As the democratisation of South Africa was achieved with a degree of political support from the international community at large, in 1994, when this process resulted in the election of a representative government, it was expected by observers in general, as well as all parties involved in the process, that massive economic co-operation would follow suit. Accordingly, it was widely recognised that the daunting task of reconstruction of the country after the appalling heritage of the apartheid regime could not be achieved with South Africa´s own resources alone, however plentiful, as naturally expectations of the population at large were enormous, proportional to the abject situation to which it had been relegated. This co-operation, however, failed to materialise in any substance in the aftermath of the inauguration of the new regime led by President Nelson Mandela. In the years that followed democratisation, South Africa struggled to consolidate its democracy not only without effective economic assistance, but also in the midst of an adverse, if not exclusionary, situation with respect to access to the markets of its main trade partners[1].

The European Union (EU), as the prosperous common market re-uniting both of South Africa´s former colonial powers, the United Kingdom and the Netherlands, which were largely responsible for the political heritage leading to the apartheid, was expected to be the first international agent to come forward with tangible co-operation measures, in addition to significant trade liberalisation. This was not to be so, even if the EU is South Africa´s main trade partner and the source of approximately 50% of the foreign investments in the country[2]

Although negotiations started early enough, they soon floundered in the traditionally petty protectionism the EU spouses in the agricultural sector[3]
, to the despair and misery of all developing world. To complicate matters further, the format chosen for the agreement mixed trade with development and co-operation, and thus urgent assistance that was required in many areas was held dependent on progress achieved in the substantive commercial negotiations, always difficult. This was more so in view of the relative lack of experience of South Africa´s negotiators in international trade matters (as compared to those of the UE), due not only to the unusual situation of an incoming new democratic administration returning from exile, but also as a result of the boycott which for many years excluded the country from the multilateral trade fori of the General Agreement on Trade and Tariffs (GATT) and World Trade Organisation (WTO).

Typically enough for negotiations with the EU, the talks only made substantive progress when South Africa resignedly acceded to conditions that would in fact preserve, in the bilateral relations, the protectionism in the agricultural sector devastatingly put into practice by the EU multilaterally. As a result, “The Agreement on Trade, Development and Co-operation” between the EU and South Africa was signed on the 13th October, 1999, (the Agreement). Its objectives are:

a) to provide an appropriate framework for dialogue;

b) to support the efforts made by South Africa to consolidate the economic and social foundations of its transition progress;

c) to promote regional co-operation and economic integration in the Southern African region and to its harmonious and sustainable economic and social development;

d) to promote the expansion and reciprocal liberalisation of mutual trade in goods, services and capital;

e) to encourage the smooth and gradual integration of South Africa into the world economy; and

f) to promote co-operation between the EU and South Africa.

The Agreement, which is signed with an indefinite period of validity[4]
, starting as of the 1st January 2000, for all practical purposes, can be divided into the following categories:

a) trade in industrialised products;

b) trade in agricultural goods;

c) new areas, comprising trade in services, investments, intellectual property and government procurement;

d) resolution of disputes; and

e) financial and technical support.

With respect to the trade part of its framework, the Agreement is a classic example of the standard negotiation pattern of the EU[5]
, in that it offers substantial percent reductions of tariffs in the area of trade in industrialised products, because they are already so low that further reductions make hardly any difference[6]
. The average post Uruguay Round tariff practised by the EU[7]
for industrialised products is approximately 1.7%. However, reciprocity by a developing country, such as South Africa in the instant case, often proves trade diversionary in general and exclusionary to other trading partners, because their tariffs are normally much higher. [8]

In addition, the Agreement vies to maintain the “status quo” in the agricultural sector, deferring liberalisation for the long term, with a view to subordinate any concessions made in regional trade pacts to the commitments to be made in multilateral negotiations within the ambit of the WTO[9]
. Accordingly, lists of products marked for progressive liberalisation[10]
, culminating with the total abolition of tariffs over a period of ten years, were annexed to the agreement. By no means all agricultural products are thus itemised. Regional safeguards were, in any case, reserved by the EU, because quite extraordinarily, France, Spain, Italy, Portugal and Greece felt threatened by the puny concessions in the agricultural sector made to South Africa, a developing country with limited competitiveness in the area, under the Agreement. This situation became so acrimonious that the efficacy of the Agreement was threatened, even after it had been signed, by virtue of opposition from Italy and Greece, which allowed for the extraction of further concessions from South Africa, in the denomination of certain alcoholic beverages. A balance of the agricultural dispositions of the Agreement does reveal, to some bemusement, that South Africa made more concessions in the agricultural sector to the EU, when the contrary was to be expected.

