The Implications of the EU's Proposed"Regional Economic Partnership Agreements" with Respect to Regional Integration and Development in Southern Africa

The Implications of the EU's Proposed
"Regional Economic Partnership Agreements" with Respect to Regional Integration and Development in Southern Africa
Dot Keet
Institute for Global Dialogue Occasional Paper 21, August 1999

It has long been recognised in the EU and amongst the African Caribbean and
Pacific (ACP) members of the Lome Convention, and expressed in the Lome Convention itself, that the grouping of countries into larger economic units is an important basis for effective and sustainable development.

In Africa, the strategic objective of re-grouping African countries and (re)integrating the continent was a fundamental reaction to the legacy of colonialism; to arbitrarily created, artificial, largely non-viable and distorted economies, characterised by pronounced under-development and deep external dependence. Regional groupings in Africa were conceived in the 1960s and 1970s as more rational economic units and formally endorsed in the Lagos Plan of 1980. These putative regions would provide larger markets and economies of scale in investment and production, with combined or complementary resources, and would generally be more effective frameworks within which to correct disarticulated and ineffective economic structures [UN-ECA, 1988].

In the case of Southern Africa there had long been both de facto as well as de jure processes of regional 'integration'. The latter, for example, took the form of the Southern African Customs Union (SACU) which incorporated Botswana, Swaziland and Lesotho, and later Namibia, under the economic domination of South Africa. But there was also a long-standing and wider functional 'integration' in the form of multi-faceted operational, technical and economic inter/dependencies throughout the region. This de facto 'regional economy' had been created not only through the initiatives of business forces but through the deliberate policies of the colonial administrations and settler governments in the region, and more latterly by the apartheid regime. The common feature of these inter-locking processes was that they all worked heavily towards the advantage of the South African economy.

Since the birth of a democratic South Africa, regional co-operation is also seen - in addition to the broader African aims - to be an important framework, through programmes within the Southern African Development Community (SADC), within which to address the gross imbalances created both within and between the economies of the region - above all between South Africa and the surrounding countries [Davies et al, 1994]. A further implication of this re-balancing and developmental approach is that it would - like the European Community/Union - have to be both politically directed or 'policy driven' [OECD,1995] as well as under-pinned by both public and private investment, by both governmental initiatives and entrepreneurial forces.

SADC has more recently had to take on board the additional demand of relating its developmental needs and plans to the challenges of the emerging liberalised global economy. The basic strategic challenge to the countries of Southern Africa, in this respect, is how to use the regional framework - which the WTO 'allows' - to create an interim economic 'breathing space' within which to develop and diversify their economies, improve their production and productivity and their export capacities preparatory to - and in order to be able to - participate more meaningfully in the highly competitive liberalised global economy [Keet, 1999]. At the same time, a united region could provide a stronger collective political base from which to engage in joint strategising for more effective engagement in multilateral institutions such as the WTO. This is now assuming added significance as the countries of Southern Africa and the rest of the ACP grouping are faced with a new challenge from the EU to replace the long-standing Lome Convention with a new framework for their future relations. The EU's proposals carry significant implications for the ACP countries, individually, and also with respect to the future prospects for regional economic groupings, such as SADC.

What is the EU proposing

The European Union has given the attractive title of Regional Economic Partnership Agreements (REPAs) to its proposed alternative to the Lome Convention, with the prospect of improved financial and technical assistance and political partnership attached. However, in terms of future trade relations, what is being proposed to the ACP members of Lome are (inter-)regional reciprocal free trade agreements (RRFTAs) between the EU, on the one side, and on the other side, the three broad ACP geographical regions, or six actual/potential economic sub-regions (four in Africa, plus the Caribbean and the Pacific).

Reciprocal inter-regional FTAs are at the core of Europe's post-Lome scenarios,
even though the EC is being prevailed upon to provide alternatives for Least Developed Countries (LDCs) in the form of continued Lome-type preferential access to the European market, and for non-LDC ACP countries in the form of inclusion into the EU's Generalised System of Preferences (GSP) for access to the European market. In either case, it would seem that these alternatives are on offer only if such countries are not part of any regional economic grouping, or do not wish to be part of a regional economic grouping.

Regional groupings that enter into trade negotiations with the EU will become free trade areas to European exporters quite rapidly, although it is presented as being a 'gradual' process. In this last respect, however, it is not entirely clear what time frames are being proposed, or are 'possible' in WTO terms (see 8 below). What seems to be on the table are three main processes and phases:

• the negotiation, in the period 1998-2000, of an overall Framework Agreement between the EU and the ACP, laying out the general principles and objectives for their post-Lome relations;
• followed by a series of negotiations, between 2000 and 2005, by the EU with the respective ACP regions or sub-regions towards the formulation of separate, tailored Regional Economic Partnership Agreements;
• succeeded by a transitional period for the implementation of the new arrangements, which is interpreted by various sources as requiring five, ten, fifteen or even twenty years.

It is also not entirely clear whether what is called 'the transitional period' is seen by the European authorities as starting in 2000, that is, when Lome in its present form comes to an end; or whether the 'transition' applies to the coming into operation, as from 2005, of the respective REPAs. The ACP have their own interpretations and usages of the term, and have declared themselves in favour of the new Alternative Trading Arrangements (ATAs) only being agreed in 2006 - after various other processes have been completed (see 1.3 below) - and then implemented over the succeeding ten years [ACP, Dakar, 1999]. The different interpretations or proposals suggest timeframes of anything between 2000 and 2010 (a ten year 'transition' from the end of Lome), or from 2000 to 2015 (fifteen years); or alternatively from 2005 to 2015 (a ten year transition for the implementation of the 'REPAs'), or from 2005 to 2020, or even 2005 to 2025 (fifteen or twenty years for the same).

