Harare — JUNE 7 is a great day for the Common Market for Eastern and Southern Africa (COMESA) as the 19-member regional economic community graduates to a customs union, the third in Africa.

But for Zimbabwe's exporters, who have been calling for tariff protection against low-cost imports from South Africa and other regional economies, the date means a tough test of competitiveness -- and many of them may go under, they say.

The government, which removed tariffs on a number of fast-moving consumer goods to counteract shortages that set in after a spate of price wars last year, has already indicated that it will ratify the bloc's customs union, which will be launched at the 13th COMESA council summit in Victoria Falls.

On the day, Zimbabwe will also take over the regional economic community's rotating chairmanship from Kenya.

Coming about a year behind schedule, the COMESA customs union aims at removing tariff barriers among member states and harmonising barriers with third parties through the Common External Tariff (CET), which the community's heads of state and government adopted in May 2007.

The COMESA CET stipulates that raw materials and capital goods should be imported into the envisaged customs union duty-free, while intermediate and finished goods should attract tariff rates of 10 percent and 25 percent, respectively.

The news of an impending customs union has already set Zimbabwe's companies on the edge as many of them face numerous barriers to competitiveness ranging from lack of working capital, limited access to international lines of credit, high input costs, depressed aggregate demand, loss of skilled workers, to low capacity utilisation, which increases their average costs.

"It is regrettable that the government rushes to sign protocols to open our market without looking at our own position, whether we are efficient enough to compete," said Dennis Maravanyika, the marketing director of Dunlop Zimbabwe. "We risk reducing ourselves to a very big market for others to dump their goods."

Zimbabwe was also among the first countries to ratify the Southern African Development Community (SADC)'s Free Trade Area (FTA) last year. It is also one of the 13 members of the COMESA FTA.

The Confederation of Zimbabwe Industries estimates capacity utilisation in the manufacturing sector at under 10 percent in some industries, a major barrier to competitiveness.

A trade development researcher told The Financial Gazette that the threat of competition may be "exaggerated" as COMESA has produced an "abnormally long" sensitive list, which apparently undermines the credibility of the customs union.

"It is not just Zimbabwe which is afraid of competition. Many others are," economist Simon Munongo said. "In fact, for many of the COMESA member states, the tendency has been to exclude almost every major trading item."

The sensitive list refers to a catalogue of goods that member states wish to "protect" or exempt from the CET. A good can only be considered "sensitive" and therefore eligible for higher-than-approved tariffs if its contribution to the regional economy or to a country's economy and revenue collection is high; others can be protected for social, health, cultural and religious reasons.

In COMESA, the list includes cars and human capital, sugar, textiles and garments, wheat and wheat products and plant and animal products.

Although the secretariat has already allocated the goods into the four-band Common Tariff Nomenclature, which is the base for the CET rates, technical work for the determination of the list of sensitive goods still lags behind schedule.

In principle, the secretariat insists that the final sensitive list should not exceed 15 percent of tariff lines for the region, and five percent of tariff lines for each member state.

Intra-COMESA trade has remained flat below 15 percent in the last five years, depressed by supply-side capacity constraints, poor infrastructure and communications connectivity, non-tariff barriers and the new pressures of globalisation, which has increased the exposure of poor countries to volatile international commodity markets.

ZimTrade, Zimbabwe's official trade promotion institution, last month urged exporters to look at the issue from a different dimension.

The bloc's FTA currently has 13 out of 21 member states and fewer than this number are expected to join the customs union.

"You must start restructuring your companies and prepare to compete now because soon the floodgates will be opened," ZimTrade chief executive officer Herbert Chakanyuka told exporters.

"The customs union will also be an opportunity for you to re-capitalise your companies cheaply since raw materials and capital goods will enter the country duty-free."