South African market access challenges in the European Union : a case of regulatory compliance and non-tariff measures

Abstract

The World Trade Organization (WTO) was formed in 1995. Since then, trade liberalisation has been on the agenda, resulting in diverse trade agreements and a subsequent decline in import tariffs. With the decrease in import tariffs, trade is expected to increase. However, despite this trend as well as a great increase in global trade since the 1990s, certain developing countries still struggle to participate in global trade.

South Africa and the European Union (EU) trade agreements have existed since 2000. This is through the Trade, Development and Cooperation Agreement (TDCA)—later replaced by the Southern African Development Community-European Union Economic Partnership Agreement (SADC-EU EPA) in 2016. An expected result of such agreements is an improvement in trade relations and flows between the partners. Thus, it can be expected that South Africa would export more orientated products to the EU.

South Africa became a net beef exporter in 2014. Trade flows for beef between South Africa and the EU, however, reveal the opposite of what was expected. Beef exports from South Africa to the EU have declined since the early 2000s. Trade patterns demonstrate that South Africa increasingly traded with countries with which it had no formal trade agreements, such as in the Middle East and East Asia. South African beef exports to the EU rapidly declined despite trade liberalisation between the two trading partners and South Africa becoming a net beef exporter. Thus, this research investigates South Africa’s market access challenges in the EU.

Since the decrease in beef import tariffs did not result in the expected increase in trade between South Africa and the EU, this study focused on investigating whether the observed trends relate to non-tariff measures applied. It further investigated whether the lack of market access concerns non-compliance with EU Non-tariff measures (NTMs) regulations and requirements.

The gravity model of international trade assessed the effects of EU NTMs and South Africa’s compliance with these regulations on its beef exports to the EU. This model involved data between 1995 and 2018. Beef exports from South Africa destined for the EU were the dependent variable. Gross domestic product (GDP) per capita in South Africa and the EU, NTMs applied by the EU, beef production in South Africa, tariffs, and a compliance variable functioned as explanatory variables.

A compliance index variable was developed to evaluate South Africa’s compliance with EU NTM regulations and requirements. This index was developed from South Africa’s policies complying with EU NTMs in a specific year, and NTMs enforced by the EU. The policies and NTMs focused on animal products, particularly red meat products, between 1995 and 2018.

This study established that NTMs applied on beef imports by the EU have harmed South Africa’s beef exports to the EU. Furthermore, although trade agreements between South Africa and the EU have reduced tariffs applied in the beef industry, tariffs continue to negatively affect South Africa’s beef exports to the EU. In evaluating South Africa’s compliance with EU NTM regulations, a divergence was established between EU NTM regulations and requirements on animal products and South Africa’s policies on the same products. During the period when South Africa’s beef exports to the EU declined, NTMs applied by the EU increased quicker than South Africa’s response to them. The divergence between EU NTM regulations and requirements and South Africa’s policy response and thus compliance was prevalent between 2010 and 2018. Thus, the study recommends an evaluation of South Africa’s policies, affecting beef trade and other animal products such that they respond to the changing trade environment, particularly with respect to the use of NTMs.