INTRODUCTION

In the period leading up to South Africa's first democratic elections in April 1994, there were high expectations in some quarters that the country's entry into regional organisations would be a major catalytic event driving a process of regional co-operation and integration forward. Sceptics, on the other hand, argued that preoccupation with domestic problems would lead to the sidelining of regional issues by a democratic South African government and to no serious effort being made to contribute to a regional programme.

Surveying the scene in the two years since the installation of South Africa's Government of National Unity (GNU), it is evident that neither of these expectations has been borne out. There has been no great leap towards a more integrated region. But nor has South Africa turned its back on the region. On the contrary, the GNU moved with some speed and decisiveness in taking organisational decisions intended to lay the basis for a new relationship with the Southern African region. Two decisions stand out in this regard: the accession in August 1994 to the Treaty of the Southern African Development Community (SADC), and the initiation in November 1994 of negotiations for a revised Southern African Customs Union (SACU) Agreement.

This article looks at the prospects for, and some of the problems being encountered in promoting regional integration in Southern Africa, from a specifically South African point of view. Through surveying both the state of the policy debate and some of the practical issues that have been encountered by South African officials in the past few months, it will be argued that there are conceptual, strategic and practical problems that will have to be addressed not only by South Africa, but by the entire region if regional integration is to become a reality in the Southern African region.

CONCEPTUAL ISSUES AND APPROACHES TO REGIONAL INTEGRATION: AN UNFINISHED DEBATE

The policy debate on regional co-operation and integration can in no sense be considered to have arrived at a point of firm conclusion by the time South Africa took its place as a partner in regional organisations. A number of studies commissioned by regional organisations,2 NGOs3 and important extra-regional interested parties,4 had broadly concurred with the main conclusion of one of the most important of them, that "all SAR (Southern African region) countries have much to gain from various forms of regional co-operation and from launching a determined effort to integrate the regional market."5

Within South Africa itself, while several influential voices in business and other circles continued to question whether the region should be a priority at all, the democratic movement, led by the ANC had broadly come to accept the following propositions:

Greater involvement in regional trade, involvement in regional projects, obtaining access to regional resources and infrastructure and co-operation in various sectors could all be of great significance to efforts to promote growth and development in a democratic South Africa.



Existing economic relations in Southern Africa were characterised by great unevennesses and by acute imbalances and disparities. South Africa's visible exports to the rest of the region exceeded imports by a factor of more than 4:1, a product not only of the stronger productive base of the South African economy, but also of protective tariffs and non-tariff barriers of various kinds that kept goods produced in regional states out of the South African market.



The overall regional ambient would be of considerable significance for a democratic South Africa; a region characterised by relative growth and stability would have very different implications than one plagued by stagnation and crisis; and South Africa could not hope to become an island of prosperity in a sea of poverty.



Southern Africa should thus command top priority in South Africa's foreign policy and the country should act together with its partners to promote growth and development throughout Southern Africa.



South Africa is already part of a region, in which there is a significant degree of economic integration, being a member of a customs union with four other countries, and part of a monetary union with three of these.

While no firm conclusions on integration as such had been agreed upon, there was general support for the idea of exploring the prospects of a programme of mutually beneficial co-operation and integration. This would be based on a general recognition that the real question was not whether there should be co-operation or integration, but rather to identify that combination of co-operation, co-ordination and integration, that was realistic and feasible under prevailing conditions, and that could thus best advance the goals of contributing to growth and development.

One of the issues that was far from resolved in the policy debates taking place either in South Africa or the rest of the region, was the approach or paradigm to adopt in promoting integration. In fact, both in the literature and underlying various concrete proposals for integration programmes in the Southern African region, several distinct approaches could be recognised.

For much of the period until the early 1990s, the debate was dominated by proponents of of three paradigms. One of these was the conventional trade or market integration paradigm, recognised as having informed much of the practice of the Eastern and Southern African Preferential Trade Area (PTA). This essentially viewed integration as a process in which tariff and non-tariff barriers to trade between co-operating partners were progressively removed and in which the external trade regimes, and eventually fiscal and monetary policies of co-operating partners were harmonised. Progress up what might be termed `the ladder of integration' was conventionally seen as moving in linear succession from a Preferential Trade Area through a Free Trade Area, Customs Union and Common Market, to an Economic and eventually perhaps Political Union.

