Topics publications: African regional integration
Trade Reports
Intra-REC trade and overlapping membership: review of COMESA, EAC and SADC
This paper analyses trade between the three Regional Economic Communities (RECs) of the Common Market for Eastern and Southern Africa (COMESA), the African Economic Community (EAC), and the Southern African Development Community (SADC) using trade data from the International Trade Centre (ITC). The data is generally ranked by 2013 as that is the most consistently and seemingly comprehensive reporting available.
Examining each REC in turn we find that both Rwanda and Uganda export around half of their totals to COMESA, with DRC and Burundi around 20%, Zambia and Malawi around 15% and the rest below this figure. Libya with less than 0.5% is the outlier. Within the EAC, Kenya is the largest intra-EAC exporter with a share that varies around one-half while Uganda, Rwanda and Tanzania have similar shares of around 15% to 20%. Rwanda reports that some 72% of its exports were destined for EAC during 2013, but the data for other years varies significantly. As expected, South Africa dominates the intra-SADC exports with a share around 50% to 60%.
Next is a group of eight members with shares that are all generally grouped between 3% and 8%. By shares of exports destined for SADC, Zimbabwe reports that over 90% of its exports are in this category, and both Swaziland and Namibia report around 50% to 60%. Angola, like fellow oil exporter Libya in COMESA, has a very low share of around 3% only destined for SADC.
Overlapping memberships are a major feature of the RECs, and we must be careful to assess the overall impact of these to avoid double-counting intra-REC trade. We have taken two subcategories of each REC: (a) ‘pure’ trade entails intra-REC trade that excludes trade counted as intra-regional trade in another REC as both partners are members in common of another REC, whereas (b) ‘geographical’ trade entails all REC members which are arbitrarily assigned to their logical geographical regions. Pure trade is a subset of the full data while geographical trade in turn is a subset of pure trade.
There are, of course, several issues related to these definitions that suggest that we are taking an almost naive approach but this approach does highlight the overlapping issue. We have only assessed exports under these definitions, and ‘pure’ entails only intra-REC trade.
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 Tripartite Free Trade Agreement: Results of Phase One of the Negotiations
African economic integration is a longstanding ideal; regularly confirmed in declarations adopted at meetings of African Governments. The Abuja Treaty, for example, records many decisions to advance inter-State collaboration and eventually to establish “an African Economic Community”. This ambitious goal has to be the outcome of a gradual process; which has lately been interpreted to require the African Regional Economics Communities (RECs) to take specific steps towards closer cooperation and consolidation. These efforts, if resulting in agreements imbued with sufficient scope and legal content, would constitute the building blocks for continental integration.
The launch in 2008 of the Tripartite Free Trade Area (TFTA) initiative brought many to believe that a breakthrough had been achieved and that there was proof that the “building block” approach is feasible. The TFTA would have provided new impetus for advancing continental integration, while the participating States would have gained better market access, and associated benefits. In October 2008 the Heads of State and Government of the Members of the East African Community (EAC), Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Community (SADC) agreed in Kampala, Uganda to establish a Tripartite Free Trade Area (TFTA). The first Tripartite Summit concluded that “the tripartite arrangement is a crucial building bloc towards achieving the African Economic Community as outlined by the Treaty of Abuja.”
This paper investigates the results and the outcomes of the TFTA negotiations so far. The negotiation process and the text of the Agreement, adopted on 10 June 2015, is assessed. An important question to be answered is whether this particular approach (merging existing RECs into inclusive FTAs) is workable and the appropriate route towards continental integration.
Is the TFTA indeed a building block for continental integration? Will inter-REC negotiations not generate their own new difficulties? What do the TFTA negotiations and the Agreement adopted in June 2015 tell us? How can new challenges and technical difficulties be dealt with? What role do regional hegemons (such as South Africa) play? What are the lessons and the implications for the Continental FTA (CFTA), for which the negotiations were officially launched on 15 June 2015?
