African blocs fail to agree on Free Trade Area
Twenty-six African countries have failed to agree on how traders would access a market of more than 600 million people through the proposed Tripartite Free Trade Area (TFTA), blurring expansion plans by companies.
The East African Community (EAC), the Common Market for Eastern and Southern Africa (Comesa) and the Southern African Development Community (SADC) have differed on the kind of preferential treatment sensitive goods and services from one bloc would be offered in another.
The 12-month period for negotiations expired on June 30.
“We were to complete this work by last month (June) but we did not reach an agreement. There are still challenges,” said Mr Mark Ogot, a senior assistant director in-charge of economic affairs at Kenya’s Ministry of East African Affairs.
It is understood that though the blocs have reached a common position on the proportion of tariff lines to be liberalised, they have broken ranks over a common tariff to be applied on sensitive products such as maize, wheat, sugar, textile and cement which are considered essential in spurring the growth of domestic industries.
The EAC countries have agreed to liberalise 37 per cent of the tariff lines estimated at 5,600 items. This would allow about 2,000 items, excluding sensitive items, to enter member countries at zero duty.
The other goods would be charged duty at the rate of 10 per cent for intermediate goods and 25 per cent for finished goods.
The SADC Customs union has agreed to remove duty on 60 per cent of its 7,000 tariff lines, offering opportunity for 4,200 goods to be exported to southern Africa.
TFTA protocol had targeted the removal of duty on between 60 per cent and 85 per cent of the tariff lines. The remaining 15 per cent of the tariff lines were to be negotiated over a period of between five and eight years.
Comesa has 5,000 tariff lines but its members who are neither in EAC or SADC have been allowed to negotiate individually because the bloc does not have a customs union.
A trade framework agreed upon by heads of state during the TFTA launch last year required countries to exchange tariff concessions based on reciprocity.
Mr Ogot said plans were underway to extend the negotiation period, but the duration was still not yet clear.
The Africa Review has learnt that the protracted discussions have been complicated by South Africa, which is keen on protecting its key markets from competition.
It is understood that South Africa was wary of opening up its domestic market and its export market in Botswana, Lesotho, Namibia and Swaziland, which are members of the SACU to the selected items, especially maize, wheat, electronics and equipment
from other blocs.
“South Africa does not appear to be keen on this arrangement because they dominate the market and are cautious of losing part of it,” said Mr Ogot.
Spanning the continent from Cape Town to Cairo, the grand FTA encompasses 26 countries with a combined population of nearly 625 million people and a total gross domestic product (GDP) of approximately $1.2 trillion.
Under the TFTA pact, the members of the three trading blocs agreed to ignore sensitive products and subject them to duty and quota restrictions in order to ensure fair competition.
The products earlier listed for protection until 2017 included, maize, cement sugar, wheat, rice, textiles, milk and cream, cane and beet sugar, second hand clothes, beverages, spirits, plastics, electronic equipment.
The implementation of the agreement would effectively open the door for EAC goods, to markets such as South Africa, Egypt, Ethiopia and Eritrea and vice versa.
The next decade
The TFTA agreement is expected to serve as the basis for the completion of a Continental Free Trade Area by 2017 which South Africa appears to be more keen on.
The CFTA aims to boost trade within Africa by up to 30 per cent in the next decade, and eventually establishing an African Economic Community.
South Africa has said that implementing the TFTA would complicate its trade with Europe because EAC was yet to sign an Economic Partnership Agreement with the European Union.