Topics publications: African regional integration
Trade Reports
A Perspective on Common Industrial Policies for the Member States of the Southern African Customs Union
The Southern African Customs Union (SACU) is a customs union, as defined by having regional free trade behind a common external tariff (CET). This creates a common customs area covering the markets of Botswana, Lesotho, Namibia, South Africa and Swaziland (BLNS).
Contrary to the conventional model of a customs union, SACU is also an excise union. Furthermore, with the exception of Botswana, the member states are also organised in the Common Monetary Area (CMA) which effectively integrates Lesotho, Namibia and Swaziland into the South African money and capital market. In the model of linear regional integration, SACU would represent a good example of variable geometry.
This paper addresses the use of industrial policy as a means of encouraging the economic development of SACU member states, the smaller and economically lesser developed countries in particular. The topic is not only relevant because SACU is a customs union of developing but unequal economies but also because the SACU Agreement of 2002 specifically requires the Member States to develop common industrial policies. This makes a close consideration of the rationale and nature of SACU industrial policy a policy and legal imperative.
The way in which SACU currently operates and the challenges the customs union face in terms of designing and implementing an appropriate industrial policy are intimately linked to the unique nature of SACU and of its development since its establishment early in the twentieth century.
To explain this uniqueness the paper commences with a brief overview of the salient developments in the history of SACU with an emphasis on facets of industrial policy followed, in consecutive sections, by a discussion of industrial policy and development strategy in the common customs area.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
A comprehensive regional industrial policy for SADC
At present, ongoing Southern African Development Community (SADC) initiatives are underway to construct a comprehensive Industrial Policy Framework for the region. The purpose of this paper is to highlight certain pertinent issues that ought to be brought into focus in the design and construction of this policy, and introduces a timeous reflection of the challenges and potential for more regionally integrated industrialisation strategies.
The paper begins by summarising some of the more recent approaches to the issue highlighted by the United Nations Industrial Development Organisation (UNIDO) and the United Nations Conference on Trade and Development Report (2011). This report emphasises the dramatically changed world environment of the 21st century which, in turn, has induced a shift in thinking on how to implement viable and sustainable industrialisation strategies and policies.
Secondly, the paper reflects on some of the newer theoretical approaches to regional industrialisation in light of these changes and their appropriateness to the issue in question. The paper concludes with a vision for a more integrated approach and a suggested institutional role that SADC and its relevant organs can play in this transformation strategy.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Another chapter in the SADC Tribunal saga: South African Court confirms the Tribunal’s Costs Order
During the final week of September 2012, the South African Supreme Court of Appeal handed down a judgment giving effect to aspects of an earlier ruling by the Southern African Development Community (SADC) Tribunal against Zimbabwe for violating certain SADC Treaty obligations. The obligations in question concerned the protection of basic human and democratic rights.
This matter came before the South African Supreme Court of Appeal because Zimbabwe had appealed against an earlier judgment against it by another local court. The latter had granted a writ of execution (requested by private applicants) authorising the sheriff for the district of Cape Town to attach immovable properties belonging to Zimbabwe and to sell them in execution of the Tribunal’s costs order against the government of Zimbabwe. The Zimbabwean appeal has now failed and unless it can convince the South African Constitutional Court to rule in its favour on the basis of a constitutional complaint, it will have exhausted all remedies available from the South African judiciary.
This adds another chapter to the saga around the SADC Tribunal in the aftermath of its rulings against Zimbabwe. The judgment explains a number of fundamental legal issues which are vital to the future of SADC.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
What role for national planning commissions in the promotion of deeper regional integration in SADC?
The Southern African Development Community (SADC) has set itself very ambitious regional integration goals. There is now general agreement that more realistic goals and a better understanding of the integration process, the legal obligations and the outcomes are required. Even with scaled-downed expectations the efforts of the members and SADC need to be improved quite dramatically in order to achieve the economic and political objectives of the organisation. And there should be a concerted effort to align the various national development plans in the pursuit of regional goals for the benefit of all.
What is the SADC formula for meeting its own goals and for monitoring the performance of member states? SADC lacks a clear approach or principle when it comes to the harmonisation of national efforts. The Secretariat cannot exercise the powers necessary to monitor and direct national activities. There is no mechanism to ensure compliance or remedy failures. Part of the solution lies in improving and strengthening SADC’s collective voice, if the necessary political will can be mustered. In the meantime the various domestic agencies responsible for national development plans should study the regional dimensions of their own schemes more thoroughly in order to align national efforts across borders and contribute to shared benefits.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Regional integration in SADC: retreating or forging ahead?
