Addis Ababa, ETHIOPIA P. O. Box 3243 Telephone: Ext. 205 Website:

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1 AFRICAN UNION UNION AFRICAINE UNIÃO AFRICANA Addis Ababa, ETHIOPIA P. O. Box 3243 Telephone: Ext. 205 Website: MODALITIES FOR THE CREATION OF A SECOND BLOC OF RECS Concept Note 0 P age

2 Contents I. BACKGROUND... 2 II. CREATION OF A SECOND BLOC - CONSULTATION PROCESS... 4 III. OBJECTIVES OF THE CONCEPT NOTE... 5 IV. INTEGRATION PROFILE AND STATUS OF ECOWAS, ECCAS, CEN- AND AMU... 5 a) Profile of the RECs concerned... 5 b) Status of Integration - Implementation of the Abuja Treaty... 8 V. PROPOSED FIELDS OF COOPERATION FOR THE SECOND BLOC... 9 VI. PROPOSED LEGAL FRAMEWORK MEMORANDUM OF UNDERSTANDING 11 VII. TASKS TO BE PERFORMED, RESPONSIBILITY AND TIME FRAMEWORK VIII. EXPECTED OUTCOMES OF THE CONCEPT NOTE P age

3 I. BACKGROUND 1 The 18 th AU Summit Decision Assembly/AU/Dec.392(XVIII) on the formation of a second bloc of combined RECs between Economic Community of West African States (ECOWAS); the Economic Community of Central African States (ECCAS); Community of Sahel-Saharan States (CEN-); and the Arab Maghreb Union (UMA), in emulation of the COMESA-EAC-C Tripartite Arrangement, has its roots in the original work of the AU Commission, through the Department of Economic Affairs, on the issue of rationalization of the RECs. The Commission began working on the subject of rationalization as far back as It was, however at the First Conference of African Ministers in Charge of Integration, held in Ouagadougou, Burkina Faso, in 2006, that the need to rationalize and harmonize the activities and programmes of Regional Economic Communities (RECs), with a view to accelerating the African integration process was underscored. This led to Assembly Decision (Assembly/AU/DEC.112 (VII) of the Seventh Ordinary Session of the Union, held in Banjul, The Gambia, in July 2006, which, among other things, recommended a moratorium on the recognition of RECs. 2 This subsequently led the African Union Commission and RECs to search for ways to overcome the phenomenon of multiple memberships of Member States to one or more RECs, as well as identify ways and means of achieving the speedy integration of African economies. A series of studies on the subject on matters were conducted, which include the following: Review of the stages defined in the Abuja Treaty and the scenarios proposed for rationalization of the integration process - completed in 2007; Elaboration of a Minimum Integration Programme (MIP) - completed in 2009; and Quantification of RECs rationalization scenarios in terms of costs and benefits - completed in The last study on the Quantification of Scenarios on the Rationalization of the RECs quantified four (4) rationalization scenarios and assessed their impact on regional economies and the continental integration process. These scenarios included the following: Status Quo Scenario; Abuja Treaty Scenario (Option 1); Abuja Treaty Scenario (Option 2); and the accelerated convergence scenario (anchored community scenario) - drawing inspiration from the EAC-COMESA-C Tripartite Arrangement (launched in October 2008 during the EAC-COMESA-C joint Kampala Summit)1. 1 The first, known as the status quo Scenario is in fact a Scenario of continuity. Under this Scenario, it is presupposed that each REC would, in its specific domain, established its own integration momentum. The second Scenario called Abuja Scenario Option 1, is anchored on the Abuja Treaty framework which advocates for each country a membership of only one of Africa s 5 Regions: North, South, East, West and Centre. Scenario 3 called the Abuja Scenario Option 2, also involves the concept of single membership of one of the 5 Regions, while at the same time retaining most of the existing memberships, provided this does not impinge upon the process of harmonized economic integration. Lastly, Scenario 4 known as Anchored Communities Scenario regards the current configuration of RECs as an unstoppable reality, but places their entire dynamics in the global process of integration of 2 Page

