Topics publications: African regional integration
Trade Briefs
The Sanitary and Phytosanitary (SPS) policies of the African Regional Economic Communities, and the way forward for the CFTA
tralac, with the support of the Development Assistance section of the German Government through the Physikalisch Technische Bundesanstalt (PTB), recently completed a comparison of the SPS policies of the African RECs. The study focuses on the Southern African Development Community (SADC), the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Economic Community of West African States (ECOWAS). To this was added the manner in which SPS matters are dealt with in the Tripartite Free Trade Area (TFTA) and brief comparisons are made to Mercosur and EU practices. The full study will be made available under the auspices of the Pan-African Quality Infrastructure (PAQI).
This trade brief provides an introduction to the Continental Free Trade Area (CFTA) and an overview of the World Trade Organisation (WTO) SPS Agreement, together with a brief list of general observations, identified issues and some recommendations on the way forward for the CFTA.
Generally speaking, the progress on developing an overall approach to SPS matters appears to have been slow, with a lot of ad hoc sector-based activity taking place instead. The Tripartite Free Trade Area also addresses SPS matters and the outcome of its negotiations contains important lessons.
This publication was supported by the Physikalisch-Technische Bundesanstalt (PTB) as part of their sub-Saharan Africa Working Group project on Upgrading of Quality Infrastructure in Africa.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the author and do not purport to reflect the views of PTB or the Trade Law Centre NPC.
Trade Briefs
When will FTAs justify optimistic Expectations about African Integration?
The public debate about what the Tripartite Free Trade Area (TFTA) and the Continental Free Trade Area (CFTA) will bring about portrays an optimistic picture. Many commentators claim that these agreements will bring significant benefits to millions of consumers and a marked reduction in poverty in many countries. However, after the signing ceremony and “launch” of the TFTA in June 2015, important negotiations about tariff schedules, rules of origin and trade remedies were still to be completed. These negotiations are said to have advanced well but it is still not known exactly what the three Annexes in question provide for. And it will take considerable time before the required number of ratifications will be deposited and this agreement will enter into force. Only then will implementation under the agreement commence.
The optimism about the TFTA and CFTA is presumably a sign that, in Africa, there is support for a new generation of intra-African trade agreements and a belief that the TFTA and CFTA fall in this category. Trade agreements with the West (e.g. the Economic Partnership Agreements) are viewed very differently. If the optimism about the TFTA and CFTA reflects a new commitment by governments to address the many obstacles (including corruption, red tape, absence of the rule of law etc) which prevent African trade from being “boosted”, this development is obviously to be welcomed. It is in fact very necessary. Intra-African trade can make a substantial contribution to the continent’s development and should be pursued in tandem with global integration.
However, one cannot escape the impression that the popular perceptions about the TFTA lack a proper examination of the technical aspects of the content of the Agreement. This trade brief takes a look at the text of the TFTA and what the parties have formally undertaken to do. We believe this to be necessary in order to form a realistic picture about the task ahead. The efforts required to ensure that the expected benefits will indeed materialize must not be underestimated.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
Amendments to the SADC Protocol on Trade
This Trade Brief examines an important amendment of the Southern African Development Community (SADC) Protocol on Trade that was approved at the 2016 SADC Summit. This amendment concerns an important provision that provides for “derogation” from tariff liberalisation commitments undertaken by Member States of the SADC Free Trade Area (FTA).
SADC is an inter-governmental organization consisting of fifteen Member States. The organization has its own legal personality, a permanent Secretariat in Gaborone, and sponsors an extensive regional integration agenda. One of SADC’s main activities centres around the implementation of the SADC FTA, based on the SADC Protocol on Trade. This instrument has not been implemented in a consistent and predictable manner. When it was originally adopted the intention was to provide for a transparent and predictable legal regime for trade in goods. However, there has never been a formal dispute between the Parties about any of the obligations, despite several complaints about violations. Private parties cannot protect their rights through judicial means.
This Protocol saw an important amendment recently; the implications of which are discussed in this paper. The aim is to gain a proper understanding of how the new “derogation” regime will function and whether more certainty and predictability regarding restrictive trade measures adopted by Member States can be expected.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Towards the Continental Free Trade Area – opportunities for South Africa’s Industrial Policy Action Plan priority sectors in the Kenyan market
Since the launch of the tripartite free trade area (TFTA) negotiations between the member states of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern Africa Development Community (SADC), there has been growing interest from South Africa to further expand its market into the African continent. This, coupled with prospects of a continental free trade area (CFTA), has made focus on Africa a priority for South Africa.
The focus on Africa is no surprise given South Africa’s economic dominance and the prospects of gaining duty-free market access beyond SADC make Africa a lucrative market if South Africa is to accelerate growth along a path that generates sustainable, decent jobs to address apartheid legacies in line with its national development strategy. To achieve this, South Africa’s National Industrial Policy Framework (NIPF) and the Industrial Policy Action Plan (IPAP) are central components of this strategy and seek to encourage and upgrade value-added, labour-absorbing industrial production.
