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3.1 Developments in trade negotiations VI: Economic Report on Africa 2007

Written by: United Nations Economic Commission for Africa

Article Overview: Other developments in international trade negotiations

3.1 Developments in trade negotiations VI: Economic Report on Africa 2007

Other developments in international trade negotiations

In light of the recent suspension of the WTO negotiations and the ongoing EPA
process, African countries have an ever greater interest in diversifying their export
markets. They are involved in a number of regional and free trade agreements and
negotiations. They are also benefiting from several major preferential schemes such
as the USA’s African Growth Opportunity Act (AGOA). Some African countries
are also engaged in bilateral trade talks with other regions of the world. This section
highlights the major recent developments related to these processes.

African regional integration

Fostering African regional integration has been a long-standing objective of the
continent. The Treaty of Abuja Establishing the African Economic Community in
1991, (chapter 1) calls for a gradual continental integration process centred on the
integration of the five subregions (North, West, East, Central and Southern). EPA
processes are also aimed at supporting regional integration in Africa. Unfortunately,
integration remains hampered by several obstacles including political and security
factors, poor transport and communication infrastructure, a low degree of complementarity
in the structures of production and the overly complex web of memberships
across different RECs.

This latter problem, also known as the “spaghetti-bowl” situation is particularly acute
in some subregions. In West Africa, the most advanced integration is by far that of
the WAEMU while EPA negotiations are ongoing between EU and ECOWAS to
which is associated Mauritania, a member of the Arab Maghreb Union (AMU).
Cape Verde, a member of ECOWAS, has recently shown interest in negotiating a
separate EPA with EU (www.acp-eu-trade.org). Most but not all of the COMESA
members are negotiating EPAs under ESA. Egypt and Libya are COMESA members
but are not part of the EPA negotiation process. However, there are long-term plans
for a customs union among COMESA countries so this means that the ESA external
tariff may have to be reviewed at a later stage.

Meanwhile, Kenya, the largest economy in Eastern Africa, is associated with Uganda
and Tanzania in the East African Community (EAC) customs union. However, while
the former two are negotiating EPAs with ESA, Tanzania is negotiating its EPA with
SADC. SADC is planning to create a customs union by 2008, implying that Tanzania would, in theory, be part of two customs unions. Moreover, within SADC,
Southern African Customs Union (SACU) countries are associated in a customs
union with South Africa, which has its own trade agreement with EU. South Africa
has, however, been recently associated with SADC in the EPA negotiations, which
should contribute to harmonization of positions. In the longer term, it seems that
the obvious solution to the question of overlapping membership is the creation of a
pan-African free trade area and then customs union, which is the stated objective of
the Abuja Declaration.

Preferential trading schemes

Thirty-seven African countries are eligible under AGOA, which grants African countries
quasi DFQF access to the US market. In 2005, US imports from SSA under
AGOA totalled $38.1 billion, up 44 per cent from the previous year, primarily due
to an increase in imports of oil. US non-oil imports from Africa actually declined by
16 per cent to $2.9 billion, mainly due to increased competition in the textile and
apparel sector in the wake of the termination of the Multifibre Agreement. There
were also some minor advances in traditional and non-traditional sectors such as
chemical products, fruits, nuts, cut flowers and footwear.

Thirty-four African countries are LDCs and are therefore eligible for the EU’s “Everything
but Arms” scheme. Other non-LDC African countries are either beneficiaries
of EU’s GSP or are party to a bilateral free trade agreement with the EU (TDCA
and Euro-Med process).

Other recent developments with regard to preferential schemes include the participation
for the first time of a customs union – Mercosur - in the General System of
Trade Preferences (GSTP). GSTP is a South-South initiative under which developing
countries grant each other preferential market access.
Bilateral talks

Several African countries or groupings are also involved in bilateral trade negotiations
in order to diversify their export markets and enhance their integration in the
global economic system. For example, WAEMU countries are currently negotiating
FTAs with several North African countries. USA and SACU are also engaged in
free trade talks. South Africa is discussing a potential FTA with India and Mercosur
countries. With the recent explosion of trade flows between Africa and China and
India, several countries are carrying out bilateral trade negotiations with these two
Asian nations.

With the suspension of WTO negotiations, several countries and regions have
expressed an increased interest in enhancing their trade arrangements networks. EU
has recently issued a declaration that it intends to negotiate agreements with countries in South and South East Asia, and revive its negotiations with Mercosur. The
USA is also currently negotiating several agreements within the Western hemisphere
and Asia. In this context, there is a risk that Africa will remain isolated from the
wave of bilateral trade agreements, due to its low negotiating and manufacturing
capacities.

Africa could in effect remain in a “spoke” situation while richer countries with more
negotiating and production capacities are able to place themselves at the centre – or
hub – of a network of trade agreements, thereby attracting more investments. In
order to avoid such a situation, African countries must -with the support of the
international community - continue to reinforce their trade capacities, both in terms
of policy formulation and of negotiations and marketable products. They must also
reinforce these capacities at the regional level in order to reap economies of scale.

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Article Tags: Africa, Africa, African countries, African countries, African Economic Community, African regional integration, AGOA, COMESA, customs union, EPA, free trade agreement, free trade agreements, integration, processes African regional integration, regional integration, SADC, South Africa, USA s African Growth Opportunity Act AGOA, WTO negotiations



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