The European Union insists the free trade agreement with South Africa will be good for development. But it’s missing the mark, argues Dot Keet
The European Union has pressed reciprocal free trade upon South Africa as a condition for South Africa to get better access to the European market. The EU emphasises its benevolent intentions and the development potential such a free trade agreement will contribute to in South Africa.
But such formal declarations of good intent are contradicted by the hard- nosed bargaining and blatant arm- twisting that have characterised the negotiations, diplomatic public statements by both sides notwithstanding.
The most recent example is the tactic of the Spanish government, acting on behalf of the crisis-ridden Spanish fishing industry, to use South Africa’s trade needs in Europe as a lever to force this country to open up its fishing waters and resources to European operators. Such access has had catastrophic effects in the fishing fields of countries – such as Canada – with much greater resources and monitoring capacities than South Africa.
Increased international access to South African fishing resources is very much against the express wishes of all stakeholders – small-scale fishermen, trade unions and the large fishing companies alike – as well as the technical researchers and policy advisers in the relevant government departments.
But such access may yet be conceded as part of the overall trade ”package”. Such a deal, South African negotiators are prepared to concede, may well bring negative effects to ”certain sectors”, but these are presumably judged to be acceptable within the expectation of an ”overall positive balance”.
The uneven effects of free trade are evident in the impact on agriculture: at the same time that European states have been demanding access to South African resources and markets, the formal EU negotiating position continues to exclude competitive South African agricultural products from entering the European market under more favourable terms.
Despite various compromises from the South African side in its proposals in other sectors, the EU negotiators have remained determined to exclude some 46% of South African agricultural exports from the agreement.
The overall exclusions may yet be slightly reduced. But what is equally significant is that, of those South African agricultural exports that will eventually be allowed into the EU, most will only do so towards the end of the stipulated period – a tried-and-tested protectionist trade device known as ”backloading”.
Yet EU agricultural exports will continue to flood into South Africa and the rest of the Southern African Customs Union, underpinned by the vast subsidisation of the EU’s Common Agricultural Policy and other more disguised governmental supports.
This amounts to a form of ”dumping” and can justifiably be deemed to be unfair trade. It carries serious dangers for smaller and unsubsidised producers throughout Southern Africa – such as those already well documented in the meat production sectors.
There may be some South African agricultural exporters, such as those in the canned fruit industry, who believe they will benefit from free trade with Europe. But there are other producers in this sector – and their employees – who won’t benefit, and who are already being badly affected by even the trade liberalisation that has already been introduced.
Even the ”assymetricality” in the trade liberalisation that South Africa has managed to gain during the negotiations is somewhat misleading, and certainly unsatisfactory.
Under these adjustments, the EU will open its markets to local exports faster (over 10 years) than would be required of South Africa in relation to European exports (over 12 years). And the respective coverage, spacing and rate of tariff reductions over these periods will differ.
However, what this still means in practice is that some 53% of EU- manufactured goods will enter the local market tariff-free within the very first years of the agreement coming into effect – and well before South African industries have had time to restructure and face up to the impact of such powerful competition.
Such implications of the proposed free trade agreement for industrial development and diversification in this country are usually overlooked or underplayed, even among government policy analysts, while the limited media coverage focuses on the more immediately evi- dent effects of the agricultural trade aspects.
It is also significant that the attempt by the South African side to introduce the concept of ”ring-fencing” around targeted important but vulnerable industries was not well received by the Europeans, although they insist on protecting their own vulnerable sectors.
The terms under which such industries in South Africa would be opened up would be defined within agreed criteria, and enshrined in special protocols for key industries such as clothing and textiles, footwear, tyres and non-ferrous metals. But South Africa has already made concessions on this front, in an endeavour to persuade the Europeans to offer concessions on the agricultural side, as yet without apparent effect.
In the final analysis, however the details may be modified, the basic problem with the free trade agreement proposals is that they are based on the dubious proposition that free trade creates a level playing field and is beneficial to all participants.
Free trade has very different implications for economies of different size, structure, levels of development, technical resources and export capacities. Years of analysis have pointed out the tendentiousness of free trade claims by most developed countries, and evidence is mounting of the bad effects it has on foreign reserves and balance of payments, and on unemployment and de-industrialisation, especially in less developed countries.
Fundamental challenges to the free trade and free market concepts are emerging. It is becoming more recognised by mainstream analysts – including the likes of economics guru Jeffrey Sachs and World Bank chief economist Joseph Stiglitz – that the radical deregulation and integration of the world’s financial markets carry dangerous effects. The free trade dimension of the neo-liberal paradigm will also have to be revised.
It would be most unfortunate if South Africa were to allow itself to be pushed into signing a highly unsatisfactory free trade agreement with the EU at precisely this historic period of change on the global plane.
South Africa should use the present ”suspension” of its talks with the EU not to continue tinkering with the details and trying to get marginal improvements. It should rather link up with, and use, the debates and international struggles that are opening up.
South African analysts, governmental and non-governmental, could be developing alternatives to the simplistic and dangerous free trade/free market paradigm currently dominating the world.
Dot Keet is a senior research fellow in the School of Government at the University of the Western Cape