Note: Advance written questions by WTO Members and replies provided by the Governments of
SACU are reproduced in document WT/TPR /M/114/Add.1 and will be available online
at:  http://www.wto.org/english/tratop_e/tpr_e/tp_rep_e.htm.WORLD TRADE
ORGANIZATIONWT/TPR/M/114
11 June 2003
(03-3032)
Trade Policy Review Body
23 & 25 April 2003
TRADE POLICY REVIEW
Southern African Customs Union
Minutes of Meeting
Chairperson:  H.E. Mrs. Mary Whelan (Ireland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3II. OPENING STATEMENT BY THE REPRESENTATIVE OF SACU 4III. STATEMENT BY THE DISCUSSANT 6
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 8
V. REPLIES BY THE REPRESENTATIVES OF SACU AND ADDITIONAL COMMENTS 13VI. CONCLUDING REMARKS BY THE CHAIRPERSON 17WT/TPR/M/114
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The Chairperson welcomed members of the Trade Policy Review Body to the second Review
of the Southern African Customs Union (SACU) and greeted the ministers and representatives of the
five delegations of SACU.  She recalled the purpose of the Trade Policy Reviews and the main
procedural elements of the meeting.  The basic documentation for the Review had already beencirculated; the report by the Governments of Bo tswana, the Kingdom of Lesotho, Namibia, South
Africa, and the Kingdom of Swaziland was contai ned in document WT/TPR/G/114 and that of the
WTO Secretariat in document WT/TPR/S/114. She was pleased that H.E. Ms Amina Chawahir
Mohamed (Kenya) had kindly agreed to act as the discussant, and emphasized that, as usual, the
discussant would speak in her personal capacity and not as a representative of her government.  $An
outline of the main issues she intended to raise had been made available in advance (WT/TPR/D/93).
Copies of advance written questions submitted by Norway, the Separate Customs Territory of Taiwan,Penghu, Kinmen and Matsu; Canada; Colombia; Hong Kong, China; Japan; Switzerland; New
Zealand; the European Union; Korea; Brazil; India; Kenya; Mexico; and the United States  had been
transmitted to all SACU delegations.  These questions, and the replies provided by the SACU
delegations, are reproduced in WT/TPR/M/114/Add.1.
2. The Chair underlined the progress achieved by the five SACU countries in economic reforms
since their last Trade Policy Review in 1998.  Trade and investment liberalization, driven by their
commitments in the WTO and their participation in bilateral and regional trade agreements, had been
a major feature in this process .  However, SACU's trade regime, the tariff structure in particular,
remained complex, and applied customs tariffs, excise duties, customs valuation, rules of origin, and
contingency trade remedies were still the only domains of trade policy formally harmonizedthroughout SACU.  It was hoped that, once in fo rce, the 2002 SACU Agreement, combined with
multilateral liberalization and outward-orientation, would foster the integration of SACU into the
world economy and help SACU countries to take up the common challenges they faced despite their
different levels of development.
3. The Chair passed the floor to the Minister of Trade and Marketing of Lesotho, to give the
opening statement for SACU.WT/TPR/M/114
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II. OPENING STATEMENT BY THE REPRESENTATIVE OF SACU
4. The representative of Lesotho, on behalf of SACU, welcomed the opportunity to interact with
Members of the WTO in SACU's first Trade Policy Review as a customs union, and thanked the
Chairperson, the discussant, the WTO Secretariat and all delegations for their participation.  While
there were some areas of the Secretariat Reports where SACU might hold different views, hewelcomed the transparency of the TPR process and affirmed SACU's commitment to opening up its
trading regime to scrutiny within the context of its WTO obligations.  These showed SACU's
continued support for and belief in the multilateral process, through which issues of common concern
could be addressed.  Uncertainty with regard to the future of the multilateral trading system and the
WTO itself proved the need to strengthen cooperation in the WTO and affirm Members' commitment
to multilateralism as a proper vehicle for responding to common challenges.
5. In 1998, when the SACU members were reviewed as individual countries, the process of
negotiating the new SACU agreement was ongoing. He was pleased to report that the new Agreement
had been signed in October 2002; the Agreement would be notified to the WTO once domestic
constitutional ratification procedures in all member States were satisfied. The new Agreement was the
basis for strengthening cooperation towards SACU's common goals and objectives, including
economic development of the region, reduction of poverty and inequalities within and amongst themember States, and issues relating to HIV/AIDS. All these efforts were aimed at contributing to the
economic revival of the region and the African continent as a whole.  The conclusion of the SACU
Agreement showed the members' desire and commitment to consolidate regional trade relations, with
the objective of fostering development of the region and its peoples.   SACU was proud of the steps it
had taken and was pleased to see that efforts were beginning to bear fruit. Recent indicators showeddemonstrable, albeit modest, economic growth in the customs union; this indicated that a solid basis
for growth of the regional economy had been laid, as a result of carefully considered plans and
policies.
6. To sustain growth in their economies, individual SACU Members had adopted
macroeconomic policies aimed, inter alia , at attracting investment, promoting industrialization,
improving competitiveness of industries, and creating conditions for development. The encouraging
outcome of these efforts could be seen in the growth of exports; over the last five years, manufactured
exports, in constant Rands, had increased by 11% per year, with particularly strong growth in
vehicles, auto components, chemicals and, more  recently, clothing.  All SACU economies were
looking to diversify their industrial bases and exporting, particularly to fast-growing countries of the
South. Current negotiations with United States and MERCOSUR were aimed at reinforcing this trend,
establishing beneficial trade links with trading partners, and accessing new markets. He hoped that theconsolidation of SACU would stre ngthen and reinforce these efforts.  SACU invited its trading
partners to support its efforts, and in particular, the strengthening of SACU and country-level
institutions.
