The Conclusion of the SADC EPA
by Gerhard Erasmus, tralac Associate
The initialling of the text of the SADC Economic Partnership Agreement last week is a major event. It means there is a final text, which will become a binding agreement once all the Parties have deposited their instruments of ratification. After many years of difficult negotiations a legally secure dispensation will in future regulate trade in goods between the EU and a selected number of SADC states.
Ratification can take some time but provisional application will allow for interim access into each other’s markets. This will neutralize the danger that exports from the BLNS countries would have lost their duty free quota free access into the EU after October this year; the deadline set by the European Commission for discontinuing unilateral preferential access of goods from these SADC states. South African exporters would have been saved by the bilateral Trade, Development and Cooperation Agreement (TDCA) concluded between Pretoria and Brussels in 2000. The EPA will bring additional benefits for certain South African exporters; such as local wine producers. European geographical indications get increased protection in local markets. The TDCA has thus seen certain improvements.
Why did it take so long to negotiate this deal and what benefits will accrue? This EPA (a detailed document of some 750 pages, if all the annexes and tariff schedules are counted) brings about a reciprocal and WTO compatible Free Trade Agreement between the Parties. This provides for security and predictability and should allow local exporters to exploit the new opportunities offered by agreed lower tariffs and the objective to liberalize, over time, substantially all trade between them. (The EU will liberalize faster and more comprehensively.) The applicable rules of origin and standards have to be met, but there will be rules and structures to deal with these matters; including how to settle disputes. European exports to this part of the world will of course also benefit. For countries such as Namibia there are some specific advantages. Namibian beef and table grapes would have lost their preferences after October because the alternative (trade under the EC’s Generalized System of Preferences) excludes preferential treatment of these products.
These were complicated negotiations. Several stumbling blocks had to be overcome; while divergent needs (also among the SADC states involved) had to be accommodated. And the world has moved on since the first meetings started in 2004. The EC originally insisted on the inclusion of a “regional MFN clause”, which would have resulted in the automatic extension of MFN treatment to the EU regarding any better treatment offered in future trade agreements with third parties. This benefit will now be limited to new trade agreements with major economies (Brazil, China, India and the USA) only. New South-South trading arrangements such as the Tripartite FTA and the proposed Continental FTA for Africa will not be affected. Quantitative restrictions on imports will be permissible as long as they are compatible with WTO obligations. Export taxes were a major concern of the SADC states; since their local industrialization plans might be affected. It has been agreed to allow export taxes on a limited number of exports, for a period of 12 years and at predetermined rates. Bilateral safeguard mechanisms will shield local producers from sudden inflows of larger quantities of EU goods; while the EU has agreed to eliminate subsidies on several exported goods. For agricultural goods a special safeguard has been adopted. A temporary safeguard mechanism was also created for sensitive products from the smaller economies in SACU. Namibia secured a transparent and predictable framework for the exports of fish products from its Exclusive Economic Zone.
The Parties (SACU members, Mozambique and perhaps Angola) have agreed to continue negotiations with the EC on a more comprehensive deal covering trade in services, trade related matters such as competition, investment and possibly procurement. Europe is a very important destination for African exports and this agreement provides a foundation for further improvements, if the Parties can muster the necessary political will. The Doha Development Round seems unlikely to bring about a new multilateral outcome; thus increasing the significance of this pact.
For SACU there will be a challenge to marry their common external tariff with the TDCA under this EPA and to address their own internal challenges. SADC will have to tend to important issues around intra-regional trade and deeper integration. The 15 SADC members will in future conduct trade with the EU under separate regimes, which poses challenges for their plans for deeper integration. Securing intra-African as well as global integration remains a difficult but unavoidable governance challenge.
The following official statements are available:
Conclusion of the Economic Partnership Agreement (Department of Trade and Industry, South Africa)
Southern African region and the EU complete negotiations for an Economic Partnership Agreement (European Commission)