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SADC FTA implementation shortcomings highlight the scale of the Tripartite FTA challenge

22 July 2013

The South Africa-based Trade Law Centre (TRALAC) has published three ‘Comment’ discussion pieces on the trade implications of the ongoing suspension of the SADC Tribunal, on SADC law and the SADC Trade Protocol.

The suspension of the SADC Tribunal in 2010 means that no state or private party “can bring an application for the enforcement of rights provided for in any of the SADC legal instruments”. The process by which the SADC Tribunal was suspended is held to demonstrate “a serious design flaw in SADC’s dispute settlement system”. The TRALAC note argues that the suspension of the SADC Tribunal directly affected the implementation of the SADC FTA, since “there are serious unresolved legal issues as a result of ‘surcharges’ and new duties imposed on mainly South African goods imported into Zimbabwe and Tanzania.” “These measures”, it is maintained, “are prima facie unlawful under Articles 3 and 4 of the SADC Trade Protocol”, but in the absence of the SADC Tribunal, these disputes cannot be ruled upon.

TRALAC maintains that the current situation has “long-term consequences for investment development and respect for the rule of law”. It suggests that trade under the SADC FTA now “apparently takes place on the basis of discretions and ad hoc policy responses”. It also highlights the irony of non-implementation of SADC FTA commitments in the context of the Tripartite FTA (T-FTA) negotiations.

The issue of the functioning of the SADC Tribunal needs to be seen against the background of the Southern Africa Trade Hub audit of the SADC FTA in 2012, which found that “certain member states are not complying with basic obligations in the SADC Trade Protocol. Some are charging ‘surtaxes’ and levies on goods imported from other state parties, which are in violation of the applicable tariff schedules. In other instances goods from selected member states are targeted, amounting to discriminatory treatment.” Complaints have also been made over the use of health standards to block imports, with little objective justification being provided.  The TRALAC analysis notes that this is not a new problem, but that the SADC Committee of Ministers of Trade (CMT) could “not yet agree on how to tackle them or how to implement effective answers”.

According to the TRALAC Comment, this reflects a more fundamental problem, namely, the reluctance of SADC governments to “litigate against each other” for non-compliance with regional trade commitments. The analysis highlights the need for independent adjudication processes specifically for trade disputes, as used elsewhere in the world. The absence of such mechanisms, alongside implementation problems, is leading to “growing cynicism” in the private sector over regional trade integration processes.

An additional problem identified is the ambiguous nature of many of the basic trade policy commitments. One example of this is Article 3 of the SADC Trade Protocol, which deals with the elimination of barriers to intra-SADC trade, but also provides for derogations from the applicable obligations. Often the processes and methods for the operational application of ambiguous commitments are not developed further by the relevant ministerial structures, leaving scope for “ad hoc and politically motivated derogations of Article 3”.

These shortcomings are seen as important, given the wider aspirations of the T-FTA.

Editorial comment

Across the Southern and Eastern African region, the limitations of non-binding and non-enforceable regional trade policy commitments are being recognised. In the EAC, press reports noted in February 2012 that “the East African Community secretariat is working on a legal document to compel member states to eliminate non-tariff barriers” (see Agritrade article ‘ EAC trade integration lags behind schedule’, 11 March 2012).

However, an important lesson from the SADC experience is the need to ensure that these are trade-specific mechanisms, and not general dispute settlement arrangements that can be undermined by broader political disputes. The suspension of the SADC Tribunal in 2010, for example, followed rulings by the Tribunal against Zimbabwe for human rights violations.

The importance for intra-regional trade and investment of dealing with the transparent deployment of trade policy measures and strengthening enforcement mechanisms – to ensure that such mechanisms are only used in clearly defined circumstances – cannot be overestimated. Patterns of investment in agro-food sector development in the SADC region suggest that uncertainties over the security of access to markets in the SADC region are leading to major agricultural sector investments concentrated on production of goods for overseas markets, where market access arrangements are seen as being more secure (e.g. sugar sector investments in LDCs for the EU market), with regional investments being undermined (e.g. maize sector investments in Zambia and Malawi for regional markets).

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