Despite benefits, EAC not ready yet for COMESA competition
The East African Community (EAC) is considering a tripartite free trade area with the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC).
This is despite the fact that the five-member community still has many issues that are obstructing free movement of goods and services within the EAC common market. The tripartite was first proposed in 2001 with COMESA and SADC seeking collaboration on matters of integration.
This collaboration was extended to include the EAC in 2005 and the COMESA, EAC and SADC secretariats agreed to establish a Tripartite Task Force (TTF) in 2006.
A 2008 Kampala summit of heads of state and governments provided a political impetus for guiding and enabling the process of establishing the grand Free Trade Area (FTA) by directing the three secretariats to prepare all legal documents and necessary steps for establishing a FTA.
During a recent conference hosted by Rwanda‘s Private Sector Federation, experts from the East African Business council (EABC) and other EAC officials tried to justify the tripatite with emphaisis on its impact to the private sector.
According to Geoffrey W.O.Osoro of the EAC secretariate, the Tripartite‘s vision is to improve the economic and social welfare of the citizens of the three regions through promotion of regional economic growth by creating a conducive environment for regional trade.
“That vision has three main pillars including market integration, infratructure development and industrial development,” he said.
Market integeration would probably intrest the private sector most as states are increasingly looking at expanding their markets to reduce dependency on European markets that have of late become unreliable.
For instance 90% of Rwanda’s main exports, coffee and tea, are consumed by Europe, US and Asia.
Hannington Namara, the CEO of Rwanda Private Sector Federation says his members are already trading with some countries who are members in COMESA and SADC even before the proposed FTA is in force.
For instance mid 2011, Rwanda moved to adopt the COMESA system known as the Regional Customs Transit Guarantee (RCTG), aimed at reducing costs incurred by Rwandan traders associated with transportation of transit goods within the region—believed to be the highest in the world.
As of 2010, more than 50% of Rwanda’s non-commodity exports were sold to the Democratic Republic of Congo, one of the 20 members of COMESA since, 1981.
As for the 15 member-SADC, Rwanda already enjoys enormous trade with the likes of Zambia and again DRC which has been a member since 1997.
Namara however reamins doubtful that EAC is ready to fully open up to competition from COMESA and SADC whose intergrations has gained more experience.
“We need to sort out remaining issues within our own common market before we delve deeper into the tripartite. Nonetheless, it will be a boast to what we have already,” he said.
An analysis by the International Trade Centre and presented to participants at the recent meeting held in Kigali asserted that the Tripartite would lead to an increase in the volume and value of overall trade as well as increase in the growth rate of future trade due to reduced tariffs.
The combined GDP of all 26 states countries in the tripartite would amount to over $1,017 billion (2010 estimate) with South Africa, Egypt, Angola and Libya leading the pack at 35.5 %, 21.3 %, 8.0 % and 7.9 % respectively.
It’s obvious that the combined economies of the East Africa are still inferior to those of SADC and COMESA contributing only 7.8% to the tripartite (less than Libya’s worth of 7.9%).
“That means East Africa stands to benefit more by dealing with bigger economies,” said a member of Tanzanian private sector.
But that could also mean, if the region plunged into the tripartite without getting proper preparation, it would be swallowed by the bigger economies hence losing those benefits.
“That’s why we need to strengthen our block first through improving the competitiveness of our own traders to place them in a better position to compete within the tripartite,” said Namara.
Several factors including none-trade barriers, negative policies by partner states and poor infrastructure hinder trade within the EAC.
The issue of identifying an EAC citizen will also present its own challenge as partners have up to now failed to reach a consensus on an east African passport that would create a regional rather than a national citizen. The same goes for visas and work permits. While Rwanda abolished work permits, partners still have them in force.
Therefore, though a tripartite is a good idea for EAC, the bloc has an urgent task of putting its own house in proper order before they open borders to COMESA and SADC.