ADDITIONAL PROTOCOL ON THE TRADE, DEVELOPMENT AND COOPERATION AGREEMENT BETWEEN THE REPUBLIC OF SOUTH AFRICA AND THE EUROPEAN COMMUNITY AND ITS MEMBER STATES
1 .1. The Government of the Republic of South Africa and the European Community and its Member States (EC) signed a Trade, Development and Cooperation Agreement (TDCA) on 11 October 1999. It came into provisional application on 1 January 2000 and entered into force with effect from 1 May 2004.
1 .2. According to Art. 22, the agreement does not "preclude the maintenance and establishment of customs unions, free trade areas or other arrangements between the parties and third countries...". This article provided room for the renegotiation of the SACU agreement as well as the enlargement of the EU, with effect from 1 January 2007, from 25 to 27 member states.
1.3. A legal basis had to be created for the administration of the TDCA with respect to the two new member states. This is embodied in the attached Additional Protocol that was signed on 10 October 2007, in Pretoria. Mr. Mandisi Mpahlwa, Minister of Trade and Industry signed on behalf of South Africa, and Mr. Louis Michel, Commissioner for Development and Humanitarian Aid of the European Commission, signed on behalf of the Portuguese Presidency of the European Union.
1 .4. The enlargement of the EC implies that South Africa is now locked into a free trade area (FTA) with most of the countries in Central and Western Europe. The only countries in Western Europe excluded from this are the members of the European Free Trade Association (EFTA) , namely Iceland, Liechtenstein, Norway and Switzerland. South Africa as part of SACU has negotiated with EFTA with a view to establishing a free trade area between EFTA and SACU, basically modelled on the FTA between South Africa and the EC. Now that SA is in a free trade area with the EC, its offensive interests stand to benefit further with the extension of the TDCA to the two new member states. At the same time economic operators and consumers are to benefit from preferential imports from those countries.
2. DOMESTIC AND INTERNATIONAL LAW CONSISTENCY
The State Law Advisers of the Department of Justice and Constitutional Development and the State Law Advisers (International Law) at the Department of Foreign Affairs have been consulted on the Additional Protocol (legal opinions are attached as Annexes "B "and "C" respectively).
3. RATIFICATION - SECTION 231(1) OF CONSTITUTION
3.1. Both the EC and South Africa have agreed to extend the TDCA to the new member states with effect from 1 January 2007. However, in accordance with section 231 of the Constitution of South Africa, Presidential approval is required in order for the Additional Protocol to be signed, ratified and put into effect.
3.2. According to the Customs and Excise Act of the South African Revenue Services (SARS), the protocol needs to be ratified by parliament first before it can be implemented retrospectively from 1 January 2007. Confirmation has been received from SARS that it is in a position to adjust the Customs and Excise Act
retrospectively to provide for the extension of the TDCA tariff preferences to the two new member states of the EC.
4. FINANCIAL IMPLICATIONS
4.1. A reduction of tariff duties will result over time in the Government forfeiting revenues collected from import trade. Based on the agreed statistical reference period, under WTO Most Favoured Nation (MFN) trade arrangements between SA and the EU, before the entry into force of the TOCA, 57% of the total imports from the EU had already been cleared under zero duties. This will increase to 86% of total imports at the conclusion of the 12-year phasing-down period.
4.2. Government does not rely on trade taxes as a major source of income, tariff policy adjustments are considered primarily in the context of trade policy and industrial strategy developments. The latter lie at the heart of the TOCA. This should also be weighed against the expected long-term positive impact of the TOCA on the national economy and hence the possible growth of other sustainable income bases of the Government.
5.1 . SARS has indicated that communication on the date for the implementation of the Additional Protocol to the TOCA will be published once it has been ratified by the Parliament. SARS has also indicated that the Additional Protocol can be implemented within the current organizational framework and no new appointment of personnel will be required.
5.2. Legislation to implement the Additional Protocol has been prepared by SARS. As implementing agent, SARS will implement the agreement retrospectively from 1 January 2007, once Parliamentary approval has been obtained. All operators that have had to had to pay normal customs duties during the period before ratification will be reimbursed.