Africa, Economy & Trade, Europe, Headlines

SOUTH AFRICA-TRADE: Shilly-Shallying By EU “Stymies Recovery”

LONDON, Jul 15 1996 (IPS) - The European Union has been accused of hobbling South Africa’s post-apartheid reconstruction by vacillating on whether or not to remove barriers to products from that country.

At the same time, critics say the EU will gain unfair advantage from a “free trade” agreement it is seeking to negotiate with Pretoria that essentially puts the two countries on the same level economically.

During President Nelson Mandela’s four-day state visit here last week, Ben Jackson, director of Action for Southern Africa (ACTSA), a lobbying group, said EU trade barriers on South African products had stymied the country’s capacity to meet basic-needs targets and create employment for its jobless millions.

ACTSA called on British Prime Minister John Major to help secure a fair deal for South African trade with the EU. By doing so, Britain would be helping to boost Pretoria’s efforts to tackle the socio-economic iniquities which are a legacy of years of white minority rule.

“Over two years after the election of South Africa’s first non- racial, democratic government, Europe treats its products little differently than when it was an international pariah,” Jackson said.

While ACTSA had in the past supported trade boycotts of the country, it now recognised that a fair trade deal would “help build the new South Africa and overcome poverty across Southern Africa”.

According to official South African sources, all previous attempts to persuade Brussels to pull down its trade barriers — including import duties described as “punishing” — have failed. Only last month E.U. trade negotiators refused to give an inch during talks with their South African counterparts.

This has contributed to a situation where – notwithstanding pledges of major economic support at the inauguration of the new South Africa two years ago – the country’s exports are hampered by high tariffs in Europe that are little-changed from those obtaining when South Africa’s unbending white minority government made it an international pariah.

Nearly half of South African exports go to the European Union, which is the country’s most important market. Many of these products are subject to harsh EU barriers. Farm products are particularly affected — fresh and tinned fruit and wine face stiff tariffs averaging about 18 per cent last year.

Comparative studies reveal that the EU actually gives a worse trade deal to the country than that offered to nations like Turkey, Venezuela and Israel which have higher per capita incomes. And this applies even when these countries sell the same products as South Africa.

South Africa pays a tariff of 11 per cent on its melons for example. Turkey, Venezuela and Costa Rica pay nothing. South Africa pays 15 per cent on fresh flowers, Israel two per cent and Colombia nothing. On avocados South Africa pays six per cent while Israel – a major competitor with lower production costs – is excluded from any duty.

On top of this, the EU remains adamant that a list of products making up nearly 40 per cent of the country’s farm exports must be excluded altogether from talks on better market access. This would impact negatively on fruit and vegetable, canning and clothes and textiles — precisely those sectors analysts say have the most potential to generate the most jobs most quickly.

As Jackson said: “Trade in these products is needed to mobilise resources to pay for upgrading the appalling living conditions in which apartheid has left many black South Africans and to achieve the objectives of the economic plan released recently.”

The latter is a reference to the policy blueprint to the year 2000 unveiled by the African National Congress (ANC) government on Jun. 14. Titled “Growth, employment and redistribution: A macro- economic strategy”, it sets as an objeftive a 10 per cent growth of non-gold exports over the period plus a GDP growth rate of six per cent and the creation of 400,000 jobs a year.

Concurrent with its South Africa trade policy, the EU is pushing for the creation of a “free trade” area with the country — confirming the fact that some EU members regard South Africa as a powerful economic competitor.

Some analysts maintain that Brussels must accept that it is imperative that South Africa shield some of its most vulnerable industries, as do other developing countries.

Ron Davies, a Member of the South African Parliameant’s trade committee, who was part of Mandela’s entourage to London, said a free trade deal would lead to the destruction of many of the country’s fledgling industries.

He added: “It is surely an irony that a proposal that purports to be designed to help us, actually seeks to grant the EU five times as much duty-free access to our markets as it would extend to us in their markets. At the same time, it seeks to protect precisely those sectors of the E.U. market where South Africa is most competitive.”

The outcome of the current wrangling over trade will have far- reaching implications for investment in the new South Africa, some analytss argue. They point to a correlation between market access for South African goods and the magnitude of local and foreign direct investment it can hope to attract.

“If South Africa generates the right macroeconomic environment, investment will pick up,” says Dr Carolyn Jenkins, a South African and fellow at Oxford Univertisy’s Centre for the Study of African Economies. “Adequate market access is obviously a major factor in the macroeconomy.”

“China has cheap labour and skilled labour – and a market that is growing very fast, so there is growing investment. So, if South Africa can get the macroeconomics right, and this includes market access for its goods, there will be an investment spin-off and more jobs will be created.”

Institutional investors here sound sanguine about the long-term prospects for investment in South Africa, despite attempts by some rightwing commentators to denigrate the government’s economic achievements.

They contend that the lower-than-expected level of foreign investment in the country since the ANC’s political ascendancy is not surprising, given the propensity of investors to adopt a wait- and-see attitude.

Rob Fisher, an executive at Fleming’s South Africa investment fund, said: “Government incentives for investors are constantly improving and the stock market is performing much better than expected. Last year there was a bull run in the market and, despite a few hiccups, things are improving. Don’t pay mind to the doomsday merchants.”

 
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