following are examples of SPS/TBT standards that have implications for
ACP exports to the EU:

     •   Hormone used in beef production — It has been pointed out that in the beef
         sector, stricter SPS standards constitute a major barrier to entry into the EU
         market, particularly for new ACP suppliers. We recognise the sensitivity of the
         issue on health ground and the need for the EU to protect human and animal
         health.

     •   No unique EU system for agrochemicals — Each EU Member State has its own
         approval system for agrochemicals. Similarly, for pesticide residues, there is not
         a harmonised system, each member country having its own “pesticide residue
         level” which makes it difficult for ACP countries to meet the different pesticide
         residue standards. All these make ACP exports of agricultural commodities to
         the EU costly.

     •   EU system of traceability — We are aware that the EU system of traceability is
         designed to cover the complete food chain from farm to table. Many ACP small
         production entities are not able to comply as mixing of produce from different
         production sources is a common feature in ACP countries. Small farms will
         hardly be able to produce exportable quantities.

     •   Aflatoxin — Many ACP States are faced with difficulties not to exceed the
         maximum level of aflatoxin, among other things, due to (a) poor weather
         conditions experienced by many producers with low cost processing technology;
         (b) poor storage facilities; (c) small scale nature of production units; and (d)
         early harvesting habits to meet family cash needs of resource poor farmers.
         Farm-gate quality standards are not equal to the EU standards.

4.       Problems faced by ACP States

-      EU SPS create an uneven playing field. ACP generally do not have the capacity,
including the human resources, in this area.


                                                                                        31
-       Introduction of zero tolerance and strict minimum residue level in the horti-
cultural and flori-cultural sectors constitute serious barriers to trade.




                                                                                  32
        Difficulty to export agricultural products because of lack of the monitoring,
testing and certification infrastructure/mechanism to demonstrate compliance with EU
import requirements.

-    SPS create administrative barriers i.e. high compliance costs in reporting to
WTO under SPS Agreement.

-     Inability to meet stringent EU standards particularly by small-scale producers
who cannot afford the high cost of compliance that makes their products non-
competitive.

-      Difficulty in securing equivalence recognition. SPS Equivalency Agreements
may facilitate trade with the EU.

5.      Furthermore, it is well known that ACP countries lack the capacity (legal,
scientific and capital) to formulate and implement fully and effectively sanitary and
phytosanitary regulatory systems. It is recommended that the ACP countries ask far a
reprieve or derogation of five to ten years depending on the measure. During this
period, ACP countries can build and upgrade their mechanisms and provisions for
meeting the requirements.

6.      In the EPA negotiations during the second phase these issues have to be
addressed. However, in the first phase the EU is being requested to agree not to change
sanitary/phytosanitary regulations unless there is a valid scientific reason as provided
under the WTO SPS Agreement and after proper and adequate advance consultations
with the ACP States. In other words, we want the acceptance of the principle of
standstill as from September 2003.

-      Development of harmonised testing standards in the EU, particularly for agro-
chemicals in determining the minimum residue level. This will fit into the principle of
“one rule fits all”.

Recommendations

7.      One Rule Fits All: It is recommended that the ACP should raise the SPS issues
within the WTO rather than with the EU under EPAs. It will be wiser to have a
common WTO SPS agreement i.e., one rule fits all, rather than a new ACP-EU set of
rules on the subject.

8.      To provide assistance to ACP States to enable them to participate actively in the
setting of internationally agreed standards and norms.

9.     To provide assistance to ACP States to set up regional and at EU-ACP level
laboratories, etc, to control pest, etc.

10.    To develop a mechanism for co-ordination, consultations and exchange of
information as regards notification and application of proposed SPS measures, whenever
these measures might affect the interest of ACP.




                                                                                      33
11.     To secure support for building capacity of ACP States und provide technical
assistance to put in place the necessary regulatory systems so that they can meet the SPS
measures.

12.    Cost compliance be taken into account while determining the level of value
added for origin purposes.

13.     To establish, as a matter of urgency, a comprehensive inventory of all SPS
measures currently in force in the EU and its Member States, including those already
notified to the WTO.

14.     To identify capacity constraints of ACP States to participate in setting
internationally agreed standards and norms, and to propose measures on how to
overcome them preferably before the entry into force of EPAs in 2008.

15.         To support, at regional and national levels, as appropriate, the ACP States to
meet hygiene conditions or to meet minimum residue level of pesticides etc, to facilitate
the export of ACP agricultural products. This may be implemented on the same line as
the project in the fisheries sector and the pesticide project being undertaken currently at
the all-ACP level.



ACP NEGOTIATING POSITION ON EPA NEGOTIATIONS ON FISHERIES



•   The fisheries sector is crucial for a large number of ACP States . It constitutes an
    important source of food-particularly protein, and export earnings. 60 ACP States
    are currently exporting fishery products to the EU. This sector has significant
    potential for further development and to contribute towards the reduction/elimination
    of poverty, the promotion of and sustainable development, both important objectives
    of Cotonou. We all agree with this.

•   The fisheries sector is an area which represents important mutuality of interest.
    Article 53 of Cotonou provides for the conclusion of fisheries agreement between
    interested ACP States and the EU. To-date 16 ACP States have concluded such
    agreements. They allow EU fishing vessels to have access to the fishery resources
    of the ACP States in waters under their jurisdiction. Of course this is against
    payment of financial compensation both by the EC and the EU vessel owners.

•   These financial compensation are very important and have to continue to be
    additional to EDF paid to NIPs and RIPs.

•   The ACP is cognisant of the issue of subsidies in the fishery sector being raised in
    the WTO. This may have serious implication for future fishery agreements. We
    have a common interest to defend our position together in the WTO. This is an area
    of collaboration between the ACP and the EU




                                                                                        34
•   Access of ACP fisheries products to EU is vital for the sustainable development of
    the fisheries industry of ACP States. This process can be facilitated if the ACP
    fishery products continue to enter the EU at a significant level of tariff preferences.
    These are preferences, which have enabled many ACP States to export fishery
    products to the EU. These preferences contribute to the competitiveness of their
    products without which they cannot compete with the like of Thailand.

•   But these exports are subjected to stringent rules of origin and hygiene conditions.
    Both constitute serious impediments to the export of the ACP fishery product.

•   The ACP, therefore, request that the rules of origin, including the definition of
    concept of “their vessels”, the width of the sea from the baseline under the
    jurisdiction of ACP States from which catches are effected and exported as
    originating products are reviewed. This should not be confused with the length of the
    territorial waters.

•   There is an urgent need to build capacity in the ACP States to enable them to meet
    the hygiene conditions to enable them to take advantage of market access
    opportunities. We acknowledge and appreciate that something is already being done
    in this regard at the All-ACP project.

•   The ACP also proposes the conclusion of fishery agreement at regional level with
    interested ACP region. This issue will be examined during the second phase, I
    presume.

•   ACP States is interested to conclude a framework ACP-EU Agreement incorporating
    certain fundamental principles, like principle of responsible fishing, rational and
    sustainable management of fisheries resources, etc. This will be on the basis of the
    principle of subsidiarity and will enable interested ACP State to conclude fishery
    agreements on terms and conditions for access to resources etc. more appropriate the
    specific situation of individual ACP coastal State.

•    Finally Fisheries Agreements that are negotiated between the EU and interested
    individual ACP States should include the following components:

    (i)      sustainability of fishery resources, especially the respect of biological pauses;
    (ii)     environment sustainability commitments;
    (iii)    meaningful financial compensation;
    (iv)     assistance to ACP States to develop their fishing industry as well as their
             processing/canning industry, and to export their fish products;
    (v)      establishment of joint ventures;
    (vi)     transfer of technology, research and training;
    (vii)    employment and training of ACP nationals on EU vessels;
    (viii)   obligatory landing of part of the catches in the ACP State concerned.

    This would contribute to the development of those countries and guarantee
    sustainable fishing activities in their waters.

•   There is clearly an area at mutual interest and of critical importance to both partners.



                                                                                           35
ACP/00/069/03                 Brussels, 6 May 2003
Or :Fr/Tr :SB/mgf
ACP-EC/WG/LI/MN/21




       Joint report on the 1st meeting of the
                Specialized Group
   on legal issues held on 5 & 7 February 2003




                                                     36
           Joint report on the 1st meeting of the Specialized Group
                 on legal issues held on 5 & 7 February 2003


As agreed at the 2nd EPA Ambassadorial Negotiating meeting, the specialized
Group on legal issues met on 5 and 7 February 2003 to examine the following
issues:

       -      Principles and objectives of the EPAs
       -      General structure and content of the EPAs
       -      Definition of Parties to the EPAs
       -      Conclusion of the All-ACP phase
       -      The non-execution clause
       -      Dispute settlement
       -      Compatibility of the EPAs with WTO rules
       -      Procedures for the entry into force of the EPAs
       -      Other issues

1.     Principles and objectives of the EPAs

The ACP side deemed it necessary for some objectives and principles to be
included in the EPAs.

The principles would be mainly:


       °      ensure compatibility of the EPAs with WTO rules;
       °       use the Lome acquis as the basis;
       °      accord special and differential treatment to all ACP countries and
              between them;
       °      preserve the unity and solidarity of the Group throughout the
              negotiations;and
       °      involve all the stakeholders so as to ensure the legitimacy of the
              EPAs.

The objectives would comprise: strategic objectives and specific objectives.

Startegic objectives:

       °      eradication of poverty;
       °      harmonious and gradual integration into the global economy; and
       °      sustainable development.

Specific objectives:

       °      ensuring sustained growth;
       °      increasing the production and supply capacity of the ACP;
       °      achieving the structural transformation of the ACP economies and
              their diversification; and
       °      supporting regional integration.


                                                                               37
Although the EC had no objection to the principles and objectives enunciated by the

ACP side since they are based on the Cotonou Agreement, it nonetheless entered

reservations on some of the points raised by the ACP Group.


Without calling into question the principle of the unity and solidarity of the ACP
Group - a principle it supports - the EC pointed out that that principle did not
involve the need to negotiate a framework agreement with the EC on a
collective basis. It explained that only thanks to the regional negotiations can the
specific needs and constraints of the ACP countries be taken into account,
which is a sine qua non if the EPAs are to be able to support the sustainable
development of the ACP States. Maintaining a structure at an all-ACP level
during the whole regional phase of the negotiations, it concluded, would be
actually the most appropriate means of ensuring the transparency of the
process and thereby preserving the unity and solidarity of the ACP Group.

As regards the principle of the preservation of the acquis of the Lome
Conventions, the European side confirmed its commitment to the relevant
provisions of the Cotonou Agreement. However, the preservation of those
acquis could however not be automatically guaranteed as requested by the ACP
when the outcome of the EPA negotiations is not known, nor can the
Commodity Protocols. The EC nonetheless confirmed that the access to the
Community market, offered the LDCs by the Everything But Arms initiative,
would be maintained.

As regards differentiation, the EC said it could not subscribe to the ACP
Guidelines where it is indicated that the ACP cannot accept a priori to apply
reciprocity, for in the Cotonou Agreement, the parties have actually already
committed themselves to progressively remove impediments to trade between
them.

As concerns the additional resources to support the adjustments to be made by
the ACP, the EC felt that that was not the aim of the EPA negotiations since it
considered the issue as having been settled by the Cotonou Agreement.
Furthermore, the real challenge, it pointed out, mainly consisted in improving the
utilization of existing resources. That remark equally applied to some of the
objectives presented by the ACP side, especially the issue of debt alleviation.

In conclusion, the specialized Group noted a wide convergence on the principles
and objectives set forth by the ACP, which were mainly based on elements
contained in the Cotonou Agreement, and which also underlay the EC’s
negotiating mandate. Divergences however exist regarding: the need to
conclude a framework agreement at an all-ACP level; the possibility of
guaranteeing the status quo as far as market access to the Community market
is concerned while the outcome of the EPA negotiations is not known;



                                                                                      38
commodity Protocols; the problem of reciprocity of market access commitments;
and the possibility of examining the issue of additional financial resources.

It was decided to pursue the examination of the points of divergence.




                                                                          39
2.     General structure and content of the EPAs

The ACP side stressed the need to come to an understanding, during Phase 1
of the negotiations, on the general structure and possible content of the EPAs,
for that will facilitate the regional negotiations, since the negotiators of the latter
phase could take inspiration from a reference framework and adapt it to their
own specific situation. The ACP side considered it indispensable to help the
regions prepare for the negotiations since their knowledge of the issues to be
discussed in the framework of the EPAs was often inadequate.

The EC emphasized the need to accord the regions as much flexibility as possible in the
negotiation of the EPAs. It must be ensured that these agreements become sufficiently-
flexible instruments capable of addressing the specific problems encountered by the
ACP states. With the diversity of the regional situations, it was impossible to elaborate a
model structure to be applied to all the EPAs. The EC further stressed that elements
agreed at the all-ACP level may well constrain the flexibility of the regional
negotiations. Finally, it expressed the opinion that the provisions of the Cotonou
Agreement on which its negotiating mandate is based, as well as the ACP Guidelines,
already provide a general description of the content of the future agreements. Nothing, it
said, hindered the ACP side from, in turn, elaborating and circulating an indicative list
of the issues liable to be negotiated and integrated into the EPAs.

The ACP side stressed the need to maintain dialogue with a view to achieving
consensual solutions, a principle which must guide the parties throughout the
negotiation process.

In conclusion, it was decided to continue with the discussions.




3.     Definition of Parties to the EPAs

The ACP side indicated that the parties to the EPAs will be the ACP states. As
regards the regional integration organizations, their capacity to be part of the
EPAs will depend on the mandate entrusted them by the member-states which
must not lose sight of the fact that it is they who are committed to the WTO, and
that the regional groupings are not members of the organization.

The EC, for its part, indicated that the Commission would be responsible for the
negotiations but that it is the member states that will be party to the EPAs if
these cover areas of mixed competence. The EU, it explained, was nonetheless
in the process of reforming its institutions in the framework of the European
Convention, and it was therefore premature to indicate precisely whether or not
the EC’s competence in trade policy will be modified. Furthermore, the EC
stressed that the fact that the ACP countries might finally be ones to sign the
EPAs would not change the regional nature of the future agreements.




                                                                                        40
     The EC pointed out that it was the Cotonou Agreement itself that stressed the
     need to base the EPAs on the existing regional-integration initiatives. Only such
     an approach can lead to the attainment of the Cotonou objective of promoting
     the gradual and harmonious integration of the ACP States into the global
     economy and promote sustainable development. The fact that it is finally the
     ACP States that will sign the EPAs will not change the regional nature of the
     future agreements.

     The ACP side pointed out that the Cotonou Agreement equally provided for the
     possibility of concluding EPAs with an ACP States on an individual basis.

     In conclusion, it was agreed that the definition of Parties to the EPAs would
     depend, on the one hand, on the provisions of all the relevant legal texts, in
     particular the constitutive acts of the regions concerned and, on the other hand,
     on the final outcome of the negotiations and the coverage of the EPAs and the
     activities of the European Convention.

4.          Conclusion of the All-ACP phase

     As far as the ACP are concerned, the conclusion of the All-ACP phase should lead to

     clearly-defined commitments applicable to both the parties. The appropriate legal form

     should be the examined with a view to agreeing on the most practical modalities.




     The EC held that the specialized group on legal issues did not have the
     mandate to examine the issue. As a matter of fact, at the 2nd Ambassadorial
     Negotiating meeting, it was agreed to postpone the discussion and return to the
     issue later, in relation to the state of progress of the negotiations.

     While taking note of this position, the ACP side stressed the need to discuss this
     important issue as soon as possible.

5.          Non-execution clause

     On the basis of the European Commission’s mandate, the ACP side asked the latter to
     specify whether or not the Community intended to introduce into the EPAs a mechanism
     for the suspension of trade relations and, if so, on what grounds and in accordance with
     what procedures. The precisions requested would enable the ACP to examine such a
     proposal and assess all the implications before adopting a position on the matter.

     The EC said it would be appropriate for the EPAs to contain measures similar to
     Articles 96 and 97 of the Cotonou Agreement. This is because firstly, they are
     already applicable to trade relations and secondly, as in the case of the Cotonou
     Agreement, such measures would be reciprocal. Finally, in any event, as per the
     procedure envisaged, the parties must engage in dialogue prior to the adoption
     of any measures.


