Trade Agreements overview of current trade governance matters for South Africa Trudi Hartzenberg trudi@tralac.org
Overview Brexit: EU UK matters and SA Brexit from June 2016 referendum, to notification and what next? Legal and practical matters for a post-brexit relationship UK s move from Economic Partnership Agreement (EPA) to an Free Trade Area (FTA) with Southern African Customs Union (SACU)? Trump Presidency New approach to trade policy - implications for WTO and broader trade policy agenda US-Africa trade relationship: AGOA and beyond Brief overview of Africa s trade agreements Update on the Tripartite FTA and CFTA negotiations
SA EU Trade governance The SADC EPA, which took about ten years to negotiate, is officially known as The Economic Partnership Agreement between the European Union and its Member States, of the one Part, and the SADC EPA States, of the other Part Comprehensive trade in goods agreement - with possible further negotiations to include trade in services and trade related matters (South Africa not interested at this stage to negotiate trade-related matters) The SADC EPA was signed on 10 June 2016 and will formally enter into force once all parties have deposited their instruments of ratification. The implementation of the agreement has been announced to be from 10 October 2016 (provisionally implemented) All SACU member states have ratified the SADC EPA (Mozambique is expected to do so in the near future)
Wine matters for a post-brexit deal Under the EPA, the annual tariff-free quota of 50-million litres of South African wine is increased to 110-million litres, while 150 000 t/y of South African sugar and 80 000 t/y of ethanol can also be exported to the EU tariff free The EPA includes a bilateral protocol between the EU and South Africa (not the other SADC EPA member states) for the protection of geographical indications and on trade in wines and spirits The EU will protect names such as Rooibos, numerous wine names like Stellenbosch and Paarl. In return, South Africa will protect more than 250 EU names spread over the categories food (cheese, meat, edible oils), wines and spirits NOW: BREXIT
Brexit: Legal and practical matters SADC Economic Partnership Agreement remains the legal basis for trade between the EU (including the UK) and SADC EPA member states (RSA, Botswana, Lesotho, Namibia, Swaziland and Mozambique) until Brexit happens Legal issues two part process i) Withdrawal under Article 50 of the Lisbon Treaty is the first part; ii) to be followed by the future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union Notification 29 March (UK would like a deep and special relationship with the EU ); and now snap election 8 June 2017 Practical issues UK is a member of the World Trade Organisation (WTO) but its trade relationship is defined as a member of the European Union (customs union with a common external tariff) A new policy framework for UK-African Caribbean Pacific relations (and all other partners) is required to replace trade and development arrangements presently governed by EU agreements. The UK s deals may be similar to those which the EU has now, but this is uncertain at this stage South Africa s relationship has to be determined in a SACU-UK context
Tracking Brexit developments Referendum 23 June 2016 uncertainty... PM s 12 Point Plan of 17 Jan 2017 (Hard Brexit. No access to the Single Market -- gains full control over immigration. Tax haven?) PM s 6 page notification letter of 29.03.2017 ( deep and special partnership emphasising economics security links) EU's draft guidelines for negotiations 31.03.2017. (Strive for certainty, 2 stages, security a separate issue, 3m EU citizens) UK to settle divorce bill of 60 bn? (UK budget contributions, cost of divorce, pension liabilities, moving EU agencies based in UK, research funding, re obligations accepted by EU re 3 rd states.) EU Council meets 29 April to approve guidelines & mandate Elections in France and Germany In mean time EU acquis continues to apply to UK Snap general election (8 June) secure a strong mandate?
What happens over next 2 years and how? EU view Preserve integrity of the Single Market Two-phase process: disentangle and then negotiate new agreement Aim for UK as a close Partner, but prepare for failure too. No sector-by sector approach Nothing is agreed until everything is agreed A phased approach & EU acts collectively An orderly withdrawal Optimal certainty no legal vacuum Reciprocal guarantees for citizens/their rights a priority Withdrawal agreement to include dispute settlement re application and interpretation of withdrawal agreement. Ireland, Cyprus and Gibraltar got special mention. It all ends on 29 March 2019, after 43 years, unless.
