SADC trade deal delayed

The proposed Southern Africa Development Community (SADC) free trade area that was to come into being on the 1 January this year has been delayed because of a disagreement over rules of origin in the original agreement. Sifiso Ngwenya, director for SADC at the South African Department of Trade and Industry told IRIN on Thursday: “On most issues we have a common understanding but we have reached a deadlock, so to say, about the rules of origins of clothing and textiles.” He added: “As South Africa and SACU (the South African Customs Union), we feel that the rules of origin in the original free trade agreement are too lax.” He said SACU felt that stricter rules were needed to prevent the region from becoming a dumping ground for cheaper goods from other parts of the world. Ngwenya said that SACU had insisted that both the process from yarn to fabric and from fabric to finished product had to take place within the region. Currently countries such as Malawi and Mozambique make some of their products from fabric which is imported from countries outside SADC. According to the South African official, SACU had proposed a compromise whereby countries would be allowed to continue with the process of exporting goods made of imported fabric for a period of three years. During this time they would have the opportunity to transform their industries, developing their own domestic sources of supply or finding other textile sources within the region such as from SADC’s main manufacturers, Zimbabwe and South Africa. But economists told IRIN that already the balance of trade in the region was heavily weighted in favour of South Africa and that if poorer countries were unable to develop their own domestic capabilities to produce fabric, it would remain this way “for a very long time to come.” As one economist said: “Many countries are very wary of giving South Africa more of a chance of becoming the economic power house in the region.” She explained that at the moment South Africa exported nearly four times as much as it imported from the SADC region, deepening unemployment fears in some of the poorer countries in the region. SADC ministers of trade and industry met on 17 December last year and gave officials from the various countries involved in the negotiations three months to seal a deal. “We are optimistic that by March we would have reached some kind of agreement,” Ngwenya said. In terms of the proposed free trade agreement, SACU members (South Africa, Botswana, Lesotho, Namibia and Swaziland) will remove all tariffs within five years of the agreement coming into effect. The remaining SADC members would gradually phase out tariffs over a period of eight years, but only starting once the agreement had been in place for a period of at least four years.