Are Economic Partnership Agreements (EPAs) beneficial to Africa? – A reflection on the EU–SADC EPA

SADC flags

In August of 2022, an arbitration council voted in favor of the European Union (EU) over the Southern African Development Community (SADC), with regards to the EU–SADC Economic Partnership Agreement (EPA). The council found that South African Customs Union’s (SACU) safeguards in the form of increased import duties were illegal. [1] These tariffs, initially adopted in 2018 in the form of increased import duties, were implemented to protect the local South African poultry industry from being swamped by cheaper EU frozen chicken imports. [2] Two years following their adoption, the SADC increased import duties on frozen chicken to 62 percent and implemented anti-dumping levies (extra import duties to prohibit flooding of the market) of 265 percent, affecting 183 million Euros worth of EU exports. [3] Concerningly, the arbitration panel’s 2022 decision in favor of the EU sets a strong precedent for the ratification of analogous rulings under the EU–SADC EPA in the future. [4] Forcing SADC countries to open up their markets raises the issue of the asymmetry of power between the EU and the SADC, and whether EPAs are beneficial to Africa. Moreover, this highlights the dire need for a reassessment and transformation of the EU–SADC EPA. 

What is the Cotonou Agreement? 

The Cotonou Agreement, signed on 23 June 2000, serves as the legal framework for all  EPAs and governs relations between African, Caribbean, and Pacific (ACP) countries and the EU. [5] An EPA describes a bilateral trade and development agreement to create a free trade area (FTA). [6] An FTA describes an agreement between countries to lower barriers to trade, such as tariffs or quotas, and reduce government regulation. [7] The benefits of the FTA supposedly include granting consumers access to a broader and cheaper range of foreign goods, as well as encouraging economic, social, and cultural development in ACP countries. [8] In dire need of access to the international market, investment, and developmental aid, 79 ACP countries excitedly joined the  Cotonou Partnership Agreement with the EU. [9] The agreement pledged to improve the institutional framework of governing structures, to allow for the augmentation of democratic states, and to forge greater regional peace and security. Regional and sub-regional integration are also encouraged through monitoring joint institutions. [10] According to the Cotonou Agreement, to achieve these professed objectives, these countries are required to support trade liberalisation to allow for the “reciprocal” exchange of goods for both the EU and ACP countries. [11]

Unpacking the Nature of the EU–SADC Relationship

The EU–SADC EPA, consisting of Botswana, Lesotho, Mozambique, Namibia, South African and Eswatini, is a development-focused trade agreement founded on the principles of the Cotonou Agreement. [12] Under this new partnership, the intended benefit for the SADC includes new access to markets and better trading terms in agriculture and fisheries. [13] The EU–SADC agreement aims to improve sustainable development by identifying areas which can benefit from funding, emphasizing private sector development, creating more equitable access to resources, and increasing employment. [14] The EU–SADC agreement proposes that these benefits can be achieved if SADC countries eliminate 86 percent of tariffs on imports from the EU. [15] Simultaneously, the EU would remove 98.7 percent of the customs duties on imports coming from the SADC. [16] However, this reciprocal exchange has been undermined by the principle of originating products. [17] The originating products principle refers to the trade rule which allows a specific product to qualify for a lower or zero preferential tariff. [18] A product can be categorised as originating (from either the EU or SADC regions) if it is “wholly obtained” from that country or manufactured in that specific country using their own technologies. [19] Moreover, for a product to retain the benefit of a lower customs duty, a product must abide by all other requirements, including the non-alteration rule, which prohibits the alteration or transformation of a product by a third country during transit to the partner country. [20] However, owing to the ACP countries’ relatively small economic power, the nature of the partnership agreement has been asymmetrical. Deregulation and trade liberalization have had pervasive consequences, undermining regional integration, development, and economic growth. [21]

A Partnership Between Unequals

Members of the SADC argue that this EPA breeds inequality and can be constituted as a “partnership between unequals” owing to their relatively weak bargaining power. [22] This partnership reifies a colonial-type trade relationship, as the SADC region is often unable to qualify for lower customs duty and is forced into an unequal exchange of goods. [23] Moreover, SADC countries have severe debt-servicing obligations which prohibits them from investing in their industrial base. [24] Thus, countries in this region are forced to export mostly primary products and become net importers, undermining their pursuit for the beneficiation and value addition of raw materials. [25] For example, South Africa’s largest export, accounting for 17.7 percent between 2009-2016, was precious metals and stones. [26] The biggest import from the EU in this same period was machinery and mechanical equipment, accounting for 20 percent of total imports. [27] The fact that SADC imports more in monetary terms, than it exports, has resulted in a negative trade balance with the EU (between 2009-2016). The loss of revenue from import duties (between ten and thirty percent) impacts socio-economic development and worsens the human development crises in African countries. [28] Therefore, the EU–SADC EPA can be seen as favoring the EU and reinforcing asymmetry in the international arena. [29]


