Benefits of Everything but Arms Initiative

 

            Everything but arms is an initiative that was introduced in the year 2001 under the European Union Generalized Scheme Preference. The initiative gives Least Developed Countries (LDC) an opportunity to export their produce duty-free and quota-free market access for all it produces except the arms and ammunition as it is indicated by the name.

            The access to the benefits of the scheme is usually automatic for the LDC, and therefore there is no application that will be needed for the countries in order to access the benefits of the initiative. The countries are added or even removed to the appropriate list by delegated regulation (Frazer, 2017). However, in the case of significant violation of the current principles of human rights and also labor rights, the Everything but Arms initiative benefits can be withdrawn.

            From 2011, the European Union has set up favorable rules of origin for the LDC in a few of the products. For example, the regulation for the initiative increased the allowance for the use of non-originating materials for most of the manufactured goods and also made an allowance for garments which have undergone a single transformation into the market.

            The European Union also provides for smooth transition of the African countries and also others by establishing a transitional period of three years that will allow the countries to move out of being LDC into other categories. This period of transformation enables the countries to have enough time to lower the risk for development of adverse effects that may result from a direct removal as it will affect the operations and also the supply of the products into the market.

            The everything but arms initiative makes an essential contribution to the development even though the most significant impact of the initiative is not felt directly. Some of the direct effects that will be felt in the least developed states are always positive, but the impacts are moderate because the supply capacity of these countries is still small (Ito & Aoyagi, 2019). The initiative improves the access of African exports to the European Union market. This will create a broader market for goods as the number of consumers of the products also increases and thus bring more profits and increase the income of the country.

             Furthermore, the larger the market of the goods into the market will lead to demand in the production of the products which will thus create more jobs for the citizens of that country and in the long run reduce the level of poverty for its citizen (Coulibaly, 2017). This will reduce the level of dependence of the people to the government and also will improve the living standards of the people in the country which will impact even in the health of the people.

            The opportunity given to the least developed countries to export their products is likely to boost developments of the country because the level of production will also go high. With low levels of restriction of products into the market and with no extra charges, the products are likely to remain affordable, and thus a large number of individuals will consume it, and that means the market for the product also increases.

            The initiative increases the value of the produce, and this is because the level of competitions for the products in the developed and the industrialized countries will also go up. This will promote a better market and also an increase in the value of the products in the market (Orbie & Martens, 2016). This will boost better earnings for the farmers and also the individuals involved in the production of the products or the good.

   

            The impact of the EBA on the least developed African countries will depend on some of the factors such as the capacity of the country to increase the supply of their products to the market and also the extent to which the initiative will bring changes and results to better access of their products into the market. If there is increase in the market access and the production of the good remains the same, the supply will also remain the same, and this will thus make least changes and little changes in the benefits to the market. Also if the country had already access to the market and there will be no improvements in the access, small benefits will also be drawn from the initiative.

            The amount of money from the taxation of the products exported to the European Union will thus move to the supplier because the product is not taxed although it is not possible to determine the amount from the action. The removal of the taxation of the products will result in some improvements, and this will occur if the supply chain will gain a significant benefit in the tax relief and therefore earn more.

            The impact of the least developed countries producers earning more will, therefore, increase their capacity to increase the volume of their exports into the markets. This is the result of the initiative. The countries which may have supplied the products into lower-priced markets are able to divert the products into the European Union market, and this will earn more export revenues for the country, and thus it will be a dynamic gain for them (Kennes, 2018). This revenue can be used in the development and boosting other sectors in the country.

            However, it is unrealistic to expect a massive impact from the initiative due to the fact that most of the least developed countries supplying to the market have a little surplus and therefore they are not able to increase the amount of produce to export to European Union market. Some of the ways the countries can increase their exportation into the markets are the diversion of the products from other markets and an increase in the imports into the country for consumption to allow more production for export. The two ways are likely to be done by a country if the prices in the European Union market are higher than in other areas and will involve mainly the products that country have been relieved by the European Union.

            Some of the African countries that have benefited from everything but arms initiative are Rwanda, Tanzania and Ethiopia. The levels of exports to the European Union from Rwanda was low before the introduction of the everything but arms initiative. After the introduction of the initiative, the levels of exports has increased and become the highest in 2016 amounting 414 million euros.

YEAR	EXPORTS VALUE IN MILLION EUR
2001	5
2007	60
2008	166
2009	171
2010	154
2011	154
2012	197
2013	184
2014	168
2015	185
2016	414
2017	193
2018	212

            The figures shows the level of exports to EU market before and after the introduction of the everything but arms initiative. This is clearly shows that there has been massive increase in exports to the EU and therefore it has benefited from the initiative.

