Press reports indicate that at their meeting on 17 and 18 June 2010, SADC EPA ministers approved a three-phase strategy for concluding the SADC-EU EPA negotiations. Phase 1 will see a technical meeting with the EC before August to address outstanding issues such as export taxes, infant industry protection, food security, free circulation of goods and the reconciliation of tariff commitments under the EU-South Africa Trade, Development and Cooperation Agreement (TDCA) and the draft SADC-EU interim EPA. Botswana’s chief negotiator is upbeat about the prospects for a successful resolution of these issues, arguing that Commissioner Karel de Gucht has given a commitment to resolving these issues within the final EPA.

Phase 2 of the strategy will focus on services and investment negotiations, although there are still wide differences between the EC and SADC EPA governments on services and investment issues. A number of SADC EPA governments favour simple cooperation provisions in these areas, while the EC favours firm commitments on the basic regulatory framework to be set in place. Phase 3 will involve the finalisation of negotiations on services and investment.

Meanwhile, at the SACU Summit on 15-16 July, a common commitment to ‘a common negotiating position that would move forward on the vision of SACU as an economic community with equitable and sustainable development’ was reiterated. Issues discussed at the SACU Summit with an impact on the development of trade relations with the EU included:

• a commitment to ‘the consolidation of SACU through common policies and strategies; pursuit of deeper regional integration through common policy development and common institutions; and strengthening of SACU’s institutional capacity’;
• ‘a [common] SACU trade and tariff policy, and trade strategy that supports industrialisation in SACU’;
• a commitment to ensuring ‘unified engagement amongst SACU member states in trade negotiations with third parties, while recognising different levels of development and capacity of member states’;
• a review of the SACU revenue-sharing formula;
• the establishment of a ‘roadmap for moving towards an Economic Community and Monetary Union’;
• the implementation of work on ‘industrial policy, agricultural policy, and competition policy, unfair trade practices, and other priority commitments in the SACU agreement’.

According to press reports at the SACU heads of state meeting to celebrate the 100th anniversary of the establishment of the Southern African Customs Union (SACU), the SADC-EU EPA and its implications were ‘fervently discussed’. While few public statements were made as to the outcome of these discussions, South African President Jacob Zuma referred no less than three times to SACU rules prohibiting the conclusion of individual trade deals with third countries. In the final statement, the heads of state recognised ‘the role that SACU can play as a building block for deeper regional integration in Southern Africa’ and called for a renewed vision with the aim of ensuring that it serves as ‘an engine of regional integration and development, industrial and economic diversification’. Emphasis was placed on building ‘economic policy coherence, harmonisation and convergence’ and developing ‘common policies and strategies for areas such as trade facilitation, effective customs controls, and competition’.

A SACU meeting is scheduled for 18 June in Botswana to assess what each SACU member would gain and lose by signing the IEPA at this point. This will be followed by a summit of heads of state to determine the way forward.

Meanwhile in May the EC delegate to Namibia warned that ‘Namibia’s continued reluctance to sign the interim Economic Partnership Agreement (EPA) with the European Union could result in the country losing almost half of its export market’ (in a context where almost half of Namibian exports of goods are destined for the EU market). The EC delegate warned that ‘Namibia’s leading meat exporter, Meatco, could … lose about 40 percent of its annual total sales value if the trade ties that bind Namibia with the EU are cut’.

In response to these remarks, Trade Minister Hage Geingob, addressing the Namibian Parliament on 19 May, highlighted the potential threat now posed by the EPA process to the future of the SACU, and the ‘serious economic and policy consequences for Namibia’ of signing the current text. These include:

• the forfeiture of the right to use export taxes as a policy tool;
• the abandonment of the current system of infant industry protection, which would mean ‘goodbye to our dairy and pasta industries’;
• the abandonment of ‘all forms of quantitative restrictions on imports and exports’, which would undermine ‘our past achievements in horticultural and cereal production’.

Observing that agreement has already been reached on alternative texts in all of the main areas of contention, Trade Minister Geingob rejected suggestions that Namibia was ‘free riding’, pointing out that duty-free access for substantially all EU exports to the SACU and by implication the Namibian market was already a reality as a result of the virtual full implementation of the tariff elimination commitments contained in the EU-South Africa Trade, Development and Cooperation Agreement (TDCA).

