Supporting Regional Preferential Trading Agreements | TradeMark Southern Africa (TMSA) - Advancing Regional Integration in Southern and Eastern Africa

Preferential trade refers to preferential trading agreements between governments whereby trade between the signatories is freer than trade with the rest of the world. Within such trade blocs, tariffs, quotas and other trade restrictions are reduced or eliminated. The purpose of such preferential trading agreements is to promote business between the countries involved and to improve the region’s capacity to compete in the global market by making it easier and cheaper to produce, import and export products.

A Free Trade Area (FTA), for example, is a kind of preferential trading agreement / trade bloc that allows each country to have preferential market access for goods originating from it into the other country’s market at tariff rates that are lower than those charged to the rest of the world. Each country maintains its own level of external tariff with respect to trade with the rest of the world. Countries therefore take advantage of their own strengths and take measures to reduce the cost of cross-border trade, thus making the region more competitive and increasing trade amongst themselves.

TMSA provides administrative, technical and financial support to the COMESA-EAC-SADC Tripartite in the establishment of a grand Free Trade Area trade bloc among the 26 member states of the three Regional Economic Communities - the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the East Africa Community (EAC). TMSA also assists the Tripartite to build regional trade policy development and implementation capacity.

Other examples of preferential trading agreement within the COMESA-EAC-SADC region of Africa include bilateral trade agreements, customs unions and common markets, all of which differ with regards to degree of regional economic integration.

Related publications:

Factsheet | Preferential Trade

Projects

COMESA-EAC-SADC Tripartite Free Trade Area (FTA)

The First Tripartite Summit, held on 28 October 2008, saw a formal agreement to establish a Free Trade Area (FTA) comprising member states of the three Regional Economic Communities of the Common Market for Eastern and Southern Africa (COMESA), the East Africa Community (EAC) and the Southern Africa Development Community (SADC). Three years later, the Second Tripartite Summit was held on 12 June 2011. Heads of State and Government came together in Johannesburg, South Africa, to discuss regional economic integration for improved trade performance and sustainable growth.

The Summit agreed that integration under the Tripartite would be a developmental process resting on three critical, interdependent pillars, namely

infrastructure development,
industrial development and
market integration.

A major outcome of the Summit includes the official launch of negotiations for the establishment of an integrated market / Free Trade Area (FTA) consisting of the 26 countries of COMESA, EAC and SADC. These countries make up half of the African Union in terms of membership and currently contribute 58% of its total GDP, estimated at approximately USD 1 Trillion.

The Free Trade Area (FTA) will allow each country to have preferential market access for goods originating from it into the other country’s market at tariff rates that are lower than those charged to the rest of the world. Countries will be able to take advantage of their own strengths and, along with measures to reduces the cost of cross-border trade, this will help to make the region more competitive and to increase trade amongst the countries belonging to the FTA.

The Tripartite FTA builds on a firm foundation of existing trade agreements within the three Regional Economic Communities (RECs). Both COMESA and SADC have functional Free Trade Areas, while EAC has a customs union and common market and are is negotiating a monetary union.

The Second Tripartite Summit reached agreement on the negotiating principles, processes, scope and institutional framework for negotiating the Tripartite FTA. A roadmap and timelines for establishing the FTA were also agreed upon.

The first phase of negotiations will address tariff liberalisation, rules of origin, customs cooperation & customs-related matters, non-tariff barriers, sanitary & phytosanitary measures, technical barriers to trade, trade remedies and dispute settlement. The second phase will focus on negotiating trade in services and trade related issues, including intellectual property rights, competition policy and trade development and competitiveness. Facilitating movement of business persons within the region will be negotiated in parallel with the first phase.

A timeline of 36 months has been set for completion of the first phase of negotiations. In the 6 – 12 months following the Second Tripartite Summit, countries will complete the preparatory phase of negotiations, including the

exchange of information;
adoption of the terms of reference, rules of procedure and the schedule for negotiations;
establishment of a Monitoring and Evaluation mechanism and
preparation of national negotiating positions for core FTA items.

Related publications:

Communique of the 2nd Tripartite Summit - English - 12.06.2011.pdf

Declaration Launching Tripartite FTA Negotiations - English - 12.06.2011.pdf

Negotiating Principles - 12.06.2011 - English.pdf

Roadmap for TFTA Negotiation - 12.06.2011.pdf

SADC Preferential Trading Arrangements

The Southern Africa Development Community's (SADC) Regional Indicative Strategic Development Plan (RISDP) adopted by Heads of State and Government identified the cluster of trade, industry, finance and investment (TIFI) as one of the highest priority intervention areas for regional cooperation and integration. Specifically, the focus on goods and services market integration is to be addressed through the implementation of a Free Trade Area (FTA) in goods and services and the formation of a Customs Union.

A SADC Protocol on Trade entered into force in January 2000 with a phased programme of tariff reductions which commenced in 2001. This resulted in the attainment of minimum conditions for the FTA in 2008 when 85% of SADC intra-regional trade attained zero duty. Maximum tariff liberalization would be attained in January 2012 when the tariff phase down process for sensitive products will be completed.

