Helen Kenani (Trade Policy Expert) Presentation at the RAME Conference Progress in the Tripartite FTA - achievements, challenges and prospects Helen Kenani (Trade Policy Expert) COMESA Secretariat hkenani@comesa.int Presentation at the RAME Conference 18-20 June 2014, Vic Falls www.comesa.int

Opportunities in the Tripartite FTA The First Summit held on 22 October 2008 and declared that the three regional economic communities (RECs) establish a grand Free Trade Area (FTA) covering the combined membership of their respective RECs and directed that a road map be drawn on the establishment of the FTA and the legal and institutional structure be drawn up. COMESA, EAC and SADC – a total of 26 countries – make up the Tripartite With a combined GDP of USD 1 trillion, and a population of 600 million Being 57% and 58% of Africa’s population and GDP; and 26/55 of Africa’s Member States

Opportunities in the Tripartite FTA It is a booming market already. Intra-tripartite exports increased from USD 7 billion in 2000 to USD 27 billion in 2008, and imports from USD 9 billion to USD 32 billion Returns on investment are said to be highest in the world; ……backward and forward linkages…FIATA The 2nd Tripartite Summit of Heads of States and Government held in June, 2011 launched the process of negotiations for a Tripartite Free Trade Area by adopting; Tripartite FTA Negotiating Principles, Processes and Insitutional Framework; Road Map for Establishing the Tripartite FTA Declaration Launching the Tripartite negotiations

The 3 Pillars of the Tripartite FTA Mark Integration, Infrastructure Dev, Industrial Dev Activity Market Integration   Trade liberalisation resulting in the Free Trade Area Infrastructure Development Improving the efficiency of the internal trade and transport network (road, rail, water and air and including ICT and Energy). Addressing supply side constraints Industrial Development Creating an enabling environment (addressing the regulatory and legal framework); value addition; diversification; enhancing productivity and competitiveness; and the development of programmes which will result in structural changes.

Market Integration-Scope and Coverage Tripartite FTA Negotiations on Trade in Goods shall be in two phases Phase Activity 1st Phase (to be concluded by June 2014) Negotiations to cover Tariff Liberalisation, rules of Origin, dispute resolution, customs procedures and simplification of Customs documents, transit procedures, non tariff barriers, trade remedies, technical barriers to trade and sanitary and phyto sanitary measures. Movement of business persons will be dealt with during the first phase of negotiations as a parallel and separate track by a separate Committee. 2nd Phase (to commence from 2015) Negotiations to cover trade in services, intellectual property rights, competition policy, and trade development and competitiveness.

Status of TFTA Negotiations Tripartite Trade Negotiation Forum (TTNF) has met Nine times and the Tripartite Committee of Senior Officials six times and accomplished the following; Agreed on the interpretation of the tripartite FTA Negotiation Principles (11) with a view to establishing a common understanding of the principles; Established working groups on; Customs Cooperation, Documentation, Procedures and Transit Instruments; Technical Barriers to trade (including Standards and Metrology), Sanitary and Phyto Sanitary Measures and Non Tariff Barriers; Rules of Origin and Trade Remedies and Dispute Settlement; Recognised the existence of the draft FTA Agreement and Annexes as the starting point for the negotiations; Agreed on a schedule for negotiations and adopted M&E Mechanism; Agreed on modalities for negotiations on tariff liberalization; Commenced text based negotiations.

Progress made-text based negotiations Thematic area Progress achieved Consideration of the draft TFTA Agreement.   Adopted more than 13 Articles. These include Article 2, (Establishment of the TFTA); Article 3 (Scope and Coverage); Article 4 (General Objectives); Article 6 (Principles); Article 8 (National Treatment); Article 9 (Elimination of Import Duties); Article 11 (Elimination of Non-Tariff Barriers); Article 12 (Elimination of Quantitative Restrictions); Article 13 (Rules of Origin); Articles 26 and 27 on TBT and SPS respectively; Article on (General Exceptions) with exception of sub-section on importation and exportation of precious and strategic metals; and the Articles on (Notification of prohibited and restricted goods); and on (Budget); Bracketed 3 Articles. These include Articles on (Most Favoured Nation Treatment); (Application/Prohibition of Export Duties) and Article (General Exceptions) – relating to the importation and exportation of precious and strategic metals Agreed to Delete Articles relating to other pillars of the Tripartite and relating to Phase II of the negotiations. Customs Cooperation: Adopted Annex 5 on Customs Cooperation and Annex 7 on Transit Trade and Transit Facilitation. Rules of Origin: TTNF has cleared the majority of the Articles of the Annex on Rules of Origin. The focus now is on the product specific rules. It was also agreed that Tripartite Member/Partner States should not reopen discussions on rules of origin on which there are commonalities (15%) among the three RECs. The TWG on Rules of Origin also to continue work on the remaining similar (29% and divergent (56%)set of rules.

Technical Barriers to Trade, Sanitary and Phyto Sanitary Measures and Non-Tariff Barriers.   Non Tariff Barriers Non-Tariff Barriers: Annex 3 on NTBs has been finalised except for 2 Appendices and Article 10 on Dispute Settlement. The TTNF agreed there will be no re-opening of discussion of Articles of Annex 3 except the said Appendices and Article 10. Draft TFTA Agreement and Annex 9 on Technical Barriers to Trade. Article 26 and Annex 9 on TBTs were finalised and adopted. Draft TFTA Agreement and Annex 10 on Sanitary and Phytosanitary Measures Article 27 and Annex 10 on SPS were finalised and adopted. Trade Remedies and Dispute Settlement. Much more is till to be done to develop Trade Remedies that are compatible with the WTO but which Member /Partner States find ease to use.

