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Thursday, March 25, 1999 Published at 13:51 GMT

Business: The Economy

Mandela hails EU trade deal

South African exports to Europe will be free of duty

Among the big issues of Kosovo and budget deadlock, the EU's Berlin Summit has taken a small step to improving its relations with South Africa before the retirement of Nelson Mandela.

EU leaders agreed to ratify a long-stalled trade pact that will open up European markets to South African produce. The deal creates a free trade zone for 90% of their two-way trade, which is worth $20bn a year.

[ image: A dispute over fortified wine held up the agreement]
A dispute over fortified wine held up the agreement
Economists say the deal could add 1% a year to South Africa's growth rate. The EU is South Africa's largest trading partner, foreign investor and aid donor.

A spokesman for Mr Mandela, who will be retiring after elections in June, said: "It is a very pleasant send-off. It removes all doubt about the trade relations between us and the EU. We are particularly pleased by the agricultural and industrial agreements."

Long-running negotiations

News of the deal was faxed to Mr Mandela in a letter from German Chancellor Gerhard Schröder.

"This agreement is a further step to consolidate and strengthen the firm partnership between the European Union and South Africa in the area of politics, business, and commerce," he wrote.

The EU originally agreed to extend a free-trade deal to South Africa in June last year, following Mr Mandela's visit to Europe, but negotiations to provide practical help to the post-apartheid regime stalled after opposition from Mediterranean countries.

Spain and Portugal were worried that their sherry and port producers could be hurt by cheap imports from South Africa.

South Africa has agreed to phase out the use of the terms "port" and "sherry" for its fortified wines, while the EU has agreed to let South Africa keep tariff barriers on sensitive industrial products like cars and textiles.

Boost for economy

The deal will help boost South Africa's ailing economy, which has been slowing since the Central Bank raised interest rates last year to defend the currency, the rand. Traditional exports of diamonds and gold have suffered from falling prices.

"There will be some immediate benefits in terms of people making investment decisions having more certainty," said Mike Schussler of FBC Fidelity.

The 200 page agreement covers more than 10,000 products and will come into effect next year.

It also covers a framework for co-operation in development aid, competition policy, and industrial standards.

The agreement has a much broader significance as it will also apply to other southern African states who are members of a regional free trade pact with South Africa.

It could prove a model for EU relations with the group of former European colonies in the developing world, the African, Caribbean and Pacific countries who currently benefit from special trade privileges.

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