Regional blocs seek to remove trade barriers
September 30, 2012 in Business
THREE regional economic communities (Recs) have taken the lead as Africa
seeks to remove trade barriers by 2017.
Report by Ndamu Sandu
The establishment of a Continental Free Trade Area (CFTA) was endorsed by
African Union leaders at a summit in January to boost intra-Africa trade.
Sadc, Common Market for Eastern and Southern Africa (Comesa) and the East
African Community (EAC) have combined forces to establish a tripartite FTA
by 2014.
Willie Shumba, a senior programmes officer at Sadc, told participants
attending the second Africa Trade Forum in Ethiopia last week that the
tripartite FTA would address the issue of overlapping membership, which had
made it a challenge to implement instruments such as a common currency.
“…overlapping membership was becoming a challenge in the implementation of
instruments, for example, common currency. The TFTA is meant to reduce the
challenges,” he said.
Countries such as Zimbabwe, Tanzania and Kenya have memberships in two
regional economic communities, a situation that analysts say would affect
the integration agenda in terms of negotiations and policy co-ordination.
The TFTA has 26 members made up of Sadc (15), Comesa (19) and EAC (5).
The triumvirate contributes over 50% to the continent’s US$1 trillion Gross
Domestic Product and more than half of Africa’s population.
The TFTA focuses on the removal of tariffs and non-tariff barriers such as
border delays, and seeks to liberalise trade in services and facilitation of
trade and investment.
It would also facilitate movement of business people, as well as develop and
implement joint infrastructure programmes.
There are fears the continental FTAs would open up the economies of small
countries and in the end, the removal of customs duty would negatively
affect smaller economies’ revenue generating measures.
Zimbabwe is using a cash budgeting system and revenue from taxes, primarily
to sustain the budget in the absence of budgetary support from co-operating
partners.
Finance minister Tendai Biti recently slashed the budget to US$3,6 billion
from US$4 billion saying the revenue from diamonds had been underperforming,
among other factors.
Experts said a fund should be set up to “compensate” economies that suffer
from the FTA.
Shumba said the Comesa-Sadc-EAC FTA would create a single market of over 500
million people, more than half of the continent’s estimated total
population.
He said new markets, suppliers and welfare gains would be created as a
result of competition.
Tariffs and barriers in the form of delays have been blamed for dragging
down intra-African trade. Stephen Karingi, director at UN Economic
Commission for Africa, told a trade forum last week that trade facilitation,
on top on the removal of barriers, would see intra-African trade doubling.
“The costs of reducing remaining tariffs are not as high; such costs have
been overstated. We should focus on trade facilitation,” he said.
“If you take 11% of formal trade as base and remove the remaining tariff,
there will be improvement to 15%. If you do well in trade facilitation on
top of removing barriers, intra-African trade will double,” Karingi said.
He said improving on trade information would save 1,8% of transaction costs.
If member states were to apply an advance ruling on trade classification,
trade costs would be reduced by up to 3,7%.
He said improvement of co-ordination among border agencies reduces trade
costs by up to 2,4%.
Karingi called for the establishment of one-stop border posts.
Participants at the trade forum resolved that the implementation of the FTA
be an inclusive process involving all stakeholders.
They were unanimous that a cost-benefit analysis should be undertaken on the
CFTA to facilitate the buy-in of member states and stakeholders for the
initiative.