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Yash Tandon, The EPA Negotiations with Europe: A Turning Point  for Africa

Speech at Wolpe Trust, Cape Town, March 9 2010

Much of the discussion around EPAs has created a sense of helplessness among concerned citizens, government circles and indigenous business interests who stand to lose if a comprehensive Economic Partnership Agreement (EPA) is signed between the Countries of Africa and the European Union.  However, there is no need for despondency.  The situation is not as bad as it looks at first sight.  There is still plenty of scope and space to save the situation.

But first we must look at facts as they are. We need neither exaggerate them nor trivialise them.  One thing is clear. It is an asymmetrical negotiating situation.  The weak and fragmented xxx nations of Africa are trying to negotiate with the powerful combined strength of xxx countries of Europe negotiating as one. Also Africans are asked to negotiate under terms that are more or less dictated by the European Commission through the combined use of sticks and carrots, rigid time lines, and threats of sanctions, or actual sanctions as in the case of Zimbabwe.

Nonetheless, we must not create alarm or despondency by exaggerating the dangers of EPAs nor relax our vigilance and alertness by minimising the serious risks we face in Africa if the EPAs do indeed materialise. Matters are of course serious, but they have not reached a no-turning point.  Let us look at them dispassionately with a view to first understanding them and then examining a forward strategy that keeps the initiatives in the hands of our people and our governments and that advances our goals of development, the eradication of poverty, industrialisation, and a fair and equitable distribution of the wealth of our nations to the masses of our people.

So let us look at the facts first.

It is true that Africa has been fragmented in the course of the negotiations with the European Union. It is true that the five regional communities which the Abuja Treaty sought to integrate as building blocs for African Unity – namely, North Africa, West Africa, Central Africa, East Africa and Southern Africa – have been divided and sub-divided as a result of the sometimes multilateral but often bi-lateral negotiations between African countries and the European Commission (EC) acting for the European Union (EU).  Thus, we have the curious phenomenon, for example, that Zambia and Zimbabwe who were the original members of the Southern African Development Community (SADC) find themselves negotiating not within the SADC framework but within a peculiar hybrid called the Eastern African Region EPA grouping.  Much of this division and sub-divisions have taken place at the insinuation of the EC; but our leaders too have allowed themselves to be so divided and sub-divided.

Notwithstanding this most unfortunate development, it is still time to remind our leaders of the commitments they had made in the Abuja Treaty and their pledges to advance the cause of African Unity. They cannot be at peace with themselves if they become the authors of Africa`s fragmentation and balkanisation.  History and future generations will never absolve them.

In the Southern African region, it is true that Botswana, Lesotho, Swaziland and Mozambique (BLSM) have signed the Interim Economic Partnership Agreements (IEPAs) in June 2009.  It is important to understand why they have chosen to do so.  It is important to understand their fears of the consequences of not signing the IEPAs. And it is important to address their concerns and suggest to them concrete and meaningful alternatives.

To start with, rightly or wrongly, they may be nursing the fear that without signing the IEPAs they might lose the preferential access for their products in the European market. Or they may fear that without the IEPAs, they may not secure “development aid” from the European Union.

This is a factual matter. It is an empirical issue. It requires a fair minded diligent researcher qualified in economics and finance to look at what sectors in BLSM stand to lose had they not signed the IEPAs, and to verify whether they would indeed lose out the so-called “development aid”.  It is also important to ask the negotiators of BLSM whether it is indeed worth their while to beg for this so-called  “aid” if the conditions attached to it make them subservient to the will of the EU, and, furthermore, to isolate them from the rest of the Southern African development community.  These are serious issues with profound consequences both for them as individual countries and for the region as a whole.

The rest of the SADC community, in any case, must not look at Botswana, Lesotho, Swaziland and Mozambique as “deviants” or as having betrayed the cause of regional integration.  There are still many issues that they and the EC have not agreed yet, including export taxes, quantitative restrictions, the issue of food security, and the Most Favoured Nation clause.  This shows that these countries are not negotiating blindly. Each of these issues is a minefield. Each of these, if badly handled, can have profound consequences for the development of these countries in the future.

Take the issue of export taxes, for example.  The EPAs, if finally concluded, will disallow BLSM countries to impose new export taxes or increase existing ones. Why are the Europeans so keen on disallowing new export taxes to BLSM? Well, because the EU is interested in their commodities and minerals which are critical to the growth of EU's own manufacturing industries. Somehow, our leaders in Africa are always made to believe (often by “experts” or “consultants” paid out of EC funds) that “we in Africa need them more than EU needs us.”  This is completely wrong-headed; indeed upside down. Europe is in desperate need for African natural resources. If they do not secure these, they will lose them out to China or India or Brazil, or other players in the global competition for resources.

So there is no reason why, provided they stand together, BLSM or any other African country should succumb to pressures from the EC.  BLSM should not agree to block the road to new export taxes. It helps the EU; it does not help BLSM. Also, furthermore, export taxes are an important source for BLSM to secure revenue and also for encouraging their own industrial sectors. Why should BLSM lose these? If they believe that the EU would somehow compensate them for the loss of revenue or for the loss of industrial opportunities, then they would have given up what they already have in their hands in return for what they may never get in the future.  Losing the proverbial bird in hand in chasing after the one that is flying in the air is no wisdom.