This paper provides an analysis of opportunities for South Africa in the Kenyan market in the following sectors: agro-processing; automotives; pharmaceuticals; and metal fabrication, capital and rail transport equipment (MCR). Clothing, textiles, leather and footwear have been deliberately omitted from this analysis, as previous in-depth analyses on this sector have already been undertaken. Furthermore, forestry, wood and paper products have been included under agro-processing (which is a separate sector under IPAP); and we also focus on pharmaceuticals, given South Africa’s advanced infrastructure and technology that are required for this specific subsector.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
Overview of the rebate facilities in the Southern African Customs Union
The Southern African Customs Union (SACU) Agreement (SACUA) of 2002 aims to facilitate free movement of goods between SACU member countries. For goods imported outside the region, a common external tariff is applied and varies across products. In addition, Article 20 of SACUA makes provision for granting a rebate of the customs duties in respect of goods imported into the customs area in line with the stipulated clauses. The rebates regime facilitates achievement of the objectives set out in Article 2 of SACUA such as increasing investment opportunities, enhancing economic development as well as promoting industrialisation in the member states.
In terms of administration and endorsement of these trade-supporting instruments, Article 8 of SACUA mandates the SACU Council of Ministers to approve customs tariffs, rebates, refunds, drawbacks and trade-related remedies. The different rebates available to the SACU member states are covered under Schedules 3 and 4 of the SACU Customs and Excise Act of 1964. Schedule 3 covers industrial rebates and Schedule 4 covers what is classified as general rebates. Depending on the purpose of importation of the concerned product, there are specific conditions attached to prevent exportation into SACU member states of products manufactured from the materials imported from non-SACU countries through the rebate facility.
The rebates are therefore used as policy instruments aimed to address the effects of tariffs on industrial development since they offer relief to industries by offsetting the duties paid on imports of rebated products. The rebate facility is thus intended to promote sectoral competitiveness and industrial development in SACU.
The main objective of the paper is to provide a baseline outline and preliminary assessment of the rebate facilities in SACU. The paper looks at the types of rebates available, the rationale and legal basis, the policy implications of rebates in the SACU member states and, more particularly, their effect on industrial development.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
The EAC Mode 4: Trade data
The East African Community (EAC) Common Market Protocol (CMP) entered into force in 2010. Among others, the protocol consists of the services liberalisation commitments and provides for development of Mutual Recognition Agreements (MRAs) to facilitate movement of labour and services in the region. The commitments relating to movement of natural persons providing services, i.e. Mode 4, were linked with those on movement of workers. MRAs covering accounting, architectural and engineering services were concluded by end of 2012. However, in 2014, state parties identified some discrepancies relating to trade in services in the CMP. The implementation of Mode 4 commitments had been a challenge. Some negotiations to amend the CMP are ongoing to resolve the issues of concern. An earlier tralac paper (click here to view) concluded that the linkage is not the challenge in itself but rather the lack of commitments to permit actual movement that is reflected in insufficient legal reforms.
This paper builds on these findings to provide trade data relating to movement of persons. In addition, it looks at the registration or practice licences issued to accounting, architectural, and engineering professionals; issuance of work permits to identify any implementation gaps and make recommendations. It is important to note that most of the information presented in this paper is based on desk analysis. The data available on various issues of interest is very patchy or missing, and is in aggregated format. This permits very limited analysis and it is difficult to draw any fair conclusions. For example, it is not possible to link data on work permits, registered professionals or arrival and departure information due to aggregated information. Therefore, the study only provides indicative information rather than reality and hence great care is required in using or interpreting the information presented.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
Are EPAs still on the African Agenda?
The Economic Partnership Agreements (EPAs) date back to the signing of the Cotonou Agreement (the ACP-EU Partnership Agreement) in 2000. Since that time, it has been the framework for the EU’s relations with 79 countries from Africa, the Caribbean and the Pacific (ACP). The trade chapter of the Agreement reflects the need for a new trade relationship with the EU and the conclusion of legal instruments reflecting the expiry of non-reciprocal preferences at the end of 2007. It affirms the role of the EPAs as WTO compatible instruments which should boost economic development and integration into the world economy. Good governance would be gained as part of the journey.
There have been intensive negotiations with groups of African states to conclude specific EPAs, but progress has been slow and implementation has been unimpressive. Overall the EPAs do not live up to the original expectations. Why has this been such an arduous journey? Has the time arrived for an honest re-assessment of the validity of the aims and objectives, the approach towards delivery, and the impact of global and regional developments since the original negotiations started 17 years ago? The world is a different place now.
