Namibia and the Economic Partnership Agreement
2013-08-14, Issue 643
The Economic Partnership Agreements (EPAs) have been negotiated for just over a decade between the EU and the ACP countries without satisfactory results. Most of the ACP countries have refused to enter or implement the agreements. Among those on the African continent at the forefront of resistance has been Namibia. Despite considerable economic risks the Namibian government has argued that the current format of the EPAs is not in the country’s interest. This paper presents in more detail the negotiations between Brussels and Windhoek and the Namibian position.
EPAs have been negotiated inconclusively for more than a decade. Initiated in September 2002 they were originally scheduled to come into force by 1st January 2008. Article 36(5) in the Cotonou Agreement set out the approach as follows:
“Negotiations of the economic partnership agreements will be undertaken with ACP countries which consider themselves in a position to do so, at the level they consider appropriate and in accordance with the procedures agreed by the ACP Group, taking into account the regional integration process within the ACP.” (1)
What sounds like a sensible strategy soon turned into one of the most contentious issues negatively affecting European-African relations since the end of the colonial era. Europe’s reputation and image has undoubtedly suffered major damage in the eyes of most African states. Europe’s EPA offensive clearly eroded the claims for occupying a moral high ground as a soft power, since the EU is seeking to use the EPA negotiations to push through agreements on a number of sensitive matters (such as investment, procurement and competition policy) that were rejected by developing countries at the WTO negotiations during 2003. According to its own understanding:
“The EU approach is based on the Cotonou Agreement and the negotiation directives of 12 June 2002. These foresee comprehensive, regional arrangements that include trade in goods, trade in services and investment as well as a range of trade related rules such as competition policies, trade facilitation, sanitary and phyto-sanitary standards, protection of intellectual property rights, trade and environment and labour standards.”(2)
This confirms that EPAs are about more than the reciprocity within a narrowly defined WTO compliance. The EU negotiated separate accords with different regions, and countries had to join one of the newly created entities. This weakened the ACP countries, which thereby were denied a collective bargaining power. It even divided hitherto established regional economic configurations. It is not far-fetched to see that there is an inbuilt conflict between regionalism as it exists and the negotiations of new multilateral processes. Countries might differ over the advantages between benefits from the continued protection of regional arrangements or the creation of individual preferential access within other trade agreements.
The negotiations on future EPAs introduced serious implementation problems and a negative impact on regionalism within the ACP group and its African member states. A further complication is the fact that all these regional configurations present a mix of Least Developed Countries (LDCs) and non-LDCs. A likely result is the further fragmentation of the process of regional integration and a division of ACP states into regional groups.
THE SITUATION FOR SADC AND SACU
Within the current EPA negotiations, the 15 SADC member states are denied being partners in one entity but are represented in four different regional configurations: Central Africa encompasses the Democratic Republic of the Congo (DRC); the East African Community (EAC) has Tanzania as its member; the Eastern and Southern Africa (ESA) group includes Malawi, Mauritius, Madagascar, the Seychelles, Zambia and Zimbabwe; while the group – misleadingly so – operating under the label SADC EPA comprises Angola, Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland (7 out of 15 SADC member states). Given that SADC’s own timetable for a free trade zone envisaged the complete abolition of taxes by 2012, the dispersed membership in the various EPA configurations was anything but an act of strengthening regional integration. Summing up the problems, a recent study concluded that, “complicated regional integration processes as well as further differentiations due to the EPA negotiations have likely created tremendous difficulties for these countries to simultaneously sort out the best regional integration roadmap and the most beneficial EPA grouping strategy”.(3)
In mid-2010 (one-and-half years after the EPAs were originally scheduled to be fully implemented), the situation reflected the strong differences in opinion, which in several cases ultimately blocked the negotiations. When the timetable became obsolete, the EU introduced the signing of Interim EPAs (IEPAs) as an attempt to save the planned schedule with the argument that this would ensure WTO compatibility. In early June 2010 the EAC indicated that it was not ready to sign such an IEPA. Negotiations with the Central Africa group have also been on hold and have not produced any concrete results. Madagascar, Mauritius, the Seychelles and Zimbabwe signed the IEPA in the ESA group on 29 August 2009 (with the Seychelles having ratified the agreement) while Malawi and Zambia had not signed. In the SADC group Botswana, Lesotho and Swaziland signed an IEPA on 4 June 2009, Mozambique on 15 June 2009. However, they did not initiate any significant degree of implementation. Angola, Namibia and South Africa refused to sign. Added up, almost half of all SADC member countries have not endorsed an IEPA even on paper.
