The SADC Trade Related Facility: Implementation Issues

The SADC Trade Related Facility: Implementation Issues
Photo credit: SADC | Nermark

29 Jun 2015

The Trade Related Facility (TRF) programme is established through a Contribution Agreement between the European Union (EU) and the Southern African Development Community (SADC), which was signed in July 2014.

The major aim of the TRF is to strengthen the process of regional integration in SADC, enhance trade with the EU and strengthen the region’s trade competitiveness globally.

Funded under the 10th EDF, the TRF consists of two financing windows:

  • the STP Window which seeks to ensure a higher level of compliance and implementation of commitments undertaken by SADC Member States under the Protocol on Trade; and

  • the EPA Window which facilitates effective implementation and monitoring of the SADC-EU EPA with a view to enhance its potential benefits, particularly in terms of improved market access.

Indicative nominal allocations have been determined for eligible SADC Member States as follows:

SADC TRF allocations

To benefit from the STP Window, a Member State must, among other criteria, have signed and ratified the SADC Protocol on Trade, at the time the programme was formulated, and for the EPA Window, a Member State must have signed the SADC-EU EPA.

The nominal allocations indicated above provide an indication of the maximum funds that a country can access. This may be reallocated following the midterm reviews to be carried out in late 2016. The Steering Committee can also decide on a reallocation of funds between the two windows in case of under-utilisation of one window and over-utilisation of the other window, following the recommendations of the Mid-Term Evaluation referred to above.

New eligible Member States can also be considered for inclusion at the time of the mid-term review of the programme.

Main activities eligible for funding

The STP Window deals with interventions that can enhance a higher level of compliance and implementation of Member States’ commitments under the SADC Protocol on Trade. The main activities identified to achieve this result deal with the removal of non-tariff barriers (NTBs) to trade in goods and services, including:

(i) enhancing customs cooperation;

(ii) technical barriers to trade (TBT);

(iii) sanitary and phyto-sanitary (SPS) measures;

(iv) rules of origin;

(v) trade facilitation;

(vi) industrial development;

(vii) trade promotion and development; and

(viii) trade in services.

The EPA Window is concerned with interventions that can prepare SADC EPA States to effectively implement and monitor the EPA and benefit from it, particularly in terms of improved market access. In addition to supporting activities similar to those carried out under the STP Window, the EPA Window can fund the following additional areas:

(i) trade defence instruments;

(ii) trade related adjustment; and

(iii) competition policy.

Possible TRF interventions to address implementation deficits

TRF Interventions should be focused on addressing implementation challenges and deficits regarding the region’s economic integration initiatives, in the context of the SADC Protocol on Trade and/ or enhancing potential benefits from the SADC-EPA, particularly in terms of improved market access through its effective implementation and monitoring. With regard to the Protocol on Trade (STP), an Action Plan Matrix for the Consolidation of the SADC FTA was adopted by the Committee of Ministers responsible for trade (CMT) in 2010, to address outstanding implementation issues. SADC has also adopted a trade monitoring, reporting and evaluation (MRE) system, with a matrix of indicators for assessing Member States implementation of the STP. This matrix links directly to the commitments agreed to by Member States in the STP. The SADC Secretariat has also recently conducted a baseline assessment of the implementation status of the various commitments made by Member States under the Protocol on Trade.

Such information is therefore useful in the process of identifying possible TRF interventions towards effective implementation of trade commitments. The SADC-EU Economic Partnership Agreement was signed by the EU and SADC EPA Group on the 15 July 2014. As part of the negotiation process, the SADC EPA States have identified medium term assistance needs requirements for the effective implementation of the EPA. These needs have informed the provisions on development cooperation contained in the SADC-EU EPA, and are also useful in the process of identifying possible TRF interventions under the EPA Window.

Enhancing customs cooperation

Part three of the SADC Protocol on Trade relates to customs procedures and the documentation requirements for import and export trade in Member States, resulting into a number of customs-related obligations. These commitments largely relate to the need to implement customs reforms and modernisation programmes based on international best practice. Four pillars are particularly vital in this area – enhancing transparency, predictability, simplification and cooperation on customs documentation and procedures under Annex II and III of the STP in order to reduce the cost of trading across borders.

