Communication from the Commission to the Council Communication to modify the directives for the negotiations of economic partnership agreements with ACP countries and regions {SEC(2006)1427}
Date: 2006-11-28
Institutions: European Commission
Subjects: South Africa, accession to an agreement, market access, negotiation of an agreement (EU), trade agreement (EU)

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 28.11.2006 
COM(2006) 673 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL  

Communication to modify the directives for the negotiations of economic partnership 
agreements with ACP countries and regions  

{SEC(2006)1427} 

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INTRODUCTION 

1)  CONTEXT OF THE PROPOSAL 

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•  Grounds for and objectives of the proposal 

This  communication  aims  at  inviting  South  Africa  to  join  the  ACP  group  of  States 
negotiating an EPA in Southern Africa (SADC).  

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•  General context 

This  communication  follows  the  SADC  proposal  tabled  on  7th  March  2006  and  its 
Annex 2 is the draft response to their proposal.  

EC-SADC EPA Negotiations, which were launched in July 2004, were suspended, at 
technical  level  in  2005  when  both  sides  realised  than  any  viable  regional  integration 
process  in  Southern  Africa  couldn't  be  achieved  without  sorting  out  the  trade 
consequences  of  the  EC-SA  Trade,  Development  and  Cooperation  Agreement  on  the 
other  members  of  the  Southern  African  Customs  Union.  In  this  context,  SADC 
proposal aims at aligning both the TDCA Review process and the EC-SADC EPA into 
one single negotiating process. 

•  Existing provisions in the area of the proposal 

Directives  for  the  Negotiations  of  Economic  Partnership  Agreements  with  ACP 
countries and regions (Annex 1 of doc. 9930/02).  

•  Consistency with the other policies and objectives of the Union 

If adopted, this Communication will help to finalise the EC-SADC EPA Negotiations 
which is one of the objectives of the Union.  

2)  CONSULTATION OF INTERESTED PARTIES AND IMPACT ASSESSMENT 

•  Consultation of interested parties 

In 2006, several rounds of EPA talks between the EU and SADC took place at Senior 
Officials level to discuss the implication of this proposal.  

•  Collection and use of expertise 

There was no need for external expertise. 

• 

 Preliminary indications of impact 

The  attached  Staff  Working  Document  is  a  preliminary  impact  assessment  on  the 
potential effects of the proposed amendment.  

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3)  LEGAL ELEMENTS OF THE PROPOSAL 

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•  Summary of the proposed action 

The proposed addendum to the negotiation directives is structured as follows: 

1.  Following  the  proposal  tabled  by  the  SADC  EPA  negotiating  group  on  7th 
March  2006,  South  Africa  should  be  invited  to  join  the  ACP  group  of  States 
negotiating an EPA in Southern Africa. 

2.  Provided  that  an  EPA  is  concluded  with  this  group  of  ACP  States,  including 
South  Africa,  the  EPA  will  replace  TDCA  trade  provisions  at  the  date  of  its 
entry into force. 

3.  Due  to  South  Africa  competitiveness,  it  is  inevitable  to  maintain  a  separate 
trade regime for South Africa in so far as access of goods to the EC market is 
concerned. 

4.  Market  access  provisions  for  trade  between  the  EC  and  South  Africa  will  be 
negotiated  on  the  basis  of  the  TDCA  provisions  and  founded  on  a  complete 
analysis  of  the  potential  impact  on  the  EU  economy.  A  selected  number  of 
exceptions could be excluded from the scope of negotiations. 

5.  Particular attention will be devoted to put in place a system of rules of origin 
with  appropriate  enforcement  measures  such  that  the  distinction  between  the 
two  different  trade  regimes  can  be  guaranteed,  on  the  basis  of  a  prior  ad  hoc 
assessment. 

6.  Safeguard measures as appropriate will be included. 

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•  Legal basis 

Article  133  of  the  Treaty  establishing  the  EC  and  Directives  for  the  Negotiations  of 
Economic Partnership Agreements with ACP countries and Regions (doc. 9930/02 of 
12.06.2002). 

