InInNo. 14ABriefBrief- November 2006 Overview of the regional EPA negotiations Central Africa-EU Economic Partnership Agreement The purpose of this InBrief series is to provide a synthesis of the main elements and issues at stake for the 6 African, Caribbean, and Pacific (ACP) groupings negotiating an Economic Partnership Agreement (EPA) with the European Union (EU). Each InBrief offers an overview of the economic and regional integration dynamics influencing the structure, pace, and outcome of the EPA negotiation process for each region. It also focuses on the main issues and challenges to be tackled by each region in order to make the new trade arrangement a development oriented instrument. Each regional InBrief is complemented by an update on the ongoing EPA negotiation process. Every 6 months until the conclusion of the EPAs, a new update will be produced. www.ecdpm.org/inbrief14a Introduction Central African economies are poorly diver- domestic product (GDP). The tertiary sector sified and highly dependent on natural (administration, commerce and transport Central Africa covers a vast geographical resources (oil, forests) for their exports and services in particular) plays a central role area with a population of roughly 32 million economic growth. In Equatorial Guinea and across the whole of the region, while agri- inhabitants. Despite diversity in size, popu- the Republic of Congo, for instance, the oil culture is significant in Cameroon, the lation density and economic profile, the sector accounts for more than half of gross Central African Republic and Chad. Economic region’s eight countries1 share a number of distinctive features and challenges. A major common concern is the high poverty inci- Central Africa-EU EPA regional configuration dence, which has not declined over the past decades. All countries but Cameroon and Gabon are classified as least developed. ECCAS (8)* Social and human development indicators CEMAC (6) also show very low levels, especially in the (These CEMAC countries are two landlocked countries (Chad and the also members of ECCAS) Central African Republic), which the United Chad Nations Development Program (UNDP) clas- sifies as “low human development”. In these two countries, all social indicators are below the sub-Saharan Africa average. Centr. Afr. Rep. Cameroon Despite a favourable natural resources endowment, economic growth in the region Equatorial Guinea has been low and volatile, though slight Democratic improvements have been made since the Gabon ongo Republic of Sao Tome & Principe Congo devaluation of the franc de la Communauté ep. C Financière Africaine (FCFA) currency and R related reforms initiated in 1994.2 The politi- cal situation remains highly instable due to * Other countries member of ECCAS but not part of the Central Africa-EU both internal conflicts in Chad, the Central EPA are Angola, Burundi and Rwanda. African Republic and the Republic of Congo ECCAS= Economic Community of Central African States and the adverse effects of conflicts in neigh- CEMAC= Communauté Economique et Monétaire de l'Afrique Centrale/ Economic and Monetary Community bouring countries. of the Central African Countries ation per oo c European Centre for Development Policy Management U -E P C A F 1 2 a g Centre européen de gestion des politiques de développement c n 9 i i 0 l i t t a 8 e t 0 r i l l i 6 a c 6 a c F o o p é r a t i o n A C P - U E Page 2 Overview of the regional EPA negotiations November 2006 InBrief 14A insignificant. In 2004, it accounted for Key priorities for CEMAC are the progressive CEMAC barely 0.28% of EU exports and 0.35% of EU elimination of the remaining internal trade (plus Sao Tome and Principe and imports. barriers and the consolidation of the the Democratic Republic of Congo) customs union, including a possible revision Trade in Goods with the of the CET to bring it into line with the one European Union, 2005 The Central African regional adopted by the West African Economic and integration process Monetary Union (UEMOA). In December Trade flows 2004, CEMAC members signed a trade • EU-bound exports: !5,393 million In Central Africa, two main regional integra- agreement with Sao Tome and Principe, and (growth 2004-2005:23.7%) tion processes are under way. The first is the together they form the regional configura- • Imports from the European Union: Economic and Monetary Community of the tion currently negotiating an EPA with the !3,421 million (growth 2004-2005: Central African Countries (CEMAC),5 which European Union. 9,8%) was established in 19946 to give new impe- • Trade balance: !