4 November 2008
editorial
Johannesburg — SA's attitude to the economic partnership agreements (EPAs) signed between its neighbours in the Southern African Customs Union (Sacu) and the European Union (EU) is exasperating.
Veiled threats to dissolve the customs union if other members implement the EPAs amount to SA holding the region to ransom. Poor member states such as Lesotho and Swaziland are heavily dependent on revenue from the customs pool, so they do not want Sacu to collapse, but they would also benefit greatly from easier access to EU markets.
Sacu states sought legal opinion on whether they are obliged to implement the EPAs and it was confirmed that they must if they wish to avoid falling foul of the World Trade Organisation (WTO). SA is immune from such a challenge because its trade with the EU is governed separately from Sacu's under a Trade, Development and Co-operation Agreement. Lesotho is also safe, because as a least developed country its qualifies for Anything But Arms treatment.
But Swaziland, Botswana and Namibia are in a decidedly precarious position. Should they fail to implement the EPAs, their trade will revert to the less beneficial Generalised System of Preferences. Namibia, which curiously has aligned itself with SA's position even though it initialed the interim EPA, is at grave risk of sacrificing its lucrative beef and grape exports.
While trade experts believe there is the likelihood of a challenge, WTO dispute settlements take a long time, so the "day of reckoning", as one trade expert refers to it, could be postponed for up to three years. But would this be worth the fallout?
SA's aversion to the EPAs is irrational since it stands to gain, to a degree, from better market access to the EU by Sacu members. Moreover, the EU is SA's biggest trading partner by a significant margin and there is a real risk that an obstructionist stance could damage the relationship.
The reluctance to sign the EPA seems to be largely ideologically driven. As developed countries increasingly flex their muscle in the multilateral system, countries in the south are advocating enhanced south-south alliances. SA is especially keen on stronger links with Brazil and India. On the surface this appears a great idea, since they are tipped as the future global economic powerhouses. But the preferential trade agreement already concluded with Mercosur (lead by Brazil) is really rather modest in its scope and the mooted trade agreement with India is understood to be equally lacking in ambition. So actual gains for South African exporters will be few and far between.
Moreover, there is a striking similarity between the industrial policies of Brazil and SA, with the same sectors earmarked for development. The only marked difference is that Brazil plans to throw $160bn at industrial development over the next three years, compared with the paltry R5bn earmarked by SA. That means Brazil has a head start in the race for export-led growth, and SA could end up eating dust if tariffs are eased.
On the other hand, many South African exporters are already well established in the EU markets, a situation which SA's stance could put at risk. It seems that SA's vision is clouded by an obsession with the Europeans colonial sins at the expense of recognising opportunities for the future.
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