• Young Diplomats Society

The EU’s economic relationship with Africa after the Cotonou Agreement


Source: Unsplash

Nathaniel Sgambellone



Abstract


The economic and trade relationship between the European Union (EU) and African members of the Organisation of African, Caribbean and Pacific States (OACPS) has been governed by the Cotonou Agreement since 2000. Despite the length of its tenure, Cotonou is frequently criticised for having failed to deliver on its development promises. As such, in an effort to revitalise the EU-Africa relationship and improve the more controversial aspects of Cotonou, a new Partnership Agreement was signed in April 2021. Nevertheless, questions remain as to whether the new Agreement will make a tangible difference to the economic development of the African continent, or whether it will reinforce Africa’s economic dependency upon Europe in spite of its lofty development goals.



Background


Historically, Europe and Africa have shared a close, complex, and often controversial political and economic relationship, underscored by protracted geopolitical issues such as migration, poverty, and an ugly colonial past. The EU has attempted to address this rather thorny issue by pursuing a raft of close economic and trade agreements with former colonised states in Africa since the 1950s. These agreements first took the form of a colonial-style Association system, before being revised into the more trade-oriented Yaoundé and Lomé Conventions from the 1960s onwards.


However, by the turn of the century, increasingly vocal demands for a more development-friendly trade regime from both civil society and developing states led the EU to dramatically revamp the aging partnership. This revision took the form of the Cotonou Agreement, which was signed in 2000 by the EU and the 79 members of the African, Caribbean and Pacific Group of States (ACP). The ACP was formally established by the Georgetown Agreement of 1975, but upon its revision in 2019 was rechristened as the Organisation of African, Caribbean and Pacific States (OACPS) in 2020.


The Cotonou Agreement was ostensibly designed to facilitate poverty reduction and sustainable development, largely through the reciprocal liberalisation of trade tariffs between the two parties. However, this neoliberal policy track has been highly controversial, attracting significant criticism for failing to adequately diversify African economies or allow African states to adequately compete in the EU’s single market.


In a bid to remedy the situation yet again, a new Partnership Agreement was concluded in April 2021 to replace the contested Cotonou arrangement. This new agreement aims to significantly update the EU-Africa relationship, providing tailored, regional solutions to endemic issues such as poverty and underdevelopment.


But will this new agreement truly revitalise what has at times become a stagnant and underwhelming economic partnership? While it promises to address seemingly intractable geopolitical issues such as migration, good governance and gender equality with a renewed vigour, the Agreement also builds on many of the economic policies that critics of Cotonou argue perpetuate the fundamental structures of underdevelopment that continue to afflict the African continent. Rather than drastically altering the economic relationship between the two continents, this latest iteration of the EU-Africa partnership may instead further entrench Africa’s economic dependency upon the EU as a major source of investment, goods and services.



The EU’s long economic history in Africa


The origins of the EU-Africa economic relationship are, somewhat surprisingly, closely linked to European colonial ties to the continent. This may seem counterintuitive given the EU’s determination to separate itself and its values from the shame of Europe’s colonial past. However, a closer examination of the Association system of the 1950s, and Yaoundé Conventions which succeeded it in the 1960s, reveals that the EU - then known as the European Economic Community - fully intended to create a close and profitable economic relationship with Africa based on reciprocal market access between EU states and former African colonies.


But what motivated the nascent European institutions to do so? In an era where decolonisation was sweeping away the old colonial order, former European colonial powers - particularly France and the United Kingdom - wished to retain access to crucial commodity markets in Africa, and thus finance Europe’s post-war recovery. These neo-colonial regimes formed part of a project referred to as ‘Eurafrica’ by European politicians, which was designed to extract raw materials from Africa not through direct colonial rule, but through shared economic institutions under the guise of economic cooperation.


Clearly, as scholars such as Hansen and Jonsson have argued at length, while the EU claimed to represent a clean break from the chains of colonialism, its early external trade policies were intimately tied to the renewal of the old colonial relationship. For proof of this neo-colonial intent we need look no further than the words of former French Prime Minister and Minister of the Colonies Paul Reynaud, who remarked in 1952 that European states must, “if free Europe is to be made viable, jointly exploit the riches of the African continent”.






However, the Eurafrica project was destined not to last. Developing states continued to pressure the EU for better protections for their industries, and were rewarded in 1975 with the first Lomé Convention, concluded in conjunction with the Georgetown Agreement that formally established the ACP group. Unlike the Association and Yaoundé regimes, which primarily served to open African markets to European competition, the Lomé Conventions that replaced them offered developing states non-reciprocal tariff preferences for their exports to the EU. Renewed a further three times, Lomé’s non-reciprocal nature enabled its 79 African, Caribbean and Pacific signatories to enjoy relatively duty-free access to the EU market without affording European states the same opportunity.


