The case of Namibia. What is so peculiar about the Namibian case in the interim Economic Partnership Agreement (EPA)? - let me explain.

Transcription

1 1 The interim EPA and its implications for SACU: The case of Namibia 2 Wallie Roux, Independent Trade Policy Analyst, Namibia Introduction What is so peculiar about the Namibian case in the interim Economic Partnership Agreement (EPA)? - let me explain. As a background: Namibia is a member of the Southern African Customs Union (SACU), together with Botswana, Lesotho, Swaziland - the BLNS countries - and South Africa. The SACU 1969 Agreement was renegotiated and resulted in the SACU 2002 Agreement, which became operational in SACU is a legal entity in international trade agreements. Namibia is also included in the Southern African Development Community (SADC) - EPA configuration, together with the rest of the SACU members, plus Angola and Mozambique. The SADC-EPA configuration is not a legal entity in international trade agreements. The SADC-EPA configuration is currently involved in negotiations with the 3 European Commission (EC) to find a post-cotonou trade dispensation that is compatible with World Trade Organisation (WTO) rules. Namibia initialled the interim EPA on 12 December 2007, but to date has not yet signed the agreement - Angola and South Africa also have not signed the interim EPA. Botswana, Lesotho, Swaziland (04 June 2009) and Mozambique (15 June 2009) signed the agreement. Note that Namibia initialled the agreement with an accompanying list of concerns in the interim EPA text, to be resolved before signature - these issues are still not resolved. This is a legal reservation in terms of the 4 Vienna Convention on the Law of Treaties Paper delivered at the SADC EU EPA negotiations Workshop for Non-State Actors, March 2010, Maseru, Lesotho. wallie@mweb.com.na The European Commission (EC) - the executive arm of the European Union (EU) - is conducting the EPA negotiations on behalf of the EU Member States. Articles 19 to 23.

2 In the event of an eventual non-signature to the interim (or full) EPA, Angola has the option of the "Everything But Arms" (EBA) trade dispensation, while South Africa has its Trade, Development and Cooperation Agreement (TDCA). However, in the case of Namibia, the country would then have no legal trade agreement with the EU and would be subjected to the punitive tariffs of the EU's Generalised System of Preferences (GSP). Hence, why did Namibia not sign the interim EPA to date? In order to fully understand the story behind the story - i.e. the EC's negotiating agenda - it necessitates a flight back into the EPA history. In fact, one has to go back to Phase 1 of the EPA negotiations that were conducted on an all-african, Caribbean and Pacific (ACP) level. Although this is something of the past by now, anyone who thinks that Phase 1 was a smooth ride should definitely think again. Phase 1 of the EPA negotiations At the conclusion of Phase 1 of the EPA negotiations there were divergences on seven broad categories, namely: Market access; Agriculture; Fisheries; Development; Services; Trade related issues; and Legal issues. Let me summarise only a few 5 examples: The ACP wanted a formal agreement (legally binding) to conclude Phase 1 of the negotiations and which should guide Phase 2. The EC opposed any formal agreement and preferred to limit discussions to a general exploration of issues of concern. Thus the agreement concluded in October 2003 to end Phase 1 of the negotiations was not legally binding and was a mere "point of reference" for Phase 2. The ACP wanted WTO rules adjusted to accommodate their needs. The EC felt that the WTO rules provide the necessary 6 flexibility to address ACP concerns. The ACP emphasised the acquis principle (no country should be worse off post- Cotonou) for all ACP countries "whether or not participating in the EPA process." The EC had no proposals for non-punitive alternative trade arrangements for ACP developing countries (like Namibia). The ACP wanted to comprehensively address EU export refunds and the trade distorting outcomes of the Common Agricultural Policy (CAP) reforms. The EC 5 Abstracts from "EPA negotiations general: Executive brief, December 2004", CTA: Agritrade: 6 Despite the ongoing WTO Doha Round and the request from developing countries for Special and Differential Treatment. 2