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
Intra-African trade – an analysis
This paper clearly reinforces the data warning outlining the dangers inherent in trying to analyse intra-African trade data. The use of mirror data, late and non-reporting and ‘vanishing’ trade has been the bane of this research; we must therefore emphasise that this paper is far from being a definitive analysis of intra-African trade. We must also emphasise, however, that the ITC is the best available source of consistent trade data and this paper represents a systematic attempt to use the available data to start shedding light on intra-African trade.
Over the last few years the aggregate intra-African trade’s (imports and exports) share of total African trade has consistently been around the 12% mark (with a high of 14% in 2009) as shares from both the European Union (EU) and the United States (US) are dramatically declining in the face of increasing Brazil, Russia, India and China (BRIC) trade.
Using the ITC direct and mirror data for imports we found that the main intra-African exporters are South Africa, Zambia, Botswana and Namibia. At the HS 2 Chapter level imports are headed by mineral fuels, ships and related equipment, general machinery, vehicles and electrical machinery, but according to the mirror data we have brought trading in precious stones and metals into the top bracket for later analysis.
By combining direct and mirror data the main intra-African exporters are South Africa, Nigeria, Côte d’Ivoire and Egypt, By HS products the main exports are fuels, ships, precious stones and metals, general machinery, vehicles, and electrical equipment.
Reconciliation of intra-African data clearly exposes the significant problems inherent in such an exercise and leaves us still seeking the truth in numerous places. There are several main data problems: (a) non-reporting where the mirror data is often used in place of direct data and, of course when neither party reports its data the mirror is non-existent; (b) the penchant for South Africa not to report gold trading and, at least until recently, poor intra-Southern African Customs Union (SACU) reporting; and (c) the suspected confusion of re-exports in at least vessels and related equipment and vehicles.
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
Implications of the Tripartite FTA for SADC and its Member States
The Tripartite Free Trade Area (TFTA) initiative was originally launched to establish a single FTA among the Member States of COMESA, EAC and SADC. This would have brought the benefits of an enlarged market and would have solved some of the problems caused by overlapping memberships faced by the Members of the three Regional Economic Communities (RECs). It proved impossible, however, to achieve this ambitious objective during the negotiations, which were conducted between 2011 and 2015. The Preamble to the TFTA Agreement, signed in early June 2015, contains references to subsequent decisions on how the negotiating goals were re-formulated and changed.
The TFTA is unfinished business. More work and political commitment are needed for concluding the TFTA agenda and completing outstanding tasks. It may take quite some time before the TFTA Agreement will enter into force. Before that will happen, the participating Governments will have to weigh the benefits or disadvantages of ratifying the Agreement. This would presumably involve discussions with their counterparts in the RECs (and there will be more than one of them in the case of many of the States involved) of which they are a party.
What are the implications for SADC and its Member States of these developments? Those SADC Members which do join the TFTA will do so individually; SADC is not a customs union and does not have a common external tariff or single customs territory, as SACU has. Firms doing business in SADC and elsewhere in Africa will need to study the extent to which the TFTA establishes new trade preferences and what they mean. TFTA rules of origin (still to be decided) will require specific attention; they might turn out to be a mixture of the different approaches followed by SADC (where the rules of origin are tighter) and the EAC and COMESA, respectively. Supply chain logic and needs could be directly affected.
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 Implications of the Tripartite FTA for SACU
How will the recently signed Tripartite FTA change the institutional landscape for trade and regional integration in Southern and Eastern Africa? The optimism levels for the (Cape to Cairo) benefits which are expected to follow, are high. It is necessary, however, to recognise the extent of the work still to be undertaken before these expectations could materialize. One of the reasons why caution is called for has to do with the challenges involved in finalizing tariff offers and rules of origin; which are the basic building blocks of an FTA. This process will have direct implications for existing regional trade arrangements.
This Trade Brief discusses a particular set of these implications; the consequences of the TFTA (as it stands), for the Southern African Customs Union (SACU) and for its Members (Botswana, Lesotho, Namibia, South Africa and Swaziland).
