Summary
An EC modelling analysis show SADC EPA signatories benefit from the EPA only in comparison with a worst case scenario of the loss of all pre-existing trade preferences. A review of the evolution of EU-South Africa agro-food trade since 2002, shows the value of EU exports tripling while the value of South African exports grew only 38%. The highest rates of growth in EU exports occurred where tariff preferences over 3rd country suppliers were most significant.
The SADC-EU EPA formally entered into force on 10 October 2016. This is the first EPA with an African group of countries to enter into force. The EC claims the provisions of the SADC-EU EPA take into account the different levels of development of the partners, granting full duty-free quota free access for 5 of the SADC EPA signatories and enhanced access for South Africa, while requiring only partial liberalisation of imports from the EU. According to the EC press release on the entry into force of the SADC-EU EPA This reciprocal liberalisation will occur ‘gradually over time’.
However, this agreement not only provides a new long term framework for the EU’s trade relations with Botswana, Namibia, Lesotho, Swaziland and Mozambique, but also extends and replaces the former bilateral trade agreement between the EU and South Africa. This reciprocal preferential trade agreement, known as the EU-South Africa Trade, Development and Cooperation Agreement (TDCA), progressively entered into effect between 2000 and 2012. This saw the reciprocal elimination of tariffs, with in the case of South Africa this covering the vast majority of agro-food imports from the EU (see box). The SADC-EU EPA built on these pre-existing commitments and extended these commitments particularly in regard to the use of non-tariff trade policy tools.
|
Agro-Food Sector Tariff Liberalisation Commitments under the TDCA Under the EU-South Africa Trade Development and Cooperation Agreement (TDCA), in the agricultural sector South Africa undertook more extensive tariff elimination commitments then the EU. South Africa agreed to the phased introduction of duty free trade on 83% of the agricultural products exported by the EU to the SACU market, while the EU agreed to eliminate tariffs on only about 61% of South Africa’s agricultural exports to the EU (with quota restricted duty free access being granted on a further 13% of traded agricultural products).
While this imbalance in tariff concessions has now been addressed under the SADC-EU EPA, with additional market access preferences being granted South Africa, the trade consequences of this imbalance over the past 13 years has seen major changes in the EU-South Africa agro-food sector trade balance.
|
This reality was largely ignored in the EC’s June 2016 economic impact assessment of the SADC-EU EPA which stressed the asymmetry in market access commitments, the agreements safeguard provisions, flexible rules of origin and economic development provisions.
This assessment reported the results of a modelling simulation of the trade and economic effect of the SADC-EU EPA, which revealed the GDP of SADC EPA members will be positively affected by the implementation of the EPA. However these positive gains are relatively small, with SADC member states collective GDP increasing between 0.01% and 1.18%. What is more these favourable GDP gains referred only to a ‘situation in 2035 compared to a situation without the EPA’. This is an important qualification.
This qualification means the basis for comparison is not between the effects of the newly concluded EPA and an extension of current trade arrangements , but rather the comparison is between the newly concluded EPA and the loss of all pre-existing trade preferences, some of which date back to 1975. This is important since it means the newly concluded EPA only yields economic benefits to SADC EPA members when compared to a worst case scenario in which established preferences are withdrawn.
This scarcely constitutes a ringing endorsement of the benefits of the new EPA arrangement for SADC signatory economies. Indeed, this EC analysis suggests very real limitations on the positive value of the new arrangement.
In addition it needs to be borne in mind that the assessment of the economic gains arising for SADC EPA members from the SADC-EU EPA does not take into account the pending departure of the UK from the EU and the consequent lapsing of EPA preferences for exports to the UK market. This needs to be seen in a context where for a range of agro-food products the UK is the major EU market for SADC members exports to the EU.
In this context, in terms of extrapolating the possible effects of the newly concluded EPA on the agro-food sector, it may well be more worthwhile to look at the experience of agro-food sector trade flows under the pre-existing EU-South Africa trade agreement. This could be useful for two reasons. Firstly because the EU-South Africa agreement provided the basis for the reciprocal market access commitments entered into by SACU members under the SADC EPA. Secondly, because the SADC-EU EPA has many similarities to the trade agreements the EU has concluded with other sub-Saharan African governments.
Sources:
EC, ‘Economic Partnership Agreement with southern African countries enters into effect’, press release, 10 October 2016
http://europa.eu/rapid/press-release_IP-16-3338_en.htm
EC, ‘The Economic Impact of the SADC EPA Group – EU Economic Partnership Agreement’, June 2016
http://trade.ec.europa.eu/doclib/docs/2016/june/tradoc_154663.pdf
Official Journal of the European Union, ‘Economic Partnership Agreement between the European
Union and its Member States, of the one part, and the SADC EPA States, of the other part’, 16 September 2016
http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153915.pdf
European Commission, “Assessment of an EU-South Africa FTA”, Staff Working Paper, February 1996.
|
Analysis and Comments If we look at the impact of reciprocal market access commitments on EU-South Africa agro-food sector trade flows we find some alarming trends. Over the course of the implementation of the agreement we find the value of EU agro-food exports to South Africa more than tripled, while the value of South African agro-food exports increased only 38%. This saw South Africa’s agro-food sector trade surplus with the EU fell 42% over this period, from €1,242.3 million to €725 million.
Source: EC market access database http://madb.europa.eu/madb/statistical_form.htm
This was attributable in part to the unequal tariff concessions granted in the agro-food sector (see box), in part to the far greater size of the EU agro-food sector and in part to the changing patterns of EU public sector support to its agricultural sector. Together these factors have had a major bearing on the evolution of EU-South Africa agro-food sector trade in recent years.
If we look at the period around the final stage of implementation of South Africa’s tariff liberalisation commitments (which were back-loaded to the end of the tariff phase down period) we find that from 2009 to 2015 the total value of EU agro-food exports increased some €745.8 million or some 82%. However in those product categories where tariff reductions were most significant under the TDCA, the rate of growth in the value of EU exports was much more pronounced (see table).
Overall the lesson is clear: the highest rates of growth in EU agro-food exports to South Africa occurred in those product categories where the margins of tariff preferences granted the EU as a result of the implementation of trade agreement commitments, were highest.
Areas of highest growth in value: share total agricultural exports, % change 2009-2015
This trade outcome was in large part foreseen by the European Commission at the time of the opening of negotiations on an EU-South Africa reciprocal trade agreement. A 1996 EC assessment argued:
“…the European Union has much to gain from an FTA with South Africa. The further opening up of the South African market in the context of such an agreement will create competitive advantages for EU exporters compared to exporters from the USA, Japan and other suppliers of South Africa. The price the EU would have to pay for such an improved position in terms of loss of customs revenues is relatively low.”
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Key words: SADC EPAs Area for Posting: ‘SADC EPA’
|