In any of these cases, however, what does seem to be up for consideration and
negotiation - and analysed in this paper with particular reference to the regional integration and development prospects between the countries of Southern Africa - are proposals that

ACP LDCs that are members of economic integration regions will continue
to have Lome preferences in their access to the European market, but that
they will eventually have to give reciprocal free trade access to EU exporters
into their markets;
ACP LDCs outside of, or opting out of regions will continue to receive
non-reciprocal Lome preferences into the EU market but - whether with or
without their own specified time limits - such margins of preference are
predicted to face increasing erosion by the broader trade liberalisation
expected to be extended within the EU and globally, which would provide
free(r) access for all exporters into the EU markets;
non -LDC members of the ACP which are not part of regions, or which do
not wish to become part of inter-regional reciprocal free trade agreements
with the EU, could have the option of access to the EU's GSP, although (a)
it is not clear precisely what this system will be, until the GSP review is
completed by 2004, and (b) it is not clear whether such non-LDC ACP
countries will receive 'enhanced' GSP close to, or very similar to the Lome
preferences they have had hitherto. But, in any event, like Lome preferences,
it is predicted that GSP terms will be eroded by broader ongoing trade
liberalisation.

Problems and questions

There are a number of significant problems about the EU's RRFTA proposals, and
a number of important questions to be posed on the direct implications of reciprocal inter-regional free trade agreements per se, and more particularly in the Southern Africa context of

• the aims and complex features, processes and progress of the current SADC trade negotiations, and the phasing in of the forthcoming regional trade integration processes;
• the fact that all the countries participating in the SADC trade negotiations are also ACP members and have hitherto utilised Lome rights in various ways and to different degrees, although South Africa has only partial membership and different trade terms with the EU;
• the very different levels of development between SADC member states, which include seven LDCs (Angola, DRC, Lesotho, Malawi, Mozambique, Tanzania and Zambia), together with seven other 'developing' economies at very different levels of development even amongst themselves (Botswana, Mauritius, Namibia, Seychelles, Swaziland, South Africa and Zimbabwe);
• the vastly wider disparities between any of the SADC countries (including SA) and any of the member states of the EU, in levels of economic development, production structures and trade capacities;
• the very different stages or levels of integration, and the very different political resources and institutional capacities of the SADC as a region compared to the EU as a region.

1. General timing and implementation

1.1 The EU's proposed time-frame(s) for the negotiation and implementation of new inter-regional trade relations between the EU and SADC are thoroughly unrealistic. They are premature, in the first instance, because the SADC trade negotiations on regional trade integration will only be completed, optimistically, towards the end of 1999, and implemented from 2000 to 2008 (that is, the minimum 8 year period originally envisaged in the Maseru Trade Protocol in 1996), but very possibly not until 2010 or even 2012 (according to the ten or twelve year phasing-in 'allowed' in WTO terms, if SADC chooses to us them), or even further ahead (if suggestions from SADC in the WTO for more flexible time frames are adopted). What this means, fundamentally, is that any proposed RFTA between the EU and SADC should not be negotiated and cannot be implemented until
2010, 2012, or even further ahead. It will only be by that stage that the new SADC trade terms will have been fully implemented, and their separate national and combined intra-regional effects have become clearer. Before that it is not possible to assess accurately the impact of extensive external trade liberalisation in this very changing and evolving situation within SADC; and thus the capacity of these economies to cope with reciprocal free trade with the EU cannot be confidently predicted.

1.2 The EU's proposal is also unrealistic because of the very different stages which the two respective regions have reached in their processes of economic, political and institutional integration. Unlike the EU (of today) SADC is still at an embryonic stage of integration. Not only does SADC not yet have the institutional capacities, but it has barely begun the process of policy convergence amongst its members that the EU has achieved (after many difficult decades of negotiation and experience).

Of key significance, in this context, is that the member states of SADC do not have a common approach to their external trade policies, let alone a common external tariff (CET), that would enable them to jointly negotiate their trade relations with the EU. The decision to raise the level of integration of SADC from a preferential or free trade area (see 4. below) to a customs union, with a common external tariff, may yet emerge as a practical necessity for the integrated regional economy. At this stage, however, the member states of SADC have very different conceptualisations of the strategic role of trade and tariff policies as instruments of economic development and diversification (see also 6.4 below). In fact, in many of the countries of Southern Africa, import and export tariffs are viewed as little more than sources of government revenue.

1.3 The timing of the negotiation and the phasing-in of a regional free trade agreement with the EU would complicate the current trade negotiations and forthcoming SADC trade integration process in another way. If all the member states of SADC were to agree to enter into negotiations on a REPA with the EU, and to do so in the 2000-2005 period stipulated by the EU, this would be imposing a multiple and burdensome negotiating agenda upon them. Most of the countries would have great difficulties in coping with this. Even South Africa, in its own right, and with much greater technical and human resources than the rest of SADC, struggled to cope with its recent (and ongoing) negotiations with the EU, simultaneously with its ongoing negotiations with SACU, as well as concurrent multi-dimensional negotiations with all the other SADC states, separately and
together. Against this background, and in the 2000-2005 period, there is a distinct possibility that the SADC trade negotiations will not have been completely wrapped up, and yet the states of Southern Africa would be expected to enter into another, even more difficult set of simultaneous negotiations with the EU, as well as deal with the extremely difficult challenges of what could turn out to be a new 'Millennial Round' of multi-sectoral negotiations in the WTO.

1.4 Even before the period in which it is proposed that the REPA be negotiated, the ACP are being required by the EU to enter into and complete in the period 1999 to February 2000 (when the current Lome terms officially come to an end) an overall Framework Agreement on the general principles and objectives of future EU-ACP relations. This is already proving to be extremely difficult for the ACP not merely because of 'resource' or 'capacity' constraints - which are real - but because of the complexity of the issues involved and the differing proposals or interpretations thereof. They are also having to research and analyse, discuss and reach consensus amongst a large number of countries at different levels of development and pursuing differing policies. In addition to which, the alternatives actually pose significant epochal choices and challenges to all the countries involved. The 'general principles and objectives' at this stage have to be kept to the basic essentials. The EU and ACP should now be focusing mainly on time-frames and procedural matters, working out and agreeing on the basis of their proposals in the WTO for a transitional waiver. Further than this, 'principles' agreed upon at this early stage could pre-determine the outcome of future negotiations, prejudging contentious issues that are still under analysis and need to be under wide-ranging discussion for some years yet.

