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WTO's Review Of SACU Sees Extensive Use Of High Tariffs

by Lorys Charalambous,, Cyprus

11 November 2009

While acknowledging that the Southern African Customs Union (SACU) has made good progress since its previous review in 2003, the World Trade Organization's (WTO) latest review notes that it continues to be one of the major users of anti-dumping tariffs.

The WTO review points out that, while SACU has been in existence since 1910, its five member states – Botswana, Lesotho, Namibia, South Africa, and Swaziland – continue to show substantial differences in levels of economic development. In addition, there is no formal harmonization of fiscal policy in SACU.

Botswana, Lesotho, Namibia, and Swaziland still have relatively narrow tax bases. Customs and excise duties constitute a major source of public revenues, but make up a negligible portion of South Africa's fiscal receipts. The report further specifies that the only trade policies harmonized in SACU are: the applied customs tariff; excise duties; duty rebates, refunds, and drawbacks; customs valuation; rules of origin; and contingency trade remedies.

Nevertheless, a new revenue-sharing formula has been established under the common revenue pool, and that change has contributed to an increase of public revenues in Botswana, Lesotho, Namibia, and Swaziland. South Africa continues to manage the pool.

The preferential trade arrangements that SACU countries have with other countries and areas, both together and bilaterally, are various. Together they have preferential trade agreements with EFTA (European Free trade Association) and MERCOSUR (a regional trade area currently encompassing Argentina, Brazil, Paraguay and Uruguay) and are eligible for non-reciprocal preferential treatment under the US Generalized System of Preferences and the US African Growth and Opportunity Act. Swaziland is also a member of the Common Market for Eastern and Southern Africa.

However, to further harmonize trade policy, the WTO says that SACU members have now agreed to negotiate new preferential trade agreements as a group. For example, they are finalizing negotiations on economic partnership agreements with the EU.

South Africa continues to set SACU’s Common External Tariff (CET) in consultation with its partners. The WTO report indicates that, in some cases, it appears that the structure of the CET does not adequately reflect the needs of the individual economies of the other SACU members.

The average rate of SACU's CET decreased from 11.4% in 2002 to 8.1% in 2009. However, the pattern of protection has shifted in favor of agricultural products, with an average rate for agricultural products of 10.1% in 2009, up from 9.6% in 2002, against an average rate for non-agricultural products of 7.8% in 2009, down from 11.6% in 2002.

Although Botswana, Lesotho, Namibia, and Swaziland are in the process of establishing their own legal and institutional framework to enable them to initiate trade remedies, the WTO states that they currently apply the anti-dumping, countervailing and safeguard measures determined by South Africa, which has been a leading initiator of anti-dumping actions among WTO members.

Comments by the US mission to the WTO disclose that the US experience with South Africa’s measures bears out the WTO’s statement. South Africa currently maintains anti-dumping duties on four US products.

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