Hon Deputy Chairperson, hon members, allow me to express my gratitude in allowing me to table this report from the select committee. Indeed, the select committee received a briefing from the Department of Trade and Industry on the Economic Partnership Agreement between the Southern African Custom Union and
Mozambique and the United Kingdom on the 5 November 2019 with the intention to recommend for ratification by Parliament.
The members were made aware of the conclusion of talks involving the governments of the United Kingdom and South Africa. These talks have sought agreement on terms that would apply to our trade relationship should the United Kingdom leave the European Union without an appropriate withdrawal agreement. The importance of this agreement cannot be over emphasized. In 2018, bilateral trade between our countries was worth R142 billion.
The United Kingdom is our fourth largest market for exports, behind only China, Germany and the United States; and it is the seventh largest supplier of imported goods. Hon Chair, it is estimated that our exports to the United Kingdom supports 56 500 direct jobs and a further 117 500 indirect jobs, bringing the total number of jobs supported by exports to the United Kingdom to nearly 175 000.
Hon Chair, how is current trade facilitated between the United Kingdom and South Africa? As with all members of the European Union, trade with the United Kingdom has to date been facilitated under what is known as the SADC- EU Economic Partnership Agreement, EPA. The SADC-EU Economic Partnership Agreement provides for the tariff
arrangements applicable to trade between six SADC countries and any of the 28 European Union member states. The SADC countries are; South Africa, Botswana, Lesotho, Namibia, Eswatini and Mozambique. A number of products are duty free and there are detailed trade rules set out in the Economic Partnership Agreement to make trade relations easier between ourselves.
Why do we need a new Economic Partnership Agreement between South Africa and the United Kingdom? Hon members will know that following a referendum held in the United Kingdom in 2016, the United Kingdom has notified the European Union of its intention to leave the European Union by 31 October this year, the date has now been extended to the 31 January 2020. If there is no agreement on the terms of the departure, it will be in the form of a no-deal exit.
This will have a material impact on the six SACUM countries, including South Africa, which trade with the United Kingdom under the terms of the existing SADC-EU Economic Partnership Agreement. All trade will then fall under standard World Trade Organisation rules, which means that the normal import tariffs would apply and many of our products will lose duty-free status.
For South Africa and for the SACUM countries, reverting to trade on World Trade Organisation terms would incur significant costs. In March this year, the United Kingdom published an interim tariff regime in the event of it leaving the European Union customs union and in the absence of a replacement to the SADC-EU Economic Partnership Agreement. If this were to occur, South Africa would lose preferential access to the United Kingdom market on 114 products, affecting exports of around R7 billion. This affects among others, vehicles, auto components, wine, textiles and clothing, sugar, fish and machinery. In some cases, this may lead to a loss of exports completely, which would be significant for a number of provinces.
In addition, United Kingdom exports to SACUM countries would be subject to higher tariffs, which may also increase the costs of these products in South Africa, and if they are input costs into South African-made products, it will hurt local industries.
What has been the process to establish a new Economic Partnership Agreement between South Africa and the United Kingdom? To avoid the disruption to South Africa's exports and that of the region, the SACUM countries engaged with the United Kingdom over a roughly two- year period. An expedited process for the negotiations saw
significant ground covered in addressing issues, and the final terms were concluded by our SACUM officials in Gaborone.
What measures are contained in the new Economic Partnership Agreement between South Africa and the United Kingdom?
The new agreement, which will be known as the SACUM-UK Economic Partnership Agreement, will effectively roll-over and replicate the terms of trade present in the existing SADC-EU Economic Partnership Agreement. It will allow for seamless, uninterrupted trade to continue between ourselves and the United Kingdom. The tariff arrangements under the SADC-EU Economic Partnership Agreement have been carried over to cover our trade with the United Kingdom.
The new agreement includes the details as follows:
The quota levels for certain products of duty-free trade; health and safety standards for agricultural products; the rules to determine whether a particular good qualifies as locally made and are therefore eligible for preferential trade rates; and whether goods which have been processed partially in an EU-state can still qualify under the rules of origin. This is called cumulation.
Hon Deputy Chairperson, it has also been agreed to what is called a built- in agenda which is a list of matters that further negotiations will be conducted on after the agreement comes into effect. These include issues such as:
The right of countries to use export taxes to promote local industries; crediting South African-made inputs in products made in other SACUM countries, when we export these to Britain in future.
The new Economic Partnership Agreement will come into effect in the event that the United Kingdom leaves the European Union on 31 January 2020, and will govern bilateral trade between the six SACUM countries on the one side and the United Kingdom on the other side. This is an important agreement to provide certainty and predictability for exporters. It will ensure that in the event of a no-deal Brexit, trade between the United Kingdom and South Africa will continue on the same terms. This means that South African businesses which use South Africa as an export base to the United Kingdom can begin to plan, knowing that their preferential access will be protected. It means that those investors, which were holding back on capital commitments until they received certainty, can begin to invest again. And it means that the thousands of workers from
across this country, whose jobs are supported by trade with the United Kingdom, can feel confident that this ANC-led government is working for them.
Hon Deputy Chairperson, the select committee, after due consideration of the briefing, decided to recommend to the NCOP plenary for the ratification of the Economic Partnership Agreement between the Southern African Custom Union and Mozambique and the United Kingdom. I thank you. [Applause.]
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.