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EPAs: The new game of divide and rule

Labour Resource and Research Institute (Namibia) | June 2008

Economic Partnership Agreements: The new game of divide and rule
A Reader

Wallie Roux
June 2008

Labour Resource and Research Institute (LaRRI)


Table of Contents

Acknowledgements
Acronyms
Foreword
Clarification
Introduction

Section 1: EPAs from a historical perspective
Origins and background
Spanner in the works
Interim arrangements
Challenges
Almost some relief ...
Launch of the EPA negotiations
Internal problems

Section 2: Key issues for developing countries
Internal problems
A possible solution?
The EPA negotiations in 2007
The EU getting desperate
Divide and rule
Using tariffs to force ACP countries into line

Section 3: The case of Namibia
Tensions within SACU
Key challenges facing Namibia
Endangering food security
Abolishing protection of infant industries
Trade liberalisation and the threat to local manufacturing

Conclusion
References
Annex 1: Selected trade-related documents
Annex 2: Organisations working on trade issues


Acknowledgements

This trade reader was written by Wallie Roux. Herbert Jauch assisted with the editing while Zilaoneka Kaduma did the layout. We are grateful to Moira Nash for supplying us with photos for this publication.

We wish to thank our partner organisations whose continuous support enabled us to publish this guide. They are the Netherlands Trade Union Federation (FNV Mondiaal), the Finnish Trade Union Solidarity Centre (SASK), the Belgian Fund for Development Co-operation (FOS) and the Rosa Luxemburg Foundation (RLS) in Germany.

Copies of this guide can be ordered from:

Labour Resource and Research Institute (LaRRI)
P.O. Box 62423 Katutura
Windhoek
Namibia
Tel: +264 (0) 61 212044
Fax: +264 (0) 61 217969
E-mail: [email protected]

Acronyms

ACP - African, Caribbean and Pacific
AU - African Union
BLNS - Botswana, Lesotho, Namibia and Swaziland
COMESA - Common Market for Eastern and Southern Africa
DDA - Doha Development Agenda
DRC - Democratic Republic of the Congo
EAC - East African Community
EBA - Everything But Arms
EC - European Commission
EEC - European Economic Community
EPA - Economic Partnership Agreement
EU - European Union
GATS - General Agreement on Trade in Services
GATT - General Agreement on Tariffs and Trade
GSP - Generalized System of Preferences
IEPA(s) - Interim Economic Partnership Agreement(s)
LDC(s) - Least Developed Country(ies)
MAT - Mozambique, Angola and Tanzania
MFN - Most Favoured Nation
REC(s) - Regional Economic Community(ies)
REPA(s) - Regional Economic Partnership Agreement(s)
RISDP - Regional Indicative Strategic Development Plan
RoO - Rules of Origin
SACU - Southern African Customs Union
SADC - Southern African Development Community
SDT - Special and Differential Treatment
SPS - Sanitary and Phytosanitary
TBT - Technical Barriers to Trade
TDCA - Trade, Development and Cooperation Agreement
WTO - World Trade Organisation

Foreword

It was a historical moment for Africa, when some of our leaders took a bold step and refused to sign the EPAs by the end of 2007. It is clear that the EU went to the EU-Africa Summit with an agenda that they were not ready to compromise on. The message from our leaders was clear: that Africa is now much more aware of the negative impacts of the reforms process that our countries have been adopting for a long time; and that the time has come for European countries to stop imposing their economic and trade agenda on the developing nations. The rejection of the EPAs by Africa will hopefully encourage other least developed nations to protect their own interests more vigorously in bilateral agreements with industrialised countries. The message from Africa is that developing countries should be more inclined to enter into cooperation with other developing nations than to sign trade agreements with the North, which for too long compromised their own interests and endangered the livelihoods of their people. The emerging economic powers, notably China and India are clearly providing African countries with an alternative to the usual bilateral and multilateral negotiations and agreements.

