Summary
The review of the implementation of the EU-SADC EPA in 2017 notes in passing the exceptionally high growth rate in EU agro-food exports to South Africa since the entry into force of the EU reciprocal preferential trade agreement in 2000. Since 2009 this has seen remarkably high rates of expansion in food categories where tariffs have been dismantled and the EU has been exempted from trade measures adopted to curb increases in imports which threaten to undermine domestic production. The experience since 2009 raises serious questions about the effectiveness of the anti-dumping and safeguard provisions included in EU trade agreements. The implementation of safeguard measures and even SPS measures against EU agro-food exports is a fiercely contested area under the EU-SADC EPA. Finally the linking of development assistance provisions to EPA implementation priorities is potentially a double edged sword, since it raises the question of whose priorities are being promoted. This needs to be seen in the context of the acute tensions between African structural economic development objectives and EU export interests in the agro-food sectors which are seen as increasingly central to the European agricultural model.
- The Context
The EC FTA implementation report for 2017 includes a review of the EU-SADC EPA which, it is acknowledged, ‘is the first and only regional EPA in Africa to be fully operational’.
This is something of an understatement, since the trade provisions of the EU-SADC EPA replaced and largely replicated the trade provisions of the bilateral Trade and Development Cooperation Agreement (TDCA) between the EU and South Africa, under which tariff eliminations on imports from the EU commenced in 2002 and were completed by 2012 (1).
It is against this background that the 2017 EC implementation report notes how the SADC-EU EPA granted the EU duty free quota free treatment for 84.9% of EU exports to the SACU market (South Africa, Botswana, Lesotho, Namibia and Swaziland – Mozambique a non-SACU member and LDC is treated slightly differently) and provided an additional 12.9% of EU exports under TRQs which partially liberalized access (via reduced tariffs on specified volumes). This agreement thus provides preferential access in one form or the other to 97.8% of total EU exports to the SACU market (1).
- EU Exports to the SACU/SADC EPA Market
In terms of EU agro-food sector exports the EC highlights how EU exports to the SACU market (the core part of the SADC EPA market) have increased for many products for which the EPA provides additional market access, in the form of additional or modified TRQs’. In particular it was highlighted how:
- ‘the value of EU exports of wheat increased from EUR 223.8 million in 2015 to EUR 266.2 million in 2017 (+19%)’:
- ‘the value of EU exports of pig fat increased from EUR 418 119 in 2015 to EUR 1 994 168 in 2017 (+ 376%);
- ‘the value of EU exports of frozen pork ham and shoulder have increased from EUR 549 089 in 2015 to EUR 890 078 in 2017 (+ 62%);
- ‘the value of EU exports of butter increased from EUR 5.56 million in 2015 to EUR 14.1 million in 2017 (+ 153%)’ (1).
The EC maintains ‘in the case of the most prominent EU export products that are subject to TRQs by SACU, in particular wheat, pork, cheese, the TRQs were overall well used’ (1).
In reviewing the implementation of the EU-SADC EPA in 2017 the EC also acknowledges in passing the profound effects of the earlier bilateral agreement with South Africa stating ‘since the Trade and Development Cooperation Agreement was signed in 1999, EU agri-food trade with South Africa has more than doubled, with EU exports increasing four-fold by 2017’ (1).
- SADC EPA Exports to the EU
In terms of SADC EPA group exports to the EU the EC implementation report notes the strong growth in exports from Lesotho (+30%), Mozambique (+25%) and Namibia (19%) in 2017 the first full year in which the EPA was applied. However the relevance of EPA application to these exports is unclear since the terms and conditions of their access to the EU market were left unaffected by the implementation of the EPA, with these countries previously having enjoyed full duty free-quota free access to the EU market on a non-reciprocal basis. This growth also needs to be seen in a context where Lesotho accounts for only 1% of the value of total SADC EPA member exports to the EU, while Mozambique and Namibia account for 6% and 4.7% respectively (1).