Strong emphasis was placed in this approach on the distinction between trade creation and trade diversion. Trade creation refers to a situation in which the production of particular goods in country A, which does not have a comparative advantage in that area, is replaced by the purchase of cheaper goods from country B which does. Trade diversion, on the other hand, takes place if country A turns from lower cost suppliers in country C to what are in reality higher cost suppliers in country B, now enjoying an `artificial' advantage because of a preferential tariff arrangement. Under the trade integration paradigm, economic integration was held to be economically desirable in cases where the trade creation effects were greater than trade diversion. In the literature, this was seen as most likely to occur in situations where:

trade among co-operating partners was either currently or potentially a large proportion of their total trade; or



where there was a high level of complementarity in productive structures: A produced what B needed and vice versa.

This approach was subjected to a number of criticisms in the Southern African debate.6 The Ricardian `comparative advantage' theory on which it is based, has been criticised as presenting an unrealistic vision of the mechanisms and power relations in contemporary international trade. The approach to the issue of `trade creation' versus `trade diversion' has been seen as static in that it refers to existing comparative advantages without considering the potential of regional co-operation to overcome obstacles and create new comparative advantages. More particularly, for these and other reasons, critics have seen it as inappropriate in `third world' regions, where the conditions described above that justify the formation of customs unions, generally do not apply.

An alternative approach, recognisable as that which informed the practice of the Southern African Development Co-ordination Conference (SADCC) during its first decade, was described as functional integration or integration through project co-operation. This set out from the premise that co-operation in the formulation and execution of joint projects aimed at overcoming deficiencies related to underdevelopment in the spheres of production and infrastructure, should be the first priority in programmes in `third world' regions. Not only was this viewed as essential to remove immediate barriers to regional trade, it was also seen as a means of generating a regional identity and consciousness which would set in motion processes of interaction that would lay the ground for a more secure integration rather than hasty trade liberalisation. The latter, it was argued, would tend to benefit stronger partners disproportionately in conditions of underdevelopment and could thus lead to a polarisation ultimately prejudicial to the whole integration effort.

A more ambitious model proposed at various times was known as development integration. Like the project co-ordination approach, it also set out from a critique of a conventional laissez faire trade driven approach, as either not leading to effective integration or else creating unacceptable polarisation in underdeveloped regions. In contrast to the project co-operation approach with at least an initial micro-focus, development integration stressed the need for both macro and micro co-ordination in a multi-sectoral programme embracing production, infrastructure and trade. It thus stressed the need for close political co-operation at an early stage of the integration process, in contrast to the market integration approach under which such co-operation would only emerge at a rather late stage. The development integration approach also emphasised the need for an equitable balance of the benefits of integration, and argued that trade liberalisation measures needed to be accompanied by compensatory and corrective measures oriented particularly towards the least developed member countries. It thus saw a need for trade integration to be complemented by:

efforts to promote co-ordinated regional industrial development;



the establishment of regional funds or banks giving special priority to the least developed members;



measures to give less developed members greater preference in access to regional markets and facilities and a longer period to reduce tariffs; and



some co-ordination of macro-policies at a relatively early stage, particularly in relation to fiscal incentives for investment.

As argued elsewhere,7 changes in the global political economy and in fashions in economic theory, had led to significant modifications in the paradigms most influential in informing efforts to promote integration in Southern Africa by the early 1990s. On the one hand, factors such as the ascendancy of neo-liberal discourse and the lack of success of many earlier integration projects in regions in `the South', fuelled efforts to refine and adapt the conventional trade integration approach to bring it more into line with the current pre-occupations of the `structural adjustment' agenda of the international financial institutions (the International Monetary Fund (IMF) and the World Bank).

The World Bank and the IMF, it should be noted, were relatively recent converts to regional integration. In the past, both institutions stood aloof from integration efforts, both in Africa and elsewhere. The structural adjustment programmes (SAPs), adopted by a succession of African countries at the behest of the World Bank and the IMF, were partly premised on a view that the fundamental requirement as far as a country's external economic relations were concerned, was to undertake "unilateral trade reform" which would "open up" the domestic economy, and integrate it more closely with the world economy at large. Regional integration was seen, at best, as an irrelevance and, at worst, a diversion from the fundamental goal of lowering tariffs towards the world at large.

The World Bank's shift towards supporting a new round of regional integration efforts in Africa dated from around 1991. It was partly based on the reality that most countries on the continent had already embraced SAPs, and a perception, in this context, that an integration programme of a certain type could reinforce efforts to promote unilateral trade reform. In studies undertaken to give substance to its newly found support for regional integration programmes, a significant attempt was discernible to modify the conventional trade integration paradigm to make it compatible with "unilateral trade reform".