Some have responded by saying it is in our own interest as Africans not to reject EPAs. However, supporters of EPAs failed to convince us about the benefits of the proposed agreements. Trade related issues are usually framed in technical language, which is difficult for many people to understand despite the fact that it affects their livelihoods in very significant ways. One thing is for sure, we do not have the capacity in Africa to compete with the manufacturing power of the EU. It will be helpful if the EU would be willing to assist us to develop our manufacturing capacity instead of continuing to extract our raw materials and selling us finished products at very high prices. If this is allowed to continue, then -at best- Africa will remain an under-developed economy based on agriculture and extractive industries. To add insult to injury, through EPAs, we are being urged to open up our already vulnerable agricultural sector to continue being the dumping ground of the EU’s agricultural produce such as chicken and tomato paste, which has already led to loss of millions of jobs in Africa.

In this reader, Wallie Roux takes us back into history and informs us of the background of EPAs. He cautions that EPAs in their current format do not seek to intensify the economic integration of Africa, but seek to ‘divide and rule’ the continent. Roux therefore warns that in its current format, EPAs may be potentially more damaging to the economies of Africa. At LaRRI we commend African leaders for realising that they were being fast-tracked through a process that could force them to further open up markets that are supposed to be protected; a process that will have negative implications for their countries’ already crippled economies.

This reader is therefore timely as it will greatly contribute to a nuanced understanding of where and how EPAs were conceptualised and their implications for Africa in particular. It is my wish that this reader attracts a broader audience and much needed attention on the continent and beyond so that more people are better informed about the history, the reality and the consequences of the much talked about but yet less understood Economic Partnership Agreements (EPAs).

Hilma Shindondola-Mote
Director, LaRRI

June 2008


Clarification

In the Trade Reader reference is made to the trade agreement(s) between the European Union and the countries of the African, Caribbean and Pacific (ACP) group. Technically and legally this is correct. However, note that the European Commission - the Executive arm of the European Union - is conducting the trade negotiations on behalf of the member states of the European Union.

The European Commission’s Directorate-General Trade, with the European Trade Commissioner as the chief negotiator, conducts these trade negotiations. Also involved in the trade negotiations with the African, Caribbean and Pacific group of countries is the European Commission’s Directorate-General Development, with the European Development Commissioner assisting the Trade Commissioner.

However, throughout this trade reader the term “European Union” is used to indicate the two main parties in these trade negotiations, namely the European Union and the African, Caribbean and Pacific group. Readers need to keep in mind that the European Commission actually conducts these trade negotiations.

The first three Lomé Conventions were concluded between the European Economic Community and the African, Caribbean and Pacific group of countries. However, the Lomé IV Convention was concluded between the European Union and the ACP group.

The Maastricht Treaty of 1992 transformed the European Economic Community into the European Union, as we know it today. After 1992 all agreements between the two parties to date, namely the Lomé IV Convention, the Cotonou Agreement and the initialled interim Economic Partnership Agreements, were concluded between the European Union and the members of the African, Caribbean and Pacific group (albeit in the latter case it was individual countries within the identified regional configurations - except in the case of the Caribbean - that initialled interim agreements with the European Union).

Introduction

EPAs are Economic Partnership Agreements - a name given by the European Union (EU) for their new trading arrangements with countries from the African, Caribbean and Pacific (ACP) group.

In recent times the word EPA has become a new buzzword as EPAs are being debated, and the media carries regular articles on this new concept. These EPAs are not yet finalised and implemented, but the deadline is set for the end of 2008. Thus the EPAs are new trade dispensations awaiting all of us in the near future.

This reader traces the developments leading to EPAs and points to the dangers of the proposed agreements for Africa. The reader examines what precisely these EPAs are and how they will eventually impact on the lives of ordinary citizens. In order to explain this, we have to step back a couple of years into history - in fact, we have to step back into the year 1975.


Section 1: EPAs from a historical perspective

Origins and background

1975 delivered two important milestones in terms of international trade. This was the year of the adoption of the Georgetown Agreement that led to the formal establishment of the ACP group of countries. It was also the year that the first Lomé Convention was concluded between the ACP and the (then) European Economic Community (EEC). Through the Lomé I Convention the EEC extended non-reciprocal (one-way) trade preferences and development aid to the ACP countries for a period of five years, which included protocols on bananas, beef, rum and sugar.

The second Lomé Convention was concluded between the ACP and the EEC in 1980, also for a period of five years. The Lomé II Convention built on its predecessor to provide non-reciprocal trade preferences and more development aid, albeit not enough according to the ACP expectations. It was also the first time that the EEC questioned the effectiveness of development aid and its development cooperation with the ACP.

