South Africa ‘in’ on SADC EPA

Confirming the European Union stance put forward by the Commission in December 2006, the EU Council of Ministers this week adopted a decision to officially include South Africa in the SADC EPA negotiation configuration. South Africa was previously an observer of the process due to its pre-existing Trade, Development and Cooperation Agreement (TDCA) with Europe. While this is a positive confirmation which is in line with SADC’s own view as expressed in early 2006, two fairly important divergences remain.

Firstly SADC requested non-reciprocal duty free quota free access to the EU market for Mozambique, Angola and Tanzania (the so called MAP countries). The EU has indicated that this would be incompatible with WTO requirements. Contrarily, it is believed that opinion taken by SADC on the same matter indicates that the WTO would condone such an arrangement. This is essentially a technical matter that can likely be settled by an exchange of the relevant legal opinions. Importantly the EU has indicated its sensitivity to ‘the legitimate concerns of these countries (the MAP), and of least developed countries in general’. This is an important olive branch.

Secondly and probably more serious, is the fact that SADC and the EU are not ad idem as to the concept of ring fencing the EPA to tariffs only. We reported previously that the EU had indicated that additional concessions in tariff areas will depend on African concessions in new generation areas of services, investment, government procurement, trade facilitation, intellectual property, the environment, labour, fisheries and competition. The EU Council of Ministers confirmed on 12 February that ‘the EPA should not limit itself to market provisions for goods only and leave aside all references to trade in services and regulatory supply side commitments’. The EU justifies this stance in categorising their inclusion as necessary for the development dimension of the EPA and necessary to foster deeper regional integration within SADC. Elements of this latter observation are certainly not without merit, but realistically the EU surely wants to improve its own position in the region, which is most effectively achieved under the new generation items. Notable also is that South Africa indicted at the WTO this week that it is in fact prepared to make additional services offers, albeit muted in some way by what have been referred to as ‘regulatory sensitivities and domestic realities’.

In the WTO the relationship between the EU and the ACP continues at present under an uneasy waiver from the WTO rules granted as part of the Doha Declaration back in 2001. The WTO mandate indicates that the present EU-ACP arrangement must be restructured by 1 January 2007. The East and Southern African EPA configuration (ESA grouping) are thought to be somewhat ahead of SADC and have produced a draft EPA agreement. Nonetheless these East African states recently made an official request to extend their negotiations by a year. Given that certain South American developing countries have taken (not inconsiderable) pain in banana and sugar trade due to a loss of trade caused by ACP preferences, it is unlikely that a renewal of the WTO waiver will be plain sailing by any measure. Perhaps this reality has prompted a more progressive statement from the West Africa EPA configuration who has indicated that they do see a conclusion of their EPA deal by the end of 2007. In our view a show down of the South lies ahead in 2007 as part of an already messy Doha Development Agenda. In this showdown we see local business interests playing a leading role. Notably the sizeable Namibian meat exporter Meatco stated this week that it sees MFN trade in beef making it impossible for Namibia to export most cuts of its beef to the currently lucrative EU market. Certainly this provides some evidence as to the negotiating stakes ahead this year.