The World Trade Organisation and the US government have written to a number of African Union member states on the legality of the implementation of the new self-financing mechanism.

In July last year, the African Union adopted a self-financing mechanism proposed by Dr Donald Kaberuka whereby a 0.2 per cent levy on eligible imports would be imposed on products from outside Africa.

Implementation of the directive is expected to begin in January next year.

The mechanism was initially supposed to take effect in January this year but most member states asked for more time to make necessary internal preparations.

However, the World Trade Organisation (WTO) has written to member countries, complaining that the move is not entirely compatible with its principles.

Among the aspects that the levy decision is allegedly in breach of is that WTO members may not apply tariffs on a product coming from one WTO member and not apply the same tariff on the same or like product when it originates in another WTO member.

This argument depicts the Union’s self-financing mechanism as discriminatory.

The other factor is that some African countries could have committed to the international trade body that they would have zero tariffs and would have duty free regimes.

Among the options floated by experts to get around the hurdle is that, if Africa was to become a free trade area, then the levy would not be in breach of the organisation’s principles. 

The issue was among the major topics of concern during the consultative meeting on the AU reforms held in Kigali over the weekend.

Nigeria’s foreign affairs minister Geoffrey Onyeama is one of those who expressed concern, saying the continent ought to seek a way forward to ensure that the mechanism is legal.

“A lot of countries have received letters from the US regarding WTO obligations. It is something we need to discuss in detail and take into consideration and also be aware of what the implications are. We need to find a way around it.  We should agree on whether our response will be collective or different,” he said.

AU seeking ‘compromise’

Kaberuka, whose mandate at the body was last week expanded to include overall AU funding, said he has since received such concerns but assured the delegates that it can be addressed as long as there is political will.

“The concerns of the compliance with national laws and international treaties and other compliance mechanisms are issues finance ministers are handling,” Kaberuka said.

Speaking to The New Times, African Union Commission chairperson Moussa Faki Mahamat said the hurdle was being addressed by a team of 10 finance ministers from across the continent.

Faki said the Union was keen on going ahead with the planned levy mechanism but they were also engaging partners such as the US and WTO to find a way around it.

“We want to liberalise Africa so that it cannot be dependent on others. A objective that the AU is no longer dependent as set has to be attained. The team of the 10 finance ministers and other experts are at the disposable of everybody to ensure that they sort it out well. They will also be engaging WTO and the US on how to go about the issue,” he said.

The New Times understands that some countries such as Mauritius are opposed to the levy model as they currently have a duty-free import regime.

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» Download Kagame’s January 2017 Report on the Proposed Recommendations for the Institutional Reform of the AU: The Imperative to Strengthen Our Union (PDF, 167 KB)

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Clarification

12 May 2017

Dear Editor,

I would like to draw your attention to the article written by Collins Mwai entitled “Africa ponders challenges as WTO steps in way of AU self-financing model,” which was published in The New Times on 9 May. This error was repeated in an article which ran in today’s edition as well.

The article states in part:

The World Trade Organisation and the US government have written to a number of African Union member states on the legality of the implementation of the new self-financing mechanism.

In July last year, the African Union adopted a self-financing mechanism proposed by Dr Donald Kaberuka whereby a 0.2 per cent levy on eligible imports would be imposed on products from outside Africa.

Implementation of the directive is expected to begin in January next year.

The mechanism was initially supposed to take effect in January this year but most member states asked for more time to make necessary internal preparations.

However, the World Trade Organisation (WTO) has written to member countries, complaining that the move is not entirely compatible with its principles.

Among the aspects that the levy decision is allegedly in breach of is that WTO members may not apply tariffs on a product coming from one WTO member and not apply the same tariff on the same or like product when it originates in another WTO member.

This is incorrect. The WTO never wrote a letter to member countries “complaining” about the AU self-financing mechanism or questioning its compatibility with WTO rules. No such letter exists.

The issue was raised by several WTO members at a meeting of the WTO’s Goods Council on 6 April, but the members were speaking in their own capacity. The WTO itself did not express any views on the matter.

We would therefore be grateful if you could run a correction and inform your readers that the WTO is not taking a position on the AU self-financing mechanism.

If you have any questions, please do not hesitate to contact me.

Regards,

KEITH ROCKWELL

Director, Information and Media Relations Division.

World Trade Organization