7. Like other regional trading arrangements, SACU considered the customs union as a building
block for deeper regional and continental integration, which would serve as the basis for attaining thegoals and objectives of the New Partnership fo r Africa’s Development (NEPAD) and for greater
integration into the global economy.  The achievement of the goals and objectives of the new SACU
Agreement would require a collective effort to mo ve forward as a region.  As a start, SACU had
agreed to develop and harmonize policies in the areas of, inter alia , industrial development,
agriculture, competition policy, and unfair trade practices.
8. The representative noted that SACU Member States interacted with each other from varying
levels of development. However, this factor had not hindered the pursuit of its common interest,
showing that when political will was mobilized constructively, it was possible for countries at varying
levels of development to work together to achieve balanced outcomes.  However, he stressed that, in
the context of the Doha negotiations, the developed countries should demonstrate the leadership thatWT/TPR/M/114
Page 5
could propel the negotiating process forward. Conclu ding the Doha Round negotiations was crucial to
supporting continued growth in the world economy, without which there would be no development
for the majority of the world’s people.  To ensure that the Doha Development Agenda lived up to its
name, SACU economies and those of other developing and least developed countries had to gain
meaningful market access and current market access arrangements needed to be maintained. It wasonly through meaningful market access that the multilateral trading system could help development.
Market access allowed developing countries fully to use the strength of their comparative advantage
to expand and diversify their export base. Technical assistance and capacity building should not be a
substitute for concerted and meaningful market acc ess, but should complement it.  SACU believed
that the WTO could play a key role in opening markets and removing barriers, particularly on
products of export interest to their economies;  the WTO could also play a key role in ensuring that
multilateral rules support development. This was important if SACU's economies were to integrateinto the global economy. To this end, and as developi ng countries, SACU had interest in ensuring that
issues such as special and differential treatment, public health and access to medicines, and
agriculture were addressed urgently.
9. The conclusion of the new SACU Agreement was not the end of the search for a consolidated
customs union, but the beginning. There was still a lot of work to do to achieve the objective of a fullyintegrated customs union; however, the represen tative emphasized SACU's collective desire to
achieve harmonization and consolidation of its policies.  It was SACU's wish that the outcomes of the
Doha negotiations would strengthen and support its efforts and help the region achieve economic
growth and development.  He reaffirmed SACU's commitment to the principle of transparency,
upheld by the multilateral trading system as espoused by the WTO.WT/TPR/M/114
Page 6
III. STATEMENT BY THE DISCUSSANT
10. The discussant, H.E. Mrs Mohamed, said that the two reports together painted an interesting
picture of economic development and performance since SACU's last Trade Policy Review.  The
evolution of SACU reflected that of African st atehood and nationhood;  from a historical union
among three British protectorates and the Union of South Africa, it had come to reflect new historicalrealities emerging from independence of the three territories Namibia joining in 1990, and then the
monumental changes that took place in South Africa in 1994.
11. The renegotiation of the SACU Agreement in 2002 was intended to make it more responsive
to new challenges and expectations of the peoples and governments of the region.  Despite very
different levels of economic scale, structure, and development, the five SACU members faced
common challenges, including the promotion of sustainable development, reduction of acute poverty
exacerbated by distorted and unequal income distribution, severe unemployment, and health problemsincluding the high prevalence of HIV/AIDS.  At the same time, the five members were seeking to
diversify their economies and become more integr ated into the world economy. For SACU members,
regional integration could contribute to significant growth and poverty alleviation, create economies
of scale,  rationalize allocation of resources and develop competitive advantages.  SACU had
continued on a path of economic reform and adjustment during the review period; liberalization oftrade and investment were the hallmarks of th e process and all the SACU economies had become
increasingly trade-dependent. Despite low levels of investment, high production costs, depreciation of
local currencies and bad weather conditions, real GDP had shown signs of positive movement across
the area.
12. Monetary and exchange rate policies in SACU remained highly influenced by South Africa;
this effective harmonization had maintained inflation at around 7% during the review period.  She
asked how the recent strengthening of the rand would affect the competitiveness of exports from the
weaker economies of the Union, why the relative harmonization of monetary and exchange rate
policies had not led to the formal harmonization of fiscal policies, and whether lack of such
harmonization had had a negative effect on public deficits.
13. SACU countries had all shown their commitment to the multila teral trading system through
their active participation in the WTO and the Doha Development Agenda, which they saw as their
best opportunity to correct imbalances in the intern ational trading regime.  Slow progress on the Doha
agenda was a matter of great concern. It was critical to SACU members, as it was to other countries in
Africa, that the few products of export interest to them should have unrestricted market access, and
that support and technical assistance should address supply-side constraints as well as special and
differential treatment under the WTO Agreements. South Africa had aligned its intellectual propertylaw with the TRIPS Agreement through new legislation, she asked what support South Africa sought
in this regard and what difficulties it foresaw with implementation, and queried how, in the light of
the impact of HIV/AIDS on their economies, public opinion in SACU Members perceived the present
stalemate on the stand-alone declaration on TRIPS a nd Public Health.  She noted the complex web of
trading arrangements to which SACU members were parties and the difficulties facing smaller andweaker members in dealing with this, and asked wh ether the SACU Secretaria t, to be formed, would
take over the negotiation of all future multilateral and regional agreements and whether this would
limit members' ability to enter into bilateral agreements.
