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
Presentation Outline
•
a) Introduction
b) Literature Review
c) Methodology and Data Description
d) Analysis
e) Evaluation of Results and Implications
f) Concluding Remarks
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
Introduction,….Land Area and
Population
Angola
Botswana
DRC
Lesotho
Madagascar
Malawi
Mauritius
Mozambique
Namibia
South Africa
Swaziland
Tanzania
Zambia
Zimbabwe
SADC
Land area
2
(1000 km )
1,246.7
600.4
3,245.4
30.4
587.0
118.5
2.0
801.6
825.5
1,219.9
17.4
945.1
752.6
390.6
10,783.1
Population, 2006
estimate (million)
16.4
1.8
59.3
1.8
19.1
13.2
1.3
20.1
2.1
47.4
1.1
39.5
11.9
13.1
248.1
Introduction... Economic
Performance
Country/
Period
GDP (current
prices US$ bn)
Per capita GDP
(current prices US$)
Average GDP
growth (%)
Annua
growth
SADC
Angola
Botswana
DRC
Lesotho
Madagascar
Malawi
Mauritius
Mozambique
Namibia
South Africa
Swaziland
Tanzania
Zambia
Zimbabwe
2006
378.7
44
10.3
8.5
1.5
5.5
2.2
6.4
7.6
6.4
255
2.6
12.8
10.9
5.0
2006
1,967.9
2,682.9
5,722.2
143.3
833.3
288.0
166.7
4,923.1
378.1
3,047.6
5,379.7
2,363.6
324.1
916.0
381.7
2000 - 05
4.0
9.16
5.49
4.42
2.46
2.21
2.86
3.69
8.57
4.62
3.63
2.32
6.91
4.71
-4.93
2006
5.7
18.6
5.4
5.6
7.2
5.0
7.9
3.6
8.0
4.1
5.4
2.8
6.7
5.3
-6.1
Introduction…..GDP contribution
by sector
bullet
sub-bullet
sub-bullet
Introduction… objectives
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•
•
•
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
Introduction…Dependence on
Trade Tax Revenue
Trade tax revenue-1999
Country
Share of
Share of total
 bullet
GDP (%
revenue (%)
 sub-bullet7.70
18.10
Botswana*
 sub-bullet18.00
58.00
Lesotho*
25.60
Madagascar 2.80
2.50
12.40
Malawi
 bullet
31.50
Mauritius
 sub-bullet 5.40
18.90
Mozambique
 sub-bullet2.20
38.00
Namibia*
 sub-bullet12.10
0.80
3.00
SA*
15.30
55.20
Swaziland*
 bullet
1.30
11.60
Tanzania
5.90
30.90
Zambia
2.60
10.40
Zimbabwe
Simple
average tariff
12.34
12.34
16.20
13.00
24.36
20.50
12.34
12.34
12.34
12.66
13.59
19.87
Research on the Trade Protection
in SADC
Authour(s)
Year
Focus
Limitation
Flatters
2001 Rules of Origin
Restricted to RoO
Lewis et al
2001 Impact of trade liberalisation
Prod. & country aggregation
Wobst
2002 Impact of tariff harmonisation
Restricted to 5 countries
Brentton et al
2004 Rules of Origin
Restricted to RoO
ESRF, Khandelwal
2004 Revenue
Narrow focus
Keck & Piermartini
2005 Impact of trade liberalisation
Prod. & country aggregation
Mutambatsere
2006 Effects of tariff reforms
Focused on cereals
Nhara, Subramanian
2006 Revenue
Narrow focus
SACAU
2006 NTB in agriculture
Baseline study
No studies on" the degree of tariff protection between SADC MS”
Methodology and Data
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•
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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 importer’s tariff rates are weighted by exporter’s world
trade to determine the index
Methods…RTR
n
RTR AB 
B
A
(
T
.
V
 i i )
i
n
 T
i
A
.Vi B

i
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
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
Data
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•
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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
AVE were calculated using…
t i ,ave 
t i , spe * Vi
Xi
Analysis….Comparative tariff structure,
1999
No of lines
Mean
Std dev
Median
Max.
Co. of var.
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•
•
•
Mal Mau Moz SACU Tan Zam Zim SADC Avg
6,120
5,442 5,479 5,246 7,824 5,619 6,066 7,166
17
13
24
21
12
13
14
20
17
13
28
13
27
11
10
17
14
10
10
25
6
15
15
15
114
30
80
35
500
30
25 100
1.0
1.0 1.1 0.6
2.2 0.9 0.7 0.8
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 SACU’s complex tariff regime
Analysis,….Tariff Distribution & Peaks
Distribution
Duty free (%)
1-5%
6-10%
11-20%
21-30%
>30%
Tariff Peaks
Domestic
International
•
•
•
•
•
Mal
33
15
18
0
34
0
Mau
28
4
22
13
5
29
Moz
1
12
30
0
21
36
SACU
45
5
8
15
22
5
Tan
39
2
6
15
37
0
Zam
21
14
0
33
32
0
Zim
6
25
9
22
18
20
Avg
25
11
13
14
24
13
0
34
14
38
0
57
5
35
0
39
0
32
5
44
3
40
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
Analysis…Agric exports and
tariffs
Agric Exports
Source
$ (mil)
Malawi
Mauritius
Mozambique
SACU
Tanzania
Zambia
Zimbabwe
Total SADC
•
•
•
356
379
187
3,954
402
61
815
6,154
% of
total
87
24.
52
11
66
11
48
43
Top 10 agric
exports
$
% of
(mil) agric
348
98
349
92
172
92
1,706 43
339
84
54
87
678
83
3,645 59
Avg Agric
tariff
16
22
29
25
18
20
26
22
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
Analysis …Tariffs faced by top 10 Agric
Exports
Exporter
Mal
Mau Moz
SACU Tan
Zam Zim
Average % of agric tariffs of top 10 products
Mal
22
42
23
78
16
19
44
Mau
16
36
27
35
20
23
18
Moz
15
37
28
19
16
20
24
SACU
20
20
32
63
25
25
36
Tan
15
34
28
21
18
23
29
Zam
16
20
27
8
16
20
22
Zim
26
40
27
70
18
22
45
Avg (weighted)
18
33
27
42
18
22
31
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
Analysis…RTR interpretation
Mal
Mal
Mau
Moz
SACU
Tan
Zam
Zim
•
•
0.4
0.7
0.2
0.9
0.8
0.6
Mau Moz SACU Tan Zam Zim
1.9
1.5
4.0
1.1 1.2 1.7
0.7
1.8
0.6 1.2 0.5
1.4
0.6
0.6 0.7 0.9
0.6
1.7
1.2 3.0 0.5
1.8
1.7
0.8
1.4 1.7
0.8
1.4
0.3
0.7
1.0
2.2
1.1
2.0
0.6 1.0
RTR =1, symmetry of respective tariff
regimes
RTR <1, MS grants more access than
receives
Evaluation and Implications
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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”
Concluding Remarks
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“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.