William Mwanza, tralac Researcher, provides a discussion of recent trade flows between the EU and countries in the African EPA groups

Negotiations towards conclusion of Economic Partnership Agreements (EPAs) between the EU and African regions have proceeded with considerable momentum over the past few months. To date, three regions have initialled full EPAs with the EU. These are the West Africa, Southern African Development Community (SADC) and East African Community (EAC) configurations.

As the dust settles after what have been some long and arduous negotiations in these regions, a cursory look at trade data for the past ten years reveals a logical pattern that the conclusion of the negotiations has followed. This has not only been according to regional significance of exports to the EU, but also in terms of individual countries protecting their interests in particular products that they currently export to the EU.

At the outset, it will be noted that out of the fifty four (54) states in Africa, forty eight (48) are in the five EPA configurations of West Africa (comprising the fifteen Economic Community of West African States and Mauritania), Central Africa, Eastern and Southern Africa (ESA), EAC and SADC (comprising seven out of the fifteen SADC member states). Although these countries are significant in number, their share of Africa’s exports to the EU has hovered around the 50% mark over the period 2004 to 2013. The other half of Africa’s exports to the EU came from what one would term the ‘non-EPA 5’. These are the North African countries namely Algeria, Libya, Morocco, Tunisia and Egypt.

With regard to the respective EPA configurations, the West African region and SADC have been the main exporters to the EU over this period. West Africa’s share in exports to the EU was only 25.4% in 2004, whilst SADC’s was 52.8%. Over the period, West Africa’s share has increased to 44.3% in 2013, while SADC accounted for 36.4%, now making West Africa the main exporting region to the EU, followed by SADC. The third most significant exporter to the EU has been Central Africa, whose share has increased slightly from 9.9% in 2004 to 12.1%. The ESA region has been the fourth most significant exporter, although its share has been decreasing, from 7.5% in 2004 to 4.7% in 2013. The EAC has had the lowest share of exports to the EU. Its share has also been declining, from 4.3% in 2004 to 2.5% in 2013.

The trends in exports by countries of these regions to the EU over the past ten years are now considered in turn.

West Africa

The West African region is the largest exporter to the EU among the EPA configurations. Over the period, Nigeria, Ivory Coast, Ghana, Mauritania and Liberia have been the top 5 exporters to the EU (in that order), accounting for over 90% of the region’s exports to the EU over the period.

Nigeria has been by far the biggest exporter, with its share of exports from West Africa to the EU rising gradually from 46.4% in 2004 to 74.2% in 2013. Meanwhile, the shares of Ivory Coast and Ghana have been decreasing, although the values of their exports have increased, from US$3.4 billion to US$5 billion in the case of the former, and from US$1.4 billion to US$5 billion for the latter.

As has been noted in an earlier discussion note titled ‘Clarification on the EAC’s market access to the EU after 1 October’, Ivory Coast and Ghana are the only countries in the West African region that have been exporting to the EU on the basis of interim EPAs since 2008. As also stated, it is only these two countries that can currently export to the EU under the terms of the full EPA to the potential disadvantage of other countries in the region, such as Nigeria, which should also be accessing such preferences after also initialling the agreement.

According to 2013 data, over 90% of Nigeria’s exports to the EU comprised oil and gas, which already attract zero Most Favoured Nation (MFN) duties in the EU market. There are other products such as natural rubber and chemical fertilizers which were in Nigeria’s top 20 exports to the EU in 2013 which can be exported duty free under the GSP scheme. As things currently stand, however, some of its other main exports such as cocoa butter and cocoa paste will continue to be less competitive than those from Ivory Coast and Ghana. This is because they will continue to attract duties under the GSP for Nigeria, whilst its counterparts export these duty free under the full EPA. Other products such as crustaceans and leather were not exported to the EU by Ivory Coast and Ghana in 2013. They are not included in the GSP scheme, however, and so Nigeria’s exports of these may be less competitive than other exporters to the EU outside the Sub-Saharan region.

