Topics publications: Trade law and regulation
Trade Briefs
tralac Policy Brief: A new tribunal for SADC, but with limited jurisdiction and fewer powers
At the recent SADC Summit for Heads of State and Government, which took place from 17 to 18 August 2013, in Lilongwe, Malawi, an important decision on the future of the SADC Tribunal was taken. The Tribunal was suspended by a Summit decision in 2010, following its rulings against Zimbabwe involving human rights violations. Zimbabwe participated in the Summit deliberations and decision to suspend the Tribunal.
Since that time no disputes about the application or interpretation of any SADC legal instrument could be settled in a binding and final manner. This impasse might now be resolved, albeit in a manner which will strip the Tribunal of many of its powers.
This important development ushers in a de novo negotiating process and will result in a very different dispute settlement dispensation in SADC. The first point to note is that the Summit has called for inter-state negotiations to adopt the text of the new Protocol for the SADC Tribunal. The negotiations will start with preparatory work that the Ministers of Justice/Attorneys-General of the member states will undertake.
These negotiations will hopefully not be a long and drawn-out process since this matter has seen in depth discussions over the last few years. The requirement of ratification before entry into force may however cause extended delays. The Summit decision states that the new Protocol will have to be ratified by two thirds of the Member States to enter into force. Since national constitutional procedures will then enter the picture, it may be quite some time before SADC sees its new Tribunal. Ratification should therefore be prioritized and should remain on the Summit’s agenda.
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: The Review of the SADC RISDP Matters
The increasing prominence and complexity of global value chains and the associated production, investment and trade relations have prompted new approaches to economic governance. Competitiveness hinges critically on the reduction of transaction costs, the integration of new generation issues into a trade strategy and facilitation of cross-border economic linkages. These developments also require new thinking about regional economic integration.
The on-going mid-term review of the SADC Regional Indicative Strategic Development Plan (RISDP) avails the region an opportunity to develop a 21st century integration agenda for Southern Africa. This new thinking should embrace a competitiveness development agenda, which addresses practical constraints faced by the region as it seeks to interact with itself and the rest of the world.
The RISDP review is an opportunity to develop a 21st century integration agenda for southern Africa, which addresses practical issues related to the movement of goods, services, capital and labour as part of a competitiveness strategy. The imperative for rules-based governance of the regional integration process cannot be overemphasized. The suspension of the SADC Tribunal in September 2010 is widely viewed as a retrogressive step with major consequences for regional governance. The outcome of the mid-term review of the RISDP can only be relevant to the region if it deals with these issues as they remain critical in informing the regional integration process going forward.
- Download: tralac Policy Brief final RISDP Review
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged.
Trade Reports
Mozambique investment regime
Mozambique is one of the Southern African Development Community (SADC) members experiencing a steady economic growth in the region. Macroeconomic policy is deemed sound and the Gross Domestic Product (GDP) has been inching upwards. The country has been regularly ameliorating its investment law to fit the current good business environment requirements to attract more investors, especially foreigners. As a World Trade Organisation (WTO) member, a more open trade and business environment has been apportioned to Mozambique by the Trade Policy Review Committee.
While the business environment has improved, the question is whether the country’s economic performance should be attributed to foreign investment flow. Although a lot of investment facilitation has been done in terms of official documents, on the ground the reality might be different, as is the usual policy challenge in many developing countries. Hitherto, the country’s economy is more reliant on prevailing Official Development Aid (ODA) channeled by traditional donors into diverse development projects.
This paper seeks to delve into the investment regime of Mozambique. The main aim is to shed light on its contribution to economic performance in the country. In addition, the paper seeks to trace investment law implementation challenges, on the one hand, for the country, and on the other, for investors.
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
Special economic zones and regional integration in Africa
One of the most prominent features of the global trading landscape in recent years has been the worldwide proliferation of bilateral and regional trade agreements. Africa is no exception to this pattern. Another prominent development in Africa over the last couple of decades has been the increasing use by many countries in the region of various types of special economic zones. These zones are more and more being viewed in the region as important mechanisms for attracting foreign investment, creating jobs, boosting manufacturing production and manufactured exports and contributing to much-needed industrial and economic development.
This paper does not seek to provide an evaluation of the performance of the various special economic zone programmes established in Africa in recent years, but instead seeks to explore the various issues, challenges and opportunities that arise when countries – and especially developing countries – use special economic zones while simultaneously pursuing regional integration initiatives.