The Southern Africa Customs Union (SACU) is the oldest union of its kind. Established in 1910, it includes Botswana, Lesotho, Namibia, Swaziland (the so-called BLNS states) and South Africa. The BLNS countries had previously initialled the SADC IEPA, though Namibia later insisted that it had withdrawn its compliance for unsolved differences. In a letter dated 11 February 2010 the SACU trade ministers informed the EU Trade Commissioner Karel de Gucht that they did not intend to sign or did they intend to provisionally apply the IEPA. Instead, they asked for negotiating and agreeing on an inclusive and comprehensive agreement with the whole group “without any country being worse off, or being forced to sign an agreement that does not serve their best interests”. They expressed trust “that there will shortly be an opportunity to meet and jointly guide the successful finalization of the EPA negotiations”.(4)
In his response of 31 March 2010, Karel de Gucht expressed the understanding that the previous signature of the four members of the SADC EPA group of the IEPA “was done in good faith, by Ministers absolutely mindful of the legal and practical consequences and obligations accompanying such an action”. He further stressed that as a “key principle of law ... agreements must be respected” and reminded the ministers that “failure to sign, notify and apply has fostered great uncertainty over the legality both under EU law and in terms of WTO compatibility of the Market Access Regulation preferences”. Ignoring the SACU ministers’ concern over their regional integration priority and their trust expressed in an opportunity to meet, he invited the concerned SADC EPA countries “to swiftly complete signature, notification and implementation of the interim EPA”.(5)
Given the spirit and tone of this response, it is difficult to dismiss any accusations of a patronizing and bullying attitude on behalf of the EC’s approach to further efforts to sort out differences in opinion. It testifies to the closed mindset guiding the EPA negotiations by the EC Trade Department since the days of the British Commissioner Peter Mandelson. As a result the EC Trade Directorate had to conclude in mid- June 2010 that the IEPAs with the SADC countries “cannot be implemented before they have been signed by all partners”.(6) Meaning, that they were currently not effective. The biggest stumbling bloc towards such a common basis has emerged in Namibia’s firm refusal to sign an IEPA.
THE CASE OF NAMIBIA
Angola and South Africa took a similar route and joined Namibia in its principled stance. However Namibia, while bordering both countries, was the smallest and most vulnerable of the three economies and took the only big risk: Its average annual per capita income classifies it as a Higher Middle Income country and hence disqualifies it from a LDC-status. This entirely fictional aggregate contrasts with one of the world’s highest Gini-coefficients, which means that the country has among the biggest discrepancies in the distribution of wealth and as a result faces a massive poverty problem among the majority of its population.
Angola, in contrast, with excessive revenue income from its crude oil reserves (mainly for the sole benefit of a small “oiligarchy”) qualifies as a LDC. This allows, under the Everything-But-Arms (EBA) initiative, preferential access to the EU market. It also has a precious good to offer, for which the EU is willing to show quite some degree of flexibility when it comes to accommodating deviating behaviour. After all, oil reserves are an internationally attractive asset, which provides bargaining power. Hence the autocratic family rule of the dos Santos clan has never really been a source of concern among Western governments or stood in their way of making or seeking business with Angola.
