In other words, the ACP may have to balance a continuation of export volume restrictions in
return for administered prices. This is the bargain at present: but it is one in which the ACP
have limited choice. If EPAs were to offer unlimited access for all ACP sugar exports, the
non-LDC states would face the same choices that, under EBA, the LDCs will face from 2009.
The outcome will be determined both by their initial choices and by the practicalities of
policing volume restrictions (given an underlying EU trade law that offers unlimited access,
not least in order to meet the requirement of WTO Article 24).10 An increase in the number of
countries eligible to export unlimited volumes, and the absence of TQs enforceable at the
border may make an extension of the current regime unworkable (especially if there is a
parallel proliferation of buyers).
There is also an open question of what will happen to any non-LDC sugar exporter that
chooses not to enter an EPA. Since neither the Sugar Protocol nor SPS are formally part of
Cotonou there is no obvious legal problem with a continuation of their access under current
arrangements (always assuming of course that these are not successfully challenged within
the WTO). But there remains uncertainty.
These are unanswerable questions at present as no EPA negotiation has yet moved
sufficiently far to have begun addressing the issues in a serious way. But, when they emerge,
the answers will have a strong impact on the likely impact of the current CAP reforms on the
EU sugar price and the gains derived by preference recipients.
The potential effect of change
How these changes may affect ACP and LDC suppliers is covered in the next section, but this
one sets the scene by considering how changes to complex preference regimes such as the
EU’s may affect domestic producers and consumers and actual or potential exporters. Any
sub-multilateral liberalisation scheme will tend to produce a combination of trade creation
and diversion. But in a reshuffling of the EU’s ‘pyramid of privilege’ many cases will not fall
neatly into either category.
Adding two additional classification categories of positive and negative diversion reversal
(‘positive DR’ and ‘negative DR’) to the standard tools of trade creation and diversion helps
to understand the range of likely effects. Trade creation is a straightforward concept: if
liberalisation removes significant tariff barriers imports may increase, displacing less
competitive domestic European production. So, too, is trade diversion: if the EU liberalises
towards some sources but not others existing imports may be diverted from a source that is
more efficient but is now less preferred to one with the opposite characteristics. Diversion
reversal occurs when a policy change removes or reduces the commercial advantage acquired
in the past by the less efficient supplier. This can occur either through a reduction in the tariff
payable by the more efficient supplier (positive DR) or by increasing the tariff paid by the
less efficient supplier (negative DR).
10
At present, imports from LDCs are controlled through regulations that specify a two-tier tariff regime for ‘in’ and ‘out’ of
quota supplies. EPAs will need to satisfy WTO Article 24’s requirement that they liberalise ‘substantially all’ trade. The EU
has interpreted this requirement in such a way that the degree to which the ACP have to liberalise is dependent upon the
extent of the EU’s liberalisation (see Stevens and Kennan 2006). If, as expected, the EU agrees to liberalise on 100% of
imports (and the ACP’s liberalisation effort takes this into account), its regulations will not be able to impose TQs on a
‘liberalised product’ such as sugar without bringing conformity with Article XXIV into question.
11