1. The Established Facts
South Africa (RSA) is the world’s second largest exporter of Citrus Fruit, second only to Spain. Those exports are worth, world- wide, approximately Euros 1.5 billion, and provide (directly and indirectly) roughly 130,000 jobs in RSA. Spain supplies around one half of all oranges sold in the EU market, equivalent to some 3 billion kg in weight. Between 2015 and 2022, RSA shipments of citrus fruit (primarily oranges) to the EU market doubled in volume, totaling some 400 million kg in 2022 (i.e. between 7 and 8 % of the Spanish figure). The RSA exports arrive in the European off season, and are therefore limited in their competitive impact on Spanish sales (and on those of the other significant EU producers, namely Italy and Greece). In 2022 RSA sold just over 30% of its citrus fruit output into the EU.
All producing countries throughout the world seek to protect their produce against disease, and to ensure that infected produce is not exported to other countries where it might cause significant problems. RSA is recognized to have developed a highly effective Risk Management System (RMS) for citrus fruits, where the 2 main pest threats are False Codling Moth (FCM) and Citrus Black Spot. The RMS ensures that 99.9% of exports are pest free. In fact, between 2018 and 2021 the checks carried out by the EU at entry points (chiefly Amsterdam, which is the entry port for two thirds of RSA exports of citrus fruit) on imports of citrus fruit from RSA found that in one of those years only 7 cases were identified and in the worst of those four years the figure was 15. By way of comparison, the data show that the problem is far more serious for exports of roses and peppers from Kenya and Uganda.
The official EU policy towards plant pests is that of zero tolerance, to be enacted oblivious of economic and social cost (in other words, quite the opposite of its policies in other critical areas, such as the environment). Despite this blanket approach, some pests are classified as more noxious than others. So in 2019 Spain began a push for FCM to be declared a “priority pest”. The purpose of this drive was to obligate all citrus fruit exporters and others to invest in technologies which would totally kill off FCM in the production locations. The method indicated to achieve this aim was for oranges (the key product) to be given enhanced cold treatment (meaning storage at minus 2 degrees Celsius) for 25 days. It so happens that this period is about the time it takes to transport by sea the oranges from RSA to the EU. However, as with most treatments, this one has other effects. It damages many oranges, especially those which are organically produced – the case for many of the RSA exports and incidentally the type of product of which the EU claims it wants to promote the consumption.
The Spanish push inside the EU was finally accepted there in June 2022. It came into effect virtually at once, meaning that RSA only had the few days between 24 June 2022 and 14 July 2022 to respond to the new situation. Some produce was already en route to the EU, while it was of course impossible to have a new system up and running within 3 weeks. The upshot of this situation, following some discussions between RSA and the EU, was that in 2022 RSA suffered a loss of export earnings of roughly Rand 200 million (of the order of $17 million at the then exchange rates). That figure is estimated to have risen to around Rand 500 million this year.
In the light of these precipitous events, on 27 July 2022 the RSA circulated in WTO (official document published on 29 July 2022) a request for consultations with the EU pursuant to: Article XXIII of GATT 1994; Article 11 of the Sanitary and Phytosanitary (SPS) Agreement; and Article 4.4 of the Dispute Settlement Understanding (DSU),while also referring to Article 4.8 of the DSU because we are dealing with Perishable Products. The RSA request draws attention to what it diplomatically labels “inconsistencies” (violations) in the actions taken by the EU. This step is the first time that RSA has ever invoked the DSU in the WTO. Under the DSU provisions, a period of 60 days is allowed for the consultations. If insufficient progress has been made within that time, then the WTO can be requested to create a panel to rule on the matter. To this author’s knowledge, no such concrete step has been taken as of this writing.
The essence of the RSA position is that the EU has effectively created a Non-Tariff Barrier to Trade (NTB) and thereby acted in contradiction to WTO provisions. The NTB should accordingly be removed.
One further fact, not per se related to oranges from RSA but of importance in understanding what is happening, is relevant. On 6 June 2023 (one month ago) the EU enacted Regulation 2023/1110, regarding a so called Temporary Increase of Official Controls “in response to risks of public health”. These import control measures relate to some 21 imported products (all emanating from countries in Africa, Latin America and Asia). Once more scrutiny of the details shows that the focus of the changes is almost entirely to do with pests and pesticides. Interestingly, there are two cases involving African countries where controls for aflatoxins have been removed. They relate to groundnuts from Senegal and Watermelons from Nigeria. The same reason is given in each case – namely, there have been no imports for more than 3 years. It seems that the controls successfully stopped trade.
2. Assessing the Situation
The two fundamental areas where the EU per se has control over policy have always been the Common Agricultural Policy (CAP) and External Trade. During the past six decades these areas, and their intersection, have become ever more the preserve of immensely detailed regulations. Put in different words – one of the most intricate systems of market management ever seen has been constructed. The regulations are elaborated and decided upon by EU actors, public and private. While outside voices might seek to be heard, their influence is highly restricted. Progressively, and since at least the beginning of this century, management of trade has had very little to do with tariffs and other monetary measures, and everything to do with regulations that effectively have the potential (or indeed the explicit aim) of cutting off trade altogether.
The weight of these internal EU decisions carries over to international agreements in which the EU is involved, from the WTO to bilateral trade deals. Extremely loose and misleading terms, such as “free trade”, “partnership agreements”, “preferences”, might be used, but the devil is always in the detail.
The EU of course has the right to decide for itself what it wants to do. Yet that right is limited by engagements which the EU itself freely chooses to enter into (and to a major extent elaborates). Prime among those has been the WTO agreements/understandings with what the EU has repeatedly declared to be its championing of a “rules based system”. National security and Public Health considerations were from the beginning indicated in these agreements as potentially valid reasons for controlling trade flows. We are now fully in an age where these two concerns are being used to shape trade in countless sectors and across the globe. But to invoke them does not itself justify specific measures and actions. The baseline principles of the WTO must be observed when instituting any measure.
My own view is that the EU actions with regard to RSA exports of citrus fruit constitute a clear cut case of an NTB in violation of WTO commitments. I would go further: in my own experience this has to be a case for a manual on NTBs.
It is most important for RSA that the case against the EU is upheld. Yet it should also be seen as a guide for other African countries, since the reliance on EU markets for many kinds of agricultural produce remains disturbingly high across the continent. There is an urgent need for expertise to be on tap to assist the continent in this complex yet exceptionally important field.