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SA farm, fish sectors face EU exports

Business Day | 27 November 2008

SA farm, fish sectors face EU exports

Mathabo le Roux
Trade and Industry Editor

SEVERAL hundred product lines, mostly in the agricultural, agro-processing and fishing sectors in SA, may face increased competition from the European Union (EU).

That is if an economic partnership agreement (EPA) is implemented in its current form. The lines include products on which EU goods receive subsidies. No date has been set for signing the agreement.

Acrimony over the terms of the EPA saw SA breaking ranks when other members of the Southern African Customs Union (Sacu) - Botswana, Lesotho, Namibia and Swaziland (BLNS) - initialled an interim agreement at the end of last year. SA currently trades with the EU under a separate pact, the Trade, Development and Cooperation Agreement (TDCA).

But as SA sticks to its principles on policy issues in the text, it is market access differences that threaten the future of the customs union.

If SA opts out and the BLNS countries sign the EPA, two different trade regimes with the region’s major trading partner will be in place.

While the regimes could be largely aligned, SA’s chief trade negotiator Xavier Carim said earlier this week that different tariffs would prevail on 436 product lines.

The EPA would give the EU easier access into the Sacu market for about 380 product lines, while the TDCA extends more favourable terms on 54 lines to EU goods. There is no customs control between SA and the BLNS countries, so while higher tariffs under the TDCA prevail on most of these, these goods could enter SA through BLNS borders unchecked.

Under the TDCA, SA is in any event obliged to liberate access for most of these products from the EU by 2012. But it still meant SA would have to open its borders and allow in goods which had not been negotiated on, Carim said at a conference of the South African Institute of International Affairs.

“What is the cost of that differential? Who is prepared to bear the cost?” he asked.

Carim said signing the EPA would have serious implications for Sacu, “because there would be a new legal reality on the ground”.

This would give the region’s powerhouse grounds to pull the plug on the customs union as different trade regimes with the EU would mean Sacu cannot enforce a common external tariff.

Trade analysts are divided on the implications of the differential tariffs for the South African market. Some commentators suggested SA was blowing the problem out of proportion.

Botswana’s chief trade negotiator Motlhware Masisi told Botswana’s Business Week newspaper on Monday: “Administratively it can be done, it is not complex.”

However, an agricultural trade economist, who declined to be named, pointed out that most of these tariff lines were in areas where European industry received subsidies.

What is more, an Oxfam report showed that some EU member states also gave subsidies to producers for the processing of agricultural goods.

“We need some more research, but the problem is it is not always clear where in the value chain the subsidies are given,” the economist said, citing examples of subsidising of fruit canning and wine distilling in some EU states.

“It is in any case common cause that the TDCA is biased in favour of the EU. Now, under the EPA, we may be required to open markets more or faster, and specifically on products that are subsidised in the EU. That does not seem right.”

But the BLNS countries remain under pressure to sign the EPA and avoid a challenge before the World Trade Organisation.

 source: Business Day