Regional economic integration remains a viable development strategy for Africa, a continent characterised by small economies and markets. Integration of these markets can facilitate efficiencies in production, investment and trade, thus enhancing development outcomes. The Southern African Development Community (SADC) has adopted a development integration approach which seeks to address production, infrastructure and efficiency barriers to growth and development. In the area of trade and economic liberalisation, the Regional Indicative Strategic Development Plan (RISDP) articulates the roadmap for SADC integration through the establishment of a free trade area (FTA) by 2008, a customs union in 2010, a common market in 2015, a monetary union in 2016, and an economic union with a single currency in 2018.
2012 marks two important milestones in SADC – the completion of member states' tariff phase-down schedules to reach a status of an effective free trade area and the current review of the RISDP. This paper provides a status of trade integration in SADC, highlighting achievements, challenges and constraints. Understanding constraints facing this process can provide insights as to whether the region should forge ahead with its approach to economic integration or retreat and evaluate the process with a view to define what could be its immediate priorities. The current review of the RISDP should provide an opportunity to appraise and inform the process moving forward, particularly the region's advancement towards its envisaged integration milestones.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
tralac Policy Brief: Priorities for SADC’s regional economic integration agenda
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).
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Books
The Tripartite Free Trade Area – towards a new African integration paradigm?
This is tralac’s third book focusing on the Tripartite Free Trade Area (T-FTA). Following an economic assessment of the impact of T-FTA, with specific emphasis on agriculture and agri-business development opportunities in this region, as well as non-tariff barriers that limit intraregional trade and investment in the first book, the second book presented an analysis of the draft T-FTA Agreement and annexes that had been developed by technical experts prior to the launch of the negotiations. What emerges from the negotiations, which were officially launched at the second Tripartite Summit in June 2011, and which got underway early in 2012, may well be markedly different from these draft instruments.
This third book aims to encourage enquiry and new thinking about the African paradigm of regional integration, specifically about the nature, design and architecture of a T-FTA to address the region’s fundamental development challenges.
The T-FTA is anchored on three pillars, namely market integration, infrastructure development, and industrialisation. The explicit inclusion of the second and third pillars in addition to the traditional market integration pillar in the ambit of a free trade area provides the potential for the development of a deeper integration agenda that addresses not only impediments at the borders but more fundamentally the behind-the-border constraints on industrial development and competitiveness.
Commitment to establish a T-FTA that goes beyond the traditional trade-in-goods agenda to address the region’s infrastructure deficit and to enhance its industrial capacity requires new thinking about traditional market integration issues such as tariff liberalisation and rules of origin, which are among the agenda items of the first phase of the negotiations. The T-FTA can be a new generation African integration arrangement; these negotiations will be a test of how serious member states are about a developmental approach to regional integration.
This book was launched at the 2012 tralac Annual Conference, held on 19-20 April in Cape Town, South Africa.
© 2012 Trade Law Centre for Southern Africa and Swedish Embassy, Nairobi
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac) and the Swedish Embassy, Nairobi. The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these publications for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Books
Monitoring Regional Integration in Southern Africa Yearbook 2011
A number of important trade-related developments took place in southern Africa in 2011. Developments on the rest of the African continent as well as in the global economy had important implications for the southern African region.
The imperative for rules-based governance, for predictability, transparency and accountability, is as much a national concern as it is a regional development and governance issue. The suspension of the Southern African Development Community (SADC) Tribunal in September 2010 took place in a legally doubtful manner. Since that time all parties enjoying standing in this forum have been denied those important legal remedies which are vital for certainty and predictability in a rules-based system. The detrimental effects go way beyond trade issues. The right of judicial review of disciplinary proceedings is affected. This is a retrogressive step with major consequences for how we are governed in southern Africa.
A third Southern African Customs Union (SACU) Summit of Heads of State and Government took place in March 2011 in Pretoria, South Africa. Discussion focused on the customs union’s challenges, including the revenue dependence of some of the smaller member states. In Swaziland matters are more complicated because of that state’s dependence on contributions from the SACU revenue pool to fund public expenditure. A decline in payments from the pool caused a crisis for the government and fuelled widespread unrest. These are to some extent sui generis SACU issues but they clearly demonstrate the linkages between development, national stability and regional governance. The region requires strong leadership on many fronts.
