COMESA

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• COMESA TOWARDS THE CUSTOMS UNION
• COMESA Free Trade Area including update on the
  Customs Union
• Port Louis, Mauritius
• 23rd April, 2009

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(No Transcript)
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COMESA Member States participating in the FTA

• Burundi
• Comoros
• Djibouti
• Egypt
• Kenya
• Madagascar
• Malawi
• Mauritius
• Libya
• Rwanda
• Sudan
• Zambia
• Zimbabwe
• Seychelles

• Non-FTA Countries
• Reduction of MFN rates.
• DR Congo Nil
• Eritrea 80
• Uganda 80
• Ethiopia 10
• Swaziland Under derogation from SACU
• Mauritius and Kenya offer 90 reciprocity.

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Elements of the COMESA FTA

• A Free Trade Area Removal of tariffs and
  equivalent
• charges on intra-regional trade. Main elements of
  FTA include
• Zero tariffs on goods from COMESA Countries.
• Goods from non-COMESA dutiable at full national
  tariff rates.
• No NTBs on COMESA goods.
• Institution building
• Application of COMESA Rules of Origin.

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COMESA Rules of Origin

• They have been wholly produced.
• The c.i.f value does not exceed 60 of the local
  materials used
• in the production of the goods or
• The value added as the result of the process of
  production
• accounts for at least 35 of the ex-factory cost
  of the goods or
• The goods are classified or become classifiable
  under a tariff
• heading other than the tariff heading under which
  they were
• imported, or
• They attain 25 value added and appear in the
  list approved by
• Council of goods of particular economic
  importance to the
• COMESA region

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Other trade related issues.

• Elimination of tariffs on intra regional trade
• should be complemented by reforms in other
• trade related areas in order to establish
  effective
• regional integration such. These include
• Strengthening trade facilitation services.
• Harmonization of customs administration.
• Transit trade policy.
• Product standards.
• Harmonizing the regulatory framework.
• Improving the investment climate.

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Trade facilitation activities

• Simplification and harmonisation of Customs
  procedures and Legislation (COMESA CD)
• Reduction of delays in crossing times and border
  posts
• Bond guarantee schemes
• Transit arrangements
• Harmonising and enforcing axle load and vehicle
  dimensions
• Regional 3rd party vehicle insurance scheme
• Simplified Trade Regime

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Trade facilitation.

• A COMESA Standards and Quality Assurance (SQA)
  programme seeks to harmonise standards and
  conformity assessment (testing, inspection and
  certification) schemes to facilitate and promote
  trade. This programme develops standards
  according to international standards and best
  practice. Since 2003, over 300 standards have
  been harmonized.
• A technical regulatory framework was put in place
  by the end of 2008, which defines how conformity
  assessment issues are harmonized. Mutual
  Recognition will take two or three more years to
  develop.
• An MOU has been signed by COMESA/SADC/EAC to
  co-ordinate efforts on conformity assessment and
  standards. A Task Force was established to look
  at conformity assessment.
• Sanitary and phyto-sanitary (SPS) protocols will
  be appended to the COMESA Treaty but SPS
  standards have not yet been adopted.

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COMESA Common Investment Area (CCIA) - Objectives

• Due to be launched by 2010
• Objectives of the CCIA encompass the following
• Substantially increasing the free flow of
  investments into COMESA from both COMESA and
  non-COMESA sources
• Jointly promoting COMESA as an attractive
  investment area
• Strengthening and increasing the competitiveness
  of COMESA's economic activities
• Gradually eliminating investment restrictions and
  conditions which may impede investment flows and
  the operation of investment projects in COMESA.

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Results of integration.

• Reduction in tariffs and other barriers to trade
  on a non discriminatory basis.
• Intra-COMESA trade has increased from US 1.3
  billion in 2001 to US 9 billion in 2008
• Diversification of exports
• Transport facilitation measures has cut transport
  costs by approximately 25.
• Supply/demand surveys carried out, and
  buyer/seller meetings trade fairs are expected
  to generate transactions worth about US 1
  billion

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Challenges to deeper integration.

• Some of the challenges hindering deeper
  integration in COMESA
• include
• lack of complementarities (i.e. exporting similar
  products)
• Non Tariff Barriers
• inadequate infrastructure
• absence of a system of compensation for losers
• structural constraints
• lack of political commitment
• Overlapping membership
• lack of effective supra-national institution
• Security and border conflicts
• Skills and Human resource developmen.

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Priorities for achieving deeper integration
regional and global

• Full COMESA FTA with lower MFN tariffs.
• Elimination of NTBS
• Liberalizing trade in services
• Export competitiveness (expansion and
  diversification of exports)
• Trade related measures and behind the border
  reforms-strengthening trade facilitation
  services, improving the investment climate and
• Harmonizing the regulatory framework to reduce
  cost of doing business and encourage (domestic
  and foreign) investments in export oriented
  sectors
• Implementation of the COMESA Customs Union.

