At the end of 2007, some developing countries may lose preferential access to the European Union (EU) market before new partnership agreements have been finalised. For Namibia, this means access for agricultural products to its most important export market is under threat. What are the likely economic and social consequences?

Research from the Overseas Development Institute, UK, examines the economic and social effects of a potential loss of preferential market access for Namibian agricultural products to the European Union.

The EU is negotiating economic partnership agreements (EPAs) with the African, Caribbean and Pacific (ACP) group of states. These new agreements are the latest step in a long-standing special relationship between the EU and the ACP countries. The EPAs will replace the Lomé/Cotonou trade regime (due to expire at the end of 2007) which gave the ACP countries preferential access to European markets through abolishing most tariffs and special quotas.

Namibia is negotiating its post-2007 trading arrangements with the EU as a member of the Southern African Development Community (SADC) EPA. But these negotiations are expected to overrun the end of 2007. As the European Commission (EC) has announced that the General System of Preferences (GSP) and the Most Favoured Nation (MFN) tariff are the only alternatives to EPAs, Namibia and two other SADC-EPA members – Botswana and Swaziland – may face having no preferential market access for their export products to Europe. This is mainly a concern for their agricultural products which, as a result of the preferences, mainly meant for the EU market.

Three products – fish, meat and grapes – account for 100 percent of Namibia’s agricultural exports to the EU. All these products depend on Europe as their major export market and benefit from Cotonou preferences.

The research finds that:

• The immediate cost to Namibia of losing current preferences would be more than €45 million a year (more than four times the amount the country receives in European Development Fund aid).
• Meat would face tariffs equivalent to 65 percent of export revenue and EU exports are most likely to cease immediately.
• The livelihoods of thousands of people involved in the meat industry might be damaged.
• Livelihoods in the grape industry are already threatened by the competition from Chile and South Africa which already enjoy superior access to the EU market.

If the current preferences are lost at the end of 2007, all Namibian agricultural exports to the EU would face less favourable market access than their major competitors – including industrialised country competitors. The economic and social impacts in Namibia could be devastating.

The research concludes that:

• The European Commission should accept that more time is needed for EPA negotiations.
• It is completely in the hands of the European Commission to apply interim measures that guarantee the current preference level until EPA negotiations are finalised.
• If the EC imposes GSP/MFN duties on imports from Namibia, Botswana and Swaziland, they should in partnership with European importers of their products consider challenging the EC for illegal taxation.

Source(s):
‘Analysis of the Economic and Social Effects of Namibia’s Potential Loss of Current Preference to the European Union’, Overseas Development Institute: London, 2007 (PDF) Full document.

Funded by: UK Department for International Development

id21 Research Highlight: 02 November 2007

Further Information:
Chris Stevens, Mareike Meyn and Jane Kennan
Overseas Development Institute
111 Westminster Bridge Road
London SE1 7JD, UK
http://www.odi.org.uk

Tel: +44 (0)20 79220300
Fax: +44 (0)20 79220399
Contact the contributor: c.stevens@odi.org.uk;  m.meyn@odi.org.uk

Overseas Development Institute (ODI), UK

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