Press briefing 31 January 2017

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Press briefing – main speech - 31 January 2017


EU-SA trade and investment partnership after EPA:

resisting the lure of protectionism?

  • We live in a world where closing borders and building walls – brick walls and trade walls, is gaining popularity and where simplifications, if not mystifications, are becoming the norm together with text-book protectionism, much against the warning of the WTO Director-General Roberto Azevêdo, who last year called on the world leaders to make sure that the dramatic slowing of trade growth does not translate into misguided protectionism policies that could make the situation much worse.

  • For a country like South Africa – with a challenging economic transformation process, sluggish GDP growth projected at 1% - 1.5% in 2017 and unemployment at 27%, – it might be tempting to succumb to the lure of protectionism.

  • When whole economic sectors suffer and people are losing their livelihoods, trade deals can be a handy scapegoat. It is easier to keep domestic markets closed and erect barriers to trade and investment than to restructure and reform. On the short term, protectionism might deliver, especially in terms of popular support. In a medium – to long-term, however, they are bound to fail.

  • In a global, interdependent world, both national leaders and multilateral systems need to counter protectionist moves but also to respond to the challenges created by globalisation. While trade overall is positive for growth and employment, it is important for developed as well as developing countries, to acknowledge there can be pockets of employment losses linked to trade, which require targeted measures aimed at strengthening productivity.

  • IN THIS CONTEXT: THE STRATEGIC RELATIONSHIP BETWEEN THE EU AND SA could be an example of how the shift in global economic relations and mistrust in trade liberalisation can be successfully addressed to help revitalise growth.

  • South Africa is one of ten strategic partners for the European Union. There are so many areas where our cooperation can fortify.

  • The SADC EPA is a generous agreement, it promotes sustainable development through asymmetric market access and enhanced co-operation, it helps attract investment, protects local producers and goods, helps regionalisation [see brochure].

  • The swift ratification and entry into force of the EPA has generated new opportunities to strengthen the bilateral and regional trade and investment relation. Aquaculture is one sector where action is gaining momentum.

  • Statistics show that the EU remains the dominant source of FDI in SA (78% of stocks in 2015) as well as the biggest export market for South Africa (above 20% and highly diversified). This compares very favourably with other big economies.

  • Most of the EU generated investment (including more recent projects in renewable energy) has created an estimated 350,000 direct jobs. It has also developed strong networks of local supply which in turn sustain further indirect jobs.

  • The EPA remains the most positive development in EU SA trade relations since SA's democratic transition. Some teething problems were to be expected and have already being successfully addressed. For example, issues relating to market access under EPA such as tariff rate quotas (TRQs) implementation by both parties and mutual notifications on the protection of geographic indications. Under the latter, rooibos, honey bush, Karoo meat and a hundred of wine-specific geographic indications are protected.

  • In the wine and spirits sector, we are working closely with the Department of Agriculture, Forestry and Fisheries (DAFF) to identify the right mechanism for extending EUR 15 million assistance for the transformation of the South African wine sector and the marketing of South African wines and spirits abroad.

  • However, outstanding issues remain, as demonstrated by the early application of a provisional agricultural safeguard on EU poultry shows (until 3 July 2017).

  • SA's food exports to EU have kept increasing at a faster pace than food import from EU. Growth potential is still considerable, notably because of EPA. Still, there is a need to keep engaging in dialogue and co-operation as many files remain unresolved. A number of sanitary and phytosanitary (SPS) measures keep casting a negative light on the bilateral relationship.

  • On poultry – as we can discuss further later on – it looks like the local industry and some journalists have been barking up the wrong tree. The crisis in the industry has been recognised by South African authorities as a complex phenomenon resulting from multiple – including structural – factors. I will focus on this issue separately to dispel misconceptions and confusion generated around the role of EU imports in that crisis.

  • Regarding fruit – let me start by stressing that overall fruit trade balance is heavily tipped in favour of SA. The EU Member States export a very limited quantity of fruit (mostly apple & pear) into SA – circa 10 000 tons versus 1 million tons of fruit exported by SA producers into the EU.

  • The EU – which is free of citrus black spot (CBS) has been rather flexible in allowing citrus fruit importation from SA, despite the fact that the pest is well established here. Co-operation has never stopped and sales turnover has kept increasing making SA the biggest exporter of citrus to the EU, thereby supporting tens of thousands of jobs.

  • Much overlooked by the press are the barriers that EU exports are facing, starting from poultry. In fact, obtaining a health certificate to export animal or plant products to South Africa can take up to 5 or more years.

  • Industrial products (electrical appliances in particular) are similarly affected by delays (now up to two years) in obtaining conformity declarations with regards to compliance with compulsory standards (managed by the National Regulator for Compulsory Specification).

  • Participation of EU firms in public projects and procurement is increasingly hindered by number of local content requirements.

  • These problems are well known to the SA authorities and market operators. We consult with them on a regular basis, strongly convinced that it is only through committed co-operation and shared vision that they can find a solution.

  • We also work with South Africa in the implementation of the National Development Plan, including in agricultural value chains through development co-operation activities to the tune of €250 million (ZAR 4 billion) for the 2014-2020 period.

  • To politicise the trade debate will never bode well for either party. We too face political constituencies, unions and lobbying in the EU, calling for support and ad hoc measures. We listen to them but do not use our trading partners as scapegoats whenever pressure mounts.

  • Let me stress once again that the EU SA trade and investment relation delivers and significantly contributes to generating jobs in SA. Before we trash it, we better think twice.

  • Key events during the year (such as the visit of Commissioner Malmström and the concomitant business delegation for circular economy in May) will help provide momentum and visibility to the economic and trade agenda.

  • The EU remains a committed partner as we share many of South Africa's challenges and believe that our strategic partnership can show us new ways to overcome them.


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