7 Interim Economic Partnership Agreement
between the European Community and its Member States and the South
African Development Community States
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(29973)
13314/08
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COM(08) 562
(b)
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13386/08
+ ADDs 1-13
COM(08) 565
(c)
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6822/10
COM(10) 57
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Draft Council Decision on the signature and provisional application of the Interim Economic Partnership Agreement between the European Community and its Member States and the South African Development Community States
Draft Council Decision concluding the Interim Economic Partnership Agreement between the European Community and its Member States and the South African Development Community States
Draft Council Decision on a EU position within the EC-South Africa Cooperation Council on the amendment of the relevant provisions and Annexes to the Trade, Development and Cooperation Agreement (TDCA) between the European Community and its Member States and the Republic of South Africa to align certain tariffs with those applied to the EU products by Botswana, Lesotho and Swaziland in the Annex 3 of the EU-SADC interim Economic Partnership Agreement
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| Legal base | (a) and (b): Articles 133, 181 and 300 EC; QMV; co-decision
(c) Articles 207 TFEU; QMV; —
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| Document originated | 23 February 2010
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| Document deposited | 1 March 2010
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| Department | International Development
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| Basis of consideration | Minister's letter and EM of 17 March 2010
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| Previous Committee Reports | HC 5-i (2009-10), chapter 9 (19 November 2009), HC 16-xxxi (2007-08), chapter 5 (15 October 2008), HC 19-vii (2008-09), chapter 7 (11 February 2009) HC 19-xxi (2008-09), chapter 5 (24 June 2009); also see (29043) 14498/07 and (29155) 14968/07: HC 16-xxi (2007-08), chapter 13 (14 May 2008)
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| To be discussed in Council | April 2010
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| Committee's assessment | Politically important
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| Committee's decision | (a) and (b) Cleared (decision reported 11 February 2009); further information requested
(c) Cleared
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Background
7.1 The Economic Partnership Agreement (EPA) negotiations
with the African, Caribbean and Pacific (ACP) group of countries,
which began in 2002, aimed at redefining the trade regime between
the two groups of countries, thereby replacing the long-standing
Lomé system of preferential access to the European market
for the ACP from 2008. The EPAs are intended to be in conformity
with WTO rules, which require that barriers to trade be dismantled
on both sides, introducing an element of reciprocity into trade
relations between the EU and the ACP states for the first time.
This gave rise to concern that extensive market opening in these
countries to the EU could create strong adjustment pressures,
while European suppliers would be only marginally affected by
free market access for ACP goods and services. The deadline for
negotiation was 31 December 2007.
7.2 The Commission's aim was always "full"
EPAs — which include provisions on trade-related areas,
trade-related rules and trade in services and include appropriate
links to development cooperation, as well as trade in goods —
in accordance with what is outlined in the Cotonou Agreement and
the Commission's negotiating mandate. But not all of the six ACP
negotiating regions were likely to conclude a full EPA by the
set deadline; so, for these regions, the Commission decided to
pursue basic "trade in goods agreements", which provide
for duty free/quota free access and simplified Rules of Origin.
7.3 Our earlier Reports set out our consideration
of the process in greater detail.[7]
The most recent concerned two Council Decisions: the first, authorising
the signature, on behalf of the Community, and provisional application
of an Agreement between the EC and its Member States on the one
hand, and the South African Development Community (SADC) EPA states
on the other; and the second authorising the formal conclusion
of the Agreement.
7.4 "SADC EPA states" refers to Namibia,
Botswana, Lesotho, Swaziland and Mozambique, i.e., countries within
SADC that have completed interim EPA negotiations. Of these, the
first four are members, along with South Africa, of the Southern
African Customs Union (SACU). In this Agreement, for some purposes
the "SADC EPA states" act collectively and for others
they act individually.
7.5 The Commission and SADC EPA states initialled
the Interim Economic Partnership Agreement (IEPA) on 23 November
2007, which enabled their inclusion in the EPA Market Access Regulation
adopted by the Council of Ministers on 20 December 2007 (which
provides for duty-free, quota-free access for all SADC EPA states'
exports to the EU, commencing 1 January 2008).
