Presentation on theme: "The Grand Tripartite FTA: Is Namibia Ready to Engage?"— Presentation transcript:
1 The Grand Tripartite FTA: Is Namibia Ready to Engage? Paul KalengaSenior Trade Adviser, SADC Secretariat20th April 2011, Windhoek, Namibia
2 IntroductionPolicy consensus that trade matters for growth and developmentThere is increasing policy consensus that regional trade openness (in the form of widening the economic spaces of fragmented small economies) matters for economic growthHence, the merging of national markets (through the establishment of FTAs ) as a growth and development strategy ( a rationale behind regional integration arrangements)This partly explain why most countries in Eastern and Southern Africa have sought to belong to a number of trade regimes (see the famous spaghetti bowl-effect)However, this has increasingly become a problem for implementation and for deepening regional integration (such as moving from FTAs to customs unions)
4 But intra-regional trade in Africa not yet a powerful engine for growth – why? Production and export structures geared to primary commoditiesInadequate industrial capacity for diversified manufactured goodsInadequate policy attention on trade in services as a catalyst for growth and investmentInadequate infrastructure (transport & communications network, energy, IT, finance, skills, etc)Persistent trade barriers (tariffs and non-tariff – design and implementation deficiencies of trade regimes) etc., etc., etc.,Caveat: intra-regional trade (SADC) is low in proportional terms – but it is still important for most SADC countries
5 What is then the rationale for another wider FTA? Addressing constraints posed by small fragmented domestic markets through export-growth strategies (this is not automatic but largely depends what a country does at the domestic level?)Consolidating and improving existing trade regimes (SADC FTA, COMESA FTA, EAC FTA)Addressing the high cost of trading / doing business (national actions and regional cooperation – infrastructure, trade & investment facilitation, NTBs, rules of origin, trade in services liberalisation, etc.)Trade potential exists : intra-regional trade in manufactures (regional market integration could be a stepping stone to export manufactures)and there is a potential to raise it: available statistics ( 2007/8) – South Africa accounted for 10% of Botswana’s merchandise exports, 18% of Lesotho’s; 30% of Namibia’s and 75% of Swaziland’s.)Zimbabwe, Mozambique, Zambia and Malawi each export between 10% and 34% of their total exports to South Africa (IMF Direction of Statistics)Intra-regional trade in agriculture – why so low?
6 The Tripartite framework – a brief background SADC and COMESA interactions on the need to harmonize their programmes (especially in trade and customs since 2001)In 2005, EAC became a Customs Union and joined what became known as the Tripartite Framework led by the Tripartite Task ForceFirst Tripartite Summit, Kampala, October 2008 decided to establish the Tripartite FTATechnical work by the Secretariats on the design of the Tripartite FTA, since 2009 and now completed and to be used as a basis for negotiationsSecond Tripartite Summit, scheduled for June / July 2011, South Africa, to launch the Tripartite FTA negotiations
7 What can the grand tripartite FTA do? Overcoming the problem of overlapping membershipConsolidating existing FTAs in COMESA, SADC and EAC into a single FTA by building on positive elements (acquis) and addressing their design and implementation shortcomingsPursue sector-wide negotiations: avoid sensitive products and exclusions, include agricultural goodsAdopt simple and liberal rules of originAddress non-tariff barriers (NTBs) and trade facilitation problemsA complementary strand on infrastructure, especially transport infrastructure (roads, rail, ports) and communication lin
8 What are the potential economic effects Trade creation?- specialization – has been a major source of trade growth in other regions such ASEAN- comparative advantage (manufactured clothing exports to RSA from Mauritius and Madagascar)Increased efficiency and productivity?Regional competitionRegional economies of scaleForeign investmentTrade diversion? (may be at the cost of trade with more efficient third countries)- External tariffs are reasonably high – must lower them to avoid trade diversionThe cost of intra-regional transport, communication, doing business
9 Is Namibia ready to engage? Namibia’s sustained economic growth cannot depend on its small domestic market – there is no policy choice but to be export-orientedFor Namibia the FTA presents an opportunity( a market of 26 countries, with a combined GDP $264 billion and over 600 million people – more so if Angola and DRC can participate)Namibia should have an offensive rather than a defensive strategy that goes beyond tariff liberalisation to addressing issues related to the high cost of doing business - trade infrastructure for trade facilitation, border measuresNamibia should strategically position itself as a transport hub within the Tripartite FTA (Walvisbay corridor, transport connection with Angola, DRC, Zambia, Zimbabwe, etc.)
10 Is Namibia ready to engage? (cont.) Developing a coherent national strategy on services sectors – outward looking rather than protectionist – services, growth and competitiveness of economies – a high potential for regional tradeImproving policy strategies to tackle constraints to manufacturingAn active engagement with the private sector (public-private partnership) for trade development and promotion – market analysis of opportunities and threats in the tripartite markets (both goods and services)Governments do not trade – the FTA is for traders, investors, consumersBuild on success stories- exploit opportunities for which firms have a comparative advantage in regional markets / seek improved market access in goods and services markets
11 Conclusions Trade policy choice for Namibia: Domestic strategy for economic diversification (goods and services) to take advantage of the opportunities arising from the consolidation of the SADC FTA and the Tripartite FTAPublic/ private partnership to exploit opportunities (areas for which Namibia has a comparative advantage in neighboring markets (e.g. trade development and promotion activities, market research, etc.)Positioning Namibia as a services hub, especially transport infrastructure / potential for making Walvisbay corridor a transport hub – leading to the cost of trading in the regionThe need for a tripartite FTA regime to be a trade, transport and infrastructure facilitation rather a mere tariff liberalization strategyTHANK YOU!