finweek

Finding the courage to take the plunge

(AFP)
(AFP)

In late November, Christian Leffler, deputy secretary general for economic and global issues at the European External Action Service, and Xolelwa Mlumbi-Peter, a deputy director-general in South Africa’s department of trade and industry, jointly toasted the launch of the SADC EPA at a reception in Pretoria.

The Economic Partnership Agreement (EPA) covering South Africa, Botswana, Lesotho, Namibia and Swaziland – essentially the Southern African Customs Union (Sacu) – came into effect on 1 November after 12 years of often-bitter negotiations. Mozambique, a sixth member of the negotiations, will probably join in later.

Leffler expressed the hope that the launch of the SADC EPA “will inspire others”.

Indeed. This EPA is one of seven in Africa, the Caribbean and Pacific, which were supposed to have come into effect by 2008. But it was only the second. And the prospects of the others are murky.

The EPAs were supposed to represent the next stage of evolution of relations between the EU and its old colonies. In 1975, not long after independence, Brussels signed the Lomé Agreement with the Africa-Caribbean-Pacific (ACP) countries (now 79), essentially giving them all duty-free access for their exports to the EU without having to reciprocate.

That was supposed to engender many industries in the old colonies. But it really didn’t. The ACP countries continued to export mainly just the usual agricultural goods.

In 2000, the EU persuaded the reluctant ACP that this non-reciprocal Lomé trade arrangement was no longer compliant with the World Trade Organization’s free trade rules. And so they replaced it with the Cotonou Agreement, agreeing to negotiate more normal, reciprocal free trade deals (while retaining many development benefits).

These FTAs, to be called EPAs, would be between the EU and seven different ACP regions, the Caribbean, the Pacific, West Africa, Central Africa, the East African Community, Comesa and SADC.

But nearly a decade past deadline, ratification of the East African EPA has been delayed until the end of the year, at the earliest, because of internal disagreement, and the West African EPA looks increasingly uncertain, largely because of resistance from regional giant Nigeria.

The other EPAs are even less likely to happen, some analysts believe, as non-Least Developed Countries (who have most to gain from EPAs) have implemented individual bilateral EPAs with the EU, while Least Developed Countries have simply continued with the full trade access they had anyway.

Why the dismal record? Many analysts blame the EU for demanding too much. Merran Hulse of the German Development Institute wrote recently that ACP leaders mostly felt the EPAs did not serve the long-term developmental interests of ACP states, “that they will lock in poor trading terms, and undermine long-term ambitions of industrialisation”.

Hulse added that this scepticism was exacerbated by the EU’s use of the EPAs to push for extra market access – such as in services, investment policy, government procurement, and intellectual property – which they had failed to get at the WTO. 

She also believes that many ACP countries have seen the rise of Chinese economic might during the years since Cotonou was signed and so have chosen “to adopt a ‘wait and see’ attitude, in the hope that shifting balances of power can be played to their advantage”.

The reality is much more that most of the ACP countries have simply been looking for new excuses. They have been dipping their toes nervously in the cold waters of reciprocal free trade for 16 years, without yet having plucked up the courage to take the plunge.

It is a cold plunge of course. No doubt about it. But it does seem inevitable. And the EPAs seem to be the best way of easing the ACP countries in. They are not fully reciprocal trade deals. They give almost all the ACP countries immediate 100% duty-free access to the EU, while giving the ACP countries long periods to phase in the opening of their markets to the EU and then not always fully. With the Caribbean EPA, which launched in 2008, that period is 25 years.

South Africa is an example to the others. It was at first deeply sceptical about the SADC EPA and refused to join it. It complained that the EU was trying to disrupt regional integration, that it was trying to bully its way into the regional market, that it was going to tie Pretoria’s hands on industrial policy.

But it got a deal it now boasts about. It includes increasing SA’s quota of bottled wine from 50m to 110m litres a year, a 150 000 tonne duty-free sugar quota, and an 80 000 tonne duty-free ethanol quota. It also won protection for such South African products as rooibos and honeybush tea and Karoo lamb and many wines as “geographic indications.”

So, as Leffler says, let’s hope it does inspire others.

Peter Fabriciuswas foreign editor of Independent Newspapers for 20 years, writing on African and global issues. He has been writing weekly columns for the Institute for Security Studies (ISS) since 2013.

This article originally appeared in the 8 December edition of finweek. Buy and download the magazine here.

 

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