1. EPA NEGOTIATIONS IN SADC Paul Kalenga Trade Policy Adviser RTFP / SADC Secretariat April 2, 2007

2. Background SADC configuration launched EPA negotiations in July 2004, Windhoek 7 March 2006, a new SADC framework proposal called for a paradigm shift: -TDCA Review / BLNS were de facto participants in the TDCA -Inclusion of South Africa -Duty-free and quota-free market access for SADC EPA in the EU market (including South Africa?) -Non-reciprocity for AMT countries (contractualization of EBA) -No binding commitments on trade in services and other trade-related issues (new generation trade issues) 7 March 2007, EC official response to the SADC proposal Still no agreement on the scope and coverage of the future SADC-EU EPA

3. EU response: market access -South Africa’s inclusion as far as trade issues are concerned, but under certain conditions – TDCA as the basis for tariff liberalization – Possible DFQF treatment for BLNS access to the EU market but some temporary exceptions reflecting Europe’s sensitivities may be included – Non-reciprocity for AMT countries is not WTO compatible, therefore not possible – EU opposes, as a matter of principle, any TDCA tariff increases. This limits the extent to which BLNS sensitivities can be accommodated where it involves tariff increases. – EU suggests a differentiated tariff treatment linked to South Africa’s level of development. Specifically, the EU insists that extension of DFQF treatment to South Africa is not currently envisaged. – EU is also interested in seeking further reciprocal trade liberalization from South Africa (how to do this independently of the BLNS?)

4. EU response: new generation issues EPA cannot be limited to trade in goods only and leave aside all references to trade in services and regulatory supply-side commitments Regulatory supply-side commitments: investment, competition, and public procurement, amongst others Cooperative arrangements as demanded by SADC (in terms of support for capacity building on new generation issues) is only possible with some binding commitments EU expects broader up-front commitments by South Africa ( a condition which seems to be attached to its membership)

5. EU response: development support SADC: binding development commitments for EPA-related adjustment support EU: development dimension goes beyond financial aspects to include a pro-development content of the EPA and support to implementation The outcome of the EPA negotiations would determine the needs and therefore the level of EPA-related development support required A link with services and trade-related rules is emerging with respect to EPA-related development support

6. Key Challenges for SADC Deadline challenge: -any prospects of securing an agreement by 1 January 2008 given no progress on substantive issues to date -expiry of the WTO waiver on 31 December 2007 -implications on real preference erosion for Botswana, Namibia and Swaziland for their key exports to the EU market The Challenge of divergent Positions: -services and trade-related issues -AMT countries and WTO compatibility -South Africa (trade in goods, services and trade-related rules) -development issues (binding commitments on trade-related rules) The Challenge on regional integration: -Lack of coherence between regional integration and EPA configuration/ and the EU’s ambition on regional integration -Configuration still a problematic issue (e.g. Tanzania/EAC in ESA)

7. Conclusions A provisional / framework agreement focusing on trade in goods to ensure WTO compatibility (also to deal with BNS concerns) Getting to grips with reciprocity for AMT countries if to remain part of the EPA Dealing with services, investment and trade related rules Rethinking of a SADC regional integration approach ( a free trade area or a customs union approach). What is the role of EPA? Caution: avoid using EPA negotiations as a platform for the EU and South Africa to press for their bilateral ambitions on the TDCA review