Southern Africa Starts Free Trade Area to Bolster Integration

By Mike Cohen

Aug. 17 (Bloomberg) -- Twelve Southern African nations set up a free trade area today in a bid to bolster regional exchange of goods and economic integration for a market of 247 million people and an economy worth more than $430 billion.

The accord was made at the annual summit of the 15-nation Southern African Development Community in Johannesburg. The bloc includes Angola, Botswana, Zambia, Malawi, Lesotho, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, Swaziland, Tanzania, South Africa, Zimbabwe and the Democratic Republic of Congo. Angola, Seychelles and Congo have yet to sign the agreement.

The free trade area ``required a lot of compromise to be made on a number of sensitive issues,'' including requiring member states to relinquish some of their sovereignty, said Tomas Salomao, SADC's executive secretary. The agreement will make ``SADC an attractive area for doing business.''

The free-trade plan was first considered eight years ago and required SADC's member states to systematically cut tariffs on goods traded within the bloc. By the beginning of the year, duties on 85 percent of their trade had been abolished, meeting the World Trade Organization's definition of a free trade area. All remaining tariffs are due to be scrapped by 2012.

``We need to recognize that regional economic integration is not only about the removal of tariff barriers,'' South African Trade Minister Mandisi Mpahlwa said in Pretoria on Aug. 13. ``We need to embark on to build both our productive and trade capacity. We need to focus on expanding our agriculture and industrial base to promote intra-regional trade.''

SADC also intends to create a customs union by 2012, a plan that's been complicated by its member states signing separate trade deals with the European Union, known as economic partnership agreements, or EPAs.

``All SADC countries are participating in EPAs with the EU, but in four separate configurations,'' Mpahlwa said. ``All these EPAs differ in terms of having different tariff liberalization obligations to the EU.''

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net