Cablegate: Sag Official: Sadc to Focus On Consolidation Of

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INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
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E.O. 12958: N/A
TAGS: ECON ETRD SF
SUBJECT: SAG OFFICIAL: SADC TO FOCUS ON CONSOLIDATION OF
FREE TRADE AGREEMENT

1. (SBU) Summary: Trade flows within the Southern African
Development Community (SADC) remain disappointingly limited
in spite of the SADC free trade agreement, according to the
SADC desk officer at South Africa's Department of Trade and
Industry (DTI). Poor infrastructure, non-tariff barriers,
and lack of capacity have inhibited intra-SADC trade. SADC
plans to address these issues, but will probably not meet its
2010 deadline of a customs union. End Summary.

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Trade Is About More Than Low Tariffs
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2. (SBU) Trade flows within the Southern African Development
Community (SADC) remain disappointingly limited, in spite of
the SADC free trade agreement, according to Njabulo Mbewe,
the SADC desk officer at South Africa's Department of Trade
and Industry (DTI). He met Trade and Investment Officer and
Deputy Economic Counselor on November 9.

3. (SBU) According to Mbewe, the elimination of many tariffs
and the launch of the SADC free trade area in 2008 are not
changing old patterns of SADC trade, even though 85 percent
of intra-SADC trade is now tariff-free. "South Africa still
has a big trade surplus with the region," he said. "Free
trade hasn't led to a supply-response in the other SADC
countries." He blamed the non-response on poor
infrastructure, non-tariff barriers, lack of capacity, and
other constraints.

4. (SBU) Under the circumstances, SADC will now focus on
consolidation of the SADC free trade agreement, Mbewe said.
Between now and 2012, SADC negotiators will address issues
such as rules of origin, non-tariff barriers, border red
tape, and the elimination of remaining intra-SADC tariffs.
In Mbewe's view, the last issue could be especially
difficult, since the remaining intra-SADC tariffs protect
sensitive industries.

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Looking Ahead on Regional Integration
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5. (SBU) Mbewe said that plans for a SADC customs union will
be put on a backburner, at least for now. There is
widespread recognition within SADC, he said, that a customs
union is not feasible by the current deadline of 2010.
However, he expressed doubt that SADC's political leadership
would officially abandon the goal. Within the SAG, Mbewe
confided, there is displeasure that SADC discussions of a
customs union revolve mostly around revenue sharing, rather
than trade policy.

6. (SBU) Looking ahead, Mbewe said SADC members must
formulate joint industrial and investment policies, lest
member states chase after the same investments or create
industries that duplicate rather than support each other. He
also stressed the need for SADC countries to do a better job
of coordinating with each other and with development banks on
infrastructure projects with regional dimensions. He said
South Africa's own development finance institutions -- the
Industrial Development Corporation and the Development Bank
of Southern Africa -- plan to step up lending outside of
South Africa in an effort to promote "real" integration.
Finally, SADC will explore free trade agreements with other
African bodies such as COMESA. "This is what business wants
us to do," he said. "They want to trade with the entire
continent."

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Comment
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7. (SBU) Mbewe's comments underscore the vital role of
USAID's Southern Africa Global Competitiveness Hub in
QUSAID's Southern Africa Global Competitiveness Hub in
Gaborone. The Hub aims to promote cross-border trade by
enhancing the competitiveness of African products and
services, building capacity for trade policy formulation and
implementation, and strengthening the enabling environment
for African businesses. The Hub is often cited by South
African officials as a model trade development and regional
integration program.
GIPS

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