            Tanzania exports to the EU has also increased since entry into the everything but arms initiative. The exports of Tanzania before the initiative were low but after the levels have been high and reaching 1096 million euros in 2011. The levels have remained high all above 888 million euros since 2011. The market for Tanzania goods has therefore risen and it is indicative of benefits of good market.

There have a lot of changes in the European Union market as the countries are able to export more to the market and also their supply quantity also increases. For example in Ethiopia where the export increased from the time the initiative was introduced in the European Union. Since 2001, Ethiopia considered the use of EBA initiative to export to the European Union, the amount of the exports from the country increased from 2001 up to 201 and from 2012 to 2016 the trend for exports to the European Union declined. However, the fact remains that the exports of Ethiopia to the European Union is still in a good position than the way it was back in 2001 and also other periods before that.

            The agricultural product mainly dominates the major export to the European Union market from Ethiopia. The agricultural products were mostly featured on coffee and flowers, and it accounted for a more significant percentage of more than 78% of all the exports from Ethiopia to the European market in 2016. It is therefore clear that the country is yet to realize its export potential to the European Union market.           

No	Sectors	Value of export to EU in 2016 in USD	Share in %
1	Agricultural products	551,240,786	90.50
2	Textile and textile product	42,809,535	7.03
3	Footwear and its Part	929,162	0.15
4	Other non- agricultural products	14,118,394	2.32

 

            From the table above, it is clear that the exports to the European Union market from Ethiopia are the agricultural products. Others include the textile and other its products, footwear and its parts and non-agricultural products (Staritz & Whitfield, 2017). The availability of a market for the products and also the removal of taxation makes it more favorable for the products to compete in the market. This thus is beneficial to the country as the market is not only widened but also made it more desirable to compete with other products from the developed countries.

Compared to other regions Ethiopia’s export to European Union has been declining. And the main reason for this may be due to the increase in the number of trading, and there is other emerging export destination due to the high demand and also presence of other GSP schemes which are offered by other trading partners which are as important as European Union. However, even after the decline in the trend, when compared to other regions, the European Union remain the most significant destination for exports from Ethiopia.

              Even though the country has a great opportunity which is offered by the EBA scheme, it has never been able to make use of the European Union market; this is due to challenges which are experienced in the supply chain and that are very crucial in the production sector. First, the country has limited productivity. The amount of produce does not reach the surplus, and therefore the country cannot be able to export a large quantity to the market.

             Besides, it is very likely that the will be no change that can be seen if the amount of products supplied to the market remains the same even if the market is duty-free. The amount produced is what matters, and thus the inability of the country to be in a position to provide enough means that it cannot have enough to export to other markets. However, the European Union market has helped in offering the market for the little the country produces.

            Ethiopia also has a challenge in the diversification of the economy; this is because the areas of production have been mainly focused on the agricultural products which thus is the backbone of the economy. This does not provide the opportunity for the country to move and focus on other sectors in the economy.

            There are also low levels in the structural changes and also little industrial development. Infrastructure is essential for the development of a country, and therefore, lack of enough infrastructure will derail the rate of expansion of other sectors in the country (Ito & Aoyagi, 2019). The industrial development is also crucial in the processing of material which will then improve the quality and also add the value of the products in the market. Exportation of raw produce does not give the amount of the product in the export market because they are unprocessed.

            There are also issues with the logistics and other services such as the quality certification, port services, and customs are also a problem and therefore before the supply of the products to the actual destination. There are a lot of challenges that are faced in the way, and the market for the product was also small; thus there was little profit from the sector.

             The competition from other developed countries and also high and therefore the products from the country had diverse challenges and could not yield enough profits. The levels for technology were too low, and the transfer linkages for the produces was also minimal. This was a big challenge because the products that were produced had a smaller market for it.

            After the introduction of the initiative, there have been drastic changes that occurred which includes development and also an improvement in the delivery of services to the producers. This included the addressing of the supply side constraints. This has improved the process of delivery of the product to the European Union market. The removal of the duties for the product also let in an increase in the profitability of the products and even gave motivation to the farmers to continue with the production.

             EBA opened up a broader market for the product as the products are able to compete in the international markets. This is because the removal of the duty on the products reduced the cost to the producers and also reduced the prize of the produce in the market (Coulibaly, 2017). This will thus make it compete favorably with others which are produced in other countries cheaply. The rise in the market for the product and also increase in the profitability allowed for more production because the producers have the resources to invest. This fosters the development of the country.