7.6 The Commission issued these proposals together
as they both concern the formalities necessary to agree formally
and give effect to the same international agreement, namely the
Agreement establishing an Interim Economic Partnership Agreement
between the EC and its Member States and the SADC EPA states (the
IEPA). The two step process is not unusual — the EC Treaty
expressly allowed the Community to apply international agreements
provisionally, prior to their formal conclusion, as the formal
conclusion process can be lengthy.
Previous consideration
7.7 The details of the IEPA are set out in our
Report of 15 October 2008. In his accompanying 10 October 2008
Explanatory Memorandum, the then Parliamentary Under-Secretary
of State at the Department for International Development (Mr Gareth
Thomas) said that the UK had consistently stated that EPAs should
help provide a strong framework for long term development, economic
growth and poverty reduction, and had centred its policy on the
principles set out in the DFID/DTI Position Paper of 2005.[8]
7.8 The Minister said that this Agreement broadly
aligned with these principles, which included the belief that:
ACP countries should be able to decide the scope of issues covered
within their IEPA; they should have flexibility over their market
opening; EPAs should provide them with duty and quota free market
access into the EU with improved Rules of Origin; they should
benefit from effective safeguards to protect their markets when
required; and EU partners should provide ACP countries with effective
development assistance to benefit from new trade opportunities
while ensuring aid is not made conditional on signing an EPA.
The initialling of this 'goods-only' agreement had thus enabled
SADC EPA states to secure market access into the EU while allowing
more time to work with other African neighbours to negotiate a
regional EPA covering other trade issues such as services.
7.9 The Minister noted a number of positive features.
But he also noted a number of concerns raised by the SADC signatories
and South Africa — SACU's biggest and most influential member,
who had chosen not to initial the IEPA — which he intended
to pursue in the Development Working Group. These included some
measures not required for WTO compatibility (e.g. MFN clause and
standstill clause), what he regarded as an over-ambitious timetable
regarding commitments to broaden the scope of the Agreement (on
services and investment) and the potential damage to the aim of
regional integration through South Africa's non-participation.
He said that he would monitor these and lobby the Commission as
necessary. Given these concerns and the fact that discussion on
the concluded SADC IEPA had not been held so far in the Working
Groups, he thought it possible that he might need to come back
to the Committee with further developments and advice. The Committee
nonetheless drew all this to the attention of the House, because
of the widespread interest in the EPA process, and also to the
attention of the International Development Committee, so that
they might be aware of the elements of the EPA and the Minister's
concerns; and in the meantime retained the documents under scrutiny.[9]
The Minister's letter of 29 January 2009
7.10 The Minister provided the following update:
REGIONAL INTEGRATION ISSUES — BORDER ADMINISTRATION:
— as
South Africa is not party to the IEPA, there were concerns over
regional integration, the most pressing relating to the mis-match
in tariffs between the SADC states and SACU. The main challenge
to maintaining coherent regional trade regimes was to harmonise
tariffs between South Africa and other countries in SADC. The
Commission had presented South Africa with a range of options
that would enable this and dialogue was ongoing.
REGIONAL INTEGRATION
ISSUES — CONTENT:
— EPA
rules on sourcing of materials meant that inputs from South Africa
which fell under the exclusion list could not be used in goods
exported to the EU from SADC. The Commission had informed him
that these items were not indefinitely excluded. However, regional
governments said there was not yet clarity on dates and how future
sourcing of inputs from South Africa would be managed. He was
monitoring the situation closely and would, if necessary, push
for greater flexibility from the Commission.
COUNTRY GOVERNMENT
VIEWS:
— Angola,
South Africa and Namibia were the only governments in the region
to express opposition to the terms of the Interim EPA. Botswana,
Lesotho and Swaziland had been generally supportive but had expressed
concerns about the impact of the Interim EPA on regional integration;
— Namibia had signalled its intention to
sign but had also raised concerns, some of which echoed those
of South Africa. Recent Commission updates said that progress
had been made on the most contentious issues. On balance, it appeared
that Namibia was likely to sign, but with the expectation that
their concerns would be addressed in the move towards a regional
EPA;
— engagement with South Africa was ongoing,
but progress had been slow in the light of "current domestic
pressures"; the Minister would do all he could to encourage
both the Commission and key negotiating partners to reach agreement
on outstanding issues.
