SA keen to bolster ties with EU

(Image: GCIS)

"We are keen to strengthen the investment partnership ... and business-to-business [links]. We are involved in the negotiations of the Economic Partnership Agreement (EPA), and we look forward to a fruitful couple of days," said Davies.

Briefing reporters on Tuesday ahead of the 6th SA-EU Summit, which takes place on Thursday, Davies said negotiations on the EPA between the EU and the African, Caribbean and Pacific (ACP) Group of States would feature at the summit deliberations.

"The European Union Trade Commissioner, Karel de Gucht, has said that the withdrawal of the provisional market access is October next year. Parliament said the deadline would be 2016. We support this rather than 2014," said Davies, citing this as one of the issues that needed to be resolved between parties.

"... There are still matters that need to be solved before we can reach an agreement. What has to be concluded by October 2014 is a matter of some debate."

The deadline would not affect South Africa, but would affect its neighbours Swaziland, Botswana and Namibia.

"It will not affect us but it will affect our neighbours, and we are concerned about the consequences of any unilateral withdrawal of market access to a bunch of countries, which are clearly developing countries, merely because we can't meet an artificially imposed deadline ," said Davies.

Xavier Carim, the Department of Trade and Industry's Deputy Director-General for International Trade and Economic Development, said the deliberations were taking place at a time when there were growing imbalances in trade.

If the EPA was not finalised by next year's deadline, there would be declines in exports to the EU by SA's neighbours.

"We have been making progress in the negotiations. It's been a drawn out process since 2007. We've made significant progress on a number of fronts but there are still a number of serious issues that need to be confronted.

"The growing concern in the [Southern African Development Community] SADC group is the termination next year. Effectively this will mean that for Botswana, Swaziland and Namibia, they will see massive declines in their exports to the EU and will hold serious socioeconomic consequences for them," said Carim.

Balancing trade levels

South Africa already has a bilateral Free Trade Agreement (FTA) with the EU called the Trade, Development and Cooperation Agreement (TDCA), whose architecture is premised on the EU granting SA much more access in terms of the tariff regime in manufactured products than they did in agricultural products.

In terms of the TDCA, the country has duty-free access to the European market for about 65% of its agricultural products and in return for that, the country receives more than 90% (from the EU).

"We as SA, having the FTA in place, would not be obliged to negotiate a new trade agreement with the EU. But we said that we would do so and we are involved in the process because we think it is strategic for SA to harmonise its trade relationships with those of our neighbours," said Davies.

The levels of trade between South Africa and EU have not returned to the levels they were at before the onset of the global financial crisis.

Total trade with EU countries last year was R383bn compared to R419bn in 2008. This was "still way off the figure that we achieved in 2008", said Davies.

The minister indicated that SA's exports to the EU remained well below the levels that they were in 2008. In 2008, SA exported R186bn worth of goods, which fell to R122bn in 2009.

Imports from the EU, however, have recovered to more than the levels which they reached in 2009. Imports were R233bn in 2008, last year they were R239bn.

"[This] meant that the trade balance has grown negatively from -R47bn in 2008 to -R95 in 2012. There are a number of factors that have underpinned this. [One] of the realities we need to take to take into account is that there's been constrained growth in some countries of the EU," Davies said.

Citrus market watch

Meanwhile, government was trying to negotiate around the issue of the EU's decision to "upgrade the surveillance" of citrus products.

"The EU has improved or upgraded its surveillance on citrus products which are bearing citrus black spot. They have now strengthened and made more stringent the requirements, and this could affect quite a large number of jobs in the South African citrus industry," said the minister.

The South African citrus industry exports around 100 million cartons to 45 countries, which generates R6bn of foreign exchange; but 45% of that total goes to the EU.

The industry employs 40,000 permanent workers and 40,000 seasonal workers.

The "surveillance upgrade" pertains to citrus black spot, a fungal disease caused by Guignardia citricarpa. It affects citrus plants throughout subtropical climates, causing a reduction in both fruit quantity and quality.

"The EU has now strengthened, made more stringent the requirements and this could affect quite a large number of jobs in the South African citrus industry. We have made a presentation to them to say that there needs to be a greater level of flexibility. At this point, they've not shown any great willingness to respond," said Davies.

He said there was a low risk of transmission of the disease, which does not damage the fruit but is on the rind of the peel. "There's a low risk that this could be transmitted to the orchards of Europe. They have increased their surveillance, and if they find five consignments [with citrus black spot], they ban you. That is of concern to us," he said.

However, Davies said government looked forward to a "fruitful" dialogue during the summit.

One of the things that South Africa wanted to convey to the EU was that the African continent was one of the next growth frontiers, and that the continent was committing itself to industrialisation, which is anchored on strengthening regional integration.

Relations between SA and the EU were improving, Davies noted.

"We have seen a strengthening EU investment relationship with SA. Between January 2008 and May 2013, there were a total of 350 [foreign direct investment] FDI projects in SA by European companies," said Davies.

See also:

• BD Live: Davies, EU in war of words over trade deals
  BD Live reports that Europe's trade chief yesterday warned South Africa about the future of its relationship with the European Union (EU), which enjoys the position of being South Africa's single largest trade partner. The warning stemmed from what BD Live reports as the trade chief's view that "European investors are 'watching developments in South Africa very carefully' after SA 'unilaterally' cut bilateral investment treaties with EU member states Belgium, Luxembourg and Spain. It had also indicated it would do the same with about a dozen EU countries in all."