The Guide to Exporting to the European Free Trade Association (EFTA) market under the Free Trade Agreement between Southern African Customs Union and European Free Trade Association (SACU-EFTA FTA) is part of the International Economics Consulting’s work with the United Nations Development Programme (UNDP) and Ministry of Investment, Trade and Industry (MITI) of Botswana. The guide comprises two major sections. The first section aims to demystify rules contained in the main text, eight annexes, and three bilateral Agricultural Agreements which form parts of the agreement in terms digestible by exporters, as well as pinpointing the untapped potential opportunities in the EU market for the private sector in Botswana. The second section lays out the requirements and sources of information to the realization of the potential product exports to the EFTA market.
EFTA-Botswana Bilateral trade
The EFTA is an intergovernmental organisation consisting of four European countries: Iceland, Liechtenstein, Switzerland, and Norway. Switzerland is the larger trader in the region and Botswana’s seventh-largest market, with exports amounting to USD 147 million, or 2.5% of Botswana’s total exports in 2019. Over the past 10 years, Botswana has maintained a trade surplus with the EFTA countries, driven by the huge diamond exports from the country to Switzerland. However, there has been a steady decline in Botswana’s export to the region since 2016, with a large drop in exports to Norway. Exports to Switzerland peaked in 2014 and 2015 at around USD 300 million, after which exports fell to almost half and only picked up in 2018 and 2019. The EFTA market still holds untapped potential for Botswana exports besides precious stones. Export potential analysis shows that the export potential exists for mechanical machinery, electrical machinery garments and textiles, as well as meat and meat products.
The SACU-EFTA FTA
The SACU-EFTA FTA was signed on June 26, 2006, between the EFTA comprising of Iceland, Liechtenstein, Norway, and Switzerland on the one hand, and the SACU comprising of Botswana, Eswatini (formerly Swaziland), Lesotho, Namibia, and South Africa on the other hand. Entering into force on 01 May 2008, the agreement covers trade in goods and lays the foundation for a further engagement of the Parties with regard to intellectual property, investment, trade in services, and public procurement. The agreement offers Botswana and other SACU member states duty-free access to the EFTA markets for most industrial goods, including fish and other marine products. Trade in processed agricultural products is covered in Annex III to the main Agreement, while trade in basic agricultural products is covered by arrangements concluded bilaterally between each EFTA States and SACU. For trade in agricultural products, the EFTA countries offer free access for 50-75% of all products originated in SACU.
The SAC-EFTA Rules of Origin (RoO) allow for products to be manufactured from non-originating materials of up to 60% of the ex-works price and still obtain originating status. The agreement, however, only allows for bilateral cumulation (that is, only materials originating in an EFTA State or SACU state shall be considered as materials originating in the Party concerned, provided that they have undergone sufficient working or processing) but not diagonal cumulation as in the case of the EU-SADC EPA.
With regard to sanitary and phytosanitary measures (SPS), technical barriers to trade (TBT), and trade remedies, the agreement refers to the multilateral agreements by the World Trade Organisation (WTO) as the relevant instruments governing the rights and obligations of the Parties. Consultation, either within or outside the framework of the FTA Joint Committee, is agreed as a method for resolving any matter arising from the application of SPS/TBT measures. Similar to the EU-SADC EPA, this agreement also foresees a set of options to adopt safeguard measures under different situations: (i) bilateral safeguard as an emergency action, (ii) Agricultural Safeguard, (ii) Exceptional Measures in Case of Structural Adjustment, and (iv) Special Treatment for Botswana, Lesotho, Namibia and Swaziland (BLNS).
The way forward
The guide was prepared to add momentum towards Botswana’s trade promotion initiatives by enhancing the business community’s understanding of trade opportunities through the SACU-EFTA FTA. While the guide has not been able to cover all possibly traded products, it provides a methodological approach in manageable steps so that trade public officials and private sectors can replicate in evaluating the trade potential and accessing reliable sources of information to strengthen their preparedness for exporting to the EFTA market under the SACU-EFTA FTA.