WORLD TRADE  
ORGANIZATION  WT/REG231/M/1 
4 May 2009 
 (09-2145) 
Committee on Regional Trade Agreements 
Fifty-third Session  
 
 
 
CONSIDERATION OF THE SOUTHERN AFRICAN CUSTOMS UNION, GOODS 
 
Note of the Meeting of 20 April 2009  
 
Chairman:  Mr D. Brauns (Germany) 
  1. The meeting was convened in document WTO/AIR/3332/Rev.1, dated 1 April 2009. 
2. Under Agenda Item C.II of its 53
rd Session, the Committee on Regional Trade Agreements 
(hereinafter CRTA or the Committee) considered the Southern African Customs Union (SACU), 
goods (hereinafter referred to as 'the Agreement').  
3. The Chairman  said that the Agreement had entered into force on 15 July 2004 and had been 
notified to the WTO on 25 June 2007 under Article XXIV:7(a) of the GATT 1994 and the Understanding on the Interpretation of Article XXI V as an Agreement establishing a Customs Union 
(document WT/REG231/N/1).  The text of the Agreement, together with its Annexes, was available on 
the Parties' official websites.  The Factual Presentation on the goods aspects 
(document WT/REG231/2, dated 3 Oc tober 2008) had been prepared by the Secretariat on its own 
responsibility in full consultation with the Parti es, in accordance with paragraph 7(b) of the 
Transparency Mechanism (TM) fo r Regional Trade Agreements (doc ument WT/L/671).  In addition, 
written questions and replies on the Agreement had been recently distributed in document 
WT/REG231/3, dated 12 Decem ber 2008, and document WT/REG 231/3/Add.1, dated 17 March 
2009.  The document containing the result of the general incidence calculation for SACU prepared by the Secretariat had been also distributed as doc ument WT/REG231/1, dated 3 October 2008.  He 
proposed to organize the consideration of the Ag reement by asking first the Parties and other 
Members to give any general comments.  The Co mmittee would then turn to the specifics of the 
Agreement by using the Factual Presentation by sec tion to guide the debate, to the questions and 
replies document, and finally to the document c ontaining the results of the general incidence 
calculation.   
4. The representative of Lesotho
, on behalf of the SACU (the  Republic of Botswana, the 
Kingdom of Lesotho, the Republic of Namibia, th e Republic of South Africa, and the Kingdom of 
Swaziland) thanked the Secretariat for having prepared  the Factual Presentation.  The SACU had been  
concluded in 1910 ('the 1910 Agreement') and had b een in effect until 1969.  The 1910 Agreement 
had already created:  (i) free movement of goods originating in the Common Customs Area without 
any duties or quantitative restrictions;  (ii) a revenue-sharing formula (RSF) for the distribution of customs and excise revenues collected by the union;  (iii) a common external tariff (CET) on all goods imported into the Union from the rest of the world;   (iv) a common pool of customs duties as per the 
total volume of external trade;  and (v) excise du ties based on the total production and consumption of 
excisable goods. Following the independence of th e former British High Commission Territories in 
the mid-1960s, a new SACU Agreement had been signed on 11 December 1969 ('the 1969 
Agreement), to reflect the changed political enviro nment in the region.  However, an important 
missing element in the 1969 Agreement was the absen ce of joint decision-making.  He recalled that WT/REG231/M/1 
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  all SACU member states were also signatories to the 1994 Marrakech Agreement establishing the 
WTO.  At the same time, important political deve lopments had taken place in Southern Africa with 
the achievement of independence for Namibia in 1990 and the attainment of democracy in South 
Africa in 1994.  Following these important global a nd regional developments, SACU member states 
had decided to renegotiate the 1969 Agreement, to better reflect the prevailing political and economic 
environment.  The aim had also been to create an internationally recognised organization with 
effective, transparent and democratic institutions providing also for joint decision-making, dispute 
settlement and the development of common policies.  The main areas of renegotiations had been in 
the following: (i) joint decision-making processes - prior to 2002, SACU had had no common institutions and therefore had been administered  through annual meetings of the Customs Union 
Commission.  There had been also no effective proc edures to ensure compliance or resolve disputes; 
(ii) revenue-sharing formula - the issue of most concern in the 1969 Agreement had been the RSF.  