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• COMESA LAUNCHING THE CUSTOMS UNION

• The COMESA Customs Union is due to be launched in
  June, 2009
• Key elements of a Customs Union
• duty-free and quota-free trade within
• customs territory (FTA)
• a common external tariff (CET)
• harmonised trade policy

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Requirements for the CU launch.

• The minimum requirements that should be fulfilled
  in
• preparation for the launch of the COMESA Customs
• Union in accordance with the recommendations of
  the
• third meeting of the Special Ministerial Task
  Force on the
• Customs Union held in February, 2008 comprise of
  the
• following
• Alignment of National Tariff Schedules with the
  agreed CET/CTN/
• Completion of the Sensitive Products list to be
  accorded differentiated tariff treatment under
  the CET.
• Flexibility and Policy Space
• Adoption of the Customs management regulations
• Ministerial regulations for the COMESA Customs
  Union

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• COMESA LAUNCHING THE CUSTOMS UNION

• Where we are Elements already in place
• Customs management regulations have been
  finalized
• awaiting consideration by the Trade and Customs
• Committee and Council of Ministers
• Ministerial regulations for the COMESA Customs
  Union have been finalized awaiting consideration
  by the Trade and Customs Committee and the
  Council of Ministers.
• Finalization of sensitive products-April, 2009.
• Finalization of tariff alignment schedules-April,
  2009

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COMESA LAUNCHING THE CUSTOMS UNION

• Where we are Elements already in
• place
• Agreed CET structure (4 band)
• capital goods - 0
• raw materials - 0
• Semi-processed goods-10-
• final/processed goods-25
• Adopted the principles of a regional trade policy.

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COMESA LAUNCHING THE CUSTOMS UNION

• The COMESA Regional Trade Policy will govern
  relations
• between the future COMESA Customs Union and third
  
• Countries. A set of Principles have been adopted
  as the
• Basis for the COMESA RTP
• Principle 1 CET rates and Sensitive products
• Principle 2 Free circulation of goods,
  elimination of Rules of Origin.
• Principle 3Revenue distribution.
• Principle 4 Export Processing Zones.
• Principle 5Trade defense measures, competition
  policy.
• Principle 6SPS and Technical Standards Programme
• Principle 7Bilateral treaties, arrangements with
  third parties, common negotiating positions.

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COMESA LAUNCHING THE CUSTOMS UNION

• In a Customs Union, trade policy is set
  collectively at regional level. However, there is
  provision for Policy space
• During the transitional period, there will be
  need to accommodate national specificities such
  as
• Treatment of sensitive products,
• Use of tariffs as incentives,
• Suspension of CET rates in special circumstances,
  
• Honouring commitments under existing trade
  arrangements.

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Benefits and opportunities of COMESA Custom Union

• Some studies undertaken to evaluate the cost and
  benefits of the COMESA FTA and Custom Union (e.g.
  Karingi et al. 2002 and Dimaranan and Mevel
  2008).
• Two important points should be emphasized
• Benefits that can be derived from custom union
  outweigh FTA arrangement.
• In the long-run, all members will benefit from
  both arrangements (CU and FTA).

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Benefits and opportunities

• Quantified main benefits already identified
• Trade expansion
• Welfare gain
• Increase in real incomes for most members
• Efficient allocation of resources
• Improved competitiveness
• Gain in economies of scale.

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Challenges of Customs Union

• Addressing effectively short run adjustment costs
  which might be high for some members.
• Tariff revenue loss and localized contraction of
  some sectors which has a key role for
  sustainable development and prosperity.
• Prioritizing investments and reform measures to
  address supply side constraints.

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Challenges of Customs Union

• Overlapping membership which constrains economic
  efficiency and compromises integration
  aspiration.
• However, this problem can be addressed by
  catalysing the grand Eastern and Southern Africa
  FTA project.
• Harmonization of policies among the three RECs is
  vital for success of the COMESA CU.

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• COMESA LAUNCHING THE CUSTOMS UNION

• Way Forward
• i) Identify and agree on sensitive products
  and adjustment measures and timeframe for
  sensitive products and
• ii) Agree implementation plan and period for
  MS to align national tariffs to CET.
• For full operation of Customs Union
• i) Finalise and adopt remaining elements of
  Regional Trade Policy
• ii) Set up and make operational an appropriate CU
  management structure.

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Conclusion Where we are going ?

• COMESA has re-defined its medium-term strategy as
  being the promotion of regional integration
  through trade and investment
• COMESA has liberalised trade in goods, now urgent
  need to liberalise intra-regional trade in
  services
• COMESA is now concentrating its efforts on
  consolidating and expanding the FTA and
  establishing a Customs Union, while accelerating
  investment promotion.
• Implementing the tripartite decisions for
  establishing Inter REC FTA and the Grand Customs
  Union

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• COMESA LAUNCHING THE CUSTOMS UNION

• Thank you for your
• kind attention