s11wp082011 sensitiveproducts in tripartite fta 20110404 fin · an assessment of agricultural...

An assessment of agricultural

sensitive products within the

Cape to Cairo Tripartite Region

by Taku Fundira

tralac Working Paper

No. S11WP08/2011

April 2011

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An assessment of agricultural sensitive products within the Cape to Cairo Tripartite Region. Author: Taku Fundira S11WP08/2011 | April 2011

Copyright © tralac, 2011.

Readers are encouraged to quote and reproduce this material for educational, non-profit

purposes, provided the source is acknowledged. All views and opinions expressed remain solely

those of the authors and do not purport to reflect the views of tralac

This publication should be cited as: Fundira, T. 2011.

An assessment of agricultural sensitive products within the Cape to Cairo Tripartite Region.

Stellenbosch: tralac.

This publication has been financed by the Swedish International Development Cooperation Agency, Sida.

Sida does not necessarily share the views expressed in this material. Responsibility for its contents rests

entirely with the author.

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An assessment of agricultural sensitive products

within the Cape to Cairo Tripartite Region

Introduction

In an effort to enhance market access, harmonise policies in areas of common interest and

address the issue of multiple membership among other issues, Heads of States from the

regional economic communities (RECs) of COMESA, EAC and SADC agreed in 2008 to

establish an FTA among the three RECs. Despite this drive to deepen integration among the

tripartite member countries, it is also equally important to note that trade liberalisation can

have negative consequences for the economy of a country. This may therefore partly explain

why countries have tended to prolong liberalisation for or even exclude from liberalisation

certain products of strategic social and economic significance.

In trade policy analysis, such products can be considered and classified as special or sensitive

products. However, what constitutes a sensitive product differs from country to country

and there seem to be no common criteria used to determine these sensitive products.

Despite this shortcoming, there seems to be a common understanding that a product is

deemed sensitive if trade liberalisation impacts negatively on the production or trade of the

said product. Such products are considered to be vulnerable to a trade policy shock that

negatively affects the product’s production, consumption and revenue-earning capacity.

We note that the issue of sensitive products for exemption from tariff liberalisation in the

different countries/regional groupings may become an area of contention in the Tripartite

FTA negotiations, simply because much of the basis for this exemption designation is likely

to be arbitrary, and the sensitive products are more likely to reflect protectionist interests

or rent-seeking behaviour, both of which will perpetuate inefficiencies. There have been

discussions around the issue of sensitive products within the individual RECs and within the

Tripartite FTA itself thus emphasising the significance of this issue and therefore we urge

countries to base their selection on genuine public policy objectives.

The fact that this envisaged FTA brings together three RECs that have either attained or

intend to establish a customs union (CU) territory complicates this process because of the

common external tariffs regimes that need to be or have been established among the

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members of each CU. Currently, COMESA and the EAC have attained customs union status

(in theory COMESA is a customs union, but in practice this has not yet been implemented)

while SADC is still an FTA also aiming at attaining CU status. For the proposed Tripartite

FTA to function there is a need for the rationalisation of tariff structures and the

development of common criteria for sensitive products among other issues.

For the two CUs (COMESA and the EAC), rationalisation of tariff structures is not an issue

as both have agreed and established Common External Tariff (CET) duty rates that have

similar applied duties on capital goods (0%), raw materials (0%), intermediate goods (10%),

and finished goods (25%). However, SADC, which is still an FTA, will need to agree on a

CET and because of the multiple membership conundrum that its members face, may well

rationalise its envisaged CET duties in a manner similar to those of the other RECs (i.e.

COMESA and EAC). The fact that within SADC there is a CU, SACU, with a rather

complex tariff structure in terms of the number of tariff lines and bands, also complicates

this process.

Apart from the need to rationalise the tariff structures, there is no indication or

transparency on how the process of determining sensitive products is currently being

conducted in the different RECs. At the moment, only the EAC members have agreed and

developed a single list of sensitive products while the other RECs of COMESA and SADC

have yet to conclude this process. It is yet to be established whether the creation of this

enlarged FTA will create urgency among the members of COMESA and SADC to complete

this process.

