By Trudi Hartzenberg
Posted 09:41 PM Aug 12, '08
0 CommentsComments on the SADC Free Trade Area to be launched at SADC Summit
Trudi Hartzenberg, tralac Executive Director, comments on the SADC Free Trade Area to be launched at SADC Summit taking place on 17 August 2008
The Southern African Development Community (SADC) will launch a Free Trade Area (FTA) on 17 August 2008, during the SADC Summit, taking place in South Africa 16-17 August.
The establishment of the FTA meets a key objective of the SADC Trade Protocol, and is an important milestone in the linear model of regional integration articulated in the Regional Indicative Strategic Development Plan (RISDP). There is no reference to the additional RISDP milestones; the customs union or common market or monetary union, in the SADC Trade Protocol. The distinction between the Trade Protocol and the RISDP is important. The Trade Protocol is a legally binding instrument, whereas the RISDP is a strategic plan which can be adapted. Yet, at every Summit in recent years member states reaffirm their commitment to regional integration as per the RISDP.
Despite this political commitment to RISDP regional integration, there is growing agreement in the region that the RISDP milestones are unrealistic and indeed the linear model of regional integration which underpins this strategic plan does not address the real challenges of regional integration and sustainable development of the region. These challenges require the development of infrastructure (eg roads, rail), trade facilitation measures (eg customs and other border procedures), elimination of non-tariff barriers, the development of policies to support good business decisions so that economic actors can take advantage of opportunities in their own countries, in the region and in the international economy.
Fundamentally the southern African region faces a complex competitiveness challenge, and it is important to understand the constraints on competitiveness and then identify the appropriate channels through which to address the challenge. Member states did recognise this in the Trade Protocol where an important objective is to ‘’to ensure efficient production within SADC reflecting the current and dynamic comparative advantages of its Members.’’
Transport infrastructure, for example, in the region imposes significant costs on intra-regional and extra-regional trade transactions. Long delays at border posts add to intra-regional trade costs. It’s clear that different initiatives are required to address these challenges. But both constrain competiveness of businesses in the region. It may very well be that challenges such as these are far more important than tariffs in promoting intra-regional trade and integration into the global economy. This means that even with the tariff phase down to establish the SADC FTA, much remains to be done. The SADC Trade Protocol (1996) does also require member states to eliminate non-tariff barriers, and although there are initiatives addressing aspects of these challenges, this proving to be a long and difficult process as a result of a policy, legal and institutional deficit at national and regional levels and other factors.
Another important concern related to the focus on tariff reduction in the establishment of the SADC FTA is that the import tariff represents a very specific policy instrument to different member states. For South Africa the import tariff is an instrument of industrial policy, to be used selectively to protect selected industries (eg clothing and textiles and automotive industry). For many other member states the tariff is an important source of government revenue, and tariff reduction poses challenges for fiscal policy. At this stage there is very little debate about the policy nexus – trade-industrial-fiscal policy – and how to manage the different perspectives in a regional development policy. With enormous asymmetry in levels of development, capacity and policy space this debate and means to address the associated challenges are overdue.
Launch of the SADC FTA requires also focus on other regional economic communities such as the Southern Africa Customs Union (SACU). SACU is wholly contained within SADC, and with South Africa, the largest economy in the region, a member of SACU, the SACU agenda is important. Implementation of the 2002 SACU Agreement is a long process, but that Agreement does contain the potential to provide impetus to the development of a coherent regional integration and development agenda. Unfortunately this potential has not been explored yet. Part 8 of the Agreement requires that member states cooperate in key policy areas. One of these is industrial policy – member states are to develop common policies on industrial development. This process could find synergy with a SADC-level debate on trade-industrial-fiscal policy. What is required for this to happen?
Another very important development at this SADC Summit is the assumption of the Chair of SADC by South Africa. As the largest, most developed economy in the region, this presents an important opportunity at a time when strategic leadership is required. South Africa’s position on the region is seldom articulated beyond a broad commitment to the region and regional integration. But what does this mean? What is South Africa’s position on SACU, on SADC and the broader African integration agenda? A key question is what coordination is there among Departments (Trade and Industry, National Treasury, Foreign Affairs) on these matters?
