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TRADE: EPA Signing Threatens Southern African Customs Union

Servaas van den Bosch

WINDHOEK, Jun 9 2009 (IPS) - Fears that accession to an economic partnership agreement (EPA) in Southern Africa will destroy regional integration seem to be coming true after Botswana, Lesotho and Swaziland (BLS) ignored a key provision of the Southern African Customs Union when they initialled their trade deal with the European Union last week.

Analysts have feared that the trade deals known as EPAs may derail the very process of regional integration which the European Union (EU) has purportedly wanted to promote with the EPAs.

‘‘It’s a complete mess,’’ says trade expert Wallie Roux from Namibia. ‘‘With the emergence of different tariffs (as determined by the EPA), the Southern African Customs Union (SACU) practically ceases to exist.

‘‘The BLS countries ignored Article 31 of SACU which prohibits bilateral agreements with third parties. It’s not only a question of how to rectify the problem of different trade regimes within SACU but the profit-sharing formula of the customs revenue pool will also need to be revised.

‘‘When Botswana offers a better price on certain products than other members, its contribution to the pool decreases and so it should receive less.’’

For most members SACU monies are a primary source of revenue, contributing up to 60 percent of government income in some cases.

In response, South Africa’s trade minister Dr Rob Davies warned the signatories that his country is prepared to set up trade barriers to protect itself from cheap imports from the EU. Davies said it would step up border controls with the countries as more favourable rules of origin under the EPA would threaten its vulnerable clothing and textile sectors.

‘‘We will not be admitting things which do not comply with rules of origin under the TDCA,’’ Davies is quoted as saying.

The Trade, Development and Co-operation Agreement (TDCA) is South Africa’s own preferential trade agreement with the EU, which lapses in 2012. Under the TDCA garments need to undergo two stages of conversion, while under the EPA this is reduced to one.

Cheap EU imports could reach South Africa’s market via the BLS countries because of the new EPA.

It is the first time that the troublesome EPA negotiations have led to open disagreement between the SACU members.

It is unclear if SACU, which celebrates its centenary in 2010, will survive the controversial signing; and what this will mean for the envisaged merging of SACU and the Common Market for Eastern and Southern Africa (COMESA) into a SADC customs union, scheduled for next year.

Roux also points out that bilateral deals between the Southern African countries and the EU might weaken their position in case of disputes. ‘‘The EU has 27 countries to bear the cost of a challenge in the World Trade Organisation and the legal resources to see it through. How is Botswana going to match that?’’

Botswana and its smaller counterparts Lesotho and Swaziland signed an interim economic partnership agreement (EPA) with the European Union (EU) on Jun 4. Mozambique has signalled its intention to sign in the near future.

Together the four countries’ trade with the EU was worth 2.1 billion euros in 2008. Mainly aluminium, diamonds, sugar, beef and fish were exported to the EU, leading to a combined trade surplus of one billion euros for the African countries.

‘‘The signing of the interim EPA marks a significant milestone in our trade negotiations. It ensures uninterrupted flow of SADC-EPA goods into the EU market,’’ argued Botswana’s trade minister, Neo Moroka, who chaired the negotiations.

‘‘There are still some outstanding issues to be resolved. These will be negotiated in parallel with negotiations towards a full EPA, covering services and investment.’’

European Trade Commissioner Cathy Ashton hailed the signing as a victory for the appeasement process the EU has embarked on, after relations with many ACP countries soured under her predecessor Peter Mandelson.

‘‘The signing of this agreement is an important step. It first of all guarantees market access to the European market for those countries that have signed today. More importantly, it is a vote of confidence in the process that we have put in motion to build a strong and lasting economic and trade relationship.’’

The ANSA countries (Angola, Namibia and South Africa) have so far not signed the agreement. Angola, as a least developed country (LDC), is eligible for preferential treatment under the EU’s Everything But Arms (EBA) agreement and has observer status in the SADC-EPA negotiations.

South Africa benefits from preferential tariffs for 90 percent of its exports to the EU under the 1999 TDCA.

Namibia has no alternative agreement and is eager to protect its high value beef exports to the EU. However, the southern African nation insisted last week that contentious issues need to be resolved before it signs the interim EPA.

At a high-level ministerial meeting in Gaborone on May 20 it was decided to leave countries free to sign bilateral deals in order to preserve the unity of SACU and SADC.

It is unclear what the recent signing and South Africa’s reaction to it will mean for Namibia’s position that was up until now considered pivotal in the process.

The country is reluctant to sign any deal that excludes its major trade partner South Africa. ‘‘Namibia might just continue with South Africa in a customs union,’’ offers Roux. ‘‘It would then probably receive an even more significant amount of the revenue pool.’’

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