Topics publications: Trade law and regulation
Trade Briefs
The final Trade Remedy Arrangement of the Tripartite Free Trade Area
The Tripartite Free Trade Area (TFTA) Agreement provides for interim as well as final Trade Remedies (TR) provisions. This was necessary because the Annex and the Guidelines on TRs (as well as the Annex on rules of origin and the tariff schedules) could not be agreed in time for the launching and signing ceremony in June 2015. The outstanding TFTA instruments were negotiated and concluded as part of the “built-in agenda”.
The final legal arrangement for Trade Remedies has now been concluded but will only apply once the TFTA Agreement enters into force. This trade brief takes a look at what is provided for in the TR Annex, how the arrangement will function, and to what degree “flexibilities” have been incorporated.
The negotiations for the Continental Free Trade Area (CFTA) are also under way. The development of its own TR regime (which will be a continent-wide arrangement) poses a major challenge to the participating Governments. Will they be constrained by what the TFTA has just produced, or would they find space for some “flexibilities” for those MS that regard them as necessary. What lessons can be learned from TFTA experience?
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 author and do not purport to reflect the views of tralac.
Trade Briefs
The Sanitary and Phytosanitary (SPS) policies of the African Regional Economic Communities, and the way forward for the CFTA
tralac, with the support of the Development Assistance section of the German Government through the Physikalisch Technische Bundesanstalt (PTB), recently completed a comparison of the SPS policies of the African RECs. The study focuses on the Southern African Development Community (SADC), the East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Economic Community of West African States (ECOWAS). To this was added the manner in which SPS matters are dealt with in the Tripartite Free Trade Area (TFTA) and brief comparisons are made to Mercosur and EU practices. The full study will be made available under the auspices of the Pan-African Quality Infrastructure (PAQI).
This trade brief provides an introduction to the Continental Free Trade Area (CFTA) and an overview of the World Trade Organisation (WTO) SPS Agreement, together with a brief list of general observations, identified issues and some recommendations on the way forward for the CFTA.
Generally speaking, the progress on developing an overall approach to SPS matters appears to have been slow, with a lot of ad hoc sector-based activity taking place instead. The Tripartite Free Trade Area also addresses SPS matters and the outcome of its negotiations contains important lessons.
This publication was supported by the Physikalisch-Technische Bundesanstalt (PTB) as part of their sub-Saharan Africa Working Group project on Upgrading of Quality Infrastructure in Africa.
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 author and do not purport to reflect the views of PTB or the Trade Law Centre NPC.
Trade Briefs
Import Controls in Zimbabwe: Statutory Instrument 64 of 2016 and more
Industrial policy initiatives are very much on the agenda at both national and regional levels in Africa. The debate, however, about what an industrial policy is and what it should be is often ideologically and politically charged. It touches fundamentally on the role of government in the process of structural transformation and economic development. In Africa, a continent with a growing number of weak states (in the sense of having the capacity to make and effectively implement policy), this debate is important.
Against the background of the discourse on industrial policy, and also its relationship with trade policy, it is an appropriate time to review Zimbabwe’s controversial Statutory Instrument 64 of 2016 (known as SI 64, a domestic legislation which requires traders to obtain an import permit from government before importing basic commodities). SI 64 ran into implementation challenges in terms of threat of retaliation from trading partners, trade-off between balancing existing employment within the retail and distribution outlets that import, and protection of the local manufacturing industries.
A year after the promulgation of SI 64, the Minister of industry and Commerce Mike Bimha has publicly announced that the government of Zimbabwe is now scrapping the legislation, and will replace it with Local Content Policy. The cabinet minister is quoted saying SI 64 has “achieved its objectives of boosting industrial capacity utilisation, stimulating retooling and investment into new technologies in industries”. A few days after making this statement, the cabinet minister reversed his earlier remarks and said SI 64 will not be scrapped. Perhaps this is the appropriate time to look back and reflect on trade policy governance in Zimbabwe, and unpack what’s really happening to the manufacturing sector.
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
Development of Information and Communication Technology Sector: Policy and Regulatory Frameworks as Enablers of Economic Growth
Since 2000, the Information and Communications Technology (ICT) sector in both Kenya and Rwanda has witnessed exponential growth and development, outperforming most other sectors of the economies of these countries. For both these countries, the ICT sector has been dominated by unprecedented rates of mobile phone penetration and attendant success in innovations of services riding on mobile phones, especially mobile money and mobile applications, including M-Pesa for which Kenya has a strong reputation.
