The Interim Economic Partnership Agreement: Why Namibia Should Not Sign – Part 2

Recent reports in the media with regards to Namibia’s so-called “reluctance” to sign the interim Economic Partnership Agreement (EPA) with the European Union (EU) have elevated the issue to a level that once again necessitates public debate on the merits of such a step…

On January 21, 2009 the EC responded to the Joint Demarche and in a predictable fashion rebutted the ANSA issues by amplifying the concessions already made to address the issues of regional integration and the Trade Development and Cooperation Agreement (TDCA) alignment with the EPA process to preserve the SACU CET.

Sadly the response only focused on the SADC EPA and did not address the SADC-wide regional integration issue.

However, the EC conceded “… once South Africa decided not to join the four other SACU members in initialling the interim EPA, thus creating a split across SACU, it became clear that this would at least temporarily affect the smooth functioning of SACU.” The EC also acknowledged “Inevitably this needs to be based, hopefully only for a short period until a full EPA is concluded, on two different legal instruments (the TDCA and the IEPA).” stating that “Every issue included into the iEPA is open for discussion in the framework of the Full EPA negotiations.”

The EC also tried to offer some comfort in “… it would remedy for the first time the significant discrepancy that the BLNS [Botswana, Lesotho, Namibia and Swaziland] countries have been criticizing ever since South Africa concluded the TDCA.” In retrospect it should be kept in mind that the TDCA is an EC creation.

The EC offered South Africa the opportunity for free trade negotiations after the country was only accepted as a qualified member of the Lomé IV Convention. This EC creation is now back to haunt them because of non-coherence between short-term gains and long-term policies in exploiting South Africa’s post-apartheid gullibility by locking the country into a bilateral agreement despite the existence of SACU.

During an interview with Trade Negotiations Insights (Issue 01, Volume 8, February 2009) Baroness Ashton was asked whether the negotiations could be completed within the deadlines set in the interim EPA. She responded, “We should also remember that the dates specified in the interim EPAs aren’t deadlines – they’re targets.” She continued, “No one can be pushed into a deal before they are ready.” Later on she said, “ACP countries sign interim EPAs when they are ready and that sometimes means at different times.”

Prompted on the EU’s Aid for Trade initiative she said, “We cannot make access to development funds conditional on signing a trade deal – EU finance mechanisms are set up to deliver development funds through clear programmes, not on the basis of progress in trade talks. So we need to reassure ACP countries they are not taking on an unfunded mandate to implement these agreements.”

The Swakopmund EPA negotiations

Then the much talked-about round of EPA negotiations took place in Swakopmund from March 9 to 12, 2009.

At this meeting the SADC-EPA group inter alia submitted written proposals on the unresolved issues. This resulted in the EC only willing to discuss a limited number of issues on the basis of their written proposals.

Agreement was reached on draft texts (Doc 109/09 ACP) concerning quantitative restrictions, food security, free circulation of goods, export taxes and infant industry protection. No agreement was reached on the Most Favoured Nation (MFN) clause and the Definition of the parties. Despite the draft texts on the five issues, one still requires EC agreement, while another is subjected to a joint review of customs legislation and procedures.

From the ”agreed” text, take Article 27 bis on food security as an example. The text specifies ”a Party or SADC EPA State” that may adopt safeguard measures to ensure food security. According to the Preamble of the interim EPA, the agreement will exist between the SADC EPA States (Botswana, Lesotho, Mozambique, Namibia and Swaziland) on the one part, and the 27 EU states ”and the European Community (EC) hereinafter referred to as the ’EC Party’, on the other part”.

This implies that the ’EC Party’ may only adopt safeguard measures collectively, while the SADC EPA States may adopt the same measures collectively, as well as individually. However, given that South Africa is currently excluded from the text, it also implies that SACU cannot collectively adopt the safeguard measures.

What are the implications where a dispute is declared against a SADC EPA State that adopted these measures individually? Firstly, the EC Party could pool its legal resources from the Commission and the 27 EU Member States to defend its case, vis-à-vis the individual SADC EPA State that could only rely on its own legal resources. Secondly, the EC Party has the fortune of 27 EU Member States to foot the bill, while the individual SADC EPA State would have to rely on its own financial ability. Which of the individual SADC EPA States has the legal resources, capacity and/or financial ability to engage in a dispute with the EC Party?

Despite the Swakopmund “agreed” texts, 19 other Articles remain unresolved in the interim EPA text. Some of the essential outstanding Articles include Regional integration (Art 4), Agricultural safeguard measures (Art 33) and Transitional arrangements (Art 46), as well as four articles on customs duties, cooperation and procedures. The EC only wants to discuss these in the negotiations towards a full EPA, despite having a profound influence on the interim EPA text.

