Topics publications: Trade law and regulation
Trade Reports
A legal and economic assessment of South Sudan’s possible accession to the East African Community
South Sudan applied to join the East African Community (EAC) in 2011, when H.E. General Salva Kiir Mayardit, the President of the Republic of South Sudan signed a note verbale. In August 2013, the EAC Council of Ministers passed a resolution, establishing a High-Level Negotiations Team (HLNT) to carry out the accession negotiations with South Sudan. On 13 March 2014, President Mayardit signed a decree, referenced 12/2014, establishing a High-Level Committee to negotiate the Republic of South Sudan’s accession to the EAC. In April 2016, South Sudan was admitted to the EAC, despite concerns over governance and the fragility of the peace.
The ambit of the EAC is wide-ranging with the partner states aiming to ‘strengthen their economic, social, cultural, political, technological and other ties for their fast balanced and sustainable development by the establishment of an East African Community’. Accordingly, the accession process creates and requires the implementation of common rules and standards that govern a wide range of areas. In the area of economic integration this process imposes the obligation to liberalise markets and ensure non-discrimination in achieving the free movement of goods, services, labour, and capital, while also requiring partner states to create uniform legislation with the purpose of establishing a common legal framework. There is scope in the accession process to adjust the pace of implementation and determine the extent of liberalisation, although this flexibility varies widely.
This study provides an assessment of the regulatory and economic aspects of South Sudan joining the EAC, focusing on the economic acquis communautaire. The collapse of the Unity government and the tragedy of the renewed conflict in the country means that many of the opportunities and challenges from accession identified are, at present, largely academic. But when, as so many so dearly hope, this young nation moves towards peace, the need to realise economic opportunities in the regional markets and from regional integration will be pressing.
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 in Africa
This working paper examines the African services trade to set a background for assessing the main issues for consideration in the current Continental Free Trade Area (CFTA) negotiations. This is done systematically by firstly looking at the actual trade data in order to see who the main traders are and assess the extent to which South Africa dominates the trade. We then look at some of the issues associated with barriers to services trade and how the CFTA may address these.
Services are a major part of modern economies; services trade is important for many African countries but the data is difficult to obtain, especially for bilateral trade data. The authors find that South Africa is not the dominant service trader on the continent but is dominant in many of the smaller services sectors. Transport and travel are the major traded sectors although these are generally outside a trade negotiation focus.
The current measurements of services trade restrictiveness show large variations between different countries and different sectors. Despite its current difficulties, the Trans-Pacific Partnership Agreement (TPP) represents the benchmark in what can be achieved with services trade liberalisation. Africa sorely needs reforms in services trade frameworks and policy environments; in the absence of specific targets for the usual negotiating reciprocal process with partners, the emphasis reverts back to regulatory reforms with its emphasis on unilateral policy and best-endeavours in trade agreements.
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
Britain’s 12 Point Brexit Plan: First Impressions
On 17 January 2017, the British Prime Minister announced her Government’s “Twelve Point Plan” for exiting the European Union (EU). It describes how the Brexit negotiations will be approached (to be conducted in terms of Article 50 of the Lisbon Treaty), possible transitional arrangements, and how the UK’s future trade dispensation might look.
The British government has been criticised for the long delay in developing the UK’s exit strategy; causing uncertainty in the markets, for investors, and among trading partners. The result of the Brexit referendum was announced on 23 June 2016. It took six months to announce the objectives which will be pursued once Article 50 is formally triggered in March this year. British firms (and the general public) now know the general outline of the UK’s Brexit strategy. However, it will take a long time before all the negotiations will be completed and the restructuring of domestic trade governance in the UK will be accomplished.
In this first tralac commentary since the announcement of Britain’s plan for exiting the EU, we look at the most important aspects of Prime Minister May’s speech and remark on some of the implications for Southern African nations. Additional analyses of the Brexit process will be published in the course of this year as the direction of the negotiations become clearer.
Making matters more complicated, Britain’s Supreme Court ruled on 24 January 2017 that Prime Minister May needs an Act of Parliament to trigger Article 50 of the Lisbon Treaty. The political bargaining which may now follow has introduced a new challenge for the Brexit process. We include a discussion of some of the implications of obtaining Parliament’s support before the exit process can formally get under way.
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
Dealing with Technical Barriers to Trade in the Continental Free Trade Area
Africa might be entering a new phase in its pursuit to boost intra-African trade and deepen regional integration. This could happen if the Continental Free Trade Area (CFTA) provides some novel answers to long-standing problems. This paper discusses one of the practical issues now on the agenda: the design of a continental scheme to deal with Technical Barriers to Trade (TBTs).
In order to shape the CFTA as a comprehensive legal framework suitable for meeting 21st century challenges, numerous trade and related issues need to be addressed. These include standard trade arrangement issues around customs procedures, tariffs, non-tariff measures, corruption, trade facilitation, trade remedies, and dispute settlement, as well as innovative answers and reforms for trade in services, finances, transport and corridors, investment, industrialisation, and the movement of capital and persons across borders. The latter includes proper engagement with how TBTs are dealt with and how to improve matters in this field.