In the run-up to a resumption of negotiations to resolve outstanding issues, South Africa’s trade and industry minister expressed optimism that the next round would focus on the kind of trade relationship that would give priority to integration of the Southern African Development Community (SADC). According to press reports, Trade Minister Rob Davies is concerned that the EPAs should have ‘no special clauses that [seek] to split the region or discriminate between SADC states’. At a recent SACU meeting member states agreed to ‘regroup’ before resuming negotiations with the EU, in order to ensure a common position on ‘all issues under discussion’. It was agreed that ‘notification, ratification and implementation of the Interim EPA by those that have signed should not be prioritised unless progress is being made in addressing the internal and external unresolved negotiating issues that still exist …. These include the alignment of market-access tariff offers, rules of origin issues, safeguarding the agreement reached during the Swakopmund meeting, addressing the remaining unresolved negotiating issues and firm commitments from the EC with respect to the [inclusion] of these solutions in the final EPA.’ A letter has been sent notifying the EC of this common SACU position.

Meanwhile the implementation of the EU-South Africa Trade, Development and Cooperation Agreement (TDCA), which de facto applies to the whole territory of the SACU, is approaching completion. In the agricultural sector, product were grouped into five categories (products excluded from tariff reductions; products where tariffs were to be immediately eliminated; products where tariffs were to be eliminated between 2000 and 2003; products where tariffs were to be eliminated between 2003 and 2006; and products where tariffs were to be eliminated between 2005 and 2012), with all but 23% of remaining tariffs on the final category of agricultural products still needing to be eliminated. Overall the tariff elimination commitments covered 86% of imports from the EU (measured according to a reference period). Areas where tariffs have been removed have enjoyed strong export growth, as South African importers now source products from the EU at a lower cost than from traditional suppliers, who in some instances pay tariffs of up to 20% in duties. In this context, this means that effectively a higher proportion of current EU exports is now entering the SACU market duty free than initially projected at the time of the signing of the TDCA.

Some analysts who are long-standing supporters of a comprehensive trade deal have suggested that the South African government may be willing to agree to open up public procurement and service provision to EU companies in areas where EU companies are not in direct competition with South African companies. In exchange, the EU would be expected to relax the MFN clause.

The EC delegate to Namibia, Elizabeth Pape, is ‘not confident’ that the Namibian government will sign an EPA. Dr Pape pointed out that the ‘continuation of the status quo is not a solution’, with something needing to be done before the end of 2010 to resolve outstanding issues. The EC delegate contends that the EC has ‘assured Namibia repeatedly of [its] commitment to honour the texts agreed in Swakopmund for the final EPA’. The Namibian government however argues that following negotiations in Swakopmund in March 2009, ‘the EU promised to address Namibia’s concerns, which include protection of infant industries, food security and export taxes’. To date however ‘no written assurance has been received’ on how provisions dealing with these issues will be dealt with in the IEPA prior to signing.

The implicit danger of a loss of duty-free, quota free access by Namibia runs through the exchanges on the issue over the last few months. Indeed, at the EC-organised information seminar on the EU-SADC EPA held in Maputo at the beginning of March, the EC head of the EPA negotiations said that the region was at a crossroads, with Namibia needing ‘to take a bold decision on its role in the EPA process, as further delaying signature … is creating a very shaky legal situation’, which ‘cannot be sustained’. According to press reports, he argued: ‘The situation is untenable because it is unfair to countries that have signed and it is an illegal arrangement not permissible under the WTO’. He argued Namibia that enjoyed ‘the same free access without any legally binding commitments’ and that this situation was ‘contrary to both EU law and World Trade Organisation rules’. He further called on Botswana, Lesotho, Swaziland and Mozambique to complete their internal procedures so that the agreement could enter into force. According to press reports, the EC feels that ‘negotiations for a full EPA including services, investment and trade-related rules must continue and also involve Namibia, Angola and South Africa, who opted out from this commitment on services’.

Press reports suggest that there is no imminent threat to the future of the Southern African Customs Union, despite such factors as: ‘the threat posed to the common external tariff by a divergence in 53 tariff lines between the EPA signatories and the other states’; the South African proposals to modify the revenue-sharing formula; and an ongoing dispute over revenue payments from previous years. The current SACU chair, Namibian Finance Minister Saara Kuungongelwa-Amadhila, argued that ‘if we address this as a group no issues will arise’. However the minister reiterated the Namibian position that ‘signing the EPA without addressing outstanding issues could be detrimental to our development’. A commission chaired by the Namibian permanent secretary of finance, Calle Schlettwein, is to be set up with the remit ‘to come up fast with a blueprint to overhaul the customs union’ and ‘position it at the centre of the SADC economic integration agenda’. This could include the diversion of part of the revenue transfers to a development fund to support industrial and agricultural development programmes.

