EU-WTO-EPA: killer acronyms

"The basis of the present mess is that 76 former colonies of European countries have for more than 40 years benefited from a system of preferential, lower tariffs on their exports to the EU: it was a small gesture of colonial guilt. By the mid-1990s, other developing countries which didn't have access to the system challenged it, and the WTO ruled it as discriminatory. The hunt was launched to replace it with a system that still benefited these former colonies but wasn't going to land the EU in breach of WTO rules. The WTO gave the EU until December 2007 to sort it out. Without a deal, these countries would be subject to tariffs on their exports.

Fair enough, but the sting was that the new system - Economic Partnership Agreements (EPAs) - had to meet the WTO requirement for reciprocity: what had started out as the EU doing some poor countries a favour became a trade deal in which the EU was given duty-free access to the markets of developing countries. In return for its generosity, the EU would get a handsome dose of trade liberalisation.

There are three big concerns on EPAs. First, every developed country has used tariff protection in its history to develop industry, but EPAs restrict that capability and could unleash a surge in European imports that could wipe out fledgling industries such as Kenya's dairy sector, as well as undercut prices of agricultural products. Second, governments themselves stand to lose a major chunk of their revenue that comes from tariffs; for instance, Zambia would lose $15.8m - the equivalent of its annual HIV/Aids budget. EU assurances that there would be aid to compensate only underline how this would increase dependency on aid. Third, the most complex and most important issue of all is how EPAs will affect regional trade. If you can get cheap widgets from the EU, why bother importing from your neighbour in Africa or the Pacific? UN studies have indicated that EPAs could lead to contraction in exactly those low and medium technology industries that are the basis for successful industrialisation."