Aim of the study

The aim of this chapter is to provide an overview of the rationale behind sensitive products

during trade liberalisation. We attempt to achieve this by providing an overview on what

motivates countries to seek for flexibilities from full liberalisation for certain products. We

do this by highlighting some of the common indicators that are generally viewed as

instruments for selecting sensitive products. This discussion is followed by a review of how

the issue of sensitive products is being handled at the multilateral and regional level. Here

our focus will be on the provisions within the World Trade Organisation (WTO)

Agreement and also within the COMESA, EAC and SADC agreements as individual RECs as

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well as an expanded Tripartite FTA. We also discuss how this affects the conclusion of

negotiations by viewing it in the perspective of the current negotiations both at the regional

and multilateral level.

Our discussion then becomes more focused and specific to agricultural trade liberalisation

within the Tripartite FTA and the extent to which agricultural products form part of the

sensitive products list. The underlying assumption here is that agriculture forms the

backbone of any economic and social development in most of the member countries’

economies and as such it is a sector of significant importance that may need some form of

support. We conclude the paper by highlighting some challenges and possible

recommendations for developing a common approach to identifying sensitive products.

Criteria for selecting sensitive products1

In general, there is a wide selection of criteria which have been used to select sensitive

products and which include the following among others: revenue contribution, importance

of the sector to a country’s economy, and the potential of the sector to regional economic

development.

The importance of a sector to a country’s economy can be measured using the following

indicators:

• Contribution to employment;

• Contribution to Gross Domestic Product (GDP);

• Value-added;

• Exports earnings;

• Outputs/Inputs for differentiated tariff treatment;

• Stage of sector development/infant industry; and

• Current level of the support given to the sector (incentives).

1 Excerpt taken from COMESA Customs Union (2009).

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The potential of sector to regional economic development is measured using the following

indicators:

• Existing market size;

• Potential market size;

• Current production/potential production/investment plan;

• Preference agreement;

• Outputs/inputs for differentiated tariff treatment; and

• Social, health, cultural and religious reasons.

As highlighted above, the grounds on which goods could be designated as sensitive are quite

broad and this could result in long lists of sensitive products being produced by member

states of the three RECs. Such a scenario would effectively render the process of

liberalisation ineffective.

Provisions regarding sensitive products in trade agreements

The success of any trade negotiations lies in the extent to which flexibilities are

accommodated. Therefore, support to sectors deemed strategic in enhancing economic

growth is important in the development of market access liberalisation schedules. In

multilateral, regional or even bilateral negotiations, it is necessary to include exemptions to

accommodate especially politically sensitive sectors. The role played by sensitive products in

improving market access is such that the number and treatment of eligible tariff lines will be

vital components of any outcome that delivers substantial benefits for both trade and

development.

However, too many exceptions put at risk the objectives of any trade liberalising

negotiation. It is therefore important to note that although such exemptions are allowed,

efforts must be made to either establish agreements without sensitive product lists or at

least ensure that countries are restricted and only allowed to develop short sensitive

products lists. In the sections to follow we highlight how the issue of sensitive products is

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handled a) at the multilateral level (WTO); and b) at the regional level (COMESA-EAC-

SADC).

a) Global context – WTO framework

In general, the objective of the World Trade Organisation is to provide a platform for

negotiations amongst members in order to set general rules for reducing trade barriers. For

the success of this rules based system, transparency, predictability and enforceability is

crucial, which implies a political commitment for all members to abide by the set and agreed

rules.

In the context of the WTO, reference to sensitive products is accorded to agricultural

products that are identified by the members and which are not subject to full tariff cuts.

Therefore both developed and developing countries can declare a product sensitive

especially for political reasons, in which case allow for flexibilities to the liberalisation norm.

According to Gouel et al. (2010), flexible treatment of these products is allowed, more in

relation to market access, and are subject to lower tariff cuts than specified by the formula;

however, in exchange, tariff rate quotas (TRQ) will be opened to ensure (at least some)

‘substantial’ improvements in market access for each product.

