Tripartite talks set new trade path
Posted Nov 25, 2008
Pan-Africanism is a concept embraced emotionally but often criticised by pragmatists who tend to believe the continent’s history of nationalistic priorities and political expedience militate against such grand schemes.
It is probably true to say that political rhetoric on regionalism and pan-Africanism as espoused by NEPAD and other programmes is usually not matched by sufficient political will when it comes to implementation.
It may be easy, then, for sceptics to dismiss as mere politicking the recent Tripartite Summit in Uganda, the first of its kind attended by heads of state and government, held to discuss the creation of a free trade area across three of Africa’s main Regional Economic Communities (RECs).
However, talks about greater regional harmonisation and co-operation towards the end of an expanded FTA across all three RECs are driven by more than political whim. The Tripartite Summit was attended by a significant number of leaders of member states in the Common Market for East and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC).
The driving force for this historic development is the need to tackle overlapping trade arrangements of the three organisations, which are becoming increasingly problematic as a result of deepening regional integration. There is also recognition that trade between the three RECs remains limited and fraught with challenges.
SADC launched an FTA in August 2008 and COMESA is to launch a customs union in December. Both blocs also have members in the East African Community (EAC), which launched its customs union in 2004, and cross membership of several states in each of their own organisations.
The proposed free trade area - the hoped-for end result of greater co-operation between the RECs - would introduce a new trade bloc comprising a combined population of more than 500 million people, a combined gross domestic product of $624 billion and a per capita GDP averaging $1,184.
The 26 countries in the three RECs make up half of the African Union’s membership, 58% of the contribution to GDP of AU members and 57% of their population.
The overlapping membership of member states is not a new problem. The issue has been on the table for more than a decade and, in fact, originated in the forerunners of these three blocs – the Preferential Trade Area, Southern African Development Co-ordination Conference and the previous EAC, which was disbanded in the 1970s.
In 2001, officials from COMESA and SADC established a joint task force at the Secretariat level to discuss and agree on the harmonisation of programmes.
In 2005, this task force was expanded into a tripartite initiative to include the EAC, shortly after it launched its customs union. In 2007, the Tripartite Task Force recommended that a heads of state meeting of the three RECS be held to give political endorsement to the overall agreement on greater co-operation and harmonisation.
The Kampala meeting appears to have given the process new urgency, with heads of state, notably Uganda’s Yoweri Museveni, lending their weight to it.
The question is how the blocs should join forces to implement the proposed FTA. Should the three organisations merge? Vested interests may make this difficult to implement.
Another option is for each country to join all three RECs, with each REC Secretariat playing a different role in facilitating deeper integration, both economic and functional.
These options will be examined as part of a roadmap for the way forward, a process being run by the COMESA-EAC-SADC Task Force, supported by the Regional Trade Facilitation Programme, which acts as the Secretariat for the Task Force.
The move towards an FTA involving half of the continent throws up interesting challenges for a large economic power such as South Africa. The options would appear to be whether to be a player in a large merged entity rather than the most powerful player in a much smaller entity and one in which it can influence crucial components of an FTA.
South Africa is conscious of its standing in the region and is unlikely to want to push its agenda too obviously on the continent. President Kgalema Motlanthe not only attended the Kampala meeting but gave his support to the tripartite initiative.
South Africa does stand to gain from tariff-free access to new markets to which it currently does not have that preferential access, such as Uganda and Kenya. This has implications for local industry in these countries (already an issue in SADC) due to South Africa’s competitive pricing through economies of scale and efficient supply chains.
Apart from trade liberalisation and customs co-operation, there are a number of areas of cooperation that are likely to be positive for the broader region.
One is the development of joint infrastructure programmes, including financing and implementation, which will broaden the planning parameters and make certain cross-border projects more viable.
Other positive areas of co-operation include joint programmes on agricultural development and food security, easier movement of business people, labour and services across the region and the formulation of common regional positions and strategies in multilateral and international trade forums.
The FTA could also increase the sourcing of goods locally through cumulation. In an FTA a good must originate from the exporting country for it to benefit from zero tariffs into another country that is a member of the FTA.
There are various rules that govern whether goods originate from the exporting country (rules of origin) and if these rules allow cumulation (meaning that goods from another country can be used in production of the good to be exported) then the FTA has the effect of encouraging sourcing from the region.
But the biggest benefit is that an FTA will create a market of significant scale for African producers and traders, one that is then potentially more viable and competitive than the current RECs.
Countries themselves are also looking for productive solutions to trade issues as regional integration deepens and trade taxes, on which most countries are dependent for revenues, begin to come down.
There is still a long way to go and many potential hurdles but it seems that at last the process is properly on track. The biggest hurdle – the political will to get the agreement signed – has now been dealt with.
However, Africa in general, and small countries in particular, cannot wait another few decades for current trade problems to be tackled and regional integration to be a greater force in the continent’s fortunes.
The politicians need to look at the bigger picture and urgently tackle the problems that have dogged African trade to ensure that this ambitious initiative is a success.