SA’s decision not to sign an economic partnership agreement with the European Union (EU) is a major blow to the embattled clothing and textile industry.

South African clothing and textile producers are now unable to benefit from less-restrictive rules that would have eased access of clothing and textile products into European markets, Eckart Naumann, an associate of the Trade Law Centre for Southern Africa (tralac) said at a conference of the think tank last month.

The more relaxed rules of origin agreed to under November’s economic partnership agreement will greatly benefit Swaziland and Lesotho . SA’s exclusion, however, could see battling South African manufacturers relocating operations to these countries to take advantage of the new dispensation, leaving thousands of employees stranded.

Jack Kipling, chairman of the Export Council for the Clothing Industry in SA, said the industry was “ very disappointed” that SA did not sign the agreement.

The change makes EU rules of origin for clothing and textiles comparable with the beneficial rules of the African Growth and Opportunity Act (AGOA), under which African countries enjoy preferential access into the US market. The key factor was that the new EU rules of origin would be far more permanent, while Agoa’s requirements could be amended at will by US policy makers, Naumann said.

For a product to be considered of local origin, it is usually required that some degree of local value add takes place during the production stage when imported materials are utilised.

SA and Namibia pulled out of the agreement that Botswana, Lesotho, Mozambique and Swaziland signed in November, citing unreasonable demands on the part of the EU.

Earlier last year SA argued for its inclusion in the negotiations, saying it would help advance regional integration. While South African manufacturers will not benefit from the new rules, things are also complicated elsewhere.

Some companies with cross-border operations in the region were able to take advantage of cumulation — a stipulation under which more than one country can jointly comply with the rules of origin to benefit from a beneficial tariff regime. With SA not party to the agreement, manufacturers that have joint operations in, for instance, Lesotho and SA, can no longer receive that benefit.

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