3 would only address export refunds on a case-by-case basis and saw no problem with the CAP reforms, because they believed it would be less trade distorting. In services, the ACP did not want to go beyond its WTO commitments. However, the EC was in favour of a WTO-plus approach in this regard. Note: there are many more examples! Throughout the Phase 1 negotiations the EC was reluctant to honour the ACP's request to address issues of common concern and was more set on moving quickly to Phase 2. The EC was even reluctant to discuss agricultural issues in a separate negotiating group and included these in the general discussions of market access. The ACP also noted 7 nine unresolved issues regarding Phase 2 of the negotiations: the regional configuration for the second phase negotiations; who would actually negotiate - i.e. would it be regional secretariats or member-state governments backed up by the regional secretariats? where such negotiations would take place - Brussels or regional secretariats HQs?; the role of the Brussels ambassadors and Brussels structures; the definition of 'sensitive products' under liberalisation processes; the length of transitional periods before full reciprocity is introduced; the impact of reciprocity on fiscal revenues; how the problem of revenue losses can be addressed; and the measures which can be adopted to protect vulnerable sectors and industries. Given the above, the ACP favoured an extension of Phase 1 of the negotiations for a two-year period, but the EC opposed this proposal. The eventual compromise resulted in a proposal that Phase 1 negotiations would only be conducted between September 2002 and September Phase 2 of the EPA negotiations Phase 2 was launched on a regional level at various times during 2003 and Phase 2 for the SADC-EPA configuration was launched in July Even despite the adoption of a Joint Roadmap at the launch of the SADC EPA negotiations, various problems emerged soon afterwards. Two of the major obstacles were the unsustainable composition of the members in the configuration - with respect to existing regional integration initiatives - and the unspecified role of South Africa as an observer in the negotiations (remember that South Africa is also a member of SACU). This resulted in the SADC Trade Ministers' Strategic Framework Proposals of February 2006 to salvage part of the Southern African regional integration agenda. These proposals inter alia included: 7 Taken from "EPA negotiations general: Executive brief, December 2004", CTA: Agritrade: 3

4 the inclusion of South Africa as a full member of the SADC-EPA configuration; and the exclusion of services and the new generation issues from the EPA negotiating agenda (since not being a requirement to comply with WTO rules). These Strategic Framework Proposals were submitted to the EC in March After a delay of 11 months the EC eventually responded in February They inter alia approved the inclusion of South Africa as a full member of the SADC-EPA configuration, albeit with differentiated approach in market access to the EU. However, the EC insisted that services and the new generation issues remain on the EPA negotiating agenda. Note: the trade chapter of the Cotonou Agreement expired on 31 December courtesy of the WTO waiver - thus leaving the (newly formed) SADC-EPA configuration with only nine months to negotiate a comprehensive agreement as proposed by the EC. Before this date - from the launch of the SADC EPA negotiations in July only Sanitary and Phytosanitary (SPS) measures and Technical Barriers to Trade (TBT) were on the negotiating agenda with the EC (with the EC being unwavering in their approach to SPS measures). In April 2007 the EU strategically made a duty free quota free (DFQF) market access offer for all ACP products with the only prerequisite being the "signing of an agreement" - with reference to the EPA. This tactical move by the EU had a marked influenced on the eventual decisions by some of the ACP developing countries. Confusion However, the DFQF offer also stated that South Africa would be treated differently "where a number of globally competitive products will continue to pay import duties". This caused some confusion given that only two months ago the EC approved South Africa as a full member of the SADC EPA-configuration. Here the question could rightly be asked: Should the SADC EPA-configuration file a similar request to treat a certain EU country differently in that " a number of globally competitive products will continue to pay import duties", would the EC agree to such a request? No need to speculate on the outcome given the asymmetrical power-balance in the negotiations between the EC and the SADC EPA-configuration. In the time leading up to the end of December 2007 towards the expiring of the WTO waiver, the EU Trade Commissioner at the time, Peter Mandelson, embarked on a trail of threats towards ACP countries should these not sign an EPA. These inter alia included: the loss of preferential market access to EU markets; punitive tariffs under the EU's GSP; and a multilateral challenge if signed agreements were not notified to the WTO. Despite Mandelson s threat, the EC realised that their overzealous ambition of having full EPAs signed by the year-end deadline was totally unrealistic, given the slow progress in the negotiations and the ever-mounting resistance to certain provisions in 4