In 2011, SADC conducted a Customs Audit to assess the status of implementation of the various regional and international customs conventions/instruments in Member States. This Audit highlighted key gaps in implementation and priority areas for intervention, particularly relating to transit, customs legislations, customs procedures and documentation, including computerisation and IT connectivity issues. Both the Customs Audit and the existing NTB mechanism indicate that most non-tariff barriers being reported on the on-line system fall largely under the lengthy and costly customs processes. This reflects poor implementation of the provisions of the STP and its Annexes as well as international instruments of the World Customs Organisation (WCO), particularly the revised Kyoto Convention.

Trade facilitation

Investing in trade facilitation provides a path for deepening regional integration. Under Article 5 of Annex III, Member States have undertaken to initiate trade facilitation programmes, and in particular, to ensure adequate coordination between trade and transport facilitation within SADC. A One-Stop Border (OSBP) model and the SADC Coordinated Border Management (CBM) Guidelines have been adopted. The SADC Regional Infrastructure Development Master Plan (RIDMP) adopted in 2012 also emphasizes the need for improved coordination between trade and transport facilitation.

The Ministerial Task Force on Regional Economic Integration decided in 2012 to address a number of “quick wins” related to enhancing border efficiencies and trade facilitation at selected borders as well as the development of a comprehensive trade facilitation programme for the region. The “quick wins” identified are:

  • Harmonization of operating hours at all adjacent borders with different operating hours;

  • A review of border hours of operation in order to cater for high traffic volumes and meet the requirements of trade at other border posts;

  • A proactive implementation of the one-stop border post programmes;

  • Facilitation of a pilot Coordinated Border Management (CBM) Programme in countries ready to adopt and implement this framework; and

  • Addressing impediments to movement of goods across the region covering but not limited to accession to and implementation of the WCO Revised Kyoto Convention, data exchange and interconnectivity amongst customs administrations; implementation of the electronic certificate of origin in SADC; and improvements to infrastructure at major border posts.

The development of a SADC trade facilitation programme is in progress and its implementation at national and regional levels is likely to require effective support interventions. TRF resources can assist SADC Member States to initiate trade facilitation programmes, especially to implement agreed regional frameworks and instruments, such as coordinated border management and one-stop border posts. The simplification and harmonization measures in the WTO Agreement on Trade Facilitation (TFA) adopted in December 2013 can expedite the movement, release and clearance of import, export and transit goods. The TRF is, therefore, an important avenue to facilitate the phased adoption and implementation of the TFA and crowding in the required technical assistance and capacity building.

Rules of Origin

Annex 1 to the SADC Protocol on Trade deals with the rules of origin, which spells out criteria on originating goods eligible for SADC preferential treatment. Rules of origin were one of the most controversial aspects of the STP negotiations and have also become a thorny issue in the implementation of the STP. The restrictive nature of the SADC rules of origin has been well documented in the Mid-Term Review of the STP conducted in 2004, which recommended some reforms. Subsequently some changes have been made but the reform of the SADC rules of origin remains an unfinished business, especially on the rules of origin for garments which requires a double stage transformation to qualify as originating goods as well as on some processed food items such as blended teas, coffee and mixtures of spices.

It is reported that some SADC rules of origin prevent smaller SADC economies to expand their production capacity and enhance their trade performance, particularly the development of efficient regional/global production networks and value chains. This may require Member States to assess impact of some sector/product specific rules on their trade and industrial development. There are also challenges related to implementation of rules of origin at national levels and the need to improve administrative systems through measures such as electronic certification and development of national registers of approved exporters.

Technical barriers to trade

Article 17 of the SADC Protocol on Trade obliges Member States to use relevant international standards as a basis for their standards-related measures. Member States should also accept each others technical regulations as equivalents, even if such regulations differ from their own, provided that they adequately fulfil their regulatory objectives. A TBT Annex to the STP seeks to facilitate the harmonization of standards and technical regulations and their concomitant conformity assessment regimes. However, recent on the implementation of the Annex suggests that technical regulation development and implementation remains ad hoc, fragmented and TBT Annex non-compliant. In particular, national policy, legislative and administrative processes are not adequate to facilitate full implementation of the TBT Annex.

