Trade Negotiations: briefings: Dep. Minister, Trade & Industry & Minister of Foreign Affairs

Meeting report

Opening Remarks by Chairperson
The Chairperson explained that this was a joint meeting between the Select Committee on Economic Affairs and the Portfolio Committees on Foreign Affairs and Trade and Industry. The briefings by the Deputy Minister of Trade and Industry and Minister of Foreign Affairs would focus on the developments regarding the negotiations on the Economic Partnership Agreement (EPA), which was becoming a very important aspect of the trade regime that informed how the country traded with the European Union (EU). The implications of EPA extended beyond trade relations and affected how the region functioned politically and how Southern African Democratic Community (SADC) states related to each other.

Briefing by Deputy Minister of Trade and Industry
Hon Rob Davies, Deputy Minister of Trade and Industry, summarised that the EU had initiated the EPAs as an alternative to the Cotonou Agreement, which gave non-reciprocal preferences to African, Caribbean and Pacific (APC) countries. The EU argued that it could no longer offer non-reciprocal preferences and that it was necessary to shift to a World Trade Organisation (WTO) compatible agreement.

The EU was of the view that the EPAs would support regional integration. However, these had in fact achieved the opposite result because SADC countries were divided into four different configurations when it came to the EPA negotiations. The emerging EPA created a series of new policy divisions in SADC, among the SADC EPA countries as well as in the Southern African Customs Union (SACU). In the interest of promoting regional integration and harmonising trade relations with the EU, South Africa chose to join the SADC-EPA process. It was under no legal obligation to do so because South Africa already had a Trade, Development and Cooperation Agreement (TDCA), which governed its trade relations with the EU.

The SADC-EPA proposal was adopted in March 2006 and it was argued that that there was no need for further reciprocity because of the impact of TDCA on Angola, Mozambique, Tanzania (AMT), all SACU members and Least Developed Countries (LDCs) in the region. It was therefore resolved that the EPA negotiations should focus on Duty Free, Quota Free (DF, QF) access to the EU market.

The EU responded after a year and granted DFQF access to the region for all products, with the exception of sugar, rice and “competitive products” from South Africa. The EU further proposed that the EPA process include negotiations on trade in services and “new generation” issues. South Africa strongly opposed the introduction of these two issues because SADC did not have common positions on them. South Africa also advanced that the region did not have a common investment and competition policy. Nevertheless, it agreed to cooperation, but not a binding obligation, with a view to building capacity in the region in these areas. The EU remained adamant that it wanted firm commitments on these issues.

Mr Davies indicated that LDCs were put under pressure to remove tariffs on a minimum of 80% of imports from the EU over a 15-year period. Controversially, the EPAs promoted the concept of collectivity, which implied that the SADC-EPA would have to act together in complaints against the EU, and that the EU could act against all SADC countries if there were to be a complaint against one state. Furthermore, he highlighted that the More Favoured Nation (MFN) clause created major impediments to trade diversification and South-South trade relations. South Africa refused to initial the interim EPA, while Botswana, Lesotho Swaziland, Mozambique and later Namibia had signed. The decision to initial was taken without reference to SACU processes, despite the potential for creating new borders in SACU and a gridlock in its trade strategy.

Finally, he announced that there would be a meeting with the EU Trade Commissioner on 4 March. It was expected that this interaction would determine whether there was a commitment to address the concerns of South Africa and the region.

Minister of Foreign Affairs Briefing
Hon Nkosazana Dlamini-Zuma, Minister of Foreign Affairs, indicated that she would supplement the presentation delivered by Mr Rob Davies. She revealed that the African Union (AU) had discussed this matter because other regions also experienced the same problems regarding the manner, pressure and speed of the EPA negotiations. Consequently, several African Heads of State raised these concerns at the Second Africa-EU Summit, and there was an agreement that there should be a review on the interim EPAs.

The Minister emphasised that it was imperative for the entire SADC region to regroup and adopt a common view, despite the fact that some countries had initialled the interim EPA. The region could not function in a divided manner and should work instead towards a more unified and coherent position.

Furthermore, the Minister claimed that the EU was using these negotiations beyond just normal trade negotiations. The EU was attempting to regain ground, which they perceived they had lost, in their quest for hegemony in Africa. In the past, the EU was the dominant factor on the continent. This was no longer the case and the EU was “pressing the panic button” to counter challenges by China and India. Finally, she declared that Africa wanted to negotiate with the EU in good faith but would not allow itself to be dictated to regarding its dealings with other partners.

