The Economic Partnership Agreements (EPAs) between the European Union (EU) and the AFRICA, Caribbean and Pacific Group (ACP) aim to define a new global framework for bilateral economic relations between the EU and ACP countries. As part of the Cotonou Agreement, EPAs aim to promote economic growth and development as well as the harmonious and gradual integration of ACP countries into the global economy. From the EU`s point of view, two main objectives stand out. First, the EU has sought new trade agreements with ACP countries that would ensure compatibility with World Trade Organization (WTO) rules. Non-reciprocal trade preferences under the Lomé Conventions required a WTO waiver, as these preferences were not limited to the least developed countries and were not granted to all developing countries. The new agreements provide for a transfer of the system of non-reciprocal trade preferences to EPAs, which are in fact bilateral free trade agreements. This means that ACP countries should open their markets to EU products over a 12-year period, planned between 2008 and 2020. The quality of ACP institutions will be the most important aspect that will determine the outcome of EPAs. Indeed, empirical and circumstantial evidence indicates that the trade policy and reform process is likely to be a more decisive determinant of economic impact than the exact direction of trade policy. In other words, how the issue prevails, what is the issue of trade policy and reform. There is now a growing literature on the conditions under which institutions develop and on the role that foreigners (donors) can play. Political leadership, ownership, accountability and a long-term vision appear to be essential to the sustainable establishment of institutions.
In the area of international trade negotiations, particularly EPAs, there is a strong tension between these ingredients and the methodology by which donors and beneficiaries strive to develop trade-related institutions through trade capacity-building programmes. Given that many ACP countries are not convinced that EPAs are necessary for their development, they have so far taken a wait-and-see approach. Nevertheless, a defensive and reactive approach during the negotiations is likely to result in a heavy implementation burden and potentially high adjustment costs once the EPAs have been concluded. This is particularly true for the least developed countries, which initially have the weakest institutional base. On the other hand, the European Commission has very proactively developed various support programmes to help both implement and adapt to EPAs. However, a very critical question is whether the Commission alone can carry out these processes. Support for trade capacity building will not have a lasting effect on ACP countries that do not take responsibility for reciprocity ideas, accompanying measures and institutional reforms. In the latter case, the costs of half-word agreements are disproportionately borne by the ACP countries concerned. Chang et al. have broadened the analytical framework and examined various other policy complementarities for the nexus of trade9. In addition to good government rules, they found that high levels of human capital, well-developed financial markets, good public infrastructure and sufficient labour market flexibility play an important role in the relationship between trade and economic growth rates.
The paper concludes that the effects of openness on growth can be significantly improved if some complementary reforms are implemented.