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Integration through common policy: Industry policy in SACU

Integration through common policy: Industry policy in SACU. Colin McCarthy Dirk Hansohm. SACU: the background. Oldest customs union – contrast to other RI schemes in Africa Survived, deepest integration Convergence But: unique and not replicable

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Integration through common policy: Industry policy in SACU

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  1. Integration through common policy:Industry policy in SACU Colin McCarthy Dirk Hansohm

  2. SACU: the background • Oldest customs union – contrast to other RI schemes in Africa • Survived, deepest integration • Convergence • But: unique and not replicable • Inequality in economic size and level of development • Compensation for dominance by SA

  3. The new agreement • Fundamental change • Creation of effective democratic institutions • Adoption of common policies and strategies • Tariffs to implement industrial policy • Frame agreement – many questions to answer • All need to benefit

  4. Common policies • Industrial development policy (to be defined, to achieve balanced development) • Agricultural policy (cooperation in policy formulation) • Competition policy (cooperation in policy formulation) • Unfair trade practices (policies and measures to be annexed) • Need to transfer sovereignty in trade and industry policy

  5. Common policies: experiences • Scope for considerable gains • Great political and technical efforts required • Risk of exacerbating, rather than erasing distortions • Unilateralism and multilateralism may be more effective

  6. Concept of industry policy • Agreement does not define ‘common industrial policies’ • Annexure needed • ‘Efforts to alter industrial structure to promote productivity based growth’ • Interventionist action • Applied microeconomic policy • Re-allocating resources to more productive use • Diversifying growth

  7. Common industry policy • Need for balance growth • Infant industry protection • Wide array of instruments for industry policy • Fiscal measures, direct and indirect subsidies • Trade policy – import tariff • Institutional framework: national bodies, tariff board, council, dispute settlement body • Basis: common policy guidelines

  8. Challenges of industrial policy in SACU • Different structures – different interests • Common industrial policy does not prevent national policies • Institutions to implement still need to be established • Limited capacity of BLNS – denied opportunity to build it behind protective CET • Erosion of revenue pool for BLNS

  9. Questions • How can BLNS industrial development benefit from trade liberalisation? • How can they benefit from SA investment? • Through lower labour cost? • Where can BLNS industrial growth come from? • What should the balance between specialisation according to comparative advantage and regional development be?

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