Launch of African Tripartite FTA Set for June

19 March 2015

The launch of a 26-country African trade deal will now take place in June during the third Tripartite Summit between the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and Southern African Development Community (SADC), sources have confirmed.

This Tripartite Free Trade Area (TFTA), once enacted, would bring together these three regional economic communities, COMESA, SADC and the EAC, which are jointly hosting the June event. The dates of the meet were not yet confirmed at press time.

The countries covered under the TFTA would range from Egypt to South Africa, a group that has a combined population of 625 million people and an aggregate GDP of US$1 trillion. These figures represent half of the African Union’s membership and 58 percent of the continent’s economic activity, according to COMESA.

Negotiations to launch the TFTA began in 2011, when heads of state from the Tripartite countries adopted a declaration  aimed at establishing an FTA that emphasised market integration, infrastructure, and industrial development as the three main pillars. The negotiating principles and related roadmap were also adopted during this summit.

New deadline

The launch of the TFTA was originally planned for December 2014 at the Tripartite Summit of Heads of State and Government in Cairo, Egypt.

However, it was then delayed and rescheduled for the first quarter of 2015, according to a draft report of the senior official’s meeting that preceded the December African Union Conference. (See Bridges Africa, 10 December 2014)

This past January, Fatima Acyl, AU Commissioner for Trade and Industry indicated that the TFTA would be launched in May in Cairo, Egypt. (See Bridges Africa, 2 February 2015)

After the TFTA launch in June, negotiations to establish a continental FTA across Africa are expected to begin shortly thereafter.

More progress expected

Last month, Malawi hosted the 11th Tripartite Trade Negotiations Forum (TTNF), with discussions geared toward finalising work in various areas such as tariff offers, rules of origin (RoO) regimes, trade remedies, dispute settlement, and movement of business people.

“The meetings in Malawi did not achieve as much as we expected,” said one source involved in these negotiations.

Apart from RoO, the other difficult negotiating areas include trade remedies and the dispute settlement mechanism, the source said.

Rules of origin

The COMESA-EAC-SADC troika faces significant challenges in harmonising differential RoO, which have so far impeded inter-regional trade and the creation of regional value chains. One of the key challenges involves finding an acceptable framework for RoO, as the EAC and COMESA regimes in this area are significantly different from the one used by SADC. 

Experts such as Eckart Naumann from the Trade Law Centre in South Africa have pointed out that 56 percent of the RoO vary across the three regional economic communities.

The TTNF agreed during their previous round of discussions last October that “where rules of origin among the three RECs are common or identical, these will be adopted as Tripartite rules without engaging in negotiations on these rules.”

At their February meeting, the TTNF then considered the need for a legal instrument for the operationalisation of the interim rule of origin for the Tripartite trade deal.

Currently the following option to operationalise rules of origin under the TFTA has been suggested: where rules are common, 35 percent ex-works costs (distribution and logistics) has been retained as an interim option to define the local input that is required for finished products to be considered TFTA goods. If enacted, such a move could mean that products on which this value-added criteria of 35 percent ex-works cost would apply could gain duty-free regional market access. 

Work on rules of origin is likely to continue after the launch of the TFTA as part of the “post signature activities,” one trade observer said.

Discussions related to rules on specific products will be more “gradual,” although “it is not expected that such work will be completed prior to the launch.”

Trade remedies, dispute settlement

The annex dealing with dispute settlement has been concluded by a technical working group and will be considered at upcoming TTNF meetings. Deliberations on dispute settlement and trade remedies have been deferred to the next TTNF.

The discussions on these topics have been particularly challenging given the lack of consensus on the approach and content of trade remedy disciplines in the planned Tripartite Free Trade Area, according to a negotiations progress report from the 10th TTNF held in Bujumbura, Burundi last October.

Another TTNF will take place in the coming months where “more concrete progress should be achieved,” according to the source.

Tariff liberalisation

Fifteen countries had made offers by the time of the third Tripartite Sectoral Ministerial Committee (TSMC) on Trade, Finance, Economic Matters, Home and Internal Affairs, which also took place last October in the context of the 10th TTNF. The other Tripartite member states have since been in the process of exchanging tariff offers.

