TOWARDS A COMESA, EAC AND SADC TRIPARTITE FREE TRADE AREA. Prepared by. Petros Shayanowako

Transcription

1 TOWARDS A COMESA, EAC AND SADC TRIPARTITE FREE TRADE AREA Prepared by Petros Shayanowako Trade & Development Studies Trust (TRADES CENTRE) Harare, Zimbabwe January 2011 Trade and Development Studies Issue No. 40 TOWARDS A COMESA, EAC AND SADC TRIPARTITE FREE TRADE AREA

2 BY PETROS SHAYANOWAKO (TRADES CENTRE) Published by: TRADES CENTRE No. 3 Downie Avenue, Belgravia P.O. Box CY 2549, Causeway Harare, Zimbabwe Tel: /8 Fax: tradesc@tradescentre.co.zw Website: January 2011 Contents Published by:...2

3 January Contents...2 Abbreviations/Acronyms...5 EVOLUTION OF THE COMESA-EAC-SADC TRIPARTITE FTA...6 THE TRIPARTITE FTA CONCEPT...6 RESOLUTIONS OF THE UGANDA TRIPARTITE SUMMIT ON THE PROPOSED FTA...7 OBJECTIVE OF THE TRIPARTITE FTA...7 STATUS OF INTEGRATION PROGRAMMES IN COMESA, EAC AND SADC...8 COMESA...8 EAC...8 SADC...9 The Tripartite Region and the African Union...9 BENEFITS OF ESTABLISHING THE TRIPARTITE FTA...9 Enlarged market and increased market access for products...10 Increase in economic growth...10 Elimination of challenges associated with overlapping membership...10 Opportunity for increased foreign direct investment (FDI)...11 Stimulant for increased industrialization...11 Improved competitiveness of products...11 Exploitation of untapped natural resources...12 Development of good infrastructure...12 SCOPE AND COVERAGE OF THE PROPOSED TRIPARTITE FTA...12 Elimination of tariffs and quotas on trade in goods...12 Liberalising trade in Services...13 Investment...13 Competition policy...14 Technical barriers to trade...14 Electronic commerce...14

4 Customs cooperation...14 Rules of origin...14 Intellectual Property...15 Dispute settlement...15 UPDATE ON LATEST DEVELOPMENTS ON THE PREPARATIONS FOR THE TRIPARTITE FTA...15 CONCLUSION...16 BIBLIOGRAPHY...17

5 ABBREVIATIONS/ACRONYMS AU - African Union AEC - African Economic Community COMESA - Common Market for Eastern and Southern Africa DFID - Department for International Development EAC - East African Community EPA - Economic Partnership Agreement EU - European Union FTA - Free Trade Area GATS - General Agreement on Trade in Services GATT - General Agreement on Tariffs and Trade HS - Harmonized System MFN - Most Favoured Nation OAU - Organisation of African Unity REC - Regional Economic Community SADC - Southern African Development Community TRIMS - Agreement on Trade Related Investment Measures TRIPPS - Agreement on Trade Related Aspects of Intellectual Property Rights WTO - World Trade Organization