In the current Doha Round of negotiations several proposals have been made regarding the

issue of sensitive products. Among others, the key to the success of the Doha Round will be

the manner in which this issue will be handled during the negotiations. A concern which is

regarded as likely to be a major source of conflict is expected to arise from the definition

and application of the concept of 'sensitive products’. Developed countries will be under

pressure to ensure that the sensitive products that they have identified are not

concentrated in products that will render the market access endeavour meaningless. This is

because in agriculture, the …tariff structures of most (particularly developed) countries

show remarkable degrees of dispersion, with tariff peaks concentrated in a very small

number of agricultural tariff lines, which explains why even a small percentage of sensitive

products can significantly limit market access improvements’ (Gouel et al 2010).

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b) Regional Context – COMESA-EAC-SADC configuration

Our general assumption is that the main variables, which have been selected as key

indicators for determining a product’s sensitivity by the three RECs are the same as those

used globally. The basket of indicators includes, among others, the following: fiscal,

contributions to output and other policy imperatives of member states.

We further note that support to sectors deemed strategic in enhancing economic growth is

important in the development of market access liberalisation schedules. This assumption is

supported by SADC and COMESA countries’ selection criteria. Both SADC and COMESA

have broadly considered revenue and infant industry arguments as key criteria for assessing

commodities’ level or extent of sensitivity. The EAC, on the other hand, has identified a

common list of sensitive products although the criteria for the selection of the products are

unclear. Under the EAC Customs Union Protocol, exemptions were made for 58 products

which do not conform to general CET structure and are regarded as sensitive, thus

attracting higher tariffs.

As already noted, the EAC is the only REC that has managed to identify and agree on a

common product list that is designated ‘sensitive’. To date, COMESA and SADC have been

unable to complete the exercise of sensitive products designation. At the launch of the

COMESA CU, it was noted that only 11 of the 19-member group had identified their

sensitive products list. However, the lists of the individual countries and the products

identified remain unclear. For SADC, there seems to be no indication of how far this

exercise has progressed, bearing in mind the fact that SADC is already lagging behind on its

implementation deadlines as set out in SADC’s Regional Integration Strategic Development

Plan (RISDP).

Country analysis of agricultural sensitive products

The big picture

Agricultural plays a crucial role in the economy of most developing countries and provides

the main source of food, income and employment to their rural populations. In most African

countries agriculture contributes over 20 percent to GDP, 70 percent to employment, over

50 percent to export earnings and about 40 percent to government revenue. The

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assumption we therefore make from a developing country perspective, is that agriculture is

a pivotal sector both from an economic and a social perspective. Thus, protection or the

need to designate some agricultural products as sensitive can be justified by the fact that in

general for most developing countries (Waiyaki, undated):

• The domestic market is considered as an initial outlet for poor small farmers;

• Farmers are not able to compete in export markets or against imported products; and

• Poor investment in infrastructure, particularly roads, communication, irrigation and

technology development limits the productive capacity of domestic farmers.

Measures are therefore required to ensure that local poor farmers are not adversely

affected by liberalisation while at the same time efforts to enhance productive capacity,

competitiveness and economic growth are underway.

Depending on each member country’s national strategic plan, countries may either seek to

have the sector heavily protected or maintain some form of protection (i.e. partial

liberalisation). For each option chosen from the scenarios highlighted here, there are

consequences for the producers, the consumers and the economy in general.

Scenario 1: Heavily protected sectors

Governments usually apply high tariffs on certain goods to limit international competition, a

global phenomenon that is deeply rooted in the politics of nations. The high tariff may imply

that the products are sensitive and therefore of strategic importance. However, applying

high tariffs is a protectionist policy that is trade restrictive and comes at great economic

cost. This is simply because it favours the domestic (often inefficient) producers at the

expense of the consumers who pay a high price for domestically produced goods. For

example, an increase in the protection of basic products such as wheat and maize flour,

cigarettes, matches, rice and milk results in price increases for end consumers, hitting poor

people hardest. Therefore such a strategy may not be ideal, especially when poverty

alleviation concerns are part of a country’s national policy strategy.

