Lost Trading Opportunities Ahead If Countries Fail to Harness AfCFTA
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Lost Trading Opportunities Ahead If Countries Fail to Harness AfCFTA
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By Archie Matheson, Head of Policy and Analytics, Botho Emerging Markets Group
March 3, 2019
Originally published on March 4, 2019 for the East African
Amidst the hope and enthusiasm surrounding the potential Continental Free Trade Area, we are neglecting one of the most important offices behind practical regional economic integration.
Though discussions of African trade during 2018 were dominated by the agreement to establish a Continental Free Trade Area (CFTA), even if ratified during 2019 its practical outcomes will not be realised for many years; substantive discussions on rules of origin and tariff lines have not yet taken place. By contrast, should the Tripartite Free Trade Area (TFTA) by ratified by the requisite number of countries – as seems possible during the coming months – over 90% of tariff lines have already been agreed, meaning actual implementation would take place in the shorter term. Indeed, by combining COMESA, EAC, and SADC – thus including over half the continent’s countries – TFTA will undoubtedly be, and to an extent already is, the primary building block of any CFTA.
In turn, the creation of TFTA is depending heavily on existing procedures and ideas from COMESA. Thus, it would be fair to say that COMESA is a driving force of regional economic integration. Within COMESA, below the ultimate decision-makers – the COMESA Authority and Council of Ministers – are the brains and engine of progress, the COMESA Secretariat. For trade matters, it is the Secretariat’s duty to support the drive for higher intra-COMESA trade in line with established protocols.
And within the Secretariat there is a department which puts this responsibility into practice, an office small in size but large in mandate: the Directorate of Trade and Customs. Given the role of COMESA on the continental stage, it is perhaps the most important office related to African trade, active in three main areas.
The Directorate helps to resolve trade disputes, relating to both rules of origin and non-tariff barriers (NTBs), covering both trade in goods and trade in services. It is called upon to give official opinion, share recommendations, arrange dialogue between disputing parties, lead on-the-spot verifications, and, if necessary, refer cases to the Council of Ministers. In January 2019 alone, three full interventions were needed and successfully completed.
It develops ideas and policies which are then presented to the Council for approval, seeking greater harmonisation and introducing trade facilitation measures. As an example, it was the Directorate which developed the NTB Reporting System which was implemented by COMESA, subsequently adopted by TFTA, and due to be discussed for incorporation into CFTA at this month’s UNCTAD meeting.
Furthermore, it leads trade negotiations on behalf of COMESA with multiple trade partners. These include talks on TFTA, CFTA, EPAs with the EU, AGOA with the US, and bilateral agreements with numerous countries. By providing extensive support for COMESA’s Council of Ministers, the Directorate is the engine room which facilitates the effective functioning of free trade across COMESA, and beneficial trade beyond.
For an office with such far-reaching responsibilities, it would be reasonable to expect an array of specialists, sufficient in number to cover the rules of origin, NTB, and small-scale trade issues which arise under Trade in Goods, or the challenges posed within the 12 separate sectors which sit under Trade in Services; experts to drive improvement in trade facilitation; and negotiation specialists for the multitude of international trade agreements.
Yet, staggeringly, the Directorate has only four full-time staff: a Director, Senior Trade Officer, Senior Customs Officer, and a Senior Research Fellow. They are assisted by no more than a handful of shorter-term contract staff. Although through its Trade Facilitation Regional Programme the EU will shortly fund two new project staff to deal with small-scale trade, total numbers are chronically insufficient. The consequences for COMESA members, importers, and exporters are costly – not through a lack of will or ability, but a lack of funding and corresponding capacity.
When trucks or containers are held at land borders or ports, they incur charges daily; resolutions are required within days, rather than weeks or even months. Often these charges are easily avoidable, but instead result in needless costs for exporters and importers – and ultimately producers and consumers. As an example, each time an on-the-spot verification is needed, one senior staff member must travel, leaving the Directorate severely short-handed. If two verifications are needed at once, one dispute must wait – one of several instances was in May 2017, when Kenyan food and beverage importers incurred huge expenses as their containers of Mauritian industrial sugar were held waiting in Mombasa, since the relevant official was tending to an Egypt-Sudan dispute over ceramics. These manufacturing businesses lost money, and had a greater inclination to look for non-COMESA sugar thereafter.
The team is not large enough to manage intra-COMESA issues, let alone negotiations relating to regional integration and global trade. Can member states be sure that they will be getting the best possible trade deals? Further, there simply isn’t the bandwidth to dedicate time to additional innovative trade facilitation development, or to encourage and secure member endorsement of harmonisation procedures.
Having been elected as COMESA’s new Secretary General, Chileshe Kapwepwe suggested that the opportunities offered by COMESA and further regional integration are seized, but also highlighted that this requires a well-managed, well-resourced COMESA that is appreciated by its member states. Together with development partners, members states need to respond to this call to action, for while they extol the virtues of the more distant CFTA, they can realise more immediate benefits by investing in an overworked office which is central to functional African trade.