Member states of the East African Community (EAC) appear to be racing against time to meet a self-prescribed deadline of December 2015 by which they pledged to have fully implemented the Common Market Protocol, which came into force on July 1, 2010.

The protocol, which was ratified by all five partner states of Burundi, Kenya, Rwanda, Tanzania and Uganda, provides for four freedoms within the region; free movement of goods; labour; services; and capital.

While the partners have done well with the other freedoms, there are sticky issues regarding certain provisions of the protocol that have made it hard to implement commitments to free movement of services and their providers; these require amendments.

With these gaps still in the protocol, it’s unlikely that member states will meet their December deadline with just five months remaining.

The 29th meeting of the Council of Ministers, held in September 2014 in Arusha, Tanzania, directed the EAC Secretariat to engage partner states in consultative dialogues involving various stakeholders to propose the specific amendments required to straighten the protocol.

Rwanda held its consultative meeting organised by the Ministry of East African Affairs (MINIEAC) during which they engaged members of the private sector who submitted their views on provisions of the protocol that they want amended or clarified.

The Minister for East African Affairs, Amb. Valentine Rugwabiza, told participants in the workshop that Rwanda was committed to work with its counterparts to seek practical solutions to enable easier cross border trade in services and to deepen regional integration.

“This exercise gives us a second chance to design a new framework and modus operandi of the EAC Common Market Protocol; a framework that is demand-driven and one that will yield maximum benefits to all,” she said.

John Bosco Kanyangoga, a lead integration consultant working closely with the Private sector Federation (PSF), says involving the private sector was the right thing to do as they’re the direct beneficiaries or victims of regional policies.

“We believe this exercise will generate an outcome that the private sector can own,” he said.

Those outcomes from the consultative meetings will be prepared as amendment proposals and presented to sectoral council of trade, industry, finance and investment to process.

What are the issues?

According to integration experts, the EAC common market protocol is one of the most ambitious regional integration agreements globally; naturally, this means it would also be one of the hardest to implement.

The sticky issues emanate from article 16 of the protocol which talks about free movement of services; member states guaranteed the free movement of services supplied by nationals of partner States and the free movement of service suppliers who are nationals of East Africa.

Although 12 components of services are listed in the protocol for liberalisation, partner states negotiated only seven and pledged to ‘progressively’ remove restrictions and allow full cross-border trading in those services by December.

They also pledged under Article 17 of the protocol to treat services and their suppliers from all other partner states equally and with no discrimination and pledged three forms of freedoms including movement of people (for non-economic reasons), service suppliers and workers.

In essence, the details of how countries were to implement the provisions on services are largely tied in complicated legalese that would make very little sense to an average service trader in the community.

Countries are at liberty to decide which services to open up to but even then, most of them haven't been satisfied by their own performance and put the blame to ‘technical errors’ in the text, which makes it hard to interpret or regulate.

A 2014 scorecard jointly conducted by several organisations, including the World Bank, gave the partners low scores on the component of service in trade; over 60 restrictions were found to be responsible for limited freedom for services trade.

Unclear definitions

Ramesh Chaitoo, an international trade expert who is currently consulting for the EAC Secretariat on how to clean up the sticky points of the protocol, said in a presentation at last week’s consultation workshop that the protocol, in its current form, doesn’t have a market access article or provision regarding services, which would shed some light on restrictions that are permissible or not in the CMP.

“The current lack of clarity could lead to difficulties in the implementation of partner states’ services commitments under the CMP,” said the expert.

In its current form, the protocol also doesn’t have regulations regarding the movement of service suppliers within the region.

Other errors are to do with unclear definitions of key terms in the protocol and their rights while on the move; for instance, the definition of service supplier and categories of service suppliers are not clear.

For instance, how many years of experience should someone have to qualify for a status of ‘contractual services supplier’ or ‘Independent service supplier? Or how long can a host country allow a ‘contractual services supplier’ or ‘independent service supplier’ to stay while away to give a service?

Should partner states include business visitors, intra-corporate transferees and graduate trainees in the categories of services supplier?

If you find these questions confusing, that’s because they are actually confusing and that is why partner states are reviewing the Common Market provisions to have them clearly answered, terms defined to ensure successful implementation of the protocol.

Why services?

Services are fast becoming the backbone for most EAC economies and a common market protocol that doesn’t facilitate their free movement would be seen as inconsequential to the region’s aspirations.

In Rwanda’s case, services constituted 48 per cent to gross domestic product in the first quarter of 2015 and the country envisages an annual sector growth of 13.5 per cent under the EDPRS II targets.

“To get to this level, we must relentlessly address any obstacles and also work with the private sector to unleash the potential in the services sector in the region,” said Minister Rugwabiza.

However, based on last year’s scorecard on how the region performed in implementing the common market protocol; the partners need to do more to spur intra-region trade in services.

A review of 500 key sectoral laws and regulations of the EAC found that at least 63 measures were inconsistent with the commitments that partner states made to liberalise services trade.

The review focused on professional services such as legal, accounting, architectural, and engineering; others were road transport, distribution (retail and wholesale), and telecommunications legislation.

Findings showed that professional services accounted for 73 per cent of the 63 identified barriers; engineering led the pack with 16 restrictions, 14 for accounting and 10 for legal services; 15 restrictive measures were found in road transport and only two in wholesale distribution.

The scorecard found that most restrictive measures to trade in services were in Tanzania with (17) and Kenya (16); Rwanda had eleven restrictions while Uganda had ten and nine for Burundi.

However, the researchers noted that Burundi’s strong performance on the scorecard is partly because most of its sectors are not yet regulated through region’s sectoral legislation.

Based on the scorecard, all partner states are guilty of non-compliance with the protocol and the scorecard recommended urgent reforms focused on liberalising legal restrictions and aligning partner states’ legislation with regional commitments.

According to Kanyangoga, those reforms are taking place, seen in the recent conclusion of several Mutual Recognition Agreements between professional bodies in the partner states including for legal and engineering services.

“There are clearly efforts to move in the right direction and the private sector appreciates that, with a clearer protocol, we can achieve more results,” he said.

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The Common Market 

A Common Market is a merger/union of two or more territories to form one common territory in which there is free movement of goods, labour, services and capital, and the right of establishment and residence.

The basic elements of a common market are:

1. a smoothly functioning customs union including complete elimination of all tariff and non tariff barriers plus a Common External Tariff

2. free movement of persons, labour, services and right of establishment and residence;

3. free movement of capital within the Community

4. enhanced macro-economic policy harmonisation and coordination particularly with regards to fiscal regimes and monetary policy.