1.5 In a more general sense, the period in which these 'post-Lome' negotiations are taking place coincides with a significant period of heightened debate on the international plane on the problematics of trade and investment liberalisation and other dimensions of the neo-liberal paradigm, or what is often called The Washington Consensus. It is important that the EU acknowledges this period of flux in international policy debates in these spheres and does not push negotiations and precipitate decisions on Lome at a tangent to, and possibly even in contradiction with, these trends and possible innovative future developments. It is equally important that the ACP governments and their researchers should be able to take advantage of the major paradigmatic debates opening up on the global plane which are interrogating some of the key issues that are integral to critical analyses of the proposed alternatives to Lome. In this context, the ACP would benefit from - and must consciously and effectively use - further time gained, not just to stall, as EU officials alledge, but to deal with major problems in their economies and societies, as well as prepare for negotiations with the EU. Conversely, they could lose some important potential advantages in premature negotiations (see also 8.3 below).

2. SADC LDCs

2.1 While holding out the possibility of continued preferential Lome-type access to the EU market for LDCs in SADC, EU spokespersons indicate that they will, nonetheless, have to give the EU "eventual reciprocity" [Lowe, 1999]. In terms of the Special and Differential Terms (SDTs) for LDCs in the WTO, and the Enabling Clause in particular, there could be strong counter-arguments against such an intention by the EU (see 8 below). In any event, for these LDCs, such 'eventual' reciprocity would almost inevitably work out, in practice, to be at the pace of the
Southern African region as a whole - which EU spokespersons themselves admit [EU-ACP, Dakar, 1999]. As part of what is proposed to be a reciprocal regional FTA with the EU, and even if there were to be different terms for the different economies within the region, it would be extremely difficult for the LDCs to control the movement of 'free' imports from Europe into any part of the SADC region, unless each and every one of them can put up effective customs controls at their intra-regional borders with appropriate rules of origin in place etc (see also 6.2 below).

2.2 If, despite 2.1. above, SADC LDCs still opt to hold onto Lome preferences,
they would either have to negotiate with the EU bilaterally, or multilaterally as "an LDC group". Either way, they could be placed in a weaker bargaining position if separated off from the rest of SADC and the ACP as a whole. This would reinforce their continued dependence on the EU and, with it, their subordination or, at the very least, their susceptibility to EU pressures and to the influence of EU interests. This, in turn, could affect their 'status' as SADC members and reduce their bargaining base within SADC. Their possibilities for negotiating mutli-directional 'trade-offs', particularly between trade and other sectors, with the rest of SADC would be reduced. Their potential gains from the inter-locking trade and development programmes with the other rather more developed economies in the region could be adversely affected. And this weakening of their relations with their immediate neighbours, with whom their future development and security needs are intricately and inextricably bound, would be happening at the same time as - and in large measure because of - their continuing focus on, or extroverted orientation towards the EU.

2.3 If, notwithstanding the problematics pointed to in 2.1 and 2.2 above, SADC LDCs, separately or as a group, still opted to hold onto Lome preferences, protocols and other provisions - on the basis of calculations and considerations internal to their national economies - this could have two negative effects. On the one hand, it would literally divide SADC in half and could weaken it as a regional entity (see also 3.1 below). On the other hand, the continued or reinforced dependence of half its members on Lome-type trade provisions could contribute towards perpetuating their status as 'LDCs' rather than encouraging processes of convergence in economic strategies and levels of economic development between them and the other SADC members through targeted regional programmes (see 3.3 below). Formal international country categorisations, with differential policy provisions, can be of temporary, tactical use for identified purposes and defined (transitional) periods, as for example in dealing with WTO agreements. However, such categorisations also carry a potentially self-fulfilling dynamic if they are conceptualised as somehow inherent to these economies, or employed as long-term responses to trade and production deficiencies. Such problems are the product of factors internal to these economies, but also a function of the nature of their insertion into the international economy, and in large measure a product of the functioning of the international economy. Treating these countries as LDCs, as inherently weak, without tackling adverse features the global system is simply confirming and reinforcing the global status quo.

3. SADC 'non-LDCs'

3.1 By offering the 'non-LDCs ' or developing countries in SADC the choice between non-reciprocal national GSP access into the EU markets or reciprocal regional free trade with Europe, the EU could be exacerbating existing policy differences and economic divergences between the SADC states. Given such a choice, many countries, that might otherwise favour a multilateral regional approach , would be pushed towards the bilateral option with the EU. While there are certainly problems with the whole of SADC negotiating trade terms with the EU as a single group (see 4. below), the EU by directly linking regional negotiations with reciprocal trade relations, could be encouraging individual SADC countries to opt for separate national approaches in order to avoid reciprocity. The regional-reciprocal linkage could thus actually serve to undermine, rather than reinforce, the regional integration in Southern Africa that the EU has long been officially committed to supporting.

3.2 On the other hand, GSP and even enhanced GSP would in all probabilities be less favourable than Lome terms and, what is more, GSP at present is a concession by the EU rather than the right of recipients. And if such GSP terms are indeed faced with quite rapid erosion by wider trade liberalisation, they would be both an inferior option and only a temporary recourse. If some non-LDCs were, nonetheless, to opt for such temporary GSP, they could find themselves subsequently impelled (back) into the inter-regional trade arrangements that might then already be underway between the rest of SADC and the EU; which such 'returning' countries may not even have had a hand in negotiating. Therefore, as it now stands, GSP does not seem to be a particularly favourable or a long term option, and it may, in fact, serve to prejudice the role and rights of such 'non-LDCs' in the overall SADC process, and in regional relations with the EU.

3.3 EU arguments on the need for 'differentiation' of status and rights for countries at different levels of development within the broad non-LDC or 'developing country' category would also have a divisive effect. This could cut across or pre-empt negotiated agreements and multilateral programmes within SADC to deal with such differences through more organic, rather than through formalistic categories and mechanistic approaches (see 5.1), The suggestion that countries with higher per capita income levels should 'graduate' into different trade categories is simplistic and lacking in sufficient recognition of the complexities of their internal socio-economic and political situations, their international economic positioning, and in many cases their literal, physical positioning as small, landlocked, or island states. On all these grounds, there are no countries within SADC (including even South Africa) that are in a position to 'graduate'. As with the ACP group as a whole, more holistic and inclusive considerations, more subtle definitions and more varied and carefully designed provisions are required. Furthermore, proposals for differentiation within the broad 'developing country' band, in and through Lome processes, would go against the established approach to, and the approach defended by developing countries in the WTO context. The EU's proposals within the Lome context could serve to reinforce particular interpretations within the WTO against the self-definition by developing countries of their respective needs and appropriate trade 'status'.