South Africa has already a Trade, Development and Cooperation Agreement (TDCA) with the EU. This is a fully WTO compatible Free Trade Agreement (FTA), which was negotiated during the second half of the 1990s in blatant violation of the SACU provisions, which would have required prior consent and involvement of the other members of the customs union. As a result, the last stage of the current TDCA implementation allows the EU to export subsidized goods duty free into the markets of the other SACU member states (including Namibia). This prevents any protection to local producers with regard to such competition. De facto, the EU already benefits from the open markets of the SACU members through its TDCA with South Africa and does not need any IEPA provisions for this penetration as long as SACU is intact. Because of the TDCA and being no ACP country, South Africa was originally not part of the EPA negotiations. Only the obvious lack of logic to this exclusion, given the country’s central role in the sub-region and its integrated economy by means of SACU and SADC membership, led to a late correction. But South Africa had reasons to find some of the clauses coming into effect under the TDCA dubious and detrimental enough to take a sceptical position vis-à-vis the current deal in the making. Thanks to the TDCA, it can afford this reluctance.
Namibia, in contrast, dared to refuse a signing of the IEPA after it had originally initialled the draft agreement at the end of 2007. At a meeting in Swakopmund in mid-March 2009 certain clearly specified objections were taken to protocol, which dealt with substantial queries Namibia expressed. These were afterwards not incorporated into the IEPA document to be signed, but according to the EC considered as matters to be dealt with ‘in good faith’. Namibia’s Minister of Trade and Industry Hage Geingob begged to differ: he subsequently charged that the EU had failed to put the given assurances to paper. His refusal to sign a document which had not incorporated the agreed changes provoked hardly concealed threats that Namibia might as a result lose its preferential (duty and quota free) access for beef, fish and table grapes to the EU market, estimated to be worth N$ 3 billion (the Namibian dollar is as a non-convertible currency pegged to the South African rand), which is a substantial if not decisive share of the annual income for the local meat, fish and grape producers.
In a spectacular speech delivered in Namibia’s Parliament in mid-May 2010, trade minister Geingob qualified his refusal to give in to the pressure and comply by signing the IEPA. Among the serious economic and policy consequences for Namibia he listed the need “to forfeit the policy option of using export taxes on raw materials as an important incentive for value addition”, to abandon the current system of infant industry protection (“We may have to wave goodbye to our dairy and pasta industries”) and the loss of “all our investments in the Green Scheme, horticultural marketing, grain storage, agricultural extension and value addition to food products”, which “would seriously disrupt rural economies and the livelihoods of thousands of small farmers”.(7) Another bone of contention remained the Most Favoured Nations (MFN) clause, which stipulates that all trade agreements entered with parties holding above 1.5% of the global trade would automatically entitle the EU for the same preferences. In the light of a trade agreement negotiated in parallel between SADC and India this was considered an obstruction to the desired strengthening of South-South trade relations.
During June and July 2010 the hardened positions, which had suggested a continued stalemate over the contentious issues, seemed to have suddenly softened. Following a high level technical negotiating session in Brussels in early May 2010, the Southern African trade ministers noted in the minutes of their meeting in Gaborone on 17 June the intention to conclude an inclusive EPA by the end of the year. This more optimistic assessment was motivated by the expected concession of the EC trade department to include the demanded changes agreed in Swakopmund into the IEPA text. While EU trade commissioner de Gucht had earlier declined even to meet the SADC EPA group to discuss their grievances, he indicated by July 2010 “that issues on food security, infant industry protection, free flow of goods and export taxes will be included in the final EPA”.(8) He further shared the opinion that by the end of 2010 a modified, comprehensive EPA with the SADC EPA region could be in place. There remained however some more contentious issues such as the alignment of market access, tariffs and rules of origin, all of essential interest from a SACU and SADC perspective. Not surprisingly, therefore, negotiations have stalled.
