South African-European Union Trade, Development & Co-operation Agreement: briefing

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Trade, Industry and Competition

17 September 1999
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Meeting Summary

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Meeting report

17 September 1999

Documents handed out
Briefing Document on the RSA - EU Trade, Development and Co-operation Agreement
Slide presentation - Briefing on the Conclusion of the RSA -EU Negotiations for a trade, Development and Co-operation
Trade, Development and Co-operation - A briefing document by the Department of Trade and Industry.

Mr B. Sibisi, Chief Director: Foreign Trade Relations, gave a briefing on the SA-EU Agreement that was reached at the end of March after nearly four years of negotiation. The Agreement is scheduled to be signed on 11 October 1999. It will then proceed to Parliament for consideration by these three committees and ratification. It was agreed that public hearings would be held before the committees ratify the Agreement.

Mr Sibisi's briefing followed the slide presentation. The essence of the agreement is as follows:
- A Free Trade Area (FTA) will be set up to cover around 90% of current trade between South Africa and the EU.
- The EU will liberalise 95% of imports from South Africa within 10 years.
- South Africa will liberalise 86% of imports from the EU within 12 years.
- South Africa's sensitive sectors will be protected (automobiles, textiles, red meat, sugar, winter grains and dairy).
- Partial liberalisation of the Agricultural sector will occur.

The following additional points were made:
- One of the reasons that the agreement has taken so long is that on non-trade issues separate consent is needed from each of the 14 EU member states. This has now happened and, as desired, the Agreement is between South Africa and the entire EU.
- Lomé Convention - South Africa initially requested full membership. The EU granted it only partial membership in June 1998 because it felt that South Africa was not a 'typical' African or developing nation. South Africa is excluded from all economic conventions increasing the need for this SA-EU Agreement.
- Broad social and political principles are fundamental to the Agreement. If these are breached, one party can take measures against the other. The process of including these principles was time consuming.
- Industrial Sector Liberalisation - Mr Sibisi believes that this part of the agreement will provide a relative advantage to South Africa. Sensitive products have been excluded. Although Textiles are not excluded, South Africa will be allowed protective tariffs on its Textiles for a longer period than the EU.
- Agriculture - This proved more problematic than industry. Initially the EU wanted Agriculture completely excluded from the agreement but it has been forced to accept inclusion. The EU will not budge on its Common Agriculture Policy but has agreed that South Africa can protect itself should it feel ill-effects from subsidized European goods. Although many South African products are excluded from the FTA they have been allowed preferential access and tariff quotas (notably for canned fruit, fruit juices, cut-flowers, wines and cheese). From initially aiming to exclude 46% of South African goods, the EU will effectively only exclude 26%.
- Fisheries - The EU have not succeeded in gaining access to South African waters.
- Safeguards are in place to protect South Africa and the Southern African Customs Union (SACU) from the impact of liberalisation should it prove too great.
-Protocol on Rules of Origin - These will be balanced so that South Africa can export cheap goods from SACU countries without being penalised.
- Wines and Spirits - Much progress has been made. The problems over Port and Sherry have essentially been resolved. South Africa still disputes that these are geographical names but has distanced itself from this argument so that agreement is possible.
- Generally Mr Sibisi believed that the agreement was a success for South Africa. The concessions made by the EU on agriculture were very pleasing and South Africa would continue to work for the end of EU subsidies and a completely free trade.
- Mr Sibisi concluded by stressing the need to ratify the Agreement quickly. The concessions made will be more significant if South Africa can feel their benefits soon. While the EU will make most of its agreed concessions quickly, South Africa will delay liberalisation as much as possible. This edge afforded to South Africa is currently much needed.

Questions to Mr Sibisi
The following important points emerged from the questions:
- No one is sure what the impact on the Southern African Development Community (SADC) will be but it is recognised that there are concerns. However as the agreement should have a positive impact on the South African economy it is expected that in turn this will have a positive impact of the economies of neighbouring nations.
- The reserve list of agricultural products that could become part of the FTA will be reviewed annually to see if they should be included. They will be reviewed by a council that will be set up to monitor and implement the whole agreement.
- Trade with the EU currently sees mainly agricultural goods being exported from South Africa and capital good being imported. The nature of the agreement means that if some restructuring of the South African industrial sector occurs massive benefits could be reaped from industrial exports.
- It was accepted that the Agreement itself was too complex and lengthy to be accessible to the average person of the business world. The Department is looking at ways to make it more accessible while still retaining its technical precision.