4 4 The main findings of the study, through means of macro-economic modeling, found Scenario 4 to be the most superior, from the perspective of quantitative, economic and social impact measured in terms of cost/benefits. It concluded that the Anchored Communities Scenario would yield a global impact of +15.2% on African exports, +13.5% GDP and +8.6% employment gain (figure 1) 2. This would, however, be based on the convergence of the existing RECs towards two integration blocs, one in the East/Southern regions of the Continent and the other in the West/Central/Northern regions. Each would be built on existing structures, but with robust coordination and a parallel progression within and between the regional blocs, towards the integration of the Continent at large by A time gain in relation to the initial Abuja project was also foreseen as possible with the coordinated progression of the two macro-recs, as well as the opening of one to the other. Figure 1: Results of the Quantification and Comparison of the Scenarios Quantification Scenarios Global Effect of Status Abuja 1 Abuja 2 Anchored Integration Anchored Quo Community Community Scenario Cost of 1% 0.80% 0.90% 0.80% 1.10% reforms/gdp GDP variation 4.70% 4.80% 5.40% 6.80% 13.50% in relation to initial GDP Imports 4.80% 4.90% 5.50% 7.40% 13.90% variation Exports 4.40% 4.50% 4.70% 7.80% 15.20% variation Employment variation 2.20% 2.30% 2.60% 3.80% 8.60% Source: Study on the Quantification of Scenarios on the Rationalization of the RECs (2010) 5 The above findings and recommendations were presented to Ministers in charge of Integration at their Fifth Conference in Nairobi, Kenya, in September Ministers subsequently endorsed the study conclusions and proposed to Heads of State that other RECs not within the EAC-COMESA-C Tripartite Arrangement draw inspiration from the initiative with a view to emulating its success. This led to the adoption by Heads of State at their 18th AU Summit, of Decision Assembly/AU/Dec.392(XVIII) with the recommendation contained therein calling on other RECs not within the EAC-COMESA-C Tripartite to work towards the creation of second bloc of combined RECs, thus emulating the Tripartite initiative. the Continent at large, while also taking into consideration the latest trends whereby some RECs are coming together to form Macro-RECs, as profiled in light of the Tripartite arrangement experience. 2 The GDP growth potential is estimated at 6.8% with respect to integration in large regional blocs in addition to +6.7% obtained during integration of the large regional blocs into a single Economic Community; thus making a total GDP growth of 13.5%. As regards employment, the gains are estimated at +3.8% for the pre- AEC stage with additional +4.8% following the transition to AEC. This represents an equivalent of nearly 2 percentage points of additional growth during the integration period. It is preferable not to judge the Scenarios on the basis of fiscal revenue losses. These are too obvious. As long as there is additional growth, taxation can bring in more revenue, in another form, than customs duties. Besides, these customs duties will stop being whittled away by informal trade, international agreements etc. 3 Page

5 II. CREATION OF A SECOND BLOC - CONSULTATION PROCESS 6 In pursuance of the aforementioned Decision consultations were held with the RECs during the 11 th AU-RECs-ECA-AfDB Coordination Meeting, held in Djibouti in Further endorsement was also received from the President of the ECOWAS Commission and the Secretary General of ECCAS during a Retreat held between the senior management of the AUC and the RECs in March 2013, at which it was agreed that a detailed consultation meeting should be held with the RECs concerned to map the way forward. 7 The above processes, therefore, paved the way for the convening of a consultation meeting between ECOWAS, ECCAS and CEN- 3 and their Member States with the overall aim of seeking further guidance on the initiative. The meeting was held during the Sixth Conference of Ministers in charge of Integration (COMAI VI), from April, in Mauritius. Representatives from the EAC-COMESA-C Tripartite Arrangement also participated in the meeting to share and exchange experience as well as learn lessons from the original Tripartite process taking place amongst those Communities. 8 The objectives of the consultation meeting were fourfold: To begin initial reflections and brainstorming on the implementation modalities of the abovementioned Decision 392by mainly identifying fields of negotiations in order to take forward the initiative To provide an overview of the EAC-COMESA-C Tripartite Arrangement as the key inspiring initiative (background paper); To identify fields of cooperation in establishing a second bloc (agreed key sectors, institutional framework, develop an Action Plan, etc); and To also identify possible risks in establishing a second bloc as well as measures to mitigate and respond to such risks. 9 The meeting welcomed the initiative and after careful deliberations, recommend amongst others: The development of a concept note to be prepared by the AU Commission in collaboration with the concerned RECs and endorsed by the latters decision making structures. The concept note should indicate, among others, the following elements as proposals: A legal framework (Memorandum of Understanding) Identified sectoral fields upon which the second bloc will be pursued, namely Infrastructure, industrialisation, trade liberalisation, free movement and peace and security; Tasks to be performed, responsibility and the timeframe. 3 AMU is concerned but has so far declined invitations to attend meetings on REC coordination activities. 4 Page

