Proposed SADC free trade area has pros and cons

Namibia and Zambia would have to restructure trade relations with other regional groupings before they are likely to attain full benefit from a proposed Southern African Development Community Free Trade Area (SADC FTA), a political think-tank said in a recent report. The South African Institute of International Affairs noted that while the proposed free trade area would create a larger market for both countries, short-term benefits would be limited. This was largely because both countries had overlapping economic arrangements with other countries that already grant free trade to some extent. The SADC FTA, a product of the SADC trade protocol, is intended to act as a catalyst for increased regional integration, and facilitate trade and investment flows within the SADC region. It is expected that by 2008, up to 85 percent of all SADC trade will carry zero tariffs, while total liberalisation is earmarked for 2012. The report highlighted the trade relationship between Namibia and South Africa and argued that Namibian consumers may benefit from cheaper agricultural products due to new competition. However, the report noted that reduced import duties from imported SADC goods would initially impact negatively on government revenues. For Namibia to fully gain from the SADC FTA it would have to increase trade with neighbouring Angola, the report suggested. The drawback is that Angola is not part of the SADC FTA. Between 1997 and 2001 Angola provided a market for 87.9 percent of Namibia's exports of beer and non-alcoholic beverages (the main category of Namibia's regional exports) to non-SACU SADC countries. However, trade relations between the two countries suffered a setback, when Angola enforced customs duties to boost revenue. The report said the phasing out of tariffs could revive cross-border trade, and Namibia would profit not only from exports to Angola but also from imports of agricultural products. Some 60 percent of Namibia's population live in the area along the Angolan border. The success Zambia has achieved as a member of Common Market for Eastern and Southern Africa (Comesa) is ironically seen as a potential obstacle to the country taking full advantage of the SADC FTA. The report noted that Comesa had a good track record of practical interventions in trade issues and that Zambia had benefited more from its Comesa-induced trade liberalisation than by being part of SADC. The major challenges for the Zambian economy were to improve both its level of industry, and its capacity to produce regionally competitive high-quality goods and services. "As the SADC FTA takes hold, Zambian firms who are accustomed to operating in sheltered national market will hard hit by the entry of regional suppliers," the report stated.