Topics publications: African regional integration
Trade Reports
Movement of Service Providers in the EAC: Legal Analysis
The East African Community (EAC) achieved a common market in 2009 when the Heads of States and Governments signed the Common Market Protocol (CMP). It became effective in July 2010 after ratification by all the state parties. The scope of CMP applies to any activity undertaken in cooperation by the state parties to achieve the free movement of goods, persons, labour, services and capital and to ensure the enjoyment of the rights of establishment and residence of their nationals within the Community (article 5).
The movement of natural persons is covered under Part D – movement of persons and labour (article 7-12) and Part F – movement of service providers (article 16) of the CMP. Movement of persons comprises of citizens travelling to another state party for reasons other than economic activities while those intending to engage in economic activity are categorised as workers or service suppliers. Movement of services includes the supply of services through the four modes: cross-border (mode 1), consumption abroad (mode 2), commercial presence (mode 3), and presence of a natural persons (mode 4). Parties agreed to harmonise and mutually recognise academic and professional qualifications (article 11) and harmonise labour policies and programmes, in order to facilitate movement of labour (article 12).
The CMP has schedules of commitments on the movement of workers (annex II) and on progressive liberalisation of services (annex V), covering seven priority sectors such as business, communication, distribution, financial, educational, tourism and transport services. All state parties’ mode 4 commitments are linked to the schedule on movement of workers. In 2012, some of the state parties reported some challenges in implementing mode 4 commitments partly due to the linkages to movement of workers but also due to other discrepancies in the CMP. Subsequently, state parties agreed to amend CMP and the negotiations for the amendments are underway. Further, some progress has been made on Mutual Recognition Agreements (MRAs) on professional services as envisaged in article 11 of CMP. MRAs covering accounting, architectural and engineering services have been signed. The negotiations are on-going for veterinary and surveyor’s MRAs.
This paper intends to assess what has so far been the implementation of the commitments made in these professional services plus educational services. The assessment will focus on policy and regulatory changes, and examine any implementation challenges. This will contribute to the on-going mode 4 negotiations and inform the COMESA-EAC-SADC Tripartite and Continental Free Trade Area (CFTA) services negotiations.
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
Subsidiarity: Should it be included as a guideline for the CFTA Negotiations?
Africa’s integration agenda has always been an ambitious one. The typical approach is to target trade in goods and for the Member States to determine, in advance, the timelines for forming FTAs, Customs Unions and Common Markets. This is a top-down and linear integration model. Is the CFTA on the same course?
By invoking the agenda of the Abuja Treaty as a CFTA objective the Regional Economic Communities (RECs) will be building blocks of the CFTA. In order to perform this function they will have to remain active contributors to the continental integration endeavour. It therefore makes sense to look at the REC responsibilities, functions and commitments as CFTA building blocks.
Some of the RECs have recently made headway in certain areas of integration within their respective sub-regions. They have expanded the scope of their integration agendas and some apparently allow the “flag to follow the trade”. However, the implementation of most of these schemes have proven to be beyond the capacity of many of the Member States. The required political will to give up national policy space and to accept the discipline of, for example, a common external tariff (CET) is mostly absent; while the implementation burden is generally experienced as very onerous. Regional institutions lack the power to monitor compliance by Member States. Disputes about trade issues are never declared.
We believe the CFTA initiative requires a fresh approach to economic integration. Unless the challenges posed by the contemporary global environment are recognised and lessons are learned from the implementation record of the RECs, the CFTA’s aim of boosting intra-African trade in a comprehensive manner, and achieving other development objectives, will not materialize. The CFTA negotiations could also benefit from studying the approaches adopted elsewhere for concluding new preferential Partnership Agreements.
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 Court of Justice as the Court of Appeal for COMESA Competition Law
The COMESA Court of Justice has not yet ruled on any competition related disputes or appeals. A COMESA legal regime for competition regulation in the Common Market does, however, exist. It consists of the Competition Regulations and the COMESA Competition Rules. The question addressed here is what role the COMESA Court of Justice plays in adjudicating disputes or appeals about competition issues in the Common Market.
In 2004 the Organization adopted a comprehensive set of Competition Regulations. They are binding on the State Parties and give effect to Article 55 of the Treaty; which states that the Member States “agree that any practice which negates the objective of free and liberalised trade shall be prohibited. To this end, the Member States agree to prohibit any agreement between undertakings or concerted practice which has as its objective or effect the prevention, restriction or distortion of competition within the Common Market”.
