Fiscal impact of EPA and its implication on the realisation of economic and social rights

1
Fiscal impact of EPA and its implication on the
realisation of economic and social rights

2
Structure of presentation

• -Types of fiscal impacts
• -Government tariff loss from E.U. imports
• -Assessment of tariff loss
• -The effects of EPA tariff loss on the
  realization of social and economic rights
• -EPA tariff loss and the right to development
• -E.U. and its human rights commitments
• -The W.T.O. context
• -Consolation
• -Conclusion

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Types of fiscal revenue loss from EPA

• Loss of tariff from non E.U. imports as a result
  of trade diversion to E.U. imports
• Stiff competition from E.U. producers and imports
  will force local producers out of business with
  this loss of business profit taxes
• Employees from these local producers will be
  faced with unemployment. The taxes from their
  income will be lost to government
• The unemployment may burden the social security
  fund of government

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The major tariff loss

• Government tariff loss from E.U. imports
• Ethiopia and other LDCs build their revenue on
  import tariffs
• LDCs in the ACP could face up to 30 revenue loss
  because of this.

5
Amount of direct revenue loss for Ethiopia from
E.U.imports

• For Ethiopia tariff reduction has two
  consequences
• 1, Customs duty losses
• 2, Revenue loss as an indirect effect of tariff
  dismantlement on VAT (VAT is calculated on the
  CIF value of imports plus customs duties, the
  tariff cut reduces the VAT base and thus VAT
  collections)
• Important to see with tariff loss from joining
  COMESA
• The tariff loss from joining COMESA would be Birr
  65 million or 0.6 of projected total tax revenue
  for 2004/5 based on static analysis .
• The COMESA cumulative loss for full dismantlement
  is estimated at Birr 94 million.

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Actual tariff loss from EPA

• _Based on static and dynamic situation
• On a static evaluation of 100 reduction in
  tariff on all imports from EU in a single year
• The loss is calculated to be 369 million Birr
  i.e. from customs 321 million Birr and 48 million
  Birr from VAT
• Equivalent to 4.5of aggregate tax revenue for
  2002/3

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Actual tariff loss from EPA

• It is estimated that the loss would grow by
  0.4in 2008/9 to 2.6 in 2017/18
• According to a study the tax loss from trade
  diversion from non EU products with the tariff
  loss of EU is predicted to be 55million Dollar
• Tariff loss from EPA in addition to COMESA tariff
  loss will certainly have a significant damage on
  government budget

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The effect of EPA on the realization of human
rights

• On a study made by UNECA
• -EPA revenue loss will undermine developmental
  objectives of ACP states.
• -It will also harm ACP states budgetary
  capabilities.
• -Create problem in financing key expenditures
  like education ,health and poverty reduction.
• -Ethiopia is found in a similar situation.

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What do human rights instruments say about these?

• Every individual has the right to enjoy the best
  attainable state of physical health Article 16
  of ACHPR
• Every individual has the right to education
  Article 17/1 of ACHPR
• The UDHR declares the same.
• The state has the obligation to allocate ever
  increasing resources to provide to public health
  ,education and other social services .Article
  41/4 of the Federal constitution.

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What do human rights instruments say about these?

• These articles emphasize the duty to provide more
  education ,health facilities and other social
  services.
• The revenue loss from an EPA will put into
  question government commitment to these social
  and economic rights.
• Violation of the constitution and international
  human rights treaties seems likely unless a
  solution is found.
• EU has a duty to see to it that social and
  economic rights are respected.

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On practicability of social and economic rights

• International covenant on economic ,social and
  cultural rights Article 2 demands progressive
  realization of the rights enshrined in the
  covenant .
• Either individually or through international
  cooperation.
• It is not only programmatic
• Government is expected to provide certain
  facilities to destitute people.

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On practicability of social and economic rights

• In its third general comment, the committee for
  economic ,social and cultural rights stated
  States failure to fulfill minimum core
  obligations is a violation of the covenant
• The core minimum includes that vulnerable members
  of society be protected by the adoption of
  relatively low cost targeted programs.
• Ethiopia directly and the EU indirectly have the
  obligation to provide low cost health, education
  and pro-poor development programmes.
• Violation of these should not be EUs agenda.

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• The right to development and EPA
• It is controversial but recognized by the UNGA
  resolution34/46,23 November 1979 and UNGA
  resolution 36/133 ,14 December 1981
• States shall have the duty individually or
  collectively ,to ensure the exercise of the right
  to development Article 22/2 of ACHPR
• The peoples of Ethiopia as a whole and each
  nation , nationality and people in Ethiopia in
  particular have the right to improved living
  standards and to sustainable developmentArticle
  43/1 of Federal constitution

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The right to development and EPA

• Ethiopia based on the above is committed to
  raising living standards and to sustainable
  development.
• EU therefore should not thwart the development of
  Ethiopia through EPA .
• The right to development should not be
  disregarded as there are strong arguments for it.
• Under this right it is argued unless a state
  develops, it could not guarantee basic human
  rights .

