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Economic and Social Research Foundation (ESRF)

Economic and Social Research Foundation (ESRF)

Trade policies and agricultural trade in the SADC region: challenges and implications

Regional Synthesis Report

March 2003

This paper was presented at the Southern Africa Regional Conference on "Agricultural Recovery, Trade and Long-term Food Security", March 26-27, Botswana.
Posted with permission of the conference organisers
[Complete report - 92Kb ~ 1 min (26 pages)]     [ Share with a friend  ]

Introduction

  1. Background Information

    Regional trade initiatives have proliferated around the world, including Southern Africa. In the last two decades, the Southern Africa region has witnessed a growing number of regional co-operation and regional integration initiatives. These are: Common Market for Eastern and Southern Africa (COMESA), Southern Africa Development Community (SADC), Southern African Customs Union (SACU), East Africa Co-operation (EAC), Indian Ocean Commission (IOC), Indian Ocean Rim (IOR) and Common Monetary Area (CMA). These seven regional institutions are involved in economic and regional co-operation. The current array of members of regional institutions in Southern Africa is listed in Table 1.

    Table 1: Membership of Regional Organizations in Southern Africa

    Country SACU CMA SADC COMESA CBI
    Angola     X X  
    Botswana X   X    
    DRC     X X  
    Lesotho X X X    
    Malawi     X X X
    Mauritius1     X X X
    Mozambique     X   X
    Namibia X X X X  
    Seychelles1     X X X
    South Africa X X X    
    Swaziland X X X X X
    Tanzania     X   X
    Zambia     X X X
    Zimbabwe     X X X

    Notes:
    1. Mauritius and Seychelles are members of IOC and IOR


    SADC, which superseded the former SADCC, was formed in 1992 and currently consists of 14 member countries, representing a total population of approximately 200 million people, and covering an area of 9.1 square kilometres (World Bank, 2001). Three countries (the Democratic Republic of Congo, South Africa and Tanzania) account for almost two thirds of the total population (64,4%), while the six smallest members (Seychelles, Swaziland, Mauritius, Botswana, Namibia and Lesotho) comprise only 4% of the total population. The total SADC Gross Domestic Product (GDP) was around US$182bn in 2000, while average GDP per capita was US$1,761. However, there are wide variances in aggregate and per capita GDP, and countries are at highly divergent levels of development. Seven SADC countries are classified as least-developed economies (Angola, the Democratic Republic of Congo, Lesotho, Malawi, Mozambique, Tanzania and Zambia). The poor countries of SADC have larger agricultural sectors. In 1999, the agricultural sector contributed 38 % in the case Malawi, 32% in Mozambique and 48% in the case of Tanzania (World Bank, 2000). Table 2 reports some basic economic indicators for SADC member countries.

    Table 2: Basic Indicators of SADC Economies, 1999

    Country Population(Millions) Area(000 Sq Km) GDP at Market Prices(Current US $m) Average Annual Real GDP Growth. % p.a
      1980-89 1990 -94 1995-99
    Angola 12.4 1247 5861 2.6 -5.9 6.8
    Botswana 1.6 567 5996 10.6 4.6 4.8
    DRC 49.8 2267 7752 1.8 -8.6 0.9
    Lesotho 2.1 30 874 3.6 4.4 3.9
    Malawi 10.8 94 1820 1.7 1.0 7.3
    Mauritius 1.2 2 4233 4.2 5.4 5.2
    Mozambique 17.3 784 4166 0.1 2.6 8.7
    Namibia 1.7 823 3075 1.1 4.3 2.8
    Seychelles 0.1 0.45 545 2.1 4.8 2.4
    South Africa 42.1 1221 1311127 2.2 0.2 2.3
    Swaziland 1.0 17 1223 6.7 3.8 2.9
    Tanzania 32.9 884 8777 3.9 2.7 3.7
    Zambia 9.9 743 3325 1.4 0.2 1.3
    Zimbabwe 11.9 387 5716 5.1 2.1 3.1
    SADC Total 194.7 9067 184494 3.4 1.5 4.0
    S. Africa Share of SADC (%) 21.6 13.5 71.1      

    Source: Lewis 2001.

    South Africa is the prominent economy in the region, accounting for 71% of SADC's GDP and approximately 22% of its population. Hence, South Africa plays an import role in the region with its geographical location and the size of its economy, particularly for trade and transport. Almost all the continental SADC countries depend on South Africa's railways, port (airports and seaports), highway and other transit facilities.

    A new economic environment has emerged within SADC with the adoption of the "Protocol on Trade" in 1996 and its implementation, which started in 2000. Article 2 of the "Protocol on Trade", among others, commits to further liberalization of intra-regional trade and establishment of free trade in the SADC region. Theoretically, the aim of the "Protocol on Trade" is to increase trade without any impediment, by eliminating import duties (Article 4), eliminating export duties (Article 5) and eliminating non-tariff barriers (article 6) to mention a few.

    In other words, the "Protocol on Trade" has intensified bilateral as well as regional initiatives to promote regional economic integration, cooperation to liberalize trade and fair competition in agricultural commodity trade. In general, the ultimate goal of the on-going efforts of SADC is to extend the current preferential trade arrangements so as to establish a regional trading block and a common market for SADC.

