African regionalism in the face of rising global protectionism

COMESA 2018 Special Report, By Caesar Cheelo*

COMESA 2018 Special Report

COMESA took a landmark step towards continental free trade. It joined forces with the 15-member State SADC and the five-member State EAC to establish a Tripartite Free Trade Area (TFTA).

The global economy has seen some significant neo-protectionist sentiments emerge in many parts of the world recently. The European Union (EU) experienced the now infamous Brexit last year (2017) and is still struggling to figure out how to settle the dust while preventing severe potential fallout in trade and investment relations between the UK and EU member country.

In another part of the world, after 2016, the USA ushered in Donald Trump’s America First foreign policy, which intended to seriously clamp down on the “very bad deals” that reportedly disadvantaged US businesses. The foreign policy included a recent escalation of tariffs on imported commodities like iron and steel from China. In retaliation, China slapped a hefty 25 percent tariff on US pork imports and also escalated tariffs on US fruits, nuts and wine. After the first strike and the counterstrike, a fully fledged trade war between the two global economic powerhouses seems quite imminent.

Despite the odds, regional integration in Africa is deepening, and COMESA, as always, is a trailblazer at setting the pace towards fulfilling the African Union’s Agenda 2063. With 19 members, a combined import trade value of over $169 billion in 2016, and an estimated population of 505 million inhabitants (2017), COMESA represents a sizable market with rising incomes. The bloc spans a land area of 11.2 million km2 endowed with a large portion of the world’s natural resources.

COMESA has been championing regional integration and free trade since 1984 when it was first formed as the Preferential Trade Area. Over the years, the Regional Economic Community (REC) has developed and implemented a strong legal framework and dynamic regional regulations. It has garnered political will through the Heads of State and Government providing direct oversight of its affairs. It has also established robust regional institutions (including a Secretariat in Lusaka, Zambia) along with a range of policies, programmes and interventions for trade, investment and the free movement of persons and commodities. The REC remains as resolute as ever about fostering African regional integration. It has set itself up as a haven for trade and investment opportunities in the continent.

In 2015, COMESA took a landmark step towards continental free trade. It joined forces with the 15-member State SADC and the five-member State EAC to establish a Tripartite Free Trade Area (TFTA). The TFTA brought together 26 countries who committed to trading on duty-free and quota-free terms amongst themselves, subject to Rules of Origin compliance requirements. As of March 2018, 22 member countries – Angola, Botswana, Burundi, Comoros, Democratic Republic of Congo (DRC), Djibouti, Egypt, Kenya, State of Libya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Tanzania, Uganda, South Africa, Swaziland, Zambia and Zimbabwe – had signed the TFTA Agreement.

Naturally, the TFTA has not been without teething problems. At the political level, these have included the fact that only two countries – Egypt and Uganda – both signed and ratified the TFTA whereas the Agreement needs to be ratified by 14 countries in order to enter into force. On the technical side, the conclusion of the so-called Phase 1 negotiations of the TFTA were delayed due to pending trade in services and other trade-related issues. The final conclusion and consensus regarding the highly contentious divergence between the COMESA and EAC Rules of Origin on the one hand and SADC Rules on the other are unclear. If a balanced resolution was reached, this was not widely publicised raising questions about exactly how implementation will take place. Nonetheless, the commitment to regional integration behind this landmark decision is unquestionable.

The success of the TFTA breathed additional new life into Agenda 2063 of the African Union (AU), spurring the necessary confidence for forging ahead with the Continental Free Trade Area (CFTA). Against that renewed impetus, in March 2018, 44 countries had signed the Consolidated Text of the CFTA, including 24 TFTA members and 17 COMESA members (only Burundi and Eritrea did not sign from the COMESA configuration). The other two CFTA legal instruments signed in relation to the 10th Extraordinary Session of the Assembly on the Launch of the CFTA were the Kigali Declaration (signed by 14 out of the 17 COMESA countries) and the Free Movement Protocol (signed by 10 out of the 17 COMESA countries). Clearly, a relatively high subscription rate to the CTFA was seen among COMESA countries. Thus, again, the commitment to a unified Africa towards continental free trade in line with Agenda 2063 is clearly demonstrated through the recent incremental steps of Africa’s RECs, COMESA included.

