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Francis Osiemo, ECDPM

ICTSD/TMEA/UoN Policy Dialogue, 23 September 2015Nairobi, Kenya

Advancing Regional Integration

Overview of Presentation Introduction

1. Trading in Eastern Africa

2. The TFTA: opportunities and challenges

3. Advancing regional integration

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• The East African Community (EAC), with a Customs Union (since 2009), is negotiating TFTA as a block.

• South Sudan and Somalia expressed interest in joining EAC. This might happen in 2016 according to the 16th EAC Heads of State Summit communiqué.

• Ethiopia is not in the EAC. But has interests in EAC’s Northern Corridor Integration Projects.

• Tanzania is the only EAC member state not in COMESA. It’s the only EAC member state in SADC.

• What does this mean for the region with the recent launch of TFTA? Are we getting closer to the CFTA?

Introduction

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Imports within EAC 2010 - 2014

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1. Trading in Eastern Africa

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Exports within EAC 2010 - 2014

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Two Key points from the data……

• Variation when it comes to imports among EAC member states seems minimal.

• Kenya continues to dominate the export market within the EAC. Its 2014 total value of exports to other EAC member states was US$ 1,467 million.

• 2003/04 – 2012/13: Ethiopia became the 2nd fastest growing economy in Africa (after Angola) with an average growth of 10.6% per year. The World Bank projects an average of 10.5% for the 2015/16 despite being an LDC.

• Ethiopia is partnering with EAC on energy sharing and transport corridors. It attended the 9th Northern Corridor Integration Projects Summit as an observer.

• (1) Planned Lamu to Addis Ababa rail link. (2) Ethiopia has a 25 year master plan to be a top energy supplier in Africa including to EAC member states(signed a 25 year power purchasing agreement with Kenya in 2012).

• Grand Renaissance Dam project? Project started in 2009 before consulting Egypt. Talks now underway.

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The Ethiopian equation in the EAC

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• TFTA launch is a sign of political will for regional integration.

• Market integration, industrial development, and infrastructure development – a developmental approach aimed at addressing infrastructure gaps and supply side constraints.

• Tanzania is the only EAC member not in COMESA. Ethiopia is in COMESA (but not in EAC) but has interests in EAC. TFTA might benefit market access in EAC.

• If TFTA is a launching pad for CFTA, which approach works best for integration: (1) “club” of countries; (2) building on existing RECs; (3) an open agreement ?

The TFTA’s integration is based on existing RECs but is also “open”

Article 2, TFTA A Free Trade Area among the Member/Partner States of COMESA, EAC and SADC is hereby established.

"Tripartite Member/Partner States" means the Member States of Common Market for Eastern and Southern Africa, the Partner States of the East African Community, and the Member States of the Southern African Development Community who are party to this Agreement and any other member of the African Union that would have become party to this Agreement;

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• TFTA has an MFN clause – Article 7, TFTA

• Tripartite Member/Partner States can maintain or enter new preferential trade agreements with 3rd countries or among themselves provided that any advantage, concession, privilege or favor granted to a third country under such agreements are offered to the other Tripartite Member/Partner States on a reciprocal basis.

• What is the implication of this provision on EPAs, AGOA and any other possible future agreements?

TFTA interaction with other agreements

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Article 30 (7)

“In the event of inconsistency or a conflict between this Agreement and the treaties and instruments of COMESA, EAC and SADC, this Agreement shall prevail to the extent of the inconsistency or conflict.”

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Dealing with inconsistency/conflict between TFTA and existing REC agreements

• TFTA has broadened, but not necessarily deepened integration.

• Key outstanding issues yet to be negotiated: Rules of origin, tariff offers, and trade remedies

• When TFTA comes into force (on the 13th day when 14 of the 26 member states deposit their instrument of ratification – Article 39(3), TFTA) , the lack of complementarity among member states might pose a challenge to integration. LDCs: SADC (6), EAC (4), and COMESA (11).

• TFTA needs complimentary investments (infrastructure, market access, industries) at REC level to contribute to integration at TFTA and eventually CFTA level. Trade negotiations should cover investments.

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The challenges facing TFTA

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• Deepening integration is a question of readiness among member states and putting mechanisms/incentives to make it work.

• Deepening integration mechanisms/incentives must work for businesses, especially SMEs that form the backbone of the economies of member states.

• Deepening integration is about the people. It must incorporate human rights (labor rights). Sustainability is key (especially in relation to the environment).

3. Advancing regional integrationThe How?

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• Deepening integration must work on the REC level, for it to work on the continental level.

• For the EAC, deepening integration is about removing existing NTBs. Might the passing of the Non Tariff Barriers Act, 2015 by the EAC Legislative Assembly be a way forward?

• Sustainability is not a new concept for the EAC. It is part of EAC’s Objectives under Article 5, EAC Treaty as read with other Articles throughout the Treaty. There is now need for realization of the concept practice.

Final takeaways….

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