Mathabo Le Roux
27 August 2007
Johannesburg — PLANS to ease import tariffs under its recently launched industry policy framework could put SA on a collision course with its neighbours in the Southern African Customs Union (Sacu).
SA's neighbours are heavily reliant on the shared income from the common revenue customs pool, with this income accounting for more than half of the national budgets of both Lesotho and Swaziland, while Namibia and Botswana also benefit handsomely.
Any change is likely to be raise the ire of the other members of the customs union.
SA wants to use the Sacu tariff book to enhance and aid its industrial development. Primarily, the policy framework identifies four lead sectors, namely capital and transport equipment, and metals; automotives and components; chemicals, plastic fabrication and pharmaceuticals; and forestry, pulp and paper, and furniture. But an array of other sectors will also ultimately receive support, including clothing and textiles, agriprocessing, biofuels, information and communication technology, white goods and retail.
The industrial policy aims to support key identified sectors in a bid to develop and boost manufacturing capacity in downstream industries. The trade and industry department is looking at three key instruments to achieve this. The first two - industrial financing and tax incentives - have already come in for heavy criticism from some quarters. The third instrument is tariff liberalisation.
The government is planning to review and streamline import tariffs in all relevant sectors, ultimately with the aim to lower the costs of inputs into downstream activities.
Xavier Carim, deputy director-general of international trade and economic development at the trade and industry department, yesterday played down the threat, saying there was not necessarily a correlation between tariffs and revenues from the customs pool, as the lowering of tariffs tended to boost imports, which in turn could swell customs revenues.
But SA's plan to unilaterally tinker with the tariff book also goes against stated objectives in the Sacu treaty of 2003 - a legally binding agreement. Part eight, article 38 of the agreement, under the heading industrial development policy, states that member states recognise the importance of balanced industrial development of the common customs area as an important objective for economic development and agree to develop common policies and strategies for industrial development.
The national industrial policy framework's aim to use import tariffs to facilitate SA's industrial development ostensibly undermines this commitment.
SA's streamlining of the tariff book means Lesotho, Swaziland, Namibia and Botswana would be left with little policy space if they wanted to embark on their own industrial development.
Carim said Sacu members were aware there would be a review but the matter had not been discussed in detail yet, as SA needed to see what it wanted to do first. But he moved to allay fears that SA would act unilaterally, saying SA could not change customs tariffs without consultation .
But a commentator pointed out that the political pressure on other Sacu countries, which are deeply dependent on SA, might mean they would be reluctant to cross the big power in the region.
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