            The initiative has also improved and also increased the country’s export revenues because of the removal of the trade barriers and the duties on the export sector. This provides the country with that capability to provide job opportunities to its citizens and therefore promote growth and development of the country (Frazer, 2017). It will also be able to expand other sectors of the economy and also build roads, hospitals and also promote industrialization of the country.

            Continuous production of products depends on the demand and also the profit the producer gets. This is highly facilitated by the availability of a market where the products will be sold and also a market which has little or fair competition for the products. The introduction of the EBA initiative in the European Union market gave the least developed counties an opportunity to sell their products to a broader market at no extra cost.

            The fact that EBA has made a significant impact on the exports of the product in the least developed countries in Africa, it has also facilitated in the reform of the CAP regime and improved the negotiations on trade in the World trade organization. This has improved the trade in the union which thus results in improvements in the export sector of the least developed countries in Africa.

            It is true that the European Union waive almost 50 countries which are considered as the Least Developed Countries under the Everything but Arms initiative. This all is under the generalized system of preferences, and it assumes that the exporters who are in developing countries claim the minimized or the zero available tariffs.

            The complex consideration that has been made such as the rules of origin and the side rules on the labor and human rights that have also exceeded the international standards hinder businesses from choosing the tariff preferences (Frazer, 2017). They claim that the rule of origin that enables one to qualify  for EBA for ornaments are difficult and they are the one that hinders the developing countries from transition up the value chain from agriculture and other products  into manufactured products

            There is also claim that the reports that were made concerning the introduction of the EBA initiative found out that there is no observable effect on the African least developed countries exports and also little impact on the development in the poorest countries. The exporters in the developing countries also claim that tariff barriers prevent them. The farmers have to compete with products which have been subsidized domestic production underpinned by the Common Agricultural Policy which does not only apply in the European Union.

            There are also concerns that have been raised by the African dairy farmers concerning the overproduction of milk by the European Union-subsidized farmers. They claim that they are gradually removed from their home markets as the European producers are forced to move and look for other alternative markets. The farmers, therefore, claim that the initiative is not fair to them.

            The farmers consider that they are losing a lot of money because they are not able to compete with the products which are brought into the market into the country. The produce that is imported into the market from the Least Developed Countries are not imposed on duty and therefore, the market prices at the time are lower than what they would sell their produce at; thus the market becomes competitive. This will make them sell their products at a lower prize which then drives them into loses.

            They also claim that the amount of products that are delivered into the market by different countries causes flooding of the market and thus the supply becomes more than the demand which generally leads to a reduction of the price of the products. This will consequently lead to a decrease in profitability and sometimes lead to loses. The market is therefore unfavorable for them due to the resulting decline in pricing of the products.

Conclusion

            Everything but arms initiative has opened a larger market for the products from the less developed countries such as Tanzania, Rwanda and also Ethiopia in Africa. This has resulted in the improvement of the exports into the European Union. However, it has also caused some challenges to the European Union farmers as they are forced to look for market for their goods yet the initiative allows imports for goods without imposing tax. This thus makes the goods less and rises the level of competition with the European farmers’ products. It has also be noticed to have little change in countries which has less surplus products to export to the market. On the other hand countries with surplus produce have noticed a significant increase and also returns from the market.

References

Coulibaly, S. (2017). Differentiated Impact of AGOA and EBA on West African Countries. Manuscript. Africa Chief Economist Office, The World Bank.

Frazer, I. (2017). Governance, Capacity and Legitimacy: EPAs, EBA and the European Union’s Pacific

Ito, T., & Aoyagi, T. (2019). Did the least developed countries benefit from duty-free quota-free access to the Japanese market?. Japan and the World Economy, 49, 32-39.

Kennes, W. (2018). How Brexit may affect ACP-EU relations.

Orbie, J., & Martens, D. (2016). EU trade policy and developing countries: towards a more ethical agenda?. In Different glances at EU trade policy (pp. 73-82). CIDOB.

Staritz, C., & Whitfield, L. (2017). Made in Ethiopia: the emergence and evolution of the Ethiopian apparel export sector. CAE Working Paper 2017: 3, Center of African Economies, Roskilde University, Roskilde, DK). Available at https://typo3. ruc. dk/fileadmin/assets/isg/02_Forskning/CAE/CAE_WP3_Staritz_and_Whitfield. pdf.