Tuesday, August 4, 2009

SA customs union at a crossroads - Carim

August 4, 2009 - Business Report - By Ethel Hazelhurst

South Africa and its neighbours must move closer in their approach to trade negotiations with the rest of the world, Xavier Carim, the deputy director-general international trade in the Department of Trade and Industry, said yesterday.

He told the sixth Southern African Forum on Trade that the Southern African Customs Union (Sacu) was "at a crossroads". And he warned that if members did not discuss a strategic approach the customs union would remain "trapped in a policy gridlock".

Sacu members have been divided by trade negotiations with the EU. Botswana, Lesotho and Swaziland signed interim economic partnership agreements (IEPAs) with the EU in June, while South Africa and Namibia held back. South Africa said the IEPAs would undermine the common external Sacu tariff.

A breakdown in relations between Sacu members will deprive the region of the benefits of closer integration, which effectively extends the market of each country.

Carim said if Sacu remained a "customs union, structured around a revenue-sharing arrangement, it will steadily be made ineffectual by global developments beyond its control".

He said serious divisions were emerging "with respect to new generation issues like trade in services, procurement, competition and investment".

He said commitments to a third party (the EU) would prevent the region from developing its own rules.

Carim's speech focused on the creation of free trade areas in the region.

And he spoke of the need to improve co-ordination between countries in the region over their approach to the Doha round of trade talks. Attempts are being made to wrap up these negotiations by next year.

Carim outlined the context - trade negotiations are taking place against the backdrop of a global financial crisis and economic recession, which is stalling progress.

South Africa is one of only three Group of 20 (G20) members that has not introduced protectionist measures, according to Carim.

He said that those measures introduced by developing countries to protect domestic industries were "pale in comparison with those of the industrialised countries".

The G20 members signed a pledge in November to avoid protectionism. But a World Bank study published in March showed 17 of the G20 members had implemented 47 measures that restrict trade at the expense of other countries. These include tariffs, and non-tariff measures that slow imports.

The study said the measures "have a significant negative effect on particular exporters shut out of protected markets".

While South Africa was not mentioned as a culprit, this status may be only temporary.

Peter Draper, the trade programme head at the SA Institute of International Affairs, pointed out that "South Africa is considering raising tariffs to protect certain industries.

"(Trade and Industry) Minister (Rob) Davies is on record as saying that he will promote the motor sector and if that requires raising tariffs he will do so. A formal application is under way from the clothing industry to raise tariffs on imports. And the process could play out in other sectors."