The World-systems theory posits that this social structure of global inequality is a deliberate exercise wherein the “periphery,” systematically underdeveloped countries, are exploited of their raw materials by the “core,” dominant capitalist countries with higher skill and capital-intensive production. [30] Currently, the EU’s industrial and agricultural exports are cheaper than domestic goods in SADC countries.[31] Cheap exports from the EU have outcompeted local products and severely affected domestic productivity and increased unemployment, poverty, and malnutrition, as SADC countries are dependent on agriculture as the largest contributor of its gross national income. [32] Moreover, food security has been undermined as local agricultural sectors are unable to compete with subsidized agricultural products from Europe. [33] The Human Development Index (HDI) for Sub-Saharan Africa was recorded at 0.55 in 2021, an indication of poor human development. [34]

African Opposition

It is worth noting that there has been a strong opposition to the EU’s categorization of Africa, considered split regionalization, as it does not conform to Africa’s five traditional geographic blocs recognized by the African Union (AU). Whereas the AU divides the continent into Central, Northern, Southern, East, and West, EU divides it into Central, the SADC, East, Eastern and Southern, and West. [35] Six traditional SADC countries — Tanzania, Madagascar, Mauritius, Seychelles, Zimbabwe and Democratic Republic of Congo (DRC) — have not been included in the SADC EPA group. Instead, they have been split across three different negotiating regions: the Eastern and Southern Africa (ESA) group, Central Africa, and East African Communities (EAC). [36] Because of this, EPAs have inhibited efforts for regional integration and the “overlapping membership” problem has undermined Africa’s ability to form a unified position in negotiations. [37]

The role of economic development funds (EDF) for regional projects, building trade capacity, and infrastructure, both in the forms of direct financial flows and technical assistance, have also been a point of contention. [38] The EU is one of Africa’s largest contributors of foreign aid, contributing roughly $21 billion per year. [39] However, this donor aid is under the ownership and control of the EU, and thus largely serves their interests, which have tended to be neoliberal in nature. [40] This aid has had similar injurious consequences to Structural Adjustment Programmes (SAPs), a set of economic reforms imposed by donor countries that a recipient country must adhere to in order to receive a loan. [41] Moreover, these countries experience high debt-servicing obligations — around $15 billion every year — which divert capital away from investing in industrialization, export diversification, technological advancement, and skills development. [42] Therefore, a cycle of “aid dependency” is created and the EU is able to continually exert strong influence on SADC countries. [43]

The Need for Change 

SADC countries should reconsider the EPA with the EU, as the trade negotiations are clearly not amounting to the intended objectives. Instead, the EPAs favor EU interests, failing the SADC’s economic growth, development, regional integration, and agricultural productivity. This partnership can almost be seen as a neo-colonial “Scramble for Africa.”

In order to achieve reform, there is an urgent need to promote regional integration, especially since the Cotonou Agreement expired in November 2021, and more bilateral trade agreements will undoubtedly arise. A post-Cotonou Agreement has been drafted but has not yet been formally signed. [44] It is worth considering other trade agreements like the African Continental Free Trade Agreement, a free trade area encompassing most of Africa, for eradicating trade barriers between the blocs imposed by the EU and creating greater regional integration. [45] Secondly, the SADC should collaborate with the other regional blocs to overcome their weak bargaining power relative to the EU and increase their ability to negotiate trade agreements. Lastly, the EU should create more favorable conditions, via subsidization, for the SADC to have more equal access to European markets and to ensure that EU goods do not flood African markets. It is vital that Africa insists on transformation within these trade negotiations, rather than stagnation and dissatisfaction with the status quo.


References:

[1]  “Panel rules in favour of EU on Southern African Customs Union’s safeguard on EU poultry cuts.” European Commission, accessed November 23, 2022, https://policy.trade.ec.europa.eu/news/panel-rules-favour-eu-southern-african-customs-unions-safeguard-eu-poultry-cuts-2022-08-03_en

[2] Ibid.

[3]“South Africa suspends chicken tariffs to ease price pressures,” Vanek, M., accessed November 23,2022, https://www.news24.com/fin24/economy/south-africa-suspends-chicken-tariffs-to-ease-price-pressures-20220801

 [4] “Panel rules in favour of EU on Southern African Customs Union’s safeguard on EU poultry cuts.” European Commission, accessed November 23, 2022, https://policy.trade.ec.europa.eu/news/panel-rules-favour-eu-southern-african-customs-unions-safeguard-eu-poultry-cuts-2022-08-03_en.

 [5] “Economic Partnership Agreements (EPAs),” European Commission, accessed December 2, 2022. https://trade.ec.europa.eu/access-to-markets/en/content/economic-partnership-agreements-epas

[6] Ibid.

[7] “What is a Free Trade Area? Definition, Benefits and Disadvantages,” The Investopedia Team, accessed December 27, 2022, https://www.investopedia.com/terms/f/free_trade_area.asp.

[8] “Economic Partnership Agreements (EPAs),” European Commission, accessed December 2, 2022. https://trade.ec.europa.eu/access-to-markets/en/content/economic-partnership-agreements-epas

[9] Ibid.