The conclusion of the third Lomé Convention in 1985 between the ACP and the EEC brought new dimensions to the agreement. For the first time the agreement included references to human dignity, economic, cultural and social rights, and political dialogue.

The Lomé III Convention also saw a shift in development aid from a project approach to community self-sufficiency to promote food security and the combating of drought and desertification.

The Lomé IV Convention was concluded in 1990 between the ACP and the EEC - the same year that Namibia gained its independence. Lomé IV was the first of these Conventions that was concluded for a period of 10 years, including a mid-term review after five years. It was also the first Convention that included human rights as a principle and emphasized the promotion of the private sector and regional cooperation.

Namibia became a signatory to the Lomé IV Convention during December of 1990. This included signing onto the Beef Protocol of Lomé IV, which afforded the country preferential access for beef to the European markets. This preferential access applied to beef primal cuts that could be exported to European markets with a zero duty and an 8% special levy, i.e. duty free and a 92% subsidization of the special levy.

In addition, Namibia was allocated a total export quota of 10 500 tonnes of deboned beef for the first two years. The annual quota was increased to a total of 13 000 tonnes of deboned beef from year three onwards (and this quota remained in place until the end of 2007). During the mid-term review of Lomé IV in Mauritius in 1995, the respect for human rights and democratic principles were emphasized.

Spanner in the works

During 1994, the United States - on behalf of the South American banana-producing countries - launched a trade dispute against the EU before the World Trade Organisation (WTO) for giving non-reciprocal market preferences to the Caribbean banana-exporting countries.

The WTO eventually ruled that these non-reciprocal preferences for Caribbean banana-exporting countries were in violation of the WTO rules, because the Lomé Convention gave an unfair trade advantage to Caribbean countries over other WTO members (especially developing countries) with regards to banana exports. This in turn meant that all the Lomé non-reciprocal market preferences of the EU extended to the ACP countries were in violation of WTO rules.

After the final ruling in favour of the United States, the EU applied to the WTO for an extension (waiver) until the end of 2007 to negotiate and conclude a new trade arrangement with the ACP countries that would be compatible with the WTO rules.

Interim arrangements

The first result of these negotiations to find a new WTO compatible trade arrangement was the conclusion of the Cotonou Agreement in 2000 to replace the Lomé IV Convention. The Cotonou Agreement is a 20-year trade and development agreement between the ACP and the EU, with the trade chapter as a transitional arrangement until the end of 2007 when the WTO waiver expired.

Since 1996 the EU embarked on a range of debates and negotiations to find a post-Lomé (and later a post-Cotonou) trade dispensation that would be consistent with the WTO’s trade rules. Initially the EU came up with a proposal of Regional Economic Partnership Agreements (REPAs) with the ACP, placing the emphasis on future regional integration and development.

However, the final proposal by the EU was to engage in EPAs with the ACP (note that the EU silently discarded the word “regional” in their final proposal). This final proposal effectively split the ACP bloc into six different geographical groupings or configurations. These configurations were identified as the Caribbean-, Pacific-, West African-, Central African-, Eastern and Southern African- and a Southern African Development Community (SADC) configuration.

The emphasis of EPAs is on regional integration, aid and development, with this time, reciprocal (both ways) trade arrangements to be consistent with the WTO rules.

Challenges

The EU’s final EPA-proposals brought four distinct challenges for the ACP:

1. The once mighty ACP bloc of almost 80 countries was now split into six different regional configurations. This step had a detrimental effect on the ACP’s bargaining power with the EU. Where once the ACP could negotiate as a bloc with the EU, its bargaining power was now diminished to six smaller regional blocs.

2. The proposed regional configurations in Africa resulted in the splitting of already existing regional integration initiatives on the continent. For example, the 14-Member SADC bloc was eventually split into four EPA configurations, namely Central Africa, Eastern and Southern Africa, SADC and the East African Community (EAC). The EAC-EPA configuration was only decided upon late in 2007.

The new SADC EPA configuration initially consisted of Botswana, Lesotho, Namibia, Swaziland (the BLNS countries), Mozambique, Angola and Tanzania (the MAT countries). The Democratic Republic of the Congo (DRC) eventually opted to negotiate an EPA with the EU as part of the Central African configuration, while the rest of the SADC Member States decided to negotiate an EPA as part of the Eastern and Southern African configuration. Late in 2007 Tanzania decided to negotiate an EPA as part of the EAC configuration.