Neo-classical customs union theory, on which the trade integration approach is based, as indicated earlier, has always cautioned against measures which would artificially divert trade from third parties with comparative advantages. However, it has been relatively silent about the type of trade regime the union as a whole should maintain with the outside world: whether the common external tariff which comes into existence when a customs union is established should be high or low, relatively protective of intra-regional trade or more `open'. This derives from the focus of the theory, which has always been on relations between members of the union rather than on relations between the union and the rest of the world.

It is precisely towards this perceived lacuna in the conventional neo-classical paradigm that officials in the World Bank have sought to address themselves. Side by side with the Bank's support for a new round of regional integration efforts, has thus been an attempt to refine and adapt conventional customs union theory to bring it more into line with the perspectives underlying "unilateral trade reform". An example of this approach can be found in a 1991 World Bank study on integration in sub-Saharan Africa.8

The main argument of this study was that the Bank should support a new round of integration projects in sub-Saharan Africa, but that these should be "consistent with an outward orientated strategy that `promotes incentives which are neutral between production for the domestic market and export'." 9 Regional integration should thus not become a means of salvaging failed import substitution industrialisation programmes, but should be harmonised with ongoing structural adjustment programmes.

This required, argued the study, some modification of the conventional goals of integration. "Customs Unions, with their potential for trade diversion behind a high CET [Common External Tariff], should not be the primary objective of integration efforts."10 The "ultimate objective" should rather be "to create conditions which would allow the private sector to freely work, trade and invest across African borders and with relatively low barriers against third parties."11

Integration should then be seen as a process of "mutual regional liberalization which would strengthen and extend ongoing adjustment efforts by adding another dimension."12 While "temporary increases in regional preferences are acceptable", this should be within a framework of a "general and significant lowering of external protection" which would guarantee that "regional preference would indeed be temporary."13 Regional integration as a process of regional liberalisation, is accordingly "an intermediary stage towards general liberalization."14 Its essential driving force would be "a private sector constituency that would benefit from the focus on creating conditions conducive to legalising and enhancing private cross-border economic activity."15

It was such an approach that largely informed the IMF/WB/ADB/EU-sponsored `Cross-Border Initiative' (CBI) which began to be implemented in a number of PTA/Comesa countries in 1993. The `Concept Paper' on which the initiative was based indicated that it was premised on "accelerated economic liberalization with respect to external payments and domestic regulatory environment" and sought to "build on the progress achieved in national structural adjustment programs." The initiative involved a series of core measures in the areas of trade, payments and exchange systems and investment. In the trade area, the programme envisaged eliminating all tariffs on intra-regional trade on a reciprocal basis by 1996 and removing a range of non-tariff barriers on imports from all countries. On payments, the programme aimed at "complete non-discriminatory elimination of all restrictions on current account transactions and relaxation of certain types of capital account transactions." In the area of investment, the programme envisaged harmonisation of investment incentives and simplification and liberalisation of cross-border investment procedures. The emphasis of this initiative was on "unilateral action and self-selection."16 Although based on extensive interactions with the PTA and consultations with SADC and the Indian Ocean Community (IOC), the CBI did not simply seek to reinforce efforts of these organisations, but to encourage a self selecting group of countries to proceed on a faster track. Goaded on by an offer of $30 million on average, a number of PTA, SADC and IOC member states signed on to this initiative.

Critics of this approach focused on a number of aspects:

The underlying assumption that the fundamental requirement of a successful externally oriented growth strategy was a unilateral and pre-emptive liberalisation of domestic tariff and regulatory regimes, was seen as not taking adequate account either of the experiences of the East Asian NICs or of the acute unevennesses and inequities of the current phase of `global liberalisation' where countries of the South made significant moves towards opening up their domestic economies only to be confronted with an increasing range of non-tariff barriers in countries of the North.17



Such an approach was rooted in an assumption that what was good for business was good for the community as a whole. Its essential thrust was towards accommodating the demands of capital, without taking account of the interests of other stakeholders.



It took little heed of, and indeed appeared to be relatively indifferent to the potential for polarisation in laissez faire approaches to integration. It also said little or nothing about such critical questions as how to overcome the barriers to integration deriving from underdevelopment, inadequate infrastructure and other deficiencies, or how to empower the most impoverished and least developed partners to become more effective in regional trade.



While conceding that an integration and co-operation agenda might proceed at different paces, and that within either there might be a need to take account of "variable geometry" and accepting that sub-sets of countries might move at different paces, initiatives like the CBI appeared to be based on an almost total isolation of the integration from the co-operation agenda, with a near exclusive focus on the "fast track" group.