From the viewpoint of what modern trade agreements should provide for, the scope of African EPAs looks decidedly outdated. They cover only trade in goods, despite evidence that the real new gains lie in areas such as services (and the synergies between services and trade in goods), trade facilitation, and better governance.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
The TFTA as a legal construct: What is it and how will it be implemented?
The Tripartite Free Trade Area (TFTA) is not, like the regional economic communities (RECs), a legal person. It is a sui generis framework agreement for promoting trade in goods among (potentially) the 26 members of COMESA, the EAC and SADC.
What is the significance of the TFTA being a framework agreement? This concept has become a methodology for, inter alia, Trade and Investment Framework Agreements (TIFAs) – inter-state instruments, couched in general terms, about trade, investment and related matters. They establish frameworks to expand trade, continue negotiations on outstanding issues, and promote integration. TIFAs are often seen as first steps towards establishing modern FTAs.
The language of the TFTA text indicates a low-level framework agreement in which the parties undertake to “progressively eliminate tariffs and Non-Tariff Barriers; liberalise trade in services; cooperate on customs matters and implementation of trade facilitation measures; establish and promote cooperation in all trade-related areas…; and establish and maintain an institutional framework for implementation and administration of the Tripartite Free Trade Area”.
It is possible that some participating states (doubting the benefits or considering the CFTA to be the better option) will not become TFTA parties. The fact that many of the Tripartite Member/Partner States had signed the incomplete (and un-scrubbed) text in June 2015 means that they may find it necessary to revisit their decision once all negotiations have been finalized. Article 44 stipulates that the built-in agenda of the TFTA must be finalized before the Agreement is complete. The three outstanding Annexes must be concluded “after the launch of the Tripartite Free Trade Area”. This has not yet happened.
The TFTA was “launched” before its negotiations had been finalized. Once the negotiations are completed the Agreement still has to enter into force, before trade in goods will be conducted (for those states which have become parties) in terms of its provisions. The TFTA does not yet exist as a proper FTA; this project is work in progress.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Reports
Senegal: the trade policy and performance profile
This paper examines the trade profile and performance of Senegal since 1960, with particular emphasis on the period since 2001. Over the course of 2015, Senegal’s macroeconomic performance was strong with a growth rate of 6.5%, making Senegal the second fastest-growing economy in west Africa (behind Côte d’Ivoire). Growth remained strong in 2016. The primary sector is the fastest-growing sector boosted by extractives, fishing, and agriculture, with the latter helped by good rainfall and strong outcomes from government programmes. Industry decelerated somewhat despite strong performances in construction, chemistry and energy, while services – which represent more than half of the total Gross Domestic Product (GDP) – are still growing rapidly, thanks to advances in the transport and communications sectors. Exports have been growing rapidly, mainly due to stronger output. However, over the past 16 years, Senegal has consistently run a merchandise trade deficit, with imports significantly above exports each year.
Senegal is a member of the Economic Community of West Africa States (ECOWAS). The ECOWAS CET was approved in 2013 with the aim of establishing a customs union for ECOWAS through the adoption of a common external tariff vis-à-vis third countries. The country concluded negotiations for an Economic Partnership Agreement (EPA) with the European Union as part of the West African group in February 2014. The EU-EPA gives reciprocal access: Senegal will continue to access the EU market while liberalising access to its own market for EU exports. The difference, however, is that the EPA gives immediate access to the EU market while West Africa will remove import tariffs over a 20-year transition period. Senegal is also a member of the African group negotiating for a Continental Free Trade Arrangement (CFTA), although to date the rhetoric on progress is running a little ahead of the reality, especially as Africa wrestles with the problem of recalcitrant or failed states within its borders.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.
Trade Briefs
Issues for CFTA negotiators to consider
This paper will examine the modalities (the formulas, targets, or specific measures used to accomplish stated objectives) associated with current negotiations on the African Continental Free Trade Area (CFTA). We emphasise that the CFTA must focus on political and African integration realities and not unrealistic and dogmatic trade and economic objectives. In order to achieve a successful outcome to the negotiations, there are three crucial issues that we believe negotiators and African policy makers need to be clear about:
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Firstly, that the modern free trade agreement (FTA) is not overwhelmingly or even importantly about comprehensive free trade or the elimination of import tariffs. It is about the reduction of tariffs over time that aim, to the extent possible, towards their elimination (or more realistically, mitigation) and trade facilitation.
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Secondly, the corollary of the first, is that several issues are at least as important as tariff elimination, and this paper will discuss some of these issues.
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And finally, acknowledging the realities of African politics, there needs to be a recognition in Africa that not all countries are ready or able to join an FTA at this stage. Arrangements to recognise and accommodate this while still moving ahead with the FTA need to be found. If these arrangements are not found, the several failed or semi-failed states in Africa will ensure the dream of African integration is never realised.
Readers are encouraged to quote and reproduce this material for educational, non-profit purposes, provided the source is acknowledged. All views and opinions expressed remain solely those of the authors and do not purport to reflect the views of tralac.