The future of the South African Customs Union (SACU) was this week again put under the sportlight when the European Union (EU) signed interim Economic Partnership Agreements (EPAs) with some members of ‘SADC-EPA’ group leaving others out.
Botswana, which chairs the negotiations, Lesotho and Swaziland put their signatures after they initialled the agreement by the end of 2007 to allow smooth trade between EU and the region while a full agreement was being sort.
“The signing of the interim EPA marks a significant milestone in our trade negotiations. It ensures uninterrupted flow of SADC EPA goods into the EU market,” Neo Moroka, Chairman of the SADC group said after the signing in Brussels.
“There are still some outstanding issues to be resolved. These will be negotiated in parallel with negotiations towards a full EPA, covering services and investment.”
South Africa, the largest economy in the region, Namibia and Angola, have all decided not to put their signatures.
Angola, as a Least Developed Country (LDC), maintains its duty-free quota-free access to the EU market under the ‘Everything But Arms’ (EBA) initiative.
South Africa has a fall back position in the Trade, Development and Cooperation Agreement (TDCA) signed in 1999 which allows preferential tariff rates for more than 90% of South Africa’s exports to the EU while Namibia does not.
The interim agreement works towards a “full” EPA, which will address all outstanding issues in terms of trade in goods, and also include chapters on services and trade-related aspects such as investment, government procurement and competition.
South Africa makes EPAs matrics interesting because it refused to initial the agreement, questioning the legality of ‘SADC-EPA’ block and also raising concerns on its infant industries.
South Africa says a clause on the agreement about infant industries will hurt its Black Economic Empowerment (BEE) drive.
“If South Africa’s government wants to be voted out of power, they must go out and tell South Africans that they have entered into an agreement that does not allow BEE. Some will say we are being industrialist, but if other states had clear beneficiation and diversification, we will be saying a different story,” SA High Commissioner to Botswana, Dikgang Moopeloa, said at the time.
The South African media also says one of the major points of divergence to emerge during talks between South Africa and the EU concerned the latter’s insistence that a ‘‘most favoured nation” clause be inserted into the agreement.
Such a clause would require South Africa to ensure that any trade concession which it grants to a country enjoying more than a one percent share of world merchandise exports – such as China, Turkey, India and Brazil – is automatically conferred on the EU, too.
South Africa says its concerns should be understood.
Meanwhile, Mozambique has signalled its intention to sign the agreement in the near future, its trade minister was absent in Brussels.
This interim agreement secures EU market access for these countries while negotiations for a full EPA with the seven country Southern African Development Community (SADC) EPA group are ongoing. The other members of the SADC EPA group are South Africa, Namibia and Angola.
The EU represents SADC group’s largest trading partner: in 2008 total trade flows with the EU for the four countries which have now signed, or are about to sign the interim EPA was almost EUR 2.1 billion.
All four countries enjoyed individual trade surpluses with the EU ÔÇô the combined surplus standing at around EUR 1 billion.
In 2008, the main exports to the EU for the four countries were aluminium, diamonds, sugar, beef and fish. Their main imports from the EU were mechanical machinery, electrical machinery, fertilisers and vehicles.
The SADC region as a whole has been a net beneficiary of trade with the EU up to now and the EPA will allow the region to improve competitiveness, diversify its exports, and build strong regional cooperation networks in support of those that currently exist or are being developed. All of this goes hand in hand with EU financial support through the European Development Fund (EDF) and Aid for Trade facilities.