It was agreed that public hearings would be held once the Agreement has been referred to the committee. These would involve industrial and agricultural stakeholders and also those who would be affected by the Science and Technology and Development sections of the Agreement. The Committee has also been invited to comment on the Agreement prior to the 11 October signing. The chairs of all the three committees (possibly Agriculture and Land Affairs as well) will prepare a document that will be circulated for comment on Monday (20 September). All comments must be submitted by 5pm Tuesday (21 September) and a discussion will be held at their joint meeting to be held on Wednesday (22 September).

Appendix 1:

Briefing Document on the RSA - EU Trade, Development and Co-operation Agreement

1. Background

The last week of March 1999 marked the end of almost four years of negotiations with the European Union towards a Trade, Development and Co-operation Agreement. Minister Erwin and Commissioner Pinheiro finalised this historic agreement which has been endorsed by both the South African Cabinet and the European Council of Ministers. It means that the road has been cleared for the signing and ratification of the agreement which is of national and international importance. The expected implemenatation date is 1 January 2000 which will allow time for government structures as well as private sector operators to prepare for the procedural implications of a free trade area with our most important trading partner in the world.


1.1 The origins of the Agreement

The call for negotiations with SA was expressed as part of the EU's desire to support SA's new democracy and address the legacy of the past. The EU argued that a free trade area was the best and only way it could provide SA with better market access. The EU's mandate tempered SA's high expectations. South Africa, however, chose to engage and develop a strategic partnership with the EU which is SA's major trade and investment partner.


As part of economic transformation, the government has adopted policies which seek to reposition and re-integrate the South African economy within a rapidly changing global economy. This necessitates the establishment of globally competitive economic enterprises. The move toward global competitiveness has to be accompanied by regional economic cooperation that advances a broad and integrated process of industrialisation and modernisation in the economies of Southern Africa.


A growing South African economy that facilitates intra-regional economic trade and investment flows is a major opportunity for development in Africa and more particularly Southern Africa in the medium term. Not only will it source a wider range of products from its neighbours but it will also be able to invest in activities that will increase the region's exports. This can only happen if South Africa is able to expand its production base by strengthening and enhancing its competitive advantage in the beneficiation of its natural resources. This in turn requires that there is an increase in value added production and a larger manufacturing sector.


The bold move toward a free trade agreement with the EU is intended to contribute towards restructuring of the economy. It is also aimed at consolidating the strategic links with the economies of the member states of the EU, securing preferential market access for South African products and providing certainty and added leverage for foreign investment into the South African economy.

2. Overall Results

The Trade, Development and Co-operation Agreement with the EU covers a wide range of issues in a comprehensive field of co-operation. It includes, inter alia;

  • Political dialogue
  • Provisions for a Free Trade Area
  • Trade related issues
  • Economic co-operation
  • Financial assistance and development co-operation
  • Social and cultural co-operation

As part of establishing a comprehensive relationship with the EU, two other agreements have been concluded:

  • Science and Technology Agreement (signed in December 1996)
  • Partial Membership of the Lomé Convention (agreed in April 1997)


At the request of the EU, SA accepted to negotiate a Wines and Spirits Agreement and a Fisheries Agreement. SA insisted, however, that such agreements should be mutually beneficial and that there should be no conditional linkage with the main agreement. The main agreement contains a so-called hook-clause providing for future negotiations for a co-operation agreement on fisheries and there is also a side letter covering the political agreement on port and sherry.



3.1 Essential Element and Non-execution provisions

Respect for democratic principles, fundamental human rights and the rule of law is established as key elements of the agreement. Good governance is established as another important principle. Any violation of these principles by one party would lead to the other party taking appropriate measures, including withdrawing some concessions. SA insisted on the formulation of these provisions such that there is objectivity in the test for breach of the essential element of the agreement without the risk of unilateral action nor the balance of economic or political interests becoming the determining factor. The agreed text has a better definition of good governance and circumstances under which the non-execution provision can be invoked.