6 EVOLUTION OF THE COMESA-EAC-SADC TRIPARTITE FTA The concept of establishing a tripartite Free Trade Area (FTA) that joins together the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Community (SADC) has gained currency and momentum in recent years. The COMESA-EAC- SADC Tripartite Summit of Heads of State and Government held in Kampala, Uganda on 22 October 2008 provided the much needed political endorsement and impetus for the establishment of this Tripartite FTA. Since the Summit was held some preparatory work has been and continues to be done under a joint framework in the combined region, hereinafter referred to as the tripartite region. The target date for the establishment of the Tripartite FTA is 2012 when all necessary preparatory work is expected to have been completed. In light of this noble aim, it may be appropriate to briefly explain the concept of a free trade area. An FTA is established when two or more countries agree to eliminate duties and other restrictive regulations of commerce on substantially all trade in goods originating within these economies. Preferential rules of origin have to be devised and used in order to identify the originating goods. The parties to an FTA retain the right to apply their individual trade policies on trade with third parties. An FTA is thus aimed at encouraging and enhancing trade among the participating member countries. Since an FTA agreement allows a party to it to grant more favourable conditions to its trade with other parties to the FTA agreement, this would appear to contravene the most favoured nation (MFN) treatment principle of the WTO which forbids discrimination. The establishment of FTAs is, however, legalized through Article IV of GATT, the Enabling Clause to GATT and Article V of GATS which provisions give permissible exceptions to the MFN principle (WTO, 2007). These WTO legal provisions are essentially meant to encourage liberalisation of trade in goods and services among WTO members. It is important that any FTA agreement complies with and is consistent with all the WTO rules governing trade and the prescribed conditions that an FTA must meet (WTO, 2008). There are many FTAs that are already operating on the global trading arena but for Africa in particular, the envisioned COMESA-EAC-SADC Tripartite FTA will be the first and largest such FTA as it will join together the three most successful and biggest RECS on the African continent, with a combined population of over 500 million people. This publication seeks, among other things, to: provide a brief explanation on the evolution or background of the concept of the COMESA-EAC-SADC Tripartite FTA; outline the objective of the proposed FTA; provide an update on the trade liberalisation programmes of each of the three Regional Economic Communities (RECs) making up the proposed tripartite FTA; explore some of the benefits to be derived from the Tripartite FTA and give some proposals on the scope and coverage of the Tripartite FTA agreement THE TRIPARTITE FTA CONCEPT The Lagos Plan of Action adopted by the Organisation of African Unity (OAU) Extraordinary Summit in 1980 affirmed the OAU political leaders commitment to the promotion of the economic integration of Africa to facilitate the eventual establishment of the African Economic Community (AEC). The political leaders commitments were concretised in 1991 in Abuja through the leaders signing of the Treaty establishing the African Economic Community (The Abuja Treaty).

7 The Abuja Treaty envisions the economic integration of the whole of Africa into a continental customs union by the year Abuja reckoned that one key strategy of achieving this continental vision is through the establishment of regional economic communities (RECS) as building blocks that will ultimately merge to establish the continental customs union. Although several RECS, including the EAC, COMESA and SADC were already in existence when the Abuja Treaty was signed, the Treaty, among other things, sought to strengthen the existing RECs and encourage the establishment of new ones. In fact, Article 88 of the Abuja Treaty makes it clear that the establishment of the AEC is the final objective towards which the activities of all existing and future RECs shall be geared. The intended strategy was staged and gradual liberalisation of regional and intra-regional trade, coordination and harmonisation of activities of all the RECs, the establishment of Free Trade Area and a Customs Union at REC level and eventual establishment of the envisioned African Economic Community. RESOLUTIONS OF THE UGANDA TRIPARTITE SUMMIT ON THE PROPOSED FTA The Tripartite Summit of Heads of State and Government of COMESA, EAC and SADC met on 22 October 2008 in Kampala, Uganda in pursuit of the broader objectives of the African Union to accelerate economic integration of the continent, with the aim to achieve economic growth, reduce poverty and attain sustainable economic development. Among other things, the Summit underscored the fact that the tripartite arrangement is a crucial building bloc towards achieving the African Economic Community as outlined by the Treaty of Abuja and resolved that the three RECs should immediately start working towards a merger into a single REC with the objective of fast tracking the attainment of the African Economic Community. In the area of trade, customs and economic integration, the Summit approved the expeditious establishment of a Free Trade Area (FTA) encompassing the member/partner States of the 3 RECs with the ultimate goal of establishing a single Customs Union. The Summit also directed the three RECs to undertake a study incorporating, among other things, the following: (a) the development of a roadmap, within 6 months, for the establishment of the FTA which would take into account the principle of variable geometry; b) the legal and institutional framework to underpin the FTA; c) measures to facilitate the movement of business persons across the RECs; The report from the said study would then be presented to a specially convened Tripartite Council of Ministers for consideration within 12 months for, among other things, the determination of the time frame for the establishment of the Tripartite FTA. OBJECTIVE OF THE TRIPARTITE FTA The main objective is to establish an FTA on a tariff-free, quota-free, exemption-free basis by simply combining the existing FTAs of COMESA, EAC and SADC. The proposed Tripartite FTA is intended to foster intra-regional trade in the tripartite region through a number of complementary programmes in the following areas: promotion of customs cooperation and trade facilitation, harmonisation and coordination of industrial and health standards, combating of unfair trade practices and import surges, use of peaceful and agreed dispute settlement mechanisms, use of simplified rules of origin that recognise inland transport costs as part of the value added in production, relaxation of restrictions on movement of business persons taking into account certain sensitivities, liberalisation of certain priority service sectors on the basis of existing programs of the three organisations, promotion of value addition and transformation of the region into an information and knowledge-based economy through a balanced used of intellectual property rights and information and communications technology,

