EU deal �sweetest of them all� for SADC
Mbongeni Mguni | Friday June 17, 2016 14:37
On May 19, 2010, having watched the trade talks with the EU drag on with little concession and mounting ‘soft threats’, Namibian president, Hage Geingob had had enough.
Trade negotiations by nature involve all parties smiling to the media and the public, while gritting their teeth behind the scenes, but frustrations had been mounting as the trade talks reached their seventh year without completion.
“I call on our friends in Europe not to abandon us and to work with us towards a lasting solution. After all, the EPA is about partnership towards the shared goals of poverty alleviation and economic development. Let’s not use bully tactics or old colonial arrogance. Let’s be partners who are equal in sovereignty,” Geingob said in a blistering address to the Namibian Parliament, which was published across the region.
In the address, Hage Geingob stated that “all too often” African states were “forced” to sign agreements that “eventually hound us”. “We cannot sign an agreement just for the sake of giving into the demands of the other side.”
There was little official response from the region on Geingob’s remarks, which in itself was a response, suggesting that many leaders shared or sympathised with Geingob’s frustrations and the pressure to conclude the talks.
Since 2004, Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa had been negotiating an Economic Partnership Agreement (EPA) or trade deal with the European Union (EU) focusing on trade in goods.
Major sticking points over the years were the treatment of agricultural commodities, the protection of infant industries in the region, the rules of origin clauses and tariffs.
SADC states, while eager to secure duty and quota-free access to the EU, were wary about fully opening up their markets to wholly untaxed EU imports that could aggressively undercut their own agricultural industries or crowd out their fledgling manufacturing sectors.
Complications around South Africa, which had previously enjoyed a separate trade arrangement with the EU, also delayed the talks as the regional powerhouse sought a deal closer to the duty and quota-free variety other states were to get.
Stress lines began forming in regional trade and political relations as well. Botswana, Lesotho, Swaziland and Mozambique signed an interim EPA with the EU in June 2009, in order to preserve their export lines. South Africa, Namibia and Angola opted out citing various concerns.
Analysts began talking about the break-up of the Southern African Customs Union (SACU) the world’s oldest and longest running customs union, uniting South Africa, Botswana, Namibia, Lesotho and Swaziland.
South Africa’s position within the region was also another complication on its own, as observed by Geingob.
“Our market is full of European products – let me add, heavily subsidised products, such as long life milk, cheese, butter, chocolate, rice, wheat, wine, beer and other processed agricultural products, imported on terms that we never agreed to.
“This is because the EU concluded a free trade agreement with South Africa, which Namibia never endorsed, a right which we have in the SACU agreement. EU goods cross our borders from South Africa because of the free flow of goods within SACU.”
The EU also mounted pressure for the deal’s finalisation, by reminding the region that a market access regulation which gave most of them duty and quota-free would soon expire and would not be renewed.
Last Friday, EU trade commissioner, Cecilia Malmström and trade ministers from the six SADC states smiled for the camera in Kasane, fresh ink drying on the EPA and this time, there were no gritted teeth behind the scenes.
After 12 years of frustrations that had nearly split the region, the EPA was finally signed, on an asymmetric basis, meaning the region is not as freely open to the EU as the EU is to the region. In addition, the deal contains safeguards for vulnerable regional sectors and has a development and cooperation agenda.
It has a lot of value because it opens up the EU market fully for countries, taking away tariffs and also making more structured, the way we cooperate in development, Malmström told Mmegi exclusively, the evening before departing to Kasane for the signing.
“There are some products from this region that are of interest to EU consumers and in turn, I hope you fill find that it will become cheaper to import advanced technology from EU to develop the value chains here and industrialise.
“For instance, a certain machine could make it easier to move up on the value chain.”
Malmström’s four predecessors had pushed the EPA negotiations to varied success. Her predecessor, Karel De Gucht famously jetted into the region in July 2013, to lend weight to the talks, informing journalists in Gaborone that talks were 95% settled.
They were officially ended in July 2014, followed by a year or so of “legal scrubbing” during which Botswana is said to have played a critical role in guiding other member states towards ironing out final details on the text.
