Way clears for trade accord with Pretoria

Date: 22/01/1998

The UK presidency is determined to break the deadlock which has hampered progress for three years, reports By Mark Turner

IT TOOK western Europe one and a half years to negotiate full EU membership for Austria, Finland and Sweden, and European Commission officials claim that it will take scarcely more than two to arrange the accession of Poland and the Czech Republic.

But it is more than three years since the Union told South Africa it was in line for a fast-track trade deal, and the meter is still running.

Although the comparisons are perhaps unfair - the European Free Trade Area (EFTA) countries were already very closely integrated into the EU and the Union has been preparing for eastern enlargement since the mid-1990s - it is no wonder that South Africa's supporters feel somewhat abandoned.

Nor is it surprising that despite the most encouraging signs since 1996 that a deal could be brokered by this summer, no one is cracking open the champagne quite yet.

“I hope we can get every cylinder opened full blast and reach agreement by the middle of this year,” says South Africa's ambassador to the EU Elias Links. But he stops short of asserting that this will happen.

“For the first time, I am really confident that the objective to complete negotiations by 1998 is realistic,” agrees Philippe Soubestre, the Commission's chief South Africa negotiator. He admits, however, that there is a long way to go.

On the face of it, both EU and South African negotiators' reticence about betting on a 1998 'victory' may appear rather pessimistic.

After two years of delay, there are now two texts on the table which, although diverging in sensitive areas, seem to have enough in common for talks to conclude in June or July.

Pretoria, almost out of the blue, presented a highly detailed offer for EU access to South African markets late last year, promising the Union free industrial and agricultural trade for about 80-85&percent; of goods within 12 years.

The European Commission last week presented its counter-offer to EU governments (although their approval is not formally needed), and should be ready to table it at a new round of trade talks at the end of this month.

The Union's package offers South Africans tariff-free industrial access within three years and agricultural within ten, and would eventually cover around 90-94&percent; of all trade.

At first glance, this might not seem too difficult. Give or take a bit, one might think both sides could move towards free industrial trade within seven to eight years, free agricultural trade within 11, and aim at a final coverage of 87&percent;.

If only life were that simple.

For a start, World Trade Organisation (WTO) rules declare that all bilateral free trade agreements between its members should cover “substantially all trade”, which most pundits agree means around 90&percent;.

Since EU-South Africa trade flows either way are roughly equivalent (especially if you include gold), the two-way opening can be calculated by a simple average of unilateral market openings.

At the moment, that falls below WTO requirements by around 3&percent;, meaning that something has to give. But it is hard to see where the slack lies.

Although the WTO appears willing to show more flexibility towards developing countries than the industrialised world, South Africa is a full member and unlikely to be granted exemptions.

EU governments decided in 1996, under pressure from the powerful French, Iberian and German farm lobbies, to exclude a minimum of 40&percent; of all South African agricultural trade (6&percent; of total trade) from any deal, and claimed the figure was non-negotiable.

And Pretoria is wedded to a series of special protocols restricting access to South Africa for Union car parts, textiles, footwear, beef, veal, wine and dairy products (around 20&percent; of all EU exports), and is unlikely to be able to improve that by more than 5&percent;.

South African diplomats stress the need for caution during the country's profound economic reconstruction, and highlight their commitment to give the most preferential access to regional neighbours.

Even though the Union seems loathe to admit it, they insist that South Africa is still a developing country and simply cannot open itself - and, further down the line, the rest of southern Africa - to the full force of European trade, especially if it is denied reciprocal access for its key agricultural produce.

Faced with an apparent deadlock, the European Commission is seriously contemplating what EU governments told it could never happen: asking for a new mandate.

Although the current Commission proposal stays within the bounds of the original mandate, officials fully expect that after the next rounds of talks (at official level at the end of this month and ministerial level in February) they will need to ask for a less restrictive brief.

That, history teaches, is unlikely to be granted without a great degree of arguing.

France was adamant last time around that the Commission's drive towards free trade had to end and it seems unlikely to give in now. It is also hard to see how German farmers, who convinced Bonn to follow Paris' line in 1996, can be persuaded to change their minds this time.

Free trade enthusiasts are nonetheless pinning their hopes on the UK presidency, which has long called for a more advantageous deal for South Africa, and indicates it would like to broker a new mandate.

“It is a priority for us to make the mandate as liberal as possible,” said a British official. “We will be pursuing this with South Africa late in January and are working on the Community offer now.”

London is armed with fairly convincing evidence that the South African agricultural products most feared by EU growers are marketed at different times of the year and therefore do not directly compete with European products. Arguments that the Union could be flooded with a sudden increase in South African produce are also unconvincing, given that the republic is already running close to full capacity.

However, even if the Union can make a more flexible trade offer, agreement is far from assured.

The EU is also linking the conclusion of a general trade deal to separate deals on fishing, and wines and spirits.

Spain, in particular, is adamant that if its fishermen are not given access to South African hake stocks (at a time when Morocco is closing its waters to Union fishing fleets), it will not be able to sign on the dotted line.

South Africa is equally determined, however, to offer any new fishing licences to its own people, many of whom were denied economic rights under apartheid, first. There is unlikely to be much capacity left over.

Similarly, both sides will find it difficult to agree on new names for South Africa's wines and spirits which, according to the EU, have misappropriated European labels.

Finally, European officials are concerned that South African trade talks with the country's regional neighbours will not be completed by the middle of this year. It would be politically impossible for Pretoria to sign a deal with the Union before reaching agreement with other southern African countries.

Given all these factors, it appears rather surprising that both sides still believe they might be able hit the mid-1998 target. But where there is a political will, there is a way.

The EU, already under attack for its failure to live up to its heady promises when apartheid fell in 1994, is likely to face growing pressure for a result as 1998 progresses.

End-of-year negotiations on a new Lomé Convention, which determines EU trade relations with Africa, the Caribbean and the Pacific, also make a speedy outcome all the more essential.

And, when push comes to shove, the Union has a lot more to gain from a prosperously trading South African ally than a country furious at an EU sell-out.

“One would want to encourage EU decision-makers to see the South not only in terms of third country relations, but of their own long-term interest,” says Links.