8 Development of robust infrastructure programs designed to consolidate the regional market through interconnectivity of all modes of transport and the promotion of competitiveness through adequate supplies of vital resources STATUS OF INTEGRATION PROGRAMMES IN COMESA, EAC AND SADC Although the ultimate long-term aims of COMESA, EAC and SADC are almost the same, the rate of regional integration, in particular trade development and cooperation in the three regions has not been the same. Some RECs have progressed at a faster rate than the others in certain areas. Currently the three RECs are separately engaged in negotiations for Economic Partnership Agreements with the European Union. These negotiations are at different stages of progress and it remains to be seen how these negotiations or EPAs will be managed in a tripartite set up. Below is a synopsis of the state of play in the three RECs with focus on trade liberalisation. COMESA In 1993, through the COMESA Treaty, COMESA evolved from the old Preferential Trade Area (PTA) which had come into force in The PTA Treaty itself envisioned its transformation into a Common Market after 10 years and left room and provision for bringing new members. The establishment of the PTA, and its transformation into COMESA, was in line with the objectives of the Lagos Plan of Action and the Final Act of Lagos of the OAU. COMESA became Africa s largest regional economic community with a population of over 300 million people. Since then COMESA has achieved tremendous progress in its trade liberalisation agenda that saw it launching a free trade area (FTA) in 2000 as a key mechanism for liberalising intra-comesa trade. The success of the COMESA FTA can be measured in the context of the dramatic increase in the volume of intra-comesa trade from US$3.2 Billion in 2000 to US$15.2 Billion in After some delay, COMESA eventually launched its Customs Union during its Summit held in Victoria Falls, Zimbabwe, in While the launch was political, it marked a significant milestone in the region s economic integration programme. The actual operationalisation of the Customs Union now only awaits the completion of some outstanding preparatory work currently underway. The ultimate aim of COMESA on its economic integration is the establishment of a Monetary Union. This aim is anchored on the REC s vision which is to be a fully integrated, internationally competitive regional economic community with high standards of living for its entire people ready to merge into an African Economic Community. EAC The EAC was originally set up in However, disagreements between the original founding members, Uganda, Kenya and Tanzania, led to its collapse. The treaty re-establishing the EAC was signed in November 1999 with the new EAC coming into being in The later admission of Rwanda and Burundi in 2007 brought the EAC s combined population to an estimated over 120 million people and a combined estimated GDP of $41 billion. Taking into account the asymmetry within the region, the EAC, in terms of Articles 2 and 5 of its Treaty, established a Customs Union as the entry point of the EAC, before liberalizing trade amongst the member states to establish an FTA. According to the Treaty, the ultimate goal of regional integration in the EAC is the establishment of a Political Federation in The Federation would be preceded by three stages; the Customs Union, the Common Market and Monetary Union.

9 SADC The SADC Protocol on Trade which came into force in the year 2000 has seen most SADC countries liberalising their trade in goods to a level that has made possible the establishment of the SADC Free Trade Area in August Technically, the FTA creates a regional market worth an estimated $360 billion a year in an area with a population of over 200 million. With the establishment of the SADC FTA, 85% of all intra-sac trade is now duty free and the region has committed itself to eliminating all tariffs by For those countries already in the SADC FTA, this target does not appear impossible. Out of the 15 SADC Member States, 11 are participating in the FTA. Angola, DRC and Malawi are still to liberalise their tariffs to the required substantial level while Seychelles only rejoined SADC recently. Despite this small set back, the regional community is in the process of preparing to launch its Customs Union in However, with a few months now remaining before the year ends and with substantial preparatory work still to be done, it is increasingly becoming too ambitious a target to achieve. Nevertheless, it is expected that the SADC Heads of State and Government Summit scheduled for August 2010 will make a pronouncement on the way forward regarding the establishment of the SADC Customs Union. The Tripartite Region and the African Union According to COMESA (2010), estimates are that exports among the 26 Tripartite countries increased from USD 7 billion in 2000 to USD 27 billion in 2008, and imports grew from USD 9 billion in 2000 to USD 32 billion in This phenomenal increase was in large measure spurred by the free trade area initiatives of the three organizations. These figures show that much more can be achieved by the three RECs under an FTA arrangement. The table below shows the membership, GDPs and populations of the three RECs in the Tripartite arrangement in relation to those of the African Union as a whole. African Union, COMESA-EAC-SADC GDP and Population, 2006 Membership GDP US$ million Population 000 African Union 53 1,065, ,564 COMESA-EAC-SADC , ,131 COMESA 19 (4 EAC,8 SADC) 286, ,130 EAC 5(4 COMESA,1 SADC) 46, ,571 SADC 15(8 COMESA,1 EAC) 379, ,002 COMESA-EAC-SADC as share of AU, % Source: World Bank, The figures in the table highlight how substantial the potential in the tripartite region is and how significant a building block the Tripartite FTA arrangement, if successful, will be to the realisation of the African Economic Community. BENEFITS OF ESTABLISHING THE TRIPARTITE FTA It would be folly to just highlight the objective of setting up the Tripartite FTA without closely looking at what benefits are likely to accrue to the partner countries or regions to the envisaged free trade arrangement. A well negotiated and crafted comprehensive Tripartite FTA agreement should provide its contracting parties with numerous benefits, not only in the area of trade but in many associated areas. Highlighted below are some of the benefits that stand to accrue to partner states in the proposed Tripartite FTA.