The alternative to this type of approach was seen by many as continuing to lie in the overall direction of the basic concerns and thrust of the development integration approach outlined above. SADCC's 1992 theme document, for example, concluded that, "the Development Integration approach, providing for investment, production and market or trade integration, is appropriate for SADCC, and that it [should] be accorded priority in the overall integrative framework."18

However, it was also conceded that an alternative development oriented integration strategy would have to take account of both the changes in the global conjuncture and the weaknesses or failures demonstrated in past practice. In particular, such a strategy would need to take account, among others, of the following:

the improbability that import substitution industrialisation, financed by foreign exchange earned from the sale of primary products on world markets, would be any more successful, under prevailing circumstances, on a regional basis than similar policies were at national level;



the fact that project co-operation had been shown to be an insufficient basis for promoting regional integration. This appeared to be a major lesson that SADC drew from its own self-critical review in the early 1990s. Co-operation in infrastructural projects was important in its own right and could contribute towards the creation of a regional identity and common sense of purpose, but an integration programme needed to reach beyond this and to embrace trade issues, as well as such `thorny questions' as currency convertibility; and



the need to find ways to promote the political commitment necessary to drive an integrated regional programme. This was widely seen as a key lesson from the experience of the European Union (EU), but was seen as a complex question with several elements. On the one hand, it depended on governments seeing concrete benefits flowing from what was generally perceived as a `surrendering' of some degree of sovereignty to regional institutions. On the other hand, it depended on creating a degree of overall legitimacy, popular support and a sense of involvement by peoples and non-government institutions.

While such points have been widely acknowledged, there has been no further major development at the conceptual or strategic level of an approach towards promoting development oriented integration in the Southern African context. The reality is that there remains a little noticed, still unresolved debate between different approaches or paradigms towards promoting integration in Southern Africa. As will be argued later, this is reflected, among others, in some of the current debates about a SADC trade protocol.

STEPS TAKEN BY SOUTH AFRICA'S GOVERNMENT OF NATIONAL UNITY AND PROBLEMS AHEAD

Trade with the rest of Southern Africa is of considerable importance to South Africa. Officially published South African trade statistics have historically referred to the trade of the whole of the Southern African Customs Union with the rest of the world, thus obscuring the trade that takes place between South Africa and its partners in the Customs Union and understating the full economic significance of trade with other African countries. A calculation undertaken by officials of the Department of Trade and Industry after the 1994 elections attempted to unpack these figures and thereby indicate the full significance of South African trade with the region. This calculation revealed that exports to other SACU countries amounted to more than R15 billion in 1993, more than the country's exports to either Asia or America. Trade with all other African countries amounted to 31,7 per cent of total trade, if SACU countries were included, and 12,8 per cent if they were not.19 The remaining non-SACU SADC member countries as a group stand second only to the SACU countries in terms of their importance as trading partners on the African continent. Figures published by the Commissioner for Customs and Excise (referring to the entire SACU area and not just South Africa) showed that exports to the remaining SADC member countries totalled R6,1 billion in 1994, while imports from these countries totalled R1,4 billion. The figure for exports represented 71 per cent of all exports from the SACU area to the rest of Africa. Expressed as a proportion of total trade, the aggregate figures for this group remained fairly modest. Non-SACU SADC countries accounted for just 6,8 per cent of total exports and only 1,8 per cent of total imports. However, when disaggregated by product categories, the figures clearly show that this trade has a much greater significance for manufacturing industries. The figures for 1994 showed that the non-SACU SADC group was the destination of more than a third of the total exports of machinery and appliances, of more than a quarter of vehicle exports, of 21 per cent of chemical products, 39,1 per cent of plastics and rubber products, 16,9 per cent of foodstuffs and beverages, and 13,8 per cent of textiles and clothing.20

The GNU's approach towards trade/integration issues has set out from an implicit if not explicit recognition of a point made in several policy studies: the region is characterised by "variable geometry" with different arrangements at different levels of integration applying among different groups of countries within the broader region. As has been indicated earlier, two important organisational decisions stand out as having created a framework for developing a new approach to regional trade policy the renegotiation of the SACU agreement, and membership of SADC.

SACU has operated as a customs union between South Africa, Botswana, Lesotho, Namibia and Swaziland for many decades, and is governed at present by an Agreement negotiated in 1969. The main provisions are that the tariff regime in force in South Africa applies to the other countries (i.e. serves as a common external tariff), and that customs and excise revenue collected in member countries is paid into a common pool and distributed according to a formula weighted in favour of Botswana, Lesotho, Namibia and Swaziland (the BLNS countries). This weighting is intended to compensate the smaller SACU countries for the polarisation and price raising effects of being drawn behind South Africa's protective tariff regime, and for the loss of sovereignty over tariff and trade policy issues.

