SOUTHERN AFRICA: South Africa neighbours concerned with EU trade deal

South Africa's neighbours are concerned over the impact on their economies of the ratification of a South African-European Union (EU) free trade agreement.

A spokesman for the Namibian ministry of trade and industry told IRIN this week that there would be "profound implications" for his country's agriculture base, and fledgling manufacturing sector.

He said: "We are concerned that agricultural products from the EU could penetrate Namibia and this could place Namibian products in a precarious position, because they would not be competing on an equal footing. EU products are heavily subsidised and would thus have an unfair advantage over Namibian products which do not enjoy such heavy subsidisation."

Under the proposed trade agreement, South Africa and the EU would remove barriers on an estimated 90 percent of all items currently traded between the two. This process is expected to take place over the next 12 years. It would mean cheaper EU goods on the South African market.

But South Africa is a key export destination for the region's
agriculture-dependent economies. According to Paul Kalanga, a researcher at the University of Cape Town's Economic Research Unit, South Africa's neighbours fear they would be unable to compete with the cheaper and better quality EU goods, and could become a dumping ground for European products.

One of the countries that stands to lose is Namibia whose beef industry contributes an estimated 90 percent to its gross domestic product (GDP). South Africa is Namibia's main market for livestock and other meat products, and accounts for more than 70 percent of the country's total exports. Economists say that if the current South African-EU tariffs are done away with, Namibia's beef industry could be crippled.

But there are economists, like Sue Keel at the University of the
Witwatersrand Business School in Johannesburg, who point out that South Africa is "between a rock and a hard place." She said: "South Africa has to pay attention to its regional responsibilities and her own needs to develop her economy. But South Africa has to get going and develop herself first before she can be of any benefit to the region."

On the upside, the deal could be the investment push that the region needs. Kalanga said the inflow of EU products could mean EU manufacturers setting up shop in the region, bringing with them much needed foreign capital and employment opportunities. However, he was quick to add that it could also shut down many domestic enterprises because they would be unable to compete with the larger and more profitable foreign firms.