WT/TPR/S/35 Trade Policies Review
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II. TRADE AND INVESTMENT REGIMES
(1) Institutional Framework
1. After 80 years as a British protectorate, Bechuanaland attained self-government in 1965 and
became the independent Republic of Botswana on 30 September 1966.  Since then, Botswana has
retained a written Constitution providing for three separate branches of Government, as well as a Billof Rights guaranteeing certain fundamental freedoms along the lines of the International Declaration
of Human Rights.
2. The Constitution vests legislative power in a unicameral National Assembly, now with
40 elected members, the President (ex-officio) , Speaker, Attorney-General and four members
nominated by the president and subject to confirmation by the elected members.  The Assembly is
elected for five years on the basis of universal adult suffrage with full freedom to organize political
parties.  A 15-member House of Chiefs has adviso ry powers on matters affecting custom and tradition
only and is not involved in the regular scrutiny of bills passed by the National Assembly.  Executive
power lies with the President, who is elected by th e Parliament (in practice, by the party commanding
a majority), and who presides over the Cabinet.  The President is also the Commander-in-Chief of the
Armed Forces.  General elections must be held at least every five years;  the President may, however,
dissolve Parliament at any time.  National elections were last held in 1994, contested by nine parties;
however, the Botswana Democratic Party has held power continuously since 1965.
3. Under a local government system introduced at independence, there are nine district councils,
one city (Gaborone) and four town councils (Fra ncistown, Lobatse, Selebi-Phikwe and Jwaneng),
which are responsible for primary education, local roads and certain local services.  Local elections
coincide with national elections and are also conducted on a party political basis.
4. An independent judiciary interprets and administers the Constitution and other laws.  The
Chief Justice and Judge President of the Court of Appeal are appointed by the President on the
recommendation of the Judicial Service Commission.   Except where notified by Statute, Roman-
Dutch law is the commercial law while the criminal law is largely based on English law. In addition to
the Court of Appeal, the formal legal system comprises a High Court and magistrate's courts;  theHigh Court is located in Lobatse but holds sessions in Gaborone and other main towns.  Customary
law cases in rural areas are heard by tribal courts associated with village kgotla , with traditional chiefs
acting as court presidents, although in towns they are replaced by Government appointees.
(2) Trade Policy Formulation and Implementation
5. The trade policy process in Botswana reflects the history and nature of the trade agreements
of which the country has been a member.  The main agreement is the Southern African Customs
Union (SACU), comprising South Af rica, Botswana, Lesotho, Namibia ( de jure  since 1990) and
Swaziland, with a common customs tariff and revenue collection and distribution system.
6. The Ministerial responsibility for SACU matters in Botswana resides with the Revenue
Department of the Ministry of Finance.  The lead role for SACU affairs and negotiations lies with the
Secretary for Financial Affairs of the Ministry of Finance and Development Planning.
7. The administration of the SACU Agreement includes a number of subcommittees to address
particular sectoral issues and trade disputes, involving the Ministries of Agriculture;  Commerce and
Industry;  Works;  Transport and Communications;  and other Ministries as required by the particularBotswana WT/TPR/S/35
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issue.  These subcommittees also often address is sues arising from the existence of bilateral trade
agreements with neighbouring countries such as Zimbabwe and Zambia.  In Botswana, most of these
issues are the responsibility of the Ministry of Commerce and Industry, although the Ministry of
Agriculture is frequently involved if agricultural products are under discussion.
8. Most of Botswana's export earnings are from minerals and beef products. The mineral
products have generally free entry to their markets, while beef has preferential entry under the LoméConvention to its major market in Europe.  Thus, for a very large part of Botswana's export trade,
there has been no need for active negotiation on tariff or access policies.  There is, however, a
significant amount of work involved in negotiating new contracts and terms and conditions of
production and sale of these products.  The responsibility for these negotiations lies with the Ministry
of Mineral Resources and Water Affairs for minerals, or with the Ministry of Agriculture for beef.
