EU Preferential Access Agreements

The EU has the most extensive network of preferential trade agreements of any WTO member. Preferential access agreements grant easier access for agri-food imports into the EU and make it more expensive for the EU to continue to provide support for its own food producers. The potential value of a tariff preference is the amount by which the EU price gap (the difference between the EU and the world price, which is often approximated by the size of the bound tariff) exceeds the tariff applied under the preference.

Thus, preferential agreements are part of the trend towards more open agricultural trade which is adding to the pressures to reform EU agricultural policy. At the same time, further reform of the CAP reduces the value of preferences and leads to the phenomenon of preference erosion.

EU preferential arrangements have traditionally been of two kinds: a non-reciprocal Generalised System of Preferences (GSP) available to all developing countries and special non-reciprocal preferential schemes for particular groups of countries.  Non-reciprocity means that developing countries are not required to offer similar preferential access to their markets in return for the access concessions they are granted to the EU market.

Generalised System of Preferences (GSP) and Everything but Arms

All industrialised countries introduced a GSP scheme in the 1970s designed to provide a measure of positive discrimination favouring developing country exporters relative to exporters from other developed countries. The EU's GSP scheme covers all manufactured exports and some agricultural and food exports from developing countries. Over the years, the EU's GSP scheme has become more generous but it still remains restrictive with respect to agricultural imports covered by the Common Agricultural Policy,

A special incentive arrangement for sustainable development and good governance, known as GSP+, offers additional tariff reductions to support vulnerable developing countries in their ratification and implementation of international conventions in these areas.

Least developed countries enjoy more favourable GSP preferences than other developing countries. In 2001, the EU introduced its Everything But Arms (EBA) initiative, which means that, all products from countries on the UN list of least developed countries (currently 50 countries) now have full duty-free access without quotas to the EU market, including agricultural products. Transition periods were put in place for three sensitive agricultural products, namely, bananas, rice and sugar. Bananas became eligible for unlimited duty-free access starting January 2006, rice and sugar wereincluded from 2009.

Cotonou Agreement

Under successive Lomé Conventions, the EU offered duty- and quota-free access to exports from selected African, Caribbean and Pacific (ACP) countries. Exports covered by the CAP were again a major exception although ACP countries receive more preferential treatment than other countries for their exports of these products.  Four commodity Protocols annexed to the Lomé Convention provided preferential access for a specified quantity of exports from a selected group of traditional ACP suppliers of bananas, rum, sugar and beef.  This non-reciprocal trade regime was extended under the Cotonou Agreement until the end of 2007. However, the trade preferences of the Cotonou Agreement, while well intentioned, had not succeeded in their objective of helping to integrate the ACP countries into the world economy. They were also incompatible with WTO rules.

Economic Partnership Agreements (EPAs)

Trade preferences under the Cotonou Agreement have now been replaced by the possibility to sign Economic Partnership Agreements with the EU. EPAs are free trade agreements designed to slowly and progressively open up trade and promote regional integration between the EU and ACP countries. By mid-2010, most but not all ACP countries had signed 'interim' EPAs covering trade preferences, with one ‘full’ EPA having been concluded with the whole Caribbean region. For the non-least developed ACP countries, EPAs provide full duty-free and quota-free access to the EU market similar to that already enjoyed by the ACP least developed countries under the EBA scheme. Over the period 2008 to 2013, €22bn will be mobalised by the EU in support of the ACP countries through the 10th European Development Fund (EDF).

Euro-Mediterranean agreements

Bilateral agreements between the EU and its Mediterranean partners have existed since the 1960s. An effort was made to strengthen these links in the mid-1990s with the launch of the Euro-Mediterranean Partnership in Barcelona in 1995. This envisaged the progressive establishment of free trade between the EU and its Mediterranean partners and amongst the partners themselves by 2010. The first step towards the creation of this free trade area is the conclusion of a full set of Euro-Mediterranean association agreements between the EU and its Mediterranean partners, granting reciprocal trade preferences. From 1998 to date, Euro-Mediterranean association agreements with Algeria, Tunisia, Morocco, Israel, Jordan, Lebanon, the Palestinian Authority and Egypt have entered into force.

Regional and bilateral trade agreements

The European Commission’s Communication Global Europe: Competing in the World (2006) sets out the frame of reference for ambitious bilateral and regional free-trade agreements as a mechanism to tackle issues that are not ready for multilateral discussions. Agreements are now in place with countries in the Asian, Balkans, South American, Gulf and Mercosur Regions. These agreements usually provide for only limited preferences for agricultural trade.

WTO rules on preferential agreements

The foundation principle of theWTO is non-discrimination between members. Under the ‘most favoured nation’ (MFN) clause, a WTO member must extend to all WTO signatories the trade concessions made to any one members. This is a protection for economically-weaker countries which are guaranteed the benefits of reduced tariffs negotiated between the major trading powers.

However, there are some exceptions to the MFN rule, which allow countries to apply lower tariffs to imports from particular countries. The most important exception concerns tariffs within regional trade agreements (either free trade areas or customs unions). Also, under the WTO Enabling Clause, countries can offer non-reciprocal preferences to developing countries. Further interpretation of this Clause has confirmed that preferences can discriminate between different developing countries provided the discrimination is based on objective criteria and no similarly-situated developing country is excluded a priori. This is the basis for the EU's GSP and GSP+ schemes.

Links:

Europa Bilateral Trade Relations Website
Website detailing the bilateral trade relations of the EU by region and country

Resources:

Arvind Panagariya, EU Preferential Trade Policies and Developing Countries (PDF), 2002
An historical account of the evoluation and qualitative assessment of the EU’s preferential trade arrangements with developing countries

World Bank, Economic Partnership Agreements: Does Preferential Access of Non-LDC African Countries Increase? (PDF). 2007
Concise trading note from the World Bank analysing the impacts of the EPAs on non-LDC countries

Candau, F. and Jean, S., What are EU trade preferences worth for Sub-Saharan Africa and other Developing Countries (PDF), Chapter 3 in Hoekman, Bernard M., Will Martin, and Carlos Braga, ed. 2009. Trade Preference Erosion: Measurement and Policy Response. Washington, DC: World Bank.
Examines the use and value of EU preference schemes for both agricultural and non-agricultural imports