14. Despite efforts to rationalize the tariff stru cture, it remained complex, with each Member
maintaining different binding commitments within the single customs union, and a host of differenttypes of duties, including applied duties that were different in nature from bound duties. She asked
how this related to WTO commitments on customs valuation. Lack of internal harmonization of VAT
and sales taxes encouraged illicit activities:  she asked whether SACU members intended to
rationalize such taxes to reduce the costs of doing business.  The entry into force of the 2002 SACU
Agreement would no doubt increase coherence of policy formulation, hopefully increase regionalWT/TPR/M/114
Page 7
trade and address SACU members' desire for fuller integration into the global market:  in this
connection, she asked whether SACU members could indicate when ratification would be completed
and the treaty enter into force.  Noting that the other SACU members were required to implement the
large number of anti-dumping, countervailing, and safeguard measures introduced by South Africa,
she queried whether this put pressure on them to undertake commitments beyond their nationalcapacities.  In regard to import procedures mainta ined for monitoring or statistical reasons, despite
some simplification, there were still some measures that seemed to inhibit imports from other
developing countries including LDCs, and some SPS measures applied by South Africa appeared
unduly restrictive.  Given the importance of ex port promotion for SACU members, it was
understandable that some SACU members, including the smaller ones, had revived export finance and
insurance schemes to address growing unemployment in labour intensive sectors.  Clearly, it was also
important to have some national or regional level regulation on competition and unfair businesspractices. Noting that South Africa was currently the only member with a competition law, she asked
how SACU members in general dealt with anti- competitive practices within the region.  She
wondered how SACU members intended to address the challenges of attracting FDI in the future.
15. On sectoral issues, the discussant called attention to the high dependence of SACU members
on a limited number of products and an unfavourable internal and external market climate. The shareof agriculture in GDP had continued to decline;  nevertheless its value to the economy, and especially
to food security, poverty alleviation, and rural development, could not be overestimated.  The recent
drought, making food aid necessary in some areas, had underscored the fragility of the agriculture
sector.  Although tariffs under SACU were becomi ng a main agricultural trade policy instrument,
each SACU member had its own "home-grown" farm policy. SACU members had agreed tocooperate on agricultural policies, yet the new SACU Agreement maintained the status quo on SPS
measures:  she asked about the rationale for that position.  Preferential access for particular
agricultural products had been critical for devel opment in some SACU members, by ensuring stable
and predictable resource flows and assisting developmen t in other areas;  in her view it was crucial to
maintain unrestricted market access for agriculture-dependent countries like Lesotho and Swaziland.She asked for information on the operation of the futures market for commodities in South Africa.
Concerning the importance of mining  as a revenue and foreign exchange earner for the region, she
asked whether South Africa, Botswana, and Namibia he ld a regional vision of integration in this area
and sought information on the outlook for future development following De Beers' withdrawal in
2002.  In respect of manufacturing, she noted th e positive results of AGOA for the textiles and
clothing sectors, especially in Lesotho, and asked for information on the outlook for this and for the
preferential agreement with the EU.  As regards services, she remarked on the low level of trade, highcosts linked to developmental challenges,  and the need to address difficulties associated with
technology transfer.  Liberalization in this area would no doubt improve efficiency and
competitiveness, but should be undertaken gra dually with adequate support and flexibility.
16. The discussant stated her deliberate avoidance of certain issues, which she believed were not
yet ripe for negotiation in the WTO.  SACU memb ers had been in the forefront of WTO discussions
on existing commitments, special and differential treatment, and implementation issues and concerns.
She would leave for others the question of how to address possible new commitments, given the
already overflowing dish of negotiations.WT/TPR/M/114
Page 8
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
17. Members welcomed the renegotiation of th e 2002 SACU Agreement since the last Trade
Policy Review of its members in 1998 and efforts by SACU countries to further liberalize trade and
investment based on their WTO commitments and enhanced regional integration.  They appreciated
their commitment to the WTO and the multilateral trading system, and their strong support for theDoha Development Agenda.  Members noted the wide economic diversity among SACU countries
and their common severe challenges, including promoting sustained economic development, product
diversification and poverty alleviation, combating HIV/AIDS, and fully integrating into the global
economy.  They appreciated the SACU states' active WTO participation and strongly supported
technical assistance and capacity building initiatives  to help them participate effectively in the
multilateral trading system.
18. The representative of Norway appreciated the objectives of the 2002 SACU Agreement to
create transparent and democratic institutions, promote fair competition and increase investment,
which should advance SACU's global integration.  EFTA and SACU members intended to commence
negotiations on a free-trade agreement in May to complement WTO negotiations and improve trade
opportunities.  Areas of special interest to SACU states and other developing countries, such as
pharmaceuticals under TRIPS, needed to be addressed urgently.  Norway was concerned that SACUcountries had become major users of anti-dumping measures.  Increased anti-dumping actions by
SACU and other countries demonstrated the weakness of WTO disciplines, and stricter rules were
needed.  Norway requested details on the type of technical assistance needed by SACU states.
19. The representative of India referred to the commitment by SACU states to trade and
economic reforms.  They participated in a number of regional and bilateral trade integration
initiatives, such as the Southern African Deve lopment Community (SADC); Namibia and Swaziland
were  also members of the Regional Integration Facilitation Reform (RIFF); and South Africa had a
bilateral trade agreement with the EU.  SACU states were also negotiating trade agreements with
MERCOSUR and the United States.  These overlapping regional trade agreements resulted in
complex rules of origin, discriminatory trading conditions for non-preferential partners, and imposeda heavy administrative burden.  India hoped that al l current and future SACU preferential trade
agreements would be in accord with WTO rules.  Despite critical constraints, SACU states had
liberalized trade to achieve closer integration.  I ndia shared SACU concerns that broadening the scope
of the Doha negotiations to include the so-called new issues would severely constrain the human and
institutional capacity of developing countries.
20. The representative of the Separate Customs Territory of 
Taiwan, Penghu, Kinmen and
Matsu  welcomed the continued economic and trade reforms that should eventually update the SACU
members' trade regimes, provide greater conformity with WTO rules, and attract greater private
investment for economic development.  While progress was slower than hoped, the region faced
severe problems.  Chinese Taipei was concerned with SACU's use of contingency trade remedies;
South Africa was the world's fifth largest user of anti-dumping actions, after the United States, the
EU, India, and Argentina.  While these actions generally served South Africa's purpose, they might
neglect the specific circumstances of other SACU states.  Contingency trade legislation needed to be
developed at the SACU level.  South Africa had undertaken to amend its anti-dumping regulationsand practices to ensure WTO compliance.  Its competent authority, the Board on Tariffs and Trade
(BTT), had also investigated restructuring the anti-dumping system; recommendations were due later
this year.  The representative requested an explanation from the authorities of South Africa of the
rationale for adding a uniform 10% freight component to the f.o.b. duty-paid value of imports to
arrive at the c.i.f. base for levying the 14% value-added tax (VAT), and how its system of customsvaluation complied with WTO rules.
