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Putting the EAC house in order before pursuing the T-FTA

08 October 2012

A private sector workshop held in Rwanda in July 2012, to discuss the proposed tripartite free-trade agreement (T-FTA), highlighted the need ‘to sort out remaining issues within our own market before we delve deeper’ into the tripartite FTA. The CEO of the Rwanda Private Sector Federation expressed scepticism as to whether the EAC is ‘ready to fully open up to competition from COMESA and SADC’. This being noted, the extent to which Rwandan companies are already seeking to exploit regional trade facilitation instruments, such as the COMESA Regional Customs Transit Guarantee system, to penetrate regional markets and improve the efficiency of the transit trade to overseas markets, was also highlighted. In terms of regional trade development, in 2010, some 50% of Rwanda’s non-commodity exports were destined for the DRC, with strong trade ties also being developed with Zambia.

While highlighting the benefits to be gained from trade relations with bigger economies, Tanzanian private sector representatives, for their part, also stressed the importance of ‘proper preparation’ of trade negotiations if smaller economies are not to be ‘swallowed by the bigger economies’. In this context strengthening the EAC was seen as the first priority, with this being addressed by progressively eliminating non-tariff barriers (NTBs) to trade, getting to grips with negative policies of partner states and addressing the challenge of poor infrastructure.

This East African private sector perspective is broadly in line with the emerging South African approach, within which, according to analysts, ‘the preference is to first channel scarce resources to existing commitments ... trying to make them as beneficial as possible’. This implies consolidating the SACU by addressing existing problems and subsequently negotiating the conclusion of the T-FTA. It is also implied that this should come before any discussion of deepening trade and economic integration through the establishment of wider customs unions (via SADC or COMESA).

Also in July 2012, analysis published by the US International Trade Commission of NTBs in the EAC highlighted the importance of addressing NTBs to trade in perishable food and agricultural products, since the uncertainty and delays created by NTBs falls particularly heavily on this category of traded goods. In such cases, delays not only increase the costs of trading, but also cause a rapid deterioration in the value of products delayed. This can profoundly undermine the development of intra-regional supply chains. The analysis implied that priority should be accorded to addressing regulatory and administrative barriers, since this is a low-cost area of intervention, but acknowledged the substantive economic benefits to be gained from infrastructure improvements.

Meanwhile a Zambian Institute for Policy Analysis and Research (ZIPAR) report on Zambia and the T-FTA urges the Zambian government to:

  • ‘continue its path of tariff reform and regional integration’;
  • clearly identify ‘offensive and defensive interests’ within the T-FTA negotiations through intensified dialogue with Zambian stakeholders;
  • engage with the COMESA secretariat with a view to mobilising support for fiscal reforms to address the revenue losses arising from trade liberalisation.

These recommendations were based on macro-economic modelling of possible outcomes to the T-FTA negotiations.

Editorial comment

Addressing NTBs to trade is particularly important for the development of intra-regional food supply chains. In this context, a number of issues remain unresolved. Within the EAC, common standards for key tradable agricultural commodities have yet to be developed. Where substantial progress has been made, and where complementary private sector initiatives have been launched (for example the Eastern African Grain Council’s cereals standards), producers still face numerous challenges in meeting these quality standards. This is particularly the case for smallholder farmers who require training and other general support to ensure that high quality standards can be met. SPS measures also remain a key NTB due to fears of the spread of plant and animal diseases, with harmonised application of SPS control measures being required.

Competitiveness-related issues need to be addressed across the wider T-FTA region if deeper trade integration is not to be undermined by the formulation of extensive product exclusion lists.

Ideally any agricultural trade integration needs to be accompanied by the establishment of instruments to improve infrastructure and, for countries potentially adversely affected by trade integration, instruments to support necessary adjustment processes. A variety of initiatives are underway in this regard, with their effective operationalisation being critical. 


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