On the other hand, such protectionist measures may provide incentives for some infant

industries for which prospects exist for the domestic producers to become competitive

over the medium to long term. The only problem with infant industry protection is that it

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may lead to the promotion of inefficient industries, which otherwise cannot survive without

the protection. According to Mudungwe (2010), a rapid cut in tariffs for a sector such as

agriculture, without complementary policies and programmes to strengthen internal

production, can result in the collapse of the sector. This can have a negative impact on

employment, effectively raising unemployment in the sector, as it is usually a major

employment section in the rural areas. This indicator has been identified as very relevant in

measuring product sensitivity in the three RECs.2

Scenario 2: Partially liberalised sectors

Most developing countries including the tripartite members, with the exception of a few,

rely heavily on tariffs for government revenue, and therefore tariff revenue concerns are

likely to play an influential role in trade policy formulation in the medium to long term. This

is because a sharp decline in revenue would impact in the short run on the ability of a

particular government to function effectively in the provision of infrastructure, health and

other social services. Therefore the products that countries may need to exclude from

liberalisation to prevent loss of revenue are often the partially liberalised sectors (attracting

medium-level tariffs) as they yield the most revenue. This is because high tariffs as already

highlighted are restrictive and allow only a few imports from which to collect the tax. Thus,

countries may find that excluding highest-tariff products from liberalisation will force them

to liberalise on their key revenue-generating products that would have negative economic

consequences for the government in the short run. It is in this instance that governments

may consider designating products attracting medium-level tariffs as sensitive purely for

revenue concern, as they find alternatives to help reduce dependency on trade revenue.

2 We caution that at the time of publication of this statement, it was unclear as to which criteria the EAC had

based its sensitive products list on.

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Methodology

As noted in previous sections, designation of sensitive products may be for specific reasons

or certain objectives. Some considerations for agricultural sensitive products include those

• most negatively affected by imports;

• with very high tariffs;

• with greatest reductions in tariff revenues;

• employing large numbers; and

• where the country has production capacity.

In our attempt to identify sensitive products for the countries in the proposed tripartite

FTA configuration, in the absence of publicly available sensitive product lists (with the

exception of EAC and SACU), several assumptions were made and are listed below.

i) For COMESA members, any product traded among member countries (intra-regional

trade) and still attracting a tariff should be designated sensitive. The underlying

assumption is the fact that within a CU, member countries have duty-free access to

each other’s markets and the only exemption is when products have been deemed

sensitive, or in this case, tariffs applied to third-party countries (i.e. to non-COMESA

tripartite members).

ii) Within SADC, products that currently attract tariffs (with the exception of Angola,

DRC and Seychelles)3, are classified in Category C –‘Sensitive Product’ or Category E

– ‘Exclusion List’. Due to the fact that SADC recently attained FTA status, the two

categories highlighted here are the ones that are permissible for levying tariffs. We

further assume that any agricultural products still attracting tariff should therefore fall

under Category C.

iii) For SACU countries comprising South Africa and the BLNS (Botswana, Lesotho,

Namibia, and Swaziland), who are also members of SADC, SACU’s CET is applied to

third countries and no internal tariffs exist between member states. SACU’s

3 These countries have not yet submitted their phase-down schedules with Seychelles having recently rejoined

the regional bloc.

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membership to SADC implies that the above assumption for SADC is applicable.

However, there are separate offers for South Africa by the other non-SACU SADC

members. These will be analysed separately. We further note that SACU has fully

liberalised its tariffs for agricultural products originating from SADC and hence no

sensitive products lists are in order here.

Caveat

The main disadvantages of this methodology are that:

a) It uses proposed SADC tariff phase-down schedules which were notified in 2000 when

the SADC Trade Protocol was signed. The problem with this is that the schedules are

only indicative and do not reflect whether countries have kept to their commitments

and implemented the phase-down schedules accordingly. To highlight this predicament

a case study analysis to support the above notion was conducted for South African

exports to the tripartite countries (see Box 1); and

b) It is difficult to analyse inter-regional tariffs as these usually reflect averages of tariffs

applied by the member countries of the particular REC under review and not

necessarily for individual countries. Individual country-country analysis was not feasible

due to lack of time and unavailability of data.

