SOUTH AFRICAN TRADE POLICY AND THE SOUTHERN AFRICAN CUSTOMS UNION Colin McCarthy tralac Associate

Topics to be covered  Essential characteristics of a customs union  Guidelines in managing the common external tariff (CET)  SACU as a customs union of economic unequals and the core of variable geometry within SADC  Challenges

Essential characteristics of a customs union  Linear progression of deeper integration  A CU is established when a FTA implements a common external tariff (CET)  Implications Management of CET should be a collective effort Guidelines required in determining tariff issues Revenue collections must be distributed

Guidelines in managing the common external tariff  Guidelines depend on the functions of the import tariff, broadly being Protection of domestic industry and employment Raising revenue for government  With emphasis on protection tariff becomes a trade instrument that serves industrial policy  With emphasis on revenue a trade-off can develop wrt protection

SACU as a customs union of economic unequals and the core of variable geometry within SADC  Large difference between South Africa and BLNS in economic size and level of development  SACU has unique history with legacy of CET determined by South Africa to serve its industrial development  Oldest operating CU in the world which many believe can serve as the expanding core of the SADC customs union  SACU must be seen in conjunction with the CMA

Challenges  Effective change-over from the 1969 to the 2002 Agreement, especially establishment of SACU institutions  Developing the guidelines that can be used by Tariff Board (still to be established)  Managing SACU as a customs and excise union

Challenges…continued  Reconciling the revenue and protection functions of the tariff Addressing the BLNS revenue problem  Reconciling industrial development needs of South Africa and BLNS in determining and negotiating the SACU tariff ……  Considering Article 38 of the 2002 SACU Agreement and recognising that we are dealing with a common SACU tariff, hence a SACU trade policy