Complementing work being undertaken under the REIS programme, TRF support can be directed at interventions aimed at domestication of the TBT Annex in national regulatory framework and supporting specific activities aimed at improving the standards and quality infrastructure within Member States.

Sanitary and phyto-sanitary measures

Article 16 of the SADC Protocol on Trade commits Member States to base their sanitary and phytosanitary measures on international standards, guidelines and recommendations, and that they work towards mutual recognition of equivalence for specific SPS measures in accordance with WTO SPS Agreement.

The SPS Annex provides that, where appropriate, Member States should work towards harmonization of their respective mandatory requirements taking into account relevant international standards, guidelines or recommendations. Recent assessment on the implementation of the SPS Annex suggests that there are critical gaps in the implementation of a number of provisions on transparency of SPS related laws, regulations and procedures; equivalence and risk assessment and determination of acceptable levels of protection.

Industrial development

Article 4(2) of the SADC Protocol on Trade provides that the process of tariff liberalization should be accompanied by an industrialization strategy to improve the competitiveness of Member States.

A SADC Industrial Upgrading and Modernisation Programme (IUMP), which was adopted by Ministers of Trade and Industry in 2009, has identified nine (9) strategic sectors for upgrading and modernisation interventions, namely: agro-food processing; processing/beneficiation of minerals; chemicals and pharmaceuticals; textiles and garments; leather and leather products; forestry; fisheries, machinery and equipment; and services. SADC Member States were encouraged to use the IUMP as a basis to develop and implement their national upgrading and modernisation programmes.

A SADC Industrial Development Policy Framework was also adopted in 2012, which recognizes that industrial policy and development is primarily a national prerogative and that industrial policies will have to be country/circumstance-specific. In addition, the framework calls for a regional strategy anchored on the promotion of value chains and production network linkages across borders.

In April 2015, an Extra-Ordinary Summit adopted a regional industrialisation strategy and roadmap; which may require policy and regulatory reforms at national levels so as to ensure regional coherence. TRF interventions can support implementation of such adopted regional frameworks and strategies at national levels.

Trade promotion and development

Article 26 of the SADC Protocol on Trade commits SADC Member States to adopt comprehensive trade development measures aimed at promoting trade within the Community. Annex V states that trade development is an important tool in the regional integration process and that trade promotion measures can provide access to a wider regional and international market.

Supporting Member States to adopt comprehensive trade development measures aimed at promoting intra-SADC and international trade, including taking advantage of the improved market access due to trade agreements such as the EPAs, is necessary. This can be done through interventions aimed at promoting the participation of the business community in SADC trade fairs and exhibitions as well as trade missions.

Trade in services

Article 23 of the SADC Protocol on Trade commits SADC Member States to “adopt policies and implement measures in accordance with their obligations in terms of the WTO GATS, with a view to liberalizing their services sector within the Community”. The SADC Protocol on Trade in Services adopted in August 2012, seeks to progressively liberalize intra-regional trade in services. The first round of SADC trade in service negotiations on schedules of commitments covering six (6) priority sectors, namely communication, construction, energyrelated services, financial, tourism, and transport services is on-going but at slow pace. This is largely because capacity constraints across sector/line Ministries.

Looking beyond trade in goods, there are significant barriers to trade and investment in services in the region. This not only hampers trade and competitiveness in key services sectors, but also frustrates the development of value chains in the productive sector of the economy.

TRF interventions can support Member States to implement progressive liberalization of intra-regional trade in services as part of the commitments they have made. This will largely require domestic regulatory reforms. In addition, these interventions will also better prepare Member States to participate effectively in other trade in services negotiations such as those under the comprehensive EPA, Tripartite and Continental FTA negotiations.

Source SADC
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Date 29 Jun 2015
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