On 30 September 2011 the EC adopted a recommendation to the EU Council of Ministers for the termination of the Duty Free Quota Free (DFQF) access by 1 January 2014 to all those ACP countries that “have neither taken the necessary steps towards ratification of an EPA nor concluded comprehensive regional negotiations”.(9) An assessment of the likely implications for Namibia estimates that more than half (51%) of total exports to the EU would be subject to additional duties.(10) While the additional tariffs would be on average moderate, it would considerably affect duties levied on beef exports and “would probably result in the de facto commercial closure of the EU market to Namibian beef exports”. Fisheries were likely to be less severely affected. Negative effects could also limit the exports of seedless table grapes to the EU market, which emerged in recent years as a viable export commodity. Research results by the Overseas Development Institute predicted that taxes imposed on beef imports from Namibia would exceed the annual EU aid fund contributions by more than four times.(11)
For obvious reasons, this did not go down well in Namibia. Trade minister Geingob responded furiously, given that the EU Commissioner de Gucht had met Namibian government officials in Windhoek earlier in September 2011 without mentioning anything concerning the looming deadline, perceived as bordering on blackmail. The Namibian Chamber of Commerce and Industry also criticized the unilateral action. A member of parliament of the governing party Swapo refused in a statement at the ACP-EU Joint Parliamentary Assembly to accept the blame of delaying negotiations, given that EU officials take six months to a year in responding to Namibia’s concerns.(12)
In April 2012 the British MEP David Martin tabled a report in response to the EC proposal on behalf of the European Parliament Committee on International Trade, which among others suggested an extension of the deadline until 1 January 2016.(13) President Pohamba reiterated the appeal to wave the ultimatum on occasion of a state visit by Swaziland’s King Mswati III in July 2012, while the Namibian embassy in Brussels and the Namibian parliamentarian representing the country in the ACP Committee on Economics initiated lobbying for an extension of the deadline.(14) On 13 September 2012 the MEPs voted for the adoption of the extended deadline, which was greeted with enthusiasm both by the ACP secretariat and Namibian officials in Brussels, who all mistook this as a victory assuming that the endorsement by the EC would be a mere formality.(15) Much to their disappointment, however, the EU Parliament’s International Trade Committee accepted on 21 March 2013 (which ironically happens to be Namibia’s Independence Day) the adjusted deadline of 1 October 2014. The EP officially endorsed the date on 16 April 2013 against opposing votes by left and green MEPs.
Meanwhile a new internal dynamic had emerged in Namibia with the re-confirmation of minister Geingob as the governing Swapo’s vice-president at the party congress in late November 2012. Following an intensive inner-party campaign between three candidates, this re-election was at the same time his nomination as the candidate for Namibia’s next presidential elections to take place with parliamentary elections, most likely in November 2014. This makes Geingob the designated successor to president Pohamba as from March 2015. The current head of state subsequently appointed him in a cabinet reshuffle days later as Namibia’s prime minister (a position he held already between 1990 and 2002) with immediate effect. His successor as trade minister was Calle Schlettwein, the deputy minister of finance and previous long-time state secretary in the finance ministry. Appearing side by side at the 7th Summit of Heads of State and the ACP countries in Malabo, Equatorial Guinea in mid-December 2012, they reaffirmed Namibia’s position that the EPAs should not be about trade only but also development and that they will continue to maintain a principled position.
As minister for trade and industry, Schlettwein re- emphasized the need to consider the country’s industrialization as an integral part of economic development strategies. In a keynote address in early February 2013 he stressed the need to transform the colonial economy by adding value to the primary resources before being exported, pursuing an infant industry protection and taxing exports of raw materials.(16) Schlettwein was not amused when the new deadline for the termination of the DFQF was shifted to 1 October 2014 to enforce compliance with the EPA. He remained adamant that this is not sufficient time to solve the outstanding issues.(17) Announcing a national consultation on the EPA for end of April in the Namibian parliament, he observed that this unilateral imposition was simply not in the spirit of partnership, fair play or equity. He was also adamant that by accepting the TDCA concluded between the EU and South Africa without consultation or endorsement of the other SACU member states Namibia had de facto offered EU products already preferential access into its market:
... to avoid the collapse of SACU, a treaty which provides real benefits to us. The main beneficiary of this condonation of the TDCA has nevertheless been the EU. More than 90 percent of EU goods enter our market duty free under the TDCA and via our SACU borders.(18)
When opening the two-day national consultation on the SADC-EPA negotiations in Windhoek he declared:
“This approach taken by the EU goes against the letter and spirit of what is supposed to be a partnership and is regrettable. It also has the potential of placing undue pressure on the negotiating processes. I therefore reiterate my concern over this unilateral step by a negotiation partner ... We as developing countries stated that ‘we want trade not aid’ from Europe amongst others and the EPA was meant to make that possible under the predictable and secure conditions required to make the necessary investment in industrialisation in order to create goods for export. We also stated that we do not want to be exporters of raw materials, but of final finished goods to consumer end markets.”(19)
The national consultations were examining the pros and cons of signing or not signing an EPA in three working groups chaired by the minister of agriculture, the minister of fisheries and Schlettwein. It became obvious that the fear of being punished for taking a principled position and facing severe economic losses and risks to the employment of workers (especially in the lucrative export of grapes to the EU) if refusing compliance led to a cautious approach, recommending continued engagement.(20) Both the commercial farmers producing high quality beef mainly for export to South Africa and the lucrative EU market, who are organized in the Meat Corporation of Namibia Ltd (Meatco) as well as the grape farmers along the southern border of the Orange River, signalled despair over the looming punishment, which for them would incur major losses.
