by William Mwanza, tralac Researcher

Sources from the tralac network have provided information that contradicts the media reports on which the discussion note ‘Preserving duty free and quota free market access by the EAC to the EU after 1 October’ was based. Further information received also highlights other EU legal instruments that were not considered in the discussion note, some already in effect and some yet to come into effect at the time of writing.

The information provided has important implications on a number of the issues raised in the discussion note as follows:

1. Status of EPA negotiations between the EAC and the EU

2. What Regulation (EU) No 527/2013 does with respect to removing countries that have not taken “necessary steps towards ratification of their respective [interim EPA] Agreements” by 1 October, and what delegated powers it confers on the EU Commission in this regard

3. In view of the foregoing, if the EU Commission could preserve the EAC’s duty free and quota free access to the EU come 1 October

It must be noted at the outset, that some issues discussed remain as initially presented. These include:

• The status of Kenya and the other EAC countries in the GSP scheme based on Regulation (EU) No 978/2012

• How the GSP scheme interacts with the interim EPA process through their respective regulations cited

• The status of Eastern and Southern Africa (ESA) countries in the interim EPA process

• The status of the EAC interim EPA vis-à-vis negotiations towards the full EPA

The correct information on the three aspects identified above is as follows:

1.  Status of EPA negotiations between the EAC and the EU

The media reports that the EAC Council of Ministers had on 20 September 2014 accepted a proposal by the EU on the full EPA text, and had since informed the EU in this regard, are not accurate. The EAC has in fact NOT yet concluded negotiations with the EU. It continues to do so and hopes to reach an agreement as soon as possible.

2.  What Regulation (EU) No 527/2013 does with respect to removing countries that have not taken “necessary steps towards ratification of their respective [interim EPA] Agreements” by 1 October, and what delegated powers it confers on the EU Commission in this regard

First and foremost, it will be noted that the interim EPA process was originally provided for by Council Regulation (EC) No 1528/2007 (or ‘the 2007 regulation’) adopted on 20 December 2007. Article 1 of this article provides that “[the] regulation applies the arrangements for products originating in certain states which are part of the African, Caribbean, and Pacific (ACP) Group of States provided for in arrangements establishing, or leading to the establishment of, Economic Partnership Agreements” [emphasis added].

In line with this article, the interim EPAs that had been concluded by 2007 were viewed as arrangements leading to the establishment of EPAs. The regulation, therefore, listed the thirty six countries that had initialled interim EPAs with the EU by 2007 in its Annex I. On this basis, these countries were able to export to the EU on duty free and quota free terms for products specified in their interim EPAs from 1 January 2008.

Regulation (EU) No 527/2013 (‘or the 2013 regulation’) was adopted on 21 May 2013, and amends certain provisions of the 2007 regulation.

The initial discussion note construed the 2013 regulation as conferring delegated powers on the European Commission, to remove from Annex I of the 2007 regulation, countries that had not taken “necessary steps towards ratification of their respective [interim EPA] Agreements” by 1 October 2014. Although the EU Commission does currently have powers to remove countries from Annex I – albeit only conferred on it by a subsequent Regulation 38/2014 to be discussed later – it was not conferred such powers by the 2013 regulation.

What the 2013 regulation in fact did was to remove the seventeen countries that were viewed as not having taken necessary steps towards ratification of their interim EPAs. As listed in its preamble (3), these were Botswana, Burundi, Cameroon, Comoros, Cote d’Ivoire, Fiji, Ghana, Haiti, Kenya, Lesotho, Mozambique, Namibia, Rwanda, Swaziland, Tanzania, Uganda, Zambia. Through its Article 1 (2), the regulation replaced Annex I of the 2007 regulation with a new list of countries that did not include these seventeen countries. This removal is to come into effect on 1 October.

The regulation then amended Article 2 of the 2007 regulation by inserting two articles (2a and 2b) delegating powers to the Commission and regulating the exercise of such powers, respectively.

With regard to the actual powers delegated, Article 2a was inserted as follows:

“The Commission shall be empowered to adopt delegated acts … to amend Annex I [of the 2007 regulation] by reinstating those regions or states from the ACP Group of States which were removed from that Annex pursuant to [the present regulation], and which have, since such removal, taken the necessary steps towards ratification of their respective agreements” [emphasis added].

Hence the Commission was only given powers to add back countries onto the 2007 regulation. Such powers could only be exercised from 1 October 2014, when the 2013 regulation will come into effect.

