trade arrangements and opportunities in sadc · to china and india. japan a long-standing important...

12 June 2008 • Park Hyatt • Johannesburg, South Africa

Trade Arrangements and Opportunities in SADC

Peter DraperTrade Project Head

South African Institute of International Affairs

Copyright © 2008 Global Insight, Inc.

Overview

• Review of Broad Trade Patterns

• Review of Trade Arrangements

• Focus on SADC EPA

• Concluding Remarks

Caveat: WTO not covered


SADC Trade Priorities: Imports

SADC IMPORTS BY REGION, 2006

Other, 0.7%Oceania, 2.0%

Americas, 10.5%

Africa, 16.0%

Europe, 32.1%

Asia, 38.6%

SADC IMPORTS BY TRADE BLOC, 2006

EU, 28.6%

SADC, 12.9%

OTHER, 45.6%

COMESA, 2.8%MERCOSUR, 2.8%

NAFTA, 7.3%


Asia’s Share of SADC Imports Exceeds Europe

SADC Import Shares, 2000 and 2006

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Asia Europe Africa Americas Oceania Other

2000 2006


SADC Trade Priorities: ExportsSADC EXPORTS BY REGION, 2006

Africa, 16.0%

Asia, 22.6%

Europe, 39.4%

Oceania, 1.9%

Rest of world, 9.3%

Americas, 10.6%

SADC EXPORTS BY TRADE BLOC, 2006

EU, 30.1%

SADC, 12.0%

OTHER, 40.9%

MERCOSUR, 0.7%

COMESA, 6.8%

NAFTA, 9.6%


Asia Rising Again, But Europe Still Dominates

SADC Export Shares, 2000 and 2006

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Europe Asia Africa Americas Rest of world Oceania

2000 2006


Stylised Facts (1)

• Europe remains most important export partner (by far)

• South Africa dominates SADC exports to and imports from third parties (by far)

• Asia now most important import source (Recent shift due to China and India. Japan a long-standing important trade partner)

• Africa incrementally more important (i.e. increased intra-Africa trade)

• Americas important but declining slightly, like Europe

• EU biggest single trade-bloc partner

• Intra-SADC trade bigger than SADC-NAFTA trade, and growing


SADC Exports to the EU

SADC exports to EU, 2006

Machinery, 13.1%

Precious metals and stones, 31.5%

Other, 24.1%

Transport equipment, 6.1%

Mineral products, 12.4%

Metal products, 12.7%


SADC Exports to NAFTA

SADC exports to NAFTA, 2006

Metal Products, 18.9%

Precious metals and stones, 34.6%

Other, 20.9%

Machinery, 6.8%

Chemical products, 8.6%



SADC Exports to China

SADC exports to China, 2006


Mineral Products, 49.4%

Other, 8.4%Machinery, 2.0%

Textile products, 2.9%



SADC Exports to India

SADC exports to India, 2006



Other, 24.2%

Vegetable products, 8.2%

Machinery, 8.9%

Mineral Products, 13.4%


Stylised Facts (2)• Pattern of SADC exports to all major regions/blocs similar• Main broad product categories

– Metals (precious and base) and metal products– Mineral products– Chemical products– Machinery– Transport equipment– Textiles (to China)– Vegetable products (to India)

• Since South Africa dominates SADC’s external and internal trade, these reflect mainly South Africa’s export strengths

• Agricultural commodities relatively more important for other SADC members

• Niche agricultural products important for South Africa• Clothing and some other light manufactures very important for certain

SADC countries, such as Lesotho


SADC Imports from the EU

SADC imports from EU, 2006


Machinery, 35.3%

Other, 22.9%


Commodities not elsewhere specified,

9.7%



SADC Imports from NAFTA

SADC imports from NAFTA, 2006


Machinery, 36.0%

Other, 23.6%

Commodities not elsewhere specified,

4.0%

Precision instruments, 7.9%



SADC Imports from China

SADC imports from China, 2006

Textile products, 15.9%

Machinery, 38.0%

Other, 25.4%

Footwear, headgear, 6.3%

Furniture, toys, 6.7%



SADC Imports from India

SADC imports from India, 2006



Other, 30.2%


Machinery, 10.2%Chemical products,

12.1%


Intra-SADC Imports

Intra-SADC imports, 2006

Machinery, 15.2%


Other, 35.5%



Metal products, 12.9%


Stylised Facts (3)• Pattern of SADC imports from all major regions/blocs also similar

• Main broad product categories:– Machinery– Transport equipment– Precision equipment– Chemical products– Metal products (from EU, China, India)– Mineral products (from India)– Light manufactures, such as furniture, toys, footwear, apparel (from China)

• Intra-SADC imports also dominated by machinery, transport equipment, metals, etc—probably reflecting SA strengths

• China increasingly replacing EU and US for high tech imports, especially IT products

• Light manufactures from China and India causing competitive pressure in all SADC economies


Trade Agreements In Place (1)

• SADC FTA

– Goods only:• 85% liberalisation by 2008

• Full liberalisation by 2012

• Asymmetric liberalisation: SACU already almost 100% open to SADC imports

– Services under consideration

– Many other relevant protocols, e.g. Finance and investment, but implementation is patchy

Intra-SADC trade is relatively small


Does Africa Have a Basis for Formal Regional Economic Integration?