5 the EPAs. In October 2007 the EC proposed a 8 goods-only negotiating agenda as a compromise to ensure any progress in the negotiations. However, the EC capitalised on this setback by introducing a two-tiered approach not to fall short in the negotiations. The first step required the configurations or countries to initial an interim EPA before the deadline, while the second step included an undertaking to continue negotiations towards a full EPA in Due to all these different kinds of pressures from the EC - especially with regards to Southern Africa - Botswana, Lesotho, Swaziland and Mozambique initialled the interim EPA in November At that time Angola, Namibia and South Africa decided against initialling the interim agreement - meaning that Namibia would loose its preferential market access to the EU, while Angola could continue trading under the EBA arrangement, and South Africa still had its TDCA with the EU. EU-Africa Summit During December 2007 two key developments took place. The first was the EU-Africa Summit in Lisbon from 08 to 09 December. During this Summit a Joint EU-Africa Strategy was adopted. The Joint EU-Africa Strategy includes an action plan (First Action Plan: ) consisting of eight partnerships and an institutional architecture for closer cooperation. The third of these partnerships is the EU-Africa Partnership on Trade and Regional Integration. The three priority actions of this partnership are (i) support the African integration agenda, (ii) strengthen African capacities in the area of rules, standard and quality control, and (iii) implement the EU-Africa Infrastructure Partnership (the latter was signed on 24 October 2007). The objective of the first priority action is the political and socio-economic integration of Africa in line with the Abuja Treaty. This 1991 Treaty became operational in 1994 and gave birth to the African Union (AU), launched during the Durban Summit in The Constitutive Act of the AU (adopted during the Lomé Summit in 2000) inter alia provided for the preparation of a Protocol on Relations between the AU and Regional Economic Communities (RECs). One of the four expected outcomes of this priority action is to create synergies between the African integration process and the EPAs. During the 7th AU Summit in Banjul on 01 and 02 July 2006, a 9 decision was adopted to recognize only eight RECs in Africa and to suspend the recognition of any new RECs in an effort to rationalize the process of regional integration. SADC is one of the eight RECs recognized by the AU. 8 9 COM(2007) 635. Assembly/AU/DEC.112 (VII). 5

6 The EC s EPA agenda resulted in the SADC bloc s splitting into four, with members negotiating EPAs as part of Central Africa, East African Community, Eastern and Southern African and SADC. Thus for SADC the EPA agenda caused new regional configurations without legal constituencies and without any supporting institutions. This is a clear indication of the EC s skilful capitalization on the volatility of the African regional integration initiatives and the exploitation of the gullibility of countries under the AU efforts towards African unity - and in the process to exonerate itself from the blame of any split-ups of existing RECs. Barroso assurance The second key development also took place during the EU-Africa Summit where African leaders complained about the unresolved issues in the interim EPA. This prompted the EC President, Manuel Barroso, to give the assurance that the unresolved issues will be reopened for negotiation in Only then did Namibia initial the interim EPA with its accompanying list of unresolved issues. It should be noted that none of the original four EPA-configurations in Africa initialled an interim EPA. Instead the EC initialled interim EPAs with countries within these configurations - which is more evident of bilateral agreements. Despite this tactic only 18 out of 44 countries in Africa initialled an interim EPA before the end of December deadline. The EC initially blamed the slow pace of the EPA negotiations in Africa on the spaghettibowl syndrome of overlapping membership to different regional integration arrangements. However, at the end of 2007 they caused an equally confusing legal spaghetti-bowl conundrum with the initialling of interim EPAs with countries within configurations. It is a fact that the interim EPA and a full EPA will lead to regional disintegration in SADC. Both these agreements will create different legal structures in the region. Furthermore, the member countries have different products on their liberalisation schedules as well as different phasing down schedules. Once signed and implemented, it will be a near impossible task to harmonise the different trading regimes with the EU without serious legal implications. So what happened to regional integration, and for that matter, the acquis principle in Cotonou Articles 35 and 37? These were simply discarded by the EC. More confusion In January 2008 Peter Mandelson contradicted the Barroso promise by stating that he is not in favour of further dialogue on deals (interim EPAs) already secured (initialled). This dispute around the unresolved issues continued until May 2008 when Angola and South Africa added their concerns to the Namibian list. The new ANSA-list (Angola, Namibia and South Africa) was submitted to the EC, who eventually had to concede that the unresolved issues could be reopened for negotiation, albeit in a parallel process. During the third week of July 2008, the then European Development Commissioner, Louis Michel, in an address to the European Parliament, said that the EU s policies 6

