Customs Union...Meeting the young's Challenges?

Clive Siachiyako
(Author)

Current economic development challenges make economic integration more crucial. Through integration a pool of countries’ economic endowments, can enhance the attainment of much desired development and economic targets.


In this regard, countries in the Common Market for Eastern and Southern Africa (COMESA) have been working on having a Customs Union as a follow-up to a Free Trade Area (FTA) launched in 2000. This is meant to increase intra-trade and boslter economic development in line with the Regional Trade Policy of the bloc. Article 45 of the COMESA Treaty requires member States to establish a Customs Union over a transitional period of ten years from the entry into force of the Treaty. The Customs Union is another step in COMESA’s integration agenda.


A customs union is created when two or more customs territories adopt and apply the same rates of customs duty on products imported from outside their territories. The same rates of customs duty are also called Common External Tariff (CET). A customs union is simply a Free Trade Area with a Common External Tariff. The two or more customs territories also adopt and apply common trade regulations on all goods coming from outside the customs union.



In Pursuance to Article 45 of the COMESA Treaty, the COMESA Heads of State and Governments at their 13th Summit held on 7-8 June 2009, in Zimbabwe, launched the COMESA Customs Union. Further, Article 64 of the COMESA Treaty provides for the establishment of the following:

• evolution of uniform national customs legislation and procedures
• reduction and eventual elimination of import duties and non tariff barriers
• the Common External Tariff (CET)

Any other aspect of customs law and practice concerning common market tariff treatmentIn view of the above, the COMESA Council of Ministers at its meeting in 2007, Nairobi, Kenya adopted the following structure of the COMESA CET:

• 0% for raw materials;
• 0% for capital goods;
• 10% for intermediate products;
• 25% for finished products.The above structure was endorsed by the 13th Heads of State and Government Summit, which was held on 7-8 June 2009, in Zimbabwe.

The 0% for raw material, 0% for capital goods, 10% for intermediate products and 25% for finished products CET will apply to imports into COMESA customs Union. Additionally, the Summit adopted the following elements of the COMESA Customs Union: 1. Council regulations governing the COMESA Customs Union2. Customs Union Management Regulations3. Public procurement Regulations.BENEFITS OF THE COMESA CUSTOMS UNIONCustoms Union will offer many opportunities and benefits to producers, cross border traders, importers, consumers, and the region.

ProducersProducers will benefit from:

• Access to wider markets
• Encourages mass production leading to economies of scale
• Low costs of production arising from economies of scale
• Equal protection from outside competition due to the CET

Cross Border TradersThe cross border equally benefit from:

• Wider source of goods
• Wider range of products for trading
• Price advantage for goods produced in the region compared to goods produced outside the customs union.

ImportersImporters benefit from enhanced trade facilitation procedures as they will not be required to go through many customs procedures in different countries. This reduces transaction costs, and results in timely deliveries.

Consumers Consumers will equally benefit from a wider choice of goods as well as from lower prices resulting from higher productivity.

LIST OF SENSITIVE PRODUCTS

In order to militate against the potential negative implications of the CET, the region agreed to allow member states to develop lists of sensitive products that should not be subject to CET. These products are deemed to be sensitive mainly due to:

Revenue implications

• Infant industry protection
• Merit goods Additionally, the region has established a COMESA Fund to help member states meet their adjustment costs arising from the implementation of the COMESA Customs Union.

OVERLAPPING MEMBERSHIP
One of the challenges that Member States face in the region is multiple membership- in respect of regional economic groupings. Zambia, like other Countries in SADC, COMESA, and EAC maintains dual membership in both SADC and COMESA. In order to resolve this challenge, the three Regional Economic Communities (, SADC, EAC, and COMESA) formed a Tripartite Taskforce with a view to harmonising their trade related programmes, and to eliminate duplication of efforts. Zambia is actively engaged in this collaborative process and participated during the Tripartite Summit involving East African Community (EAC), SADC and COMESA Heads of State and Government in October 2008 in Kampala, Uganda. The Tripartite Summit agreed, among things, as follows:

• Form an enlarged Free Trade Area encompassing SADC, EAC and COMESA;
• leading to an enlarged customs union;
• Develop a roadmap for the establishment of the enlarged FTA;
• Directed the three Chairpersons of the RECs to ensure that the there RECs speed up the development of joint programmes that enhances cooperation and deepening of co-ordination in industrial and competition policies.It is expected that the three regional economic communities will harmonise their programs leading to the formation of an enlarged customs union encompassing SADC, EAC, and COMESA.

ZAMBIA’S PREPAREDNESS TO IMPLEMENT THE COMESA CUSTOMS UNION
Zambia actively participated during the negotiations of the elements for the COMESA Customs Union, including the Common External Tariff and the list of sensitive products. Government had held a number of meetings with stakeholders including the private sector in developing positions that would benefit all stakeholders. Currently Government is engaged in consultations with the business community, academia, and Civil Society Organizations on the list of sensitive products. Specifically, Government is waiting for submissions from, among others, the following:

• Zambia Association of Chambers of Commerce and Industry,
• Zambia Association of Manufacturers,
• Zambia National Farmers Union,
• Pharmaceutical Society of Zambia Ministry of Commerce Trade and Industry already sent out letters to the above associations with a view to receiving submissions on sensitive products from them.

Zambia will be expected to submit the list of sensitive products to COMESA Secretariat as soon as consultations are over. Further, member states have between 3 to 5 years to align their tariffs to the COMESA CTN. It is expected that during the 5 years period, Zambia would have aligned her tariffs to the regional CTN and ready to implement the COMESA Customs Union. The list of sensitive products, the 3-5 yeas transition period for tariff alignment, and the COMESA Fund provides Zambia with enough policy space to adequately prepare to implement the COMESA Customs Union.