Cotonou Agreement

The Cotonou Agreement was signed in Cotonou, Benin, on June 23, 2000, and revised in 2005. It is a cooperation agreement between the European Community and its member states and the 78 African, Caribbean, and Pacific countries (the ACP), most of whom are former European colonies. The Cotonou Agreement builds on a series of similar agreements and includes five interdependent pillars: an enhanced political dimension, increased participation, a more strategic approach to cooperation focusing on poverty reduction, new economic and trade partnerships, and improved financial cooperation. Recent controversy has mainly focused on the trade provisions, which granted the ACP unilateral preferential access to European Union (EU) markets until the end of 2007, after which these had to be replaced by new trading arrangements called Economic Partnership Agreements or EPAs.

Much of the driver for this change in trade policy came from the increasing difficulties the ACP and EU had in justifying to other World Trade Organization (WTO) members the special EU market access in previous agreements. Favoring one group of developing countries over others is incompatible with the principle of Most Favored Nation (MFN) treatment set out in Article I of the General Agreement on Tariffs and Trade (GATT) and the subsequent agreement in 1974 to enable the provision of greater market access for developing countries—the “Enabling Clause.” As a result, the EU was forced to seek a series of waivers from other WTO members to enable its special trade regime for the ACP to continue. At the same time a series of complaints was brought to GATT/WTO on the EU-ACP banana regime—in a dispute dubbed the Banana Wars. It was consistently found that the special access for ACP bananas was incompatible with the rules of the international trading system. A final waiver was agreed in 2001 that allowed preferences to continue until EPAs were negotiated in 2007.

Moreover, the special access to the EU market which ACP countries enjoyed did not seem to have been effective in stimulating growth and economic diversification. In spite of the privileged market access, ACP shares of EU trade declined from 6.7 percent in 1976 to 3 percent in 2007, while about 55 percent of their total exports became concentrated in only 5 products. There was broad consensus among the ACP and EU that a more comprehensive approach was required. This led to the decision to create EPAs between the EU and regional groupings of ACP countries. Negotiations at the regional level finally began in 2003 with six regions that broadly speaking cover the Caribbean, the Pacific, eastern Africa, west Africa, central Africa, and southern Africa.

Negotiations on EPAs between the EU and ACP subregions have been long and complex. As negotiations advanced, it became clear that a key issue was the interpretation of requirements to establish reciprocal market access under WTO-compatible free trade areas (FTAs). Fears were widespread among the ACP [Page 423]and many development-oriented nongovernmental organizations (NGOs) that opening ACP markets to EU products would damage domestic industry. This motivated an intense discussion on the extent and timing of ACP liberalization that was complicated by the fact that the requirements for WTO-compatible FTAs are not clearly defined. The rules state that “substantially all trade” be liberalized within “a reasonable period of time.” A subsequent understanding by WTO members stated that “a reasonable period of time” could exceed 10 years only in “exceptional circumstances” but there is no clear definition of “substantially all trade.” This led to claims that EU exports to the ACP could be liberalized at levels as low as 50–60 percent over periods as long as 20 years, while still qualifying as FTAs under WTO rules. Further controversy surrounded the extent to which services trade and measures covering issues like investment and intellectual property were in the ACP interest.

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