                                                                                           41
     The ACP side took note of the EC’s wish as well as its explanations, and said
     the ACP Group would examine the issue thoroughly and adopt a stance
     thereon, to enable it reconsider it with the European side at a later stage.

6.         Dispute settlement

     The EC presented the broad lines of the provisions set forth in its most recent
     trade agreements. In case of dispute, it is always desirable to have a
     consultation phase before embarking on an arbitration procedure binding the
     parties, it said.

     The ACP side, in turn, recommended the need for the EPAs to take due account
     of dispute-settlement mechanisms existing at national and regional level, and
     take inspiration from the relevant international norms. It also advocated the
     possibility of the ACP acting as a third party in any dispute that might arise
     regarding the EPAs, even in cases where those disputes relate to other regions.

     It was decided to have a more in-depth examination of these issues at a later
     stage.

7. Compatibility of the EPAs with WTO rules

     The ACP side said the compatibility requirement should take due account of the
     Post-Doha situation which is still evolving. They sought assurance of the EU’s
     support to ensure that their interests are taken into account and the appropriate
     flexibility is injected into the WTO rules, especially through the negotiations of
     the regional agreements on trade, agriculture, market access, services, and
     fisheries subsidies.

     The EC confirmed the ACP opinion regarding the need to take due account of
     the evolutionary nature of WTO rules, and further shared the wish to engage in
     close dialogue with the ACP in the framework of the WTO negotiations. It
     reiterated the relevant cooperation mechanisms existing in Geneva. As regards
     Article XXIV of GATT, it emphasized the need to employ all existing flexibility
     with a view to turning the EPAs into real instruments of development. That, it
     said, was the principal objective of the EPAs.

     In conclusion, the specialized Group decided that the issue of the EPA
     compatibility with WTO rules should be examined throughout the EPAs taking
     due account of the developments at the WTO.


8.         Procedures for the entry into force of the EPAs

     The ACP raised the issue as to whether or not the EPAs must be ratified and, if
     so, by whom. As far the ACP were concerned, the EPAS should be ratified by
     the member States be they EPAs with the States or with a regional grouping,
     considering their scope and their implications. The ACP wanted to know
     whether, as regards the European Community, i.e., the Community alone will


                                                                                    42
     ratify the EPAs or whether it would do so hand-in-hand with its member states
     considering the explanations given under definition of the parties.

     The EC recalled the activities underway within the European Convention, and
     said its Member-States would ratify the EPAs only if the latter cover areas not
     falling within the exclusive competence of the Community.

     The specialized Group concluded that the procedures for the entry into force of
     the EPAs will depend both on the ratification procedures and the content of the
     agreements.

     It was decided to further examine the issue, taking due account of all the
     relevant elements.


9.         Other issues

     It was agreed that the group would discuss any issue the Ambassadorial
     meetings might deem it necessary to consider or be requested by either party.

     Both parties also agreed to prepare a joint report after each session of the
     specialized group.




                                  *****************




                                                                                 43
ACP/00/070/03                    Brussels, 6 May 2003
Or:Fr/Tr:SB
ACP-EC/WG/LI/MN/22




 Joint report of the 2nd session of the Specialized
         Group on legal and other issues
             held on 17 February 2003




                                                        44
 Joint report of the 2nd session of the Specialized Group on legal and
                other issues held on 17 February 2003
______________________________________________________

As decided at the 3rd EPA Ambassadorial Negotiation meeting, the Specialized
Group on legal issues met on 17 February 2003 and examined the issues raised
by the ACP side regarding the EC’s paper on “Procedures”


The EC briefly presented the elements underlying its paper. Referring to the
principle of maintaining the unity and solidarity of the ACP Group, which was
raised by the ACP side at the previous meeting of the specialized group, the EC
emphasized that an effective means of strengthening ACP solidarity would be
the establishment of the appropriate procedures therefor, particularly the
establishment of a Coordination Committee at All-ACP level to ensure the free
flow of information between the regions which, in essence, would safeguard the
transparency of the different negotiation processes. That Committee would
report to the joint ACP-EC Ministerial Trade Committee, thereby assisting it to
ensure the overall coherence of the EPA negotiations. The Coordinating
Committee should be composed of representatives from the various regional
groupings, the ACP Secretariat, and the EU.


As regards the external aspect of transparency, the idea would be to involve civil
society in the regional negotiations, especially the private sector and social
partners. It was therefore proposed to consult the non-state actors on the best
mechanisms for information and consultation. The EC proposed to report on the
outcome of its consultations in May 2003.


While recognizing the importance that should be attached to maintaining the
transparency and coherence of the negotiations, the ACP side however pointed
out that there were two different concepts at play. The question of transparency,
which was related to the circulation of information, has suddenly become a
question of form, whilst that of coherence, it being related to the substance of
the negotiation, constitutes a question of substance. The question of
transparency can easily be entrusted to the Secretariats of the regional
organizations, while that of coherence is more delicate to resolve. Furthermore,
the ACP side emphasized the need to respect the institutional framework
established by the Cotonou Agreement. Maintaining coherence of the EPA
negotiations should be undertaken through the institutions set up by Articles 15
to 17 of the Cotonou Agreement.




                                                                               45
The EC indicated that the coherence of the regional negotiations should not be
imposed by the all-ACP level, for that would restrain the flexibility required for
the regional negotiations to enable the EPAs to respond adequately to the
specific situations of the different regions. It should be radical and
“spontaneous”, and come as an expression of the common will of the regions
concerned. Regarding the appropriate institutional framework for the structure it
is proposing, the EC indicated that the EPA negotiations are not governed by
the institutions set out under Articles 15 to 17. Instead, negotiations will be
undertaken in an ad hoc framework, in an “international organization” format, as
exemplified by the opening Ministerial Conference and Ambassadorial
Negotiation meetings. It is impossible to deviate from this practice. The EC
illustrated this point of view by stressing that the Joint ACP-EC Ministerial Trade
Committee, the only institution created by the Cotonou Agreement, which is
formally linked to the EPA negotiations, was not part of the regular institutions of
the Cotonou Agreement.

The ACP side emphasized that much analysis would be required regarding the
maintenance of the coherence of the regional negotiations. It was therefore
necessary for the ACP to set up an internal mechanism to enable it undertake
the necessary analyses. The ACP side also expressed the view that there
should be no deviation from the practice by linking the transparency and
coherence exercise to the Cotonou institutions, since the Agreement constitutes
the basis for the EPA negotiations.

The EC observed that there were serious divergences between the parties,
probably due to the fact that the EC was proposing the creation of a structure
that has no decision-maker power. That position reflected the desire not to
impose a rigid framework on the regional negotiations but, on the contrary, to
accord them all the necessary flexibility to negotiate agreements tailored to the
specificities of the regions concerned. The EC understood that the ACP side
would have preferred a structure with decision-making powers, which will ensure
the respect of an overall framework throughout the regional negotiations. The
fundamental disagreement was therefore the same as the subject of the
conclusion of the all-ACP phase. It reflected a serious divergence relating to the
objective of the discussions at all-ACP level. The EC position in that regard has
always been extremely clear, namely, the negotiations should be held solely at
regional level.

The ACP side stressed that it did not consider it as restraining the regional
negotiations but merely providing a general reference framework. It pointed out
that the regions in question constitute the ACP Group and participate in all joint
decisions and so nothing can be imposed on them. That was even more
important since, throughout the negotiations, the unity and solidarity of the ACP
Group, as well as the coherence of the negotiations, must be preserved. The
ACP side further stressed its disagreement with the EC position regarding the
nature of the activities under the all-ACP phase. As far as it was concerned, that
phase was very much one for the negotiation of issues common to all the ACP
countries, not merely a phase for the clarification of positions, it being
understood that the specific issues will be examined during the 2nd phase.



                                                                                 46
The EC wondered whether maintaining the solidarity of the ACP regions
required a joint approach, and whether that was not an element that could be
ensured by the ACP side. Nonetheless, in order to better understand the
position of the ACP side, the EC asked the latter for its opinion on the
organization and competence of the structure that will be maintained at an all-
ACP level during the regional negotiations.

The ACP side responded that it had not yet taken a decision in that regard, and
hoped it would be possible to revisit the issue at a later stage, once it is clarified
internally.

The Specialized Group therefore decided to revisit the issue at a later stage.

As regards the external aspect of transparency, the EC indicated that it would
be important to involve civil society in the negotiation of the EPAs, in conformity
with the principle of legitimacy highlighted by the ACP side. In that context, the
EC referred to the ACP proposal at the last meeting of the ACP-EC Ministerial
Trade Committee meeting to reflect together on what form the involvement of
non-state actors should take, and proposed to give details later on the how the
consultation of civil society should be undertaken by the Community.

The ACP reaffirmed its strong adherence to the principle of involving non-state
actors in the implementation of all aspects of the Cotonou Agreement. It
emphasized that it did not have a homogeneous mechanism for the consultation
of civil society and so it would be necessary to make a detailed examination of
the adequate ways of doing so. The ACP side further noted that the EC would
report in May 2003 on its consultations as well as its proposal to present details
of how it intends to carry out that process.




                                  ***************




                                                                                   47
ACP/00/097/03           Brussels, 24 September 2003
ACP-CE/WG/LI/MN/31




      Joint Report of the 3rd session
 of the Specialized Group on legal issues
               13 June 2003




                                                  48
Joint Report of the 3rd Session of the Specialized Group on
legal issues, 13 June 2003

The Specialized Group on legal issues met on 13 June 2003 to pursue its
consideration of the subjects examined at its first session.

1. Principles and objectives of the EPAs

1.1. Preserving the acquis of the Lome Convention

The ACP side reaffirmed the need to maintain and further improve the acquis of
the Lome Convention. In support of its position, it cited, among other things,
Article 37, paragraph 7 of the Cotonou Agreement, which stipulates that:

“On the Community side, trade liberalization shall build on the acquis and shall
aim at improving current market access for the ACP countries through, inter alia,
a review of the rules of origin.”.

Regarding commodity protocols, the ACP side pointed out that, under Article 36
paragraph 4 of the Cotonou Agreement the ACP and EC had affirmed the
importance of those protocols, and that if the parties agreed on the need to re-
examine them in the framework of the new trade agreements, that was with a
view to “safeguarding the benefits derived therefrom, bearing in mind the special
legal status of the Sugar Protocol”.

The EC, for its part, indicated that the issue of the preservation of the Lome
acquis arose at three levels, and confirmed that they had already been
addressed in the Cotonou Agreement.

•   Firstly, at the level of the preferential regime applicable to the import of ACP
    products into the Community. The EC confirmed that, in the framework of the
    EPAs, the current regime would be maintained and should be improved. It
    observed that, on that point, there was agreement between the parties.

•   Secondly, at the level of commodity protocols. The EC recalled the
    uncertainties surrounding the protocols which, it said, were mainly linked to
    the reform of the CAP and the WTO rules, and the terms of the Cotonou
    Agreement. It said its understanding of the provisions in question was
    different from that of the ACP which, it felt, was confusing the reasons for re-
    examination (“especially as regards their compatibility with the WTO rules”)
    with its specific objective (“with a view to safeguarding the benefits derived
    therefrom”). While confirming the aim of the re-examination, the EC
    considered it impossible, at that stage and without a previous analysis of the
    factors necessitating re-examination, to prejudge the concrete outcome. It
    therefore deemed it expedient to pursue discussions in the framework of the
    re-examination of the protocols.




                                                                                 49
•   Lastly, at the level of the regime of access applicable, if need be, outside the
    EPAs. The EC recalled the Community’s commitment, under the Cotonou
    Agreement, to examine in 2004 the situation of non-LDC ACP countries that
    might decide they are not in a position to negotiate EPAs. While confirming
    the objective of providing those countries with a new trading arrangement
    equivalent to their existing situation and in conformity with WTO rules, the
    EC felt it could not prejudge the outcome of that examination. In fact, these
    would largely depend on the particular situation of the countries that might be
    concerned. The EC therefore considered it necessary to pursue discussions
    on that point, if need be, during the examination scheduled for 2004.

1.2. Compatibility of the EPAs with WTO rules

The ACP side reaffirmed that the current WTO rules were inadequate to support
the implementation of coherent development strategies in the ACP States, and
stressed the need to establish a trading system governed by fairer and more
equitable rules. It also emphasized the need to adjust the WTO rules to take due
account of the specific situation and interests of the ACP countries, and finally
called on the EC, during the WTO negotiations, to support its positions
regarding the review of the WTO rules.

The EC responded that it was determined to negotiate EPAs with all the
flexibility required to take account of the economic, social and environmental
constraints of the ACP countries and their capacity to adapt their economies to
the liberalization process. That, after all, would be the principal criterion for
determining the Community’s position on the EPAs. Furthermore, the EC
pointed out that it considered the rules under Article XXIV of GATT as being
flexible enough to enable the EPAs to respond to their own development
objectives, and invited the ACP side to specify those areas where it felt flexibility
would impede the negotiations from pursuing the Cotonou objectives. In that
regard, it recalled the measures in the Memorandum of Agreement on the
interpretation of Article XXIV which enabled the normal transitional period of 10
years to be exceeded in case of duly-justified exceptional circumstances. Rather
than seeking to modify the relevant provisions, it would be more appropriate to
identify and, wherever justified, advance the exceptional circumstances that
require special treatment. This was also the approach agreed upon under the
Cotonou Agreement which stipulates that “the parties shall closely cooperate
and collaborate in the WTO with a view to defending the arrangements reached,
in particular with regard to the degree of flexibility available”.

In conclusion, the two parties agreed that the negotiations of the EPAs should
take due account of the evolving nature of WTO rules. They further decided on
the need to cooperate closely during the WTO negotiations.




                                                                                  50
2. Conclusion of the all-ACP-EC phase

The ACP side reiterated its desire for the all-ACP-EC phase to be concluded
with an agreement or legally-binding commitments. If it was not possible to
conclude an agreement, another type of formal document could be adopted that
must, all the same, have more weight than a mere record of proceedings. It
stressed that an agreement or such a document would be useful for all the
parties to the EPA negotiations since it would serve as a point of reference for
the different negotiations of the second phase.

The EC responded that it had been agreed at Ambassadorial level to revisit that
issue at a later stage once the negotiating process reached a more advanced
stage. Nonetheless, it recalled that the state of discussions between the ACP
and EU had been set out in the joint reports which, in turn, could serve as points
of reference for the regional negotiations.

The ACP side asked the EC to take note of its concerns, and said it deemed it
necessary for a decision to be taken in that regard as soon as possible. It
emphasized how important it was to present all the outcomes of the activities of
the first phase of the negotiations in a single document.

Both the parties decided to pursue their reflection on the issue.

3. General structure and content of the EPAs

The ACP side reaffirmed the importance of agreeing, during the first phase, on
the general structure and scope of application of the EPAs so that it could
provide the regions with a basis for their subsequent negotiations. Referring to
the discussions of the first session, it asked whether there had since been any
change in the EC’s position.

The EC considered that the outcome of the discussions at Ambassadorial and
Specialized group levels, which had all been accordingly set out in joint reports,
already served as guidelines for the coming regional negotiations. As regards
the general structure of the EPAs, it reiterated the opinion that the structure had
already been provided by the Cotonou Agreement on the one hand, and by the
EC and ACP mandates, on the other hand. When the texts are placed side by
side, they would make it possible to have an appreciation of those issues that
could be considered in the framework of the regional negotiations. However, in
its desire to prevent the regions from getting caught in a straight-jacket prepared
in an abstract way at all-ACP-EC level and, rather, to enable them to adjust the
EPAs to their specific problems, the EC expressed the view that the content of
the Agreements should be defined only by the regions, and it was particularly
necessary not to prejudge the progress and outcome of the regional
negotiations.




                                                                                51
The ACP side expressed disappointment at the Community position, stressing
that an agreement should be reached some day on the directives to be given to
the regions for their negotiations. As a matter of fact, the regions expected that
the negotiations at all-ACP-EC level would determine the orientations for those
of the second phase. The ACP side also declared that it would shortly submit a
proposal to the EC in that regard.

