Guide to exporting to the EU under the EU-SADC Economic Partnership Agreement

Author :
Category :


Introduction

The Guide to exporting to the European Union (EU) under the European Union- Southern African Development Community Economic Partnership Agreement (EU-SADC EPA) 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 various provisions spreading in over 2,100 pages 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 EU market.

EU-Botswana Bilateral trade

The EU is Botswana’s second-largest export market, after India, with exports amounting to USD 1.1 billion in 2019 – one-fifth of Botswana’s total exports. By comparison, Botswana imported USD 540 million from the EU, giving the country a trade surplus of over USD 500 million. Belgium, being an important trans-shipment point, was the largest market for Botswana’s products, absorbing 97 percent of all the exports to the EU. Botswana’s exports to the EU have been dominated by trade in diamonds, which account for 97 percent (USD 1 billion) of the total exports, followed by meat (both fresh and frozen) whose exports amounted to USD 32 million in 2019. Besides the currently limited exported categories, the EU represents a potential market for Botswana’s exports of mechanical machinery, electrical machinery, plastics, iron and steel, meat, inorganic chemicals, and salt.

The EU-SADC EPA

The EU-SADC EPA was signed on June 10, 2016, between the EU and six members of the SADC (Botswana, Eswatini, Lesotho, Mozambique, Namibia, and South Africa). The EPA grants the contracting parties – including Botswana – a series of benefits. These include, among others, duty-free quota-free (DFQF) access to the EU market. This represents a significant competitive advantage to Botswana’s products, as it enables the Botswanan product to be cheaper than those produced in countries having no FTA with the EU. For example, an average tariff margin of 27.5% is granted to Botswana’s exports of meat to the EU. Botswana, in exchange, offered to fully liberalise 74% and partially liberalise 12% of all national tariff lines, leaving 14% excluded from liberalisation.

The EPA Rules of Origin (RoO) are formulated to support deeper regional integration via the development of regional value chains and enable producers to source inputs from various other countries without losing free access to the EU. This is evidence in the cumulation rules, whereby, under certain conditions, non-originating materials can be considered as originating, when used in manufacturing another product. In addition to the most frequently used bilateral cumulation under FTAs, the EU-SADC EPA also allows regional cumulation (cumulation between materials originating in two or more SADC EPA), diagonal cumulation (cumulation of materials originating in other ACP EPA countries, or an EU Overseas Country or Territory (OCT)), and full cumulation (cumulation of working or processing with materials from other SADC EPA countries, ACP EPA countries, OCTs or EU countries).

Customs, technical barriers to trade, as well as sanitary and phytosanitary measures, are one of the key impediments to trade in Africa. In this context, the EPA does not foresee any legally binding obligations, but rather a set of “soft law” measures that aim to solve as much as possible the issues raised by those elements. The EPA also provides a set of trade remedy measures that Botswana can resort to as a ‘safety valve’ in cases of severe hardship caused to its economic sectors by trade liberalisation under the EPA. These include safeguard measures in accordance with the multilateral (WTO) trade rules, or measures related to agricultural, food security, infant industry protection, as well as a special mechanism applicable to Botswana, Eswatini, Lesotho, Namibia (BELN) countries.

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 EU-SADC EPA. 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 EU market under the EU-SADC EPA.

The Guide has been published by the UNDP and MITI of Botswana.