The CFTA will hopefully provide for better trade governance on national as well as regional levels. There should be binding legal instruments to ensure effective implementation, the protection of rights, remedies in case of violations of obligations, legal certainty, and institutional oversight. International agreements do not guarantee more trade and a better business climate but a well-designed legal construct which tackles underlying causes is a sine qua non for improving the present situation. For the CFTA to deliver on its promises some bold decisions about sharing national policy space and sovereignty are required.
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 Reports
Governance Implications of South Africa’s Withdrawal from the International Criminal Court
Media reports described South Africa’s recently announced withdrawal from the International Criminal Court (ICC) as showing “startling disregard for justice from a country long seen as a global leader.” Amnesty International said South Africa was “betraying millions of victims of the gravest human rights violations and undermining the international justice system”.
The political fallout of this decision can be huge; South Africa played a dominant role during the 1990s in the setting up of the ICC. Other African nations may follow suit, which will undermine the effectiveness of what has become a unique forum to deal with international crimes and grave human rights violations. Burundi already said it would withdraw, and Namibia and Kenya have raised similar plans. The ICC has been criticized as targeting African leaders, despite issues of admissibility of cases being governed by the Rome Statute. As a rule the Court does not select its own cases.
The South African withdrawal announcement came unexpectedly. There was no explanation on how the matter was decided or why it was urgent. The announcement was accompanied by a statement that the Government is now also abandoning its appeal against the 2015 Judgment by the High Court of South Africa which found that, as a question of applicable law, the Government was compelled to arrest President Bashir pending a formal request for his surrender from the International Criminal Court for war crimes, crimes against humanity and genocide. That judgment also found that the conduct of the Government was inconsistent with the Constitution of the Republic of South Africa and invalid.
The reasons offered by the South African Government as to why it is withdrawing from the ICC are discussed here, together with some of the domestic and International legal principles which now come into play. There are broader governance issues and they will also be mentioned.
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 Court of Justice as the Court of Appeal for COMESA Competition Law
The COMESA Court of Justice has not yet ruled on any competition related disputes or appeals. A COMESA legal regime for competition regulation in the Common Market does, however, exist. It consists of the Competition Regulations and the COMESA Competition Rules. The question addressed here is what role the COMESA Court of Justice plays in adjudicating disputes or appeals about competition issues in the Common Market.
In 2004 the Organization adopted a comprehensive set of Competition Regulations. They are binding on the State Parties and give effect to Article 55 of the Treaty; which states that the Member States “agree that any practice which negates the objective of free and liberalised trade shall be prohibited. To this end, the Member States agree to prohibit any agreement between undertakings or concerted practice which has as its objective or effect the prevention, restriction or distortion of competition within the Common Market”.
There are thus two legal regimes which govern the enforcement of competition law and policy in the COMESA Member States:
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National competition laws apply to the enforcement of anti-competitive practices emanating at national level. National competition authorities in the respective Member States exercise the required powers and enjoy the necessary jurisdiction in terms of national legislation.
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The regional competition regime is invoked where there is a cross border impact of anti-competitive behaviour or a real prospect thereof.
The COMESA Competition Regulations do not refer to the Court of Justice and does not grant a right of appeal to the Court against decisions of the Board. There are several references to “appeals” in the Regulations (e.g. in Arts 15, 26 and 33) and some are dependent on further rules being adopted. They refer to the appeals heard by the Board.
However, it is generally accepted that, by necessary implication, the COMESA Court of Justice exercises jurisdiction over all disputes about the application and interpretation of COMESA legal instruments. It should, therefore, also be able to hear appeals against the decisions of the Board of Commissioners.
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
Regional Competition Law – A COMESA perspective
The promotion of competition and fair business practices is an essential aspect of market regulation and regional integration. This Trade Brief provides an overview of the COMESA competition regime. It also mentions some of the challenges flowing from flaws in the design of the Regional Economic Communities (RECs).
The COMESA Competition Regulations have the mandate to regulate cross-border conduct by undertakings in the Common Market for Eastern and Southern Africa (the “Common Market”). It is therefore critical for undertakings operating in the Common Market to understand the circumstances under which the Regulations will apply. This is so that undertakings can become aware of their legal obligations under the Regulations and further take the necessary steps to comply with same.
For this reason, just like any other law, Article 3 of the Regulations provides the scope of application of the Regulations. Article 3(2) provides that “These Regulations apply to conduct covered by Parts 3, 4 and 5 which have an appreciable effect on trade between Member States and which restricts competition in the Common Market.”