3.2 Free Trade Area (FTA) Provisions

3.2.1 General Features

When SA presented its trade offer to the EU in June 1997, it called for free trade with asymmetrical coverage of all trade and sectors and special protocols to cover sensitive products. It also called for development and financial measures to support further regional integration and to facilitate the adjustment process in Southern Africa. The outcome of the negotiations meets the WTO requirements of Art. XXIV GATT 1994. The coverage of the FTA will be around 90% of current trade between the Parties with the following elements:

  • Community: full liberalisation of 95% of imports from SA at the end of the transitional period of 10 years.
  • South Africa: full liberalisation of 86% of imports from EU at the end of the transitional period of 12 years.
  • Includes both traded and non-traded products.
  • Provides for the protection of SA's sensitive sectors (automobiles and components, textiles and clothing, red meat, sugar, winter grains, and dairy).
  • Includes the agricultural sector, alongside all other sectors with partial liberalisation and provision for regular reviews on products on the reserve lists.
  • Commits the EU to provision of support for SACU for adjustment efforts resulting from the establishment of the FTA.
  • Contains several elements that assure a positive regional impact on the other countries of SADC.


3.2.2 Industrial Sector

Approximately 86% of SA's total exports to the EU consists of industrial products. While the EU's average tariff levels for industrial products is low, the removal of tariffs will nevertheless give SA's exporters a relative advantage against some of their competitors in the EU market. The EU will eliminate its industrial tariffs either immediately or within three years after the entry into force of the agreement. This includes most of the sensitive products of textiles and clothing (only about 20% of SA's textile exports to the EU will be phased out over a longer period. i.e. 6 years from the entry into force of the agreement). At entry into force of the agreement tariffs on auto-components will be reduced to 50% of the MFN rates applied by the EU. Other products like ferro-chromium with tariff elimination starting in the 4th year will continue to have a global duty free quota. Only six lines of aluminium will remain on the reserve list. The products on the reserve list will nevertheless be subject to reviews.


As indicated the transitional period for the phasing out of tariffs by SA is twelve years to allow for adjustment by firms. Sensitive products like automobiles and parts will remain on the reserve list without any tariff elimination or reduction schedules at this point. This will be reviewed in the light of the outcome of the mid-term review of the Motor Industry Development Programme. With regard to other sensitive products, South Africa persuaded the EU to moderate its initial expectations. This will enable SA to have a slower phase-down. In the case of clothing and textile there is a commitment to reduce the tariffs applicable to imports from the EU. Depending on the segment of the market, by the end of the 8th year the tariffs will vary between 5% and 20%. Between the 8th year and the end of the transition period, EU products will enjoy a preference over the MFN rate of around 40%. The agreement therefore takes into account the changes in these industries at a pace far beyond what was conceivable a few years ago.


3.2.3 Agricultural sector

The agricultural sector is traditionally the most protected sector in the EU and has generally been excluded by the EU in other free trade agreements. In its mandate the EU a priori excluded about 46% of agriculture from the FTA with SA.

  • Agricultural safeguard clause

While the EU's Common Agricultural Policy (CAP) is still a matter of concern, the agreement provides (with regard to agricultural policies) for consultation and compensatory adjustments for any changes which may affect the balance of concessions. The Agricultural policies provision is supplemented by an Agricultural safeguard clause which gives SA the right to challenge the EU should there be proof that increased imports of agricultural products are causing harm or threatening to cause harm to the domestic industry. The onus is on South Africa, especially the industry, to put in place an effective monitoring system that will serve as an early warning signal in this regard.

  • EU export subsidies

Although SA did not succeed in eliminating EU export subsidies completely, there are some important breakthroughs. Firstly, the EU has committed itself not to pay export refunds on cheese exported to South Africa under the tariff quota of 5000 ton. Secondly, the EU is willing to eliminate export refunds on products South Africa might want to offer for front-loading during the implementation period. Refunds will be eliminated in full once tariff liberalization starts. This is an important aspect of the agreement, as most of the EU agricultural products will not be competitive on the domestic market without refunds. South Africa will take up this challenge. Should the EU be unwilling or unable to eliminate export refunds, South Africa can simply retract its offer of front-loading.

