DEVELOPMENT BULLETIN-AFRICA: Pretoria’s Free Trade Talks with EU Worry SACU

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Niccolo Sarno

PORT LOUIS, May 2 1998 (IPS) - Small Southern African nations linked in a customs union with South Africa fear that a Free Trade Agreement (FTA) being negotiated between the European Union (EU) and Pretoria will endanger their fragile economies.

Negotiations with the EU on ‘sensitive trade sectors’, were still deadlocked after reaching the 17th round, which started on Friday last in Brussels. But the FTA is expected to become a reality soon, with important implications for other members of the Southern Africa Customs Union (SACU — Botswana, Lesotho, Namibia, South Africa and Swaziland).

“Whatever will be agreed with South Africa directly affects other SACU members,” Swaziland’s Prince Khuzulwandle Dlamini said last week in Mauritius, where a SACU parliamentary group met. “Anything exported from the EU to South Africa will inevitably end up also in our markets.”

The SACU Parliamentary liaison Group was set up in 1996 to ensure that the negotiations do not end up damaging SACU economies. The group says that there is a need to ensure that the smaller nations’ sensitive sectors – which include beef, dairy products, sugar and canned fruit – are also accomodated within the FTA.

SACU members fear that they will lose valuable income from customs duties – which are currently shared between them – as a result of the FTA. Trade experts say revenue losses to these countries may be six to eleven times the annual level of the EU aid they receive. It is estimated that the free trade agreement could result in Botswana, Lesotho, Swaziland and Namibia losing revenue of between 400 and 800 million dollars a year.

Namibia has argued that the FTA would badly hurt its lucrative beef industry, which makes up 90 percent of the country’s gross domestic product (GDP), if the existing tariff protection in South Africa is removed.

“If they (Europeans) now start to sell goods to us, which they should actually buy from us, how is that going to help us, us the people of Southern Africa?” wondered Petrus Hazienda, a communal farmer from Namibia.

The bi-annual ACP-EU Joint Assembly, which brings together the Africa, the Caribbean and Pacific (ACP) countries and the 15- member EU, announced at an Apr. 20-23 meeting here that South Africa would officially join the Lome Convention from June 1.

The convention is a giant trade and aid pact that links the EU and the 70-member ACP. However, the trade chapter of the convention will not be accessible to the African economic giant. Pretoria will not be given the same duty-free access to the EU market as the ACP countries, nor will it have any allocations under special agreements such as Lome’s banana, sugar, or beef protocols.

Rob Davies, leader of the South African parliamentary delegation to Mauritius, said the EU was beingparticularly obstinate in not agreeing to tariff-free access for South African agricultural exports.

He said South Africa could not improve its negotiating position, as the EU’s executive Commission had asked, without that having an adverse effect on the South African economy. The EU’s Commission, which is in chargeof the negotiations, had proposed that the FTA cover at least 90 percent of all trade and that full reciprocity be in place within 10 years.

South Africa, on the other hand, said recently that it preferred a trade and development agreement with the EU, with the focus on regional development rather than the dismantling of extra- regional tariff barriers.

As a senior adviser at the Economic Commission for Africa remarked recently, South Africa would have to remove tariffs on some 45 percent of its present imports from the EU, while the EU would have to remove tariffs on only 3 percent of its imports from South Africa. The EU accounts for 44 percent of South Africa’s exports, 28 percent of its imports, and 50 percent of its foreign investment abroad.

European parliamentarian and rapporteur for EU-South Africa relations Glenys Kinnock said South Africa’s economy would face huge adjustment problems because of the FTA, which would not have the same consequences on European industries.

She said agriculture was the hottest issue being negotiated, and pointed out that South African melons exported to the EU still faced a tariff of 11 percent, whereas Turkish, Venezuelan, and Costa Rican melons entered the EU duty free.

Kinnock also said that weak SACU economies were unable to survive distortions to their markets created by cheap European products subsidised by the EU’s Commmon Agricultural Policy.

Highly subsidised EU beef already accounts for 70-80 percent of all meat which now goes into canned meat production in South Africa. “It is effectively pricing locally produced meat out of this particular market,” Euro parliamentarian Tony Cunningham said in Mauritius. Subsidised EU beef is being docked in South Africa at less than one quarter of the price paid in Europe.

During the Joint Assembly, a represetative of South Africa said that it would be ironic if his country was forced to accept a new kind of FTA that could be the model for future relations between the EU and ACP states when the Lome pact expires in February 2000.

The European Commission repeated last week that the vast amounts of aid previously provided to ACP states would be partially rlaced by economic cooperation, meaning that Europe would rather help these countries enter the global market economy that continue providing aid.