Care has to be taken when determining what amounts to trade between Member States. The concept of effect on trade is the chief criterion which establishes the jurisdiction of the Regulations. Consequently, the Regulations will not apply to conduct that is not capable of affecting trade between Member States. The application of Regulations is confined to conduct having minimum level of cross-border effect in the Common Market. The concept of ‘trade’ is not limited to traditional exchanges of goods and services across borders; it covers all cross-border activity including establishment. EU Case Law has held that the concept of ‘trade’ also includes situations where conduct affects the competitive nature of the market. Thus, when assessing whether a business practice has the potential to affect trade between Member States, one must ask the question: “how does the conduct affect the structure of the market?”
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
When History and Governance Confusion undermine Trade Certainty: The 1964 Trade Agreement between South Africa and Zimbabwe
Legal certainty is essential for the functioning of FTAs. Compliance with the WTO rules is important to protect the rights of all parties in the multilateral system; including the members of a particular FTA. FTAs (as well as customs unions and interim regional trade arrangements) must be notified to the relevant WTO bodies. And there must be clarity about the technical aspects and functioning of such arrangements. The Transparency Mechanism for RTAs adopted in 2006 enables the WTO and its members to understand these features of a particular FTA and what the internal preferences are about.
The present “Beitbridge dispute” between South Africa and Zimbabwe involves unilateral tariff increases, surcharges and import bans which are incompatible with the applicable SADC FTA procedures, of which both parties are member states. What contributes to the legal difficulties is the fact that trade between the two countries seems to be governed by different sets of rules. The result is uncertainty and governance confusion.
The South African-Zimbabwean trade agreement is discussed here because it is topical and in order to show how uncoordinated legal arrangements result in technical and legal confusion. This happens because the bilateral deals are not aligned to the broader FTA rules and the applicable REC obligations.
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
Implications of sensitive products exclusions on intra-regional trade: A case study of the East African Community
The objective of the East African Community (EAC) is to deepen the integration process within the Community through liberalisation and promotion of intra-regional trade. The EAC became a fully-fledged customs union on 1 January 2010, and has made strides in deeper integration by ratifying several protocols and agreements in order to achieve its stated goals, including the ratification and entry into force of the EAC Common Market Protocol by all the five EAC partner states on 1 July 2010.
The EAC has also been active in the launch of the Tripartite Free Trade Area (TFTA) with Common Market for Eastern and Southern Africa (COMESA) and Southern African Development Cooperation (SADC), as well as being one of eight regional economic blocks to negotiate the Continental Free Trade Area (CFTA).
The objectives of this study are as follows: i) To identify the excluded tariff lines (sensitive list) from the CET for the EAC on a country-by-country basis and to seek the rationale for the exclusions; ii) To track the trade volumes since the customs union protocol entered into force and to analyse the impact of the exclusions on trade; iii) To draw implications of the exclusions on the proposed TFTA and CFTA; and iv) To investigate whether there are any other restrictions on trade within the customs union such as export restrictions as well as whether, and to what extent, tariffs or equivalent charges are still imposed on products traded within the customs union.
The report is organised as follows: section two reviews the sensitive products by country and the rationale for their choice and any other trade restrictions in place, section three provides trends trade and the likely impact of the excluded products, section four draws the implications of the sensitive list on TFTA and CFTA, while section five concludes and provides policy recommendations.
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
How do the Southern African RECs compare as Rules-based Arrangements?
During the week of 4 to 11 July 2016 tralac hosted a training workshop for the COMESA Court of Justice. It was a very worthwhile experience in terms of offering an opportunity to take a look at, amongst other things, the case law which is being generated by the Courts and Tribunals of COMESA, the EAC and SADC. This particular aspect (dispute settlement in the context of regional trade and integration) is an important but often neglected aspect when it comes to assessing the progress by African Regional Economic Communities (RECs).
If disputes about the application and interpretation of the regional legal instruments can be settled in an objective and binding manner an important element is added to how commerce and trade across borders are conducted. This provides for certainty in the markets and for investors. It will also lead to benefits for domestic traders and service providers. This will, over time, advance the effectiveness and legitimacy with which government development policies are implemented and will add to a general improvement in governance, the ability to fight corruption and tackle illegal activities such as tax evasion and money laundering. The overall ability of governments to deliver on their development plans, will improve.
The present fiasco at the Beitbridge border post between South Africa and Zimbabwe shows the consequences when regional governance lacks a rules-based system. The implementation of Zimbabwe’s Statutory Instrument No. 64 of 2016, which banned the import of basic foodstuffs and other products from South Africa, has disrupted bilateral and regional trade and has caused distress for domestic firms and consumers in the two countries directly involved as well as in the region.
The crisis in Zimbabwe demonstrates the weakness and dangers inherent in a system which lacks a legitimate and predictable system for resolving disputes. There is a strong case for arguing that, because of the very nature of the problems to be addressed as part of promoting intra-African trade and integration, effective institutions, legal certainty and the predictable application of the rules are very necessary. It brings benefits to inter-governmental relations and for the private sector. Adjudication will, in addition, clarify the use of exception clauses and when governments will be entitled, as part of the applicable law, to invoke trade remedies and acceptable trade defence measures.
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.