Briefing Notes on EPA Negotiations Presentation to Joint Foreign Affairs and Trade and Industry Hearings, 27/2/2008

Origin and Stated Objectives of EPAs EPAs emerged as EU’s proposal for WTO compatible alternative to Cotonou preferences (WTO waiver for which expired 31/12/07) Stated objectives included clear commitment that EPAs would support regional integration and EU stated that it had no mercantilist objectives in process Also touted as a platform for EU to provide enhanced support across wider platform

SADC-EU EPA Configuration Process of negotiation not with ACP as a whole, but separate regions…divided SADC members into different configurations (MZZ in ESA group, DRC in CEMAC, Tanzania in EAC, Mauritius on its own); SADC configuration SACU plus AM(T); EPA negotiations coincided with TDCA review; In interests of promoting regional integration and harmonised relationship with EU, SA joined SADC EPA process;

SADC EPA Group Proposal SADC EPA proposal adopted March 2006; argued reciprocity in place via impact of TDCA on all SACU, AMT are LDCs, therefore no need for further reciprocity; Negotiation should accordingly focus on BLNS sensitivities, achieving DFQF access to EU market for all in harmonised system and development cooperation; Cooperation but no binding obligations in new generation issues

EU Response EU responds March 2007; Proposes DFQF for all products except sugar, rice and “competitive products” from SA; Argues LDCs should accept reciprocity (to promote regional coherence, to secure improvement in RoO, and, implicitly, to access any funding made available under EPA);

EU Response ctd Argues that EPA process should also include negotiation of agreement on trade in services and “new generation” issues (investment, gov’t procurement, competition, labour and environmental standards) and IP (geographic indications); Says all must be completed by December 2007, date of expiry of WTO Cotonou waiver, with implicit threat that if waiver expires with no EPA agreement ACP will trade on worse (GSP) terms with EU;

Negotiation Process March- November 2007 Process advances at technical level on trade in goods: EU offers to improve access for SA (but less than DFQF) in return for improved access for its products; Huge pressure on AM(T) (as well as other LDCs in other regions) leads to offers to reciprocate tariff removals on min 80% imports from EU over max 15 years;

Negotiation Process ctd Most difficult issues: trade in services and trade related issues; Although presented as measures to enhance region as investment destination; no common regional positions on these issues (In EU common position only emerged at advanced stage of its integration process;

Negotiation Process ctd Also aware that these have been identified as critical “beyond the tariff” issues to enhance access for EU firms; SADC EPA common position – except for services - is that we will agree on cooperation with a view to building capacity in region in these areas, but no binding commitments nor subject to dispute settlement under the EPA; On services cooperation only for a year, with review thereafter.

SADC EU Interim EPA As deadline loomed EU agreed to negotiate Interim EPA as step to full on EPA to be concluded after December IEPA to focus on trade in goods but… …EU insisted must include commitment to negotiate reciprocal liberalisation of “substantially all” trade in services within 4 years of tabling of IEPA”… …and also that must be commitment to negotiate commitments on Investment agreement.

IEPA ctd Schedule of Trade in Goods component of IEPA agreed… …but legal text included number of contentious new issues only raised late in process, including; Definition of collectivity…could lead to SADC EPA having to act together in complaints against EU and EU being able to act against all in complaint against one;

IEPA ctd Structures and procedures of EPA council that could amount to creating powerful new body that could trump SACU or SADC and presume sophisticated decision making procedures in SADC EPA group (which is neither SADC nor SACU); Onerous (WTO plus) customs administration procedures to protect EU imports from multiple duty payment;

IEPA ctd Requirement to ban export taxes (an increasingly important element of minerals beneficiation strategies); A “More Favoured Nation” clause requiring extension on line by line basis of any more favourable treatment to 3 rd parties with more than 1% of world trade (China, India, Brazil etc) to EU

Interim EPA MFN clause major impediment to trade diversification and South-South trade; SA refused to initial, BLSM did, and N did later but under protest; Decisions to initial taken without reference to SACU processes despite potentially creating new borders in SACU and gridlock in SACU in trade strategy. Undertaking at EU-AU summit by President Barosso to address concerns. Meeting with Commisioner Mandelson on March 4 likely to give indication of likely scope.