With regard to the exercise of such powers, Article 2b was inserted, and the relevant part reads as follows:

“5. A delegated act adopted pursuant to Article 2a shall enter into force only if no objection has been expressed by the European Parliament or the Council within a period of two months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object …” [emphasis added].

Hence for delegated acts by the Commission – adding back countries onto Annex I of the 2007 regulation – to come into effect on 1 October 2014, thus ensuring no interruption to the trade regime, they ought to have been notified to the EU Parliament and Council by 1 August 2014. If there was no objection from either the Parliament or the Council in the two month period leading up to 1 October, the delegated acts would have effect from this date.

2.1  Interim-EPA implications for Kenya

The EAC had not taken necessary steps to ratify its interim Agreement with the EU by 1 August 2014. No delegated act by the Commission could therefore be notified to the EU Parliament or Council to this effect. Hence, when the 2013 regulation starts to apply on 1 October, Kenya and the other EAC countries will not be in the list of interim-EPA beneficiary countries detailed in Annex I of the 2007 regulation.

Meanwhile, Kenya has been moved to the beneficiary list of the EU’s GSP scheme through a proposed delegated act available here. This delegated act was notified at the end of July 2014 and is to come into effect on 1 October. It applies not only to Kenya, but also to Botswana, Cameroon, Côte d’Ivoire, Fiji, Ghana, Namibia, Swaziland. These are all countries that will also be removed from the interim-EPA list on 1 October, along with Kenya.

The remaining EAC countries will continue to export to the EU duty free and quota free under the ‘Everything But Arms’ (EBA) arrangement.

Although this clarifies the position of the EAC countries, it is important to note other delegated acts that were proposed, and which preserve preferences for other countries. These are detailed in sections 2.2 and 2.3 below.

2.2  Delegated acts proposed by the EU Commission based on Articles 2a and 2b, as inserted by the 2013 regulation

At the end of July 2014, the EU Commission also provided notification of other delegated acts, through which it exercises the powers conferred on it by the 2013 regulation, to add back onto Annex I of the 2007 regulation, countries that were removed but had since taken necessary steps towards ratification of their respective interim EPAs. Two delegated acts were notified as follows:

2.2.1  A delegated act reinstating Fiji available here

2.2.2  A delegated act reinstating Cameroon available here

Subject to possible objections from the EU Parliament and Council, these delegated acts will preserve duty free and quota free market access for Fiji and Cameroon, based on their interim EPAs, from 1 October.

2.3  Delegated acts proposed by the EU Commission based on Regulation 38/2014 of 15 January 2014

Further to the 2013 regulation, it is important to note that another regulation was adopted in January 2014, which among several amendments to different regulations, also amended article 2 of the 2007 regulation. This regulation 38/2014 (or ‘the 2014 regulation’) can be found here.

This regulation also specifies delegated powers for the Commission, this time by replacing Article 2 (2) of the 2007 regulation with the following text:

“The Commission shall amend Annex I by means of delegated acts in accordance with Article 24a to add regions or states from the ACP Group of States which have concluded negotiations on an agreement between the Union and that region or state which at least meets the requirements of Article XXIV GATT 1994” [emphasis added].

This now gives the Commission powers to add onto Annex I, regions or states that have concluded negotiations on full EPAs.

Importantly, the introductory wording of Article 2 (3) of the 2007 regulation was also replaced by the following words:

“That region or state will remain on the list in Annex I to this Regulation unless the Commission adopts a delegated act in accordance with Article 24a amending Annex I to remove a region or state from that Annex, in particular where:” [emphasis added]

In the original regulation of 2007, Article 2 (2) and Article 2 (3) provided that it was the Council that could add and remove regions or states, respectively, upon a proposal from the Commission to that effect.

The amendments to Article 2(2) and the introductory wording of Article 2 (3) therefore give the Commission powers to add regions or states that have concluded negotiations on full EPAs to Annex I, and also to remove them if they do not ratify these full EPAs within a reasonable period of time, as provided for in Article 2 (3) (b) of the 2007 regulation.

The regulation then inserts Article 24a to regulate the exercise of such powers, with the relevant part stating:

“5. A delegated act adopted pursuant to Article 2 (2) … shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of two months of notification of that act ... or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object … ”.

On the basis of this regulation, the EU Commission notified another delegated act in July 2014 available here.

