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South Africa Increasing Access to European Markets
February 4, 2002
Summary
South African and European Union officials signed a trade agreement Jan. 28 to expand South Africa's duty-free exports of wine and spirits. The agreement heralds an important step toward freer trade between Europe and South Africa, and it will strengthen Pretoria's long-term economic outlook. But a multitude of economic hurdles remain -- and without a stable rand, growth will be limited.
Analysis
South African and European Union trade officials signed a deal Jan. 28 to increase wine and spirit exports. Under the trade agreement, South Africa can annually export 43 million liters of wine duty-free to European nations. This is a 10-million-liter increase over the present quota.
The agreement is an important step toward a long-term free-trade partnership between Europe and South Africa. Since the end of apartheid, Pretoria has struggled to maintain positive growth rates, attract foreign investment and expand a lumbering economy. The partnership with Europe will strengthen South Africa's long-term economic outlook. But a number of economic hurdles will limit short- to mid-term growth prospects.
The trade pact with Europe will increase Pretoria's access to European markets, adding to the country's attractiveness as a destination for foreign direct investment. Since South Africa's economic situation affects the entire region, the export opportunities for Pretoria's neighbors will expand as well. But the effects are likely to be muted for the near future, in part due to a weak currency and rising inflation.
The wine-and-spirits agreement has been a sticking point in expanded trade relations between South Africa and Europe for the past seven years. South Africa had been reluctant to relinquish the use of names like grappa, sherry, port and ouzo, which are identified with European products.
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Dan
South Africa Increasing Access to European Markets . . .