Just to complicate matters further, the BLNS countries are all members of the Southern African Customs Union (SACU) together with South Africa - which incidentally is the oldest customs union in the world, dating back to 1910. South Africa was initially only given an unspecified role of observer in the SADC EPA configuration. However, on request of the SADC EPA configuration, South Africa was eventually included as a full member in February 2007.

In July 2006 during the 7th African Union (AU) Summit in Banjul, a decision was taken to recognize only eight Regional Economic Communities (RECs) in Africa. SADC is one of the eight RECs recognized by the AU as building blocs of the African Economic Community. The SADC bloc of 14 Member States has its own regional integration agenda in Southern Africa. According to SADC’s Regional Indicative Strategic Development Plan (RISDP) the bloc will establish a Free Trade Area in 2008, a customs union by 2010, a common market by 2015, a monetary union by 2016 and one central bank with a single currency in 2018.

What will become of these regional integration goals of SADC given that its members are fragmented between four African EPA configurations?

3. The EU included services and other so-called “new generation issues” (investment, competition, government procurement, intellectual property rights, etc) as part of their EPA agenda. These issues are not a requirement to comply with WTO rules, because the developing countries resisted its inclusion during the WTO Ministerial in Cancun.

Despite complaints from the different EPA configurations, the EU kept these issues on their EPA agenda (i.e. the EU’s EPA agenda requires more than what is needed to comply with the WTO rules).

4. Lastly, there are still unresolved issues in the WTO itself that negatively impact on developing countries when they engage in trade agreements with developed countries - like the developing countries in the ACP currently engaged in the EPA negotiations with the EU.

One of the unresolved issues is the Special and Differential Treatment (SDT) of developing countries under WTO rules. Article XXIV of the WTO lays down the rules for establishing Free Trade Areas and customs unions, which currently excludes SDT for developing countries.

An anomaly is found in the WTO rules when comparing Article XXIV (trade in goods) with the General Agreement on Trade in Services (GATS) Article V. GATS Article V makes provision for SDT for developing countries, especially with regards to the absence or elimination of discriminatory measures in accordance with a country’s level of development. GATS Article V also provides for SDT for developing countries in the case of trade cooperation between developed and developing countries.

Why the inconsistency between the WTO’s Article XXIV (trade in goods) and GATS Article V (trade in services)? To date the issue of this inconsistency has not yet been resolved. Unfortunately the EPA negotiations are conducted under the auspices of the unresolved issues in Article XXIV of the WTO.

Almost some relief ...

During 2001 the WTO’s Doha Round of multilateral negotiations was launched with a promise to developing countries that their concerns would be addressed and the focus would be on development. The Round was initially referred to as the Doha Development Agenda (DDA) to emphasize the envisaged development aspect for developing countries.

The initial timetable for the conclusion of the Doha Round was set for the beginning of 2005. However, this never materialized and the Doha Round is still not concluded. In the meantime the development aspect was totally watered down given the unresolved disputes in market access for agricultural and non-agricultural goods.

This was the last hope for the developing countries in the ACP group to rectify the discrepancies in the WTO rules to be applied in the EPA negotiations. Thus the EPAs would have to be compatible with WTO rules that still include some unresolved issues.

Unfortunately the ACP developing countries have to adapt to this situation, given that Cotonou Article 37.7 stipulates that the EPA negotiations will be conducted under the “... WTO rules then prevailing.” This means that the ACP countries entered into the EPA negotiations with the EU with a given handicap!

Launch of the EPA negotiations

According to the EPA proposals the negotiations between the ACP and the EU would be conducted in two phases. Phase one of the EPA negotiations was formally launched in Brussels on 27 September 2002 on an all-ACP level. This paved the way for an EPA negotiating framework and a roadmap to conduct the negotiations on a regional level.

During 2003 and 2004 phase two of the EPA negotiations was launched with the identified six regional configurations. The EPA negotiations with the SADC configuration were officially launched in Windhoek on 08 July 2004.

A totally new dimension in terms of regional integration in Southern Africa earmarked this launch, given that the members of the SADC bloc were now fragmented and South Africa was initially sidelined from the negotiations.

