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The Extent of SADC Trade Protection and its Effects on the Least Developing Members of the Region. TIPS ANNUAL FORUM Date: 29 – 31 October 2008 Presenter:

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Presentation on theme: "The Extent of SADC Trade Protection and its Effects on the Least Developing Members of the Region. TIPS ANNUAL FORUM Date: 29 – 31 October 2008 Presenter:"— Presentation transcript:

1 The Extent of SADC Trade Protection and its Effects on the Least Developing Members of the Region. TIPS ANNUAL FORUM Date: 29 – 31 October 2008 Presenter: Mmatlou Kalaba

2 Presentation Outline a) Introduction b) Literature Review c) Methodology and Data Description d) Analysis e) Evaluation of Results and Implications f) Concluding Remarks

3 Introduction ….background SADC consists of 14 members which are all developing countries and LDCs. They face various economic, development, social, health and welfare challenges Regional integration and trade liberalisation is used (indirectly) as a vehicle to address some of these challenges. Protocol on trade is the central and legal agreements to foster trade liberalisation However, there are major differences between member states

4 Introduction,….Land Area and Population

5 Introduction... Economic Performance

6 Introduction…..GDP contribution by sector bullet sub-bullet

7 Introduction… objectives One way of encouraging trade is through reduction of prohibitive tariff barriers, and so far that is the option that SADC has adopted. In this study examines the degree of tariff protection in the agricultural sector amongst member states Justification: Tariffs are important both as revenue sources and for enhancing competitiveness. Furthermore, high tariffs are in products of interest for LDCs and priority trade policy areas Focus: Agricultural tariffs, period: 1999

8 Introduction…Dependence on Trade Tax Revenue bullet sub-bullet bullet sub-bullet bullet

9 Research on the Trade Protection in SADC Authour(s)YearFocusLimitation Flatters2001Rules of OriginRestricted to RoO Lewis et al2001Impact of trade liberalisationProd. & country aggregation Wobst2002Impact of tariff harmonisationRestricted to 5 countries Brentton et al2004Rules of OriginRestricted to RoO ESRF, Khandelwal2004RevenueNarrow focus Keck & Piermartini2005Impact of trade liberalisationProd. & country aggregation Mutambatsere2006Effects of tariff reformsFocused on cereals Nhara, Subramanian2006RevenueNarrow focus SACAU2006NTB in agricultureBaseline study No studies on" the degree of tariff protection between SADC MS

10 Methodology and Data The main method of relative tariff ratio index (RTR ) Developed by Sandrey, modified further by Gehlhar & Wainio,Jank and then later by Wainio & Gibson It is a tariff-based measure and uses bilateral index between trading partners. The importers tariff rates are weighted by exporters world trade to determine the index

11 Methods…RTR where, A, B represents countries Ti = AVE tariff rate for product i Vi = share of exports of product i in total exports. A ratio of close to one reflects evenness in the respective tariff regimes between partners. It does not reflect tariff levels

12 Method…Pros & Cons Pros –Summarises lots of date into concise results –Changes in applied tariffs are immediately considered –Effective in measuring progress of FTAs and other regional agreements –Assess own protection –Useful for trade negotiations Cons Ignores elasticity effects and substitution possibilities One partner assumption is unrealistic (proxy) Other factors are not included, i.e. tastes & pref, transport costs, political, etc

13 Data Trade and Tariff Data Sources: SADC TD & SADC MS tariff schedules Product coverage: HS 6 digit (Agriculture) Country coverage: 11 MS (SACU as a unit) Period: 1999 & 2006 AVE were calculated using…

14 Analysis….Comparative tariff structure, 1999 SACU & Zim had most tariff lines and highest individual tariffs Zim, Moz & Mau have highest average tariffs Dev. MS appear to have highest max tariffs Co. of Var reflects SACUs complex tariff regime

15 Analysis,….Tariff Distribution & Peaks SACU & Tan had most duty free tariffs High % of Moz tariffs were more than 30 Only Dev. MS had domestic tariff peaks Mau had more domestic peaks than all of SADC MS combined SADC had high concentration of international tariff peaks

16 Analysis…Agric exports and tariffs Contribution of Agric was lowest Zam & SACU and highest in Mal Agric exports are concentrated in few products for all MS except SACU Agric tariffs are higher than total average in all, but Mau

17 Analysis …Tariffs faced by top 10 Agric Exports SACU & Mau applied highest tariffs on products of interest to LDCs Mal & Tan faced highest tariffs in Dev. MS, and yet offer most access SACU, Zim & Moz had protective tariffs on products of offensive interest to themselves

18 Analysis…RTR interpretation RTR =1, symmetry of respective tariff regimes RTR <1, MS grants more access than receives

19 Evaluation and Implications Covered 60% of agric exports (value) Agric contribution to exports is high LDCs Dev MS set high tariffs on agric sector, with most set below average and few very high. Indication of protection for IP development or competitiveness. Yet, the same products are of high interest to LDCs, hampering their IP development potential LDCs spread tariffs with very little focus on specific sectors in an attempt to balance three or policy decisions. The dependence on tariff revenue is also evident in their schedules. Lack of diversification and high protection by partners make them more vulnerable. LDCs grants more access, and yet faces the highest protection in important products. This against the principle of growth through trade

20 Concluding Remarks Growth and Development through trade strategy that SADC adopted is a sound principle for regional integration, however protection on agriculture may affect agriculture negatively. This is not helped by listing many agric products as sensitive. This may also be the cause for decline in intra-SADC trade in the sector, as MS seek favourable markets elsewhere. Agric development needs to be linked to trade and industrial policies to enhance progress of vulnerable LDC sectors. As SADC moves into deeper levels of integration, then these policy developments will require a collective effort. This should also include ways to substitute tariff revenue to allow flexibility in policy space.

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