Despite this, the euphoria over the new Lomé system quickly faded. By the time Lomé IV expired in 1999, the conventions were widely considered to have failed to improve the economic fortunes of their poorer members in a meaningful way. Consequently, Lomé’s successor - the Cotonou Agreement of 2000 - was conceived as a comprehensive political and economic partnership, one which again introduced reciprocal trade preferences for both parties from 2008 onwards.


Reciprocity under the Cotonou Agreement meant that OACPS members had to open their markets and commit to significant liberalisation of import and customs duties on EU exports, albeit at a staggered rate. This was to be achieved through a series of Economic Partnership Agreements (EPAs), which separated African states into 5 regional groupings and demanded that OACPS markets gradually become tariff free for most EU exports of goods and services over a period of 12 years.


The EU’s justification for this seismic policy shift was that since the Lomé regime allowed only OACPS members to enjoy tariff-free access to its market, it was incompatible with the Most-Favoured-Nation (MFN) principle of the newly-established World Trade Organisation (WTO). The MFN principle demands preferential trade agreements be open to all WTO members rather than a select few. To support the least developed countries (LDCs) through this transition, the EU announced the Everything But Arms (EBA) scheme in 2001, which allowed LDCs to export all goods except weapons and ammunition to the EU tariff-free. However, the remaining OACPS states had little choice but to enter into negotiations to sign EPAs, as failure to do so would have resulted in the loss of their existing trade preferences with the EU under the WTO’s multilateral, rules-based trading order.



Cotonou controversy: encouraging development or facilitating neo-colonialism?


Despite the EU’s assurances to the contrary, the revised trade relationship between the EU and Africa under the Cotonou Agreement – with the exception of Tunisia, Egypt, Morocco, and Algeria, which are not OACPS members and have pursued their own bilateral agreements with the EU – remained controversial in its application. Under the EPAs, OACPS states would only be able to impose protective tariffs on products that comprised less than 20 per cent of their total trade with the EU, forcing governments to choose between protecting nascent manufacturing sectors or larger but less complex industries such as agriculture. This led to African states experiencing significant losses in tariff revenue, which has in part prevented many from generating the necessary capital to satisfactorily diversify their economies.


In 2007, for example, when the EPAs were first being negotiated, states such as the Democratic Republic of the Congo, Sierra Leone, and Madagascar relied on customs duties for 33.7, 49.8 and 53.5 per cent of their total tax revenue respectively. Under the EPA signed with West Africa, Cabo Verde and the Gambia were predicted to lose almost 20 per cent of government revenue, which was more than 3.5 per cent of their total GDP. In 2009, Bilal and Stevens estimated that tariff liberalisation on raw materials would cost African states approximately USD $359 million annually.




Perhaps most importantly, reciprocal trade liberalisation under Cotonou has failed to significantly diversify the sectoral composition of Africa’s exports to Europe. 70 per cent of the EU’s exports to Africa in 2020 were complex manufactured goods, while Africa’s exports to the EU were predominantly composed of primary unprocessed commodities and raw materials such as green coffee beans and cocoa. Additionally, as a result of forcing OACPS states to remove entry tariffs on a range of goods and services, EPAs have allowed wealthier foreign businesses to dominate African markets. This has particularly affected the agriculture and livestock sectors in Africa, as foreign corporations possessing much greater technical expertise, value-adding capacity, and financial assets have pushed local businesses out of the market.


For example, since Ghana signed its EPA with the EU in 2016, its poultry industry has been decimated, with imports of cheap, unwanted European poultry cuts nearly doubling from €65 million to €123.1 million by 2019. The Conference of Trade Ministers of the African Union (AU) expressed its disappointment with the potentially negative impact of EPAs as early as 2006, arguing that simply opening African markets to EU trade “may not by itself deliver economic development”. 15 years later, this warning still rings true. Despite its best intentions, Cotonou’s neoliberal policies have essentially placed products “from one of the world’s most economically advanced regions in direct competition with producers in some of the world’s poorest countries”.





The post-Cotonou Partnership Agreement: where to from here?


As such, the question remains - in light of the Cotonou Agreement’s drawbacks, what is the outlook for the EU-Africa relationship going forward? Cotonou’s expiry in 2020 presented the EU and the OACPS with an opportunity to significantly revise the partnership to reflect the economic needs of both parties. Indeed, the new Partnership Agreement, signed in April 2021, places renewed emphasis on a swathe of prominent and contentious geopolitical issues, namely:

  • Human rights, democracy and governance;

  • Peace and security;

  • Human and social development;

  • Environmental sustainability and climate change;

  • Inclusive sustainable economic growth and development; and,

  • Migration and mobility.

