Africa, Development & Aid, Economy & Trade, Europe, Headlines

TRADE: South Africa in Growing Conflict With EU

David Cronin

BRUSSELS, Feb 6 2009 (IPS) - Brussels officials have rejected calls from three southern African governments for a reassessment of a new trade accord with the European Union.

In January, South Africa, Namibia and Angola made a joint appeal to the EU, urging that it delay the formal signature of a trade liberalisation deal, known as an economic partnership agreement (EPA), with several of their neighbouring countries. Describing the accord as “seriously flawed”, the three governments argued that it would set back efforts to boost economic cooperation in southern Africa for “many years”.

Botswana, Namibia, Swaziland, Mozambique and Lesotho all gave their initial approval to an EPA with the Union in late 2007. But when the agreement was analysed, some of these governments voiced profound unease about how it could drive a wedge between them and the region’s largest economy South Africa, which had decided against joining an EPA.

Later this month, the EU’s 27 governments are to discuss if they should give the European Commission, the executive arm of the EU, a mandate to proceed with signing and ratifying the EPAs it has negotiated with the African, Caribbean and Pacific (ACP) bloc.

South Africa, Namibia and Angola have called for the brakes to be applied to this procedure temporarily.

Even though European Commission President José Manuel Barroso gave an undertaking in late 2007 that provisions in trade deals which African countries deem to be contentious could be renegotiated, his officials have now declined to accept the appeal.

In a document, seen by IPS, the Commission said that reopening an EPA with Southern African countries would not be “practicable” because it would “ignore” the decision of other governments in that region to accept the agreement.

The agreement with southern Africa has been given the suffix ‘interim’ as it primarily relates to trade in goods. The EU is now hoping to widen its scope so that it becomes a ‘full’ accord, which also deals with prising open Africa’s services markets, as well as containing clauses on investment, public procurement and competition.

Paul Goodison from the European Research Office, which monitors EU-Africa economic relations, said that “one way forward” could be to use a technique that trade negotiators describe as ‘bracketing’. This would involve placing brackets around provisions in the EPA that Namibia, South Africa and Angola consider inimical to the interests of their region. It would allow the remainder of the agreement to be signed by both European and African governments but with the contentious clauses not coming into effect.

Peter Mandelson, Europe’s trade commissioner from 2004 until last year, had refused to agree to the use of bracketing. But his successor Catherine Ashton has undertaken to demonstrate greater flexibility in the handling of the EPAs. She will be visiting southern Africa in the coming week.

“The hope is that with a new hand at the helm, substantive changes in the European Commission position could become possible,” said Goodison. “It remains to be seen if at the beginning of next week Commissioner Ashton will have given substance to her rhetoric.”

Interviewed by the publication Trade Negotiations Insight, Ashton stated there is a need to “replace controversy over interim agreements with a positive debate on full EPAs.”

But she defended the Commission’s position on some of the proposals that have most rankled with African countries. Several African governments have taken issue with a demand by the Commission that they eliminate taxes they have imposed on export of raw materials, arguing that such fiscal measures are vital to nurture nascent industries by encouraging the processing of basic resources at home.

While recognising those concerns as legitimate Ashton said: “The commitment to removing trade barriers like export taxes must be a cornerstone of EU trade policy. I am a firm believer in the benefits of open markets and the opportunities they can deliver to businesses and individuals.”

As Angola is internationally recognised as a ‘least developed country’, it was able to take a different approach to the EPAs than many of its neighbours. Its status meant that the Commission never threatened to impose higher duties on its exports to the EU if it decided against signing an agreement.

Although Angola has remained outside a regional EPA, it has complained that the Commission provided it with “little clarity” about what the implications of signing up would be. Not enough details have been provided, for example, on what financial assistance would be made available to compensate for the revenue losses once it has to reduce most tariffs on imported goods.

As part of an ‘aid for trade’ strategy formulated in 2007, the EU has agreed to make 2 billion euros (2.6 billion dollars) available to poor countries each year by 2010.

But that pledge was made before several EU member states decided to slash their development aid budgets in response to the financial crisis. In recent months, Italy has cut its aid allocations by 56 percent, Ireland by 10 percent, while Latvia has taken steps to abolish its aid budget entirely.

Glenys Kinnock, a Socialist member of the European Parliament, noted that there is “nothing legally binding” in an EPA recently concluded with the Caribbean region, the most comprehensive agreement yet reached with the almost 80 ACP countries.

“Aid for trade is the elephant in the room,” Kinnock added. “Nobody wants to talk about how much (EU) member states are going to contribute.”