One of the agreed principles of the EPA negotiating framework stipulated specifically that these negotiations “... shall build on regional integration initiatives of ACP states,” (Cotonou Article 35.2) and support regional integration initiatives in the different ACP regions (Cotonou Article 37.3) - a provision totally neglected by the EU with the commencement of their EPA negotiations with the SADC configuration.

Section 2: Key issues for developing countries

Internal problems

Apart from the fragmentation of the SADC bloc and the unfeasible composition of the SADC EPA configuration, countries in Southern Africa were faced with another dilemma, namely that of overlapping memberships to regional organisations - referred to as the “spaghetti-bowl syndrome”.

This “spaghetti-bowl syndrome” was (and to a large extent still is) also evident within the composition of the SADC EPA configuration. As an example, the BLNS countries are all members of SACU (together with South Africa), while Swaziland is also a member of the Common Market for Eastern and Southern Africa (COMESA) - albeit under derogation. South Africa, as a SACU and SADC member, was not part of the original EPA configuration and was only given an unspecified observer status in the negotiations. Tanzania is a member of the EAC customs union - and customs unions (in this case EAC and SACU) cannot overlap in economic terms.

These internal conflicts resulted in the SADC configuration falling behind in the EPA negotiations in comparison to the other EPA configurations. At the end of 2005 only Sanitary and Phytosanitary (SPS) measures, and Technical Barriers to Trade (TBT) were negotiated with the EU - with the EU being unwavering in their approach to SPS measures.

Also, in terms of international trade law, what actually transpired when the SADC bloc members decided to negotiate under different EPA configurations, is that the SADC member states neglected their regional commitments of the adopted RISDP by entering into separate negotiations with the EU without any legal institutional framework and no supporting institutions. The same happened with the other three EPA configurations in Africa.

This presents an international legal challenge that is still valid, given that the SADC bloc envisages introducing a Free Trade Area in 2008. Taking into account that the EU concluded the Trade, Development and Cooperation Agreement (TDCA) with South Africa before the commencement of the EPA negotiations, they knew then that South Africa could not be included in any of the EPA configurations. Hence the eventual split-up of the SADC bloc was on the cards long before the launch of the EPA negotiations. Note that the BLNS countries are de facto members of the TDCA courtesy of their SACU membership (free movement of goods between Member States: SACU 2002 Agreement, Articles 18 and 19).

A possible solution?

Realizing the inherent problems within the SADC configuration and that the original SADC regional integration ambitions could not be realised under this fragmented dispensation, the SADC EPA Trade Ministers on 12 February 2006 adopted a range of Strategic Framework Proposals in an effort to salvage part of the Southern African regional integration agenda.

The objective of the SADC Strategic Framework Proposals was to align the EPA negotiations with the TDCA review underway at that stage. In short, the Strategic Framework Proposals recommended that the BLNS countries be incorporated as de jure members of the TDCA, taking into account their sensitivities, as well as the Least Developed Country (LDC) status of Lesotho.

Likewise, the MAT countries are all LDCs and should be contractualised into the EU’s Everything But Arms (EBA) trade preferences, while services and the other so-called new generation issues should be excluded from the EPA negotiations (since not being a requirement to comply with the WTO’s trade rules). These SADC Strategic Framework Proposals were submitted to the EU for consideration on 07 March 2006.

After a delay of 11 months the EU eventually responded to the SADC Strategic Framework Proposals on 14 February 2007. The EU’s response was to include South Africa as a full member of the SADC EPA configuration, albeit with a differentiated approach in market access to the EU. Furthermore the EU did not approve the EBA contractualisation of the MAT countries and they also insisted that services and the new generation issues be kept on the EPA agenda.

The EPA negotiations in 2007

The EU’s response was not at all what the SADC configuration had expected and they were stuck with this agenda when the first (real) round of EPA negotiations commenced in March 2007 in Brussels. Despite minor progress, the negotiations ended in a stalemate primarily because the EU insisted that services and the other new generation issues be kept on the negotiating agenda (please note: this is not a requirement in terms of WTO’s trade rules).

Three more rounds of EPA negotiations followed in 2007 between the EU and the SADC configuration. As if history repeated itself, all rounds ended in a stalemate because of the EU’s insistence to negotiate services and the other new generation issues as part of the EPA agenda.

