AAMP Training MaterialsModule 4.1: Regional Trade Agreements

& Cross Border TradeHelen Kenani (COMESA)

hkenani@comesa.int

Contents

• What is a regional trade agreement?• COMESA vision and mission• Rationale for trade integration• Current trade agreements• Non-tariff barriers to trade in foodstuffs• Legal basis for export/import bans• Opportunities in the East and Southern Africa region• Enforcement mechanisms and procedures• Way forward

What is a regional trade agreement?

• Regional trade agreements aim to reduce or eliminate restrictions on items traded between the member nations

• COMESA aims to be a community of member nations within which goods, services, capital and labor move feely across borders

• The COMESA vision is to boost economic prosperity through integration and co-operation in– trade, customs & monetary affairs– Transport, communications and information– Technology, industry & energy– Agriculture, environment and natural resources– gender

Rationale for trade integration

• Fundamental Questions– Who should integrate and why?– How should integration happen?– Which countries benefit from integration?

Regional trade agreements in ESA

• COMESA, EAC AND SADC set up Free Trade Areas (FTA) established to carry out regional integration

• While they all mandate the establishment of customs unions, the EAC will also pursue the formation of a single political confederation

• Establishing an FTA implies that trade among member countries should be quota and duty free, provided that they meet agreed Rules of Origin and other standards.

Challenges of trading in food in ESA

• Infrastructure– High transport costs lead some countries in FTAs to source

food elsewhere to meet deficits (Kenya/Zambia, 2004, 2008)

• Supply side constraints– Interconnectivity is poor within countries, making transport to

borders costly and difficult– Low production is the norm, but when there is a bumper harvest,

storage capacity is unavailable

• Information– Planting and marketing information is often lacking

Challenges of trading in food in ESA

• Import / export bans– Arbitrary trade bans on food commodities for political, health or

security reasons

• Uncertainty– Unpredictable policy changes cripple private sector traders’

ability to plan, and discourages trade

• High production cost– High input costs and fragmented land use result in inefficient

production leaving ESA farmers uncompetitive

Challenges of trading in food in ESA

• Sanitary and Phytosanitary (SPS) issues– SPS concerns often limit trade in staple food crops during crises

• Standards– Until regional trade agreements harmonize, standards can be

used as an excuse to reject imports of food

COMESA Legal basis for trade bans

• The COMESA Treaty stipulates the circumstances under which a member state may restrict trade in food staples– To protect animal and plant health– Food security: to protect against famine or civil disturbance– To protect items of national importance

Opportunities from FTAs

• Expanded single market– Producers have access to a market of over 500 million people

which should boost production

• Food security– Increased food production and integrated markets should reduce

likelihood of food crises

• Competitiveness– As producers compete with a wider group for the larger market,

competitiveness will be enhanced

• Better Utilization of Resources– The open market will encourage specialization

Opportunities from FTAs

• Agro-based industries– Enhanced production arising from creation of the larger market

should trigger the development of agro-industries

• FDI and intra-investments flows– The expanded market will attract Foreign Direct Investment as

well as intra-regional investment

• Employment creation– Increased investment will in turn create new employment

Opportunities from FTAs

• Reduced imports from non-FTA countries– Regional efficiency improvement leads to increased production– Money not spent on expensive overseas imports can be put

toward health, education and infrastructure

• Economic growth and development– Ag-sector growth will increase farm-incomes which in turn will

reduce poverty

Trade Agreement Enforcement

• Article 49 of the COMESA Treaty stipulates that member states should eliminate all non-tariff barriers (NTB) to trade and refrain from introducing new NTBs to imports originating within the FTA

• Infant Industry: Member States must take reasonable steps over a specified period determined by Council before quantitative or like restrictions can be placed on similar goods from other Member States.

• Article 61 Safeguard Measures: serious injury

Way Forward

• Address supply-side constrains– Enhance production– Improve energy, road, and rail infrastructure– Create air-transport links for high value exports

• Hasten the process of standards harmonization– Agree on SPS measures and customs procedures– Comply with 24 hour operating border post

• Support the decision of the leadership of COMESA , EAC and SADC to merge into a single market for the region to experience prosperity.

• Promote PP Dialogue on issues of trade policy