6 III. OBJECTIVES OF THE CONCEPT NOTE 10 The objectives of the concept note are the following: Modalities for the Creation of a Second Bloc of RECs Concept Note Provide some details on the profile of the RECs concerned and their integration status vis-a-vis the Abuja Treaty stages and progress in key integration sectors Outline the proposed sectoral fields of cooperation upon which the second bloc will be pursued Outline the proposed legal framework between the Communities and its content Outline tasks to be performed, responsibility and timeframe IV. INTEGRATION PROFILE AND STATUS OF ECOWAS, ECCAS, CEN- AND AMU a) Profile of the RECs concerned 11 The integration profile of the concerned RECs is described in the following overview: Figure 2: Profile of ECOWAS, ECCAS, CEN- and AMU RECs Background General Objectives Integration Objectives ECOWAS Created on 28 May 1975 by the Treaty of Lagos. Sixteen countries were the original signatories to the Treaty. However, with the absence of ECCAS Mauritania, ECOWAS currently comprises 15 Member States4. Possesses 11 of the world s 48 Least Developed Countries (LDC), which constitutes 73 per cent of all ECOWAS Member States, making West Africa the foremost LDC region in both Africa and the world. These 11 countries exhibit some of the lowest socio-economic development indicators, including the lowest Human Development Index ratings in the world. Almost half of the population in the region is less than 20 years old and 65 per cent are under 25 years Established in 1983 by a Treaty signed on 18th October of that year in Libreville, Gabon Republic and which came into force in Economic, social and cultural cooperation. Its vision as set out in its Vision 2020 document is that of moving from an ECOWAS of States to an ECOWAS of people by 2020, characterized by borderless, peaceful, prosperous and cohesive ECOWAS region built on good governance where all people have the capacity to access and harness the regions abundant resources through the creation of equal opportunities for sustainable development and environmental preservation. Promotion and strengthening of cooperation amongst its Members and a dynamic, balanced and self-sustaining development, especially in the Economic union in stages:- Harmonization ; Creation of joint enterprises; Creation of a common market through: free trade area, common external tariff and common trade policy; Establishment of a monetary union, Free movement; Regional agreement on cross border investments; Regional investment code; Community population policy Elimination of customs duties and non-tariff barriers; Establishment of a common external tariff; Establishment of a common 4 The Republic of Benin, The Republic of Burkina Faso, The Republic of Cape Verde, The Republic of Cote d Ivoire, The Republic of the Gambia, The Republic of Ghana, The Republic of Guinea, The Republic of Guinea Bissau, The Republic of Liberia, The Republic of Mali, The Republic of Niger, The Federal Democratic Republic of Nigeria, The Republic of Senegal, The Republic of Sierra Leone and The Togolese Republic. 5 Page