This working paper looks at the growth of the ICT sector in Kenya, while reflecting on similar growth in Rwanda. Specific emphasis is given to telecommunication infrastructure development and the attendant internet penetration, mobile phone usage penetration, and mobile phone money and innovations which ride on mobile money. In doing so, the paper examines the role of the ICT sector as defined in the national development blueprint of Kenya (Vision 2030), and that of Rwanda (Vision 2020) and the prominent role given to science, technology and innovations. The facilitative role of national policies and regulatory initiatives that have been instrumental in creating a thriving ICT sector, especially in Kenya, is examined in the light of Kenya’s global reputation for mobile money and mobile money innovations. Finally, the paper presents lessons, opportunities and challenges that have been presented by the policies and regulatory frameworks adopted by these countries.
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
When will FTAs justify optimistic Expectations about African Integration?
The public debate about what the Tripartite Free Trade Area (TFTA) and the Continental Free Trade Area (CFTA) will bring about portrays an optimistic picture. Many commentators claim that these agreements will bring significant benefits to millions of consumers and a marked reduction in poverty in many countries. However, after the signing ceremony and “launch” of the TFTA in June 2015, important negotiations about tariff schedules, rules of origin and trade remedies were still to be completed. These negotiations are said to have advanced well but it is still not known exactly what the three Annexes in question provide for. And it will take considerable time before the required number of ratifications will be deposited and this agreement will enter into force. Only then will implementation under the agreement commence.
The optimism about the TFTA and CFTA is presumably a sign that, in Africa, there is support for a new generation of intra-African trade agreements and a belief that the TFTA and CFTA fall in this category. Trade agreements with the West (e.g. the Economic Partnership Agreements) are viewed very differently. If the optimism about the TFTA and CFTA reflects a new commitment by governments to address the many obstacles (including corruption, red tape, absence of the rule of law etc) which prevent African trade from being “boosted”, this development is obviously to be welcomed. It is in fact very necessary. Intra-African trade can make a substantial contribution to the continent’s development and should be pursued in tandem with global integration.
However, one cannot escape the impression that the popular perceptions about the TFTA lack a proper examination of the technical aspects of the content of the Agreement. This trade brief takes a look at the text of the TFTA and what the parties have formally undertaken to do. We believe this to be necessary in order to form a realistic picture about the task ahead. The efforts required to ensure that the expected benefits will indeed materialize must not be underestimated.
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
Amendments to the SADC Protocol on Trade
This Trade Brief examines an important amendment of the Southern African Development Community (SADC) Protocol on Trade that was approved at the 2016 SADC Summit. This amendment concerns an important provision that provides for “derogation” from tariff liberalisation commitments undertaken by Member States of the SADC Free Trade Area (FTA).
SADC is an inter-governmental organization consisting of fifteen Member States. The organization has its own legal personality, a permanent Secretariat in Gaborone, and sponsors an extensive regional integration agenda. One of SADC’s main activities centres around the implementation of the SADC FTA, based on the SADC Protocol on Trade. This instrument has not been implemented in a consistent and predictable manner. When it was originally adopted the intention was to provide for a transparent and predictable legal regime for trade in goods. However, there has never been a formal dispute between the Parties about any of the obligations, despite several complaints about violations. Private parties cannot protect their rights through judicial means.
This Protocol saw an important amendment recently; the implications of which are discussed in this paper. The aim is to gain a proper understanding of how the new “derogation” regime will function and whether more certainty and predictability regarding restrictive trade measures adopted by Member States can be expected.
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
Services Trade Restrictions and Trade Performance in Africa: Some Insights
We live in a world where the production and consumption of services has been growing faster than that of merchandise for some time now. However whilst considerable gains await the adoption of new services modes and types, some countries lag others in the adoption, rollout and uptake of these services. Under-development and investment risk limit the extension of many services types in developing countries and there are both these supply-side and demand constraints on the growth of services sectors in these country groups.
Consumers and producers pay a premium for services that are often sub-par and the economy is denied the gains that should accrue to the improving production possibilities related to better services. There is therefore a strong case for services trade liberalisation in much of the developing world, and this paper examines the potential benefits for a subset of African countries.
Using historical and cross-sectional data, this paper attempts to identify patterns of relationship between services trade restrictions (STRs) and real trade merchandise growth, in order to identify where gains could be made through liberalisation. The paper looks at a group of African countries as a whole, and thereafter in groups disaggregated by export specialisation product group. Both informal, semi-formal, and formal quantitative techniques are used.
