Economic pact with EU causes discord among Sadc members
Engineering News | 31st July 2009
Economic pact with EU causes discord among Sadc members
By: Christy van der Merwe
One of the underlying principles of the Economic Partnership Agreement (EPA) between the European Union (EU) and the Southern African Development Community (SADC) is that it should complement and support regional integration initiatives.
However, the signing of the Interim EPA (I-EPA) by some member states, and not by others, has generated uncertainty within the region.
The SADC-EPA group, comprising Botswana, Lesotho, Namibia, Swaziland, Mozambique, Angola and South Africa, split in June over whether or not to sign the I-EPA offered by the EU. Botswana, Lesotho, Swaziland and Mozambique moved ahead with the signing, despite objections from other members, including South Africa.
In an opinion article in a Johannesburg-based daily newspaper, South Africa’s Trade and Industry Minister, Rob Davies, said: “South Africa will not sign an EPA until it is convinced that concerns are substantially addressed. “The European Commission (EC) has agreed to our proposal to continue to engage on all these outstanding issues.”
In the article, Davies said that the emerging I-EPA outcome was “very different” and went against the aim of enhancing regional integration.
“SADC members have found themselves in five separate negotiating configurations. Each has negotiated market access arrangements for the EU that vary considerably from one another,” Davies stated.
“The separate arrangements also create the basis for new trade policy divisions as they provide market opening obligations and commitments to the EU before the region has had time to build its own regional markets and rules in such new areas as services, investment, competition and procurement,” stated Davies.
He also said that the I-EPA contained legal provisions that limited the State’s policy space to promote agricultural and industrial development, and to diversify trade relations with other key economies.
On a recent visit to South Africa, Botswana’s Trade and Industry Minister, Daniel Neo Moroka, explained why Botswana had signed the I-EPA: “If we did not sign . . . we would have reverted to the Generalised System of Preferences, which would [entail] much more punitive duties. “We did our analysis, and, on some of our exports to Europe, the duties would be as much as 80% of the value of our imports into Europe. “So, therefore, that is where the threat lies,” he said.
He reiterated that 70% of Botswana’s exports (largely diamonds and beef) went to Europe. “Economic interest had to assume primacy, not necessarily to the detriment of geopolitical interests,” he added.
When questioned on the reason for negotiating services under the EPA, Moroka said that, on Botswana’s part, it was a sovereign choice.
“[Botswana has] dealt with [Europe] for 30 years. We have not dealt with China for 30 years, nor have we dealt with others . . . It’s a sovereign choice and it has to be respected,” he said.
Davies, however, felt that, for the Southern African Customs Unions (Sacu) to realise its potential, it needed a common understanding of how to position itself in a changing global economy. Shifting patterns of global trade required a forward-looking response to develop mutually beneficial trade and investment relations with these new sources of global economic growth.
Sticking Points
Moroka explained that one of the major ‘sticking points’ in the negotiations to sign the EPA was the ‘most-favoured nation’ clause.
Under the terms of the I-EPA, all SADC countries – except South Africa – were granted duty- and quota-free access to the EU market. Since SADC countries extended preferential market access to the EU, they felt it was fair to do the same and allow South Africa the same preferential market access.
The sticking point arose when the EU suggested that, if South Africa entered into an agreement with any third-party country which commanded more than 1% of world trade, then the same preferential treatment should potentially be extended to the EU.
“We know this is a sticking point because we know that, in our region, we are talking about South–South negotiations, and this, to a certain extent, would impact on the policy space of a big economy like South Africa and even, to a certain extent, our own economies as we grow,” affirmed Moroka.
But he conceded that this was not compelling enough for Botswana not to sign.
Another major issue was that of definition of the parties. The EC wanted the definition of the parties to include all members of the SADC-EPA, including South Africa.
“Not all of us are happy with that particular clause. Our preference is that, if any one of [the SADC member States] is recalcitrant, then let [it] face the music with the EC. “But, of course, the EC was not particularly happy with this,” said Moroka.
When the EPA negotiations began in 2003, South Africa was merely an observer State, as it already had a trade agreement with the EU in the form of the Trade Cooperation and Devel-opment Agreement.
South Africa joined the negotiations in 2007, when it became apparent that, if the EPAs were to enhance regional integration, South Africa, the largest economy in sub-Saharan Africa, should be a participant.
The principle of ‘special and differential treatment’ was important here, as it meant that different concessions would be granted to different countries with differing levels of development.
A number of South African trade experts had previously said that, given that three of the five Sacu members had signed the I-EPA, there was a clear violation of the Sacu agreement, which bound members to negotiate and conclude negotiations as a group.
The breach was said to have given nonsignatories to the I-EPA the legal right to restrict imports covered by the agreement.
Moroka said that there had been reports that Botswana had allegedly violated Article 31 of the agreement, but said that all members were involved in the negotiations, and were still negotiating the ‘sticky points’.