10 Enlarged market and increased market access for products The main benefit of the Tripartite FTA is that it will be a much larger market, with a single economic space, than any one of the three regional economic communities and as such will be more attractive to investment and large scale production. The three RECs (COMESA, EAC and SADC) have a combined population of over 500 million people, and a combined gross domestic product (GDP) of USD 624 billion. The 26 countries in the three RECs constitute half of the African Union (AU) s membership and their combined population constitutes 57% of the AU s total population. The Tripartite FTA will therefore create an enlarged market for producers and traders in the partner countries to the FTA. Due to the principles of variable geometry and asymmetry, not all COMESA and SADC member states are in the COMESA and SADC FTAs. For instance countries such as Angola, DRC and Malawi are not yet participating in the SADC FTA although they are Member States of SADC. Similarly countries such as DRC, Eritrea and Ethiopia, though Members of COMESA, are not yet participating fully in the COMESA FTA. The situation is similar within the EAC. Due to these variations in the levels of trade liberalisation within each of the 3 RECs some countries in the tripartite region currently only access part of the COMESA, SADC and EAC markets at MFN rates, which are not preferential as they apply to trade with all WTO members. The establishment of the Tripartite FTA is set to eliminate tariff and non-tariff barriers and other restrictions of commerce thus enhancing partner countries market access to the expanded market of the Tripartite FTA. If successfully implemented, all partner countries to the Tripartite FTA will then be able to trade freely with more than half of the African continent. Increase in economic growth The establishment of the Tripartite FTA will create potential to increase economic growth arising from the larger regional market. Across all spheres, there is unarguably more economic activity in a large market than a small market. The benefit of such increased activity is the economic growth of the whole tripartite region thus alleviating poverty among the population of the region. This is in line with the objectives of the Abuja Treaty. Elimination of challenges associated with overlapping membership The tripartite arrangement will assist to address some current challenges resulting from overlapping membership by advancing the ongoing harmonisation and coordination initiatives of the three organisations to achieve convergence of programs and activities. In this way the arrangement will greatly contribute to the continental integration process. Of the 26 countries in the tripartite region, 13 already belong to at least two regional groupings (Annex 1). Notably, a lot of progress has already been achieved in each of the three RECs. SADC launched its FTA in 2008 and is scheduled to launch its Customs Union in COMESA launched its FTA in 2000 and went on to launch its customs union in The EAC launched its customs union in 2004 and is presently working on setting up its Common Market. There is certainly need to tackle overlapping trade arrangements of the three RECs, which are becoming increasingly problematic as a result of deepening regional integration. The need for the three RECs to harmonize or merge their programmes cannot therefore be over-emphasized. While there is no problem with a country belonging to more than one FTA, which is the case presently with some of the countries in the tripartite region, with deeper integration into the level of Customs unions, a problem will certainly exist. This is due to the fact that, for practical purposes, a country may not belong to more than two customs unions mainly due

