Cotonou’s demise - Namibia to lose millions
New Era, Windhoek
Cotonou’s Demise - Namibia to Lose Millions
By Wezi Tjaronda, Windhoek
30 April 2007
The end of the World Trade Organisation waiver for Cotonou trade preferences at the end of this year will cost Namibia hundreds of millions, considering that the country’s agricultural and fish exports are built on the preferences.
While trying to find a way to access the EU market for Namibian products, a study was done to examine the economic and social impact of the end of the current EU preferences for Namibia, which found that Namibia stands to lose around N$675 million per year. This amount is equivalent to more than four times the money Namibia receives annually under the 9th European Development Fund.
"N$675 million per year is the minimum cost for the Cotonou preferences which assumes stable export quantities and revenues," said Mareike Meyn of the Overseas Development Institute, who presented the findings of the study at a Public Dialogue Meeting last week.
Namibia’s agricultural exports focus on the EU market and are built on EU preferences with 44 percent of exports in the meat industry, 70 percent of grape production and 60 percent of fish destined for the EU market.
In the medium term however, higher costs are anticipated as meat exports are likely to face tariff increases of up to 130 percent, which is equivalent to 65 percent of total sales revenue.
The report said abattoirs employ in total 1 604 workers, of which 203 worked in the Northern Communal Area (NCA) abattoirs, at which 3 000 communal farmers market between seven and eight cattle.
The NCA abattoirs lose N$10 million every year, which is fully covered by Meatco. The price drop resulting from the end of the EU preferences would negatively affect the whole livestock industry, as farmers would lose their economic base.
Additionally, subsidy levels of the NCA abattoirs would also decline further thereby reducing the viability of the slaughterhouses, also resulting in a reduction of the marketability of NCA meat and jeopardising efforts to move the veterinary cordon fence southwards.
"This would not only endanger overseas exports but also considerably limit exports to South Africa," she said.
The grape industry, which also relies mainly on exports to the EU, is the biggest employer in the Karas region, engaging 3 000 permanent and 6 500 casual workers. In total, 16 000 people are said to depend on the industry alone.
With the contribution of the grape industry, informal settlements have become towns complete with water and electricity infrastructure, a school, police station and private clinic.
Since the EU trade regime towards Africa, the Caribbean and Pacific countries (ACP) was found to be incompatible with WTO regulations, the Cotonou waiver expires end of 2007, meaning that the European Commission will not be able to extend the waiver. The affected countries can however agree to negotiate Economic Partnership agreements to qualify for the EU’s offer to eliminate tariffs and import quotas for ACP countries, giving all these countries the same full market access to the 27 EU countries that all least developed countries (LCDs) in this group and elsewhere already have under the EU’s "Everything But Arms" regime.
Namibia is currently negotiating an EPA as member of the SADC-EPA configuration, but as members of SACU the BLNS countries are locked into the EU-South Africa Free Trade Area. The report also said the problems to finalise that SADC-EPA include, among others, many unresolved issues, divergent interests between the EU and South Africa and the fact that South Africa does not need to finalise negotiations by end 2007.
BLNS cannot also enter into an EPA which is not approved by South Africa because this would be violating the SACU agreement.
Jurgen Hoffmann, Senior Trade Advisor to the Agricultural Trade Forum, said last week that by having a fully-fledged agreement with the EU the neighbouring country is not under pressure to negotiate as SACU.
"But Namibia is under pressure to find a solution as a matter of urgency," said Hoffmann.
The alternatives to the trade agreement under the Cotonou agreement include the General System of Preferences (GSP), GSP+ and Everything But Arms.
Under the GSP, the study found that for meat the tariff increase would equal 65 percent of total EU export revenue which may most likely result in the cessation of exports, while the tariff increase for grapes would be 6.4 percent of total EU export revenue.
For fish, price increases might be feasible because of low price elasticity of demand for fish products and the worldwide depletion of stocks.
The tariff increase for grapes would be 0.55 percent of total EU export revenue.
The study concluded that neither the GSP nor GSP+ would offer equivalent market access for all of Namibia’s agricultural export.
"The loss of Cotonou preferences would put Namibia in a less favourable position than its major competitors, all of which are more developed than Namibia," said Meyn.
The Cotonou agreement, signed between the EU and ACP countries in 2000, provides for negotiation before the end of 2007 of a new regional WTO compatible trading arrangement.