In connection with the so called new areas, the EU has endeavoured to adopt, in regional trade agreements with developing countries, the same methodology used by the United States of America (USA), in that they both strive to obtain the free convertibility of currencies for current accounts payment to its nationals[11]
; look for full access to the internal markets of the trading partner, including the area of financial services; try to ensure that current intellectual property norms are accepted[12]
; privilege a favourable legal treatment of competition and anti-trust matters[13]
; and make certain that government procurement is open to companies domiciled in the EU[14]
. At this point, it is worthwhile mentioning that South Africa, similarly to Brazil and India, is a signatory of Article XIV[15]
of the International Monetary Fund Agreement of 1944 ( the Bretton Woods Agreement) and thus enforces exchange controls.

The rules of origin of the Agreement are particularly noteworthy as they are not only harsh but unmistakably and most abundantly trade exclusionary[16]
. Protocol one of the Agreement defines the concept of originating products, an euphemism for rules of origin, which have been hailed internationally as the cutting edge of protectionism. The Agreement is substantially more restrictive in non-originating materials than both NAFTA and the Common Market of the South (MERCOSUL), as it allows only for a total value of 10% or 15% of the ex-works price of the product, depending on the case. For the same category, NAFTA allows for 60% in non-originating materials[17]
, whereas MERCOSUL permits a content of external materials of between 40% and 50% of the final price of the product. NAFTA´s rules of origin, based in a much higher threshold, were responsible for a major diversion of historic currents of trade in favour of the USA in the commercial relations with Mexico, to the detriment of Mexico´s traditional partners.

The co-operation package is the compensation for major concessions made by South Africa in the aforementioned trade areas, which was received with enthusiasm by its population. The Agreement is very broad in the area of economic and industrial co-operation and this part, if proven effective, could in the medium and long term be highly beneficial not only for South Africa and its people, but for the whole African continent. Co-operation includes support in the area of industrial modernisation; economic empowerment; environmental protection; investment protection; trade development; strengthening of small and medium sized enterprises; information technology; energy; health and safety standards; transportation; tourism; agriculture; and services. However, the multilateral trade implications of such package are that it could also prove to be trade diversionary, as developing countries may not be able to match the financial package offered by the EU and thus be alienated from the South African market[18]
, not only in government procurement, but in trade in services as well.

Co-operation partners eligible for financial and technical assistance shall be national, provincial and local authorities and public bodies, non-governmental organisations and community based organisations, regional and international organisations, institutions and public or private operators, in addition to any other body designated by both parties. Any such project will be covered by a loan or finance agreement between the EU and South Africa, which makes the latter a necessary guarantor whenever the interested party is from the private sector[19]
. Unfortunately, the Agreement does not specify the resources available for all such highly meritorious purposes, and subjects the funding thereof to the budget of the EU.[20]
It is expected that the materialisation of the benefits contemplated therein does not prove excessively burdensome.

Article 104 of the Agreement deals with the matter of dispute settlement, which has become increasingly important in a world that demands more juridicity in multilateral as well as in bilateral trade relations. Private economic agents have pressed for access to the dispute resolution systems of bilateral trade pacts. NAFTA, for one, has paid heed to this clamour and its arbitration procedures allow for a private agent to bring a claim therewith against any government, including its own. This has been hailed as a model of governance and transparency, as it permits access to jurisdiction without censorship and prevents, what is disgracefully normal in trade negotiations, that a government, by means of trade concessions and for reasons of its own, will sacrifice an economic sector for another. Conversely, MERCOSUL has justifiably been vehemently criticised for the maintenance of control over jurisdiction for private agents. It also paid an enormous price for this posture[21]

Similarly to what prevails in MERCOSUL, the Agreement allows for control by the parties over what is going to be subjected to the dispute settlement mechanism. Thus, it reserves the system for disputes between the signatories, whilst preserving all rights and obligations under the WTO agreements. Any dispute may be referred to the Co-operation Council, which is the “de facto” secretariat of the Agreement. Each party will appoint an arbitrator and a third will be appointed by the Co-operation Council. A decision will be made by the panel between three and six months. After the report is made known, the losing party will have 60 days to advise all of its intentions about implementation, to be effected at the most within fifteen months from the date of submission of the findings thereof.