The present TFTA Agreement is not a comprehensive foundation for an FTA. It will take much more effort and time before such a comprehensive FTA among all 26 member states will become a reality; which cannot be achieved without important trading nations such as South Africa (and SACU) becoming a party. At present it is not yet known whether Pretoria will sign and ratify this Agreement. South Africa may decide to continue to participate in the negotiations to complete Phase I (the built-in agenda) but will presumably wait for a final outcome on Annex I on the Elimination of Customs Duties, Annex II on Trade Remedies and Annex IV on Rules of Origin before a decision on signing and ratification is taken. This has direct implications for SACU; which is a customs union. It has a common external tariff (CET) and a single customs territory. Trade in goods arrangements with third parties have to be concluded jointly.
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 new Principles for Negotiating the Continental FTA
The African Union Assembly launched the Continental Free Trade Area (CFTA) negotiations during the 25th Extraordinary Summit of Head of States and Governments on 15 June in Johannesburg, South Africa. It adopted a statement on the Objectives and Guiding Principles for Negotiating the Continental Free Trade Area; in terms of which these negotiations will be conducted.
In order to make the ambitious CFTA project a reality and to get the process started, new legal and institutional arrangements have to be put in place. The Members of the AU will be the parties to these agreements and they will participate in the CFTA negotiations. The Department of Trade and Industry of the African Union Commission will assist the Members States during this process, which will apparently kick off in June 2016. This tralac Trade Brief discusses the most salient points in this document.
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
Intra-SACU trade relationships and related issues
Much of the focus of South Africa’s trading relationship with BLNS countries is on the SACU revenue-sharing formula, a formula which is based entirely upon one side and one side only of this relationship. The SACU tariff revenue pool is divided on the basis of intra-SACU imports. These imports are dominated by BLNS imports from South Africa.
The objective of this paper is to analyse the Southern African Customs Union (SACU) trading relationship and briefly discuss the tariff revenue-sharing formula before going further and examining the implications of interrelated themes in terms of regional development. Analysis has generally focused much more on South Africa’s exports to Botswana, Lesotho, Namibia and Swaziland (BLNS) for two reasons: (a) this is the dominant trading relationship and (b) the SACU tariff revenue sharing is based upon intra-SACU imports only.
We have used South African trade data sourced from the International Trade Centre (ITC) expressed in US dollars in the first section of the paper but BLNS trade data sourced from the SACU Secretariat denominated in rand in the second section.
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 road transport sector in the context of the SADC Protocol on Transport, Communications and Meteorology
The SADC Protocol on Transport, Communications and Meteorology (TCM) of 1996 aims to integrate the transport sector in the region. It places strong emphasis on the commercialisation of transport services provision and private sector participation in road transport infrastructure development and maintenance. The Protocol on TCM focuses on three core themes relating to road transport namely the development and maintenance of road infrastructure and funding, the regulation of road users (vehicles, drivers and market access), and road transport facilitation. These three areas together contribute to the facilitation of intra-regional trade and the realisation of the region’s developmental integration objectives.
The scope of the Protocol is vast and its objectives very ambitious. However, the circumstances in the transport sector have changed since its adoption in 1996. SADC MS are now negotiating the establishment of the Tripartite COMESA-EAC-SADC FTA which requires, amongst other things, the harmonisation of road transport regulation in the Tripartite Region to facilitate trade among them. Greater focus is also now placed on the development of transport corridors and the facilitation of transport, border, customs and transit measures along particular routes. This may necessitate a review of the Protocol on TCM to make provision for these changing conditions.
Many obligations remain unimplemented or partially implemented. Some of the obligations contained in the Protocol on TCM may have proven unattainable or unrealistic. A clear implementation plan of the Protocol on TCM, aligned to the planning format of the Regional Indicative Strategic Development Plan (RISDP) and Regional Infrastructure Development Master Plan (RIDMP) is required to consolidate and deepen regional integration. The setting of targets for implementation over the short-, medium- and long-term requires evidence-based planning, aligning of budgeting processes and strong regional coordination and monitoring systems to oversee the effective implementation of activities at the national level.
