The case for reciprocity in South African/European trade relations

South Africa and the EU are currently engaged in trade negotiations. The main options are to be inside Lome with exclusions, or outside with concessions, or to opt for a bilateral free trade treaty. This paper sets out the arguments in favour of a free trade treaty with Europe, namely that it would be welfare enhancing (especially if broadened into a customs union agreement and exemption from anti-dumping suits could be obtained); the Lome deal is of limited value: South Africa should not be excluded from the world trend towards bilateral and multilateral free trade accords; the credibility of sound domestic economic policies will be enhanced (which would attract foreign investment); and the benefits for the region may be positive over the longer run. Such an agreement would also be to the advantage of the EU and could become a model for European deals with other African countries on the expiry of Lome. To obtain a better rather than a worse type of FTA, South Africa should negotiate a negative list (if any); immunity against anti-dumping suits; provision for an eventual customs union; provisions for maintaining temporary protection for South African industries while the agreement is phased in; and the inclusion of SACU as a whole in the agreement.