Trouble brewing in world’s oldest customs union
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