7 would not always be coherent with development objectives. According to him, as a consequence, Africa will have to learn to live with the adverse effects these policies will sometimes have on their countries development situation. He went on to say that although he agrees that organisations criticizing the EU for these inconsistencies are ethically and intellectually correct, they are perhaps politically not right. When it comes to weighing the interests of European farmers against those of developing countries, in many cases those of the former still prevail over the latter. In his own words: There are limits to what is feasible in political terms. New hope? In an unexpected turn of events, on 03 October 2008 Mandelson resigned as European Trade Commissioner to take up the position of Secretary of State for Business in the United Kingdom Cabinet. Baroness Catherine Ashton was appointed as the new European Trade Commissioner on 06 October On 15 December 2008, Baroness Ashton wrote a letter to Action for Southern Africa on the SADC EPA. In the letter she said, With SADC our objective remains to consolidate the regional integration and if possible include South Africa in the EPA. To that effect we have started to negotiate the concerns that have been expressed by South Africa, Namibia and Angola. Our objective is to reach agreement on all [note!] these issues that would be acceptable to the region as a whole, including those who have not raised these concerns. On Services and Investment in the interim EPA she said, Only those countries wishing to negotiate in these areas will do so. On Competition and Government Procurement, Negotiations will only be envisaged once adequate regional capacity has been built. Due to the continued non-resolution of the ANSA concerns, on 06 January 2009 these countries submitted a Joint Demarche to the European Union Member States stating that they had repeatedly raised concerns about specific aspects of the Interim Economic Partnership Agreement (IEPA) that profoundly impede prospects for deepening the processes of sustainable integration and development within and between the countries of Southern Africa. In the Demarche five issues were raised, addressing the compromising of the SADCwide regional integration process, long-term trade policy divisions in the region, the lack of flexibility towards the ANSA concerns, the inadequate proposal to avoid the undermining of the SACU common external tariff (CET) and the non-clarity on accommodating Angola s post-conflict situation in the negotiations. On 21 January 2009 the EC 10 responded to the Joint Demarche and in a predictable fashion rebutted the ANSA issues by amplifying the concessions already made to address the issues of regional integration and the TDCA alignment with the EPA process to preserve the SACU CET. Sadly the response only focused on the SADC EPA and did not address the SADC-wide regional integration issue. 10 MD no: 026/09. 7

8 Remember that the TDCA is an EU creation. The EC offered South Africa the opportunity for free trade negotiations after the country was only accepted as a qualified member of the Lomé IV Convention. This EC creation is now back to haunt them because of non-coherence between short-term gains and long-term policies in exploiting South Africa s post-apartheid gullibility by locking the country into a bilateral agreement despite the existence of SACU. The BLNS countries are de facto members of the TDCA courtesy of their SACU membership. During an interview with 11 Trade Negotiations Insights, Baroness Ashton was asked whether the negotiations could be completed within the deadlines set in the interim EPA. She responded, We should also remember that the dates specified in the interim EPAs aren t deadlines they re targets. She continued, No one can be pushed into a deal before they are ready. Later on she said, ACP countries sign interim EPAs when they are ready and that sometimes means at different times. Prompted on the EU s Aid for Trade initiative she said, We cannot make access to development funds conditional on signing a trade deal EU finance mechanisms are set up to deliver development funds through clear programmes, not on the basis of progress in trade talks. So we need to reassure ACP countries they are not taking on an unfunded mandate to implement these agreements. Swakopmund EPA negotiations Then the much talked-about round of EPA negotiations took place in Swakopmund from 09 to 12 March At this meeting the SADC-EPA group inter alia submitted written proposals on the unresolved issues. This resulted in the EC only willing to discuss a limited number of issues on the basis of their written proposals. Agreement was reached on 12 draft texts concerning quantitative restrictions, food security, free circulation of goods, export taxes and infant industry protection. No agreement was reached on the Most Favoured Nation (MFN) clause and the Definition of the parties. Despite the draft texts on the five issues, one still requires EC agreement, while another is subjected to a joint review of customs legislation and procedures. Note that "agreement" does not mean these issues are resolved. It simply means that the parties understand each other's positions and moved closer towards a resolution. Despite the Swakopmund agreed texts, 19 other Articles remain unresolved in the interim EPA text. Some of the essential outstanding Articles include Regional integration (Art 4), Agricultural safeguard measures (Art 33) and Transitional arrangements (Art 46), as well as four articles on customs duties, cooperation and procedures. The EC only wants to discuss these in the negotiations towards a full EPA, despite having a profound influence on the interim EPA text. The EC made it clear that the so-called Swakopmund agreed EPA texts would only be 11 Issue 01, Volume 8, February Doc 109/09 ACP. 8