With the expected trade liberalization following the Marrakech Agreement, it had become necessary 
to review the RSF;  and (iii) trade relations with th ird parties -  with trade liberalization evident, it had 
become also necessary for SACU as a Customs Union to develop a joint mechanism to engage third 
parties in trade negotiations with a view to enha ncing SACU member states’ integration into the 
global economy. 
5. Following the renegotiations which lasted seven years, the new Agreement had been signed in 
2002 ('the 2002 Agreement') in Gaborone, Botswana, and had entered into force on 15 July 2004, 
following ratifications by the five SACU member states.  SACU believed this Agreement to be 
comprehensive comparing to the 1969 Agreement, as it not only covered revenue-sharing but also 
provided for deeper integration, enhanced economic cooperation through common institutions, 
common policies, and dispute settlement mechanis ms.  A new and transparent revenue sharing 
formula and joint mechanisms to deal with trade negotiations with third parties had been adopted.  
The main objective of the 2002 Agreement was to enhance trade among member states by facilitating 
the free movement of goods, whilst deepening integr ation through cooperation in the development of 
mutually beneficial economic and trade policies.  At the same time, the Agreement recognised the 
different levels of economic deve lopment of the member states and the need to provide for their 
economic development.  The specific objectives of the 2002 Agreement were to:  (i) facilitate the 
cross-border movement of goods between the territo ries of member states; (ii) create effective, 
transparent and democratic institutions ensuring  equitable trade benefits to member states; 
(iii) promote conditions of fair competition in th e Common Customs Area; (iv)  substantially increase 
investment opportunities in the Common Customs Area; (v) enhance the economic development, 
diversification, industrialization a nd competitiveness of member states; (vi) promote the integration of 
member states into the global economy through enha nced trade and investment; (vii) facilitate the 
equitable sharing of revenue arising from customs,  excise and additional duties levied by member 
states;  and (viii) facilitate the development of comm on policies and strategies.  He further pointed out 
that the 2002 Agreement provided for the liberalizat ion of trade in goods only to facilitate free trade 
amongst the member states, while providing for a co mmon external tariff and a mechanism to collect 
and share revenue.  In this regard, all customs, ex cise and additional duties collected in the Common 
Customs Area were paid into a Common Revenue P ool.  The respective share of each member state of 
the total customs, excise and additional duties co llected in the Common Customs Area during any 
financial year was determined by applying a re venue-sharing formula, which comprised customs, 
excise and development components.   
6. As a Customs Union, SACU member states had decided to collectively undertake trade 
negotiations with third parties through a Comm on Negotiating Mechanism (CNM).  In addition, 
SACU members sought to develop a common indus trial development policy, while cooperation 
mechanisms were envisaged in th e areas of agriculture and competition policy.  The Agreement was 
also aimed at addressing unfair trade practices within  SACU.  He recalled that the African continent, 
through the African Union, had taken decisions to accelerate regional economic integration to 
promote economic development.  As members of th e African Union, Southern African countries were  WT/REG231/M/1 
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  contributing to the achievement of these objectiv es.  Given these developments, SACU Council of 
Ministers had been engaged in a process to provi de strategic direction on how SACU could be 
repositioned to play a catalytic role towards the achieve ment of deeper integration in Southern Africa.  
SACU member states had also resolved to accelerat e the full implementation of the 2002 Agreement, 
including policy development and harmonizati on initiatives, and strengthening and establishing 
effective institutions to facilitate the achievement of SACU objectives.  At the sub-regional level, 
SACU aimed to strategically position itself as a nucleus for strengthening and deepening regional 
integration and trade relations with  its neighbours.  In this regard , SACU actively sought to initiate 
and strengthen trade relations with  other regional economic bodies on the continent.  SACU member 
states believed that although deeper integration po sed challenges, the benefits of expanded market 
opportunities, increased trade and overall improvement  in welfare, outweighed these drawbacks.   