[10] Ibid.

[11] Ibid.

[12] “SADC-EU Economic Partnership Agreement: briefing”, Parliamentary Monitoring group, accessed December 2, 2022. https://pmg.org.za/committee-meeting/23118/

[13] “EPA SADC- Southern African Development Community”, European Commission, accessed December 2, 2022. https://trade.ec.europa.eu/access-to-markets/en/content/epa-sadc-southern-african-development-community

[14] Ibid.

[15] Ibid.

[16] Ibid.

[17] Ibid.

[18] Ibid.

[19] Ibid.

[20] Ibid.

[21] “Neoliberalism: What it is, with examples and Pros and Cons,” Liz Manning, accessed December 27, 2022, https://www.investopedia.com/terms/n/neoliberalism.asp.

[22] Omolo, Christopher Otieno. “The Africa-EU Relations and Regional Integration in Africa: Reassessing EU’s Influence on Africas’s Integration Project (s).” L’Europe en Formation 1 (2019): 27-50. https://www.cairn.info/revue-l-europe-en-formation-2019-1-page-27.htm accessed December 2, 2022.

[23] Ibid.

[24] Kamidza, Richard. “The Southern African Development Community Group and The European Union Trade Negotiations: Implications and Challenges to Regional Integration and Development.” In Conferência Inaugural do IESE: Desafios para a investigação social e económica em Moçambique. 2007, 5.

[25] Ibid.

[26] Ibid.

[27]  “South Africa’s trade with the European Union Category: Economics” South African Markets Insights, accessed December 2, 2022. https://www.southafricanmi.com

[28]  Kamidza, Richard. “The Southern African Development Community Group and The European Union Trade Negotiations: Implications and Challenges to Regional Integration and Development.” In Conferência Inaugural do IESE: Desafios para a investigação social e económica em Moçambique. 2007, 3.

[29] Ibid.

[30] “World Systems Theory”. Study.com, accessed December 2, 2022. https://study.com/learn/lesson/world-systems-theory-wallerstein.html 

[31] Kamidza, Richard. “The Southern African Development Community Group and The European Union Trade Negotiations: Implications and Challenges to Regional Integration and Development.” In Conferência Inaugural do IESE: Desafios para a investigação social e económica em Moçambique. 2007, 3.

[32] Action, Practical. “The Crisis in African Agriculture, A More Effective Role for EC Aid.” Practical Action/PELUM. Available at the africanvoices. org. uk website (2005), 10.

[33] Kamidza, Richard. “The Southern African Development Community Group and The European Union Trade Negotiations: Implications and Challenges to Regional Integration and Development.” In Conferência Inaugural do IESE: Desafios para a investigação social e económica em Moçambique. 2007, 5.

[34] “Human development index scores of sub-Saharan Africa from 2000-2021”. Statista, accessed March 9, 2023. https://www.statista.com/statistics/1244480/human-development-index-of-sub-saharan-africa/ 

[35] Kamidza, Richard. “The Southern African Development Community Group and The European Union Trade Negotiations: Implications and Challenges to Regional Integration and Development.” In Conferência Inaugural do IESE: Desafios para a investigação social e económica em Moçambique. 2007, 5.

[36] “EPA SADC- Southern African Development Community”, European Commission, accessed December 2, 2022. https://trade.ec.europa.eu/access-to-markets/en/content/economic-partnership-agreements-epas#:~:text=Economic%20Partnership%20Agreements%20(EPAs)%20are,EU%20imports%2C%20over%20transitioning%20periods

[37] Ibid.

[38]  Tshuma, Darlington. “What if Africa stops receiving foreign aid? The risk of reversing development gains in a Covid-19 world.” (2022): 7.

[39] Ibid.

[40]  Kamidza, Richard. “The Southern African Development Community Group and The European Union Trade Negotiations: Implications and Challenges to Regional Integration and Development.” In Conferência Inaugural do IESE: Desafios para a investigação social e económica em Moçambique. 2007, 4.

[41]  “What are structural adjustment programs (SAPs)?” Investopedia. https://www.investopedia.com/terms/s/structural-adjustment.asp

[42] Ismi, Asad. Impoverishing a continent: The World Bank and the IMF in Africa. Ottawa: Canadian Centre for Policy Alternatives, 2004.

[43]  Kamidza, Richard. “The Southern African Development Community Group and The European Union Trade Negotiations: Implications and Challenges to Regional Integration and Development.” In Conferência Inaugural do IESE: Desafios para a investigação social e económica em Moçambique. 2007, 4.

[44] “The OACPS-EU partnership: Damage control or saving the last pieces?” ECDPM, accessed March 9, 2023. https://ecdpm.org/work/oacps-eu-partnership-damage-control-saving-last-pieces

[45]  “Cotonou 2.0: A bad trade deal for Africa?” Jan P. Wilhelm, accessed accessed December 2, 2022. https://www.dw.com/en/cotonou-20-a-bad-trade-deal-for-africa/a-57503372

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