By Gilbert Kaimana, Times of Zambia
THE Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) should abandon plans to launch respective customs unions and instead concentrate on strengthening the free trade areas (FTAs).
According to a study by the Zambia Business Forum (ZBF) both organisations must be strengthened through harmonising their free trade areas which would lead to a merger of the two regional blocks.
The study undertaken by prominent economic consultant, Bwalya Ng’andu concludes that the choice for Zambia belonging to either the COMESA or SADC customs unions was not clear because the country stood to benefit from both customs unions once established.
Presenting the study findings at an Economics Association of Zambia (EAZ) organised discussion on Tuesday night, Dr Ng’andu said the study reveals that any departure from either organisations would be a lose-lose affair, and hence not a viable option to consider.
Dr Ng’andu said Zambia and other countries in the two regional bodies need not deal with the case for overlapping membership now, but must deal with the problem of the non-functional FTA in COMESA and the SADC FTA to be launched in August this year.
He said SADC and COMESA should remain and postpone going into the customs unions and deal with issues of FTA.
“The rationale for going into customs unions at this stage is irrelevant, because in both the FTA is not functional,” he said.
The study also revealed that the agenda for customs unions in both bodies was only driven by leadership roadmaps, but presented no safeguards against trade differentials and compensation mechanisms for revenue loss in both cases.
Dr Ng’andu said a vivid problem for members in both regional bodies was that while they were pushing for establishment of customs unions, the member states had continued to negotiate and amend old bilateral trade agreements.
He said basing on simulation comparisons if a choice was to be made, Zambia potentially stood to gain revenue of US$8.8 million yearly by belonging to the COMESA customs union, but the country would likely suffer revenue loss as a result of tariff abolishment if it went with the SADC customs union.
The gains from the COMESA customs union would be as a result of imposing tariffs on South Africa, which was Zambia’s biggest trading partner.
But the SADC customs union presented more benefits in terms of consumer welfare and the Value Added Tax (VAT) revenue, which would offset the losses if the country opted for the COMESA customs union.
Dr Ng’andu said Zambia needs to improve its comparative advantage in both regional bodies as well as work at formulating a responsive industrial policy.
At the same function, discussant Oliver Saasa said merging the two bodies could not be a viable option, but what was needed was to focus on harmonisation and alignment.
Another discussant Dale Mudenda said there was need to do more research based on particular traded goods, and was of the idea that the debate should not just be looked at from the trade point of view but in terms of infrastructure.