At the multilateral level, in 2013, a number of COMESA member States were among the World Trade Organization (WTO) members that concluded the negotiation of the Trade Facilitation Agreement (TFA) at the Bali Ministerial Conference. The TFA aims to address the vast amount of “red tape” that exists in moving goods across borders, which poses challenges for traders from both developing and developed countries and imposes a particular burden on small and medium-sized enterprises. It contains provisions for expediting the movement, release, and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. By the time the TFA was entering into force in February 2017, 12 out of the 19 COMESA Member Stated (or 63%) had ratified it, agreeing to implement the TFA upon its entry into force. Moreover, a preliminary assessment by COMESA to determine the level of alignment between the TFA and the COMESA Treaty found that out of the 40 Provisions/Measures of the TFA, 28 (or 70%) were already specifically catered for in the COMESA Treaty as of the time of entry into force of the TFA. Again, the level of COMESA’s dedication to using regionalism as the main avenue for enhancing free trade is well-demonstrated.

However, Africa and indeed COMESA are not yet out of the woods with regard to its pursuit of robust free-trade regional frameworks, regulations, institutions, systems and programmes; a lot of issues remain unresolved. These include a battery of internal and external threats, which the continent and the RECs, COMESA included, should keep striving to manage and address.

Internally, the challenges that arise from COMESA, EAC and SADC and the countries therein being considerably heterogeneous were inherited by the TFTA and now stand a good chance of being carried forward into the CFTA. For instance, the issue of hugely disparate Rules of Origin between COMESA and EAC on the one hand and SADC on the other are likely to simply escalate as countries from ECOWAS, CEMEC, Maghreb Arab League, etc. – with their different trade protocols and Origin Rules – now come on board. Concluding negotiations that balance and iron out the divergent rules on the continent is something the RECs will have to contend with.

Similarly, other than EAC and SACU – a Customs Union made up of a subset of countries originally belonging to either SADC or COMESA or both – the vast majority of countries in the TFTA failed to establish a common external trade position while they had been in their respective RECs. Chances of establishing common trade and investment (including debt accumulation) positions just became a whole lot more complicated with the escalation to a CTFA. And such a collective position would be critical to avoid threats of large funding opportunities disrupting the continental agenda on trade, investment, industrialisation, and human progress.

Another internal challenge in COMESA and in Africa at large is the wide proliferation of non-tariff barriers (NTBs). COMESA and the TFTA have made strides in addressing NTBs through, for instance, the NTBs Online Tracking and Resolution Mechanism. Nonetheless, the natural inclination of countries to protect their trade interest continues to add pressure for the escalation of NTBs as tariff barriers have declined.

On the geopolitical and philosophical fronts, some observers argue that regionalism has lost its lustre in Africa. High profile political champions with a core interest and passion for keeping Africa’s enchantment with regional integration and free trade alive are few and very far in between. The deep passions of yesteryear people like the late Nkwame Nhuruma of Ghana, the late Julius Nyerere of Tanzania and Kenneth Kaunda of Zambia, who put their lives and countries on the line for the idea of Africanism, have significantly diminished with time. Political leaders have sometimes been accused of simply paying lip service to African unity, with lukewarm to mildly warm attitudes towards regional integration; these pale in comparison to African forefathers’ strong convictions about a unified Africa. The risk of an inadequate handover of the ideal of regionalism to the next generation is very real. On this score, prospects to entrench the ideology of regionalism in the next generation’s mental wiring are under threat.

On the external side, as one example of latent tension introduced from outside the continent, the influence of China cannot be ignored. The world’s largest exporter has been making a move on Africa with massive project- and debt-financing investments in infrastructure as well as equity and other financings in industries. In 2015, it ramped up its initiative for Africa, FOCAC, raising the financing stakes to $60 billion for the period 2015-2018, a move that sent large African economies like South Africa, Nigeria, Ethiopia and Angola scrabbling for maximum shares of the funds set aside for infrastructure development, industrialisation, and talent discovery. Because of the prospects of using Chinese financing to build individual productive capacities and setting themselves apart, individually, as growth and export hubs, for a moment, Africa’s economic big economies got caught up in the allure of the first-come-first-serve opportunities of FOCAC and all but forgot about the AU’s Agenda 2063.

These are some of the key new internal and external issues that will influence and shape Africa’s path towards regionalism amidst growing protectionism in the West and in the East. How proactive and dynamic Africa will be in defining or refining its preferred course of development and how quickly it will regroup with commensurate policy, strategic, structural and regional agenda reforms will be decisive for the success of regional integration or, for the breakaway of Africa from regionalism.

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