True extent of cross-border trade?

Source: The Economist

Host of problems to confront, especially supply-side agenda and weak institutions.


Trade Agreements In Place (2)

• SA-EU Trade, Development, and Cooperation Agreement

– De facto inclusion of BLNS (except imports via Walvis bay)

– Goods coverage only

– Asymmetric liberalisation (EU opens faster, deeper)

– SA (and therefore the BLNS) will be fully open to the EU by 2012

SA/SACU – EU trade is substantial, and this arrangement may be expanded


Preference Schemes• EU: Everything but Arms (EBA)

– Duty-free quota-free (DFQF) access to EU market for all LDCs– In SADC Angola, DRC, Lesotho, Madagascar, Malawi, Mozambique, and Zambia can

utilise this scheme

• US: African Growth and Opportunity Act (AGOA)– Offers preferential access to US (NAFTA) market(s) for eligible African countries, on

most products– All in SADC but Zimbabwe are eligible

• China: Preferential access to Chinese market for LDCs– Limited product coverage– Not limited to African LDCs

• Less known about recent Indian offer except it applies to all LDCs (i.e. not just African)

• Literature considers AGOA more beneficial (better-designed) than EBA (especially rules of origin)

• Chinese offer will be of limited value, but scheme well-designed to meet African LDC export profiles


Trade Agreements Under Negotiation• SACU-Mercosur

– Limited product coverage, small preferences offered by both sides

– Not much trade will be created– Existing trade relatively small and confined to SA– Political symbolism dominates

• SACU-India– Likely to be similar to Mercosur deal– A case of missed opportunities, especially in services?– Existing trade dominated by SA

• Underpinning both is the IBSA initiative


The Interim EPA (1)

• Economic Partnership Agreements with the EU

– Most important current negotiation outside the WTO

– Highly controversial, especially in SACU

• The SADC EPA group contains only 7 of 14 SADC countries: SACU plus Angola, and Mozambique

• Other SADC member states participated in the ESA group, except Tanzania (EAC) and DRC (CEMAC)


The Interim EPA (2)

• In the SADC EPA group:

– Angola, Mozambique and Lesotho have EU market access secured under EBA

• Yet Mozambique and Lesotho (LDCs) initialled the text

– South Africa has TDCA with EU; this de facto includes BLNS on imports from EU, but BLNS exports to EU not covered by TDCA

– Thus Botswana, Namibia and Swaziland need the EPA to maintain access enjoyed under the preceding arrangement, known as the Cotonou Partnership Agreement


The Interim EPA (3)

• TDCA is comprehensive, so for SACU the goods chapter of SADC EPA not difficult to work out

– But there have been many complications

• For Mozambique and Angola (if it signs the concluded text), there will be substantial market opening to EU imports

• Liberalisation phased in over a long time period (in stages until 2018)


SACU Tariffs and SA Imports

0%

10%

20%

30%

40%

50%

60%

70%

t >= 40%30% <= t <40%

20% <= t <30%

15% <= t <20%

10% <= t <15%

5% <= t < 10%0% < t < 5%0%Other

% of total lines % of total imports


EPA Implications• At the end the EU will have the best access to SADC of all

external (non-SADC) trade partners– Is this wise?

• New generation issues highly contentious—SA will need to make tough decisions

• Large question marks over SADC integration:– Half of SADC’s members are in other EPA negotiating groups

– What future for the mooted SADC customs union?

– SACU may split

• These ructions are matched elsewhere:– COMESA deeply split

– CEMAC too

– EAC the most cohesive


Implications of Other Arrangements• AGOA very important, but a unilateral measure

– What happens if Congress changes its mind?

– What implications does the McDermott bill (duty free quota free market access for LDCs) hold?

• EBA needs to be improved for LDCs, especially in rules of origin– EPAs may provide an opportunity for this

• SADC FTA almost fully in place—comprehensive, but politically sensitive, and some members have not met implementation targets (e.g. Zim)

• SACU-Mercosur and SACU-India lack ambition

• SACU-China?

• SACU-US?

12 June 2008 • Park Hyatt • Johannesburg, South Africa

Thank You!Peter Draper

Trade Project HeadSouth African Institute of International Affairs

[email protected]

trade arrangements and opportunities in sadc · to china and india. japan a long-standing important...

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