EU/SA Agreement; Cotonou Convention: briefing

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Trade, Industry and Competition

23 June 2000
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Meeting report

23 June 2000

This week two agreements have been signed between South Africa and the EU. The first relates to the political, trade and the development relationship between South Africa and the EU. The second agreement to be signed on 23 June is the Cotonou Convention and South Africa is one of the signatories.

The issue of trade distortion and price depression which results from Europe's common agricultural policy and large system of subsidies was raised during the meeting. Mr Lamy said that they were moving away from the protection of inefficient farmers and moving toward a system of agricultural support which goes to the revenue of farmers.

Mr Pascal Lamy, EU Trade Commissioner, made the presentation accompanied by other delegates such as the EU Ambassador to South Africa.

Comments that he made included:
· The European Renaissance gave rise to important political and economic achievement in Europe. For this reason the African Renaissance is appealing to the EU.
· Europeans value the South Africa's important stabilising role in Africa in the prevention of conflicts.
· On 22 June an agreement was signed in Durban between South Africa's Minister of Finance and the EU. The agreement relates to the political, trade and the development relationship between South Africa and the EU. Thus the relationship is not solely development-oriented as it was before. They have undertaken to provide R5,5 billion over the next six years to continue development programs in SA. The current aid program from the EU is the largest grant program in South Africa.
· Currently the EU accounts for 40% of South African trade.
· There is also the Cotonou Convention, a new partnership agreement between the 77 member African, Caribbean and Pacific (ACP) group of states and the fifteen member European Community which will be signed later that day in Benin. EU which SA is a part of was to be signed later that day. The Convention gives prominence to poverty alleviation strategies. The EU expects SA to play an important role in the implementation of this agreement that included the effective promotion of human rights (see Appendix for additional information).
· This landscape paves the way for more political dialogue. Sometimes South Africa regards the EU with suspicion and mistrust but they are working together on this.
· In the future the EU is interested to work with South Africa to address issues such as:
- achieving common goals
- uplifting the poor
- strengthening South African exertion in the global economy
- tackling HIV/AIDS, racism, xenophobia
- violence against women and children

Mr Ramgobin (ANC) commented that the central to SA's foreign policy is the African Renaissance. In light of the historical relationship between Africa and Europe he asked if the EU had an overall strategic programme for developing the three pillars of development, trade, and politics in SA. He added that South Africa cannot develop and have a stable political environment if they are surrounded by a sea of poverty.

Mr Lamy said that the EU cannot separate the supportive relationship that they have with South Africa from the relationship that they have with the rest of Africa. The EU/SA relationship is however a more profiled relationship than the one the EU has with other African countries.

On the strategic plan for Africa he said that such a concept must be tabled by African countries. The EU can only push them in the right direction but the original idea must come from Africa. He agreed that the plan should be more strategically oriented.

On the EU's role, he said the visibility of what the EU does in respect of peace-keeping, debt assistance and trade assistance is not always obvious. He said that perhaps what they do should be more visible.

Mr Hanekom (ANC) noted concerns for the agricultural sector in South Africa. There is an increasing concern that some EU measures such as the common agricultural policy get in the way of what South Africa is trying to achieve. Four billion rand of the EU budget is used to provide direct support to their farmers. This large system of subsidies has a price-depressing effect on the global economy and a negative impact on South Africa. South Africa has largely opened its markets but third world country markets are not open to South Africa because of surpluses from the EU (which come from the subsidies).

Mr Lamy said that the original concept for the common agricultural policy started in the 1950s and 60s was built for self-sufficiency. It has resulted in trade distortion. They are in the process of changing this. Since 1990 they have started moving in the direction of less trade distortion in respect of agricultural policies in Europe. They are moving toward a system of agricultural support which goes to the revenue of farmers. He added that it is politically a difficult situation.

It is true that the EU is still supporting inefficient farmers which are maintained by the common agricultural policy. The reason for this is because economic appraisal in Europe is not just about buying and selling but has a multi-functional role to play. They are shifting their system toward less domestic support as a trade-off with other elements. Politically it is a difficult trade-off.

Mr Beukman (NNP) asked if there was movement in the EU to provide more aid through NGOs.

Mr Lamy agreed that they are relying on NGOs. This is more so in South Africa than elsewhere at present.

Ms Taljaard (DP) asked for a comment on the high levels of investment that the EU made at the African summit in Cairo. She also asked for the EU's comments on a global competition policy.

Mr Lamy replied that the EU is not an investor. They are in a system of market capitalism. Investors look at making a profit. The EU can create a stable environment for investors. The main thing that the EU can do is to contribute to the stabilisation process.

He said that there are no international competition rules now, but in light of the speed of globalisation there will be an international competition regime in a few years. Currently there are several competition cases which have to be looked at by the US and the EU competition authorities, for example, the Microsoft case.

Additional information on the Cotonou Convention
It replaces the four previous Lome Conventions, which structured ACP-EC trade, development and broader relations since 1975. The Convention is geared to tackle poverty within the ACP states, by establishing effective ACP-EC political dialogue, development support and trade and broader economic cooperation. It is particularly concerned to reverse the trend towards economic, technological and social marginalisation of the ACP states - specifically endeavouring to stimulate regional integration among the ACP states and their better involvement in globalisation trends. The Convention strives to enhance ACP-EC adherence to the accepted international principles of respect for human rights, the rule of law, good governance and democratic processes and practices.

Its uniqueness is also evident in the ways in which it seeks to involve civil society, the private sector and organised labour in viable partnership projects. These non-state partners participation in the Convention's implementation, is regarded as key to its wider success, legitimacy and transparency. They are being informed and consulted in the choice of ACP-EC cooperation projects. Similarly, gender equality and environmental sustainability is targeted in all new ACP-EC cooperation processes.

This new twenty-year ACP-EC Convention, will be reviewed every five years. It also has a new five-year, EUR 13.5 billion development resource window - the European Development Fund (EDF). The EDF is designed to be applied to achieve more balanced macroeconomic fundamentals, along with expanded private entrepreneurship and social service delivery. New ACP-EC partnerships will be forged, to replace the previous trade preferences granted to the ACP states by the EC. These new arrangements will remove tariff barriers reciprocally and progressively, with the aim of attracting investment.



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