9 incorporated into the final EPA, thus giving it a non-legal status in the interim EPA. Instead the EC opted for the adoption of 13 two Declarations that only refer to the Swakopmund agreed texts, yet again giving it an uncertain legal status. This unfortunate development has moved the EPA negotiations beyond the point of determining whether an interim EPA or full EPA would be beneficial for the Southern African countries. At this time the decisive factor is about legal coverage in case of a dispute with the EU. This is a sad state of affairs given that the original partnership agreement as contained in the Cotonou Agreement, is no longer at play. On 20 March 2009 Commissioner Ashton wrote letters to the Trade Ministers in Botswana, Lesotho, Mozambique, Namibia and Swaziland stating that the Swakopmund meeting... represents substantial progress and addresses the vast majority of the concerns previously outlined by ANSA countries., and... that we can arrange for the signature of the interim EPA in the very near future. In a similar letter to the South African Trade Minister (only the last two paragraphs differ), she stated I think that I have done all I could in terms of substance and timing, to accommodate the concerns expressed by the ANSA group and I m pleased that this has allowed us to find concrete solutions on how to solve the majority of those concerns in the context of the full EPA. and... we now need to proceed with the signature of the interim EPA with those SADC members that have initialled the agreement. This has become a matter of urgency. Why the sudden haste to sign an unconcluded agreement with no legal standing on the so-called agreed texts? - refer to Baroness Ashton s interview with Trade Negotiations Insights. How will these (and the other outstanding Articles) be dealt with in the context of a full EPA without any written legal assurances on the technicalities regarding these issues? Despite this, Botswana, Lesotho and Swaziland (BLS) signed the interim EPA on 04 June 2009, while Mozambique signed on 15 June. In terms of the 14 Vienna Convention on the Law of Treaties, these countries may not do anything to undermine the purpose and objectives of the Agreement. Prior to signature a country is not subjected to any obligations. Note that for these countries the trade chapter on market access is now finalised, i.e. there can be no further negotiations. However, the ANSA countries can still negotiate on this. According to the 15 interim EPA text, the parties agree to provisionally apply the agreement pending entry into force. This provisional application will cause discrepancies in the SACU CET. Also, given the non-resolution of the MFN clause, should SACU extend better terms in a trade agreement to a third party, the BLS countries will have to extend the same to the EU. This will lead to further discrepancies in the SACU CET. 13 Council document 14062/ Article Article

10 Why Namibia should not sign Now the EC has a renewed thrust to pressure Namibia into signing the interim EPA, despite some of the unresolved issues still not being resolved. In the process Namibia is accused of holding back the EPA process and its being labelled a 16 "free rider" for enjoying DFQF access to the EU without a signature. Let's take the analogy of a property agent offering you a house to buy. When you complain about several structural damages the agent then agrees to repair some (not all) of the damages. However, this agreement will not be included in the purchase offer, only in the final purchase document - how this will be done is unclear. Then the agent exhorts pressure on you to sign the purchase offer without any legal sureties about the outstanding structural damages and how the repairs that were agreed to, would be incorporated in the final purchase document. Would you sign such a purchase offer? Hence, don't blame Namibia... I thank you. 16 COUNCIL REGULATION (EC) No 1528/2007 of 20 December