Discussion
Mr M Ramgobin (PC Foreign Affairs, ANC) stated that the EPAs should not be seen in isolation of what was happening in the world. He advised that individual African states should examine themselves in the context of the region and the continent to reflect on issues of unity and division.

Ms S Camerer (PC Foreign Affairs, DA) thanked Mr Davies for an interesting briefing. She enquired what strategies were in place to counter the hegemonic ambitions of the EU and to ensure that SACU would speak with one voice.

Dr Dlamini-Zuma replied that the Department was engaging with Botswana, which was the lead negotiator, and other countries to find a common position. She insisted that the EPAs were provisional, and that there still was an opportunity to reach some consensus.

Ms F Mohamed (PC Trade and Industry, ANC) believed that the “More Favoured Nation” clause was problematic. She asked whether the different SADC states, which were configured under different EPAs, exchanged notes and kept each other informed about developments in their specific EPAs.

Dr Dlamini-Zuma answered that the SADC Secretariat was responsible for ensuring that there was an exchange of information between the SADC-EPA and other EPAs. She conceded that she was not certain whether this happened in reality. Lastly, she stressed that this exercise was necessary to attain the harmonisation between the different EPAs due to cross-membership.

Mr J Sibiya (SC Economic Affairs, ANC) posed two questions. Firstly, he queried why many LDCs in SADC and other regions agreed to remove tariffs of about 80% of EU imports over 15 years, without negotiating a similar reciprocal deal. Secondly, he sought to understand the EU’s restrictions on importation of South African cheese and red meat.

Mr Davies explained that LDCs benefited from a Duty Free, Quota Free (DFQF) system for all their products, with the exception of rice and sugar, entering the EU. In exchange, regions were expected to substantially reduce tariffs of imports from the EU. This arrangement differed from previous DFQF agreements, which were non-reciprocal. It was also one of the concerns raised by South Africa. In response to the latter question, Mr Davies confirmed that the EU normally placed restrictions on agricultural products.

Mr Xavier Carim, Chief Negotiator: DTI, announced that all issues relating to agricultural products were dealt with directly by the Department of Agriculture (DoA). Nevertheless, he expanded that the EU wanted preferential rates for its cheese imported into South Africa and offered to reciprocate this favour to South Africa. Negotiations were still ongoing but the Department of Agriculture was reluctant to make any such concession because European cheese was subsidised. Regarding red meat, he indicated that South Africa had had an outbreak of foot and mouth disease in the latter part of the previous year. The EU subsequently banned all imports of beef from South Africa, and only relaxed this after assurances from DoA that the country’s beef was safe. Finally, he added that the Member had implicitly raised a fundamental question whether the EU was using standards as a protection mechanism, and whether South Africa should retaliate. Unfortunately for South Africa and other developing countries, this was not possible because of scientific and institutional capacity constraints. 

Mr S Rasmeni (PC Trade and Industry, ANC) examined why South Africa was not part of the original EPA negotiations. He suggested that this was an illustration of a lack of regional integration. In addition, he asked what the real motivation was behind South Africa’s decision to enter into the negotiations.

Dr Dlamini-Zuma clarified that the EU initially did not want South Africa to be part of the negotiations because it already had its own trade arrangements with the EU in the form of the Trade, Development and Cooperation Agreement (TDCA). The EU configured SADC and SACU members into different EPAs, which was agreed to by African states. This collective mistake impacted negatively on SADC because it played on existing divisions. After the division, some members of SADC were incorporated in the Common Market for Eastern and Southern Africa (COMESA) EPA while others remained part of the SADC-EPA. In order to reduce further fragmentation, and in the interest of regional integration, South Africa sought to become a member of the latter formation.

Dr A Luthuli (PC Foreign Affairs, ANC) remarked that the EU reached its stage of development after many years and numerous difficulties. She reckoned that the EU was stampeding and rushing the different regions into a decision. The process was being driven without regions being given the space to arrive at a coherent position. Ultimately, she accused the EU of engaging in tactics of divide and rule.

Dr Dlamini-Zuma confirmed that countries were pressurised into signing the EPAs due to threats that they would lose out on certain concessions. For its part, South Africa refused to sign because it would not be worse off, and because it still had the TDCA to fall back on.

Mr Davies commented that the Department was not condemning any country that initialled because it understood the intolerable pressure the countries were put under.

Mr D Dlali (PC Trade and Industry, ANC) asked whether there was any prospect of starting the EPAs afresh. He also queried why South Africa was treated differently and was not entitled to DFQF privileges.

Dr Dlamini-Zuma stated that South Africa’s stage of development and capacity was different to that of other countries in the region. Also, she remained optimistic that SADC would thrash out all the issues and reach a common view, which would form the basis of restarting the EPA negotiations.

