Building capacity to help Africa trade better

COMESA: Regional market under siege


COMESA: Regional market under siege

It is generally agreed amongst the international community, at least in principle, that liberalisation of trade and allowing the free movement of goods, services and people, among countries that share common geographic boundaries and states situated at different poles of the earth, is a must. In order to make the liberalisation of trade a reality and to ensure the free flow of goods and services, states initiate various types of structures.

The Common Market for Eastern & Southern Africa (COMESA) is Africa’s largest economic community. COMESA was established by a treaty agreed in 1993 by 15 east and southern African states. Before this, some east and southern African states had tried to develop other structures. These include the sub-regional Preferential Trade Area (PTA) in 1978 and later the establishment of a Preferential Trade Area for Eastern & Southern Africa, in 1981. The latter became a stepping stone for the inauguration of COMESA.

This economic community embraces states with very differing economic, political and social experiences and legacies. Countries ranging from those with a large population size, such as Ethiopia, to countries with very small number of people, like Swaziland or Lesotho, are all members of this block.

Moreover, this block encompasses countries colonised by various European powers, such as Great Britain and France. This continues to test the vitality and stamina of African states to establish structures able enough to quench the interest of African minds and hearts. Hence, the difference of interests among member states of the common market makes the forum special.

Of course, the block is vital, in that its success or failure would help to test the capacity of African states to establish alliances ready to accommodate the differing interests of various states.

The inauguration of COMESA spurred on the intra-trade relationship of its member states. Research confirms that Intra-COMESA trade has grown from 834 million dollars in 1985, to 1.7 billion dollars in 1994, 15.2 billion dollars in 2008 and 17.4 billion dollars by the end of 2010.

An almost six-fold increase in intra-COMESA trade has happened since the launch of the Free Trade Area (FTA) in 2000. Even though intra-COMESA trade has boosted the economic power and capacity of member states, it has also proved to be a dining room for various quarrels and animosities among member states and some wayward businesses, if not well regulated.

Hence, regulation of the activities and conducts of market actors – obviously at a regional level – is the only option to mitigate market activities and conducts that might have adverse effects on the economies of member states.

As the treaty establishing the common market eloquently epitomised, member states of the block agreed that any practice which negates the objective of free and liberalised trade shall be prohibited. To this end, the member states agreed to prohibit any undertaking which has as its objective preventing, restricting or distorting competition within the common market.

There are various manifestations in which the actions of market actors in one member states can create an adverse impact on the market situation of other member states. For example, the merger of companies in one member state may have an adverse effect on the economic activities of another member state.

The merger of companies producing goods and exporting the same to the member states of the common market may enhance the market share and power of the merged companies. The merged companies in one member state could, however, also abuse their market power by fixing the price of goods exported to other member countries, which makes intervention or regulation indispensable.

Consequently, the enhancement of the market power of the merged companies in one member state of the common market may rob or descend the market power of companies of the importing states. Hence, mergers that have a regional dimension should be notified to the COMESA competition commission, by the merging actors.

Even though the treaty clearly obliged member states of the block to take various measures to enhance the participation of private businesspeople in the market and prohibit some business activities that have a negative impact on the economic or social life of member states, effective regulation frameworks that enumerate detailed provisions were not proclaimed until 2004.

COMESA’s competition regulation, which is one of the instruments used to regulate business activities and market actors, was enacted with the purpose of promoting and encouraging competition. This was to be achieved by preventing restrictive business practices and other restrictions that deter the efficient operation of markets. It is believed that this would enhance the welfare of the consumers in the common market, and protect consumers against offensive conduct by market actors.

This regulation has established the block’s competition commission. This is one of the executive wings of the common market entrusted to enforce market regulation. The commission is empowered to monitor, investigate, detect, make determinations or take action to prevent, inhibit and penalise uncompetitive undertakings. This effort is supported by the Board of Commissioners – the supreme policy body of the commission – which is entrusted with adjudicating on any matters related to the enforcement of the competition regulation and hear cases of appeal that come from the decision of the commission.

Despite the fact that the establishment of the competition commission was epitomised by the regulation, which is proclaimed in 2004, the commission has incepted its operation in 2013. Hence, it is too early to assess the success or failure of this institution. However, it is tantamount enough that for the realisation of effective and workable competition between market actors in the COMESA member states, a lot has to be done both by member states of the common markets and organs of COMESA.

Member states of COMESA are obliged to take measures, such as domestication of the treaty provisions of the common market that relate with competition matters. Even though member states has signed the establishment treaty, differing procedures of ratification of instruments by member states continue to affect the full and uniform realisation of the competition regulations in the common market.

In some member countries, both the treaty and competition regulations are not binding instruments, for they are not domesticated to the law of their own jurisdictions. Hence, national competition authorities of those countries are not legally obliged to collaborate in different areas with the COMESA competition commission to regulate their markets.

This would, in one way or another, reduce the legitimacy and respectability of the COMESA competition regulations enforcement organs. To make the intra-trade relation between member states of COMESA more effective, robust and sustaining, member states of the common market should domesticate the COMESA treaty and competition regulations as a part of the law of their respective jurisdictions. They should strive for the realisation of the aspiration of the block, which is to see a common economic community.

In addition, all member states should equally own the COMESA institutions and participate through their endeavour, working together as a team. It is easily traceable that all member states of the common market are not equally participating and contributing to the effectiveness of the block.

To realise any effective common market, member states should contribute their level best for the realisation of the consensual objectives. No different is the case with COMESA.

But, for this to happen, COMESA’s competition commission should strengthen its enforcement power to fully carry out its responsibilities. Specifically, it should make a bold advocacy move to domesticate the regional competition regulations in all member states’ jurisdictions.

Tesfaye Niway is a presiding judge at the Adjudicative Tribunal of the Ethiopian Trade Practice and Consumer Protection Authority

Source: http://addisfortune.net/columns/regional-market-under-siege/


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