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
Suitable Mechanisms for Negotiating Trade in Services and Movement of Business Persons in the Continental Free Trade Area
The purpose of trade agreements is to promote international trade. Preferential trade agreements on services or Economic Integration Agreements (EIAs) as they are defined in Article V of the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO) can promote international trade in services by reducing barriers on foreign participation, improving transparency of policies and regulations affecting trade; and increasing the credibility of the trade regime (reducing the risk of (re-)introduction of trade restrictive policies).
Various negotiating and scheduling approaches can have an influence on the outcome of these three trade objectives and the subsequent agreement. However, the level of negotiating outcomes depends not so much on the choice of negotiating and scheduling approach, but on the political will to generate particular results.
The negotiating modalities contain the agreed objectives, the level of ambition the parties wish to achieve and the process to achieve the envisaged outcomes. In addition, the negotiating modalities usually includes the development of disciplines (regulation, competition, government procurement of services, and subsidies) that would establish a transparent, reliable and predictable business environment to facilitate the creation of regional value chains and deeper economic integration.
What approach should be adopted for the drafting and negotiation for trade in services and the movement of business persons in the Continental Free Trade Agreement? This paper provides an analysis and discussion of various models of services negotiations (i.e. positive, negative and hybrid and implications for the CFTA); various multilateral, plurilateral and regional experiences on trade in services and movement of business persons; the treatment of trade in services within African RECs and the Tripartite negotiations; the pros and cons of negotiating movement of business persons, within the framework of trade in services negotiations or separately; and possible negotiating modalities for trade in services and movement of business persons based on international best practices.
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 role of customs management in the facilitation of trade in the region
The role of customs in the 20th and 21st centuries has evolved in many respects. With the proliferation of regional trading arrangements (RTAs) whose main objective is to increase trade between the parties through elimination of tariff and non-tariff barriers to trade, the role of customs in trade facilitation has gained increasing prominence in most regional trade agendas. This is largely because it is a customs responsibility to implement the tariff liberalisation commitments under the RTAs.
Equally important is the undeniable fact that burdensome customs procedures have been cited as one of the huge non-tariff barriers (NTBs) to trade. In addition, customs cooperation is an important aspect in the successful implementation of RTAs. It is not surprising therefore that most preferential trade agreements now include provisions on customs in the areas of simplification and harmonisation of trade procedures, documentation and customs cooperation. In addition, most of the RTAs now contain specific provisions on trade facilitation; however, in most such RTAs the details on the specific measures for achievement of the facilitation are usually either sketchy or non-existent.
The Southern African Development Community (SADC) launched its free trade area (FTA) in 2008, in accordance with the provisions of the SADC Trade Protocol (STP) as a culmination of a process of progressive tariff phase-downs on originating goods that had begun in 2000. At the same time all forms of existing NTBs were to be eliminated with no new ones introduced. It is clear that while there has been significant success on removal of tariffs and on non-tariff barriers to trade, little progress has been made. The continued incidence of NTBs is a direct affront to efforts in the region to facilitate intraregional trade in accordance with the STP in fulfilment of the objectives of the SADC FTA, itself one of the key milestones of the SADC regional integration agenda.
Part Three of the STP provides for Customs Procedures that underpin the role of customs in the attainment of the objectives of the protocol. These procedures relate to rules of origin (Article 12), customs cooperation (Article 13), trade facilitation (Article 14) and transit trade (Article 15). In light of these articles, this paper seeks to explore:
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the general role of customs in regional trade
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key aspects of customs management in regional trade
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the role of customs in the implementation of the World Trade Organisation (WTO) Agreement on Trade Facilitation
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the role of customs in the 21st century and regional integration
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some of the challenges faced by customs administrations in the facilitation of regional trade.
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.