  • Tariff quotas

The introduction of tariff quotas is important in that it makes inroads into the EU reserve list. Especially the tariff quotas for canned fruit (60 000 ton), fruit juices (5 000 ton) and cut-flowers, in particular proteas (900 ton) are of interest to the industry in SA. The quotas for wines and sparkling wines, as well as for cheese are also significant.

  • Reserve list

The EU list of exclusions has been reduced, i.e. from 46% to 38% (based on 1997 trade statistics). If one takes into account tariff quotas, it has been reduced even further to 26%. This is an important development. In addition, it is now called a reserve list subject to regular reviews with a view to further opening of the market. South Africa will therefore be continuously pressing for a review of this list in the light of changing circumstances on EU and/or world markets.

3.3 Trade-related issues

While the SA law on the regulation of economic activities is consistent with international practices, SA took a view that provisions on trade-related issues in the bilateral agreement with the EU should not go beyond the current multilateral conventions and disciplines agreed in bodies like the WTO, WIPO etc. This is particularly important given SA's commitment on playing an active role in advancing the interests of the developing countries in the multilateral fora. A number of the trade-related issues put on the table by the EU are still subject to intense debates and examination in the multilateral fora. On issues like govern-ment procurement and intellectual property rights the agreement provides for mechanisms for further dialogue with the EU. Generally speaking, commitments that were made were regarded as necessary for the proper functioning of the free trade area. These include:

  • Customs Unions and FTAs

The agreement provides for consultations to take into account the mutual interests in the event that the maintenance or establishment of CUs or FTAs affect each other's interests. For SA, this provision was regarded as essential for the protection of domestic interests against the change in the balance of rights which may arise from the future enlargement of the EU.

  • Anti-dumping and Countervailing Measures

The agreement provides for parties to consider alternatives (constructive remedies) before imposing definitive anti-dumping duties and counter-vailing duties. This creates an opportunity for the relevant firms to put options for undertaking on price, volume and/or combination of that rather than to face prohibitive duties.

  • Safeguards

There is a comprehensive provision covering regular, regional and transitional safeguard measures. The regular safeguard provides for measures to be taken in the case of import surges which threaten or cause injury to domestic producers. This is supplemented by the non-reciprocal provision in terms of which SA will be able to take exceptional measures to protect infant industries or sectors facing serious difficulties caused by increased imports during the transitional period. There is also provision for measures to be taken to safeguard any of the other SACU members against increased imports which threaten or cause serious deterioration in that member's economic situation. The comprehensive safeguard provision is important to ensure that SA and other SACU members can temporarily protect themselves or slow down the pace of liberalisation if the impact proves to be more than what SA or the respective SACU member can handle.

  • Used goods

The exceptions clause provides for the protection of domestic producers against the importation of used goods.

  • Competition Policy

SA sought to ensure that the provisions do not go beyond those of the new competition policy and law. It provides for consultative mechanisms to attempt to accommodate the interests of each Party with the application of domestic law. It does not regulate the provision of state aid, nor deals with services and government procurement as was proposed by the EU.

  • Public Aid

The agreed text recognises that it is in both parties' interest to ensure that public aid is granted in a fair and transparent manner. It also takes into account the facilitating role that can be played by state support and involvement in the restructuring of the SA industry and economy. It thus provides for consultation between the parties to find a satisfactory solution to situations where public aid distorts fair competition.

  • Dispute Settlement

To ensure that there are no unnecessary delays in the resolution of disputes, the agreement sets out clear disciplines for the trade chapter. Other disputes on the general provisions of the agreement or for those arising in areas such as Develop-ment Cooperation and Economic Cooperation will be governed by a less tight procedure.



The agreement provides for co-operation in a variety of fields including industrial restructuring and modernisation, investment promotion and protection, trade development, development of SMMEs, information and communication technology, energy, mining and minerals, transport, tourism, services and consumer protection.


