The Grand Tripartite FTA:
Is Namibia Ready to Engage?
Paul Kalenga
Senior Trade Adviser, SADC Secretariat
20th April 2011, Windhoek, Namibia
Introduction
•
Policy consensus that trade matters for growth and development
•
There is increasing policy consensus that regional trade openness (in the form of
widening the economic spaces of fragmented small economies) matters for
economic growth
•
Hence, 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)
Problem of overlapping memberships
But intra-regional trade in Africa not yet a
powerful engine for growth – why?
• Production and export structures geared to primary commodities
• Inadequate industrial capacity for diversified manufactured goods
• Inadequate policy attention on trade in services as a catalyst for growth
and investment
• Inadequate 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
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?
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 Force
• First Tripartite Summit, Kampala, October 2008 decided to establish the
Tripartite FTA
• Technical work by the Secretariats on the design of the Tripartite FTA,
since 2009 and now completed and to be used as a basis for negotiations
• Second Tripartite Summit, scheduled for June / July 2011, South Africa, to
launch the Tripartite FTA negotiations
What can the grand tripartite FTA do?
• Overcoming the problem of overlapping membership
• Consolidating existing FTAs in COMESA, SADC and EAC into a single FTA by
building on positive elements (acquis) and addressing their design and
implementation shortcomings
• Pursue sector-wide negotiations: avoid sensitive products and exclusions,
include agricultural goods
• Adopt simple and liberal rules of origin
• Address non-tariff barriers (NTBs) and trade facilitation problems
• A complementary strand on infrastructure, especially transport
infrastructure (roads, rail, ports) and communication lin
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 competition
Regional economies of scale
Foreign investment
Trade diversion? (may be at the cost of trade with more efficient third
countries)
- External tariffs are reasonably high – must lower them to avoid trade
diversion
The cost of intra-regional transport, communication, doing business
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-oriented
• For 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
measures
• Namibia should strategically position itself as a transport hub within the
Tripartite FTA (Walvisbay corridor, transport connection with Angola, DRC,
Zambia, Zimbabwe, etc.)
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 trade
• Improving policy strategies to tackle constraints to manufacturing
•
An 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, consumers
• Build on success stories- exploit opportunities for which firms have a
comparative advantage in regional markets / seek improved market access
in goods and services markets
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 FTA
•
Public/ 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 region
•
The need for a tripartite FTA regime to be a trade, transport and infrastructure facilitation
rather a mere tariff liberalization strategy
THANK YOU!