It’s tough to crack fortress Europe

2013-06-23 14:00

A new generation of trade policy divisions must be avoided

A decade-long negotiation for an economic partnership agreement between the European Union (EU) on one hand, and the Southern African Customs Union (Sacu) – plus Angola and Mozambique – on the other, is racing against an EU-imposed deadline next year.

Negotiators met in Brussels, Belgium, this week, but I’m of the view that Europeans still need to acknowledge the “asymmetric” nature of the engagement and avoid new divisions in the Southern African Development Community (SADC).

South Africa’s relationship with the EU is wide, deep and strong. Despite the EU share of our total trade declining from 35.7% in 2005 to 25% in 2012, the EU remains South Africa’s largest trade and investment partner.

SA-EU economic relations are anchored in the Trade, Development and Cooperation Agreement (TDCA) of 1999, which was fully implemented towards the end of last year.

Now the Economic Partnership Agreement (EPA), which includes South Africa and six regional neighbours, has moved to centre stage in the context of our evolving trade relationship.

Since joining the EPA process in 2005, SA’s key objectives have been to consolidate a common regional arrangement and ensure improved access to the EU market.

We also believe that any final agreement should not unduly restrict our development or industrial policy space, nor impede our efforts to reach diversification in trade.

While there has been steady progress in the negotiations, there are still a number of outstanding technical and

legal provisions that require resolution. We would be concerned if such engagements created a new generation of trade policy divisions in the SADC and Sacu.

It is also important to appreciate the vast economic asymmetries between the EU and SADC EPA member states.

According to World Trade Organisation statistics, imports from the EU constituted 32%

of SA’s total global imports in 2010. By contrast, SA’s total exports to the EU accounted for 1.2% of the EU’s global imports.

This shows that the cost of market openings would fall disproportionately on South Africa.

Our calculations show that already by 2010, 95% of SA’s agricultural imports from the

EU received duty- and quota-free treatment in the Sacu market.

Furthermore, with the TDCA fully implemented, SA (and Sacu) retains tariffs on 112 agricultural lines, whereas the EU retains tariffs on about 615 agricultural lines, leaving the EU with greater policy space in this area than Sacu.

In addition, Sacu countries are unable to offer the levels of domestic support available to EU agricultural producers.

There is also growing concern by SA exporters who increasingly confront new nontariff barriers in the EU, notably new environmental measures as well as labelling standards.

It is important to highlight these asymmetries as they weigh heavily in Sacu calculations to offer further preferences to the EU.

Improved access for our exports is necessary to achieve an EPA outcome that would be of some benefit to SA.

While we have little to gain in industrial product exports, there is scope to enhance our access to the EU market for agriculture, especially agro-processing, that would support our industrial policy and job creation objectives.

In an effort to make a positive contribution to the negotiations, we have made a major concession by acceding to the EU’s request to negotiate a deal on geographic indications (GIs).

Our offer comprises a bilateral deal on GIs between the EU and SA that will establish an international, legally binding agreement to protect EU names for wines and spirits, and agricultural products.

The full benefits of such an arrangement would accrue to EU producers immediately on conclusion of a deal.

While SA has a regime to protect the names of wines and spirits, we will need to expend considerable resources to put in place a similar system for agricultural products.

Given the amount of technical and policy work that remains outstanding, we remain concerned about the EU’s decision to terminate duty-and quota-free access to the EU market by October 1, 2014.

This arbitrary deadline places undue pressure on the negotiations, particularly on the members of the SADC EPA group, which would be hit hard if they lost preferential access to the EU.

The shape of a final negotiating outcome is in place. But to finalise the process, we will need an agreement that provides a meaningful degree of asymmetry in favour of the smaller economies and ensures that the outcome does not undermine regional integration.

» Davies is minister of trade and industry

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