Botswana, to a large extent, played a key role in ushering the region towards signing the EPA, having chaired the SADC EPA group through the most critical years. Botswana was also the largest of the SACU states that signed the interim EPA and hosted several of the crucial meetings held when it appeared the region or the talks would fall apart.
Botswana’s zeal was driven by practicalities such as its potential loss of a large export market, critical SACU revenues and the adverse economic impact of antagonising key coastal states like Namibia and South Africa.
For Malmström, Botswana’s role was critical in achieving agreement.
“Botswana has been motivational,” she said.
“Very quickly, Botswana realised that this agreement would be something of advantage. In its relationships with its neighbours, Botswana played an important role of showing these advantages and opportunities.
“Maybe without Botswana’s leadership, we would still be in discussions.”
Analysts are agreed that the time taken to finalise the talks dulled the lustre of the final EPA. While the EU remains the world’s single richest market, troubles in several economies there have reduced its value over the years and the possible exit of the United Kingdom is an even greater threat to the overall EPA’s worth to SADC.
“Looking back, maybe it was a good thing that the agreement was delayed because the last few years have been very difficult for the EU and many of our trading partners have seen a decrease in trade with us,” Malmström said.
“Now that we are slowly recovering, I think it’s slightly a better position.
“The SADC region also has vulnerabilities right now with the commodity prices and that’s why increased trade and cooperation is a good thing for new opportunities, investment and jobs.
“The EPA is not a quick fix, but it can be a powerful instrument to diversify and industrialise and there are explicit funds set aside to help that.”
She added: “I really hope Britain chooses to stay because we need them and hopefully, they want us as well. If they vote to leave, it will be quite a negotiation and they will have to define their relationship with us. I believe the EPA will be sweet regardless.”
Besides the economic weaknesses, the length of time it took to complete the EPA talks allowed other suitors to approach the SADC region with competing offers, such as the US with its African Growth and Opportunities Act, and China, with its Forum on China-Africa Cooperation. Asian titans such as India, Japan and South Korea have also approached Africa and the SADC region, with forms of trade arrangements. Malmström’s take is different
“It’s good that the SADC region is reaching out to the world and of course, the more trade the better. Ours is the most advantageous, although I should say we are not in competition with each other.” Analysts have noted that unlike AGOA, the EPA has less political overtones where states failing to toe the US preferred political line could be banished. The EPA is also open-ended, unlike AGOA. Meanwhile, the offers from most of the Asian titans are not reciprocal, meaning they do not offer tariff incentives for regional exports.
In addition, SADC member states who sign and ratify the EPA will have access to the EU’s 100 million Euro fund for economic integration and a separate 32 million Euro trade related fund set up specifically to help implementation of the trade deal. Critics of the EPA have, however, noted that SADC and other weaker states have previously signed trade deals, but these have gathered dust, as local companies have been unable to secure orders due to factors such as lack of capacity, quality, standards and access to capital.
This, Malmström said, is the focus of efforts around the EPA going forward.
“The EPA has to be ratified by the SADC states and the European Parliament so that it enters into force on October 1 this year,” she explained. “That’s when the real work begins to see how we can use it and make sure that we create opportunities to take advantage of the possibilities.
“For instance we can create public private partnerships in order to take advantage of the possibilities and jointly create both physical and virtual infrastructure.
“The virtual infrastructure, in part, is about making sure the skills are there to take advantage of the EPA, from customs to computer skills needed to calculate and have the right forms and procedures. “We also need to build up the agencies involved in the EPA to help, for instance, with enhancing food safety requirements around fruits, food or meat intended for the EU.”
The trade commissioner said the challenge was to find ways to take full advantage of the agreement. “It will not be dramatic change from day one, because it’s up to making sure the conditions are there and companies are informed about the possibilities.
“We have to jointly define the priorities and earlier, I spoke to the Vice President and urged government to start formulating the priorities to see how we can cooperate. “Also SADC has to formulate how to boost regional trade because that will be the most efficient tool in promoting economic growth.
“Hopefully we can contribute.”