Botswana is set to lose its preferential access to the EU market following an announcement by the 27-member bloc that a market access regulation giving SADC states duty and quota-free access to the European Union will elapse in two years time.
After ten years of intense negotiations on an Economic Partnership Agreements (EPAs) with African Caribbean and Pacific (ACP) countries, the EU has set a January 2014 deadline for the talks to end, leaving Botswana and other countries in the SADC region with a little over two years to sign the agreement or lose preferential access to the highly lucrative market.
The lifespan of the market access regulation, which was drafted and made available to the African states by the EU in January 2008 after failing to meet a December 2007 deadline, has now been limited to January 2014 potentially squeezing Botswana out of the its biggest market for beef and base metals.
"The regulation was a bridging solution for the countries that had negotiated Economic Partnership Agreements but not yet signed and ratified," the EC said in a press release.
"Four years of application has provided enough breathing space for ratification or further negotiation. It is therefore time to bring the process to a close, by amending the Regulation and concluding Economic Partnership Agreement negotiations," the EU said.
Although Botswana has an interim Economic Partnership Agreement (iEPA) it signed with the EU two years ago along with Swaziland, Lesotho and Mozambique, falling back to the provisional arrangement will put the country on crossing paths with other SACU members.
SACU members have a Common External Tariff (CET) which they charge other third parties and falling back on the iEPA would mean Botswana agreeing on another CET with the EU, a development that will divide the world's oldest customs Union. Cohesion within SACU directly affects the pace of SADC-EPA talks with the EU because five of the SADC group's seven members belong to the customs union as well.
The EPAs were necessitated by a World Trade Organization (WTO) decree that preferential trade agreements between countries must be reciprocal. In order to get tariff breaks from the EU, ACP countries would have to open their markets as well, although not to the same extent. However ,within the SADC-EPA bloc ,South Africa, Namibia and Angola have declined to sign the iEPA, fearing unfair competition from the EU market as well as limitation to their economic policy-making space. It is understood at high-level that the European Commission decision to terminate the market access regulation was informed by the diminishing panorama for an early finalisation of a full EPA.
The EU is also understood to be reluctant to grant South Africa the full duty and quota-free access to be enjoyed by smaller SADC states in the full EPA because of that country's level of development.
" All efforts are being made for the SADCstates to come to an agreement before the new deadline. From the Botswana side, all we can do is to try and win over our fellow states in the region so that we maintain our high yield EU market. "We hope this will not come to a situation where we are forced to choose between our neighbours and the EU. As the well-developed market, we also hope the EU will try and avoid a situation where Southern Africa's regional integration is threatened," said a source close to the EPA negotiations.
Botswana and Namibia will be expected to make deal-making overtures at the next SADC -EPA talks with the EU in November slated for Lesotho. In a commentary released this week, Isabelle Ramdoo and San Bilal of the European Centre for Development Policy Management predicted a tough negotitiating period ahead similar to the one of 2007, when talks where inconclusive leading Botswana to signing the iEPA.
"Like in 2007, expect a bumpy ride in the coming months: some countries might be pressured to sign, ratify and implement the EPA that might not fulfil their ambitions and interests in terms of content, timing and geographical configuration by fear of market disruption, in particular if they risk losing preferential access to the EU," said Ramdoo and Bilal. "Others might simply walk out.
If no common position can be found at the regional level, the EPAs could seriously disrupt any regional integration effort." Researcher Paul Kruger from the Trade Law Centre of Southern Africa was quoted by the Inter Press Service as predicting a particularly "tricky" situation for the (Southern African Development Community) SADC-EPA configuration.
"The EPAs are too substantial to implement entirely before 2014. I expect the Europeans to at least want the EPAs ratified by the parliaments of the ACP countries in order to be WTO compatible, but the SADC-EPA is being completely renegotiated.
"The position of South Africa, that did not sign an interim EPA, is also instrumental in this. What if the South Africans say: 'We don't want to negotiate an EPA in 18 months'? This would mean a split in the configuration.Countries like Namibia would have to decide to continue siding with South Africa and lose market access or to join Botswana, Lesotho and Swaziland, which have signed to the agreement," Kruger said.