Africa RECs Strengthen Ties

Published on 13th May 2011

In the inaugural tripartite summit held in Kampala, Uganda in October 2008, our heads of state and government made a number of decisions, one of which was that the 26 countries that make up the COMESA-EAC-SADC tripartite should speed up the process of integration as outlined in the Lagos plan of action and as articulated by the continental body of the African union commission. Specifically, our heads of state and government approved the expeditious establishment of a free trade area encompassing the member and partner states of COMESA, EAC AND SADC, with the ultimate goal of establishing a single customs union.

This tripartite FTA (or the grand FTA) would when fully functional, constitute the largest single market in Africa, with a population of 565 million people and a combined gross domestic product of us$875 billion and is expected to reach the trillion dollar economy size over the next two years.

In order to assist in the creation of the tripartite FTA the three secretariats of COMESA, EAC and SADC have spent the last year and a bit in first of all designing a process that would result in a FTA being established and then preparing a draft FTA agreement that should be able to guide the member and partner states in their deliberations.

In preparing for the grand FTA we are guided by the vision and direction of our heads of state and government. The tripartite summit communiqué is clear on one thing and that is the very strong political will and commitment to deepen integration and to create the tripartite FTA at the earliest opportunity. The communiqué sends a clear message that the tripartite FTA is not only politically achievable but also economically feasible – in the short term.

COMESA has a fully functioning FTA and has launched its customs union; EAC partner states are in a customs union and have launched their common market and by January 2012, SADC will be a FTA with full product coverage.

This means that all members of the COMESA FTA should be able to automatically extend the benefits of an FTA, based on tripartite rules of origin, to all SADC and EAC countries on the basis of reciprocity. There is no need to negotiate a tariff phase down with a country that has already phased down inter-regional tariffs to zero. If this pragmatic approach is adopted all that would need to be negotiated are rules of origin and the other components of a FTA such as a dispute settlement mechanism, safe-guards, customs procedures, non-tariff barriers, etc.

Some member states want to have an a-priori list of sensitive products. This, if correct, would take us backwards and not forwards. We are instructed to build on the status quo, which is at the very least a FTA that covers all tariff lines. Anything less and we would not be in conformity with the instructions of the heads of state and government.

Some may argue that a sensitive list is needed to protect infant and vulnerable industries. I would humbly suggest to them that there are other ways to protect infant industries and this is through a set of safe-guard measures and these safe-guard measures should be negotiated so that they are flexible enough to meet the needs of the member states and easy and efficient to implement so that they do not become technical barriers to trade.

In any case there is plenty of evidence to show that the “elephant in the room” regarding competitiveness is the global economy and not from within the region. Let us not fall into the paradox where we offer a higher level of market access to trading partners in Europe, the Americas and Asia than we do to our neighbours.

This process of negotiating a tripartite FTA need not take long, especially if the controversies of preferential rules of origin can be avoided, which I believe they can if the principle that rules of origin are a means to avoid trade deflection and not a means to restrict trade are observed.

Staying on rules of origin, I would suggest that the minimum should be that an agreement on rules of origin ought to be transparent, simple and promote trade. This may seem obvious but we do not need to look very far to see examples of preferential rules of origin being used to restrict trade and frustrate our regional traders.

There are plenty of lessons to be learnt from successful economies where liberal rules of origin have been the source of prosperity and wealth creation. There are no examples where restrictive rules of origin have led to an increase in trade or inward investment flows. This negates the claim that stringent rules of origin can be used as an instrument of promoting industrialisation and value addition. There is no hard evidence to back the claims that the more stringent the rules of origin are, the more they promote investment in the manufacturing sector. On the contrary, countries that have liberal rules of origin, combined with investment promotion mechanisms, have been able to attract investments and foreign direct investment into the productive sector. Rules of origin should take account of the fact that the globalisation process entails regional and global value chains.

I am not certain that at the technical level the vision and values of our heads of state and governments are equally shared. I get the impression that at the technical level there is a tendency to conceptualise the tripartite FTA within the context of the existing configurations of the three RECs. the fault with this approach is that it tends to be ideological and deterministic in that each REC within the tripartite may view the negotiations as a re-run of the previous negotiating processes that led to the creation of our respective FTAs.

We need to get out of the mind-set that is common in trade negotiators and that has dogged the Doha development round of negotiations. This mind-set is one where all innovation and change is treated with suspicion and defensive negotiating positions are usually taken. Instead of negotiators looking for opportunity, they only see danger.

I am not suggesting that we should throw caution to the wind and adopt change for the sake of change but I am suggesting that our future, and our children’s future lies in deepening integration and the opportunity we have now, to create a market covering half of Africa, does not come every day. We are privileged to be given such a unique opportunity to create a meaningful market space in Africa and we should think hard before we squander such a unique opportunity.All advances in economic development have come with a certain amount of risk taking and a clear vision of what the future holds.

It logically follows that the tasks before the technicians and senior officials from member countries/partner is states is to review the key elements of the respective FTAs and craft a tripartite FTA that improves on the existing FTA trade regimes and does not take us backwards.

It also follows that the principles of duty-free, quota-free market access, no a-priori, exemptions or exclusions, no quotas, standstill provisions; MFN and national treatment and transparency, are the basis of the negotiations.

By Sindiso Ngwenya
Chairman of the tripartite and SG of COMESA.

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