The EC took note of the ACP’s position but said it felt that, by using a text on the
general structure and content of the EPAs, the ACP was attempting to arrive at
a kind of framework agreement, whereas it was well known that the EC was not
prepared to accept such a document. It also reiterated that, if the ACP position
was motivated by the need for transparency, then it should suffice to circulate to
the regions the summary records of the discussions of the all-ACP phase.

4. Definition of the parties and the procedures for the entry into force of
   the EPAs

The ACP side said the two points were inter-related since, for the most part, the
determination of the parties would imply the solution regarding the procedures
for the entry into force of the EPAs.

It however pointed out the need to make a distinction between negotiating
framework and parties to the EPAs. Indeed, as far as the ACP was concerned, it
had not yet been established whether the structure that negotiates would be the
one that will be party to the EPAs.

The EC reiterated its stance expressed at the first meeting of the Group. The
Commission will be the negotiator on the Community side, and the outcome of
the negotiations will be binding on the EC. The EU member-states per se will be
formally parties to the EPAs if these cover areas of mixed competence.
Nonetheless, since the EU was in the process of reforming its institutions, it
would be necessary to await the outcome of the next Inter-governmental
Conference before it can be known precisely to what extent the EC’s
competence in trade issues will be modified.




                                                                                 52
ACP/00/067/03                      Brussels, 2 May 2003
ACP-EC/WG/MA/MN/24
SEDD




EPA Negotiations: Joint Report on the First Dedicated
              Session on Market Access
        ACP House, 15 April 2003, 3:00 p.m.




                                                          53
EPA Negotiations: Joint Report on the First Dedicated Session on
                        Market Access
                  ACP House, 15 April 2003, 3:00 p.m.

The session discussed the following issues:

1.      Principles and specific objectives of EPAs:
There was a common understanding that the Cotonou Agreement’s principles for the
EPAs would guide the negotiations. The specific objectives mentioned by the ACP side
(to accelerate export-led growth, prepare ACP adaptation to global changes; and promote
ACP trade) were discussed and found broadly relevant; the Commission side emphasised
the need to further build ACP markets, and then build on these through the EPAs.

2.      Scope and content of EPAs, including special and differential treatment
(SDT):
The ACP side saw SDT as indispensable, and argued for further ACP-EU discussions,
which were urgent in view of the ongoing WTO negotiations that would be concluded
ahead of the EPAs. In general, the Commission side argued that the ACP objective
should be to reach a level where they would no longer need SDT. In the area of many
trade-related rules in particular, SDT meant extra costs and risks for traders and investors.

(a)     WTO compatibility of EPAs
On the WTO compatibility of EPAs the ACP side indicated that given the changing
nature of the WTO rules and the level of development of the ACP countries, it would be
advisable to seize the opportunity afforded by the on-going discussions at the WTO to
render these rules more flexible so as to take account of the needs of the poorest
countries. Referring to paragraph 3,2 of the European mandate, the ACP side asked for
clarifications on what the EU means by “substantially all trade”, the duration of the
transitional period and the base for tariff removal. The Commission side suggested that
EPA product coverage should over time be 90%+ of trade. Among other things, this was
justified in view of the objective of achieving deeper integration. Transitional periods
could be as long as justifiably necessary and the base for tariff reductions should be
defined at some stage in a pragmatic way. All these things with development objectives
in mind. The ACP side flagged their difficulties with product coverage of 90%+. Both
sides agreed on the need to continue clarifying the approach for reducing tariffs.


(b)      Asymmetry
The ACP side recalled that asymmetry is one of the fundamental principles of the EPAS.
It indicated that, in this regard, both parties’ attention should be devoted to elements such
as product coverage, grace and transitional period and the rate and stages of dismantling
tariffs. The ACP side felt that the rules of origin should also be based on the principle of
asymmetry in order for it to take account of the level of development of the parties
involved on either side. The ACP side also pleaded in favour of cumulation with other
EU partners who benefit from preferences in order to contribute to the promotion of the
exports of its member countries. The Commission side had no a priori problems with
asymmetry, but said that the ACP should not treat the EU worse than other developed


                                                                                         54
countries. Arguing that the rules of origin were a question not so much of asymmetry as
of possible differentiation between ACP regions, the Commission side said it had an open
mind on the need to take specific regional needs into account in the rules of origin of the
EPAs, where this was justified. At the same time its starting point was the current origin
protocol, and similarity of rules of origin between EPAs could be an outcome of
negotiations, and would facilitate ACP-wide cumulation of origin. Both sides agreed on
the need for further analysis and more detailed discussion.


    a)      Differentiation
The ACP side said, differentiation could take place between ACP and EU, between ACP
regions and within ACP regions. The ACP Group felt that differentiation within the
regions should be better tackled within the regions but it should be necessary to take
measures to maintain the coherence of the Group. The Commission side said that
differentiation should support regional integration and not undermine it, and not lead to
trade circumvention or fraud.


3.      Access to the EU market:
 The ACP side sought improvements in this access but noted that its preferences were
already steadily eroded, and that proposals for EU tariff reductions at the multilateral
level was a particular concern. The Commission side said they were open to improving
ACP access through EPAs, by building on and further enhancing the market access
currently provided under the Cotonou Agreement. The Commission side further stressed
that ACP preferences should be jointly defended at multilateral level and that they would
welcome close co-operation with the ACP on this matter.

The ACP side agreed and argued in favour of the creation of a more effective co-
ordinating mechanism between ACP and EU. The Commission side said erosion of
preferences was an inevitable process. The ACP should use the time when preferential
margins were still there to prepare for such erosion, notably through EPAs.


4.      Access to ACP market:
The ACP side recalled the progressive removal of barriers to trade between ACP and EU,
as laid down in Art. 36:1 Cotonou, but added that the scope and speed of this should
depend on the expected impact, studied at regional and national level. The Commission
side said that development-oriented reciprocity should be based on a definition of the
appropriate level of protection and the right process of getting there. The initial and final
protection levels depended on the region. Safeguards could apply to deal with unexpected
events.

5.     Clarification of certain elements of the EU directives for the EPA
negotiations: Replying to specific ACP questions, the Commission side specified the
following:

(a) “food security clause”: This would be based on the approach set out in the EU’s paper
on modalities for the agricultural negotiations in WTO;




                                                                                         55
(b) “the abolishing of all charges having equivalent effect to customs duties upon entry
into force of EPAs”: For the sake of simplification and transparency, all protection should
be reflected in the customs duty (without prejudice to the appropriate level);

(c) “Any discriminatory internal fiscal measures or practices already in existence will be
eliminated from the entry into force of EPAs”: This was a standard national treatment
provision aimed at ensuring that parties’ products would receive treatment no less
favourable than that accorded to like products of national origin. Both sides should look
at the possibility of going “WTO+” where appropriate.

The ACP side indicated it would appreciate further clarification on these elements from
the EU, possibly in writing.

Both sides agreed that discussions on market access should continue.




                                                                                       56
ACP/00/0120/03          Brussels, 24 September 2003
ACP-EC/WG/MA/MN/33
SEDD




      EPA Negotiations: Joint Report on the
               Second Dedicated
           Session on Market Access
       ACP House, 3 July 2003, 10:00 a.m.




                                                      57
The session agreed on the issues to be discussed and adopted the draft joint report on
the first dedicated session on market access held on 15 April 2003.

Both sides noted with satisfaction the convergence of views on the objectives and
principles regarding market access, notably that EPAs would be compatible with WTO
rules as they evolve as well as with the objectives of the Cotonou Agreement. They also
agreed that at the end of the EPA negotiations, no ACP State participating in an EPA
should be in a less favourable position than it is today. The EC side added that EPA
negotiations on market access shall build on the Lome acquis with the objective of
improving on it.

On the product coverage of EPAs and the length of the transitional periods, both sides
agreed that these would be defined in detail at regional level, taking account of the level
of development of the ACP countries and regions, of their socio-economic constraints,
as well as of their capacity to adapt their economies to the liberalisation process.

With regard to the notion of “essentially all trade”, the ACP side argued that the figure
of “90%+” put forward by the EU is excessive, taking into account the level of
development and the specific constraints ACP countries and regions are facing. The EC
side recalled that ACP market opening was not a “price to pay” for maintaining EC
preferences, but rather part of a comprehensive operation aimed at creating an integrated
economic area favouring investment and competitiveness, and at strengthening ACP
production, supply and trading capacity. It should therefore be addressed with an
ambitious objective in mind, in a way that best contributed to the achievement of the
Cotonou objectives.

On the transitional period, the ACP side recalled the particular situation of ACP
economies and the transitional periods agreed between the EC and some of its non-ACP
partners as well as those agreed under other regional agreements involving countries
whose level of development is far higher than that of ACP economies. It argued that the
ACP States should be given sufficient time for implementing national / regional policies
in support of adjustment and regional market building. In particular, the ACP side
suggested a five-year moratorium before the start of tariff reductions, and the
establishment of a review process aimed at ensuring that the transitional period would
not end before the ACP economies involved had achieved a certain level of
development.

The EC specified that the approach followed with regard to the length of the transitional
period should be similar to the one suggested with regard to product coverage.
Therefore, while the general target should be set at an ambitious level, the actual length
of the transitional period should be defined case-by-case, depending on the products /
sectors and countries / regions involved, and the specific constraints they are facing.
Regarding the moratorium suggested by the ACP side, the EC recalled that EPAs
themselves would directly contribute to regional market building as well as facilitate
adjustments, by consolidating and deepening existing regional integration initiatives,
and by helping to establish an open, transparent and reliable framework for trade, which
will mobilise private sector initiative and attract investment. It indicated furthermore that
efforts in all these areas should be undertaken in parallel, hand in hand, thus making
EPAs, domestic flanking policies and development co-operation complementary and


                                                                                          58
mutually supportive. A general moratorium on tariff reductions should therefore, in its
view, not be considered. This did, of course, not exclude the possibility to “backload”
the liberalisation schedule for any given product or sector, where this was required by
the specific constraints the ACP countries and regions concerned were facing in this
sector.

Regarding the review process suggested by the ACP side, the EC agreed on the need to
keep the adjustment process induced by EPAs under constant review. However, it held
the view that an open-ended liberalisation schedule defined on the basis of the
achievement of specific development benchmarks would not be compatible with the
provisions of the WTO. It agreed, however, that it would be possible to temporarily
suspend – where serious difficulties occur as a result of trade liberalisation – the
implementation of the agreed liberalisation schedule and, where necessary, to re-
modulate the rate of trade liberalisation.

Both sides therefore agreed that, during the transitional period, it should be regularly
evaluated whether developments in the ACP regions remained in line with the objectives
of the EPA process, or whether corrective measures were necessary.

Safeguard measures were seen by both sides as a necessary component of the EPAs,
which should be negotiated at the regional level.

On the issue of rules of origin, the ACP side reiterated that these should be
asymmetrical in view of the development level and needs of the ACP States. It was
necessary to overcome rules of origin constraints and improve the rules of origin in line
with Article 37 (7) Cotonou.

The ACP side also explained that asymmetry was meant to address different levels of
ACP and EC development, and to promote ACP industrial development and exports.
Furthermore, building on the acquis meant maintaining ACP-OCT-EC cumulation of
origin, and extending cumulation possibilities to other EC partners currently excluded.

The EC repeated that the negotiations should be based on the current rules of origin, but
that it would assess any specific request for improving such rules, taking into account
the specific needs of ACP regions. It maintained its doubts and difficulties with regard
to a general principle of asymmetrical rules of origin, but did not exclude the possibility
of differentiation between regions on a product specific basis, where this was justified
by the specific needs and constraints of the regions concerned.

The EC furthermore, stated that EPA rules of origin should contribute to building
regional ACP markets and industries, and that temporary derogations from the rules of
origin would seem more in line with this objective than permanent exceptions (such as
asymmetry).

Both sides agreed that EPA rules of origin should take account of the level of
development of the ACP States. They also concurred that further examination at expert
level would be required on the issue of asymmetry, with a view to improve the mutual
understanding of their respective positions.




                                                                                        59
The ACP side concluded that good progress had been made and the EC side underscored
that both sides shared the same objectives for the EPA negotiations. There was no other
business and the meeting was closed.




                                                                                    60
 ACP/00/109/03                  Brussels, 24 September 2003
ACP-EC/WG/D/MN/34




ACP-EU NEGOTIATIONS OF ECONOMIC PARTNERSHIP
                    AGREEMENTS


JOINT REPORT ON THE DEDICATED SESSION ON THE
DEVELOPMENT DIMENSION OF EPAS IN THE AREA OF
                     SERVICES
             HELD ON 25 JUNE 2003




                                                         61
A dedicated session on the development dimension of EPAs in the area of
services was held on 25 June 2003 at 3.00 p.m. at ACP House. The meeting
was chaired by H.E. Mr. I. Mataitoga, Ambassador of Fiji and ACP Spokesman
for Trade in Services, and co-chaired by Mr. I. Feustel of DG Trade.

The discussions during this session focused on the development of the services
sector in the ACP countries.

In its introduction of the item, the ACP side stressed the importance of services
for the development of ACP countries and for economic efficiency. It also
underlined that this sector offers opportunities for the diversification of ACP
economies, which could help to reduce their excessive dependence on exports
of primary commodities, the prices of which are declining. However, ACP
countries face major constraints in developing their services sector and are only
able to supply a limited number of services.

The ACP explained that unless their capacity and supply-side constraints were
addressed, they would not be able to capitalize on trading opportunities in the
area of services and the aggregate share of their services exports in world trade
would continue to go down. Further, it was essential for ACP countries to
strengthen their intermediate services since these could make an important
contribution to the competitiveness of ACP goods and services. The efficiency
and competitiveness of ACP domestic services and service suppliers had also
to be improved. Moreover, ACP countries needed to put in place appropriate
policies and create legal and regulatory frameworks necessary for the
development of services.

The ACP therefore requested that support be provided to them for:

   (a)    tackling their capacity and supply-side constraints;
   (b)    strengthening their intermediate services;
   (c)    increasing the efficiency and competitiveness of their domestic
          services and service suppliers; and
   (d)    developing appropriate policies as well as legal and regulatory
          frameworks.

The support was not necessarily in terms of financial resources although these
could constitute an important component of the required assistance.

For the ACP, what was provided for in the Cotonou Agreement was not
sufficient for the development of their services sector. Hence, they considered
that EPAs should include provisions on support for the development of the
services sector in ACP countries and clearly specify the means through which
such support should be provided, including financial resources additional to EDF
ones. The ACP were asking for financial resources additional to EDF ones
because unless financial resources were provided to them through rapid and
flexible disbursement procedures, they would have to wait for a considerable
time before they would obtain the required resources to develop their services
sector.


                                                                              62
The EC responded that the availability of an efficient services sector constitutes
an important factor for the development of ACP countries and regions. It
recalled that the importance of trade in services in world trade was constantly
increasing. Services were therefore a potential source of growth for the ACP
countries. Moreover, the service sector was becoming an increasingly important
input for trade in goods and therefore a key determinant for the competitiveness
of the ACP.

The EC concurred with the assessment of the ACP side that the capacities of
many ACP countries in this sector are still rather limited and that there is an
urgent need to develop these capacities. It underlined, in this context, that EPAs
themselves, would, in its view, significantly contribute to achieve this objective:
liberalization of trade in services would contribute to the establishment of an
enabling environment, thereby encouraging more efficient, varied and
competitive markets at home and contributing to increase the competitiveness of
the ACP regions concerned. It emphasized that this development dimension of
EPAs was also underlined by the fact that EPAs would be negotiated in a
flexible way, bearing in mind the level of development of the service sector of
the ACP countries and regions concerned, and taking into account specific
economic, social and environmental concerns, as well as their capacity to adapt
their economies to the liberalization process.

The EC finally stressed the need to support the development of the service
sector through appropriate development support measures, to be carried out in
accordance with the provisions of the Cotonou Agreement. However, it held the
view that EPAs and development support should be complementary and
mutually supportive and the EPA negotiations and development support
measures should go hand in hand. It noted that insufficient attention has been
paid in the past to the development of services in ACP countries, but underlined
that it did not see any limitation in the Cotonou Agreement, which would prevent
both parties to do more than what had been done in the past to develop services
sectors in the ACP. What was needed, in reality, in its view, was to identify and
to design concrete programmes. With this in mind, it has suggested the
establishment of Regional Preparatory Task Forces which would be mandated
to identify the needs of the ACP countries and regions concerned so that
appropriate support programmes could be worked out.

