19. January 2009

Leads charge to amend EU trade deal

SA, Namibia and Angola have sent the European Union (EU) a letter — on an official South African letterhead and signed by the three countries’ ambassadors — reiterating concern about the interim economic partnership agreement (EPA), and urging the EU to allow more time before the pact is signed.

This puts the future of the Southern African Customs Union (Sacu) again under a cloud. It is understood new EU Trade Commissioner Baroness Catherine Ashton will now travel to SA in the first week of next month to win over SA and attempt to broker a deal. Botswana, Namibia, Lesotho and Swaziland (BLNS) at the end of 2007 initialled the interim pact to preserve preferential access to the EU.

The EU wants to formalise the deal in the first quarter of this year. However, SA, which remains outside the negotiations because of concerns, has threatened to pull the plug on the customs union if the interim deal is not renegotiated.

The letter, dated January 8, comes despite an open-handed offer extended by the EU in December, which proposes to align the EPA with SA’s existing trade arrangement with the EU, the trade, development and co-operation agreement (TDCA). The offer would essentially allow Sacu to maintain its common external tariff — cited by SA as one of the primary threats to the customs union. The offer had an additional upside for SA as it would delay SA’s tariff liberalisation commitments under the TDCA, and give it better access to the European market.

After initially reacting positively, hailing the proposal as an important development, SA hardened its stance. SA’s chief trade negotiator Xavier Carim said last week the new offer constituted a “short-term, partial solution". The main concerns detailed in the letter include: the fact that the Southern African Development Community (SADC) was negotiating EPAs under four different configurations, hampering regional integration; long-term trade policy divisions that would stem from different commitments under the different EPA; and lack of flexibility of the EU on concerns raised by SA, Angola and Namibia.

The letter laments that the December proposal was an “inadequate” solution. Carim contended that the offer did not address the issue of the most-favoured nation (MFN) clause. Under the MFN clause concessions made to other countries in future free trade agreements would be automatically extended to the EU.

SA is required only to consult with the EU when it enters into new trade deals but the BLNS, by initialing the interim EPA, have agreed to the clause, which means they will be obliged to extend preferences in future trade deals to the EU, which would again disharmonise the common external tariff, he said.

SA’s demand that the MFN clause be excised from the pact puts the Europeans in a difficult position. The EU is the first major economy to offer southern Africa duty free market access in a fully fledged trade deal. The union demanded the MFN clause to prevent itself from being “permanently disadvantaged”, former EU trade commissioner Peter Mandelson told Business Day last year. (ITUC)

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