The BLNS countries have complained over the years that the revenue sharing formula, in fact, does not fully compensate them even for the price raising effects, that there is a lack of consultation by South Africa of its SACU partners, and there have been various alleged non-tariff barriers preventing their access into the South African market. South Africa has complained in turn that the weighted allocation of excise, as well as customs duties to the BLNS, have become an increasing burden on the South African fiscus, and that SACU has become unaffordable.21

Despite such problems, there remains broad support, both in South Africa and the other SACU countries, for maintaining a customs union arrangement among the five, while making SACU itself a less South African dominated and more equitable arrangement. Indeed, some have argued for SACU to be upgraded into a common market, by introducing free movement of labour, as well as of goods and capital in the SACU area.22

The SACU renegotiations are addressing such critical questions as the creation of new structures and mechanisms for joint decision-making in tariff setting bodies (instead of, as under the current agreement, the tariffs in force in South Africa simply applying to other SACU members), and the possibility of achieving a greater degree of co-ordination in such areas as industrial and competition policy, as well as the long standing `hot potato' of the revenue sharing formula.

Another major issue that has arisen, is whether SACU should be enlarged by admitting selected SADC member countries who are not currently members, or be restructured as a `sub-set' arrangement that needs to be harmonised with broader regional organisations such as SADC. Enlargement of SACU appeared to be a policy objective of the former South African regime (which saw this as a means of extending South African hegemony and undercutting organisations such as SADC). There are also a number of SADC countries (Zimbabwe, Malawi and Mozambique) that have been mentioned from time to time as inclined to seek membership of SACU.

A number of problems can be identified with any proposal to enlarge SACU, at least in the short term. In the first place, the specific history of the close integration of Botswana, Lesotho, Namibia and Swaziland into the South African political economy cannot be ignored. These countries were at one time all administered from South Africa as virtual economic regions of the country and were, indeed, destined in the colonial scheme to become incorporated politically as well. SACU was thus formed, not to promote integration as such, but rather to manage trade relations among a group of countries already integrated with South Africa in a specific, one-sided way. The level of integration between SACU countries, moreover, has tended to lessen rather than deepen over the years. There was at one time, for example, virtual free movement of labour across borders (although once in South Africa, apartheid influx control regulations applied). South African currency was also at one time legal tender in all SACU countries - in other words, they were once members of a tight monetary union. This history and background clearly do not apply to the rest of Southern Africa. Other SADC member countries, while having significant ties to South Africa and, in some cases, among themselves, have different practices, institutional arrangements and levels of development - all of which would require significant adjustment and time - before they could become part of a Customs Union arrangement.

Secondly, the implications of the democratisation of decision-making processes, widely expected to result from a new SACU agreement, have had to be taken into account. Democratisation will almost certainly mean that the SACU Common External Tariff (CET) will cease to be, as it is the tariff "in force in South Africa" under the 1969 agreement, and instead becomes a tariff set through negotiation by all member countries. Bringing in new members would thus probably imply complex negotiations with countries with different levels of development and interests in the CET.

The Marrakesh General Agreement on Trade and Tariffs (GATT) Agreement, concluded after the Uruguay Round, moreover, has introduced an important clarification in the interpretation of Article XXIV of GATT, which is relevant in this regard. Article XXIV, which governs the acceptance by the World Trade Organisation (WTO) of regional integration schemes amounting to a departure from the Most Favourable Nation (MFN) principle supposed to apply to all other member countries, states that these arrangements are acceptable provided that the tariff applying to external parties is not, on the whole, higher than the tariffs previously in force. The Uruguay Round `Final Act' states that "the evaluation ... of the general incidence of duties and other regulations of commerce before and after the formation of a customs union shall in respect of duties and charges be based on an overall assessment of weighted average tariff rates and customs duties collected." 23 It indicates that the Secretariat of the WTO itself, will make such computations in accordance with the methodology used in assessing offers made during the Uruguay Round. What this means is that merely extending a CET already in force and accepted by GATT to other countries may not be acceptable to GATT even if it is to potential new members. A new tariff would have to be no higher than the weighted average of the existing SACU CET and the tariffs in force in potential new member countries.

Thirdly, the admission of new members would raise questions in respect of the revenue sharing formula. While there are signs of flexibility on the part of some BLNS countries about adjusting some aspects of the present formula, there is also a strong consensus among them that any new formula should include a weighting in favour of the less developed member countries. Several potential new members could well have levels of exports and imports higher than those of the BLNS countries. They would almost certainly press for a significant weighting to compensate for the potentially major effect on their domestic industries of the duty free entry of South African goods. Extending a weighted formula to new members would thus have important fiscal implications for South Africa, as well as greatly complicating negotiations on revenue sharing.