21. The representative of Canada commented favourably on the continued economic reforms by
SACU governments, characterized by further trad e and investment liberalization, driven by WTOWT/TPR/M/114
Page 9
commitments and participation in bilateral and regi onal trade agreements. Canada encouraged further
trade and investment liberalization in services to improve efficiency and the competitiveness of
SACU's exports, in particular by reducing telecommunications, transport, and energy costs.  Further
trade liberalization would likely reduce SACU's customs and excise revenues, and fiscal reforms,
including new sources of income, might be required to cover government expenditures. Structuralreforms, including privatization, would also be needed to attract more investment. Canada recognized
that membership of SACU states in other trade agreements, each with different provisions, goals,
coverage, and agendas, made their trade regimes complex. While Canada appreciated the rationale
behind such trade agreements, managing these with limited resources was a major challenge that
could also divert resources away from multilateral efforts. SACU members' various trade regimes
needed to be WTO consistent.  Canada supported the need to address developing-country concerns,
including in the areas of technical assistance and special and differential treatment. Special anddifferential treatment for developing countries was necessary but should not weaken the trading
system's integrity.
22. The representative of Colombia commented that renegotiation of the 2002 SACU Agreement
reflected "open regionalism" and strong political will by partners to strengthen SACU as a broad
economic and trading area.  The new agreement would facilitate greater harmonization of economicpolicies for the benefit of SACU states.  Colombia encouraged them to further remove trade barriers,
including in services, using multilateral disciplines to facilitate this process.  SACU states had
lowered the average applied MFN tariff rate from 15% in 1997 to 11.4% in 2002.  However, the tariff
structure was complex due to specific and compound duties, and Colombia encouraged SACU states
to simplify their rates.
23. The representative of Hong Kong, China co mmended SACU members' for reducing the
simple average MFN applied rate to 11.4%. While the tariff structure had been simplified, it remained
complex, comprising ad valorem, specific, mixed,  compound, and formula duties. Internal tax
differences among SACU members also undermined the utility of a common external tariff. Hong
Kong, China encouraged SACU to simplify and reduce its tariff structure to enhance transparency andfacilitate trade, and to reduce the gap between applied and bound rates to increase the predictability of
its tariff regime. The representative noted that specific excise duties on certain imported beverages,
such as mineral water, lemonade, and flavoured mineral water, were higher than on similar locally
produced goods, and urged SACU to eliminate such  discrimination. One SACU member also imposed
seasonal import bans on several agricultural products to ensure that the domestic crop was used first.
Such discrimination against imports needed to be rectified to reflect the basic WTO principle of
national treatment. Further liberalization and investment in services should improve the efficiency ofother economic activities and SACU export competitiveness.
24. The representative of Japan appreciated the efforts by SACU countries to promote economic
development and diversification. It welcomed the new 2002 SACU Agreement, which would
introduce democratic decision making. Japan hoped that it would also accelerate further policy
harmonization, thereby increasing regional trade and fostering SACU's integration into the worldeconomy, if combined with multilateral liberalization and outward orientation. Broadening the scope
of WTO negotiations to include new issues would severely test the human and institutional capacity of
SACU countries.
25. Japan welcomed the announcement by the South African Minister of Trade and Industry of the
intention to extend the Motor Industry Development Programme (MIDP) for light commercialvehicles from 2008 to 2012, and hoped it would be extended to medium, and heavy vehicles. South
Africa's Telkom had a monopoly on basic public switched services, and it was hoped a second
network operator (SNO) would be allowed to increase competition. The representative requested an
update on when Botswana would ratify the WIPO Copyright
 Treaty and the WIPO Performance and
Phonograms Treaty, and an explanation for the fall in registrations og intellectual property rights inWT/TPR/M/114
Page 10
Swaziland since 1995.  Japan believed that improved multilateral commitments by SACU countries should
contribute to their overall economic development.
26. The representative of New Zealand acknowledged  the participation of SACU countries in the
multilateral trading system, and welcomed their call for initiatives to further liberalize trade, as well as
South Africa's recent statement advocating the necessity for agricultural reforms for the Doha Round
to achieve a genuine development outcome. New Zealand sought elaboration on what they saw asnecessary steps to achieve their WTO priorities of eliminating all trade and non-trade barriers,
especially in products of interest to developing countries, meaningful special and differential
treatment and capacity building technical assistance. Trade liberalization, including in agriculture,
was one of the best ways for developing countries to meet their development goals. Although
developing countries needed special and differ ential provisions, avoiding or winding back
liberalization in either developed or developing ma rkets would not help developing countries in the
long term.
27. The representative of the European Union encouraged SACU countries to continue their trade
liberalization both regionally and multilaterally to help their further integration into the global
economy. The EU recognized the benefits of regional agreements as a platform for integration into themultilateral trading system, and the challenges posed in designing regional integration arrangements
for a heterogeneous membership. The trade regimes of the different regional initiatives (eg SACU,
SADC, COMESA) overlapped, and it was not alwa ys clear how conflicts were resolved. The EU
supported efforts to harmonize and simplify these different integration initiatives, which would also
help business, both domestic and foreign, and encourage trade creation and investment. The EUregretted that partners had not been more ambitious in extending the scope and depth of the customs
union in renegotiating the 2002 SACU Agreement. It remained limited to a relatively narrow range of
matters; for example, quantitative restrictions, customs procedures, import and export licensing, trade
defence instruments, technical regulations and standards, and SPS measures were not harmonized.