On the issue of financial resources, the EC said that additional resources should
not be an issue, as long as resources were not lacking. It would, in its view, be
unreasonable to ask the EU Member States to provide additional resources as
long as resources from previous EDFs were still available. Such a request could
reasonably only be made if all existing EDF funds had been committed and to a
large extent disbursed. It further noted that one of the reasons for the slow
disbursement of available funds was often due to a lack of absorption capacity
in the ACP side. The EC had therefore put in place the € 20 million facility for
EPA negotiations. In early 2004, the new € 50 million intra-ACP facility would
become operational. It had three pillars: the first one aimed at helping the ACP
to identify trade-related needs and to draw up coherent action plans, the second
one aimed at reinforcing ACP countries and regions capacities in terms of trade


                                                                                63
policy formulation, and the third one was targeted at providing short term
support to address trade-related institutional capacity problems. The mid-term
review process on the 9th EDF, scheduled to take place during 2004, would
allow to build on the results of this work. Review of country and regional
strategies could pay attention to the needs of ACP countries arising from EPAs,
and make available, where appropriate, increased funding for that purpose.

Reacting to the EC’s assertion that the ACP were responsible for the slow
disbursement of EDF resources, the ACP side pointed out that the EC also
shared that responsibility because of the complex and cumbersome EDF
procedures. It expressed doubts on whether it would be possible for additional
resources to be made available to ACP States in the context of the mid-term
review since the resources had already been allocated to focal sectors identified
by ACP countries and it would be very difficult for them to change overnight the
focal sectors. The ACP understood that the EC could not commit itself to an
unknown amount of additional resources. What they were seeking was an
agreement from the EC that additional resources would be made available to
them for the development of their services sector should the need for such
resources be demonstrated. The ACP asked the EC to show flexibility on that
issue.

The ACP further expressed the view that EPA should have a strong
development dimension and that unless their services sector becomes
competitive, it would be very difficult for them to liberalize trade in services in the
context of EPAs. They pointed out that there is no obligation under the Cotonou
Agreement for ACP States to liberalize trade in services in the context of EPAs,
and that in any event, it would be up to the ACP countries and regions
concerned to decide whether they would wish to engage in such liberalization.
Further, EPAs are not meant to dictate which policies ACP regional integration
processes should adopt. Rather, EPAs should, in accordance with the principle
of sequencing enshrined in Article 35(2) of the Cotonou Agreement, build on
regional integration processes of the ACP and not undermine them. The ACP
also recalled that even in the GATS, it is provided that developed countries will
give assistance to developing countries in order to make it possible for the latter
to compete effectively in the area of services.

The EC stressed that it had no intention to force any ACP country or region into
any policy which it did not wish to adopt or which was not in line with its regional
integration objectives. Recalling, however, the contribution which EPAs would
make to the development of the service sector in particular, and to the
strengthening of the competitiveness of the ACP countries, in general, it held the
view that negotiations on the liberalization of services should not be excluded
but rather go hand in hand with development support measures. This was, in its
view, in line with the overall undertaking of both sides, to make use of all the
means available to enhance the trading capacity of the ACP states, but also with
the more specific undertaking relating to trade in services, whereby both sides
agreed “on the objective of extending under the economic partnership
agreements, and after they have acquired some experience in applying the Most
Favoured Nation (MFN) treatment under GATS, their partnership to encompass
the liberalization of services in accordance with the provisions of GATS and


                                                                                    64
particularly those relating to the participation of developing countries in
liberalisation agreements” (Art 41(4) of the Cotonou Agreement).

Normally, negotiations on this issue should be opened early enough to be
concluded by 2007 at the latest. However, where this would be required by
particular economic, social and environmental constraints encountered by
certain ACP countries or regions, actual negotiations could be postponed to a
later date. In such an event, the parties to the negotiations should regularly
assess the situation in the course of the EPA negotiations and should set a date
for the start of the negotiations in this sector in 2006 at the latest. They should
further ensure that the preparatory phase is actively used for the negotiations, in
particular by mobilizing appropriate support for the development of services, in
line with the provisions of the Cotonou Agreement.

Conclusion

Both the ACP and the EU sides agreed on the need for support to be provided
in the context of EPAs to the ACP for the development of their services sector.
This support would need to target the specific needs of ACP countries and
regions.

However, there was a divergence of views on the sequencing of EPA
negotiations and the provision of support for development of the services sector
in the ACP countries. There was also divergence of views on whether financial
resources additional to the EDF ones should be made available for the
development of the services sector in the ACP countries.




                                                                                65
ACP/00/0106/03                      Brussels, 24 September 2003
ACP-EC/WG/TRA/MN/39




        EPA Negotiations: Joint Report on the
  First Dedicated Session on Trade-Related Areas
                      1 July 2003




                                                                  66
The first dedicated session on trade related areas took place on Tuesday, 1 July 2003
at ACP House. Both sides agreed to focus the discussion on one item, namely
“Exchange of views on trade related issues”.

The EC introduced the discussion by stressing that trade rules were becoming more
and more important in a trading environment where tariffs had be significantly reduced.
In order for trade liberalisation to maximise its positive effects it was therefore essential
to tackle all rules-related factors that were leading to market segmentation. The issue
paper, which the EC had presented during the third ambassadorial meeting, provided a
description of the numerous areas where EPAs would provide an opportunity to
address such “beyond the border” measures.

The EC also indicated that regional negotiations would need to deal with two
challenges. The first one related to the way existing Cotonou commitments – and they
were often far-reaching – would be translated into region-specific rules. The second
one had to do with the means to operationalize these rules concretely, through
appropriate capacity and institution building. Regional Preparatory Task Forces, which
the EC had proposed to establish, would help to identify specific needs and prepare
adequate programmes to be financed in accordance with the provisions of the Cotonou
Agreement. Once the negotiation phase would be over, the EC had suggested
establishing Joint Implementation Committees, which would help to ensure that
adequate support is provided for the proper implementation of the agreed rules.

The EC stressed that the negotiations on trade-related areas would of course need to
take account of the DDA negotiations, providing an opportunity – where both parties
would find it useful – to go beyond WTO rules. Finally, as was already indicated in the
EC issue paper on rules, the EC was of the view the list of trade-related areas, which
EPAs could address would best go beyond the issues contained in the Cotonou
Agreement to include government procurement and data protection.

The ACP side reacted by agreeing on the importance of addressing non-tariff barriers in
today’s trade exchanges.. Infrastructure and regulatory issues needed to be tackled to
build on tariff liberalisation, in order for trade to be enhanced.

Many ACP countries however had neither the human, institutional nor infrastructure
capacity to deal with trade-related areas, nor the legal frameworks to implement
complex trade-related areas. It was therefore necessary to have a minimum level of
infrastructure for developing the appropriate product, health and safety standards as
well as for establishing or further strengthening institutions for regulation and
enforcement in the trade-related areas. For the ACP side, it was therefore critically
important to urgently acquire or upgrade the requisite expertise, institutions and
infrastructure for dealing with these complex issues before it could negotiate specific
rules. In this regard, the ACP was agreeable to negotiating only some of subjects listed
in Articles 44 – 52 of the Cotonou Agreement let alone additional areas proposed by the
EU side, such as government procurement and data protection, and some of the other
areas for which multilateral approaches had not been agreed upon.

The ACP side therefore proposed that, before proceeding to the regions with trade-
related issues, a uniform approach should be agreed at this first phase of the
negotiations. That approach could address the scope and coverage of the issues as
well as the modalities for co-operation in these areas. The ACP side indicated it would
present to the EC side its position on those aspects of the trade related subjects that
should be handled at the all-ACP – EC phase leading to a common framework
agreement on them.


                                                                                          67
Moreover, the ACP side stressed that ACP countries had already accepted a number of
trade-related commitments in the context of WTO and ILO, which EPA would need to
take into account. Furthermore, the WTO has yet to agree how to treat some of trade
related issues in a multilateral context. The ACP side thus underlined two principles for
EPA negotiations: the need to build capacity and the necessity to take account of the
results of the current WTO negotiations. In this context, the ACP side also reiterated its
stand that, unless and until multilateral trade rules had been crafted in the additional
areas proposed by the EC and on competition policy, investment, and trade facilitation,
the ACP countries and regions would not be amenable to negotiating any “rules” in the
context of EPAs. In the meantime the ACP side expected to conclude co-operation
arrangements in the agreed areas.

The EC indicated it was surprised by the ACP reluctance to address these issues as a
matter of priority. Since both sides agreed on the importance to tackle “beyond the
border” trade-restrictive measures, why could we not agree to do so urgently? The EC
also stated that EPA negotiations would of course need to take account of the
evolutionary nature of the WTO rules. It recalled, however, that the Cotonou Agreement
already contained some precise trade-related commitments including in those areas
where multilateral approaches had yet to be agreed upon, which would have to be
implemented regardless of the outcome of WTO negotiations. The EC position was that
EPAs provided an opportunity to fine-tune these commitments in the light of regional
specificity and, where necessary, in the light of the WTO negotiations. The question
was more “how” to address these questions than “whether” it was needed. The EC was
fully aware of the difficult situation of some ACP countries and regions in this respect. It
therefore recognised that there was a need for assisting them implement trade-related
rules. However, in the light of the necessity to take account of the ACP specific
situation, the EC wondered what the conclusion of an all-ACP – EC framework could
bring. Referring to the various levels of intellectual property protection among the ACP
countries and regions, the EC underlined that ACP regions had in most cases very
different trade-related needs. Finally, the EC stressed that one of the main objective of
EPAs would be to consolidate existing ACP regional integration initiatives. Since non-
tariff barriers were by all means significant factors hindering the development of intra-
regional trade, it was of the view that it would be important to address those in the
context of EPA negotiations.

The ACP side responded by underlining that it was not backtracking from its Cotonou
commitments, but those commitments had to be seen in the light of the existing
situation. Furthermore, capacity building was part of the commitments undertaken by
the parties in the Cotonou Agreement. Taking the area of competition as an example,
the ACP side indicated that a “two step” approach was needed. First, ACP States and
regions would need to develop effective competition agencies. Second, there was a
need to develop economically sound national and regional competition laws. These two
areas would need to be adapted to the local situations since the ACP countries and
regions concerned had different experiences in the area of competition – some had
elaborate competition laws, while some others did not even have a competition policy.
There was also a need to address the uncompetitive behaviour of multinational
companies, based on the relevant UNCTAD guidelines. It would serve no purpose to
negotiate rules which ACP States did not have the capacity to implement.

On the benefit of a framework agreement on trade related areas, the ACP side
observed that this should be seen in the context of the outcome of phase 1 of the EPA
negotiations, currently under consideration in a different negotiating group.




                                                                                         68
Finally, the ACP expressed the need to harmonise the terminology used in addressing
these issues. It asserted that the term “trade related areas”, used in the Cotonou
Agreement should be used. On the EC proposals for the establishment of Regional
Preparatory Task Forces and of Joint Implementation Committees, the ACP side
indicated that it was still consulting internally on the suitable structures and mechanism
for dealing with phase 2 negotiations as a whole. The EC would be informed of the
outcome of these consultations when these would be completed.

Both parties concurred on the importance of trade-related issues. They noted that as
progress was being made in lowering tariffs, other “behind the border issues” had
become serious barriers to trade. In order to have smooth trade flows between the
parties to the EPAs, issues such as standards, sanitary, veterinary or phytosanitary
rules or rules for the protection of consumers, needed to be addressed, so as to ensure
that, even where these measures had been introduced for valid reasons, they did not
result in high costs and become practical obstacles to trade. Both sides also agreed
that well functioning infrastructure and institutions, and appropriate regulatory systems
were two necessary ingredients for the success of any trading economy, and that they
were complementary. They noted, however, that some divergences of views persisted
on the scope and coverage of the issues and on the question of sequencing the
provision of capacity building support vis-à-vis the negotiation of EPA-related rules.

Both sides also agreed on the need to take account of WTO discussions on these
subjects, including the outcome of the forthcoming WTO Ministerial Conference in
Cancun. They noted that some divergence of views persisted as to whether or not
EPAs should go beyond WTO commitments in trade-related areas, and whether or not
the start of EPA negotiations on trade-related areas needed to await for WTO
agreements in these areas.




                                                                                       69
ACP/00/044/03 Rev. 2                Brussels, 19 May 2003
ACP-EC/WG/D/MN/23
AN/dn




   NEGOTIATIONS OF ECONOMIC PARTNERTSHIP

                  AGREEMENTS (EPAs)




 Joint Report of the First Dedicated Session on the
         Development Dimension of EPAs




                                                  7 April 2003




                                                            70
INTRODUCTION

The first dedicated session on the development dimension of EPAs took place in the
afternoon of Friday, 21 February 2003 at ACP House. This report captures the main
elements and conclusions of the discussion.

The session was co-chaired by H.E. Ambassador Dr. Zedekia Josef NGAVIRUE of
Namibia and Mr. Ingo FEUSTEL of DG Trade.

AGENDA ISSUES

There was no formal agenda for the meeting. However, two substantive issues were
agreed to by both sides for a general exchange of views. These were:
       •       EPAs as an instrument for development; and
       •       Link between EPAs and development co-operation.



Item 1:       EPAs AS AN INSTRUMENT FOR DEVELOPMENT

The ACP side introduced this item and stated that for the ACP, the starting point on
development issues is to reaffirm the core principles of ACP-EU cooperation as defined
under Article 1 of the Cotonou Agreement. That is: “reducing and eventually
eradication poverty consistent with the objectives of sustainable development and the
gradual integration of the ACP countries into the world economy”.

The achievement of ACP sustainable development must therefore be at the heart of
negotiations. To this end, EPAs should be seen as instruments for achieving sustainable
development and not as ends in themselves. The objective of the ACP Group is to
ensure that decisions taken and commitments made within the framework of EPA
negotiations enhance the sustainable development of ACP countries and neither erode
nor dismantle gains already made.

The ACP side made it very clear that EPAs are not a substitute for sustainable
development. The challenge is to ensure that EDF and other scarce resources are not
diverted away from existing development priorities of ACP countries into an array of
requirements and conditions for trade liberalization. This point was further elaborated
by noting that the provisions of the Cotonou Agreement were negotiated and agreed
upon at a time when the content and implications of EPAs were not known. As such the
ACP perceives on-going technical preparations as providing the necessary inputs to fully
understand the possible content and development implications of EPAs. Emphasis was
made of the need for technical preparations to be continuous throughout the entire
negotiating process.

The ACP concluded its initial remarks by pointing out that the Cotonou Agreement
provides in Article 20 the framework that should guide development oriented EPAs in
ACP countries.




                                                                                     71
The EC agreed that EPAs are part and parcel of the Cotonou commitments and therefore
subject to the objectives and principles of the Cotonou Agreement. In particular, they
clearly must contribute to the achievement of the objectives in Art. 1 of the Cotonou
Agreement. This has been underlined by Art. 34 of the Cotonou Agreement, which
defines the specific objectives of ACP-EU economic and trade cooperation.

The EC therefore concurred with the ACP that EPAs must be an instrument for
development. It suggested that, given this general agreement on this point, further
discussions should now concentrate on the question of how to ensure that this really
happens.

Addressing a frequent misconception, the EC noted that despite the clear understanding
between both sides, EPAs were still often wrongly perceived as a tool, designed only to
achieve WTO compatibility of ACP-EU trade relations. Accordingly, “reciprocity” was
considered as a price to pay for maintaining current preferential market access. Even
worse, EPAs were sometimes perceived as a means, invented by the EU, to open up the
market of the ACP for the benefit of EU exporters. As a consequence, EPAs were
frequently looked at with a defensive mind and “limiting the damage” was considered as
an objective for negotiations.

The EC held the view that this perception obstructed the view on the real issue to
discuss. It did not allow EPAs to become an instrument for development: results would
be arbitrary, depending primarily on the negotiating skills of the ACP countries, rather
than being functional in the light of development objectives.

