Priorities for SADC’s regional economic integration agenda – tralac Policy BriefPosted on Monday, August 20th, 2012 by tralac in News
This Policy Brief starts from the premise that regional economic integration makes sense for Africa; a continent characterised by small markets, small economies and small countries. The creation of an integrated economic space can facilitate efficiencies in production, investment and trade, thus enhancing development outcomes.
The 32nd Summit of Heads of State and Government of the Southern African Development Community (SADC) takes place against the backdrop of two important milestones in SADC’s regional economic integration agenda; namely the completion of Member States’ tariff phase down schedules to reach the status of an effective Free Trade Area (FTA) and the review of the Regional Indicative Strategic Development Plan (RISDP).
Member States have undertaken commitments, in the SADC Treaty, to develop specific instruments, such as Protocols, to foster deeper economic cooperation and integration. The main objective is to address production, infrastructure and efficiency barriers to growth and development. This approach to integration was formalized in 2003 as the RISDP. The roadmap for SADC integration is premised on the establishment of a free trade area (FTA) by 2008; Customs Union in 2010; Common Market in 2015; Monetary Union in 2016; and an Economic Union with single currency in 2018.
The RISDP is not a legally binding instrument and can be periodically reviewed and amended to take into account global, regional and national developments. The current RISDP review provides an opportunity to appraise the progress achieved and the challenges to inform the process moving forward.
This Policy Brief highlights priority issues confronting the region in advancing the regional integration process.
Enhancing effective implementation of the SADC FTA
SADC has made significant progress in reducing tariffs and eliminating quotas. The potential benefits of tariff liberalization are however constrained by restrictive, product-specific rules of origin, especially on clothing and textiles and agro-processed products. More flexible rules of origin, that require lower thresholds of regional value addition, would enable many smaller SADC countries to expand their production capacity and enhance their trade performance. In particular, a single-stage transformation rule for garment production would allow producers to source competitively-priced inputs from global sources and so increase their export competitiveness.
The potential gains from liberalisation are further eroded by the proliferation of non-tariff barriers (NTBs), many of which violate specific provisions in the SADC Trade Protocol. Imposing new NTBs, quantitative import and export restrictions and export duties on intra-SADC trade are prohibited by the Protocol and should only be applied in exceptional circumstances. NTBs affect in particular intra-SADC trade in agricultural products which is closely linked to food security and poverty. Trade facilitation is also hampered by NTBs such as protracted delays at borders, road blocks and other behind-the-border regulatory impediments. The current online NTB reporting system (www.tradebarriers.org) is an important transparency mechanism, but requires a robust rules-based dispensation for the resolution and prevention of NTBs.
Ensuring compliance with commitments undertaken
The potential benefits from these protocols will only be realized with effective compliance with commitments undertaken. There is a clear challenge in SADC with Member States not complying with the commitments undertaken in the SADC Trade Protocol. Compliance requires legal and institutional infrastructure at national and regional levels, and is part of a broader governance imperative. The SADC Tribunal is an important institution provided for in the SADC Treaty to ensure compliance as well as to adjudicate upon disputes. The suspension of the Tribunal in August 2010 has cast a shadow on its legal autonomy, the commitment of Member States to regional integration, as well as broader governance issues. Its reinstatement would signal an important commitment to SADC’s rules-based integration process. In addition, the Secretariat, as the principal executive institution of SADC, should have powers to monitor and enforce Member States’ compliance.
Well-functioning FTA – an essential step to deeper integration
In the RISDP 2010 was set as an indicative timeline for the establishment of the SADC customs union. The linear integration model contained in the RISDP indicates that the implementation of each integration stage prepares the way for the next stage. Therefore effective implementation of the FTA should be SADC’s immediate trade policy priority. According to the principle of variable geometry, it is possible for some countries, when they are ready, to move ahead to further stages of integration. Given the challenge of overlapping membership and diversity in production structures and trade patterns, variable geometry (subject to a clear rules-based dispensation) may be an optimal integration strategy for SADC. The review of the RISDP is an opportunity to consider SADC’s approach to regional integration and specific milestones.
Strengthening infrastructure and services synergies
Infrastructure development is an indispensable pillar for regional integration, competitiveness and development. The Regional Infrastructure Development Master Plan (RIDMP) is a very welcome initiative for the SADC region. While the development of physical infrastructure is essential; effective access to infrastructure services requires regulatory reform, regional harmonization of regulation and a services liberalization agenda. Participation in value chains (regional and global) is an important pathway to industrialization; this requires competitive infrastructure services inputs such as energy, telecommunications, finance and transport. Therefore services liberalization negotiations should be a priority.
Fostering an inclusive and consultative integration process
The RISDP review provides an opportunity for an inclusive debate and consultative process on SADC’s regional integration approach and strategy for deeper integration. Regional economic integration should go beyond an inter-governmental process, to foster broader participation by the private sector and non-state actors, ensuring also that regional economic integration is mainstreamed into national development policies and strategies.