Safeguarding local industry

SADC and COMESA are currently in the process of liberalising trade in services.

The COMESA region, for instance, has since given indications that it has already put in place common market customs management regulations and impetus has already shifted to the domestication process.
Economists contend that services such as financial, communication, and transport – which provide vital inputs to the manufacturing and agriculture sectors – can help promote growth and development in an economy.
However, as much as there are benefits to be accrued from increased liberalisation of trade in services, developments in this area also pose a number of threats to local economies.
A number of studies have shown that current trade liberalisation rules and policies have led to increased poverty and inequality.
For instance, a 2001 United Nations Conference on Trade and Development (UNCTAD) study revealed that the poorest 49 countries – which make up 10 percent of the world’s population – account for only 0.4 percent of global trade; and the disparity is growing.
It is important to note that notwithstanding South Africa, the large majority of the countries that constitute both the COMESA and SADC regions have service industries that are still largely developing, therefore opening them up for increased competition even at the regional level has the potential to undermine their development.
In this respect there is need for the governments of the respective blocs’ members to effectively engage the private sector in their countries insofar as any arrangements entered into within the regions will have a significant impact on the operating environment of the private sector.
Some observers postulate that relative levels of protectionism are necessary for growing industries for economies such as those that typify many countries in Africa.
There are however contradicting perspectives in other circles.
Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) director, Dr Gibson Chigumira, says the liberalisation of trade services in some countries offers them an opportunity to “leap frog in development”.
Zimbabwe itself is in the process of reviewing the proposed road map and timelines for trade in services negotiations in view of the minimum liberalisation proposals to be made by the government on the General Agreement on Trade in Services (Gats) commitment, which is meant to extend the multilateral trading system to the services sector.
The country is also a member of both the COMESA and SADC regional blocs.
The Secretary-General of the COMESA Business Council, Trust Chikohora, believes that the opening up of economies at the regional level especially in respect of the services sector is critical for enhanced economic growth in the respective economies.
“The liberalisation of the services sector in the region will greatly assist in improving efficiency and increasing benefits through the removal of obstacles to free movement of services in the region.
“Services sector is an increasingly important part of the trade of almost all economies and it presently accounts on average for around 50-60 percent of Gross Domestic Product in the COMESA region,” he said.
Notably, Zimbabwe’s manufacturing sector has largely underperformed over the past decade as a result of an economic debility typified by hyper-inflation and constrained financing, the latter still prevalent to date.
This means that the services sector has played a critical role in buttressing the economy during that period and signs are pointing to an increased role of services in that economy.
The director of international trade in Zimbabwe’s Ministry of Industry and Commerce, Beatrice Mutetwa, notes the importance of liberalising an economy’s trade in services.
However, she adds a caveat.
“Services are currently a significant contributor to GDP across the globe and we believe they can play a greater role in the local economy … We however cannot open up all our service sectors because we would not be able to compete from the flurry of imported services,” she said.
With both the positive and negative impact of liberalising an economy’s trade in services widely publicised and critiqued, only time will tell whether the current regional drive to open up the sectors will be of benefit or a turn for the worse.

May 2013
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