The EU sought details on SACU plans to develop regional approaches in these areas, and to pursue
integration in services and investment. SACU's tariff structure remained complex, comprising formula-
based duties that were potentially in conflict with the Customs Valuation Agreement. SACU countries
were linked to the EU by the ACP-EU Cotonou partnership agreement, and South Africa by a separateTrade, Development and Co-operation Agreement.
28. The representative of the Republic of Korea noted that South Africa was the world's fifth
largest user of anti-dumping measures between 1995 and 2002, when it initiated 157 anti-dumping
investigations and applied 106 measures.  He hoped that SACU states would be more cautious in
initiating anti-dumping measures. Differences also re mained among SACU partners in key trade policies,
such as customs procedures, sta ndards and technical regulations, an d these could undermine market access.
The representative sought the views of SACU partners on this issue.  He suggested that SACU should be
developed in a manner beneficial to other WTO Members and so as not to obstruct global free trade.
29. The representative of Brazil said that his country was acutely aware of the challenges
developing countries faced to achie ve greater integration into the world economy and the multilateral
trading system. These included balancing the potential benefits of greater global trade liberalizationthrough the WTO - still strongly skewed against the products of export competitiveness of developing
countries - and the advantages of promoting greater competitive ness by gradually exposing domestic
industries to international competition through regional trading arrangements. While this approach mightlead to a complex trade regime through overlapping preferential arrangements, it seemed unavoidable in a
global situation characterized by imme nse disparities in countries' ability to benefit from, and to influence,
multilateral trade rules. Brazil was particularly inte rested in hearing how to promote enhanced regional
integration through a customs union without adversely affecting third-party trade.
30. 
The representative of Kenya commented that trade and investment had been the cornerstone of
SACU's liberalization, and that this had reinfor ced both regional and multilateral cooperation and helped
secure enhanced export markets and international cooperation. Kenya welcomed the 2002 SACUWT/TPR/M/114
Page 11
Agreement aimed at democratizing SACU and creating new institutions to enable partners to participate
fully in decision-making. It would enhance integration among SACU countries, reduce economic
distortions, and ensure an equitable distribution of the benefits. SACU economies are largely dependent onagriculture and mining which, with declining terms of trade, was not in the long-term interest of SACU
countries.  Kenya encouraged them to embrace polic ies aimed at product dive rsification, and commended
South Africa for establishing a futures market to hedge against risks in agricultural products.
31. The representative of Mexico referred to the challenges confronted by SACU states and
developing countries in meeting WTO commitments.  The multilateral trading system needed to be
transparent and the best way to examine the conformity of Members' policies with its WTOcommitments was through the TPR mechanism.  Mexi co was particularly interested in knowing more
about SACU policies and measures in the areas of technical barriers to trade, sanitary and
phytosanitary arrangements, and intellectual property.
32. The representative of the United States referred to impressive trade-opening domestic
economic reforms  by SACU countries to advance the objectiv es of the multilateral trading system and
to further regional integration. Simple average MFN duty rates had declined from 15% to 11.4% between
1997 and 2002, while the ratio of regional imports and exports to GDP had grown from 52.4% to 62%.SACU governments had privatized state enterprises, promoted public sector reform, maintained firm fiscal
discipline, and advanced intra-regional trade throughout the Southern African Development Community.
The 2002 SACU Agreement would build on these achievements by democratizing trade policy formulation
and promoting common rules for agriculture, industry, competition, customs, and standards. SACU
countries were among the leading beneficiaries of the African Growth and Opportunity Act (AGOA) -accounting for more than a quarter of total U.S. non-fuel imports under this programme. AGOA II would
offer additional benefits for te xtile and apparel producers in Botswana and Namibia. U.S./SACU
negotiations for a free-trade agreement (FTA) were scheduled to begin in late May and would build onAGOA's success, reinforcing ongoing regional economic reforms and lowering the perceived risk of doing
business in southern Africa. The United States
 believed that developing countries in southern Africa and
elsewhere could only  achieve sustainable growth through more open trade and integration into the
global economy.
33. The representative of Nigeria noted that th e new 2002 SACU Agreement had been negotiated
in an environment of regional political stability, and, as well as democratizing decision-making, it had
broadened the Union's future direction beyond revenue aspects. Nigeria hoped the agreement would
facilitate SACU's development aspirations and help it take advantage of the opportunities available in the
WTO. Trading regimes of SACU countries were highly complex due to membership of several trade
agreements with different provisions, goals, geographical and product coverage, and trade liberalizationagenda. While the common revenue pool and sharing formula in the new SACU agreement were meant to
ensure more stable funding for partners, customs and excise revenue might fall with further tariff
liberalization. SACU's economic reforms, including trade and investment liberalization, had been drivenboth by WTO commitments and their participation in bilateral and regional trade agreements. Some SACU
states were planning competition policies and instrume nts to address unfair trade practices. SACU tariffs
remained complex, but it was noteworthy that the tariff structure had been simplified and the simple
average MFN applied rate reduced from 15% in 1997 to 11.4°% in 2002. Further tariff rationalization,
through simplification, should improve transparency. SACU countries, except South Africa, depended on afew primary products for foreign exchange, and were thereby vulnerable to volatile world prices. SACU
prospects depended heavily on the economic outlook of the European Union and the United States; trading
opportunities were provided by AGOA, the Cotonou Agreement and the EU-South Africa Trade,
Development and Co-operation (TDC) Agreement.  South Africa dominated many areas, such as
intra-SACU trade, the tariff regime, monetary po licy, standards setting, anti-dumping and countervailing
measures. Broadening the scope of WTO negotiations would stretch SACU's human and institutional
capacities.