This summit identified five priorities for the SACU work programme. Regional industrial development to support regional economic growth and equitable and sustainable development is the overarching objective of the SACU work programme. The aim is to develop a strategy to address some of the fundamental industrial development asymmetries among the member states. The second area for the work programme is a revision of the revenue-sharing formula. The enormous development asymmetry in SACU finds expression in significant dependence on international trade taxes for fiscal revenue among the smaller member states, while South Africa views the import tariff as an instrument of industrial development, to be used selectively to protect specific industries. The revenue-sharing arrangement therefore continues to bedevil SACU deliberations on a deeper integration again. Trade facilitation was identified as the third priority work area. There is cause for concern, as member states appear to be increasing, rather than decreasing, border measures and controls. This runs counter to the very nature of a customs union. The fourth focal point for the work programme is the development of SACU institutions. As at the end of 2011, there is still no SACU Tariff Board or Tribunal. It does seem as if member states are not keen to develop the institutional infrastructure for effective management of this aspect of the customs union. Strong leadership, especially from South Africa, remains a complicated challenge. The final point of focus is the development of a common negotiating mechanism for negotiations with third parties.
Important focus in SADC was on the establishment of the Free Trade Area (FTA). The SADC FTA was launched in August 2008 with the aim of full liberalisation by all member states, except Mozambique, by 2012. Mozambique had negotiated a longer time frame until 2015. During 2011, SADC considered applications from several member states for derogations from their negotiated tariff phase-downs. An application from Zimbabwe to suspend its tariff phase-down for category ‘C’ products until 2012 was approved. Tanzania applied for permission to reintroduce duties on sugar and paper imports. It was agreed that a study to investigate the impact of the derogations should be commissioned to assess what the impact of the derogations would be on intra-SADC trade. While important, there are more fundamental concerns regarding the very presence of provision for derogations in a free trade agreement. Such matters are far better addressed via the safeguards provided for in the SADC Trade Protocol. Safeguards and trade remedies cannot, however, be introduced without proper prior investigations along the applicable General Agreement on Tariffs and Trade (GATT) rules. That reminds us of deep-seated problems facing regional integration in this part of the world: the incomplete and unconsolidated nature of legal instruments and the absence of proper monitoring mechanisms.
There was very little discussion of the proposed SADC customs union, which according to the Regional Indicative Strategic Development Plan (RISDP), should have been established in 2010. A review of the RISDP was completed late in 2011 by the SADC Secretariat for the period 2005-2010. While there is acknowledgement of achievements in a range of areas such as infrastructure development, the holding of democratic elections in several countries and customs cooperation, there is still strict adherence to the linear model of regional integration with unrealistic deadlines. Recognising that the RISDP is a strategic plan and not a legally binding instrument is important; review and adaptation are to be expected as circumstances change. Unfortunately this did not happen, with this review.
The second COMESA-EAC-SADC Tripartite Summit, at which the formal Tripartite FTA negotiations were launched, was held on 12 June 2011 in Johannesburg, South Africa. The T-FTA is to be anchored on three pillars: market integration, infrastructure development, and industrial development. The Roadmap for Establishing the T-FTA and the Negotiating Principles, Processes and Institutional Framework were endorsed by the Summit. The first phase of negotiations will cover a trade-in-goods agenda, tariff liberalisation, rules of origin, customs cooperation and customs-related matters, non-tariff barriers, sanitary and phytosanitary measures, technical barriers to trade, and dispute settlement. It has also been agreed that the movement of business persons will be negotiated as a separate track of negotiations alongside the first phase of negotiations. The second phase will cover trade in services and trade-related issues, including intellectual property rights and competition policy. A time frame of 24-36 months has been set for the completion of the first-phase negotiations. There is no specific time frame yet for the second-phase of negotiations. The negotiations will be conducted in a Tripartite Trade Negotiations Forum (TTNF) which held its first meeting in December 2011 in Nairobi, Kenya.
2011 also saw the Economic Partnership Agreement (EPA) negotiations between the African, Caribbean and Pacific Group of States (ACP) and the EU back on the agenda, with the EU setting a deadline for the completion of the negotiations. The 18 ACP countries that have yet to conclude an EPA have until 1 January 2014 to do so. Since 1 January 2008 the European Commission (EC) has applied an interim regulation to allow the ACP countries that have initialled an EPA to benefit from continued EU market access, but a new market access regulation announced by the EC means that countries, including Botswana, Lesotho, Mozambique, Namibia, Kenya, Zambia and Tanzania, which have either not signed or not implemented their agreements, will be removed from the market access regulation at the beginning of 2014. For the least developed countries in this group, the fall-back position is Everything but Arms (duty-free, quota-free access to the EU market), but for the developing countries in this group (e.g. Namibia and Botswana) this will mean regression to the Generalised System of Preferences (GSP), much less favourable and comprehensive access than they currently enjoy.
