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Comesa plan hits a snag

East African Standard, Kenya

2 August 2004

Comesa plan hits a snag

By James Anyanzwa

The drive for a Comesa Customs Union (CU) has suffered a major setback following sharp differences among member states on the proposed common external tariffs.

Sources close to Comesa indicated that eight of the trading block’s 19 member countries have developed cold feet over the proposed Free Trade Area (FTA) fearing loss of competitiveness and revenue.

The FTA, which was launched on October 31,2000, is a reciprocal arrangement that requires participating member states to offer duty free access to their markets for goods that qualify under Comesa rules of origin.

The area currently has 11 countries including Kenya Egypt, Madagascar, Mauritius, Djibouti, Malawi, Sudan, Zambia, Zimbabwe, Rwanda and Burundi.

The reluctance by the 8 countries to join the FTA and the intense disagreements over a Common External Tariff (CET) are said to be jeopardising any chances of the organisation to actualise the customs union by the December 4, 2004.

Mr James Musonda, a senior consultant at the Comesa secretariat, said the customs union dream was unlikely to be realised by December."We must have a Common External Tariff before we can think of a customs union," Musonda said in Nairobi at a workshop on the status of Comesa trade regime.

It is understood that as part of its efforts to speed up the process, the Comesa secretariat has given member countries up to September 30, 2004 to iron out differences. The proposed tariff structure is due to be evaluated by the Comesa Council of Ministers at a meeting to be held in Djibouti in May 2005.

The meeting will discuss the possible impact of the proposed external tariffs on competitiveness and revenue collection in member countries. Musonda said that participating countries had not agreed on the common external tariff fearing its implications on their revenues.

Other contentious issues include disagreement on the administrative structure for the CET and customs union and differences over competition law.

"Countries are currently consulting on the structures of the common external tariff to be used in Comesa," Mr Walter Kamau, a senior executive officer at the Kenya Association of Manufacturers told said.

The council of ministers will review the status of the Comesa FTA and the roadmap towards the Comesa customs union and then set a new date for the launch of the customs union.

"At the end of the day it is the political will and dedication by governments that will determine whether we shall have a customs union or not. In every integration process there are always losers and winners in the short run," Kamau said.

The biggest challenge is for the Comesa member states to proactively provide sector specific inputs and suggest the kind of CET structure (bands) and rates that can guarantee continuity of their manufacturing industries in the region.

"Any CET structure that does not give adequate levels of tariff differentials between raw materials, intermediate and finished products could lead to the death out of many industries unless their products are exempted from the applicable CET," Kamau said.

It is said that the 10 per cent of total volume of intra-Comesa trade is also at risk.

Imposition of excise duty and suspended duty on goods originating from Comesa region has become a common practice in many Comesa countries. Kenya has accused Malawi of imposing a 20 per cent excise duty on her vegetable oils while Rwanda is imposing suspended duties on galvanized black pipes from Kenya.

Sudan has reportedly to have refused to honour the Comesa certificate of origin for glass tableware and railway slippers made in Kenya. The complainant utilises 95 percent of local raw materials.