In reality, EPAs had a clear development objective in mind: building on regional
integration initiatives existing within the ACP, they would contribute to create larger
markets, governed by a stable, transparent and predictable environment, which would
act as economic poles of attraction. Within these enlarged markets, goods and services
would circulate freely, allowing thus for economies of scale, for improving the level of
specialization, for reducing production and transaction costs, thereby helping, altogether,
to increase the competitiveness of the ACP. This, in turn, would lead to an increase in
trade flows in the region, with the EU and with the rest of the world, thereby promoting
the sustainable development of the ACP countries and contributing to poverty
eradication in the ACP countries.

EPAs therefore also were far more than simple trade agreements, setting rules for trade
between the parties. They were, above all, a means to strengthen the supply capacity of
the ACP countries, by creating an environment favorable to business initiatives and to
investment.

The EC agreed that EPAs would lead to a restructuring of ACP economies. Negotiations
should not aim at avoiding any restructuring, but rather promote it, since restructuring of
ACP economies was one of the pre-conditions for increasing their competitiveness.
However, restructuring would need to be monitored, taking account of the specific
economic, social and environmental constraints of the ACP countries and regions
concerned as well as of their capacity to adapt and to adjust their economies to the EPA
process. EPAs should therefore be designed with all the flexibility required, including
with regard to the length of the transitional period available for the ACP concerned for
tariff dismantling and the final product coverage on their side.


                                                                                        72
However, to make EPAs an instrument for development, it would be essential that this
flexibility is not used in an arbitrary way, but rather in the light of the specific
development objectives defined by the ACP countries and regions concerned. Ensuring
that EPAs are instruments for development was therefore a common undertaking,
requiring ACP States and regions to clearly define their development policy objectives,
and both sides to ensure that EPAs are in line with and supportive to these objectives.


The ACP side responded to the EC’s intervention on the following five key areas:

1.     on the negative perceptions of EPAs - the ACP noted that this originated from
       the time of negotiations of the Cotonou Agreement, particularly with respect to
       the notion of WTO compatibility. To counter these negative perceptions and to
       emphasize the central role of development in negotiations, the ACP proposed
       that it would make sense to reflect the “development” dimension in the acronym
       “EPAs”.


2.     on the link between EPAs and regional integration - the ACP side reiterated
       that EPAs should follow and support regional integration and not the other way
       around.

3.     on market enlargement - the ACP side emphasized that market enlargement
       through opening of borders and the freeing of trade should reflect growing
       capacities within respective ACP countries and regions to produce goods and
       services, and the strengthening of infrastructures necessary to ensure smooth and
       efficient marketing and distribution to support the enlarged markets. The key
       point is not about building markets but enhancing ACP capacity and the
       strengthening of infrastructure to support market enlargement.

4.     on technical studies - the ACP side reiterated that technical information on
       sustainability of EPAs were starting to flow in and these would generate new
       perspectives and positions in terms of adjustment processes during the transition
       period and implementation of EPAs.

5.     on transition periods - the ACP stated that the transition period should not be
       bound arbitrarily, but guided by development thresholds or benchmarks and the
       outcome of negotiation of special and differential treatment provisions at the
       WTO.

The EC provided further clarification of its earlier statements by reiterating that the
central issue is how to make sure that EPAs become instruments for development. The
EC emphasized that EPAs must be in line with and supportive to the ACP countries’ and
regions development policy objectives. Therefore, EPAs will not be substitute for ACP
development policies but will constitute instruments for supporting those.
On the technical studies, and in particular the national and regional Impact Assessments,
the EC argued that one would have to avoid turning these useful tools into purely
defensive instruments which would primarily aim at limiting the impact of EPAs on
ACP economies. In this respect, the EC proposed that both sides should deal with EPAs


                                                                                      73
the same way as with other instruments of ACP-EU development cooperation: fix
specific development policy objectives and use EPAs proactively to support these
objectives. The Impact Assessments should above all assist in identifying policy
measures necessary to support these objectives.


Concerning the link between EPAs and regional integration among the ACP, the EC
agreed that EPAs should build on the regional integration process existing within the
ACP. The aim should not be to introduce conditionalities via EPAs, but to use EPAs as
an opportunity to strengthen regional integration if both sides agree. In this context, the
EC made a reference to the integration process leading to the establishment of the
African Union, which would be based on existing sub-African integration initiatives.
EPAs should be used to promote this objective of the African continent.


With regard to the ACP proposal to add “development” to the acronym “EPAs”, the EC
indicated it had no strong views on this. What mattered was the substance, not the label.
Nevertheless, by adding development to the EPAs it should not be construed that the
EPAs alone will allow to achieve the relevant development policy objectives nor that
they will define all measures necessary to achieve these objectives.

In its concluding statement, the ACP side reiterated that the results and analysis of the
technical studies are not for defensive purposes, but to, inter alia, shed light on the kind
of positive and negative adjustments required as a result of and to facilitate
implementation of EPAs. Further that the objectives of EPAs should be to reduce and
ultimately eradicate poverty and not simply to enlarge markets.


Item 2:        LINK BETWEEN EPAs AND DEVELOPMENT

The EC side introduced discussions under this item. The starting point was, again, on
Articles 1 and 34 of the Cotonou Agreement. The EC noted that the Cotonou Agreement
defined several areas of cooperation designed to achieve the objectives outlined in these
two Articles. All these areas are interlinked and complementary and efforts undertaken
in these areas must be mutually supportive. EPAs are one instrument within one area of
cooperation. EPAs alone, therefore cannot achieve the overall objective of the Cotonou
Agreement to eradicate poverty in the ACP countries. Efforts must be undertaken in all
areas of cooperation to achieve this objective and these efforts must be complementary
and mutually supportive. In particular, EPAs must be part of the development policy of
the ACP countries and regions concerned and development policy measures must
complement and support EPAs. In the same way, EPAs must be integrated into ACP-EU
development cooperation, and development cooperation must complement and support
EPAs.

To ensure this complementarity and mutual supportiveness in both areas of cooperation,
the EC had proposed the creation of Regional Preparatory Task Forces which would be
constituted by development cooperation and trade experts from both the EC and the
ACP countries and regions concerned. These experts would follow the EPA negotiation
process and identify necessary development support measures to be carried out in the
framework of ACP-EU development finance cooperation.


                                                                                         74
The ACP side responded by reiterating the fact that the link between EPAs and
development is a key point and stressed the need for building synergies. The ACP side
emphasized the need to take into consideration the various development initiatives,
which could assist the sustainable development of ACP countries, including the needs
and specificities of the various regions that compose the ACP Group. Such measures
should seek, among others, to upgrade the overall competitiveness of the ACP
productive sectors to enable the successful integration of ACP countries in the global
economy. Attention should also be given to the implications of EPAs on the
development of key economic sectors and indicators in ACP countries.

The ACP referred to its Guidelines on the negotiations and specifically to the principles
that should underline EPAs, and proposed that the following provisional list of
development issues be discussed during future sessions of the negotiating group on
development dimensions of EPAs:

    •   Objectives and principles of EPAs;
    •   Macroeconomic governance issues;
    •   Trade;
    •   Agriculture;
    •   Fisheries;
    •   Regional dimension of EPAs;
    •   Services;
    •   Infrastructure;
    •   Industry;
    •   Mining;
    •   Energy; and
    •   Private Investment.

While noting that, for instance, infrastructural projects should not be part of EPAs but
rather be considered in the framework of development finance cooperation,
the EC took note of this list and proposed that the list be discussed in a subsequent
dedicated session.


The first dedicated session was concluded on the note that the ACP General Secretariat
would liaise with the EC on an appropriate agenda and date for the second dedicated
session.


CONCLUSIONS OF THE SESSION


1. The following points of convergence emerged from the discussion:
•   EPAs are instruments for development that contribute to foster “the smooth and
    gradual integration of the ACP States into the world economy, with due regard for
    their political choices and development priorities, thereby promoting their
    sustainable development and contributing to poverty eradication in the ACP
    countries”, and not ends in themselves.


                                                                                      75
•   EPAs must take account of the development policy objectives of the ACP countries
    and regions concerned. In this regard, they must take account of the specific
    economic, social and environmental constraints of the ACP countries concerned, as
    well as of their capacity to adapt their economies to the EPA process.

•   EPAs should support the regional integration process of the ACP States and not
    undermine it.




                                                                                  76
2. On the following points, a divergence of view exists:

               ACP view                                      EC view

                                  Transition periods

- Transition periods should be guided by      - The appropriate transition periods must
development benchmarks and the                be defined in the course of the regional
outcome of negotiations of special and        negotiations, in the light of the
differential treatment provisions at the      development strategies of the ACP
WTO.                                          countries and regions concerned and on a
                                              case by case basis.

                   Link between EPAs and development support

- EPAs should concentrate, among others, - Development policy as well as
on capacity building and strengthening   development support measures require an
infrastructure in the ACP States to      integrated     approach.    Development
support market enlargement and the       support provided in connection with EPA
competitiveness of productive sectors.   therefore needs to be integrated into
                                         comprehensive                development
                                         programmes, to be carried out in
                                         accordance with the relevant provisions
                                         of the Cotonou Agreement.
- A task force of ACP-EC experts will be - A specific structure should be put in
established    to   ensure   that    the place on a regional basis, to ensure
development dimension is incorporated in coherence      between     EPAs      and
the EPA process.                         development support provided in the
                                         framework of the Cotonou Agreement.
                                         - To this end, Regional Preparatory Task
                                         Forces should be established.
                              Additional resources

- There is a need for additional resources    - Resources available for financing of
on top of those available through NIPs        development co-operation for the next
and RIPs, in order to enable the ACP          five years have been agreed in the
States to support the adjustment costs that   framework of the Cotonou Agreement.
will be brought about by EPAs.                This question is not up for renegotiations
                                              in the framework of the current EPA
                                              negotiations.
- NIPs and RIPs have been programmed
in favour of strategic sectors identified
through the national and regional
development strategies. Thus, diverting
resources from such sectors in favour of
EPA adjustment will undermine the
development efforts engaged by the ACP
and the EC.
Finally, both sides agreed to hold further discussions, inter alia on the points of
divergences and on the list of issues presented by the ACP.


                                                                                       77
   ACP/00/076/03                          Brussels, 24 September 2003
   ACP-EC/WG/D/MN/29




            EPA Negotiations: Joint Report on the
Second Dedicated Session on the Development Dimension of EPAs
                        11 April 2003




                                                                   78
Without adopting any formal agenda, both sides agreed to focus the discussion on the
link between EPAs and development co-operation and, in particular, the two issues
proposed by the ACP side on capacity building and infrastructure. They also approved
the Joint Conclusions of the first dedicated session on the development dimension of
EPAs.


Link between EPAs and development support

The ACP side introduced the discussion and indicated it would like, for this dedicated
session, to specifically focus on capacity building and infrastructure in line with the
results of the first joint dedicated session.

     i.    Capacity Building

As agreed at the start of the session, the ACP side gave a detailed introduction of its
position on this important issue. The ACP approach to and position on capacity building
was linked to the twin objectives of the trade and economic cooperation chapter of the
Cotonou Agreement – that is, poverty reduction and smooth and gradual integration of
the ACP economies into the global economy. In this regard, the ACP underlined three
key principles:

     (a)    the necessity to take into account the different levels of development and
           capacity of the ACP countries;

     (b)    building capacities in five key areas that will contribute to poverty reduction
           and enhancement of competitiveness of the productive sectors of the ACP
           countries; namely capacities to:
               a.      upgrade the overall productive capacity;
               b.      export;
               c.      attract investment;
               d.      respond to market requirements; and
               e.      engage in trade governance.

     (c)   capacity building activities should be targeted at three main categories of

           stakeholders:

              a.      Governments;

              b.      National and regional inter-governmental, professional and

                      financial institutions servicing the productive and

                      export/import sectors in the ACP countries; and

              c.      ACP enterprises and other economic actors.


                                                                                        79
On building productive capacity

The ACP side emphasized that generating wealth in key economic and social sectors and
thereby reduce poverty can be achieved by, inter alia:

         •   enhancing capacities to develop and implement policies aimed at achieving
             economic diversification, sustainable use of natural resources, and
             maintaining socio-economic balance that support sustainable development;

         •   strengthening productivity and efficiency through technology development,
             research and innovation;

         •   enhancing capacities to establish legislative, regulatory and related
             institutional framework in support of key productive sectors;

         •   enhancing overall technical capacities of ACP enterprises

         •   enhancing capacities within the ACP countries to harness overall resources
             for development; and

         •   consolidating public finances.

On the capacity to attract Investment

The ACP side made it clear of the view that the EPA process must contribute to:

         •   creating an environment for mobilizing domestic savings for productive
             investment and through appropriate development of domestic financial
             infrastructure; and

         •   creating an environment that will facilitate greater flow of external resources
             including foreign direct investments (FDIs).

On building capacity to export

The ACP side clearly emphasized that for EPAs to contribute to increasing ACP export
capacities will require, inter alia:

     •       identifying existing and potential supply capacities, and strengthening and
             expanding these capacities;

     •       enhancing productivity in export sectors;

     •       enhancing diversification of exports away from primary products in favour of
             products with higher value-added;




                                                                                         80
     •     strengthening the capacities and efficiency of export corridor services and
           institutions; and

     •     increasing the spread and efficiency of export infrastructure.

On building capacity to respond to market requirements

The ACP side elaborated its view that the EPA process should contribute to
strengthening the capacities of ACP countries to respond to market requirements
through, inter alia:

     •     upgrading national and regional standards certification and other trade
           regulatory institutions including the setting up of these institutions; and

     •     strengthening ACP capacity to adapt to and manage the implementation of
           the internationally agreed technical and other standards and regulations
           including environmental and sanitary and phyto-sanitary standards.

On building Capacity to engage in trade governance

The ACP side expressed its strong belief that the institutional requirements of a
strengthened governance system are demanding and complex and the development of
robust institutions is a long-term process that require sustained efforts and concerted
international support. In this regard, the EPA process must contribute to building
capacity within the ACP countries to effectively engage in trade governance through,
inter alia:

     •     strengthening capacity to participate effectively in regional and multilateral
           negotiations;

     •     strengthening policy dialogue among the major stakeholders including
           development partners; and

     •     supporting the build-up and/or strengthening of public/private partnerships.


The EC underlined the importance of the issues raised by the ACP side. It agreed that
EPAs were, indeed, far more than simple trade agreements, setting rules for trade
between the parties. They were, above all, an instrument for development intended to
strengthen the supply capacity of the ACP countries; by enlarging their markets, by
creating an environment favourable to private sector initiatives and to investment and by
improving their capacity to handle all issues relevant for trade.

It further agreed that, to achieve their objectives, EPAs needed to be accompanied by
appropriate development strategies and policies of the ACP countries and regions and be
supported by development co-operation. In this context, capacity building was of
particular relevance.




                                                                                      81
However, while re-emphasising its commitment to provide adequate support measures
in this regard, the EC questioned the need to redefine the range of possible interventions
in an abstract manner.

It recalled that, despite their special legal standing, EPAs were integral part of the
Cotonou approach. Economic and trade co-operation was defined as one of the three
pillars of the ACP-EU Partnership Agreement, and even the objectives and principles of
EPAs were defined by this Agreement. The actual negotiations of EPAs had only been
postponed for practical reasons: to allow the ACP countries to prepare themselves
adequately for these new trading arrangements and to provide for a longer period for
their negotiation. EPAs are not substitutes to the Cotonou Agreement, but should be
designed and implemented in the framework of this Agreement. EPA-related support
measures should therefore, like all other support measures, be based on the provisions of
the Cotonou Agreement.

The EC further held the view that defining EPA-related support measures within EPAs
themselves, would jeopardise the integrated approach to development finance co-
operation, on which the ACP and the EU, in reality, agreed. For instance, bottlenecks in
infrastructure, such as roads, would not only act as an impediment to trade, but also
prevent, for example, access to essential social services. They would therefore, both
challenge the achievement of the objectives of sustainable development and poverty
eradication. Addressing such bottlenecks in an artificially fragmented way would clearly
result in a serious loss of efficiency and effectiveness and be in contradiction with the
approach to development finance co-operation agreed between both sides.

