Mathabo Le Roux
28 October 2008
Johannesburg — AS TRADE negotiators prepare to resume talks in Brussels on an economic partnership agreement (EPA) with the European Union (EU), SA appears to have hardened its stance on the future of the Southern African Customs Union (Sacu) in the event of implementation of the trade agreement with the EU.
Sacu was split last year when Botswana, Lesotho, Namibia and Swaziland broke ranks with SA, and signed the interim EPA, which has to replace the Cotonou agreement to make bilateral trade with Europe compatible with World Trade Organisation (WTO) rules.
A cloud has hung over the union for months as the divisive EPA talks brought tension in the customs union to the fore.
Under article 31 of the Sacu agreement, member states may not enter into new preferential trade agreements with third parties without the consent of other members. SA softened its stance at a ministerial meeting in Gaborone this year when Trade and Industry Minister Mandisi Mpahlwa said SA would not stand in the way if other Sacu states opted to press on with the EPA.
But fears persist that SA might use division on the EPA as a reason to break up the union. This would have grave economic implications, especially for Lesotho and Swaziland. Their economies rely heavily on revenue from the customs pool.
A source close to the talks said: "The 'new' ANC is much more inward looking, and there are perceptions within the ranks that money that exits SA via customs sharing could be used to alleviate the plight of the poor here. This could really be the end of the road for Sacu."
The large transfers from the customs revenue pool have increasingly annoyed SA's treasury, which wants the transfers classified as aid. Sources say SA may now use the split over EPAs to break up the union to get out of the customs-revenue sharing agreement.
"There is political will to kill the union because of the customs payments. Everyone seems to agree that the EPA will not include SA, but that means SA also does not want the others to sign," the source said.
"There are very bitter feelings in Botswana, Lesotho and Swaziland about what is happening."
Another source said there was much anxiety, particularly in Lesotho and Swaziland, about the issue.
"They are obviously very stressed because there is pressure on their budgets. SA does not want them to go this way (of pushing ahead with the EPA).
"There are internal tensions, but it is not clear whether the others will follow SA's way or whether SA will budge," the source said.
Botswana and Namibia in particular do not have much leeway, and are under pressure to conclude the EPA. In the absence of a WTO-compatible agreement, their trade would revert to the Generalised System of Preferences under which tariffs are even steeper. The economic fallout for these countries in terms of trade preferences lost could be severe.
SA and the EU are to have a joint co-operation council to discuss updating and revising the Trade, Development and Co-operation Agreement, the arrangement between SA and the EU, next Monday and Tuesday. Then the parties fly to Brussels for a technical meeting on Wednesday and negotiations proper on Thursday and Friday.
While SA has in the past punted the EPA as an opportunity to strengthen regional integration, and motivated its bid to join the talks on those grounds, it opted out of the EPA at the end of last year, citing concern about demands in the text.
SA's main objections are to a provision to negotiate liberalisation of services and investment issues and a most-favoured nation clause in the interim agreement, which would see concessions made to other countries in future free-trade agreements automatically extended to the EU.
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