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Tanzania turns to Southern African Customs Union

The EastAfrican

Tanzania turns to Southern African Customs Union

By Mike Mande, The EastAfrican

21 August 2006

Tanzania is likely to enter into a trade agreement with the Southern African Customs Union (SACU) allowing the East African nation to export textile and clothing material on preferential terms within the trading bloc’s countries.

The agreement, which will signal Tanzania’s entry into SADC Free Trade Area by the year 2008, Customs Union by 2010 and the Common Monetary Union by 2015, will be a vehicle envisaged on SADC free trade area in the protocol on trade to be agreed in Lesotho.

Nazir Karamagi, Minister for Industry, Trade and Marketing told The EastAfrican last week that more opportunities are being opened for Tanzanian clothing and textiles in the Southern African Customs Union market, where strictness on rules of origin has now been relaxed following a recent agreement on trade matters.

Mr Karamagi said that based on recent agreements on trade matters, the SACU group has agreed to allow Tanzania to access their market under a one stage transformation rule subject to quotas.

The quotas are based on current production and the agreement is apparently valid for five years.

"Negotiations on rules of origin have been one of the difficult areas for the SADC trade protocol, which is one of the legal instruments for regional integration," he said, adding that the negotiations are based on Economic Partnership Agreement.

The Southern African Customs Union comprises Botswana, Namibia, Lesotho, South Africa and Swaziland.

Southern African countries - Malawi, Mozambique, Tanzania and Zambia (MMTZ countries) - have since 2000 been exporting textiles and garments to the SACU duty-free which was expected to expire at the end of June this year.

SACU demanded that MMTZ countries provide details in which SADC exporters must attain capacity for the double-transformation regime in line with the SADC Trade Protocol.

The double transformation means that a country should have the capacity to produce fabrics and garments, for such garments to enjoy preferential market access under regional trade terms.

SACU has already agreed to grant two of the MMTZ countries-Malawi and Zambia-a request for an increase in the volumes of textile exports after the two fulfilled outstanding requirements.

Malawi’s quota was increased by four million to 12.5 million tonnes.

Namibia, Botswana, South Africa, Swaziland, Mauritius and Zimbabwe fall in the category of SADC member states that are required to meet the double transformation criteria.

Until this year, least developed countries such as Angola, the Democratic Republic of Congo, Lesotho, Malawi, Mozambique, Tanzania and Zambia were expected to meet a less stringent rule of origin of single transformation, to enjoy preferential access to regional markets.

These countries are now required to upgrade to the double transformation regime - something that will not come cheaply considering that many countries have already performed badly in building capacity for the Africa Growth and Opportunity Act (Agoa) market.

As most of the SACU members are pre-occupied with refining their own efficiencies so as to ably compete in lucrative markets in the United States and Europe, it seems that extension of the duty-free status is not a unilateral priority.

The MMTZ/SACU Agreement is ad hoc as SADC member states wait for the trading bloc to become a free-trade area in 2008.

Sources in the Ministry of Industry, Trade and Marketing failed to explain the value of the quotas which Tanzania has been given, but confirmed the relaxation of rules of origin and that the SACU market has been enlarged for Tanzanian clothing and textile goods.

Enlargement of the market for clothing and textiles in SACU comes when the Tanzania textile industry has not fully utilised the Agoa market, which also provides special treatment for, among others, textile goods from Africa.

The government of Tanzania has lately embarked on a programme to promote the textile industry including the establishment of Export Processing Zones (EPZs) as an ongoing strategy.

Already Tanzania has given an $18 million tax waiver to NIDA Textile Mills (see page 2) and is looking to provide more waiver to other factories to meet the export quotas.

A senior official in the Ministry of Industry, Trade and Marketing told The EastAfrican from Maseru, Lesotho that the trade agreement would also boost Tanzania’s trade into a lucrative business agreement with other members of SACU that would see the country’s textile and clothing industry exporting most of its products to SACU member countries duty free.