Economic Milestones Achievable

Munetsi Madakufamba (SADC Today)—With the year 2008 fast approaching, the SADC region is preparing for a new way of doing business.

The SADC Free Trade Area (FTA) is to be launched next year in what would be a momentous development for the 240 million SADC citizens, the dawn of a new era of regional cooperation and socio-economic development.

Within the framework of the FTA, the SADC region hopes to remove barriers on all intra-regional trade. The target is to ensure that 85 percent of most intraregional trade is at zero tariffs by 2008.

Member States remain confident that they can move a gear up to remove outstanding impediments for the region to achieve set targets.

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

The Summit of SADC Heads of State and Government in Lesotho in August 2006 raised concern about the pace at which SADC’s economic integration programme was being implemented.

Consequently, a Ministerial Task Force was appointed to come up with a progress report that was tabled before an Extraordinary Summit of Heads of State and Government in Midrand, South Africa, in October 2006.

The October Summit reaffirmed the region’s commitment to achieving the trade milestones, noting several challenges that need to be overcome.

“Summit noted progress made in the attainment of an FTA 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, thus there is need to diversify national economies and increase intra-regional trade and growth. The 2007 Summit in Lusaka is expected to review progress and give fresh impetus for Member States to complete all outstanding tasks for the FTA to be launched as planned.

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 difficult 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 (COMESA), which are planning their own customs unions.

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