3.4 Proposals by some analysts for sub-sub-regional RFTAs involving only a few
of the more viable, or higher income non-LDCs states in SADC, that are not part of the Southern African Customs Union (SACU), namely Mauritius Zimbabwe and the Seychelles [IMANI, 1999] could further divide and weaken SADC. More significantly, it would be creating yet another regional sub-grouping in the already complicated panorama of a number of over-lapping bilateral and multilateral agreements within Southern Africa (and overlapping into East Africa); all of which
SADC is battling to reconcile in trade policy, co-ordinate in practice and 'back into' the broader, more embracing Southern African trade integration and development programme (see also 9.3 below).

4. Free Trade Agreements

4.1 The most significant feature of the SADC regional trade integration process is that it has to be asymmetrical between South Africa and the other SADC states, because of the vast disparities in economic development and trade flows between SA and the rest. But trade terms have to be variable also between the other relatively more developed SADC economies and the LDCs in recognition of their different levels of development and respective vulnerabilities (see 5.1 below). And these variable trade terms have to be integrated into a carefully phased, and gradually incremental process. If the implementation of this complex multi-dimensional intra-SADC process had to take place simultaneously with another differing regional trade liberalisation process with the EU, the co-ordination and sequencing of the many differing tariff and other trade terms would be
extremely difficult to manage.

4.2 The EU might - as a result of current analyses and debates, further studies and deeper, long-term dynamic impact assessments, and as a result of forthcoming negotiations - eventually concede that its proposed inter-regional reciprocal FTAs will have to be much more gradual processes of anything up to twenty years from 2005, and initially incorporating only 'elements of reciprocity'. This might be welcome in some quarters as placing less pressures on these economies and thus being less unfavourable to SADC development prospects. With its greater
complexity, however, such a modified, more variable and more gradual process with the EU would, paradoxically, further compound the difficulties of co-ordination and sequencing on the ground in Southern Africa.

4.3 If, in the rather unlikely event that all the member states of SADC were to
decide to negotiate a REPA, including at its core a reciprocal free trade agreement with the EU, there would - in addition to one customs union - be at least three free trade agreements operating in Southern Africa: the first a bilateral FTA between the EU and SA, the second a multilateral (eventual) free trade agreement amongst (most of) the member states of SADC, and the third an inter-regional FTA between SADC and the EU. In order to correlate or integrate these three FTAs,
there is a strong possibility that the EU will push to extend the laboriously negotiated terms and approach of the recently concluded SA-EU FTA to the whole of SADC. (see diagram I). This is conceivable on the basis of the more advanced state of the SA-EU FTA, the fact that South Africa is by far the strongest economy in the region, and in the light of evidence that even key South
African trade strategists are considering this [Erwin, 1998].

4.4 The other SADC states are very unlikely to accept the bilateral SA-EU agreement being 'multilateralised' upon them, especially when they have expressed doubts about its implications for them, even as a bilateral agreement between the EU and SA [SACU, 1998]. But there is another contradiction or paradox in the scenario indicated in 4.3 above. The EU originally insisted, in response to South Africa's earlier bid to join Lome, that a reciprocal free trade agreement was more 'appropriate' for the more industrialised South African economy, rather than Lome non-reciprocal preferential provisions which were specifically designed for lesser and least developed economies. Yet the EU-SA FTA could, in the light of 4.3 above, become if not the total blue-print then at least a model, a powerful precedent and a further pressure upon a grouping of countries at much lower levels of development than South Africa. The EU, in now proposing reciprocal regional FTAs with lesser and least developed countries has completely inverted in e

5. Regional trade and development

5.1 In the hypothetical case of the whole of SADC entering into a reciprocal FTA
with the EU, this would seriously erode, or effectively nullify, one of the fundamental purposes of the SADC trade agreement, which is to provide the lesser and least developed economies within the grouping with a period of preferential access into the South African market, and into each other's markets over third parties from the outside. The same applies to South Africa in relation to the other SADC countries. In spite of considerable external admonitions and pressures not to "discriminate against third parties" in the global economy [World Bank, 1991] these preferences are being negotiated between the SADC states

• in function of the self-defined needs, potential strengths and current sensitivities of the respective economies, of certain sectors or even with respect to specific products in the separate economies;
• to counter-balance the very uneven levels of development, particularly between South Africa and the rest of SADC, and particularly in the context of the sharp and growing trade imbalances between SA and all the other countries of SADC; and
• to take into consideration other non-economic problems and specific economic sensitivities within each of the states participating in the SADC trade and development negotiations.

Thus, the SADC trade region will, for some years (see 1.1) be a regional preferential trade area, rather than the free trade area that it is widely depicted as. A regional free trade area may be the goal, but intra-regional preferential trade will be the substance of trade relations and provide the necessary modalities for trade integration and promotion, and development, for some years, yet.

5.2 Whether as a preferential trade region or a full free trade area, if the whole of SADC were to enter into a reciprocal free trade agreement with the EU, this would be damaging to development prospects within and between the economies of the region. This is because free (or even merely freer) access of highly competitive and large scale EU producers/exporters into all the countries of the proposed regional FTA would result in insupportable competitive pressures upon comparatively smaller and much weaker

• SADC producers in their own national markets;
• SADC exporters into other parts of the SADC regional market, and above all
• SADC exporters into the South African market, which is a sizeable and more physically accessible market for them, as well as being a market where they have acquired some knowledge and expertise, built up some commercial credibility and established some niches. Such a competitive edge would be eroded or even wiped out by free trade competition from European producers.

5.3 The added problem with this penetration and domination of local, national and regional markets in Southern Africa by European producers/exporters is that their 'competitiveness' has been developed in large part on the basis of decades of direct and indirect government supports and subsidies. These continue to this day most blatantly in the EU's Common Agricultural Policy (CAP), but they were used also for industrial development in the past. Even without full free trade in Southern Africa, the advantages of subsidised EU agricultural producers/exporters over their Southern African counterparts, and their damaging effects upon them, have already been demonstrated on the ground [ERO, 1998]. These effects would be exacerbated under conditions of full 'free trade', reinforcing both the opposition to free trade, as well as the demand that such contrived and unfair current advantages that can be ended must indeed be ended, even though this would not undo advantages built into EU production by history. At the very least, however, recognition of the historical background, including the colonial background, could be expressed in fully compensatory effective financial and technical counter-programmes (see also 7.1 below) designed and implemented by the EU through appropriate consultations with those disadvantaged by such unfair trade competition and unequal broader economic relations.

