A free-trade deal with Europe is only a matter of months away, writes Madeleine Wackernagel
Talks with the European Union (EU) over a free-trade agreement have dragged on for so long that the typical response to yet another statement from one side or the other is confusion at best, lack of interest at worst. But as the parties meet again for the 15th round of negotiations early next month, this time to discuss trade-related issues and economic co- operation, signs are that a deal is finally within reach.
Indeed, says Bahle Sibisi, director of bilateral trade at the Department of Trade and Industry, which is spearheading the talks: “We have broken the impasse and reached agreement on how to push the process through faster for the first time. Both sides now know in detail what the structure of the agreement will look like and how tariffs will be phased down.
“If we conclude the next stage of the negotiations as envisaged, ratification should be possible in the first half of 1998, with the institutional issues completed by the beginning of 1999.”
The EU, despite having instigated the talks, is severely constrained by its common agricultural policy, which protects most of its agricultural produce against foreign competition.
South Africa, says Rashad Cassim, head of the Trade and Industrial Policy Secretariat, would be willing to liberalise its entire economy if the EU followed suit, but Europe is hamstrung by political considerations. This does, however, mean that South Africa has more leverage in turn to protect its sensitive sectors, such as agricultural products and the motor industry.
South Africa has also insisted from the outset that any deal must also take our neighbours into consideration.
Botswana and Namibia, for example, are big beef producers and fear that an EU deal would give the Europeans preferential access to South Africa’s markets. But, says Sibisi, South Africa is proposing that “sensitive” products, such as red meat, be left out of the trade deal. In this way, regional exporters win preference over the Europeans.
Both parties have identified “sensitive” products that would be governed by separate protocols but there is some variance over defining the term. South Africa has stipulated they should be economically sensitive rather than influenced by political considerations; the EU, however, has to battle a strong agricultural lobby.
So far, the South African team has proposed that red meat, dairy products, winter grains, sugar, wine and spirits, fall into the category of sensitive agricultural goods, with textiles and clothing, motor assembly and parts, as well as television components and assembly, falling under industry. But a formal response from the EU is still awaited.
In the meantime, talks continue next month on trade-related issues, including competition policy and intellectual property rights, in addition to economic co-operation, covering industry, services and agriculture.
South Africa has yet to put its new competition policy in place, so the EU is expected to monitor closely any potential breaches of the free-trade spirit, including the erection of non-tariff barriers. Intellectual property rights, on the other hand, have been adopted under the Uruguay round of the General Agreement on Tariffs and Trade, the forerunner to the World Trade Organisation.
South Africa has already outdone itself in terms of the World Trade Organisation by dropping tariffs more rapidly than required. At present, approximately 23% of our imports from Europe are duty-free and the EU deal would allow some asymmetry, with the EU dropping tariffs at a faster rate than South Africa.
Thus, as the negotiations stand now, when the agreement comes into effect on January 1 1999, 90% of the EU’s total trade should be duty free, rising to 94% between 2000 and 2002; 98% in 2003/05 and 100% in 2005/11.
South Africa would be allowed a 65% rate in 1999, rising to 70% of total trade being duty free by 2002/04 and 85% in 2005/11.
In the United States, the administration is keen to open up trade with Africa and legislation to this end is being considered. But the Africa Growth and Opportunity Act, launched with much fanfare in April, is now unlikely to be passed by Congress until next year.
The Act was grounded in the “trade not aid” theory; the United States administration could do more good to support economic growth in Africa by granting countries easier access for their products. But the narrow focus of the Bill has raised alarm in some quarters, contributing to the hold- up. Social development must become part of the picture.
It is not enough to only include those countries that are getting on with their market reforms and are already firmly set on the path to economic growth, says Dr Millard Arnold, minister-counsellor for commercial affairs at the US commercial service in Johannesburg. There are many more countries in desperate need of assistance that still need to be helped, even if their policies are not market- oriented.
“The Clinton administration, more than any other, is focusing on Africa,” says Arnold. “But just bulldozing the legislation through without considering all the options would be counter-productive.”
South Africa’s role in these discussions has been to put the rest of the continent first – an extraordinarily magnanimous gesture, says Arnold.
Hopefully, it will pay off.