Status on the disadvantages for South Africa regarding Member Countries of the Southern African Customs Union (SACU) and the European Union (EU) with Agreements within the Framework of the Economic Partnership Agreement

NATIONAL ASSEMBLY

FOR ORAL REPLY

QUESTION NO: 22

PUBLISHED IN INTERNAL QUESTION PAPER NO 8 OF 11 AUGUST 2009

DR CP MULDER (FF PLUS) TO ASK THE MINISTER OF INTERNATIONAL RELATIONS AND COOPERATION:

1. Whether the fact that some member countries of the Southern African Customs Union (SACU) and the European Union (EU) have signed agreements which fall within the framework of the Economic Partnership Agreement will hold particular disadvantages for South Africa; if not, why not; if so, what is the extent of these disadvantages;

2. whether the Government, in light of the agreements between SACU member countries and the EU, is currently considering an adjustment in the distribution of revenue within SACU; if not, why not; if so, what will be the extent of this adjustment in the distribution of revenue within SACU?   NO850E

REPLY:

1. The signature of the Interim Economic Partnership Agreement (IEPA) by some SACU member countries will hold challenges for South Africa within the regional context.  The EPAs will complicate efforts to build a single trade regime within the SADC region and between the region and the EU which remains the region’s single most important trade partner.  The IEPA will limit the scope for industrial and agricultural development policy among SADC and SACU countries, which also hampers enhanced industrial capacity.  It will ‘lock-in’ trade relations with the EU and hamper efforts to diversify the region’s trade relations with other key economies due to the ‘most favoured nation’ (MFN) clause; including the most dynamic emerging economies in the world economy. In addition, it will also limit capacity for structural change and development within the region.  EPAs will reduce import duty revenue through tariff reductions, although this will take place in a phased-down manner.  This reduction will impact on the ability of various governments to supply public goods to their citizens such as education and health – limiting the ability of countries within the region to achieve the MDG goals

It is in South Africa’s political and economic interest that SACU member economies thrive.  South Africa’s approach has been that contentious provisions in the IEPA be addressed satisfactorily, and that SACU continue to work to forge a common tariff offer to the EC in order to preserve SACU’s common external tariff; the essential underpinning for the customs union.  Differential obligations to the EU under the Trade Development and Cooperation Agreement (TDCA) and IEPA will foreclose harmonisation of a range of policies in SACU in the future, including on the “new generation” policy areas. Further, in the longer term, the MFN provision of the IEPA could further knock holes in the common external tariff and this will potentially hamper long-term economic development in the region.

2. South Africa is not considering an adjustment in the distribution of revenue within SACU in light of the agreement between SACU member countries (BLS) and the EU. Revenue shares in SACU are determined on the basis of provisions contained in the 2002 SACU Agreement and therefore subject to consultation and agreement by all member states. However, the signing of the EPA by the BLS will impact on the collection of customs revenue and affect the distribution of revenue to all member states.