5.4 Conversely, as long as the scale or volume, quality and price competitiveness of SADC producers does not compare with those of European producers - or of other producers entering the EU market even on less favourable terms - it is highly unlikely that there will be much compensatory gain, from trade per se, for SADC economies in reciprocal free trade relations with the EU. As is frequently pointed out by African negotiators (in the WTO trade liberalisation context for example), while improved access for lesser and least developed countries into the largest and most developed markets may be useful and even essential, it is certainly not sufficient [OAU, 1998]. Without improved 'supply capacities', weaker economies are poorly placed to take advantage of such improved opportunities [ACP, 1997]. Their needs do not reside only in the sphere of reduced protectionism and greater trade openness on the part of the developed economies. Nor are the main needs, on the part of the lesser developed countries, in the technical field of improved 'market information' and better 'marketing skills' (which is how the WTO/ITC support programme to African countries interprets it). The fundamental need of the lesser and least developed countries is to have the time, the policy 'space' and the political right to pursue their own economic development and diversification needs; and, in this respect, to identify their essential requirements and optimal strategies with respect to external economic relations and external inputs. It is only within such strategically conceived frameworks that improved financial and technical assistance, and increased foreign investment can be made to be useful... or, at
least, less exploitative.

6. Economic development and diversification

6.1 There are various suggestions that, because of the problems identified above, the terms of any EU-SADC FTA should be asymmetrical in timing and product coverage, and gradual in implementation; with full implementation being completed only in ten, fifteen or even twenty years [EU Parliament, 1998]. There may be some merit in such proposals, but it cannot be confidently predicted or guaranteed in advance when (or whether) national and intra-regional economic restructuring and new patterns of investment and production will have gone fast enough or far enough to enable them cope with the dangers of reciprocal free trade. In fact, in the very process of merely introducing increasingly free trade with so powerful an economy as the EU, future production potential in the weaker economies of Southern Africa (including even South Africa!!) may be insidiously and imperceptibly pre-empted, before they have begun to be implemented or even identified. The effect would be that these economies would continue to be trapped in their existing production patterns - euphemistically defined by neo-classical economic theorists, as their 'comparative advantages' - with little opportunity to develop new productive capacities, new comparative and competitive advantages, including higher value-added processing and manufacturing capacities. In this way, free trade would reinforce and confirm orthodox economic notions about the
respective comparative and competitive advantages of nations, and the respective international economic roles of highly industrialised and underdeveloped economies; in other words the global status quo.

6.2 SADC is a work-in-progress, and intra-regional trade integration and development is explicitly linked, and in many ways premised upon the implementation of a whole range of related provisions. As the Maseru Trade Protocol (1996) indicates, regional trade integration and promotion in Southern Africa requires extensive improvement of transport, communication and other infrastructures, co-ordination and harmonisation of trade financing, insurance and banking systems, customs procedures etc. Furthermore, as long as intra-regional trade is based upon differential preferences for different member states and different products, and while external trade and tariff policies of the member states differ, it is essential that customs controls at the intra-regional borders be improved and rules of origin be agreed. All of such guarantees and facilitatory provisions are important and challenging and will take some time and considerable resources for the individual economies and even for the region collectively to implement. In this complex situation, 'reciprocal free trade' with the EU would be a further complicating factor.

6.3 The facilitation and promotion of intra-regional trade and the eventual transformation of Southern Africa into an integrated trade region are not ends in themselves. Nor is intra-regional trade, as a 'stimulator of production', sufficient in and of itself. Similarly, neither is free trade as an encouragement and practical endorsement of 'more efficient producers' in the respective countries (according to neo-classical trade theory) a particularly sophisticated or appropriate approach. The fundamental problem is the under-developed or un-developed production and export capacities within the different countries, and the extremely uneven development of productive capacities between the respective countries in SADC, particularly between South Africa and the rest. In this context, free trade would simply serve to reinforce the competitive advantages of South African companies. This is precisely why intra-regional trade liberalisation has to be introduced gradually and accompanied by a range of associated policy measures to counter-act further polarisation of trade and development benefits towards South Africa. This also requires practical investment and technical programmes supportive to weaker economic sectors, and economies, and even towards severely deprived areas, elsewhere in the region. What applies to the South African economy and companies operating in Southern Africa applies even more forcefully to the very much more powerful European economies and companies.

6.4 As the SADC trade protocol indicates (although very inadequately) there is a
direct link between trade and industrial development policies. Expressed more fully, trade policies, trade promotion and the strategic use of trade and tariff policies can be important instruments in broader industrial development and diversification strategies. However, for the relationship between trade and industrial policy to be fully effective, and for regional trade integration/promotion to be optimally useful, the current relationship in Southern African negotiations between industrial and trade strategies would actually have to have been reversed. The SADC trade negotiations should have been preceded by, and in large measure been shaped by, fuller and detailed determinations within each country, and within the region as a whole, as to what their desirable or possible industrial development and diversification strategies could or should be. The sequence of these processes has, in effect, been reversed in practice by a complex combination of conjunctural and historical factors. The result is that most SADC countries are having to formulate
their tariff negotiating positions on the basis of rather belated and inadequate production analyses and projections, rather than fully researched and elaborated industrial development strategies. SADC, as a grouping, has little option now but to make the best of this rather anomalous situation. But it certainly will not help this difficult process if further and even more radical changes in the trade relations between SADC and the EU are introduced before further work has been done on national and intra-regional industrial development strategies.

6.5 There is a particular policy instrument directly affected by EU decisions that could assist national and regional production development and diversification - both in the agricultural processing and in the more advanced manufacturing sector - and at the same time improve the volume, quality and price competitiveness of exports of such products into EU markets. This instrument allows the utilisation of components or other inputs from a number of countries within national, cross-border or multilateral regional production processes; with rights of entry into the EU market under the 'regional cumulation' of local content requirements within the rules of origin in the Lome Convention. This provision can enable groups of countries to produce together more effectively. In the case of Southern Africa, it could also encourage the combination of the industrial strengths of South Africa with the comparative advantages of other SADC countries and thus assist in their common or mutual economic development. Above all, it would allow the end
products of such collaboration into the EU market under favourable Lome terms, thereby helping them to be more competitive as against other global producers. The problem, at present, is that the EU has determined that 'regional cumulation' co-operation under Lome terms between South Africa and any other countries in SADC will only be permitted by the EU on an ad hoc basis. The delays and
uncertainties created by such an approach are not conducive to long term investment and production planning. If such ad hoc (and self-serving) reserved powers of decision-making by the EU - rather than clearly guaranteed rights of all Lome members - are to be sustained and made part of the proposed REPA with SADC, it will further prejudice regional economic co-operation and development
in Southern Africa.