11 to the application of a common external tariff (CET) in a Customs Union. The negotiation and establishment of the Tripartite FTA would thus be beneficial to the tripartite region as it will bring harmony and to a large extent, eliminate problems associated with multiple memberships to the three RECs. Opportunity for increased foreign direct investment (FDI) With the increase in trade, cross-border investments among COMESA countries have also increased over the years from the year 2000 to 2008 thus confirming the fact that trade is a catalyst to sustainable economic growth and development. Despite this increase in investment, countries in the tripartite region are in dire need of foreign direct investment in order to continue stimulating economic growth and revival in those countries. The Tripartite FTA would help improve the investment climate in the whole tripartite region and thus attract new investors in fields such as agriculture, mining, forestry, manufacturing, financial services, telecommunications and energy which are key for the economic development of the tripartite region. Stimulant for increased industrialization The bigger market that the Tripartite FTA would create for Tripartite region and the attendant higher demand for products will motivate business in the tripartite region to seek partnerships with foreign investors to expand their production capacities and open new industries that can produce diverse products in order to exploit the new and bigger African market. An analysis of the current trade figures for intra-comesa trade shows the US$15.2 Billion trade realized in 2008 mainly comprises of primary agriculture products, with a small percentage of trade in manufactured products. Increased industrialisation in the tripartite region as a result of the FTA will ensure value addition of primary products so that they fetch better returns on the global market. The value addition of the region s raw materials will directly benefit the producers and contribute to wealth and employment creation within the tripartite region. The possibility of joint infrastructural development programmes by countries in common corridors in the FTA region will provide further stimulus for industrial expansion across the whole region as connectivity improves and manufacturers seek to exploit cost benefits arising from proximity to essential raw materials. Improved competitiveness of products The elimination of import duties under the proposed Tripartite FTA will enable countries in the tripartite region to import necessary raw materials from Africa at a cheaper cost. This in turn would reduce the cost of production of goods manufactured for export from those materials thus making them more competitive on the regional and international market. The larger market also means that countries can specialise in areas where they have a competitive advantage. Because of the different natural and other endowments of the different countries in the tripartite region, competitive advantages of the partner states in the Tripartite FTA obviously vary. Such advantages and variations can be attractive factors for investment. Presently, countries in the region have to source some of their essential raw materials from outside Africa, sometimes at huge transport and other shipping costs. This tends to increase the cost of production resulting in the final price of the commodity being uncompetitive on the local, regional and international markets. Sourcing the products from Africa under

12 the Tripartite FTA arrangement would greatly cut on transport costs, reduce production costs and thus make the products more competitive at least on price. However, in order for products in the Tripartite FTA to be competitive, much will need to be done in the 3 regions to reduce costs associated with inefficiency in production systems, border delays among others which have hitherto contributed to the uncompetitiveness of some of the regions products on both the local and international markets. Exploitation of untapped natural resources With 49% of Africa s total land mass, the combined COMESA, EAC and SADC region is endowed with numerous valuable natural resources which, with an increase in FDI, would be exploited for the benefit of the region. Presently some of the resources remain untapped due to low FDI in areas such as mining, forestry, agriculture, energy and manufacturing. Once the proposed Tripartite FTA manages to create a conducive climate for investment the region would be better positioned to exploit its hitherto untapped natural resources through cheaper and more efficient processes of beneficiation and other value addition processes, again making the end products more valuable and competitive on the global market. Development of good infrastructure The existence of good infrastructure is an attractive factor to new investment. Good infrastructure makes production costs low and production efficiencies high. Good infrastructure is therefore necessary for the success of the Tripartite FTA because lack of the same hampers efficient and cost-effective production, effective marketing and smooth cross border movement of raw materials and finished goods, among other important areas. The mere establishment of the FTA will most likely stimulate investment in joint infrastructural development programmes as partner countries seek to unlock all the potential benefits of trading under the Tripartite FTA. SCOPE AND COVERAGE OF THE PROPOSED TRIPARTITE FTA In order for it to bring forth the envisaged and potential benefits to the partner countries, one would expect the Tripartite FTA to seek to cover, key among other areas, trade in goods and services, investment, competition policy, technical barriers to trade, electronic commerce, customs cooperation, rules of origin, intellectual property and dispute settlement. Such a coverage and scope would make the FTA fairly comprehensive. In the following paragraphs, brief justifications are given on the necessity of including some of these key areas. Elimination of tariffs and quotas on trade in goods The inclusion of liberalisation of trade in goods in the FTA agreement would be necessary and unavoidable in the Tripartite FTA since duty and quota free movement of goods is always a key aspect of any FTA. The removal of tariffs on intraregional trade will reduce the costs of procurement of essential raw materials and therefore of production. This would make the region s products cheaper, more accessible to the region and more competitive on the global market. However, the Tripartite FTA should allow for parties to protect their sensitive industries through a regime of sensitive products on which duty and quota free market access is restricted but only for a maximum period of two years after entry into force of the agreement. This period should allow for gradual tariff alignments and adjustments by the concerned parties before all trade in goods in the tripartite region becomes free.