The EC finally questioned the need to define EPA-related support measures within EPA
negotiations. It noted that development finance co-operation, as defined by the Cotonou
Agreement, offered a sufficiently broad base to carry out any support measure which
might be needed in connection with EPAs, and that none of the activities suggested by
the ACP side had been excluded. It further referred to the provisions of Part 3, Title I of
the Cotonou Agreement on “Development Strategies”, which placed particular emphasis
on the support to “Economic development” and “Regional co-operation and integration”
as well as to “Institutional development and capacity building”. The latter had even been
defined by the Parties as a cross-cutting issue which needed to be addressed
systematically and comprehensively in all development programmes. It noted that these
provisions, although not meant to be exhaustive, already explicitly covered the vast
majority of the points raised by the ACP side.

In conclusion, the EC held the view that the challenge ahead was not to redefine general
commitments on the provision of EPA-related development finance operations but to
implement the already existing commitments through concrete actions. This could,
moreover, only be done at the national / regional level, since these actions needed to
respond to the specific needs and constraints of the countries and regions concerned.

The EC recalled its proposal to establish for each region engaged in EPA negotiations a
Regional Preparatory Task Force (RPTF), composed by experts of both sides
responsible for the implementation of ACP-EU development finance co-operation.
These RPTFs would participate in the regional EPA negotiations and have the mandate
to identify and to design EPA related support measures and to present proposals for
consideration within the national and regional programming dialogue between the EC


                                                                                        82
and the ACP countries and regions concerned. The RPTFs would thus be a forceful
instrument to ensure that, as already provided for by Article 18 of the Cotonou
Agreement, development finance co-operation and EPAs are interlinked and
complementary, and that efforts undertaken in both areas are mutually reinforcing.

The ACP side responded by reiterating the fact that it would be very prudent, within the
framework of EPA negotiations, to fully specify the development areas already
identified at the first joint dedicated session. The ACP also reiterated its position as
articulated at the first joint dedicated session that the ACP countries cannot benefit fully
from market enlargement unless they have the capacity to trade and the infrastructure to
support market enlargement. In this regard, the ACP Group was keen to get down to
substance and discuss how EPAs can build capacity and strengthen infrastructure and
thereby benefit fully from the EPAs.

The ACP side, therefore, emphasized that capacity building, infrastructure and issues
raised at the first dedicated session are central to the negotiations and must be discussed
in the context of the EPAs. Thus capacity building and infrastructure is one of the
precise links between EPAs and development support.

In conclusion, the ACP side emphasized that the Group must be informed through the
results of the EPA impact and sustainability studies of the implications of EPAs on their
respective economies. In the case that the ACP Group is not convinced of the benefits of
EPAs this will make their task in negotiating EPAs more difficult.

Both sides agreed to continue the discussion at the subsequent session. They further
agreed to exchange prior to this session relevant documentation on these issues so as to
facilitate a more in-depth discussion. The second dedicated session was adjourned on
this note.




                                                                                         83
ACP/00/086/03 Rev 1                Brussels, 24 September 2003
ACP-EC/WG/D/MN/30




NEGOTIATIONS OF ECONOMIC PARTNERTSHIP AGREEMENTS (EPAs)




   Joint Report of the Third Dedicated Session on the
           Development Dimension of EPAs




                                                             84
            Joint Report of the Third Dedicated Session on the
                    Development Dimension of EPAs


INTRODUCTION

The third dedicated session on the development dimension of EPAs took place
in the afternoon of Wednesday, 04 June 2003 at ACP House. This report
captures the main elements and conclusions of the discussion.

The session was co-chaired by H.E. Ambassador Jaques OBIA of the Republic
of Congo and Mr. Ingo FEUSTEL of DG Trade.

In his introductory remarks, the ACP co-chair expressed concern that the EC
was not able to exchange documentation with the ACP on the link between
EPAs and development support as this was intended to facilitate a more in-
depth discussion at the third dedicated session. It was noted that the ACP side
had exchanged its documentation with the EC on capacity building and
infrastructure.

The ACP side, however, expressed the hope that the two sides will be able to
make good progress and reach some conclusions on the issues under
consideration.

In response, the EC took note of the concerns of the ACP side. It indicated that its
inability to exchange documentation was due to the fact that it did not prepare
written interventions for the meetings, so as to allow discussions to be fruitful and
to the point. It expressed the confidence that, nevertheless, there would be in-depth
discussion on the two issues.

AGENDA ISSUES

Both sides agreed on a flexible approach in the discussion on the following
issues:

   1.        Approval of the draft joint reports:

        •       Joint report for the 1st joint dedicated session; and
        •       Joint report for the 2nd joint dedicated session;

   2.        Link between EPAs and development support

        •       capacity building
        •       infrastructure




                                                                                  85
1.     APPROVAL OF THE DRAFT JOINT REPORTS

       (i)    Draft Joint Report of the 1st Dedicated Session
              [ACP/00/043/03 rev 2 – ACP-EC/WG/D/MN/23]

Both sides approved the draft joint report of the first joint dedicated session. It
was also agreed that the report be annexed to the joint report of the 5th Joint
Ambassadorial session on EPAs.


       (ii)   Draft Joint Report of the 2nd Dedicated Session
              [ACP/00/076/03 – ACP-EC/WG/D/MN/29]

The ACP side expressed agreement with the content of the draft joint report of
the 2nd joint dedicated session and proposed its adoption.

The EC, however, expressed reservation. It held the view that the draft report
contained an ambiguity which needed to be sorted out before proceeding any
further. In its opinion, the views expressed by the ACP side on the link between
EPAs and development support, as is reflected in the first two sentences of
paragraph 15 of the draft joint report, seemed to indicate that the ACP side
considered EPAs as simple trade agreements, setting rules for trade between
the parties. In reality, there seemed to have been an understanding that EPAs
will directly contribute to the economic development of the ACP countries, by
enlarging their markets and by improving the predictability and transparency of
the regulatory framework for trade, thereby creating the conditions for increased
investment and enhancing the supply capacity. EPAs were thus an undertaking
using trade policy as an instrument for development.

In response, the ACP side made it clear that its reading of paragraph 15 of the
joint report of the second dedicated session did not seem to be consistent with
EC interpretation. In this regard, it reiterated its earlier views that trade policy by
itself will not help meet the two objectives of reducing poverty and integrating
the ACP economies into the global economy. Without addressing the need to
enhance, inter alia, production and trading capacities, trade policy by itself will
not generate the envisaged results of EPAs. The ACP side emphasized that the
two positions would be complimentary if the development of these capacities
would be included into the concept of the link between EPAs and development
support.


After due consideration of the view expressed, both sides agreed that the two
positions are in reality not contradictory but indeed complementary: while EPAs
will directly contribute, through the establishment of an appropriate framework
for trade, to the development of the ACP countries, EPAs also need to be
accompanied by appropriate development support measures so as to allow ACP
countries to maximize the benefits of EPAs. To achieve this, EPAs need to be
mainstreamed into the development policies of the ACP countries and regions
and fully integrated into the development support strategies of the EC.


                                                                                    86
The discussion on these issues was concluded on the following lines:

•    Both sides agreed that their positions were in fact complementary: while
     EPAs will directly contribute to the development of the ACP countries, they
     also need to be accompanied by appropriate development support measures
     so as to allow ACP countries to maximize the benefits of EPAs.

•    To achieve this, EPAs need to be mainstreamed into the development
     policies of the ACP countries and regions and fully integrated into the
     development support strategies of the EC.

•    Based on this understanding, both sides agreed to approve the joint report.

•    They also agreed that the report should be presented to the 6th joint
     Ambassadorial session on EPAs.



2.      LINK BETWEEN EPAs and DEVELOPMENT SUPPORT


        (i)    CAPACITY BUILDING

The ACP side briefly introduced its position on the subject in view of the fact that
the details were elaborated at the previous dedicated session. Emphasis was
placed on the three principles that should underline joint consideration of
capacity building strategies within the EPAs. These are:

        1. the necessity to take into account the different levels of development
           and capacity of the ACP countries;

        2. building capacities in five key areas that will contribute to poverty
           reduction and enhancement of competitiveness of the productive
           sectors of the ACP countries; these are capacities to:
               a.     upgrading the overall productive capacity;
               b.     export;
               c.     attract and retain investment;
               d.     respond to market requirements; and
               e.     capacity to engage in trade governance.

        3. capacity building activities should be targeted at three main categories
           of stakeholders:
                    i. Governments;
                   ii. National and regional inter-governmental, professional and
                       financial institutions servicing the productive and
                       export/import sectors in the ACP countries; and
                  iii. ACP enterprises and other economic actors.



                                                                                 87
In conclusion, the ACP side reiterated that the specific measures proposed to be
undertaken in the context of EPAs under the five major areas of capacity
building were elaborated in the position document ACP/00/036/03 sent to the
EC in line with the agreement of the 2nd joint dedicated session.

The EC agreed on the importance of capacity building in the EPA process for all
three categories of actors mentioned by the ACP side. It recalled the provisions
of the Cotonou Agreement (Articles 19-33) which even defined capacity building
as a “crosscutting issue”, to be systematically considered in all EDF financed
development programmes, including in the field of trade and regional
integration.

It further recalled that these provisions also defined general guidelines for
support in this area (which were further elaborated in the Compendium provided
for in Article 20(3) of the Cotonou Agreement) and noted that these guidelines
did not differ in substance from the position paper presented by the ACP side.
Therefore, while not disagreeing with the ACP position paper, the EC held the
view that rediscussing general principles on capacity building was not really
useful, since an understanding on this issue already existed. Instead, it was
more important than ever to ensure that this agreement on principles be
translated into concrete actions, so as to effectively tackle the specific needs of
the ACP countries and regions. Considering the diversity of the ACP countries
and regions, this could only be done at the national and regional level. It recalled
that it has proposed for that purpose the establishment of Regional Preparatory
Task Forces. These task forces would be composed by development and trade
experts from both sides and be mandated to identify, in the context of the
regional negotiations, the concrete needs of the countries and regions
concerned and to elaborate appropriate proposals for EDF financing.

The discussion on capacity building was concluded on the following lines:

•   Both sides concurred on the importance of capacity building for the EPA
    process;

•   Both sides noted the commitment of the EC to support capacity building in
    this context and a convergence of views on the general principles and
    modalities for such support as defined by the Cotonou Agreement and the
    Compendium;

•   Both sides concurred on the need to ensure the implementation of these
    principles and modalities, through the identification and design of appropriate
    capacity building programmes and projects.


       (ii)   INFRASTRUCTURE

In introducing the discussion, the ACP side made a reference to the position
document ACP/00/049/03 on Infrastructure that was sent to the EC after the 2nd
joint dedicated session. In this document the ACP initially identified the following
key sectors, inter alia:


                                                                                 88
   •       Transport;

   •       Energy; and

   •       Information and Communication Technologies (ICTs).

On transport, the ACP position was that development of the transport sector in
these countries is an indispensable support for the creation and distribution of
wealth, the expansion of which conditions the development of other aspects of
our economic and social progress. To this end, the EPA process should seek to
ensure that the sustainable development of the transport sector leads to:

   •       access to maritime ports and airports;

   •       liaisons between urban centres and the interior;

   •       liaisons between production centres and markets;

   •       development, rehabilitation, and maintenance of rural infrastructures; and

   •       promoting the integration of transport infrastructures, and harmonizing
           regulations and procedures.

On energy, the position of the ACP side was that energy is a major factor in
sustainable development. The ACP Group’s objective through the EPA process
is to ensure a sustainable and more efficient energy system. To this end, efforts
must be made to:

   •       incorporate energy as a horizontal factor in development programmes;

   •       ensure greater access to energy;

   •       guarantee a supply of high quality and affordable energy; and

   •       enhancing technology transfers, particularly those relating to renewable
           energies.

On information and communication technologies (ICTs), the position of the
ACP side was that most ACP States and regions are yet to benefit from the
socio-economic advantages pertaining to information and communication
technologies (ICTs) due mainly to, inter alia, the lack of telecommunication
infrastructure. Access to information, and therefore to knowledge acquisition, is
viewed as crucial for the development of ACP States. The development and
strengthening of ICTs infrastructure networks in the context of the EPA process
should, therefore, focus on the following:

       •    Provision of access to affordable, reliable and competitive ICTs products
            and services;


                                                                                   89
    •   Expansion and modernisation of telecommunication networks;

    •   Establishment of adequate policies and regulatory frameworks, including
        the adoption of, and compliance with, appropriate international
        standards; and

    •   Active promotion of the use of ICTs, particularly in rural areas.

The EC agreed on the need to ensure that EPAs and development cooperation
are complementary and mutually supportive and on the importance, in this
context, of the issues raised by the ACP side. It noted that the scope of the
Cotonou Agreement was broad enough to provide any assistance which might
be required by the ACP countries and regions, and recalled that general
strategies for the provision of development assistance in the areas mentioned
by the ACP side had already been defined in the Compendium. As in the case
of capacity building, there was therefore no need to reinvent the wheel, but the
challenge ahead was to make it roll.

The EC further noted that, if it wanted to make any criticism on the ACP position
paper, it would be that this paper was not ambitious enough and too limited in its
scope. In transport, for example, efforts to develop the physical infrastructure
would be redundant, if they were not coupled with efforts to develop the related
service sectors. A good port infrastructure, for instance, will not be fully exploited
without competitive handling and well- functioning customs services. Therefore,
a more comprehensive approach was needed. On the other hand, it drew the
attention to the shortcomings of a sector specific approach. The construction of
roads, for instance, had an impact not only on the development of trade, but
also on other specific development objectives, as for example, access to health
care or to education facilities.

For this reason, the Cotonou Agreement had opted for an integrated approach
to development cooperation, with a view to increasing its effectiveness
(efficiency) and to maximizing its contribution to the achievement of the overall
development objectives. All these considerations pointed to the need to make
EPAs part and parcel of the development policies of the ACP countries and
regions as well as of the support strategies of the EC.

In response, the ACP side reiterated that the development dimension of EPAs
was not yet internal to the provisions of the Cotonou Agreement on development
strategies and to the Compendium. Further that in the spirit of cooperation, the
EC should assist in identifying this EPA specific dimension of development co-
operation and integrating it into the ACP-EC development cooperation
arrangements. As regards the practical implications of such development
cooperation arrangements to support the EPA specific development needs, the
ACP side asked the EC whether financial resources would be appropriately
allocated to these needs.

The EC agreed on the need to identify in a spirit of partnership the specific EPA-
related development needs of the ACP countries and regions and to provide for


                                                                                   90
appropriate support within its development support strategies. In response to the
financing issue, it recalled that an amount of 600 mio € was already available
within the 9th EDF to reinforce ACP trade and integration capacities. It further
noted that one of the reasons for the slow disbursement of available funds was
often due to lack of absorption capacity in the ACP side. Therefore, since a
priority was to reinforce the capacity to identify trade-related needs, the EC had
put in place the € 20 million facility for EPA negotiations, of which about 50 %
was still available. In early 2004, the new € 50 million intra-ACP facility would
become operational. It had three pillars: the first one aimed at helping the ACP
to identify trade-related needs and to draw up coherent action plans, the second
one aimed at reinforcing ACP countries and regions capacities in terms of trade
policy formulation, and the third one was targeted at providing short term
support to address trade-related institutional capacity problems. The mid-term
review process on the 9th EDF, scheduled to take place during 2004, would
allow to build on the results of this work. Review of country and regional
strategies would indeed specifically pay attention to trade issues in general and
to the EPA dimension in particular, and make available, where appropriate,
increased funding for that purpose. Finally, by the year 2004-2005, the
discussion on the 10th EDF would most probably start. In this regard, while
recalling that any discussions on the 10th EDF was outside its mandate, the EC
expressed the view that overall allocation would without any doubt depend to a
large extent on the state of disbursement of funds currently available. If all these
funds had been disbursed, or at least committed, additional needs connected to
the EPA process would certainly be taken into consideration.

The discussion on infrastructure was concluded on the following lines:

     •   Both sides concurred on the importance of infrastructure in the context
         of the EPA process;

     •   Both sides noted the commitment of the EC to support the development
         of infrastructure in this context and a convergence of views on the
         general principles and modalities for such support as defined in the
         Cotonou Agreement and the Compendium;

     •   Both sides concurred on the need to ensure the implementation of these
         principles and modalities, through the identification and design of
         appropriate projects and programmes.


