EPA talks: The endless EU trivia

As if there was not enough pressure, trade minister, Dorcus Makgato-Malesu appeared calm after a long day at the official residence of Head of the European Union (EU) delegation in Gaborone.

She had just met visiting EU Trade Commissioner, Karel Lodewijk Georgette Emmerence De Gucht to discuss the seemingly unending Economic Partnership Agreement (EPA) deal. Talks ranged from addressing trade imbalances to rules of origin and dealing with preferential trade agreements. Botswana and Namibia are at crossroads, as they will emerge as the region’s biggest losers should De Gucht revise the preferential trade scheme on January 1, 2014 as part of his overall effort to push for full EPA with African, Caribbean and Pacific (ACP) states. Botswana currently enjoys free access to the EU market – its products do not pay duties at the EU’s borders and are not subject to quotas. But this regime is based on a temporary instrument, which will end on 1 October 2014 and the time for Botswana to make up her mind is now.

For Botswana, any loss of preferential access to the EU market would sound a death knell to the country’s ailing beef sector, which is presently reliant on lower value exports to the South African market and other regional countries. Makgato-Malesu is aware of Botswana’s predicament. If excluded from the generalised scheme of preferences (GSP), Botswana beef sector will crumble in the face of mature beef exporters such as Brazil, Argentina, and sadly of late, Namibia. Concluding the talks – that would unlock trade valued at P330 billion  - between Botswana and the EU took centre stage and Makgato-Malesu appeared to understand the importance of these talks: “Botswana has signed EPAs and will ratify,” she sighs in relief as she settles for an interview on Friday. 

However, there is another problem. The SADC bloc is fragmented in its quest to unlock P750 billion worth of trade with the EU and this exposes Makgato-Malesu’s frustrations. “We are at different levels within negotiations,” she would admit painfully to prying journalists. Angola is not in the party and has opted to become an “observer.” The Trade, Development and Co-operation Agreement (TDCA) allows South Africa to have a symbiotic relationship with the EU, which excludes 35 other ACP member states. Under TDCA, South Africa liberalised its market and enjoys preferential treatment on its motor vehicle industry, which resulted in trade increasing steadily from 26 billion Euros in 2000 to 47 billion Euros today, increasing its foreign direct investment significantly.

While Angola and Mozambique are not affected by De Gucht deadline, Makgato-Malesu is well aware of the effects duty charges may have on Botswana’s subsistence farmers who enjoy competitive EU beef prices. Trade between the EU and Botswana has been impressive over the years and since 2000, the trade has grown more than 400 percent, according to De Gucht.

Statistics also show that in 2011 alone, trade between the EU and Botswana grew by 12 percent, but fears of a rotting beef sector linger on. During the month of July and September last year, trade between Botswana and the EU barely exceeded P9 million as beef exports faltered. In 2010, exports reached an all time high of P868 million, but fell drastically the following year to P460 million as a result of recurring Foot and Mouth Disease and challenges associated with management of the national abattoir. Except for diamond, other export commodities performed dismally, with copper and nickel stagnating at P3.4 billion in 2011 and 2012 respectively. There appears no light at the end of the tunnel as demand for base metals remains subdued in 2013 and fears of high copper prices also mount on low demand from Europe and China. There are other curses that come with the 13-year-long EPA negotiation between 28 EU member states and SADC. “Development partners are in control,” squeaks Makgato-Malesu, half complaining and half confessing to the uncomfortable truth.

She smiles, perhaps to conceal her defeat. African governments can be “chaotic” as De Gucht had observed in reference to Joseph Kabila’s DRC. They even rely on their ‘opponents’ for technical support when they should not be. Makgato – Malesu is well aware of this madness. “At times we are trained by people we are supposed to be negotiating with,” she says in a defeated voice. The Namibian fisheries industry faces the same fate that has befallen Botswana beef. A key concern for the fish trade with the EU is that Namibia, which will be considered as an upper middle-income country by 2014, is likely to be excluded from the GSP following a proposal by the Economic Commission, which has exposed the country to world fish exporters such as Norway, Thailand, Canada, Vietnam and Chile. If this were the case, Namibia would no longer qualify to access EU markets with zero or reduced tariffs, thus threatening the future of the Namibian fishing industry, employing over 15 000 people. With annual trade exceeding P750 billion, by far, the EU is SADC’s largest trading partner and a mutually beneficial and permanent trade regime is what Makgato-Malesu hopes for.

And some progress has been made, for example, in the area of rules of origin and administrative procedures. For Botswana, sticky issues include reciprocal duty free and quota free market access and other issues related to the protection of infant industries and safeguard measures.

Asked what is stalling the negotiations, the former Belgian minister of foreign affairs veers into diplomacy. “We haven’t reached the finishing line,” he says towards the end of the interview on Friday. “There are minor issues, 95 percent has been settled.” He hopes negotiations will be concluded before the end of the year.
Aware that Botswana is also unhappy with some parts of negotiations that affect beef exports, De Gucht extends an olive branch to Makgato–Malesu. “The EU is listening and we are showing a lot of flexibility towards Botswana’s interests. I hope this goes to show our willingness to make this deal a reality.” His voice is reassuring and authoritative in equal measure, but his red face shows symptoms of fatigue.

“It is for you and your economic development,” he says. But De Gucht cannot afford to be overly impatient with African elites, who, of late have been warming up to China and India. Others  - Brazil, Russia and India (known as BRICS)  - are following China’s path. “We have a long tradition with ACP, there is no competition with China,” De Gucht assures journalists. But the second biggest economy is touting the idea of a south-south cooperation and has seen its trade with Africa growing from US$10 billion (about P880 billion) in 2000 to US$200 billion (P1.7 trillion) in 2012. While the EU remains, by far, South Africa’s largest regional trading partner for both imports and exports, China overtook the US to become South Africa’s biggest trading partner. Chinese Embassy in South Africa has delicious statistics to support this. Exports to China stood at R27.6 billion (about P27 billion) for the year to June, against R35.8 billion (approximately P35.2 billion) for the whole of 2008, reinforcing the Asian country’s burning desire to open trade links with Africa.

Much like other western traders before him, De Gucht has fallen into the trap of downplaying the rise of the Asian giant. “What China is doing is not directly affecting us,” De Gucht says without elaborating. As former minister of foreign affairs, de Gucht is aware of diplomatic gaffes and would not want to extol his development partners. But at this stage, his loss of patience is almost evident. “I need to return to Brussels. It helps if there is a deadline and everybody has to make his own mind.” At least Makgato – Malesu was listening.