An Alphabet Soup of Powerlessness Negotiating an EPA with the EU By Dr Roman Grynberg This week Dr Grynberg explains how negotiations for a new Economic Partnership Agreement with the European U

							An Alphabet Soup of Powerlessness
Negotiating an EPA with the EU
By Dr Roman Grynberg

This week Dr Grynberg explains how negotiations for a new Economic Partnership
Agreement with the European Union have fallen short of expectations – as the EU pursued
its own trade interests instead of a genuine ‘development deal’.

For ten years I have watched and been party to the attempt of the Pacific islands to chart their
own trade course in a globalising world. If trade were run by economists and trade agreements
determined on costs and benefits then most of the agreements that the 14 island countries have
tried to negotiate would have been well and truly signed and sealed by now. This is because the
islands are (with the possible exception of PNG and Fiji) so small trading partners would have
been able to be very generous with such small partners. But trade negotiations are run by
lawyers on the legal principle of precedent. When you give concessions to a small island country,
other much larger trading partners will ask for the same concessions and therefore the
negotiations with any trading partner take on an importance that bears no relationship to the size
and importance of Pacific nations.

Ten years ago the islands began negotiating their first regional trade agreement – the Pacific
Island Countries Trade Agreement (PICTA). At the time Australia saw PICTA as a major foreign
affairs humiliation because Australia, as a member of the Forum, thought its exclusion from the
deal was an insult. What it was, was a recognition by the islands that they needed to take small
baby-steps before they negotiated with much larger trading partners. To satisfy Australia, the
islands agreed to the Pacific Agreement on Closer Economic Relations (PACER) which promised
nothing but to discuss negotiating a new trade agreement if they negotiated with another
developed country (such as the European Union). Whether the islands agreed to start
consultations with the intention of negotiating a trade agreement or not it was stipulated in
PACER that consultations would begin by 2011 in any case. When PACER was signed it all
seemed a long way off, as these types of agreements invariably do.

The time that PACER provided was to allow islands to make their first steps under PICTA and
their own regional negotiations in order to prepare for what would inevitably be difficult
negotiations with Europe for a new Economic Partnership Agreement (EPA) and with Australia
and New Zealand under PACER. Of course the inevitable happened, and rather than rapidly
deepen their integration (whether through PICTA or the Melanesian Spearhead Group
Agreement) the islands have largely dragged their feet on the implementation of new trade rules.
By 2009 only six of the 14 Forum island countries were trading with each other under PICTA
rules.

In 2004 Forum island countries began to negotiate with Europe for a new EPA. The [then] EU
Trade Commissioner Pascal Lamy told the Pacific and the other five regions comprising the
African, Caribbean and Pacific (ACP) countries that the EPA would be a real development
agreement which would strengthen regional integration. The Pacific took him at his word and
prepared a World Trade Organisation (WTO) compatible trade agreement which would address
the unique development challenges of small remote states. But the new Commissioner that
replaced Lamy, Mr (now Lord) Mandelson had no such development agenda. The development
proposals of the Pacific were completely dismissed as unrealistic and setting precedents that
would be completely unacceptable in other more important regions. Mandelson pursued with his
characteristic rudeness and aggression the most mercantilist agenda that Europe has pursued
with developing countries since the heyday of colonialism. His treatment of Pacific island
ministers in October 2007 was legendary – an object lesson in the use and abuse of power that
few who participated will ever forget. Pacific island ministers were given no choice but to agree to
whatever the EU demanded or lose their market access for fish and sugar and the tens of
thousands of jobs in Fiji and PNG that went with it.

This was the real face of the European development agenda in the EPA and not the rosy
statements about development and regional integration. No-one had ever done more to
strengthen Sino-Pacific relations than Mr Mandelson did in the way he treated Pacific island
ministers. The experience with Mandelson has been well documented in a number of regional
newspapers and several ministers have commented on it. When Mandelson, the man the British
tabloid press affectionately dubbed ‘the Prince of Darkness’ finally returned to the UK last year to
strengthen the cabinet of an obviously desperate Prime Minister Brown there were no tears shed
in the ACP group and very few in the European corridors of power. Now the UK has appointed
Baroness Ashton to replace Lord Mandelson, and while she is far more diplomatic, it is to be seen
whether the change is cosmetic or real. In the end whether it is Lamy or Mandelson or Ashton
these people must reflect aggressive instructions from EU member states.

