New trade pacts threaten regional unity

A clothing factory in Cape Town, South Africa. Several governments in Southern Africa worry that the European Union’s interim trade agreements will make it harder for them to promote exports of manufactured goods.

Photograph: Panos / Sean Sprague

Last November, a handful of the 14 member states of the Southern African Development Community (SADC) chose to sign new trade deals with the European Union (EU). Those that signed the interim Economic Partnership Agreements (EPAs), as they are known, did so to pre-empt the expiration of an earlier trade arrangement that had provided preferential access for some African exports into European markets. A few countries left the SADC negotiating group entirely to join other regional economic groupings that are also bargaining with the EU. The rest simply refused to sign.

These divergent responses resulted from the overlapping and often competing interests that emerged during the negotiations for the EPAs. Since 2002, the EU and African, Caribbean and Pacific (ACP) countries have been trying to reach an understanding on the new agreements. But interim EPAs were put forth after they failed to agree on the full package, and some ACP countries felt obliged to sign them.

“The most enduring legacy of interim EPAs is likely to be the potentially fatal blow they have dealt to feeble regional economic integration efforts in Africa,” notes Mr. Peter Draper of the South African Institute of International Affairs (SAIIA) in Johannesburg. “With the exception of the East African Community, which signed as a bloc, every other regional grouping in the subcontinent fractured.”

UN Secretary-General Ban Ki-moon, in a report to a 22 September high-level meeting in the General Assembly on Africa’s development needs, was also critical of the interim EPAs. Because they have been negotiated with individual countries, “without paying particular attention to existing regional economic communities,” Mr. Ban argued, the interim EPAs “will slow down or unravel the regional integration agenda in the continent.”

Trade arrangements in question

Since 1975, the EU and ACP countries have shared special development cooperation arrangements under four Lomé Conventions and, since 2000, the Cotonou Agreement  (named after the African cities in which they were signed). Through them, the EU provided trade preferences, aid and technical assistance to ACP countries. But such preferences in favour of African exports were deemed incompatible with the new global trade liberalization regimes that took effect in 1995 when the World Trade Organization (WTO) was established. The WTO demanded that the EU-ACP relationship be reshaped by December 2007, triggering the EPA negotiations (see Africa Renewal, July 2007).

From the outset, the EU chose not to negotiate with countries through their existing regional economic groupings, but instead created special negotiating blocs. That, coupled with the refusal by some countries to sign the interim EPAs, makes it difficult for countries to harmonize regional trade tariffs or schedule the eventual removal of duties on products originating in Europe.

The fact that regional groups and negotiating blocs include both least-developed countries (LDCs) and others has exacerbated the problems, since the EU treats their imports differently. The EU offers duty-free access to a large range of goods from LDCs on a non-reciprocal basis (that is, the LDCs can impose tariffs on EU products, while the EU does not reciprocate). Yet many non-LDC countries had also benefitted from preferential trade terms under the Cotonou Agreement, which were withdrawn at the end of 2007.

Pressure to sign

Partly because of widespread opposition to EPAs among African governments, civil society organizations, unions and trade experts, the two sides failed to reach an agreement on deadline. Only 18 African countries initialled interim EPAs by the close of 2007. The signers included eight African LDCs. Since LDCs already enjoy duty-free access to the EU and therefore derived no direct benefit from signing interim EPAs, their decision to do so points to the complexities of evolving EU-Africa trade relations. Some critics claim there have been political and economic pressures to sign.

Malawian President Bingu wa Mutharika has gone as far as to accuse the EU of “imperialism,” saying it was punishing countries that resisted signing the EPAs by threatening to withhold aid. Alessandro Mariani, the head of the EU delegation to Malawi, denied there was any link between the EPAs and European aid, in Malawi or any other ACP country.

The politics of the current phase of EPA negotiations “are just as complex as [those of] the first,” argues Mr. Draper of the SAIIA in South Africa. Different African countries within the same region, he notes, now have different interests. As a result, “some countries within regions are obliged to open their domestic markets to EU exports whilst others aren’t.” With some of their neighbours signing onto EPAs, those countries that have not may need to maintain robust border controls to prevent smuggling of European goods. Such controls could, in turn, further hamper intra-regional trade.

The Southern African Customs Union (SACU) faces particular challenges. Because of an earlier and separate accord with the EU, South Africa must follow stricter trade rules than do its SACU partners, Botswana, Lesotho, Namibia and Swaziland. Those four countries have more favourable access to European markets than South Africa does, complicating efforts to maintain SACU as a customs union.

‘Subversion’ and imbalances

“Regrettably, the impact of these EPA negotiations has tended to subvert our efforts towards regional integration,” said former South African Deputy Foreign Minister Aziz Pahad. “Not only have SADC countries been parcelled into different EPAs,” he pointed out, but the talks have created “deep cleavages” within SACU. South Africa, Angola and Namibia, he continued, have raised concerns about the imbalances in trade concessions included in the interim EPAs, as well as their “negative implications for regional integration.”

SADC has 14 members: Angola, Botswana, the Democratic Republic of the Congo (DRC), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. But in the EPA talks, two of them, the DRC and Tanzania, are negotiating under different bargaining blocs.

Among the rest, four (Swaziland, Mozambique, Botswana and Lesotho) initialled interim EPAs. Angola, Namibia and South Africa refused outright to sign, arguing that the accords would hinder their long-term economic development objectives.

Interim EPAs cover only goods, market access into the EU and development cooperation. But there is an understanding that signers would eventually negotiate liberalization of services and other trade-related issues, such as investment and government procurement. South Africa opted out of the negotiations mainly over EU demands that it liberalize services, including by opening up banking and tourism to European companies. South Africa also disagreed with an interim EPA clause that requires SADC signatories to extend to the EU any concessions they provide any other country in future trade agreements.

Namibian Ambassador to Brussels Hanno Rumpf has noted another problem. Under the interim EPAs, the EU is insisting that SADC governments stop using export taxes and levies to create incentives for local companies to add value to goods. Such government measures were intended to promote greater exports of manufactured products and thus lessen the SADC countries’ dependence on exports of minerals and other raw materials.

Some African countries and a number of non-governmental organizations are pressing for a renegotiation of the most contentious features of interim EPAs. “It is important for countries that have initialled interim deals to be given the chance to renegotiate problematic clauses,” notes the non-governmental group Oxfam. “The deals were finalized in haste, without sufficient time to analyse the potential implications of the provisions being agreed.” The EU, however, is currently refusing to consider any renegotiation.

A high-level meeting on EPAs convened by the Commonwealth Secretariat in early 2008 in Cape Town, South Africa, declared that additional donor assistance “cannot compensate for poorly conceived and hastily drafted provisions of EPAs.” Even if they have signed EPAs, the meeting declared, countries have a right to demand renegotiation to ensure the agreements’ “consistency with national and regional development plans and aspirations.”