Niamey, July 07, 2019
With the launch of the operational phase of the African Continental Free Trade Area (AfCFTA) in Niamey, Niger on 7th of July 2019, the urgency to make intra-Africa trade the driving force behind economic growth on the continent has never been greater. As the clock ticks towards the commencement of the AfCFTA, the African Union Commission (AUC) and Trade Mark East Africa (TMEA), one of the largest aid-for-trade organisations worldwide, have forged a
partnership to boost intra-African trade and realise the ambitions for the continental free trade area in selected Southern and Eastern Africa countries.
In a wide-ranging interview on trade-related issues with CUTS Nairobi team, H.E. Erastus Mwencha, the Chairman of TMEA and immediate former Deputy Chairperson of the African Union Commission, discusses the strategic partnership with the AU, progress made in reducing trade costs within the East African Community (EAC) region, the various barriers to trade, national plans being undertaken in anticipation of the AfCFTA as well as TMEA’s recent expansion. Below are edited excerpts.
Despite having eight Regional Economic Communities (RECs) that are the building blocks of the CFTA, African countries have to a large extent not exploited opportunities to trade with each other. Why is this the case?
Africa’s intraregional trade lies well below that of other regions because African countries are yet to exploit their latent potential in trading among each other. For example, at just 12 percent, intra-EAC trade volumes have not reached desired levels, yet it has the potential to grow at between five and 10 per cent annually. There are various factors that have constrained efforts towards successful African economic integration, ranging from persistent non-tariff barriers to overlapping membership to economic blocs, political upheaval, weak interdependence of trade systems, and homogenous primary commodities. Moreover, complex and often conflicting trade rules, incoherent external policies, poor connectivity and limited availability of information on trade opportunities remain a challenge.
While the continent has made some gains in the past 10 years, intra-Africa trade (IAT) still cries for solutions as the share of intra-African exports as a percentage of total African exports remains low compared to other regions of the globe such as Europe, Asia and North America. There is clearly much more work that African countries need to do to increase intra-regional trade. The AfCFTA is therefore a welcome intervention as it is projected to increase the value of intra-African exports primarily through the removal of tariffs on goods and expansion of the services sector.
Since its establishment in 2010, TMEA has built an excellent track record of helping EAC member states to reduce the cost of doing business. Tell us more about how this has been achieved.
As an aid-for-trade organisation, TMEA works closely with the EAC partner states, EAC secretariat, the private sector and civil society through regional and country specific programmes to generate momentum and capacity to address obstacles to trade, competitiveness as well as factor mobility.
In this context, we support the EAC and Partner States in the implementation of the World Trade Organisation’s Trade Facilitation Agreement (WTO TFA) that focuses on lowering the cost of doing business by minimizing regulations and procedures required to move goods and services across borders. Using the Problem-Driven Iterative Adaptation (PDIA) framework, TMEA has successfully applied both results driven and corridor approaches to facilitate trade and develop more efficient transport corridors in the EAC region.
One of the major TF projects we have championed is the provision of transport and trade infrastructure at ports and border posts in the EAC regions. For instance, we have helped Kenya and Tanzania to catalyse over $500m from international lenders for physical infrastructure investments at Mombasa and Dar Es Salam ports, resulting in significant port time reductions.
TMEA has also built and delivered more than 12 One-Stop Border Posts (OSBP) and supported the implementation of integrated border management (IBM) systems in Rwanda, Burundi, Uganda and Kenya. This is in addition to the Single Window projects in Rwanda, Uganda and Kenya.
Besides the aforementioned, we have also supported the limination of non-tariff barriers (NTBs) to trade in the EAC through the Time Bound Programme on Elimination of Identified NTBs. As a result, a significant number of NTBs have been identified and removed. This has played a role in the reduction in in both the time taken, and costs involved, in trading across borders in the EAC in recent years. Moreover, our TF dialogue on standards harmonisation within the EAC has led to a 99 percent reduction in average conformity assessment clearance time for certified goods as well as substantial testing cost savings.
Taken as a whole, these interventions have helped to deepen regional integration while enabling EAC Partner States and business to reap huge benefits, thereby boosting local economies and stimulating growth. As we speak, EAC is one of the continent’s fastest-growing regional blocs, registering an economic growth of 5.7 percent in 2018.
TMEA recently expanded to seven new countries beyond the EAC region to adjoining Southern African Countries. What informed this move?
TMEA was established with the aim of supporting a portfolio of trade development and regional integrations programmes across the EAC partner countries. We take particular pride in being the
largest aid-for-trade organisation globally and this is reflected in the breadth and depth of our activities as well as our excellent track record of implementing successful TF programs across the region. We are excited with this new phase of growth into seven other countries beyond the EAC region.as we seek to deepen regional integration and enhance trade competitiveness.
