The Trade Beat (Johannesburg)

Southern Africa: The Endgame of the EU-SADC EPA Negotiations

Despite the World Trade Organization's Doha Round negotiations displaying signs of life with the conclusion of the Trade Facilitation Agreement during the Bali Ministerial in December last year, the negotiation and conclusion of comprehensive bilateral and regional trade agreements by many of the world's industrialised economies, including the United States, Australia, Japan, Canada, Korea and the European Union (EU), continues apace.

In Africa, the bilateral and regional trade agreement agenda has been dominated for the past few years by two negotiating tracks. The first has involved efforts to promote increased intra-African trade through deeper integration within the continent's various regional economic communities and the establishment of a Tripartite Free Trade Area (T-FTA) as a stepping stone towards the creation of a Continental Free Trade Area, while the second has involved efforts to conclude Economic Partnership Agreements (EPAs) between various regional groupings of African countries and the EU, the African continent's most important trading partner. The prominence of the EPA negotiations has increased in recent months given the October 2014 deadline for the conclusion of the EPAs.

EPAs, which are comprehensive reciprocal trade and economic agreements between the EU and regional groupings of African, Caribbean and Pacific (ACP) countries, were supposed to replace the EU's unilateral trade preferences for ACP countries provided under the framework of consecutive Lomé Conventions and the Cotonou Agreement, but which expired in 2007.

Although EPA negotiations were initiated in 2002, only 36 ACP countries had concluded EPAs with the EU by the end of 2007, and, with the exception of the EPA concluded between the EU and the Caribbean countries, all of these were interim agreements concluded to preserve access to the EU market. Under Market Access Regulation (MAR) 1528 of 1 January 2008, the EU granted duty-free quota-free (DFQF) market access to all exports from those countries with which it had concluded an EPA (including interim EPAs). Since the beginning of 2008, other ACP countries have exported to the EU under the Generalised Scheme of Preferences (GSP), which among other preferences, provides DFQF access to exports from least developed countries (LDCs) under the Everything but Arms initiative.

Negotiations towards the conclusion of EPAs between the EU and the African regional EPA groupings have continued since 2008, but these negotiations have not always progressed smoothly and at times have been acrimonious. A number of stumbling blocks have surfaced during the negotiations, leading many on the EU side to question the commitment of African countries to concluding the negotiations, and many on the African side to question whether the agreements being proposed by the EU really will promote sustainable development and support regional integration as claimed.

By 2011 only four African countries - Mauritius, Madagascar, Seychelles, and Zimbabwe - had finalised their EPAs, and in September that year the EU announced that it was imposing 1 October 2014 as a deadline for the withdrawal of MAR 1528. Any countries not having ratified an EPA or 'taken necessary steps' to do so by this deadline stand to lose DFQF access to the EU market, unless they are eligible for preferential access under the GSP.

While heavily criticised on the African side, this deadline appears to have given some momentum to the EPA negotiations. By March 2014 it was being reported that an EPA deal had been struck between the EU and the Economic Community of West African States (ECOWAS) EPA grouping, while negotiations on the East African Community (EAC) and Southern African Development Community (SADC) EPAs have been reported as entering their final stages.

In southern Africa, where seven countries - Angola, Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa - have been negotiating as part of the SADC EPA Group (the other eight SADC countries are negotiating EPAs as part of other regional configurations), there does appear to be a genuine belief that an EPA - which would replace the interim EPA agreed in 2007 and signed in 2009, will be concluded by the October 2014 deadline. Nevertheless a small number of issues still remain unresolved and will have to be addressed before a successful conclusion to the negotiations can be reached.

In particular, with the long-contentious issue concerning the inclusion of a most-favoured nation (MFN) clause in the EPA having apparently been resolved - according to Xavier Carim of South Africa's Department of Trade and Industry it has been agreed that there will no longer be an obligation on the Southern African Customs Union (SACU) to automatically extend advantages granted to other trading partners to the EU - three specific negotiating issues remain outstanding and have been 'elevated' for 'political guidance'.

The first is divergent views on the use of export taxes. The EU sees these as trade distorting measures which will undermine its ability to source raw materials, while the SADC countries view them as instruments that can be used to promote local beneficiation of raw materials, thereby boosting industrial development and helping to promote efforts to advance up global value chains.

The second as-yet unresolved issue in the EU-SADC EPA negotiations is that of agricultural safeguards. While agreement on the use of general safeguards has been achieved in the EPA negotiations, the SADC countries are trying to push for the inclusion of a provision allowing for the use of special agricultural safeguards which would be quicker to implement. The EU, however, feels that these would be unnecessary and potentially open to abuse.

The third and final outstanding issue in the negotiations is that of rules of origin. Agreement on this issue does seem to be imminent however, as a deal providing significant scope for cumulation has been tabled.

These three outstanding issues differ in terms of the level of disagreement they raise between the negotiating parties and, in the case of export taxes and agricultural safeguards, palatable solutions are not immediately obvious. Nevertheless, the likelihood that all three issues will be resolved by the October deadline - at least to the point whereby the conclusion of the EPA is made possible - is fairly high.

This is because failure to conclude a deal would result in Namibia and Botswana losing DFQF access to the DFQF market, and would put significant strain on regional integration efforts in southern Africa, and on the functioning of SACU in particular. After over a decade of negotiations, there must surely also be a desire on both sides to finally conclude an agreement.

Sean Woolfrey is a Researcher with tralac. This article was first published on their website.

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