9. The primary responsibility for policy work on the WTO Agreements and for regional trade
agreements such as SACU, the Southern African Development Community (SADC), the Lomé
Convention and the South Africa/EU trade negotiations lies with the Ministry of Commerce and
Industry.  With the exception of the Lomé Convention, most of these trade issues are of recent
relevance to Botswana and hence the capacity to support them is still in an early stage ofdevelopment.
10. All decisions involving international commitments and treaties must be approved by the
Cabinet and authorized by the President.  The signature of the President ratifies a treaty, and thus no
parliamentary approval is needed.
11. Preparation of trade policy issues for Cabinet decision involves a Memorandum for the
Cabinet by the Ministry primarily responsible for an issue.  Inter-departmental consultations usually
involve the Ministry of Finance and Development Planning, the Ministry of Commerce and Industry,and the Ministry of Agriculture, with participation as required by the Bank of Botswana, the
Department of External affairs, the Ministry of La bour and Home Affairs (for issues on labour codes),
and the Office of the President.  However, there is no standing committee on trade policy in the senior
bureaucracy through which all trade policy issues must be processed.
12. The data base and information systems on which trade policy relies are also in an early stage
of development.  Assistance to create such systems has been arranged with donors, and the base for
policy analysis in the trade area will be improved in the near future.  While there is no formal agency
that carries out periodic reviews and assessments of trade policies, various studies have been carried
out as part of ongoing work over the years.
(3) Trade Policy Objectives
13. Its small domestic market means that Botswana must enter into trading relationships with
other countries in order to achieve sustainable economic development.  For this reason, Botswana is
an active partner in the multilateral trading syst em and in several regional trade arrangements,
including SACU and SADC.  Botswana also ha s a bilateral trade agreement with Zimbabwe.
14. Botswana's general trade policy objective has been to achieve the broadest possible free and
dependable access for Botswana's industrial products and services, especially within the southern
African region.  This means minimizing the net costs of preferential arrangements, and within that
context, increasing Botswana's share of produc tion for the SACU market, given the common external
tariff.WT/TPR/S/35 Trade Policies Review
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(4) Trade and Investment Laws and Regulations
15. The main legislation governing foreign trad e is the SACU agreement.  The 1985 Controlled
Goods Act provides for controls on certain products by means of permits.  The Industrial Property Actdeals with industrial property rights and competition.
16. There is relatively little regulation of foreign business activity in Botswana.  The Employment
Act of 1982 provides basic guidelines for employment in Botswana.  This labour legislation controls
minimum wages, length of work-week, annual and maternity leave, hiring, and termination.  Although
the law applies to both domestic and expatriate workers, some categories  - such as managers,
executives, administrators, and professional staff  - are excluded from that part of the Act covering
hours of work, overtime, rest periods, annual leave entitlement, sick leave and working on public
holidays.  Health and safety  laws, embodied in the Factories Act of 1973, are designed to providebasic protection for workers from unsafe working conditions.  Neither law represents an impediment
to investment.
17. Foreign investment in publicly quoted shares on the Botswana Stock Exchange is limited to
5% of the equity for any individual investor, and 49% of equity for all foreign investors combined.
18. The Government of Botswana has Double Taxation agreements with the United Kingdom,
South Africa and Sweden.  The Minister of Finan ce and Development Planning may also, by order,
known as the Development Approval Order, prescribe tax relief to a business if that business is shown
to be promoting the development of the economy of Botswana.  The factors that are given
consideration are:
- the number of Botswana citizens employed and in what capacity;
- the facilities provided to train and impart skills to Botswana citizens;
- the provisions made for the eventual replacement of non-citizens;
- the provisions made for the participation of the Botswana citizens in management;- the area where the business is located;  and- the contribution of the business to the reduction of the price of consumer goods.
The Minister may enter into a tax agreement, on behalf of the Government which becomes operative
on ratification by Parliament, to vary the provisions of the Income Tax Act as regards the impositionof tax or any obligation under the Act;  generally in cases of capital intensive projects, such as mining.