7 CEN- December Ceased operation from due to internal crises taking place in some Member States. Reactivation of the Community in ECCAS comprises ten Member States5. Established on 4 February 1998 in Tripoli, Libya. The Community comprises 28 Member States covering all the five regions of the continent6. AMU Founded in February 17, 1989, when the Constitutive Treaty of the Union of the Arab Maghreb, was signed by the five Heads of State in Marrakech. Comprises five Member States 7 fields of industry, transport and communications, energy, agriculture, natural resources, trade, customs, monetary and financial matters, human resources, tourism, education, culture, science and technology and the movement of people. The aim of which is to achieve collective autonomy, raise the standard of living of citizens within the region. Establish a comprehensive economic union based on the implementation of a community development plan that complements and supports the national development plans of member countries and covers, amongst others, areas such as economic and social development, sustainable development: agriculture, industry, energy, social, cultural, health. Multi-dimensional objectives especially in regard to defense; and Safeguarding the independence of each Member State trade policy; Free movement; Harmonization of national policies Creation of a economic union; Freedom of movement and of establishment; Improving means of transport and communication; Coordination of educational and pedagogic systems Free movement of persons, services, goods and capital between Member States; The adoption of a common policy in all areas. In economic terms, the common policy is to ensure the industrial, agricultural, commercial and social development of member states. Dismantling of all tariff and non-tariff barriers to trade between member countries; Customs union; Common market Figure 3: Overlapping membership Country Membership Country Membership Country Membership Algeria AMU Eritrea CEN- Senegal ECOWAS, CEN- Angola ECCAS Gabon ECCAS Sierra Leone ECOWAS, CEN- 5 The Republic of Angola, the Republic of Burundi, the Republic of Cameroon, Central African Republic, Republic of Congo, the Democratic Republic of Congo, Gabon, the Republic of Equatorial Guinea, the Democratic Republic of Sao Tome & Principe and the Republic of Tchad. 6 Republic of Benin, Republic of Burkina Faso, Central African Republic, Union of the Comoros, Republic of Côte d Ivoire, Republic of Djibouti, Arab Republic of Egypt, Republic of Eritrea, Republic of Gambia, Republic of Guinea, Republic of Guinea Bissau, Republic of Ghana, Republic of Libya, Republic of Kenya, Republic of Mali, Republic of Mauritania, Kingdom of Morocco, Republic of Niger, Federal Republic of Nigeria, Republic of Senegal, Republic of Sierra Leone, Republic of Somalia, Democratic Republic of Sao Tomé et Principe, Republic of Sudan, Republic of Tchad, Republic of Togo and the Republic of Tunisia. 7 Republic of Tunisia, People's Democratic Republic of Algeria, Kingdom of Morocco, Republic of Mauritania and Republic of Libya. 6 P age

8 Benin ECOWAS, CEN- Gambia ECOWAS, CEN- Somalia CEN- Burkina Faso ECOWAS, CEN- Ghana ECOWAS, CEN- Sudan CEN- Cameroon ECCAS, CEN- Guinea ECOWAS, CEN- Togo ECOWAS, CEN- Cape Verde ECOWAS, CEN- Guinea-Bissau ECOWAS, CEN- Tunisia AMU, CEN- Central African ECOWAS, CEN- Kenya CEN- Soa Tome ECCAS Republic and Principe Chad ECCAS, CEN- Liberia ECOWAS, CEN- Senegal ECOWAS Comoros CEN- Libya AMU, CEN- Burundi ECCAS Congo ECCAS Mali ECOWAS, CEN- Côte d'ivoire ECOWAS, CEN- Mauritania AMU, CEN- Dem. Rep. of the Congo ECCAS Morocco AMU, CEN- Djibouti CEN- Niger ECOWAS, CEN- Egypt CEN- Nigeria ECOWAS, CEN- Equatorial Guinea ECCAS Sao Tome and Principe ECCAS, CEN- Figure 4: Economic performance per REC REC 2010 FDI in Total GDP in Real GDP GDP per GNI per Fiscal Inflation millions of Population millions Growth (%)) capita capita balance (%) USD (2009) in million of USD (2010) (%of GDP) AMU , ,755 2, ,037 CEN , , ,050 ECCAS , ,850 3, ,050 ECOWAS , ,271 Source: African Union Statistics Unit, Together ECOWAS, ECCAS, CEN- and AMU represent of 39 countries, a combined population of over 600,000 million people, over 50 per cent of Africa s economies, a combined Gross Domestic Product (GDP) of over US$ 774 billion, and a GDP per capita averaging US$ 1,828 (UNCTADSTAT, 2010 figures). The 35 countries also make up more than half of the African Union (AU) in terms of membership. 13 Of the RECs concerned, ECOWAS exhibited the highest GDP growth at 5.7 per cent in 2010, followed by ECCAS (5.6 per cent) and CEN- (5.0 per cent, prior to the political uprisings in the region). ECCAS has the largest GDP per capita at USD 3,850, however, this may be largely due to the fact that many countries within the region are endowed with hydrocarbons. Inflation was also the highest in the region. In terms of FDI, ECCAS and CEN- attracted the largest share in With regard to intra-african trade flows, the historical trend during the period shows that on average, amongst all the eight RECs, CEN- and ECOWAS were amongst the top four with 26 per cent and 15 per cent, respectively. The RECs 7 P age