There are thus two legal regimes which govern the enforcement of competition law and policy in the COMESA Member States:
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National competition laws apply to the enforcement of anti-competitive practices emanating at national level. National competition authorities in the respective Member States exercise the required powers and enjoy the necessary jurisdiction in terms of national legislation.
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The regional competition regime is invoked where there is a cross border impact of anti-competitive behaviour or a real prospect thereof.
The COMESA Competition Regulations do not refer to the Court of Justice and does not grant a right of appeal to the Court against decisions of the Board. There are several references to “appeals” in the Regulations (e.g. in Arts 15, 26 and 33) and some are dependent on further rules being adopted. They refer to the appeals heard by the Board.
However, it is generally accepted that, by necessary implication, the COMESA Court of Justice exercises jurisdiction over all disputes about the application and interpretation of COMESA legal instruments. It should, therefore, also be able to hear appeals against the decisions of the Board of Commissioners.
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
Regional Competition Law – A COMESA perspective
The promotion of competition and fair business practices is an essential aspect of market regulation and regional integration. This Trade Brief provides an overview of the COMESA competition regime. It also mentions some of the challenges flowing from flaws in the design of the Regional Economic Communities (RECs).
The COMESA Competition Regulations have the mandate to regulate cross-border conduct by undertakings in the Common Market for Eastern and Southern Africa (the “Common Market”). It is therefore critical for undertakings operating in the Common Market to understand the circumstances under which the Regulations will apply. This is so that undertakings can become aware of their legal obligations under the Regulations and further take the necessary steps to comply with same.
For this reason, just like any other law, Article 3 of the Regulations provides the scope of application of the Regulations. Article 3(2) provides that “These Regulations apply to conduct covered by Parts 3, 4 and 5 which have an appreciable effect on trade between Member States and which restricts competition in the Common Market.”
Care has to be taken when determining what amounts to trade between Member States. The concept of effect on trade is the chief criterion which establishes the jurisdiction of the Regulations. Consequently, the Regulations will not apply to conduct that is not capable of affecting trade between Member States. The application of Regulations is confined to conduct having minimum level of cross-border effect in the Common Market. The concept of ‘trade’ is not limited to traditional exchanges of goods and services across borders; it covers all cross-border activity including establishment. EU Case Law has held that the concept of ‘trade’ also includes situations where conduct affects the competitive nature of the market. Thus, when assessing whether a business practice has the potential to affect trade between Member States, one must ask the question: “how does the conduct affect the structure of the market?”
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
Implications of sensitive products exclusions on intra-regional trade: A case study of the East African Community
The objective of the East African Community (EAC) is to deepen the integration process within the Community through liberalisation and promotion of intra-regional trade. The EAC became a fully-fledged customs union on 1 January 2010, and has made strides in deeper integration by ratifying several protocols and agreements in order to achieve its stated goals, including the ratification and entry into force of the EAC Common Market Protocol by all the five EAC partner states on 1 July 2010.
The EAC has also been active in the launch of the Tripartite Free Trade Area (TFTA) with Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Cooperation (SADC), as well as being one of eight regional economic blocks to negotiate the Continental Free Trade Area (CFTA).
The objectives of this study are as follows: i) To identify the excluded tariff lines (sensitive list) from the CET for the EAC on a country-by-country basis and to seek the rationale for the exclusions; ii) To track the trade volumes since the customs union protocol entered into force and to analyse the impact of the exclusions on trade; iii) To draw implications of the exclusions on the proposed TFTA and CFTA; and iv) To investigate whether there are any other restrictions on trade within the customs union such as export restrictions as well as whether, and to what extent, tariffs or equivalent charges are still imposed on products traded within the customs union.
The report is organised as follows: section two reviews the sensitive products by country and the rationale for their choice and any other trade restrictions in place, section three provides trends trade and the likely impact of the excluded products, section four draws the implications of the sensitive list on TFTA and CFTA, while section five concludes and provides policy recommendations.
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
Moving money across borders in the SADC region
Under the Southern African Development Community’s (SADC) Finance and Investment Protocol, Annex 6 provides for cooperation on payment, clearing and settlement systems. The subcommittee responsible for this Annex has successfully implemented a cross-border payments system, and is reportedly working towards addressing regulatory issues and the cost profile with regard to worker remittances.