19. Botswana law guarantees the right to private ownership.  There is a brief list of enterprises
reserved for ownership by Botswana citizens
1, but these restrictions do not represent any significant
impediment to foreign investment.  The right to establish, acquire, and dispose of interest in business
enterprises is protected.
20. Botswana enjoys a dual legal system in that both the Common Law and the Roman-Dutch
Law are operational in the judicial system.  As with the British legal system, both secured and
                                                     
1For more details on reservation policy and the list of reserved activities, see Chapter III.Botswana WT/TPR/S/35
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unsecured creditors have equal access to courts during insolvency proceedings.  The right to access
the courts extends equally to foreign and domestic parties.   However, secured creditors rank top of
other creditors during assets distribution.  This performance is often remedied by the inclusion of the
pari passu  clause in most agreements.
(5) Trade Agreements and Regional Co-operation
21. Botswana's goal is to ensure that regional economic integration arrangements are equitable in
terms of benefits received by all members. Regional economic integration also presents opportunities
for cooperation in developing the infrastructure and harnessing of water and energy resources, some
of which are particularly scarce in Botswana.
(i) The WTO Agreement
22. Botswana became a founding WTO member in December 1994.  The major benefit to
Botswana of the Uruguay Round is seen as being reductions in the cost to Botswana of the common
external tariff.  Tariffication of agricultural quotas is expected, in time, to reduce the cost of some
agricultural products within the SACU.  Howeve r, reduction of European subsidies on agricultural
products may lead to a reduction in the price of beef products from Botswana and may also gradually
eliminate the current marginal advantage of access to the European market under the LoméConvention.
23. In acceding to the WTO Agreement, Botswana acceded to the General Agreement on Trade in
Services. Under this Agreement, Botswana has already made commitments on the treatment of
foreign services providers in a number of sectors. These sectors include:
(a) Business services:
Professional services including architectural services, engineering services, integrated
engineering services, medical and dental services, veterinary services, servicesprovided by midwives, nurses, physiotherapists and paramedical personnel and other
medical services;
Computer and related services, particularly consultancy services, installation of
computer hardware, software implementation services, data-processing services, and
data-base services and maintenance and repair of office machinery and equipment;
Research and development services relating to social sciences and humanities
(including law and economics);
Real-estate services involving own or leased  property, or on a fee or contract basis;
Other business services, particularly maintenance and repair of equipment (excluding
maritime vessels, aircraft or other transport equipment) and translation andinterpretation services.
(b) Communication services:  commercial courier services.
(c) Tourism and related services:  hotel and restaurant catering, and travel agencies and
tour operators.WT/TPR/S/35 Trade Policies Review
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24. Botswana's tariff schedule in the Uruguay Round corresponds to that of South Africa, with a
few exceptions (bindings of 20% on dairy products, wheat, maize, rice, groundnuts, sunflower seeds,
and small tractors).  Nevertheless, although SACU governs much of Botswana’s trade policy, the
individual countries, not SACU, are members of the WTO, and Botswana has notified some of its
external arrangements to the WTO (Table II.1).
Table II.1
Status of Botswana’s selected notification requirements to the WTO, as at 6 January 1998
WTO AgreementDescription of
requirements PeriodicityDocument No. of most
recent notification Comments
Anti-dumping(Art. 16.4)Laws and
regulationsOnce by 3.95,
then changesG/ADP/N/1/BWA/1, 9.9.95 No laws on anti- dumping
Agriculture Aggregate measure of
supportAnnual (end of
marketing year)G/AG/N/BWA/5, 15.4.97 List of ‘Green Box’
measures
Agriculture
(Art. 5.7 and 18.2)Special safeguard
provisionsAnnual G/AG/N/BWA/3, 21.2.97
Agriculture
(Art. 10 and 18.2)Export subsidies Annual (end of
marketing year)G/AG/N/BWA/4, 24.2.97 No export subsidies up to
end 1996.
