11 December 2006

Now oil-rich Libya to join Comesa FTA

By JAINDI KISERO

The EastAfrican

Oil-rich Libya is to become the second North African country after Egypt to join the Free Trade Area of the Common Market for Eastern and Southern Africa (Comesa). The implication is that exports from this oil-rich country will now have duty-free access to 13 other Comesa member-states that have so far signed on to the Free Trade Area arrangement.

According to a confidential report of the proceedings of the Comesa Council of Ministers held in Djibouti last month, Libya informed the meeting that it had already ratified its accession to the trading bloc and would formally conclude the process after submitting the legal instruments to the Comesa secretariat in Lusaka, Zambia, later this month.

Libya has in recent years begun playing an increasingly visible role both in terms of investment and trade in East and Central Africa. Only recently, its state-owned oil marketing company, Tamoil, announced that it was acquiring the East African assets of the American oil major Mobil. The Libyans are also at an advanced stage of clinching the deal to build the Kenya-Uganda Pipeline Extension project.

Arab-African countries have lately been playing a greater role in Comesa in their bid to find new markets for their relatively more developed and low-cost manufactured products. Indeed, the growing importance of the Muslim North in trade within Comesa is gradually changing traditional trading patterns on the continent, with the Northerners growing into an important export destination for agricultural commodities produced in the sub-Saharan countries of Comesa. Egypt, Sudan and Libya are growing in importance as destinations for tea exports from Kenya, Uganda, Rwanda and Burundi.

The largest trading bloc on the continent, Comesa is still experiencing difficulties in persuading some of its member states to move to the next level of integration by joining the FTA. The upshot is a state of confusion: a Tower of Babel where each member is forced to trade with each other member despite the fact that member may be at a different stage of integration.

While 13 countries are members of the FTA, countries such as the Democratic Republic of Congo, Ethiopia, Seychelles and Uganda are still trading under the Preferential Trade Area (PTA) arrangement that allows only limited duty-free access to members.

Swaziland, whose membership in Comesa overlaps with its membership of the Southern African Development Community (SACU), is a member in name only, having been allowed to trade under a “derogation” - meaning that the country is altogether exempted from opening its markets to others under Comesa terms. Clearly, Comesa must sort out the confusion quickly considering that its plan is to move from the FTA to the next level of integration - a Customs Union targeted for the year 2008.

Libya’s announcement that it was joining the FTA was clearly one of the most important highlights of the Council of Minister’s meeting. Also to announce that it had decided to join the FTA was the Indian Ocean archipelago of the Comoros. With these two new entrants, the total number of countries in the FTA has increased to 15.

What is emerging, however, is that most of the non-FTA countries are still reluctant to come on board. A closer look at the proceedings of the meeting of the Council of Ministers reveals that most member states are still trotting out excuses for not joining, either saying that they are still conducting consultations with the private sector or that they are yet to conclude their research into the consequences of joining the trading bloc.

For instance, Uganda said that it cannot make a decision on joining the FTA until December next year, when the Cabinet is expected to have considered the issue. Kampala, however, added its Minister of Finance Ezra , had already given the cleared participation in the FTA .

In the case of Ethiopia, the government said it will not make a decision on joining the FTA until it receives and considers the outcome of a study it has commissioned on how entry into the trading bloc is likely to impact on its economy.

Seychelles informed the council that it will only make a decision after completing consultations it has been holding with the Comesa secretariat on how some of the goods it wants to be treated as “sensitive items” are likely to be affected once it joins the FTA. DR Congo said that its experts have already submitted the necessary papers and instruments to the government for approval and that it plans to join the FTA after the swearing in of the new government. Swaziland said that although there was support for the country’s participation in the FTA within its private sector, civil society and parliament, it was still reluctant to join.

As a matter of fact, the minutes of the Council of Ministers meeting show that Swaziland requested Comesa to extend its derogation to the year 2008. Reluctance by some member states to enter Comesa’s FTA is but one of the challenges facing the trading bloc. Several trade disputes between member states are still to be resolved.

For instance, Malawi, Kenya and Zambia are still at each other’s throats over duties on wheat flour. At the Djibouti meeting, the Council of Ministers was informed that the Comesa secretariat had commissioned a new independent study on the wheat flour sectors in the three countries to verify the facts about the dispute.

The secretariat also announced that the results would be circulated to the concerned governments by the next meeting of the Trade and Customs Committee. In the meantime, Kenya has given an undertaking that it is committed to implementing the wheat flour quota imposed by the council and that it has put in place the necessary internal rules to guide wheat flour imports from December 2006 to May 2007.

Then there is the palm oil controversy that has pitted Kenya against Zambia. The Council of Ministers noted that, in view of the stalemate between the two countries over palm oil-based cooking oil exports from Kenya to Zambia, there was a need for an independent review of the manufacturing process to resolve the impasse.