The reason why the EU position towards its former ACP colonies has hardened and become so
mercantilist and self interested over the last decade is fairly well understood. It is largely
attributable to the growth of the 'three-headed monster' called the BRIC ( Brazil India China)
which an increasing portion of the EU trade bureaucracy fears will wipe out the EU agricultural,
service and manufacturing sectors in coming years as these nations become more and more
competitive.

    “Negotiation on substantive issues with small and remote
    islands was never really on the EU agenda. There was an
    EU template and the Pacific had to fit.”
Within a short while the islands are likely to completely capitulate to Europe and give them what
they want no matter what damage some of the provisions will have on their long term growth of
the largest Pacific states. The failure of the region to stick together in 2007 and 2008 and the
inescapable precedent that the Caribbean created when it signed the EPA last year has meant
that there is no point negotiating any further – the choice now is only sign or not sign. Negotiation
on substantive issues with small and remote islands was never really on the EU agenda. There
was an EU template and the Pacific had to fit. The only real benefit the EU has granted has been
a change in one rule of origin for fish. Given the enormous technical and standards compliance
barriers to fisheries trade only the largest countries will be able to benefit. While Pacific islands
will continue to get duty free access for their exports to Europe (something which they have never
been able to effectively use since it was granted by Europe under Lomé and Cotonou in 1975)
this was never the planned benefit of negotiating an EPA.

After 2020 the Cotonou agreement, which has bound the Pacific, the Caribbean and Africa to the
EU since 1975, will expire. After that date many in the Pacific fear desperately that the EU will
maintain its interest in Africa (for obvious strategic reasons) but the Pacific will become irrelevant
and there may be no successor treaty to Cotonou. Therefore leaders may sign the EPA out of the
belief that it will maintain EU interest in the region. I am told by my i-Kiribati friends that there is
saying that if you have sharks in your lagoon the only way the fish can protect themselves is to
bring another one in. The EU despite the hideous experience of the EPA negotiations is correctly
perceived as the most benign and disinterested of great powers in our region, unlike others.

The tragedy of the EPA is not what it will do to the Pacific but what it could have been, had the
EU pursued an agreement that was not so mercantilist and self interested. It is massive
opportunity lost. The EPA will create jobs in the tuna canning sector, and no-one should
underestimate these, but they will disappear within 10 years as the EU liberalises tuna imports
from Asia. In the end the EPA was intended only to fit all the 5 or 6 ACP regions into the EU’s
trade template with just the most minor of variations to reflect the reality on the ground.
The EPA is an opportunity lost if one views relationships with Europe with some hindsight.
Irrespective of what one says about the Lomé convention and the Cotonou Agreement now they
were, at the time, the most imaginative and constructive trade and aid agreements ever written by
any group of nations. Nothing has been so bold as Lomé. It was something, with all its faults, that
people could be proud of. Indeed the late Ratu Sir Kamisese Mara christened a speedboat he
boat in 1975 the Lomé. He had negotiated these a treaty that generated real prosperity for the
people of Fiji. He could rightly be proud of his achievements. It is unlikely that anyone apart from
an EU trade official will name anything after the EPA. An EPA with Europe could have been a real
development instrument (as Lamy had promised ten years ago) but the Europeans who negotiate
now suffer severely from sclerosis of their imagination. The EPA as it is, solves nothing and has
done nothing to endear Europe to any of the ACP regions.

**Next Week: Negotiating with ‘friends’ – a free trade deal with Australia and NZ?**

Dr Roman Grynberg was, until earlier this month, Director of Economic Governance at the Pacific
Islands Forum Secretariat.