Evaluating two international agreements for consistency with GATT/WTO rules: a methodological study with regard to EU/RSA trade, development and cooperation agreement and southern African development community agreements

Abstract

Whether the type of integration pursued is deep or shallow, international cohesion through international trade is accepted as a key to unlock economic welfare of participating states. Trade liberalisation is with no doubt, the key and major driver of globalisation. Amongst other drivers of globalisation foreign direct investment is important. Through foreign direct investment, the backlog of unemployment, underdevelopment and backwardness receive reasonable attention. States less endowed with resources can benefit from those well endowed. It is on this understanding that the world has experienced an unprecedented mushrooming of regional trade agreements with the majority of them geared towards acceleration of economic benefits. Improvement in the efficiency of trade agreements, including maximising economic benefits that flow from foreign direct investment is an essential component of any economic growth and development strategy. In Sub-Saharan Africa where protective policies have not led to broad-based economic growth, gain in the efficiency of attracting foreign direct investment is viewed as necessary for economic growth and the alleviation of rural poverty. As regarding whether all existing trade agreements satisfy the requirements of the Multilateral Trade World Body, GATT/WTO is not what this study seeks to address. Focus in this context is specifically on the SADC Trade Protocol and the Free Trade Area between the European Union and the Republic of South Africa known as EU/RSA Trade, Development and Cooperation Agreement. The EU/RSA Free Trade Area has been in operation since 2001 while the SADC region is expected to become a free trade area in 2008. This study provides a methodological investigation using available literature in order to gather necessary legal and economic content of international agreements that should be adhered to with regard to the GATT/WTO rules. It attempts to develop a format to evaluate legal components, checks and balances of intra regional and inter continental trade agreements. It also evaluates the SADC Trade Protocol and the EU/RSA Trade Development and Cooperation Agreement according to the format. This study firstly, finds that there is sufficient literature on both legal and economic aspects of international trade agreements and commitments. Secondly, the SADC Trade Protocol is not compliant on three aspects, namely the doctrines of Home Country Measures, Fair and Equitable Treatment and Employment. Thirdly, the EU/RSA Trade, Development and Cooperation Agreement comply with GATT/WTO rules but it must clearly spell out its Sanitary and Phytosanitary Standards and consolidate itself on the Fair and Equitable Treatment doctrine. Fourthly, SADC is relevant in the overlapping of membership with other multi - and bi-lateral agreements for as long as such memberships do not disturb the responsibilities and obligations of individual member states to the GATT/WTO. Finally, on economic matters that were evaluated for the betterment of the residents of SADC and EU/RSA Trade, Development Cooperation Agreements’ member states, the study argues that both the SADC Trade Protocol and the EU/RSA Trade, Development and Cooperation Agreement have sufficient provisions to ensure that land utilised for mining purposes is rehabilitated so it could be allocated to other economic activities for use; there are some operational restrictions hampering foreign direct investments in the SADC and EU/RSA TDCA’s member states such as lacking customs and Excise services, impediments on land ownership for investments and pressure from domestic interest groups on their governments in fear of FDI competition; there is no effective legislation in the SADC Trade Protocol that provides a requirement for a foreign investor to impart skills to national (domestic) workers so that these workers can confidently hunt for other jobs or enter into business ventures when the investor has left the State (the EU/RSA TDCA has such a provision). The study recognise the SADC Trade Protocol and the EU/RSA Trade, Development and Cooperation Agreement as credible and advanced pieces of legislation. Taking into consideration the advanced level of the two Agreements, the study recommends embarking on a fast tracking policy harmonisation process for especially newly joined EU member states and South Africa to ensure uniformity and cohesion; all that has been pointed out as lacking in the two agreements must be rectified in order for the residents of member states to enjoy envisaged economic benefits of being signatories to these Agreements; SADC has to refocus its resources on integrating economies of member states, a move that is likely to reduce wars in the region. Other stricter mechanisms that can enforce compliance with the SADC Trade Protocol (and also with other SADC Agreements) must be explored before SADC can achieve the status of a free trade area. It has to ensure, by way of an example, that outstanding issues are harmonised and all member states move in the same direction to allow for reliable policy reforms and to ensure that institutional arrangements are enhanced to allow for the smooth transition of economies that are not on the same level of development. Whether some of these issues can be achieved remains another challenge that suggests further research. SADC seems to be attempting to emulate the example of the European Union. The European Union came a long way from individual states passing through different stages to become a union. The development of the European Union into a trading block has endowed it with vast negotiating experience. Over time increasingly more resources were devoted ensuring that it becomes a success. Engaging in trade negotiations is costly and wrong policy advice could have high opportunity costs to the EU’s economy. In conclusion, it will be useful to point that this study’s flexibility and its approach to handling a multi-disciplinary investigation with the help of a checklist is recognised as its main strength.