SA Wants a Strong Regional Market
(Rob Davies)--There has been growing public discussion on the implications of the interim economic partnership agreement (IEPA) for regional integration in southern Africa. I want to clarify the South African government’s views on these vital issues.
Since 1994 South Africa has identified regional integration in southern Africa as a top priority within our global economic relations. Our commitment to regional integration is founded on two precepts.
First, as former president Nelson Mandela often said, South Africa cannot expect to exist as an island of prosperity in a sea of poverty. Our economic destiny is inextricably intertwined with the continent. Second, a more integrated regional market provides industries located across the region the opportunity to overcome limits imposed by small national markets, achieve economies of scale, and thus enhance competitiveness.
Regional integration serves as a platform to participate more effectively in the global economy. Based on this, South Africa has been an active member both of the Southern African Development Community (SADC) and the Southern African Customs Union (SACU).
SACU is the oldest surviving customs union in the world. But its real significance lies in its potential to advance deeper forms of developmental integration. It could do this by serving both as an anchor and a driver of deeper integration in SADC, and by engaging more effectively in wider global trade relations. Within itself, SACU has the potential to move beyond the customs union structured around a revenue-sharing arrangement that it now is, by taking steps to becoming a common market and even a closer monetary union.
To advance towards such deeper forms of integration requires that SACU members forge a common vision on regional industrial development and trade policy. Playing the role of an anchor and driver of deeper integration in SADC requires that SACU members share a common view on current processes of integration in SADC.
In our view, the experience of the implementation of the SADC free trade area to date confirms that the most serious constraints to balanced regional trade are weak production structures. Consequently, the focus of future work should be consolidation of the SADC free trade agreement and building a work project to overcome real economy supply capacity constraints.
This must be the bedrock for new formal trade integration plans, such as the establishment of a SADC-wide customs union. For SACU to realise its potential, we need common understanding on how to position ourselves in a changing global economy. Shifting patterns of global trade require a forward-looking response to develop mutually beneficial trade and investment relations with these new sources of global economic growth. We also need to develop a common trade negotiation agenda based on agreed positions in multilateral trade negotiations, notably in the World Trade Organisation (WTO) Doha round.
If we reach an understanding on these points, we can take SACU forward. If not, SACU runs the risks of being trapped in policy gridlock and rendered ineffectual by global developments beyond its control. It is in this context that South Africa’s concerns with the effect of the IEPA on SACU must be understood. When South Africa entered the economic partnership agreement negotiations in 2005, we hoped to ensure that the goals of regional integration could be advanced by harmonising our trading relations with an important trading partner, the EU. We also took note that the European Commission had said that one of its key objectives in negotiating was to enhance regional integration.
The emerging IEPA outcome is very different. SADC members have found themselves in 5 separate negotiating configurations. Each has negotiated market access arrangements for EU goods that vary considerably from one another. This will complicate efforts to foster regional integration. The separate arrangements also create the basis for new trade policy divisions in the region as they provide market opening obligations and commitments to the EU before the region has had time to build its own regional markets and rules in such new areas as services, investment, competition, and procurement.
The IEPAs, furthermore, contain legal provisions that limit the state’s policy space to promote agricultural and industrial development, and to diversify trade relations with other key economies. A series of incompatibilities in the legal provisions under the SACU agreement, the trade development and co-operation agreement (TDCA) and
IEPA could, unless addressed, steadily erode the basis for building policy coherence in SACU. Moreover, unless addressed urgently, some IEPA legal needs could undermine SACU’s ability function even as it has until now. These include differences in the rules of origin under the TDCA and IEPA.
South Africa will not sign an EPA until it is convinced that concerns are substantially addressed. The European Commission has agreed to our proposal to continue to engage on all these outstanding issues. In pursuing these engagements, South Africa will seek to strengthen WTO-compatible trade relations with the commission in a way that does not undermine our prospects for deeper integration in SACU and SADC.
While we are committed to this approach, it is evident that SouthAfrica cannot achieve these objectives on its own. We need a common vision among SACU member states and a willingness from the commission to prioritise its concern to promote regional integration not just in broad declaratory statements, but in detailed outcomes of negotiating processes.
*Rob Davies is the Minister of Trade and Industry
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