3.       ANY OTHER BUSINESS

Under this item the two sides agreed that the 4th dedicated session will take
place on 27th June at 15.00 at the ACP House and will focus on other aspects
of the link between trade and development co-operation.




                                                                                 91
ACP/00/107/03                     Brussels, 24 September 2003
ACP-EC/WG/D/MN/36
Or:FR/Tr:AM/Rev:SB




    NEGOTIATIONS OF ECONOMIC PARTNERSHIP
              AGREEMENTS (EPA)




       Joint report on the fourth dedicated session
      on the development dimensions of the EPAs
                       27 June 2003




                                                                92
          Joint report on the fourth dedicated session
         on the development dimensions of the EPAs

A.   INTRODUCTION

1.   The fourth dedicated session on the development dimensions of EPAs
     was held at ACP House on Friday 27 June 2003. It was chaired by
     Ambassador Jacques OBIA of the Republic of Congo, and Mr. Ingo
     Feustel of the European Commission (EC).

2.   Without adopting a formal agenda, the two parties agreed to discuss
     industrial development and regional integration.


B.   INDUSTRIAL DEVELOPMENT

3.   The ACP side initiated the discussion by stating that opening up trade did
     not automatically lead to enhanced economic growth. To ensure growth,
     trade liberalisation must take account of the different levels of
     development; respect the principles of comparative advantage, vertical
     and horizontal integration, EU support through its development
     cooperation policy, and the possible resort to safeguard measures. To
     formulate the most effective industrial policies possible, it is also
     important to take account of the different levels of economic
     development. In that regard, six key areas should be given special
     attention:

     -     creation of a conducive business climate ;
     -     enhanced productivity and competitiveness;
     -     develop capacity to adapt and manage standards and quality;
     -     access to funding;
     -     technological development; and
     -     human resource development.

4.   The EC replied that the industrial development of ACP countries and
     regions was one of the objectives of EU-ACP cooperation. In pursuing
     that aim, it was necessary to make full use of all the instruments available
     under the Cotonou Agreement. The EPAs were one of these and would
     contribute directly to attaining the objectives defined by the ACP side,
     particularly the creation of a conducive business climate. To maximise
     the potential benefits of the EPAs to ACP countries and regions, the EPA
     negotiations ought to take account of the diverse national and regional
     specificities and constraints and of the development objectives defined by
     the countries and regions in question. However, although the EPAs will
     make a significant contribution to ACP industrial development, they must
     be accompanied by appropriate support measures which extend beyond
     the few areas mentioned by the ACP side. These measures must be




                                                                              93
     supplementary to the EPAs; the measures and the EPAs must be
     mutually supportive.

5.   The ACP side noted that there was broad agreement on these issues.
     Both parties therefore concluded that the industrial development of the
     ACP countries and regions would constitute one of the EPA objectives.
     They also agreed that EPAs and development aid measures must be
     complementary and mutually supportive. As regards the necessary
     support measures for industrial development, the parties agreed they
     should meet the specific needs of the countries and regions concerned in
     particular in some of the identified key areas


C.   REGIONAL INTEGRATION


6.   The ACP side stressed that one of the main EPA objectives should be to
     strengthen the various ongoing regional integration processes within the
     ACP Group. The EPA negotiations must therefore take account of the
     complexity of the existing initiatives, as well as their political and trade
     schedules. The ACP side also stressed that the EPAs should, inter alia,
     take account of the regional dimension of the following factors: trade in
     goods and services, rules-related issues, implementation mechanisms
     and cooperation instruments. In conclusion, the ACP side emphasized
     the importance of adequately assessing the regional significance of the
     EPAs. To maximise the possible outcome of the EPA negotiations, it will
     be necessary to ensure their complementarity in relation to ACP and EU
     development strategies.

7.   The EC confirmed that, pursuant to the provisions of the Cotonou
     Agreement, one of the EPA priorities would be to reinforce the ongoing
     regional integration initiatives among ACP States and regions. The EPAs
     will therefore be based on the ongoing processes and are expected to
     contribute to their consolidation, particularly regarding any potential
     overlap and implementation problems. The EC indicated its willingness to
     subscribe to the areas mentioned by the ACP side, the regional
     dimension of which should be taken into consideration. In any event,
     these areas corresponded to the elements contained in the “toolbox”
     discussion paper which the EC presented at the third ambassadorial
     meeting (EC/NG/WD/12 EN). The EC also said the EPAs would assist in
     introducing harmonised rules at regional level, with a view to facilitating
     intra-regional trade without necessarily creating new barriers to trade with
     third countries, particularly other ACP countries and regions. As regards
     instruments of cooperation, efforts must be made to ensure they also
     contribute to strengthening regional integration both through their design
     and implementation.




                                                                              94
8.   Finally, the parties achieved a broad convergence of views on the
     following issues:

       •   First of all, it was agreed that support for regional integration
           initiatives between ACP States would constitute one of the main
           EPA objectives. It follows that the EPAs should take account of the
           integration processes of the regions concerned and support the
           processes rather than undermine them. Where appropriate, EPAs
           will be used to reinforce regional integration, inter alia by assisting
           in the regional harmonisation of trade-enhancing rules;

       •   Both parties concurred that appropriate tools to support regional
           integration processes be considered and agreed upon during the
           EPA negotiating process building on the elements identified in the
           EC document on the “tool box”, namely trade in goods, trade in
           services, trade-related issues and enforcement mechanisms;

       •   The EC is committed to support the regional integration processes
           in the context of EPAs and the general principles and modalities
           for such support as defined in the Cotonou Agreement and the
           Compendium.




                                                                               95
ACP/00/0119/03 Rev.1      Brussels, 26 September 2003




      ACP FOLLOW-UP MECHANISM
 FOR PHASE II OF THE EPA NEGOTIATIONS




                                                 96
                      ACP FOLLOW-UP MECHANISM
                 FOR PHASE II OF THE EPA NEGOTIATIONS



I.    Mandate :

      1. Ensure circulation of information among the regions;

      2. Ensure transparency and coherence in the various regional negotiating
         processes;

      3. Facilitate dialogue and consultation;

      4. Give advice and make recommendations – on its own initiative or on request
         - on any issue related to the negotiations (difficulties, deadlock, etc.);

      5. Conduct a study of the state of advancement of the negotiating processes and
         make recommendations where necessary;

      6. Identify, on the basis of “All-ACP” issues and areas of interest determined
         by the Group, the effect that any position or agreement adopted by any region
         with the EC might have on the other regions or the Group;

      7. Make recommendations for enhancing the effectiveness of approaches and
         strategies that might help the ACP regions in conducting the Phase II
         negotiations.


II.   Structure :

      1.     Technical level: Follow-up Group comprising:

             •    Chief technical negotiator for each region or any other configuration;
             •    A representative from each of the 6 ACP regions;
             •    A representative of the regional organisation if the latter is not
                  conducting the negotiations;
             •    Secretary-General of the ACP Group;
             •    Troîka of the Committee of Ambassadors;
             •    A representative of the Group of Senior Experts.

      The Group may have recourse to any expertise it considers necessary for the
      smooth conduct of its work.




                                                                                     97
       2.    Political level :

             •   Committee of Ambassadors
             •   Council of Ministers

       The Ministerial Trade Committee will be kept informed by the Committee of
       Ambassadors and may make any recommendation it deems appropriate to the
       Council of Ministers.


III.   Operating modalities

       1.    Negotiators will periodically submit progress reports on the negotiations
             to the ACP Secretariat;

       2.    The Technical Follow-up Group will meet at least twice per year to
             examine the negotiators’ reports;

       3.    The ACP Secretariat will report to the Committee of Ambassadors who
             will make recommendations to the Council of Ministers;

       4.    With due regard to the Committee of Ambassadors’ report and possible
             recommendations from the Ministerial Trade Committee, the Council of
             Ministers will review the state of advancement of the negotiations to
             ensure coherence between the various processes, in conformity with the
             ACP Group’s principles of unity and solidarity and with due
             consideration of the situation in each ACP region.

       5.    At the request of one or more regions, the Council may examine any issue
             relating to the EPA negotiations.


                                 ---------------------------




                                                                                   98
ACP/61/113/03 Rev.1                           Brussels,   28   September   2003
Sustainable Economic Development Department




         ACP-EU NEGOTIATIONS OF ECONOMIC PARTNERSHIP
                         AGREEMENTS

                AREAS OF CONVERGENCE AND DIVERGENCE




                                                                            99
                                                            A.     APPROACH AND STRUCTURE

      ISSUES                CONVERGENCE                                        DIVERGENCE                                     REMARKS
                                                                      ACP                            EC

Approach to the    Conduct of the negotiations in two Phase I is for negotiation of        Phase I is simply for The divergence on the nature of
Negotiations       phases.                               issues cutting across the         clarifications.       Phase I exists since the start of
                                                         interests of all ACP countries.                         the negotiations.
                   Phase I could extend until September
                   2003 when Phase II negotiations
                   could start.    Phase I covers the
                   principles and objectives of EPAs and
                   issues of common interest to all ACP
                   States while Phase II would address
                   issues specific to the ACP countries
                   and regions.

Structure of the   Conduct of the negotiations at two
Negotiations       levels, namely Ministerial and
                   Ambassadorial.

                   Holding of dedicated sessions to
                   allow for detailed consideration of
                   specific issues.
                                                                     B.      LEGAL ISSUES

     ISSUES            CONVERGENCE                                        DIVERGENCE                                              REMARKS
                                                            ACP                                  EC

Principles and      Agreement     on      the Conclusion of an all-ACP-EU          No need to conclude an all-ACP-
Objectives of       principles and objectives Agreement.                           EU Agreement.
EPAs                set out in the Cotonou
                    Agreement.                Additional financial resources       The question of financial
                                              should be provided to support        resources has been settled in the
                                              adjustments to be made by the        context    of    the     Cotonou
                                              ACP as a result of EPAs.             Agreement.


General Structure                              Agreement should be reached No need to agree on the general             The ACP want agreement to be
and Content of                                 during Phase I on the general structure and content/scope of            reached on this issue because they
EPAs                                           structure and content/scope of EPAs.                                    consider that this would facilitate
                                               EPAs.                                                                   Phase II negotiations.

Outcome of                                     Phase I should result in clearly-   Phase I does not warrant any        There has been a divergence of
Phase I                                        defined     legally      binding    commitments, in so far as the       views from the start of the
                                               commitments. According to the       EPA negotiations already have a     negotiations on this issue of crucial
                                               ACP Negotiating Guidelines,         legal basis in the Cotonou          importance to the ACP Group. This
                                               an all-ACP-EU Agreement             Agreement.                          issue needs to be resolved as soon
                                               should be concluded.                                                    as possible.




                                                                                                                                                               1
     ISSUES              CONVERGENCE                                     DIVERGENCE                                REMARKS
                                                              ACP                              EC

Compatibility of    EPAs must be compatible         Current WTO rules are not Current WTO rules contain the
EPAs with WTO       with WTO rules then             adequate enough to sustain the flexibility required by EPAs.
Rules               prevailing and take into        implementation of coherent
                    account the evolutionary        development strategies in ACP
                    nature of WTO rules.            States and need to be adapted to
                                                    take due account of their
                    There should be closer situation and specific interests.
                    cooperation between the ACP
                    and the EC during the on-
                    going WTO negotiations.
Definition of the   The European Commission is The          Cotonou      Agreement EPAs are to be concluded with
                    the negotiator while the equally provides for the ACP regions and not with
Parties to EPAs     European Community would possibility of concluding EPAs individual ACP States.
                    be a party to EPAs; in case with individual ACP States.
                    EPAs cover areas of mixed
                    competence, the EU Member
                    States would also be parties
                    thereto. Nonetheless, since
                    the EC is in the process of
                    reforming its institutions, the
                    EC’s competence in trade
                    issues could be modified.

                    As regards the ACP, it has
                    not yet been established
                    whether the structure that
                    negotiates would be a party to
                    EPAs.




                                                                                                                             2
     ISSUES             CONVERGENCE                                       DIVERGENCE                                         REMARKS
                                                              ACP                            EC

Modalities for     This issue is linked to that of
Entry into Force   definition of the parties to
of EPAs            EPAs because once the
                   parties are known, this would
                   help to determine the
                   procedures to be followed for
                   entry into force of EPAs.
Mechanism for      There is agreement on the                                                                      The details of this mechanism have
Follow-up of       principle of an all-ACP-EC                                                                     yet to be worked out.
Phase II           follow-up mechanism for
Negotiations       Phase II negotiations.
Non-Execution                                        EPAs should not include The non-execution clause should be
Clause                                               the non-execution clause as included in EPAs.
                                                     this would be tantamount to
                                                     providing a mechanism for
                                                     the imposition of trade
                                                     sanctions.
Dispute                                                                                                           There has been a preliminary
Settlement                                                                                                        exchange of views on this issue.
                                                                                                                  The ACP and the EC agreed that
                                                                                                                  this issue would be further
                                                                                                                  examined at a later stage.




                                                                                                                                                       3
                                                                    C.   MARKET ACCESS

    ISSUES                    CONVERGENCE                                      DIVERGENCE        REMARKS
                                                                         ACP                EC

Objectives and   There is convergence of views on the
Principles       objectives and principles, including those
                 contained in the Cotonou Agreement, that
                 should govern market access for non-
                 agricultural products.
                 At the end of the EPA negotiations, no ACP
                 State should be worse off than it is currently.
                 The EPA negotiations on market access
                 should build on and improve the Lomé
                 acquis as well as take into account the
                 principle of special and differential treatment.

                 EPAs should build on regional
                 integration as spelt out in Article 35(2) of
                 the Cotonou Agreement, and since EPAs
                 are meant to build markets, both parties
                 agree on the principle of sequencing in
                 any trade liberalization scheme. Besides,
                 ACP States should not, in the context of
                 regional integration processes, give to
                 other ACP States less favourable
                 treatment than they give to the EU.




                                                                                                           4
 ISSUES         CONVERGENCE                                         DIVERGENCE                                                   REMARKS
                                                        ACP                                EC

Product     The product coverage of        The EC’s proposal for a product The product coverage should be
Coverage    EPAs will be defined in        coverage of more than 90% is 90%-plus.
            detail at the national or      excessive and does not take into
            regional level, taking         account      the    level     of
            account of the level of        development of ACP countries
                                           and their economic and social
            development of the ACP
                                           constraints.
            countries and regions
            concerned, of their socio-
            economic constraints, as
            well as of their capacity to
            adapt their economies to
            the liberalization process.

Transitio   The transition period should There should be a five-year The EC does not agree to the The EC does not exclude the possibility of
n Period    be as long as necessary.     moratorium before the start of ACP proposal for a five-year “backloading” the liberalization process for
                                         tariff dismantlement.          moratorium.                  any given product or sector, where this is
                                                                                                     required by specific constraints faced by the
                                                                                                     ACP countries and regions concerned.

                                           There should be a review          An open-ended liberalization        The EC, however, agrees that it would be
                                           process aimed at ensuring that    schedule defined on the basis of    possible to temporarily suspend – where
                                           the transition period would not   achievement       of     specific   serious difficulties occur as a result of trade
                                           end before the ACP economies      objectives   would     not     be   liberalization – the implementation of the
                                           involved would have reached a     compatible with the provisions of   agreed liberalization schedule and, where
                                           certain level of development.     the WTO.                            necessary, remodulate the rate of trade
                                                                                                                 liberalization.




                                                                                                                                                                   5
     ISSUES           CONVERGENCE                                    DIVERGENCE                                                REMARKS
                                                           ACP                             EC

Safeguard         Safeguard measures should
Measures          be incorporated in any
                  EPA.
Rules of Origin   There is agreement on the     Different sets of rules of     The EC is not favourable to     Both the ACP and the EC nevertheless
                  principle of cumulation of    origin should apply to the     asymmetrical rules of origin.   agree that the issue of asymmetrical rules of
                  origin at the all-ACP level   ACP and the EC in EPAs         For the EC, the rules could     origin should be examined at expert level,
                  as already provided for in    so as to take due account of   differ only from region to      with a view to improving the mutual
                  the Cotonou Agreement.        the differences in their       region for certain products     understanding of their respective positions.
                                                levels of industrialization    where this would be justified   This has yet to be done.
                                                and development.               by the specific needs and
                                                                               constraints of the regions
                                                                               concerned.