At the October meeting, those member states that have not exchanged tariff offers were urged to do so by 30 April 2015.

The Tripartite Task Force was also tasked with filling Annex 1 of the TFTA agreement with finalised tariff offers, while mobilising resources to assist those member states having trouble with completing their offers.

Tariff offers for all COMESA countries that are not in in the EAC or SACU are “ready” except for Zimbabwe, the Democratic Republic of Congo, Eritrea, and Ethiopia, according to the negotiations progress report.

All EAC member states – Burundi, Kenya, Rwanda, Tanzania, and Uganda – have also completed their tariff offers.

Offers for Burundi, Kenya and Rwanda are based on the EAC acquis of 100 percent tariff liberalisation for existing FTA countries, subject to reciprocity. For example, the EAC has had exchanges with both SACU and Egypt of tariff offers and has since begun negotiations with both.

Tariff offers for non-COMESA SADC countries, including Swaziland, were not yet ready, the report said.

According to the report, the modalities for tariff liberalisation set a goal of 100 percent tariff liberalisation under the TFTA. 

The principle of “building on the acquis” has been retained. As a result, countries that are members of existing regional economic community (REC) FTAs are not required to negotiate tariff liberalisation under the TFTA with other members of the same regional deals. However, they can consolidate their existing tariff liberalisation levels into the TFTA in line with the above-mentioned principle.

In addition, the modalities stipulate that for countries that have not yet fully liberalised their tariffs under their respective REC regimes, or between countries in existing REC FTAs, 60-85 percent of tariff lines should be liberalised upon the TFTA’s entry into force. The text includes an additional period of five to eight years to liberalise the remaining tariff lines.

Movement of business people

The main stumbling block to progress on the movement of business persons has been divergent views over the interpretation of the ministerial direction that negotiations should take place in Phase I of the TFTA "on a separate track." 

Following guidance from the third meeting of the TSMC in October 2014, the Technical Tripartite Committee on Movement of Business Persons (TC-MBP) agreed to develop the terms of an agreement on the Movement of Business Persons. The COMESA-EAC- SADC Tripartite Technical Committee settled on a draft agreement on the movement of business persons within the region in November 2014.

While much progress has been achieved in the last two meetings of the TC-MBP, some important articles on the draft agreement are still outstanding and have to be resolved. These include guiding principles, temporary entry, stay and exit, and dispute settlement.  

National consultations are ongoing on all these areas and a meeting of the TC-MPB could be held in July to resolve the outstanding issues.

Industrial development

The Tripartite Technical Committee on Industrial Development (TTCID) has adopted draft modalities for cooperation and a draft programme of work on industrial development.

This committee will now develop the appropriate legal instrument for cooperation in industrial development, as outlined in the Programme of Work and Road Map.

Linking TFTA, EU-EPAs

A briefing released this month by the European Parliament explains that the creation of the TFTA is “important” in the context of the Economic Partnership Agreements, as it would prevent a potential situation in which EU goods could enjoy better access to local markets than products originating from other African Regional Economic Communities (RECs).

The EU concluded its EPAs with three African regional economic communities last year, namely SADC, EAC, and the Economic Community of West African States (ECOWAS), after more than a decade of difficult negotiations.

All three African RECs are now expected to engage in the ratification process for these EPAs.

Next steps

Among other elements, the finalisation of negotiations on outstanding TFTA areas – especially in regards to rules of origin, trade remedies, and dispute settlement – will be introduced following the launch of a post-signature implementation plan.

After the launch, the deal will enter into force upon ratification of the text by two-thirds of the Tripartite FTA member states, according to the revised 2010 draft agreement. The Tripartite FTA will then serve as a building block for the continent-wide free trade agreement, known as the Continental FTA.

During a meeting last month, Sindiso Ngwenya, Secretary General of the Common Market for Eastern and Southern Africa (COMESA) and Chair of the Tripartite Task Force, proposed that COMESA, SADC, and the EAC jointly launch negotiations with the ECOWAS for establishing an FTA. (See Bridges Africa, 6 February 2015)

ICTSD reporting.

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