A programme for the consolidation of the SADC FTA has been elaborated and, together with the recently launched Tripartite FTA, this integration process is destined to make trade an instrument of sustainable growth and development of the SADC economies.

The specific strategies adopted to achieve goods and services market integration in the region are:

the gradual elimination of tariffs;
adoption of common rules of origin;
harmonization of customs rules and procedures;
attainment of internationally acceptable standards;
harmonization of sanitary and phyto-sanitary measures;
elimination of non-tariff barriers;
liberalization of trade in services; and
negotiation and establishment of the common external tariff.

Key objectives of TMSA's support to SADC include

Consolidation of the SADC FTA through providing technical assistance on accession and preparation of tariff offers to countries that are not yet party to the FTA (Angola, Seychelles and DRC); audits on tariff phase downs and rules of origin; harmonization of customs and trade facilitation instruments; addressing standards and SPS issues; implementation of non-tariff barriers and trade monitoring and compliance mechanism (TMCM); addressing gaps in trade statistics and trade information database; developing a trade development and promotion programme for SADC; and dealing with constraints to investment.
Negotiating trade in services liberalization, especially assessing and building of services negotiating capacity, both in the context of SADC and the Tripartite integration process.
Facilitating the development of competition laws in Member States.
Promoting diversified production competitiveness through key interventions including the implementation of the SADC Industrial Upgrading and Modernisation Programme (IUMP).
Preparatory work towards an appropriate strategy and model for a future Customs Union.
Ensuring synergies between the SADC market integration process and the Tripartite FTA.

Benefits of TMSA's support includes

Expansion of small and limited markets for goods and services into larger regional markets in SADC and in the context of the Tripartite region with expected growth benefits
Increased trade competitiveness and productivity especially for small, poor and landlocked countries
Reduction in the cost of doing business through improved trade facilitation
Increased intra-regional trade and investment
Inducing wide-ranging reforms towards accelerating economic growth and reducing poverty

Trade Policy Capacity Development

Trade policy remains an important instrument in the development policy framework of the COMESA-EAC-SADC integration process. For this reason, the Heads of State and Government of the Member States of the Common Market for Eastern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC) have signed a declaration committing them to negotiate and establish a Free Trade Area (FTA) anchored on three pillars: market integration, infrastructure development and industrial development.

This neo-conventional approach to market integration has a clear focus to address the growth-retarding constraints as it goes beyond simple trade liberalization in goods to include services and other measures aimed at reducing the cost of doing business and enhancing economic competitiveness. However, such ambitions largely depend on the capacity of trade officials to design, negotiate and implement the necessary interventions required for the realization of this regional economic integration objective. Effective development outcomes are also contingent upon the capacity of the private economic agents to participate in this process. This capacity should be enhanced.

Against this background, there is a need to design and implement a dedicated skills development programme to address trade policy capacity constraints among officials and stakeholders in Member States as well as within the three Secretariats of the Regional Economic Communities (RECs).

TMSA will develop a collaborative partnership with relevant training institutions in the region to address the challenges associated with inadequate trade policy capacity in the East and Southern African region, with specific reference to the Tripartite Integration Arrangement. Apart from contributing to design and teaching / training, TMSA will offer limited scholarships. The programme will specifically target trade policy officials and relevant stakeholders in the public and private sectors and the three REC Secretariats.

Experience in this area has already been gained through an ongoing mixed-modality post-graduate learning approach on trade policy management and law, in collaboration with the Trade Law Centre for Southern Africa (TRALAC) and the Graduate School of Business at the University of Cape Town. This approach is attractive as it is professionally accredited and allows participants to combine learning with their day-to-day trade policy work.

In addition, TMSA will also develop and implement short training and outreach programmes to support the Tripartite FTA negotiation and implementation processes.

Key objectives of TMSA's support include:

Enhancing capacity among trade policy and law officials and relevant stakeholders in the public and private sectors and in the COMESA, EAC and SADC Secretariats;
Developing and enhancing capacity to design and deliver an effective programme on skills development in trade policy and law, with specific reference to the Tripartite Region ;
Strengthening institutional capacities of the Tripartite FTA to deal with design and implementation challenges arising from it;
Promoting effective cooperation and collaboration with regional institutions and international agencies (such the WTO and World Bank) involved in the delivery of regional trade policy courses with a view to make such interventions respond to the demands of the Tripartite integration process.

Benefits will include:

Increased national and regional ownership of the Tripartite market integration process
Increased capacity of trade officials to effectively negotiate and implement the Tripartite FTA and other complementary regional trade policy initiatives
Enhancing the capacity of existing regional training and research institutions to deliver capacity building outcomes in line with the demands of the region
Promoting effective private-public dialogue towards growth-enhancing trade policy and regulatory reforms

Progress to date include the development of a post-graduate trade policy management course in collaboration with TRALAC and the University of Cape Town Graduate School of Business targeted at students from Tripartite countries and institutions.