The German diplomatic representative in Namibia, meanwhile, has urged Namibia to sign the SADC-EU EPA, believing that ‘it is in Namibia’s best interest’. In response, Namibia’s foreign affairs minister, Marco Hausiku, maintained that Namibia is ‘very serious’ about the EPA, but noted that the negotiations were still ongoing and a consensus still needed to be reached.
An article has also been posted in the Botswana Gazette sounding a note of caution over the implications of the EPA commitment for existing government policy measures to promote economic diversification in Botswana. Particular concerns were expressed over the implications for local dairy sector development and for the wider processes of regional integration under way, given the different tariff elimination commitments made in the various interim EPAs (IEPAs) initialled and signed by governments in the southern and eastern Africa region.

At the regional level, a preferential trade agreement has been concluded between SACU and Mercosur, albeit with a limited product coverage of some 1,000 tariff lines, compared to the 6,500 tariff lines covered in the EU-South Africa TDCA. Trade in sensitive products such as beef (and presumably sugar) has been excluded from the SACU-Mercosur agreement.

South Africa’s deputy director-general for trade and industry, Xavier Carim, has sought to place the current dispute with the EU over specific provisions in the IEPAs in a much wider policy framework. Addressing the SADC Southern African Forum on Trade, Carim highlighted the fact that EPAs in their current form ‘limit the SADC region’s policy space to promote industrial and agricultural development, would hamper efforts to promote trade diversification, and would undermine regional integration processes’. He however reiterated South Africa’s commitment to ‘addressing these issues with the EU and other members in the SADC and the Southern African Customs Union’. For this to happen however, it was held that the EC needed to move beyond ‘broad declaratory statements’ to address the ‘detailed outcomes of the negotiating processes’.

Carim pointed out that ‘SADC members had now established five separate negotiating configurations in relation to the EU’, and said that ‘Each of these configurations has different tariff dismantling obligations, the products that are covered are different, the timing for the tariff reductions is different, the products that are excluded are different, and all of this is going to certainly complicate and possibly foreclose efforts to foster deeper regional integration in SADC’. He explained that this situation would mean ‘strengthening customs controls and rules of origin controls within the region’. He further noted that ‘the provisions contained in the agreement were beyond WTO compatibility’.

Specifically with regard to the Trade, Development and Cooperation Agreement and the SADC IEPA, Deputy Director-General Carim highlighted certain discrepancies in the ‘tariff regime and the rules of origin’ and argued that these differences needed to be addressed if the coherence of SACU was not to be undermined. Particular concerns were expressed about the impact of the EPA on efforts to establish common industrial, agricultural and trade policies within the SACU and on the broader processes for deepening regional integration which needed to be initiated. Carim stated that ‘We need a work programme to overcome the current policy deadlock that we currently face, and the zero-sum approach, by building production value chains across all member states in agriculture and industry’. This, he argued, should be backed up by further work on specific spatial development initiatives. He pointed out however that a ‘common policy vision is a prerequisite for strengthening SACU institutions’. He concluded by acknowledging that SACU was ‘at something of a crossroads’, and needed to ‘move forward, in a more coordinated and harmonised way’, otherwise it would ‘find itself increasingly ineffectual’.

This view contrasts markedly with academic analysis contained in two TNI articles looking at ‘the moment of truth for regional integration’ and the future of the SACU respectively. The ‘Moment of Truth’ article explores the different perspectives of those SACU governments which have now signed the IEPA. For Botswana, the issue is depicted simply as an issue of maintaining access to the EU market, the aim being ‘to ensure that there would be uninterrupted flows from the ACP countries into the European market’. It is acknowledged however that Botswana also has interests in the negotiations beyond just trade in goods. A similar rationale is held to exist for Swaziland, with its heavy dependence on sugar exports to the EU. All of the SACU signatory governments are believed to take the view that concluding the EPA process could have a positive impact ‘in terms of increasing investment and productive capacity at home’. The more favourable rules of origin applicable under the IEPA (particularly for clothing and textiles, via the introduction of the long called-for single-stage processing rule) are seen as having been critical in these countries’ decision to sign.

The article on the future of the SACU explores the multiplicity of issues lying behind the current crisis in the SACU. Not least of these is the vexed question of the future of the revenue distribution arrangement. However, more fundamental differences are held to exist with regard to the role of trade policy in relation to industrial and agricultural development policies. The article argues that while Botswana in particular favours almost wholesale liberalisation to ‘kick- start’ a process of economic diversification, South Africa and Namibia wish to see trade policy tools actively used as part of wider industrial and agricultural development policies. South Africa in particular, with its more broadly based economy, is increasingly ‘favouring a sector-based industrial policy incorporating potential tariff increases, a renewed emphasis on state-owned enterprises in network service sectors, and a retention of policy space’. According to the analysis, ‘this dichotomy is at the heart of the differences concerning trade negotiations with the EU’. This, it is argued, ‘highlights the third divergence: foreign policy orientation’, with Botswana being seen as strongly aligned with western Europe, while South Africa actively seeks to diversify its relations away from traditional colonial ties. This, the article reasons, is why the MFN clause has assumed such a ‘totemic’ significance. It is held that the EU’s insistence on a non-negotiable MFN clause ‘has aggravated matters’.

