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SA wary of calls to broaden EU trade pact

Business Day, South Africa

SA wary of calls to broaden EU trade pact

Carli Lourens, Trade and Industry Editor

15 February 2006

SA’s chief trade negotiator, Xavier Carim, said yesterday that it was premature for the European Union (EU) to call for a large-scale expansion of the free trade agreement between the 25-nation bloc and SA.

EU trade commissioner Peter Mandelson called last week for a “step-change” in the five-year-old deal, currently under review, to now include services, investment and procurement.

The call signals a drive by the EU to gain substantially greater access to the South African market.

Carim said that it was “a little early” for the EU to call for an expansion while several issues relating to the implementation of the deal were yet to be resolved.

The primary purpose of the scheduled five-year review under way was to resolve issues relating to the implementation of the deal to date, said Carim.

He said SA would be prepared to discuss an expansion of the deal, which involves mainly trade in industrial goods, but only once outstanding issues had been resolved.

Trade analysts have warned that an expansion in line with Mandelson’s call could have negative consequences for SA.

Riaz Tayob of the Southern and Eastern African Trade Information and Negotiations Institute warned that concessions in investment could affect government’s empowerment efforts, as the EU might seek exemption from such obligations.

He also warned it could have negative consequences for the motor industry development programme which, he said, was expensive but provided social benefits in some areas.

The Trade Law Centre’s Calvin Manduna said it appeared the EU was ratcheting up pressure to gain increased access to other markets in bilateral deals due to slow progress on these fronts in the Doha talks.

Manduna said SA should not expand the deal until a thorough analysis had been undertaken of the effects the trade deal has had so far.

Mandelson said South African exports to the EU had increased 46% since the deal was implemented in 2000.

These exports increasingly comprise of manufactured products.

But Manduna said the increase and diversification of exports were not necessarily attributed to the free trade deal.

A recent study by BusinessMap Foundation also did not find conclusive evidence that the free-trade deal had led to an increase in fixed investment, as SA had expected.

Manduna warned that SA should be cautious in the concessions it was willing to make relating to services, investment and procurement because other countries - such as the US, with which SA is negotiating a free trade deal - might want SA to match them.