WRITTEN QUESTION E-2382/99

by Bart Staes (Verts/ALE) to the Commission

(16 December 1999)

Subject: Impact on Southern Africa of the trade, development and cooperation agreement with South Africa

The trade, development and cooperation agreement between the European Union and the Republic of South Africa has recently been approved. It provides for free access to the South African market for 86 % of EU products, while the 15 EU Member States will grant free access to 95 % of South African products. Given that South Africa is a member of two regional pacts, this will also have an impact on other countries in the region.

South Africa is in a customs union with Botswana, Namibia, Lesotho and Swaziland. These five countries are not allowed to levy tariffs at their common frontiers. Accordingly, EU products will be bought and sold via South Africa tariff-free, even though Botswana, Namibia, Lesotho and Swaziland are heavily dependent on customs tariffs for their revenue. In addition, South Africa is negotiating liberalisation of trade with the ten other members of the SADC. Until an agreement is reached, businesses in the SADC countries will find it harder than their EU competitors to gain access to the South African market.

On 22 September 1998 Commissioner Pinheiro said in answer to written question E-2287/98(1) by Mr Jaak Vandemeulebroucke that the Commission expects that the envisaged agreement will have a positive dynamic economic effect on both South Africa and the other countries in the region.

1. How much revenue did Botswana, Namibia, Lesotho and Swaziland derive from the collection of customs duties in 1995, 1996, 1997, 1998 and 1999?

2. What is the estimated revenue from customs duty levied on EU products imported into Botswana, Namibia, Lesotho and Swaziland in 2000 and 2001?

3. What indicators suggest that the agreement will have a positive dynamic economic effect on Botswana, Namibia, Lesotho and Swaziland?

4. What indicators point to the agreement having a positive dynamic economic effect on the other SADC countries?

(1) OJ C 118, 29.4.1999, p. 51.

Answer given by Mr Nielson on behalf of the Commission

(25 January 2000)

A detailed study, funded by the Commission, has been undertaken by the Botswana institute for development policy analysis (BIDPA) to assess the likely impact of the Community/Southern Africa (SA) free trade agreement (FTA) on the economies of Botswana, Lesotho, Namibia and Swaziland (BLNS) and to put forward recommendations which will enable BLNS states to maximise the expected benefits whilst also minimising any potential adverse effects.

The average annual revenues (as a % of GDP) derived from the common revenue pool by the BLNS countries are: Botswana: 17,1 %, Lesotho: 41,7 %, Namibia: 27,6 % and Swaziland: 44,8 %.

The estimated effects of the trade development and co-operation agreement (TDCA) (diminishing common revenue pool because of lower tariffs) on the total revenues of BLNS countries are: Botswana: 5,3 %, Lesotho: 12,9 %, Namibia: 8,6 % and Swaziland 13,9 %. In reality the loss of revenue should be far less because many sensitive products have been excluded from liberalisation on the SA side, and there is no reason to believe that there will be a lasting shortfall. The Community is ready to assist the BLNS countries in implementing fiscal reform, necessary to diversify their sources of income and needed independently from the TDCA.

There will be gains for consumers and entrepreneurs alike. The business community will have access to a cheaper, better quality and more diversified range of supplies for their inputs and capital goods. They will thus stand better prospects for investing, exporting and hiring additional staff. Job creation and investment drive in the Southern African Customers Union (SACU) are expected to be the main positive effects of the FTA. This will result in a distributional gain within the BLNS economies and allow their ministries of finance to collect revenue through a different system of taxes.

The relationship between SADC and the FTA is more difficult to deal with in practical terms, because SADC has yet to become a structured entity on the trade front, through the negotiation of its own FTA. The general Community policy, to encourage economic integration at a regional level, ensured that it did not gain a better access to the SA market than the SADC countries; for example SA reserved certain trade concessions in the textile sector to its SADC partners. Furthermore, any trade concessions obtained by the Community under the FTA with SA have to be extended, according to the SADC trade protocol, to all SADC members. This ensures that SADC countries will secure better access to the SA market.