Introduction

The Heads of State and Government of the 26 member states of the Common Market for East and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC) agreed in October 2008 to establish a grand Free Trade Area (FTA) which is now referred to as the Tripartite FTA (T-FTA). This integration initiative has in the (almost) three years since this political decision, followed a course rather different from other regional integration initiatives in Africa. Since October 2008 various task teams of technical experts have been engaged in analytical work and have prepared a Draft Agreement and 14 annexes, dealing with issues, in addition to tariff liberalisation, ranging from Rules of Origin (RoO) to the Movement of Business Persons and Dispute Resolution. The most recent iteration of this technical process has produced drafts of these instruments, dated December 2010. These drafts provide points of reference in many of the chapters of this book. Negotiations, however, were only officially launched at a Summit, held in South Africa, in June 2011. It is, therefore, very important to recognise that the Tripartite FTA does not exist yet and substantive negotiations have not yet begun. The Draft Agreement and the 14 annexes lack official status, yet it is a useful exercise to review these draft instruments and the emerging negotiations process, as member states deliberate negotiating guidelines, and soon start substantive negotiations.

The Trade Law Centre (tralac) has already published a book, Cape to Cairo – An Assessment of the Tripartite Free Trade Area, on specific issues related to the Tripartite FTA (available electronically on the tralac website, www.tralac.org) to coincide with the Summit in June 2011. The book focuses on economic analysis, and a broadly focused assessment of the impact of the T-FTA, with particular focus on agriculture and agri-business development.

This second book delves more deeply into a range of issues relevant to a discussion about what will make the T-FTA work. At this early stage of the process, before negotiations begin in earnest, there are important issues to consider that could contribute to making the T-FTA a successful integration arrangement. Thus far, Africa’s integration record is marked by grand schemes, weak legal and institutional foundations for a rules-based dispensation of regional integration, and an implementation record that demonstrates very little serious commitment. Can the T-FTA be different? The answer to this question lies not in the draft instruments, but the outcome of the political economy process that will begin as member states negotiate the legal instruments of the T-FTA. However, the analysis in this book can provide an opportunity to reflect on what exists already in terms of regional integration in East and Southern Africa, and what lessons can be learned from this experience. Specific issues covered include sugar trade, RoO, trade in services, movement of business persons, dispute settlement and trade remedies and safeguards, as well as World Trade Organisation (WTO) rules on regional trade agreements and implications for the T-FTA.

The T-FTA will be anchored on three pillars: market integration, infrastructure development and industrialisation. These pillars appear to capture the key challenges that proscribe the competitiveness of African businesses, and so limit both Africa’s own integration achievements and the integration of African economies into the global economy. Many analysts would concur that the key challenge facing African countries, both in African or global integration contexts, is not necessarily market access, but the capacity to produce tradables competitively. Since negotiations have not begun in earnest yet, there is an opportunity to consider carefully the challenges of Africa’s integration experience, so that the T-FTA can mark a watershed in African integration.

Market integration initiatives have traditionally been the hallmark of African integration, with infrastructure development (specifically sector development initiatives and cross-border projects) featuring on the regional cooperation agenda. Industrialisation was part of the early post-independence discussion on regional integration as a remedy to continental fragmentation, small economies and small markets with limited scope for economies of scale, but it has in recent years featured less explicitly on the integration agenda. How will these pillars provide for the construction of a rules-based regime for regional integration in East and Southern Africa?

The following are among the issues that merit consideration at this stage of the T-FTA process:

i) Liberalisation of trade in goods could proceed expeditiously, building effectively on the tariff liberalisation that has already been achieved by the constituent regional economic communities (COMESA, EAC and SADC). It is possible however, that such liberalisation could be seriously hampered by extensive lists of sensitive products, and restrictive RoO.

ii) The development of infrastructure (both national and cross-border) is essential to reduce the transaction costs of doing business generally, and of trade specifically. However the effective use of (hard) infrastructure requires appropriate policy and regulatory (soft) infrastructure, which forms part of a services agenda. Trade in services liberalisation has not been embraced as part of a regional integration agenda by many member states in the T-FTA region, yet without serious work on a services liberalisation and regulatory reform agenda, the benefits of the T-FTA are likely to remain elusive, and costs of doing business and trade in region may still hamper global integration initiatives.

iii) A rules-based regime provides certainty, predictability and transparency for regional trade and investment. Explicit undertakings in the legal instruments by member states with effective implementation are integral to a rules-based regime, as is effective dispute resolution. On this score the track record in the region is not impressive, neither with respect to dispute resolution nor with regard to effective implementation of undertakings. The question is how committed the member states are to a rules-based regional integration regime.

iv) African integration has generally been state-driven, with very little input from other stakeholders, especially the private sector. Design and negotiation of regional integration initiatives without effective private sector involvement may well lead to agreements that frustrate business, investment and trade, both in the region and in global markets. An example of an area where private sector input is indispensible is RoO; and SADC’s RoO are an example of a regime that expresses protectionist interests and frustrates intra-trade, rather than providing a workable framework for determination of origin to avoid trade deflection.

There is currently much focus on regional integration, not only in Africa, but globally. Global features of the current wave of regional integration include the development of comprehensive FTA agendas, extending well beyond trade in goods, with strong emphasis on deeper integration. The role of services liberalisation, regional investment governance, competition policy and other behind-the-border issues to promote competitiveness find expression in these deep integration arrangements. The development of robust, efficient and competitive trade and production chains benefits from rules-based governance that extends well beyond border measures such as tariffs. The Asian and East Asian regional trade agreements are setting benchmarks that promote regional clusters of production and trade excellence. Can the T-FTA do the same?

Trudi Hartzenberg
Executive Director, tralac

Download book here: Cape to Cairo: Making the Tripartite Free Trade Area work.pdf (2448KB)

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