9 that traded least among themselves were AMU (6 per cent) and ECCAS (1 per cent). On average countries within CEN- registered the highest exports beyond their borders to the rest of African countries from 2000 to 2007(an average of US$2,227 millions), ECOWAS was the third highest with an average of $1,838. Figure 5 also illustrates the level of intra and inter-rec trade in 2010 amongst some of the highest performers and lowest performers, including those outside the regions concerned. Figure 5: Intra and Inter-RECs trade in 2010 (% of their overall trade) Trade in 2010 AMU COMESA ECCAS ECOWAS C AFRICA AMU 2.6% 0.7% 0.1% 0.5% 0.2% 4.0% COMESA 0.8% 4.8% 0.5% 0.2% 6.5% 10.8% ECCAS 0.3% 1.2% 0.8% 1.5% 3.0% 6.1% ECOWAS 0.6% 0.2% 1.1% 9.1% 3.1% 12.8% C 0.2% 5.1% 1.2% 1.5% 9.0% 12.9% AFRICA 1.2% 2.6% 0.7% 2.6% 4.5% 12% Source: Trade Map, 2012, cited in the SIA VI, 2013 b) Status of Integration - Implementation of the Abuja Treaty 15 With regard to the status of integration of the RECs concerned, ECOWAS has made progress in building their FTA. ECCAS launched its FTA but is facing enormous challenges in implementing it. UMA and CEN- are still in the stage of cooperation amongst their Member States (see Figures 6 and Graph 1). Figure 6: Status of implementation of the Abuja Treaty per REC Stages of the Abuja Treaty Stage one: Stage two: Stage three: RECs Strengthening existing RECs and creation of new RECs where they do not exist Coordination and harmonization of activities Gradual elimination of tariff and non-tariff barriers Free Trade Area Customs Union Stage four: Continental Customs Union UMA IGAD C CEN In progress In progress Not yet Not yet Not yet Not yet Not yet Not yet 2013 Not yet This stage will be achieved when all RECs have achieved Customs Union and ECOWAS 2015 harmonized COMESA their respective ECCAS No date fixed Common External tariff EAC (CET), with a view of creating one single continental CET. Source: SIA VI, 2013 Stage five: Establishment of an African Common Market This stage will be achieved when all RECs have achieved continental customs union as well as free movement of labour and capital. Stage six: latest 2034 Monetary and Economic Union This stage will be achieved when all RECs have achieved African Common Market at which time there will be a common currency, issued by the African Central Bank. 8 P age

10 Graph 1: Integration stage of each REC Common Market Customs Union Pre- Free Trade Areas Free Trade Areas IGAD AMU CEN ECOWAS ECCAS C COMESA EAC 16 Progress made in the implementation of key integration sectors, namely the fields identified to constitute the basis of the second bloc, is summarized below. These sectors include: trade, infrastructure, free movement of persons, peace and security and industry. With the information available, ECOWAS appears to making the most progress, with policy frameworks, programmes and activities in all the identified integration sectors. V. PROPOSED FIELDS OF COOPERATION FOR THE SECOND BLOC 17 Although there are clear difference between the RECs concerned with regard to the pace of implementation of their integration programmes and the Abuja Treaty. The profile of each and the advancements made by some serve as foundational areas upon which to build cooperation through the formation of a second bloc. For example, ECOWAS and ECCAS both having attained FTA status; monetary cooperation is underway between francophone countries in West and Central Africa; the principles and values held by some (e.g. ECOWAS in the area of unconstitutional changes of government and extensive experience in peace and security and conflict resolution); progress in the area of free movement (ECOWAS and AMU regions, which can stand as an example to other RECs); and ECOWAS and ECCAS both have in place selffinancing mechanisms. All are areas of comparative advantage upon which to build deeper cooperation amongst the RECs concerned. 18 It is recognised that given the differing levels of integration that exist amongst the RECs concerned, forming a second bloc of combined RECs would continue to uphold the principle of variable geometry. The intention is not to slow down those that are advancing (Tripartite Arrangement is a casing point), they will continuing their own programmes. In fact those that are moving more quickly can help to accelerate the pace of others and deeper cooperation can also quicken the pace of progress as the Communities move towards the same common goal in the case of the Tripartite Arrangement, the common goal includes forming a grand FTA between the three Communities and an eventual Common Market. 9 P age