Despite this (and other) ongoing work, the World Bank still reports that seven of the top twenty most expensive remittance corridors are between countries in the SADC region, and a further two between countries in the region and elsewhere in sub‑Saharan Africa.
Many factors affect cost of remittances – weak infrastructures, a lack of transparency and competition, and financial regulation constraints. This briefing will explore two alternative (to traditional bank transfers and money transfer operators (‘MTOs’) such as Moneygram and Western Union) channels of remittances that rely on existing networks for funds transmittal – mobile money, which uses the mobile phone network, and retailer remittances, which use the networks of retail stores.
These channels not only offer potential competition in the space occupied by banks and traditional MTOs, but potential to reach further – in both a geographical and socio-economic sense – than traditional providers. This trade brief therefore also considers what else SADC could do to play a leadership role in encouraging an environment to better facilitate the cross‑border movement of money through these channels in the region to enhance competition and thereby potentially reduce prices.
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
How do the Southern African RECs compare as Rules-based Arrangements?
During the week of 4 to 11 July 2016 tralac hosted a training workshop for the COMESA Court of Justice. It was a very worthwhile experience in terms of offering an opportunity to take a look at, amongst other things, the case law which is being generated by the Courts and Tribunals of COMESA, the EAC and SADC. This particular aspect (dispute settlement in the context of regional trade and integration) is an important but often neglected aspect when it comes to assessing the progress by African Regional Economic Communities (RECs).
If disputes about the application and interpretation of the regional legal instruments can be settled in an objective and binding manner an important element is added to how commerce and trade across borders are conducted. This provides for certainty in the markets and for investors. It will also lead to benefits for domestic traders and service providers. This will, over time, advance the effectiveness and legitimacy with which government development policies are implemented and will add to a general improvement in governance, the ability to fight corruption and tackle illegal activities such as tax evasion and money laundering. The overall ability of governments to deliver on their development plans, will improve.
The present fiasco at the Beitbridge border post between South Africa and Zimbabwe shows the consequences when regional governance lacks a rules-based system. The implementation of Zimbabwe’s Statutory Instrument No. 64 of 2016, which banned the import of basic foodstuffs and other products from South Africa, has disrupted bilateral and regional trade and has caused distress for domestic firms and consumers in the two countries directly involved as well as in the region.
The crisis in Zimbabwe demonstrates the weakness and dangers inherent in a system which lacks a legitimate and predictable system for resolving disputes. There is a strong case for arguing that, because of the very nature of the problems to be addressed as part of promoting intra-African trade and integration, effective institutions, legal certainty and the predictable application of the rules are very necessary. It brings benefits to inter-governmental relations and for the private sector. Adjudication will, in addition, clarify the use of exception clauses and when governments will be entitled, as part of the applicable law, to invoke trade remedies and acceptable trade defence measures.
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
Intellectual Property Rights Promotion and Protection Under the Tripartite Free Trade Area (TFTA): Proposals for an Intellectual Property Protocol
The Agreement establishing a Tripartite Free Trade Area (TFTA) among the member states of COMESA, the EAC and SADC was signed on 10 June 2015 in Egypt during the Third Tripartite Summit of Heads of State and Government. The signing of the Agreement marked the conclusion of phase I of a process that had begun in October 2008 with a meeting of the Tripartite Summit of Heads of State and Government in Kampala, Uganda. According to the Declaration Launching the Negotiations for the Establishment of the TFTA, phase II of the negotiations is meant to cover ‘the built-in agenda in services and trade-related areas’. In the Sharm El Sheikh Declaration, the third Tripartite Summit further elaborated on this mandate by directing the commencement of phase II negotiations in five areas:
- trade in services
- cooperation in trade and development
- competition policy
- intellectual property rights
- cross border investment.
This paper is concerned with the fourth of those areas. Intellectual property (IP) is a technical area that has to date received little attention in the regional integration agendas of tripartite states in spite of the fact that the world is often said to be moving from an industrial to a knowledge-based economy of which intellectual property is a critical component.
