The Interim EPA: Why Namibia should not sign

The Interim EPA: Why Namibia Should Not Sign - Part 1

by Wallie Roux
21 July 2009

RECENT reports in the media with regards to Namibia’s so-called “reluctance” to sign the interim Economic Partnership Agreement (EPA) with the European Union (EU) have elevated the issue to a level that once again necessitates public debate on the merits of such a step.

These reports were sparked by the current spate of remarks by the Minister of Trade and Industry, Dr Hage Geingob, on why Namibia has not yet signed the interim EPA. This has opened a Pandora’s box with local Civil Society Organisations (CSOs), the European Commission (EC), the local meat industry and the Namibia Chamber of Commerce and Industry (NCCI) joining the bandwagon in reaction to Geingob’s comments.

Several local CSOs came out in support of the Government’s stance not to sign the interim EPA at this stage and voiced their concerns about the latest developments that brought about a discord between the Southern African EPA participants. This has specific reference to the necessity of preserving the integrity of the Southern African Customs Union (SACU).

The EC, through the spokesperson for the European Trade Commissioner, Lütz Güellner, came out strongly to counter the recent remarks of Geingob with regards to the signing of the interim EPA. The latest from his side concerns the ambiguity of Namibia towards the interim EPA and a possible legal challenge to end the country’s current duty free quota free (DFQF) market access to EU markets.

The Chief Executive Officer (CEO) of Meatco, Kobus du Plessis, reacted to Geingob’s comments by attaching an income and loss statement for the local meat exporting industry should Namibia decide not to sign the interim EPA. However, he acknowledged that the meat sector is not the only sector in the Namibian economy and that regional integration and SACU receipts are important to the country.

Lately the NCCI, through its CEO Tarah Shaanika, also voiced its support for the Government not to sign the interim EPA at this stage. The NCCI recognises the threat of the interim EPA to regional integration in Southern Africa and warned that the Government should “continue seeking strong and unequivocal written assurances that what has been agreed in negotiations will be honoured”.

All of the above responses warrant an in-depth look into what is actually at play at the moment. For this, it is necessary to highlight some of the tactics and discrepancies towards the Southern African Development Community (SADC) EPA members, the current pressure to sign an unconcluded agreement, as well as potential consequences with regards to the so-called “agreed” texts during the Swakopmund EPA negotiations in March of this year.

Since the first rounds of negotiations, these were marred with controversy and eventual distrust given the EC’s negotiating tactics and the autocratic attitude of the former European Trade Commissioner, Peter Mandelson.

A flight into history should recall that despite an agreed Joint Roadmap at the launch of the negotiations on July 8, 2004, the initial composition of the SADC EPA configuration was unsustainable in terms of existing regional integration initiatives and the unspecified role of South Africa as only an observer.

A chronology of events unfolded with the negotiations in Southern Africa soon falling behind the progress achieved by other configurations. On February 12, 2006, SADC-EPA trade ministers adopted a range of strategic framework proposals as a salvage attempt for the local regional integration agenda. These proposals were submitted to the EC on March 7, 2006.

The two main proposals were the inclusion of South Africa as a member of the SADC configuration (to preserve the integrity of SACU) and the exclusion of the so-called new generation issues (services, investment, intellectual property rights, competition, etc.) from the negotiations – these issues are not a requirement to comply with World Trade Organisation (WTO) rules.

It took the EC 11 months to respond to these proposals, consequently delaying any progress in the negotiations even further. On February 14, 2007, the EC approved South Africa’s inclusion as a member of the SADC EPA configuration (albeit with a differentiated approach in market access). However, they insisted to keep the new generation issues on the negotiation agenda. By then the negotiations were already in trouble given the EPA deadline of December 31, 2007.

On April 4, 2007 the EU strategically announced DFQF market access (IP/07/476) to all African, Caribbean and Pacific (ACP) countries as part of the EPA negotiations. This offer covers all products “including agricultural goods like beef, dairy, cereals and all fruit and vegetables”, “with a phase-in period for rice and sugar”. The offer would apply immediately given the prerequisite of “the signing of an agreement”.

However, the offer also introduced an additional impediment for the SADC EPA configuration in “The only exception will be South Africa where a number of globally competitive products will continue to pay import duties.” What if the SADC EPA configuration would counter this argument with a request to treat an EU country differently on the grounds of “a number of globally competitive products that will have to continue paying import duties”?

