The trade and development agreement between SA and the EU : implications for SACU

Burger, Pieter Francois Theron (2000-12)

Thesis (MBA)--Stellenbosch University, 2000.


The Trade, Development and Co-operation Agreement (TDCA) will create competitive challenges, threats and opportunities, driving out less efficient performers while bolstering more efficient enterprises and industries. This is in line with the general principles of the World Trade Organisation (WTO) which promotes the reduction of trade barriers in order to liberate trade on a global basis. This dynamic process of adjustments will continue throughout the implementation of the European Union - South Africa Free Trade Agreement ( EU-SA FTA) which is the main component of the TDCA. The European Union (EU) has historically been Southern Africa's most important trading partner. The main reason why South Africa entered into a Free Trade Agreement (FTA) with the EU was to enhance exports to South Africa's largest export market, attract higher levels of investment from the EU, and gradually expose the South African industry to competition to ensure that it is restructured to become globally competitive. Since 1910 South Africa has been part of the Southern African Customs Union (SACU), which also comprises Botswana, Lesotho, Namibia and Swaziland (BlNS). The EU-SA FTA will accordingly impact on trade relations between South Africa, the EU and the BLNS countries. Not only will SACU face increased competition from cheaper EU imports, but BLNS countries will also face reduced income from the common revenue pool. South Africa will have to remove a higher level of tariffs from a greater volume of imports than is the case for the EU. For the BLNS, the relative adjustment effort is even greater. The BLNS will have to adjust to the elimination of tariffs on 30% of goods currently imported from the EU, while the TDCA will bring about no improvement in their current terms of access to the EU market. The BLNS products currently exported to the EU which are most likely to be affected by the EU-SA FTA are: clothing (Lesotho), preserved fish and flowers (Namibia), and grapefruit, processed pineapples, corned fruit and grapes (Swaziland). These products are under threat from South African products which can, as a result of the FTA, be exported to the EU at reduced tariffs. BLNS products which could be affected as a result of cheaper EU imports are: grain (Botswana, Namibia and Lesotho), chicken production (Swaziland), sugar (Swaziland), beef (Namibia and Botswana), and the small wheat-farming sector in Namibia and Botswana. The EU-SA FTA is further likely to have a substantial impact on South Africa's exports to the EU. The total increase in exports as a result of the FTA is estimated between 1.3% and 1.4% of the 1996 value of South Africa's exports to the EU. The main drive will come from industrial products which are less protected than agricultural products. The South African government, further, concluded that the negative effects of the direct costs to SACU would be outweighed, in the long term, by the dynamic and geopolitical benefits of an FTA with the EU. The signal that the South African government has given with signing the TDCA with the EU indicates that the Southern African economy should restructure itself to become internationally competitive. This is the only way to survive in a global trade arena which is under WTO principles becoming increasïngly more liberated.

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