The beef producing lobby always welcomed the EPA as an opportunity to secure a safe market for the export of prime beef and had since the initial threat in 2010 increasingly campaigned for a more accommodating policy by the government. Grape farmers in a submission to the two-day consultation warned that their business would in the absence of any viable alternatives for marketing their product under similar favourable conditions “die a sudden death” if they would be forced to pay the customs tariffs for EU exports, putting at risk the employment of 3,000 permanent and 4,500 seasonal workers, currently providing a livelihood for an estimated 45,000 people in the region.(21) Government will have no easy task to justify its legitimate concerns that under the current conditions the EPA will be not beneficial for the country’s overall economic policy and obstructive to its efforts to move from a supplier of raw materials towards some domestic value adding industry.
Given the country’s comparatively vulnerable situation, the courage to stand up against Brussels has been remarkable but might not last forever. This does not diminish the impact the position has had for other countries negotiating the EPAs. It can be assumed that Namibia’s principled refusal to get bullied into an agreement against what it considered its own best interests served as an example for other countries originally more willing to adhere to the pressure exerted. That the EPAs remain a contested notion and require from the EU more wheeling and dealing than was probably anticipated at the beginning shows that even relatively small economies with comparatively little weight can make a meaningful impact during negotiations. During June 2013 the Head of Division for Southern Africa in the European External Service made a five-day visit to Namibia to strengthen relations. This was followed by a one-day visit of EU Commissioner de Gucht in mid-July. It seems, as if the Goliath in Brussels is eager to find a way to end the fight with David without getting too bruised.
While some believe that ACP countries have nothing to gain in EPA negotiations, the EU also has more to lose than to gain – at least in terms of reputation and acceptance concerning its Africa policy. In the absence of sufficient capacity among the ACP countries to meaningfully negotiate the EU proposals, many among those at the receiving end felt being coerced into a process they actually resisted. The EPA negotiations were neither convincing evidence to claims that the EU would not ignore the interests of the ACP countries, nor were they meeting the criteria for coherence with other fundamental principles of development policies by EU member countries, such as support to regional integration. The EU’s EPA policy and implementation strategy has clearly contributed to a loss of credibility among the ACP countries and in particular on the African continent.
South Africa, however, is facing a similar risk in the context of Southern Africa. As regional economic giant, it remains confronted with the options to act as a benign hegemonic leader or a sub-imperialist power guided exclusively by its own narrow interests. Such selfishness would be detrimental to any efforts seeking to strengthen regional integration. South Africa considers its financial contributions through the SACU revenue formula to the other member countries of the customs union as unrealistically high and seeks a drastic adjustment. This would massively affect the annual budgets and economies of the four economically junior BLNS partners, who are exposed to the exports from and through South Africa and have already had to accept the unilateral TDCA entered into by South Africa with the EU. The result might be an end of SACU and further divisions in SADC. Above all this is not an issue of economical arithmetic but primarily a political question:
Can South Africa afford to push the SACU countries into the laps of the European Union? Can South Africa afford to allow Europe to divide Africa once again? What is needed is an understanding leadership from all sides, and skillful negotiations that are not based on reprisals or retribution but on a long-term pursuit of objectives that benefit the entire population of the region.(22)
1. Quoted from South Centre, The Cotonou Partnership Agreement, the Economic Partnership Agreements and WTO Compatibility: Can Initialed Interim EPAs be Notified? Analytical Note SC/TDP/AN/EPA/22. Geneva: South Centre, June 2009, p. 4.
