This note has been prepared at the request of USAID’s Trade and Investment Program (TIP), to provide an independent assessment of the recent paper on Estimating the Impact on Mozambique of Different Trade Policy Regimes: SADC, SACU or MFN? by Andrea Alfieri, Xavier Cirera and Alexis Rawlinson. The review consists of three sections: general comments, technical comments, and conclusions. My intention in this review is to raise issues as I see them, focusing on constructive criticisms, as a input for other readers, particularly those without a strong technical background in economics. I trust that the authors will quickly point out any instances where my comments reflect a misunderstanding of their analysis.
In June 2010, INE data for 2009 became available, permitting analysis of Mozambique’s performance in SADC and world markets. While SACU had completed tariff elimination for SADC partners in 2004, Mozambique’s other SADC partners were committed to begin reductions on sensitive products, mostly agricultural, in 2007 or 2008 and to complete implementation in 2012. Therefore Mozambique began to enjoy a margin of preference (MOP), the difference between the most-favored-nation (MFN) tariff and SADC tariff rates, on all products during 3 years of the 5-period of this analysis, 2005 to 2009. In 2008 SADC partners were committed to eliminating duties on all other nonsensitive products. Mozambique was committed to reduce tariffs applying to South Africa on nonsensitive products from 20 to 10 percent in 2007 and completing the reduction to free in 2008. On sensitive products, Mozambique’s first reduction from 20 percent to 15 percent was scheduled in 2009. In 2012 a reduction to 10 percent is scheduled, and duties will be eliminated in 2015. Completion of the Trade Protocol was believed to afford opportunities for new exports by SADC partners to each other. A 2008 review of SADC implementation found that Malawi, Zimbabwe, and Zambia had not had fully implemented offers. Malawi, in fact, had stopped implementing reductions in 2004 for revenue reasons. Zimbabwe is believed to be current in its implementation and Zambia has taken steps to catch up. Angola and DRC have not made tariff offers or reductions to SADC partners.
From March 23-25, 2008, the TIP Project helped financed the First International Conference on Regional Integration Issues and SADC Law.
Trade agreements among SADC member as well as with third parties raise many issues of consistency with SADC obligations. A number of statements and papers have raised the consistency of Zimbabwe’s PTAs with Mozambique and Zambia as an issue. The issues facing Mozambique are not unique, even though other SADC members may not yet recognize these same issues in their own arrangements. SADC contains a “best endeavor” obligation to coordinate matters involving third parties, and broad institutional mechanisms to address issues. SADC members must try to agree on interpretations and application and, through cooperation and consultation, to arrive at a mutually satisfactory agreement.