The EC made it clear that the so-called Swakopmund ”agreed” EPA texts would only be incorporated into the final EPA, thus giving it a non-legal status in the interim EPA. Instead the EC opted for the adoption of two Declarations (Council document 14062/08) that only refer to the Swakopmund ”agreed” texts, yet again giving it an uncertain legal status.

This unfortunate development has moved the EPA negotiations beyond the point of determining whether an interim EPA or full EPA would be beneficial for the Southern African countries. At this time the decisive factor is about legal coverage in case of a dispute with the EU. This is a sad state of affairs given that the original ’partnership agreement’ as contained in the Cotonou Agreement is no longer at play.

On March 20, 2009 Commissioner Ashton wrote letters to the Trade Ministers in Botswana, Lesotho, Mozambique, Namibia and Swaziland stating that the Swakopmund meeting “… represents substantial progress and addresses the vast majority of the concerns previously outlined by ANSA countries.”, and “… that we can arrange for the signature of the interim EPA in the very near future.”

In a similar letter to the South African Trade Minister (only the last two paragraphs differ), she stated “I think that I have done all I could in terms of substance and timing, to accommodate the concerns expressed by the ANSA group and I’m pleased that this has allowed us to find concrete solutions on how to solve the majority of those concerns in the context of the full EPA.” and “… we now need to proceed with the signature of the interim EPA with those SADC members that have initialled the agreement. This has become a matter of urgency.”

Why the sudden haste to sign an unconcluded agreement with no legal standing on the so-called “agreed” texts? – refer to Baroness Ashton’s interview with Trade Negotiations Insights. How will these (and the other outstanding Articles) be dealt with in the context of a full EPA without any written legal assurances on the technicalities regarding these issues? Does this haste for signatures perhaps relate to the end of the EU Commissioners’ term of office in September this year?

EC covert actions and the way forward

On March 23 this year, Corporate Europe Observatory (through access-to-documents requests) revealed that in 2005 the EC’s main delegate in the negotiations, Ivano Casella, manufactured phoney support for the SADC EPA under an umbrella of a EU-Southern African Business Forum. This was done to create the impression that African businesses are pro-EPA – this from people who are supposed to be trusted in the negotiations.

Casella reportedly invented the idea (based on similar successes in the Mercosur countries) for African businesses to ”speak to governments with one voice”, to back the EC’s own stance in the EPA negotiations.

This even went as far as the provision of travel funds to business participants from Botswana to attend a preparatory conference in Brussels in September 2005.

Botswana, Lesotho and Swaziland (BLS) signed the interim EPA on June 4, 2009, while Mozambique signed on June 15, 2009. In terms of Article 18 of the Vienna Convention on the Law of Treaties, these countries may not do anything to undermine the purpose and objections of the Agreement. Prior to signature a country is not subjected to any obligations.

According to Article 105.4 of the interim EPA text, the parties agree to provisionally apply the agreement pending entry into force. This provisional application will cause discrepancies in the SACU CET. Also, given the non-resolution of the MFN clause, should SACU extend better terms in a trade agreement to a third party, the BLS countries will have to extend the same to the EU. This will lead to further discrepancies in the SACU CET. In this context the Namibian situation could be compared to a person wanting to purchase a house.

When the property agent offers the prospective buyer a house, the prospective buyer complains about several structural damages. The agent then “agrees” to repair some (not all) of the damages. However, this “agreement” will not be included in the purchase offer, only in the final purchase document – how this will be done is unclear. Then the agent exhorts pressure on the prospective buyer to sign the purchase offer without any legal sureties about the outstanding structural damages and how the repairs that were “agreed” to, would be incorporated in the final purchase document. Would a signature to such a purchase offer be a legally sound decision?

During the 10th regional seminar of the ACP-EU economic and social interest groups, President of the follow-up committee of the European Economic and Social Committee, Luca Jahier, admitted, “The negotiations on the interim EPAs have been the focus of much criticism for not supporting existing regional initiatives and I agree with these pre-occupations. I agree that the temporary EPAs are not good for the regional integration but we must understand that to reach a final EPA is complicated. The SADC region is particularly complicated, with EPA negotiations taking place in four different geographical configurations.”

On June 30, 2009 during an EC (DG Trade)-Civil Society Dialogue, Peter Thompson said, “Ashton replaced Peter Mandelson; she has the same mandate, but a different tone and pair of ears; she has changed the atmosphere, but there is no change in substance; we are still working on the same rules and guidelines”, i.e. proof that despite a rhetoric of words, the process is back to square one.

Taking into account all of the above, the recent remarks from Dr Geingob on the state of play with regards to the interim EPA are more than valid. The calls from Namibian CSOs and the NCCI for the Government not to sign the interim agreement at this stage hold more than merit.

Wallie Roux is a Namibian Independent Trade Policy Analyst