                                                                                                                                                               6
                                                  D.      AGRICULTURE AND FISHERIES AGREEMENTS

      ISSUES                CONVERGENCE                                   DIVERGENCE                     REMARKS
                                                                   ACP                  EC

Importance of     Agriculture and fisheries play a central
Agriculture and   role in the economies of most ACP
Fisheries         States. They are of vital importance for
                  achieving the objectives of the Cotonou
                  Agreement,       namely      sustainable
                  development of ACP States, eradication
                  of poverty and smooth and gradual
                  integration of ACP States into the world
                  economy.

Objectives        The EC has indicated during the
                  discussions that it agrees with the
                  objectives of sustainable development,
                  poverty     eradication    and   rural
                  development put forward by the ACP.
Principles        The negotiations in the area of                                                For     the     EC,     precise
                  agriculture will build on the Lomé                                             provisions should be agreed
                  acquis.                                                                        to    operationalize      those
                                                                                                 principles on a regional basis.
                  The EC has indicated that it agrees with
                  the principles of sustainability and trade
                  creation proposed by the ACP.

                  The EC agrees that a safeguard clause
                  can be envisaged. However, it should
                  not be disruptive of trade in agricultural
                  products.




                                                                                                                                   7
   ISSUES             CONVERGENCE                                       DIVERGENCE                                              REMARKS
                                                              ACP                                 EC

PMDT            PMDT is essential for adding PMDT is crucial       for the PMDT can only have an impact                The ACP have also proposed
                value to ACP agricultural transformation of ACP economies. if a dynamic private sector                 the conclusion of commodity
                products.                                                  exists. For the EC, it is EPAs              agreements under EPAs for the
                                                                           which would establish an                    importation into the EU of part
                                                                           enabling environment.                       of    ACP      production   of
                                                                                                                       commodities in order to ensure
                                                                                                                       a fair remuneration to ACP
                                                                                                                       producers.

                                                                                                                       The ACP have equally asked
                                                                                                                       for the establishment of a
                                                                                                                       mechanism to provide an
                                                                                                                       insurance to absorb the
                                                                                                                       volatility    in    prices    of
                                                                                                                       commodities.
Sanitary and    EPAs should address SPS issues Standstill on EC SPS measures The introduction of a standstill          The EC has, however, pointed
Phytosanitary   since they constitute obstacles to as from September 2003.   for ACP countries would not be            out that it would take new SPS
Measures        trade.                                                       possible since the EC has to              measures in accordance with
                                                                             retain the necessary latitude to          the WTO SPS Agreement so
                SPS issues can be dealt with at the                          introduce new measures where              that these measures are as least
                national, regional and even at the                           necessary.                                trade-distorting as possible and
                all-ACP level.                                                                                         based on internationally-agreed
                                                                                                                       standards.
                The EC is prepared to assist ACP                                    The EC has indicated that it has
                countries in building up their Derogation of five to ten years to   difficulties with the ACP
                capacity to meet SPS standards.  ACP countries from compliance      proposal on derrogation from
                                                 with EC SPS measures, depending    compliance with SPS measures.
                                                 on the measure.




                                                                                                                                                          8
    ISSUES                CONVERGENCE                                            DIVERGENCE                                            REMARKS
                                                                     ACP                                  EC

Sanitary and                                           Conclusion of SPS equivalence For the time being, equivalence           According to the EC, the
Phytosanitary                                          agreements with the ACP.      agreements        cannot     be           conclusion of equivalence
Measures (cont.)                                                                     concluded with ACP States                 agreements could, however,
                                                                                     because the latter do not have            be envisaged in the long term.
                                                                                     testing      and     conformity
                                                                                     assessment systems equivalent
                                                                                     to those of the EC.
Export Subsidies   The EC has indicated during the
                   discussions that agreements on
                   export refunds could be concluded
                   with interested ACP States, in
                   accordance with Article 54 of the
                   Cotonou Agreement.

                   The impact of the CAP reform
                   should be addressed during the
                   EPA negotiations.
Rules of Origin                                        Since the Cotonou Agreement Rules of origin should be
                                                       provides for cumulation at the all- negotiated at the regional level.
                                                       ACP level, rules of origin should
                                                       be negotiated at the all-ACP level
                                                       for incorporation in the proposed
                                                       all-ACP-EU agreement.
Fisheries          Possibility of concluding regional Conclusion of a framework The EC does not seem to be The two sides have agreed to
                   fisheries     agreements      with ACP-EU     Agreement   on favourable to the conclusion continue the discussion on the
                   interested ACP regions.            fisheries.                of a framework ACP-EU issue of a framework ACP-
                                                                                Agreement on fisheries.      EU Agreement on fisheries.




                                                                                                                                                                9
                                                  E.       TRADE IN SERVICES

      ISSUES          CONVERGENCE                              DIVERGENCE                                          REMARKS
                                                    ACP                                 EC

Specific Objectives                 Benefits of liberalization of trade in   The EC considers that the    For the ACP, the following
                                    services are not automatic and a         ACP objectives are a         specific objectives should be
                                    country cannot rely exclusively on       reflection of its rather     pursued in the field of services:
                                    foreign firms for the development        defensive stance towards
                                    of its services, particularly key        liberalization of trade in   (a) to strengthen the capacity,
                                    services such as water, health and       services.                        efficiency               and
                                    education.                                                                competitiveness of ACP
                                                                                                              countries in the supply of
                                                                                                              services, particularly those
                                                                                                              of export interest to them;

                                                                                                          (b) to improve access to the EU
                                                                                                               of services originating in
                                                                                                               ACP               countries,
                                                                                                               particularly in mode 4
                                                                                                               relating to the movement
                                                                                                               of natural persons; and

                                                                                                          (c) to     develop    effective
                                                                                                              measures for increasing
                                                                                                              ACP participation in world
                                                                                                              trade in services through,
                                                                                                              inter alia, access to
                                                                                                              technology, and access to
                                                                                                              distribution channels and
                                                                                                              information.




                                                                                                                                              10
     ISSUES                 CONVERGENCE                                          DIVERGENCE                                             REMARKS
                                                                       ACP                               EC

Development of        Support should be provided in       Financial resources additional     Additional resources cannot
the Services Sector   the context of EPAs for the         to EDF ones should be made         be provided to the ACP as
in ACP Countries      development of the services         available through rapid and        long as EDF resources are
                      sector in ACP countries, and        flexible          disbursement     still available.
                      should target the specific needs    procedures for the development
                      of ACP countries and regions.       of the services sector in the
                                                          ACP countries.
                      It is important to have in place
                      a regulatory framework that is
                      supportive of services activities
                      in ACP countries.

Liberalization of                                         There is no obligation under the   For the EC, the issue is not    Article 41(4) of the Cotonou
Trade in Services                                         Cotonou       Agreement       to   whether services should be      Agreement provides that “The
in the Context of                                         liberalize trade in services in    liberalized in the context of   Parties further agree on the
EPAs                                                      the context of EPAs.               EPAs, but when.                 objective of extending under the
                                                                                                                             economic partnership agreements,
                                                                                                                             and after they have acquired some
                                                                                                                             experience in applying the Most
                                                                                                                             Favoured Nation (MFN) treatment
                                                                                                                             under GATS, their partnership to
                                                                                                                             encompass the liberalisation of
                                                                                                                             services in accordance with the
                                                                                                                             provisions     of    GATS       and
                                                                                                                             particularly those relating to the
                                                                                                                             participation     of     developing
                                                                                                                             countries      in     liberalisation
                                                                                                                             agreements.”




                                                                                                                                                                    11
    ISSUES                    CONVERGENCE                              DIVERGENCE                         REMARKS
                                                                 ACP                EC

Principles for      Should liberalization of trade in services
Liberalization of   be undertaken in the context of EPAs, it
Trade in Services   should be underpinned by the principles
that Could be       of special and differential treatment,
Undertaken in the   asymmetry and positive regional
Context of EPAs     discrimination.

                    Both sides would retain the right to
                    regulate, and to introduce new
                    regulations on, the supply of services
                    within their territories in order to meet
                    national policy objectives.

Modalities for      Should liberalization of trade in services                           The EC has indicated that it intends to use the
Liberalization of   be undertaken in the context of EPAs, it                             “positive list” approach for services
Trade in Services   should be progressive, in principle                                  liberalization within EPAs. However, it does
that Could be       based on the “positive list” approach                                not want to close the door at this point in time
Undertaken in the   and adapted to the level of development                              to the possibility of having a horizontal
Context of EPAs     of the ACP countries and regions                                     standstill provision for services in EPAs. It is
                    concerned both in overall terms and in                               to be noted that in the EC negotiating
                    terms of their services sectors and sub-                             directives, it is stated that “The parties will
                    sectors and to their specific constraints.                           agree that no new or more discriminatory
                                                                                         measures will be introduced by either party
                    The negotiations would address whether                               after the beginning of the negotiations
                    and how a special safeguard mechanism                                between the regional grouping and the EC.”
                    in the area of trade in services could be
                    established.




                                                                                                                                            12
     ISSUES       CONVERGENCE                           DIVERGENCE                                            REMARKS
                                             ACP                                EC

Movement of                     The access of ACP service          Mode 4 is not the best means of   The EC has, however, indicated
Natural Persons                 suppliers to the EC market under   providing services to other       that it is willing to discuss the
                                mode 4 (movement of natural        countries, even from the          issue of mode 4 liberalisation in
                                persons) should be improved.       development point of view.        the EPA negotiations as it is an
                                                                                                     issue of mutual interest.




                                                                                                                                         13
                                                             F.      TRADE-RELATED ISSUES

   ISSUES            CONVERGENCE                                             DIVERGENCE                                           REMARKS
                                                                   ACP                               EC

General     While progress is being made in           Before proceeding to Phase II, a   It would be more logical for    The EC has, however, indicated
            lowering tariffs, other “behind the       uniform approach to trade-         negotiations of trade-related   its willingness to discuss the
            border issues” are becoming serious       related issues should be agreed    issues to be with ACP           ACP position at a future
            barriers to trade. In order to have       during Phase I. That approach      countries or regions during     dedicated session.        The
            smooth trade flows between the            could address the scope and        Phase II.                       dedicated session has not yet
            parties to EPAs, issues such as           coverage of the issues as well                                     taken place.
            standards, sanitary and phytosanitary     as the modalities for co-
            measures or rules for the protection of   operation in these areas.
            consumers need to be addressed so as
            to ensure that, even where these
            measures have been introduced for
            valid reasons, they do not result in
            high costs and become practical
            obstacles to trade.

            Well functioning infrastructure and
            institutions,      and   appropriate
            regulatory systems are two necessary
            ingredients for the success of any
            trading       economy,   and     are
            complementary.




                                                                                                                                                          14
    ISSUES          CONVERGENCE                                           DIVERGENCE                                       REMARKS
                                                               ACP                                    EC

WTO            Account should be taken of the Unless multilateral trade rules are        EPAs should be WTO-plus in
Discussions    discussions in the WTO.        crafted in the additional areas            the area of trade-related
                                              proposed by the EC and on                  issues and the ACP should
                                              competition policy, investment and         not let the WTO process
                                              trade facilitation, the ACP would not      dictate the agenda of the EPA
                                              be amenable to negotiate any rules in      negotiations.
                                              the context of EPAs. The WTO has
                                              yet to agree on how to treat some of
                                              the trade-related issues in a
                                              multilateral context.
Scope and                                      What is critically important is to        The list of trade-related areas
Coverage of                                    urgently acquire the requisite            that EPAs could address
Issues to be                                   expertise,       institutions      and    should go beyond the issues
Addressed                                      infrastructure for dealing with trade-    contained in the Cotonou
                                               related issues before the ACP can         Agreement        to     include
                                               agree to negotiate specific rules.        government procurement and
                                                                                         data protection.
                                               Negotiations are not required on all of
                                               the issues listed in Articles 44-52 of
                                               the Cotonou Agreement.
                                               There should not be negotiations on
                                               the additional areas proposed by the
                                               EC and some of the areas in which
                                               multilateral rules have not been
                                               agreed upon.




                                                                                                                                     15
                                                          G.    DEVELOPMENT ISSUES

      ISSUES                CONVERGENCE                              DIVERGENCE           REMARKS
                                                               ACP                   EC

Link between EPAs    EPAs must be instruments for
and Development      development, and not ends in
                     themselves.

                     EPAs must take account of the
                     development policy objectives of
                     the ACP countries and regions
                     concerned as well as the specific
                     economic, social, environmental
                     and structural constraints of the
                     ACP countries concerned and
                     their capacity to adapt their
                     economies to the EPA process.

                     EPAs should be accompanied by
                     appropriate development support
                     measures so as to allow ACP
                     countries to maximize the
                     benefits of EPAs.

Capacity Building    Capacity        building       and
and infrastructure   infrastructure are crucial for the
                     EPA process and the EC is
                     committed to support the ACP in
                     this respect.




                                                                                                    16
     ISSUES          CONVERGENCE                         DIVERGENCE        REMARKS
                                                   ACP                EC

Industrial    The industrial development of the
Development   ACP countries and regions would
              constitute one of the EPA
              objectives.

              EPAs and development aid
              measures must be complementary
              and mutually supportive.

              The necessary support measures
              for industrial development should
              meet the specific needs of the
              countries and regions concerned
              in particular in some of the
              identified key areas, namely the
              creation of a conducive business
              climate; enhanced productivity
              and               competitiveness;
              development of the capacity to
              adapt and manage standards and
              quality; access to funding;
              technological development; and
              human resource development.




                                                                                     17
      ISSUES                  CONVERGENCE                           DIVERGENCE        REMARKS
                                                              ACP                EC

Regional integration   The strengthening of regional
                       integration initiatives between
                       ACP States would constitute one
                       of the main EPA objectives.
                       EPAs should therefore take
                       account of the integration
                       processes      of the regions
                       concerned and support those
                       processes rather than undermine
                       them.

                       Where appropriate, EPAs will be
                       used to reinforce regional
                       integration, inter alia by assisting
                       in the regional harmonisation of
                       trade-enhancing rules.

                       Appropriate tools to support
                       regional integration processes
                       should be considered and agreed
                       upon during the EPA negotiating
                       process.




                                                                                                18
      ISSUES       CONVERGENCE                             DIVERGENCE                                                REMARKS
                                                ACP                                    EC

Additionality of                 Additional resources over and           Resources       available    for   This is an issue of crucial
Resources                        above those available under NIPs        financing of development           importance to the ACP which
                                 and RIPs must be provided to the        cooperation for the next 5         needs to be resolved as soon as
                                 ACP through rapid and flexible          years have been agreed in the      possible.
                                 disbursement procedures so as to        framework of the Cotonou
                                 support the adjustment costs that       Agreement. This question is        Another important issue which
                                 EPAs will entail.                       not up for renegotiation in the    is yet to be discussed is the
                                                                         framework of the current           fiscal, economic, balance of
                                 NIPs and RIPs have been                 EPA negotiations. The real         payments        and        social
                                 programmed in favour of strategic       challenge is not to increase       implications of EPAs. As has
                                 sectors identified through national     the     available      financial   been recognized in the ACP
                                 and       regional       development    resources but rather to make       Negotiating Guidelines, the
                                 strategies.        Thus,    diverting   better use of them.                ACP would, inter alia, need
                                 resources from such sectors in                                             additional financial resources to
                                 favour of EPA adjustment will                                              offset the adjustment costs
                                 undermine the development efforts                                          which EPAs would entail.
                                 engaged by the ACP.
Regional                         A task force of ACP-EC experts          Regional Preparatory Task
Preparatory Task                 should be established at the all-       Forces should be established
Forces                           ACP-EC level in order to ensure         to ensure coherence, on a
                                 that the development dimension is       regional basis, between EPAs
                                 incorporated in the EPA process.        and development support
                                                                         provided in the framework of
                                                                         the Cotonou Agreement.




                                                                                                                                                19

				
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