Free trade no guarantee

THE purpose of trade liberalisation through free trade agreements (FTAs) should have a strong emphasis on sustainable national development for a country and its needs, otherwise they undermine development objectives through loss of tariff revenues, increased competition and environmental pressures, a recent study reveals.

‘It is not automatic that economic growth or growth in market access through trade liberalisation leads to economic development, let alone sustainable development.’ the study on the status and impact of trade liberalisation on bilateral and regional integration in southern Africa found.
Titled ‘Sustainable development – the missing piece in the Southern African Customs Union (Sacu) regional trading arrangements?’ and authored by Wolfe Braude and Khutsafalo Sekolokwane for the Canadian Institute for Sustainable Development (IISD), the study cautioned that ‘it is not automatic that growth in market access through trade liberalisation and elimination of tariff leads to economic development.’
‘These factors open up markets for a country’s exporters but can allow more competitive suppliers to penetrate the country’s domestic market. Increased competition from imports due to liberalisation can result in reduced production and eventually to job losses if sufficient adjustments are not made in time.’

RAMATEX
CLOSURE

Citing the recent closure of Malaysian textile factory Ramatex in Namibia, which cost about 6 000 jobs, the study noted that foreign investment to utilise trade preferences does not necessarily lead to sustainable development.
Trade agreements may even undermine sustainable development where they impact negatively on domestic regulatory requirements, the experts argue in the study, which was published towards the end of last year.
The number of bilateral and regional free trade agreements (FTAs) around the world has grown sharply in recent years, based on the assumptions that free trade and the removal of regulations on investment would lead to economic growth, poverty reduction, increased living standards and employment opportunities, the authors stated.
For developing countries, attraction of foreign direct investment and access to markets are key motivations for such negotiations.
Economic integration has been promoted at the regional level throughout Sacu and the Southern African Development Community (SADC).
Both Sacu and SADC either have existing or planned free trade agreements with trading partners as diverse as the USA, the European Union, India, China the European Free Trade Association (Efta), the East African Community and the Mercado Comun del Sur (Mercosur) in Latin America.
Botswana, Lesotho, Namibia , Swaziland and South Africa are members of Sacu also of the SADC trade bloc.
The SADC Regional Indicative Strategic Development Plan (RISDP) accepted by its members calls for the establishment of the SADC free trade area by 2008, which was implemented, a SADC Customs Union by 2010, a SADC Common Market by 2015, a SADC, Monetary Union by 2016, and a single currency by 2018. The smaller Sacu might be incorporated into the envisaged 2010 customs union.
A high proportion of government revenues in Swaziland, Lesotho and Namibia come from the overall Sacu fiscal transfers (Lesotho 28 per cent, Swaziland 24 per cent, Namibia 12 per cent and Botswana nine per cent.
Trade agreements entered into by southern African countries mainly focus on market access.
During their research they found a ‘lack of co-ordination between government departments in each Sacu state in preparing country positions prior to negotiations, lack of awareness or research into the linkages between trade and sustainable development, capacity both in personnel and institutional structure lacking to integrate sustainable development into trade policy and lack of collaboration between government, business and civil society in the run-up to negotiations.
They also found an ‘unwillingness to insist on adjustment support from the more developed trade partner(s) during negotiations and an unwillingness to insist on sufficient resources for and time to implement such support.’
‘It is therefore unclear what positive effect the overall trade liberalisation has had on the region beyond boosting exports,’ according to Braude and Sekolokwane.
They recommend that ‘trade agreements must still fall under the oversight of national parliaments, and such parliaments must not be relegated to merely rubber-stamping such agreements, but must be able to interrogate the trade-offs made’.