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•  Subsidiarity principle 

The  communication  falls  under  the  exclusive  competence  of  the  Community.  The 
subsidiarity principle therefore does not apply. 

•  Proportionality principle 

The  communication  complies  with  the  proportionality  principle  for  the  following 
reason(s). 

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The proposed form of action (Addendum to the Negotiating Directives) is as simple as 
possible in the context EU-SADC EPA negotiations. 

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•  Choice of instruments 

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Proposed instruments: Addendum to the Negotiating Directives. 

Other means would not be adequate for the following reason(s). 

It is the fastest way to resume EU-SADC EPA talks. 

4)  BUDGETARY IMPLICATION 

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The communication will have no financial implications. 

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL  

Communication to modify the directives for the negotiations of economic partnership 
agreements with ACP countries and regions 

On 7th March 2006 SADC tabled to the EC a proposal which foresees to formally associate 
South  Africa  in  the  SADC  EPA.  This  proposal  singles  out  market  access  as  the  sole  issue 
while rejecting further negotiations on trade related rules. In return the EU would be offered 
the  access  currently  defined  in  the  TDCA  to  all  SACU  members  (South  Africa,  Botswana, 
Lesotho,  Namibia  and  Swaziland  –  the  'BLNS'),  with  the  possibility  to  raise  some  tariffs  to 
take into account possible BLNS sensitivities. 

As  for  the  non-SACU  countries  that  are  members  of  the  SADC  EPA  grouping  i.e. 
Mozambique,  Angola  and  Tanzania  ('MAT'  -  LDCs  and  therefore  EBA  beneficiaries)  the 
request  is  that  EBA  would  be  "contractualised"  on  a  non-reciprocal  and  hence  WTO 
incompatible basis.  

This proposal raises the following questions: (1) Should we accept South Africa in an EPA? 
and if yes, at what conditions (2) Can we exclude all commitments on trade-related rules? 

The  EC  believes  that  it  can  accept  the  inclusion  of  South  Africa  into  the  EC-SADC  EPA. 
However  this  acceptance  is  subject  to  certain  conditions  and  requests  concerning  the  trade 
regime to be applied to South Africa, the situation of MAT', the scope of the future agreement 
and the definition of tariff offers. 

SADC  proposal  is  welcomed  in  so  far  as  it  clarifies  the  role  of  South  Africa  in  the 
negotiations  and  provides  a  much  needed  basis  for  further  discussion,  building  on  an 
institutionally coherent and economically integrated core group of countries, which could be 
gradually  expanded  to  integrate  more  countries  in  the  region.  However,  integrating  South 
Africa  into  the  EPA  would  pose  significant  challenges.  SA  being  the  most  competitive 
economy of the region, it can't be treated as the other members of SACU. The EC will have to 
differentiate its tariff treatment while preserving the regional coherence of the group. In so far 
as  the  trade  regime  is  differentiated,  the  EC  will  have  to  guarantee  the  feasibility  of  an 
appropriate  and  rigorous  system  of  control  for  rules  of  origin  and  the  establishment  of  an 
autonomous  safeguard  mechanism  which  will  automatically  apply  in  case  of  a  trade  surge 
linked to circumvention. 

Excluding  all  commitments  on  trade-related  rules  (e.g.  Services,  Investment,  Government 
procurement,  trade  facilitation,  IPR  and  Competition)  would  be  very  difficult  to  reconcile 
with  Cotonou.  Moreover  rules  are  the  essence  of  the  development  dimension  of  EPAs.  On 
these areas it is clear that the EC does not look for access for its companies. Its objective is to 
promote  regional  harmonisation  as  well  as  regional  preference  so  that  operators  would  be 
faced  with  predictable,  transparent  and  enforceable  rules.  A  step-by-step  approach  with 
Review clauses in order to define an acceptable package of EPA rules would be an acceptable 
compromise. 