SADC EPA Group

As mentioned, the SADC EPA Group is now the second largest exporter to the EU by EPA configuration. South Africa has been the main exporter to the EU although its share has decreased from 78.5% in 2004 to 50.7% in 2013. Angola is the second largest exporter, with its share rising from 4.3% in 2004 to 29.1% in 2013. Botswana recorded a share of 10.9% in 2013, followed by Mozambique, Namibia, Swaziland, and Lesotho, respectively, which all recorded shares of less than 5%.

South Africa’s exports to the EU have been varied, comprising mostly of minerals such as gold, platinum, iron, and coal, as well as motor vehicles, fruits, and wine. It currently exports to the EU under the TDCA, and is not included as an immediate beneficiary of the full EPA alongside Botswana and Namibia. To the extent that the full EPA provides better preferences than the TDCA, South Africa may be disadvantaged in its access to the EU in some of these products.

Angola is currently just an observer in the EPA process. Its main exports to the EU have comprised of oil and gas and other minerals such as diamonds, granite and copper. These have accounted for almost 100% of its exports and all have zero MFN rates.

Botswana’s main exports to the EU have been minerals, namely diamonds and nickel, which both attract zero MFN duties. It has also exported significant amounts of beef, totalling US$31 million in 2013. Beef is not included as a beneficiary product in the current GSP scheme. Had Botswana not concluded a full EPA with the EU, its exports of beef would have had to attract ad valorem duties of up to 12.8% plus some specific duties. The full EPA therefore preserves its preferences, particularly for this product.

Namibia’s main exports to the EU have comprised copper, fish, zinc, uranium, diamonds, table grapes and beef. Some of these products such as copper, uranium, and diamonds already attract zero MFN duties. Under the GSP, Namibia would have incurred reduced tariffs on some of the products, such as zinc, which would have attracted duties of 1.5%. As noted in the case of Botswana, beef is not included in the current GSP scheme, and so exports from Namibia would have had to incur duties of up to 12.8% plus some specific duties. Fish products are also not included in the scheme, and so exports would also have had to incur duties of up to 14.5% depending on the species.

EAC

Although it has accounted for the lowest share of exports to the EU over the past ten years, the EAC is the third region to conclude a full EPA with the EU. Kenya has been the highest exporter to the EU, accounting for a share of 47.3% of the region’s exports in 2004 and 52.6% in 2013. Tanzania has been the second highest exporter, although its share has been decreasing, from 35.8% in 2004 to 25% in 2013. It has been followed by Uganda, whose share has increased from 14.4% in 2004 to 19.9% in 2013. Burundi and Rwanda have each accounted for less than 3% of exports from the region over the past ten years.

As the only developing country in the region, Kenya was under the most pressure to conclude an EPA with the EU, so as to preserve preferences that it was previously accessing on the basis of the region’s interim EPA with the EU. These interim EPA preferences were withdrawn on 1 October 2014, and Kenya is currently exporting under the general arrangement of the GSP. Among its top 20 exports to the EU in 2013, it is currently incurring tariffs on some products as follows:

• Fresh cut roses and buds – 8.5%
• Fresh or chilled beans – 10.1%
• Pineapples – 22.1%
• Fresh cut flowers and buds – 8.5%
• Prepared or preserved beans – 15.7%
• Avocados – 1.6%
• Fresh or chilled peas – 4.5%
• Fresh cut carnations and buds – 8.5%
• Fresh or chilled vegetables – 9.3%
• Prepared or preserved tuna – 20.5%
• Nile perch – 9%
• Pineapple juice – 30.1%

Now that the EAC has initialled a full EPA with the EU, these products will start entering the EU duty free again two months from the date that a delegated act is notified by the EU Commission to the EU Parliament and Council, adding the EAC countries onto the list of beneficiaries in the 2007 Market Access Regulation.

As least developed countries (LDCs), Tanzania, Uganda, Burundi and Rwanda still currently have duty free access to the EU under the ‘Everything But Arms’ arrangement.