FUTURE REGIONAL
ENGAGEMENT:
— the
Trade Commissioner was to visit the Southern African region in
February and the Commission planned to hold a seminar in early
2009, once the Interim EPA had been signed, to promote constructive
discussion with countries in the region on difficult or sensitive
issues that were not fully resolved within the Interim EPA but
were to "be seriously considered in the regional agreement."
7.11 In sum, the Minister described the SADC
region as complex and containing countries with quite divergent
interests; while a number of concerns had yet to be resolved,
structures were in place to work towards their resolution.
Our assessment
7.12 Though it was plain that there had been
little, if any, concrete progress regarding any of the Minister's
major concerns, we felt that there were at least indications that
the Commission was beginning to address them, and it would not
be possible for them to do so were the IEPA to remain unsigned.
We therefore cleared the documents, and again drew this to the
attention of the International Development Committee, and asked
the Minister to write before the summer recess with a further
update.[10]
7.13 The Council Decisions were subsequently
endorsed, with a list of desiderata concerning subsequent discussions
with the SADC countries, by the European Parliament in its resolution
of 25 March 2009, [11]
and adopted by the Council on 24 April 2009.
The Minister's further letter of 11 June 2009
7.14 The Minister set out the then position as
follows:
STATE OF PLAY OF THE INTERIM EPA
— the
visit by the then Trade Commissioner Ashton to the SADC region
had been positively received, following which agreement was reached
on issues including export taxes, infant industry safeguards,
quantitative restrictions, free circulation of goods and tariff
alignment to preserve the SACU;
— the Interim EPA was signed on 4 June
by Botswana, Lesotho and Swaziland. Mozambique was expected to
sign shortly, and Namibia was expected to sign towards the end
of 2009;
— following these discussions, the Commission
produced two Joint Declarations and the legal text of the Interim
EPA; the former were intended to give assurances to the SADC
signatories that specific modifications would be made to the Agreement. The
first Declaration set out the position on tariff alignment, such
as that the tariffs under the SADC EPA align with those of the
South African Customs Union; the second set out the commitment
to regional integration and the region's commitment to concluding
the full EPA negotiations;
— the new legal texts, to be included in
the full EPA, would cover the areas referred to above, where agreement
had been reached, which meant that the agreed changes detailed
in these legal texts did not change the terms of the Interim
EPA text, but only became effective once the full
EPA was signed.
NAMIBIA'S POSITION
— Namibia
had requested that the legal text detailing changes to be included
in the text of the full regional EPA be included as an addendum
to the Interim EPA; the Commission could not give such assurances,
as the Interim EPA would have to be re-submitted to the European
Council; Namibia had cited this as the main reason for not signing;
— while it appeared that Namibia would
not sign in the short term, the EU was an important market for
its agricultural exports (especially beef and grapes), and failure
to sign the EPA could ultimately lead to the Commission revoking
Namibia's Market Access Regulation (which provides countries that
have signed an EPA provisional duty-free, quota-free access to
the EU); discussions were ongoing.
7.15 The Minister concluded by saying that he
would continue to support the SADC region in its ambition to sign
the full regional EPA and "encourage the Commission to be
as development focused and transparent as possible in its negotiations
with SADC states."
Our assessment
7.16 We thanked the Minister for this
further information, which we felt was reassuring as far as it
went. But we found it odd that he made no mention at all of South
Africa, and asked for a further update in the autumn, to include
an indication of where South Africa — a key factor —
then was in the equation.
7.17 In the meantime, we again reported this
further information to the House because of the widespread interest
in these issues, and for the same reason again drew it to the
attention of the International Development Committee.[12]
The Minister's further letter of 8 November 2009
7.18 In this third letter, the Minister of State
at the Department for International Development (Mr Gareth Thomas)
provided an update on the most recent developments within the
region and outlined South Africa's position, as follows:
STATE OF PLAY OF THE INTERIM EPA
— Botswana,
Lesotho and Swaziland signed the Interim SADC EPA on the 4th June,
and Mozambique signed shortly afterwards on the 15th June. Namibia
is yet to sign;
— there
had been no change in Namibia's position and none is expected
before Namibia's presidential and parliamentary elections, due
to be held on 27th and 28th November 2009. The Commission is prepared
to review the situation post-election;
— South Africa and Angola had not initialled
the Interim SADC EPA and were therefore not expected to sign an
Interim EPA.
