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TRADE: EPA Damages Regional Cooperation in Southern Africa

Brigitte Weidlich

WINDHOEK, Feb 15 2008 (IPS) - The Southern African Development Community (SADC) should engage in serious discussions to prevent the economic partnership agreement (EPA) with the European Union from destroying its regional integration efforts.

This is according to Paul Kalenga, senior trade policy adviser at the SADC Secretariat in Gaborone, Botswana.

‘‘SADC is still behind with its regional harmonisation, including establishing a free trade area, while at the same time having to negotiate complicated trade deals with the EU,’’ Kalenga pointed out.

The regional free trade area became operational on January 1 this year and will be officially launched at the annual SADC summit in August. A SADC customs union is planned by 2010 and higher levels of economic integration are planned for realisation by 2018.

The 14 SADC member states hold different opinions on how the EPA with the European Union (EU) will affect regional integration, Kalenga said at a roundtable discussion in the Namibian capital of Windhoek on February 13. It was arranged by the German funder, the Friedrich Ebert Foundation.

As an example, he mentioned that Mozambique had made a completely different tariff offer to the EU than fellow SADC member states. ‘‘We require some unified actions here,’’ Kalenga recommended.

Only 35 out of the 79 African, Caribbean and Pacific (ACP) countries ‘‘initialled’’ (signed) interim EPAs with the EU in December last year, including the 15 Caribbean countries that signed a full EPA.

Five countries of the 14 SADC members – Botswana, Lesotho, Namibia, Swaziland and Mozambique – put their signatures to an interim EPA. However, Namibia listed a number of concerns that, if not resolved, may prevent it ratifying the agreement by the end of this year.

South Africa did not sign and will continue to trade with the EU under its separate Trade and Development Cooperation Agreement (TDCA), while Angola may yet sign.

Tanzania, the eighth member of this particular SADC grouping, signed an interim agreement as part of the East and Southern African EPA configuration instead.

Dr Malan Lindeque, permanent secretary in Namibia’s trade ministry, noted that South Africa’s refusal to initial the interim EPA and its separate trade agreement with the EU was fragmenting SADC rather than promoting integration.

South Africa and four other SADC countries, Botswana, Lesotho, Namibia and Swaziland, are the five member states of the Southern African Customs Union (SACU), which has existed since 1910.

According to SACU’s article 31, ‘‘no member state shall negotiate and enter into new preferential trade agreements with third parties or amend existing agreements without the consent of other member states,’’ but South Africa contravened this stipulation when it entered into the TDCA in the late 1990s.

The interim EPA is for trade in goods only. The second phase includes trade in services and covers investment, telecommunication, transport, finance and energy.

Negotiating the second phase may have serious consequences for the economic integration of SADC countries as they have not ratified regional protocols in those sectors.

‘‘This is like burning the candle at both ends,’’ a roundtable participant said in the open discussion between the private sector and the government at the roundtable.

‘‘With regard to the EPA talks, SADC was not well prepared last year,’’ Kalenga added. The SADC secretariat had a special EPA unit. Its mandate ended in December 2007 and has not yet been renewed, which could present a problem as the talks are continuing this year.

The SADC-EPA member states will have to decide at ministerial level how the new secretariat will be staffed and empowered to fulfil a more meaningful function in the next round of EPA negotiations.

Referring to the process last year, Lindeque told the roundtable participants that ‘‘the rules and timeframes (for EPA talks) changed all the time.

‘‘Namibia was in a dangerous situation two months ago and many developing countries felt under pressure ‘to sell the farm’. We were certainly not happy how things were done,’’ he said.

Under the interim EPA, Namibia and the other signatories obtained duty-free and quota-free access for products it wants to export to the 27 EU member states but it has to provide reciprocal market access for EU goods by July 1 this year by slashing import tariffs on 80 percent of goods.

The remaining tariffs will be phased out over several years.

Namibia has reservations about the most favoured nation (MFN) provisions demanded by the European Commission (EC). This refers to Namibia being compelled to extend the same conditions to the EU as are contained in future trade agreements with any other countries.

Namibia is also unhappy about the EC’s demand that export levies and taxes on Namibian goods be scrapped as the country uses these as incentives for local value addition.

The EC further demands the abolition of internal quantitative restrictions on EU exports to the rest of the Southern African Customs Union (SACU). This, it is felt, is inconsistent with the regional trade arrangements under both the SACU and SADC agreements.

‘‘How will the EPAs impact on SADC and SACU? That is not clear at all,’’ Lindeque pointed out.

Another concern of Namibia is the need for provisions to protect infant industries, which the EU only wants to allow until 2020, and the need to retain minimum local-content provisions with regard to rules of origin in the manufacturing sector.

Namibia managed to protect its local beer production as an infant industry for now by slapping tariffs on foreign beer imports for the next 12 years.

The country further reserved the right not to ratify the agreement if these issues are not satisfactorily resolved.

The African Union (AU) approved a strong resolution on the EPAs during its recent summit in Addis Ababa, Ethiopia, which ended on February 2. It disallows African regions from signing full EPAs ‘‘as long as the draft agreement is not submitted and discussed at the continental level’’.

According to Wallie Roux, an independent trade analyst in Namibia, the country’s exporters should use the next 10 months to seek alternative markets in order not to rely on EU access, since it could well happen that Namibia refused to sign a full EPA by December 2008.

‘‘Producers should develop strategies for other export opportunities and invest in product diversification. Value addition in the local secondary sector is necessary so that Namibia can adapt to the challenges of globalisation,’’ said Roux.