Ntombiyemfundo Pamela Mukwenha of Dominican Convent
The Southern African Development Community is an intergovernmental organisation. It furthers socio-economic cooperation and integration as well as political and security cooperation among fifteen Southern African Countries. It complements the role of the African Union.
The origins of SADC lie in the 1960s and 1970s, when the leaders of majority-ruled countries and national liberation movements coordinated their political, diplomatic and military struggles to bring an end to colonial and white-minority rule in Southern Africa. The immediate forerunner of the political and security cooperation leg of today's SADC was the informal Front Line States (FLS) grouping which was formed in the mid 1970s whilst the Southern African Development Coordination Conference (SADCC) was the forerunner of the socio-economic cooperation leg of today's SADC which was formally established on 1 April 1980.
The FLS dissolved in 1994 whereas SADCC was transformed into SADC on 17 August 1992 with the adoption by the founding members of SADCC and newly independent Namibia of the Windhoek declaration and treaty establishing SADC which provides for both socio-economic cooperation and political and security cooperation. On 14 August 2001, the 1992 SADC treaty was amended heralding the overhave of the structures, policies and procedures, a process which is ongoing.
SADC aims are generally set out in different sources such as the harmonised, detailed and recent development and cooperation plans such as the Regional Indicative Strategic Development Plan (RISDP) and the Strategic Indicative Plan of the Organ (SIPO). The sources include the SADC establishing the organisation of various protocols which as the corruption protocol, the firearms protocol, the OPDS protocol, the health protocol and the education protocol and declarations such as those on HIV and AIDS and food security. The concept of greater region integration in both political and economic affairs is one of its long term plans.
SADC has fifteen member states namely: Angola, Botswana, D.R.C, Lesotho, Madagscar, Malawi, Mauritius, Mozambique, Namibia, Scychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. Its headquarters are in Gaborone, Botswana.
A free trade area is a designated group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods between them. It is a market model in which trade in goods and services between or within countries flow unhindered by government imposed restrictions. It can be considered the second stage of economic integration. A SADC Free Trade Area would serve well as this kind of economic structures of the countries involved are complementary .
Economists that advocate free trade rightfully believe that free trade was the reason why certain cultures prospered economically. Adam Smith for example, pointed to increased trading as being the reason for the flourishing of not just the Mediterranean cultures such as Egypt, Greece and Rome, but also of Bengal and China. Trade liberalisation initiatives such as the European Union are proving quite beneficial in fact trade in some countries represents a significant part of GDP showing that free trade could help boost the GDP of SADC number states.
The aim of a free trade area as well as its purpose is to reduce barriers for easy exchange of goods and services so that trade can grow as a result of specialisation, division of labour and most importantly via (the theory and practice of) comparative advantage. The SADC FTA will allow member states to produce the goods and services they can produce most efficiently, qUickly and cheaply results in great and better output than before and to trade their surpluses of those goods for the products they cannot produce, or are less efficient at producing.
The growth of regional trading blocs has been one of the major developments in international relations in recent years. The SADC Free Trade Area will result in an increase in the volume and value of goods and services traded. The free movement of capital between and within countries can help generate social benefits such as the construction of schools, hospitals and medical facilities.
However like most development efforts free trade is quite controversial and has drawn criticism from both ends of the political spectrum. It does bring in an element of political leaders relinquishing some of their power and it brings in competition amongst members BUT only when its principles of specialisation are not followed. Free trade policies have battled with mercaritilism, protectionism and isolationism (all the policies pertaining to these).
While international trade has been present throughout much of history its economic, social and political importance have increased in recent centuries, mainly because of industrialisation, advanced transportation, globalisation, multi-national corporations and outsourcing. In fact, one could say that it is probably the prevalence of international trade that is usually meant by the term globalisation.
More liberal trading regions such as the SADC Free Trade Area are leading to increased trade volumes, larger investment flows and increasingly footloose industries. As Dr Prega Ramsamy in 2004 stated, the SADC FTA has to be "a win-win situation", all members states should benefit. The creation of a wider economic space where goods and services can move without trade barriers means that there would be a wider market for goods that are produced according to acceptable standards that are even competitive with non-SADC FTA members. Under all FTA arrangements the increased total imports from FTA partners exceeds the reduction in imports from non-FTA partners. The SADC FTA is not trade creating. It is envisaged that it will increase the common market to two hundred and fifteen million people which in turn would lead to increased foreign direct investments (FDI).
The SADC FTA is expected to help alleviate the chronic problem of poverty and to act as a strategy for sustainable development in SADC countries. The SADC protocol on trade in Article 2 clearly states that it plans to enhance the economic development, diversification and industrialisation of the Region. It can help create opportunities for producers who have been marginalized or disadvantaged economically by the conventional trading system. A SADC FTA will ensure the inability of firms to distort markets through government imposed monopoly or oligopoly power and the absence of trade distorting polices that give some forms, households or factors of production an advantage over others.
The SA DC FTA can ensure free access to SA DC markets and market information enabling the expansion and creation of business objectives. With free movement of labour assured job opportunities are also destined to rise and stop unemployment levels. The free movement of capital is also of great advantage as learning facilities can be built such as schools and universities, medical facilities such as hospitals and pharmacies and many more infrastructure. These government owned services are thereafter with the help of capital able to provide low-costing services or even to be free of charge particularly services such as New Start Centres.
