Institute for World Economics and International Management - IWIM „ Are Economic Partnership Agreements likely to Promote or Constrain Regional Integration in Southern Africa? Options, Limits and Challenges Botswana, Mauritius and Mozambique are Facing” Conference Paper prepared for the Namibian Economic Policy Research Unit (NEPRU): “Monitoring Regional Integration in Southern Africa”, Windhoek, June 12-13, 2004 Mareike Meyn Diplom-Volkswirtin Institute for World Economics and International Management (IWIM), University of Bremen

Institute for World Economics and International Management - IWIM Table of Contents 1.Introduction 2.The Theoretical Concept of EPAs 3.Trade Relations and Market Access to the EU 3.1 Trade Structure and Current Status of Privileges 3.2 Constraints to Enter the EU Market and Challenges Botswana, Mauritius and Mozambique are Facing 4.How Should an “Optimal” EPA for Southern African Countries Look Like? 5.BMM’s Trade Relations with Southern African Countries and their Involvement in SADC and COMESA 6.The Impact of EPA’s on Regional Integration in Southern Africa 7.Conclusions and Policy Recommendations

Institute for World Economics and International Management - IWIM Why Promoting South-South Integration for EPA Negotiations? To avoid a “hub-and-spoke” relationship with the EU To increase the bargaining power vis-à-vis the EU and push through issues that are of fundamental interest for southern African countries To benefit from regional integration gains (e.g. trade creation, economies of scale) Condition: Custom Unions or effectively implemented Free Trade Areas Question: Does the European approach that pushes southern African countries to opt for one integration framework promotes regional integration in southern Africa or hamper regional integration efforts?

Institute for World Economics and International Management - IWIM Botswana’s, Mozambique’s and Mauritius’ Involvement in Regional Integration Agreements and Trade Agreements with the EU WTO Botswana SACU SADC COMESA EBA TDCA Cotonou / EPAs Mozambique Mauritius CBI IOC

Institute for World Economics and International Management - IWIM Export and import volumes and main trading products with South Africa 2001 (in Mio. US$) Export volume in million US$ and % of total exports Main export products to South Africa Import volume in million € and % of total imports Main import products from South Africa Botswana339.8 (6.5%) Live animals, Meat, 2,978.8 (86.6%) Petroleum, Vehicles and Transport Equipment, Electrical Machinery Mauritius11.9 (0.9%) Carbonate, Cotton Yarn (16.8%) Coal and Petroleum Products, Cotton Fabrics, Plastic Goods, Vehicles Mozambique107.1 (54.4%) Electrical Energy, Brazil Nuts, Coconut and Palm Oil, Fish (67.5%) Petroleum Oils, Electrical Machinery, Vehicles and Transport

Institute for World Economics and International Management - IWIM Export and import volumes and main trading products with SADC (minus South Africa) and COMESA, 2001 (in Mio. US$) Export volume in million US$ and % of total exports Main export products Import volume in million € and % of total imports Main import products BotswanaSADC 18 (0.3%) SADC Salt, Blood, Copper Mattes SADC 6.5 (0.2%) SADC Sugar, cement, Cotton Fabrics MauritiusSADC 1.4 (0.1%) COMESA 81.0 (6.2%) SADC Cotton Fabrics COMESA Cotton Fabrics, Flour, Fertilizer, Feed preparat. SADC 2.2 (0.1%) COMESA 54.1 (3.3%) SADC Coal and Fuels COMESA Energy and Fuels, Textiles, Garment, Food MozambiqueSADC 0.2 (0.1%) SADC Petroleum Oils, Fish, Palm oil SADC 0.8 (0.1%) SADC Beer, Wine

Institute for World Economics and International Management - IWIM South Africa SACU SADC TDCA SADC EPA Mauritius SEA EPA LDCs Angola Mozambique Tanzania BLNS DR Congo Malawi Zambia Zimbabwe SADC Countries’ chosen Configuration for EPA Negotiations

Institute for World Economics and International Management - IWIM Fragmentation of SADC member countries in EPA negotiations South Africa and the BLNS countries that are locked into the liberalisation schedule of the EU-South Africa and have de facto liberalised their markets towards the EU by 2012; The rest SADC EPA countries, namely Angola, Mozambique and Tanzania, that are all Least Developed Countries and thus potentially able to retain their non-reciprocal trade relations with the EU under the “Everything But Arms” initiative; and The remaining SADC countries (DR Congo, Malawi, Mauritius, Zambia and Zimbabwe) that are entering into the Southern Eastern Africa EPA. To avoid smuggling, trade diversion and economic polarisation and to promote intra-regional trade and regional integration in southern Africa, a common external trade policy towards the EU would be in the best interest of all SADC countries.

Institute for World Economics and International Management - IWIM Conclusions and Policy Recommendations SADC should put pressure on its members to opt for a consistent regional policy and to decide for regional integration in a SADC, COMESA or EAC framework. SADC countries’ decisions to negotiate an EPA in two different regional frameworks give reason to question whether the current configuration of 13 SADC member countries is going to survive. –DRC, Malawi, Mauritius, Zambia, and Zimbabwe are currently negotiating a Southern Eastern Africa EPA and all but DRC might join the COMESA Customs Union later this year. –Tanzania will be bound in a Customs Union with Uganda and Kenya from October 2004 –SADC EPA = BLNS + Angola and Mozambique or enlarged SACU ?

Institute for World Economics and International Management - IWIM Conclusions and Policy Recommendations To cope with the challenges created by EPAs, the SADC EPA has to move on towards deeper regional integration. SADC can no longer rely on its slowest members but has to adopt an integration framework of different speeds where core members work constructively towards a CU. These core members could be the SACU countries that are enlarged by Mozambique. The enlarged SACU has to harmonise its trade-related policies and formulate common policies in this field respectively. Efforts to create a common trade negotiation body must be strengthened. Angola should maintain its non-reciprocal trade relations with the EU in the short- to medium term and join the SADC EPA only after having integrated in its intra-regional trade and investment framework. However, the EPA concept violates those from the EU formulated requirements that ACP countries will be treated according to their different development status.

Institute for World Economics and International Management - IWIM Thank you for your attention! Questions and comments are very welcome.