Implementation of SADC Trade Protocol on track

SANF 08 No 52
The implementation of the SADC Trade Protocol has been a long and painstaking regional process that will continue beyond the formal launch of the Free Trade Area at the SADC Summit in mid-August.

Twelve SADC Member States have signed up to the protocol following a ratification process and are therefore part of the Free Trade Area (FTA), with the exception of Angola and the Democratic Republic of Congo who have asked for more time before joining the FTA.

The official launch of the FTA is expected during the 28th Southern African Development Community (SADC) Summit in South Africa on 16-17 August, signalling the creation of one of the largest free trade zones on the African continent with more than 250 million people.

This historic event that will usher in a new era of economic integration and rapid industrialisation of the sub-region through expanded trading opportunities.

Premised on the gradual removal of barriers to trade, the FTA is a culmination of the eight-year process that started with the signing of the SADC Trade Protocol in 1996, which came into force in 2000.

Thus the creation of an FTA this month signifies the achievement of a major milestone towards the quest for deeper economic integration in SADC.

The main instrument of trade liberalization as provided for in the protocol has been the elimination of customs tariffs and non-tariff barriers on the bulk of intra-SADC trade.

Once the Trade Protocol came into force in 2000, the first major step was for Member States to undertake negotiations for tariff phase-down which entails gradual removal of customs duties.

The negotiating process was conducted through the “request-offer approach” under the auspices of the Trade Negotiating Forum, which met regularly as provided for in the Trade Protocol.

Critical to the negotiating process was the principle of asymmetry, which was born out of the realization that, among other issues, SADC Member States were at varying levels of economic development. For purposes of implementation of the Trade Protocol, Member States were put into the following categories:

• Developed Countries (mainly South Africa but de facto, Southern African Customs Union – SACU);
• Developing Countries (Mauritius and Zimbabwe) and;
• Least Developed Countries — LDCs (being the remainder i.e. Angola, DRC, Madagascar, Malawi, Mozambique, Tanzania and Zambia).

Based on these clusters, SADC pursued a tariff phase-down programme at variable scales of speed in which the developed countries cluster was expected to generally front-load their tariff reductions to achieve the “substantially all trade” threshold by about year-five of implementation, that is by 2005.

The developing countries cluster was expected to generally mid-load their tariff reductions to achieve the same threshold by about year seven or eight of implementation, that is by 2007-8 while the last category, the LDCs, was expected to back-load their tariff reductions to beyond the 8-year threshold but not to exceed 12 years.

However, for category A and B products (see box), tariffs were to reach the zero percent level by 2008 in line with the World Trade Organization requirement which stipulates that substantially all trade should be free in an FTA.

The “substantially all trade” threshold for SADC is made up of 85 percent of all products, constituting category A and B products but excluding category C products.

A Mid-Term Review commissioned by SADC in 2004 revealed that Member States were implementing the Trade Protocol but progress was generally slow. One of the key recommendations to ensure compliance was that Member States were to effect tariff phase-downs on the 1st of January every year.

An audit done by the Southern African Trade Hub for the SADC Secretariat indicated that as of February 2008, Mauritius, Mozambique, SACU countries, United Republic of Tanzania, Zambia and Zimbabwe had gazetted their tariff offers or issued notices effecting the 2008 tariff phase-down. Malawi was expected to do so before the launch in August 2008 while Madagascar only acceded to the Protocol in 2006 and is allowed more time to catch up.

In addition to removal of tariffs, Member States have also agreed to several other trade facilitation measures such as the elimination of non-tariff barriers to trade. Removal of non-tariff barriers involves harmonization of customs rules and procedures, the harmonization of sanitary and phyto-sanitary measures as well as adoption and implementation of common rules of origin.

Member States are currently developing a model Customs Act that will facilitate the harmonization of customs regulations and procedures. Work on the SADC Customs Bond Guarantee Scheme has been completed while a decision is expected soon on the Single Customs Document and the Regional Goods Transit System, both of which have already been piloted.

Given that not all products qualify for duty-free under an FTA, a considerable amount of time was spent on negotiating the rules of origin, which were eventually agreed as being product specific. A SADC Certificate of Origin, which authenticates goods that originate from the region, is already in use in Member States.

The rules of origin are to ensure that goods not originating from the region do not enjoy tariff preference. They are also to ensure that the region is not flooded with imports from third countries.

While considerable work has gone into negotiating and agreeing regional instruments of the FTA, the focus will now shift to the national level where compliance matters most.

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