Results of the analysis

A total of 16 countries,4 the bulk of which are SADC members, were analysed. Non-SADC

COMESA members (especially the northern countries) were not included due to limitations

of data availability and for Libya - all agricultural products are duty-free at Most Favoured

Nation (MFN) levels. We also note that South Africa is treated differently to other SADC

countries by some SADC members5.

Our analysis reveals the following:

• Among the countries analysed, market access of agricultural products is generally

relatively open as very few product lines still face high tariffs. This supports the notion

4 These were: Botswana, Burundi, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, South Africa, Swaziland, Tanzania Uganda, Zambia and Zimbabwe. 5 These include Madagascar, Malawi, Mozambique and Zimbabwe.

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that tariff is no longer the main trade barrier, but that other non-tariff barriers are

inhibiting trade.

• We also note that certain sectors such as HS04 – dairy, HS10 – cereals, HS17 – sugar,

HS22 beverages and HS24 tobacco products are key sectors for different countries

that are regarded as sensitive and therefore still attract high tariffs.

• Of the countries analysed, Malawi, has the highest number of product lines which still

face tariffs of 10 percent and above. This may be attributed to the fact that Malawi has

been lagging in its phase-down commitments to the SADC Protocol and also to its

recent request for derogation within the context of the SADC FTA. On the other

hand, this may be a strategy for maximising on tariff revenues which Malawi depends

upon.

• SACU has fully liberalised agricultural products to its SADC counterparts; however,

separate tariff offers for COMESA countries are in place and will be discussed

separately.

• Mauritius still applies tariffs to a number of products albeit at relatively low rates with

the exception of HS24 – beverages, spirits and vinegar which has a tariff of 24 percent.

• As the analysis is based on tariff phase-down offers by individual countries and not by

the current applied tariff regimes, as already highlighted, it is difficult to establish

whether or not all countries have implemented and reformed their tariff regimes

accordingly, and we therefore note with caution the tariffs applied especially in the

case of Zimbabwe which has the majority of products duty-free with the exception of

HS24 – beverages, spirits and vinegar (97%) and HS24 – tobacco and manufactured

tobacco substitutes (28%).

• Zimbabwe is an interesting case: because of the decade-long economic collapse that

the country has been experiencing recently, the country has allowed imports of basic

foodstuffs (the bulk of agricultural products) duty-free. However, with transparency

concerns regarding the current tariff schedules applied, the case may have been

reversed and tariffs applied.

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Table 1 below summarises the agricultural products at the HS2 level that are currently

facing tariffs, showing the average and (maximum) tariff applied for all 16 countries.

Table 1: Products currently attracting tariffs for select countries (SADC offers)