At the multilateral level, the Doha Development Round made no discernible progress during 2011. Despite this, WTO issues remain important for the region. Issues of WTO compatibility feature in SACU as regards, for example, Article 26 on infant industry protection; in SADC as regards the discussion on trade remedy provisions in the Protocol on Trade; and also in the context of the tariff liberalisation negotiations which are just starting for the Tripartite Free Trade Area.
South Africa launched its first National Development Plan (NDP) in November 2011. The NDP sets out the vision of the National Planning Commission for South Africa’s growth and development to 2030. In addition to strong focus on domestic matters such as the reduction of poverty and inequality, industrial development and employment creation, infrastructure development and the development of a capable state, the NDP also sets out a vision for South Africa’s global integration. Two distinct strands of the global integration strategy are African integration and South-South partnerships. Commitment to SACU, SADC and the T-FTA are articulated. As the regional hegemon in southern Africa, South Africa’s policies are important for the region’s integration agenda.
This book was launched at the 2012 tralac Annual Conference, held on 19-20 April in Cape Town, South Africa.
© 2012 Trade Law Centre for Southern Africa and the Konrad-Adenauer-Stiftung
Publication of this book was made possible by the support of the Trade Law Centre for Southern Africa (tralac) and the Konrad Adenauer Foundation. The views expressed by the authors are not necessarily the view of any of these institutions.
Readers are encouraged to quote and reproduce the material contained in these books for educational, non-profit purposes, provided the source is acknowledged. Please contact us to obtain authorisation for reproducing this material.
Trade Briefs
The Regional Indicative Strategic Development Plan: SADC’s trade-led Integration Agenda
The Southern African Development Community (SADC) Secretariat conducted a desk review of the Regional Indicative Strategic Development Plan (RISDP) in 2011. This paper provides a brief review of the findings of this review and places this assessment in a broader regional perspective.
The RISDP was adopted by the Council of Ministers of the SADC in August 2003 as a blueprint for regional integration in SADC. Underpinned by SADC’s vision of a common future within a regional community, as well as its mission to promote sustainable and equitable economic growth and socioeconomic development through, among other things, deeper cooperation and integration, the RISDP sets the priorities, policies, and strategies for achieving the community’s long-term goal – the eradication of poverty in the region. The ultimate objective of the RISDP is therefore “to deepen the integration agenda of SADC with a view to accelerating poverty eradication and the attainment of other economic and non-economic development goals”.
The Desk Assessment revealed that remarkable progress has been made since the effective implementation of the RISDP began in 2005, demonstrating the continued need for such a strategic plan. However, limited resources and capacity constraints have hampered the ability of the SADC institutions and member states to effectively implement the RISDP programmes and deliver on all the targets and milestones set for the period.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Monetary Union: the Experience of the Euro and the Lessons to be learned for the African (SADC) Monetary Union
In June 2004, Professor Colin McCarthy presented a paper at a conference, entitled On the euro outside the euro-zone: the South African perspective. The paper addressed the lessons that southern Africa could learn from European Union (EU) monetary integration and specifically whether the region can take their cue from the euro. The backdrop to the paper was the apparent success at the time of EU monetary integration, on the one hand, and on the other, the declared intention of the African Union (AU) and other regional integration arrangements such as the Southern African Development Community (SADC) to evolve into monetary union in the final stages of linear regional integration. In the latter regard the eurozone was widely considered to be a role model of monetary integration and an exercise that could and should be replicated in Africa.
The sceptical views expressed in the paper were not based on inherent weaknesses of the euro as regional currency. The euro was accepted to be a stellar phenomenon in European integration. The argument was that conditions in Southern Africa and Africa as a continent did not meet the requisite conditions for successful monetary integration such as macroeconomic convergence, which was a fundamental building block of the eurozone, and furthermore, that in regions of disparate economies exposed to diverse external shocks a loss of policy space in exchange and interest rate determination would be inappropriate.
Recent developments in the eurozone, however, have revealed that the euro construct has fundamental weaknesses which strengthen the argument that monetary union is a step in the process of regional integration that calls for extreme caution. Hence, this paper extends the argument in support of caution in deciding on monetary union by emphasising certain conditions that the euro crisis has revealed as crucial for monetary union to work. The role model, which started out with acclaim, has in its operation exposed certain structural weaknesses in design. These weaknesses and the conditions for successful union that they imply add more stumbling blocks in the way of achieving monetary union in an African setting.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.