Bridges Weekly Trade News Digest • Volume 13 • Number 21 • 10th June 2009

Three Southern African Nations Sign Interim EPA with EU

Discuss this articleShare your views with other visitors, and read what they have to say

Three members of the Southern African Development Community (SADC) - Lesotho, Swaziland, and Botswana - signed an interim economic partnership agreement, or EPA, with the European Union on 4 June. The deal will give the SADC countries access to EU markets while the parties negotiate a permanent EPA. Mozambique has also expressed its intention to sign the agreement but was not present as last week’s meeting in Brussels.

The EU and the SADC did not reach consensus on controversial issues - notably the EU’s ‘Most Favoured Nation’ status and definition of the parties to the agreement - before last week’s meeting. As a result, three members of the African regional group - Angola, Namibia, and South Africa - opted not to sign.

This decision is least consequential for Angola, which enjoys duty-free, quota-free EU market access under the EU’s ‘Everything But Arms’ (EBA) initiative for Least Developed Countries. Namibia’s decision will not affect its current access to the European market, according to an EU trade official. Namibia, which does not have LDC status, has an open invitation to sign the interim EPA.

South Africa negotiated the Trade, Development, and Cooperation Agreement (TDCA) with the EU a decade ago, which already gives the country open access to EU markets. But South Africa took issue with the agreement’s implications for its Black Economic Empowerment (BEE) drive, an initiative that supports local infant industries.

Divergence among the African parties may have wider implications. South Africa has been quick to assert that this interim deal undermines the Southern African Customs Union (SACU). By signing this deal with the EU, SACU members Swaziland and Lesotho have broken rules that prevent the bloc’s members from entering into individual trade agreements with other countries. If this dispute is not resolved, it could mean the end of the century-old customs union.

Some analysts have interpreted this assertion as a veiled threat and criticised South Africa’s obstructionist role in the talks. South Africa already benefits from the TDCA, while the other parties are under pressure from the WTO to reach a deal since a waiver on the Cotonou agreement - which gives former colonies preferential EU market access - expired in December 2007.

But South Africa’s Department of Trade and Industry (DTI) responded Monday that it was merely voicing real legal issues and not intending to threaten any SACU party. “It is a question of the legal requirements to manage the way the union functions. This is not a political issue, these are legal requirements in order to protect our markets,” DTI deputy director-general Xavier Carim told reporters.

Either way, a glitch with SACU will have major implications. Lesotho earns about 60 percent of its national revenue, and Swaziland 70 percent, through the SACU revenue-sharing scheme. If SACU is dissolved, Lesotho could lose up to a quarter of its GDP overnight, and Swaziland 20 percent. The economic fallout from the breakup of SACU would likely spill over into neighbouring South Africa.

ICTSD reporting; “Namibia: No Penalty for Not Signing EPA, Says EU,” THE NAMIBIAN, 8 June 2009; “Threat of regional upheaval if SA torpedoes customs union,” BUSINESS DAY, 8 June 2009; : DTI says SA not threatening stability of Sacu, regional trade,” CREAMER MEDIA’S ENGINEERING NEWS, 8 June 2009; ”European Union signs interim EPAs with some SADC countries,” SUNDAY STANDARD REPORTER, 7 June 2009.