Subsidies andcountervailing measures(Art. 25.11)Subsidies Annual (triennial then
annual changes)G/SCM/N/3/BWA and
Add.127.2.96Maintains notifiable
subsidies
Subsidies andcountervailing measures(Art. 25.11)Countervailing
actions takenSemi-annual G/SCM/N/23 and Add.1,
22.4.97No countervailing duty
actions were taken
Safeguards(Art. 12.6)Pre-existing
Art. XIX  measuresEnd of February 95 G/SG/N/BWA/1,
11.2.97No laws relevant to
agreement
Sanitary and phytosanitary
measures (Art. 7, Annex B)SPS to be notified
promptlyAd hoc G/SPS/N/BWA/1 and 2,
27.11.96Control of infant formula
and food.
Understanding on the
implementation of
Art. XVIIState trading
enterprisesNot specified G/STR/N/1/BWA, 11.2.97 No state trading enterprises
Technical Barriers to Trade
(Art. 10.6)Measures taken G/TBT/Notif.96.418,
6.12.96Regulation of infant foods
and articles
Source:  WTO documents.
(ii) The Southern African Customs Union (SACU)
25. On 1 March 1970, the Southern African Customs Union (SACU) Agreement, concluded on
11 December 1969, replaced the 1910 Customs Union, which linked the former British protectorates
of Botswana, Lesotho and Swaziland (BLS) with South Africa. Namibia became a de jure  member on
10 July 1990, having been a member de facto  while it was administered by South Africa.  The aims of
the SACU, as expressed in the preamble to the 1969 Agreement, are to advance economic
development, in particular in the less-developed member countries and diversify their economies, and
afford all parties equitable benefits arising from intra-Union and international trade.  The Customs
Union Commission, the administerin g body of SACU, meets annually in each of its members' capitals
in turn. SACU also has three liaison committees:  Customs Technical Liaison Committee, Trade and
Industry, and Transport.
26. Under the SACU Agreement, members apply the customs duties, including tariffs, and excise,
sales, anti-dumping, countervailing and safeguard duties as well as related law, set by South Africa, togoods imported to the common customs area from third countries outside the Union.  A SACUBotswana WT/TPR/S/35
Page 25
member country may enter separately into, or amend, trade agreements with a country outside the
common customs area, provided the terms of such agreements or amendments do not conflict in any
way with the provisions of the SACU Agreement.   Members may not impose duties or quantitative
restrictions on goods imported, exported or re-exported  within the SACU area (Articles 2 and 3 of the
Agreement), except in specified exceptional circumstances.2  Botswana, Lesotho, Namibia and
Swaziland (the BLNS States), but not South Africa, may, following consultation, apply additionalduties or increase duties for protection of infant indu stries and of industries deemed to be of major
importance to their economies (Articles 6 and 7 of the Agreement);  Botswana has used this twice
(Chapter IV).
3  Rebates, refunds and drawbacks extended by members should generally be identical,
except in specified circumstances including emergency situations, obligations under multilateral
agreements or technical assistance agreements.  However, a member may also grant a rebate, with theprior approval of other members, for purposes that may be agreed by the parties.  Exceptional
restrictions may be justified on, inter alia , economic, social, and cultural grounds.  Moreover,
members participate in marketing arrangements under which agricultural imports from other SACU
countries may be restricted, particularly at harvest time (Chapter IV).
27. Rights of transit across South African terr itory are provided to SACU members under the
Agreement.  The provision for duty-free circulat ion of goods within the SACU area implies the
collection by South Africa of applicable customs duties and excise taxes on virtually all the external
trade and production of land-locked Botswana, Leso tho and Swaziland.  All customs duties, and sales
and excise taxes collected by members are pooled in the Consolidated Revenue Fund of South Africa.
The pooled revenue is distributed to member countries.  The shares of the BLNS countries are
determined on the basis of a revenue sharing formula and the residual (after BLNS countries have
been paid) is allocated to South Africa.
28. The original revenue-sharing formula was based on the respective contribution of the BLS
countries to total imports into, and consumption of  excisable goods produced within, the SACU area.