13 Liberalising trade in Services Although relatively a sector that many developing countries consider delicately sensitive and new, it is important to note that free trade in services would immensely benefit the tripartite region. Individual countries in the tripartite region have varying strengths and competitive edges in different service sectors. Allowing for free trade in services would thus promote mutually beneficial service trading arrangements between and among different countries in the FTA region. The nexus between trade in goods and services needs to be always recognised, appreciated and strengthened as without certain services even the liberalisation or freedom of trade in goods would not achieve the intended objectives. It is gratifying to note that, in the tripartite region, the three RECs have already noted the importance of trade in services in their regions. In COMESA, the Regulations on Trade in Services were adopted by the Council of Ministers in June, 2009 while the guidelines for negotiations on trade in services were adopted by the Committee on Trade in Services in September the same year. In SADC, the importance of services and the need to liberalise trade in services within SADC are recognised in Article 23 of the SADC Trade Protocol. Discussions are underway at the Trade Negotiation Forum (TNF) for liberalising trade in services under the framework of the SADC Protocol on Trade in Services. At the EAC, trade in services is under negotiation under the framework of the Common Market Protocol which has free movement of services as a key component. The negotiations are in line with Articles 5 and 76 of the Treaty Establishing the EAC. While services on their own are important in an economy, they also play a significant part in the entire goods supply chain. It is therefore necessary that there be efficient and cheap services in the Tripartite FTA and for this to materialise, the FTA has to liberalise trade in certain services considered essential for the whole region. Different countries in the tripartite region have different strengths and competitive advantages in different service sectors. This is good for the tripartite region in that, with liberalisation, partner countries can easily trade in services in accordance with their advantages and needs. One hopes that when properly crafted, the Tripartite FTA agreement would, among other things, provide for the liberalisation of trade in certain services across all the four modes of supply. The inclusion of trade in services in the Tripartite FTA agreement has the support of the WTO rules. Article V of the WTO s GATS provides for economic integration between members who may enter into agreements for the purposes of liberalizing trade in services between and among the parties to such agreements, subject to a set of conditions. When they are eventually undertaken, the Tripartite FTA negotiations would need to take into account commitments already made by the parties at the WTO and other fora. In order to provide real benefits to member, the Tripartite FTA should seek to cover more service sectors, than those in respect of which WTO members in the region have made commitments at WTO. Investment Tripartite region is in dire need of FDI and all other forms of investment. Investment is urgently and desperately needed in agriculture, mining, manufacturing, infrastructure development, telecommunications, and financial services. The Tripartite FTA should provide for opening up of more investment opportunities in the region in these areas. It should further see the establishment of an investment protection framework and mechanism in order to allay any reservations that would-be investors might have. The need will therefore arise for the Tripartite region to respect bilateral protection agreements already in existence with other countries in the region and beyond. This will entail a need for the Tripartite FTA Agreement to, among other things, clearly provide for the attraction and protection of foreign direct investment. At the multi-lateral level, GATS provides for foreign investment in services under Mode four of service supply. Any agreement on investment in the proposed Tripartite FTA will have to be consistent with the principles provided for in the WTO Agreement on Trade-Related Investment Measures (TRIMS).