Or take the issue of the Most Favoured Nations (MFN) clause.  The EU wants BLSM to sign this.  But why should they?  If they signed the MFN, it would bind them to ensure that any trade concession that they grant to a country enjoying more than a one percent share of world merchandise exports - - such as India or China for example -- is automatically extended to the EU too. Once again, BLSM could be sacrificing what they could gain from bilateral or multilateral South-South trade and services agreement for practically nothing in return from the EU. They would also, of course, isolate themselves from the rest of Africa and the rest of the Third World. So BLSM should not sign MFN under the EPAs.

These are only two examples from a number of issues that still remain unsettled between BLSM and the EU. 
Of course BLSM are not the only countries in a dilemma. What applies to BLSM also applies, even more strongly, to Zimbabwe.  In September 2009 Zimbabwe, in spite of ferocious EU sanctions against the country, signed an IEPA with the EU.  It was both perplexing and surprising.  Was it an attempt to appease the EU?  Did the Zimbabwe government really believe that if it did not sign the IEPA it would lose out on market access to the EU?  Or did they think that if they signed the IEPA, there would be doleful of “development aid” pouring into the country?

Once again, there are still many issues of disagreement between Zimbabwe and the EU including export taxes, quantitative restrictions, the issue of land and food security, and the MFN clause. Zimbabwe should not yield to any of these even if, in return, the EU agrees to lift the sanctions. Lifting the sanctions could become a bait to get the country to sign a more comprehensive EPA. But this would make Zimbabwe hostage to policies decided in Brussels and other capitals of Europe, and not in Harare.

Above all, for Zimbabwe (as indeed for Zambia), it is time to reconsider whether they wish to be part of the “Eastern African” group (just because the EC put them into that box), or whether they should return to the SADC, of which, after all, they were the founding members. At least Zambia has chosen not to sign the IEPA, which further compounds the perplexity of why Zimbabwe chose to sign it.  The Zambia Minister of Commerce, Felix Mutati, who was the chief negotiator in the ESA grouping, was clear about why it was not the time to sign the IEPA.

Coming back to the SADC region (where Zimbabwe and Zambia should be), besides BLSM, of the other members of the group, the majority have refused to sign the IEPA.   Namibia's Minister for Trade and Industry Minister, Hage Geingob, is reported to have said:  "A partnership means that all partners are equal. Why else would you include the word partnership in the EPA? It also means transparency."   Namibia is not happy with the process by which the EC is handling the negotiations, on top, of course, of the more substantive issues, such as export tariffs, quantitative restrictions and the MFN.  Angola too has refused to sign an IEPA. There is nothing that the EC would not do to tie down Angola to an Interim EPA, if it could. Angola has oil and other resources which the EU needs badly, and if Europe does not get its act together, quickly!, it could lose Angola forever to the Chinese, Indian, the Brazilians and others.  Brazil, in fact, has an advantage of language and common historical experience over Portugal and the rest of Europe put together.

And, there is, of course, South Africa. It too has not signed the IEPA.  Here the negotiations are even more dense and complex than those with the smaller countries, for there is much at stake, on both sides.  Of course, the experience of the earlier Free Trade Agreement between the EU and South Africa has left a bitter taste on the South African side, especially on the issue of the “geographic indicators” on wines and spirits.  The MFN clause, in particular, is a big issue. Can South Africa really afford to extend to the EU any trade, services or investment concessions that it chooses to make to India, China, Brazil, Russia, the US and other trading blocs and investment partners?  If it did so, what would be its consequences for South African companies that are trying to hold on to South African market (let alone the Southern African regional market), and resources? What would be their implications for the currently explosive issue of unemployment and social unrest?  These are serious questions, and South Africa can ill afford to get in bed with Europe under the terms and conditions on offer from Europe.

In fact, time has come for South Africa to offer an understanding and benign leadership to the region, especially to the countries in the Southern African Customs Union (SACU).  It would not do well for South Africa, for example, to tighten its borders with Botswana, Lesotho and Swaziland, which South Africa might be tempted to do in pursuit of short-term gain or protection of short term interests (for what could turn out to be also short-sighted). Some in South Africa might argue that this is necessary in order to prevent European goods enjoying easier rules of origin or lower tariff levels in the BLS countries from entering South Africa through SACU regime.  But if this argument prevailed, and South Africa tightened its borders, then such a measure would be a triumph for the European Union`s ceaseless effort to divide and rule this part of the world.  South Africa should ponder carefully before taking such a step.

South Africa might also want to review the formula and the basis for allocating customs revenue to the SACU countries.  There is a common perception in South Africa that it is already doing enough to provide a more than reasonable share of the common customs revenue to these countries.  Indeed, it is known that some of these countries get 60% of state revenue through SACU.  So it is to some extent a factual question.  But it is, above all, a political question, not one of arithmetic or even just finances.  Can South Africa afford to push the SACU countries into the laps of the European Union? What is needed is an understanding leadership from all sides, and skilful negotiations that are not based on reprisals or retribution but on a long term pursuit of objectives that benefit the entire population of the region that share the same space and the same historical memory.