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The right to development and EPA

• It is also emphasized that there is a right of
  states to enjoy the benefit of international duty
  to cooperate.
• It is believed to link the acceptance of the
  benefit with a corresponding obligation on
  developing countries to respect human rights of
  their people.
• Furthermore preferential treatment is thought to
  lift the veil of sovereignty.
• Making it the collective responsibility of the
  community of states to internationalize the
  welfare state.

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The right to development and EPA Main points

• Developing states need to be developed (in a
  position) to respect human rights.
• There must be recognition to an international
  obligation to give assistance emanating from the
  duty to cooperate on developed countries.
• Pursuant to this EU should strive for provisions
  of safety nets programmes before EPA becomes a
  reality .

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EUs human rights commitments

• Respect for human rights ,democratic principles
  and the rule of law ,which underpin the ACP-EU
  partnership ,shall underpin the domestic and
  international policies of the parties and
  constitutes the essential element of this
  agreement. Article 9/2 of Cotonou Agreement

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EUs human rights commitments

• Community policy in the sphere of development
  cooperation,which shall be complementary to the
  policies pursued by member states,shall
  foster(Art.130u of Maastricht treaty)
• -The sustainable economic and social development
  of the developing countries more particularly the
  most disadvantaged among them.

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EUs human rights commitments

• -The smooth and gradual integration of developing
  countries into the world economy
• -The campaign against poverty in the developing
  countries.

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EUs human rights commitments

• The Luxembourg European council In a resolution
  of 28 November 1991 declared the EU and member
  states will give active support for countries
  which improve their human rights performance.
• Art.177/2of the EC treaty stresses that EC
  policy in the area of development cooperation
  shall contribute to the general objective of
  developing and consolidating democracy and the
  rule of law ,and to respecting human rights and
  fundamental freedoms .
• Art.179/1 provides that the EC shall adopt the
  measures necessary to implement the objectives of
  development cooperation.

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EUs human rights commitments

• Support national strategies for poverty
  reduction, enhancing macro-economic stability,
  improving the investment climate
• (EU strategy for Africa, 22-11 2005)
• On EPA, Support EPA by improving access to EU
  markets, help ACP integrate into world markets,
  establish rules to spur investment and growth

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. EUs human rights commitments

• Provide financial support for building trade
  capacity, implement supply side reforms linked to
  EPA
• In respect of liberalization by African
  countries, support the objective of asymmetry and
  flexibility, particularly in transitional
  periods, and safety measures.

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EUs human rights commitments

• In terms of case law the European court of
  justice in Opinion 2/94 recognized that
  Art.177(2) EC provides that community policy in
  the area of development cooperation is to
  contribute to the objective of respecting human
  rights and fundamental freedoms
• All these duties and obligations of EU are strong
  manifestations that human rights should be parts
  and parcel of EUs activities in its
  international relations.
• And development assistance is geared for human
  rights purposes.

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EUs human rights commitments

• The EU should act in ways that are in line with
  its treaty obligations and other duties.
• If EPA is going to result in revenue loss that
  can be a cause for violation of social, economic
  and development rights, then the EU pursuant to
  the above mentioned commitments should mitigate
  the outcome .
• It should provide for safety mechanisms and
  development assistance .

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In the WTO context

• EPA as an FTA is governed under Art.24 of GATT
• GATT is annexed to WTO establishing agreement
• The preamble of the agreement declares the
  purpose WTO to be raising standard of living,
  ensuring full employment, a large and steady
  growing volume of real income, and expanding the
  production of and trading in goods and services
  among others.

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In the WTO context

• If EPA is going to result loss of revenue
• Fulfilling basic education, health, pro-poor
  facilities and employment will be difficult.
• This is in direct conflict to WTO goals as
  mentioned above.
• Unless development assistance and safety nets are
  put in place.

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Consolation

• EPA will not be implemented before 2008 and
  tariffs are not going to be eliminated in 1 year.
• Transitional periods for LDCs and developing
  countries could be extended giving adjustment
  periods.
• Consumers will benefit from dismantled tariffs .

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Consolation

• -Employment and income gains can be experienced
  if production and investment occur because of
  liberalization.

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conclusion

• Tariff losses will result from tariff
  dismantlement of EPA
• They should be seen with tariff loss from joining
  COMESA
• Tariff losses means difficulty in providing
  education, health and pro-poor facilities for
  impoverished or marginalized people.
• This, if not addressed will result violation of
  social, economic and developmental rights.

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conclusion

• Ethiopia should be helped with developmental
  assistance, safety nets and capacity building
  (e.g.for tax adjustment) to make it able to
  protect social, economic and developmental
  rights.
• EU has the obligation to provide conditions for
  the respect of human rights as well as to give
  developmental assistance to thwart EPAs negative
  effects.

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conclusion

• The obligation should not be limited to the EU
  alone, the UN has an obligation too.
• The UNGA in the 2005 world summit has dedicated
  itself to support efforts to overcome LDCs
  supply-side constraints and to increase aid to
  build productive and trade capacity of developing
  countries