Spain’s acceptance of South Africa to the Lom Convention is only the beginning of a wider battle over trade and development issues, writes Lynda Loxton
SPAIN’S decision not to veto South Africa’s limited accession to the Lom Convention was only the start of a process of negotiating a new trade agreement with the European Union, parliamentary trade and industry committee chair Rob Davies said this week.
Interviewed soon after his return from a meeting of the joint assembly of the EU and the African-Caribbean and Pacific (ACP) states, Davies said Spain’s decision opened up the way for South Africa to be granted Lom membership in April, but many bilateral trade issues still had to be cleared up.
”We will, in fact, derive very few direct economic benefits from our qualified membership of Lom,” he said.
”It gives us access on an ad hoc basis to the accumulation rules, which means that a product that is produced in an ACP country with South African inputs can enter the EU on a Lom basis. But this facility is only available on an ad hoc derogation basis.
”It gives South African companies the right to tender for contracts which are funded under the EU development fund. We will then also participate in the joint bodies of the ACP, the joint assembly and the ministerial meetings.
”It is probably quite important that we do participate because this is the time when the ACP/EU negotiations on the future of Lom are taking place.”
It was clear, therefore, that the main benefits South Africa hoped to derive from a new relationship with the EU – namely trade related issues – were being dealt with bilaterally. And, as the saying goes, the devil is in the detail.
A number of recent thorny trade issues highlight the difficulties ahead. For example, there has been an outcry in recent weeks about the alleged dumping of EU beef in Southern Africa.
Davies said this was owing to the fact that South Africa had ended direct controls or quotas on imported beef at a time of a huge beef surplus in Europe partly because of the mad cow disease scare.
As a result, there had been a massive increase in beef imports and Davies estimated that they had risen from about 7000 tons to 47 000 tons.
”The most important thing is that this beef draws exports subsidies of around R6/ton and it comes in at about half the South African landed price,” Davies said.
”This not only threatens the South African beef industry, but also that of neighbouring countries.”
The issue had been raised with the EU and it slightly reduced the subsidies for beef sold here, but this had ”made a very marginal difference and not addressed the fundamental problem.
”It is a major problem and it is estimated that the loss to South Africa and Namibian producers is larger than the total amount of EU aid made available to South Africa and Namibia. Namibia is estimated to have lost about 11% of its beef export market.”
Davies said this highlighted the fact that the EU did not always stick to the broad developmental principles it espoused in trade matters.
”The fact of the matter is that it amounts to selling a product in a foreign country’s market at below the cost of production and in a way that is damaging the economy of the recipient country,” Davies said.
”It may not be that a legally enforceable dumping case can be made, but we need to get some awareness of this point. At the moment, the attempt is to try to deal with this through negotiation, but we need to see some consistency.” On the other side of the coin, some South African producers were facing insurmountable barriers to entry into the EU market. Davies has tried to highlight the case of the Langeberg fruit-canners in the Western Cape as a case in point. Most of their products remained on the agricultural exclusion list and attracted duties of about 25%, which would probably go down to about 18% when the EU implemented its Uruguay obligations.
Davies said this was based on fears that the canners would ”flood” the European market, putting many competitors there out of business. This overlooked the fact that South African canners faced severe land and water restrictions and their growth potential was limited. They also did not measure up to the quality and price requirements of the EU market.
These issues affected not only South Africa, but also its neighbours in the Southern African Development Community – a point South Africa has been trying to bring home to the EU with mixed success.
”A lot of lobbying work needs to be done in Europe,” Davies said.
”We need to be pushing for consistency between principles and actual positions and the beef dumping issue is not a very good omen.”
Davies said that it was important, however, that as part of the Lom Convention, South Africa would be party to discussions on the future shape and direction of the accord.
The EU had produced a Green Paper pinpointing several options on the way forward but Davies said it signalled ”a fairly radical and drastic change from the pattern of Lom IV”.
Chief among these was an enhanced relationship with the least developed countries and a move towards a reciprocal arrangement for the rest.
Davies cautioned against this approach, which appeared to be mainly motivated by the fact that the ACP countries’ share of EU imports had been declining and that reciprocity would be vital to compel ACP states to subject themselves to the discipline of the global market and increase their competitiveness.
”Such a view is based on a rather simplistic and one-dimensional view of the requirements for the successful integration of developing countries into the world economy,” he said.
While it could be agreed that a combination of macro-economic stability, opening up of domestic markets and the development of supply capacity were needed, this would vary in degree and intensity from country to country.
Davies said developing countries were already subject to the discipline of their Uruguay round obligations [of the General Agreement on Tariffs and Trade, the precursor to the World Trade Organisation] and many were subject to structural adjustment programmes.
”It is not immediately obvious that subjecting them to the further disciplines of, and adjustments by, a reciprocal agreement will be beneficial,” he said.
The EU Green Paper had not attempted to analyse or explain why the ACP states’ share of the EU market had not reached expectations and it was not clear whether the aim was to move to reciprocity by withdrawing preferences.
It also had to be borne in mind that negotiating reciprocal trade arrangements required ”enormous negotiating effort” that not all developing countries could necessarily cope with.
”It is strain on our capacity but what about countries with lesser capacity?” Davies asked.