SADC Trade in Services negotiations and the development of sector specific annexes
JB Cronjé, tralac Researcher, discusses the ongoing trade in services negotiations in the Southern African Development Community (SADC)
The SADC Protocol on Trade in Services states in its preamble the desire to create an integrated regional market for services in order to achieve “sustainable economic growth and development and to meet the challenges of globalisation”. It states further that “an integrated market for services, complemented by cooperative mechanisms, will create new opportunities for a dynamic business sector, and strengthen the Region’s services capacity, its efficiency, and competiveness and expand the Region’s services exports”. In order to achieve this, the Member States acknowledge the need for “reform (regulatory, institutional and administrative) and liberalisation in the services sectors of the region”. In fact, the establishment of a favourable business environment throughout the region in order to achieve the objectives of the Member States is expressly provided for.
Consequently, the Member States identified six priority sectors for liberalisation, namely communication, construction, energy-related, financial, tourism and transport services. Put differently, the identification and removal of measures affecting trade in any of the priority sectors that restrict market access and discriminates against services and service suppliers of another Member State. The negotiations among the Member States (excluding Angola, Namibia and Madagascar) are ongoing. Indications are that progress has been made on the communication, financial, tourism and transport services sectors. One should immediately mention that the way in which the negotiations is taking place as oppose to how it was envisaged in terms of the objectives of the Protocol is worlds apart. The level of ambition in the negotiations is hampered by the principle of asymmetry “reflecting individual State Parties’ disadvantages by reason of size, structure, vulnerability and level of development of their economy” (Article 16) resulting in limited commitments being offered. This reality is in contrast with the objective of the Members for establishing an integrated services market that makes provision for differentiated implementation time-frames among different Members. Negotiations in the two other sectors will apparently commence during the second half this year.
However, it is the Member States’ commitment to regulatory, administrative and institutional reforms that is receiving very little attention at this stage of the negotiations. It is arguably due to a lack of attention to these matters that the negotiations are progressing at lacklustre speed and disappointing levels of ambition. For example, an integrated transport market requires the Members to pay attention to the measures that inhibit the efficiency of the various services, in particular logistics services, that are necessary for the development and optimal functioning of value chains; the adoption and implementation of transport facilitation measures that would increase competitiveness; and the development of integrated transport infrastructure that will reduce the cost of cross-border trade. This requires a comprehensive approach to the services negotiations which considers the various linkages between trade in goods, trade facilitation and transport services. Various SADC Protocols deal with these related matters and complement each other.
For example, the SADC Trade Protocol guarantees freedom of transit through the territory of another Member along the most convenient transport routes in Annex IV. The annex focuses also on trade facilitation matters. There are also two other annexes relevant to land transport, namely Annex III on formalities connected with importation and exportation and Annex II on customs cooperation and administration of trade regulation.
There are also other issues affecting cross-border transport such as the cost of complying with different regulatory regimes associated with non-physical infrastructure including compliance with regulation on road users (including vehicles and drivers). Transport service providers also face costs relating to the physical infrastructure. Improvements in physical infrastructure will reduce congestion, transport times and vehicle operating costs for transport providers. This also creates benefits for companies that are using transport services. Cheaper and more reliable transport services will allow companies to reorganise and reduce their inventories and to consolidate production and distribution facilities.
These and other transport facilitation and infrastructure development, maintenance and financing matters are dealt with under the SADC Protocol on Transport, Communications and Meteorology (TCM). The Protocol on Trade in Services creates a link to the TCM due to the direct effect and impact it has on regional trade. The reciprocal effect transport has on trade allows those trade officials responsible for supervising and monitoring the implementation of the Protocol on Trade in Services to also monitor matters relating to the integration of services markets including those trade-related matters covered under the TCM (Article 24). Coincidently, the implementation and monitoring mechanisms of the TCM are also one of its major weaknesses. This imposes a limit to what both the TCM and Protocol on Trade in Services can achieve in terms of the establishment of a reliable, efficient and cost-effective transport market in SADC. In fact, the TCM acknowledges its shortcomings and provides for the conclusion of an agreement among Member States for the phased liberalisation of market access including cabotage (Article 5.3); harmonisation and standardisation of driving times, breaks and rest periods for drivers; and other regulatory measures to ensure competition and equitable cross-border transport opportunities (Article 5.4). Article 26 of the Protocol on Trade in Services provides for the development of annexes. This creates an opportunity in the current negotiations for the Member States to consider the development of an annex to the Protocol on Trade in Services that would ensure full market access liberalisation including cabotage and the adoption of pro-competitive measures that could facilitate the development and integration of transport services among unequal partners in the region.