Conclusions and Recommendations

  • So far the countries of Eastern and Southern Africa have not signed anything that cannot be retrieved, or saved.  No real harm is done. There are still too many issues that are in dispute for the process to move towards an EU-friendly and Africa-unfriendly enforced agreement.
  • The Southern and Eastern African countries should put an immediate embargo on further negotiations with the European Union. Let them not be pushed by the argument that “time is running out”.   That “wolf cry” has been heard like an annual chorus at least since before the Doha Round of WTO negotiations, and that was already nine years ago.  There is no such wolf at Africa`s door. If there is one, it is at Europe`s door. If they fail, quickly, to get African countries, lock stock and barrel, into their trading and investment camp, they will soon lose out irreparably to India, China, Brazil, etc. It is no accident that the anti-Chinese noise is getting more and more shrill and desperate in Europe, even among some civil society organisations and the academia.
  • The governments of the countries that have signed IEPAs should put the agreements before their parliaments for ratification. Indeed, even if their Constitutions do not provide for ratification by the parliaments, they must provide ample opportunity for the democratic processes to monitor and regulate treaty obligations that can have far reaching and long term consequences, some of which might be irreversible, or reversible at huge cost to the people.
  • South Africa should consider, in open solidarity-based discussion with members of the SDAC community (including Zimbabwe and Zambia), to reach out to those countries in the region that have signed the IEPAs to see how best to accommodate their legitimate concerns and fears, so that intra-SADC and intra-SACU concessions are made prior to facing the EC. That is the only way to beat the “divide and conquer” strategy of the European Commission.
  • Let African negotiators debate with the intellectuals and civil society members in their countries who know a thing or two about the pros and cons of free trade fundamentalism, and the perils of globalisation.  The neoliberal ideology that lured Africa into the globalisation orbit is in tatters. The very countries that were the authors of the neoliberal ideology of free trade, free flow of capital, denationalisation and privatisation – namely the US and Europe – are turning protectionist and are indeed nationalising or part-nationalising private assets, including banks.  Africa must wake up to the folly of the neoliberal chimera. 
  • Africa must reactivate the Abuja Treaty`s very sensible and, yes, practical proposals on developing the five regional communities -- North Africa, West Africa, Central Africa, East Africa and Southern Africa – as the building blocks towards achieving pan-African unity. In this context, the June 2008 initiative taken by the EAC, COMESA and SADC to start negotiations for a grand Free Trade Area among them is an excellent initiative. It is time to take it one step further. It would be important for the Heads of States parties to this initiative to meet for half a day to give it the necessary political boost and mandate to their Trade Ministers.
  • As for the interface between the WTO and the EPA , once the current EPA negotiations are put on hold, African countries should push for a revision of the WTO's Article XXIV relating to regional trade agreements and Free Trade Agreements (FTAs). This article calls for the liberalization of “substantially all the trade” in the FTAs. However, paragraph 29 of the Doha Declaration notes that “The negotiations shall take into account the development aspects of regional trade agreements”. (WTO Doha Ministerial Declaration, WT/MIN(0)/DEC/1, 14 November 2001). If and when African countries resume negotiations with the EU (and there is no need to hurry on this before the revision of Article XXIV of the WTO), they should refuse to accept EU`s interpretation that “substantially all trade” means 80% tariff liberalization. This is quite absurd. It is a completely unjustified application of a principle that is reasonable when negotiating FTAs between advanced industrialised countries to a situation of asymmetry between the EU and the ACP countries.  
  • If and when negotiations resume, African countries should limit them to a goods-only EPA pegged to development benchmarks, and with no built-in clauses about negotiations on services, competition policy, investment policy and government procurement that were thrown out of the WTO negotiations.  Why should Africa negotiate on areas that are already a forbidden territory in the WTO? This is an area where the South Centre has done excellent work.  As a South Centre paper argues: “Importantly, liberalization in goods should be done in keeping with development benchmarks i.e. only when the sub-regions have attained a certain level of development (e.g. measured by per capita GDP; per capita manufactured exports etc) should the sub-region liberalise x percentage of their tariff lines.  Since the EPA proposes a model of development that is fundamentally flawed and anti-developmental, pegging liberalization to development benchmarks, if the EPA is signed is the only way to ensure that liberalization is paced appropriately and is not fixed to an arbitrary and artificial timeline such as 15 or 25 years.”  (South Centre, “EPAs the wrong development model for Africa”, Informal Note, 19 February, 2010).
  • Africa must refuse to be pressurised to succumb to the EU demands of MFN clause inserted in the EPA text. If they succumb to this it will seriously erode any benefits they could get from South-South trade, services and investment agreements. A South-South regime that does not extend to Europe or to other developed countries is recognised as fully legitimate and compatible with the WTO and GATT.