Economic Partnership Agreements — Why should you care?
TRADING with the European Union has been enhanced following the ratification of European Union — Eastern and Southern Africa interim Economic Partnerships Agreement (EU-ESA iEPA). Zimbabwe is among the five countries including Comoros, Madagascar, Mauritius and the Seychelles to benefit from the EPAs.
In 2020, the European Union has been at the forefront in international trade in terms of both exports and imports as it accounted for about 25,6 percent of trade in goods and services.
The regional block is Africa’s number one trading partner accounting for 28 percent of Africa’s total trade with the rest of the world and was also the largest source of foreign direct investment, amounting to Euro 242 billion in 2019.
Going one step further than Free Trade Areas (FTAs) and regional trade agreements (RTAs), Economic Partnership Agreements (EPAs) intend to cover more areas in addition to trade in goods, including, for example; trade in services, investment, development and administrative assistance. The Cotonou Agreement offers the EU and the African Caribbean and Pacific (ACP) countries the opportunity to negotiate development-oriented FTAs called EPAs.
The coverage of EPAs can be expanded through “rendezvous clauses” in which parties agree to continue negotiations on specific matters at a later stage. The mechanisms under the EPAs to boost exports to the European markets are illustrated in the graphic elsewhere in this article.
The interim Economic Partnership Agreement (iEPA) between the EU and the Eastern and Southern Africa (ESA5) countries includes: duty free, quota free access to the EU market for ESA states; asymmetrical opening of ESA markets to EU exports with a minimum of 80 percent; special safeguards and measures to support development objectives in the ESA countries; detailed provisions on the rules of origin; fisheries and trade defence; cooperation on technical barriers to trade, as well as on standards on animal and plant health; and mechanism for dispute settlement.
Zimbabwe has excluded the following products from liberalisation: products of animal origin; cereals; beverages paper; plastics and rubber; textiles and clothing; footwear; glass and ceramics; consumer electronics; and vehicles. One Zimbabwean success story is told by Luxaflor Roses which exports roses to South Africa and Europe.
Cut flower export has huge potential in Zimbabwe, thanks to iEPA. Zimbabwe exports between 5 and 6 tonnes of cut flowers (two thirds of which are roses) to the EU. Other success stories are presented by Selby Enterprise and Nature-inspired jewellery pieces and sculptures. According to the International Trade Centre (ITC), Zimbabwe exported live trees and other plants, bulbs, roots and the like; cut flowers and ornamental foliage, to the European Union to the tune of US$2.45 million and US$2.87 million in 2020 and 2021, respectively.
For more information on European markets, discover the Access2Markets (A2M) website a single online tool for EU export and intra-EU trade and the ITC World Trade Map.
The A2M website provides information for each product, for each EU agreement and breaks down the legal language into practical information.
The EPAs and the African Continental Free Trade Area (AfCFTA) are markets to build on, and it is high time that Zimbabwean businesses tape into these markets to access larger markets by utilising the available trade agreements.
The volume of trade between the EU and Zimbabwe has been on an upward trend with all products that were exported to the EU in 2020 and 2021 amounting to US$78,7 million and 171,4 million, respectively. However, other sources indicate about US$500 million and northwards in terms of total trade between the EU and Zimbabwe.
This shows a recovery after the disruptions caused by the coronavirus pandemic in 2020 and 2021. Zimbabwe’s exports to the world have been on the rise with total exports rising by 37 percent in 2021 from a figure of US$4,4 billion recorded in 2020 as per the International Trade Centre Statistics.
Among the EU Member States, Zimbabwean has a high export potential to countries like Belgium, Netherlands, France, Finland and Germany, in that order. Zimbabwean fruit (excluding citrus) jams or similar are on high demand in the Netherlands, France and Germany. Fresh cut flowers are also on high demand in the Netherlands and Norway.
The Netherlands Embassy in Zimbabwe has been playing a big role in facilitating trade between Zimbabwe and the European country. Zimbabwe’s horticultural sector is the major beneficiary of the interventions of the Netherlands Embassy and the European Union, in general.
On Tuesday, 04 April 2023, the Regional Trade Section for Comoros, Madagascar, Mauritius, Seychelles and Zimbabwe representatives were in Harare at the Delegation of the European Union to the Republic of Zimbabwe for a presentation on the EU-Zimbabwe trade relations and the iEPA.
The visit has become more of an annual event where issues surrounding trade between the EU and Zimbabwe are discussed with importers and exporters as well as private sector representative such as the Zimbabwe National Chamber of Commerce and the Confederation of Zimbabwe Industries. The aspiring and current exporters need to gradually monitor new regulations that are being put in place by the European Union, some which are non-tariff barriers to trade.
Some of the challenging issues that Zimbabwean importers are facing pertain to the rules of origin and the procedures that are deemed to be cumbersome in nature. Such issues are being reviewed as part of the on-going trade negotiations between the EU and the Republic of Zimbabwe as well as four other participating countries in Africa.
Any importers and exporters are encouraged to submit any issues that are inhibiting their trading with the EU to ZNCC for assistance to be accorded.
An example of the new regulations coming into play is the proposed Carbon Border Adjustment Mechanism (CABM) by the EU which is expected to come into force in its transitional phase as of October 1, 2023. The CABM will initially apply to imports of certain goods and selected precursors whose production is carbon intensive and at most significant risk of carbon leakage.
These include cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. The permanent system is expected to enter into full force on January 1, 2026.
The EU seeks to put a fair price on carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries.
This certainly will have a significant impact on Zimbabwe’s future trade with the EU on the mentioned products, with an expectation that other products that are carbon intensive will be added to the list.
The local industry has to move in line with global developments and continuously innovate and re-strategise production processes in line with the climate action and the environmental, sustainability and governance (ESG) aspects.