14 Competition policy The need for fair competition in the proposed Tripartite FTA is important if regionally and mutually beneficial trade is to be achieved. The Tripartite FTA agreement must therefore cover this important trade-related area. For Tripartite region, negotiating for a tripartite competition policy will be easier as the country has already been involved in the setting up of a similar regional policy under COMESA. The Tripartite FTA will therefore do well to simply build on what COMESA and the EAC have already established regarding competition policy. Currently, the WTO does not have any disciplines on competition. However, through the WTO principles of non-discrimination, monopoly, national treatment and others as enshrined in the multilateral agreements on trade, competition is somewhat indirectly covered to some extent. Technical barriers to trade Presently there are disparate technical standards in different countries in Africa on various commodities. Notably some efforts have been made in COMESA and SADC to harmonize standards in the regions. There will be need for the Tripartite FTA to provide regional standards that are applicable to all members so that there is common understanding and agreement on standards. This would obviate the incidence of having to comply with different standards as goods or services move from one country or region to another, thus removing technical barriers to trade. The WTO Agreement on Technical Barriers to Trade (TBT), in Article II, prescribes the minimum requirements that any technical regulations, including those in an FTA, should satisfy. The harmonized standards under the Tripartite FTA would have to conform to those requirements. Electronic commerce With the increase in global trade, electronic commerce has become necessary so that trade transactions are expeditiously undertaken as a way of facilitating trade. Although this is a fairly new area for Africa, it would be beneficial to the tripartite region if the Tripartite FTA agreement makes provision for cooperation and development in this area. The WTO does not have any agreement on e-commerce presently. Customs cooperation The role of customs in the successful implementation of the Tripartite FTA is crucial. This is so because it is the efficient implementation of the Tripartite FTA arrangement that delivers the intended benefits to the FTA members and Customs plays a very significant part in ensuring duty free, expeditious and smooth cross-border movement of goods in an FTA. Border delays constitute a very high component in the landed cost of both imports and exports in Africa. The need for cooperation in customs in order to ensure efficient and facilitative customs procedures as goods move across the borders in the FTA cannot be overemphasized. For instance, customs authorities are the ones responsible for crossborder clearance of goods traded. Consequently, issues related to administration of rules of origin, advance rulings, customs valuation in terms of the WTO Customs Valuation Agreement, HS classification and border enforcement rests squarely on customs. It would therefore be important that the proposed Tripartite FTA provides for a framework for customs cooperation in all these areas so that trade is facilitated in the tripartite region. Rules of origin FTAs use rules of origin to ensure only FTA-originating goods enjoy duty and quota-free market access in the FTA. It will be necessary that the Tripartite FTA develops a set of rules of origin that are not too restrictive while being effective in

15 distinguishing FTA-originating goods from non-fta originating goods. The currently existing rules of origin under COMESA and those under the EAC would make an appropriate starting point for the development of the rules of origin for the Tripartite FTA as they are similar in architecture. In this regard harmonization of the rules of origin under the Tripartite FTA would mainly entail bringing on board the SADC rules of origin into the architecture of the more user-friendly EAC and COMESA rules. More importantly, the Tripartite FTA rules of origin would need to promote value addition within the FTA region and allow for sourcing of goods locally through cumulation of origin in which a commodity may be progressively processed in more than one FTA partner state before being exported. For the purposes of applying non-preferential trade policies such as MFN treatment, anti-dumping and countervailing duties, safeguard measures and any other discriminatory restrictions or measures, it will be necessary for the Tripartite FTA to, in addition to establishing a set of preferential rules of origin, also establish a set of non-preferential rules of origin in accordance with the provisions of the WTO Agreement on Rules of Origin. Intellectual Property The need to provide protection to intellectual property rights has gained currency and acceptance with most individual countries having some form of laws on the protection of such rights. Intellectual property is directly linked with innovation and in a free trade area such as the proposed Tripartite FTA, innovation is to be encouraged hence the need for protection so that its good benefits can be ethically and formally exploited by all parties to the Tripartite FTA while protecting the same against piracy. The Tripartite FTA should therefore make provision for trade in intellectual property. The principles enshrined in the WTO Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) should make the basis for such provisions in the Tripartite FTA Agreement. Dispute settlement In any trading arrangement, there is always the possibility and potential for disputes between the trading partners. Unless a good dispute settlement mechanism exists, some disputes can even threaten the continued operation of a trading arrangement. The Tripartite FTA would therefore need to provide for an appropriate dispute settlement system to resolve any disputes that may arise. Ideally the dispute settlement mechanism should encourage consultation and engagement by the parties involved and if that fails then the matter can be taken before a tribunal or panel established for the purpose whose decision would be final. Whatever form and structure it will take, the Tripartite FTA s dispute settlement mechanism should conform to and be consistent with the principles enshrined in the WTO s Dispute Settlement Understanding (DSU). UPDATE ON LATEST DEVELOPMENTS ON THE PREPARATIONS FOR THE TRIPARTITE FTA Since the Tripartite Summit in 2008, some progress has been achieved in implementing some of the resolutions of the Summit in preparation for the establishment of the Tripartite FTA. Notable among these achievements are the following: (a) The secretariats finalised the study on a roadmap for establishing the Tripartite FTA, with the legal and institutional framework, and covering movement of business persons (b) The report of the study, together with the draft instruments, was circulated to Member States and introduced in formal meetings of Member States at REC level. Member States noted the report and urged each other to undertake consultations and provide comments (e) Consultations on the draft instruments have been undertaken at the REC level by each of the three RECs, and at the national level by some Member States. Draft instruments so far developed include the Tripartite FTA agreement and annexes, tariff liberalisation modalities, rules of origin, the road map and the negotiating time table (f) The Secretariats of the three RECs jointly undertook country missions to seven Member

