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Preferential Agreements, Non-Tariff
Barriers and Associated Market
Access Issues
Andrew Mold
UNECA, Addis Ababa, Ethiopia
Presentation at the Regional Meeting on EPAs,
22-24 September, 2005, Mombasa, Kenya
Presentation outline
The Issue- What are we giving up?
Evaluation of preferential market access –
was it really so bad as they tell us?
Reasonswhy preferential schemes did not
always meet expectations
impediments to African exports –
New
NTBs
Preferential Market Access
Proliferation of preferences:
- 28 for LDCs
- 9 of those from Quad countries
Why? Recognition of need for “Special and
Differential Treatment”
But also advantages for preference-granting
countries…a posteriori cost, non-binding,
graduation, lower import bill, etc.
Ways to Evaluate Preferences
1. Share of preference-countries in imports
2. Product Specific- Analysis
3. Utility and Utilization Rates
4. Econometric estimation using gravity
models
5. General equilibrium modelling
Share of ACP Countries in EU
Imports
1980 1990 2000
Total Imports 21.7 21.0 28.6
(billions euros)
ACP share 7.7 4.7 2.7
ACP trade - 3.7 -3.6 -2.2
balance with EU
Share of EU preferential imports by
region (average 2001-2002)
100
80
Percentage
60
Subsaharan Africa
40
Latin America
20 Top 10 World
0
Utilization and Utility Rates of
Preferences for LDCs
GSP/Dutiable Utilization Utility
Imports Rate Rate
EU 99 34 33
United States 54 77 41
US (exclud. 5 79 4
Minerals)
Canada 11 59 6
Japan 41 73 30
Total 69 53 37
High Usage of Preferences by
African Countries?
In general, preference use is indeed
high!
OECD (2004) research shows that
choice of scheme depends on –
1.Size of the Transactions
2.Size of Margins
3.Rules of origin
Knowledge of schemes is also important
Use of EU Preferences
Country 1,000 in 1000€ in %
Total MFN= zero MFN + Imports MFN = 0 Cotonou
Imports Cotonou under MFN Preferences
zero or Cotonou
Ivory Coast* 2,600,303 1,652,511 2,470,654 95.0% 63.6% 36.4%
Angola 2,264,214 2,194,183 2,264,203 100.0% 96.9% 3.1%
Kenya 845,305 281,319 834,662 98.7% 33.3% 66.7%
Mozambique 582,737 25,265 573,894 98.5% 4.3% 95.7%
Senegal 404,990 81,540 399,211 98.6% 20.1% 79.9%
Uganda 259,375 127,682 259,310 100.0% 49.2% 50.8%
Ethiopia 183,860 139,661 175,019 95.2% 76.0% 24.0%
Mali 65,450 55,334 65,107 99.5% 84.5% 15.5%
Lesotho 10,255 6,573 10,255 100.0% 64.1% 35.9%
African ACP Countries
– Total 23,326,717 17,279,488 22,698,061 98.0% 74.10% 23.20%
Why might preferences be less
efficient now?
Preference margin erosion (av. tariffs 30%
1970, now 3%)
Proliferation of preferences (AGOA, EBA,
GSP, GSP+, Cotonou, etc.) has devalued
existing preferences
Free trade agreements make some preferences
obsolete
Decline in terms of trade (e.g. Ocampo y
Parra, 2003)
Overall protection in agriculture
(Percent tariff equivalent)
Type of United Canada European Japan
protection States Union
Tariffs 8.8 30.4 32.6 76.4
Subsidies 10.2 16.8 10.4 3.2
Total 19.9 52.3 46.4 82.1
The Problems with EBA
Rules of origin are stricter than Cotonou
Sugar, rice and bananas excluded until
2009
Actions still possible against „import
surges’
Divides Africa against itself?
The „Janus-Headed’ nature of
New Barriers to Trade….