Central Africa

Amongst the EPA configurations, the Central African region has accounted for the third largest share of exports to the EU. Cameroon was initially the largest exporter to the EU within this region, but now lies second, as its share has decreased from 39.4% in 2004 to 23.3% in 2013. Meanwhile, Equatorial Guinea’s share has increased from 19% to 38.2% during the period, making it the top exporter. Gabon’s share has increased somewhat from 10.9% to 13.6%, whereas Congo Brazzaville’s increased from 5.5% in 2004 to a high of 20.7% in 2012, before registering 12.9% in 2013. The Democratic Republic of Congo’s share has decreased from 17.7% in 2004 to 11.2% in 2013. The shares of Chad, Central African Republic and São Tome and Principe have decreased to less than 1% each over the period.

Negotiations on a full EPA are yet to be concluded, and have stalled due to the political situation in the Central African Republic. Meanwhile, Cameroon is the only country that initialled an interim EPA with the EU in the region. It has since ratified this interim EPA and is still exporting under the preferential terms of this interim EPA. The majority of the other countries are LDCs and so are exporting to the EU under the EBA. Equatorial Guinea will graduate from being an LDC in 2017, and if a full EPA is not concluded by then, would have to export to the EU under the GSP.

Congo is currently exporting under the GSP. Over 85% of its exports in 2013 comprised oil and gas, and copper. These all currently enter the EU duty free. Of its other top 20 products, coffee attracts duties of up to 4.8% and zinc attracts duties of 2%. The other products also enter duty free, mostly as non-sensitive products under the GSP.

Gabon is an upper-middle income country, and so cannot benefit from the GSP scheme. Over 80% of its exports to the EU in 2013 comprised of oil. Of the other top 20 products, some currently incur MFN duties as follows:

• Wood products – up to 10%
• Iron or steel waste and scrap – up to 4%
• Ink – 6.5%
• Surveying, hydrographic and meteorological instruments – 3.7%
• Air craft parts – up to 2.7%
• Trucks – up to 22%
• Palm oil – 12.8%

It is not clear when negotiations between this region and the EU will be concluded, after which some of the respective products of these countries would benefit from reductions in tariffs.

Eastern and Southern Africa

The ESA region is currently fourth in terms of its share of exports to the EU. Mauritius has been the highest exporter to the EU in the region, although its share has reduced from 35.6% in 2004 to 27.9% in 2013. Madagascar has been the second largest exporter, with a share of 18.3% in 2004 and 19.6% in 2013. Ethiopia’s share has increased from 6.2% to 13.7% over the period, making it the third biggest exporter. Zambia’s share has also increased from 5.9% to 11.4%. Zimbabwe is the fifth largest exporter. Its share has decreased from 15.2% in 2004 to 9.5% in 2013. Seychelles’ share has hovered around 7% over the period. Malawi’s share increased from 5.3% in 2004 to a high of 8.6% in 2009, before decreasing to 5.6% in 2013. Sudan’s share has gone from 5.3% in 2004, to 4.4% in 2013. Comoros, Djibouti, Somalia, and Eritrea have each recorded less than a 1% share over the period.

Mauritius, Madagascar, Seychelles and Zimbabwe are currently exporting to the EU under their interim EPA, which they signed in 2009. Negotiations towards a full EPA are continuing. Meanwhile, the remaining countries in the region are all LDCs and are currently exporting to the EU under the EBA.

Conclusion

This broad review of the respective EPA countries’ exports to the EU shows the logical pattern that the conclusion of the EPA negotiations has followed. Underpinning this pattern has been the protection of interests, not only seen by the relative amounts that the respective regions export to the EU, but more importantly, those of certain products currently exported by individual countries. The current status quo shows how countries within some of the regions are poised for further competition between themselves in accessing the EU market. As negotiations towards full EPAs move towards conclusion in the remaining two EPA configurations, another question will become more pertinent. This is not only how countries will continue to compete in accessing the EU market, but also what increased preferential access to EU products will mean for regional integration both within and between the respective Regional Economic Communities, that is, as it concerns intra-African trade.

Tell us what you think.