A look at the new EU/SADC economic partnership agreement

Legislation | | MIC Customs Solutions |

The EU has signed an economic partnership agreement with six nations of the Southern African Development Community, which will help to strengthen Europe's trade ties with the region.

As part of its efforts to reduce trade barriers between Europe and other parts of the world, the European Union has been making efforts to commercial agreements with a number of countries and territories, with the aim of driving economic growth and sustainable development.

To this end, a new economic partnership agreement (EPA) was signed in Botswana on June 10th between the EU and six countries of the Southern African Development Community (SADC), marking the first deal of its kind pursuing economic integration between the EU and an African region.

The deal with Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland, known as the SADC EPA group, is expected to create a number of economic benefits, while also laying the groundwork for future productive cooperation between the EU and Africa.

The background

Currently, the EU is the SADC EPA group's largest trading partner, with South Africa accounting for the largest proportion of EU imports and exports to and from the region.

In 2015, the EU imported goods worth almost €32 billion from the region, with minerals and metals comprising the bulk of these supplies. Europe, meanwhile, sold almost the same value of goods back to the six African countries, consisting mostly of engineering, automotive and chemical products.

The nations involved in the deal are diverse in terms of economic development, with Lesotho and Mozambique classes as least-developed countries, whereas the likes of Namibia and Botswana hold upper-middle income status. This created challenges in the negotiation of the EPA.

The key provisions

As such, the final deal accounts for the different levels of development of each partner by guaranteeing Botswana, Lesotho, Mozambique, Namibia and Swaziland 100 per cent free market access, and fully or partially removing customs duties on 98.7 per cent of imports coming from South Africa, while stating that the SADC EPA group does not have to respond with the same level of market openness.

This approach, known as asymmetric liberalisation, allows the African nations to maintain tariffs on products sensitive to international competition, or in cases where nascent, fragile industries or food security issues are involved; it will also make it possible for Southern African producers to put together products from components from various countries without risk of losing free access to the EU market.

Under the terms of the EPA, it is expected that the southern African markets will open gradually and partially to EU exports, while EU producers of traditional quality products with a worldwide reputation, such as wines and food products, will receive exclusive rights to use their traditional names in South Africa.

The deal also encompasses sustainable development commitments and a consultation procedure for environmental or labour issues, with a comprehensive list of areas in which the partners will cooperate to foster sustainable development having been defined. Joint institutions will be established to support dialogue, smooth the handling of trade issues and monitoring the impact of the EPA over time.

Currently, the agreement applies only to the six aforementioned nations, but Angola has observer status and may join the EPA in future. It will now be submitted for approval to the European Parliament and for ratification by the EU's member states, as well as by the African countries that have signed.

The benefits

The signing of the deal has been welcomed by representatives of the EU and the SADC EPA group as a move that will help the African nations to diversify their economies and broaden production, while giving European businesses greater trade access to a number of emerging markets.

Cecilia Malmstrom, the EU's commissioner for trade, said: "With the economic partnership agreement that we are signing today, we want to base our trade relations with our partners in the Southern African region on commonly agreed, stable rules. Trade has helped lift millions of people from poverty throughout the years; thanks to agreements like this one, we are preparing the ground for that process to continue."

Commissioner for international cooperation and development Neven Mimica concurred, saying: "Fully utilizing the economic potential of the private sector and further strengthening trade is critical for the new global development agenda of the Sustainable Development Goals. Today's agreement can help us to tap this potential."