The EU’s trade commissioner criticised South Africa’s trade and investment policies yesterday, castigating the government for unilaterally scrapping bilateral investment treaties and warning that this could force investors to pull out.
Commissioner Karel De Gucht also told Trade and Industry Minister Rob Davies that South Africa’s proposed export taxes on primary products were not the right way to boost industrialisation, branding this as protectionism.
De Gucht demanded more market access for EU agricultural products – specifically wine and sugar – in the negotiations for an economic partnership agreement (EPA) between the EU and seven members of the Southern African Development Community (SADC).
De Gucht and Davies were speaking at a South Africa-EU business forum in Pretoria on the eve of the South Africa-EU summit taking place today.
The commissioner said he understood that South Africa wanted to revisit and upgrade its investment protection regime. But the EU objected to the way it did so – scrapping treaties with one EU country after another, without much consultation and before a replacement had been put in place.
Davies responded by saying that South Africa had scrapped the investment protection treaties because they were outdated and they would automatically have been renewed for 10 years if they had not been scrapped.
But he insisted that investors faced no threats to their investments, noting that the constitution required a 75 percent majority in Parliament and a decision of the Constitutional Court to remove the entrenched protection of private property, so expropriation of investors’ property was completely out of the question.
“I can assure investors that the changes will amount to a big fat nothing,” he said.
De Gucht’s remarks cast a new light on the optimistic picture that Davies had painted about the SADC EPA negotiations, suggesting that the two sides were close to agreement.
Although South Africa has had a free trade agreement with the EU since 2000, a SADC EPA would increase the access of South Africa and the EU to each other’s markets.
Davies indicated that after recent concessions from both sides, the haggling had been narrowed down to whether SADC would give greater market access to ten EU agricultural products – seven cheeses, two other dairy products and a food preparation.
He said the EU had accepted 29 of the 33 additional agricultural products for which SADC wanted greater access to the EU market. The EU had rejected two sugar products, one wine and one starch product.
Of the 14 extra agricultural products for which the EU wanted greater access to the SADC market, Davies said SADC had accepted one wheat product and one butter product and, partly, two pork products.
SADC was consulting with its industry over seven cheese products and was considering two other dairy products and the food preparation, he said.
Davies attributed much of the progress in the negotiations to the EU backing off its original insistence on the SADC countries following certain trade policies. These included a demand that SADC governments ban export taxes on primary products and that they give the EU most-favoured nation status.
However, De Gucht’s critical remarks about South Africa’s proposed export taxes on primary goods raised questions about whether the EU was ready to be more flexible about this proposal.
Davies said the progress in negotiations was also due to a general agreement on geographic indicators. This meant that each side would allow the other exclusive use of names for agricultural products associated with a geographic area.
He noted that the EU had accepted rooibos and honeybush teas and Karoo lamb as South African geographic indicators, while South Africa had accepted the EU’s much longer list of geographic indicators.
But De Gucht painted a rather different picture. He said that the EU had already offered South Africa more access for its agricultural goods than South Africa had given the EU.
He said he was not prepared to go back to EU companies suffering from the recession to say they would be facing renewed competition from South Africa and offer nothing in return.
Davies said South Africa hoped that the EPA would help to address South Africa’s growing trade deficit with the EU, rising from R47 billion in 2008 to R95bn last year. page 18