SADC trade deal with EU criticised for not promoting regional economic development
The Southern African Development Community (SADC) has received much negative press domestically since its establishment in 1992.
Recently, much of this criticism has been levelled at the bloc and Pretoria over their engagement in a rapidly evolving architecture of regional and international trade deals.
In particular, the Economic Partnership Agreement (EPA) signed by the SADC with the European Union has come under scrutiny. From one political economic view, the deal has been criticised for failing to support efforts to promote inclusive, sustainable development in Southern Africa and for undermining regional integration efforts.
From another, the EPA’s key protagonist in the region —South Africa—has been accused of failing to fully exploit the business-friendly quotas and tariffs that the pact’s liberalised trade regime offers.
These contradictory views were considered at a meeting held by the Centre for Conflict Resolution in Cape Town in July on the effect of the pact, at which it was proposed that the reality is more nuanced than dominant views might suggest.
Much of the discontent with the agreement, which has been provisionally implemented since October 2016, stems from the limited involvement of trade unions and civil society in the protracted and often fraught negotiations to forge the deal, and its disconnection from present regional structures in Southern Africa.
Although it is named after the SADC, only six of the bloc’s 16 members are party to the trade pact.
Indeed, as a partner in the regional EPA negotiations from 2007 on wards, Pretoria freely admits that it front-loaded alignment with its existing Trade Development and Co-operation Agreement with the EU and the common external tariff regime of the Southern African Customs Union, comprising South Africa, Botswana, Lesotho, Namibia, and Swaziland. The only other regional party to the agreement, Mozambique, didn’t sign up until later.
Meanwhile, critics of the agreement further argue that the creation of a free trade regime in goods and services between countries at different development levels will disrupt local production systems, deplete government revenues, create unemployment and institutionalise rather than reduce poverty. They hold that, notwithstanding its safeguards, the EPA undermines member states’ capacity to protect their domestic industries from cheap imports, stripping them of the power to determine which productive sectors should be liberalised and which protected.
The critics also argue that the agreement will disrupt intra-regional trade by prioritising international markets.
These criticisms may be viewed in the broader context of other impediments to regional integration efforts. Structural obstacles include supply-side constraints such as the use of obsolete equipment,inadequate infrastructure, high transportation costs and insufficient capacity for innovation.
The progress towards integration has also been stymied by little political will to implement regional protocols at a national level, exacerbated by the absence of a regional mechanism for enforcing compliance. In addition, South Africa has been accused of behaving like a colonial power in the region, leveraging the market access that it may gain through regional trade deals to pursue its own, parochial economic interests.
However, for its part, Pretoria has expressed the belief that intra- and extra-regional trade must contribute to mutually beneficial regional development and, as the chair of SADC in 2017–2018, aimed to shift the bloc’s economic priorities from harmonising trade and markets to supporting industrial growth.
To this end, South Africa has designed and promoted a regional infrastructure programme and has sought to promote engagement among trading blocs on the continent on the basis of complementary development rather than comparative advantage. Its stated goal remains to forge trade links that can add value to products and increase intra-African commerce from its present low level of 16%of total trade on the continent.
Which is not to say that the SADC EPA doesn’t have clear domestic benefits for South Africa, particularly in relation to agricultural and fishery exports to the EU, which have risen steadily since 2014, with the balance of trade rising to R4-billion in Pretoria’s favour in 2017.
In this context, the new deal, which offers immediate or staged elimination of customs duties over a period of up to 10 years for increasing quotas of wholly obtained or processed fruit, vegetable and fish products, represents a big improvement for South Africa on the terms agreed under its previous pact with the EU.
The EPA further offers multilateral safeguards on exports in line with World Trade Organisation provisions, as well as a transitional mechanism to control the flow of imports to ensure food security and provide SADC signatories with the flexibility to implement measures to protect their domestic agricultural markets.
At the same time, the potential trade benefits to be gained from exploitation of tariff-rate quotas, the elimination of customs duties and the new rules of origin outlined by the EPA may be hindered by the obstacles faced by new entrants to the market. Many smallholder producers don’t have the knowledge and technical capacity to access domestic markets, let alone exploit the trade opportunities offered under the EPA.
In addition, in South Africa and more widely across the region, government officials in relevant departments at national level are hampered by capacity constraints in promoting understanding of the EPA’s implications,while those at the provincial and district levels are, by and large, unaware of its contents.
Notwithstanding such constraints and the SADC EPA’s inherent drawbacks as a tool of regional development, the pact clearly offers potential benefits, which, in a region facing declining growth, rising unemployment and persistent inequality, policymakers can ill afford to overlook.
For example, article 4 of the deal supports the accumulation of materials from different countries in the SADC EPA to produce exports to the EU. The preferential access to European markets offered to such goods may be leveraged to forge regional value chains, promoting sustainable development. The creation of such value chains may also mitigate the effects of drought and climate change in the agricultural sector; promote economic diversification, for example in Botswana’s beef production; support industrialisation and foster mineral beneficiation.
Regional economic development and integration may be further promoted through a range of trade facilitation programmes promoted by the deal, including those that provide technical assistance for exporters,support sectoral restructuring and promote sustainable water use and management.
Mark Paterson is a consultant with the Centre for Conflict Resolution in Cape Town and co-editor of Africa and the Millennium Development Goals: Progress, Problems and Prospects