Rules of origin form the backbone of a preferential trade agreement like the one SA is about to sign with the EU. These rules prohibit the deflection of trade and thereby protect the integrity of the agreement. The protocol will therefore determine the administrative framework of the agreement between SA and the EU. It prescribes what would count as local content and has the same function as a passport for a human being. The rules determine the ability of economic operators in the contracting parties to reap the rewards of duty-free access to one another's markets. Important features of the protocol include:

  • Cumulation

Cumulation of the rules of origin is an instrument enabling the parties to a free trade area to use material originating in certain other countries, i.e. without violating the rules of origin. The protocol provides for diagonal (or partial) cumulation between SA and the EU as well as with materials originating in non-SACU ACP countries. As far as SACU is concerned it allows for full cumulation with materials originating in BLNS..

As far as cumulation within the context of the Lomé Convention is concerned - i.e. trade in the direction SA to all ACP countries to the EU - the EU has undertaken to remove the current ad hoc provision with regard to SA and to replace it with diagonal cumulation with SA. This means that ACP countries including BLNS will be able to cumulate with materials which have acquired originating status in SA.

  • List rules

These are specific rules for specific products, based on the tariff nomenclature. This list which is contained in Annex II of the protocol describes the working or processing to be carried out on non-originating materials in order that the final product can obtain originating status. SA's view was that some of these rules did not reflect the level of productive capacity in South Africa. These are 04.03 (cream yoghurt); 09.02 9 (tea); 20.08 (peanut butter); 20.09 (fruit juices); 22.02 (beverages); and 25.25 (mica). This matter is still under consideration by the EU.

  • General value tolerance rule

Art. 5 allows a certain percentage of the value of the final product to be imported from other countries, notwithstanding the conditions set out in the list rule. The protocol makes provision for a general tolerance of 15%, with the exception of textiles (which will be covered by explanatory notes 5.1 and 6.1), fish, tobacco and alcohol.

  • Prohibition of drawback of, or exemption from, customs duties

The Commission's proposal contained in Art.14 of their draft protocol specified that non-originating materials used in the manufacture of products destined for the EU or SA market shall not be subject to drawback of or exemption from customs duties. However, it did not preclude the application of the export refund system for agricultural products applicable in the EU.

This proposal was not acceptable to SA and the prohibition on draw-back has therefore been deleted from the protocol.

  • Definition of fishing vessels

As far as the definition of fishing vessels is concerned, a paragraph has been added at the end of article 4.2 to reflect SA's position on the requirement for officers and masters, subject to the entry into force of tariff concessions on fishery products (which in reality will only be granted if SA is willing to grant the EU access to its fishing waters).

  1. Sectoral Agreements

6.1 Fisheries Co-operation

The EU put SA under lot of pressure for a Fisheries Agreement with provision for access to SA's fishing resources. It thus made a linkage between the Fisheries agreement and the market access concessions as well as the overall agreement.

From the outset SA explained its new fisheries policy and its efforts towards the restructuring of the industry and conservation of fisheries. It emphasised that access to fishing resources would not be possible. An agreement regarding the future fisheries co-operation was reached in December 1998. This includes:

  • Both sides declared that they will make their best endeavours to negotiate and conclude a co-operation agreement no later than the end of the year 2000.
  • The EU wants to hold back the implementation of tariff concessions to SA on fisheries products. The most sensitive of these concessions are only envisaged in the light of the content and continuity of the future fisheries agreement.
  • SA will abolish its tariffs on fisheries products in parallel to the elimination of duties of the corresponding tariff positions by the Community.

6.2 Wines & Spirits

The political compromise on port and sherry which was reached in Davos on 29 January by Minister Erwin and Professor Pinheiro contains the following main elements:

  • Phase out clause for SA use of names port and sherry in exports to third countries.
  • Definition of SA domestic market to include all of SACU.
  • SA to continue the use of names port and sherry on its domestic market throughout the transitional period of 12 years.
  • Review of the use of names within the transition to decide on the names to use beyond the 12 years.
  • SA wine sector to enjoy a duty free quota and financial assistance for restructuring of the industry.


