Regional integration threatened
SA digs in its heels in negotiations with EU
SOUTH AFRICA HAS BEEN accused of trying to break up the decades-old Southern African Customs Union (SACU) by not signing a new trade pact with Europe that the other SACU members have initialled. But some say the European Union has forced African countries to sign under duress. The members of the SACU are the BLNS countries – Botswana, Lesotho, Namibia and Swaziland – and SA.
At issue is the Economic Partnership Agreements (EPAs) that members of the African Caribbean and Pacific (ACP) group of countries have to conclude with the EU to comply with World Trade Organisation rules. SA has been under no obligation to conclude an EPA with the EU, as it has its own trade agreement reached with the EU in 1999.
However, SA decided to join the EPA process, with the BLNS countries and other Southern African states, with a view to greater regional integration. Instead of that happening, the opposite is now a threat: some say the SACU may even disintegrate due to SA’s refusal to sign the EPA.
Deputy Trade & Industry Minister Rob Davies says there’s a number of reasons why SA isn’t keen to agree to the EPA. The first is the EU’s insistence of an inclusion of a more favoured nation (MFN) clause that would require SA to ensure any trade concessions it grants to a country enjoying more than 1% share of world mechandise exports – such as China, India or Brazil – to be extended to the EU.
Davies says that appears to be a violation of a World Trade Organisation clause enabling developing countries to reach more favourable agreements among themselves. “The EU’s stance is an obstacle to our diversifying our trade to the fastest growing economies,” Davies says.
Then there’s the EU’s opposition to export taxes. Davies says that affects not only SA but also Namibia, which uses export taxes as a tool to encourage beneficiation. SA has a diamond levy that would be in contravention of the EU’s position.
“It looks as if the EU doesn’t want ACP countries to make deals with China and encourage beneficiation,” Davies says. SA has long supported a policy of beneficiating its minerals, keeping the value chain in SA for longer so that jobs can be created.
The third problem with the EPAs that Davies mentions is Europe’s aversion to the extent to which infant industry protection can take place in ACP countries. Infant industry protection is the use of tariff barriers to protect local industries from competition from foreign countries.
Also problematic for SA is the fact the EU wants to treat SA differently to its neighbours, as SA is further developed and poses more of a threat to the EU. While it may have seemed that SA wanted to piggyback on the BLNS countries to receive the same duty-free and quota-free access to the EU as they will under the EPAs, that won’t be the case for SA.
Another issue for SA, mentioned by SA Institute of International Affairs research fellow Peter Draper, is trade in services and investment, as well as Government procurement. “That’s a big issue for the EU with its big services industries. But SA isn’t prepared to negotiate on those issues. SA is saying there should first be regional provisions on those issues before an accord can be reached with the EU,” says Draper.
A problem for the SACU is that SA administers customs and if there are different external tariffs in the region, implementation becomes problematic. The SACU is under threat, because there would be no common external tariff.
Namibia reluctantly initialled the EPA, as it was under great pressure to do so due to threats to its beef exports. Without the EPA, Davies says Namibia would pay a 90% duty instead of the duty-free/quota-free access under the EPA. Namibia initialled it under duress.
According to a report by the Inter Press News Agency, the EPAs require that ACP countries remove at least 80% of the trade taxes they levy on imports from Europe. “That requirement has been denounced by non-governmental organisations, fearful that farmers and nascent industries in poor countries will be unable to compete with an avalanche of imports that are often cheaper than goods produced domestically and, in the case of food, highly subsidised,” the report said.
Davies says only half the ACP countries have initialled the EPAs and a final deal still needs to be worked out. But talks this month between trade negotiators from the EU and SADC failed to find a resolution to the impasse, which is threatening regional economic integration.
Only half the countries have signed. Rob Davies