34. The representative of Morocco noted the encouraging reforms in several areas, including in
industrial development, agriculture, competition policy, and foreign investment, despite difficultWT/TPR/M/114
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challenges.  Efforts to diversify exports and improve the supply of services, such as telecommunications,
reflected the willingness of SACU countries to m odernize their economies.  SACU governments were
determined to meet WTO commitments.
35. The representative of Malaysia commended SACU countries for their increased trade
performance, despite modest economic growth and a difficult international environment. Except South
Africa, they depended on a few products, such as diamonds and beef for Botswana; diamonds, fish and
meat for Namibia; water, clothing and textiles for Lesotho; and sugar and food chemicals for Swaziland.
SACU was an open trading area, with average applied MFN tariff rates of 11.4% in 2002. However, there
was room to simplify the complex tariff structure, which comprised a wide variety of ad valorem, specific,
mixed, compound, and formula duties. Removal of formula duties based on reference prices would bringSACU into conformity with the WTO customs valuation provisions. South Africa had used contingency
measures, including many anti-dumping investigati ons and ten countervailing investigations. Malaysia
hoped that restructuring of the anti-dumping and countervailing system  in SACU would conform with
WTO rules and reduce the large number of investigations.
36. The representative of Australia referred to the ongoing commitment of SACU states to economic
reform and continued trade and investment liberalization. Australia shared SACU's interests in securing
comprehensive agricultural trade reform in the Doha round to end distortions that were discriminatingagainst efficient agricultural producers and denying developing countries the full benefits of participating
in the international trading system.WT/TPR/M/114
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V. REPLIES BY THE REPRESENTATIVES OF SACU AND ADDITIONAL
COMMENTS
37. The representatives of the different SACU co untries spoke on behalf of SACU as follows:
the representative of Swaziland on macroeconomic policies and trends, of South Africa on trade
policies by measure, of Namibia on trade policies by sector, and the representative of Botswana madethe closing remarks. In their replies, the representatives emphasized that the new SACU Agreement
introduced significant changes to the decision-maki ng process and created new SACU institutions.
These would enhance democracy and greater cooperation within the union.  The present meeting was
a milestone, as the first review of the SACU as a customs union.
38. Since their last Trade Policy Review in 1 998, SACU member states had continued their
economic reform programmes. Further liberalization of trade and investment, driven both by
commitments in the WTO and by participation in bilateral and regional trade agreements, were majorfeatures in this process. SACU countries had individually experienced modest but consistent
economic growth since 1997; currently, average GDP growth exceeded 3%.  Exports and the balance
on trade account had grown steadily; in 2002, SACU ’s exports amounted to  R314 billion and imports
to R274 billion, a positive trade balance of R40 bill ion.  Although SACU countries were at different
levels of economic development, they faced common challenges such as eradicating poverty andcushioning the poor against natural disasters such as droughts and floods; combating HIV/AIDS;
promoting sustainable growth and development; and reducing high unemployment.
39. Over the recent past, all SACU countries, except Lesotho, had experienced a decline in
foreign direct investment (FDI). Within SACU, th ere was need to harmonize FDI incentives, improve
competitiveness, and mobilize local savings to create employment. Membership of the CommonMonetary Area promoted convergence in monetary and exchange rate policies, contributing to greater
macroeconomic stability. However, harmonization of SACU members' monetary and fiscal policies
needed to take account of their differing levels of development.
40. The representative stressed the importance of trade in SACU’s economic development, noting
that its members were eligible for non-reciprocal preferential treatment under the Generalized Systemof Preferences (GSP); the Cotonou Agreement with the European Union (except South Africa); and
the U.S. African Growth and Opportunity Act (AGOA), while as an LDC, Lesotho was eligible for
the "Everything but Arms" initiative of the EU a nd participated in the Integrated Framework for
Trade-related Technical Assistance .  Trade preferences by developed countries would continue to play
a pivotal role in the integration of SACU economies into the multilateral trading system, but effective
market access had to be accompanied by measures to address supply side constraints. SACU countries
gave high priority to micro-economic reforms designed to ensure efficient provision of inputs andservices and ease supply-side constraints.
41. SACU had achieved some success in the diversification of its economies and remained
committed to broadening its industrial base.  Mineral exploitation and  beneficiation were a key
anchor for growth and development, particularly in Botswana, Namibia, and South Africa. Certain
labour-intensive manufacturing activities, particularly textiles and clothing, had expanded strongly inrecent years throughout SACU, largely as a result of new incentives under preferential arrangements.
SACU would also strive to exploit the benefits of services trade, for example in tourism, where the
area's attractions were among the best in the world. Constraints such as inadequate infrastructure,
finance and marketing/promotion needed to be addressed promptly. Further liberalization and
investment in services should improve the efficiency of other economic activities by reducing costsrelated to, inter alia , telecommunications, transport, and energy.
42. Greater integration within the customs union and into the global economy would require bold
advances by SACU's multilateral trading partners. SACU would thus continue to participate
proactively in the Doha Development Agenda negotiations.WT/TPR/M/114
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43. On trade policy measures, the representative noted that SACU was unique in including
countries at different levels of development, economic complexity, and variation in market size. The
intention was to continue its integration without compromising the interests of any of the member
states; this deepening process should continue in tandem with further liberalization of SACU’s
external trade.  While enormous efforts had been made to deepen the customs union, areas wherework remained to be done on harmonization included standards, customs procedures, trade remedies,
and competition policies. This harmonization was pr ovided for in the new SACU Agreement, which
established institutional arrangements to continue efforts towards a more cohesive regional market.
Policies to be developed at a national level would be complemented by increased regional
harmonization.
