Powering regional integration through trade

In Summary

• The Common Market for Eastern and Southern Africa (COMESA) Source21 trade conference, held in Nairobi from July 17 to July 21,themed “The Hallmark of Quality”, greatly focussed on status of regional trade integration.

• Last year was an alarming year for Africa's  regional trade blocks, despite the launch of the African Free Continental Trade Area.

African leaders pose for a group photograph as they meet to sign a free trade deal that would create a liberalized market for goods and services across the continent, in Kigali, Rwanda March 21, 2018.
African leaders pose for a group photograph as they meet to sign a free trade deal that would create a liberalized market for goods and services across the continent, in Kigali, Rwanda March 21, 2018.
Image: REUTERS

The Common Market for Eastern and Southern Africa (COMESA) Source21 trade conference, held in Nairobi from July 17 to July 21,themed “The Hallmark of Quality”, greatly focussed on status of regional trade integration.

Heads of State, Ministers, policy makers and dignitaries from across East and Southern Africa attend with a view to discuss  deliberated on positive actions to be concluded with a view to increase intra-African trade.

Last year was an alarming year for Africa's  regional trade blocks, despite the launch of the African Free Continental Trade Area.

 

On the home front, the East African Community battled with numerous challenges, from concerns over the progress of integration programmes by the block’s legislative arm, the East African Legislative Assembly (Eala), to predictions that a collapse of the regional block, similar to that of 1977, may be imminent.

The EAC’s 2018 calendar was marred with controversies, criticisms and ill fate.

Similarly, growth in intra-African trade fell below par, with intra-African trade standing at 16 per cent. This, is in contrast to advanced regional trade blocks which registered higher levels of regional trade, with the same standing at 68% in Europe, 37 per cent in the North Americas, and 20 per cent in Latin America.

Despite the low growth, it is maintained that intra-African trade is ripe with potential, keeping in mind a consumer base of 1.2 billion people, and a combined Gross Domestic Product of about $3 Trillion.

The above considered, a number of policy measures are likely to revitalise intra-EAC trade. These include a focus on the improvement and modernization of infrastructure linkages, the removal of non-tariff barriers and the prevention of double taxation.

While progress is being made on the infrastructure front, with Kenya leading the charge through its commitment to the Standard Gauge Railway and Lamu Port-South Sudan-Ethiopia-Transport (LAPSET) projects, the same can not be said with regard to the removal of non-tariff barriers and the prevention of double taxation.

It is unfortunate that some partner states, in the misguided attempt to protect local industries from increasing regional competitive market forces, have opted to introduce protectionist policies.

 

These effectively skews the domestic playing field in favour of domestic industries at the expense of regional growth and development, thereby working against COMESA’s commitment to regional integration, as enshrined in the Tripartite Free Trade Area.

On double taxation, it is telling that there does not exist any form of double taxation agreement between the partner states. Consequently, businesses operating within the region have to consider double taxation as an additional business cost. This serves to further prevent regional harmony on the business front.

Karen Kandie – MD IDB Capital