The expansion is informed by the successful TF initiatives in EAC region and fueled by the need to increase cross-border trade by unlocking economic potential across Eastern and Southern Africa. We want to leverage TMEA’s experience in East Africa and ensure similar TF initiatives are implemented to boost trade and prosperity in the adjoining Southern African countries. While there are other emerging lessons from on-going projects that will guide the design of our new regional activities, it is clear that TMEA’s multi-donor institutional model focusing on trade and development has been successful in helping to mobilise substantive resources to support regional and country specific programmes aimed at achieving the EAC regional integration agenda.
TMEA and the AUC have forged a partnership to boost intra-African trade. How will the two parties work to boost intra-African trade and help Eastern and Southern African countries prepare for the onset of the AfCFTA?
The AfCFTA is an “economic game changer” and a major leap forward for Africa as it creates a single African market of 1.27 billion consumers and more than US$ 2 trillion in GDP, making it one of the largest free trade areas to be formed in decades. It constitutes a necessary response to the challenges facing Africa in the multilateral trading system and the global economy. If it successfully implemented, it has great potential of changing the economic trajectory of the continent. However, there are complexities in implementing the AfCFTA that require partnerships between the AU and key stakeholders in the region such as TMEA. Understandably, similar approaches followed by TMEA in supporting EAC and its new frontier countries to address obstacles to trade would be replicated in implementing the AfCFTA.
The AU-TMEA partnership is therefore an important milestone and is designed to provide strategic support to the AUC in order to ensure a successful implementation of the AfCFTA Agreement. The partnership embodies our mutual vision of a prosperous Africa unified by free trade and offers the opportunity to start implementing priority initiatives aimed at boosting intra-Africa trade even as negotiations on other sticky issues continues. One of the key features is the collaboration on the development of an action plan for the implementation of the AfCFTA for selected countries in Eastern and Southern Africa. With operations across six countries, and working with a multitude of stakeholders, including government, private sector and civil society, TMEA is well-positioned to support the AU to realize the goals of the CFTA agreement.
Another key aspect involves complementing each other’s efforts in supporting the implementation of the Action Plan for Boosting Intra-Africa Trade (BIAT) that aims at deepening Africans market integration, fostering competition among African countries and significantly increasing the volume of trade that African countries undertake among themselves. To this end, we will join forces to increase export growth and diversification, develop and monitor trade/transport corridors so as to improve the flow of goods, services, people and information between countries and regions as well as to address a host of other non-tariff barriers to trade.
In light of important role played by the private sector, women and youth with respect to crossborder trade, the partnership will jointly encourage their inclusion in the negotiations and the implementation of the AfCFTA.
While Africa has increased its aggregate trade volume, intra-African trade is still lagging behind trade with China and the EU. Does TMEA have a solution or intervention that will address this perennial challenge?
It is quite unfortunate that Africa’s share of trade with China and the EU still surpasses that happening within the continent. The reality is that trade flourishes when countries produce what their trading partners are eager to buy. With a few exceptions, this is not yet the case with Africa as many countries in the continent specialize in the same export products as their neighbors, making it difficult to trade with each other. This is a primary reason for the low intra-regional
trade and continues to pose a huge challenge for policy makers and regional integration.
The urgency to make intra-Africa trade the driving force behind economic growth on the continent has therefore never been greater, and the CFTA offers the promise of increasing intra- African trade by a projected US$34.6 billion by 2022 through the removal of tariffs on 90 percent of goods and progressively liberalizing trade in services, thus paving the way for job creation, sustainable development and economic growth. Besides the AfCFTA, the AU Heads of State and Governments in January 2012 adopted the BIAT Action Plan aimed at deepening Africa’s market integration and significantly increasing the volume of trade that African countries undertake amongst themselves.
While there is no magic bullet, our experience in unlocking the potential for adjoining neighboring countries to trade shows that trade facilitation combined with infrastructure is key in driving intra-regional trade and catalysing investment. TMEA has made this possible by focusing on addressing bottlenecks to trade and automating trade processes. By implementing quick win measures to thin borders and reduce the cost and time to trade along key corridors, TMEA will help keep momentum going for these two ambitious initiatives to be realised while countries are involved in the longer-term exercise of negotiating trade and tariff regimes.
TMEA therefore calls for renewed political commitments from governments to implement agreed obligations enshrined in trade agreements. This should be complemented by strong commitment to rules-based governance with regards to international agreements and building institutional capacity so as to ensure that people benefit from trade and investment. Added to this is the need to boost connectivity and information availability among AU member states as well as the elimination or significantly reduction of non-tariff barriers. For this to happen, it will require practical steps on the ground even if they come with some costs.