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Crunch week for world’s oldest customs union

Business Day (South Africa) | 03 March 2008

Crunch week for world’s oldest customs union

Mathabo le Roux
Trade and Industry Editor

THIS week is crunch time for world’s oldest customs union, the Southern African Customs Union (Sacu).

Sacu trade ministers meet in Gaborone with European Commission (EC) trade head Peter Mandelson tomorrow in a bid to break a stalemate over the economic partnership agreement (EPA) the region is negotiating with the European Union (EU).

Mooted as an opportunity to harmonise the region’s trade arrangements with its biggest trading partner and deepen regional integration, the EPA, in a strange twist of irony, has achieved the opposite. It has divided the region and is threatening to split it perman-ently.

The acrimony over the interim EPA has united South Africans across the spectrum - in their vilification of the EU.

But that solidarity seems misplaced when regional dynamics are considered.

“The blanket approach of demonising the EU is not necessarily helpful,” says Trade Law Centre of Southern Africa (Tralac) executive director Trudi Hartzenberg.

“Negotiations are tough and the EC will pursue its own interests; there is no doubt about that. But are we adequately preparing for these negotiations and do we know what we want? ” she asks.

Feedback from those close to the negotiating process echoes Hartzenberg’s concerns.

Private sector representatives from the region came together under the auspices of Tralac last month to assess the status of the EPA. What emerged was a picture of a process undermined by regional infighting and poorly prepared negotiating mandates .

Southern African Development Community (SADC) secretariat trade adviser Paul Kalenga has painted a bleak picture of what went wrong on the ground.

But what seems to really underpin the dismal EPA process is a disconnect between political aspirations and the bureaucratic mandate to give those commitments wings.

Southern African heads of state have for long proclaimed a commitment to regional integration. However, in reality there seems to be a complete disengagement at political level from the economic reality on the ground.

Measured against the outcomes of bilateral negotiations, political commitment to regional integration appears to be a facade, failing to find resonance in trade policy and strategy.

Hartzenberg points out: “Political commitment without the legal and institutional infrastructure to implement those commitments means that the benefits of those commitments would not filter through economically.”

At the heart of the problem appear to be the diverse interests in the region and the vast chasm in levels of development of the different states.

In the customs union, member states range from SA, the continent’s economic powerhouse, to Lesotho, which qualifies as a least developed country (LDC). This means member states have different visions for development and how the customs union can serve their purposes.

Lesotho and Swaziland, for instance, rely almost solely on their customs union status for the transfer of vast funds from the customs revenue pool.

Botswana, on the other hand, is irked because import duties are a barrier to sourcing the cheapest inputs for projects they may be pursuing, while SA again may want to retain these import tariffs to protect infant industries.

Although the Sacu Agreement of 2002 commits members states to pursue common regional policies, such as agricultural and industrial development policies, this has not happened.

SA’s chief trade negotiator Xavier Carim admits common policies have not been explored. “We need to look at that and have that discussion.

“It may be difficult in some areas but I believe there are other areas where a common industrial development package is possible.”

Further highlighting the flagrant neglect of regional integration processes appears to be the disdain with which the region treats the very institutions it had formed to facilitate regional integration - the SADC and Sacu secretariats.

Kalenga laments that despite the central and potentially strategic input the SADC secretariat can make, the body simply has not been equipped with adequate capacity, nor given the necessary authority to play a meaningful role.

“It appears we do not want a SADC secretariat with teeth. This strategy is not helpful,” he says.

Gerhard Erasmus, a Tralac associate and professor of international law at the University of Stellenbosch, concurs: “The region is treating our secretariats as post boxes. If we don’t want to use them, we will keep running into capacity constraints.”

What the EPA process has done, says Peter Draper of the South African Institute of International Affairs, is highlight that Sacu members are “extremely distrustful” of each other.

“They are taking a risk aversion approach to ceding sovereignty to the collective. One may well wonder if the secretariats are deliberately disempowered politically,” he says.

Whatever the outcome of tomorrow’s meeting, policy think tank the Institute for Global Dialogue senior researcher Brendan Vickers believes the EPA process has been a catalyst to force a very necessary debate between the member states on issues that have been bubbling under the surface.

There has been friction in the union long before the EPA talks started - most notably the unpalatably large transfers of customs revenue to BLNS countries (Botswana, Lesotho, Namibia and Swaziland).

Rather than pursuing regional policies and bringing the region together with common developmental policies and a united thrust to integrate in the global economy, Sacu members seem content to receive significant transfers from the customs revenue pool bolstering state coffers.

The issue has been a sore point for SA’s treasury , which wants the transfers to be classified as aid.

“There have long been issues around the customs union and the EPA has forced these to the fore. There should be a debate about what the customs union should be.

“It can’t be just about revenue sharing. Every one of these countries has development interests and this process is forcing them to air those issues in a regional context,” Vickers said.

 source: Business Day