Sunday, February 04, 2007

SADC on course to attain free trade area

from Nyasa Times, Malaysia

by Munetsi Madakufamba

WITH JUST over 12 months remaining before the SADC region can create its Free Trade Area, Member States remain confident that they can move a gear up to iron out outstanding impediments for the region to achieve set targets.

Since 2000, SADC countries have been implementing a programme towards creating a Free Trade Area by 2008, a Customs Union by 2010, a Common Market by 2015 and a Monetary Union by 2018.

However, the last heads of state Summit, in the Lesotho capital of Maseru in August, raised concern about the pace at which SADC's economic integration programme was being implemented.

The Summit appointed a Ministerial Task Force to come up with a progress report which was tabled before an extraordinary Summit of Heads of State and Government in Midrand, South Africa, in October.

The extraordinary Summit noted that several challenges needed to be overcome but reaffirmed the region's commitment to achieving the trade milestones.

“Summit noted progress made in the attainment of an FTA [Free Trade Area] and concluded that the SADC Free Trade Area programme is on course and that it will be launched as planned by 2008,” reads the communiqué in part.

However, the Summit noted that SADC's trade patterns consist mainly of commodities and that there is need to diversify Member State economies and increase intra-regional trade and growth.

“In addition, Summit noted that the establishment of the FTA should take cognisance of developmental integration elements such as infrastructure, poverty alleviation and sustainable development,” says the communiqué.

On whether the Customs Union is based on an appropriate model, the Summit directed the Ministerial Task Force to undertake and finalise a study to advise on suitability of the model.

“In this regard, Summit directed that a road map be developed to facilitate the implementation of the SADC Customs Union programme,” says the communiqué.

As the SADC region moves towards the planned Free Trade Area, one of the challenges is to bring down tariff and non-tariff barriers in line with agreed timetables within specific product lines. The target is to ensure that 85 percent of all intra-regional trade is at zero tariffs by 2008.

Economic integration in SADC is guided by the Trade Protocol, which was signed in 1996 and came into force in 2000.

As part of its implementation, Member States have been negotiating tariff reduction schedules, rules of origin, a dispute settlement mechanism, special product agreements, elimination of non tariff barriers and harmonisation of customs, trade documentation and clearance procedures.

Tariff phase down is based on a variable geometry model, taking into account the asymmetrical level of development in Member States.

SADC Member States are at different levels of development, with South Africa far much more developed than the rest in terms of industrial base.

Countries within the Southern African Customs Union (SACU) - Botswana, Lesotho, Namibia, South Africa and Swaziland - are liberalising faster, followed by Mauritius and Zimbabwe, while the rest follow. Tariff reduction is divided into three categories, the first being goods that were to be liberalised by 2001, the second by 2008 and the third by 2012.

Special agreements have been concluded on trade in sensitive products such as sugar, and textiles and clothing.

Negotiations on rules of origin, which seek to promote use of local raw materials, were the most difficult, but have since been completed for most product lines. The most sticky areas were wheat flour products and motor vehicles.

Another challenge for Member States to achieve a successful Free Trade Area is to address the supply side of trade.

This calls for a strong industrial base in each member state to produce exportable goods that have a competitive edge.

The variable geometry model is meant to allow Member States time to adjust and prepare themselves for inevitable competition in a liberalised market. The question is whether industries in Member States have had sufficient time to prepare for the new market.

Multiple membership to Regional Economic Communities (RECs) that are working towards creating, or already have, a Customs Union is yet another challenge. Some SADC Member States belong to SACU, which is a functioning Customs Union, while others belong to either the East African Community (EAC) or the Common Market for East and Southern Africa (COME-SA), which are planning their own customs unions.

World Trade Organisation (WTO) rules prevent countries from belonging to more than one Customs Union at the same time. This calls for rationalisation of existing and planned customs unions if Member States are to comply with WTO rules.

Economic integration in SADC is expected to boost intra-regional trade, which stood at 25 percent of all international trade in 2003. The target is to increase trade among Member States to between 35 percent and 60 percent by 2008.

At present, intra-regional trade is concentrated in the SACU countries with far less trade happening among non-SACU members.

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