The 1969 formula provided for a compensation factor of 42% of the shares of the BLS countries;  this
factor was introduced to compensate the BLS countries for the fiscal lags in the distribution of
revenue,  the "price-raising" (trade diversion) and "industrial polarization'' effects, and the "loss of
fiscal discretion"   related to the Agreement.  The formula was renegotiated in 1975 and a
"stabilization factor" was added in 1977 to stabilize the revenue shares of the BLS (the BLNS since
1990) countries at about 20%, and allow them to fluctuate between 17 and 23% (Box II.1).  In recent
years, 17% has been the operative figure.
                                                     
2Article 5 (1) of the SACU Agreement requires South Africa to afford the other members adequate
opportunity for consultation before imposing, amending or abrogating customs duties, except in specified cases.
3Protection of infant industries is normally allowed for a maximum of eight years.  This time limit is
provided under Article 6 for own country protection and has never been used in Botswana.  However, Article 7allows a member State to apply for protection under the Common External Tariff but the use of such protection
has been restricted by various quantitative and qualitativ e requirements, e.g. proof of the non-availability, in the
common customs area, of the good to be produced is required if a reduction of duties were requested onindustrial inputs;  and the supply of more than 60% of the SACU market is required if an increase in duties onfinal products were requested to protect new industries.WT/TPR/S/35 Trade Policies Review
Page 26
Box II.1:  The Revenue Sharing Formula of the Southern African Customs Union (SACU)
The formula whereby the member countries, other than South Africa (RSA), share in the revenue
pool is as follows:
 S = 1.42 { R[(A + B + C) / (D + E + F + G)] }
where:
S = share allotted to a specific member country.
A = c.i.f. value (at the border) of imports into the country irrespective of their origin
and including all duties paid or payable thereon;  imports from the customs area
(in particular the RSA) are thus included.
B = value of excisable and taxable (sales tax) goods produced and consumed in the
country.
C = excise and sales duties paid on B.
D = c.i.f. value of imports into the SACU area, excluding intra-regional trade in
common customs area.
E = customs and sales duties paid on D.
F = value of excisable and taxable (sales tax) goods produced and consumed in the
SACU.
G = excise and sales duties paid on F.
R = the total revenue pool of customs, excise and sales duties, i.e. E + G.
Member countries therefore receive a (variable) percentage of the total revenue pool, to which a
surcharge of 42% is added.
If the formula yields a revenue rate of less (more) than 20% an additional amount is added
(subtracted) equal to the difference between th e amount calculated and the amount commensurate
with a 20% revenue rate, provided that the resultory rate is not less (more) than 17 (23)%;  thus the
formula is applied subject to
0.17 ≤ [S / (A + B + C) ] ≤ 0.23
where S, A, B and C have the same meanings as in the formula above.
South Africa's share is the residual after the BLNS countries have been paid.
29. All Members recognize that certain aspects of the SACU Agreement have become outdated.
Re-negotiations started in 1994.  The emphasis seen from Botswana, has been on democratization andchanging the institutional structure of the SACU Agreement, as well as technical revision of the
revenue-sharing formula (the level of compensation for the price-raising and the industrial
polarization effects, and for the loss of fiscal discretion, as well as the stabilization factor), the timeBotswana WT/TPR/S/35
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lags in distribution of revenue by South Africa, th e management of the SACU system and the need for
a dispute settlement mechanism.4
30. Proposals provide for the exclusion from the customs union of excise duties (which could
then be set independently) and for introducing a consistent set of calculations for all five members,
rather than treating South Africa as the residual.  This could require more structured regulation ofindividual countries’ use of special drawbacks or other concessions, as effects on the total revenue to
be distributed would then affect the actual shares paid.
(iii) The Southern African Development Community (SADC)
31. Botswana has been an active participant in the Southern African Development Coordination
Conference (SADCC) since its creation in 1980.  The basic objective of this association of ten States
was initially to reduce dependence on South Africa, with the coordination of regional infrastructuredevelopment projects (and related external financial assistance) being the principal means employed
for pursuing this objective.  While SADCC initiatives had not focused on regional trading
relationships, the 1992 summit changed the name of the organization to the Southern African
Development Community (SADC) and redirected the institution's programmes towards a broader
concept of regional economic cooperation and integration with more emphasis on facilitation ofinternational trade within the region.  SADC currently has 14 members:  Angola, Botswana, the
Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, the Seychelles,
South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.