The EU getting desperate

The EPA negotiations were suppose to be concluded at the end of 2007 with the expiring of the WTO waiver, with the signing of full EPAs between the EU and the different ACP EPA configurations. Given this deadline, the EU was facing more and more resistance from the different ACP configurations for their insistence to include services and the other new generation issues on the EPA agenda.

This eventually forced the EU to subside to adopt a two-step approach in their EPA negotiations. Step 1 would include the initialling (note, not signing!) of a goods-only agreement (i.e. an interim EPA, or IEPA) before the end of 2007 to comply with the WTO’s trade rules as stipulated in the WTO waiver.

Step 2 would include of a commitment with the initialling of an IEPA to negotiate services and the other new generation issues during 2008 towards the signing of a full EPA. This is again a new EU initiative to keep services and the other new generation issues on their EPA negotiating agenda!

The EPA negotiations in 2007 did not work out the way the EU had intended - especially with regards to the five EPA configurations in Africa and the Pacific region. The WTO waiver was about to expire at the end of 2007 and most of the different ACP-EPA configurations (except the Caribbean) were not yet in a position to engage in negotiations regarding the liberalization of services and the other new generations issues.

Given that the EU was about to loose face in their over ambitious EPA campaign, they eventually backed-off on their demands to have full EPAs signed before the end of 2007. Instead they agreed to goods-only agreements, but there was a catch in the detail.

The countries in the different ACP EPA configurations were given the choice to initial a goods-only IEPA before the end of 2007. However, this initialling was linked to an undertaking to negotiate services and the other “new generation issues” during 2008 - this undertaking was compulsory and part and parcel of the deal offered by the EU.

Divide and rule

As the year 2007 was drawing to a close, the EU was unable to convince the undivided EPA configurations to initial IEPAs (except for the 15-nation Caribbean configuration), they reverted to another tactic of luring vulnerable individual countries within EPA configurations to initial IEPAs - a step which is totally against the spirit of the original EPA framework agreement and contrary to the regional integration principle of the EPA negotiations.

Using tariffs to force ACP countries into line

Despite this unconditional prerequisite imposed by the EU late in 2007, they still (very ingeniously) had more aces up their sleeve than the ACP configurations ever could have anticipated. Should an ACP developing country decide against the initialling of an IEPA, then such country would be subjected to punitive tariffs under the EU’s Generalized System of Preferences (GSP) as from the beginning of 2008.

The EU’s Generalized System of Preferences (GSP) is a WTO compatible preferential trade regime, but its provisions and tariffs are not as generous as the Cotonou trade agreement.

A specific complication for Namibia (and Botswana) is that beef is not included in the list of beneficiary products under the EU’s GSP. This means that beef exports to the EU under the GSP would receive no preference, hence the WTO’s Most Favoured Nation (MFN) duties would apply. In this case beef exports would attract EU import duties of between 40% and 140%, depending on the type of product exported.

If this is compared to the zero import duty and an 8% special levy under the Beef Protocol of the Cotonou Agreement, it is easy to understand that beef exports to the EU under their GSP system would be uneconomical and would thus be terminated.

The ACP’s Least Developed Countries (LDCs) could opt for the EU’s Everything But Arms (EBA) scheme instead of the GSP. The EBA scheme was specifically designed for LDCs to export all products (except arms) to the EU duty free. However, the Rules of Origin (RoO) under the EBA scheme are very restrictive.

Even under the threat of being downgraded to the GSP the different EPA configurations resisted the EU’s proposal because of the inclusion of a commitment to negotiate services and other new generation issues in 2008.

Then the EU changed tactics again - this time by targeting vulnerable individual countries within configurations to initial IEPAs under the auspices that the IEPAs need to be notified to the WTO in order to avoid a challenge from non-ACP developing countries. However, by April 2008 the EU had not yet notified any of the initialled IEPAs to the WTO. This new tactic by the EU is contrary to the regional integration principle of EPAs in that they were now splitting the member countries within the EPA configurations.

Some countries bowed to this pressure and eventually initialled IEPAs with the EU (many because of the hidden danger of forfeiting development aid). By the end of 2007, only 35 ACP countries (out of a total of 79) initialled IEPAs with the EU. This number includes 18 countries from Africa, two from the Pacific and the 15 countries from the Caribbean who initialled a full EPA with the EU.

