JB Cronjé, tralac Researcher, discusses the Southern African Development Community’s trade in services negotiations

In August 2012, the Members of the Southern African Development Community (SADC) approved the SADC Protocol on Trade in Services at its 32nd SADC Summit of Heads of State and Government held in Maputo, Mozambique. The Protocol was signed by the SADC Council of Ministers of Trade in July 2009, but was only put before the SADC Summit for approval in August 2012. Three Member States, Angola, Madagascar and Zimbabwe did not sign. A further three Member States, South Africa, Botswana and Namibia did not sign the Protocol apparently due to a lack of Presidential representation at the time of signature but all three have indicated that they will sign the Protocol. South Africa has ratified the Protocol in September 2013 without signing the Protocol. The South African government was of the opinion that ratification is not limited only to Member States that have signed the Protocol. The Protocol follows the structure of the World Trade Organization’s General Agreement on Trade in Services (GATS) very closely. The main objectives of the Protocol are to:

• progressively liberalise intra-regional trade in services on the basis of equity, balance and mutual benefit with the objective of achieving the elimination of substantially all discrimination between the State Parties and a liberal trading framework for trade in services with the view of creating a single market for trade in services;

• promote sustainable economic growth and development;

• enhance economic development, diversification, local, regional and foreign investment in services economies of the Region;

• ensure consistency between liberalisation of trade in services and the various SADC Protocols in specific services sectors;

• pursue services liberalisation, while preserving the right to regulate and to introduce new regulations; and

• enhance the capacity and competitiveness of the services sectors of the State Parties

The Protocol creates a legal framework for the progressive liberalisation of trade in services within the SADC region and serves as the basis for the negotiation of market access and national treatment commitments in specific services sectors. According to Article 16 of the Protocol, Member States must enter into successive rounds of liberalisation within three years of completion of the previous round. Negotiated outcomes must be in conformity with the requirements of GATS Article V, particularly sectoral coverage and the absence or elimination of substantially all discriminatory measures.

The Negotiating and Scheduling Guidelines for the First Round of SADC Trade and Services Negotiations were approved by the Council of Ministers of Trade in February 2011. The first round of negotiations commenced in April 2012 and is on-going.  These negotiations should be concluded within three years. The first round of negotiations focuses on the liberalisation of six priority sectors (communication, construction, energy-related, financial, tourism and transport services). Other services sectors as well as any Most Favoured Nation (MFN) exemptions will be negotiated in future rounds. The starting point for the negotiation of specific commitments is Members’ existing GATS commitments, including the horizontal section. The negotiations take place on a request and offer basis. At the conclusion of the negotiations each Member State must offer some improvement to its existing GATS commitments, for each of the six priority sectors.

The table below shows that all SADC Members have undertaken GATS commitments in at least one priority sector. Seychelles is in the process of negotiating accession to the WTO. According to the Negotiating Guidelines, the six priority sectors are deemed to cover the sub-sectors included in the WTO Sectoral Classification List (MTN.GNS/W/120).

Table: GATS Commitments by SADC Member and by sector

Source: WTO

This services sectoral classification dates back to the early 1990s and does not take into account the many technological and structural changes many sectors have undergo in recent decades. The development of the internet and mobile telephony has created a range of internationally tradable products that were unknown only two decades ago. Many countries have also started to gradually expose previous monopoly domains such as telecommunication to competition. Today, global value chains are reshaping international trade. At the core of this development is the intersection of trade, investment and services. Trade in parts and components is interlinked to international movement of investment in production facilities and the demand for services such as telecommunication, internet, courier, logistics and finance to coordinate this fragmented production.

As a result, WTO Members have been discussing changes in the classification of a number of sectors including postal and courier, maritime transport, logistics and energy.  In particular, energy services are not covered as a separate comprehensive entry in the WTO Sectoral Classification List. During the WTO’s Uruguay Round of negotiations Members undertook commitments in three energy-related services sub-sectors, namely ‘transportation of pipeline fuel’, ‘services incidental to energy distribution’ and ‘services incidental to mining’. Lesotho, Malawi, South Africa and Zambia each made commitments in the sub-sector ‘services incidental to mining’. Given the importance of this sector in advancing economic growth and development, some WTO Members have called for an improved classification of energy services that includes all services involved in the energy supply chain, inlcuding exploration, extraction, production, generation, transportation, transmission, distribution, marketing and consumption.  Unfortunately, the Negotiating and Scheduling Guidelines seem to limit negotiations on energy services to the three abovementioned sub-sectors. Such a narrow approach will undermine the Protocol’s objectives of enhancing capacity and competitiveness and achieving consistency between the liberalisation of energy services and the SADC Protocol on Energy.

Apart from concerns regarding the scope of the negotiations, Article 16(4) of the Protocol creates an important prohibition which states “during the negotiations, State Parties shall not introduce new and more discriminatory barriers to trade in services”. Since the commencement of negotiations South Africa has, for example, adopted or is in the process of adopting legislation that would limit foreign ownership in the private security industry; introduce labour market tests; and, more recently, Draft Immigration Regulations (see Government Gazette No. 373375 of 14 February 2014) that would prohibit foreigners establishing a business or investing in an existing business in South Africa from employing more than 40 per cent foreigners in the operations of their businesses.

It could take years before the SADC negotiations are concluded. The introduction of new or more discriminatory measures during the negotiation process undermines the objective of achieving a liberal trading framework for trade in services and the creation of a single market for trade in services in the SADC Region.

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