Perhaps the most significant change in the new Agreement is that instead of one overarching framework, it adopts three regional protocols in addition to the general provision applied to all parties. This “regionalises the joint institutions, adding new layers and processes, including regional summits, councils of ministers, regional joint (ambassadorial) committees and parliamentary assemblies”. The EU has argued that this will allow for “unprecedented regional focus… to manage and steer the relations with the EU and different regions involved”.


The regional protocol for Africa upgrades and replaces the Joint Africa-EU Strategy (JAES), which was established at the 2007 Lisbon Summit as a formal channel to strengthen political cooperation, peace and security architecture, governance and human rights protections, and trade and economic integration between the EU and Africa. In particular, the protocol emphasises the importance of building resilient and effective institutions to facilitate the implementation of its six key priorities, and calls on both parties to “tackle inequalities and promote social protection with a view to eradicate poverty”. Clearly, the Agreement’s priorities for the future of EU-OACPS cooperation lie in compartmentalising the institutional architecture of the EU’s partnerships with developing states, streamlining Brussels’ external trade and development policies.


However, while on the surface these changes seem to herald a watershed moment in transforming the entrenched donor-recipient nature of EU-OACPS relations, the reality is not so clear cut. In a surprising move, the new Agreement has abolished the European Development Fund (EDF), the primary source of EU development aid to OACPS states for over 60 years. Instead, development and aid finance for the OACPS will be incorporated into the EU’s general budget as part of its new €79.5 billion Neighbourhood, Development and International Cooperation Instrument (NDICI).


This decision to centralise the EU’s financial support to African OACPS member states, which have traditionally relied heavily on the predictability of EU aid, renders “the financial aspects of the partnership… considerably thinner”. The NDICI may contain €29.18 billion in funds dedicated to Sub-Saharan Africa, but the Agreement essentially “puts an end to the dedicated and institutionalised aid architecture that has long been the lifeblood of the EU-OACPS partnership and its joint institutions”. The EU is evidently eager to avoid a continued characterisation of its relationship with the OACPS as “a form of collective patronage”. However, by reducing the certainty with which aid will be provided to Africa, it has rendered its OACPS partners even more dependent upon Europe as a source of funding and investment.



The future of EU-Africa trade: a question of dollars and sense


Crucially, trade and economic relations seem to have taken a back seat in the new-look partnership. EU-OACPS trade policy will no longer be a collective endeavour, but will continue to use the bilateral EPA framework as its foundation. As a result, trade between the EU and African OACPS member states will be regulated via the existing regional EPA groupings. This is a somewhat disappointing result for many African states; the EPAs have thus far generated significant controversy for failing to take into account African development priorities, while continuing to open local markets to foreign European competition. As such, many African states have delayed signing or ratifying EPAs in their current form. Opponents of the EPAs continue to decry them for locking in unfair and unsatisfactory trade regimes that hamper efforts to diversify developing economies and deepen the complexity and scope of OACPS export industries.


By simply carrying over the existing economic framework – one that has largely failed to improve the economic fortunes of African OACPS member states – the recent Agreement represents a missed opportunity for the EU to enter into a more constructive, OACPS-focused trade discourse with Africa. Indeed, the EU has often been criticised for using EPAs to normalise a neoliberal development model that seeks to “advance the global trade agenda” and implement so-called ‘WTO-plus’ issues such as investor rights, trade facilitation and competition policy in its partnerships with developing states, rather than crafting policies that reflect their development priorities.


Despite the 2021 Partnership Agreement’s new institutional structure for the EU-Africa relationship, African members of the OACPS will therefore continue to interact with one of their most important aid and trade partners under an economic system that has proved largely unsatisfactory with regards to the achievement of their development goals outlined in the AU’s ‘Agenda 2063’ action plan, which aims to transform Africa into “the global powerhouse of the future”. While the Agreement places renewed emphasis on geopolitical cooperation regarding issues that are salient to both Africa and the EU, such as migration and good governance, the fundamental economic foundation of the relationship remains largely unchanged. Viewed from this perspective, it seems unlikely that the new regime will ameliorate the existing economic asymmetry between Europe and Africa. Instead, it may entrench it further.



Conclusion: what next for EU-OACPS economic cooperation?


In light of these latest shifts in the EU-Africa relationship, it is hard not to judge the latest Partnership Agreement as the “last hurrah” of the neoliberal economic system forged by the EU under the Cotonou Agreement over 20 years ago.