The theory of comparative advantage argues that in an unrestricted marketplace (in equilibrium) each source of production will tend to specialize in that activity where it has comparative (rather than absolute) advantage. The theory argues that the net result will be an increase in income and ultimately wealth and well-being for everyone in the FTA. However the theory refers only to aggregate wealth and says nothing about the distribution of wealth. In fact there maybe significant losers, in particular amongst the recently protected industries with a comparative advantage. The proponent of free trade can however retort that the gains of the gainers exceed the losses of the losers.
The more member states we have complying to the SADC FTA idea the larger the internal market and the greater the number of potential customers.
The SADC FTA and its agreements are cascadable to some degree if the number states sign an agreement to form the SA DC FTA and choose to negotiate together (either as a trade bloc or as a forum of individual members of their FTA) another free trade agreement with some other external country (or countries) then the new SADC FTA will wrists of the old SADC FTA plus the run country (or countries) ensuring more economic empowerment.
The World Trade Organisation was created to facilitate free trade by mandating the mutual most favoured nation trading status between all signatories ensuring that with the help of the WTO the FTA will be beneficial to the citizens of the SADC region. The WTO has to be involved in setting up the FTA.
The African Economic Community organisation of the A.U. should also be involved as it states wanting to establish and help establish ground for mutual economic development amongst the majority of African States, whether or not a direct member. The African Economic Community's many goals is the actual creation of a free trade area, along with the establishment of a single currency and Central African Bank, and thus establishing an economic and monetary union which will benefit the citizens of the SADC region.
Governments of SADC number states should ensure the proper and best utilisation of the resources of each member states e.g. if the country has minerals, mining projects should be implemented, helping establish self-sufficiency and generating wealth. Governments can ensure that public services e.g. police protection and postal services are functioning and working efficiently as these services assist the FTA.
Empirical evidence for the success of free trade can be seen in the contrast between countries e.g. South Korea (adopted a policy of export-oriented industrialisation) and India (had a more closed policy). South Korea has done much better by economic criteria than India over the past fifty years and furthermore its success also has to do with effective state institutions.
Cumulation is the relationship between different FTAs regarding the rules of origin. Sometimes cross-cumulation takes place as different FTAs supplement each other e.g. NAFTA can inter-trade with the European Free Trade Association.
Most Member States face pressures from particular interests to delay or avoid the effects of regional trade liberalization. The Trade Protocol respects the sovereign rights of Member States to continue to protect a certain number of such sectors by declaring them sensitive and excluding them from the effects of preferential tariff reductions. The imposition of trade restricting rules of origin for this purpose, however, is inappropriate. It bypasses limits on the use of the sensitive sector provision and erects an artificial barrier to producers in other SADC Member States that would benefit from utilizing SADC trade preferences to trade among themselves. The use of WTO-approved safeguard measures is already provided for in the Trade Protocol to deal with cases of serious market disruption due to trade liberalization. The UNCTAD, ITF and the IMF can also be involved. Pertaining also to government of countries should be stable, instead in the economy and avoiding civil war.
One must first recognise that effective integration requires more than reducing tariffs, and quotas. Many other barriers have the effect of segmenting markets and impeding the free flow of goods, services and investment.
The SADC FTA could try to protect its markets e.g. by paying subsidies to maize-meal farmers in Zimbabwe or to the beef farmers in Botswana. This encourages more production. A single market needs to be constructed, representing the first stage towards "fullblown I economic and monetary union.
As a trading bloc we become several countries grouped together whose volume and value of trade increases. The type and quality of the transport network will affect the market potential therefore member states need to work on and invest in their transport mechanisms.
A major step would be to step-up industrialisation SADC members with the exception of South Africa are LEDCs which sell primary goods to MEDCs at low and often fluctuating prices. Raw materials are more vulnerable to changes in market price and demand. MEDCs e.g. the members of the E.U. trade secondary processed goods which are sold at high and usually steady prices. Conclusively trade on LEDCs is deficit as inputs cost more than exports. Boost up industrialisation like NICs such as Japan and accumulate wealth through the scale of manufactured goods and SADC members will be able to provide jobs, improve transport systems and developed countries. A good example of the benefits of industrialisation is the fact that the amount of Trans-Pacific trade now exceeds that which crosses the Atlantic.
Eliminating customs duties between SADC numbers reduces the cost of products. Infrastructure in support of trade e.g. banking, stock market and technology in support of trade such as electronic commerce an vending machines can be purchased. Aid from the IMF in the form of a grant/loan aimed at short-term relief or long-term benefit can be given.
Initial indications suggest that the direct impact of the SADC Trade Protocol has been very limited.
Intra-regional trade in products which do into receive preferences has grown much faster than trade in products which are eligible for preferential treatment. The rules of origin are likely to be one of the key constraints on the take-up of the available preferences. This, more simple rules of origin which provide producers with flexibility in proving compliance, backed up by training of customs officials and better information for traders is likely to contribute towards more effective enforcement of rules of origin whilst at the same time facilitating legitimate preferential trade and integration within SADC. An appropriate approach would be to supplement the existing rule which ensures that simple screen driver assembly operations do not confer origin. The trade protocol is likely to stimulate regional integration and facilitate the growth of companies that can compete at a global level.
The longer we delay the formation of the SADC FTA, the larger trade gap in the world market between us as the SADC member states and other free trade organisations e.g. NAFTA and the E.U.
