tralac Annual Conference 2012
tralac celebrated its 10th anniversary in 2012. The 2012 Annual Conference, held on 19-20 April in Cape Town, South Africa, provided a special occasion to review the trade agenda of east and southern Africa.
As has been the case in recent years, the interesting trade developments are on the regional trade agenda, rather than in the multilateral arena. The appetite for concluding the Doha Development Round of the World Trade Organisation (WTO) remains weak; understandably so, given that key WTO members are preoccupied with elections this year and the West is still in the grips of serious economic crisis.
For African countries, the regional integration agenda remains important. At the 18th African Union Summit, held in January 2012, African countries reiterated their commitment to regional integration. A declaration from the Summit emphasizes the importance of implementing commitments already undertaken in various regional economic communities, and speeding up the process of continental integration. Indeed a proposed architecture for a Continental Free Trade Area was discussed at the Summit.
For countries in east and southern Africa, the focal point of the integration agenda is the Tripartite Free Trade Area (T-FTA); negotiations are scheduled to begin in earnest early in the year. Phase 1 of the negotiations will cover trade in goods issues, including tariffs, standards and rules of origin, and also the movement of business persons. Much technical work has preceded the official launch of the negotiations, at a Summit in June 2011, resulting in a draft agreement and 14 annexes. The status of these documents is not clear and it remains to be seen what the negotiations will produce. Whether the T-FTA will be a comprehensive, modern agreement providing a rules-based regime for deeper integration and development, remains to be seen.
Focus on the individual regional economic communities within the region, highlights a number of important issues. Implementation remains a major challenge. Tariff liberalization is a case in point. Within the Southern African Development Community (SADC), which should have been by 1 January 2012, a fully-implemented FTA, there are some member states which have not implemented tariff phase-downs as agreed, or have an extended time frame, to 2015, for achieving these phase-downs. These implementation challenges, many of which are related either to revenue dependence on trade taxes or, more fundamentally, to the problems of integrating partner countries whose industrial capacity and diversity differs significantly. Similar implementation challenges are encountered in the East African Community; where trade within the customs union is in fact not yet fully liberalized.
The well-acknowledged fact that the real problem in Africa relates to, industrial development (broadly defined to include the services sectors and not only core manufacturing) and competitiveness requires much more than a regional integration agenda which focuses primarily on trade in goods and specifically on border issues such as tariffs. These will not address the challenges of diversity in levels of economic development or polarization.
It is encouraging that the T-FTA includes three pillars; market integration (the traditional agenda) and then two further pillars; infrastructure development and industrial development. The latter two will be extremely difficult to manage in the context of the FTA negotiations, but are now putting on the table the real issues that Africa's integration agenda has not so far addressed. There is no doubt that the poor state of infrastructure effectively erodes competitiveness for many firms, but building road, rail, port and other infrastructure is only part of the solution.
Effective regulation (this links to the services agenda, which has not been taken very seriously in Africa either) and effective management of the infrastructure are equally important. The services agenda requires both a regional and national focus; domestic regulatory reform has to be part of the overall agenda, alongside a liberalization agenda. Institutional capacity development remains a major constraint on effective government in many African countries. Again this requires national initiatives. In short, it is well recognized that the quality of the national building blocks are major determinants of the success or otherwise of regional integration initiatives.
Industrial development (definitely including the services sectors) has to be addressed; but industrial policy is an area where ideological debates on the role of the state can paint our policymakers into a very tight corner. Taking a lead from the private sector on industrial policy initiatives will be important. But this again is not a hallmark of African integration; the private sector gets on with the business of funding market opportunities, despite governments' political commitments to ambitious integration schemes. Only when the two camps get together to shape an integration agenda, can we expect to chart an integration agenda that contributes to Africa's capacity to produce competitively, and so address fundamental challenges of unemployment and poverty.
Can all of this come together in the T-FTA?