7. In conclusion, he emphasized that SACU presente d an ideal tool for trade liberalization in 
Southern Africa as it facilitated the integration of the economies of its member states into the global 
trading system.  The 2002 Agreement recognized the impact of the Uruguay Round of Multilateral 
Trade Negotiations on global trade liberalization and the SACU member states remained fully 
committed to the rules-based multilateral trading sy stem and the successful conclusion of the Doha 
Development Round.  Finally, he informed the Co mmittee that SACU was about to commemorate a 
hundred years of existence in 2010 demonstrating it s longstanding commitment to integration.  In 
reviewing its existence, SACU member states had concluded that the Customs Union had well served them despite the historical challenges and that, gi ven its existing level of integration as a Customs 
Union, it had the potential to be an effective instrument for further integration and economic 
cooperation.  Therefore, member states had reco mmitted themselves to further strengthen the SACU 
as a vehicle for implementing a common agenda towa rds regional integration in Southern Africa.   
8. The representative of the United States
 remarked that SACU was an important comprehensive 
agreement, from both a global and a regional persp ective.  As noted in the Factual Presentation, 
SACU was the oldest customs union in the world,  with a common external tariff in place since 
1 July 1910.  SACU's membership was diver se from an economic development perspective and 
despite many challenges it maintained a high share of duty-free tariff lines both on agricultural and 
non-agricultural products.  She thus encouraged SA CU members to continue to push forward with 
additional tariff liberalization, as this would benef it SACU's development and that of SACU's regional 
partners.  She understood that South Africa might  increase tariffs on apparel products and asked 
whether other SACU member states would take th e same action and if so would this change the 
common external tariff on such products.  If not,  ho w would it be reconciled with the terms of the 
SACU agreement.  The representative of Lesotho  clarified that SACU had a well-established 
procedure in the Agreement for ch anges to the common external tariffs.  This procedure provided for 
the final decision-making on amendments to such  tariffs by the SACU Council of Ministers.  
Individual member states therefore were not able to change the common external tariff, but could, 
however, propose to amend such tariff,  which would then trigger the SACU mechanism and 
procedures for tariff setting. 
9. The representative of the European Communities (EC)  thanked the Parties for the 
comprehensive presentation.  She drew the Committe e's attention to Table IV.1 on page 15 of the 
Factual Presentation.  She noted that six RTAs concluded by the Parties had not been notified to the WTO.  Noting that the Parties had already responded to this question in writing, she asked for a more 
detailed explanation.  In addition,  the EC believed that the table was incomplete, given the fact that 
SACU members had recently signed some other preferential trade agreements (PTAs), such as 
EFTA-SACU, MERCOSUR-SACU, or US-SACU Trad e, Investment, Development, Cooperative 
Agreement (TIDCA).  The representative of the United States
 supported the EC's question. 
 WT/REG231/M/1 
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  10. In response, the representative of Lesotho
 noted that information on FTAs/PTAs and bilateral 
agreements that had been in force at the time  when SACU had been notified to the WTO was 
circulated in its notification.  The SACU-EFTA  FTA had only entered into force on 1 May 2008, 
while the SACU-MERCOSUR PTA was envisaged to only enter into force on 1 January 2010.  The 
SACU-EFTA FTA had been notified to the WTO on 29  October 2008 and its consideration had been 
scheduled on 19-20 November 2009.  The SACU-U S TIDCA Agreement did not include a tariff 
liberalization schedule and was merely a cooperation agreement in the areas of investment, trade and 
development.  The bilateral agreement between Bo tswana and Zimbabwe was currently under review 
and a decision on its notification would be taken at a later stage.  The bilateral agreement between 
Botswana and Malawi was an old Agreement that had been signed in 1956.  In practice, trade between 
the two countries was however governed by the SADC  Protocol on Trade and an assessment by the 
two Parties of the need for the continuation of th e Botswana-Malawi Agreement would be undertaken 
in the context of the SADC Protocol on Trade.  With respect to the bilateral agreement between 
Namibia and Zimbabwe, Namibia planned to take this up with Zimbabwe for the two countries to 
jointly determine when and how to notify the Agreem ent, taking into account that the two parties were 
also members of the SADC FTA, which may render th e PTA obsolete in the near future.  Regarding 
the agreements between South Africa and Mozambique, Zimbabwe and Malawi, respectively, these were old agreements and trade between South Afri ca and these countries was mainly governed by the 
SADC Protocol on Trade. 
