SA Trade Negotiators Play Hardball With EU

The Namibian (Windhoek), 5 March 2008

EU trade chief Peter Mandelson dangled a carrot in front of SA's negotiators at the weekend, hinting at greater access to European markets in exchange for SA returning to the negotiating table to resolve a standoff over a stalled regional trade deal with the EU.

But his promises may not be enough to persuade SA.

SA's chief trade negotiator, Xavier Carim, said that improved market access - evidently offered on agriculture, fisheries and industrial goods - did not ease concern that EU demands would limit SA's policy options.

Mandelson dismissed calls from SA's government to start talks on new trade accords with southern African nations from scratch, saying SA's neighbours would not want that.

SA has rejected draft accords the EU signed with African countries including Botswana, Lesotho and Swaziland.

SA has concerns about some EU demands, such as liberalisation of services.

The motivation for SA's participation in the EPA talks was to deepen regional integration, but the conflict between SA and the EU over the pact has fractured unity in the region.

It has also put the Southern African Customs Union (Sacu) at risk as four of its members have initialled the deal, leaving SA out in the cold.

Mandelson discussed the matter with President Thabo Mbeki on Saturday, in a meeting he described later as amicable: "We did not solve all the issues, but I think there is a better understanding between us.

It is in both our interests to sort things out, but we also have a responsibility to those in the region.

Our differences have put them in a difficult position."

SA appeared to be grappling with broader, sometimes conflicting, issues, Mandelson said, such as its own economic interests, its wider regional role and its hopes for increased south-south partnerships.

It would take time to work these out "It would help if we all agree on the destination and move towards a way that serves the customs union.

But that requires goodwill and give and take and a recognition that the development needs of the union's most needy members must be paramount."

In terms of the EPA, the EU offered duty-free, quota-free market access for southern African countries into the EU, but did not extend that offer to SA.

Asked about EU insistence on treating SA differently, Mandelson said: "If we could re-engage SA in the steps of the negotiations for a wider, deeper EPA, I hope it would be possible to find ways to increase SA's access into Europe's markets.

I don't underestimate the sensitivities for some (of the EU members), but I would like to look at some agricultural areas, for instance, or industrial goods or fisheries in ways in which SA felt that it would benefit commercially from engaging further."

Rules of origin, among other things, could be open for further negotiation.

Carim said that concern remained about demands that would undermine rather than build regional integration.

That could limit the region's policy space.

"Improved market access is not the point." A host of issues, tabled in the past two weeks, had "complicated matters".

These concerns included: a demand for the elimination of export taxes, which could limit the region's drive to advance beneficiation; prescriptions on procurement, which could dilute SA's empowerment drive; and demands that would limit ability to source local content, which would undermine SA's industrial development drive.

But more critical was a legal concern about the definition of the parties.

"The way they define the parties does not correspond with the way the region can react.

"We have seven different jurisdictions that have to act nationally, but that is not reflected in the text.

The interim EPA requires decision-making structures we just do not have and, legally, cannot work," Carim said.

He was also unhappy about the demand for most-favoured nation (MFN) treatment, which would see concessions made to other countries in future free-trade agreements automatically extended to the EU.

Mandelson explained the EU's demand for MFN, saying: "We downgraded on the market access demands, and made a very lopsided, asymmetrical agreement in the region's interest.

"In denying ourselves access in the short term, we were worried that we would be permanently disadvantaged.

That's why we asked for the MFN clause."