HS2 H2Des EAC Mau Moz Mad Mal Zam Zim

01 Live animals 0 0 0 3 (5) 1 (5) 0 0

02 Meat and meat products 0 3 (32) 4 (10) 5 (5) 5 (15) 2 (10) 0

04 Dairy, eggs, honey, edible animal products n.e.s.* 22 (60) 3 (22) 5 (10) 5 (5) 9 (15) 1 (10) 0

05 animal products n.e.s. 0 0 0 0 5 (5) 0 0

06 Live plants 0 0 0 0 (5) 4 (15) 0 0

07 Edible vegetables 0 0 4 (10) 3 (5) 7 (15) 0 (10) 0 (10)

08 Edible fruits, melons 0 1 (16) 0 (10) 3 (5) 12 (15) 0 0

09 Coffee, tea, mate, spices 0 3 (16) 0 4 (5) 6 15) 1 (10) 0

10 Cereals 24 (75) 0 0 (3) 0 3 (5) 0 0

11 Milling products 4 (60) 0 (6) 0 (10) 0 12 (15) 1 (10) 0 (10)

12 Oil seed, etc. n.e.s. 0 0 0 0 4 (15) 0 0

13 Vegetable extracts n.e.s. 0 0 0 0 2 (15) 0 0

14 Vegetable products n.e.s. 0 0 0 0 2 (15) 0 0

15 Animal, vegetable fats and oils, etc. 0 1 (6) 3 (10) 2 (5) 8 (15) 0 0

16 Meat, fish and seafood, food preparations n.e.s. 0 13 (22) 0 5 (5) 15 (15) 0 0

17 Sugars and sugar confectionery 17 (100) 3 (22) 2 (10) 0 9 (15) 1 (10) 0

18 Cocoa and cocoa preparations 0 4 (22) 0 0 8 (15) 0 0

19 Cereal, flour, starch, milk prep and products 0 5 (22) 1 (10) 0 10 (15) 0 3 (10)

20 Vegetable, fruit, nut, etc. food preparations 0 5 (32) 1 (10) 0 11 (15) 0 0

21 Miscellaneous edible preparations 0 6 (22) 0 0 13 (15) 0 0

22 Beverages, spirits and vinegar 0 24 (32) 0 (10) 0 9 (10) 0 97 (1210)

23 Food residues, animal fodder 0 1 (22) 0 (8) 0 5 (15) 0 0

24 Tobacco and manufactured tobacco substitutes 8 (35) 7 (32) 1 (10) 0 15 (15) 0 28 (50)

*n.e.s. not elsewhere specified Source: tralac calculations based on SADC tariff offers

During the analysis we noted that some countries (Madagascar, Malawi, Mozambique and

Zimbabwe) had separate offers for products originating from South Africa. The applied tariff,

although not trade restrictive, points to the fact that they may be in place merely as key

revenue generating products or, in fact, accord special preference to goods originating from

South Africa. This is because in the region, South Africa which is a net food exporter is the

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major trading partner of most countries as very few countries trade amongst each other.

Therefore it makes economic sense, from a revenue perspective, to target imports from

South Africa as they form the bulk of trade with these countries.

Table 2 summarises some of the products originating from South Africa that attract duties

(Note that products shaded in [grey] all enter duty-free into the respective markets). Two

points can be raised from the analysis of treatment accorded to goods originating from

South Africa in comparison to products originating from other SADC members. These are:

i) Either South African products are levied higher tariffs than other SADC members as

reflected by the higher average applied rates for certain products (the case of

Madagascar and to a certain extent Mozambique), this may be the case for revenue

collection purposes;

ii) or South African products are given special preference in comparison to products

from other SADC members (in the case of Malawi and Zimbabwe). Furthermore, this

observation can be seen from the number of agricultural products from South Africa

that are entering duty- free (see products with area shaded in grey in the table below).

As can be noted, Malawi is the most easily accessed market for products from South

Africa. This can in part be attributed to the long history and bilateral relations that

South Africa has had with Malawi.

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Table 2: Products with different tariffs applied (%) for South Africa (SADC offers)