The paper argues that any collapse of the SACU would be an economic disaster for the BLNS economies, given the importance of SACU revenues to the state budgets. It suggest that given the fiscal transfers which take place, any dismantling of the SACU would actually require an increase in levels of domestic taxation in order to retain the same revenue levels. It is also argues that any dismantling of the SACU would ‘reinforce the potential for a regional trade war, and … choke economic growth in the BLNS’.

The paper suggests ‘at a minimum’ the following ways forward:

• a compromise in which the BLNS accept less revenue in exchange for a ‘greater say over trade and industrial policy’;
• a high-level dialogue to hammer out the specifics of such a compromise;
• that the EU drop its insistence on the current MFN clause.

The final analysis recently posted on the SADC IEPA is from a Namibian trade specialist tracing the evolution of the negotiations and the origins of the current impasse in the SADC-EU EPA negotiations. The analysis provides a distinctly Namibian perspective on the contentious issues faced.

According to press reports at a meeting of the SADC trade ministers on June 19th 2009, South Africa’s Trade and Industry Minister Rob Davies argued that South Africa ‘would like to see the Southern African Customs Union (SACU) move towards an economic union … reaching a common understanding on the direction of regional industrialisation’, and not just being ‘an organisation of convenience … held together by the fact of transfers of revenues’. However he warned that ‘if operation of the interim EPA moves in a direction contrary to that vision, South Africa would have to defend itself and send SACU progressively backwards’, including through ‘strengthening customs controls within the region’.

Meanwhile, in a statement to the Namibian Parliament, Trade and Industry Minister Hage Geingob sought to explain the Namibian position in the EPA negotiations. He noted that in March 2009 negotiators had resolved ‘most of the outstanding issues’, but that the draft declaration prepared by the EU as a basis for incorporating these agreements into the text of the agreement to be signed had not been adequate. The EC subsequently announced that it would not accept any revision of its proposed text prior to signing of the IEPA, and would only accommodate the compromises reached in the text of the comprehensive EPA. It was against this background that the EC announced the signing of the SADC IEPA with those governments willing to sign on June 4th.

Minister Geingob expressed the Namibian government’s dismay at this turn of events, and explained the government view that ‘if the issues agreed at Swakopmund are not reflected in a binding document, it does not bind the parties to take these issues into account during the negotiations of the final EPA’. He nevertheless expressed understanding as to why some SADC governments had gone ahead and signed the IEPA, and took the view that this would pose no problems for Namibia, provided the Namibian position was ‘given the necessary support and understanding’.

He noted that despite the agreement reached in Swakopmund, two further issues remained outstanding: the MFN clause and the definition of the parties. Minister Geingob confirmed that Namibia ‘will sign when their conditions are met, that is to say, “when our interests are adequately considered”’. He confirmed that ‘Namibia remains fully committed to the conclusion of an EPA with the EC and wants to continue negotiations as a matter of urgency and priority’ to achieve that goal. The Namibian government has found support for its position among both the local business community and civil society bodies, which have argued that ‘outstanding issues’ should be resolved prior to signing the IEPA.

On July 8th the Namibian press reported statements from Trade Commissioner Ashton’s spokesperson, Lutz Guellner, that the Namibian government faced the possibility of a legal challenge to its duty-free, quota-free access established under the December 2007 regulation. ‘The train goes on, if Namibia does not jump on board it would be too late for anything’, he said. According to press reports, the EU says that Namibia’s ‘repetitive complaints’ that the agreements reached in Swakopmund have not been honoured is ‘baseless’, since Commissioner Ashton has written to the contact person for the SADC Group, Minister Neo Moroka, on this issue.

On June 4th the governments of Lesotho, Swaziland and Botswana signed the SADC IEPA. The governments of Angola, Namibia and South Africa did not sign, given their ongoing concerns over certain contentious issues in the agreement which have either not been resolved or which have been resolved but not yet incorporated into the text. The Namibian government expressed its willingness to sign the IEPA ‘when the outstanding contentious issues have been resolved through new wording in the texts of the interim EPA’. The government of Mozambique for its part expressed its intention to sign the agreement at a convenient time, and duly signed on June 15th. Announcing the Mozambican signature of the SADC IEPA, the EC press release expressed its hope ‘that Namibia will sign in the near future’ and made a commitment to ‘continue to work with Namibia, Angola and South Africa on certain outstanding issues’.

