The Economic Partnership Agreement with Europe: Hold your nose and Ratify!

I had the distinction of being in the room when then EU Trade Commissioner Pascal Lamy announced that the EU would negotiate an agreement with  all the African Caribbean and Pacific(ACP) states that was truly based on development. No-one could have imagined a dozen years later the agreement would ultimately be so concerned with the EU’s development rather than that of Africa.

What is so noxious?
The EPA will give Botswana quota-free and duty-free market access to the EU market for beef along with virtually all other products. How could anyone think this is a bad outcome? Under the old Lomé Convention and subsequent Cotonou Agreement Botswana had fixed quotas established by the EU on the amount of beef we could export. This was set at around 19,000 tons. Of course we never achieved this volume of exports, not even close, so eliminating the quota is of no commercial significance because it never effectively held back our beef exporters. We also used to export almost all our rough diamonds to the EU and some copper/nickel matte but these are duty-free no matter what the source, so the EPA is commercially meaningless there. In the past we also used to export large amounts of garments to the EU. In 2007 exports of garments to the EU reached a whopping P1.1 billion before disappearing to virtually nothing within five years. This was a result of the full effects of garment sector liberalisation at the WTO which were only felt throughout Africa and the world after 2005.

Of Sugar and Hangovers from Cheap Wine Negotiations
But the real big winner of the SADC EPA has not been Botswana or Namibia but South Africa. When South Africa was finally liberated from the grip of apartheid the EU, in a rare and uncharacteristic moment of generosity, got teary-eyed and offered South Africa an extraordinarily generous trade agreement. At the time trade negotiators called it ‘the Mandela effect’.

The EU gave South Africa first-class access for agricultural products as well as South African plonk which has always been one of the most important issues for SA negotiators. While EU Trade Commissioners and their officials could get sentimental about Mr Mandela, the Portuguese, Spanish and Italian wine makers were having none of it, and they forced the Commission to effectively renege on the access that they had negotiated for SA wine producers. The SA trade negotiators, ever practical, reluctantly agreed knowing well they would get a second bite at the grape, so to speak, by being part of the negotiations of the SADC EPA (South Africa formally joined the negotiations in 2007). The EU knew this as well; the SADC EPA might in theory be about all the small African states like Botswana and Namibia but unless they could buy off the South Africans there would be no deal because the South Africans could use their power in SACU to stop the smaller states from signing. And so the really big winners from the EPA were the South Africans who got a significant increase in their market access for wine (from 47 million to 110 million litres), and access for their sugar producers who got a duty free quota of 150,000 tons as well as 80,000 tons of ethanol.

So if the EPA was supposed to be about the small countries in SADC like Botswana (beef) and Namibian (grapes and fish) and Swaziland (sugar) then how is it that  SA ended up the big winner? Simple… the more things change, the more they stay the same!

The four headed BRIC Hydra
Sometime around 2004/5 I noticed a quantum change in EU officials and it was most evident in their attitude to the BRIC countries. Up until that time the Europeans were at forefront of the ‘rah-rah brigade’ of globalisation. ‘Look how globalisation is lifting up these developing countries’ they would tell the ACP countries … ‘you Africans, Caribbeans and Pacific Islanders should follow them’. Then suddenly the attitude changed when it became all too obvious that the high Russian export taxes on gas and petroleum were giving Russian energy intensive firms a massive advantage over the EU and that India was likely to dismantle the EU service sector with their competitive service export firms. Inefficient and subsidised agriculture in Europe was going to be destroyed by hyper-competitive Brazilian farmers and finally the Chinese would ultimately eliminate what little was left of European manufacturing. Suddenly from the vantage point of Brussels and London globalisation was now seen as a threat to Europe and much less as a commercial opportunity.
At that time in the EPA negotiations the EU attitude also changed to reflect its much darkened protectionist mood. It was personalised in the form of the move of Pascal Lamy as Trade Commissioner, to the WTO and his replacement by Lord Peter Mendelssohn, aka ‘The Prince of Darkness’ as he is not so affectionately known in the British press. The EPA negotiations started to become not about what was even in theory good for the ACP countries but what the EU needed in order to sign.

Legally, the EPA was supposed to be completed in 2007 but has dragged on for another seven more years because it was the EU that would not sign any agreement that permitted ACP countries the unrestricted use of export taxes, even though they are perfectly legal under WTO law. Amongst other demands, the EU also insisted that in future anything the ACP countries gave the BRICs would have to automatically be given to the EU.

Learn to say ‘Ni hao Zhongguo’ (hello China)!
Botswana will get almost nothing of commercial value from the EPA, despite all the hype that will follow. We will maintain our preferential access for beef and the BMC will continue to eat up those benefits with its production inefficiencies. The few economic benefits that Botswana as a country does get will help cover the massive and increasing bill that the taxpayer has to pay for the Department of Veterinary Services to ensure that our framers can comply with ever-rising EU heath and food safety standards. Soon we will need to look for new beef markets as already high food and health standards in Europe will continue to rise but unfortunately the very high EU prices for beef that we are have been getting of late are likely to lull those responsible for new markets to sleep.

Nevertheless, we must sign and ratify this agreement with the EU, not for the subsidy it provides to BMC or for the farmers but because our relationship with Europe is at the very core of the nation’s geo-political DNA. Botswana is a small country in a not so good neighbourhood with some really bad and aggressive neighbours around us. Batswana have known this fact since the three dikgosi went to London to seek the protection of Queen Victoria from the Boer Republics and Rhodes in the Cape Colony. For the moment we still need Europe and even though the EPA is clearly meant to limit our ability to conduct trade policy in future, and will help South Africa far more than anyone else, the nation needs to hold its collective nose and ratify this odious agreement.

But it is the geo-political rather than commercial needs that are the only really good reason to ratify. After all in 30-40 years time, when our children have all learned to speak Mandarin fluently and Europe is as relevant to Africa as the Carthaginian Empire, we can still tear up the EPA because China, unlike Europe, is a rising power which will not have to ask such things in order to protect its commercial interests in Africa. It will have other tools!

Source: http://www.thetradebeat.com/opinion-analysis/the-economic-partnership-agreement-with-europe-hold-your-nose-and-ratify