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South Centre

Aid for trade and financial assistance to implement the EPAs

Fact Sheet No. 6

South Centre

May 2007

SARPN acknowledges the South Centre as the source of this document: www.southcentre.org
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Background and context

  1. The European Commission (EC) has argued that African, Caribbean and Pacific (ACP) countries negotiating an Economic Partnership Agreement (EPA) with the European Union (EU) should not be dissuaded away from signing such agreements on the account of large implementation and adjustment costs. The EC does not dispute that implementing and adjusting to EPA reforms will suppose a financial challenge for ACP governments and economies. However, the EC has promised that countries signing such an agreement would benefit from EU financial and technical assistance as may be necessary1:

    1. To address the supply-side constraints that have historically hampered trade and development in the ACP, to upgrade ACP productive capacities and to develop trade-related infrastructure in a way that ACP economies can take advantage of the EPAs; and
    2. To support the costs ACP countries will face in adjusting to the new economic conditions introduced by the EPAs.
    3. To support ACP governments in the implementation of the EPA rules, the establishment of new institutions, and the enactment or reform of legislation to comply with EPA obligations.

  2. In order to guarantee that ACP governments would have the capacity to effectively implement, monitor and enforce an EPA and in order to guarantee adjustment costs can be coped with, some of the central questions for ACP EPA negotiators include:
    1. What will be the total implementation and adjustments costs related to an EPA for ACP countries?
    2. How much aid has the EU committed to assist ACP countries face these costs?
    3. What are the instruments through which such financial assistance will be channelled? What are the conditions to access and use these funds?
    4. How effective is the European Development Fund (EDF) as an instrument for disbursing aid and how does it match the needs of ACP countries if they sign an EPA?

  3. The promise of increased aid has been seen by many as a strong incentive to engage in EPA negotiations. While a ministry of trade might often be cautious about signing an EPA, the ministry of finance could be more interested due prospects of financial support. Representatives of the private productive sector may also be lured into signing EPAs as some expect aid inflows to improve the local trade-related infrastructure.


  4. However, pledges of increased EU aid require careful examination because ACP countries will have to make far-reaching reforms and face serious adjustment challenges after signing an EPA. The trade related assistance of ACP countries must be assessed in light of its sufficiency, timely disbursement, predictability and efficiency to meet the costs of implementation and economic arising from EPAs.

Footnote:
  1. “EPAs will not fail through a lack of financial support” from “Economic Partnership Agreements: tackling the myths”, comment by EU Trade Commissioner. The Standard, Kenya, 23 April 2007. Available at: http://ec.europa.eu/commission_barroso/mandelson/speeches_articles/artpm037_en.htm




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