IPS | Apr 19, 2009
European Union pushes trade deal on Africa
But is it good for the continent?
By Servaas van den Bosch
WINDHOEK, Namibia, (IPS/GIN) - The signing of a finalized economic partnership agreement (EPA) between the European Union and southern African countries seems imminent-despite regional trade fragmentation remaining a danger.
Top-level delegations met in March in the scenic seaside town of Swakopmund, Namibia, in another attempt to broker the problematic EPA between the EU and a clutch of Southern African Development Community (SADC) members, consisting of the Southern African Customs Union (SACU) countries plus Angola and Mozambique.
SACU includes the regional giant South Africa and its small neighbours Namibia, Swaziland, Lesotho and Botswana.
As officials rushed back to their capitals to report to their superiors, the EU seemed confident that a deal is in the offing. “I would say parties have come a lot closer in the talks last week,” EU Ambassador to Namibia Elisabeth Pape said.
The SACU Secretariat, based in Windhoek, confirmed to IPS in a written statement that “substantial process” has been made in “addressing the unresolved negotiating issues that SADC EPA states identified.”
SACU added, though, that, “a number of issues still remain that would need further engagement between the two sides. As a result, it is too early to make a judgment call on this matter as the process is still continuing.”
Officials in Namibia, one of the pivotal countries in the agreement because of its resistance to the deal, were less forthcoming with information.
“Our delegation is reporting to the minister as we speak, and we hope to come with an announcement toward the end of the week,” said a spokesperson of the Ministry of Trade and Industry in Windhoek, the week of March 17.
While the Namibian government stayed mum on whether an agreement has been reached in Swakopmund and a media blackout seemed to be in effect, details of a possible way out of the impasse have begun to emerge.
The EU has apparently made concessions regarding the protection of infant industries against competition from industrialized nations.
Ms. Pape confirmed this: “On the request of middle-income countries, such as Namibia, we have forgone the deadline on the duration of such protective measures. Instead this can be reviewed on a per industry basis.”
This means that countries can more effectively shield some vulnerable sectors of their economies from the favoured European diet of liberalization.
The Europeans have reportedly also agreed to allow countries to continue export taxes while the implementation of new taxes is open for discussion. Several countries in SADC tax the export of raw materials in lieu of domestic value addition.
The most-favoured nation clause, the most contentious issue, seems unresolved however. The MFN decree automatically confers any trade benefits under future agreements with other countries onto the EU as long as it concerns a country that contributes 1.5 percent or more to the world economy.
This means that if Namibia signed a deal with developing economies like China, India or Brazil, it should extend exactly the same terms to the European bloc.
“It is a fundamental point,” argued Ms. Pape, and one she thinks the African countries should concede. “These negotiations are give and take, and parties have to come toward each other.”
Nevertheless, Ms. Pape thinks an understanding is “very close.” “We hope to sign an agreement in the first half of this year, or perhaps sooner, and then continue negotiations for a full EPA.”
The EU has argued that the previous trade regime contradicts World Trade Organization “free” trade principles. When the EU’s deadline for a new regime under an EPA expired at the end of 2007, continued preferential trade was guaranteed under an “initialled” interim agreement. That agreement now needs to be formalized.
While Mozambique and SACU members Lesotho, Swaziland and Botswana indicated they are willing to sign, Namibia, Angola and South Africa in January asked for a delay to reflect on the EPA. The request was denied. Angola is not part of the EPA group yet but is consulted on the texts because of future cooperation.
Namibia-which initialled the interim agreement at the last minute in December 2007-appears to have been swayed and is now leaning toward putting its signature to the EPA.
South Africa is refusing to sign the interim agreement, and it seems possible the EU will go ahead without the continent’s economic powerhouse. “South Africa still has a bit of time,” Ms. Pape said. “They have signed a separate deal, the trade, development and cooperation agreement, which hasn’t expired yet.”
Asked what consequences the potential withdrawal of South Africa from the EPA will have on the union, the SACU secretariat responded that it would be “a challenge” without entering into details.
“SACU has faced many challenges before, and it is expected that the Organization will also face this challenge, if it appears. Member states are committed to the future of the customs union, and we are convinced that this same commitment will also carry the organization through this challenge, should it occur,” the statement concluded.
It is still unclear to what extent the EU has succeeded in inducing concessions on the liberalization of “new generation” areas, such as government procurement, health, services, competition policies, investment and trade. The interim EPA deals only with goods.
Including the “new generation” issues is not required for the deal to be WTO compliant, but it is an important factor for the EU in its interpretation of the reciprocity principles of the Cotonou trade agreement with African, Caribbean and Pacific countries, on which the EPAs are supposed to be based.
Opponents say such non-tariff liberalization will re-colonize southern Africa because it will benefit the established economies of the EU infinitely more than the developing markets of SADC. Others, however, maintain that beefed-up market access is exactly what the region needs.
Another crucial question will be how the EPA will impact on SACU and SADC’s Free Trade Area, which is set to evolve into a common market in 2010.
There are fears that the fragmented tariff agreements of SADC countries with the EU will destabilize those regional structures. At the moment the EU is negotiating with different blocs of SADC countries.