The governments of Namibia and South Africa have both denied that the signing of the IEPA by three SACU members is splitting the SACU, although South African officials have stressed that South African authorities will need to respond to the ‘consequences of practical realities that the region finds itself in as a result of the EPAs’. Specifically it has been pointed out that South Africa will be ‘required to strengthen customs controls within SACU to avoid the trans-shipment of EU exports to the South African market via Botswana, Lesotho and Swaziland’. According to DTI Deputy Director-General Xavier Carim, this is ‘a question of the legal requirements to manage the way the union functions’.

In addition it has been pointed out that ‘differential legal obligations to the EU under the TDCA and IEPA will foreclose harmonisation of a range of policies in the SACU in the future, including on the “new generation” policy areas such as services and investment. … The differential obligations on the most-favoured nation provision of the IEPA could further puncture the common external tariff’.

However, it has been pointed out that this will only become a problem once the governments of Lesotho, Swaziland and Botswana ratify the signed IEPA and if, in the interim, the EC has not addressed the concerns of fellow SACU members South Africa and Namibia. At this point the process of signing the IEPA would come up against the provisions of article 31(3) of the SACU agreement, which is ‘unequivocal in requiring that there be the consent of all SACU member states before any trade deal is concluded with third parties’. It is however only following ratification that South Africa customs authorities would need to intensify surveillance on goods entering South Africa from Botswana, Lesotho and Swaziland in those sectors where there are inconsistencies in the treatment of these products under the TDCA and the SADC IEPA. These inconsistencies could relate either to the basic tariff treatment accorded such products or to the rules of origin applicable to such products. Textiles and clothing is seen as being a potentially sensitive area in this regard.

It is as yet unclear what the consequences will be of Namibia’s decision not yet to sign the SADC IEPA. Namibian officials are of the opinion that their continued commitment to signing the IEPA, once outstanding contentious issues have been addressed in the text of the agreement to be signed, means there is no basis for the withdrawal of current duty-free, quota-free access established under the December 2007 EU Council regulation establishing transitional access for countries whose governments had initialled IEPAs.

However, in response to a headline in the Namibian newspaper announcing ‘no penalty for not signing’, a spokesperson for EC Trade Commissioner Ashton, Lutz Güllner, told the Namibian newspaper that ‘while our immediate objective is to work with the government of Namibia towards signature, as you know we have a legal obligation to replace the former trade arrangements under the Cotonou Agreement with the WTO-consistent trade agreements’. He continued: ‘pending the signature of interim EPAs, the EU granted unilateral trade preferences to those countries which would otherwise not benefit from preferential access to the EU any more. … These preferences were granted to the countries that have initialled the interim EPAs on a provisional basis and on the clear understanding that both sides would work towards signature of the agreements. It is obvious that these preferences cannot be maintained for an unlimited time’. This leaves a degree of uncertainty as to the short-term effects on access to the EU market for those SADC IEPA members which have not signed the IEPA, notably Namibia.

On an issue of particular relevance to the agri-food sector, South African officials have questioned the impact of the IEPA in supporting the structural transformation of southern African economies and have gone so far as to suggest the IEPA is ‘likely to accentuate static comparative advantages and entrench dependence of African countries on the EU in a fashion not dissimilar to colonial era relationships’. A particular constraint in this regard was held to be the ‘strong prohibition of export taxes by the EU in the EPA negotiations’. Other areas of concern highlighted by the Namibian government have included the provisions prohibiting the use of import licences, infant-industry protection provisions which are inconsistent with current SACU practices, weak agricultural safeguards and the MFN provisions. These provisions were felt to have more to do with ‘the EU’s “Global Europe” strategy, whose objective is partly to increase the EU’s competitive hold in Africa in the light of the rise of China and India’, than with the structural development needs of southern African economies.

Press reports indicate that a policy introduced in Namibia five years ago to stimulate horticultural production for local markets has been highly effective in stimulating both new marketing initiatives to link farmers to retailers and new production initiatives. According to the reports, ‘the rule states that local retailers have to buy a certain percentage of their stock from local suppliers [currently at 32.5 %] or face penalties. … If a retailer buys less than this percentage in one month, it is penalised by not being allowed to import more foreign produce the next month.’

This policy is part of a broader Namibian Agricultural Board project called the National Horticulture Development Initiative (NHDI) which aims to increase the Namibian horticulture sector production by developing an appropriate information system, marketing structures and regulatory arrangements. The NHDI states that to reach its objectives, the following strategies have been followed:

• development of a comprehensive database;
• development of marketing infrastructure;
• development of an import permit system;
• promoting local purchasing by consumers;
• addressing production issues such as training, credit schemes and introduction of new technology.

This policy has stimulated substantial new investment and production growth across a range of horticultural products. Based on recent analysis, it has been projected that Namibia could theoretically produce up to around 60% of its total fruit and vegetable needs.

