TRADE: Namibia Caught in Stand-Off Between South Africa and EU

• by Servaas van den Bosch (windhoek)
• Thursday, August 20, 2009
• Inter Press Service

This position was voiced by Calle Schlettwein, permanent secretary in the ministry of finance at an Aug 17 talk on the economic partnership agreements (EPAs) in Windhoek, hosted by the Friedrich Ebert Foundation and the Agricultural Trade Forum. The foundation is connected to Germany’s Social Democratic Party while the forum represents agricultural business interests in Namibia.

In July Mozambique and the SACU-states Botswana, Lesotho and Swaziland signed an interim EPA with the EU. In the unlikely event that the Europeans insisted on immediate application of the agreement, SACU’s common external tariff (CET) would collapse, with disastrous effects for the regional union.

Yet, EPA-sceptics Angola, Namibia and South Africa (ANSA) held out for further assurances from Brussels.

'The EU’s overriding ambition with the EPAs is to have guaranteed access to our raw materials,' explained Schlettwein. 'This has been combined with a quest from the developed world to change the rules in developing countries with regard to services.

'This reduces Namibia’s policy space dramatically. We need to be able to add value ourselves. The EPA is a hindrance to development for large parts of our population.'

With regard to the Singapore issues, such as services, Schlettwein added that these would give EU-traders unlimited access to its markets without necessary reflecting what Namibia needs.

'The EU speaks of negotiations on equal footing, but where are we equal? We are probably the most unequal parties imaginable. How likely would it be for Telekom Namibia to take over Deutsche Telekom? This inequality needs to be acknowledged.'

Peter Draper, head of the trade programme of the South African Institute of International Affairs (SAIIA), attached to the University of the Witwatersrand in Johannesburg, warned the arid nation not to take too much stock in economic diversification.

'How realistic is it to build a domestic manufacturing base? Can you really compete with China and India? It’s not so bad to export resources; countries like Australia, Sweden and Chile have done well with it. The question is how do you invest the proceeds?'

Draper argued that, the 'economic logic' for 'a country like Namibia' points towards liberalisation of the services sector to attract investment.

Schlettwein responded that the comparatively low trade volume – 50 million dollars – with the EU is ultimately far less important than the high volume trade with South Africa and the potential offered by China, India and the U.S. 'We have to make tough decisions about who we want to trade with most,' he explicated.

Draper’s comment was that 'Namibia is caught between a rock and hard place. If it signs the EPA, it risks antagonising South Africa which brings SACU revenue into play.'

The south-western African country’s take from the customs pool is about one billion dollars annually, roughly forty percent of its total budget.

The contribution of Botswana, Lesotho, Namibia and Swaziland (BLNS) to the pool is marginal.

'Botswana, Lesotho, Namibia and Swaziland last year deposited 36 million dollars in customs duties, compared to South Africa’s 3.2 billion dollars. BLNS contributed almost 60 million dollars in excises versus 8.7 billion dollars by South Africa,' accounted Schlettwein.

'The revenue sharing formula in SACU is favourable to the BLNS in order to industrialise an area that has been and still is used as a capital market by South Africa. It’s unlikely that South Africa will cut this umbilical cord. The other countries would immediately start exporting poverty to South Africa, which is not a commodity that is in high demand.'

However, a change in SACU seems imminent regardless of the EPAs. Schlettwein: 'SACU revenues are down by over one billion dollars overall. Namibia faces a cut of 160 million dollars. The South Africans have made it clear they want to renegotiate the revenue-sharing agreement.'

Together with the diversion of SACU’s CET under the interim EPA this will have to be sorted out soon, he stresses.

'We cannot be in a customs union where countries undermine the very provisions that hold it together. If we must come up with a new constitution of SACU, so be it. If it has to be abolished over time to migrate into a SADC customs union, so be it. SACU is not an absolute.'

So Schlettwein holds the door open for a customs union that includes Angola. 'ANSA definitely has a role to play,' he told IPS. 'And an inclusion of Angola would have a bearing on SACU.'

Existing tensions between South Africa and Botswana on trade and foreign policy matters could possibly fuel the emergence of an ANSA configuration.

Still, the Namibians maintain they will sign the interim EPA as soon as contentious issues have been resolved in the EPA texts, although there is some bad blood since Brussels reneged on promises made in Lisbon at the end of 2007 and in Swakopmund this March.

'Signing the interim EPA locks us in a situation where we don’t know if our issues will actually be addressed in the end,' said Schlettwein. 'The EU asking us to trust them again might be a bit of a stretch,' admitted Draper.

Moreover, the Europeans’ 'divide and rule tactics didn’t help regional integration at all', Schlettwein pointed out. 'With five different EPA configurations, establishing a CET for the 2010 SADC customs union is just impossible.'

According to Draper, the region is still a far way from common industrial policies but could focus on common standards as a start for further integration.

He expected that South Africa will eventually jump to join the EPA to save the unity in SACU, if nothing else. Although the controversial most favoured nation (MFN) clause that extends trade deals with third parties to the EU 'will go to the wire', he predicted.

He regarded as mitigating that the reciprocity of this clause also extends trade benefits between the EU and big agricultural exporters in South-East Asia, or elsewhere, to the SADC-EPA region.

© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service