44. The representative welcomed the recognition by delegations of SACU's steps to liberalize
tariffs. A comprehensive and sophisticated tariff rebate system to reduce input costs for exporters alsoensured that applied tariffs were substantially lower than nominal rates would suggest. Steps were
currently under-way to simplify the tariff structur e. SACU members noted the observation that the
trading regime in the region was complicated by the existence of various agreements with different
rules and geographical coverage. They would seek to rationalize their trading regimes to facilitate
intra-SACU and external trade. SACU was firm ly committed to increasing multilateral trade
liberalization; however, bilateral agreements were concluded for pragmatic reasons related to the
existing complexity of global trading arrangem ents. SACU was also undertaking initiatives to
diversify export markets and industries and, in this context, was conducting further bilateral
negotiations as a group with countries both in the North and South.
45. The representative emphasized that South Africa was in full compliance with its WTO
intellectual property commitments, including in respect of existing geographical indications. Other
SACU members were working actively to bring their la ws into compliance.  All sought to ensure that
the TRIPS Agreement took into account the protection of indigenous knowledge.  Enforcement of
intellectual property protection was a challenge for SACU members; they acknowledged the support
for capacity enhancement offered by a number of WTO Members.
46. Each SACU member had national strategies and programmes to counter the HIV/AIDS
pandemic, focusing on awareness, prevention, and treatment. All needed support from development
partners in addressing the challenge. SACU attached great importance to the Doha Declaration on
TRIPS and Public Health to strengthen their efforts against HIV/AIDS. They called for speedy
resolution of the impasse on paragraph 6 of the Declaration in the overall efforts to advance the Doha
Development Agenda.
47. Use of anti-dumping in SACU had always been in accordance with WTO rules. In
undertaking investigations, the whole of the SACU industry was taken into consideration. The
representative reaffirmed SACU's commitment under the Doha Development Agenda to further
tightening disciplines on the use of anti-dumping .  The new SACU Agreement provided for greater
consultation on all matters of common concern, including anti-dumping.  Putting such actions into
context, the representative stated that, as a result of substantial liberalization of the external tariffunder the Uruguay Round, a large number of foreign companies had started to explore the SACU
market. In such circumstances, dumping was not unusual. Since 1999, the number of anti-dumping
initiations had fallen significantly, from a peak of 21 to six in 2001 and four in 2002.
48. As a developing region, SACU attached great importance to technical assistance to support its
economic growth and development policies, as well to building institutions necessary to enhance itsparticipation in regional fora and the WTO. SACU was currently working on a strategy to promote
capacity building and technical assistance at national and sub-regional levels.
49. In respect of sectoral developments, the representative stressed that the new SACU
Agreement laid a firm basis for alignment of sectoral policies in key areas.  Agriculture remained anWT/TPR/M/114
Page 15
important source of rural income and employment, and a major earner of foreign exchange in all
SACU members, all of which had active policies to support sustainable agricultural and rural
development.  The need for such policies was underlined by the regular occurrence of natural
calamities such as droughts and floods, exposing vulnerable populations, in particular, the rural
communities.  SACU would seek to promote policies that addressed food security while promotingliberalized agriculture.  However, real structural change in the highly distorted agricultural policies of
the North would be essential. The burden of adjustment by developed countries should not be borne
by developing countries and the modalities of the Doha agricultural negotiations should incorporate
measures that took into account the needs of preference receiving countries.
50. To promote further development of agriculture in the region, diversification of the sector was
taking place. Increased supply capacity was essential; an important aspect was development of
technical and institutional capacity to implement sanitary and phytosanitary requirements, which werebecoming increasingly difficult to overcome in major markets. SACU countries also took account of
the need to address land issues by instituting policies and programmes for sustainable land reform and
management.
51. The representative said that SACU would ad dress and simplify its tariff regime for
manufacturing in a determined manner. The stru cture would be streamlined to respond to SACU
members’ obligations under the WTO Agreem ents. The governments saw manufacturing and
value-added activities as cornerstones in addressing the challenges of poverty, unemployment,
economic growth and development. Industrial and microeconomic strategies were aimed at improving
the productivity and efficiency of key sectors of manufacturing in the sub-region through supply side
measures. These strategies had contributed to robust growth in a number of non-traditionalmanufactured products, most notably in vehicles and components. Another area of particular interest
to SACU was agro-processing, to add value to agri cultural and fishery products for export. SACU as a
group was exploring opportunities for improved market access within multilateral and bilateral
frameworks.  There had also been considerable growth recently in clothing and textiles, particularly in
the BLNS countries, largely stimulated by increased access to key markets, notably the United Statesunder AGOA . This underlined the importance of increased market access for labour-intensive
manufactures, in which SACU had most comparative advantage. To position SACU in the global
economy, the group was in the process of negotiating a free-trade agreement (FTA) with the United
States, and exploratory work for FTAs with MERCOSUR, the European Free Trade Area (EFTA),
India, China, and Nigeria was under way.
52. SACU countries were determined to intensify va lue-added activities in the mining sector. All
members had incentive policies for beneficiation of mineral products. The success of these policieswas circumscribed by limited market access for such products in developed country markets.
Improving market access would be an important objective in this area.
53. SACU members also recognized the important contribution services could make to growth,
development, and successful integration of the re gion into the global economy. SACU recognized the
symbiotic relationship between services and manufacturing. The region was potentially poised fortremendous growth in service activities. An efficient services sector, particularly in infrastructural
services such as telecommunications, transport, energy, and finance, had an economy-wide impact
that could be enhanced through appropriate multilateral and regional liberalization strategies.
Although services was not explicitly part of th e new SACU Agreement, a high level of services
integration already existed for historical reasons. Through spatial development initiatives, SACU hadenhanced regional integration by encouraging integrated development, including in manufacturing,
transport and tourism. All SACU Members were engaged in restructuring state assets in main service
sectors and in developing strategic partnerships for acquisition of foreign technology through direct
investment. SACU members had also built significant capacities to manage the process of services
reform in a manner that balanced increased efficiency and members’ socio-economic goals.Continuing reform in services would provide conditions for the realization of joint economicWT/TPR/M/114
Page 16
objectives in agriculture, mining, and manufacturing, and intensification of value-added and small and
medium enterprise-based activity within the region.