32. The organs of SADC include the Summit of Heads of State and Government (the supreme
policy-making body), the Council of Ministers and its Secretariat based in Gaborone, Botswana.SADC aims to promote regional cooperation and economic integration towards a single common
regional market, with a common currency system, and balanced and equitable mutual benefits;  its
ultimate goals are the development and economic growth of Southern Africa.  To achieve its
objectives, SADC seeks to develop policies aimed at the progressive elimination of barriers to free
movement of capital, labour, goods and services, and to mobilize support for national and regional
projects.
33. SADC promotes cooperation in sectoral activi ties such as transport, communications, tourism,
energy, industry and mining between member States, and runs projects partially financed by foreign
sources.  Specific sectoral tasks with coordination offices are allotted to member States;  Botswana
coordinates agricultural research and training.  In late 1994, a decision was taken to set up a regional
rapid-deployment peacekeeping force.  The creation of a regional development bank and a regional
Parliament is also envisaged.  SADC holds consultative conferences with cooperating Governments
and international agencies.  In September 1994, SADC and the EU launched a joint cooperation
programme in areas such as trade promotion and control of illegal drug trafficking.
5
                                                     
4The loss of fiscal discretion results from the fact that South Africa sets the common tariffs and excise
tax schedules for the whole customs union   The structure of import duties has historically protected
South African producers from non-SACU competition.  The industrial polarization effect results from the fact
that industries serving the whole customs union market we re located primarily in South Africa.  A two-year lag
exists between the date of payment of revenue to BLNS countries and the relevant statistics on which it is based(each member's share in the revenue pool is determined before the start of the financial year).
5EIU (1996a).WT/TPR/S/35 Trade Policies Review
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34. The SADC Treaty provides for protocols that will set out principles and procedures under
which member States will conduct their cooperation in specified areas.  A protocol on SharedWatercourse Systems was signed in 1995 and four others were signed at the Maseru (Lesotho)
Summit in August 1996.  The four protocols deal with:  illicit drug trafficking;  energy;  transport,
communication and meteorology;  and trade.  As at the end of 1997, the Trade Protocol had only been
ratified by Botswana, Mauritius and Tanzania.
6  The Protocol aims to establish a Free Trade Area
(FTA) in the SADC region;  it pr ovides for intra-SADC trade libera lization, with the removal of tariff
and non-tariff barriers within eight years from its entry into force.
35. The timeframe and the process that would lead to the establishment of the FTA will be
determined by the Committee of Ministers responsible for trade matters, and may be asymmetrical;
countries with higher tariff rates would be the first to start lowering the levels of their tariffs.7  The
Committee will also take into account sensitive sectors or products in each member country.  SACU
members will make a common tariff commitment.8  Intra-SADC trade, particularly in food and
beverages;  agricultural, mining and chemical produ cts;  textiles and clothing;  and wood products,
increased by about 12.4% between 1990 and mid-1996.
36. The SADC Trade Protocol stipulates the following origin criteria for intra-SADC free trade:
goods "wholly produced" in the member States are either mineral products extracted from the ground
or sea-bed of the member States;  vegetable prod ucts harvested within the member States;  live
animals born and raised within the member States;  products obtained from live animals within the
member States;  products obtained from the sea and from rivers and lakes within the member States
by a vessel of the member State;  products manufactu red in a factory of a member State, exclusively
obtained from within the member State;  used articles fit only for the recovery of materials, provided
that such articles have been collected from users within the member State;  scrap and waste resultingfrom manufacturing operations within the member States;  or goods produced within the member
States exclusively or mainly from the above, or from materials containing no element imported from
outside the member States or of undetermined origin.