HS2 H2Des Mad Mal Moz Zim

01 Live animals 5 (10) 0 0 0

02 Meat and edible meat offal 10 (10) 0 7 (15) 3 (5)

04 Dairy products, eggs, honey, edible animal products n.e.s. 10 (10) 0 7 (15) 3 (5)

06 Live trees, plants, bulbs, roots, cut flowers, etc. 1 (10) 0 0 0

07 Edible vegetables and certain roots and tubers 7 (10) 0 6 (15) 3 (5)

08 Edible fruit, nuts, peel of citrus fruit, melons 5 (10) 0 (15) 1 (15) 2 (5)

09 Coffee, tea, mate and spices 8 (10) 0 0 0

10 Cereals 0 (5) 0 0 (3) 0

11 Milling products, malt, starches, inulin, wheat gluten 3 (5) 0 1 (15) 0

12 Oil seed, oleagic fruits, grain, seed, fruit, etc. n.e.s. 1 (5) 0 0 0

13 Lac, gums, resins, vegetable saps and extracts n.e.s. 1 (5) 0 0 0

15 Animal, vegetable fats and oils, cleavage products, etc. 4 (10 0 4 (15) 2 (5)

16 Meat, fish and seafood food preparations n.e.s. 10 (10 0 0 5 (5)

17 Sugars and sugar confectionery 0 0 1 (15) 1 (5)

18 Cocoa and cocoa preparations 0 0 0 2 (5)

19 Cereal, flour, starch, milk preparations and products 0 0 1 (15) 3 (5)

20 Vegetable, fruit, nut, etc., food preparations 0 0 6 (15) 0 (5)

21 Miscellaneous edible preparations 0 0 0 (8) 3 (5)

22 Beverages, spirits and vinegar 0 11 (15) 1 (15) 1 (15)

23 Residues, wastes of food industry, animal fodder 0 0 2 (8) 0 (5)

24 Tobacco and manufactured tobacco substitutes 0 0 2 (15) 8 (25)

Source: tralac calculations based on SADC tariff offers

A review of SACU’s offer to COMESA (see Table 3) reveals the following:

• SACU’s offer to COMESA as depicted in the table below highlights that the bulk of

agricultural products from COMESA members face a tariff into the South African

market; thus the creation of an FTA will significantly open new opportunities for the

affected COMESA members;

• HS24 – tobacco products face the highest average tariff of 24 percent followed by

HS19 – cereal products with a 10 percent tariff. The rest of the agricultural products

face tariff rates of lower than the average of 10 percent.

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Table 3: Tariff (%) barriers applied by SACU to COMESA (SACU – COMESA offers)

HS2 H2Des SACU

02 Meat and meat products 9 (30)

04 Dairy, eggs, honey, edible animal products n.e.s. 7 (18)

06 Live plants 6 (12)

07 Edible vegetables 5 (20)

08 Edible fruits, melons 3 (19)

09 Coffee, tea, mate, spices 1 (13)

10 Cereals 0 (3)

11 Milling products 3 (11)

12 Oil seed, etc., n.e.s. 3 (11)

13 Vegetable extracts n.e.s. 3 (9)

14 Vegetable products n.e.s. 1 (4)

15 Animal, vegetable fats and oils, etc. 4 (7)

16 Meat, fish and seafood food preparations n.e.s. 7 (13)

17 Sugars and sugar confectionery 2 (19)

18 Cocoa and cocoa preparations 4 (10)

19 Cereal, flour, starch, milk prep and products 10 (26)

20 Vegetable, fruit, nut, etc., food preparations 9 (31)

21 Miscellaneous edible preparations 7 (13)

22 Beverages, spirits and vinegar 5 (13)

23 Food Residues, animal fodder 3 (10)

24 Tobacco and manufactured tobacco substitutes 24 (71)

29 Organic chemicals 4 (8)

33 Essential oils, perfumes, etc. 1 (6)

35 Albuminoids, modified starches, enzymes 1 (9)

38 Miscellaneous chemical products 3 (8)

51 Wool, animal hair 0 (3)

52 Cotton 3 (9)

Source: tralac calculations based on SADC tariff offers

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BOX 1: A review of South African agricultural exports facing tariffs in the Tripartite Configuration

During the data training week we undertook a review of the agricultural products that South

African exporters face in the COMESA-EAC-SADC Tripartite Configuration. Our aim is to

identify agricultural products that are classified as sensitive products by members of the Tripartite

Configuration and therefore may well remain so in the broader regional integration process. We

have also included the broad range of clothing and textile products (HS50-63) as a category, but

it should be noted that only agricultural products (raw materials such as cotton, animal hair, etc)

are considered and therefore should not be confused as an examination of the entire clothing and

textiles products. To determine the tariffs barriers applied to these South African products, we

use the current applied rates as reported to the UN ITC MacMap database (at the HS 6 level of

the harmonised classification system) by the respective countries in the Tripartite Configuration.

Our preliminary analysis reveals the following:

• With the exception of SACU members and Libya, South African agricultural products still

face tariffs in the Tripartite Configuration;

• Mauritius (95%), Seychelles (85%), Zambia (83%) and Mozambique (81%) are the only

countries which are relatively open to South African exports of agriculture products. The

rest of the countries in the Tripartite Configuration still maintain protection in over 60

percent of the product lines under review, with Burundi (100%), Rwanda (96%), Zimbabwe

(95%) and Sudan (88%) maintaining protection in virtually all products.