54. The representative of SACU thanked the Chairperson, the Discussant and the Secretariat for
their valuable contributions to the review process. The Secretariat reports would focus SACU's
thinking on critical areas for follow-up. The review process had been educational and enriching, hadplayed a significant role in bringing the SACU c ountries together and provided a platform to work
together as a collective. SACU had endeavoured to  respond to most of the questions raised, although
some comments would be taken home for furthe r reflection.  The strengthened institutional
framework of the new SACU Agreement would assist the group in reaching common positions that
would advance its goal of deeper economic integration. SACU appreciated the expressions of support
and encouragement from WTO Members; the WTO was a very important organization and could
assist in deepening SACU's regional integration effort s and helping it to integrate with the rest of the
multilateral trading system to achieve its development objectives.
55. The Discussant stated that the trade policies  of SACU reflected its Governments’ economic
circumstances and challenges, including the differing development and resource levels of its
members.  SACU's objectives of promoting sustai nable development, alleviating poverty, combating
disease, and integrating into the global trading syst em were certainly achievable. However, the speed
and level of harmonization and integration would depend mainly on SACU members themselves but
also on circumstances beyond their control. Hence the importance of the WTO negotiations. SACU
had affirmed the expectations of many on the outcome of the Doha round and the difficulties posed by
the work programme. However, unless certain issues began to move off the negotiating table, the
work programme would become much more difficult, given existing institutional and humancapacities. The level of technical assistance and capacity building provided would also have to
improve dramatically. She was encouraged by the responses by SACU regarding harmonization of
FDI initiatives, the need to improve competitivenes s, mobilization of local savings, and the priority
given to macroeconomic reform.  She welcomed the commitment to simplify and liberalize tariffs and
the encouragement of investment in the services sector.
56. The discussant stressed SACU’s need for effective market access, particularly in labour-
intensive manufactures and value-added mineral products.  She emphasized the importance of
developing more explicit SACU-based agreements in the services sector.  She looked forward to an
outcome from the Doha Ministerial Declaration that would correct glaring imbalances, would be
economically meaningful, and would keep development at its core.  She believed that a temporary lull
in the Doha work programme would precede rapid progress, including on TRIPS and access to
medicines.WT/TPR/M/114
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VI. CONCLUDING REMARKS BY THE CHAIRPERSON
57. This Trade Policy Review of the Southern Af rican Customs Union (SACU) has allowed us all
a far better understanding of the "new" SACU, of it s trade policies, and of the policies and aspirations
of its members.  Our dialogue has been thorough and comprehensive, stimulated by the full and open
engagement of the high-level  delegations of Botswana, Lesotho, Namibia, South Africa, and
Swaziland, as well as the insightful comments made by the discussant.
58. Members commended the SACU countries for the progress achieved in their economic
reform programmes since the previous time their trade policies were reviewed in 1998, and noted that
trade and investment liberalization had played a key role in these programmes.
59. Members acknowledged efforts made by SACU in  trying to simplify its tariff structure.
However, they noted that SACU's trade regime remains complex; the tariff structure still comprises
ad valorem , specific, mixed, compound, and formula duties.  The imposition of formula duties raised
concerns about compliance by SACU countries with their tariff bindings and with their obligations
under the Customs Valuation Agreement.  Concerns were also expressed about differences in tariff
bindings among SACU countries, and about the la rge use of anti-dumping and other contingency
trade remedies by South Africa on behalf of the customs union.
60. Some Members emphasized that lack of harmoni zation within SACU in certain key non-tariff
measures, such as quantitative restrictions, customs procedures, standards and technical regulations,
sanitary and phytosanitary measures, competition policy, and internal taxes, distorts trade flows, and
undermines the utility of having a common external tariff.  In this regard, Members welcomed the
2002 SACU Agreement, which provides for a more democratic institutional structure, a dispute
settlement mechanism, a new system regarding the common revenue pool and sharing formula, andfurther harmonization of policies throughout the customs union.  Members expressed hope that, once
in force, the Agreement would contribute to the fu rther integration of SACU into the global economy.
61. Members praised SACU members for their commitment to the multilateral trading system,
and for their strong support for the Doha Development Agenda.  Several Members called attention to
the complications of trade policy making stemming from SACU states' membership in overlappingpreferential arrangements. This was not only difficult to manage, given the limited resources of the
countries, but could also detract from multilateral efforts.
62. In the light of their recent macroeconomic perf ormance, SACU countries were encouraged to
move ahead in implementing structural reforms, including privatization, and market and product
diversification.  Fiscal reforms and new sources of government revenue would be necessary to address
the expected negative effects of further tariff liberalization and increases in health-related budgetary
expenditures, notably on HIV/AIDS and poverty alleviation.
63. Members also sought further clarification on:
− export and investment incentives;
− standards, technical regulations, and SPS measures;
− public procurement regimes;
− protection of intellectual property rights;
− agriculture, including food security;
− mining;
− manufacturing, particularly motor, textiles and clothing industries; and
− services (telecommunications, tourism, transportation, financial services, energy).
64. Members appreciated the replies provided by th e delegations of SACU, and looked forward to
further responses.WT/TPR/M/114
Page 18
65. In conclusion, I believe that through this Review we have gained a better understanding of the
progress made by SACU since 1998, and of the challenges that lie ahead.  The very strong
participation by SACU in this meeting, the large number of questions posed, and the active
discussion, indicate the importance Members attach to this Review.  I enc ourage SACU countries to
improve their multilateral commitments, both in goods and services, and to pursue the implementationof their reform programmes, with a view to enhanc ing the transparency, predictability, and credibility
of their trade regimes, and adherence to the WTO principles.  Trading partners can help by ensuring
that their markets are fully open, and by providing appropriate technical assistance to SACU.
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