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East Africa: Ministers propose bigger regional trading bloc

Business Daily (Nairobi) | 12 February 2008

East Africa: Ministers Propose Bigger Regional Trading Bloc

Allan Odhiambo

East Africa’s trade ministers have proposed the formation of a larger trading bloc to eliminate friction among states over deals signed with partners outside the continent.

The proposal made at a meeting of the Trade ministers in Arusha last week calls for the formation of a grand Free Trade Area (FTA) consisting of the Common Market for Eastern and Southern Africa (Comesa) and the Southern Africa Development Community (Sadc).

Sources at the meeting said the council of ministers had agreed that a wider FTA offered the best solution to the differences that have arisen among East African Community (EAC) member states in the recent past.

The differences deepened recently with indications that Uganda plans to leave Comesa preferring to belong to a single trading bloc - EAC. Tanzania left Comesa eight years ago but remains a member of SADC, a situtation that has complicated EAC’s drive towards a unified market within Comesa.

The drive for a grand coalition is in line with a resolution passed during last month’s African Union summit in Addis Ababa that called for continent-wide cooperation among African states in matters of trade and development.

Differences among EAC member states have hinged on Tanzania’s firm grip of SADC, igniting regular debates as to what platform best serves East Africa’s economic interests.

The proposal for a grand FTA was made after trade technocrats from EAC member states failed to agree on the key outstanding issues such as the signing of a comprehensive Economic Partnership Agreement (EPA) with Europe later this year.

"The ministers have the final say on which way to go," said Dr Richard Sindiga, the chief economist at Kenya’s Trade and Industry ministry.

At the meeting, Tanzania is said to have maintained that it would continue being a member of SADC contrary to the wishes of Kenya, Rwanda and Burundi who are in favour of Comesa.

Uganda reportedly tabled an even more radical proposal requiring the member states to cease their membership in all other trading blocs except EAC.

It also emerged that Tanzania was weighing the possibility of negotiating a new EPA with Europe under SADC while the rest of the EAC bloc are for the Comesa-backed Eastern and Southern Africa (ESA) platform.

All these plans were however dropped and with all EAC member states agreeing to signing new trade arrangements with the EU under the East African Customs Union.

Analysts said the challenge for Tanzania continuing EPA negotiations under SADC is that it would be forced to sign under the Southern African Customs Union (SACU).

It is said that such a move would be in contravention of the WTO regulations since the country is already included in the pact that the EU signed with EAC Customs Union.

Kenya and the rest of EAC members also found it impossible to pursue the ESA route because Comesa remains an amorphous bloc having yet to establish a Customs Union.

A free trade area refers to a group of countries that have agreed to eliminate tariffs, quotas and preferences on most (if not all) goods trading among them. It a form of economic integration that comes out of countries whose economical structures are complementary.

The Comesa bloc has a 14-member FTA, including Kenya while SADC plans to establish a similar bloc by the end of this year.

Sources at the Arusha meeting told Business Daily Kenya had expressed reservations over the grand FTA proposal, citing the threat that South Africa’s larger economy could pose to it.

Observers, however, said that Kenya’s concern could be "laced with a tinge of mischief" because it has the provision to negotiate for favourable terms of an FTA arrangement.