Despite the DFQF offer, resistance to the EPAs among the ACP countries was mounting given the EC’s non-accommodating attitude and its strong-arm tactics during the negotiations to ensure signatures to these agreements. Peter Mandelson’s last attempt to force ACP signatures came when he threatened ACP developing countries with punitive tariffs from the EU’s Generalised System of Preferences (GSP) should they decide not to sign EPAs before the 2007 deadline – this despite the acquis principle that no country would be worse off post-Cotonou.

As a confirmation, during an address to the European Parliament’s International Trade Committee on September 11, 2007, Mandelson said it was “irresponsible” for anti-poverty campaigners to claim that if the ACP does not sign EPAs by end-2007, punitive tariffs should not be imposed on those countries. This, Mandelson claimed, was because he had “no [other] legal option” than that imposed under the WTO rules – thus deliberately neglecting the Cotonou provisions.

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 the EPAs (especially from African countries). On October 23, 2007 the EC proposed a goods-only negotiating agenda 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 2008.

The second step also provided for the continuation of the negotiations on the new generation issues.

Despite these threats from the EC, only 35 out of 79 ACP countries initialled an interim EPA before the end of December deadline – these include the 15 countries from the Caribbean, only two countries from the Pacific and 18 countries from Africa.

Namibia only initialled the interim EPA after assurances from the EC President, Manuel Barroso, during the EU-Africa Summit in Lisbon on December 8-9, 2007, that the unresolved issues would be re-opened for negotiation during 2008. A statement containing a list of issues to be resolved before signature accompanied the initialling.

In total contrast, Mandelson, during an address to the members of the European Parliament on January 29, 2008, contradicted the Barroso promise to re-open the contentious issues of the interim EPAs, stating that he was not in favour of further dialogue on deals (interim EPAs) that were already secured (initialled).

On February 26, 2008, the Director of ACP relations in the EC, Klaus Rudischhauser, conceded that the EC’s handling of the trade negotiations that lead to the proposed interim EPAs was a public relations “disaster” and a “huge communications failure”. This prompted the EC to embark on an “EPA success stories” campaign in a number of ACP countries.

Peter Thompson, EU Commission Director responsible for EPAs and development (GSP), on March 6, 2008 sent a communication [D(2008) VV D/2489] to the Heads of Delegations in these ACP countries to reflect on their website “some of the more positive stories that emerged on interim EPAs”, because “The fact that these views are expressed by third parties and do not come from the mouth of EU negotiators, ... contributes to re-balancing the debate.”

In order to add further impetus to the plight of the Southern African countries, Angola and South Africa, on May 19, 2008, added their concerns to the Namibian list of unresolved issues (now referred to as the ‘ANSA’ list). The ANSA list was submitted to the EC who then agreed that these concerns could be re-opened for negotiation, albeit in a parallel process to the EPA negotiations.

During the third week of July 2008, the European Development Commissioner, Louis Michel, in an address to European Parliament members, said that the EU’s policies 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”.

In an unexpected turn of events, on October 3, 2008 Mandelson resigned as European Trade Commissioner to take up the position of Secretary of State for Business in the United Kingdom cabinet. On October 6, 2008 Baroness Catherine Ashton was appointed as the new European Trade Commissioner.

On December 15, 2008, Baroness Ashton wrote a letter to Action for Southern Africa (ACTSA) 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.”

On January 6, 2009 the ANSA 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 SADC-wide 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.

The Interim EPA: Why Namibia Should Not Sign - Part 2

by Wallie Roux
21 July 2009

On January 21, 2009 the EC 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 Trade Development and Cooperation Agreement (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.

However, the EC conceded “... once South Africa decided not to join the four other SACU members in initialling the interim EPA, thus creating a split across SACU, it became clear that this would at least temporarily affect the smooth functioning of SACU.” The EC also acknowledged “Inevitably this needs to be based, hopefully only for a short period until a full EPA is concluded, on two different legal instruments (the TDCA and the IEPA).” stating that “Every issue included into the iEPA is open for discussion in the framework of the Full EPA negotiations.”