7. Technical, financial and other aspects

7.1 It would appear that offers by the EU of financial and technical assistance to off-set what are somewhat euphemistically called 'transitional adjustment costs', are to come from existing Lome financial provisions/ funds, and are not, therefore, additional resources [van Reisen, 1999]. As such, they cannot be adequate to the scale and complexity of the post-Lome changes being proposed. It is also difficult to assess, in advance, what the full scale and impact of such 'adjustment costs' will be. Nor are mere quantitative compensations likely to be sufficient or commensurate with the qualitative (national development and human) costs entailed in what the EU is proposing. Furthermore, the promise of technical and financial assistance by the EU could be seen to be an aid carrot to gain acceptance for and to promote reciprocal free trade. This would not be the first time that such financial inducements have been utilised by the EU to gain support for trade and investment liberalisation programmes being promoted by the European Commission in
Southern Africa (see 9.3).

7.2 Similarly questionable are promises by the EU of improved European private
investment in SADC if FTAs are signed and if Southern African governments 'lock in' or (more euphemistically) 'anchor' their economic policies within and through such agreements. On the one hand, such increased investment flows can only be encouraged and cannot be guaranteed by the EU. On the other hand, even if such investment flows were to materialise, under conditions of trade and investment liberalisation they are of questionable benefit to the 'host' countries without the guidance of national or regional foreign investment terms and conditions and development requirements. Above all, such proposed 'locking in' of economic development policies would be a surrender of important policy options for the governments of Southern Africa, and the loss of the flexibility and future policy adjustments that may be called for in changing national, regional or global circumstances.

7.3 As an extension of the policy controls and conditionalities indicated above, the EU is also proposing that the new REPAs should incorporate a number of 'trade-related' provisions. These could include guarantees on the rights of European investors along the lines of the controversial Multilateral Agreement on Investment (MAI), the definition of competition policies and the right of access of European investors to government procurement programmes in Southern Africa, agreement on sanitary and phyto-sanitary and other production standards, as well
as other intellectual property, environmental, labour and social conditionalities. The point about the inclusion of such 'trade-related' conditionalities is that some are more problematic and less acceptable to SADC countries than others; but most importantly of all, many of these proposals are highly contentious and are currently being opposed by developing countries, including SADC, within the processes of the WTO [SADC, 1997]. The EU is being opportunistic in trying to get such provisions in 'by the back door' through its own trade negotiations with the relatively weaker and dependent ACP countries. In the process, these countries would be separated off from the support and added strength that they could have from dealing with such controversial proposals together with the rest of the developing world within the framework of the WTO.

8. The WTO dimension

8.1 Whether deliberately or not, EU policy analysts are mis-representing to the
ACP the role that WTO terms reportedly have in 'obliging' the EU to abandon its preferential trade provisions for the members of ACP. One objection based on the 'non-discrimination' principle of the WTO has already been resolved through the EU's extension of Lome preferential trade provisions to include non-ACP LDCs as from the year 2000. The alleged time prescriptions for the progression of regional trade arrangements into full-blown free trade areas, or customs unions, are not relevant to the ACP since such terms (Article XXIV) do not apply to agreements between developed and developing countries, let alone LDCs. In fact the WTO provision that is most applicable to the ACP, in terms of the EU's relations with them, is the Enabling Clause which allows the EU if it is willing to do so, to make concessions to LDCs and developing countries that do not have to be reciprocated. To the contrary, in proposing that such countries will have to reciprocate trade liberalisation to European exporters, the EU is actually in direct contradiction with both the letter and the spirit of the Special and Differential Terms (SDTs) for LDCs and developing countries within the WTO. The EU may wish to downplay or ignore the WTO's Different and More Favourable terms for developing and especially least developed countries. The ACP cannot do so and
should not allow the EU to do so.

8.2 The other more practical or political argument by the EU, with respect to the WTO, is that it will be extremely difficult, if not impossible, for the EU to obtain a waiver (temporary exemption) from the member states of the WTO to continue with special provisions for the ACP countries. In the first place, this argument by the EU ignores the widespread use of waivers by various countries in the WTO. More importantly, it chooses to ignore or counter the call by the ACP countries [ACP, 1997], and various voices within Europe [Eurostep, 1998], for the 15 EU countries and the 71 ACP countries to combine their political influence (in the case of the former) and their numerical weight (together) to achieve any waivers for the ACP that might be required in the WTO. If this joint ACP-EU effort produces counter-demands elsewhere in the WTO for quid pro quo concessions, this would in turn require further joint efforts and wider alliances to be built with other developing countries by the ACP-EU alliance. This is not impossible or unusual but in keeping with the general negotiating processes and trade-offs that characterise decision-making in
the WTO. It is a question of assessing and changing the balance of political power, and it is a question of political will on the part of the EU - and the ACP - and not a matter of insuperable political obstacles, let alone immutable legal proscriptions.

8.3 A more fundamental feature of the WTO and, indeed, the very character of the
WTO, is that it is a political construct, a negotiating arena, not some supra-political legal body. Its raison d'etre is as an instrument with which the most powerful governments (and their global corporations) are re-shaping international economic rules and regulations to promote the emerging liberalised global economy. The WTO is a political platform upon which the most powerful states act to promote their respective interests in relation to each other and the rest of the world. As such,
WTO 'multilateral' negotiations are characterised by constant political battles, overt and covert, but also by complex back stage manoeuvres and tactical alliances between the strongest economies. However, developing countries are gradually formulating their own counter-strategies and building alliances in the WTO against 'the majors' or 'the quad' (the EU, the US, Canada and Japan). The WTO is increasingly understood to be a site of political struggle. WTO terms have to be understood to be accessible to alteration if appropriate alliances are created and effective interventions are pursued, reinforced by wider governmental and non-governmental campaigns and pressures from outside the WTO. This is the context and this is the spirit in which the WTO and its role vis-a-vis Lome and the ACPs' interests has to be viewed [Keet, 1997].

