M Mpahlwa: Economic Partnership Agreement Negotiations

12 December 2007

The engagements of the recent Africa-European Union (AEU) Summit clearly
demonstrated that most African countries participating in the EPA negotiations
are confronting serious difficulties in the process. Many countries have not
reached agreement and even those that have concluded interim arrangements
indicated their concerns at the emerging outcome. The EU acknowledged the
concerns and offered the possibility to address these in the next phase of
engagement in 2008. This would be essential to ensure that a final outcome is
considered mutually beneficial so that the EPA is seen as sustainable and
legitimate by all sides.

South Africa endorses this approach and believes that a developmental
outcome for the EPA that promotes regional integration is not out of reach if
all parties accept the shortcomings of the emerging agreements, and agree to
fully address them before finalising the outcome. There are nevertheless
serious issues that would need to be addressed in a positive manner. Although
South Africa was under no legal obligation, we agreed in 2004 to explore our
participation in the Southern African Development Community-EU (SADC-EU) EPA
negotiations in an effort to strengthen the prospects for regional integration
in Southern Africa. We were concerned that the EPA negotiations had already
created a division within the SADC membership as some members had opted to
negotiate the EPA as part of another grouping, the Eastern and Southern African
(ESA) Group.

We had hoped that, by forging a unified regional approach among the SADC EPA
States to the negotiations with an important trade partner, we would strengthen
trade relations within the region as well as the region's trade relations with
the EU. The other SADC EPA States and the EU both recognised the benefits of
our participation and agreed that South Africa should participate as a full
partner in the EPA negotiations. Together with the other SADC EPA States, we
forged a common negotiating mandate that was adopted by the SADC EPA Ministers
of Trade in Luanda in February 2006. The European Commission (EC) that
negotiates on behalf of the EU formally responded to the SADC EPA Framework one
year later in March 2007. Thus, the negotiating process has unfolded under a
tight time framework, as we all agreed to aim for conclusion by December
2007.

As we approached the final stages of negotiations and possible
implementation of an agreement in 2008, it had become clear that serious
difficulties would need to be addressed. Each of the central elements of the
SADC EPA Framework which established a common mandate for the SADC EPA States
has been eroded. First, while there was some possibility of narrowing
differentiation between South Africa and other SADC EPA States with respect to
trade relations with the EU, the current status is that South Africa will
continue to be treated differently and less favourably in the EU market as
compared to the others thus perpetuating the division in the region's relations
with the EU.

Second, while the SADC EPA States had originally agreed that least developed
countries (LDCs) should not be required to offer reciprocity to the EU under
the EPA. However, LDCs are now required to open their 80% of their market to EU
exports, with that threshold set on the insistence of the EC. This runs counter
to an agreed position in the Doha Round which grants LDCs non reciprocal duty
free access to developed country markets.

Third, the SADC EPA States agreed that Botswana, Lesotho, Namibia and
Swaziland (BLNS) would adopt the terms of the South African-EU Trade,
Development and Co-operation Agreement (TDCA) for offering market access to the
EU on the understanding that their concerns with the TDCA would be fully
addressed. The negotiations whittled down the number of BLNS sensitive product
lines that could be addressed in a positive manner.

Fourth, the SADC EPA states originally agreed that all new generation issues
should be matters for co-operation between themselves and the EC but not
involve binding obligations subject to dispute settlement. At present, all SADC
EPA States, except South African and Namibia, are obliged to negotiate services
and investment over a four-year period, with the prospect that future
negotiations will include government procurement and competition. The
obligations to negotiate these issues create a new generation of trade policy
divisions in the region and foreclose the option of building regional markets
and rules in Southern Africa.

Over and above these difficulties, the EC submitted a range of additional
and onerous demands on the SADC EPA States in the last negotiating sessions.
Some proposals would limit the scope for developmental policies of
diversification and industrialisation in the region. Others would create
competing legal and institutional obligations to existing regional processes.
Of particular concern is the differential application of some proposal that
threaten to now divide and undermine the oldest customs union in the world, the
Southern African Customs Union (SACU).

It is clear that the developmental and integration principles on which we
entered the negotiations are under challenge. The emerging outcome contravenes
principles set out in the Cotonou Agreement the TDCA as well as the strategic
partnership that is being constructed between South Africa and EU as they each
relate to the need to strengthen regional integration in Southern Africa.
Developmental and integration objectives appear to have given way to narrow
commercial interests.

We are fully aware of, and sympathetic to, the immediate difficulties
confronting Botswana, Namibia and Swaziland. We believe that all sides,
particularly the EU, have a responsibility to ensure that these countries
continue to receive tariff preferences to ensure their trade is not disrupted
when the World Trade Organisations waiver for the Cotonou Agreement lapses on
31 December 2007. At the same time, it is imperative to ensure that the new
arrangement fully supports regional developmental policies in a manner that
does not undermine ongoing regional integration processes in Southern
Africa.

The South African government supports the view that the negotiating time
frame for the EPA be extended in 2008 to give time to reach a balanced and fair
developmental outcome. We are convinced that with political goodwill on all
sides, it is possible to conclude the negotiations in a manner that both
strengthens regional integration in Southern Africa and, at the same time,
consolidates the region's trade relations with the EU.

Issued by: Department of Trade ad Industry
12 December 2007
Source: Department of Trade and Industry (http://www.thedti.gov.za)