Deepening Integration in SADC - Fes-botswana.org

may also occur when there is displacement of a less efficient external
supplier by a more efficient producer within SADC.
What SADC should be worrying about is a form of trade diversion
that will result from a distorted or a relatively simple form of the 'rules
of origin' which can be a cause for serious complications when attempts
are made to implement the 'Rules of Origin'. This factor is likely to be
made more complex when member countries face the impacts of entry
into an EPA or from other FTAs, e.g. the impact of the EU-SA-FTA. For
a smooth transformation of SADC towards market integration and
entry into an EPA, the potential adjustments on trade and polices must
take into account (a) the necessity to prevent the region from further
marginalisation within the world economy; and (b) the fulfilment of
the objective of fostering market integration and/or economic
integration that is linear progression in degrees of integration from
free trade area, customs union, and common market to an economic
community.
As an FTA, SADC needs a certain level of macroeconomic
convergence, policy harmonisation and stability. In SADC, there is
currently an extremely large divergence in the macroeconomic policy
stances pursued by different member countries. These factors
undermine liberalisation initiatives and influence the different influences
on countries' respective growth rates, given the variety of
macroeconomic policy environments, political, cultural, historical and
social characteristics.
The need for adjustment of trade and economic policies derives
from the perceived current and persistent distortions in the policy
environment of member countries. Despite the various attempts to
liberalise their trade and foreign exchange regimes and removal of
price controls, frequent policy reversals leading to large budget deficits,
monetary policy pressures, high levels of domestic interests and
crowding out of private sector initiative, are still prevalent in many of
the region's economies. It is well known that a weak fiscal stance
often undermines the goals of monetary, financial and meaningful
trade liberalisation (although the latter is not an end in itself). Thus,
although there is greater degree of market determination of official
exchange rates, some countries regularly allow overvaluation to occur,
a condition that causes problems for exporters and importers.
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