1. - Safeguard measures (e.g. EU and US
protect steel industries in 2002)
2.Anti-dumping Measures
3. Rules of Origin
4.Environmental and Labour Standards
5.Phytosanitary Measures
Frequency of non-tariff
measures facing LDC exports
Description Developd Middle Latin Europ East
countries East America e and Asia
and Central and
and the
North Asia the
Africa Carib. Pacific
Agricultural and 48.24 57.69 34.24 32.93 24.42
fishery products
Minerals and 6.72 5.73 6.64 6.72 4.52
fuels
Manufactures 10.67 10.96 11.68 7.15 5.57
TCM code TCM description 1994(%) 2004(%)
1 TARIFF MEASURES (TRQ, ETC) 5.8 0.3
3 PRICE CONTROL MEASURES 7.1 1.8
4 FINANCE MEASURES 2.0 1.5
417 Refundable deposit for sensitive products 0.6
categories
5 AUTOMATIC LICENSING MEASURES 2.8 1.7
6 QUANTITY CONTROL MEASURES 49.2 34.8
617 Prior authorization for sensitive product 18.1 17.1
categories
627 Quotas for sensitive product categories 0.2 0.2
637 Prohibition for sensitive product categories 2.5 6.8
7 MONOPOLISTIC MEASURES 31.9 58.5
8 TECHNICAL MEASURES 31.9 58.5
Non-core 5+617+627+637+8 55.3 84.8
measures
Core measures 1+3+4+6+7-(617+627+637) 44.7 15.2
Phytosanitary Regulations
For EU, no. of notifications 6X between 1998
(202 cases) to 2002 (1520). Examples?
1. Kenyan Horticultural exports (worth US$500)
threatened by „Minimal Residual’ Requirements
2. Aflatoxin regulation on nuts, cereals and dried
fruits (estimated cost of US$670 million).
3. In 2002, Zambia turns down food aid from US
because of EU legislation on GM elements
(99.9% free).
4. Lake Victoria fish industry – case of cholera…
Increased costs of compliance…
1. Ugandan honey industry – estimated cost of
US$300 million to conform with ISO standards
2. Ugandan coffee industry – production costs will
increase by 200% for av. firm.
The vast majority of food safety and health measures
notified to WTO between 1995-2000 had no
international standards at all.
Standard justification for these
trends?
“Increased regulatory policy can be seen as the
result of higher standards of living
worldwide, which have boosted consumers'
demand for safe and high-quality products,
and of growing problems of water, air and
soil pollution which have encouraged modern
societies to explore environmentally-friendly
products” (WTO, 2004).
Difficult to square with anecdotal
evidence of relaxation of standards…
8 % French fruits and vegetables above legal levels
of pesticides (Herman & Kuper, 2003).
1992-3, EWG study in US. 5.6 % of fruits &
vegetables contaminated beyond legal levels. In 13%
of violations, said pesticides completely prohibited.
In 1997, UK government raised permitted level of
glyphosate in soybeans by a factor of 200 times.
(Glyphosate is active ingredient of Roundup,
manufactured by Monsanto)
Fertilizer Use per Capita, 2003
FERTILISER USE
KG/HECTARE
ARABLE LAND
World 98.3
Asia and Pacific 163.2
Latin America and Caribbean 84.8
Near East and North Africa 70.9
Sub-Saharan Africa 12.6
Developed Market Economies 121.3
- Belgium/Luxembourg 343.2
- France 226.5
- Netherlands 451.9
- UK 337.8
Matrix of Anti-dumping Cases Involving
African countries, 1995-2004
Argentina
European Union
New Zealand
India
Australia
Canada
South Africa
Thailand
United States
Totals:
Brazil
Exporting Country
Algeria 0 0 0 0 1 0 0 0 1 0 2
Egypt 0 0 0 0 6 0 0 3 0 1 10
Libya 0 0 0 0 2 0 0 0 0 0 2
Malawi 0 0 0 0 0 0 0 1 0 0 1
Mozambique 0 0 0 0 0 0 0 1 0 0 1
Nigeria 0 0 0 0 0 1 0 0 0 0 1
South Africa 10 4 2 5 4 6 3 0 1 15 50
Zimbabwe 0 0 0 0 0 0 0 2 0 0 2
Totals 10 4 2 5 13 7 3 7 2 16 69
Rules of Origin (ROO)
A major handicap for small, structurally un-
diversified economies
Administrative costs of compliance between
2.0 and 5.7% (Estevadeordal and Suominen,
2003)
Mattoo. Et. al. (2002), AGOA benefits
would be 5X higher with less restrictive
ROO
EBA tighter ROO than Cotonou.
Labour and Environmental
Standards
Importance of guaranteeing labour and
environmental standards, but…..
Danger of legislative overkill
e.g. „social audits‟ in Kenya (processed foods
from Del Monte) or South African citrus
fruits having to meet EU requirements for
service workers
Conclusions
With fall in tariffs, NTBs more important than ever
Africa especially vulnerable to „New Protectionism’
EPAs won‟t resolve these problems….and might
make some more acute.
Initiatives to be welcomed (STDF for instance).
Importance of African countries being involved in
setting standards
Positive side? Possibility of building a brand -
“Produce of Africa” could be associated with
ecological sound production. Problem?…organic
creditation service costs around $14,000 a year.
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