11 Figure 7: Progress per REC per key integration sectors Programmes/Projects/Institutions RECs Trade facilitation Infrastructure Free movement Industry Peace and Security AMU NA 8 NA Tunisia is the only country that allows NA citizens of other Member States to access freely its territory. From the five countries of the UMA, the free movement of people is in place between three Member States, namely, Libya, Morocco and Tunisia. However, visa restrictions are still applied between the rest of the countries on bilateral basis. CEN NA NA Holders of diplomatic and service NA passports are exempted from visa obligations. This privilege shall be extended to students, businessmen, athletes and academicians. ECCAS NA ECCAS Consensus Blue Print on Transport in No progress in accelerating the free NA Central Africa (PDCT-AC) movement of people. Some ECCAS Capacity Building Program of Aviation Safety countries request visa to enter their Oversight (COSCAP). territories, namely, Gabon, Equatorial Adopted a Code of Civil Aviation of Central Guinea, Sao Tomé and Principe and Africa in June 11, Angola. ECOWAS ECOWAS Regional Axle Load Control Supplementary Act Source: SIA VI, 2013 ECOWAS established National Road Transport and Transit Facilitation Committees with membership from all key public and private sector actors in trade and transport facilitation in all member states to ensure the free flow of trade and transport along their respective corridors. ECOWAS is coordinating an AfDB funded multinational highway and transport facilitation programme. Fostering the implementation of the Yamoussoukro Decision on air transport liberalization through the adoption of Community Acts on the establishment of a common air transport legal framework for ECOWAS Member States Visas are not required for nationals of Member States within the Community who travel across Member States of the ECOWAS region. Residents of West Africa have the right to move freely and settle anywhere within the Community. Adopted the ECOWAS passport in December 2000 and has been The ECOWAS has also adopted measures in order to facilitate the movement of persons transported in private or commercial vehicles West Africa Industrial Policy (WACIP) and Action Plan Mining Development Policy (EMDP) and Implementation Matrix NA NA ECCAS is the reference institution in terms of prevention, conflict management and peace building in Central Africa. The legal framework of its actions is based on the Protocol of the Peace and Security Council in Central Africa (COPAX), enriched by the signing of the Protocol for securing vital interests of ECCAS member States of the Gulf of Guinea Early Warning Mechanism of Central Africa (MARAC) ECOWAS Early Warning System 8 It is expected that RECs against which it is marked NA indicating that information was not available should provide the Commission with such information. 10 Page

12 19 Further, as the Tripartite Arrangement has demonstrated, the issue of overlapping membership then becomes an advantage rather than a hindrance, with the Communities concerned working to coordinate their activities for the same Member States, reducing duplication and dissipation of efforts, transaction costs and wasting of resources. 20 In view of the above, the consultation meeting between the concerned RECs and their Member States, therefore, proposed the following fields upon which to build the second bloc of combined RECs: Infrastructure to foster regional connectivity, market expansion; Industrialisation for structural transformation, employment creation, economic diversification, supply and value chain linkages between countries and regions; Trade liberalisation to promote the free flow of goods between countries and regions and foster higher levels of intra-african trade ; Free movement to promote the free flow of factors of production as essential cornerstones in the creation of an internal market/common market; and Peace and security to promote regional stability as an essential element in fostering stable and sustainable economic growth and development. 21 It should also be noted that on the aspect of trade, this sector was also identified in view of the 18 th Ordinary Session, held on January 2012 in Addis Ababa, Ethiopia, on the theme Boosting Intra-African Trade. The latter of which adopted Decision (Assembly/AU/Dec.394 (XVIII) and Declaration (Assembly/AU/Decl.1(XVIII), on a Roadmap for the establishment of a Continental Free Trade Area (CFTA) by the indicative date of 2017 and an Action Plan for Boosting Intra-African Trade. The Plan highlights the measures required at national, regional and continental levels to eliminate the barriers to the growth of intra-african trade. Therefore, cooperation between the concerned RECs in the area of trade liberalization will go a long way towards the realization of the CFTA. The following milestones and indicative timeframes have been decided for the establishment of a CFTA based on a framework, Roadmap and Architecture endorsed at the Summit: Finalization of the East African Community (EAC)- the Common Market for Eastern and Southern Africa (COMESA)- Southern African Development Community (C) Tripartite FTA initiative by 2014; Completion of FTA(s) by Non-Tripartite RECs, through parallel arrangement(s) similar to the EAC-COMESA-C Tripartite Initiative or reflecting the preferences of their Member States, between 2012 and 2014; Consolidation of the Tripartite and other regional FTAs into a Continental Free Trade Area (CFTA) initiative between 2015 and 2016; Establishment of the Continental Free Trade Area (CFTA) by 2017 with the option to review the target date according to progress made. VI. PROPOSED LEGAL FRAMEWORK MEMORANDUM OF UNDERSTANDING 22 It is proposed that a Memorandum of Understanding (MoU) should form the initial basis of relations and cooperation between the RECs concerned in the formation the second bloc. The rationale behind using a MoU is that it is a flexible instrument, easy 11 P age

