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THE 6th South Africa-European Union (EU) summit was held on July 18 and this was, perhaps, well overdue. Tensions between South Africa and the EU have been high since South Africa joined the Brics bloc, comprising Brazil, Russia, India, China and South Africa.
The theme of the summit was ‘Job creation through inward investment’ and aptly so, since several European countries, along with South Africa, are battling unemployment.
The situation worsened through European investors being wary of developments in South Africa after the country cut bilateral investment treaties with Belgium, Luxembourg and Spain and will do so with a total of roughly 12 EU countries.
South Africa’s joining of the Brics and the cutting of bilateral investment treaties has raised fears that these moves will be at the expense of its long-standing ties to Europe’s developed economies.
As an economic region, the EU remains South Africa's leading trade partner and, perhaps even more importantly, three-quarters of our foreign direct investment (FDI) stock originates from the EU.
Given the traditionally and current strong ties between us and the EU, any changes in the EU can consequently have a significant impact on the local economy.
For example, if the EU can turn around its 18 months of economic contraction, South African exports to the region might start to increase again and its contribution toward FDI might become even more substantial.
On the other hand, EU regulations impacting our exports to the region can just as easily hinder local manufacturers and exacerbate the trade deficit.
For example, in the week before the summit, the EU notified the World Trade Organisation (WTO) of a draft commission regulation on food.
As one of our major exports to the EU, this regulation will affect far more than just the agricultural sector. Consider the minimum wage for farmworkers, the rising petrol price and now the mandatory compliance to this regulation.
These costs, of whatever nature, all contribute to the already struggling economy through impacting the farmers and workers, the packaging, distribution and export companies.
The difference among the three costs (wages, petrol and regulation) is that we have a say in what the final EU regulation looks like. In other words, before the regulation comes into effect, we are allowed to review and comment on the draft regulation.
If the comments are of a national interest, the department of trade and industry takes a national stance on the regulation and engages the EU through the WTO. This formally initiates a dispute in the WTO.
If the consultations prove fruitless after 60 days, South Africa can request adjudication by a panel.
While it appears as though we are moving to favour the Brics nations, we cannot simply ignore developments in the EU.
Should it recover from its current slump, the EU still offers a significant market for our exports and a large source of investment for our development.
- Fin24
*Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.
The theme of the summit was ‘Job creation through inward investment’ and aptly so, since several European countries, along with South Africa, are battling unemployment.
The situation worsened through European investors being wary of developments in South Africa after the country cut bilateral investment treaties with Belgium, Luxembourg and Spain and will do so with a total of roughly 12 EU countries.
South Africa’s joining of the Brics and the cutting of bilateral investment treaties has raised fears that these moves will be at the expense of its long-standing ties to Europe’s developed economies.
As an economic region, the EU remains South Africa's leading trade partner and, perhaps even more importantly, three-quarters of our foreign direct investment (FDI) stock originates from the EU.
Given the traditionally and current strong ties between us and the EU, any changes in the EU can consequently have a significant impact on the local economy.
For example, if the EU can turn around its 18 months of economic contraction, South African exports to the region might start to increase again and its contribution toward FDI might become even more substantial.
On the other hand, EU regulations impacting our exports to the region can just as easily hinder local manufacturers and exacerbate the trade deficit.
For example, in the week before the summit, the EU notified the World Trade Organisation (WTO) of a draft commission regulation on food.
As one of our major exports to the EU, this regulation will affect far more than just the agricultural sector. Consider the minimum wage for farmworkers, the rising petrol price and now the mandatory compliance to this regulation.
These costs, of whatever nature, all contribute to the already struggling economy through impacting the farmers and workers, the packaging, distribution and export companies.
The difference among the three costs (wages, petrol and regulation) is that we have a say in what the final EU regulation looks like. In other words, before the regulation comes into effect, we are allowed to review and comment on the draft regulation.
If the comments are of a national interest, the department of trade and industry takes a national stance on the regulation and engages the EU through the WTO. This formally initiates a dispute in the WTO.
If the consultations prove fruitless after 60 days, South Africa can request adjudication by a panel.
While it appears as though we are moving to favour the Brics nations, we cannot simply ignore developments in the EU.
Should it recover from its current slump, the EU still offers a significant market for our exports and a large source of investment for our development.
- Fin24
*Geoffrey Chapman is a guest columnist and trade policy expert at the SABS. Views expressed are his own.
