Editorial in Business Day of Johannesburg

| Friday December 14, 2007 00:00

Despite an existing trade agreement with the EU (the Trade, Development and Co-operation Agreement, or TDCA), SA asked last year to be included in the economic partnership agreements (EPAs) that the EU was negotiating with African, Caribbean and Pacific countries.

As the EPAs were intended to be agreements with a developmental approach, SA stood to gain significantly from its inclusion, and initially the EU balked at the request for this reason. But it eventually accepted SA's motivation that an aligned trade regime would help facilitate regional integration, and in March the European Commission acceded to SA's participation.

And that's when the trouble started. Every negotiating session seemed to become a battle. The parties fought about market access, on products considered sensitive by the BLNS countries (Botswana, Lesotho, Namibia, Swaziland), on rules of origin. By the sound of things, they fought about every comma and period in the text. And then there was SA's big bugbear that almost sank the negotiations before they got off their mark - an EU demand that trade in services be included in the negotiating agenda.

As the talks progressed, the EU softened its stance and made concessions on most of the issues. Significantly, the European Commission granted single tariff access to the Southern African Customs Union (Sacu), an unprecedented move to realign tariffs so that, in some instances, tariffs on certain European goods would be higher than under the TDCA.

The concession was a major one in the push for harmonisation. The European Commission even backed down on trade in services, noting SA and Namibia's wish to be excluded from services negotiations in the text, but, significantly, not excluding them from the overall agreement.

To all intents and purposes, SA had bargained itself an excellent deal, increasing the benefits it had enjoyed under TDCA and ostensibly scoring a major victory in the push for regional integration. And in the last week of November, the parties seemed ready to sign a deal. But at the last minute SA and Namibia opted out, citing onerous terms.

Inexplicably, SA's official announcement on the negotiations did not state exactly what its objections were. But they are widely reported to revolve around three issues: a Most Favoured Nations (MFN) clause that would see concessions made by southern African countries to major trading economies (larger than 1percent of world trade) automatically extended to the EU; an EU request to eliminate new export taxes; and - once again the services issues.

But what the South African negotiators are not saying is that the issues of export taxes and services are covered even more extensively under the TDCA. And in terms of the MFN clause, the EU had agreed to handle this on a consultative basis with SA. The onerous terms, then, seem to be a matter of interpretation. So what is SA's real gripe?

Its decision to opt out of the EPA has not only shattered illusions about the commitment to regional integration, but has put the very future of Sacu the oldest customs union in the world at risk.

In the process, the EU has been painted as the big, bad ogre trying to bully developing countries into deals that are bad for them. But this argument does not hold water. The extent of the concessions made by the EU not least to SA points to the contrary. Then there is the fact that Botswana, Lesotho, Swaziland and Mozambique have opted to initial the interim EPAs.

What is more, far from crying foul, these countries were even willing to negotiate services. To assume that they would bind themselves to trade pacts that were bad for them is patronising in the extreme. And judging from reports from the negotiating chambers, the reality is that SA's neighbours, rather than welcoming its strong-arm approach as being in the interests of the region as a whole, had become increasingly exasperated at SA's stalling tactics. They are increasingly questioning whether SA is really as committed to the integration of the region as it claims to be.

It is deeply ironic that as SA was arguing for regional integration in its push to be part of the EPA, it was at the same time embarking on an ambitious plan to review the tariff book. As part of the industrial policy framework, it has already announced the review of several chapters of the tariff book, with a view to cutting tariffs into inputs.

It is estimated that the complete review would comprise as much as 85percent of the tariff. But import tariffs are an instrument of the customs union and SA has no business reviewing tariffs without proper consultation with its partners in Sacu. And there is little evidence that SA is in fact considering the interests of other member states as it embarks on this extensive and significant review process.

Moreover, the Sacu treaty commits member states to pursuing common industrial policies and strategies. SA's decision to unilaterally push its own agenda flagrantly breeches this commitment.

SA's decision to balk at signing the interim EPA seems to have less to do with the onerous terms it claims the EU forced into the text than with the region's powerhouse being peeved about losing control over the negotiations as its partners in the customs union agreed to negotiate issues SA did not want on the agenda. The impression is that of a spoilt child that resorts to strong-arm tactics to keep control of the playground.

SA has repeatedly proclaimed its commitment to an African renaissance and held up regional integration as a way to achieve it. Its actions, however, explain why it is more often seen as a regional bully than as a big brother.