For South Africa´s other trade partners in the developing world, such as Brazil, the Agreement should be regarded as trade exclusionary. Even the USA felt its commercial interests threatened and immediately suggested to South Africa the execution of a free trade agreement between the two countries. Therefore, it is of utmost importance that Brazil and/or MERCOSUL enter into a separate bilateral trade agreement with South-Africa, in order to neutralise the many advantages granted the EU in its relations with that country, in services as well as in market access. For South Africa, it would be also important to have such an agreement with Brazil and/or MERCOSUL, as for its agricultural sector access to the markets of the EU became a specious proposition and the huge internal Brazilian market offers many opportunities for South African industrialised products and services. Additionally, South Africa is more dependant on external trade (16.7% of GDP) than both Brazil (7.3%) and Argentina (8.6%).

Unfortunately, bilateral relations between Brazil and South Africa, since democratisation, have been excellent only on a political level, on account of the consistent, if not proverbial, deficits of efficiency demonstrated by Brazil in negotiating external trade matters. Efforts to have a candid and very basic agreement to avoid double taxation, encouraged by the business sectors of both countries since 1994, have floundered in the quagmire of bureaucracy in Brasília[22]
. Similarly, negotiations for an agreement for protection of investments have been making very slow progress. The lack of such an agreement will cause a Brazilian private party to incorporate in Europe in order to establish a commercial presence in South Africa, in view of the preferential exchange treatment, among others.

Bilateral trade between Brazil and South Africa has been growing steadily in the recent past, even if it is reflected by a modest volume of approximately US$ 800 million only. At the moment, this is represented by transportation equipment; minerals; textiles; chemicals; and machinery. However, one should not be discouraged by the absolute numbers and by the puny participation in the US$ 53 billion, US$ 26.2 and US$ 23.5 billion total volume of exports of Brazil, Argentina and South Africa, respectively[23]
. The potential for growth is definitely there, as it was in the MERCOSUL countries when of the execution of the Treaty of Asuncion in 1991.

Recently, South-Africa took the initiative of proposing negotiations for such a bilateral trade pact with Brazil and/or MERCOSUL, which was very warmly received indeed by the parties concerned. In the words of the South African ambassador to Brazil, “my sense is that enough of love declarations have been made, perhaps it is time we leveraged action out of love for one another” [24]
. In a recent visit to South Africa in March of 2000, the Brazilian Minister of Foreign Relations[25]
, representing all MERCOSUL countries, proposed that a preferential trade agreement between the South African Customs Union (SACU) and MERCOSUL be signed before the end of the year. For that purpose, both trade blocs agreed to start preparing lists of sensitive areas to be excluded from such agreement. Subsequently, over a period of years, this agreement could evolve into a customs union.


Area: 8,511,965 sq. km.
Capital: Brasília
Population: 163.7 million
Urban: 78 %
GDP: US$ 820 billion
Origins of GDP:  
Agriculture: 10.7 %
Industry: 39.3 %
Services: 50 %
Main Trade partner: EU
Principal exports:  
Manufactures : US$ 32.7 billion
Transport Equipment: US$ 6.8 billion
Soyabeans: US$ 5.7 billion
Coffee: US$ 3.1 billion
Minerals: US$ 3.1 billion
TOTAL US$ 53 billion (including others)


Area: 1,225,815 sq. km.
Capital: Pretoria
Population: 38.8 million
Urban: 50 %
GDP: US$ 140 billion
Origins of GDP:  
Agriculture: 4.5 %
Industry: 34.6 %
Services: 60.9 %
Main Trade partner: EU
Principal exports:  
Metals + Metal products: US$ 6.3 billion
Gold: US$ 6.0 billion
Diamonds: US$ 2.9 billion
Machinery + transport: US$ 2.6 billion
TOTAL US$ 23.5 billion (including others)