South Africa turns down EU-SADC trade deal ahead of Lisbon summit

subscriber | 07 December, 2007

JOHANNESBURG. With the EU-Africa summit in Lisbon just around the corner a rift has opened up between EU and South Africa about who should pay for a process of integrating Africa with the global economy.

South Africa, together with Namibia, has boldly put its foot down and refused to sign the Economic Partnership Agreement (EPA), a trade deal that it believes neighbouring countries - together with all the countries in the East African Community, plus Zimbabwe and the Seychelles - have been bullied signing by EU through a package of development assistance.

EU is thoroughly disappointed as it feels that South Africa and Namibia that way have spoilt the party and, for the time being, decided not to - though EU sources are holding out for at least Namibia to come on board as it otherwise will face seriously steep tariff hikes on grape- and meat export to EU.

EU and Nordic companies with an interest in the negotiations are those affected by South African tariffs, including the motor industry, telecom and electrical component industry. Nordic importers from Africa also would have an interest in seeing an EPA in place.

The EPA’s are meant to be a stop gap measure and are complement EU’s ACP, Africa-Caribbean-Pacific agreement, until a wider agreement is in place within World Trade Organisation.

The content is about the same to bring down all EU tariffs, except for rice and sugar where there is a phased process, in one direction, while countries in Africa are reducing their tariffs at a reduced speed to protect certain industry and agriculture.

Among the SADC countries Lesotho, Swaziland and Mozambique signed the interim agreement in November - while Angola signaled that it wants to be part of the deal, which is valid already from next month.

The East African community’s all five member states - Uganda, Tanzania, Kenya, Rwanda and Burundi - also signed the EPA late November, as did Zimbabwe and the Seychelles.

The EU-Africa summit in Lisbon next week may convince a few more countries - though South Africa is not likely to come onboard which may create a rift between EU and South Africa observers believe.

Even worse, the negotiations may also cause a rift within SADC.

“After a lengthy process they have ended up with a split SADC — that is the real problem,” suggests Trudi Hartzenberg, executive director of the Trade Law Centre for Southern Africa, in an interview with Business Day newspaper.

EU sources close to the talks are disappointed with South Africa’s “totally blatant self serving attitude”, which is believed to be influenced by pressure from trade unions and high unemployment.

I

n a war of words South Africa counters that EU has made “unreasonable demands”, without specifying the exact reasons for its misgivings exact that it believes other African countries felt pressured to accept EU’s mixed offer of relaxation and development assistance.

The EU side believes that its bent over backwards to accommodate South Africa, by extending deadlines and allowing for two-phased approach, where a services and investment agreement will be negotiated for another year, and that its got nothing in return from the South African side.

Services, in particular so called “new generation” issues such as financial services and telecommunications, are both crucial areas for South Africa and it would have little to gain from relaxing access.

The official South African stance is very much that other countries in the region do not understand the complexity of the agreement, and that the region is not ready to negotiate a services agreement.

A major stumbling block, says sources, is that South Africa believed that EU was prepared to do a comprehensive deal with SADC that included South Africa - and that South Africa that way could gain some back door benefits that eluded it during the South Africa-EU TDCA deal signed in 1999.

As much as that may have looked naïve South Africa was hoping that the country’s special economic and stabilising role in the region would count for something and carry enough weight to ignore that the country does not qualify as a LDC.

EU says in a press statement that the trade agreement is flexible and helps to protect agricultural markets in ACP countries as well as to “provide shelter for growing industry from
external competition”, including “sensitive industrial sectors”.

EU offers a €23 billion development assistance package over the next seven years to cushion them further including to spend € 2 billion a year in “aid for trade” and that way help implement
Economic Partnership Agreements.

“The money will be available to help countries prepare new structural reforms and trade policies, adjust to the changes they bring and enhance infrastructure and competitiveness to seize trade opportunities”, states EU.

Scanview
These are many and complex issues and it is problematic if, e.g. an African country, by signing EPA has to lower its tariffs and looses out on that income - and instead is compensated through aid. That is not progress- a deal must be assymetric and give ample time for the African country to adapt.

But not too much time as politicians have a tendency wait until the last minute and protection is not great in principle if you want to develop competitive products.

While it’s obvious that EU’s motives are far from altruistic, it has seen the light and knows that ACP countries are not offering any real threat to Europe’s agriculture and industry.

In South Africa’s case it has a lot to gain from lower EU tariffs and it benefits on a day-to-day basis from its economic dominance in Africa.

But EU also has a lot to gain from South Africa’s participation in the process, as it is the most important trade- and investment force in Africa.

It is somewhere in that grey area between short term greed and long term interest that the two lost each other and they somehow need to swallow their pride and find new ways to get back on track.

It was clear-cut from the outset that South Africa doesn’t qualify as an LDC and that if South Africa wanted to gain some benefits through a SADC-EU EPA accord, the country should understand that it would be obliged to pass on some of those benefits to its neighbours by dropping tariffs and make amends.

Instead the opposite seem to happen.

It is after all in South Africa’s interest to do what many European countries are doing, to try and assist those countries from which economic immigrants are pouring in -.

And to help them to grow their own economies and, yes that way make them more competitive but also, which is why South Africa has a lot more to gain than to loose, to grow demand for South African products in those countries.

Further information about the EPAs is available on www://ec.europa.eu/trade/