TNI reports ongoing concerns amongst SADC officials about the impact of notifying the interim EPA to the WTO before concluding the negotiations on contentious issues. It is felt that such a step would undermine the SADC group’s negotiating position. Meanwhile Namibia’s President Hifikepunye Pohamba has stressed that ‘more work remains to be done’ in the EPA negotiations. Ongoing concerns include ‘vital issues such as food security, protection of infant and sensitive industries and regional integration’ issues. The importance of the EU as a trading partner (taking 46% of Namibia’s exports, some US$2.9billion) is widely recognised and hence getting the final deal right remains an over-riding concern.

On March 20th Trade Commissioner Ashton sent a letter to SADC trade ministers arguing that a date should be set for signing the interim EPA. The letter outlined developments in the SADC interim EPA negotiations in recent months, including the broad agreements reached in Swakopmund on the majority of contentious issues. It proposed that these compromises be incorporated into the final EPA, and expressed the view that on this basis ‘we can arrange for the signature of the interim EPA in the very near future’. Trade Commissioner Ashton argued that time was ‘not on our side’, given the need to notify the WTO, so that the trade relationship with the BLNS and Mozambique can be placed on a firm legal footing. She therefore proposed that the parties should ‘proceed with the signature of the interim EPA with those SADC members that have initialled the agreement’. She described this as ‘a matter of urgency’.

Namibia for its part wants to see some 19 issues not discussed in Swakopmund resolved prior to the signing of the IEPA, while the EC favours leaving these for resolution as part of the comprehensive EPA. According to press reports, the Namibian government sees no overriding WTO imperative for an early signing of the IEPA and would like to see all issues of concern resolved before signing any agreement. This was confirmed by the Joris Heeren, head of the trade section in the EC delegation to Namibia, who told IPS ‘there is no legal deadline, as was the case in 2007 when the WTO waiver expired’.

Speaking in Prague at the 17th session of the ACP-EU Joint Parliamentary Assembly, Co-President Glenys Kinnock acknowledged that interim EPAs were initialled ‘in haste’ and that revisiting contentious issues remains a ‘key element’ in the negotiations. According to press reports she advised ACP governments of countries like Namibia to seek ‘strong and unequivocal written assurances’ that ‘what has been agreed in negotiations will be honoured’. She suggested that ‘an annex or declaration could be attached to the interim EPA confirming what was agreed by all parties’.

In a February 2009 statement to Parliament, the South African minister of finance Trevor Manuel announced an impending decline of R1 billion in SACU revenue transfers to the BLNS in the coming year and a further decline of R1.5 billion in the following year. The decline in revenue is attributed to the global economic recession which has resulted in a sharp down-turn in imports of high-value, high-revenue items such as cars. This comes on the back of annual increases in transfers from the SACU revenue pool to the BLNS of 22% per annum over the 2000-01 to 2006-07 period. Swaziland and Lesotho were identified as most vulnerable to this decline in SACU transfers given their high revenue dependence on trade-based taxes.

Meanwhile an EC ‘flash note’ reported that ‘final compromises being reached on most issues of greatest concern to both sides’ in the SADC-EU IEPA negotiations following a meeting of senior officials in Swakopmund. This includes issues related to the provisions on ‘export taxes, infant-industry protection, food security, quantitative restrictions and free circulation of goods’ as well as tariff issues related to preserving the integrity of the SACU common external tariff. Further discussions are held to be needed on the MFN provision and the ‘definition of the parties’.

In February 2009 South Africa adopted regulations extending TDCA tariff preferences to Bulgaria and Romania. The regulation came into immediate effect and was retroactive, allowing Romanian and Bulgarian companies to reclaim duties paid since January 1st 2007 on products falling under the TDCA provisions.

At the South Africa-EU strategic partnership meeting in South Africa on January 16th 2009, ministers reiterated the objective of ensuring that the EPA negotiations ‘support regional integration and development in southern Africa’. A commitment to intensifying cooperation and addressing issues in order to ‘ensure a conclusion to the EPA that is acceptable to the parties’ was made. It was agreed that ‘both sides should seek to find mutually acceptable solutions to the concerns raised in the negotiations’. It was further agreed that the impact of the agreement on regional integration in SADC should be taken into account. It was also noted that ‘South Africa and the EU remain committed to reach[ing] an outcome that consolidates SACU’s common external tariff’.

In the run-up to this meeting the ANSA group (Angola, Namibia and South Africa) had submitted a joint demarche to EU member states setting out concerns over the EC approach to addressing contentious issues and the implications of that approach for regional integration processes. Fears were expressed that the ‘SADC-wide integration process will be compromised if the current approach persists’, since a multiplicity of diverse tariff elimination commitments will be entered into by SADC member states and different commitments will be made on new issues, making it very difficult to establish a common regional framework. The view was expressed that EC engagement on the substantive issues raised by ANSA governments ‘has thus far been extremely limited. ... No flexibility has been demonstrated by the EC on the key substantive points of concern’.