Despite limitations in the data, meaningful patterns that are consistent with expectations based on economic theory could indeed be identified. The relationships vary among the services sectors and the export specialisation groups, and when analysed in aggregate these patterns were less discernible. Within each export specialisation category, the African countries with below average STRs tend to enjoy above average trade growth. Liberalisation of services trade should therefore be on the agenda of Africa’s exporting nations and should be part of a supply-side policy package to boost production and 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 Briefs
Overview of the rebate facilities in the Southern African Customs Union
The Southern African Customs Union (SACU) Agreement (SACUA) of 2002 aims to facilitate free movement of goods between SACU member countries. For goods imported outside the region, a common external tariff is applied and varies across products. In addition, Article 20 of SACUA makes provision for granting a rebate of the customs duties in respect of goods imported into the customs area in line with the stipulated clauses. The rebates regime facilitates achievement of the objectives set out in Article 2 of SACUA such as increasing investment opportunities, enhancing economic development as well as promoting industrialisation in the member states.
In terms of administration and endorsement of these trade-supporting instruments, Article 8 of SACUA mandates the SACU Council of Ministers to approve customs tariffs, rebates, refunds, drawbacks and trade-related remedies. The different rebates available to the SACU member states are covered under Schedules 3 and 4 of the SACU Customs and Excise Act of 1964. Schedule 3 covers industrial rebates and Schedule 4 covers what is classified as general rebates. Depending on the purpose of importation of the concerned product, there are specific conditions attached to prevent exportation into SACU member states of products manufactured from the materials imported from non-SACU countries through the rebate facility.
The rebates are therefore used as policy instruments aimed to address the effects of tariffs on industrial development since they offer relief to industries by offsetting the duties paid on imports of rebated products. The rebate facility is thus intended to promote sectoral competitiveness and industrial development in SACU.
The main objective of the paper is to provide a baseline outline and preliminary assessment of the rebate facilities in SACU. The paper looks at the types of rebates available, the rationale and legal basis, the policy implications of rebates in the SACU member states and, more particularly, their effect on industrial development.
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 EAC Mode 4: Trade data
The East African Community (EAC) Common Market Protocol (CMP) entered into force in 2010. Among others, the protocol consists of the services liberalisation commitments and provides for development of Mutual Recognition Agreements (MRAs) to facilitate movement of labour and services in the region. The commitments relating to movement of natural persons providing services, i.e. Mode 4, were linked with those on movement of workers. MRAs covering accounting, architectural and engineering services were concluded by end of 2012. However, in 2014, state parties identified some discrepancies relating to trade in services in the CMP. The implementation of Mode 4 commitments had been a challenge. Some negotiations to amend the CMP are ongoing to resolve the issues of concern. An earlier tralac paper (click here to view) concluded that the linkage is not the challenge in itself but rather the lack of commitments to permit actual movement that is reflected in insufficient legal reforms.
This paper builds on these findings to provide trade data relating to movement of persons. In addition, it looks at the registration or practice licences issued to accounting, architectural, and engineering professionals; issuance of work permits to identify any implementation gaps and make recommendations. It is important to note that most of the information presented in this paper is based on desk analysis. The data available on various issues of interest is very patchy or missing, and is in aggregated format. This permits very limited analysis and it is difficult to draw any fair conclusions. For example, it is not possible to link data on work permits, registered professionals or arrival and departure information due to aggregated information. Therefore, the study only provides indicative information rather than reality and hence great care is required in using or interpreting the information presented.
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 TFTA as a legal construct: What is it and how will it be implemented?
The Tripartite Free Trade Area (TFTA) is not, like the regional economic communities (RECs), a legal person. It is a sui generis framework agreement for promoting trade in goods among (potentially) the 26 members of COMESA, the EAC and SADC.
What is the significance of the TFTA being a framework agreement? This concept has become a methodology for, inter alia, Trade and Investment Framework Agreements (TIFAs) – inter-state instruments, couched in general terms, about trade, investment and related matters. They establish frameworks to expand trade, continue negotiations on outstanding issues, and promote integration. TIFAs are often seen as first steps towards establishing modern FTAs.
The language of the TFTA text indicates a low-level framework agreement in which the parties undertake to “progressively eliminate tariffs and Non-Tariff Barriers; liberalise trade in services; cooperate on customs matters and implementation of trade facilitation measures; establish and promote cooperation in all trade-related areas…; and establish and maintain an institutional framework for implementation and administration of the Tripartite Free Trade Area”.
It is possible that some participating states (doubting the benefits or considering the CFTA to be the better option) will not become TFTA parties. The fact that many of the Tripartite Member/Partner States had signed the incomplete (and un-scrubbed) text in June 2015 means that they may find it necessary to revisit their decision once all negotiations have been finalized. Article 44 stipulates that the built-in agenda of the TFTA must be finalized before the Agreement is complete. The three outstanding Annexes must be concluded “after the launch of the Tripartite Free Trade Area”. This has not yet happened.
The TFTA was “launched” before its negotiations had been finalized. Once the negotiations are completed the Agreement still has to enter into force, before trade in goods will be conducted (for those states which have become parties) in terms of its provisions. The TFTA does not yet exist as a proper FTA; this project is work in progress.
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.