16 States over the course of 2010 to assess preparedness at the national level for engagement in preparations for establishment of the FTA. The Member States visited were in support of the expeditious establishment of the FTA, called for meetings of experts in thematic areas to immediately begin well ahead of the Tripartite Summit, and called for ownership of the process by the Member States rather than the process remaining Secretariat-driven. (g) The Tripartite Task Force has met regularly and agreed on ways forward on critical issues and has agreed that the next Tripartite Summit be held in South Africa tentatively during the first quarter of 2011 (h) Tripartite workshops for Member States have been held on Non Tariff Barriers and on Rules of Origin which have produced draft instruments (i) A Tripartite meeting for the private sector was held on rules of origin. The meeting endorsed the draft annex on rules of origin (j) A dedicated tripartite workshop for Member States was held on rules of origin. There are critical issues, however, that still need attention particularly the origin criteria (k) The three secretariats have held meetings on Sanitary and Phyto Sanitary Measures, and on customs cooperation; in both areas, efforts to finalise a tripartite work program are at an advanced stage though not finalised yet (l) A tripartite meeting on the vision and strategy, the FTA Agreement, tariff liberalisation modalities, rules of origin, and the road map, was held on January 2011 the meeting made good progress in all the sessions except the one on rules of origin where the meeting called for more time and another full-scale meeting of the Member States (m) The secretariats have established units to deal with Tripartite matters, though the units would appear to be far too small taking into account the scale of the activities to be undertaken. (n) Reasonable funding for tripartite activities has been secured, mainly from DfID CONCLUSION An enlarged market created by the establishment of the Tripartite FTA presents increased market opportunities for the trade in goods and services produced within the FTA thus stimulating increased industrialisation, production, employment, income generation and poverty reduction, among other economic and social benefits. Of great importance, however, will be the scope and coverage of the Tripartite FTA Agreement, whenever it will be negotiated. The agreement will need to be comprehensive enough to cover all important areas related to and associated with trade in an FTA framework. The establishment of the Tripartite FTA linking up COMESA, EAC and SADC is an initiative that needs to be expedited in order to deliver its plausible numerous benefits without delay. The three RECs need to now focus their efforts on making the FTA a reality. The various draft instruments that have been developed, and others as necessary, now need to be finalised and formally adopted. It is now time for the second Tripartite Summit to be held to review progress on the road map crafted in the first Summit and chat the way forward.

17 BIBLIOGRAPHY EAC-COMESA-SADC. (2011). Brief on the state of preparations for the Tripartite FTA, 02 february 2011 COMESA. First COMESA-EAC-SADC Summit: COMESA, EAC and SADC to form a Single Free Trade Area by Site visited on 21 July 2010 Cronje J.B. (2010). Trade in services and the regional integration process in Southern Africa. Tralac, Stellenbosch, South Africa Final Communique of the COMESA-EAC-SADC Tripartite Summit of Heads of State and Government, 22 October 2008 Fundira T. (2010). Towards a tripartite COMESA-EAC-SADC Free Trade Area: The process, issues and priorities (17-18 June, Arusha, Tanzania). Tralac, Stellenbosch, South Africa Site visited on 21 July 2010 Games D (2008). A reality check for SADC s FTA. Site visited on 21 July, 2010 Kiraso B (2009). EAC Integration process and the enabling peace and security architecture. EAC, Arusha, Tanzania Mbogori C (2009). Private sector perspective on trade in services negotiations in the EAC. EABC, Arusha, Tanzania Ngwenya S (2008). COMESA Secretary Generals Speech to the 13th Summit of COMESA Authority Heads of State and Government held in Victoria Falls, Harare Ngwenya S (2008). Regional Integration in COMESA Tralac (2008). One Free Trade Area, one Customs Union and one Regional Economic Community, 20/10/

18 Annex I Extent of overlapping membership in COMESA-EAC-SADC COUNTRY COMESA EAC SADC Overlapping Angola Botswana Burundi Comoros Djibouti DRC Egypt Eritrea Ethiopia Kenya Lesotho Libya Madagascar x Malawi Mauritius Mozambique Namibia Rwanda Seychelles South Africa Sudan Swaziland Tanzania Uganda Zambia Zimbabwe TOTALS