Trade wars

Trou­ble brew­ing in world’s old­est cus­toms union

Finweek English Edition - - Cover - TROYE LUND

IF SOUTH AFRICA’S PART­NERS in the South­ern African Cus­toms Union (SACU) go ahead as planned and sign the eco­nomic part­ner­ship agree­ments (EPAs) with Europe, SA be­lieves it will be left with lit­tle choice but to walk out of the 100-year-old union. The po­ten­tial break-up fol­lows yet an­other meet­ing with the Euro­peans in Brus­sels – which ended as it be­gan: with SA re­fus­ing to sign the cur­rent EPA. How­ever, the other SACU mem­ber states – Botswana, Le­sotho, Namibia and Swazi­land (BLNS) – have ini­tialled and agreed to sign the in­terim EPA with the in­ten­tion of im­ple­ment­ing it as soon as pos­si­ble.

Trade & In­dus­try Depart­ment chief trade ne­go­tia­tor Xavier Carim says be­cause the Euro­pean Union has raised the bar and in­serted de­mands on south­ern African states never meant to be part of the deal, SA won’t ac­cept the EPA. Con­se­quently, if the BLNS coun­tries go ahead and con­clude the EPAs as they stand, it would mean there’s no longer a com­mon ex­ter­nal tar­iff – the very premise on which the SACU and the rev­enue ar­range­ment is es­tab­lished. Bor­der con­trols will have to be erected be­tween SACU coun­tries to ad­min­is­ter around 450 prod­uct lines.

“This is clearly a step back­ward for re­gional in­te­gra­tion in south­ern Africa, be­ly­ing the EU’s com­mit­ment to sup­port re­gional in­te­gra­tion through the EPA. The EPAs (as they stand) will have a struc­tural im­pact on SACU. They’ll un­der­mine its fu­ture from tech­ni­cal, ad­min­is­tra­tive and pol­icy points of view,” says Carim, who adds SA’s pre­ferred out­come would be a move to pro­mote the re­gion’s eco­nomic in­te­gra­tion, some­thing that will be fur­ther jeop­ar­dised as a re­sult of the EPA agree­ments.

The BLNS coun­tries ar­gue the Euro­peans have got them be­tween a rock and a hard place, leav­ing them no op­tion but to sign. SA Trade & In­dus­try di­rec­tor-gen­eral Tshediso Ma­tona says they have a point. But while he ac­cuses Europe of tak­ing more than it gives and, in do­ing so, mak­ing a mock­ery of its com­mit­ment to south­ern Africa’s de­vel­op­ment and re­gional in­te­gra­tion, Ma­tona urges the BLNS coun­tries to re­alise the long-term con­se­quences of sign­ing the EPA can­cel out any per­ceived short-term gains.

Gil­berto Bi­acuana, a trade econ­o­mist at the South African In­sti­tute of In­ter­na­tional Af­fairs, says the prob­lem is the BLNS coun­tries have far less bar­gain­ing power than SA. That’s es­pe­cially so, given the EU has threat­ened to slash the ac­cess African coun­tries have to Euro­pean mar­kets if they don’t sign the EPA.

The point is that what ap­pears to be large con­ces­sions to African states are of­ten hol­low. For ex­am­ple, un­der the pre­vi­ous ar­range­ment Namibia and Botswana couldn’t fill the quota of­fered by the EU. The re­al­ity is that – thanks to un­changed do­mes­tic ca­pac­ity con­straints – there’s un­likely to be growth in ex­ports un­der the new lim­it­less ex­port con­ces­sion for beef as out­lined in the EPA.

In forg­ing ahead with the EPAs, SA’s cus­toms union part­ners face an even more in­vid­i­ous re­al­ity: a crush­ing fi­nan­cial loss that will fol­low an SACU break-up. While some EU of­fi­cials have sug­gested SA is us­ing the EPA trade ne­go­ti­a­tions as a smoke­screen to break up the SACU, SA’s con­tri­bu­tion to SACU is in­deed sig­nif­i­cant. So much so there’s some de­bate in the ANC and its al­liance part­ners as to whether it’s in­deed worth it and whether the money could be bet­ter spent on do­mes­tic needs.

This de­bate is, of course, linked to the pres­sure the ANC is un­der to adopt an agenda that will ad­dress do­mes­tic un­em­ploy­ment by re­struc­tur­ing in­dus­trial pol­icy and through mas­sive in­dus­trial and in­fras­truc­tural projects. The BLNS coun­tries ben­e­fit dis­pro­por­tion­ately be­cause SA con­trib­utes more than 90% of the cus­toms pool but draws only around 45%.

All in all, con­trary to south­ern Africa’s lead­er­ships’ po­lit­i­cal state­ments about com­mit­ment to re­gional in­te­gra­tion, it seems as though di­vi­sions within the re­gion are be­com­ing even more en­trenched. While SA says crit­i­cism from within the re­gion about it be­ing the source of neg­a­tiv­ity is un­fair, Africa’s largest econ­omy is un­likely to gain pop­u­lar­ity from its de­ci­sion to draw a line in the sand. But the im­ple­men­ta­tion of the EPA will leave it no choice.

Step back­wards. Xavier Carim

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