Discussions

From the TDCA to the SADC-EU EPA – the significant changes

From the TDCA to the SADC-EU EPA – the significant changes

06 Dec 2017

Willemien Viljoen, tralac Researcher, discusses the legal changes brought into effect with the transition from the TDCA between South Africa and the EU to the SADC-EU EPA

The Trade, Development and Cooperation Agreement (TDCA) has been governing the trading relationship between South Africa and the European Union since it entered into force (provisionally since January 2000 and fully since May 2004). The TDCA covers political dialogue; trade and trade-related issues; economic cooperation; development cooperation; and cooperation in areas including science and technology, environment, culture, social issues and health. During a review of the provisions of the TDCA the decision was made to align the review of the TDCA sections governing trade and trade-related aspects with the negotiations of the SADC EPA.

Accordingly, Protocol 4 of the EPA explicitly states those TDCA provisions to be repealed and replaced once the EPA enters into force. Most notably, all provisions pertaining to trade and trade-related aspects (except Article 31 on marine transport) will cease to be in effect. In comparison with the TDCA, the EPA brings significant changes to the provisions on trade and trade-related matters, new areas of cooperation, including sustainable development and tax governance, and dispute settlement provisions.

1.  Market Access changes

Under the EPA Botswana, Lesotho, Mozambique, Namibia and Swaziland (BLMNS) have 100% duty free (except for arms and ammunitions) access to the EU market, while the EU has 86.2% duty free access to the SACU market and 74% duty free access to the market of Mozambique. South Africa has 98.7% duty free access to the EU market. The EPA improved market access for South African fisheries products and 32 agricultural products. The parties have agreed to liberalise fisheries tariff lines, over a period of no longer than nine years. The EU tariff phase down for South African fisheries imports will be done on the basis of the duties under the General System of Preferences (GSP) which is lower than the Most Favoured Nation (MFN) duties. South African agricultural products with improved market access include sugar, ethanol, active yeast, white crystalline powder, citrus jams, skimmed milk powder, butter, canned mixtures of fruit (other than tropical fruit), frozen orange juice and wine. EU agricultural products with improved market access to the SACU market include wheat, barley, certain cheese and pork products.

2.  Rules of origin

The rules of origin under the SADC EPA are formulated to support the development of regional value chains by maximising the number of goods that can benefit from duty-free access. Specifically, the agreement enables producers to make products with elements from various other countries, without losing free access to the EU. The SADC EPA countries can benefit from cumulation of origin for all materials that can be imported duty free into the EU. Furthermore, the requirement for direct transport is replaced with the principle of ‘non-alteration.’ This allows for transhipment, storage and splitting of consignments in the territory of third countries of transit.

3.  Export taxes and re-introduction of duties by South Africa and BLMNS

Article 19 of the TDCA prohibited the use of quantitative restrictions on import or exports and measures with an equivalent effect, including new customs duties or charges on exports. Article 26 of the EPA allows the BLMNS countries and South Africa to utilise export taxes and re-impose duties in ‘exceptional circumstances.’ BLMNS can introduce temporary customs duties or export taxes on a limited number of products after consultations with the EU for revenue needs or to protect infant industries, the environment or for food security purposes. Furthermore, all SADC EPA states can temporarily introduce customs duties or export taxes on no more than 8 products at a time (at the HS6 level except ‘ores and concentrates’) for 12 years to satisfy industrial development needs.

4.  Export subsidies by the EU

Article 68 of the EPA prohibits the use of export subsidies by the SADC EPA states on agricultural goods traded between them. These export subsidies must cease as of the date of entry into force.

5.  Safeguard measures

The TDCA allowed parties to utilise multilateral, transitional and agricultural safeguards when a surge in imports caused distress for the domestic industry in the importing country. Under the EPA the available safeguard measures have been expanded; allowing for the use of multilateral safeguards and a variety of bilateral safeguards (general bilateral measures and measures specific to agriculture, securing food security, protecting infant industries and certain products in the BLNS countries). One of the most significant changes relates to the agricultural safeguards; these measures can only be utilised on 23 specified agricultural products once imports reach the trigger volumes indicated in Annex IV.

6.  Geographical indications (GIs)

Under the EPA 3 agricultural products and food stuffs (honey bush tea, rooibos tea and Karoo lamb) and 38 wine (including wine of origin Western Cape and Philadelphia) GIs of South Africa was added to the TDCA list of GI protection (now a total of 105 South African GIs) in the EU market. South Africa can also add an additional 30 GIs for future protection. The co-existence of some names like feta and Valencia oranges are also provided for. GI protection for EU products in the South African market was increased to a total of 251 GIs; 105 GIs for agricultural products and foodstuffs were added (including cheeses, olive oils and meat products), 5 beer GIs are new (from Germany and the Czech Republic), while an additional 27 wine GIs and 5 GIs for spirits will be protected on the South African market.

7.  Other provisions in the EPA

Other provisions added to the EPA, include measures on sustainable development, non-tariff measures and trade facilitation. The provisions regarding dispute settlement have also evolved significantly.

  • Emphasis is placed on support for sustainable development; the agreement aims to contribute to poverty reduction and eradication and enhance supply capacity, competitiveness and economic growth through cooperation in environmental governance, good work for all, exchange of information, corporate sustainability, forest management and sustainable fishing practices.

  • The EPA makes specific reference to ‘non-tariff measures.’ Article 39 allows countries to use quantitative restrictions only when in line with WTO Agreements and Article 40 states that internal taxation and regulations must be utilised on the basis of national treatment – they should not be used as protectionist measures to benefit domestic producers.

  • Chapter IV contains detailed provisions on customs and trade facilitation requiring parties to exchange customs legislation and procedures; establish joint facilitation initiatives; ensure administrative capacity building; exchange experiences and best practices; and ensure coordination among related agencies.

  • Detailed provisions about cooperation on Technical Barriers to Trade (the removal of unnecessary barriers and the enhancement of technical capacity and transparency) and Sanitary and Phytosanitary measures (cooperation on SPS matters, address difficulties in various priority areas, and improving technical capacity of the SADC EPA states) are included in the EPA.

  • Under Article 104 of the TDCA disputes were either settled through a decision by the Cooperation Council or arbitration. By contrast the EPA provides for three ways of dispute settlement: consultation then mediation then arbitration. These different methods must follow sequentially from one another in the settlement of disputes. Consultations are noted as the preferred method for dispute resolution (Article 77).

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