In the SADC configuration, Botswana, Lesotho, Swaziland (all SACU members) and Mozambique initialled an IEPA with the EU during November 2007, while Tanzania decided to initial an IEPA as part of the EAC. At the time Namibia and South Africa decided against the initialling of an IEPA, while Angola indicated that it would accede to the agreement at a later stage.

Section 3: The case of Namibia

Namibia’s decision not to initial an IEPA came after the last round of EPA negotiations in Brussels when the country was faced with a list of unresolved issues that could have a detrimental effect on its long-term economic development - referred to as limit its policy space for future development.

Namibia eventually initialled an IEPA in December 2007 after the EU-Africa Summit in Lisbon. During the Summit African governments complained about the contentious issues in the IEPAs and the immense pressure by the European Commission (EC) to have these interim arrangements initialled by the end of 2007.

This prompted the EC President, Manuel Barroso, to assure the African governments that the unresolved issues on the IEPAs would be reopened for negotiation in 2008. On condition of the Barroso assurance, Namibia initialled the IEPA together with an accompanying statement with a condition that the initialling is contingent on the assurance that its unresolved issues encountered in 2007 be reopened for negotiation in 2008. Furthermore, Namibia did not sign onto the services agreement, because the government felt that this highly complicated area could not be negotiated within a period of one year.

Tensions within SACU

As was mentioned before, the EU’s latest tactic to target vulnerable individual countries within an EPA configuration is contrary to the regional integration principle. This is specifically applicable to the SADC configuration, with special reference to SACU. The EU’s tactics resulted in a split between the members of the SADC configuration, as well as the members of SACU.

The initialling of an IEPA by Botswana, Lesotho and Swaziland, and later the conditional initialling by Namibia, with South Africa’s decision not to initial an IEPA, caused tensions between the Member States of SACU.

Article 31.3 of the SACU 2002 Agreement states specifically that no member shall negotiate or enter into new preferential trade agreements with third parties without the consent of the other members. Botswana, Lesotho and Swaziland initialled an IEPA without the consent of Namibia and South Africa, while Namibia consulted with South Africa before it conditionally initialled the IEPA. These unilateral decisions placed a high degree of pressure on the integrity of SACU.

Furthermore, Article 31.2 of the SACU 2002 Agreement explicitly states that the members shall establish a common negotiating mechanism when negotiating agreements with third parties. Taking into account the outcome at the end of 2007 with regards to the initialling of the IEPA, it is clear that the stipulation in Article 31.2 was never followed.

SACU, with its focus on trade, is an important regional integration initiative in Southern Africa. The annual receipts of the BLNS countries from the common customs pool are a significant source of national revenue and the merits of splitting up SACU should seriously be questioned.

The year 2008 would be decisive for the continuation of SACU as a customs union. Should the negotiations in 2008 result in the break-up of SACU, then the BLNS countries would be the losers and the blame should be squarely placed at the door of the EU. All indications to date point to the fact that the EU is disregarding the provisions contained in the Cotonou Agreement in order to further their own interests.

Key challenges facing Namibia

Let’s first take a look at the consequences of some of the unresolved issues experienced by Namibia during the EPA negotiations in 2007.

The EU introduced a last minute ‘non-negotiable’ Most Favoured Nation (MFN) treatment clause in the IEPA text. This clause contains a condition that should Namibia in future trade negotiations with other countries afforded better market access to any of those countries than is currently contained in the IEPA text, then that (better) market access would automatically apply to the EU’s goods entering Namibia.

This in effect means that Namibia cannot in future negotiate any new trade agreements with other countries that contain better market access conditions than that stipulated in the IEPA text, because it would be obliged to extend the same (better) market access to the EU. The inclusion of this MFN clause by the EU is an infringement to the economic policy sovereignty of Namibia, especially since the country did not agree to its inclusion in the IEPA text. The EU’s insistence that this inclusion is ‘non-negotiable’ is a disregard of internationally agreed conventions on the independent decision-making right of individual countries.

Endangering food security

Furthermore, the EU requires that the quantitative restrictions on the importation of cereals (maize and wheat) be abolished. Namibia applies quantitative restrictions on the importation of maize and wheat during the year at the time when these crops are ready for harvesting. During that time the importation of these crops is prohibited until the local crop is harvested and sold to the processors for further processing. Thereafter the importation of maize and wheat is again open to anyone who wants to import these commodities.