This is a particularly important subject in the context of the COMESA-EAC-SADC T-FTA as a large number of the countries involved are actively using special economic zones or are currently in the process of establishing zone programmes.
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 new approach to a regional Free Trade Agreement in east Africa: ‘willing participants’
Earlier tralac research (Sandrey et al., 2011) explored the economic background to the so-called Tripartite Free Trade Agreement (FTA) between the Common Market for Eastern and Southern Africa (Comesa), the East African Community (EAC) and the Southern African Development Community (SADC). This showed that while there were solid economic gains to such an FTA there were also many problems, both from an economic perspective and from the political-economy perspective, and furthermore these problems were interrelated.
Highlighted were the problems of (a) overlapping memberships in the region and (b) the substantial economic losses for some countries resulting from comprehensive trade liberalisation. In addition, and while perhaps not highlighted but certainly in the background, is the regional problem of several failed or semi-failed states that are patently not candidates for regional integration.
This paper takes what can be described as the European Union (EU) approach of starting regional integration slowly from a base of those few countries that appear to be ready for comprehensive liberalisation. This EU approach has been one of starting modestly in 1960 with the original six members and slowly enlarging (and deepening) over the years to the current 27 members and counting.
We believe that such an approach has potential for east Africa and consequently we assess the five countries in the Southern African Customs Union (SACU), the five in the EAC and Egypt as being our foundation members of what we call ‘an FTA of the willing’ with tariff reductions only. The objective of this paper is to use the Global Trade Analysis Project (GTAP) computer model to assess the economic implications of this approach to regional integration.
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
An analysis of the SADC Free Trade Area
The Southern African Development Community (SADC) Free Trade Agreement (FTA) has been entering into force over a period of time. It was originally set to become fully operational by 2008, and it has progressively become more of a reality since around that time.
Trade data for the region and Africa is notoriously unreliable and difficult to obtain, and this has consequently made the current exercise of gleaning trade and tariff data to assess the SADC FTA difficult and frustratingly incomplete. We have used the International Trade Commission (ITC) data for their most recent 2010 trade as the source of data, augmented by World Trade Organisation (WTO) and SACU overall trade figures. Even this data is incomplete and not necessarily consistent with other data. However, we are able to confirm the commonly accepted position that intra-SADC trade is low (and not necessarily increasing) and that South African trade dominates both the overall SADC and intra-SADC trade. In particular, South African exports were 68.1% of intra-SADC exports for 2010, our base year, but a significantly lower 14.8% of intra-SADC imports as Angola, with 31% of regional global exports, only contributes some 5.8% of the intra-SADC exports (and much lower import shares). It makes a big difference if Angola and the DRC are included in SADC trade analysis.
Overall, the FTA is making solid progress; much of that progress has been driven by SACU’s offer of largely tariff-free access to the other SADC member states. The fact that Angola, the DRC and Seychelles have not yet joined the FTA, and the exceptions from the tariff offers of many other members, means that this FTA still has quite some distance to travel.
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
South Africa’s National Development Plan and its implications for regional development
In 2012/2013, the African National Congress and South African Government adopted the National Development Plan (NDP) as its launchpad and blueprint for a future economic and socioeconomic development strategy for the country. Supposedly incorporating both the more recent Department of Trade and Industry’s (DTI) Industrial Policy Action Plan (IPAP) and the Economic Development Ministry’s New Growth Path (NGP) into the new National Planning Framework, the NDP has critical and important implications for the various regional economic communities in southern Africa at present. The purpose of this contribution is to provide an overview and assessment of these possible implications.
The core issues contained in the NDP relate to economic growth and the ability of the growth initiative to broaden socioeconomic transformation in the country by 2030. However, a more detailed reading of the plan reveals the implications it has for the various regional communities with which South Africa is engaged.
These implications are to be found principally in Chapters 3 and 7, dealing respectively with ‘Economy and Employment’ and ‘Positioning South Africa in the World’. It is essential that the various regional economic communities that South Africa has commitments with (principally SACU and SADC) engage with the plan from this early stage rather than neglect it.
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
Deriving value from the Global Value Chain (GVC) concept: an approach to regional industrial policies
The need for sustainable structural transformation in Sub-Saharan Africa (SSA) is universally accepted and has more recently been reinforced by several international organisations, various structures within regional economic communities and analytical and policy-oriented literature. A convincing and effective regional industrial policy is one of the cornerstones of the Southern African Development Community’s (SADC) regional integration strategy with member countries committing themselves to its implementation. However, minimal progress has been forthcoming on this front, as is borne out by the 2011 SADC review on this policy.