The demarche argued that ‘Proposed solutions that unduly exacerbate differentiation between South Africa and other members of SADC and SACU should be avoided as they create additional trade policy divisions in the region’. It went on to argue that in the light of the experience to date, ‘the indication that these may be addressed in negotiating towards a full or final EPA offers little comfort’, particularly since ‘the signing and entry into force of [the] IEPA will create a new legal framework ... that will make changes to the legal text of the IEPA to address the concerns more difficult to obtain’. The demarche also articulated the specific concerns which Angola has as an LDC. The demarche closed by calling for ‘more time to fully engage EU member states and the Commission on each of these issues’, given that there is no imminent danger of a WTO challenge since Botswana, Namibia and Swaziland are already de facto members of an FTA with the EU as a result of their membership of the SACU, and thus the basis for trade relations with the EU is already WTO compliant.

In early February Trade Commissioner Ashton visited the SADC region and held consultations with the South African government, the ANSA sub-group and the SADC EPA configuration members as a whole. Trade Commissioner Ashton reiterated the importance of keeping all countries on board in the EPA negotiating process and indicated that she would not be pressing for an early signature of the SADC IEPA. It was agreed that substantive issues of concern would be discussed at a meeting of senior officials in March 2009.

The kind of concerns held by Namibia have been illustrated by the debates in the Namibian Dairy Producers’ Association, where fears have been expressed that the announced reinstatement of export subsidies for dairy exports from the EU (set at zero in July 2007) and the US could negatively impact on local production.

Meanwhile an EC fact sheet has been posted summarising the main features of the SADC-EU IEPA. This fact sheet notes the fragmentation of the region which has occurred, with some countries initialling wholeheartedly, others initialling with profound reservations, and South Africa and Angola declining to initial the IEPA. It further notes that Namibia and South Africa have opted out of any commitments on services in the ongoing negotiations, but could revise their position and remain associated [with] the full EPA negotiating process.

Press reports in December 2008 indicate that a proposal has been tabled to ‘retrofit’ the Trade Development and Cooperation Agreement (TDCA) and the SADC IEPA tariff-elimination commitments, so as to ensure the integrity of the SACU common external tariff. This involves extending the phase-in period for tariff reductions under the TDCA on some 33 tariff lines and accelerating the implementation of tariff reductions under the TDCA on some 320 tariff lines. In exchange South Africa will receive improved access on certain tariff lines, including fisheries, agricultural and some industrial products.

Some commentators described the offer as an ‘extremely open-handed gesture’ from the EC, and South Africa’s chief trade negotiator, Xavier Carim, described the proposal as ‘quite an important development’, adding that it was a good development since ‘we have been arguing for this since May’. The EC argues that the new proposal ‘would allow SA to align its tariff regime with that agreed with the BLNS’ and would ‘solve the problem of regional coherence, and give SA the improved market access it seeks’. It would furthermore ‘leave open the option for SA of folding the bilateral agreement into the EPA if they wished’.

In a press briefing in November 2008 Botswana’s minister of trade and industry, Neo Moroka said ‘South Africa’s attempt to prescribe to everyone how to deal with the EPA with the EU has caused huge problems’ within SACU, raising the need for ‘some significant changes’. According to press reports minister Moroka argued that ‘Botswana can no longer afford to let South Africa take the lead in trade negotiations’. Government officials argued that Botswana has a great interest in free trade adding ‘we hope South Africa comes on board but if not we do without them’, continuing ‘administratively it can be done, it is not complex’. Minister Moroka argued ‘we are just a small economy and what is beneficial to a huge manufacturing country like South Africa cannot be the same for us’.

Some press commentators have raised the spectre of the break-up of SACU, although government officials have made it clear that ‘Botswana has no intention of leaving the customs union of its own accord’. Other press reports have pointed out the difficulties faced in operating two separate tariff schedules towards the EU under the customs-union agreement

Addressing the Namibian parliament’s standing committee on economics in October, 2008 the permanent secretary for trade and industry Malan Lindeque argued that ‘the EU will have to be more flexible at the next round of talks’ and expressed the hope that the new Trade Commissioner would indeed be more accommodating than her predecessor. According to the ECDPM at her confirmation hearing Trade Commissioner Ashton told MEPs that ‘her priority is to engage in dialogue and negotiations with the ACP, including on controversial issues and agree to necessary changes that will ensure EPAs are the best possible agreements and are supported by ACP countries’.