    The "Protocol on Trade" is expected to lead to significant changes in domestic economic policies and trade regimes, which in turn will have significant implications for the regional economy, especially in the production and exchange of agricultural commodities with influence on national and regional food security. Coupled with the worldwide drive for freer trade, this regional initiative is expected to reduce existing trade protection by eliminating tariff, non-tariff and technical barriers to trade in order to facilitate cross-border movement of goods and services.

    While substantial steps towards more liberal trade have been taken, nonetheless, current policy falls short of this free trade ideal. Many countries within SADC still impose some type of tariff, quantitative (non-tariff) restrictions and other technical barriers with agricultural trade. The " Protocol on Trade" implies policy reforms within the SADC member countries to dismantle existing protectionist measures. It is expected that implementation of the "Protocol on Trade" will increase economic growth in the region by directing scarce productive resources to their best uses. It is crucial for every SADC country to understand the intra-SADC agricultural trade pattern, trade policies, its challenges and implications. The development of trade in the SADC region faces many challenges including:

    • Freer movement of good and services across border
    • Improve competitiveness and quality of standards
    • Strive towards harmonizing trade policies
    • Ensure that trade policies in SADC would conform to a global economy as per WTO regulations.
    • Diversify in tradable commodities according to each country's comparative advantage.
    • SADC countries are members of other trading block, such as COMESA, IOC, ACP, SACU and EU-FTA, which overlaps each other in trade policies


    Since most SADC economies are pre-dominantly agricultural based and food dominates agricultural trade among SADC countries, enhanced trade in agricultural products potentially provides a tool for fighting poverty in the region, promoting regional integration, and increasing economic growth and welfare.

    The demand for better estimates of the impact of barriers to intra-SADC trade matches the preoccupation of many policy makers. Domestic regulations may constitute major trade impediments. It may be also that both tariffs and non-tariffs barriers are simply becoming more visible due to the proposed reduction in tariff and non-tariff barriers by SADC. Thus, country studies were commissioned in SADC countries. Each country's research team carried out their respective country-level analysis. One important aspect of each country-level study was to adopt a unified approach and method in order to ensure consistency so that a synergy can be extracted from each country report for this final regional report, which will facilitate the implementation of "Protocol on Trade". This final synthesis report presents the combined findings of these FANRPARN funded country studies for the major trading countries in the region. This synthesis is based on five country studies, which are; South Africa, Tanzania, Zambia, Malawi and Namibia.


  2. Study Objectives

    As listed in the "Technical Proposal", the main objectives of this regional project were to conduct a comprehensive analysis of trade policies, and to identify impediments to intra-SADC trade. The objectives of the proposed study as stated in the "Technical Proposal" are as follows:

    • Review the performance of trade policies in the region, both policies of individual member states and SADC policies.
    • Analyze the flow of agricultural trade in the SADC region
    • Investigate sector specific trade policies, such as tariff and non-tariff policies, and assess shortfalls and impacts of tariff, non-tariff and technical barriers to trade in the region, with particular focus on trade in agriculture.
    • Identify other barriers in the region apart from tariff, non-tariff and technical barriers that hinder the development of trade in the region and taking advantage of AGOA proviso and those of WTO.
    • Examine the roles of the government, private sector, financial institutions, cooperative societies and marketing boards in facilitating development of trade in agriculture.
    • Observe and analyze other supply constraints in the SADC region as far as agricultural trade is concerned and offer policy recommendations
    • Assess Potential Trade Patterns


  3. Methodology

    To achieve the objectives of the study and to ensure consistency so that a synergy is extracted from each country level report, each country level study adopted a unified approach and methodology. The study involved both desk and fieldwork using three methodologies and various data sets.

    First each country took an inventory of the existing agricultural trade policies in their countries, the level, composition and trend-profile of intra-SADC trade in agricultural products. This addressed the questions of what SADC members were trading with each other, the importance of agricultural trade and what the nature of this exchange implies for the success or failure of efforts in promoting SADC intra-trade in agriculture.

    Secondly, each country level study conducted survey interviews of both agricultural trading enterprises and institutions. Survey-based methods provided the inventory of what the member countries are experiencing with regional trade such as tariff, non-tariff, and technical barriers, geography and logistical problems, administrative problems, transport, communications, financial and other constraints, which work against trade.

    Thirdly, the studies undertook empirical analysis by estimating various competitiveness indices and Gravity models using various data sets. Gravity models were employed to analyse trade flows between SADC member countries. In some countries, indices of Revealed Comparative Advantage (RCA) were computed to show the range of agricultural products SADC members could export competitively. The indices provide some indication of comparative advantage. A Regional Orientation Index (ROI) indicated whether regional trade is growing in relative importance. This provided information about the effect of regional arrangements on the direction of trade. Other indices of the intra-agricultural trade provided useful insights into the extent of intra-agricultural trade taking place and its implication for regional initiatives as well as complementarities of potential partner's imports and exports. These include Diversification and Hirschman Indices.

    The main findings from the individual country studies are summarized in the next section followed with a section providing a synthesis of regional issues, and the final sections provide policy recommendations and suggestions on areas for further research.


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