The Extent of SADC Trade Protection and its Effects on the Least Developing Members of the Region.

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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
2008Presenter Mmatlou Kalaba
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Presentation Outline

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

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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

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Introduction,.Land Area and Population
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Introduction... Economic Performance
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Introduction..GDP contribution by sector
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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

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IntroductionDependence on Trade Tax Revenue

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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
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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

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MethodsRTR

• 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

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MethodPros 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

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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
• AVE were calculated using

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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

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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

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AnalysisAgric 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

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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
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AnalysisRTR interpretation

• RTR 1, symmetry of respective tariff regimes
• RTR lt1, MS grants more access than receives

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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

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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.