The agreement with the EU will, among other things, establish for the next 12 to 15 years SA's trade relationship with its major trading partner and important trading block. The agreement establishes as good concessions as each party can get at this point. There is room for improvement within the reviews as set in the agreement. The agreement reached between Minister Erwin and Commissioner Pinheiro is the basis for both Parties to move forward after almost four years of protracted negotiations. It still has to be formally signed after which it will be submitted for ratification by Parliament. The venue for the signature of the agreement is more than likely to be in SA which would mark the historical agreement between SA and Europe.


4 September 1999




1. South Africa reconfirms that the names "port" and "sherry" are not and will not be used for its exports to the EU

2. South Africa will phase out the use of the "port" and " sherry" names on all export markets within 5 years, except in the case of non-SACU SADC countries, where an 8 years phase out period would apply.

3. For the purpose of the Wines and Spirits Agreement, the South African domestic market is defined to cover SACU (Botswana, Lesotho, Namibia, South Africa and Swaziland).

4. South African products may be marketed as "port" and "sherry" on the South African domestic market during a 12 years transitional period. Beyond that period the new denominations of these products which shall be used on the South African domestic market will be jointly agreed between South Africa and the EU.

5. From entry into force of the agreement, the EU will provide a duty free quota for wines covering the current level of trade of 32 million litres of South African exports to the EU, with allowance for the future growth of this quota.

6. As an additional effort to the main objectives agreed for the Development programme for South Africa to be funded by the EU, the EU will provide assistance of 15 million euro for the restructuring of the SA wines and spirits sector and for the marketing and distribution of SA wines and spirits products. Such assistance will commence at the entry into force of the Wines and Spirits Agreement.

7. A Wines and Spirits Agreement between South Africa and the EU will be concluded as soon as possible and no later than in September 1999, in order to ensure that the entry into force of the Wines and Spirits Agreement will take place before or in January 2000.

Berlin, 24 March 1999

Appendix 2:
Briefing on the Conclusion of the RSA -EU Negotiations for a trade, Development and Co-operation

1. Background

The last week of March 1999- end of almost four years of negotiations

The European Council of Ministers approved the agreement on 24 March 1999, in Berlin.

2. Overall Results

· Political dialogue


· Provisions for a Free Trade Area


· Trade related issues


· Economic Co-operation


· Financial Assistance and Development Co-operation


· Social and cultural co-operation

Other agreements:

· Science and Technology Agreement (December 1996)


· Partial Membership of the Lomè Convention (effective since June 1998)


3.1 Essential Element and Non-execution provisions


· democratic principles


· fundamental human rights


· the rule of law

coverage of around 90% of SA/EU trade:

EU: full liberalization of 95% of imports over 10 yrs

SA: full liberalisation of 86% of imports over 12 yrs

Support for SACU


3.2.2 Industrial Sector


· 86% of SA's total exports to the EU


· establish relative advantage for SA exporters


· EU eliminate either immediately or within three years


· including textiles and clothing (80% of the current trade)



[Ed note: graphs not included]



[Ed note: graphs not included]


3.2.3 Agricultural sector

Improved coverage

- Agricultural safeguard clause

- Tariff quotas

- Position re: export subsidies

- Reserve list to be revisited



[Ed note: graphs not included]



[Ed note: graphs not included]







[Ed note: graphs not included]

3.2.3 Other trade principles

- Customs Union and FTAs

- Anti-dumping and Countervailing Measures

- Safeguards

  • Used goods


- Cumulation


- List rules

- General value tolerance rule

- Prohibition of drawback of; or exemption from, customs duties

- Definition of fishing vessels



6.1 Fisheries Co-operation

6.2 Wines and Spirits

6.2 Wines & Spirits

Phase out clause for SA use of names port and sherry in exports to third countries.


Definition of SA domestic market to include all of SACU.


SA to continue the use of names port and sherry on its domestic market throughout the transitional period of 12 years.


Review of the use of names within the transition to decide on the names to use beyond the 12 years.

SA wine sector to enjoy a duty free quota and financial assistance for restructuring of the industry.


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