STATE OF PLAY OF THE FULL EPA
— discussions
towards the full regional EPA covering all seven SADC countries
(Botswana, Lesotho, Namibia, Swaziland, South Africa, Mozambique
and Angola) were progressing with negotiations taking place over
the services and investment chapters;
SOUTH AFRICA
— Negotiations
towards the full EPA included South Africa, notwithstanding its
expressed reluctance at signing a full EPA; meanwhile, South Africa
continued to export to the EU under the Trade, Development and
Cooperation Agreement (TDCA);
— South Africa had raised concerns that
the EPA jeopardised regional integration by generating two trading
regimes in the region, the SADC EPA and TDCA; the Commission had
responded by making changes to the SADC EPA so that its tariffs
were aligned to the TDCA;
— the Minister supported these steps to
align tariffs and help preserve regional integration;
— at the 10-11 September 2009 EU-South
Africa Summit, South Africa noted further concerns which included
the Most Favoured Nation clause, Definition of Parties and Rules
of Origin, and had agreed to participate in a trade meeting chaired
by Botswana to try to resolve these concerns;
— DFID had also commissioned research to
analyse the costs and benefits to South Africa of signing the
SADC EPA as opposed to remaining under the TDCA, the results of
which he expected to be received by January 2010, and which would
be shared with all parties.
7.19 The Minister again concluded by saying that
he would "continue to encourage the Commission to be as development
focused and as flexible as possible in its negotiations with SADC
states."
Our assessment
7.20 We once again thanked the Minister for this
further informative update.
7.21 For the same reasons as before, we both
reported it to the House and drew it to the International Development
Committee.
7.22 Notwithstanding the Commission's and others'
efforts, the whole basis of a regional EPA, interim or full, remained
uncertain so long as South Africa's position remained likewise.
We therefore asked the Minister for a further update before the
Easter recess.
The Minister's letter 17 March 2010
7.23 In his letter, the Minister of State at
the Department for International Development (Gareth Thomas) provides
the following update:
STATE OF PLAY OF THE INTERIM EPA
"Botswana, Lesotho and Swaziland signed the
Interim SADC EPA on 4 June, and Mozambique signed shortly afterwards
on 15 June. South Africa and Angola have not initialled and are
therefore not expected to sign the Interim EPA.
"Namibia initialled the interim SADC EPA, but
remains reluctant to sign. There has been little progress recently.
In December, I met with the Minister of Trade and Industry for
Namibia, the Rt Hon Hage Geingob, and my officials have raised
with the European Commission issues mentioned by him as concerns.
These include the Most Favoured Nation (MFN) clause, which obliges
both the EU and the ACP nations to extend to each other any more
beneficial terms they extend to another major trading economy.
I am writing to the Rt Hon Hage Geingob to keep him informed of
developments.
"More broadly, the European Commission hosted
a seminar on the 1-2 March in Maputo, Mozambique, to discuss the
practical implications of the SADC interim EPA for the private
sector. I understand that the seminar was well attended and I
welcome the commitment of the private sector in Mozambique to
engage with the opportunities created by the EPA.
STATE OF PLAY OF THE FULL EPA
"The Full Regional EPA is intended to cover
all seven SADC countries (Botswana, Lesotho, Namibia Swaziland,
South Africa, Mozambique and Angola). Discussions towards the
Full EPA are progressing with negotiations taking place over the
services and investment chapters.
SOUTH AFRICA
"South Africa remains reluctant to sign an Economic
Partnership Agreement (EPA) with the EU, preferring to remain
with its current trading arrangement, the Trade, Development and
Cooperation Agreement (TDCA).
"I have previously mentioned that South Africa
had raised concerns that the EPA could jeopardise regional integration
by generating two trading regimes in the region, the SADC EPA
and TDCA. The UK consistently supported the Commission and South
Africa in seeking to align the two tariff regimes and help preserve
regional integration. I am pleased to say that the Commission
has now responded by aligning 53 tariff lines in the TDCA and
SADC EPA and a proposal has been issued to this effect.
