Trade: The end of EPA acrimony may be in sight

It was a mere sentence in the draft minutes of the meeting of Southern African Development Community (SADC) ministers in Gaborone on Jun 17: "Ministers noted the strategy proposed by senior officials aimed at concluding an inclusive EPA by the end of 2010."

A timeline in the document then outlines the signing of "an inclusive EPA" and its notification to the World Trade Organisation (WTO) by the end of the year.

After the skirmishes around the controversial trade pact - that spells out a reciprocal tariff regime on goods between the countries and the EU - the decision may seem sudden. As recent as May 2010, Namibian trade minister Hage Geingob defended the country's opposition to the EPA in parliament, accusing the EU of "bullying" its much smaller southern African counterparts.

While significant progress was made during a high level technical negotiating session in Brussels in early May, there are still some significant issues outstanding that could see signing pushed into next year. Independent trade policy analyst Wallie Roux, based in Windhoek, told IPS he assumes that the December 2010 deadline will be missed.

"There are still too many outstanding issues. Signing an EPA by the end of the year would basically require the European Commission (EC) to drop these issues." They include the contentious most favoured nation (MFN) clause that requires the countries to extend any future trade preferences with parties representing more than 1.5 percent of global trade to the EU.

Namibia and South Africa have fervently argued this reduces their policy space and hampers South-South trade just as SACU is negotiating a trade deal with India. The EC argues the MFN clause forms part of most trade agreements but there are indications that Brussels may be willing to limit the number of countries the clause applies to.

The definition of parties (DoP) that puts the SADC-EPA group, which is not a legal entity, at odds with SACU is also still not ironed out, as are the rules of origin that spell out which goods are considered to have been produced within the region.

For Namibia the issue of export taxes on minerals and infant industry protection also remains important.

Apart from these obstacles, "agreement has been reached on 53 tariff lines that were sensitive for the BLNS (Botswana, Lesotho, Namibia, Swaziland) countries," says Jürgen Hoffmann of the Agricultural Trade Forum (ATF) that negotiates on behalf of the farming sector in Namibia.

"There are some 230 tariff lines under the TDCA that will still need to be aligned but I don't expect major problems with that. In truth there are only 10 or so dubious tariff lines left that need to be resolved," he adds.

The TDCA, or trade and development co-operation agreement, is South Africa's trade deal with the EU. On Jun 21 it became public that Europe had indicated that the TDCA tariffs could be accommodated within the EPA.

Although this assumes - perhaps optimistically - that the BLNS will not have problems adopting the provisions of the TDCA it could go a long way in bringing South Africa on board and dramatically simplify alignment of tariff lines and rules of origin.

The EC also indicated countries could directly proceed to sign a full EPA, suggesting it would solve the problem of implementing the interim agreement.

Maybe the most important step forward is the EC's offer to postpone agreement on services for another five years, or alternatively to let countries sign this provision as and when they are ready. The SADC-EPA ministers in Gaborone chose the first option and will start negotiations on this as a bloc in 2014.

"On services and investment, ministers noted that the alternative option proposed by the EC could be divisive and emphasised the need for the SADC-EPA group to move together and avoid division," read the minutes of the Gaborone meeting.

A technical meeting in July and another high level meeting before August are planned to solve the last outstanding issues in the third quarter.

Relations between the Europeans and the Namibians deteriorated after Namibia refused to sign the interim EPA it had initialled at the end of 2007. A decision of Botswana, Lesotho and Swaziland to unilaterally sign the interim EPA, leaving other countries in the negotiation configuration behind, put pressure on the Southern African Customs Union (SACU).

Fears that the world's oldest customs union would disintegrate because of the EPA were temporarily laid to rest by heads of state during its centenary celebrations in Windhoek recently. South Africa is expected to use the upcoming SACU heads of state summit on Jul 15-16 to set the tone in the EPA negotiations. To this end, it might put in play its hold over the SACU revenue pool.

While South Africa contributes most to the pool, the other members benefit more under the current revenue sharing formula, deriving as much as 60 percent of their national budgets from the pool. Pretoria has indicated it wants to see changes to this arrangement.

Article published courtesy of IPS Africa