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EU to look into threats to SACU

Business Section


MBABANE – The European Union (EU) is reported to have committed to look into the ‘contentious’ issues that have threatened to rip apart the Southern African Customs Union (SACU).

This will come as a relief, especially to neighbouring countries, especially those who recently signed the interim Economic Partnership Agreement (EPA) – Botswana, Lesotho and Swaziland (BLS). Angola, Namibia and South Africa (ANSA) refused to sign the interim EPA.

After the signing, SA’s Minister of Trade and Industry Rob Davis reportedly threatened to put up trade barriers in order to prevent cheap clothing from the EU entering the country through the BLS countries. Analysts viewed this threat as a sign that SACU was nearing collapse, as this move would deprive the BLS countries off revenue from the shared customs pool and would spell the end of regional integration, an important tool for global trade.

According to the SA’s Business Day, Davies said, at media briefing before his budget vote speech in Parliament on Tuesday, that he had met with the EU Trade Commissioner Catherine Ashton in Paris last week where she committed the EU to review the rules of origin provisions at the heart of SA’s problem with the interim EPA. He said Ashton’s commitment was ‘significant’.

Rules “She told him the EU would work with SA to align the rules of origin provisions in the interim EPAs with those in the Trade Development and Co-operation Agreement (TDCA) between SA and Europe,” the report reads. Work had already begun at a technical level to achieve this alignment, Davies told reporters. An independent economist who preferred anonymity said the ‘commitment’ by the EU to address the concerns was commendable.

“In fact, it would work in our favour as the BLS countries if these contentious issues were addressed and solutions sought as a way forward, instead of ignoring them and hoping they will go away. This is the attitude in our countries, to take things for granted, which would eventually lead to surprises in SACU mainly because SA is the engine of SACU and most of the BLS countries rely heavily on the customs union for revenue income. We hope the EU and SA, together with the other countries involved, will really seek to solve these concerns amicably,” he said. The interim economic partnership agreements allow for the import of single stage manufacturing clothing imports into SA whereas the TDCA required a two-stage manufacturing process. This prevented Europe being used as a conduit for cheap clothing imported from elsewhere. Davies said if the rules of origin provisions in the partnership agreements were not amended, SA would have to put up border controls and demand rules of origin certificates. This would make free movement in goods within SACU more difficult.

Goods An alignment with the TDCA would mean that no single-stage goods would be allowed into the SACU market. This would achieve policy coherence within SACU ‘for now’, although in the long term this could be undermined by issues such as export taxes, infant industry protection and more favoured nation status. Introduction of these provisions could result in SACU becoming just a free-trade area rather than a customs union, Davies warned.

“As the full economic partnership agreements will require individual SADC members to take on obligations with the EU in new trade- related policy areas such as investment and services, before the region builds regional markets and rules in these areas, they could impact on the future trajectory of integration,” Davies said in his speech. He hoped the competition authorities would expand their “activist” role in curbing anti-competitive conduct which remained ‘disturbingly pervasive’ in the economy.

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