Permanent secretary Lindeque noted in his address to the Namibian parliament that the IEPA had been reluctantly initialled, since there were a range of issues of profound concern to the Namibian agricultural sector in the current text, including provisions on import licensing and export taxes. The fear was that if these provisions were applied in their current form, local production could be swamped by imports from the EU. He told parliamentarians that ‘should all talks fail and Namibia does not sign the full EPA, then we will look at other markets like the USA, European countries which are not EU members like Norway … and possibly Asia’.

The ECDPM reports growing disquiet in Botswana, Lesotho, Swaziland and Mozambique, where governments fear that non-signature could lead to a suspension of current duty-free access. These governments are seeking assurances that while outstanding issues of concern to the ANSA sub-group are being addressed ‘there will be no loss of market access’.

Meanwhile South Africa has released figures showing it emerging as a net food importer last year for the first time since 1985. The South African ministry of agriculture reported that ‘South Africa imports higher-value processed agricultural goods while exporting lower-value unprocessed products’. However, while the EU was the main export market, imports were increasingly coming from the Mercosur region.

The ICTSD reports that the EC has requested South Africa to improve access for EU food and processed agricultural exports beyond that provided under the TDCA as part of the SADC EPA negotiations. Some progress has reportedly been made in securing EC acceptance of ANSA concerns, although further progress is needed in addressing these issues. A number of problems are held to remain around agricultural trade issues.

SADC sources meanwhile suggest a preference for ratifying only the completed EPA (rather than first ratifying the IEPA), so as to avoid unnecessary duplication of the ratification process. Meanwhile in an open letter to Namibian NGOs Trade Commissioner Peter Mandelson has reiterated his view that a prerequisite for addressing issues of concern to Namibia is that ‘both sides should sign what has already been agreed before engaging on the different issues’. He argues that issues of concern linked to regional integration can then be subsequently addressed.

LaRRI has published an information booklet on the SADC EPA negotiations which looks at the particular concerns of Namibia against the backdrop of the overall process of negotiations.

On August 17th 2008 a SADC free-trade area was formally established involving 12 of the 15 SADC members. It has created a trading bloc of 247 million people where tariffs have been eliminated on 85% of all intra-regional trade. The establishment of free trade in 100% of products is scheduled for 2012. The FTA is seen as a prelude to ambitious plans: a customs union by 2010, a common market by 2015, monetary union by 2016 and a single currency by 2018.

However concerns were expressed over ‘conflict with economic partnership’ deals that SADC states have with the EU. President Thabo Mbeki of South Africa highlighted that the EPAs ‘will have a profound – and even limiting – impact on the process of deepening integration at the regional level’. According to press reports economists in the region have also ‘warned of economic pain and even job losses in the short term’, as a result of the establishment of the SADC FTA. ‘Angola, the Democratic Republic of Congo and the Seychelles have decided not to join until they put their economic houses in order’. Sounding a cautionary note against the general euphoria, South Africa’s trade minister, Mandisi Mpahlwa, called for recognition that ‘regional integration is not only about the removal of tariff barriers’, but also about building ‘both our productive and trade capacity … expanding our agriculture and industrial base’.

The EU-South Africa summit revisited the EPA negotiations in July, with a joint presidential statement noting ‘the positive role that the Trade, Development and Cooperation Agreement (TDCA) continues to play in increasing exchanges between South Africa and the EU’. ‘An open and frank exchange of views’ took place on the EU-SADC EPA negotiations with a shared commitment emerging to promoting ‘development and regional integration in Africa’. A commitment was also made to ‘bridge the prevailing differences and reach an outcome that is balanced and beneficial to all parties’.

Meanwhile the EC in a July 9th 2008 EPA Flash news announced progress in the SADC-IEPA negotiations and suggested this ‘could lead to signing the agreement in October 2008 ... the EC is ready to accept a single offer from SACU’. It was noted that ‘Angola, Namibian and South Africa have presented a list of ‘concerns’ that they would like to address within full EPA talks’.

Press reports suggest that Namibian officials are of the view that the EC is now willing to be more flexible in addressing contentious issues in the ongoing SADC IEPA negotiations.

Press reports claim that EU trade negotiators have accused Angola, Namibia and South Africa of having formed a ‘pressure group’ ‘aimed at coercing the EU in a bid to give more concessions’. The EU’s chief negotiator with SADC Avano Casella said the EU was ‘still studying the document’ but expressed the belief that ‘compromises are possible’. Despite press reports of the imminent signing of the SADC-EU EPA, Anton Fall, the director of SACU policy development and research, said that members were ‘still negotiating towards the full EPA’, with the SACU first needing to address the areas of concern among its member countries, before signing a full EPA with the EU. EC negotiators had raised concerns that Brazil may challenge the IEPA, if speedy progress to full signing is not achieved