Since the turn of the century, as a reaction to the phenomenal shifts in the trends of world trade, new analytical tools have been developed to better understand these shifts and improve the quality of information for policy makers regarding the nature of sustainable industrialisation at a country, regional and international level. The framework of the ‘global value chain’ (GVC) has become pivotal to the analysis of industrial policy today. Even though much of the analysis regarding GVC has hardly been specific to regional economic communities, this brief introduction argues that the framework of such analysis can possibly be extremely ‘valuable’ in instituting industrial policies at a regional level.
This working paper begins by assessing the limited extent of present levels of industrialisation in SADC, and by introducing the relationship between industrialisation and growth, further reinforces arguments made earlier regarding the urgent need for cohesive industrial policies in the region. The second part of the contribution looks at the concept of the GVC and its possible applicability in a regional context such as SADC. The paper concludes by suggesting a ‘needs’ analysis regarding the implications of the concept of GVCs to better inform regional policy analysts as to how to begin implementing a viable regional industrial 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
The New Zealand-China Free Trade Agreement: implications for South Africa
Two-way merchandise trade between New Zealand and China has increased since the Free Trade Agreement (FTA) was implemented, but this is a weak test of the FTA per se as virtually all countries have been increasing their trade with China. However, examining Chinese merchandise trade through to the end of 2012 applies a stronger test and confirms that New Zealand’s imports into China were increasing at a rate significantly above the average. This is especially true for agriculture where dairy in particular is booming. These agricultural imports certainly seem to be aided by tariff preferences, and in some instances these gains are likely to be accentuated as the tariffs fade to zero for New Zealand.
Only a very few import lines are not subject to tariff reductions, and these focus upon the special case of wool where other access concessions apply, upon some agricultural lines where New Zealand is not active anyway, and upon some forestry products. Virtually all Chinese imports into New Zealand were duty free or rapidly heading that way, but there is little evidence that this has led to a surge in imports that some predicted.
Examining South Africa’s bilateral trade with China we find that (a) a large percentage of the imports into China are already duty-free mineral-related and natural resource-products, and (b) that while there appears to be some potential gains from agricultural concessions into China these gains may be restricted through the limited abilities of South Africa to supply the Chinese; this is so because no concessions were granted to New Zealand in the two most important agricultural sectors (sugar and maize) and therefore South Africa may have trouble in negotiating in these lines. The great concern for South Africa is that preferential access for Chinese imports of textiles and clothing would decimate South Africa’s domestic sectors that are currently hiding behind a 45% tariff wall.
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
Trade negotiations for a Free Trade Agreement: a guide to general principles and requirements
Why do countries seek trade agreements? Despite numerous and vocal critics, virtually every World Trade Organisation (WTO) member is involved in at least one (and often numerous) FTA or preferential trade agreement (PTA). Sometimes it is for no other reason than being left behind, as a competitor has trade preferences in your markets. Sometimes, as in the case of the smaller open economies such as Chile and New Zealand, it is a desire to complement their unilateral domestic reforms, while at other times it is the desire of a large economy to force a smaller country into granting trade concessions.
There are dangers and pitfalls in trade negotiations to be aware of. One of these is policy space, which should be an ongoing concern for many developing countries as negotiated concessions restrict future government policy options. Associated with policy space is the particular concern that some developed countries are insisting upon a clause that entitles them to automatically have any future concession negotiated with a third party to be granted to them as well (analogous to the WTO Most Favoured Nation (MFN) clause). Another danger is trade creation versus trade diversion. Only by a careful analysis of these overall effects can an indication be made as to whether or not an FTA will be unambiguously positive for a country.
The objective of this paper is to outline the process of a trade negotiation and, in particular, a pathway to follow. This paper runs a parallel pathway to a companion paper assessing the China-New Zealand Free Trade Agreement (FTA), and both heavily rely upon the New Zealand Ministry of Foreign Affairs and Trade publications for background data and information. It also references extensively the 2005 paper on regional and bilateral FTAs by Martin Khor, the Director of the Third World Network, and refers to the Chilean examples as, along with New Zealand, this South American country leads the world in ‘genuine FTA relationships’. And the term ‘genuine FTA relationships’ is emphasised as many so-called FTAs are in reality less rigorous preferential trade agreements (PTAs), with a genuine and comprehensive FTA being a PTA ‘on steroids’ (note in particular the term ‘comprehensive’).
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.