Thursday, September 4, 2008

Analysis of EPAs negotiations - July 2008

Eastern Africa-Southern Africa (ESA)

In ESA the make up of country groups and the intentions of the countries change. ESA was created by the EU, who tried to mop up COMESA into one group. However, ESA does not correspond to COMESA. The relationship between CS and negotiators in ESA is not great. However, the relationship between MPs and CSs is a lot better.

· The EAC countries, Burundi, Kenya, Rwanda, Tanzania and Uganda initialled an EPA as a regional grouping

· Other ESA countries to have initialled an EPA are Comoros, Madagascar, Mauritius, Seychelles and Zimbabwe

· Djibouti, Eritrea, Ethiopia, Malawi, Somalia, Sudan and Zambia being LDCs export under EBA

The EAC aims to conclude an EPA by June 2009. There were rumours that they will sign the Interim EPA on 26 June. The EAC made quite extensive liberalisation commitments, driven by Kenya (flowers, horticulture etc). Entering into an EPA will seriously undermine the EAC, who themselves have a flexible trade relation/agreement. There are signals from Uganda and Tanzania that they are not happy with the IEPA. The EAC is not keen on opening their market for services; instead they only want cooperation clauses in the full EPA. The EAC EPA is attracting a lot of criticism from industrialists and farmers.

At the end of June, there was an EAC workshop in Mombassa to create coherence between the negotiating positions of EAC countries on WTO issues and in the EPA negotiations. The main differences in position are not between the EAC countries themselves, but between the negotiators in Geneva and the EAC states. The governments defended what they had negotiated in the EPA negotiations while the Geneva negotiators were critical on that. The negotiators realised the need for coherence between their positions. The EAC countries requested advice from UNCTAD[8] and other organisations on chances and risk of negotiating on services liberalisation and trade- related issues.

Malawi will not sign, because they can export under EBA.

Zambia initialled an EPA to safeguard access to the EU market for some export products and to obtain speedy EDF disbursement and improved Rules of Origin. Services are very important for Zambia. Zambia, Zimbabwe and Malawi are playing with the thought of negotiating under SADC.

There will be a workshop for ESA MPs to create discussion in the ESA parliaments with well-informed MPs. This should spill over to ministers and public debate and influence the negotiations. There is great cooperation between CS and MPs in Kenya, Uganda, Zambia and Tanzania.

Southern Africa region (SADC)

· SACU[9] plans to SIGN an IEPA with the EU by July 1. The announcement was done during the Council of Ministers of SADC 2008, where it was said that all five members are now working together.

· Botswana, Lesotho, Mozambique, Namibia and Swaziland initialled an Interim EPA

· South Africa has its own FTA[10] with the EU, the TDCA[11] and has been resisting initialling or signing an EPA.

· Angola exports under EBA

· Tanzania, Zimbabwe, Zambia and Malawi are negotiating in the ESA formation 

South Africa (SA)

South Africa is a key country in terms of resistance against the SADC EPA. The South African government has maintained a rather pro-development position with regard to EPAs. There is a willingness of the SA government to engage with CS in discussions on problems with EPA. SA cannot initial an agreement anymore, because the EC Regulation specified that this had to be done before the end of 2007, so the only way that they can join would be by signing an EPA.

A number of South African groups and universities articulate free market policy approaches without paying attention to development for poor people. The main interest of big business, like insurance and mining companies, is in investing outside so they try to ensure that South Africa does not do anything to limit their capability to freely ‘play’ in the global market. As they want to penetrate other African markets they do not want much protectionism and regulation on the continent and consequently they are not interested in domestic trade policy. As an example, in their relation with China, SA has more investment in China than vice versa.

Though Trade unions mainly COSATU haven’t been active players in EPA debate they are anti-EPA, because of job protection. The metal workers union, are opposed to the EPA because it threatens to remove current protection of vehicle manufacturing and the health workers union because their sector will be threatened by services liberalisation.

The Treatment Action Campaign (TAN) that focuses on treatment for HIV/AIDS people fight for the need to develop generic manufacturing capacity within SA and are very aware of the risk of protection of IP rights. 

The churches have campaigned against EPAs but at the moment the focus is on xenophobic violence and on Zimbabwe. 


Swaziland, Lesotho and Botswana

The reason for Swaziland (S), Lesotho (L) and Botswana (B) to initial an EPA is mainly not to lose development (EDF) money from the EU. Because their services sectors are underdeveloped and they have hardly anything to regulate they have no problem signing away any policy space in that area.

B, S and L are government-dominated states and have reasons to want to escape South African domination. In all three cases the main pushers for the EPA is the government, which faces virtually no opposition.

In Swaziland people are appointed by the king, and if you don’t agree with the government position, you go, hence there’s no way to influence the government. Lesotho, is so small, it is a government state with no private sector. All private sector companies are branches from South African companies. Botswana is quite the same. While ostensibly democratic, the main party has been in power for years, they manage the country and there is no way the opposition will come to power. 

The EU or SACU, a dilemma to escape SA domination

All SACU members except Botswana are members of the common monetary area. Botswana’s monetary independence is a strong currency.

Swaziland and Botswana have a very important diamond industry. 

The destruction by the South African lorry and vehicle industry of the Botswana industry is one of the causes for Botswana’s resentment against SA. In agricultural policy, Botswana maintains a closed border with South Africa. You cannot sell Botswana products in SA, which is against customs union agreement but they do it all the same!

While EU money is a substantial part of the budget of B, S and L, another substantial part of their money comes from the common revenue pool from SACU that consists of three divisions: Customs; Excise (South Africa contributes 99% of all excise taxes, which are subsequently divided according to GDP, while SA only receives 0.3% so they effectively pay the other SACU members); a Development component that still needs to be finalised. The Swazi budget consists of 50-55% SACU money, while for Lesotho this is even higher. Development aid from Europe is actually less than the money they get from SACU. 

SACU/Regional integration

If B, S and L decide to sign an EPA that does not address Namibian and South African concerns (containing clauses on services liberalisation) in order to secure their aid money, this would effectively destroy SACU. South Africa would simply export under their TDCA and Namibia would refuse to sign anything. While this might provide a chance for B,S and L to break away from South African domination, in a couple of years time, these countries would have to come crawling back, because they need the money from the SACU common revenue pool even more than they need the EU aid money.

In the SACU agreement there is a clause stating countries cannot enter into any agreement with a 3rd party without consent of the other members. If they do it again this would split up SACU. The political agenda underlying the so-called stand-off between Botswana and South Africa in the negotiations is key to understanding EPA in the region.

If anything, it is clear that the EPA puts huge pressure on the regional integration process in South Africa and has the potential to regionally disintegrate the region. 

Zambia

Zambia initialled due to some export products, EDF disbursement and improved Rules of Origin. The national working group meeting with EU officials –raised the need for renegotiation of contentions clauses and trade related issues. Services is very important sector for Zambia, however they committed to 60% liberalization under EPA. This is in stark contrast to the fact they have taken on no commitments under WTO !