9. Broader strategic implications for SADC and the ACP

Although the focus of this paper is on the Southern African region, there are some wider implications of SADC decisions for the ACP, as a group. There are also some key aspects of the EU's RRFTA strategy that apply to the whole of the ACP, together with other LDCs and developing countries in general.

9.1 The negotiation of a specific and separate EU-SADC RFTA would have a number of implications for the rest of the ACP. Separate regional negotiations may be argued by the EU to be a more focused and effective approach, allowing for more differentiated and appropriate agreements with the differing regions of the ACP. However, it will divide the ACP and weaken their bargaining strength vis-a-vis the EU; which is the main reason why the ACP as a whole stand for
maintaining their unity and conducting their negotiations with the EU as a group. Furthermore, with the possible 'hiving off' of the SADC region, the ACP would lose the advantages of negotiating with the EU in combination with the strongest region with the strongest economies within the ACP group.

9.2 A separate SADC agreement with the EU could affect the rest of the ACP in
another way. If - notwithstanding the problems and questions posed above - SADC were to decide to enter into separate reciprocal free trade negotiations with the EU, the outcome could and probably would be used as a model to influence the character, direction and pace of the regional agreements that the EU might then negotiate with the much weaker economies, and the much weaker regions of the
rest of the ACP. Even if SADC were to succeed in negotiating an agreement with the EU that takes account of the needs and aims of the countries of the Southern African region, these may not be entirely appropriate for other countries/regions. To apply a future 'SADC model' to other ACP regions would be similar to the inappropriate extension of the EU-SA FTA to the whole of SADC, as outlined in 4.2 and 4.3 above.

9.3 The EU, together with the other most powerful industrialised states, have common interests in generalising trade and investment liberalisation throughout the world in the interests of 'their' global corporations and to the benefit of their national economies. Since the early 1980s, they have marshalled the IMF and the World Bank to implement such trade and investment liberalisation as a central part of their structural adjustment programmes (SAPs) throughout Africa. The European Commission also entered into direct partnership with the IMF/WB, and their client African Development Bank (ADB), in the early 1990s, in a so-called Cross-Border Initiative (CBI), to encourage accelerated unilateral trade and investment liberalisation by various governments in Southern Africa [Keet,1994]. The basic aim of the World Bank behind this initiative was to direct the multilateral SADC integration process towards 'open regionalism' through extensive prior national and cross-border liberalisation within the region. This accords with the
EC's own position on the need for 'open regionalism' in Southern Africa [EC, 1995]. This has two ongoing implications vis-a-vis the current post-Lome scenarios. On the one hand, the unilateral liberalisation promoted by the CBI has had the effect of reinforcing policy divergences between the countries of SADC and, coming on top of the earlier IMF/WB SAPs, has complicated the current
trade negotiations and other intra-regional economic relations [Meyer & Thomas, 1997]. An RRFTA would do the same in the ways indicated in 2. 3. and 4. above. On the other hand, the CBI could now actually contribute to the introduction of an RRFTA in Southern Africa. As an integral part of the CBI, the IMF/WB, ADB and EC very explicitly coopted local businessmen and government officials in
Southern Africa into so-called Technical Working Groups (TWGs) to promote the regional liberalisation project. Such free trade agents, created or strengthened by that earlier liberalisation programme may now predispose some government officials in Southern Africa towards an uncritical acceptance of the EU's latest free trade strategy in the region.

9.4 The EU's latest 'post-Lome' strategy seems to be an addition to, and a departure from its earlier approach. The EU is no longer only promoting 'open regionalism' to the benefit of the general global economy, and its own interests in that open global economy. The proposed RFTAs are part of a simultaneous EU strategy to promote what can be called a 'biased regionalism' to directly favour the EU's economic interests. This arises out of and reflects broader simultaneous strategies of globalisation and regionalisation which, in turn, are an expression of both the global co-operation and the growing neo-mercantilist competition between
the EU, US and Japan. They are all intent upon reinforcing and extending their own economic blocks and are striving to gain prior or privileged access to, and predominant influence in promising economies and economic regions throughout the world [Keet,1999]. This is most evident in their competing strategies, for example, in relation to MERCOSUR in South America, and ASEAN in south-east Asia. However, even the much more embryonic and economically weaker SADC region is an object of these rivalries. The intensified international competition for markets, access to resources and investment fields does not take the form of carving out formal territorial colonies, as in the past. It is through targeted reciprocal regional FTAs that the EU could achieve prior access and a preponderant position in various regions of the world. This strategy might incorporate countries currently at quite low levels of development, and where there is no immediately evident
economic gain of great significance to be had. However, this serves to underscore the parallels with the first scramble for Africa in that spheres of possible future economic influence are being drawn and pre-conditions for future strategic advantage are being established. The US, for its part, is very explicitly concerned about the advantages that EU exporters and investors are gaining over their US counterparts through new free trade agreements, such as that with South Africa. And this is why the US is hard on the heels of the EU in proposing its own free trade programme for Africa (the so-called African Growth and Opportunities Act ). The EU's RRFTA strategies have to be located and evaluated in this competitive international context, with a clear understanding of what the US will probably demand in the wake of any special RFTA between SADC and the EU.

Some Observations and Proposals

1. It is of prime important that the EU is not allowed to intervene in the SADC
region in ways that push intra-regional relations and the regional integration project towards 'open regionalism' to serve 'the global economy' and global interests, including EU interests therein. But nor should the EU be allowed to push SADC towards special reciprocal inter-regional arrangements that even more directly, and tendentiously, serve EU interests. SADC has to be shaped by the specific and combined needs of its member countries and their peoples on the basis of a more
strategically conceived engagement with the global system, and with important players, such as the EU, within the global system.

2. It is essential that the EU is not allowed to promote its relations with, and its interests in Southern Africa in ways that further complicate the already difficult processes on the ground in the region. This means that the EU should not be given an increased role and further influence to aggravate the complex intra-regional relations and often conflicting policies between the respective governments, which some EU policies in the region, intentionally or otherwise, have already had a direct hand in fostering. The prime responsibility in this regard rests on the shoulders of the political, bureaucratic, managerial and business elites in these countries to
prioritise regional relations over external relations, to work through their differences and divergences, and to negotiate and implement effective strategies for regional integration and real development.

