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Initial review of impact of EU–US trade partnership on selected developing countries

The European Centre for Development Policy Management has published a paper on the possible impact of the proposed Transatlantic Trade and Investment Partnership (TTIP) between the USA and the EU on 43 low-income developing countries (LICs), 33 of which are ACP countries.

The paper, based on a report commissioned by the UK Department for International Development, reviewed two potential areas of impact on imports from the selected LICs, namely:

  • the impact of removing MFN tariffs on EUUS trade;
  • the impact of EUUS regulatory integration.

The analysis found that, in general, the larger the MFN (and the lower the duty paid by the country reviewed), the higher the potential loss of preferential margins. However, it found also that tariff reductions under the TTIP carry a potential threat only for some countries in very specific products, since there is little overlap between the structure of USEU trade and the non-fuel exports of the countries reviewed. Assessing these specific impacts requires country- and product-specific analysis at a more detailed six-digit level (i.e. of the international HS product codes). Currently, most of the areas of impact are in non-agricultural products (the only identified exception is Malawian tobacco exports to the USA).

In terms of possible policy responses, the report suggested that affected developing countries could lobby for the exclusion from liberalisation of those export products which face high MFN tariffs. Since many of these products correspond to domestic sensitivities in the US or EU, many of these products may already be scheduled for exclusion from any EUUS tariff liberalisation process.

Potential effects of the TTIP on ACP and non-ACP countries

LIC with 5 or more of the top 20 exports that attract MFN tariff above 10% LIC with one or more of the top 20 exports that attract MFN tariff above 15% LIC with 10 or more of the top 20 exports that are sensitive to SPS measures
EU Haiti, Mauritania, Madagascar(Non-ACP: Bangladesh, Cambodia, Nepal, Pakistan) Chad, Burundi, Ghana, Madagascar, Malawi, Togo(Non-ACP: Cambodia) Burkina Faso, Burundi, DRC, Gambia, Ghana, Kenya, Mauritania, Rwanda, Somalia, Sudan, Uganda(Non-ACP: Palestinian Occupied Territories)
US Haiti, Kenya, Madagascar(Non-ACP: Bangladesh, Cambodia, Pakistan) Burkina Faso, Ethiopia, Guinea, Haiti, Kenya, Madagascar, Malawi, Mali, Mozambique, Rwanda, Togo, Uganda(Non-ACP: Bangladesh, Cambodia, Kyrgyzstan, Palestinian Occupied territories, Pakistan) Ghana, Nigeria, Malawi, Togo, Uganda

Source: ECDPM, Potential effects of EUUS economic integration on selected developing countries (see below)

In terms of SPS measures, 11 of the 12 countries that have 10 of their top 20 exports subject to SPS regulatory regimes where changes could potentially be introduced that affect exports to the EU are ACP countries. Of the countries potentially affected that export to the US, all five are ACP countries. These ACP countries could be adversely affected if stricter SPS standards were applied as a result of regulatory harmonisation. However, how individual ACP countries are affected will depend on their compliance capacities.

Countries identified as currently coping well with SPS requirements include Kenya, Uganda, Tanzania, Zambia and Zimbabwe: for these countries, regulatory harmonisation could well result in cost savings in serving both EU and US markets. For countries currently facing challenges in meeting existing SPS requirements, which include Ghana, Gambia, Guinea, Madagascar, Mauritania and Mozambique, regulatory harmonisation will pose new challenges.

However, it should be noted that the ambitions for regulatory harmonisation under the TTIP are described as quite modest, with regulatory changes potentially being quite limited, given the sensitivity of this issue on both sides of the Atlantic.

The analysis noted that in the regulatory field, if the EU and US succeed in pursuing effective mutual recognition agreements (MRAs), LICs could lobby for these MRAs to be open to third countries meeting the rules of either the EU or US, with, where the changes made so require, assistance being extended to increase compliance capacities. This could take the form of training or perhaps loans for capital investment.

Overall, the review of the TTIP process has highlighted the importance of continued investment in developing countries in enhancing competitiveness.