The application of these import restrictions gives local producers a chance to sell their harvest to the processors without competition from imports. The rational behind this policy is to boost Namibia’s food security options and to allow for the employment of workers in the primary cereal production industry.

Should these quantitative restrictions be abolished as required by the EU, then the local cereal producers would be faced with direct competition from lower priced and subsidized cereal imports - a situation that would seriously jeopardize Namibia’s food security options.

Equally important, direct competition from lower priced and subsidized cereal imports during the harvesting season would result in local producers losing their market share and consequently they would be put out of business. This in turn reflects on the workers on these farms who would have to be laid off since the local primary cereal production industry cannot compete with the cereal imports that are subsidized and imported at lower prices.

Given the number of cereal production farms in Namibia and the number of dependents of a single worker, including the place and circumstances these workers are currently accommodated, the abolition of these quantitative restrictions would result in a socio-economic disaster for Namibia within a short period of time.

Abolishing protection of infant industries

The EU also requires that Namibia’s protection of infant industries, afforded to it under the SACU 2002 Agreement, be phased out over time. The infant industry protection of SACU allows newly established industries in the BLNS countries a grace period of duty protection for an eight-year period to establish themselves in order to meet future competition from other producers or manufacturers in SACU. Currently Namibia enjoys infant industry protection for its pasta- and UHT-milk producing industries.

Should this temporary protective measures be phased out as required by the EU, then future investors in the Namibian economy, may it be local or foreign, would think twice before investing capital locally as opposed to South Africa, which is the economic powerhouse in Southern Africa. Also, the phasing out of the infant industry protection would have serious consequences on current and future employment of workers in these industries.

Trade liberalisation and the threat to local manufacturing

The IEPA text inter alia contains a stipulation for the provisional implementation of the trade arrangement, i.e. Namibia should introduce reciprocal trade (both ways) with the EU at the latest from 01 July 2008. According to the trade liberalization schedule of the IEPA, Namibia should liberalize (open up) 80% of trade with the provisional implementation of the IEPA, with 44 sensitive tariff lines to be liberalized by 2015 and a further three sensitive tariff lines to be liberalized by 2018.

The result of this would be that processed and manufactured goods in Namibia would be in direct competition with subsidized exports from the EU. Given the size of the economies in Europe in comparison to that of Namibia, the bulk of these goods would enter the country at lower prices than local processed or manufactured goods. This in turn could eventually result in local processing and manufacturing industries having to close down because they cannot compete with the lower priced EU exports.

The closing down of any local industry would result in even higher levels of unemployment as most affected workers would be unable to secure employment in other sectors of the economy. Eventually the country would become dependent on EU exports without the necessary income to pay for these goods - a clear example of how the EU’s self-interest would perpetuate poverty and under-development in Africa.

Conclusion

The proposed EPAs hold little promise for developing countries and will become an effective impediment to local economic development. It is thus hardly surprising that worldwide protests against EPAs are beginning to emerge. Even in Namibia, where trade issues receive very little public attention, several non-governmental organisations came together in early 2008 to discuss the proposed EPAs and their likely effects on local workers and citizens. At the beginning of March 2008 nine non-governmental organisations handed a petition letter to the EC delegation in Namibia in an effort to strengthen the Government’s position of its unresolved issues experienced in 2007 during the EPA negotiations.

In April 2008 the same non-governmental organisations wrote a letter to the Swedish Minister for Trade, highlighting these issues in support of the Government. The Swedish Minister met with Ambassadors from Angola, Kenya, Namibia and Rwanda to discuss the way forward in the EPA negotiations. In this pre-emptive letter the nine non-governmental organisations reiterated the negative consequences of the IEPA on Namibia.

It will be critical in the coming months to mobilise resistance to the implementation of the IEPA in its current format and thereby strengthen the Namibian Government’s hand not to sign a final EPA with the EU. This action would force the EU to reconsider its current position towards Namibia under the auspices of the IEPA and to rather focus on the real needs of the people in the country. Namibia should also link up with African and international campaigns against EPAs, which have emerged in the past few years. The battle is not lost but there is little time left to prevent EPAs from becoming a new and powerful too to promote EU interests at the expense of Africa’s development needs.


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For annexes, please download the attached .doc file


 source: LaRRI