Of immediate interest of course is what does South Africa aim to achieve during its Chairmanship of SADC?
Tell us what you think?
The Southern African Development Community (SADC) will launch a Free Trade Area (FTA) on 17 August 2008, during the SADC Summit, taking place in South Africa 16-17 August.
The establishment of the FTA meets a key objective of the SADC Trade Protocol, and is an important milestone in the linear model of regional integration articulated in the Regional Indicative Strategic Development Plan (RISDP). There is no reference to the additional RISDP milestones; the customs union or common market or monetary union, in the SADC Trade Protocol. The distinction between the Trade Protocol and the RISDP is important. The Trade Protocol is a legally binding instrument, whereas the RISDP is a strategic plan which can be adapted. Yet, at every Summit in recent years member states reaffirm their commitment to regional integration as per the RISDP.
Despite this political commitment to RISDP regional integration, there is growing agreement in the region that the RISDP milestones are unrealistic and indeed the linear model of regional integration which underpins this strategic plan does not address the real challenges of regional integration and sustainable development of the region. These challenges require the development of infrastructure (eg roads, rail), trade facilitation measures (eg customs and other border procedures), elimination of non-tariff barriers, the development of policies to support good business decisions so that economic actors can take advantage of opportunities in their own countries, in the region and in the international economy.
Fundamentally the southern African region faces a complex competitiveness challenge, and it is important to understand the constraints on competitiveness and then identify the appropriate channels through which to address the challenge. Member states did recognise this in the Trade Protocol where an important objective is to ‘’to ensure efficient production within SADC reflecting the current and dynamic comparative advantages of its Members.’’
Transport infrastructure, for example, in the region imposes significant costs on intra-regional and extra-regional trade transactions. Long delays at border posts add to intra-regional trade costs. It’s clear that different initiatives are required to address these challenges. But both constrain competiveness of businesses in the region. It may very well be that challenges such as these are far more important than tariffs in promoting intra-regional trade and integration into the global economy. This means that even with the tariff phase down to establish the SADC FTA, much remains to be done. The SADC Trade Protocol (1996) does also require member states to eliminate non-tariff barriers, and although there are initiatives addressing aspects of these challenges, this proving to be a long and difficult process as a result of a policy, legal and institutional deficit at national and regional levels and other factors.
Another important concern related to the focus on tariff reduction in the establishment of the SADC FTA is that the import tariff represents a very specific policy instrument to different member states. For South Africa the import tariff is an instrument of industrial policy, to be used selectively to protect selected industries (eg clothing and textiles and automotive industry). For many other member states the tariff is an important source of government revenue, and tariff reduction poses challenges for fiscal policy. At this stage there is very little debate about the policy nexus – trade-industrial-fiscal policy – and how to manage the different perspectives in a regional development policy. With enormous asymmetry in levels of development, capacity and policy space this debate and means to address the associated challenges are overdue.
Launch of the SADC FTA requires also focus on other regional economic communities such as the Southern Africa Customs Union (SACU). SACU is wholly contained within SADC, and with South Africa, the largest economy in the region, a member of SACU, the SACU agenda is important. Implementation of the 2002 SACU Agreement is a long process, but that Agreement does contain the potential to provide impetus to the development of a coherent regional integration and development agenda. Unfortunately this potential has not been explored yet. Part 8 of the Agreement requires that member states cooperate in key policy areas. One of these is industrial policy – member states are to develop common policies on industrial development. This process could find synergy with a SADC-level debate on trade-industrial-fiscal policy. What is required for this to happen?
Another very important development at this SADC Summit is the assumption of the Chair of SADC by South Africa. As the largest, most developed economy in the region, this presents an important opportunity at a time when strategic leadership is required. South Africa’s position on the region is seldom articulated beyond a broad commitment to the region and regional integration. But what does this mean? What is South Africa’s position on SACU, on SADC and the broader African integration agenda? A key question is what coordination is there among Departments (Trade and Industry, National Treasury, Foreign Affairs) on these matters?
Of immediate interest of course is what does South Africa aim to achieve during its Chairmanship of SADC?
Tell us what you think?
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