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’It’s Ok to Belong to More Trade Blocs’

New Vision, Kampala

’It’s Ok to Belong to More Trade Blocs’

12 March 2008

By Peter Kaujju, Kampala

The East African Community (EAC) in November 2007 signed interim agreements with the European Union (EU) after the December 31 expiry of the Cotonou arrangement that gave preferential treatment to Africa, Caribbean and Pacific countries accessing the EU market. Peter Kaujju, spoke to Chungu Mwila, the director for investment promotion and private sector development at the Common Market for Eastern and Southern Africa (COMESA).

COMESA being Africa’s largest economic bloc, how much have you achieved in trade promotion?

We established the COMESA free trade area (FTA) in October 2000, where 13 states are members. Intra- regional trade has increased by 25% from under $400m to $7.3b at the end of 2007.

Uganda is not yet a member of the COMESA FTA, but we are looking forward to Uganda joining. Studies show that Uganda would benefit by joining the FTA because they will be able to bring in goods duty-free.

Some people have argued that it is because they belong to the EAC and so the country cannot join the COMESA FTA. But what is important is how you can harmonise the different trading regimes. It is possible for trading blocs to co-exist like it’s in Europe and America.

COMESA will evolve into a Customs Union later. What happens to the members like Uganda that already belong to other blocs?

The council of ministers and heads of government last year approved that COMESA should evolve into a Customs Union.

COMESA started as a Preferential Trade Area but in 1993 it was transformed into COMESA.

The next logical step is to have a Customs Union. This will mean having a common external tariff (CET).

Like in the EAC, one of the characteristics is that member states will apply a common external tariff according to the agreed categories.

In COMESA, it has been agreed that raw materials and capital goods will attract zero rate. Intermediate goods will attract CET at 10% and finished products 25%.

This means that since different COMESA countries are charging different rates, they will have to align their import duties to what has been agreed upon.

What is important is for the two regional trading bodies to harmonise their CET.

Isn’t there any conflict having many regional trading blocs?

Member states have realised there is need to harmonise the three trade regimes.

I can confirm that, already there is a tripartite taskforce of the EAC, SADC and COMESA working on how best to harmonise the three trade regimes.

A decision was taken in Nairobi, Kenya that there should be a common summit of the three organisations. The three secretariats are intensively consulting to ensure that the ministers of trade meet this year to see how the three trade regimes can be harmonised.

We are also mindful of a bigger vision of an African Common Market. Although we would like to strengthen the regional trading blocs, the broader vision is that they should fit into the grand plan of an African common market.

Some people have argued that intra-regional trade is not effective as it should be because of the similarity in the goods that are produced. What is your position?

Some sceptics have said we are all banana economies so it is not possible. But the main thrust is on adding value to what we produce and to diversify our economies by investing in various sectors.

What is COMESA’s stand on Economic Partnerships Agreements (EPAs) because some regions have signed independently?

The key factors is that African countries should be able to reciprocate and not only be given preferences to access the European market. They should also be able to access our market.

African governments and COMESA in particular, have argued for putting development at the centre of EPAs. There should be more resources coming to the region for us to be able to benefit from the agreements.

That is why when we started negotiations, COMESA and other blocs were configured into Eastern and Southern African Countries (ESA) to negotiate with the EU.

We decided to negotiate as a bigger group for a better thing and negotiations proceeded accordingly. What is important to note is that the negotiations have not yet been completed. But because the Cotonou Agreement was expiring on 31st December 2007, the Europeans were arguing that there was no framework for preferences. It was important to sign the interim agreement. Negotiations are continuing.

Only last week, COMESA convened a meeting of the taskforce and it was agreed that Africa has to remain as one group when it comes to negotiations. The African Union is coming to insist that no regional bloc will be allowed to sign agreements with the EU. Our stand point is that no group should be disadvantaged and that is why we want to ensure that what we get out of the EPAs will benefit African countries.