• In most countries under review, ‘food, beverages and tobacco’ and ’vegetable products’ still

face the highest level of protection.

• Mauritius, Mozambique, Seychelles, Tanzania and Uganda are the only countries that offer

duty-free access to South Africa raw material products classified under Clothing and

Textile (C&T) exports.

P a g e | 19


The tables below provide details of the level of protection that South African exporters are

facing in each of the countries in the Tripartite Configuration. We have only shown the

averages and not the variations within these categories. The data clearly signals that:

(a) There is a considerable distance to go in implementation of the so-called SADC Free

Trade Agreement; and

(b) This and the high tariffs further north do not augur well for anything other than an

FTA in name only!

The categories shown are:

• Chapters HS 01 to 05 inclusive, live animals, animal products;

• Chapters HS 06 to 14 inclusive, vegetable products;

• Chapter 15, animal or vegetable fats & oils;

• Chapters 16-24 inclusive, food, beverages & tobacco; and

• Chapters 50 -63, clothing and textiles.

P a g e | 20


Table 4: Regional (average) tariff barriers to South African exports

Country/sector Ch 01 05 Ch 06-14 Ch 15 Ch 16-24 CH 50-63

Angola 10 9 5 14 2

Burundi 18 5 5 5 5

Comoros 11 5 5 8 16

DRC 12 12 14 16 5

Djibouti 12 12 13 15 26

Egypt 14 6 7 237 5

Eritrea 7 10 9 16 2

Ethiopia 23 24 23 25 6

Kenya 26 21 14 23 0

Madagascar 18 18 16 18 5

Malawi 13 19 18 22 8

Mauritius 12 11 13 0

Mozambique 14 14 13 12 0

Rwanda 13 9 22 26 6

Seychelles 63 83 211 0

Sudan 37 33 33 36 28

Tanzania 27 24 19 23 0

Uganda 27 23 19 23 0

Zambia 11 19 13 19 15

Zimbabwe 35 23 15 36 5

Source: UN ITC MacMap database, data training week analysis

P a g e | 21


Impact of sensitive products on deepening integration and the way forward

As highlighted earlier, the process of designating sensitive products can perpetuate

inefficiencies and thus undermine the process of deeper integration. Furthermore, the lack

of resources and analytical capacity to undertake detailed analysis and the lack of properly

defined guidelines and benchmarks also hinder the process. This may partly explain the

delays by some countries in COMESA and SADC to identify and notify their lists of sensitive

products to the respective secretariats. There is therefore need for policy makers to find

ways to develop a systematic approach to determining sensitive products and to ensure that

all stakeholders are aware of the purpose of a sensitive products list (i.e. economic versus

political versus social concerns). As a principle, it is proposed that the RECs should not

introduce new sensitive products in addition to those currently present in their schedules,

but to work towards reducing their lists. This is simply because even a short list of sensitive

products reflects poorly on the desire to establish a CU with a CET, to which all the RECs

have aspired or aspire to attain.

P a g e | 22


References

COMESA Customs Union. 2009. Status on Sensitive Products and Implementation of the

Transition Period. [Online]. Available:

http://programmes.comesa.int/attachments/119_comesa_customs_union_status_03%2006%

202010.pdf.

Gouel C., Mitaritonna, C. and Ramos, M.P. 2010. The Art of Exceptions: Sensitive Products in

the Doha Negotiations. Working Paper No 2010 – 20. Paris: Centre d'Etudes Prospectives et

d'Informations Internationales (CEPII).

Mudungwe, N. (2010). Is there a Common Criteria or Approach for Selecting Sensitive Products in

Regional Trading Blocs: The Case for COMESA, EAC and SADC? Paper presented at the

Tripartite Regional Integration Forum, Arusha, Tanzania, 17-18 June 2010

Waiyaki, N. (Undated). Sensitive & Special Products in Trade Negotiations: The Case of Kenya.

Kenya Institute for Public Policy Research and Analysis, available on

http://www.uneca.org/trid/documents/cotonu/Special%20Products%20Slides%20Cotonou.ppt

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