Mmegi Online :: The EPA, the WTO and Botswana's beef industry
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Tuesday 19 September 2017, 16:12 pm.
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The EPA, the WTO and Botswana's beef industry

'BMC finances have gone into free fall and the government rather than the cattle industry has become its main 'cash cow' writes *ROMAN GRYNBERG
By (GMT +2)
Mmegi Online :: The EPA, the WTO and Botswana's beef industry








The last few years have, to say the very least, not been kind to the cattle industry. In the past this has been put down to Acts of God ie: droughts and disease that have disrupted supply but what has harmed the industry has just as much to do with the way in which BMC and the industry have been managed. Despite high prices in Europe during the boom of 2007-8, the Botswana Meat Commission (BMC) failed to capitalise on them and Botswana's prices fell while other prices were rising. In 2008-9 the BMC basically went into financial meltdown as beef prices collapsed with the global recession.

This was followed by the disastrous outbreak of Foot and Mouth Disease(FMD) that slowed trade in 2009-10. If all that was not enough in 2011, EU inspectors banned exports of our beef because our system of boluses used for indentifying the source of beef and cattle was clearly not in conformity with EU standards. Simply put the last five years have been disastrous for Botswana's beef  industry.

As a result of this and other factors BMC's finances have gone into free fall and the government rather than the cattle industry has become its main 'cash cow'. In 2012 the government was forced to give the BMC a loan of P104m and then P250m.
Exports to the EU which have been stopped for over a year will recommence in July and the financial hemorrhaging of the BMC should stop.

Cows Flying Cattle Class
In the early colonial and post-colonial days Botswana's beef was exported to South Africa but following the Lome Convention in 1975 the EU, with its high prices became the main target market for our cattle industry. Ever since the 1970's Botswana's cattle industry has been dependent upon exports to the EU. The very high prices paid by the EU have raised rural incomes and helped to alleviate poverty. But slowly the 40-year-old market access to the EU is facing ever more serious internal strains. The high beef prices in the EU were based on both high tariffs and massive levels of export subsidies under the Common Agricultural Policy (CAP). The former Secretary General of the Commonwealth, Don McKinnon a New Zealand farmer was fond of saying the support levels for EU beef were enough to fly every European cow around the world first class every year. In 1990 export subsidies for EU beef were Euro 10 billion. Now as the EU has undergone one CAP reform after another cattle could only fly cattle class (ie economy) with EU export subsidies  down to a mere  Euro 1 billion in 2010. But if the Doha round of trade negotiations at the WTO ever closes, which with president Barack Obama in the Whitehouse seems unlikely, then the EU will have to cut its beef import duties by 50 percent from its current levels of Euro 3/kg for chilled meat plus 12.5 percent. As the EU has moved to reform its agricultural sector after 2013, demand and production are expected to be stagnant to 2020 but the  price of beef in the EU market price could fall from 15-33 percent by the end of the decade if the WTO negotiations come to an end. The beef sector is the one that will experience the sharpest downward price adjustment because it still remains heavily protected by high tariffs.

The CAP reform that occurred in 2003 was based on providing EU farmers with fixed income rather than price supports. By providing fixed income supports while at the same time the EU moved to raise the fixed costs of compliance with its ever rising standards it shifts the relative the commercial balance in favor of EU at the expense of imports from countries like Botswana where variable costs ie: land and labour costs are lower.

Mad Cows - A Botswana Condition?
But just as the EU prices are set to decline the EU is also imposing ever more stringent standards on the trade making it more expensive and difficult for Batswana farmers and policy makers to comply with its standards. The global standards for the beef trade are established by International Office of Epizootics but there is little stopping countries or regions setting higher standards. And this is precisely what the EU does. For example, the EU does not accept animals from

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FMD areas even when the animal is certified free of FMD, the BMC is still forced to debone the meat in order to decrease the (non-existent) risk of FMD.
This is not required by international standards but it is by the EU. The EU forces Botswana  to test cattle, at very high cost for Bovine spongiform encephalopathy (Mad Cow Disease) even though we have never had it, and it is the EU that is the main source of the disease. The EU standards on animal welfare, transport, cleanliness and a host of other areas including labour standards just become higher each year. The cost of this compliance with the EU standards is paid by the taxpayer but the benefit goes to the farmer. Few doubt that the cost of complying with the EU's ever higher standards may actually be higher than the benefit in terms of higher prices but EU access is such a bedrock of Botswana's external relations and its agricultural policy that no-one dares say that it might be time for us to get out of the EU market.

EPA, Shmepa!
Now a new threat to our market to the EU is emerging. It comes from the almost never ending free trade negotiations with Europe called the Economic Partnership Agreement (EPA) negotiations. Several SADC states have had close to a decade of negotiations with the EU and, as yet, no final closure. In late 2007 Botswana, Swaziland, Lesotho and Mozambique (and Namibia, sort of) initialed the interim EPA so as to maintain their market access to EU for their beef, fish, sugar textiles and table grapes. Now the EU has threatened 18 countries, which includes Botswana that if they have not commenced ratification by the end of next year then the EU will withdraw its concessions. This would mean no more duty free, quota free access for our beef. Last week the European Parliament's Development committee convincingly voted down the Commission proposal to withdraw market access. If the European Parliament votes down the proposal in plenary, which is improbable, then it will not proceed.

No Mandela in SADC
The problem is that the negotiations with the EU for a final EPA which is supposed to end this year are supposed to be in a host of areas which included services etc. But the really big problem is not just the scope but South Africa which, as member of SACU has joined the EPA negotiations.

South Africa already has a relatively generous free trade agreement which it negotiated with the EU when President Nelson Mandela was in power. The EU's generosity is frequently referred to as the 'Mandela Effect'. Unfortunately the rest of SADC has no-one of the stature of Mandela hence in the EPA negotiations the Europeans have been less than kind. South Africa is in no hurry to sign the EPA unless it gets good improvements in its market access to the EU. Botswana has not ratified the Interim EPA and will do so once the final EPA is completed and all SACU members are satisfied.

But what if South Africa is unable to come to a deal with the EU by the end of this year when the negotiations are supposed to come to an end according to an EU imposed deadline?Then in theory Botswana could act alone and ratify the Interim EPA and continue to have access to the EU beef market. The problem is that under the terms of the 2002 SACU Agreement we would need South Africa and the rest of SACU's agreement. This for many reasons might prove difficult to obtain.

Goodbye Europe?
Perhaps it is time for Botswana to openly ask whether beef access to the EU is really worth the cost or should it better focus its relatively small exports on alternative markets? Almost every country that was once a beneficiary of the old Beef Protocol and that includes  Swaziland, Madagascar and Zimbabwe have ceased exporting either voluntarily or with EU compulsion exited the market.  Only Namibia remains in the EU market. As long as Botswana farmers continue to benefit irrespective of the price paid by the taxpayer for compliance with the beef market standards then no change in marketing policy is likely.
*These are the views of Professor Roman Grynberg and not necessarily those of BIDPA where he is employed.

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