3. In so doing, the SADC states would be on much stronger grounds, and their arguments would carry much greater authority in persuading the EU to recognise the strategic importance and primacy of regional co-operation and development in Southern Africa, over and above relations with and any proposals from the EU. At the same time, however, a responsibility rests on both SADC and the EU to ensure that regional strategies in Southern Africa are not promoted in such a way as to divide and weaken the ACP as a whole, or to foist any future SADC model upon them. Conversely, that should not preclude the other ACP states from benefiting from the SADC experience.

4. If the EU decides to maintain trade access to its markets for SADC LDCs (through Lome-type preferences), or to non-LDCs (through enhanced GSP), these would have to be generous, targeted, long-term and, if necessary, bound in the WTO [UK Parliament,1998]. A fundamental principle, however, is that the EU cannot be allowed to demand that such trade preferences should be reciprocated in any way by countries at totally different levels of development to the EU. At the same time, SADC governments should not rely on continued Lome-type trade and aid provisions as the basis of their production and trade strategies. If they insist on
a postponment of negotiations and achieve an extension of Lome for a further period, this should only be in order to resolutely utilise the space and time, and any resources provided, to develop and diversify their economies, both separately and as part of SADC programmes, in order to definitively end such dependence as rapidly as possible.

5. SADC economic agencies - governmental and entrepreneurial - must insist that if the EU really intends its policies to support development in Southern Africa it must, in turn, recognise that improved trade access into the EU markets, while useful and even necessary for weak economies, is not a sufficient provision without improved productive capacities within those economies. On the one hand, this requires that European investors be encouraged by EU political forces to agree investment terms and conditions in SADC that will promote development aims and not merely maximum profits for themselves. On the other hand, if the EU is really committed, as it states, to assist the development of indigenous productive capacities in these countries, it must ensure its own policy coherence. Above all, this means that it's technical and financial aid policies must not be contradicted and undermined by its (free) trade policies.

6. If the EU is genuine in its declared support for development within and between the countries of Southern Africa, it must also be made to recognise that FDI, or aid-and-trade support, however generous, can never be a substitute for internally-driven economic development and diversification. Aid programmes can support this, but programmes that in any way complicate or constrain such organically rooted and self-sustaining development, through the imposition of pre-set global policy requirements, such as in the WTO, are fundamentally counter-productive. The EU should not be extending and reinforcing such economic policy impositions through its own trade-related conditionalities within the Lome context. There are similar problems with the kind of externally-defined and externally-driven, even if well-intentioned, political conditionalities that the EU is trying to set (but see 10. below).

7. The EU must be made to understand and accept that, if it is honest in its declared intentions to help combat poverty and underdevelopment, and to counter the vast disparities between the highly industrialised countries and the lesser or least developed countries of the world, this must at its most basic include, on the one hand, the elimination of all forms of EU protectionism. On the other hand, it must include the ending of subsidies (and other less obvious supports) to European producers that contribute to unfair trade and actively exacerbate the imbalances between the EU and the ACP. If these are politically contentious issues within the EU, as their representatives frequently explain to outside critics, then they must be confronted with the same political will that the EU, the US and their international finance institutions routinely require of their client governments in the developing world in response to popular opposition to their policies.

8. The SADC states have to convince the EU that, if it is serious in its official commitment to sustain and deepen 'relations of partnership' with the ACP, this cannot refer only to Lome-type political co-operation. In terms of the real power relations, this was not, with the best will on both sides, a genuine partnership of equals. Nonetheless, the argument has to be made for EU-ACP political relations to be broadened to include strategic relations of mutual support and co-operation in the global context. This is essential, from the ACP's point of view, in order to challenge and change the terms and modus operandii of the WTO, the IMF and other international institutions, that are so inimical to the needs of the weaker countries of the world. In aligning itself with the developing countries in global institutions, the EU would be moving from being part of the problem to becoming part of the solution to the damaging and increasingly dangerous workings of the liberalised global economy.

9. It is fundamentally important for the ACP to recognise that the Lome Convention was not an unproblematic arrangement between Europe and its former colonies. This was not so much with respect to the ways in which preferences were used, and were or were not useful for different economies and specific commodities. The more fundamental summation has to be that Lome (although not only Lome) reflected and reinforced an unfortunate dependence upon the EU by the ACP, and an over-concentration upon EU markets. The necessary response, however, is not simply to replace the 'neo-colonial' Lome with post-colonial neo-liberalism, which is where EU proposals are now strongly tending. The urgent need is to convince Europe that it - still - has an historic responsibility (even for those European countries that did not have formal colonial empires) and an important current role in contributing towards the rapid, if belated, transition of the ACP states from dependence to self-defined and self-sustaining development. Such an approach is neither a matter of historic 'culpability' nor current 'charity' on the part of the EU, but of enlightened, far-sighted human and planetary responsibility. But such possibilities also depend upon the genuine will on the part of the ACP to break out of their dependence.

10. In this context, too, it is essential for both the EU and the ACP to recognise the vital importance of full and rooted democracy, guaranteed human rights, and political security and stability on the ground in these countries (and throughout the world). This has to include the full role and rights of non-governmental organisations within national, regional, inter-regional and global processes [ACP NGOs, 1997]. All these conditions have to be the essential underpinnings and the very substance, and not just the 'future outcome', of more balanced and
co-operative international political and economic relations and a more equitable and stable global system. It is in this context that the technical requirements by the EU for 'good governance' must be located, and it is this context that it will be most effectively promoted.

In Conclusion

In the final analysis, and in conclusion, the most fundamental and widest issue is not how Lome must be altered or ended in order to 'fit in' with the WTO's rules and the liberalised global economy but, rather, how the WTO and the underlying neo-liberal paradigm per se need to be adjusted or radically altered to allow for genuinely co-operative and equitable international economic and political relations. And, in this context, the question is how the important experiences of Lome, positive and negative, could contribute to this. Thus, the general strategic challenge to all involved in the ACP-EU negotiations is how the current discussions and
future decisions about Lome can become part of, and feed into a broader engagement and challenge to the global free trade and radical free market paradigm increasingly dominating, dividing and endangering the world.

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