TDCA/SADC EPA STUDY
"We have now received the results of this study.[13]
"Key findings included that:
- "Economic costs to South
Africa signing the EPA would be low
- "The EPA could boost regional trade with
South Africa's neighbours
- "Most Favoured Nation clause was highlighted
as the only significant reason for South Africa to object to signing
"As a result of the findings, which reinforce
what I have heard in meetings with ministers from the SADC region,
I have raised the issue of MFN with the Commission and my officials
are pushing for increased flexibility in this key area.
"We are actively disseminating the study, through
a number of avenues including our High Commissions in South Africa
and Botswana. The UK also hosted a seminar in Brussels on 4 March
to discuss the research and delegates included representatives
from the Commission, other Member States, NGOs and the European
Parliament.
"I discussed the importance of EPAs with the
new Trade Commissioner, Karel De Gucht, in February, at my first
meeting with him in his new role. I remain fully committed to
ensuring EPAs are development friendly and will continue to work
with the Trade Commissioner and other Member States to achieve
this."
The Council Decision
7.24 The document sets out the proposal referred
to by the Minister, to amend the TDCA to align 53 tariff lines
with the Interim SADC EPA.
7.25 In his Explanatory Memorandum of 17 March
2007, the Minister recalls concerns raised by South Africa that
the interim SADC EPA would disrupt the SACU common external tariff
— because 53 tariff lines on EU imports differed between
the interim SADC EPA and the TDCA and would cause difficulties
to the free circulation within SACU of the products covered by
those tariff lines — and says that this amendment will address
these concerns by aligning the two tariff regimes.
7.26 He explains that the alignment will be done
in different ways depending on the tariff line: of the 53 tariff
lines that are to be aligned:
- 49 tariff lines will be liberalised
by 2015;
- the remaining four tariff lines will be frozen
at 2007 TDCA tariff rates and for the time being there will be
no further liberalisation.
These amendments to the TDCA will, the Minister concludes,
mean that all 53 lines will face the same tariffs in both the
SADC EPA and the TDCA.
The Government's view
7.27 The Minister says that the Government has
"consistently supported steps being taken by the European
Commission and South Africa to align tariffs and help preserve
regional integration", and continues as follows:
"This proposal to amend the TDCA to align 53
tariff lines with the Interim SADC EPA will solve the most pressing
issue related to the mis-match in tariffs between the SADC states
and SACU.
"Aligning these TDCA tariffs to those of the
interim SADC EPA will mean that South Africa is liberalising these
lines at a slower rate than originally foreseen in the TDCA. This
will benefit South Africa because it will mean the region will
operate with a coherent set of tariffs with Europe, facilitating
the free circulation of products within SACU, preserving the SACU
tariff coherence and ensuring clarity, long term economic predictability
and legal certainty for economic operators."
Conclusion
7.28 We are grateful to the Minister for this
further information, which we once again report to the House because
of the widespread interest in trade and development in southern
Africa.
7.29 South Africa remains the key. The Minister
is endeavouring constructively to remove obstacles towards South
Africa's full participation in the EPA process. The measures embodied
in this latest Council Decision would appear to be a further step
in the right direction. We now clear the Council Decision.
7.30 Looking ahead, we should be grateful
if the Minister would continue to update the Committee on any
further significant developments in the SADC, both with respect
to South Africa and generally.
7 See headnote. Back
8
Which is reproduced at the Annex to chapter 1 of HC16-i (2007-08)
of (7 November 2007). Back
9
See headnote: HC 16-xxxi (2007-08), chapter 5 (15 October 2008). Back
10
See headnote: HC 19-vii (2008-09), chapter 7 (11 February 2009). Back
11
See http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2009-0179+0+DOC+XML+V0//EN
for the full text of the European Parliament resolution. Back
12
See headnote: HC 19-xxi (2008-09), chapter 5 (24 June 2009). Back
13
Which, the Minister says, is available at http://www.acp-eu-trade.org/library/library_detail.php?library_detail_id=5244&doc_language=Both.
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