This act notes that:

• Côte d’Ivoire and Ghana and the EU concluded negotiations on an EPA on 30 June 2014

• Botswana, Namibia and Swaziland, and the EU concluded negotiations on an EPA on 15 July 2014

Hence it provides that that these five countries be added onto Annex I of the 2007 regulation from 1 October 2014. The Commission reserves the right to remove them from the Annex if they do not ratify their full EPAs within a reasonable time.

2.4  Conclusion on preserving duty free and quota free market access to the EU

Out of all the countries that were moved to the beneficiary list of the GSP scheme, therefore, it is only Kenya that has not been included in any delegated act that would preserve its duty free and quota free access to the EU after 1 October. Fiji and Cameroon will continue trading based on their interim EPA which they have ratified. Côte d’Ivoire, Ghana, Botswana, Namibia and Swaziland will trade based on the full EPA that they have initialled.

It is important to emphasise that this has been done based on two separate forms of delegated power conferred on the European Commission by two separate amendments to Article 2 of the 2007 regulation. Firstly, the Commission has notified a delegated act to reinstate countries that have taken necessary steps to ratify their interim EPAs, based on the 2013 regulation. Secondly, it has notified a delegated act to add regions or states that have concluded negotiations on a full EPA, based on the 2014 regulation.

However, while the Commission’s application of the 2013 regulation appears to be in order, the delegated act that it has notified based on the 2014 regulation has been questioned by certain quarters, including within the EU. As noted, the delegated act has only included Côte d’Ivoire, Ghana, Botswana, Namibia and Swaziland; countries that were removed from Annex I of the 2007 regulation, but have since concluded negotiations on a full EPA.

Such application has implications for countries in the Southern African Development Community (SADC) and the Economic Community for West African States (ECOWAS), with the ramifications more pertinent in the latter.

In SADC, it is only Botswana, Namibia, and Swaziland that will export to the EU based on the full EPA that they have initialled until the agreement starts being provisionally implemented (i.e. upon ratification by all the respective SADC countries). Lesotho and Mozambique will export under the EBA arrangement of the GSP until then, while South Africa will continue to utilise its Trade, Development and Cooperation Agreement (TDCA) with the EU.

In ECOWAS, only Côte d’Ivoire and Ghana will export to the EU based on the full EPA that they have initialled until the agreement starts being provisionally implemented. The least developed countries in the region will export under EBA. Nigeria and Cape Verde will however have to trade under the GSP scheme until then, which still entails some higher duties on certain products.

This situation unnecessarily disadvantages countries like Nigeria and Cape Verde. It has been argued, therefore, that all ECOWAS countries must have been included in the delegated act based on the 2014 regulation because they have all concluded negotiations on the full EPA.

Indeed, since the new text of Article 2 (2) of the 2007 regulation – as brought about by the amendment in the 2014 regulation – provides for regions or states that have concluded negotiations on a full EPA to be added to Annex I of the 2007 regulation by the Commission, a strong argument does indeed hold that it was the entire ECOWAS and SADC configurations that should have been added to the Annex, in addition to countries listed in 2007 that have since ratified their interim EPAs (including those reinstated on the basis of the 2013 regulation). After 1 October, all ECOWAS and SADC countries would have hence been able to export to the EU under the preferential terms of the full EPA text that they have initialled, until this agreement starts to be provisionally implemented and later enters into force, unlike is presently the case. 

3.  If the EU Commission can preserve the EAC’s duty free and quota free access to the EU come 1 October

Based on the foregoing, it is clear that the suggestion in the discussion note for the Commission not to remove the EAC countries from Annex I of the 2007 does not hold. The 2013 regulation will remove these countries from the Annex come 1 October. The four LDCs will continue exporting duty free and quota free under EBA. Kenya will export under the general arrangement of the GSP, entailing higher tariffs on specified products.

The question that remains now, therefore, is not whether the Commission can preserve interim EPA preferences for the EAC past 1 October, but rather when the EAC and EU negotiations on the full EPA will conclude. This will determine the amount of time that Kenya will have to export under the GSP. Once the full EPA is initialled, the EU Commission will in accordance with the 2014 regulation, notify a delegated act to the EU Parliament and Council, ideally adding the entire EAC configuration onto Annex I of the 2007 regulation. The delegated act will come into effect two months from the time it is notified to the EU Parliament and Council, or sooner if both institutions indicate that they will not object. Once this delegated act comes into effect, the EAC countries will be able to export on the preferential terms that they will have agreed with the EU in the full EPA text until this agreement starts being provisionally implemented and later enters into force. This will then be subject to the agreement being ratified by the respective EAC countries within a reasonable period of time.

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