For these, and other reasons, the alternative perspective of viewing SACU as an important sub-set arrangement within a broader regional programme appears much more viable. This would see SACU as having an important role to play in its own right and in reinforcing efforts to promote an equitable deepening of integration in the region at large. But, it would not, as an organisation embracing only some countries in the Southern African region, seek to abrogate to itself any exclusive or privileged role in this regard. Rather, it would seek to harmonise its actions to an increasing extent with those of organisations such as SADC. This appears to be the approach of South Africa's negotiating team in the SACU negotiations.

The other major regional trade issue has been the type of trade relationship to aim at within the broader non-SACU SADC region. A major question which immediately confronted the South African GNU in this regard was whether to work towards a new relationship on a bilateral or multilateral basis. The new government found itself bombarded with proposals from several individual SADC countries to either renegotiate existing, or negotiate new, preferential bilateral trade agreements. At the same time, the SADC Secretariat, which had been working on a regional trade protocol, tabled a draft protocol to establish a Free Trade Area in the SADC region for discussion, shortly before South Africa's accession to the organisation.

South African officials have expressed their preference for a multilateral, regional approach. Several reasons appear to underlie this, including the desire to avoid duplication, an expressed commitment to reinforce efforts to promote regional co-operation, and a sense that the new rules created by the Uruguay Round of GATT could pose problems for a purely bilateral route.

With regard to the last point, legal opinion in South Africa24 has suggested that provisions of the Marrakesh Agreement appear to be much more receptive than previous GATT rules to claims by classes or groups of countries to have preferences granted to similar countries extended to them on the grounds that not doing so would constitute discrimination. Any substantial new bilateral agreements, it has been suggested, could find themselves either rejected or compulsorily extended to other countries in the region (i.e. multilateralised) through WTO intervention. Moreover, to secure a waiver for a bilateral agreement from the WTO under Article XXV, South Africa would probably have to present itself as a developed country making concessions to developing countries. This completely contradicts the stance it is taking in negotiations with major trading blocs, where the advantages of it being seen as a developing country are apparent.

Thinking within the GNU appeared to be in favour of seriously working towards a viable multilateral framework agreement that would also allow for some bilateral flexibility. It has been suggested that a SADC trade protocol should focus on defining a process of negotiating a new regional trade regime, rather than specifying its content, and, in particular, doubts have been expressed about whether a Free Trade Area would be a beneficial arrangement for the rest of the region in the short term at least.

A `quick and dirty' study by staff of the South African Industrial Development Corporation has suggested that SACU countries (and mainly South Africa) would benefit to the extent of a 1,1 per cent increase in GDP, a 4,6 per cent increase in total exports and an eight per cent increase in manufactured exports from the removal of all tariffs within the SADC area. The same study, however, concluded that the resulting increased competition to domestic manufacturing industries from South African imports would have a net negative impact on GDP of four of the remaining six SADC countries.25

The conclusion that would appear to follow from this study, which in fact merely repeats that of several of the policy studies in the years before 1994, is that further South African access to these countries' markets would need to be carefully structured and phased. On the other hand, the IDC study identified a range of agricultural and industrial products (including textiles and clothing, footwear, furniture and ferrous products) produced in the non-SACU SADC member countries which would be competitive in the South African market at lower tariff rates.26 This would suggest that an asymmetrical Preferential Trade Area, in which South Africa opened up its market to a greater extent than would be required by other countries, and which operated on a somewhat differentiated basis country by country, would be the optimum arrangement in the short term.

Such proposals, however, have come up against strong counter-arguments from other countries. One line of argument that is increasingly encountered, is that neighbouring countries have already liberalised and that South Africa should simply follow suit. This argument has a point, in that existing South African tariff arrangements do indeed still display features of the historical protectionism towards the rest of the region. This issue has loomed largest in discussions with Zimbabwe and Zambia. Zimbabwe had a bilateral preferential trade agreement with South Africa which dated back to 1964. Attempts to update it in negotiations with the previous South African regime broke down and the existing agreement was allowed to lapse at the end of 1992, with serious implications for Zimbabwe's clothing and textile industry, among others. A partial reinstatement at the end of October 1995, against strong lobbying by South African clothing manufacturers, has been dismissed as inadequate by Zimbabwe, which has from time to time threatened to retaliate by increasing tariffs on South African imports.27 Zambia, which has had no trade agreement with South Africa, has complained that it has "progressed far in liberalising markets and opening up its economy", but that this has not been matched by the strongest economy in the region.28

Calls for reciprocal liberalisation, like those made by Zambia, failed to highlight that the liberalisation exercise in which they were involved, was undertaken within the context of their structural adjustment programme (spurred on by their signing on to the CBI) and was thus oriented towards external liberalisation in general. Brought into the regional integration debate and it is here that the unfinished debate over paradigms of integration is relevant they amount (probably unself-consciously) to a call for an integration programme based on the World Bank/CBI-type approach, with all that it entails.

