The fate of the world’s oldest customs union, the Southern African Customs Union (SACU), is hanging in the balance as a result of the Economic Partnership Agreements (EPA) that most SACU countries have signed with the European Union (EU).
According to Ipsnews.net, SACU governments are now trying to figure out how to prevent paralysis or even total collapse. But they are finding themselves divided. Some in the SACU want a retreat from the liberalization agreements they have agreed to while others want to move ahead and deepen the integration with the EU, for fear of losing out on EU aid and market access.

The EU is maintaining import tariffs and quotas on sensitive products from Africa to protect its producers.

Five countries make up SACU: South Africa, the largest economy in the customs union, Botswana, Lesotho, Namibia and Swaziland (the so-called BLNS countries). SACU has been a customs union since 1910.
There have been tensions within SACU since 1999, when South Africa concluded Trade, Development and Cooperation Agreement (TDCA) with the European Union. The agreement will affect the BLNS countries negatively.
Since it determines that nearly all EU goods will eventually enter the SACU without duties, there will be considerable loss of tariff revenue for the BLNS: up to 50 percent for Lesotho and Namibia, 30 percent for Swaziland and 10 percent for the relatively more developed Botswana.
Dot Keet, a trade specialist speaking on behalf of the Africa Trade Network at a non-governmental organizations’ meeting on the EU’s free trade agreements in Brussels last month, also pointed out the negative effect of the TDCA on South Africa itself.
When the TDCA was signed, South Africa’s exports to the EU increased initially but, once the country started implementing lower tariff levels, EU exports also expanded. According to Keet, “Trade deficits between South Africa and the EU are growing at about two billion euros per annum in the EU’s favour“.
Keet said that EU agricultural exports into South Africa and SACU have increased by 50 percent since 2003. The entry of processed food imports has been most damaging: jams and tinned fruit and vegetables.
In contrast, the EU is maintaining import tariffs and quotas on sensitive products to protect EU producers. Many of these, such as beef, are products in which South Africa and the other SACU countries have a competitive advantage.
Keet added that most of the new penetration from the EU into South Africa is in the financial services sector and other capital-intensive areas, such as high technology electronics. “This is reflected in the slow pace of employment creation in South Africa,“ of great concern since unemployment rates hover around 40 percent (including those unemployed who have given up job seeking).
The Most Favored Nation (MFN) clause will oblige South Africa to offer the EU the same market access terms it might offer to other countries, such as India and Brazil, in future bilateral agreements. The TDCA is a goods and agriculture-only agreement and, unlike the EPA, does not include these new issues nor the MFN clause.
From various reports, within the SACU, governments are now deeply divided about how to proceed in the EPA talks with Europe. Three of the BLNS countries, Swaziland, Botswana and Lesotho, are urging their neighbours to quicken the pace of negotiations with the EU. These countries intend to conclude full EPAs by the end of 2008.

China’s earthquake caused massive losses to agriculture but will not trigger major food shortages or price hikes, the vice minister of agriculture said.
The 7.9 magnitude quake destroyed 300,000 hectares (741,000 acres) of cropland and left 12.5 million livestock and poultry dead in China’s top food producing province, said vice minister Wen Chao’an, AFP wrote.
“The quake has severely damaged a large amount of agricultural infrastructure and made it very difficult to restore agricultural production after the disaster,“ he told a press conference.
However, ministry officials said that production would be stepped up in other provinces to make up for any shortfall and that prices and food supplies would remain largely stable.
“This quake may affect agriculture in the earthquake zone but it will not have any fundamental impact on the overall supply situation in China,“ Wen said.
Sichuan province where the earthquake struck is China’s top food producing province in terms of arable crops and livestock. It produces 60 million pigs a year.

The wealth gap among Middle Eastern nations may widen as countries with crude oil spend their way out of the food crisis and those without bust their budgets, Bloomberg said.
The region’s powers are pursuing different approaches to defusing the tensions unleashed by the jump in the cost of staples such as rice, vegetable oils and dairy products.
Egypt has forbidden the export of rice and is raising taxes to help pay for an 88 percent increase in subsidies, while Saudi Arabia can afford to lower tariffs and the United Arab Emirates is looking to buy farms as far away as Thailand.
“Oil producers can easily pay for food subsidies,’’ John Sfakianakis, chief economist at Riyadh-based Saudi British Bank, said in a telephone interview. “The countries without oil are more fiscally challenged and face public contention and discontent.’’
Egyptian President Hosni Mubarak says he will raise the issue of skyrocketing food costs when he hosts world leaders, including US President George W. Bush as well as business executives at the Middle East’s World Economic Forum starting May 18th.
Economic disparities mean regional leaders are unlikely to agree on a coordinated response.

Former Malaysian Prime Minister Mahathir Mohamad slammed the government’s move to allow US oilfield services provider Halliburton Co. to begin operating in Malaysia, saying the country doesn’t need “blood money“.
“It is appalling that we have allowed this war-profiteering company to invest in Malaysia,“ he said in a statement, referring to Halliburton’s contracts in Iraq for the US government. “Are we so void of our humanity that we have to allow these war criminals to come in and thrive in our economy?“
According to AP, Mahathir, who remains a respected figure in the Muslim world after his retirement in 2003 after 22 years in power, urged the government to ban Halliburton from using their “ill-gotten profits to operate in any way“ in Malaysia.
Halliburton recently launched a 200 million ringgit ($62.5 million) manufacturing center in the Iskandar Malaysia economic hub in southern Johor state.
Mahathir, a vocal critic of the 2003 US-led invasion of Iraq, accused Halliburton, once led by Vice President Dick Cheney, of raking in billions of dollars in profits from the Iraq war.

The European Bank for Reconstruction and Development begins its annual meeting in Kiev on Sunday to discuss the impact of global economic turmoil and soaring food prices in the former Soviet bloc.
EBRD president Jean Lemierre, meanwhile, presents his swansong summit after eight years leading the bank, which was formed in 1991 to help former communist nations in Europe and central Asia adopt market economies, AFP wrote.
Bank governors meeting in the Ukrainian capital were expected to appoint German deputy finance minister Thomas Mirow as Lemierre’s successor, and they will also discuss the adoption of Turkey as a country of operations.
The appointment of Mirow, 55, the only candidate to succeed Lemierre, comes at a period of rapid change for the EBRD, which invests in 28 countries including Kazakhstan, Moldova, Russia and the Ukraine.
Frenchman Lemierre has overseen the bank’s switch in focus towards investing in southeastern Europe and Russia since his appointment in 2000.