Finally  'Contractualising'  EBA  regime,  as  requested  by  Mozambique,  Angola  and  Tanzania 
(MAT)  is  not  compatible  with  WTO  rules,  insofar  as  it  would  not  fulfil  GATT  Art.  XXIV 
requirements and therefore would create a discrimination with other EBA beneficiaries. The 

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EC  believes  that  these  countries  should  not  be  left  aside  the  EPA  negotiation  process,  as  it 
would lead to a further fragmentation of the region, rather than fostering regional integration 
which  is  a  core  EPA  objective.  In  any  case  whatever  the  final  EPA  format,  the  future 
agreement should remain open to the ACPs of the region who wish to join later.  

The  objective  of  the  present  Communication  is  to  explain  the  advantages  of  modifying  the 
Directives for the negotiations of Economic Partnership Agreements with ACP countries and 
regions  in  order  to  formally  include  South  Africa  into  the  EC-SADC  EPA  negotiating 
process, as well as the conditions that would be linked to this modification.  

Annex 1 to the present Communication is the draft  Addendum  to  modify  the  Directives  for 
the negotiations of Economic Partnership Agreements with ACP countries and regions. 

Annex 2 contains the EC response to the SADC EPA Framework tabled on 7th March 2006. 

The attached Commission staff working document is a preliminary impact assessment which 
explains briefly the state of EC-SADC EPA negotiations, the problems to overcome and the 
economic and institutional questions linked to this modification. 

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Annex 1  

ADDENDUM TO THE DIRECTIVES FOR THE NEGOTIATION OF ECONOMIC PARTNERSHIP 
AGREEMENTS WITH ACP COUNTRIES AND REGIONS 

(doc. 9930/02 of 12.06.2002) 

1. 

2. 

3. 

4. 

5. 

Following  the  proposal  tabled  by  the  SADC  EPA  negotiating  group  on  7th  March 
2006,South Africa should be invited to join the ACP group of States negotiating an 
EPA in Southern Africa. 

Provided that an EPA is concluded with this group of ACP States, including South 
Africa,  the  EPA  will  replace  TDCA  trade  provisions  at  the  date  of  its  entry  into 
force. 

Due  to  South  Africa  competitiveness,  it  is  inevitable  to  maintain  a  separate  trade 
regime for South Africa in so far as access of goods to the EC market is concerned. 

Market  access  provisions  for  trade  between  the  EC  and  South  Africa  will  be 
negotiated on the basis of the TDCA provisions and founded on a complete analysis 
of the potential impact on the EU economy.  

Particular attention will be devoted to put in  place  a  system  of  rules  of  origin  with 
appropriate enforcement measures such that the distinction between the two different 
trade regimes can be guaranteed, on the basis of a prior ad hoc assessment 

6. 

Safeguard measures as appropriate will be included. 

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Annex 2  

EC response to the SADC EPA Framework 

tabled on 7th March 2006 

Background 

in 

On  7th  March  2006  the  SADC  EPA  group  tabled  a  proposal  on  how  to  approach  EPA 
negotiations,  as  follows:  South  Africa  should  participate 
the  EPA  negotiation; 
Mozambique, Angola and Tanzania should be granted a non-reciprocal EBA like treatment on 
a contractual basis; market access should be the sole issue for the negotiation; new generation 
issues  could  be  discussed  in  a  cooperative  manner  but  with  no  binding  commitment  made 
under  the  EPA.  As  regards  market  access,  extension  of  EBA  equivalence  to  all  countries 
including South Africa is requested from the EC. In return the EU would be offered the access 
currently  defined  under  the  EC-South  Africa  Trade,  Development  and  Cooperation 
Agreement  (TDCA)  to  all  members  of  the  Southern  African  Customs  Union  (SACU).  This 
market access offer for the EU could however be subject to increases of currently applicable 
TDCA  duties  on  a  number  of  products  in  order  to  accommodate  concerns  from  Botswana, 
Lesotho, Namibia and Swaziland (BLNS). Lesotho should be given special consideration due 
to its LDC status. 

Configuration 

SADC  proposal  is  welcomed  in  so  far  as  it  clarifies  the  role  of  South  Africa  in  the 
negotiations  and  provides  a  much  needed  basis  for  further  discussion,  building  on  an 
institutionally coherent and economically integrated core group of countries, which could be 
gradually expanded to integrate more countries in the region. 