The two other SADC EPA members whose terms and conditions of access to the EU market were unaffected were Botswana, whose exports fell in value terms 37% in 2017 (due to drop in the value of diamond exports) and Swaziland the value of whose exports to the EU dropped 28%, largely as a result of the end of EU sugar production quotas and the consequent fall in EU sugar prices and sugar import demand (1).
The growth which did occur in BLNS exports to the EU largely related to products with low initial export values, for example ‘exports of soft drink concentrates increased from EUR 2.98 million in 2015 to EUR 8.94 million in 2017’ while ‘exports of dates, figs, pineapples and avocados increased from EUR 0.37 million in 2015 to EUR 1.49 million in 2017’ and ‘exports of dried nuts and fruit increased from EUR 1.18 million in 2015 to EUR 1.32 million in 2017’. These products however represented only 0.39% of total BLNS exports to the EU in 2017 (up from 0.15% in 2015) (1).
The only SADC EPA member state whose terms and conditions of their access to the EU market were improved as a result of the implementation of the SADC-EU EPA was South Africa, whose exports to the EU in 2017 grew only 0.7%. This being noted in the agro-food sector the additional market access concessions granted South Africa as part of the SADC-EU EPA process did see some strong export growth. According to the EC analysis
- ‘the value of South African exports of sugar to the EU increased from EUR 2.3 million in 2015 to EUR 52.6 million in 2017’;
- the value of South African exports of fish, crustacean and molluscs to the EU increased from €192.7 million in 2016 to €235 million in 2017 (+22%);
- newly granted concessional TRQs for wine and orange juice were also fully utilised (1).
However it is noteworthy how some South Africa TRQs granted for access to the EU market remained entirely unutilised, notably for skimmed milk powder and butter, in large part due to the internal EU regulations for the domestic sale of dairy products (which have to be sold via ‘approved undertakings’ (i.e. EU dairy companies) and which cannot be sold directly to retailers and the small size of the allocated quotas (e.g. for strawberries, glucose and glucose syrup, citrus jams) (1).
Nevertheless overall this saw South Africa’s share in SADC EPA members exports to the EU increase to 83.1% in 2017 up from 80.5% in 2014 (1).
- Implementation Discussions
In terms of progress in 2017 in the implementation of the EU-SADC EPA the EC highlighted how 3 meetings of the Trade and Development Committee had been convened with progress being made on both institutional issues and concrete issues, such as ‘quota management systems, cumulation of origin and the agricultural safeguard’. In addition ‘preparatory work for the start of diagonal cumulation of origin’ has been initiated ‘but this work is not finalised yet’. This suggests that difficulties are faced in operationalising the improvements in rules of origin which the SADC-EU EPA has introduced.
The EC highlights how National EPA Implementation Plans (NEIPs) have been drawn up jointly with each SADC EPA member state except Namibia. The aim of these plans is to ‘maximize the contribution of the EPA to long-term sustainable economic development’, with the NEIPs being seen as ‘a useful tool to align EPA implementation priorities with development assistance funds’. The EC highlights how ‘under the 11th EDF, a total of EUR 30 million are about to be earmarked to the 5 SADC EPA States other than South Africa specifically for EPA implementation’ (1).
Against this background the EU has identified ‘a number of outstanding issues with regard to the implementation of the EU-SADC EPA’. These include:
- reaching agreement on the dispute settlement procedures to be applied;
- activating the cumulation commitments for SADC EPA members, so as boost regional value chains.
The EC also highlights how ‘SACU has carried out a safeguard investigation on EU poultry according to a legal basis and methodology the EU disagrees with’; implying the SADC interpretation of the utilisation of the safeguard provisions of the agreement is being questioned (2).