13 to adopt and implement as a simplified form of legal instrument to be entered into force upon signing by the concerned Parties. It is also inspired by the experience of the COMESA-EAC-C Tripartite Arrangement which was formed through a MoU. 23 The benefits of formalizing the cooperation between the RECs c concerned through a MoU is that: i) it ensures that all parties are in agreement on their roles and activities, thereby decreasing misunderstandings and future conflicts; ii) outlines how decisions about the cooperation will be made during implementation; iii) can help keep the cooperation arrangement on track and focused on the original objectives/activities; iv) specify the fields/sectors upon which the second bloc will be based; and v) establish the coordination mechanism. 24 The MoU would aim to describe the intentions of the cooperation between the RECs concerned and how they would work together in pursuit of a common integration agenda and address integration challenges. The MoU would set out the objectives of the Arrangement, its sectoral focus, institutional arrangements for coordination and implementation, exchange of expertise, financial responsibilities as well as programming arrangements. It would also set out specific activity areas aimed at addressing key challenges facing the concerned Communities in the area of integration, such as: The risk of trade deflection due to multiple membership of member/partner states in different RECs with differing trade regime; Multiplicity of trade regimes and instruments for different trade arrangements which creates legal and administrative bottlenecks; Market expansion restriction due to varying tariff and non-tariff barriers to trade between the RECs; Lack of competitiveness at regional and international levels; Varying trade facilitation instruments between regions which greatly impact on inter-regional business activities; Non optimal investment environments across the regions; Restrictions in the movement of persons; Limited capacity development; Regional infrastructure issues; and Industrial development issues. VII. TASKS TO BE PERFORMED, RESPONSIBILITY AND TIME FRAMEWORK 25 In addition to the drafting of this concept note, the following activities were agreed during the consultation meeting between the RECs and their Member States: ACTION Concept Note 1) Prepare and send the concept note to the Secretariats of the concerned RECs and the ECOWAS Commission RESPONSIBLE ENTITIES TIMEFRAME AUC (EAD) May P age

14 ACTION 2) Concerned RECs to consult their Member States and agree on the way forward Study tour to Tripartite Implementation Unit 3) Organise a study tour, involving the AUC and the concerned RECs, to the Tripartite Implementation Unit in one of the Tripartite RECs with the aim of understanding the process involved while preparing for the negotiations Negotiation meeting amongst concerned RECs 4) Convene a negotiation meeting between the concerned RECs only Modalities for the Creation of a Second Bloc of RECs Concept Note RESPONSIBLE ENTITIES Concerned RECs AUC (EAD) Harmonisation activities with sub-regional organisations TIMEFRAME May to November 2013 September/October 2013 AUC (EAD) November ) Harmonisation of programmes and activities of ECOWAS (lead), the concerned RECs with those of the subregional organisations UEMOA and MRU ECCAS (lead) and CEMAC, CEN- (lead) and UMA Statistics gathering and strengthening of statistical capacity 6) Gather the necessary statistical data on the AUC, ECOWAS, identified fields and strengthen statistical UEMOA and MRU capacity of the concerned RECs ECCAS and CEMAC, CEN- and UMA January 2014 onwards February 2014 onwards VIII. EXPECTED OUTCOMES OF THE CONCEPT NOTE 26 The expected outcomes arising from the concept note are the following: Submission to the policy organs of the RECs for endorsement on the modalities Timetabling of the first second bloc Summit between the concerned RECs and signing of an MoU between the Communities Launching of technical studies required for the second bloc Launching of the key institutional and preparatory work for the formation of a second bloc 13 P age