2. European Commission, EU-ACP Economic Partnership Agreements: State of Play at June 2010. Brussels: European Commission/Directorate-General for Trade, 15 June 2010, p. 3.
3. Michael F. Jensen and Yu Wusheng, Regional Trade Integration in Africa: Status and Prospects. Policy study commissioned by the Ministry of Foreign Affairs of Denmark. September 2012, p. 50.
4. Letter by the SACU Secretariat, 11 February 2010, Ref: 15/2/2, pages 2 and 3.
5. Letter by Karel de Gucht, 31 March 2010, EP/cs/A 249 (10) D 216, pages 1 and 2.
6. European Commission, op. cit., p. 6.
7. Hage Geingob, Ministerial Statement, delivered to Namibia’s National Assembly, 19 May 2010.
8. Jo-Maré Duddy, EU promises to back off on EPA. The Namibian, Windhoek, 23 July 2010.
9. European Commission, Brussels, 30.9.2011, COM (2011)598 final, 2011/0260 (COD), Proposal for a Regulation of the European Parliament and of the Council amending Annex I to Council Regulation (EC) No 1528/2007 as regards the exclusion of a number of countries from the list of
regions or states which have concluded negotiations, p. 2.
10. Lorand Bartels and Paul Goodison, EU Proposal to End Preferences of 18 African and Pacific States: An Assessment. Commonwealth trade hot topics, issue 91, November 2011, p. 4.
11. ODI project briefing: The End of Current EU Preferences for Namibia: Economic and Social Impacts, May 2007, available at http://www.odi.org.uk/iedg/Publications/Namibia_ Preferences_Project_Briefing.pdf
12. Jo-Maré Duddy, Billions in balance if trade pact fails. The Namibian, 11 October 2011.
13. European Parliament, Committee on International Trade, 2011/0260(COD), 13.4.2012, Draft Report, p. 7.
14. Jo-Maré Duddy, Pohamba calls on EU to waive EPA deadline. The Namibian, 26 July 2012.
15. Jo-Maré Duddy, EU backs down on EPA deadline. The Namibian, 18 September 2012.
16. Clemens von Alten, Schlettwein will aufräumen. Allgemeine Zeitung, 5 February 2013.
17. Jan Poolman, EPA deadline upsets Schlettwein. Informante, 27 March 2013.
18. Quoted in Edgar Brandt, Call for national consultation on EPA. New Era, 8 April 2013.
19. Quoted in Edgar Brandt, EU deadline for EPAs regrettable – Schlettwein. New Era, 25 April 2013.
20. Eberhard Hofmann. Regierung schwankt bei EPA. Allgemeine Zeitung, 26 April 2013.
21. Lukman Cloete, Grape farmers panic over EPA delay. The Namibian, 20 June 2013.
22. Yash Tandon, Salvaging EPA negotiations with Europe: A turning point for Africa. Speech delivered at the Harold Wolpe Memorial Trust, Cape Town, March 9 2010, (http://www.pambazuka.org/en/category/comment /63120)
* Dr. Henning Melber is Senior Advisor/Director emeritus at The Dag Hammarskjöld Foundation Uppsala/Sweden, Extraordinary Professor at the Department of Political Sciences/University of Pretoria and Professor Extraordinary at the Centre for Africa Studies/University of the Free State.
This policy brief is a shorter version of a paper presented to the Symposium “South Africa and the United Nations” held on 19 July at the University of Pretoria. It forms part of a joint research project by the Department of Political Sciences/University of Pretoria and the London School of Economics on South Africa’s foreign policy, sponsored by the Open Society Foundation of South Africa.
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