Outstanding Work   Important outstanding issues which have to be finalised by June, 2014 include the following; Negotiations on Goods 12 Member/Partner States have prepared tariff offers. Quality of offers based on the agreed modalities. Finalization of the Annex on Rules of Origin including the Annexes on Trade Remedies and Dispute Settlement. Adoption of Annexes on SPS, TBTs and NTBs by the TTNF. Completion of Negotiations on outstanding Articles including the 3 bracketed Articles of the Agreement (MFN, Export duties, Security Exceptions) and Articles referred back to the Working Groups (Customs cooperation and trade Remedies) for further work.

Outstanding Work Negotiations on Goods Preparation of the post negotiations agreement road map comprising of outstanding activities from the negotiation. Phase 2 Negotiations Negotiations on the built in agenda: Trade in Services, Intellectual Property, Competition Policy and Trade and Development. Timely ratification domestication and implementation of the Agreement.

Outstanding Work Movement of Business Persons A Tripartite Technical Committee on Business Persons has been established. It has adopted TORs, Rules of Procedure and a Work Programme and schedule of negotiations. According to the TTBP Work Programme negotiations on Movement of Business Persons should be completed by June, 2014. Outstanding issues include: common methodology and approach on the instrument to be negotiated on the movement of business persons; categories of business persons to be included in the scope; definition of business persons; and whether this should be visa or non-visa regime.

Main reasons for slow progress on key issues Wide divergencies among the delegations on some critical issues, such as thresholds and timeframes; Absence of informal brainstorming workshops faciliated by experts, where expert analytical work on specific issues would provide opportunities to appreciate the dimensions and implications of issues and chart ways forward in light of examined options; Taking too long on some issues without an appropriate regard to the roadmap; for instance, the Tripartite FTA negotiations have required a collection and examination of more trade data well ahead of the negotiations, than any other trade negotiations in the recent past; Technical and human resource capacity constraints that could prevent proper adherence to the Roadmap.

Main reasons for slow progress on key issues Lack of consistency in participation in the negotiations by experts from Member/Partner States. Inadequate resources by Member/Partner States to finance Experts’ participation in the negotiations. A heavy trade negotiation agenda at other levels competing for the same limited resources with TFTA negotiations; Partner States have held fewer national stakeholder consultation meetings than would be desirable. Difficult areas for reaching consensus, eg Rules of Origin

Continental processes based on TFTA-CFTA The Continental FTA is scheduled for 2017 and is expected to build on the TFTA. Therefore necessary to conclude on the TFTA Programme. According to the meeting of the 8th Ordinary session of the Conference of AU Ministers of Trade (October, 2013), the work on the CFTA and Boosting Intra African Trade should be accompanied by capacity building programmes aimed at strengthening the competitiveness of African economies, and on building negotiating capacity and the implementation of free trade agreements.

Industry Development Pillar A Tripartite Technical Committee on Industrial Development has been established. It has adopted its TORs and is in the process of finalizing the Roadmap and Programme of Work on industrial development pillar. The main outstanding activities include: Preparation of Tripartite Modalities of Cooperation in Industrial Development Harmonization and coordination of industrial policies to facilitate intra-industry trade and promote business linkages in the Tripartite Development of competitive value chains in key industrial sectors Fostering of collaboration in science, technology and inovation to facilitate sustainable industrial growth :

Priority areas for support Technical Assistance and Capacity Building support to the RECs and Regional Member States to complete negotiations on the legal text of the tripartite FTA and Annexes, to prepare for both the launch and post- launch negotiations of Phase 2 i.e the built in agenda. to complete negotiations on the Movement of Business Persons text. Capacity building to focus on awareness creation, institutional development, and availing financial resources required for the successful and effective implementation of the agreement (including Movement of Business Persons).

Priority areas for support Capacity Building for implementation of programmes for reducing trading costs by addressing sanitary and phyto-sanitary measures (SPS) and Non- Tariff Measures (NTMs) Capacity building for Implementation of programmes on trade facilitation focusing on customs cooperation. Development of Industrial value chain action plans; and Support private sector participation in the negotiations

Points for discussion The importance of concluding the negotiations and signing the TFTA Agreement, on the basis of progress made and Articles and Annexes that have been finalized; the outstanding issues can be in the built-in agenda for further work when the TFTA is in force – this is what happens in other negotiations eg WTO The need to make some quick progress on rules of origin – the current approach of negotiating product-specific rules of origin will at best result in a TFTA based only on 44% of tariff lines covering only 53% of intra-tripartite trade, ie lines that are identical and similar; there is therefore need to revisit this and consider the flexible approach of the COMESA and EAC rules of origin that provide for a number of criteria to confer origin that can be chosen by the private sector for use as appropriate The need to make some quick progress on tariff offers – while most of the countries have made ambitious tariff offers (100% subject to reciprocity and the possibility of safeguards to protect important industries), SACU has made the lowest offer covering only 60% of tariff lines, when 56.3% of the SACU tariff lines already have 0% MFN duty. The principle of variable geometry can be invoked to proceed with an ambitious TFTA that provides a large market for trade and investment.  

End of Presentation;Thank you