Tuesday, July 20, 2010

'Disappointing' Sacu talks fail to resolve disunity over EU deals

By Donwald Pressly, July 20, 2010, Business Report

Little progress was made in resolving differences between the minor players in the Southern African Customs Union (Sacu) and the key player, South Africa, after the heads of state meeting called by President Jacob Zuma last week.

There was no discussion on the long-standing issue of Mozambique becoming part of the union, although the issue of other regional states joining the five-member group remains on the Sacu agenda.

There was also no resolution on the issue of a common external tariff for the region.

Describing the meeting as "disappointing", Trade Law Centre director Trudi Hartzenberg said it would be bad for business in the region if the customs union was downgraded to a free trade area. This was one way of resolving the issue of economic partnership agreements (EPAs) signed by Botswana, Swaziland and Lesotho with the EU in 2008, which caused uncertainties over a common external tariff.

The impact of this would be that goods imported from a third party - a state outside of Sacu - could become liable to trade tariffs as the goods crossed the border into one of the five member states, which also includes Namibia. Namibia, like South Africa, has not, as yet, signed an EPA.

Hartzenberg explained that South African businesses that were flourishing in the region might import items from the EU, which could then face tariffs as they crossed borders into, for example, Botswana. Most goods came through the ports of entry in South Africa before being shipped across the borders of Sacu states.

Disharmony has grown in the group since the signing of the EPAs but Zuma declared at the end of the weekend meeting that Sacu revenue should focus on fostering trade and tariff policies that supported industrialisation in the region.

South Africa has long held the view that payments from the revenue pool should not prop up member states' budgets.

Department of Trade and Industry chief director for multilateral relations, Xolelwa Mlumbi-Peter, confirmed that there had been "no discussion" on the long-standing matter of Mozambique joining the union. "Sacu must agree on accession criteria," she said.

On the matter of the EPAs, she said it had been agreed by the heads of state that there should be "a unified approach". It had been agreed to "continue engaging collectively with regard to EPAs".

Hartzenberg said there was "enormous tension" between the interests of the smaller countries in Sacu who had signed the EPAs and their commitment to Sacu.

This was because in terms of an article of agreement between the states, they are committed to negotiate collectively with any third party.

However, both Botswana and Namibia were between a rock and a hard place over their beef exports to the EU. Outside of EPAs they would have to fall back on a general system of preferences which did not include beef, a key export item for both countries.

That could mean the states would lose duty-free, quota-free access of their beef to Europe. It was all very well to say that these countries should establish new markets outside Europe, but establishing new trade channels was not easy, Hartzenberg pointed out.