What happens over next 2 years and how? UK view Restore national self-determination & re-invent UK trade governance Leaving EU but not leaving Europe Convert EU acquis into UK law - ensure continuity Deep & special partnership: economic & security matters No membership of the Single Market Fair settlement of rights & obligations Avoid harm to Ireland & peace process. No hard border Agree terms of future partnership alongside withdrawal Bold and ambitious FTA between UK-EU More ambitious than anything before include crucial sectors such as financial services & network industries
Assume there is a UK-EU FTA: What rules govern UK s other International Trade? Trade under WTO rules? What does this mean? But since 1973 UK an EU member International trade in goods regulated by EU CET, tariff quotas etc. UK is a WTO member but without Tariff & Services Schedules (1994). Old schedules predate WTO Preferential trade agreements challenges of renegotiations Interim arrangement and a WTO waiver? UK likely to want a comprehensive FTA (incl services); keep in mind that the EU deal is a compromise of all EU interests (we don t know what UK s trade policy is) And if there is no deal with the EU? Are WTO talks just as urgent now?
Implications for South Africa, SACU & Africa? EU of 27 will continue to have the rights and obligations as before re its international agreements [SADC EPA] UK will no longer be covered by agreements concluded by the EU. (WTO schedules, EPAs, climate etc) Practical trade facilitation issues where do goods destined for UK markets, land (Rotterdam harbour?) Tariff rate quota s...will EU want to renegotiate (reduce?) TRQs in EPA (taking into account eg wine exports to UK)?
The Trump Administration Trade and broader economic policy: America first: emphasis on job creation, elimination of unfair trade/us trade deficit (use of border taxes and other measures); preference for bilateral trade agreements not mega-regional agreements Executive Order 29 April 2017: Addressing Trade Agreement Violations and Abuses (review and assess all trade agreements including World Trade Organisation) Withdrew from Trans Pacific Partnership (and no news about negotiations with the EU: Transatlantic Trade and Investment Partnership Agreements) Strong stance on NAFTA (Mexico and Canada), but now softening.. softening on China too? No specific comment yet on trade policy towards Africa, except to say that trade agreements must work for the US; however discussion about changes to development assistance programmes (eg USAID)
What can Africa and South Africa expect? Strong focus on compliance (possible out of cycle reviews for African countries under AGOA and possible suspension of preferential market access) For South Africa: key sectors benefitting from AGOA are autos, clothing & textiles and a broad range of products (wine, fruit ) US concerns about chicken/beef/pork exports to South Africa (South Africa has been implementing anti-dumping duties for more than a decade, now concerns about standards)
Way ahead: US South Africa AGOA will not be renewed US is concerned that EU has better market access to African countries (and SA in particular) US will want a reciprocal agreement which opens South African (SACU) market (comprehensive agreement including goods, services, investment and competition issues) Important to prepare for comprehensive FTA negotiations with the US (these will be US-SACU negotiations because South Africa is a member of the customs union)
Update on Africa s trade negotiations Still strong focus on integration - for South Africa, this means SACU, SADC, TFTA, and CFTA African markets are important for SA Tripartite Free Trade Area (TFTA) 26 Member States (Cape to Cairo); FTA launched in June 2015, but negotiations on tariff liberalisation, rules of origin, and trade remedies continue South Africa is negotiating with EAC (Kenya, Tanzania, Rwanda, Burundi and Uganda) and Egypt Lessons: tariff negotiations are very sensitive (Member States want policy space eg SA see Minister Davies post-state of the Nation (SONA) speech)
Continental Free Trade Area (CFTA) Negotiations launched in June 2015 and began early 2017 Second round of technical working groups, met late April/early May Launch the CFTA on 29 December 2017 What can we expect? What about the relationship between the TFTA and CFTA Conclusion: SA s trade policy focus to protect domestic producers; seek access to foreign markets Note: SA has not notified its commitments under the WTO Trade Facilitation Agreement; does not support discussion of investment facilitation at the WTO (citing policy space concerns)