Another major challenge to the development of an appropriate regional programme in Southern Africa, is the pressure for South Africa to become involved in cross-continental Free Trade Area agreements with advanced industrialised regions. This has been most evident to date in the current negotiations for a long term agreement with the European Union (EU). South Africa's application to be admitted to the Lome Convention has not been accepted as far as the trade chapter of the convention is concerned. Instead, the EU has proposed that South Africa's desire for greater access to the EU market could be accommodated by a reciprocal, but asymmetrical Free Trade Area agreement. Negotiators from the two sides have agreed to explore the possibilities of such a FTA, on the condition that "nothing is agreed until everything is agreed."

In the proposal forwarded to the Council of Ministers by the European Commission in October 1995, a Free Trade Agreement with a coverage of at least ninety per cent and implemented in tranches over a maximum of ten years was proposed. Based on the Commission's own figures, this would give South Africa increased duty free access to the EU market for about seven per cent of its mainly agricultural products, while requiring South Africa to liberalise more than forty per cent of its current imports from the EU.29 Apart from the implications for the South African domestic economy, it has been pointed out that such proposals could have major repercussions for any programme of regional integration.

For a start, any agreement with tariff implications reached with South Africa, would automatically have to apply to the rest of SACU if the customs union is to be maintained. The BLNS countries are all members of Lome, whose trade relations with the EU are currently governed by the Convention and its Protocols. Since the EU is bound to exclude a range of South African agricultural products from an FTA, the question of the basis on which similar products produced in the BLNS countries would enter the EU (Lome or the South African FTA) would arise. If it were to be the latter, significant losses would be experienced by the BLNS.30 Moreover, the elimination of duties on forty per cent of EU imports into South Africa would be bound to have significant implications for customs revenue, and hence on the negotiations over the revenue sharing formula.

As far as relations with the rest of the region are concerned, if the appropriate arrangement at this point is something more like a preferential than a free trade area, then the economic and political implications of South Africa moving further with Europe than with Southern Africa would arise as a serious issue. Indeed, it is, more in general, a moot point of what space the pressures of post-Uruguay Round globalisation (of which the proposed EU agreement is an example) will allow for regional integration.

CONCLUSIONS

South Africa has now taken its place as a fully legitimate partner and member of at least two of the major Southern African regional organisations. In the short period of time since the installation of South Africa's new Government, it has begun to work with the rest of the region towards developing a programme of increasing sectoral co-operation, and restructuring trade relations to promote a more balanced pattern of trade and a more integrated regional market.

A Memorandum of Understanding to establish a Southern African Power Pool and an agreement on Shared Water Courses were signed at the SADC summit in August 1995. Discussions on a multi-modal transport agreement to develop road, rail, port and tourism facilities in the Maputo corridor are underway with Mozambique. South Africa is participating in meetings of appropriate SADC sector co-ordinating units or commissions. There have also been negotiations aimed at creating new trade relationships in the region. These have taken place against the background of an increase in exports from SACU to other SADC member countries equivalent to 24,5 per cent of the 1993 total in 1994 and an increase in imports of 45,8 per cent.31

While these developments are all positive, and perhaps all that could be expected in the short space of time since the process of democratic transition in South Africa has begun, expectations as to what South Africa can bring to a new partnership with the region need to be kept in perspective. Although South Africa's GDP is nearly three times that of the rest of SADC (excluding Mauritius), figures released by the Central Statistical Service indicate that the Human Development Index for the country's African population in 1991 (0,500) was below that of Botswana and Swaziland and was only marginally above that of Zimbabwe.32

Many challenges lie ahead for Southern Africa. The region still has to produce a comprehensive strategy for regional co-operation and integration that fully takes account of the new opportunities and realities facing it. It also has to define how it sees its efforts at regional level, fitting in with and complementing those at the broader African continental level, and how the Southern African region should position itself in a global context still characterised by acute divisions between the underdeveloped South and developed North.

