Services in West Africa’s integration agreements

13 August 2012

Regional Integration Agreements (RIAs) have been used as trade-policy instruments in West African countries since their independence. However, aside from the movements of the production factors, the first RIAs in the subregion barely mentioned services. The first agreements connected with services are: the Protocols of the Economic Community of West African States (ECOWAS) on the free movement of persons, the right of residence and establishment, and articles 91-95 of the treaty creating the West African Economic and Monetary Union (WAEMU). Encouraged by studies showing the positive relationship between the liberalisation of the trade in services and economic growth, the countries proceeded unilaterally – or made commitments during the multilateral negotiations at the WTO – for the liberalisation of the trade in services. However, in part due to the perceived loss of the ability to regulate and the lack of cooperation on regulations, they were reluctant to make major commitments within the General Agreement on Trade in Services (GATS). This reluctance can be overcome by cooperating on regulations to create stronger regulatory institutions, better enlarged access policies, better prudential and competition regulations, and better cooperation between host countries and source countries in Mode 4. This cooperation is already improving on a bilateral and regional level.

The liberalisation approach
As per usual, RIAs in West Africa will not immediately liberalise all service sectors and modes of supply. The content of the liberalisation of an agreement is either explicitly defined by universally applicable rules or detailed in market access lists that are specific to each country. The lists can be designed in a variety of ways. They can be based on positive elements (identifying what is covered or allowed) or on negative elements (unrestricted free trade except for the areas identified in the list). Mixed approaches are also possible. ECOWAS and WAEMU have chosen to adopt the negative approach.

Main areas
Trade agreements set rules that force governments to keep policies in place for the purpose of hindering foreign participation in the national economy. When it comes to the trade in services, these rules relate to national treatment, market access, MFN treatment, and domestic regulation.

National treatment
National treatment is one of the main areas aiming to prevent imported services from being subject to more restrictive political measures than the services of the importing country. The ECOWAS and WAEMU agreements include a national treatment obligation clause that applies to all service activities covered by these agreements. The scope of the national treatment obligation depends on how similar or analogous foreign services and services specific to the importing country are considered to be. National treatment in these agreements implements the “treatment identity” type, and the similarity is based on service providers and not on services. This wording is more than just rhetoric. The implications it has on the market opening are far from trivial. For example, a measure that states that “all taxi drivers must speak the country’s language” metes out identical treatment, but is less favourable to foreign drivers.

Market access
Market access is the second main area involved in deciding the content of the liberalisation of integration agreements. For most RIAs, the measures covered by the market access areas fall into a catalogue of lists of explicit trade barriers. In the GATS, the provision on market access emphasises four types of quantitative restrictions, limitations on the type of legal entity, and restrictions on foreign-owned joint stock. The ECOWAS and WAEMU agreements do not set up areas of market access for quantitative restrictions that are non-discriminatory in nature.

MFN treatment
The principle of the Most Favoured Nation, one of the basic principles of the multilateral trade system, forces members of the WTO not to discriminate between their trade partners. There are no rules for MFN treatment concerning the right of establishment and the movement of natural persons in the West African integration agreements.

The movement of natural persons
Labour mobility is included in agreements on services because, in order for many services to be supplied, suppliers and consumers need to be in close proximity. WAEMU does not specify the category of natural persons and ECOWAS only identifies the following categories: migrant workers, occupational travellers, seasonal workers, and frontier workers.

For professional services, the explicit lack of trade barriers is a prerequisite, but it is not enough to allow access to foreign suppliers. In order to work, foreign professionals must meet one of the two other conditions: they must either have the required local qualifications or have their foreign qualifications recognised. For some professions, the first condition can necessitate several years of training, which can be a de facto barrier to market access. The second condition relates to highly-skilled professions. Even in that case, the government will only recognise external qualifications if it considers that the foreign school system and the professional standards in place abroad are similar to national requirements. Governments then recognise each other’s standards, which leads to mutual recognition arrangements. When it comes to ECOWAS, article 5 of the Establishment Protocol states, among others, that “to facilitate access to non-salaried activities and the exercise of such activities, the Commission shall recommend to the Council, which shall propose to the Authority that decisions be taken for the mutual recognition, at Community level, of diplomas, certificates, and other qualifications.”

Rules of origin
The advantages of RIAs on services benefit the signatory parties and discriminate against the non-signatory parties. The amount of preference given to signatory parties depends on the definition of the rules of origin. Here, the rules of origin are broader, since agreements on services apply both to services and service providers, and relate to (i) Origin of the services; (ii) Origin of legal persons providing services and (iii) Origin of natural persons supplying services.

The ECOWAS and WAEMU agreements have established ‘quite’ a liberal origin rule for legal persons. Indeed, they extend the benefits to legal people who are constituted or otherwise organised under the law of that other member, and are engaged in substantive business operations (or have their main business address) in the territory of that member or any other member, regardless of the national identity of those who hold or control these persons. For naturalised persons, the advantages are limited to community nationals and not extended to permanent residents. No specific origin rule is defined for services.

Trade rules
Trade rules for services are generally a group of areas designed to supplement the main obligations that determine the content of the liberalisation of trade agreements. The main obligations are essentially national treatment, market access, and the MFN treatment. Traditional areas for these rules are: domestic regulation, subsidies, public markets, and emergency safeguards. In these areas ECOWAS and WAEMU agreements have not changed the existing rules within the GATS, nor have they created any new ones (no GATS-X).

Conclusion
In Africa, there are two different liberalisation approaches: on one hand, the ECOWAS and WAEMU agreements and, on the other hand, the intraregional agreements of other regions that have followed the GATS model, like the EAC, COMESA, and the SADC. These differences could lead to a debate surrounding which approach to choose within the context of a broader integration of services on a continental level envisioned by the African Union (AU). Such a choice should a priori be guided by focusing discussion on the approach that would provide liberalisation, more transparency, and more credibility for the future intra-African agreement on services. From a technical perspective, both approaches could meet if the ECOWAS and WAEMU groups were to make the national restriction lists for rights of establishment and the movement of natural persons more transparent.

There seems to be a willingness to promote regulatory cooperation between the countries of the various agreements of the region in selected sectors such as telecommunications. However, it is crucial to follow article 5 of ECOWAS’ right of establishment in order to move forward in the area of mutual recognition for professional services.

Authors:
Aimé Tchabouré Gogué: Professor of international economy at Lomé University in Togo and international consultant.

Sekou F. Doumbouya: Programme Officer at ILEAP.

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