Promoting intra-trade through trade facilitation

Lazarus Sauti

The Southern African Development Community (SADC) is hampered by trade and transport facilitation issues more than any other region.

As a result, countries within the regional grouping still play a marginal role in continental as well as global market.

With its natural resources, tourist attractions and vast trade opportunities, intra-regional trade only stands at 10 – 12 per cent of total trade in Southern Africa.

One significant reason – although, of course there are others – is that regional economies are still narrowly based on the production and export of unprocessed agricultural products as well as raw minerals.

“Now, due to relatively low productivity and technology, these economies have low competitiveness in global markets – apart from crude extractive products.

“The low productivity of traditional agriculture and the informal activities continue to absorb more than 80 per cent of the labour force, and growth remains highly vulnerable to external shocks,” agrees Roberto Azevêdo, the director-general of the World Trade Organisation (WTO) – an international organisation which regulates international trade.

Azevêdo added, “Costly and cumbersome border procedures, inadequate infrastructure and administrative burdens often raise trade-related transaction costs within the region to unsustainable levels, creating a further barrier to intra-regional trade.”

The United Nations Conference on Trade and Development – UN body responsible for dealing with development issues, particularly international trade – the main driver of development, concurs.

“Long waiting times at borders, inappropriate fees, cumbersome formalities, and inadequate or unclear rules and regulations, are serious obstacles to trade.

“These factors, as a consequence, adversely affect investment, employment as well as trade-led development,” explained the UNCTAD.

Further, most SADC countries are landlocked and this forces goods to cross several national borders during transport to market. Archaic trade procedures, without doubt, make life difficult for these and other SADC countries.

Consequently, member-states must consider trade facilitation – the simplification, harmonisation, standardisation and modernisation of trade procedures, according to the Organisation for Economic Co-operation and Development (OECD) – an international economic organisation of 34 countries founded in 1961to stimulate economic progress and world trade.

Trade facilitation, as added by the WTO, encompasses policies designed to reduce trade transaction costs as well as at-the-border and behind-the-border policy reforms, customs and border procedures.

“It improves border management, enhances institutional development, transit and regional facilitation, and eliminates non-tariff barriers and unnecessary other non-tariff measures that impede trade growth,” said the WTO.

Jan Hoffmann, an expert in trade facilitation, also urges regional leaders to embrace trade facilitation so as to effectively complement SADC’s efforts to create a regional free trade area.

This, as Hoffmann notes, should begin with removing all the barriers which prevent full integration of the region into global value chains.

“Trade facilitation can serve deeper integration processes. It improves trade control administrations and increase revenues. As SADC countries are pushing for a free trade area, they need to remove all barriers which hinder integration and put in place mechanisms that promote trade facilitation,” said Hoffmann.

South Africa Reserve Bank governor, Lesetja Kganyago, also encouraged trade facilitation within the region to improve transacting systems and to curb the easy flow of ‘dirty’ money.

“If you do not avail efficient and affordable cross border remittance systems, people will rely on the alternative which will not help in abating dirty money and terrorism,” Kganyago said.

A specialist in international trade, Arancha Gonazlez, agrees with Kganyago and added that trade facilitation creates necessary conditions for small and medium enterprises and large businesses in the region to flourish and join global value chains.

“Trade facilitation brings benefits to developing countries as it makes it small and medium enterprises and large companies to integrate into regional and global value chains,’ noted Gonazlez, adding that building capacity to export and trade is the key to unlocking the potential of small and medium enterprises, the world’s largest potential source of jobs.

Petros Shayanowako, in a 2014 Trade Law Centre (TRALAC) paper titled “The Bali WTO Trade Facilitation Agreement: Implications for Southern Africa”, asserted that SADC member-states need technical assistance in capacity building if they are to effectively embrace trade facilitation.

“SADC member-states need various kinds of technical assistance, whether sourced from within the countries, the region or from international development partners if they are to fully embrace trade facilitation and promote inclusive development,” noted Shayanowako.

Kganyago agrees, saying the region also needs to make collaborative efforts in ensuring that trade system are synchronised.

“To promote intra-trade via trade facilitation, countries in Southern Africa need to make collaborative efforts in ensuring that trade system are synchronised,” said Kganyago.

Shayanowako also said countries must craft policies and mechanisms that allow the region to take advantage of new trade opportunities, and he urged each SADC country to establish and operationalised a national committee on trade facilitation.

He noted that few countries already have such committees in place, but very few, if any, are operational. These would need to be resuscitated.

“The setting up of the national committee on trade facilitation should ideally be one of priority actions to be taken because of the crucial roles that those committees will play in championing the trade facilitation agenda at national and regional level,” said Shayanowako.

He also said regional countries should be committed to collaborate with all stakeholders and provide each other with mutual assistance to ensure that customs laws are properly observed as well as to prevent, investigate and combat customs offences.

“To effectively increase intra-trade in SADC, countries need to be warm to trade facilitation. It (trade facilitation) will help them monitor exports and imports to prevent duty leakage as well as to clamp down on the influx of poor quality goods in regional countries,” Shayanowako said.

Importantly, SADC’s intentions to streamline customs procedures and trade facilitation are outlined in the Protocol on Trade, Annex II Concerning Customs Co-Operation within the Southern African Development Community.

The Annex sets out to simplify and harmonise customs laws and procedures by providing for common measures through which member-states shall undertake to comply in the formulation of their Customs laws and procedures, establishing appropriate institutional arrangements at regional and national levels, and co-operating to prevent fraud and illicit trade.