Progress towards a more integrated regional market, in particular, requires greater clarity about what integration is intended to achieve, how it fits into a broader programme, including sectoral co-operation and co-ordination, and of the significance of post-Uruguay Round pressures of globalisation. In this context, continuing the unfinished debate about approaches or paradigms of integration in a way that places equitable and mutually beneficial development oriented growth firmly at the top of the regional agenda, is becoming increasingly urgent.

ENDNOTES

Edited version of a paper prepared for Second ACDESS Workshop on South Africa within Africa: Emerging Policy Frameworks, Protea Gardens Hotel, Johannesburg, 24-27 January 1996. This article is published as part of the Human Security Project, which is endorsed by the United Nations High Commissioner for Refugees, with the financial assistance of the Hanns Seidel Foundation of Germany and the Foundation for Global Dialogue (FGD).



SADCC, Towards Economic Integration, theme document for 1992 Consultative Meeting, Maputo, 29-31 January 1992; SADC, Southern Africa: A Framework and Strategy for Building the Community, SADC, Harare, 1993.



Southern African Foundation for Economic Research (SAFER), Conference Papers, conference held at the Africa Institute of South Africa, Pretoria, July 1992.



African Development Bank (ADB), Prospects for Economic Integration in Southern Africa, Oxford, Oxford University Press, 1993.



Ibid., p. 17/1.



See, for example, O S Saasa, Economic Co-operation and Integration among Developing Countries: An Overview, in O S Saasa (ed.), Joining the Future: Economic Integration and Co-operation in Africa, African Centre for Technology Studies, Nairobi, 1991.



R Davies, Approaches to Regional Integration in the Southern African Context, Africa Insight, 24(1), 1994.



World Bank, Intra-Regional Trade in sub-Saharan Africa, Economics and Finance Division, Technical Department, Africa Region, Washington, 23 May 1991.



Ibid., paragraph 2.08.



Ibid., paragraph 2.09.



Ibid., Executive Summary, paragraph 10.



Ibid., paragraph 11.



Ibid., paragraph 15.



Ibid., paragraph 14.



Ibid., paragraph 13.



Cross-Border Initiative (CBI), Concept Paper: Initiative to Facilitate Cross-Border Private Investment, Trade and Payments in Eastern and Southern Africa and the Indian Ocean, mimeo of project supported by World Bank, African Development Bank, IMF and Commission of the European Communities, Brussels, 1993.



UNDP, Human Development Report 1992, Oxford University Press, New York, 1992, pp. 63-4.



SADCC, op. cit.



Department of Trade and Industry (DTI), Text of Presentation to Parliamentary Portfolio Committee on Trade and Industry, Cape Town, 7 June 1995.



Republic of South Africa, Monthly Abstract of Trade Statistics: Foreign Trade Statistics of the common customs area of Botswana, Lesotho, South Africa and Swaziland, Commissioner for Customs and Excise, Pretoria, January-December 1994.



See R Davies, The SACU: Background and Possible Negotiating Issues facing a Democratic South Africa, in M Sisulu, M Nkosi & R Thomas (eds.), Reconstituting and Democratising the Southern African Customs Union, National Institute of Economic Policy, Braamfontein, 1994.



G Maasdorp, The Advantages and Disadvantages of Current Regional Institutions for Integration, in P Baker, A Boraine & W Krafchik (eds.), South Africa and the World Economy in the 1990s, David Philip, Cape Town, 1993, p. 245.



GATT, Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, 1993, interpretation of Article XXIV, p. 1.



L Blumberg & W Wentzel, Trade Relations with Southern Africa: A Preliminary Legal Analysis, Development Bank of Southern Africa, Halfway House, 1994.



Industrial Development Corporation (IDC), Impact of Trade Liberalisation on Intra-Regional Trade in SADC, presentation to Workshop on SADC Trade Protocol, Department of Trade and Industry, Pretoria, June 1995.



Ibid.



Business Day, 24 August 1995.



Business Day, 12 October 1995.



European Commission, Communication from the Commission to the Council: Recommendation for a Council Decision on Complementary Negotiating Directives for an Agreement for Trade and Co-operation between the European Community and the Republic of South Africa, mimeo, Brussels, 1995.



European Research Office (ERO), EU-South Africa Free Trade Area Negotiations: Regional Implications, mimeo, Brussels, 1995.



Republic of South Africa, op. cit.



Central Statistical Service (CSS), The Socio-Economic State of South Africa as Reflected by: a) The Results of the October Household Survey (OHS) according to the nine provinces; b) the Human Development Index (HDI), CSS, Pretoria, n.d.