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EU-SA trade deal set for a tune-up

Business Day (Johannesburg)
August 31, 2004

EU-SA Trade Deal Set for a Tune-Up, Not an Overhaul

By Siseko Njobeni

Five years after the deal was struck, it is up for review and agricultural subsidies will top the agenda

IT HAS been almost five years since SA and the European Union (EU) last sealed a bilateral trade agreement and the current deal comes up for review in November.

The main aim of the Trade, Development and Co-operation Agreement is to create a free trade area between SA and the EU over a 12-year period. The EU is SA’s biggest trading partner.

SA exports to the EU have grown from €10,7bn in 1999 to €14,7bn last year. In the same period, imports from the EU to SA have grown from €9,7bn to €13,4bn.

Strong trade growth would suggest that the new agreement need not depart significantly from the current one but the review process will have to take into account new developments since the October 1999 deal.

For example, in 2000 the EU signed the Cotonou Agreement with the African, Caribbean and Pacific (ACP) countries, including SA.

The pact focuses on poverty alleviation, development aid and closer economic and trade relations.

In SA’s case, the Trade, Development and Co-operation Agreement and the Cotonou Agreement overlap in the area of trade and development. Since the conclusion of the first agreement, SA and the EU have signed other agreements on wines and spirits.

The review process will also have to look at the implications of the recent dramatic expansion of the EU’s membership.

"It (the EU enlargement) is a good thing. It stands to reason that we are now dealing with a larger market. There will be many benefits for our exporters," says Francois van der Merwe of the EU desk in the foreign affairs department, which will lead the review process.

Van der Merwe says the review will involve a consultation of stakeholders in the areas of competition policy, government procurement, intellectual property, agriculture and tourism.

He says SA and the EU will make proposals which the SA-EU Co-operative Council will consider before the ratification of any amendments to the agreement.

The EU-SA Co-operative Council oversees the implementation of the trade and development agreement.

Wilhelm Smalberger, head of the EU desk in the trade and industry department, says there is no desire on either side to overhaul the entire agreement.

EU first counsellor on political and economic co-operation Jurgen Lovasz says it is important to identify bottlenecks in the SA-EU trade relations.

"Based on my own experience, South African exporters are not well informed about the EU market. We will have to work on that."

He says it is important for South African exporters to constantly keep track of legislative developments in the EU. He cites the regulatory changes governing the use of pesticides in EU countries. He has also found South Africans lacking in the area of lobbying.

Agricultur al issues are likely to be debated during the review, particularly as the EU and US have come under attack for their continued subsidisation of their farmers.

Critics of this practice, including SA, say it distorts world prices of agricultural products.

The issue of agriculture subsidies has strained relations between several developing and developed countries at recent World Trade Organisation meetings.

"The issue of agricultural subsidies is a political problem in Europe. We have farmers who will topple governments if the subsidies were to be removed tomorrow," says the EU’s first counsellor for development co-operation, Klaus Schmidt.

He believes the EU is "not such a bad sinner" in this regard. "Look at the other players ... the US, they are even worse," he says.

SA and the EU have continued to protect their vulnerable sectors.

For instance, the EU excluded mainly agricultural products from the current trade agreement while SA has protected certain products in the vehicle, textiles and clothing sectors.

Meanwhile, the consultation of stakeholders labour being a key participant in SA has started.

A two-day conference will be held in Johannesburg in November to review the agreement.

Mpho Mokhantso, of the National Union of Metalworkers of SA, is impressed with government’s extensive consultation process, "especially through Nedlac (the National Economic Development and Labour Council)".

Government has asked Nedlac to consolidate the proposals of labour and business.

However, Mokhantso is unimpressed with the level of attention given to trade issues by parliamentarians.

"I do not think they (parliamentarians) apply their minds to trade issues." He says it is important to assess the effect of trade agreements on job creation.

"These trade agreements must have a strong social plan in order to assist us address unemployment."

 source: EU-SA Trade Deal Set for a Tune-Up, Not an Overhaul