Answer to Question #283421 in Macroeconomics for Comfort

Question

QUESTION ONE

a. What is economic integration?

b. Briefly discuss the history of SACU and its functions.[15 marks]

Answer 1

a)      

Economic integration is where two or more countries agree to all trade barriers and co-ordinate and cooperate their activities as they trade. This generally implies a free trade and protection among the participants.

b)     History and Functions of SACU

SACU is so far one of the oldest known customs union existing all over the world which evolved in 1903 the first one being

It was formed after the Second Boer War, and the establishment of British control over the republics of Boer whereby a new Convention was signed consisting several countries as follows; Cape Colony, Basutoland, Bechuanaland Protectorate among others. North-western Rhodesia joined in 1905. Another convention which supplanted the previous one was signed in 1906 but the previous members remained. The current configuration was established in 1910 between South Africa Union and the High Commission Territories of Bechuanaland, Basutoland and Swaziland. Some countries like Southern Rhodesia and North-western Rhodesia by 1910 declined to join but they maintained common tariff and free trade arrangements from 1910 to 1935. An attempt was made in 1949 to re-establish a customs union between South Africa and Southern Rhodesia which was unsuccessful.

The agreement was updated in 1969 with the independence of the High Commission territories and it was relaunched as the SACU and signed between the Republic of South Africa, Botswana, Lesotho and Swaziland which officially entered into force on 1 March 1970.

Functions

·        Ensuring free interchange of goods and services between member countries.

·        Provision of common external tariff and a common excise tariff to this common customs area.

·        Creation of institutions which are effective, transparent and democratic to ensure equitable trade benefits to Member States.

·        Promotion of fair competition conditions in the Common Customs Area.

·        Promotion of economic development through regional coordination of trade