Mr Dlali referred to certain claims in the Business Day newspaper, which mentioned worrying comments attributed to the Botswana and South African governments.

In response to this, Dr Dlamini-Zuma countered that those allegations in the article emanated from a faceless and nameless individual, and should therefore be treated with the contempt that they deserved.

Mr Dlali stated that Africa was not treated as an equal partner in the negotiations. He could not comprehend why Africa continued to beg when it had an abundance of natural resources.

Mr J Seremane (PC Foreign Affairs, DA) commended Mr Davis for a “meticulous and informative” presentation. Like the previous Member, he was adamant that Africa should be treated as an equal partner in all negotiations. He continued that Demands should not be placed on African countries if they were not given the opportunity to make demands in return. 

Mr M Pheko (PC Foreign Affairs, PAC) maintained that African countries were adopting the position of beggars towards other countries, despite the wealth of natural resources in Africa. He stressed that Africa should strive to create a relationship of interdependence and not dependence. He also added that the continent should resist hegemony and always assert its independence and unity.

Mr J Maake (PC Trade and Industry, ANC) described the EPAs as “sheer bullying and blackmail” by the EU. Instead of promoting unity, the EPAs achieved the opposite result.

Ms D Ramodibe (PC Trade and Industry, ANC) commented that the EU was threatened by South Africa’s ability to bring together other African countries.

Dr Dlamini-Zuma disclosed that Africa did not enter into the negotiations as equal partner because in all frankness, it was not on par, economically, with the major foreign powers. She acknowledged that Africa was rich in natural resources. However, it could not claim to be rich because it could not manage to turn all its resources into wealth. Nevertheless, she remained convinced that Africa had the potential to be rich. Finally, she admitted that the continent usually went with a begging bowl to the EU and other rich countries.

Prof E Chang (PC Trade and Industry, IFP) enquired why South Africa did not involve other members of SACU in its bilateral trade negotiations with China.

Mr Carim contradicted this claim. SACU was consulted. Although this did not take place early in the process, but still some time before the Agreement was implemented.

Mr S Njikelana (PC Trade and Industry, ANC) characterised the EPAs as the re-colonisation of Africa, only in a more dangerous and sophisticated way. He proposed that parliament engage with the Inter-Parliamentary Union (IPU) to explore the issues that impacted on the WTO negotiations. Lastly, he inferred that the EPAs were a serious attempt to reverse all the gains made by developing countries.

Dr Dlamini-Zuma insisted that SADC should investigate whether the real objective of integration was just to develop a free trade Custom Union, or to develop capacity within the region to manufacture, sell, and export products. If it was not the latter option, South Africa would continue to dominate and would, to some extent, be no different to the EU. Lastly, she appreciated Mr Njikelana’s suggestion regarding parliament’s active engagement with its EU counterparts. She added that this would add value to the debate.

Mr Z Madasa (PC Foreign Affairs, ANC) raised three issues. Firstly, he asked about Africa’s shift towards Asia. Secondly, he sought to determine whether the Department of Trade and Industry (dti) had engaged the business community on the issues surrounding EPAs. Thirdly, he observed that the EU was strong because all member states had a common economic policy, which was not the case in the SADC region.

Mr Davies responded that South Africa was a resource-based economy and its resources were in great demand by China and India. In light of this, the Department rejected any attempts to preclude African states from diversifying its trade relations and strengthening South-South relations. Lastly, he revealed that business and labour, through NEDLAC, were informed about the negotiations.

Dr M Sefularo (PC Foreign Affairs, ANC) stated that he did not have a sense of the country’s or the continent’s red lines. Consequently, he urged the Department to identify this as a matter of priority.

Mr Davies replied that the Department’s red lines were on the issues of trade services and new generation issues, which were disregarded by the EU. He indicated that “the more we can hold our lines, the better it will be”. In conclusion, he mentioned that parliament could add value by identifying what the red lines should be.

Mr Carim explained that the Department had studied the EPA text and identified eight or nine red lines.

Mr B Martins (PC Trade and Industry, ANC) reminded all participants that parliament would ultimately decide whether to ratify the EPA.

Mr Davies recognized the role that parliament would play and stated that the Members’ concerns, reservations and objections would be conveyed to European Trade Commissioner Mandelson at the meeting next Tuesday.

A member enquired whether the Minister foresaw light at the end of the tunnel.

Dr Dlamini-Zuma stated that this would only be the case if there was a substantial renegotiation of the EPAs.

The Chairperson stated that the struggle to reunite the region would not be easy. Despite this, he challenged the Departments to pursue this endeavour.

The meeting was adjourned.