The EC also tried to offer some comfort in “... it would remedy for the first time the significant discrepancy that the BLNS [Botswana, Lesotho, Namibia and Swaziland] countries have been criticizing ever since South Africa concluded the TDCA.” In retrospect it should be kept in mind that the TDCA is an EC 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.

During an interview with Trade Negotiations Insights (Issue 01, Volume 8, February 2009) 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.”

Then the much talked-about round of EPA negotiations took place in Swakopmund from March 9 to 12, 2009.

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 draft texts (Doc 109/09 ACP) 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.

From the ”agreed” text, take Article 27 bis on food security as an example. The text specifies ”a Party or SADC EPA State” that may adopt safeguard measures to ensure food security. According to the Preamble of the interim EPA, the agreement will exist between the SADC EPA States (Botswana, Lesotho, Mozambique, Namibia and Swaziland) on the one part, and the 27 EU states ”and the European Community (EC) hereinafter referred to as the ’EC Party’, on the other part”.

This implies that the ’EC Party’ may only adopt safeguard measures collectively, while the SADC EPA States may adopt the same measures collectively, as well as individually. However, given that South Africa is currently excluded from the text, it also implies that SACU cannot collectively adopt the safeguard measures.

What are the implications where a dispute is declared against a SADC EPA State that adopted these measures individually? Firstly, the EC Party could pool its legal resources from the Commission and the 27 EU Member States to defend its case, vis-à-vis the individual SADC EPA State that could only rely on its own legal resources. Secondly, the EC Party has the fortune of 27 EU Member States to foot the bill, while the individual SADC EPA State would have to rely on its own financial ability. Which of the individual SADC EPA States has the legal resources, capacity and/or financial ability to engage in a dispute with the EC Party?

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 incorporated into the final EPA, thus giving it a non-legal status in the interim EPA. Instead the EC opted for the adoption of two Declarations (Council document 14062/08) 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 March 20, 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? Does this haste for signatures perhaps relate to the end of the EU Commissioners’ term of office in September this year?

On March 23 this year, Corporate Europe Observatory (through access-to-documents requests) revealed that in 2005 the EC’s main delegate in the negotiations, Ivano Casella, manufactured phoney support for the SADC EPA under an umbrella of a EU-Southern African Business Forum. This was done to create the impression that African businesses are pro-EPA – this from people who are supposed to be trusted in the negotiations.

Casella reportedly invented the idea (based on similar successes in the Mercosur countries) for African businesses to ”speak to governments with one voice”, to back the EC’s own stance in the EPA negotiations.

This even went as far as the provision of travel funds to business participants from Botswana to attend a preparatory conference in Brussels in September 2005.

Botswana, Lesotho and Swaziland (BLS) signed the interim EPA on June 4, 2009, while Mozambique signed on June 15, 2009. In terms of Article 18 of the Vienna Convention on the Law of Treaties, these countries may not do anything to undermine the purpose and objections of the Agreement. Prior to signature a country is not subjected to any obligations.

According to Article 105.4 of the 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. In this context the Namibian situation could be compared to a person wanting to purchase a house.

When the property agent offers the prospective buyer a house, the prospective buyer complains 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 the prospective buyer 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 a signature to such a purchase offer be a legally sound decision?

During the 10th regional seminar of the ACP-EU economic and social interest groups, President of the follow-up committee of the European Economic and Social Committee, Luca Jahier, admitted, “The negotiations on the interim EPAs have been the focus of much criticism for not supporting existing regional initiatives and I agree with these pre-occupations. I agree that the temporary EPAs are not good for the regional integration but we must understand that to reach a final EPA is complicated. The SADC region is particularly complicated, with EPA negotiations taking place in four different geographical configurations.”

On June 30, 2009 during an EC (DG Trade)-Civil Society Dialogue, Peter Thompson said, “Ashton replaced Peter Mandelson; she has the same mandate, but a different tone and pair of ears; she has changed the atmosphere, but there is no change in substance; we are still working on the same rules and guidelines”, i.e. proof that despite a rhetoric of words, the process is back to square one.

Taking into account all of the above, the recent remarks from Dr Geingob on the state of play with regards to the interim EPA are more than valid. The calls from Namibian CSOs and the NCCI for the Government not to sign the interim agreement at this stage hold more than merit.

Wallie Roux is an Independent Trade Policy Analyst.

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