2 July 2020 – The cost of trade is mainly associated with tariffs and non-tariff costs. Although there are many reasons why these costs are high, minimising trade costs is to the benefit of importers, exporters and consumers due to the reduction in transaction costs which leads to lower prices. While concerted efforts through bilateral, regional and multilateral negotiations over the last 20 years have resulted in a decline in the cost of tariffs, non-tariff trade costs have increased, especially for countries in southern Africa.
There are many reasons why trade costs may be higher than they need to be; these include geography, the trade policies of a country and trading partners, the quality of transport infrastructure, inefficiency of logistics services and weaknesses in economic governance. Accordingly, an important challenge for trade facilitation efforts is to identify the major sources of trade costs at any given point in time.
In most cases, the non-tariff trade cost associated with trade among southern African countries is higher than the non-tariff trade costs associated with trade between countries in southern Africa and countries farther afield. These non-tariff trade costs arise from trade facilitation challenges along the whole supply chain, from production to the delivery of the goods and include the cost of inadequate infrastructure, inefficient border operations, quality control inspections, roadblocks, quantitative restrictions and additional trade charges and varying domestic regulations. These factors contribute to the low levels of trade among countries in the region. Source (Tralac)