Re­gional in­te­gra­tion threat­ened

SA digs in its heels in ne­go­ti­a­tions with EU

Finweek English Edition - - Eco­nomic Trends & Anal­y­sis - GRETA STEYN

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

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