SOUTH AFRICAN TRADE POLICY AND THE SOUTHERN AFRICAN CUSTOMS UNION

Colin McCarthy

tralac Associate

Topics to be covered

Essential characteristics of a customs union

Guidelines in managing the common external tariff (CET)

SACU as a customs union of economic unequals and the core of variable geometry within SADC

Challenges

Essential characteristics of a customs union

Linear progression of deeper integration

A CU is established when a FTA implements a common external tariff (CET)

Implications

Management of CET should be a collective effort Guidelines required in determining tariff issues Revenue collections must be distributed

Guidelines in managing the common external tariff

Guidelines depend on the functions of the import tariff, broadly being

Protection of domestic industry and employment Raising revenue for government

With emphasis on protection tariff becomes a trade instrument that serves industrial policy

With emphasis on revenue a trade-off can develop wrt protection

SACU as a customs union of economic unequals and the core of variable geometry within SADC

Large difference between South Africa and BLNS in economic size and level of development

SACU has unique history with legacy of CET determined by South Africa to serve its industrial development

Oldest operating CU in the world which many believe can serve as the expanding core of the SADC customs union

SACU must be seen in conjunction with the CMA

Challenges

Effective change-over from the 1969 to the 2002 Agreement, especially establishment of SACU institutions

Developing the guidelines that can be used by Tariff Board (still to be established)

Managing SACU as a customs and excise union

Challenges…continued

Reconciling the revenue and protection functions of the tariff

Addressing the BLNS revenue problem

Reconciling industrial development needs of South Africa and BLNS in determining and negotiating the SACU tariff ……

Considering Article 38 of the 2002 SACU Agreement and recognising that we are dealing with a common SACU tariff, hence a SACU trade policy