11. The representative of the EC 
as a follow-up requested the Parties to clarify (i) the possibility 
for SACU member states to negotiate and to enter into new PTAs with third parties, or to amend 
existing ones;  and (ii) the legal difference betw een the term "concurrence" in the 1969 Agreement 
and "consensus" in Article 31.3 of the 2002 Agreement.  The representative of Lesotho  said that 
although he could not at this stage provide a legal interpretation, he could indicate that under the 1969 
Agreement, SACU member states could unilaterally  decide to enter into negotiations with third 
parties and could also conclude such negotia tions and seek "concurrence", after concluding 
negotiations, from the rest of the SACU Membership .  In comparison, under the 2002 Agreement, 
consent was required before a member state entered in to negotiations with a third party.  This allowed 
for an assessment beforehand to determine the poten tial impact of a future agreement on the Customs 
Union collectively and member states individually. 
12. The representative of the United States  asked whether SACU member states envisaged to 
modify their revenue sharing programme over the next years, and if so in what ways.  The 
representative of Lesotho  recalled Article 43 of the SACU Ag reement under which amendments to 
the Agreement were allowed.  However, he replie d that, at this stage, the current programme of 
sharing revenue was not expected to change.  Mo reover, SACU member stat es recognized the impact 
of the current economic downturn on their economies and subsequently on the Customs Union’s tariff 
revenue, as well as the possible negative effects that further trade liberalization, both bilateral and 
multilateral, would have on expected customs reve nue. The SACU member states were therefore 
expecting lower payouts from the Common Revenu e Pool and discussions were underway within 
SACU to address the possible adverse implica tions of expected lower tariff revenue.  
13.  The representative of Japan  expressed her appreciation to SACU member states for their 
presentation of the Agreement and to the Secretaria t for the Factual Presentation.  She also thanked 
SACU member states for the written responses provided to the question submitted by Japan even after 
the deadline suggested by  the Secretariat.  
14. The representative of Lesoth o appreciated the positive feedb ack from WTO Members during 
the consideration, and in particular the United St ates and Japan for their en couragement.  He assured 
Members that SACU member states remained committed to further liber alization, as clearly stated in 
Article 2 of the 2002 Agreement.  He thanked again a ll the delegations for their interest in SACU.  He 
hoped that WTO Members would, while taking into account of SACU’s unique history and specific  WT/REG231/M/1 
 Page 5 
 
 
  challenges, continue to support them in their atte mpts to strengthen the Customs Union and further 
integrate into the global economy. 
15. The Chairman  noted that the consideration of the goods aspects of the Southern Africa 
Customs Union had allowed the Committee to clarify a number of questions and oral discussion of the 
Agreement could be concluded in accordance with  paragraph 11 of the TM .  If any delegations 
wished to ask follow-up questions they were i nvited to forward submission in writing to the 
Secretariat by 27 April 2009 and the Pa rties were asked to submit replies  in writing by no later than 
4 May 2009.  In accordance with paragraph 13 of the TM all written submissions, as well as minutes of this meeting would be circulated promptly, in  all WTO official languages, and would be made 
available on the WTO website. 
16. The Committee took note
 of the comments made. 
__________