The EC can therefore accept the inclusion of South Africa into the EC-SADC EPA. However 
this  acceptance  is  subject  to  certain  conditions  and  requests  concerning  the  situation  of 
Mozambique,  Angola  and  Tanzania  (the  'MAT'),  the  scope  of  the  future  agreement  and  the 
definition of tariff offers. 

The EC believes that the SADC EPA group proposal would leave aside Mozambique, Angola 
and  Tanzania  from  the  EPA  negotiation  process,  and  increase  fragmentation  of  the  region, 
rather than fostering regional integration which is a core EPA objective. 

In  any  event  and  regardless  of  the  final  SADC  EPA  configuration,  the  agreement  should 
remain open to all ACP States of the region that would wish to join at a later stage, subject to 
the agreement of the Parties. 

Market access in goods 

Due  to  South  African  competitiveness,  especially  in  agriculture,  it  is  inevitable  to  grant  a 
different regime for the access to the EU market to South Africa and the other EPA members.  

The EC tariff offer would be based on a situation which, de facto, already exists, the TDCA 
on the one hand and Cotonou provisions on the other hand. Any additional tariff concession 
for the 'BLNS' and the 'MAT' would be the outcome of the EPA negotiation and depend on 

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the efforts of these countries to take commitments on trade related rules. Extension of DFQF 
treatment to South Africa is not envisaged in the foreseeable future.  

Concerning  access  of  EU  goods  to  the  SADC  EPA  market,  the  TDCA  should  also  be  the 
starting line for the negotiation. As a matter of principle the EC opposes TDCA tariff increase 
on EU goods for exports to South Africa.  

The  EC  also  recognises  that,  within  SACU,  Lesotho  due  to  its  LDC  status  should  be  given 
special consideration. This will be taken care of during the negotiation process. 

A non-reciprocal and contractual DFQF treatment for Angola, Mozambique and Tanzania is 
not  compatible  with  WTO  rules,  as  it  would  not  fulfil  GATT  Art.  XXIV  requirements  and 
would  create  a  discrimination  with  EBA  beneficiaries.  EPA  should  aim  at  achieving  full 
market  access  to  the  greatest  extent  possible  for  SADC  EPA  countries  (other  than  South 
Africa), while recognizing the need to address the import regime for a few sensitive products. 

Should  finally  any  country  decide  not  to  join  the  EPA  market  access  provisions,  their  tariff 
treatment  would  then  be  based  on  the  unilateral  EU  GSP  regime  (EBA  as  long  as  they  are 
LDCs), or, in the case of South Africa, the TDCA. 

New generation issues 

investment;  government  procurement; 

Regarding the scope of the future agreement the EC considers that the EPA cannot limit itself 
to  market  access  provisions  only,  and  leave  aside  all  references  to  regulatory  supply-side 
commitments  (e.g.  services; 
trade  facilitation; 
intellectual  property  rights;  competition;  labour  and  environment).  These  issues  are  the 
essence  of  the  EPA  sustainable  development  package  and  necessary  to  progress  further 
the 
towards  a  deeper  regional 
implementation  of  commitments  difficult  in  these  areas,  appropriate  measures  should  be 
considered in the framework of the development cooperation instruments, in particular within 
the Cotonou Agreement, or Member States or other donors programmes. Assistance could be 
provided against clear commitments on rules.  

lack  of  capacity  risks  making 

integration.  Where 

The EC may consider that a 'step-by-step' approach could help define an acceptable package. 
The  objective  should  be  to  focus  primarily  on  rules  that  govern  trade  such  as  services, 
investment, and trade facilitation, and to deal with other trade-related rules at a later stage. 

EPA and TDCA 

Finally the EC agrees that the negotiating process should be streamlined. Both TDCA review 
(as far as trade issues are concerned) and EPA negotiation should be merged into one single 
process and a clear set of technical and senior officials meetings should be agreed and clearly 
structured  to  ensure  that  SADC  Member  States'  capacity  is not  overstretched.  A  Ministerial 
meeting could be organised by the end of 2006 to provide political guidance to this process. 

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