Door opens just a little widerBy Estelle Drew
In 1999, after four years of intense discussions, the EU and South Africa concluded negotiations on an historic trade and partnership agreement. The Trade, Development and Cooperation Agreement (TDCA) came into force this year, but only after delays because of the reticence of some EU member states.
As a result, South Africa, a qualified (but not full) member of the Lomé Convention since 1997 will have better access to the EU. The agreement is in line with the EU’s new development policy to facilitate Africa’s integration into the world economy by promoting growth, competitiveness and investment. It also includes provision for a Free Trade Area (FTA), financial assistance, development cooperation, trade related issues, economic cooperation, social and cultural cooperation, and political dialogue.
The most important element of the bilateral agreement remains the establishment of a FTA between the EU and South Africa. The free trade agreement is fully WTO (World Trade Organisation) compatible and aims at strengthening the relationship between the two sides. The EU is already South Africa’s main trading partner, accounting for 40% of South Africa’s imports and exports. With 70% of the country’s foreign direct investment, the EU also represents South Africa’s main investor. However, unsurprisingly, South Africa accounts for only 1.9% of the EU’s imports and 1.3% of its exports.
The agreement should apply to most products by the end of a transitional period. At present, some products (mainly agricultural products) are excluded from the agreement, while others - such as certain textile and automotive products - are only subject to partial liberalisation. Although the EU claims to be committed to opening up its markets to South Africa in a fast and broad manner, its exclusion of some key products from the agreement has infuriated South Africa.
Detailed rules
of origin
The EU-South Africa trade agreement contains detailed rules of origin in order to ensure that the products benefitting from the preferential agreement are of European or South African origin. These products must have been ‘wholly obtained’ or ‘sufficiently worked or processed’ in either the EU or South Africa to be included within the agreement. However, if South Africa has difficulties in complying with some of the rules of origin, it can seek derogations from the agreement.
The TDCA provides the legal basis for continued financial assistance for development activities in South Africa. Development assistance from the EU is already in hand in South Africa, through the European Programme for Reconstruction and Development (ERPD) and the multi-annual loan programme for South Africa. From 2000, there will be a wider focus on development projects and programmes.
The EU-South Africa agreement not only covers trade and development aspects, but also deals with political, social and cultural issues. Political dialogue between the two parties is also encouraged on issues such as social justice and racial, political or gender discrimination. The EU and SA are both pushing for a better understanding of cultural diversities.
Nevertheless, the deal came close to collapse in February 2000 when Italy and Greece threatened not to ratify the new Agreement. These countries wanted South Africa to stop using terms such as ‘grappa’ and ‘ouzo’, which they believed should only be applied to their ownproducts. This nearly scuppered the whole multi-billion pound deal, even though South Africa only produces very limited quantities of these products in comparison to Europe.
South African resentment
Not only has South Africa been refused full membership of the Lomé Convention by the EU, it has repeatedly faced considerable European trade protectionism.
The resentment felt by the South Africans was highlighted at the last EU-ACP Joint Assembly in Abuja (Nigeria) in March (see African Business, May 2000), when the South African delegate Bob Davies noted that “certain vested interests” in the EU had threatened to hijack the new strategic relationship between the EU and South Africa.
The stance taken by these EU member states was also strongly criticised by British MEP Glenys Kinnock who considered it “appalling protectionism”.
British MEP Caroline Lucas warned that the EU’s protectionist stance had set a worrying precedent for future agreement talks between the EU and ACP countries, and was worried about the potential loss of customs duties on South Africa’s neighbours such as Swaziland.
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