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SA welcomes landmark European trade offer

Business Day | 22 December 2008

SA welcomes landmark European trade offer

Mathabo le Roux
Trade and Industry Editor

Concession by Brussels should keep customs union intact

THE European Commission has made a major concession in trade talks with the Southern African Customs Union (Sacu), offering a deal that should avert the break-up of the customs union.

In an exchange of offers last week, the European Union’s (EU’s) executive arm proposed a tariff deal that would align the bloc’s controversial Economic Partnership Agreement (EPA) with the bilateral trade agreement under which SA trades with the EU. If accepted, the offer would essentially allow Sacu to maintain its common external tariff and keep the customs union intact.

SA has had no desire to sign an interim EPA. The other customs union members, Botswana, Lesotho, Namibia and Swaziland (BLNS), initialled the interim pact last November to preserve preferential access to the EU. SA and the other Sacu members have since been at loggerheads on the deal.

With SA opting out and the BLNS signing the EPA, two different trade regimes with the region’s major trading partner would be in place, creating a legal anomaly that would give the region’s powerhouse grounds to pull the plug on Sacu.

But Brussels last week proposed the alignment of the EPA tariff schedule with the Trade, Development and Co-operation Agreement (TDCA), the agreement under which SA trades with the EU.

The offer has an additional upside for SA as it would delay SA’s tariff liberalisation commitments undertaken in the TDCA, and give it better access to the European market.

Originally, the EPA would have given the EU easier access into the Sacu market on 320 product lines, while the TDCA extends more favourable terms on 53 lines to EU goods.

The new deal consists of an extension or “retrofitting” of the 53 tariff lines, which would benefit SA; the extension of concessions on 320 tariff lines, to the benefit of the EU; and an improvement of SA’s access to the EU on fisheries and industrial and agricultural goods in exchange for concessions on the 320 tariff lines.

South African chief trade negotiator Xavier Carim on Friday said the offer was “quite an important development”.

“The result (of the offer) would be a single Sacu arrangement. It is a really good development. We have been arguing for this since May ,” he said.

Commentators have described the offer as an “extremely open-handed gesture” from Karl Falkenberg, the European Commission’s deputy director-general of trade, in a final act before he vacates his post to take up a more senior position within the commission.

“This totally puts the ball back in SA’s court,” one commentator said.

The latest offer had exposed SA as an “emperor without clothes” in the EPA negotiations.

But Carim said details still needed to be assessed, and while it would solve the differential tariff situation, other concerns that SA had voiced remained.

The content of the offer is detailed in an internal document circulated among EU members, which is in Business Day’s possession. In it the European Commission notes that SA’s decision not to initial the EPA has created division within Sacu.

“To maintain Sacu tariff coherence, SA would have to align with the commitments made by BLNS countries without getting any concession in return from the EU. This would present SA with a tension between its regional coherence objectives and its wish for improved access into the EU,” the document states, proposing as a solution the conclusion of a tariff alignment that would allow SA to align its tariff regime with that agreed with the BLNS.

The proposal would “solve the problem of regional coherence, and give SA the improved market access it seeks. It would also leave open the option for SA of folding the bilateral agreement into the EPA if they wished,” the document continues.

The document goes further, stating that the European Commission is ready to go beyond this offer, and include further market access concessions, if SA so demands.

 source: Business Day