37. Manufactured goods are classified as originating if the c.i.f.  value does not exceed 60% of
total costs of materials used in the production process, (i.e. at least 40% local-content requirement), orif there is local value added of at least 35% of ex-factory costs.
38. The treaty also provides for a protocol to establish a disputes tribunal, which will adjudicate
upon disputes arising from the Treaty that cannot be settled amicably between member States
(Article 32 of the Treaty).  Members of the tribunal will be appointed for a specified period.
Decisions of the tribunal will be final and binding.
(iv) SACU-SADC interaction
39. Given Botswana's major role in SADC, as the seat of the secretariat, and simultaneous
membership in SACU, the potential interaction between the two arrangements is seen by Botswana as
significant.
                                                     
6The Protocol on Trade was not signed by Angola.
7Marchés Tropicaux , 30 August 1996;  and Jeune Afrique Economie , No. 225, 16 September 1996.
8An overlap exists between SADC and SACU on the one hand, and SADC and the Common Market
for Eastern and Southern Africa (COMESA) on the other.Botswana WT/TPR/S/35
Page 29
40. The SADC agreement will lower tariffs and tariff revenues significantly for imports from
non-SACU members of SADC compared to the Common External Tariff.  The non-SACU, SADC
region is a reasonably important source of imports  for the SACU, and the elimination of tariffs on
these imports will reduce revenues.  Precisely how this reduction will be distributed among the SACU
members will depend on the structure of their imports from the region and the nature of the new
formula that may be agreed for their division.
41. The SACU-SADC interrelationship poses othe r problems.  The SADC is a Free Trade
Agreement, with separate external tariff regimes.   On the other hand, the SACU is a Customs Union
with a common external tariff.  Since both arrangements provide free market access for goods of other
members, with some limited exceptions for Free Trade Areas, countries with a Free Trade Area status
would have the capacity to lower tariffs on inputs , and thus on costs, while Customs Union members
would need a joint decision of all members to adjust the common external tariff.  This has important
implications for the flexibility of the tariff polic y to meet the competitive conditions of other Free
Trade Area members.  The implication is that a non-SACU member of an  SADC Free Trade Area
would be able to reduce the tariff on an imported i nput in order to reduce the cost of an exporter to,
say, the South African market.  This would give an advantage over a SACU member unable to reduce
imported input costs in the same way.
(v) Botswana/Zimbabwe Trade Agreement
42. The Customs Agreement between the Federation of Rhodesia and Nyasaland, the
Bechuanaland Protectorate and Swaziland - whic h originally came into force in 1956 - was the
forerunner of the present-day trade agreement between the Republic of Botswana and the Republic of
Zimbabwe (B/ZTA).  While this bilateral agreem ent was premised on mutual recognition of the
benefits to be derived from free trade, following the achievement of independence by Zimbabwe in1980, several developments generated friction in th e trading arrangement between the two countries.
43. Of particular importance was the relocation of some Zimbabwean manufacturing enterprises,
motivated by the severity at the time of Zimbabw ean foreign exchange controls and the easier access
to imported inputs in Botswana.  The stress in the relationship became more pronounced as Zimbabwe
experienced increasingly severe balance-of-payments difficulties, causing the Zimbabwean authorities
to impose import quotas and tighten local-content requirements on goods imported from Botswana,and as several manufacturers in Botswana perceived that they were injured by the "dumping"
practices of some Zimbabwean enterprises.
44. After several years of protracted negotiations, a new agreement was finally signed in
October 1988.  The provisions of the amended document, and especially their administration,
reflected reservations on the part of both contracting parties.  In particular, Zimbabwe has continued
to seek ways to prevent Botswana's SACU affiliation from serving as a vehicle for South African
goods circumventing the more restrictive provisions of the South Africa/Zimbabwe trade agreement.
On the other hand, Botswana has continued to object to Zimbabwean impediments to its exports, andhas occasionally resorted to retaliatory measures.