-1,972 million tus to economic integration in the region. Central Africa’s second main regional inte- Taking over from its predecessor, the Union gration process is the Economic Community Share of agriculture in trade Douanière et Economique de l’Afrique Centrale of Central African States (ECCAS).8 ECCAS • EU-bound exports: 10% (UDEAC) founded in 1964, CEMAC has was created in 1983 with the ambitious • Imports from the European Union: 15% adopted an agenda including the conver- mandate to foster political dialogue, gence and monitoring of national macroeco- sectoral cooperation and trade integration Participation in EU trade: nomic policies; the creation of a single at the regional level. The organisation • EU-bound exports: 0.32% market based on the free movement of remained largely inactive during its first • Imports from the European Union: goods, services, capital and persons; and the fifteen years, due to financial difficulties and 0.46% coordination of sectoral policies. The Union institutional weaknesses as well as conflicts has also defined an action programme cover- in the Great Lakes area. Its activities were Main trade partners (2003): ing a fifteen-year period (1999–2014) to reach re-launched at the Malabo Conference in • Exports: United States (34%), European these objectives. In terms of institutional 1999 with a specific focus on conflict Union (33%), China (14%), other (19%) setting, the CEMAC Regional Executive prevention and peace consolidation, both • Imports: European Union (54%), United Secretariat is the main supranational body, in essential prerequisites for the creation of a States (9%), other (32%) charge of legislative as well as management Central African common market. activities. Since 2002, CEMAC has been Source: Comext (2005), EU declarations and IMF (2004) financed through an autonomous financing mechanism based on the collection of an International trade disparities among the countries are signifi- integration communitarian tax.7 negotiations cant: Cameroon and Gabon,3 accounting respectively for around 50% and 25% of the Looking specifically at trade and economic In addition to their own regional economic region’s total GDP, are relatively large integration, the CEMAC zone is first of all a integration process, Central African coun- economies, while Chad and the Central monetary union with a common monetary tries are involved in several external trade African Republic are among the poorest in policy, managed by the Banque des Etats negotiations. All of the countries, except for the world, with per capita gross national d’Afrique Centrale (BEAC), and a common Equatorial Guinea, are members of the WTO incomes not exceeding US $300. currency, the FCFA, pegged to the euro. In and therefore participate in the ongoing December 2000, CEMAC also formally Doha Development Round. Moreover, these Despite regional integration initiatives, became a free-trade area (FTA), though countries are signatories of the Cotonou intra-regional trade flows are still limited.4 many tariff and non-tariff barriers have Partnership Agreement, which requires an As for external trade, Central African remained. This, combined with serious phys- Economic Partnership Agreement (EPA) to economies are very open to the interna- ical constraints to transport and lack of be negotiated with the European Union by tional market. Though with market volatility economic complementarity, hampers the end 2007. The Democratic Republic of Congo over the years, total exports (in dollar terms) development of intra-regional trade. Finally, (DRC), previously negotiating an EPA in the have risen by some 50% over the twenty- the CEMAC region is a formal customs East and Southern Afirca-EU EPA configura- year period up to 2000, to reach almost union notified to the World Trade tion, joined the CEMAC configuration at the !9.5 million in 2003. The European Union, Organization (WTO), with WTO observatory end of 2005. Furthermore, with two excep- especially France, is the region’s major trad- status since 2000. Regional integration tions,9 Central African countries benefit ing partner, although the United States also measures progressively adopted since 1994 from preferential and non-reciprocal access receives a significant share of its exports include major tax and customs reforms; to the US market for a significant share of (see box). Central African exports are common rules on investment and competi- their exports under the African Growth concentrated in just a few sectors. Oil is the tion; regionally harmonised value-added Opportunity Act (AGOA). These various liber- main determinant of the region’s trade taxes; a common external tariff (CET) with alisation initiatives are meant to be conver- performance, holding about a two-thirds four rates (5%, 10%, 20% and 30%); and a gent and complementary, contributing share of total exports since 1990. This is common regime of customs valuation and towards the integration of the Central Africa followed by wood and some agricultural rules of origin. Some of these reforms are into the world economy. products (bananas, cocoa beans, cotton and still in the process of implementation. coffee). Despite liberalisation efforts, Central However, progress is slow and their effective Africa’s participation in world trade remains application remains largely incomplete. www.ecdpm.org/inbrief14a Page 3 EPA Negotiations focus on sectors most likely to be affected tions and related financial assistance.