The EC is also looking to use the Trade and Development Committee established under the EU-SADC EPA to discuss SPS measures adopted against EU exports, foremost of which are South African measures against poultry meat exports. Specifically the EC has been ‘actively pressuring the South African authorities to recognise the HPAI-free status of Member States and to recognise regionalisation in future outbreaks instead of imposing country-wide bans’. For its part the South African government is insisting on audit visits to EU Member States before any market reopening takes place.
The EC concludes it analysis of the EU-SADC EPA for 2017 by arguing ‘it is clear that, to maximise the Agreement’s positive impacts, in addition to tariff liberalisation, other outstanding implementation issues will need to be addressed’.
| Comment and Analysis
– EPAs and Agro-food Sector Trade Flows For most EU exports to the SACU duty free-quota free access has been enjoyed since 2012, with the provisions governing the use of tariff and non-tariff trade policy tools being similarly fully in force since 2012. This has revealed serious shortcomings in the effectiveness of anti-dumping and safeguard provisions included in EU trade agreements. What is more in the light of the extent of the preferential access grated EU agro-food exporters there has been a particularly significant expansion in EU agro-food exports to South Africa since 2009 in those area where full duty free quota free access was granted under the pre-existing EU-South Africa TDCA. When considered alongside the expanded TRQ preferential access granted this has seen a remarkable growth in EU agro-food exports to South Africa. This has been a consequence of both the reduction and elimination of tariffs on imports from the EU and the limitation of the application of non-tariff trade policy measures to imports from the EU as a result of the provisions agreed as part of the reciprocal trade agreements set in place. This has created a situation of staggeringly high rates of growth in EU agro-food exports to South Africa in those product categories where tariff reductions were most significant under the TDCA, and where as a result of provisions of EU trade agreements EU exports were exempt from trade defence measures applied to imports introduced in response to import surges. Areas of highest growth in value EU agri-food exports 2009-17: share total agricultural exports, % change
This experience since 2009 provides an insight into the potential impact of the implementation of EU reciprocal preferential trade agreements with other ACP countries and regions in the agro-food sector. – Aligning Development Assistance with EPA Implementation Priorities In terms of aligning development assistance funding with EPA implementation priorities the question arises whose EPA implementation priorities? Will it be the implementation priorities of the SADC EPA members who may be looking to develop agro-food sector production more for local and regional markets, given the level of local and regional food consumption growth underway? Or will it be EU priorities linked to opening up SADC markets to even greater levels of EU agro-food exports as overseas markets become of growing importance to the economic growth and well-being of EU agro-food industries? – Using EPAs to Remove SPS Barriers to EU Exports The South African governments’ insistence on audit visits to EU Member States before any poultry market reopening takes place would appear to be necessary given the pan-European nature of EU poultry companies and the emerging practice of cutting and packing poultry products sourced from non-EU member states prior to export as ‘EU origin’ poultry meat. This would appear to require the introduction of country specific origin labelling of poultry meat based on the country where the bird was raised rather than the country where cutting and packaging takes place (see companion epamonitoring.net articles ‘Growing Role of Ukraine in EU Poultry Meat Imports Raises Rules of Origin and SPS issues in EU Poultry Meat Export Trade’, 22 January 2018 and ‘Ukrainian Poultry Company MHP Secures Third foothold inside the EU’, 22 October 2018). This would appear to be necessary for any relaxation of current restrictions on imports form the EU on SPS grounds, given the devastating consequences HPAI outbreaks can have on domestic poultry flocks. |
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Sources:
(1) EC, ‘Individual reports and info sheets on implementation of EU Free Trade Agreements’, Commission Staff Working Documents, SWD(2018) 454 final, 31 October 2018
http://trade.ec.europa.eu/doclib/docs/2018/october/tradoc_157473.PDF
(2) EC Delegation South Africa, ‘Statement on Poultry by the EU Delegation to South Africa on the occasion of the Fair Play Social Support Summit’, 2 August 2017
https://eeas.europa.eu/sites/eeas/files/201700801_statement_on_poultry.pdf