45. The current version of the agreement provides that trade is generally to be free of customs
duties and quantitative export and import restrictions.  However, in order to qualify for such
treatment, goods must meet specific qualifications, rules of origin and related documentation
procedures.  There are also limitations on transport facilities and port of entry.WT/TPR/S/35 Trade Policies Review
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46. To be considered as originating from Botswana or Zimbabwe, manufactured goods must meet
a 25% or more local-content requirement.  The fo rmula for the calculation of local content includes
the following items, which constitute manufacturing  costs:  the cost of materials grown, produced or
manufactured in Botswana or Zimbabwe used in the manufacture of goods to be exported to
Zimbabwe or Botswana;  and the cost of "direct labour involved in the manufacture of goods".  This
definition of local content excludes managerial salaries and local-owned profit.  It is therefore verystringent and has been the subject of much conflict, including (temporary) abrogation of the Trade
Agreement by Zimbabwe on more than one occasion.
47. Following the Zimbabwean devaluation in 1991, Botswana's products lost much of their
competitive advantage in Zimbabwe and the South African market became more important for
Botswana.
(vi) The Lomé Convention
48. Since 1975, Botswana's exports have been eligible under the Lomé Convention for virtually
duty-free access to the European market.  The current, fourth, Lomé Convention (Lomé IV) was
concluded for ten years starting from 1990.
49. Subject to a safeguard clause and rules of origin, commodities from ACP States, except those
covered by the Common Agricultural Policy, enter the EU free of customs duties and quantitative
restrictions.  Preferences under Lomé IV are estimated to cover some 40% of EU imports from ACP
States, with a large majority of the remaining imports entering the EU market duty free either on an
MFN basis or under GSP rates.9  The ACP States are required to extend MFN treatment to EU
products (Article 174).
50. Under the Beef Protocol of Lomé IV, traditional beef exporting countries are granted a 90%
rebate of the specific element of the EU tariff (previously, of the variable levy) on beef imports.Botswana has been favoured with a particularly generous beef quota (presently 18,916 tonnes per
annum until the year 2000), which it now does not manage to fill.  Not all beef produced in Botswana
is eligible for sale in the EU market owing to the risk of foot and mouth disease in some parts of the
country.  Part of Botswana's beef is sold elsewher e, including some to South Africa at SACU prices,
which are somewhat higher than world prices but less than the EU price.  Other Botswananon-traditional exports, such as clothing and textiles, also benefit from preferential treatment under
the Lomé Convention because they are not constrained by quotas.
51. As a result of tariffication following  the implementation of the WTO Agreement, the EU
market may in time become more accessible to other more competitive beef exporters such as
Australia and New Zealand, previously denied access by the variable levy system.  Liberalizing the
EU market is expected to affect the Botswana beef industry in two ways.  On the one hand, reduction
of EU beef subsidies and tariffs may reduce EU market prices;  as EU beef prices decrease,
Botswana's beef export prices would also decrease.  On the other hand, world beef prices have been
projected to increase by 5% above pre-Uruguay Round levels following liberalization of beef markets
(FAO, 1994). This increase is  attributable to the reduction of subsidized exports for both the EU and
the United States and the expansion in import demand in Asian countries.  The combined impact of
these two factors on Botswana's beef prices depends on whether the EU will continue to be
Botswana's major beef market and whether increases in global beef prices are greater or less than EU
price decreases.
10
                                                     
9WTO (1996).
10See Fidzani et. al (1996).Botswana WT/TPR/S/35
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(vii) Other trading arrangements and international agreements
52. Botswana has preferential access to North American and other developed markets through the
Generalized System of Preferences (GSP).  However, Botswana’s trade with the United States is
currently very small.
53. Botswana is a member of the United Nations and its agencies, the Organisation of African
Unity (OAU), the International Monetary Fund, the World Bank, the Non-Aligned Movement, theAfrican Development Bank, and the Commonwealth.  Botswana has also acceded to the Convention
on International Trade in Endangered Species of Wild Fauna and Flora (CITES), the International
Centre for the Settlement of Investment Disputes (ICSID), and the Multilateral Investment Guarantee
Agency (MIGA).