Liberalisation may hurt SACU

Without giving any statistics, SACU executive secretary Tswelopele Moremi projected that the SACU revenue pool could decline in the coming years but said that for the 2006/7 period, revenue shares for member states had increased.

Moremi attributed the increase of SACU receipts to the appreciation of the rand and a rise in the volume of imports from outside SACU.

SACU is one of the oldest customs unions in the world. Its member states are Botswana, Lesotho, Namibia, South Africa and Swaziland.

The aim of the regional customs union is to maintain free trade between member countries at the same time providing for a common external tariff and a common excise tariff.

All customs and excise duty collected is pooled into South Africa’s National Revenue Fund.

The amount is shared among members according to a revenue-sharing formula as described in the agreement.

Moremi said the World Trade Organisation (WTO)’s tariff liberalisation policies could deal a body blow to the regional customs bloc, whose revenue is a huge source of national income for member states.

“Moving forward, there is an expectation that the pool may decline. This is partly a result of expected global tariff liberalisation emanating from the WTO as well as the effect of the various trade negotiations that SACU is pursuing with third parties,” Moremi told The Southern Times.

“These are expected to result in tariff reductions which may, in turn, mean lower customs revenue,” Moremi added, but declined to reveal figures. The Namibian government early this year said SACU had been the country’s largest contributor to its foreign currency receipts.

Economists have, nevertheless, warned that the relevance of customs unions was diminishing as economies liberalise.

“There is, however, another view that says, as tariffs decline, the volume of imports will increase, hence greater customs revenue,” Moremi said.

Member states such as Lesotho, however, face a devastating reduction in tax income if the regional customs are axed under the moves towards free trade.

Economic analysts say that whilst many anti-poverty campaigners say global free trade would help poor African states, Lesotho ‘ which is underdeveloped and with poor road routes to South African ports ‘ is unlikely to benefit.

Under the five-country SACU agreement, Lesotho gets its share of tax on imports to itself and other member states, in a deal aimed at compensating the country, which is surrounded entirely by South Africa, for its lack of industry.

“There are signs that SACU is out to sign free trade agreements and this puts Lesotho in jeopardy,” Lesotho Revenue Authority assistant commissioner Retselisitsoe Motsoeneng is on record as saying.

In the financial year to March 2006, SACU revenue made up 54.7 percent or US$159 million of Lesotho’s tax receipts.

Moremi said that at global level, customs unions still have a place. She cited Article XXIV of the General Agreement on Tariffs and Trade (GATT), which provides for Regional Integration Arrangements (RIAs) such as the Free Trade Agreements (FTAs) and customs unions.

“Since the road to trade liberalisation is not an easy one, there is bound to be a proliferation of RIAs. With the suspension of the Doha Round, RIAs are likely to increase in number,” Moremi said.

October 2006
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