Issues concerning intellectual property, development and trade have proven to be controversial in the past due to, among other factors, the perception that strong IP laws can provide an unfair competitive advantage to certain developed countries who themselves used weak IP laws to develop economically. The territorial nature of intellectual property law, which means that every State has a right to design a legal framework appropriate to its level of development, also hinders harmonisation of IP laws. More recently, with advances in technology, issues have arisen with regard to the relationship between IP and access to medicines, IP, climate change and green technology, and IP and development. In addition, the issue of the scope of IP rights has been debated in the context of exceptions to rights under copyright law to cater for special situations such as access for visually impaired persons, educational and research institutions, and libraries and archives. All this means that the area of intellectual property is going to be a sensitive and complex issue in the context of TFTA negotiations.
The aim of this paper is to examine some of the issues related to the intellectual property track of the phase II negotiations in order to propose a few options that the member states may wish to consider as they endeavour to arrive at an outcome that will be supportive of their development objectives. The goal is therefore to explore the options available for states negotiating the TFTA so far as the development of provisions on intellectual property is concerned. In so doing it will be necessary to ask, given the differing capacities of the parties and their diverse legal frameworks, whether the provisions should focus primarily on cooperation with regard to procedural matters or whether parties should be more ambitious and aim to include more substantive, binding provisions?
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
South Africa: Tariff policy – does it matter?
In recent years South Africa has increasingly turned to changes in the SACU tariffs to stimulate its economy. These changes have included both decreases in the case of inputs into domestic manufacturing and increases in the case of the importation of those goods directly competing with the domestic sector. It is only the latter category that we concentrate on in this paper.
Some analysts decry the increases as reverting to a past era of protectionism that increases consumer costs, while others welcome the moves to stimulate the economy and generate more jobs. We make no judgement on the economic merits of these tariff increases but rather set out to report on their consequential effect on import flows and assess their relative importance in terms of import values.
At the start we acknowledge a difficulty in assessing the impacts of the tariff increases and in particular judging their ‘success’ or otherwise in decreasing import flows as this ignores the counterfactual. Would imports have increased in the absence of tariff increases? Over a short period in a static analysis of this nature and acknowledging possible counterfactuals we cannot make a definitive judgement on this.
In many of the cases the data shows that import decline is more related to non-tariff market factors (for instance the global financial crisis, world price spikes, significant decrease in local demand etc.) than the increase in tariffs itself. This seems to question the effectiveness/success of the tariff adjustment policy. Many products continued to show import growth even after the tariffs were introduced. Usually one should have expected the tariff increases to have had an immediate impact on trade (e.g. the following year) but this was not the case, as imports continued to fluctuate quite markedly (some products, for instance, reached import peaks two years after the tariff was introduced).
The authors are Trade Negotiations Coordinator (SACU) and tralac Associate, respectively. This paper reflects the views of the authors and does not represent the view of the SACU Secretariat. It was developed as part of the ‘Geek Week’ data training workshop held at tralac during the week of Monday 11 April to Friday 15 April 2016.
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
One Year after its Launch: Has the Tripartite Free Trade Area been overtaken by Events?
The Tripartite FTA (TFTA) is often referred to in publications and in statements as if already a reality, or at least imminent. The true position is that this agreement is not in force; and not even concluded in terms of all critical elements to be agreed upon. The negotiations, in key areas such as tariff liberalisation and rules of origin, have not been finalized and the process might be losing momentum. In short, there is, as yet, no TFTA. It is still subject to negotiations in key substantive areas. At this stage 17 of the 26 negotiating member states have signed the incomplete agreement; ratification will have to wait till everything has been concluded.
Present indications are that the parties (or at least some of the main players) are bogged down in difficult technical and political issues involving the extent of their tariff offers and the content of the concomitant rules of origin. These are essential elements in the design of a trade in goods agreement, if they are not finalized then there cannot be new FTA. In the meantime very important new trade-related developments are taking place elsewhere on the continent and there is a possibility that the FTA could be overtaken by events.
The TFTA teaches us several lessons. The CFTA will have to produce meaningful outcomes if it hopes to meet the real challenge at hand; to boost intra-African trade in an effective manner. When doing so it may actually clarify the choices of individual states regarding the TFTA and whether to pin their hopes on its results. An honest pursuit of the CFTA goals may lead to a realization that unless the synergies between itself and the TFTA are in fact mutually supportive and the arrangements are designed to produce compatible results, the TFTA in its present form may turn out to be a stumbling block, rather than a building block for the CFTA.
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.